Doing Business In India

Where others have failed, Mr. Pallonji Mistry has proved to be a visionary. The business world has always hailed the foresight and acumen of business leaders like Late Dhirubhai Ambani, Mr Ram Prasad Goenka (R P Goenka) and other illustrious names who have built empires from humble beginnings. Mr Pallonji Mistry built on the business that his grandfather started in a small way (Ratan Tata’s successor: Spirit of enterprise runs deep in Cyrus Mistry’s family). Today, Shapoorji Pallonji group has over 23,000 employees and a turnover of US $ 2.5 billion, with presence across real estate, construction, infrastructure, agriculture, consumer products, textiles, engineering, shipping and logistics. Beside this it is the largest single investor in the Tata Sons, the holding company of the Tata group.

All these business leaders have created vast amounts of wealth for themselves and their children to inherit. Then what has Mr. Pallonji Mistry done differently that we can actually stand and salute him?

In one master stroke he has done what others could not do. He has crafted a succession plan that effectively takes care of the aspirations of both his sons and has insured that there shall be no warring in future. Most siblings end up squabbling for a larger share in the inheritance not because of the quantum that each begets but for their desire to lead the flagship business. All family succession have met the same fate.

In this case, what has been achieved is not short of a master class in managing relationships and ensuring that the family stays together. The elder son gets to drive the Shapoorji Pallonji business whereas the younger on, Cyrus Mistry shall head the Tata empire. They shall remain as one happy family……

You may have experienced this before….. you get a call on your mobile… it rings once or twice and then clicks off. You look at the missed call number and its from an international destination. Your first reaction…… maybe a relative in distant land or a new foreign customer???? Inquisitiveness makes you to call back. No one really remembers all the ISD codes … is +1 for US or +44 for UK. Do most us really understand and make out. Once you call back… the receiver on the other side takes your call and informs you that you have won a lottery or they would want to carry out a poll on some current issue. You disconnect…..

Seriously, what could this be….. why are so many missed calls happening from ISD destinations… +92, +994, +263, +37. When we checked, +92 is for Pakistan, +994 is Azerbaijan, +263 is Zimbabwe and +373 is Moldova. None of these countries inspire confidence. Moreover they remind you of internal strife and maybe unlawful activities. Then why would calls come from these destinations?????

There is no logic……..

Yes……. there is but one possibility

Calls originating from these destinations are all international numbers and thus attract higher tariffs for call back. All this happens for some benefit. There is no way someone is calling you to let you know that there is lottery you have won in an international draw without participating or that your unknown ancestor has left you obnoxious amount of wealth or more so that some wealthy person has died inestate and there are no claimants, so the attorney on file is willing to partner you to share the spoil.

You know this is all is ‘humbug’, but still, if you have someone calling you and the call gets disconnected…your reaction is to call back…

Who should benefit from this natural reaction of human beings. It could be some tricksters who can pull-off with some gullible souls or may be the telephone companies who benefit from the international calling.

Look at the current scenario for telecom companies, the APRU (Average revenue per User) has been consistently declining, the operating margins are under pressure and the competition is increasing. Why wouldn’t telecom companies find ways to increase billing per subscriber? This is an easy way..call from friendly countries where numbers cannot be traced or routing to other destinations and really, if it gets traced blame it on the terrorist link in those countries. These countries have no databases or efficient legal systems for redressal. What would you say……… Ingenuity or unworthy.

Discussions by eminent credit experts have highlighted the pure dependence of credit risk assessment on financial statements and payment history. Whereas good business research thrives on ‘Alternate data sources’ then why shouldn’t credit risk assessment incorporate alternate data for a robust model? Whether financial statements are more reliable is debatable point especially in the context of MSMEs (they form the bulk of business enterprises all over the globe). Most developed economies do not insist on audited statements from business owners and in developing economies, we are aware of what happens. The business owner decides what is to be presented….. Yes, payment history is credible and can be used as a source of information but can be misleading if relied solely upon. Credit rating does consider ‘alternate data sources’ but as a product is used for a minuscule segment of the universe. When you consider credit scoring or internal risk assessment processes, invariably ‘alternate data sources’ are disregarded. Moreover, majority of the credit officers are unaware of ‘alternate data sources’ and their relative weight in the risk assessment model. It seems that we all want to follow the system that has been established………….. Are we doing it right?

The Satyam episode has become a joke on Corporate Governance, Questionable Polity and Degenerating Ethical Standards. I had mentioned my views in this blog, Satyam Saga…..Is Corporate Intelligence Adequate In India?, a couple of weeks earlier.

In all this mess, there are some blokes who have the sense of humour to make a joke of this ugly episode.

Chief Minister of Andhra Pradesh (the State in which Satyam ex-boss, Mr. Ramalinga Raju had political patronage), Mr Y S R Reddy went to a school. After have a brief talk with the children he asked them if they had any questions to ask him.

One boy raised his hand and stood up.

YSR: Whats your name?
Prakash: Prakash

YSR: Whats your question?
Prakash: Sir I have three questions.
1) Why did the Andhra Pradesh government provide so many land deals to Raju?
2) Where is the Rs.7000 crores?
3) For all the controversial situations, why does the ruling party alway blame the rival political party?

YSR: You are an intelligent student Prakash..(just then the bell rang for recess).

Oh dear students we will continue after the recess is over.

After the recess

YSR: Ok children where were we? Yes, so anybody wants to ask any question?
Suresh raises his hand

YSR:Whats your name?
Suresh: Suresh

Suresh: Sir I have 5 questions.

1) Why did Andhra Pradesh government provide so many land deals to Raju?
2) Where is the Rs.7000 crores?
3) For all the controversial situations, why does the ruling party blame the rival political party?
4) Why did recess bell ring 20 mins before the scheduled time, and
5) Where is Prakash?

Obviously corporate intelligence is not adequate and investors are not safe. They all seem to be talking about a Rs. 7000 cr fraud, but what about the billions lost in capitalisation of the Satyam stock and consequenlty the market slide. This is the worst kind of fraud that have been perpetrated with a cold mind.

There are two questions that need to be answered:
1. After the corporate governance issues with the Maytas deal, why was Raju allowed so much time? Obviously there more top management people involved than just the Chairman (as he confesses)

2. What were the Auditors doing? Need to closely look at the various relationships that audit firms maintain with clients. That could result in compromising their position. Audit firms should only have one relationship…that is conducting audit. After Enron, Aurther Andersen was disbanded and sold off and the consulting arm became Accenture. All firms should delineate audit and consulting function in seperate entities.

All this proves that we need better corporate intelligence.

Vivek Parti, CEO, India Business Database.com, Business Credit Information Company

The financial markets are shaky and people with cash are making their moves. The first out of the block has been the undoubtable Mr. Warren Buffet. His keeness in Wachovia thru Wells Fargo is a smart accumulation of financial assets. Then there is General Electric that has readied a war chest for meaningful and related acquisitions.

Similarly Indian companies that have their DNA in risk aversion can now, in a low risk environment (low risk since globally valuations have taken a severe beating), scout for opportunities inorder to fulfill corporate objective of technology advancement, global reach or simply securing supplies.

Before you set out a word of caution. Do not blindly pursue acquisitions based on a trend or your competitor’s aggression. Make your move after you have set out your long term strategy and have carried out a thorough due diligence. For global business research, you can find assistance at indiabusinessdatabase.com

Yes there is slow down in the global business environment. Couple this with all the disturbances: the middle-east uncertainity, Pakistan meltdown, and the general war against global crime. We as global citizens are paying beyond our means to finance this war.

But some of us find opportunity among the ruins. Read this article on OPPORTUNITIES make the best use of it. Aren’t we still in business? Delhi got back to business even after the cracker show…………..

Hi. Its been a long time since we last met. While surfing I came across this wonderful information and I thought I should share this with you. CII is looking out for 15 Indian small and medium enterprises that can access international know-how with the support of country’s top technology and management institutes by introducing a three-year training programme.

The Visionary SME Programme set for a September-end launch would have contribution from experts at the Indian Institute of Management, Calcutta and the Indian Institute of Technology, Madras along with Shobishiba, a Japanese management consultant.

The programme would start with 15 firms initially and the volume of participation would grow later depending on the success of the maiden run.

CII is going to create model small & medium enterprise (SME) of global standards by selecting 10-15 SMEs from different sectors in association with IIM-Calcutta, IIT-Chennai and a Japanese consultant, Shobi Shiba.

In uncertain times businesses face tough situations. Most of them go about doing the same routine until the situation around them eases or they bite the dust. But proactive managements assess the situation clearly and take corrective steps. Steve Report has written a well-meaning article on the same subject. Steve says
“What are “The 5 Steps To Stop Insane Management From Driving Business Into The Ground?”

1. Have a very clear profit plan at each line item of business performance. Measure actual performance against plan and have clear accountability for achieving the plan line item by line item. To implement this you must have timely, accurate and relevant information. No excuses…must have.

2. When people who are accountable for line item performance consistently fail to meet the stated goals, replace them. Period!

3. The number one function in a business that will be the subject of most of the excuses is sales. These excuses come from people who do not understand how to market to a consumer who places ever increasing importance on relationships. Why do you think the community building sites like YouTube, MySpace and Facebook are in the top ten most highly visited sites globally? According to Alexa, YouTube is 3 , MySpace is 6 and Facebook is 8 ) Every business must have a relationship driven marketing strategy and then implement it. See Relationship Marketing below.

4. Always be evaluating the market including on line competitors. I wonder if Microsoft, Yahoo and AOL in retrospect would have done anything different when Google first came to market? No company is immune from being seriously weekend by competition. I look at the drugstore landscape. I live in Florida where competition is very active particularly for pharmacy prescriptions. A new format of drugstores was introduced not that long ago by Walgreens, CVS, and others with positioning of buildings with 24 hour drive through pharmacies on high cost real estate. Two things have happened with those changes. Prices skyrocketed to pay for real estate and relationships with the pharmacy customer has almost become extinct. Within this landscape I am aware of several privately held drugstores doing very well because of their attention to customer relationships.

5. Don’t push a boulder up hill. Some companies were never meant to be. People start companies or buy existing companies because they think it is a good idea. The only opinion that matter is the market. If your business was not all that strong in the past and you are basically doing everything right, the best action to stopping the profit leaks may mean closing the doors. If you are not sure Contact Me.”