Month: September 2010

Inheritors in public limited companies

In a recent interview to Business Standard, Kishore Biyani, the Founder and CEO of Future Group made a very controversial quote

“I don’t believe in the hypocrisy of asking family members to join at a junior level. The CEOs would run the business and be accountable; family members would set broad guidelines and manage relationships.”

There is no denying that several business families in India induct the sons and daughters at a junior level initially in their family owned company. Then they make accelerated progress through the ranks of the organisation, before being appointed on the board and then eventually becoming the successor . The Bajaj sons, Ranbaxy inheritors, Birla inheritors, all have gone through this route.

The hypocrisy of this route can well be seen in the recent example of Rishad Premji, son of Wipro Chairman , Azim Premji. In a 2007 article in Rediff,

The elder of Wipro  Chairman Azim Premji’s  two sons, Rishad studied at the Harvard Busines School and graduated from Wesleyan University, Connecticut. With a penchant for software and music, Rishad sure has learnt one thing from his father, and that is to maintain a low profile.

Rishad, who is currently with Bain and Co, had a brief stint with GE before doing his MBA. His move now to join his father’s empire is interesting considering the fact that Azim Premji once said he did not want Wipro to become a family business.

Sources in Wipro maintain that Rishad will have to work his way through to the top. It is said that Rishad was keen on joining Wipro. Like everyone else, he too had to send in his resume and as luck would have it, he managed to find a placement.

Rishad will join the 70,000-employee-strong software-led conglomerate, which also makes soaps and bulbs, as a business finance solutions manager. It is also learnt that he will report to its president, Girish Paranjpe.

In September 2o10, The Hindu Business Line reports :

Mr Rishad Premji, son of Wipro Chairman Mr Azim Premji, has been appointed Chief Strategy Officer of IT Business, Wipro Technologies. In a statement, Mr Saurabh Govil, Senior Vice-President – Human Resources, Wipro Technologies, said Mr Rishad Premji was till recently General Manager – Treasury & Investor Relations and brings with him a diversified experience of Consulting, Finance, Treasury and Operations. In this role, Mr Rishad will report to the joint CEO’s, IT Business.

Within three years, Rishad has moved from an entry level position to become a direct report to the CEO of the IT business. This blogger believes at this rate Rishad will be the CEO in another three years. No prizes for guessing why this movement has been so rapid.

 Azim Premji owns 85 % of Wipro and if he feels his son Rishad is his rightful successor nobody can question him. His dilemma, perhaps, is the cloak of professionalism that he wishes Wipro to project. 

Kishore Biyani has no such dilemmas. His daughter Ashni Biyani has joined directly as Director of Future Ideas and his nephew Vivek Biyani has joined as the Director of Home solutions retail.

 The second part of Mr Biyani’s quote is also very interesting where he says “The CEOs would run the business and be accountable; family members would set broad guidelines and manage relationships.” A textbook role of CEO of any company would include setting broad guidelines  and managing relationships, yet Biyani feels CEOs just stop at running the business. In other words, what he really means is Chief Operations Officers ( COO) will be professionals but CEOs and Board members will be family members. Just that, in these title fluffing times, COOs will be called CEOs, without having the role and responsibility.

Now let us look closely at what a rich businessperson running a public limited company can bequeath to his sons and daughters. He has wealth which he has by virtue of the shareholding in his companies. He can sell his holdings in the companies and bequeath the wealth to his inheritors. He can bequeath the shareholding directly to his inheritors, thereby they becoming claimants to  board positions as owners. He can not only bequeath the shareholding, he can also appoint them as successors to the top job, thereby becoming owner-managers. 

A vast majority of Indian family owned public limited companies choose to bequeath their holding as well as appointing them as successor. Contrast this with what Bill Gates is doing.

Bill Gates, one of the world’s richest men, has said that he is not interested in using his billions to launch a dynasty and would not leave his fortune to his children. Gates and his wife Melinda , 44, have three children –Jennifer , 14, Rory, 11, and eight-year-old Phoebe. 

“I knew I didn’t think it was a good idea to give the money to my kids. That wouldn’t be good either for my kids or society. So the question was, ‘Can I find something that had incredible impact?’ I knew I wanted to do that,” Gates was quoted by The Sun as saying.

So far, Gates and his wife, through their foundation, have given away £18 billion which has helped deliver vaccines to more than 250 million children in poor countries. 

If Indian businessmen cannot do what Bill Gates has done, they should go by what Kishore Biyani says and spare us the hypocrisy.
  

 

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Death pangs for the MCA course ?

It is perhaps, the first time that an MCA has risen to the top job in a leading software company. The MD and CEO of Tata Consultancy Services, N.Chandrasekharan is an MCA from REC Trichy ( now, NIT ).  Just when it appeared that the MCA course was getting its due recognition, it appears that there are question marks for its survival.

As per a recent Careers360 article on MCA,  “there are 75,021 seats in 1089 institutions. Andhra Pradesh and Tamil Nadu account for nearly 60 percent of total number of MCA seats in the country.”

The MCA admissions for the year 2010 are nearing completion.  The news from Andhra Pradesh which has the largest number of MCA seats in the country is depressing. Deccan Chronicle  reports that :

As many as 367 of the 660 MCA colleges have applied for “closure” due to poor response from students in the current academic year 2010-11. While a total of 34,451 seats were on offer in the convenor quota during Icet counselling, only 13,104 have been filled. This is of course apart from seats in the management quota.

The vacancy data  from Tamil Nadu is not readily available, but preliminary information gathered indicates, that the picture is not very different either. There are nearly 240 colleges offering MCA courses in TN. The total number of seats for MCA would be in the region of 15,000. As per the counselling schedule put up by a web-site, only 8543 candidates have been called for counselling. Even a candidate scoring  3.00 marks out of 100 is being called for counselling. Assuming that a small percentage of candidates called for counselling, do not show up for counselling, a vacancy of 50 % of seats in Tamil Nadu MCA colleges can be expected.

Why this situation has arisen ? It could be a mix of several factors.

Firstly, Information technology and Computer Science as a career is losing its sheen, thanks to the recession of 2008-09. This is showing up even in choice of disciplines in IIT. For the first time, Electrical Engineering has closed earlier than Computer Science at IIT-Bombay, reports TOI.

Secondly, inspite of MCA being a specialised post-graduate course, focussing on computer applications, it is treated at par with B.Tech in Electronics/Computer Science /IT by most IT services companies for the purposes of recruitment. Given the huge number of seats created in the engineering disciplines, MCAs compete directly for placement with B.Tech graduates.

Thirdly, MCA programme competes with the MBA programme. In AP, the entrance test is common. Many colleges offer both MCA and MBA programmes. Many students prefer MBA over MCA because it is one-year less and more importantly the placement of MBA is not dependent on the fortunes of one industry, namely the IT industry.

Fourthly, MCA is competing with its own under-graduate version the Bachelor of Computer Applications (BCA) course. Now many universities are offering the BCA course.  Good software programmers can get recruited right after their BCA, without waiting three years for an MCA.

Fifthly, for many science graduates, IT companies are offering jobs just after graduation. TCS , Cognizant  and Infosys hire science gradautes. Wipro has gone a step further. It not only offers a job but an opportunity to get an MS in Software Engineering from BITS Pilani through their WASE programme.

Lastly, the ballooning of seats in MCA was a highly opportunistic response from the private educational institutions, not unlike the NIIT/ APTECH. When NASSCOM and the IT industry kept lamenting about the manpower shortage facing the IT industry, many responded by adding an MCA programme. Both engineering colleges as well as MBA colleges started offering MCA courses. They added seats with little thought about faculty or course or infrastructure. Until 2008, when the IT industry was hiring in thousands, this problem was not visible.

The IT companies continue to hire MCAs but only from the top institutes. It is clear from the industry response that even the top institutes in India, whether MCA or engineering do not prepare the students well for a career in the IT industry. TCS is building a huge training campus in Kerala.

Tata Consultancy Services (TCS) has announced that the company is setting up a new learning and development campus in Thiruvananthanpuram (Trivandrum), Kerala. The new campus will house up to 10,000 professionals when fully completed and will offer TCS’ learning curriculum to those who join the company from colleges.

Whereas, there is surplus capacity in private engineering colleges and MCA colleges, the IT industry is creating its own campuses. This is because of the huge gap in quality.

The shakeout was imminent and augurs well for the sector. This will bring a lot of pressure on the colleges which have managed to fill-in their seats to improve quality. Or else, it could be well their turn to close down in future.

As for the MCA aspirants, it should be understood that the MCA course is a specialised course. It prepares the students for a career in building and maintaining software applications. It should be taken up only by those who enjoy software programming and should be only at the good institutes.

 

Weekly Business Quiz # 46

1. Which brand has launched ‘made for india’ models of digital cameras with front and back LCD screens for better self pics ?

Ans. Samsung

2. What connects Ashni, Roshni, Lakshmi, Tania to business ?

Ans.  Daughters of tycoons,  now in business. Ashni Biyani, Roshni nadar, Lakshmi Venu and Tania Godrej Dubash

3. While working on an electric car 100 yrs ago who had said ‘electric is the future because you will pump all oil out of the ground’?

Ans. Thomas Alva Edison

4. Name the world’s largest and oldest branded pencil co. It started in 1761. The 8th generation of the family is now running it

Ans. Faber Castell

5. An Indian co Vashishta Wahan claimed to represent a German co to neg. Investment in AP and cheated AP govt. Name the German Co. Clue:- cleverly it shares the same 2 letters as the German co.

Ans. Volkswagen

6. Name the cereal which is gaining popularity among indians. After Quaker, Saffola and Kellogg’s have launched it.

Ans. Oats

7. On whose life story is the movie SOCIAL NETWORK based ? It’s tag line ‘to make 500 mill. friends you make a few enemies’.

Ans.  Mark Zuckerberg- the founder of Facebook

8. Name the century old dictionary which will bring out only the online version of its next edition i.e. no print edition.

Ans. Oxford

9. Name the India born angel investor who is on the US FORBES rich list thanks to his early investments in Google .

Ans. Ram Shriram

10. What is the new international standard for brand valuation ?

Ans. ISO 10668

11. Name the charlatan scientist who came up with a herbal fuel that made news 15 yrs ago. He has come up with a new formula now.

Ans. Ramar Pillai

12. A recent Newsweek cover story puts GE Motorola Petrobras Infosys on its cover. What connects these cos. ?

Ans.  Huge training centres as big as universities

13. Which Indian corp has tied up with Manchester United to start a soccer coaching prog in 240 schools in india ?

Ans.  Bharti

14. Stock market excesses are often explained by a Gordon Gekko quote ‘ Greed is good’. Name the movie from which it is taken.

Ans. Wall Street.. Its sequel is running now.

 

Weekly Business Quiz # 45

Q1. Which PSU major will be taking over the sick PSU Bharat Heavy Plates and Vessels (BHPV) ?

Ans. BHEL

Q2. Which logistics co was founded by Jimmy Guzder? He died recently.

Ans. AFL earlier Airfreight Limited

Q3. Which German city hosts an annual beer festival every year ? It is celebrating its 200th one this year.

Ans. Munich

Q4. Which country is building the SKYLON sky plane which can take 24 passengers to space and land like a plane ?

Ans. UK

Q5. As per the draft mining bill 26 % stake in the mining projects will go to locals. What are the exceptions ?

Ans. Oil and gas

Q6. Which bank is testing an ‘Unhappy Service’ in AP ? It even plans to patent it.

Ans.  SBI.

Q7. After facing employee backlash for its iRace policy which co has decided to put its HR policies ‘on probation’ before implementing?

Ans. Infosys

Q8. Which telecom provider has been given RBI clearance for a limited banking facility thru cell phones ?

Ans.  Bharti Airtel

Q9. In a study conducted by CSE what adulterant has been found in most brands of indian and imported honey ?

Ans.  Antibiotics

Q10. Which corporate production house is behind 14 national film awards announced recently producing Paa, Well done abba, Abhohoman ?

Ans. Reliance Big Pictures

Q11. We read about gold mines, diamond mines etc but why no silver mines ?

 Ans. Silver is usually by product while mining lead zinc or gold

Q12. Name the popular anti wrinkles treatment which is the brand name of ALLERGAN, USA.

Ans. Botox

Q 13. Only 54 hospitals in India have NABH. What is NABH and who awards it ?

Ans. National Accreditation Board of Hospitals . Quality Council of India

Weekly Business Quiz # 44

Q1. There are many suitors for PARAS pharma. EMAMI may get it. What brands make PARAS so hot ?

Ans. MOOV , ITCHGUARD, D’Cold, KRACK, LIVON, RINGGUARD

Q2. Which co owns and manages the famous diamond mines at Panna, MP ?

Ans.  NMDC Ltd

Q3. When Tatas sold the Lakme business to HUL the company remained with them and they renamed it TRENT. Expand TRENT.

Ans.  Tata retail enterprise.

Q4. “Mahabharata of Polyester” is the sequel to Polyester Prince by Hamish Macdonald. Who is it based on ?

Ans. The Ambani brothers feud

Q5. Who has authored the book “The March of Mobile Money: The Future of Lifestyle Management” predicting death of paper money ?

Ans. Sam Pitroda

Q6. Which MNC often credited for being the pioneer of outsourcing from Bangalore completed 25 years in India ?

Ans. Texas instruments

Q7. What % of net profits should cos spend mandatorily on CSR activities as per a prop. revision to companies act ?

Ans. 2 %

Q8. According to a Canadian survey which social network is used mostly by narcissists and those with low self esteem ?

Ans. Facebook

Q9. Which variety of mangoes are processed at the mango processing cluster of Chittoor/ Krishnagiri that is used in Maaza, Frooti ?

Ans. Totapuri

Q10. Name this hotshot director who acted in a TVC for FEVICOL where he plays the judge in a tug of war for elephants ?

Ans. Rajkumar Hirani

Q11. Chairman of which real estate group has decided to use his signature as the logo of his group ?

Ans. Mantri

Q12. Name the construction group which will build the tracks for the first Formula One race in india to be held at NOIDA in 2011?

Ans.  Jaypee

 Q13. Name the chairman of HSBC who has quit the top job to become the UK minister for trade?

Ans. Stephen Green

Q14. What is the device that produces the ‘ticking’ sound in clocks and watches ?

Ans. Entrapment

– Compiled by G.Mohan

 

Naming Energy companies

The other day, I was driving through one of the arterial roads of Jubilee Hills, Hyderabad and I saw a new office complex. My eyes fell on the board being erected. I could see the logo KVK written stylishly. My instinct told me, it must a power company. It sure was, KVK Energy and Infrastructure.

Yesterday, I was having a chat over phone with a friend. He mentioned a hot stock , BGR Energy, a Chennai based power equipment supplier.

Unconnected events and unconnected information. Yet, I had my own eureka moment , this morning. ( Even a-ha moments for collector of trivia is also just that, trivial).

I  tried recalling all the power companies I know. I found many of the new companies being set up had a pattern in their names. A 3 -letter acronym, folowed by Power or Energy and then the mandatory Limited. Besides KVK and BGR mentioned above, I could immediately think of GMR, GVK, KSK and JSW.

It is true that there are many power companies which do no fall into this pattern like Reliance Power, Tata Power, Torrent, Adani, CESC etc. Also, there are many 3 letter initials which are not power companies like SKS, ITC, GSK, HCL etc.

But I guess there is a fad, may be a small one.

There are fads in company names, much like names of kids or Hindi cinema titles. My daughter has 2 classmates named Ankita and 3 boys in her class named Aditya. In Hindi cinema, long English titles are currently the fad. I Hate Luv Storys, Once upon a time in Mumbai, We are family etc.  In the 80s, many diversified companies shortened their names to abbreviations only like DCM, ITC, CMC, HMT etc.

In the case of power companies, I guess the trend would have started with the success of the first Independent Power Producers (IPPs) from the south GMR and GVK. Since these were successes others followed. I think this naming trend comes out of  part fashion, part superstition and plain creative laziness.

To make life simpler for some of the new IPPs in future, I can help a little with my creativity. Here is a to-do list for the “Power” entrepreneur.

Choose a 3-letter acronym. Easiest is to choose the initials of your name. (GMR, GVK, BGR, KVK are all initials of the promoter like Grandhi Mallikarjun Rao, GV Krishna Reddy, BG Raghupathy etc).

 If  it is not your money alone, you have partners then you could choose the initials of the partners ( KSK gets its name from the partners).

If you are a doting parent you could choose first letters’ of your kids’ ( legit only) names.

If you are a God-fearing businessman who attributes all your wealth to the many Gods, choose 3 of your favourite Gods’ names initials.

Please take care that the initials so chosen do not clash with an existing company. Also avoid some popular 3 letter initials. SRK is best avoided. In every language and every city, fans of SRK, both in and out of media , have made it sure that SRK stands for Shah Rukh Khan. Others to be avoided are NTR, YSR, MGR etc. These represent larger-than- life heroes/ leaders, who have a fan following even to this day. If you want to avoid some stone throwing on your steel and glass building, just before an IPO, these letters are best avoided.

If all these does not help here are some 3 letter initials which are up for grabs. IWM, GPR, IDK, MMM, LLL.

If you are wondering what these stand for, here are my own expansions.

IWM – I Want Money – shows focus of the company,

GPR – Great Power Rip-off – tell it the way it is, not using prefixes like Reliance and do a GPR.

IDK – I Don’t Know ( anything about power business)

MMM – Minister, Money and Mafia or LLL – Land, Licence and Luck  ( your core competencies to be in the power business ).

Until a 3-letter company has a failed IPO or worse goes bankrupt, this fashion will continue.

Owners as Brand Ambassadors

What connects the following ? Kingfisher Airlines, MDH masala, Khaitan fans, Country Club, Dr Sarkar’s, RRB energy, Mantri developers.  Their businesses are all very diverse. What could possibly be common between a spice marketer and a real estate company or between an airline and a fan manufacturer. Yet they share something. These companies have their CEOs or owners appearing in their advertisements and company communications rather prominently.

If you board a Kingfisher flight, you will be invited by Vijay Mallya, the promoter, to be a guest and a promise to be treated like a guest in his own house. The inflight magazine Hi Blitz is full of pictures of Mallya attending various parties with celebrities from cinema, politics, sports etc. After one flight, you will know who the owner of the airline is.

TV commercials of masalas are not expected to be either entertaining or informative. Yet, I am always amused at MDH TVCs. One cannot miss the old man , the owner of MDH, in the ads. He can be seen  blessing the guests in a wedding, sitting in a reclining chair having a cup of coffee or even atop an elephant like a maharajah with the voiceover announcing ‘Masalon ke Shahenshah’.

Country Club, a mid-size vacations company, from Hyderabad is a big advertiser. Perhaps, not so much for their products, but as a vehicle for its owner Rajeev Reddy. If you cannot recognise Rajeev Reddy watch a Country Club ad on TV , press or even a hoarding. If you see a dark-complexioned fat man ( not unlike a Telugu film hero)  with little or no neck, sporting an oversized goggles and a printed Hawaiian shirt in a thumbs-up   posture, he is Rajeev Reddy.

Years ago, Khaitan fans had a slogan “Khaitan- bas naam his kaafi hai”. Even if one thought that this was an attempt at trying to emulate a Ford or Honda or closer home a Tata or Godrej, by putting family name as a brand, the ego trip was when the Chairman gave a personal guarantee for each fan sold by   the company. Each and every warranty certificate was signed by the Chairman personally.

Recently, a real-estate developer Mantri Developers, has gone a step further. The Chairman Sushil Mantri has made his signature as the logo for his company. A press release says :

The Mantri Developers’ new logo is inspired by the signature of Mr. Sushil Mantri Founder and & Managing Director, Mantri Developers. Elegantly crafted with fluid lines, the new logo is a seal of the trust that the customers and partners have reposed in the brand. The strong color of the logo connotes the spirit of enterprise, excellence and energy. In the most compelling way possible, the logo guarantees that Mantri will always stand by and honor their commitment and promises.

When a CEO or an owner appears so prominently in the promotions and communications one cannot but feel amused. Their desire for self-promotion is so high, sometimes even at the cost of the businesses and brands they promote. It does not help that these CEOs  must be surrounded by sycophants posing as advisors and consultants, who would be encouraging these megalomaniacs to appear in the ads and having a good laugh on the side.