Sucheta Dalal :Another MD says Tata (13 July 2003)
Sucheta Dalal

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Another MD says Tata (13 July 2003)  

Three years ago, Rallis India went through enormous turmoil which led to the exit of the then Managing Director Vijay Rai and a change in its external auditors. This was followed up by a clean-up phase, but it hasn’t quite worked that way.

On Saturday, its current MD, Rajeev Dubey also put in his papers citing personal reasons. Dubey had kicked off a restructuring process, that included the sale of its pharmaceutical business, merger of subsidiaries and a staff reduction programme.

While Dubey and the Tatas are careful to maintain a dignified silence over the issue, we learn that Rallis’ performance was a problem. It incurred hefty losses on unsold fertiliser stock that was returned by dealers in Andhra Pradesh leading to a see-saw movement in its profit performance.

The Andhra Pradesh incident involved a regional manager who had pushed nearly Rs 65 crore of fertilisers to two dealers, who were related to him. The sale took place nearly two years ago and the dealers have been returning unsold stock causing losses to the company. At the end of December 2002, the company had declared a loss of Rs 11 crore on account of stock returns, but the losses have since mounted to over Rs 18 crore. While Mr Dubey is understood to have reported the problem to the board very promptly, company sources say that he also took moral responsibility for the episode, which led to the firing of nearly 15 persons.

Over valued?

A reader points out that when Housing Development Finance Corporation (HDFC) officially took over and renamed the Zurich Mutual Fund schemes, there was an interesting phenomenon. On June 20, the income and STP schemes of all funds showed positive returns, only the Zurich schemes showed negative returns. The mutual fund industry was abuzz with speculation about why this happened. Their conclusion: The Zurich may have been consistently overvaluing its assets, and HDFC marked them down to fair value after acquisition.

What about Zurich’s investors? They didn’t even know that a merger was in the offing. So those who just happened to exit before the takeover may have been the lucky ones, while those who stayed back are probably the losers. Unless, HDFC Mutual fund merges the Zurich schemes similar to its own ones and evens out the difference in Net Asset Values. The moot question is did the regulator go into mutual fund merger valuations?

Side effects

ALTHOUGH pharmaceutical stocks are in the limelight, Dr Morepen Laboratories has continued to decline after a little upward blip. The stock rose from a level of Rs 10 at May end to over Rs 17 by mid-June. But thereafter, despite its high profile advertising campaign, investors seemed to lose interest in the company, and its stock price declined to around Rs 13 in a hugely bullish market.

The reason is probably Morepen’s failure to repay its fixed deposit holders. An investor, Mrs. Harshilee Thanawala says that fixed deposits that matured in February 2003 have not yet been repaid as yet.

In December 2002, the company wrote to depositors that its post-dated interest warrants would not be honoured since it has switched its account from ICICI Bank to Corporation Bank. It said that fresh warrants would be issued.

Nearly six months later, investors have heard nothing from the company. Unless Dr Morepen pays its fixed depositors, it cannot possibly attract investors.

Permission marketing

THE menace of telemarketers accessing mobile phones is so real that smart users are already very careful about revealing their phone numbers. There is always a lurking fear that the bombardment of marketing calls, like Internet spam and snail mail junk will create a situation where people would abandon the convenience of the mobile to avoid marketing calls.

So, when the Indian Merchants Chamber called a conference to hard-sell ‘mobile marketing,’ some of the audience was there to find out what horrors were in store for cell phone users.

But they were in for a pleasant surprise. Service providers and advertisers are extremely conscious about the prospect of killing the medium through excessive hype and the danger of alienating consumer by invading their privacy.

Andre Nair of WPP pointed out that far from being a ‘veritable marketers dream that reaches the creme de la creme of users’ (as touted by the organisers), it wasn’t even a channel for upscale users anymore. In fact, ‘permission marketing’ was their mantra, it means, no harassing consumers without their explicit permission. What is now needed is for the message to percolate down to companies who have been unleashing their Direct Selling Agents (DSA) on unsuspecting phone users.

-- Sucheta Dalal