Sucheta Dalal :Mumbai v/s Delhi (10 June 2002)
Sucheta Dalal

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Mumbai v/s Delhi (10 June 2002)  

Mumbai and Delhi are so far apart that they think and react differently to every issue. Their attitude to the VSNL controversy is no different. Steeped as it is in politics, Delhi perceives the controversy as a political spat fuelled by ministers who would like to sabotage Arun Shourie’s highly successful efforts at privatisation. For Delhi-wallahs, the prospect of Rs 1,200 crore being diverted from a former sarkari company, even before the ink has dried on the sale-deed, is apparently no big deal. That it will go into a loss-making Tata Teleservices with a doubtful future is also irrelevant. They are uninterested in the quality of investment, or issues of corporate ethics. Mumbai, the financial capital tends to be more practical. It cannot figure out how the controversy has anything to do with Disinvestment Minister Arun Shourie, who enjoys a huge fan following in the metropolis. To Mumbaikars it is a simple case of a greedy, badly timed and questionable corporate decision, which has backfired on the Tatas. By allowing the debate to take a political colour, Pramod Mahajan may allow the Tatas to get away with asset stripping, unless the stock market’s reaction acts as a check.

How VSNL crashed

Home Minister L.K. Advani may have ended the acrimony between Pramod Mahajan and Arun Shourie, but the stock market is not as willing to forgive the Tatas. On May 29, VSNL traded at Rs 183.20. Thereafter it rose inexplicably, and touched Rs 188.40 on June 3, despite a drop in net profits and the controversy. Even then, the weak futures prices gave away the fake buoyancy of the underlying price. However the prop-up attempt could not be sustained last week and the scrip collapsed. The VSNL price has cracked by nearly Rs 30 to close at Rs 159.35 on Friday. Maybe the Tatas should try listening to the market before insisting that what they are doing is correct and in the best interests of VSNL and its shareholders.

What about MTNL?

Investor Grievances Forum chief and BJP MP Kirit Somaiya is pressing ahead with his complaint against the Tatas for stripping VSNL’s assets. But we couldn’t get an answer from him about why he isn’t doing the same with MTNL, which invested Rs 250 crore in the defaulting Maharashtra Krishna Valley Development Corporation and another Rs 100 crore in ITI. An internal inquiry has apparently been launched into the investment, and will no doubt come up with a scapegoat; but it is no secret within MTNL that the decision was purely due to political arm-twisting and approved by several politicians. A new dimension was provided by a political observer who says that although contractors corner bulk of the money that is invested in MKVDC, the usual double-digit payoff is unavoidable. Meanwhile, political observers also point out that three controversial co-operative banks controlled by the Nationalist Congress Party leaders have probably provided funds for the ruling coalitions defence maneuvers.

Indophile Warburg

Japan has sent in a special flight to help evacuate its citizens from India. The USA, UK, Germany, Canada, France and Australia are indulging in hysterical scare mongering to the point that some countries are not even issuing visas out of India. So much so that the stock market which had remained relatively shockproof until recently has begun to go into a tailspin. In these circumstances, it was a pleasant surprise to find an unequivocal Indophile in Warburg Pincus. Defying the collective Western view it declared that India was ‘the best place outside the United States to invest in the world’ because of its ‘steady move to a market based economy and efforts to deregulate key sectors’. If its view is dictated by the fact that it successfully raised $5.3 billion of private equity in a ‘difficult economic environment’, Indians can only cheer at the development. Lets hope that the returns on Warburg Pincus’s investments in India match its sunny optimism about the country.

-- Sucheta Dalal