Different Strokes

Questioning cozy relationships

GIC is discovering the `irritation’ of having outside directors who question cosyinvestment decisions of their board who comprise heads of the extended family of FIs. One chairman calls these institutions `cousins’. So when IDBI Bank was finding it tough to get investors to buy its premium public offering at Rs 18 a share, it turned to its `cousins’ and corporate houses for help. GIC’s outside directors objected, not to the investment itself, but certainly to the price at which it was offered. They expected GIC’s investment department to be savvy enough to figure out that the price would drop on listing and pick up the shares then. IDBI Bank, said one director, was clearly overpriced and even the lay person could see that it could be acquired cheaper on listing. Their contention has proved true, because the share has quoted between Rs 11 and Rs 14 ever since it was listed. The GIC management argues that if outside directors wish to meddle with investment details, they should handle the investment portfolios themselves. Why should the institutions complain? Shouldn’t they be using thepressure of outside directors as an excuse to get out of the debilitating habit of bailing out other government institutions? Institutional chiefs can either complain about behest lending and directed investment or use this as an opportunity to break free from the vicious practice.

A prayer for Rs 70,000

While the Infosys scrip continues to reach record highs on Indian bourses and on Nasdaq, its self effacing chairman Narayan Murthy still finds it difficult to make the mental transition from a middle-class professional to a super-rich entrepreneur. Murthy, who made a special trip to Mumbai to launch Harsha Parekh’s book on the role of the Internet in the scholarly communications process, spoke on how computing power had increased a million times while the prices had fallen by a factor or 20 or more. The same process of incredible change has also ensured that this modest entrepreneur — who, along with his wife had entered HDFC in 1979, with a prayer for a Rs 70,000 loan to buy a 750 square feetflat in Pune — is today worth a few hundred crores and created hundreds of millionaires among his colleagues and shareholders, in the process. That too while setting new standards of corporate accountability. The change has been so rapid that it even had the HDFC chairman Deepak Parekh expressing open regret that he had turned down Murthy’s invitation to join the Infosys board a few years ago.

Not the right way

Oriflame, Tupperware, Avon, Amway and Aviance — MNC direct marketing networks which had caught the imagination of savvy urban and semi-urban housewives and entrepreneurs — are fast beginning to lose their attraction. In most cases, it is the failure to price their products right. Except for Amway, most others have dropped their prices dramatically. Amway is going in for small unit sizes to camouflage high costs. Wouldn’t it be better if Amway spent sometime trying to figure out why distributors where returning their packs, often untouched? As for product superiority — users have yet todiscover a difference significant enough to warrant the high prices.

Author’s e-mail: suchetadalal@yahoo.com