Rational Expectations

Welcome to the new millennium. Over just the last five years, the market capitalisation of the entire group of industrialists who8217;re household names for our generation, has gone down dramatically. In some cases the market cap is down to a third. The market value of the shares of companies owned by takeover tycoon Rama Goenka, a namefeared by rival industrialists in the 8217;80s, is down to around a third of what it was five years ago.

Or let8217;s take this decades8217; most respected industrialist, the late Aditya V. Birla. In March this year, the Aditya Birla group8217;s market capitalisation was exactly half what it was in March of 1994. Over the same period, the Tatas lost a third of their collective value. Paper king Lalit Thapar saw his group8217;s market cap fall to a fourth. And the Dhoots, who looked all set to reign over the emerging white goods sector, saw their companies8217; market cap fall from Rs 2,256 crore in March 1994 to just Rs 573 crore five years later. All these firms saw their fortunes revive somewhat in October when the stock market rose to an all-time high. But since you can8217;t sustain an all-time high forever, they8217;ve all bounced down again.

Rahul Bajaj has managed to just about retain the value of his group8217;s shares through aggressive expansion of his scooter-making facilities. It is, in fact, this volumes-strategy that may helpDhirubhai8217;s Reliance Petro to figure in the top 10 list in the next decade.

Who8217;s come in the place of today8217;s kings? The knowledge brigade. That8217;s firms who8217;re making their millions from their intellect and bright ideas, as opposed to the earlier size-is-everything or economies-of-scale variety of industrialists. So Ranbaxy8217;s ability to discover new drug molecules has catapulted its market cap from Rs 2,367 crore in March 1994 to over Rs 14,000 crore this October.

Similarly, Wipro and Infosys8217; promise to emerge as huge players in the global software market has resulted in each one8217;s market cap increasing around hundred times from March 1994 to now. In March 1999, in fact, Wipro8217;s market cap was Rs 18,439 crore as against Reliance8217;s Rs 16,060. The stock boom of October changed that a bit Reliance was Rs 33,076 crore against Wi-pro8217;s Rs 31,394 crore. A tenuous lead, and certain to change soon. The names are a bit difficult at first, but Wipro8217;s Azim Hasham Premji and Infosys8217; N.R. Narayana Murthy are allset to become household ones soon college students dream of becoming th-em already, just as they all wanted to become Dhirubhais in the 80s.

Now it8217;s no one8217;s case that the Ranbaxy8217;s and Infosys8217; of the world will continue in their top perches forever, or that Dhirubhai will be relegated to the dustbin of corporate history. There is a definite cyclicality about these things, and if petrochemicals was the flavour of the 8217;90s, it is possible that software and pharmaceuticals will be out of favour in another ten to twenty years. In any case, groups like the Ambanis are already trying to stitch up a communications and e-commerce empire, another industry billed to be a winner in the next millennium.

What8217;s important about this are two or three things. For one, with intellect so keenly prized in the new millennium, and venture capitalists desperately looking for ideas to back, your own wealth is no longer vital and the field is a lot more open to anyone than it has ever been in the past. Earlier this week, forinstance, Satyam Infoway, a subsidiary of Satyam Computers, shelled out Rs 500 crore to buy Rajesh Jain8217;s portal, Indiaworld.com. Oh yes, Indiaworld is just 5 years old, has a turnover of Rs 1.3 crore and profits of Rs 25 lakh. Such is the power of ideas.

Second, and more important, few of these new millennium industries require the sort of government patronage that yesterday8217;s industrialists cut their teeth on and thrived upon hurrying through your own licenses, cornering critical raw material and the likes of that are things that just don8217;t matter to the Premjis and Murthys of this world. In any case, companies such as Ranbaxy and Wipro, are really aiming at the global market, and all that they8217;re asking from government is that it stay out of their way, and come up with legislation which allows them to do business 8212; such as the one recognising electronic signatures, so vital for e-commerce. Similarly, in telecom, what firms are asking the government is that it allow them to lay their cable and othernetworks in peace.

This is the new paradigm. While politicians such as Atal Behari Vajpayee are just about learning how to incorporate new-millennium terms such as convergence8217;, bandwidth8217; and molecules8217; in their speeches, the New Industry just doesn8217;t need the government. What does government do, when the country8217;s top industrialists are not asking for favours? Simple: Just govern!