Escorts Mutual Fund

MUMBAI: UTI Mutual Fund along with National Institute of Securities Markets (NISM) on Tuesday launched a training programme called “Building an Investment Advisory Business” for its financial advisors. The programme was inaugurated by Prof. Sethu, Officer on Special Duty in-charge, NISM and Jaideep Bhattacharya, Chief Marketing Officer, UTI AMC.

The objective of the programme is to help in the transition of financial advisors from distribution to advisory. The programme will enhance the role of financial advisors from only selling mutual fund products to advising investors in choosing the right product to meet their financial goals.

With the advent of the new SEBI regulations on entry load from August 1, the role of financial advisors has become more advisory in nature rather than just pure distribution. To equip them with special skill sets like financial planning, time management, assessing risk appetite etc., UTI Mutual Fund along with NISM started this training programme for its financial advisors across the country.

On the occasion Prof. Sethu of NISM said, “This move would equip the distribution channel to serve the interest of retail investors effectively”.

MUMBAI: The 626-point fall in the Sensex on Monday would have shaved off around Rs 7,000 crore, or roughly 4%, from the equity portfolios of all mutual funds combined, based on their holdings at the end of July.

A back of the envelope calculation on the basis of stock portfolio weightage (as per July AUMs) of mutual funds reveals that key players such as ICICI Pru MF, Reliance MF, DSP Blackrock , UTI MF, Birla Sunlife MF, SBI MF, HDFC MF and Sundaram MF would have shed their equity asset base by around 3.3-4 .5% on Monday.

According to sources, the mutual fund industry is currently holding Rs 20,000 crore of cash in their portfolios, with most fund houses maintaining 8-9 % cash levels. Domestic institutional investors have bought shares worth close to Rs 3,000 crore since the beginning of this month.

“Institutional investors have begun cashing out of high beta stocks and moving into market defensives. Most fund managers have been increasing investment exposure to large-cap IT stocks, energy and pharma stocks over the past few days,” said Gopal Agarwal, equities head, Mirae Asset Global Investment.

As per first quarter shareholding pattern of India Inc, domestic mutual funds were overweight in consumer staples, industrial utilities and telecom companies in their portfolios. Underweight positions in technology, financials and materials funded their market purchases in highbeta sectors. Towards end-July and beginning of August, mutual funds tilted their portfolio to add financial services’ companies and defensives such as consumer goods and IT in their portfolios.

“The focus now is on stocks with higher safety margins. We’ve been investing in stocks keeping in mind high valuations,” said SBI Mutual Funds CIO Navneet Munot. According to Mr Munot, the market will continue to be volatile near term.

Market watchers said, apart from switching investments into low-beta sectors, mutual funds are also increasing their exposure to equity derivatives. In times of volatility, fund managers find it beneficial to allocate some part of the portfolio in extremely liquid instruments like equity derivatives where fund management strategies such as raising cash or deploying cash can be easily managed without significant impact cost.

Although, derivatives trading in India has been in existence for more than eight years, their use by mutual funds is of relatively recent origin. Previously, mutual funds could use derivatives only for hedging purposes; also, they could deploy no more than 50% of their assets towards hedging. But with changes in Sebi guidelines, mutual funds are allowed to increase net assets exposure up to 80% in the futures and options segment.

According to dealers, a few fund managers have begun trading in options market by buying ‘put options’ , anticipating a further fall in share prices.

Domestic mutual funds (MFs) invested Rs 5,548 crore ($1.14 billion) in oil & gas, metals, power, auto and information technology stocks in July, according to a report by Mumbai-based brokerage house Net Worth Stock Broking. In contrast, the five sectors that saw the maximum outflow of MF money in the month were banks, pharmaceuticals, engineering, finance and shipping. MFs sold stocks worth Rs 1,636 crore ($337.3 million) in these sectors, indicating what experts say is a high level of sector rotating to gain from the volatility in the market.
ONGC, Sterlite Industries, Tata Consultancy Services, NTPC and ITC were the top five stocks purchased by MFs. ONGC saw a net increase in exposure by Rs 1,205 crore ($248.5 million). The top five stocks sold by MFs were RIL, IDFC, Larsen & Tubro, Cipla and HDFC Bank. MFs decreased their net exposure in RIL by Rs 998 crore ($205 million) during the period.
“Sector rotation by MFs has increased due to high volatility in markets. While valuations in the oil and gas sector were cheap, power stocks were in focus mainly due to the initial public offers by Adani Power and NHPC. Similarly, information technology (IT) saw a boost in inflows as the third-quarter results of IT companies were good. The global rally in commodities and improvement in consumer confidence is behind the rise in investments in metal and auto sectors,” said Sameer Narayan, head of equities at Fortis Investments, which manages over Rs 10,000 crore in equities.
During July 2009, the total equity assets under management (AUM) of the MF industry rose 5.29 per cent, while the broader equity benchmark index, Nifty, moved up by 8.05 per cent.
Cash levels of MFs in equity funds increased 2.19 per cent to Rs.25,167.2 crore ($5.19 billion) from Rs. 24,628.2 crore ($5.08 billion). The overall equity cash level of the industry is 14.6 per cent of the total AUM. However, the equity plus debt cash level saw a massive increase of 92.1 per cent in July to Rs 70,465.9 crore ($14.52 billion).
According to Sanjay Sinha, chief executive officer (CEO) of DBS Chola MF, unattractive yields at the end of July was the main reason MFs did not invest in debt schemes. “A majority of inflows into debt schemes of MFs in July came in the last week of the month, when yields on debt papers were lower.”
http://www.business-standard.com/india/news/mutual-funds-rotate-stocks-to-gainvolatility/367275/

(MFs) sold shares worth a net Rs 681.80 crore on Monday, 17 August 2009, as against an inflow of Rs 258.50 crore on Friday, 14 August 2009.
MFs' net outflow of Rs 681.80 crore on 17 August 2009 was a result of gross purchases Rs 499.60 crore and gross sales Rs 1181.40 crore. The BSE Sensex tumbled 626.71 points or 4.07% at 14,784.92 on that day.
MFs sold shares worth a net Rs 756.70 in August 2009 (till 17 August 2009). MFs had bought shares worth a net Rs 1825.50 crore in July 2009.

HYDERABAD: Insurance regulator IRDA will make it mandatory for all insurers to disclose their financial statements to the public, even if they are not planning to get listed on stock exchanges

“We have sent a proposal to the government, as we reckon that insurers should make public disclosures, irrespective of whether or not they plan to launch initial public offerings. Disclosures will apply to both public and private insurers,” IRDA chairman J Hari Narayan told ET.

The proposed move will bring in transparency and enable policy-holders to gauge the financial strength of insurance firms. It will also help potential investors assess the strength of a company that plans to launch an initial public offering (IPO).

Currently, insurers furnish quarterly statements to IRDA, but this is not in public domain. Most life insurance companies are yet to start making profits, a fact that many policy holders may not be aware of in the absence of financial statements.

Holding companies of insurance firms that are listed on the stock exchange, however, make certain disclosures on their subsidiaries, based on the norms stipulated by market regulator SEBI. If the government accepts the insurance regulator’s proposal, the country’s largest state-owned insurer Life Insurance Corporation and other private insurers will have to make public disclosures of their quarterly statements, among other things.

“Furnishing a balance sheet and a profit and loss account should not pose a problem and is a good start. IRDA will have to specify the norms for disclosure, including the format and so on,” said a chief financial officer of a private insurance firm, who wished not to be named.

The existing disclosures of insurers to the regulator also include providing information on investment portfolios at regular intervals, besides financial and operating ratios such as incurred claim, commission and expense ratios.

Companies also need to disclose their actual solvency margin (ability to repay claims), policy-lapse ratio, current financial position and their risk management architecture to IRDA, besides all related party transactions.

Policy lapse ratio refers to the percentage of the life insurance company’s policies in force at the beginning of the year that are no longer in force at the end of the year. This ratio is critical, as it indicates the rate at which policies are going off the books and the resultant loss of earnings to the company.

The existing insurance law allows only companies that have completed 10 years of operations to launch an IPO. Companies planning to launch initial public offerings (IPO) to raise capital will have to make additional disclosures including their valuation, product offerings and their distribution channels. There are 42 insurance firms operating in India, with total assets under management (AUM) of over Rs 9 lakh crore.
http://economictimes.indiatimes.com/Personal-Finance/Insurance/Insurers-may-have-to-make-financials-public/articleshow/4908654.cms

Crop, cattle insurance go hi-tech

MUMBAI: With traditional forms of farm insurance being subject to a high degree of moral hazards, insurers are relying on technology. Iffco Tokio General Insurance, which is promoted by the largest fertiliser co-operative in the world, is working on a pilot scheme where crop insurance claims would be settled, based on vegetation images provided by US satellites.

Besides to reduce fraud in cattle insurance, the company will inject radio frequency identification device (RFID) tags into insured animals to ensure the veracity of claims.

Speaking to newspersons, Iffco Tokio General Insurance MD S Narayanan said: “We have been providing weather index-based crop insurance cover for farmers for some time. But claims are prone to manipulation at the ground level.”

He added that to overcome this hurdle, the company was running a pilot project with the assistance of International Labour Organisation where NASA’s satellite imagery is used to arrive at the Normalised Difference Vegetation Index, the difference in the green cover over a specified area over weeks.

“The data is available for areas as small as 250 square meters and can be used to assess whether there is a crop failure or not,” said Mr Narayanan. He said in addition to NDVI, rainfall and temperature variations were also considered.

According to Mr Narayanan, insurers are not able to process claims based on the reduction in output because there are a number of factors within the control of the farmer that affect agri production. The satellite image-based assessment is being done on a pilot basis in Chhattisgarh and is yet to be launched as a formal product.

Mr Narayanan was speaking to the media at the launch of Iffco Tokio’s new health insurance plan Swasthya Kavach, a health insurance policy that provides wider cover, including medical evacuation benefits by offering a low-cost package for nuclear families.

Along with the weather insurance, Iffco Tokio is also innovating cattle insurance, another area where insurers are facing moral hazards as farmers make claims for the death of uninsured cattle by passing off an uninsured animal as one that is covered. “The technology for identifying animals has moved from hot branding, to ear tags but none of these are adequate,” said Mr Narayanan.

The RFID programme is also a pilot project being run in Mehsana and Khurda districts in Orissa. Mr Narayanan said there were objections from some farmers for the RFID tags being injected. “If they do not want the RFID tags, we do not want them as customers” he said.

Insurance Australia told to bring money through Singapore for transparency
The government and financial sector regulators have prevailed on Insurance Australia Group (IAG) to route its investment in a general insurance venture with State Bank of India through Singapore, instead of the original proposal to bring the money through a Mauritian subsidiary.
Sources involved with the finalisation of the joint venture confirmed the development and said the investment through Singapore would still make IAG eligible for tax benefits, under India’s Comprehensive Economic Cooperation Agreement (CECA) with the city-state.
IAG’s investment in the joint venture, in which it would hold 26 per cent, is estimated at Rs 540 crore, including an entry premium.
According to sources familiar with the development, the regulators wanted transparency in the transaction, especially because it involved the country’s largest bank, which is also a public sector player.
When contacted, an IAG spokesperson said he would respond to the questions as soon as possible.
Although the tax benefits under CECA are the same as those offered by the Double Taxation Avoidance Agreement with Mauritius, the Indian government had ensured that companies do not use Singapore merely to avail of fiscal incentives. As a result, a clause has been inserted in CECA allowing only companies with a presence for a specified number of years and having invested a certain sum of money to be eligible for tax benefits.
The sources said following SBI’s assurance, the Insurance Regulatory and Development Authority (Irda) has given the general insurance venture first-stage approval. SBI Chairman Om Prakash Bhatt recently said the company was expected to start operations by the end of the year.
The joint venture can take the advantage of more than 15,000 SBI branches across the country to distribute its non-life products. The large branch network has helped SBI Life Insurance, the group's life insurance venture, become the first private sector player to break even in 2006-07.
India currently has 21 general insurers. Among new general insurance players which entered the sector are Raheja-QBE, which started operations in April 2009. The joint ventures of Religare-Swiss Re and Max Bupa are also expected to enter the health insurance market in 2009-10.

Haldia Petrochemicals may get Rs 310 crore insurance claim for a fire that engulfed a part of the mother plant on July 2 this year.
According to a senior insurance company executive, the plant is insured by four companies, New India Assurance, National Insurance, United India and ICICI Lombard Insurance Company.
Out of Rs 310 crore, Rs 100 crore is for loss of property while the rest, Rs 210 crore, is for loss of profit. The plant is likely to suffer 30 per cent loss of capacity because of the accident, affecting the company’s profitability in 2009-10.
Ram Prasad, general manager, General Insurance Corporation (GIC), said the reinsurer would bear a part of the total claim but did not know the exact amount to be paid. The company could not be reached for comment.
An executive of a public sector company that has insured the plant said that the exact loss because of damage to plant and machinery was not known. However, he said it could be around Rs 300 crore.
The fire had destroyed a boiler within the naphtha cracker complex and caused collateral damage.
However, no loss of life was reported when the furnace of the naphtha cracker unit caught fire. The plant is 125 km from Kolkata. The company said the plant caught fire due to apparent malfunctioning of some control systems.
The company had posted a loss in 2008-09 after reporting profits for the last five years. It posted a loss of Rs 275 crore as compared with a profit of Rs 279 crore a year ago. Its profits were affected by the 5 per cent import duty on naphtha and the global financial turmoil.

State Bank of India, the country’s largest lender, is set to flood the market with a host of sector-specific private equity funds focused on stressed assets, real estate and small and medium enterprise in addition to a venture capital fund.
This is in addition to the $3 billion (around Rs 15,000 crore) infrastructure fund being set up in association with the Macquarie group and International Finance Corporation.
While SBI and Macquarie would hold 45 per cent each in the fund, IFC’s stake would be limited to 10 per cent. The fund has already received commitment for a little over $1 billion (over Rs 4,000 crore) and the rest of the funding was close to finalisation, bank sources said.
They added that some projects had also been identified and the fund would start investments soon. “We do things on a large scale. The investment opportunity is large and it will help finance infrastructure development in the country,” SBI Chairman Om Prakash Bhatt said.He added that the bank was in the process of setting up an asset management company to manage these private equity investments.
While the Reserve Bank of India had expressed certain concerns over SBI’s private equity investment, Bhatt said regulatory approval had been received. “The delay is now on our part. We have to receive board clearance to operationalise the funds,” said Bhatt.
Though SBI would be a late entrant to the private equity space, Bhatt was confident that it would not be a deterrent.
For instance, in the infrastructure space, IDFC Project Equity already has a presence through a fund with a corpus of close to $1 billion and it has invested around $250 million (around Rs 1,000 crore) from the fund.
Similarly, UTI Asset Management Company has also set up a $500-million fund in partnership with Germany’s HSH Nordbank and Kuwait’s Noor Financial Investment Company.
In addition to the infrastructure-focused funds, the other private equity players are also eyeing the space. But SBI executives said that the focussed funds would look at a longer time horizon than the other players who were looking to maximise returns over the short term.
Similarly, in the other sector-specific space, such as real estate, a host of dedicated funds already have a presence and SBI would have to battle it out. “The requirement is very large,” Bhatt said.
In case of segments such as stressed assets, companies such as Tata Capital are also planning a foray. Tata Capital, the non-banking finance company promoted by the Tata Group, is close to tying up capital, though it has refused to disclose the size of the fund.

Hope for better
If the held-to-maturity cap is raised, then headroom gets created and banks will be comfortable investing and trading in government securities

Our Bureau
Mumbai, Aug. 18 In order to push through the gargantuan Government borrowing programme, the Reserve Bank of India may have to throw-in a sweetener by allowing banks higher headroom for parking securities in the ‘held-to-maturity’ or HTM bucket.
By doing so, banks would be encouraged to participate in the auction of Government securities without having to worry about mark-to-market provisioning towards depreciation in the prices of securities in the current scenario when yields are rising (that is prices are falling).
The Union Government’s gross budgeted borrowing programme at Rs 4,91,044 crore in the financial year 2010 is 54.2 per cent higher than the previous year’s Rs 3,18,550 crore.
Banks are permitted to park SLR (statutory liquidity ratio) securities not exceeding 25 per cent of their demand and time liabilities in the HTM bucket (investments acquired with the intention of holding them till maturity are categorised as HTM). However, most banks are currently full up on this count, that is, they are not in a position to accommodate fresh investments in this category. SLR securities include Government securities and State development loans.
As against the regulatory prescription of maintaining minimum SLR investments at 24 per cent of their net demand and time liabilities, banks, especially the nationalised ones, are believed to be holding excess SLR investments, 300 basis points over the minimum statutory requirement. Hence, they are forced to park excess SLR investments in either the Available for Sale (AFS) bucket, which has mark-to-market provisioning implications, or the Held for Trading (HFT) bucket, which requires securities to be sold-off within 90 days of being bought.
“Given that yields are hardening and there is hardly any room left in the HTM bucket for parking securities, there is no reason why banks should invest in Government securities and book MTM losses. If the HTM cap is raised, then headroom gets created and banks will be comfortable investing and trading in Government securities,” said Mr S. Srinivasa Raghavan, Head, Treasury, IDBI Gilts.
Currently, banks are sitting on a pile of SLR investments as credit growth is still slack. In the run-up to the end of the second quarter, most banks had reached the limit on the HTM portfolio and bank treasuries are uncomfortable with the idea of adding to their investment portfolios as they are subject to market risk, a bond dealer with a public sector bank said.
In the backdrop of the huge budgeted Government borrowing, expectation that poor agricultural production may force the Government to go in for additional borrowing, and inflation seen nudging up from September onwards, market players are bidding for securities in auctions at higher yields (or lower prices), thereby, reinforcing the bearish undertone in market.
Further, market players view the RBI’s rejection of all bids submitted at the August 7 auction of three Government securities for raising an aggregate amount of Rs 12,000 crore as an indication of its discomfort with the higher yields quoted by bidders.
According to bond market dealers, the prospective upturn in the interest rate cycle, possibly towards the last quarter of the current financial year, has already been discounted by the market.

Our Bureau
Mumbai, Aug. 18 The Securities and Exchange Board of India said that parity in the exit load structure in the case of all investors should be made applicable at the portfolio level.
There are funds that have different plans for retail and institutional clients (for example, plan A and plan B) for the same scheme, said a fund manager.
The plans would charge different exit loads as one would be for retail and another for institutional, despite the underlying portfolio of stocks being the same in both options, he explained. According to the new mandate, it seems that this would now not be allowed, he added.SEBI, in a circular, has also clarified that mutual funds should comply with charging the same exit load to all classes of unit holders on or before August 24.
Early this month, SEBI had asked mutual funds to charge all classes of investors the same exit load. This would mean that mutual funds cannot charge differential exit loads for retail and institutional investments.

The National Stock Exchange (NSE) is likely to launch interest rate futures in a few weeks, Managing Director and Chief Executive Officer Ravi Narain has said.
“We are working towards the launch of interest rate futures very shortly, hopefully in a few weeks,” Narain said at a risk management summit organised by the Confederation of Indian Industry.
The exchange was waiting for approval from the regulator, the Securities and Exchange Board of India (Sebi), he said.
A joint technical committee of the Reserve Bank of India and Sebi had, in June, recommended allowing interest rate derivatives based on 10-year government bond yields.
Meanwhile, the NSE was working on the modalities of forming an SME exchange, Narain said.

Sebi should change the way issues are graded, say experts.
Perceived as the quality gauge for public issues, grading of initial public offers (IPOs) has failed to make a major impact either on the investment rationale of retail investors, or the wealth created by the underlying companies post-listing.
In fact, the higher the grade of an IPO, the poorer has been its performance in the market. Companies such as Reliance Power, Edelweiss Capital and Gammon Infrastructure, which were rated four out of five (meaning above average fundamentals), have posted losses in the range of 46 to 56 per cent. And, nine out of 10 which were similarly graded lost more than 40 per cent, according to a report from SMC Capitals.
During 2007 and 2008, the boom years for IPOs, investors hardly took cognisance of ratings assigned to a particular company. And that was the reason why some of the companies with even absolutely low ratings managed to gather stellar subscription figures.
Despite opposition from several quarters, the Securities and Exchange Board of India (Sebi) had made it mandatory for all IPOs to be graded by rating agencies from April 2007 onwards. After a company gets Sebi approval for an IPO, it has to rope in rating agencies such as ICRA, Crisil, Fitch and CARE to get the issue graded.
According to Sebi guidelines, an IPO grade cannot be rejected. Irrespective of whether the issuer finds the grade acceptable or not, the grade has to be disclosed as required under the DIP guidelines. However, the issuer has the option of getting its issue graded by another rating agency.
“Investors have completely ignored IPO grading... In my view, equity as an instrument cannot be graded. It is a risky asset class and one needs to capture a lot of other factors apart from the ones listed in the draft red herring prospectus (DRHP). Though India is the first country to introduce IPO grading, it has not served its basic purpose,” said Prithvi Haldea, managing director, Prime Database.
Recently, Sebi chairman CB Bhave had said that the regulator would review the IPO grading concept as it had gained some experience after receiving both positive and negative responses on the move.
Though there was a view that Sebi should scrap it, experts said that the regulator would bring in some changes to the way grading was being done rather than doing away with it.
“Grading has not really caught on with retail investors as it was intended to be. Retail investors still get carried away by the herd syndrome. Rating agencies are mainly concerned with vetting the DRHP. They do not evaluate it as an investment proposition. Pricing of the issue is an important part, which is not covered by rating agencies while grading an IPO,” said Kavita Shah, senior vice- president, Collins Stewarts Inga.

Our Bureau
Mumbai, Aug. 18 The Securities and Exchange Board of India has settled the case against foreign institutional investor JP Morgan Investment Management on consent term in the matter of its alleged failure to notify the change in its sub-account’s name – JP Morgan Fleming Emerging Markets Equity Fund to JP Morgan Emerging Markets Equity – immediately after the change of name.
JP Morgan’s proposal for consent settlement of the matter without admission or denial of guilt was settled on payment of Rs 3 lakh towards settlement charges and Rs 25,000 towards administrative charges by the SEBI’s High Powered Advisory Committee, a SEBI order said.

Our Bureau
New Delhi, Aug. 18 Corporation Bank’s retail customers with debit cards can now make income-tax payments through any of the 1,037 ATMs of the bank.
Billed as a first-of-its-kind service in the banking industry, the facility was launched by the Finance Secretary, Mr Ashok Chawla, in the capital on Tuesday.
The CBDT Chairman, Mr S.S.N. Moorthy, the bank’s Chairman and Managing Director, Mr J.M. Garg, and senior officials from the bank and the Income-Tax Department were present at the occasion.
Corporation Bank has four million debit card holders, of which about two million (with PAN) can pay income-tax through ATMs, said Mr B.R. Bhat, General Manager of the bank.
To avail this facility, a customer would need to make a one-time registration (either online or at a branch) and provide details such as debit card number, Permanent Account Number, challan number, e-mail ID, mobile number and name and address of the assessee.
After the registration, the customer can go to any Corporation Bank ATM, select the tax payment option in the main menu and opt for “direct tax payment”.
Once details such as assessment year, name are confirmed, the customer’s account will be debited and a message conveying that the transaction was successful will be displayed on the screen.
Confirmation
ATMs will generate an acknowledgement for the tax payment. The customer will also get an SMS and instantaneously receive an e-mail with the details.
Speaking on the occasion, Mr Chawla said the new facility provides a simple method for payment of income-tax. “It would help Corporation Bank get more loyal customers and at the same time increase revenue collections for the income-tax department,” he said.
The Finance Secretary said he hoped other banks will also implement a system of paying tax through ATMs.The Chairman of the Central Board of Direct Taxes said payment of income-tax should become a habit.
Describing the latest facility as a “revolutionary step”, Mr Moorthy said he foresees a scenario where all tax payments could be e-enabled in the next couple of years.
http://www.thehindubusinessline.com/2009/08/19/stories/2009081951550600.htm

Chennai, Aug. 18 From his late-teens days in 1976 to 1981, says Mr Sunil Bharti Mittal, there were only failures in life. Then, in an exhibition in Taipei, he saw a push-button telephone.
The Chairman and Group CEO of the Bharti group of companies recounted his early days of hope and perseverance while delivering the ‘Anantharamakrishnan Memorial speech’ after accepting the ‘17th Amalgamations MMA Business Leadership Award ’08-’09, instituted by the Amalgamations group and the Madras Management Association.
Among the audience were Mr R.C. Bhargava, Chairman, Maruti Suzuki Ltd, and Mr Venu Srinivasan, Chairman and Managing Director, TVS Motor Company Ltd, and Mr Mittal’s early entrepreneurial life touched both the companies.
He said how, despite his desperate attempts, he failed to get a Maruti dealership in Ludhiana and how, later, he did get a TVS Suzuki dealership, but which floundered in the “Hero Honda territory”.
Learning that the previous recipient of the MMA award was Mr Brijmohan Lall Munjal (in 2002), Mr Mittal said Mr Munjal was his guru to whose companies he used to supply bicycle crankshafts and would borrow ‘Rs 5,000’ from time to time.
From those early stages to being the country’s third largest company by market capitalisation (indeed, Mr Mittal, said, if the MTN deal goes through, Bharti will be the third largest telecom company in the world), Bharti group grew by struggle, hard work and “divine blessings and proper alignment at home.”
‘Risky bet’
As a company of Rs 25 crore turnover and Rs 5 crore profit in 1991, Bharti Telecom took a big bet in the face of competition from “big boys” to enter telecommunications.
When the Government announced its intention to throw open mobile telephony to the private sector in 1992, Mr Mittal said that he knew “it was my moment to seize”.
Fourteen companies bagged the bids and the only surprise winner was Bharti, which made it on the strength of its technical presentations in four circles.
“Then came Minister Rajesh Pilot and said, ‘one company, one circle’ and instead of being disappointed we were delighted,” because Bharti knew it could handle only one circle.
Raising resources
Despite the big challenge of raising resources to fund growth — against its initial estimates of Rs 100 crore, Bharti soon discovered it needed thrice as much — the emerging telecom giant knew that it only had wait out the competition whose business-model was burdened by heavy bid fees.
Thus, came opportunities to buy SkyCell in Chennai and Spice in Kolkata, but still as more players were allowed in each circle, competition became intense. Mr Mittal said Bharti reckoned it needed about 10,000 people to man its business, and there was no way it could take so many in and train them.
Those were the days when “whoever walked through the front door was given a rifle and a uniform and sent to the battlefront”. Out of this need was born the “leap of faith” into outsourcing. When Bharti gave its network management to Nokia, and IT to IBM “there were gasps all over”.
Many asked, “are you out of your mind to give your network to outsiders,” but today “this model has been adopted by the globe.”
http://www.thehindubusinessline.com/2009/08/19/stories/2009081951240200.htm