For India’s second-largest software exporter, 2017 was a testing year in terms of corporate governance. The first non-promoter CEO , Vishal Sikka, quit amid a welter of whistle-blower accusations involving irregularities in a deal to buy an Israeli firm, an over-generous pay package and underperformance, which pulled down the stock price. Sikka’s exit was followed by several board stalwarts who had backed him. Ranged against him was, principally, N R Narayana Murthy, the elder statesman among the seven co-founders, who had anointed the choice of Sikka back in 2014 and now accused him of cover-ups and worse. Sikka’s exit in August saw an interregnum during which co-founder Nandan Nilekani stepped in as non-executive chairman, and U B Pravin Rao, the COO, as interim CEO to steady the ship. By December, the company announced the appointment of Capgemini executive Salil S Parekh as CEO and managing director. Parekh will take charge in January 2018 at a time when the external environment for Indian IT companies
is becoming more challenging than ever.
After the ructions of 2016 between Ratan Tata and Cyrus Mistry, Tata’s successor as chairman of Tata Sons, which controls the Rs 673,347-crore group, Natarajan Chandrasekaran, 54, became the first professional executive to be appointed to the post. The former chairman of blue chip TCS, Chandrasekaran formally took charge in February this year and approached with professional efficiency the group’s multiple legacy hotspots. In September, he negotiated the long-drawn deal to merge Tata Steel Europe, relic of the expensive 2007 Corus acquisition, with Germany’s thyssenkrupp AG. By October, he had rid the group of the loss-making Tata Teleservices, handing it virtually free to Sunil Mittal’s Airtel, and decided to phase-out the small car, the Nano. The affable marathon runner is also ensuring that expansions have a business case. “I have clearly stated the emphasis on returns and capital allocation, but that does not mean we will exit a business that does not meet our targets,” he said in a recent interview to Tata Review. In 2018, expect the Tata group to bid for Essar Steel, the Taj Mansingh hotel property in Delhi and for Air India.
General Motors drives out
One of the earlier foreign car-makers to enter India after delicensing, Motown major General Motors announced in May that it would stop selling cars in the country, one of the world’s five largest markets, by the end of this year and focus instead on exports. To this end, it will retain its research facility in Bengaluru and consolidate its production line Talegaon, Maharashtra. Ahead of that, the company closed its plant in Halol, Gujarat, which is being sold to M G Motor India, a subsidiary of China-based SAIC Motor Corporation. GM cars were first sold under the Opel brand, and later Chevrolet. It never managed to make major inroads, however, and market share has dwindled to 1 per cent.
Nine years from its controversial beginnings and underwhelming performance, the car model that riveted world attention as the world’s cheapest car has all but exited the market. Rumours of its imminent demise did the rounds through most of 2017 and by the middle of the year dealers in most parts of the country had stopped accepting orders for the small car. Average daily production had dwindled to two a day, and by the festive month of October factory dispatches had dropped to 57 units. The Nano will be replaced by an electric car, for which a joint venture is in the works, but that will be called Neo, indicating a break with the past.
Son rises on Uber, Ola
Ola’s Bhavish Aggarwal, Uber’s Dara Khosrowshahi and Softbank’s Masayoshi Son
Top cab aggregators, Ola and Uber, now an essential part of our lives, have been making news
for fund-raising, business expansion, regulatory face-offs, surge pricing and suchlike. But two key developments in 2017 could change the competitive paradigm for the big rivals in India. In October, Bhavish Aggarwal-led Ola raised $2 billion from a clutch of investors including from Japan’s SoftBank led by Masayoshi Son, and China’s Tencent. In November, San Francisco-based Uber agreed to accept a $1 billion investment from SoftBank. Undaunted by the prospect of having a major investor in his company take a stake in his rival, Aggarwal went ahead and acquired food delivery major FoodPanda in an all-stock deal, committing to invest $200 million in the space. So ride-hailing apart, 2018 could also be all about UberEats vs Ola-FoodPanda.
changed the dynamics of the telecom industry quite so decisively as Mukesh Ambani’s Reliance Jio. Last year, its free soft launch roiled competitors enough to complain to the regulator, to little effect. This July, its formal launch extended the juggernaut by dropping data prices over 95 per cent and making voice calls free. In less than a year, India became the world’s largest data market, overtaking the long domination of US. The average consumer started using five times more data (1 gigabyte) than he did before. Total usage hit over 200 million GB a month. Jio not only grabbed 150 million subscribers from incumbent operators, it also forced many players like Telenor, Sistema and now RCom to call it a day. But by offering customers mobile services free and then charging them after a few months, it also caused its competitors to face serious financial problems, burgeoning debt and mega-consolidation, making Indian telecom a four-player market.
In October, a single deal enabled Tata Sons Chairman N Chandrasekaran to rid the group of its unviable mobile telephony business and offered Bharati Enterprises’ Chairman Sunil Mittal a way to combat Reliance Jio’s deep-pockets by acquiring virtually free Tata Tele’s mobile business customers. This apparent win-win arrangement involves the merger of the consumer mobile businesses of Bharti Airtel with Tata Teleservices Ltd and Tata Teleservices Maharashtra Ltd on a “debt-free, cash-free” basis. At one stroke, this deal gives Bharti 40 million customers in 19 circles, plus access to scarce spectrum. Bharti has, however, agreed to take over a “small portion” of Tata’s unpaid liabilities for spectrum acquired in government auctions. This is a negligible price to pay to see market share go up to 41.5 per cent and revenues jump 10 per cent.
Wired for competition
Aditya Birla group’s Kumar Mangalam Birla and Vodafone’s Vittorio Colao
In March, the country’s second- and third largest mobile service providers, Vodafone India and Idea Cellular, owned by the Aditya Birla Group, announced a merger to create what would have been India’s largest telecom operator with a 35 per cent market share (the deal preceded Bharti’s virtually free acquisition of Tata Teleservices). Vodafone will own 45.1 per cent of the merged company and the Aditya Birla group will own 26 per cent, after paying Rs 3,874-crore cash for a 4.9 per cent stake. With the competition regulator approving the deal in July, the stock market regulator in August, only the green signal from the National Company Law Tribunal is awaited. The merger is expected to be completed by early next year. 2018, then, will see the battle of the Big Three.
Flipkart, Snapdeal: Frenemy action
Flipkart’s Kalyan Krishnamurthy and Snapdeal’s Kunal Bahl
The biggest merger in Indian e-commerce — between Flipkart and Snapdeal — was left undone after prolonged talks between stakeholders failed. While Snapdeal continues in sort of a miniature avatar, Flipkart strengthened its war-chest with $2.5 billion from SoftBank Vision Fund, a tech-focused venture fund . With that, Japan’s Softbank now holds a fifth of the Sachin Bansal and Binny Bansal-founded Bengaluru firm and is the biggest investor in the Indian internet space. Flipkart has dismissed “rumours” about the exit of Kalyan Krishnamurthy, a former Tiger Global executive, as CEO. But those are smaller issues for the e-commerce leader focused on fighting Amazon, which is ready to double its India investment any time.
From Russia, with funds
Essar group’s Prashant Ruia
Ten months after it was announced in October 2016, Russia’s largest oil producer completed the buyout of the Indian assets of Essar Oil from the debt-laden Ruia-controlled Essar group. At $12.9 billion for 20-million- tonne refinery at Vadinar, Gujarat, a captive power plant, a port and 3,500 petrol pumps, this represents the largest foreign direct investment deal for India and the largest outbound investment for Russia. Rosneft now has a 49 per cent shareholding in Essar Oil and an investment consortium of Trafigura, a Singapore-based commodity trading major, and UCP, a Russia-focused asset management company, has acquired another 49 per cent. The sale helped the Essar group reduce its debt to Indian and foreign banks by almost 60 per cent.
Weeks after a vote of confidence from a 30-place jump up the World Bank’s Ease of Doing Business rankings, Japanese auto major Nissan announced that it would begin arbitration against India seeking $700 million for the non-payment of state incentives as part of a 2008 agreement to set up, in alliance with Renault, a manufacturing plant in Tamil Nadu. The arbitration has been filed under the terms of the Comprehensive Economic Partnership Agreement with Japan. The two auto majors had invested $946 million and the incentives were to kick in from 2015. A legal notice was sent to Prime Minister Narendra Modi last year, but Nissan had not received the payment despite multiple assurances, the company’s lawyers said. With the Nissan arbitration, India become the leading nation for the number of such cases (over 20) against it.