How Corporate India’s moments of pride,
greed, envy, lust, gluttony, wrath and sloth played out in the year that was
Self-interest
prevailed unashamedly and unambiguously in the year that was. India walked away from the Regional Cooperation
Economic Partnership with Asia-Pacific nations to protect domestic farmers and
industry from a flood of cheap imports. Survival superseded consensus. The
surgical strike on corporate tax by eight percentage points propelled India
into the competitive league despite some dissent of cash handout being a better
incentive to propel consumption and investment. Strike-back replaced
compromise. Energy producers, staring at bankruptcy due to state power
distributors’ reluctance to pay, took the lenders to court for clubbing them
with other sectors to determine their solvency.
Self-preservation overrode commitment. Auditors and financial heads of
several companies preferred to quit rather than acquiesce to dodgy numbers. Nationalism
co-existed with political correctness. As capital of Rs 70000 crore was being infused
into non-performing public sector banks, the Reserve Bank of India was pulling
them up for under-reporting of their bad loans. The wealth destruction
accompanying the auto sector’s painful transition to new emission norm to face
the challenge of climate change was met with resigned acceptance by investors
even as the contention that the plunge in sales was also due to buyers’
resistance to the ramp-up of retail prices gained some traction. With survival
at stake, companies adopted desperate strategies to stay relevant. Telecom players
grappled with issues such as the duration of the ring-tone and if the originator
of calls should pay any fee to the receiving service provider. The drying up of
liquidity following the collapse of IL&FS late 2018 torpedoed the
transmission of the central bank’s rate cuts, with NBFCs mopping up funds above
the benchmark.
Pride suffered
a blow. The fastest-growing economy was toppled from the pedestal by small
economies in the neighborhood. The smugness that foreign investors have little
option but to invest in India was busted when the first budget of the re-elected
government hiked the surcharge on the tax on the super rich. The decision of a
committee that the RBI should hand out a bigger payout to the treasury
deteriorated into a contest of greed versus prudence. The access to funds was
viewed as a lazy option to expend on fiscally damaging but socially relevant
programs without taking the difficult road to grow revenues. On the other side
of the coin was relief that the government’s market presence would be
curtailed, leaving room for private borrowers. The wrath of the lenders, who
refused to grant more roll-over of their repayment schedules, grounded a full-service
air-carrier on the promoter’s reluctance to cede control. Among the receiving
end of investors’ ire were mutual funds signing standstill agreements with
borrowers unable to service their debt and the market watchdog for absolving
fund managers by allowing separation of toxic paper to protect the NAV. The
gluttony of two promoters of hitherto thriving enterprises in the banking and
media space to add to the top line by pledging their shares dragged down their
stocks and eventually led to their departure from their ventures nurtured from
scratch.
IPOs, good
and mediocre, got bumper subscriptions, capturing the lust for quick gains. Who
was the suitor and who was wooed was a topic of speculation following Saudi Aramco
agreeing to take up to 20% stake in RIL: the Saudi government-owned oil
explorer had to justify to subscribers of its IPO the intended US$2-trillion
valuation, at a time of down-trending crude prices, with additional income
streams. The Indian oil-to-retail conglomerate needed to pare debt to raise more
resources to drive the telecom business, a potential cash-cow. In contrast, the
other marriage of convenience was forced than voluntary. Ten PSU banks were
merged into four to make them attractive to prospective suitors. Envious of its
unique entrepreneurial model, a construction conglomerate launched a hostile
bid for a tech solutions provider that was rocked by stake-sale by one of its cash-strapped
promoters to service the debt of his floundering quick-service restaurant chain. Angry whistle-blowers played no small part in
the regulator refusing its nod to a housing financier to merge with a legacy
private bank and knocking down the valuations of an IT solutions provider and a
drug maker, two heavyweights of the headline marker. How sloth can result in
miscalculation was illustrated by telecom services providers who threatened to
close down when asked to pay their share of under-reported revenues to the government
instead of cutting flab and admitting that their business model of relying on
voice calls at the expense of data had misfired. Indeed, the mainline indices
hitting record highs even as mid and small caps languished as 2019 came to an
end told a tale of a year that was disruptive yet riveting.
-Mohan Sule
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