Let's move the cheese together
Tata Sky gets shortchanged with its Zee agreement

(column by Smita Polite, Sreoshi Ghose)

The Zee-Star war saga has all the makings of a daily soap opera with its twists and turns. The latest happening on this front is Direct-to-Home (DTH). Late April 2006 saw Zee, which commands a strong market position with its brand Dish TV, and Star, which owns Tata Sky (an 80:20 JV with the Tatas), planning to join hands. According to a TAM report, India has 117 million TV owning homes, out of which around 71 million have cable and satellites, and 2.26 million are DTH homes. The number of cable operator set top boxes are 0.8 million. And DD & DishTV are the undisputed leaders. Dish TV launched in 2003, and had invited Star and Sony to broadcast their channels through their platform; this was in tune with a December 2004 TRAI mandate advising DTH participants to make all channels available to each other without bias. Jawahar Goel, Vice-Chairman Essel Group (Zee promotors), confirmed, "Dish TV has already approached Star and Sony." Despite TRAI rulings, Star had declined the offer then. But now, would the new rapprochement be gainful to both Zee's Dish TV & Star's Tata Sky? Tata Sky plans to woo consumers with in-house staff ; Tata Sky has also come with a prepaid model similar to that of cellular services. However, the fact is that Dish TV already has a massive dealership network of 4,500 dealers; an advantage that Tata Sky would find extremely hard to cover up. The only critical advantage that Tata Sky had was direct access to programming. Sadly, even this advantage would be frittered away by joining with Dish TV. Analytically speaking, apart from forecasted advertising revenues, the effect of this planned joint co-opetition move can be summarised for Tata Sky in one word: Losses!

(End of Smita Polite, Sreoshi Ghose column)

Cementing the headquarters
L&T's must control operating costs; lest more assets get sold

When you decide the right way ahead, you must stick by it. In that context, Larsen & Toubro's (L&T) recent move to sell off 21.6% stake in L&T Infrastructure Development Projects Limited to private equity players led by JP Morgan Chase, seems to be doing the contrary. After all, the company had decided previously to be focused on its core business of infrastructure after a series of unsuccessful diversifications. Analysts have already started commenting on how this sale finally marks the beginning of the end of L&T's infrastructure business. Factually, the infrastructure sector remains the mainstay for L&T, contributing revenues of Rs.112.78 billion, that is, 85% of total group revenues for year ending March 31, 2005 (growth by 7% yoy). Total corporate revenues increased by 35% yoy to Rs.132.69 billion in the same period.

The gross corporate revenues for the period April-December 2005 grew by 14% to Rs.102 billion. But despite profit after tax for the quarter ending December 31, 2005, increasing by 41% to Rs.1.8 billion, what motivates L&T to sell its stakes in its core business spaces? The answer could well lie in the number of order backlogs L&T has started suffering. The maximum order backlogs occurred in 2005, which surely isn't a healthy sign. Not surprisingly, cash flows from operating activities have steadily declined from Rs.13.27 billion in 2002 to Rs.1.11 billion in 2005. Operating margin fell to 7.2% from 8.1% in the previous year. Without doubt, unless L&T starts controlling its operational costs, it would not be long before other assets also go up the auction banner...

Get insured!
The ICMR-VOICE Planman Consulting insurance survey shatters many insurance perspectives

(column by Smita Polite, Steven Phillip Warner)

With a host of international companies entering the insurance sector in India, the business of insurance has never been as interesting as today. With almost 80% of the total population uninsured, the insurance market is buzzing with activity. April 2006 saw the release of India's first ever insurance sector customer satisfaction survey by Indian Council of Market Research (ICMR) on behalf of Consumer VOICE, a leading consumer awareness forum (refer 4Ps B&M, April 28-May 11, 2006 issue for full report).

The survey threw up extremely interesting insights into the Indian insurance industry, a critical one being that none of the companies could actually pride themselves on a satisfied customer base. The Indian economy is zooming ahead at a breath-taking GDP growth rate of 8%, and is expected to China by 2025, according to a Goldman Sachs forecast. With the purchasing power of the Indian masses shooting northwards, there is nothing but a clear yes to the question on whether the insurance biggies can make it a time worthwhile in the Indian sub-continent. The insurance sector in India had its roots in the very basic and healthy 'free market economics'.

However, soon after that, it was brought under the nationalization banner. Today, it has traced its way back to a liberalised market. With the passage of time, a lot of reforms have merrily loitered into the insurance business, much to the dismay of the ill-factors in society who had delved into making quick money by exploiting less informed and gullible Indians. The Malhotra Committee, led by former Finance Secretary and RBI Governor RN Malhotra, submitted their highly effective recommendations in 1994, and the sector was further regularised by the passage of the Insurance Regulatory and Development Authority (IRDA) Bill in December 1999. According to the research findings, the most reliable company in the life insurance segment was TATA AIG.

Companies like TATA AIG and Bajaj Allianz are pulled by the thrust of the engine of powerful brand names, in which target customers place massive amounts of trust. The TATA brand is also putting all efforts forward to make a distinct brand identity by providing bonus and additional facilities. The health insurance sector saw the maximum number of discontented customers, with TATA AIG again being voiced as the top brand. As far as the public sector undertakings are concerned, their very origin serves as their Achille's Heel.

In home insurance, HDFC Chubb dominates the numero uno slot, followed by IFFCOTOKIO and TATA AIG. With motor insurance being fueled by the ever increasing vehicle sales, the sector has become an important revenue generator. The market leader in this sector was IFFCO Tokio that fitted the bill as the top motor insurance company with commendable cheque pick-up and realisation of payment service. It performed the best in the overall grading, but HDFC Chubb and TATA AIG followed close behind. However, the most important element that emerged was that insurance companies have to work on doing their bit to actually retain their customers - or else they might just lose them to the newer players who are lured to the huge profits that this sector promises...

(End of Smita Polite, Steven Phillip Warner column)