Caught in a car crash

People are travelling more than ever these days. A holiday in the middle of the week can be enough for some people to jump at the idea of driving out of town to a nearby picnic spot, a waterfall, or take a trek into the woods.

The Mumbai-Pune expressway has made it possible to go all the way to Pune in 2 hours, and what earlier used to take 4 hours. So people are whizzing up and down those smooth roads easily and more frequently. Here is a word of caution, yes, but not about overspeeding, but the repercussions of being in the right for a change, and still being victimized.

I know many people who drive in Mumbai, who must be tearing their hair out in frustration, every time they have to take their brand new car into the killing traffic. I must say, most Indians don’t drive with much respect for rules and road sense. (I’m Indian, so I know what I’m talking about and this isn’t a xenophobic statement). So, even if you are a good driver and you keep your distance and drive carefully, there’s going to be some moron somewhere, who will plan to kill you, or at the very least maim you.

On the open expressway, it is a real free for all. Cops are not around for miles and speed is genuinely any limit you chose to drive at. Also, poor driving sense is amply displayed on this stretch. So be careful. I’ve seen small cars like the Santro and Zen being so completely totaled, that they looked like they had been eaten by a machine and spat out. And of course, I shudder to think of the fate of people who got caught inside.

I’ve been in an accident on the Mumbai-Pune expressway and thankfully, my family and I came out alive, with my mum suffering mild scratches, where glass shards grazed her as the window splintered. My sister had a bruised rib, though she was sitting in the back, sandwiched between my mum and me. I wasn’t hurt at all, even though my brother had to swerve and almost climb over the road divider on my side, to avoid this state transport bus, that just pulled out in front of us, without signaling.

The bus rammed us and since we were going at 75 km an hour (for the uniniated, it is slow speed on the expressway), my brother had to get the car in control and so we stopped quite a bit away from the bus. The passengers of the bus had got out, but no one ventured near us. They were too busy tuned into the driver’s version of the story.

I remember telling them later that they didn’t have the decency to see whether we were alive or dead. The passengers stood around, gossiped and jumped to conclusions all in that 10 minutes it took us to recover from the shock of the collision and get out and walk back to the bus. Yes, another reason to be a careful driver is just this – people are not going to stop and help. They are more worried about the delay, than the accident. And because this bus was full of office-goers on the way home or to their shifts and who claimed to take the same bus every day, and knew the driver and conductor, they were even more convinced that we were at fault.

With people already prejudiced, you can’t expect them to help you and if you insist on asking for the bus driver’s licence number, you have another drama on your hands. The rule is that the driver can’t give you his licence number because he works for the state transport, and since the bus is the state’s property, the government is held liable for any damages that we seek and not the driver himself personally. How nice!

So now, not only is your car badly damaged, the crowd is getting inflamed because of the delay and also because you insist on the cops being present to file a report. On the expressway, a police station is usually 20-25 kms away, so tempers and frustrations are building. In the meanwhile, some of the bus’s passengers are bitching big time. Something like this: rich people-won’t take responsibility-show off contacts-delaying us-what do they think of themselves-our poor driver-poor us etc. I was honest enough to tell someone there, that one can expect small mentality from people like the driver, who probably doesn’t know better, but even some of the better-off passengers were displaying the typical narrow mindedness! This surely didn’t win me any admirers there, but the hell with it.

In such a situation you can’t win. But I still stand by my statement, that those passengers didn’t have any decency or manners. No one came over to see how damaged our car was or whether we were all okay or injured, until I made this comment. And this remark I made, did pinch a lot of the people there. Because, when two cops finally arrived almost four hours later (yes, we waited on the expressway for them with such a friendly crowd!), one man was furious. He told the cops, what did I mean by saying they didn’t have manners, is that the way to talk? Yes it is. You were there standing and watching the fun and when it began to pinch your conscience, you were forced to retaliate. This man also said something that, whether he realized it or not, showed off his class bias. I remember telling these people, that if this had been their own car, they wouldn’t be so quick to defend the driver.

This man later told the cops, that these people (ie. my family) think they are only ones who have driven or sat in a car; even I’ve driven a Mercedes. But that was just my point. You’ve ‘only driven’ a Mercedes, that belonged to someone else. Try owning one and then watch it getting mauled in an accident – there is a huge difference. Your anger would quickly be directed in the opposite direction, depending on, which vehicle your sitting in. Then, you would forget how many ‘best driver’ awards the bus driver had won.

There were many words exchanged in the heat of that moment. It was hugely stressful for us, and I admit that the bus’s passengers were delayed but this is a price you have to pay for being in accident - as if they didn’t know that. We would have to wait for the cops to file a statement, so that we could claim insurance, and it was too bad their driver was held up as result of it. After all, they were all standing up for him.

The passengers told us that the driver had just won the ‘best driver award’ from the state corporation and that he and the conductor really took care of the bus and the passengers. The conductor had installed a TV and VCR with his own money, so passengers had a good time. How nice, but did that really mean, he was right in ramming my car? None of the passengers, I spoke to could tell for sure what had happened, even the ones who had been looking out of their windows. Most said that they realised what had happened because of the noise of the crash!

When the cops came, they said that if we wanted to make a formal complaint, then the bus and our car would have to be taken back to their station and both the drivers would be given breath tests and then the vehicles would be checked for any mechanical faults and what speeds they were being driven at, and then statements would be taken down. Meanwhile, the bus and our car would be with them, so we would have to hire another car to go home and keep coming back, as and when the case progressed!

Do you realize how incredibly skewed the system is against the private vehicle owners? The conductor had called for a replacement bus but we had to call for a car, or just let this matter go. My dad called up a cop friend of his (that’s why it’s important to have contacts, something those passengers will learn, only when they are at the receiving end of this kind of unfairness), who told the cops at the scene, to file a statement there itself as a favour to him and that we won’t be pursuing the case, and that we needed the statement for claiming insurance, and that we won’t be holding the driver ‘personally’ accountable.

That’s how it really works – the law. The irony is that my father is a lawyer and he saw the nasty side of it for the first time in his 40 plus years of being in the profession.

By then, after 6 hours or so, the replacement bus had also arrived with a supervisor, who told us pretty much what the cops did and also told the cops that he wanted damages from us for the bus! So to get a statement written down on the site of the accident, we had to pay Rs 400 for the dent at the back of the bus.

And as if that wasn’t enough, the passengers also decided to test the waters and started yelling for “damages” for the time they had wasted there! Well, talk about man being a rational animal. Obviously, some people haven’t evolved that much. If there is way to milk other people’s misery, some people will find and use it.

It was the cops who calmed them down and told them to get into the bus as the matter had been resolved. Actually, if anything, it just shows how matters like these are never resolved. It left a very bitter taste in my mouth and I carried along a lot of unsaid comments for months after the accident, that I wanted to fling in those passengers’, cops, driver, conductor and supervisor’s faces.

I remember having the parting shot. I told the supervisor -- so this is why you guys kill for government jobs. Because you know you’ll never have to take responsibility for anything!

Written for www.dancewithshadows.com

How AIDS touched my life

This is a story of an innocent life shredded to pieces and it will make many angry, still many will feel sad, but most will feel helpless in the face of the big terror called AIDS. It’s an incurable scourge that invades your body and once there, your entire life becomes hostage to it.

You can put on a cheerful mask and walk around among healthy people, but like the living dead.

This is the story of one such person. Shobha was a bright, pretty, hardworking teenager who came to Bombay to work for us. She lived on my grandmother’s island (A Village by the Sea; Mangalore), and my mum brought her to Bombay so she could have a shot at a better life. Her family were one of my grandmum’s neighbours back in Mangalore and their home was a hop, skip and jump away. But that distance didn’t reduce the fact that there was a world of difference between them and us.

My grandmum was the daughter-in-law of a family that rented out boats for fishing and these people were the hired help. In a village, a family’s economic situation is not as starkly visible as in a city, where slums and mansions co-exist. Shobha’s family had food to eat, a house to live in but a lot of mouths needed to be fed, as is always the case.

So, my mum brought her away to Bombay in 1977 and a year later, she was expecting me. So, it seemed like a perfect arrangement – mum got a young maid for herself, a nanny for me and Shobha got a better home and a lot of food for herself. She was around 12-13 years old at that time.

But by the time, I was about a year old, she had left us for good and gone back to Mangalore, where her family said they were looking to get her married off. She went away – suspecting nothing.


Shobha hovers behind me in this picture, I was 8 months old.

What happened to her after she went back is a subject of constant whispers and rumours, even today almost 27 years later. The most popular being that she was sold into prostitution by her family. They acted as pimps for her. She serviced fishermen who could afford her, contractors and engineers who were sent to the village to lay down roads or water pipelines, rich businessmen who owned the fishing trawlers etc.

The result was three good-looking sons from different men, who fortunately for them, looked like Shobha, so even though tongues wagged constantly, finger pointing was kept to the minimum. Those kids were always hanging out with my cousins and me, whenever we were at our granny’s for the holidays. It didn’t matter to us, what their mother did for a living and who their fathers were. Those were such innocent days, playing and running around with a prostitute’s children without a care in the world!

We never discriminated between her kids and ourselves but she was always hovering in the background apologetically. It didn’t occur to me until I was much older, why I was refrained from going that – hop, skip and jump distance – to her house. She had a affection for me that she obviously didn’t have for the others because she had helped mum raise me for a while. So, there were treats for me like ripe mangoes plucked and brought over or even the raw ones, which I love to slice and eat with salt. She also bought and gave us fresh fish, which my granny would insist on paying for. But she always stopped short of entering the house itself, no matter how much I asked her to come in – she knew something that I didn’t – she wasn’t going to be tolerated inside the house by the adults, no matter how much the eldest granddaughter wanted it.

During my college years, my visits to Mangalore became infrequent and I finally went back last year, after almost 10 years. So, much had changed in my life. I was no longer the kid who pranced around my grandmum’s fields and cowshed. I was a boring adult with a job! So, much had changed in Mangalore – there was a bridge built (from the jetty on the other side to the island), finally piped water connections would be given to each home, my uncle had torn down the old house and built a modern bungalow.

But Shobha was the same, amazingly thin, despite three pregnancies and so much else her body must have suffered. She still had clear, smooth, wrinkle-free skin, that would cause envy here in the city. She was smiling as usual and also keeping her distance, as usual. But this time, my aunts muttered to me under their breath, that I should just say ‘hello’ to her that was about it. I asked why and they evaded some more, as if I was 10 years old rather than the 27 year old I was.

Then I told my aunts, that I would ask Shobha herself, how life was treating her and how her kids were doing now, and why my aunts were pretending like she was a ghost to be avoided, rather than a flesh and blood person. They were suitably shocked and knew I would do exactly that, So, out came the truth – Shobha had AIDS. It was just a matter of time.

Everyone in the village knew about it – Shobha was treated as was normally possible by people, who have little or no information about AIDS, but only know it’s incurable and is fatal. If there was a camp for God’s rejected souls, then she certainly would have been left there, by her heartless family. Her meals never really filled her stomach. I guess the ghastly logic that must have gone around in the minds of her family members, who destroyed her life must have been – she’s going to die anyway, so why not starve her slowly and gently. These people had lived off her earnings and her body for so long, and now she had become a liability to them.

The sad part was that since AIDS really has no cure and symptoms can only be controlled, and only for that long, her family knew that - care for Shobha or neglect her – either way no one will know the difference. I was so angry about it and I wanted to do something for her – even hand her some money as a last resort. I tried talking to my aunts about who was the doctor treating her and they said, they didn’t know, and they thought her family was not bothering about taking her to a doctor, in the first place.

But Shobha herself, didn’t seem to care anymore. She didn’t want me or anyone else to worry about her. She also kept a more than an unusual distance and never came around to granny’s house the entire time I was there. She didn’t want to talk to me about her condition, her family’s ruthlessness - she had just given up on herself. I went to live with an aunt on the last few days of my visit, and that’s when she sent over a basket of raw mangoes. It was a farewell present – and one that I will never forget.

I came back to Bombay and I heard from my relatives that things had gone from bad to worse for Shobha. A few months ago, she died of the disease mercilessly stalking her body.

Or rather, as rumours go, she may have been murdered by her family. The story goes that one night, her family just lifted her up from her bed (by then she was unable to walk) and took her down to the river and drowned her! The official story is that she committed suicide, something which the rest of the villagers don’t believe in.

I don’t either. Shobha had too much spirit, to disappear quietly into the night. She must have realized, that the disease exposed her family for what they had done to her like no amount of whispering and gossiping would have. She was a stinging, living reproach to them, and their greed. She just had to be done away with.

But she lives on for me, in my memories. This is a tribute to her flawless style – the acceptance of a horrible destiny that was not bequeathed to her by God, but by her fellow humans – who have a lot to answer for.

One billionaire's pudding is another's poison

Managing Partner at TCI New Horizon Fund, Madhav Bhatkuly went to the London School of Economics, LSE, to beef up on the many theories that abound in the field of financial economics. But he was always intending to come back to India because something here had caught his interest. It was the way the stock market works - the intricacy and the mechanism and the beauty of it appealed to him.

Inspiration & motivation
But another source who lit the fire within him about the stock market was his best friend's father, who was then the Chairman of Citigroup. Bhatkuly told CNBC-TV18, "I had a close friend and his father used to be the chairman of Citigroup at that time and he used to lecture at the stock exchange, virtually after every budget. So I was chatting with his son one day and his father was preparing for the budget speech and I asked what is this? He said that I am going to talk about the stock market and the implication of the budget."

He recalled, "So I asked him what is the stock market and how does it really function? So he said if you want to be a part of a very big, successful and famous company but you don’t have the money to own it, and you want to own just a small part to be part of the story, then the stock market is the place to go. And actually, in many ways that was the defining moment. It first got me interested, that here was an opportunity to be a part of history or a part of success."

At the LSE, he majored in derivative products. The entire field was new back then so he didn't have many textbooks to study from except the one written by Fischer Black and Myron Scholes, which had come out just a few years before he graduated. So he was lucky enough to study original research. But when he got back to India, he realised that all those theories he studied were of little use. It was really experience that counted.

He began his career with ICICI, which was purely a project finance institution at that time. Madhav recalled, "I was busy going to greenfield project sites and doing spreadsheets and cash-flow analysis on Lotus (software). But it was an extraordinary experience. That gave me insight into corporate India and helped and shaped me as an analyst. I think that job really taught me or gave me the bridge between everything that I had learned in theory and the real world - of what drives earnings models and businesses and also to work with entrepreneurs, which I think has actually contributed to the process of investing today."

Investing principles
He doesn't believe that investors reach a magical circle of competence, as supposed by some. But investing is a process of trial and error, just like everything else. He said, "I think with experience and consistently just simply going out and doing the job, you begin to understand some things naturally better than somebody else."

After all, even the billionaires of the world have not made their money following any one holy grail. Benjamin Graham has been quoted telling Warren Buffett, "Warren the money won’t make a damn difference to you and I, our wives might just live a little better!"



All the same, some of these successful investors have followed their own path to riches. Warren Buffett has never invested outside the US. On the other hand, Sir John Templeton wanted to go out and buy the entire Indonesian Stock Exchange, the very first time he felt bullish about Indonesia! George Soros keeps it simple - he buys when the price is not right and sells when it is - the very essence of stock market trading. So, each of these men are rolling in money but have all arrived at it, in their own individual style.

So which style does Madhav call his own? He explained, "If I have to identify myself with one particular approach, at heart I would call myself a value investor. But value can mean different things. Is it prospective value? Is it enduring value? Is it value based on history etc. I spent most of my early career or the last few years as well, in small cap stocks, where perhaps the market efficiencies were higher and maybe because they were illiquid or for whatever other reasons."

Evaluating businesses
He looks at different valuation methods for different businesses. For instance, if it’s utility, he may use the discounted cash-flow, DCF, method but for anything else, he might use a different concept.

He added, "But along with that, it was also important to understand leadership in the business in its entirety. And what I looked for primarily was whether there was hunger enough to inspire that CEO to want to make it into a bigger business. Also, was there a cogent strategy and more often than not if you meet a lot of business leaders, you will find that some of the best or the most successful leaders are very well put together in their thoughts."

Also managements which spend time in execution of strategic visions is what makes "the difference between a good idea and a successful one." Madhav also believes in getting his facts and figures cross-checked with the mid-level managements of companies.

He explained, "It is important to visit second and third-line managements across the company. To first of all understand whether you were receiving the same soundbytes as you would hear from the top. But more importantly, were there processes. Was there enough in terms of execution capability and deliverable action points built into the system itself."

According to him, Sun Pharmaceuticals and Godrej Consumer Products are two companies, which demonstrated his belief in executing strategies and that had processes in place for doing so.

Indian stories
Analysts need to be able to spot what's going to provide a margin of safety with regard to every stock their looking at. It could be prospective earnings or absolute assets. He spotted this safety point in the shares of Oriental Bank of Commerce, OBC, when it was in the red and was burdened wth NPAs that were not serviced.

He elaborated, 'We were the first foreign investors in OBC, at roughly about Rs 55 a share. It went through a terrible period as a result of which it had accumulated non-performing loans in excess if 9%. But two years prior to that, there was a change in leadership. There was a new leader who had cleaned the processes. So as a result of, which the company had begun to have a shift towards identification and greater disclosure.'

'We also found that interest rates in India had fallen so much, that OBC had 41% of it’s book in Indian government bonds or treasuries, and that the unrealized gains on the securities portfolio was greater than the market cap. This meant good news - that it could have wiped off the NPAs in one shot! So the margin of safety was very clearly visible.'

He found absolutely great value waiting to be unlocked in United Breweries. He reiterated, 'I think United Breweries is a very good example of startling value. The company went through two phases. One, when it was a consolidated entity and it had non-core assets including 40% holding in McDowell as well as huge real estate holdings. So there was huge value which could be harvested at some point of time.'

He added, 'If you look at or dissect the management of the business in two facets - corporate governance and market leadership. They have delivered dramatically on market leadership, I mean, here was a company which clearly knew what to do in the market place, Kingfisher made up 40% of the Indian beer market for several years and eventually went up to 50%. Kingfisher as a standalone brand was 27% of India’s beer market. So obviously the company knew what to do in the marketplace but it wasn’t translating that into profits.'

Spotted deals
Oriental Bank of Commerce
Godrej Consumer Products
Sun Pharmaceuticals
United Breweries

'When we first looked at just the beer business, we spent a lot of time figuring out what normalized earnings would be because the company had no profits. So what was the intrinsic worth of those profits? For that we looked at a company in Sri Lanka called Lion Beer, which was a Carlsberg’s joint venture in Sri Lanka. We were just trying to do a little bit of analysis in terms of the dynamics and what the costing was and we figured that the margin of safety was very large and there was an opportunity here.'

http://www.bufferstock.org/graham.htm

Written for www.moneycontrol.com

How the elephant can use the dragon

Fifteen years ago, when India was taking its first diffident steps towards economic unshackling, a full complement of analysts and strategists were ready with their growth prescriptions. A lot of water has flown under the bridge since then.

The question now is - has India lived up to its potential?

This question was put to three Harvard Business School professors - associate professor (administration) Das Narayandas, senior associate dean Krishna Palepu and chair, organisational behaviour Nitin Nohria.

Nitin Nohria told CNBC-TV18, "I think it's really remarkable to see that how much progress has been made over the last year. My sense is that the sea change that I see or the critical inflection point that I see is that, companies have moved from a defensive posture to now being in a genuinely aggressive posture in terms of global competition.

Until the last year, the sense was that Indian companies were really trying to fix their own businesses to compete domestically relative to the global competitor. I think now that they have developed the confidence that they can be successful, they are finally beginning to look outwards.

Like the Tata Group going out and buying Daewoo, it's just one example of how this more offensive posture in terms of what, at least we think, is a shift that we have see in the last year."

Krishna Palepu echoes Nohria, "I think that's a very important change that has taken place. The level of confidence (has grown) in risk-taking and in exploiting, not only the domestic market but global markets as well, and seeing growth opportunities as opposed to thinking in term of restructuring.

"The only contrast is the ambition level that Indian companies exhibit, (which) is modest compared to, for example, the ambition level that the Chinese companies are exhibiting. It's a first step but we still have a long way to go."

Chinese companies have been aggressive and have been gobbling up big chunks of the world's output of grains and metals, especially steel. So has India remained quivering, in the wings and just watching it all happen or are we participating?

Says Das Narayandas, "I think till a few years back or till last year, the dominant question was can we, in the face of everything that's happening, survive and manage in the domestic markets? This year, as I look around, I think it's (now) changed so we can."

This new found confidence has changed the equations considerably for many. Narayandas said, "If the first few things don't happen right, which will be the case if you are going to be more aggressive, then it shouldn't be that we immediately start to climb up and become self-doubting thomases.

"It is very important to have the resilience and the market should be willing to take a couple of hits but (should) support entrepreneurs, who do take the chances. So any mistakes will not be the entrepreneurs'. I mean they have to take chances and they will. It will be the markets (responsibility) and their patience and their willingness to stay with them."

Palepu adds, "Not only with the markets but the press actually because the press has to mature in analysing these things, that when you have moved industrial activity to a more risky path and more ambitious path, there will be mistakes that will be made, but that's a part of the learning process and people need to put that in perspective and educate the market.

"For example, if one of our pharmaceutical companies spends a lot of money on R&D, which doesn't work out, but that's R&D done, sometimes it doesn't work out. You can't just write it off saying that now this company doesn't know what it is doing."

He elaborates, "If one of the companies goes into acquisitions and has difficulty in integrating it, that's part of the learning process. So you need to have an overall perspective. But at the same time, that's not a license for being totally careless in the way you do things.

"But (my) interacting with Indian managers (shows that) they are pretty cautious actually. I think historically, they have been trained to be very cautious in the way they grow and manage things and so I don't worry as much about people making reckless moves, as much as, not having high enough ambitions, as a vision for the next 5-10 years."

Nohria commented on the changes in the business environment in India, "There are many companies (which) are examples of really major players that were non-entities ten years ago. I mean Bharti is a company that Krishna has studied and this was non-player ten years ago and it's a huge enterprise right now. Jet Airways is another example."

He explained, "If you look at what has just happened with deregulation. Over ten years, there are clearly some examples that have built really substantial companies in a domestic sense and then hopefully, some of these people will become global too. As we know, airlines are expanding or being given opportunities to go international. At least this is an opportunity for Jet Airways to become a major rival to British Airways in the London-Bombay route, which is the most profitable route. So there are clearly opportunities that are being created. There have been many more Indian companies (that) we now take for granted but they weren't there ten years ago."

About five years ago, China was where the MBA students seemed headed. This was an exciting, unexplored, fertile business turf. But with perceptions changing, a fast track route and a single window clearance being promised in India, China is losing its allure, or is it?

Says Nohria, "As we have been struggling with trying to clean our act, China has had its act in place. So, as we were in this mode, that was more defensive, they were in a mode that (was) relatively more offensive and so it got framed as India versus China debate.

"There is something inherently energising about a comparative debate. But I think there is probably a better way of framing it and I think Krishna has really framed this in a way that I find very compelling."

Palepu reiterates, "The other very important thought process we need to have is that, it's not just China, but China plus Hong Kong plus possibly, Taiwan because they have lot of business linkage.

"So, when you think about that and actually think about India and compare, the comparison really doesn't make sense because it's a agglomeration of three very different stages of development. Hong Kong is almost in an advanced kind of stage. Taiwan has been in the middle stage of development and then you have China. That's really the combination that you are looking at."

He explains, "So if you frame it as comparative issue, it's a lost cause in some sense because you are not just looking at China. We can say we (India) have an advanced financial system in the stock market but China doesn't have it. Not true, if you include Hong Kong stock exchange or you can say we have entrepreneurial companies but China doesn't have, not true if you include Taiwanese companies. So actually frame it as a total stuff, it's a more complicated issue."

Palepu adds, "But I think the opportunity here is to take advantage of the complementarities between the two countries. I think individual companies, to their credit, as opposed to observers like us, who might be thinking about a comparative race, are seeing these synergies.

"I think first of all, Indian IT companies are going and setting up shop in China to exploit markets from China into Japan or into Korea, where actually the language skills and the culture is more compatible. Indian pharmaceutical companies are going into China and trying to exploit the domestic market there."

Palepu suggests synergy can be achieved in other sectors, apart from IT. He says, "Take Tata Motors and Indica. There is a niche in China, that is very similar to the niche that Tata Motors has been able to hit so well and there are a large number of consumers in China, looking for a product like that (Indica), which they don't have because all multinational car companies roll out their own traditional stuff and therefore an opportunity is there."

"Other areas could be hotels because of the explosive growth in the Chinese economy, so business travel is increasing. I can think of many areas where Indian companies can go there and given the skill that we have, the market is somewhat similar, in many ways and slightly ahead of us. Open your mind (to Chinese competition) and not see them as rivals but as a business opportunity (that can be) taken advantage of and for collaborating."

Krishna Palepu's Case study: Where India scores

A Taiwanese hardware company called Inventek, that has major operations in China has a billion dollar plant in China, that produces notebook computers and is a very sophisticated operation. (They crank out a notebook computer in 15 seconds.) But the one thing that the CEO was telling me is that despite their being very sophisticated and an extremely productive operation, they don't make much money, and the reason is that there is lot of competition for this kind of contract manufacturing, and China makes it very easy with all the infrastructure being available.

Inventek's CEO admires Indian software companies, which serve the same customer that he serves, but they are making a lot of money. Inventek started 20 years before the Indian software companies did and they actually have more advanced technology but don't make any money. The software companies from India, who started 10-15 years later, are able to make lot of money. So how does India do it?

The CEO came to India on a mission to learn and to find out how to serve customers and make money. Now, Inventek is considering setting up a software facility in India and when Palepu asked him, "why do you want to set up in India?" He said, "If you really want to learn how to build a big software business, you have got to go to India." So they are considering setting up an operation in Hyderabad but in a way that is synergistic with their hardware operation but (plan) to build more value-added components using Indian talent.

Written for www.moneycontrol.com