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Indian IPOs Sizzle, but for How Long?

In india news on September 7, 2009 at 7:21 am

By M H Ahssan

Big foreign investors are snapping up issues—but overpricing is spooking small investors

Is India in the grips of IPO fever? The symptoms are certainly there. As many as 40 Indian companies plan to list their shares on the Bombay stock exchange in the next few months, hoping to ride the coattails of a post-election rally that has propelled the benchmark Sensex index up more than 30% since mid-May. And there’s no shortage of demand for the new paper. When state-run National Hydro Power (NHP), one of India’s largest electric utilities, decided to offer the public a measly 14% of its shares, the issue was more than 20 times oversubscribed. The Aug. 31 IPO raised $2.1 billion, making it one of the biggest on record for India. “Things are looking up, there’s a relatively stable government in place, and there’s an appetite for this sort of thing,” says Ashok Kumar, who runs theIPOguru.com, a Web site that tracks new Indian listings.

But investor beware. This gold rush is looking different from the one in 2007, when 100 IPOs mopped up an average of $100 million apiece. Companies priced their shares then on the low side, which gave investors a gratifying pop on the first trading day. This time sellers seem to be doing the opposite. Shares of NHP seesawed the first day but closed just 3% higher. Much the same happened with the July 28 IPO for Adani Power. Again the issue was oversubscribed, with foreign investors, including Credit Suisse Group (CS) and T. Rowe Price International, having put in for three times as many shares as the company was allowed to sell under market rules, a director at the company said. Yet the stock closed flat on the first day and is now trading at just 1.2% above its initial offering price.

The trend has spooked Indian retail investors, many of whom were burned by the Reliance Power IPO in January 2008. While the placement raised a record $3 billion, shares of Reliance Power plunged 21% in the first day of trading. That disastrous debut pricked the Indian IPO bubble, prompting the cancellation of more than $1.7 billion in planned new offerings. “It’s the Reliance Power factor,” says R. Venkatraman, a 28-year-old software engineer who quit investing in IPOs in 2008. “Now, IPOs just don’t list that well.”

These days it is foreign institutional investors that are doing much of the buying. Desperate to diversify in a market dominated by fewer than 50 Indian blue chips, they are eagerly gobbling up the institutional tranches set aside for them under current stock exchange rules. “It’s a large market made up by a small number of companies,” says a representative of a U.S. private equity firm, who asked not to be identified because he’s involved in an Indian IPO himself. “So you wait for a decent new company and load up as much as you can.”

That’s music to the ears of the Indian government, which is embarking on a divestment program that could yield some $20 billion in IPOs in the next 12 months. And if a proposal that would force all listed Indian companies to have at least 25% of their shares in public hands is adopted, a further $40 billion in share sales could flood the market over the next five years, HNN analysis shows. How-ever, a few lackluster offerings could ruin the party for everyone. Says Kumar: “If you have two or three more IPOs like Adani and NHPC that are overpriced and tank on their issue, it could kill off the entire market.”

Blowing the whistle on fake drugs

In india news on September 7, 2009 at 7:17 am

By Shabina Akhter

The government has decided to reward those who provide information on manufacturers and dealers of spurious drugs.

Have you encountered a drug that does not work, leading you to believe that it is fake? Or do you know of anyone who is engaged in the manufacture of spurious drugs? The Union health minister, Ghulam Nabi Azad, recently announced a “whistle blower policy”, aimed at encouraging the common man to provide information about the manufacture of fake drugs. The health ministry plans to give cash rewards to both the informer and the officer who seizes adulterated, spurious or misbranded drugs and cosmetics.

At present, based on the information gathered by the Central Drugs Standard Control Organisation, the office of the Drug Controller General of India raids places suspected of manufacturing or selling such drugs. The tip-off often comes from a member of the general public. The government hopes that a cash reward will lead to more people coming forward with such information.

The Indian Drug Manufacturers Association (IDMA) in Mumbai, which represents the interests of Indian (as opposed to foreign) drug manufacturers, is all praise for the whistle blower policy. “This policy is a timely one. The fact that it seeks to reward people for giving information on the manufacture and sale of spurious drugs is why the chances of it being successful are so high. If implemented properly, this policy will make it difficult for spurious drug makers to operate,” says Daara B. Patel, secretary-general of the IDMA.

According to the Drugs and Cosmetics Act, any drug that has been manufactured by compromising on its quality, or has been stored in such a way that it has lost its properties or has been tampered with or misbranded, is termed spurious. And according to the ministry of health, about five per cent of the drugs sold in the country is counterfeit and 0.3 per cent is spurious. Of course, it is not easy to tell a fake drug from a genuine one. “It’s very difficult to identify a spurious drug,” says T.R. Gopalakrishnan, advisor to the IDMA. “Only a series of chemical analysis can reveal a drug’s spurious nature. However, a case of misbranding can be easily identified,” he says.

One reason for the proliferation of spurious drugs in our country is that there are not enough drug inspectors who can keep a check on quality. “The acute shortage of drug inspectors makes it easier for dealers and manufacturers of spurious drugs to operate with impunity,” says Harinder Sikka, director of corporate affairs, Piramal Healthcare, the pharmaceutical company. “There’s just about one inspector for every 500 chemists in cities like Delhi. What’s more, only seven of the two dozen testing labs across India are functional. The rest of them, according to the Mashelkar Committee (which was set up to look into the drug patent laws in the country) report, are either shut or non operational,” he adds.

Besides, we do not even have an effective adverse drug reaction report system to monitor where and when patients are experiencing an adverse reaction to drugs. In some countries, it is mandatory for hospitals to report to a nodal agency if a patient has adverse reactions after taking a prescribed medicine. But that is not the case in India.

In such a scenario, offering rewards for tip-offs on spurious drugs may go some way in bringing the guilty to book. But experts point out that merely announcing a policy will not be enough. Says Sikka, “One of the major drawbacks of this policy is that people might try to make money out of it by making fictitious claims. Besides, the ministry is yet to decide on vital issues like how to implement the policy, who needs to be alerted and how it would go about protecting the identity of the whistle blower. It is only when the government takes strong measures to implement the policy that the consumer will benefit.”

People do have the option of going to the consumer courts in case they feel that they’ve been duped by fake drugs. “We do get a few consumer cases related to spurious drugs. At the moment we are fighting a case for a client who had bought an ayurvedic product that caused an allergy. Chemical analysis revealed that it had a high content of lead and mercury. The case will now be forwarded to the local food and drugs administration,” says Dr M.S. Kamath, medico-legal consultant and honorary secretary of Mumbai’s Consumer Guidance Society of India.

Since most of us will not be able to distinguish between real and fake drugs, experts advise that some basic rules be followed while buying drugs.

“Make sure that the seal, prints and hologram are genuine. If the prints are a bit blurred or fuzzy, refuse the medicine. But in case you want to lodge a complaint, buy a strip or a bottle of medicine and submit it to the office of the Drug Controller General of India or its zonal offices,” says Dr Kamath.

Under the Drugs and Cosmetics Act, the punishment for selling spurious drugs could be life imprisonment as well as a fine of Rs 10 lakh or three times the value of the confiscated goods, whichever is more.

If you are in doubt about the quality of the medicine you have purchased, “it’s best to go back to the doctor and show the medicines,” advises Dr Kamath.

However, sometimes doctors too are at a loss to know if a particular drug is fake or genuine. As Dr Chandra Kumar Behany, consultant gastro enterologist, Kothari Medical Centre, Calcutta, points out, “Many a time even doctors fail to distinguish between the two. At times both the packaging and printing of spurious drugs are impeccable.”

On the whole, the best bet for consumers would be to buy medicines from reputed shops and insist on a receipt, says Mumbai-based consumer activist Jehangir Gia.

And if you do catch on that you’ve been sold spurious drugs, you can always blow the whistle on the dealer and bring the culprit to book.

Pragmatism: A Mid-life Choice?

In india news on September 7, 2009 at 7:13 am

By M H Ahssan

Principal Robert Thangaiah stopped briefly outside room 63. It was 6 am and the boys should be heading for the shower. The exams were to begin at 8 am. Ninth grader Manas Mehta was leaning against his window, his room unlit and quiet. Thangaiah knocked on the open door and stepped in just as Manas turned to look, his eyes red and tearful.

Thangaiah sat him on the chair just as Namdev Tripathi, a senior board member of the Green Foundation School, also arrived. Both had read the morning papers. Vaibhav Mehta, chairman of Gimm India, had been arrested in the middle of the night for financial laundering. And there was a picture of Mehta being led away… Manas had mercifully not seen the papers, but he had logged on early morning to do some online math tutorials and saw the Aaj Tak breaking news ticker. In panic and shock, he had run down to the warden’s room to call home, and his uncle confirmed the news. Manas had broken down and the warden had called the Principal and Tripathi.

Thangaiah searched his heart for words that would make sense. There was a script for loss of a near one, for failure in exams, for a broken heart, for losing a match. But what would you tell a student whose father had been arrested?

Sobbing now on seeing his favourite teacher, Manas said to Thangaiah, “Sir, my father is not like that.” In the same breath he said, “Sir, is it true that with age one crumbles and yields to corruption? If so, then I want to die young…”

Thangaiah’s heart lurched in fright, even as he felt the stab of pain that only a son can feel for his father, when Tripathi spoke: “You should not take such a pessimistic view of life. Business is like that. Often it ensnares and traps you, but your father will be OK; the system that he belongs to will provide a way forward.”

Thangaiah looked Manas in the eye and said, “This moment is going to expect great strength from you. It can diminish you a lot, but it will also come with lessons. Just think of Karna when he learnt of his mother’s identity. Some truths liberate us, some truths strengthen us, and some truths prepare us for greater tests. There have been times I felt like dying, much as you do now. But, out of this dying is the higher living. Speak to your mother and give her strength. If she needs you back home, we can work on that. For now, son, gather yourself and continue the day. Take time off to pray.”

Thangaiah was sad. Such pain and at 14! All he wanted was that his students should have strength of character to be able to withstand all kinds of moral pressure. All those people out there, who manage industries, money markets and banks, have passed through the portal of schools and have been shaped by teachers. Oh God, why does it not sustain!

Later in his room, Manas’s words assailed him. “Is it true that with age one crumbles and yields to corruption?” How does a school teacher look at a student in later life — on the wrong side of right? I know life holds many a temptation, but is not 12 years under a teacher strong enough to hold the soul together? Do I pray for my students to be protected or do I pray for the world to be safe? Who am I to look at how far my teaching goes?

Thangaiah wandered to his colour-coded post-it board. The number of pinks denoting ‘thoughts to think’, far outweighed the yellow ‘things to do’. The greens were ‘hope’, which were thoughts experienced by his students. Asked Shantum Tigunait, class IX: “Sir, is punishment meted out to alleviate the anger of the law or to bring about reform? Bernie Madoff has been sentenced to 150 years; what does that accomplish apart from expressing the intensity of the law’s ire? Would the world be better off or if his able body was left to rot in jail or if his remaining years are applied to community service? People like Ramalinga Raju, Madoff, the Andersen partners, the Enron people should these intellects not be applied to community work? Is not that a better route to reform? Should punishment necessarily humiliate and diminish? Sir, what are jails for?” Voices from the green post-its spoke all at the same time. Principal Thangaiah could not ignore that the world of business was encroaching upon the young far earlier these days.

At 14, Shantum’s vision of correction and punishment was healthy, but an ideal given the world outside. This was also Thangaiah’s world where he had to contend with various approaches to education. The key bug was an attitude, called pragmatism. Thangaiah shuddered every time he encountered it… which was everyday.

Like this morning’s sparring with the basketball coach Gabriel over suspending Shibi Kar of the ‘A’ team for willful head-butting and then refusing to shake hands with the winners. Gabriel said, “Sir, young boys need to express to get in touch with their feelings. It’s natural!” In Gabriel’s response, Thangaiah sensed a dissent with correction itself, than with the methods. Whereas the teacher for business studies felt that expression must also be tactical. And in a most ungainly manner he told Thangaiah, “The students need to see the world as it is and know that there needs to be a middle path as well.”

Last week, pragmatism paid them a covert visit. The day boarders of class XI were camping at school. At dinner, discussion veered towards the four, who were to attend the Model UN in Istanbul. One of the students had a passport that was expiring in a month, so would not get a visa. Now came the father’s text message, “It is fixed! PP being organised in a week. A small gift to agent took care!” The students argued: “The system makes it imperative that you bribe! If he did not ask, I would not have to give… I don’t want to, but sometimes I am forced to.” Another student Vaishnav, contested this: “I feel both are equally responsible”. Goswami, the history teacher, offered balanced words: “Don’t be extreme, be practical and sensible. It is not necessary to always be idealistic. Ask your parents… You will tie your hands if you take such a position. Gobhi’s father did that so he can go to Istanbul… think!”

The heady wine of pragmatism was offered to students as a moderate, balanced voice of sanity, observed Thangaiah in his diary. The challenge is immense: should I drop colleagues and stick to my position? Or should I too drink the heady wine? It reminds me of the death certificate when my father died… the corporation office worker wanted money. Baba’s body there, me here, the goblet of pragmatism in between, without takers…

Thangaiah remembered the desperation with which parents offered him air conditioners, home theatre systems and other expensive products in exchange for an admission. Here stands a little soul of four years clutching his father’s hand, and the father speaks the language of pragmatism to me, “We will equip your computer lab…” How does the little soul grow? Would you see your son or daughter grow up unbending to temptations or negotiating at every stage?

Now pressing down the green post-its he wondered, are we, as teachers, supposed to teach pragmatism or right conduct? My own teacher said, “Don’t be corrupt. Don’t live if that is what it means. What is wrong with being poor?” Is there room for us to dilute this? And what is my script for Goswami? Should I not be invoking leadership here? Was Manas’s father a victim of pragmatism? Can education teach pragmatism? Cost-benefit analysis, give some take some, trade offs, leverage, is there hope?

Thangaiah glanced at the yellow post-its, hoping for relief from ethical debates. “Laxman Jhula Annexe, plead with officials.” This annexe was being planned for an elaborate art and music school. The simple roadblock: the power allotment. The chief accountant, Bhrigu Hedda, had applied but the application went into freeze. Acquiring 40 acres, registering the land, getting permissions, etc. was no mean feat. Bhrigu spoke to administrative officers, block development officers, tehsildars, but no luck. Bhrigu would not ‘pay’: “Art and music cannot be born on the lap of speed money,” he reasoned. But the board was impatient: “Anyone who launches a large project has to do all these things. After all, we are doing it for the school!” Bhrigu stood his ground. He was never superior, but also never servile. He did not blame the officials either. Instead he asked, “What is the procedure? What do I need to do?”

The board was uneasy with the delay, as various big names had donated money to have the different music halls named after their family. But now the matter had hung. Col. Roy had called him and said, “Sometimes we have to set aside our views for the sake of progress. I had to pay for registering my house. The man wanted Rs 2 lakh, but I managed with Rs 40,000. What to do? I have a family. Please go and make him an offer. He will settle for less… Once in a while, we have to compromise.”

Was Manas’s father a victim of the once-in-a-while? What was the difference between Mehta and what was being proposed? Just scale, thought Thangaiah. At lunch, he asked the mathematics teacher Babu Joseph what he thought about this. Joseph said: “No, no, no! This is not about ethics. This is simpler; far simpler. You get to honesty when you are faced with dishonesty, you see. This is different. This is the bypass. So far your brain had a binary quality, 0 or 1. Now a 0.5 is introduced; you are given a menu to shift on that axis and saunter around 0.4, 0.7… such as a cow tied to a pole; it can wander around the pole limited by the radius the rope proffers. Here, the radius is pragmatism. ‘Adjust’, ‘accomplish’, ‘manage’… These performance parameters are for the mind’s continued delusion. Not for your higher intellect.”

Principal Thangaiah had a tough job. He was of the view that emotional intelligence is what schools need to work with, the rest will fall in place. But since the mid-90s, he had been unable to shepherd his students or his teachers. The former because many of the latter were more oriented to the middle path — believing that living is an art, and the art is about negotiating.

As for the management, it had become bottom line-driven, and hence top line too. This meant admissions were sometimes given in exchange for corpus fat. Thangaiah, in fact, had no viewpoint on donations. He only had a viewpoint on integrity, and even that he had become wary of expressing to his management, saving it for his students. As Bhirju would observe acerbically, “You don’t give tonic to a dying man, but to the growing!”

There were points where student management met operations. An eminent businessman’s grandchildren needed admission in the middle school. He sent his emissary offering to pay Rs 2 crore for four halls in the Laxman Jhula Art School. Thangaiah had sent back the application with sincere regrets to the board, “Class VI and VIII are full; 19 students in the waiting list.” The Board called him, “You need people who will support you. And people who support you should not have to wait in queues and lists. Do you want the art and music school or not?”

How does one retain purity? We are not in business but in education! The rush to be in the top 20 list, the rush to have better exam results, the rush to have a Hall of Fame with names of students who made it to Yale and IIT… Thangaiah considered this unnecessary. “What am I bringing up the kids for? To be victorious in the IIM-IIT race? That cannot be a school’s expectation. May be the parents’ expectations. Certainly not my vocational intent. (This is like the heart surgeon who wanted Rs 5 lakh under the table for baba’s bypass surgery! Is there not a difference between a calling and commerce?)” But Thangaiah couldn’t blame the board either, after all the businessman had asked them, “How many of your kids make it to Ivy League colleges?” Bhrigu, who was present, had said, “We don’t keep track of that, but for sure, none of our ex-students have been accused of breaking the law, for fraud, for swindling the tax department, for disrespect to women or the country, for drugs, not even for traffic violations.”

And there was Vaishnav’s verdict, “According to me, both are equally responsible.” Thangaiah had asked them how they would feel if their parents had paid money to get admission into the school. They were sure, they would feel bad. And how proud would they feel about their school if they heard that the school took money for some admissions… They would feel ashamed.

They had then veered to the kitchen where they would all wash the dishes and dry them and stack them away. The rota was an essential part of GFS’s schooling. This helped team building, goal setting and sharing simple tasks. It broke squeamishness about essential things including gender conditioning. Karsan Divakar said, “We have a dishwasher at home, and I have wondered about why some of us have life easier than others.” Soon they were all talking about privileges, and as they got into a line for their dessert, Thangaiah asked them if they would stand in queue or take the quick shortcuts. Amrita said it would be most tempting to take the shortcut. Particularly, if it harmed no one. “What is wrong with that, sir?” Thangaiah had said the answer will come, let us wait.

The answer came four days later when they put heads together to examine the Right to Information Act. Names like Arvind Kejriwal and Aruna Roy, Nikhil Dey, Shankar Singh came up. Studying the bio-data of these people, the students went silent. “Why would someone turn away from a life of privilege?” they asked. What made them turn away from a life of privilege and comfort to lead difficult lives? Thangaiah connected with privileges and paid admissions, and said, “If I have the privilege of jumping a queue, then it means that others are less than equal. And if I have to wait, irrespective of money or power, then I surrender privilege for all-round dignity and respect. Walking like everyone, eating the same quality of rice, washing dishes like everyone… just that some people have the courage to surrender privileges and some people fear the loss of privileges. We come back to making choices.”

Tripathi called. “The board met to discuss the budget deficit. It has been agreed that it makes ‘pragmatic’ sense that we increase our class size to 35 from the next session.”

Thangaiah stepped out of the dining room to the verandah, and argued helplessly, “Green Foundation was always meant to be a small school and our key to quality education is the class size.” Tripathi continued, “Next, Manas Mehta and also what you said at the PTA last week. Parents came back annoyed asking, “Is GFS not performance oriented?” Our students have to leave school one day and take on the world. We need to build achievers. And to top it your stance on promoting Manas to class 10 despite him having missed his exams is worrying me.”

At the PTA, Thangaiah had said, “What marks children get is no concern of mine. We do good academics, but we also have diverse children. I would like to see that no child contemplates suicide, no child feels he or she is useless and also that no child should leave school feeling the world is poor in possibilities. And if the school delivers this, I would have done my job for your children.”

(This was the same PTA where Ashutosh Kailash, an ex-student and now operations head of an MNC, had said, “Many who have been students here are in an unwitting time warp. We are incapable of viewing our principal as another manager trying to shine the brand equities of 1,000 students or grappling with management issues, money issues! We continue to think of him as a teacher who got annoyed with spelling errors or manners!)

Thangaiah had seen that the board was distanced from the daily decision-making and deciding on issues regarding students, hence unable to relate to students’ contexts. So, he said to Tripathi, “We see the child, his context, his inner potential, his drive and his intelligence. And translating all this to a good looking table of marks is often difficult. In Manas’s case, even unfair, given his circumstances. Yes, I am aware that his term exams were not top drawer, but his subject scores in the sciences are very good. Besides, I teach him ethics and knowledge, I know his mental construct. The lad is very good. And please recall Ashit Shenoy, who barely passed his languages through high school, topper in chemistry and biology always… Isn’t he one of India’s leading surgeons?”

Tripathi: Robert, these are boys who need to go out and face the world that demands performance and performance only. Mollycoddling will make them soft and unfit for society. He needed to have taken his exams!

Thangaiah: What is the purpose of schooling, sir? Is it to shape the students to fit into society? No. It is to help them realise their potential, their intelligence and then apply it to living.

Tripathi: If you are doing exams to evaluate, you have to produce results. If results don’t matter, you should get out of this business.

Thangaiah faced the night as he had many times before. The tension between their two positions was eternal. Life produced humans; as a teacher he scrubbed them and let them see their individuality. Performance and results were the concern of parents and businessmen, he thought. He wondered now if the abolishing of class X board exams would appease or fuel these tensions.