You Haven't Seen Anything
(220000 ( BEST UNDER A BILLION
PRICE RS. 100. AUGUST 17, 2012
INDIA
YOU HAVEN’T SEEN ANYTHING Ratan Tata’s corporate innings was spectacular. Now, he’s ready to take YET the Tata trusts to the next level.
www.forbesindia.com Letter From The Editor Goodbye Tata, Hello World!
very year, after we publish before perspective on how the trusts the much-awaited Forbes list have evolved—but also why they’re E of the 100 Richest Indians, shortly set for a radical rethink. I invariably get letters from readers On December 28 this year, when Ratan enquiring why Ratan Naval Tata’s Tata turns 75, it will bring the curtains name is missing from our list. I’ve down on one of the most impactful even had a few foreign journalists tenures in India Inc. However, if you’re EVEN THOUGH THEIR based in India and abroad call me to expecting Tata to hang up his boots and WORK HAS TOUCHED enquire whether the unique ownership settle into a quiet life of retirement inside SEVERAL MILLION model—where a set of trusts own 66 his newly built sea-facing mansion in INDIANS OVER MANY percent of Tata Sons—was for real. Colaba in the southern tip of Mumbai, DECADES, THERE HAS For decades, the workings of the trusts you could be in for a surprise. SELDOM BEEN ANY have remained shrouded in secrecy. Unknown to the world, Tata has ATTEMPT TO CLAIM Despite several attempts in the past, been actively preparing for a plunge CREDIT OR SEEK no media publication has succeeded into the world of philanthropy. As heIND IAPUBLICITY in persuading either Ratan Tata or the prepares to focus full-time on the ------management team at the trusts to share trusts, this could well be a game- their incredible story. To be sure, it is a changer for Indian philanthropy, story worth chronicling. Today, the Tata almost akin to the impact that Bill trusts are easily the biggest foundations Gates had when he decided to of its kind in the country and among focus on the Bill & Melinda Gates the top 10 in the world. Even though Foundation in 2000, shortly after their work has touched several million stepping down as CEO at Microsoft. Indians over many decades and the Tata’s formidable vision, global institutions they built long outlived their infl uence and business acumen will founders, there has seldom been any act as a huge shot in the arm for his attempt to claim credit or seek publicity. family’s philanthropic trusts, but more This cover story by my colleague importantly, it could serve as a role model and our Senior Assistant Editor for other Indian business families who’ve Prince Mathews Thomas is signifi cant made billions and now need to fi nd not only because it off ers a never- sustainable ways to give back to society.
Best,
Indrajit Gupta Editor, Forbes India [email protected] @indrajitgupta
August 17, 2012 | FORBES INDIA 5 INDIA 66 50 Volume 4 | Issue 17 | August 17, 2012 Contents
ENCORE! REGULARS Ratan Tata has big 16 Letters to the Editor 54 plans for the Tata trusts 18 Exit Interview 20 Close Range 22 World Watch
124 Thoughts India Alok Brahmbhatt for Forbes ACHAL BAKERI, chairman and managing BITTERSWEET Regulatory troubles are ahead director, Symphony Ltd for Cadbury and Kraft FEATURES
ENTERPRISE trusts are even more ambitious still its biggest—has a long history, 46 A Fleetcar NamedIND Meru IA but Changyu is looking to the future What lies beneath the business MY LEARNINGS irony of a great brand that’s 66 Back from the Edge 82 Time Machine losing money? Achal Bakeri saved Symphony Sincere Watch has passed through by focusing on what made his many hands, but its latest buyer sees REAL ISSUE company great better times ahead 50 A Sticky Situation Kraft Foods ran afoul of BEST UNDER A BILLION CROSS BORDER corruption regulations in the US 69 200 Best Under a Billion 84 China’s Steve Jobs and India A weak global economy hasn’t Lei Jun doesn’t want Xiaomi slowed down these top companies company to be China’s Apple—he COVER STORY from Asia-Pacifi c wants it to be even better Brian Harkin / Getty Images 54 Bigger. Stronger. Better. Ratan Tata could rest on his 78 Grape Leap 88 Qualcomm is Dialled In UPFRONT laurels. But his plans for the Tata China’s fi rst modern winery—and The cellphone-chip maker is facing stormy seas, but CEO Paul Jacobs is HINDSIGHT IDEAS & OPINION Trajectories keeping an even keel 24 The 10-Million-Dollar 30 We Don’t Study Markets, We India’s growing population is a Mercedes Study People stark contrast to a greying China 94 Silicon Valley’s Unlikely Saviour Later this month one of the Consumers want technology that’s No longer the king of Silicon Valley’s world’s rarest cars will hit the more human, says Intel futurist THE CONSILIENT INVESTOR VCs, Kleiner Perkins is hoping Mary auction block Brian Johnson 38 Where Angels Fear to Tread Meeker can put them back on top When investors hit the panic BREAKPOINT CURRENT EVENTS button, opportunities abound for FORBES INDIA LEADERSHIP 26 Birth Right 32 Financial Goals of the Urban those with cooler heads AWARDS 2012 Lifespring Hospitals is saving lives Affl uent in India 92 The FILA Jury Meet 2012 with low-cost maternity care Their goals, aspirations and OLYMPICS The Forbes India Leadership dreams regarding their fi nancial 40 It’s vital to let people feel they Awards jury is one step closer to 28 Tourism in the Time of investments are part of the Games announcing this year’s exceptional Economic Slowdown London 2012 CEO Paul Deighton business leaders New York City fi nds a way to keep COMMENT says community buy-in is key to
46 Ganesh Lad / Fotocorp tourists coming 34 China and India: Diff erent a successful Olympics RUNNING ON EMPTY A great brand isn’t enough to bring Meru profi ts
8 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 9 INDIA
Volume 4 | Issue 17 | August 17, 2012 Contents 104 RECLINER 104 Greek Tragedy A traveller fi nds history repeating itself in the cradle of Western civilsation
FREQUENT FLIER 113 My Manila From beautiful beaches to local dining hubs, the city has plenty to keep visitors coming back
APPRAISALS 116 Book: Dark Pools Journalist Scott Patterson sheds light on the shadier workings of the INDstock market IA
RECLINER 118 The Magic of Rangefi nders Once the world’s most popular cameras, Rangefi nders still have classic appeal
122 Cheat Sheet: On the Fast Track With Ramzaan underway, a look at fasting traditions from religion Zac O’Yeah Zac to politics GREEK TRAGEDY Crisis or no crisis, Greece remains an attractive destination
Cover Photograph: Carl Court / AFP / Getty Images
WE VALUE YOUR FEEDBACK. Write to us at: [email protected] PAPER WEIGHT A recyclable chair, accessories Letters may be edited for brevity. 120 to keep your gadets looking good, and more Read us online at www.forbesindia.com
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Magazine Upfront Features Life Daily Sabbatical Multimedia Blogs News
INDIA http://forbesindia.com/blog MUST-READ BLOGS CHINA, A SOCIAL MEDIA http://forbesindia.com/blog COUNTRY What makes the Chinese embrace Social Media so OUR GUEST BLOGGERS avidly? Like much else in China, the answer lies in the way the government monitors and controls information V KRISHNASWAMY SANJOY dissemination in the country. BHATTACHARYYA INTELLECT VERSUS INTUITION IN CATALYTIC PHILANTHROPY BUSINESS DECISION MAKING IN INDIA Business owners in Middle India have Like most things in India, its a specifi c challenge of decision Writes on sports. Has Investment guru Sanjoy blogs social problems exist at scale making. As the business needs to covered fi ve Olympics on his life as a bridge player unimaginable anywhere else in grow rapidly and the complexity and the world. How can philanthropy cost of decisions rise, can they aff ord help India solve some of her most to decide based largely on hunches intractable social problems? and intuition? SUSHOBHAN MARCO D’SOUZA INDIA MUKHERJEE THE ELBOW PUSH FACTOR DISCLOSURES AND While we have ‘learnt’ to respect ACCOUNTABILITY privacy, our inherent attitude The intent of the discussions and towards it is somewhat diff erent. disclosures in an annual report should Off ers opinion on the best Writes about gadgets, gizmos For Indians, personal space isn’t help in understanding the business and digital ideas in the world and all things technology defi ned in physical terms. We see its health. This move to limit the level of nothing wrong or disrespectful extant quantitative disclosures is not or invasive in jostling each other healthy. http://forbesindia.com/thedailysabbatical around. DAILY SABBATICAL http://forbesindia.com/multimedia Your daily dose of wisdom from the likes of Harvard, Stanford, INSEAD, Oxford, ISB, Yale, Rotman, Tuck School of Business COVER STORY PODCAST FORBES INDIA SHOW and many others...
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INTRODUCING THE ROLLING STONES APERTURE CELEBRATE 50 YEARS The new avatar SO, WHAT’S NEW IN LONDON 2012? Rare images that chronicle the of Forbes India We examine some London 2012 innovations that world’s greatest rock-n-roll slideshows help us interpret the Olympics in a diff erent light band during the early years
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14 FORBES INDIA | August 17, 2012 Letters To The Editor Readers Say
BLAME GAME with my Swift VXI. I went The lack of a safety Refer to Why Good People to the dealer four times, regulatory authority in Do Mad Things (August they changed the brake India is most visible in the 3, 2012 issue podcast). booster and did all the fact that standard safety You should change the checks but they said ‘the features such as ABS headline. It should be car is ok, change your [anti-lock braking systems] “Why SMART people do driving style.’ But I feel and air bags are provided MAD things”. Subroto they are misleading. only in the highest variant Bagchi has rightly We owners have to of any car model. Indian diff erentiated between all stand together, then auto manufacturers are Good and Smart People. Maruti and Suzuki will still confused what is a Arvind Rao was defi nitely hear. Shame on [Maruti] luxury feature and what SMART. I don’t think he as it is the No 1 brand is a safety feature. Recalls BY THEIR PASSIVE can be classifi ed as GOOD. in India. Thanks Forbes aff ect fewer people than RESIGNATIONS, THEY Saleem India for your kind lack of standard safety SHOWED THE INVESTOR On the Web appreciation in this regard. features, and yet the sector COMMUNITY THAT Abhishek Sidhwa continues with impunity. THEY ARE DECORATIVE I fi nd [the independent On the Web INDVidooshakIA PIECES USED BY directors’] behaviour On the Web PROMOTERS fouler, more pathetic I got the new Dzire VXi ------and diffi dent than the and with my fi rst drive I CRASH LANDING protagonist Arvind missed hitting the other Refer to How to Destroy Rao’s complexity and cars in heavy traffi c in an Airline (July 20, 2012 corruptibility. As directors, Mumbai after I applied issue). This has happened they are not bound the hand brake of the car. with many companies by any constitutional [The dealer] is not ready earlier. This is due to oaths of confi dentiality, to accept it as a fault, either exceeding your that they should resign but a new feature of the resources or expanding without telling the world new Dzire VXi. If this is without doing proper the reasons for their a feature then everybody homework. In Vijay decision. By their passive needs to change their Mallya’s case, it is the resignations, they showed driving style and use the high risk sector, with his the investor community hand brake to stop the personal ego to remain that they are decorative car. I am going to take this in the limelight attached pieces used by promoters matter to consumer courts. with this industry. as cosmetic pieces to Sanjay Kandhway Surinder Seth observe certain statutory On the Web On the Web conditions. Corporate governance is very far, far away in corporate India. Shashank CORRECTIONS & CLARIFICATIONS On the Web AUGUST 3, 2012 ISSUE On page 20 – The interview with Harsh Mander was twitter.com/Forbes_India HIT THE BRAKES conducted by KP Narayana Kumar. facebook.com/ForbesIndia Refer to This Swift Won’t On page 42 – Arvind Rao purchased 6 lakh shares linkedin.com/groups?gid=1959962 Stop (August 3, 2012 issue). in OnMobile on November 23, 2010, not 2011, as written. plus.google.com/115075196102530859200 I have the same problem The error is regretted.
16 FORBES INDIA | August 17, 2012 Upfront/Exit Interview Creativity and Commerce Must Be in Sync UTV’s co-founder ZARINA MEHTA numbers. Numbers speak to their audience. There is tells DEEPAK AJWANI Age: 50 me. I can crunch numbers a purpose. If there is no Education: BA Economics from better than most people. purpose, why are you and ABHISHEK St Xavier’s College, Mumbai We have charts and charts creative? Creative and Last Position: Cofounder and Chief RAGHUNATH how Creative Offi cer, Broadcast, Disney UTV of numbers which tell us commerce have to be in the network kept New Position: Managing Trustee, when to put our show, sync. When a Doraemon hits coming Swades Foundation what’s the demographic and Shinchan are rocking, Interests: Food, books, music that’s watching us, etc. I don’t need to create Then we start talking. new content. I need to Q You’ve been one of the There’s nothing like a market them. That’s what cofounders at UTV. What’s good brainstorm. Call I did. Creativity doesn’t it like leaving it all now? people from all over the always have to be original Letting go is the hardest organisation. When I used content. And this is a thing to do in life. I thought to brainstorm on Bindaas, content person talking. I would never be able to I would call people from do it. UTV was my fi rst movie marketing,IND from QIA What’s the next job and it is mmy last job. I Disney, and producers’ step for you? have done it ffor 27 years. ideas would come out. I wanted to help people And leaving iitt has taken me There are many ideas on in a diff erent way. It’s been ffourour years. FForo the last four the list and then I pick brewing in my mind for yeyearsars I havhavee wanted to do one. Now, don’t ask me years, [I] didn’t discuss it ssomethingomething diff erent. I how I pick because even with anybody, not even wwantedanted to aapply my mind I don’t know that. I just Ronnie [husband]. We ttoo diff eren erentt problems. know that’s the idea. It’s have this foundation called EEarlierarlier I wwouldo say every probably 27 years kicking Swades. Our aim is rural ttwowo years, ‘‘II think I want in. At that point, don’t listen empowerment through to mmove.’ove.’ BBut I never to anyone. Trust yourself the best modern practices, knknewew wwhath I wanted and your instincts. So the technology and values. We ttoo do nnext, so I process is like a pyramid. have been working in rural neneverve left. Then You have this base of ideas, Maharashtra for the last we sold UTV to then your inner team and fi ve years and impacted DDisney.i That’s fi nally you. Then your 70,000 people in 117 villages wwhenhe I thought job is to go back and push in Raigad district. Our plan eeverythingver will your ideas down again: is ambitious. We want be fi ne if I leave. First to your own team, to empower one million then your layers of teams people in rural Maharashtra Q HHow does the and then the public. in seven years, the keyword creativecre process being empower. We aim workwo for you? Q How do you balance to spend around Rs 500 SupposeSu there creativity and commerce? crore in the next fi ve years is no idea. You You need to give creativity of which Rs 250 crore will fi rstr speak to equal value to commerce. be from our foundation. ppeoplee and do Creative people need to And if I don’t do yoyourur research. understand numbers if it now when I am 50,
ThThenen look at the they want to understand when will I do it? Vikas Khot Upfront/Close Range
RAMESH C JAIN Age: 65 Designation: Chairman, Industrial relations task force, CII and Former group vice chairman of Eicher Career: Currently independent consultant; former group vice chairman of Eicher Education: B Tech (Hons) from IIT Kharagpur and M Sc (business admin- istration) from Cranfi eld University, UK Interests: Golf
produce normal market demand. And you Can’t Treat Contract need a temporary workforce which meets the peaks of 20-30 percent growth rates. Labour Unfairly But that does not mean that you should treat the contract labour unfairly in terms RC Jain, former Q How do you read the situation of compensation, working conditions or group vice-chairman, at Maruti’s Manesar plant? what have you in terms of facilities for I understand that the Manesar union INDa permanent worker.IA In my mind, the Eicher, tells ASHISH consists of very young people. I see that fl exibility premium which organisations K MISHRA that the they lack maturity of a good union leader enjoy should be paid out in compensation manufacturing which is expected out of union leaders of to temporary workforce. Obviously quite industry needs any big company. I also have a feeling that a few companies are not doing this today. somewhere the external leadership, the If companies believe they can cut costs to change its senior people at trade unions which are at in this manner, I don’t think that is a fair communication with national level, I don’t think they are doing thing to do. Managements have to learn workers to prevent their bit in terms of mentoring the younger how to handle the contract labour. another Manesar leaders. They must train them on their rights, duties and responsibilities. So while Q The last fi ve years have seen increasing they have a right to demand, they have number of such incidents and mostly certain duties and responsibilities towards in the automobile sector. Why? the companies in which they work in. Somewhere we thought that with the I think there has been a breakdown in service sector, trade unions had taken a the process of how to handle grievances and back seat. But in the last few years the employee engagement. Supervisors should manufacturing sector has again starting be the fi rst ones to know the grievances of seeing light of day, and the growth in the the workers even before a union does. And automobile sector is the most visible, which these should be escalated which should is why you are seeing many more incidents. result in the formulation of a strategy. But the fact is that in this country there are only 10 percent workers in the organised Q What is your view on contract sector who have a union. 90 percent are not labour? It’s a big issue in almost all unionised at all, what about them? How do manufacturing companies now… they resolve their problems? I think this is Let me fi rst say that I am not against a million dollar question for our country. contract labour. There are fl uctuations in the business cycle of a company. There has to be a way out in which you have to have a To read the full interview, visit forbesindia.com
permanent workforce which is adequate to Amit Verma
20 FORBES INDIA | August 17, 2012 Upfront/World Watch
US 30-39.9 40-49.9
An analysis of US data showed that The daily energy expenditure in work- related physical activity has fallen by more than 100 calories per day Problem during the past 50 years.
of DENMARK 30-39.9 Inertia 30-39.9 In Denmark, building of INDIA infrastructure to promote cycling has resulted in a 50% increase in cycling in the past two decades. If 1.5 billion people, across the globe, all non-cyclists in Denmark became cyclists, about 12,000 deaths could be aff ected by coronary heart linked to little physical activity disease, diabetes, some types of would be prevented every year. cancer, several other diseases, and even premature death; all because they lack physical activity BRAZIL 40-49.9 INDIA CHINA 50 19.9 20-29.9 The overall physical inactivity of Brazilians only seems to have increased over the years. 19.9 30-39.9 It seems to be the only emerging economy whose inactivity across For India, its developing state, China is one of the few countries income levels has equaled a high keeps it occupied, and its physi- where more than 20 percent of its income state. cal inactivity level is much lower population either cycles or walks compared to anywhere else in the to work. This keeps their physical world. Fifty-eight percent of the inactivity in check. population still works on farms, and that keeps the activity levels high. It is the one of the few countries, AUSTRALIA where men and women’s physical inactivity levels are the same. 30-39.9
*Number based on Physical inactivity in 30-39.9 adults (15 years or older) worldwide in men ( ) For a nation that is known for ad- and women ( ) All numbers are in percentage venture sports, the population is less adventurous when it comes Source to its daily commute. This is the fi rst in a Series of fi ve papers about Less than 5 percent of Aus- physical activity by The Lancet. This is Physi- cal Activity 1 Global physical activity levels: tralians walk or cycle to work, surveillance progress, pitfalls, and prospects and this increase their physical inactivity levels. Compiled by Nilofer D'Souza Sameer Pawar Sameer
22 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 23 Upfront/Hindsight
INDIA The 10-million-dollar Mercedes
Later this month one 1936 While living in Paris, the 23-year-old Roadster is left solely for Gisela’s use. Baroness Gisela von Krieger buys a Mercedes- of the world’s rarest Benz 540K 2-door coupe. Her 19-year-old 1959 Henning dies in Switzerland of mela- cars will hit the auction brother, Henning, buys a Mercedes-Benz 540K noma. Gisela puts the Roadster in storage in the Special Roadster, which Gisela—considered one Homestead Inn barn in Greenwich, Conn and block during California’s of the most fashionable women of her time— returns to Switzerland to mourn her brother. Pebble Beach Classic commandeers soon after. The Von Krieger family crest is hand-painted on the door. JUNE 1989 Gisela’s body is discovered in Car Week. The 1936 her apartment in Vevey. A longtime recluse, SEPTEMBER 1939 Germany invades she’s buried in a pauper’s grave despite owning Mercedes-Benz Von Poland, and the Von Kriegers are briefl y placed considerable property in London, valuable bank Krieger 540K Special in a French internment camp. Henning quickly securities and diamond jewelry by Cartier and returns to Germany to join the Luftwaff e, while Van Cleef & Arpels. Roadster is worthy of Gisela and Josephine return to neutral Monaco to live in the Hotel de Paris. 1992 David Gooding, the head of the Beverly its own biopic. The Hills-based auction house Gooding & Co, re- prized possession of a 1943 Ignoring the Third Reich’s orders to re- ceives a call from a Connecticut lawyer asking turn to Germany, Gisela obtains a Swiss visa by about an old convertible he found in a garage. German baroness who stalling in Monaco and rotates the Roadster be- Gooding realises it’s the Roadster, one of only crisscrossed countries tween the Swiss resort towns of Davos, Luzern very few made: “I told them, ‘This is the Holy and Vevey. Henning returns to Switzerland. Grail. You’ve got something really special here.’ ” and continents to fl ee the MAY 1949 The family moves to the US in 1998 A New Hampshire collector buys the car horrors of WWII, the a bid to ease Gisela’s mounting depression. after years of litigation about its rightful owner. Roadster was found in The car is shipped to New York on the RMS It’s restored by the legendary Chris Charlton Queen Elizabeth and is serviced in the city by and finished in black and chrome over a cognac a Connecticut garage in Zumbach’s, a famous foreign car garage on leather interior. Manhattan’s West Side. 1989. Predicted to fetch AUG. 19, 2012 Gooding & Co will sell the more than $10 million, FEBRUARY 1953 After returning from 1936 Special Roadster at public auction. “I am Europe to finalise details of their now deceased sure it’s going to break a record,” Gooding says. it should continue mother’s estate, Gisela and Henning settle with “The last of its kind sold for around $10 million, to make history. their beloved Mercedes in Greenwich, Conn. and this is a much more significant, better, more When Henning starts driving a 1951 Lincoln, the original example. I think it’s going to be well in excess of that.”
24 FORBES INDIA | August 17, 2012 Upfront/Breakpoint
A YOUNG MOTHER at Birth Right Lifespring, Hyderabad Lifespring Hospitals has come up with an innovative model to provide low-cost maternity care to thousands of women
By NILOFER D’SOUZA
hen Loretta Selvakumar section. This is almost half the cost was expecting her fi rst of a private hospital delivery. W child in 1994, she was While the service aspect of elated. But nine months later, when delivering a child in a hospital remains she delivered a healthy baby boy in almost the same, what Ayyappan and a government hospital in Bangalore, his team have done is crack the low- his life was cruelly cut short after cost model for maternity hospitals. he slipped off a table. She promised Kumar helped make Ayyappan’s herself that no matter how costly, vision a reality by working on the her next delivery would be at a very fi rst pilot and building the other INDIA private hospital with better care. 12 hospitals. In an earlier interview Selvakumar has since had three to Forbes India, Kumar said, “We children, all born in a private keep [our costs] low from the time we hospital. But even though the design the hospital. We have a lease number of private hospitals has agreement over time and this brings gone up dramatically since 1994, the down our capex. Former schools, diff erential cost to deliver a baby at a apartment buildings, old godowns government hospital versus a private are converted into hospitals so our DELIVERING HEALTHCARE Chairman & Managing one has gone up exponentially. Director of HLL Lifecare M Ayyappan cost of setting up is much lower.” The rising costs are a Apart from lowering their signifi cant reason why India has especially in the space of mother and infrastructure costs, Kumar says, the highest number of maternal child. With this in mind, he roped in they look at the business as “low cost deaths in the world at 56,000 a KPMG to prepare a fi nancial plan. meant volume like a low cost airline”. year, or one every 10 minutes. Ayyappan brought in Anant Every month, at least 100 babies are This was something M Ayyappan, Kumar, who was working with a delivered in each of their hospitals, chairman & managing director, trust of HLL, as CEO to run a pilot of which have a capacity of 20-25 beds. HLL Lifecare Limited, observed on his dream—a low-cost, high quality A third area way Lifespring has his many visits across the country. maternity hospital. And Lifespring lowered costs is by relying on vendors. He says, “I’ve seen the real face of Hospitals Private Ltd was born. For example, in an in-house pharmacy, India; like in Uttar Pradesh, I’ve It is a joint venture between the usually, there is pilferage, expiry of seen young girls at 16-17 deliver government, HLL and Acumen Fund, products or high inventory costs. 5-6 children and still carrying.” It a global non-profi t venture fund. Lifespring has entered into was a good thing too that this issue Since 2005, Lifespring has grown to an agreement where supply
caught Ayyappan’s eye because he 12 hospitals in Hyderabad. It charges is just-in-time, which reduces India Moses for Forbes decided to do something about it. Rs 4,000 for a normal delivery and their costs signifi cantly. Ayyappan was brought into HLL Rs 9,000 for a delivery by Caesarean Finally, Lifespring also trains we utilise our resources effi ciently, that cluster. This ensures an eff ective issues. Ayyappan and his team have Lifecare in 2003 with a clear mandate nurses to be midwives, bringing cost comes down,” said Kumar. use of resources,” Kumar says. In the now deferred their plan to touch to diversify the company’s revenues of LIFESPRING TRAINS NURSES TO down the need to recruit more It is this need to utilise resources next fi ve years, they plan to will look the 100-hospital mark by fi ve years. Rs 163 crore that came largely from its BE MIDWIVES, BRINGING DOWN doctors as well as the costs. Not optimally that has kept their at Delhi, Mumbai and Ahmedabad. But he is confi dent. “We are talking contraceptive business. As he charted THE NEED FOR MORE DOCTORS only do the trained nurses assist expansion plans confi ned to Lifespring earlier planned to to private equity holders. In one his expansion plan, he knew he had AS WELL AS COSTS doctors, they also help with billing Hyderabad. “We will do serious expand to 100 hospitals by 2012, to two months, there will be more
Amit Verma to improve the delivery of healthcare, ------and administrative work. “When mapping, go to one city and build but couldn’t because of funding investors coming,” he says.
26 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 27 Upfront/Breakpoint
city as a contrast to parts of redneck America, is boosted by these measures. Tourism in the “We see strong growth projections for tourism to NYC in the next four years,’’ says George Ferttita, CEO of Time of NYC & Company. Fertitta was picked by Bloomberg to head the not for profi t quasi-agency that worked with Economic a budget of $35 million this year. Half of these funds come from the city and the rest from partnerships with the likes of Amex, Travelocity and Slowdown American Airlines. The New York Restaurant Week, one of the most Mayor Mike Bloomberg’s aggressive push ensures popular summer events this summer, that the slowdown doesn’t aff ect travellers’ decisions that off ered dining deals in 300 to visit one of the world’s most expensive cities restaurants all over the city, is being underwritten by American Express. By CUCKOO PAUL The 20-day event resultsIND in millions IA of dollars in sales and is an integrated he mayor of New York City term and meant to ensure that there program being tried out now in many recently set a revised tourism is infrastructure to allow the city Ttarget for the city—55 million and its fi ve boroughs to grow. De- JUST 10 YEARS AGO, TOURISTS tourists and revenues of $70 billion bottlenecking the airports was a big WERE LOOKED UPON AS A by 2015. Though Mike Bloomberg initiative that somewhat eased entry NUISANCE. THAT IS NO will be out of City Hall by the end points into the city. Blueprints are LONGER THE CASE of next year, he has set tourism on a being laid out to handle traffi c in 2030. ------George Ferttita, CEO of NYC & Company trajectory that has consistently defi ed Yet, a lot of the push comes from the slowdown. The city has always initiatives that don’t necessarily other cities of the world, says Ferttita. this was the “Just Ask the Locals” India ended 2011 with 6.2 million beaten the rest of the United States require dollars on the ground. This Domestic tourists constitute campaign kicked off in 2008. This foreign tourists, growing 9 percent in attracting tourist traffi c—it has July, a study by NYC & Company, three-fourths of the visitors to NYC. featured celebrities like Robert De over the previous year. The lessons now exceeded its own expectations. the city’s marketing and tourism The city has never been a cheap Niro and Julianne Moore off ering tips are two-fold. First, it is critical that the Targets set for this year were met partnership organisation, showed destination, and hotel room rates are on things to do in the city. Of course, centre and state tourism authorities last year, making it an example for that a year after the enactment of daunting for the budget traveler. A in many parts of the world, people forge stronger partnerships with the tourism authorities the world over. the Marriage Equality Act, same- study by PKF Consulting shows that have their own ideas about what to do tourism trade. Stronger tie-ups with In his three terms as mayor, sex marriages have generated about average daily room-rates in the city in the city, says Ferttita. Thanks to the hotels, travel agencies, airlines and Bloomberg has changed much of the $259 million in economic impact increased to $277 in 2011, up from popularity of Sex and the City, Fertitta others in the travel chain are needed. way the city works, focusing on better and $16 million in revenues. About $261 the previous year. National had to face some unusual questions Like elsewhere in the world, the transport, safety and cleanliness. He 8,200 same-sex marriage licences Tourism Agencies all over the world at a recent conference in Shanghai. return on every rupee spent by the has also personally driven initiatives were issued in this period. Even as struggle to fi nd the balance between That does not stop him and NYC & agencies needs to be examined. This that have made the Big Apple more the Act was passed, the city launched trying to maximise the yield per visitor Co from turning its focus to tourists is essential to improve marketing and attractive for visitors. Earnings from “NYC I Do”, a multi-channel, global and not pricing themselves out of from newer geographies. “Historically, off er value to tourists. The second tourism were up to $17.3 billion in 2011 communications initiative that the market. NYC competes not only most international tourists came from part is the need for a drive to improve and the sector provided 310,000 jobs. promotes the attractiveness of the fi ve with Canada and the Caribbean, but Europe, but the eff ort is now to look tourism infrastructure. Hotels Fundamental planning changes in boroughs as a place for couples to get also with 49 other American states, at other markets, especially in South groups have drawn up extensive zoning of the city boroughs to allow married or enjoy their honeymoon. all of whom are cheaper to visit. The America,” he says. 200,000 of NYC’s plans to increase their network all construction of more hotel rooms is Marriage equality has made the city attitude of the locals can be a big visitors last year were from India. over the country. Better roads, a one big initiative. This will take the more open, inclusive and free—it has diff erentiator says Fertitta. Just 10 The city has stepped up its marketing greater focus on safety for tourists available rooms in the city up from also helped support the local economy, years ago, tourists were looked upon eff orts to try and increase this number. and more public amenities at tourist 73,000 to 92,000 in the next fi ve says Bloomberg. NYC’s global image in as a nuisance, but that is no longer The NYC experience has a lot of spots are needed to make the India Julienne Schaer Chris Helgren / Reuters years. Much of the planning is long popular culture and media, as a liberal the case, he says. One measure of lessons for Indian tourism authorities. experience truly incredible.
28 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 29 Upfront/Ideas & Opinions
BRIAN D JOHNSON literally know who we are, even as or the fl ying ‘vimana’ mentioned Age: Born in 1972 to we walk into a room or boot up a in the Ramayana, his books tell a technologist parents; considers system. At work, computers will story of the future that people can himself a born-futurist. know whether the user is an introvert associate with. His next book, Vintage Work: Future casting or an extrovert, what time of the Tomorrow, will be out in September. Interests: Artifi cial intelligence, robotics, illustrator and day she is more productive, what When you are building for that commissioned painter, director kind of humour cracks her up and future, you can’t punt. It’s a big deal. of two feature fi lms at what time of the day, and so on. “Which is why we need to change the As a piece of artifi cial intelligence, story that people tell themselves about Siri, a built-in digital personal the future they will live in. You have assistant in iPhone 4S, might not control over that future, [it] doesn’t be great, but it’s a start, he says. matter whether you are a scientist, (He now uses a Samsung Galaxy engineer, sociologist, or in media.” 3S.) “I’ve been telling my company That’s perhaps easier said than that people want their technology done. Look at how smartphones to have a sense of humour…we feel have invaded our lives. closer to it, we learn quickly.” “Can smartphones kill us? That’s As an example of personalisation, a bad narrative,” he counters. We INDhe quotes his colleagueIA Genevieve needn’t fear the future of technology; Bell, an anthropologist at Intel Futures instead we ought to ask the right Lab, who thinks the smartphone questions. These devices have should know that the owner is in a not been around for a long time pub and doesn’t allow him to post so we don’t really have the norms on Facebook. “Now think what it around what is acceptable and would do,” he says with a grin. For what is not. Let’s have a cultural years we’ve had to tailor ourselves conversation around it, he suggests. to the machines, now it’s going to be Building a future on the the other way round. It’s starting to relationship between humans and happen and it can bring some serious technologies has its own perils: Being productivity change, he believes. off the mark. But getting it wrong Besides studying people, Johnson is not a “binary thing” for Johnson, digs into science fi ction for ideas. And though he admits he’s had to do since good fi ction is about people, course correction. When Intel began good science fi ction is also about making chips for set-top boxes, it people and character. Such a language started on the assumption of video- Johnson was appointed the Intel allows him to prototype the human on-demand. But as companies failed ‘We don’t study markets, futurist in 2010. He travels around impact of technology which he then miserably in converting TVs into the world talking to a variety of takes to his engineers to show what a computers, the futurist in him had people, fi guring out what kind of particular experience might be like. to fi nd out what people love about future they want to have or avoid; Through Project Tomorrow — an TV. It became clear that watching we study people’ how they perceive or use technology. interactive communication initiative television is like a “social act”. So He then uses that information to that is currently on in the UK and will chips were designed accordingly and What kind of future do t’s not often that you meet makes predictions, then he does build models which help design chips move to Brazil and South Korea next today we have TV and internet on people want to have? Intel’s a corporate futurist. So not comprehend the complexity of that make such a future possible. year — he releases the conversation to the same screen, two to four layers Iwhen you meet one, you it and is probably trying to sell you That future, according to him, the public to see if they like the future. of HD video overlaid with HTML. futurist BRIAN JOHNSON are tempted to ask the obvious: something, he says. Instead, what is one where computational power The narrative matters to him. Just In the end, says Johnson, studies that and then helps What does the future look like? he does is look 10 to 15 years ahead, and zero size computing — chips so as his conversations and talks are technology is about culture. design chips that make such Brian D Johnson, the futurist roughly estimate what the future small (seven nanometers) that they peppered with metaphors from the “We don’t study markets, we a future possible at Intel, says he doesn’t make is going to be like and then work to can be inserted into anything — will past, stories of the mechanical duck study people; it doesn’t matter predictions, because the future build it. “I don’t want to be right; mean technology gets more human. (created by Jacques de Vaucanson where they are. We go to every By SEEMA SINGH is always in motion. If somebody I want to get it right,” he says. Our phones and other devices will in 1739), Frankenstein’s monster continent, except Antarctica.”
30 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 31 Sameer Pawar 32 Upfront/ FORBES INDIA|August 17,2012 such as Specifically, goals objective. as theirprimary prioritise family-centricgoals Indian consumerstypically or geography, affl Irrespective ofage,income AROUND THEFAMILY FINANCIAL GOALSREVOLVE and LongTerm Retirement Aspirations Personal aspirations Family essentials Family PROFESSIONALS FOR THEINDIANURBAN STRENGTH OFPRIORITIES and aspirations. personal ambitions take precedenceovereven or disability death family incaseofearner’s education India affl the urban goals of Financial financial securityfortheir parents’care,and providingforchildren’s uent in Current Events Current uent 30 % 40 % 10 % 20 % NEIGHBOURS BUY PEOPLE BUYWHAT THEIR REASONS PRODUCTS—BUT FOR THEWRONG MANY BUYTHERIGHTFINANCIAL while showingatendencyforgold Bengaluru shiesawayfrominvestments social status. which reflect theirdesireforbetter estate, bothof Chennai goesforgoldandreal fiproducts (like xed deposits). equities)andsecure of bothriskier(like that combinesarange Mumbai favoursawell-diversifi ed portfolio funds andfixed deposits So, Delhiprefers‘secure’ productslikemutual product ownershipbehaviour. demonstrate uniqueandremarkablyvaried wasconducted in thecitieswheresurvey age orotherdemographicfactors.Consumers influenced bygeographyratherthanincome, Investment productholdingpatternsaregreatly RETIREMENT ANDLONG TERM PERSONAL ASPIRATIONS FAMILY ASPIRATIONS FAMILY ESSENTIALS invest mostoftheirmoneyinequity did so benefits. For example,41%ofpeoplewho totheactual product reasons contradictory to bebuyingsoundfinancial products,but for A surprisinglylarge numberofpeopleseem tegh f Priorities of Strength (in %-calculatedfromshareofprioritygiventoattributesbelongingeachgroupgoals) INCOME DOESNOTAFFECTGOAL PRIORITISATION But the survey throwsupsomeunexpectedresults. But thesurvey that theywouldbothermoreaboutpersonalgoalsthanfamily. well-informed financial decisions.Also,onemightassume Ordinarily, onewouldassumetheseprofessionalstomake financial investments,andthefactorsthatinfl uence them. focused ontheirgoals,aspirationsanddreamsregarding their 12lakh+)livinginmajormetropolitanRs centres.Thestudy withanaveragehouseholdincomeof consumers (age 28-45 ofafflresearcher TNStoconductasurvey uenturbanIndian Ameriprise Financial,recentlycommissionedmarket The IndianarmoftheAmericanfinancial planninggiant, GOALS D N I Rs 13-20 lakh 11 51 5 11 5 11 16 20 18 17 21 20 34 32 32 28 28 41 39 47 39 36 INSURANCE REASON FOR BUYING REASONS FOR BUYINGEQUITY versus protectionfortheirfamily. doingsofor highreturns to insurancereport respondents whoallocatedmaximumfunds investment. Similarly, ofthe aboutaquarter which iscountertothebasicpremiseofequity for reasonsof‘secure’ or‘guaranteed returns’ Returns 68% High Rs 21-30 Returns High Investment A good Save Tax Returns Guaranteed Security INCOME GROUP lakh Security 21% Rs 31-40 Rs 31-40 IA 14% lakh 28% %8% 9% Compiled byUditMisra Guaranteed returns Rs 40-46 Rs 40-46 lakh 20% Rs 46 lakh More than 56% Upfront/Comment China And India: Different Trajectories
when China suff ered huge shortages sitting for the nationwide Civil in food and resources and people Services Examination can opt to use believed a population explosion any of the recognised languages for loomed. Unfortunately the population the test, except in the mandatory decline this policy has brought about English and optional foreign language will be diffi cult to reverse. There’s sections. India’s constitution little likelihood that China’s women mandates that the two offi cial will return to a TFR of 2.1, as highly languages for intrastate and interstate educated women who earn large communication be Hindi and English. salaries don’t want to be burdened But no prime minister in Delhi, no with two or more children. They matter what language he chooses, marry later and delay childbirth can be understood by more than a in order to enjoy life, especially limited segment of the population. By LEE KUAN YEW travel to foreign countries. Worse, INDMono-ethnicIA China has one written hina’s imploding population many women do not marry at all. language with diff erent pronuncia- contrasts with India’s Some estimates are that 10 percent tions, depending on the region. But Cincreasing one. China of women in China remain single. leaders in Beijing can be heard and currently has 1.35 billion people, and In Singapore it’s 20 percent. understood by the whole nation. its one-child policy—put into eff ect In every country—developing in 1979—is still in force. Every child and developed—the older the VITAL FOR A VIBRANT ECONOMY must have a household registration workforce, the lower the overall level I’ve just returned from visiting Japan document, without which education of entrepreneurship and creativity. and Hong Kong. Japan’s TFR is 1.39; and employment aren’t possible. The contrasts between China and South Korea’s, 1.23; Hong Kong’s, 1.11; But China’s total fertility rate (the India are stark. India’s population is and Singapore’s, 1.20. I found Japan to average number of children a woman 1.21 billion, and it has a TFR of 2.5. be aging but Hong Kong to be vibrant. has during her childbearing years) Estimates are that India’s population I can’t help but believe this is in is around 1.6, and rapidly declining. will reach 1.4 billion by 2026. part because more than 220,000 This spells future problems for China, Population problems in India centre people commute daily from China as the replacement rate needed to on whether there will be adequate to Hong Kong and many of Hong keep its population stable is 2.1. homes, schools, education and health Kong’s people have second homes More than 20 of China’s top facilities for all of these people. across the border on the mainland. demographers, sociologists and India has more than 2,000 Singapore takes in immigrants economists have submitted petitions ethnic groups, with more than from China, India and the rest of to the government advocating 400 spoken indigenous languages. the region, which contributes to its ending the one-child policy. But Each state elects its own chief remaining a dynamic economy and even if its leaders wanted to top up ministers; therefore, whoever is society. Hong Kong’s population the population with immigrants, in charge in Delhi doesn’t have is legally and illegally increased by China wouldn’t be able to fi nd the complete control and infl uence immigrants. Japan, on the other hand, numbers needed to send its population over events in individual states. is a nation of pure-bred Japanese. It into a stable replacement mode. India recognises 22 languages, refuses migrants, so its population The mind-set behind the one- but an estimated 41 percent of the is shrinking and aging—a diffi cult child policy dates back to the days population speaks Hindi and about trend to reverse once a country’s
Thomas Kuhlenbeck for Forbes Thomas Kuhlenbeck following the Cultural Revolution, 10 percent, English. A candidate birthrate has declined so rapidly.
34 FORBES INDIA | August 17, 2012 Upfront/Interview Backstage With Steve Ballmer
By RICH KARLGAARD
n early July I interviewed Q Your stock price is half Microsoft CEO Steve Ballmer what it was in 2000. I onstage at the company’s The stock market has always had its Worldwide Partner Conference. own meter. Sometimes it’s ahead of Watching Ballmer prepare itself, sometimes behind. All Micro- sure that no stone is left unturned, backstage was a revelation. He paced soft can do is focus on creating in terms of really showing Windows the corridors, practicing his lines in a exciting products. If we deliver 8 in its most innovative form. With booming stage voice. It came in handy them and make more money, that Windows 8 you can get a tablet and when his mike failed at the end of will translate into rewards for our a PC in a single package, and I think his presentation. He boomed on and shareholders. Surface probably proves that as well 16,000 people had no trouble hearing as anything. Our goal is not to compete him. After the interview onstage, Q Has Microsoft’s historic success with hardware partners. The bulk of we retreated to the greenroom to made it vulnerable to disruption? INDour WindowsIA volume is going to come continue the conversation. So far we’ve done a pretty good job from our hardware partners. of avoiding that. We make bold bets Q This is a big year for you. on the future, more than most big Q In the 1980s and 1990s you and Bill It’s up there. Microsoft’s founding companies. Gates formed one of the most produc- [in 1975] was the day somebody tive partnerships American industry said software was going to be a real Q It’s frequently said that has seen. Do you miss Gates? business. The launch of the IBM Microsoft often stumbles on the Well, yes, I miss him! Bill comes in a PC in 1981 was when the notion of fi rst two versions of a product, day or two a month, just to brainstorm the microprocessor as the engine of then nails it on the third. with groups, talk about their plans computing got legitimised. Then the I’m not sure if that was a compliment and ideas for Offi ce and so on. He’s 1995 launch of Windows 95 was big or not, but we are persistent and on e-mail pretty regularly regarding for everybody—big for Microsoft, big patient. We made a big bet on Xbox, Microsoft matters. And he’s on the for the industry. and I’m glad we did. We made a big board. We don’t have a dependency, With Windows 8 we think we’re bet on Bing, and I’m glad we did. Bing though. The leadership team runs the ushering in a new round, one of hasn’t delivered full fi nancial return, business every day. mobility, natural user interface and but man, we have a product that the cloud. delivers more relevant results than Q Apple and Microsoft have had Google and is more diff erentiated for a great rivalry ever since both Q A recent Vanity Fair article social networks and for our Facebook were founded in the mid-1970s. said that Microsoft’s last 10 years partnership than anything else out Microsoft had the better of it in the have been a “lost decade”. there. I love what we’re doing with 1990s, but now Apple’s on a roll. Ultimately progress is measured Windows 8. We’re reimagining our Apple does amazing work, and through the eyes of our users. We number one product. That’s cool. But Microsoft is doing amazing work. have 1.3 billion people using PCs it’s not for the fainthearted. It takes a It’s always great when you get a lot today. There was a time in the 1990s certain boldness. of people pushing themselves to do when we were sure there’d never be better, be better, invent better and to 100 million PCs sold a year. This year Q Building your own tablet better serve, better lead customers in alone there will be 375 million sold. computer seems like a departure. new directions.
Thomas Kuhlenbeck for Forbes Thomas Kuhlenbeck So, is it a lost decade? With Surface we wanted to make Rich Karlgaard is the publisher of Forbes.
36 FORBES INDIA | August 17, 2012 Upfront/The Consilient Investor
is now devoid of a single supporter! or are temporary. There is no point particular company or industry can The most minute blemish about the in seeking a bargain to either be often persist for a prolonged period Where Angels Fear to Tread company, whether real or imagined, arrogant, stubborn, or eager to be despite evidence of a recovery. Hence, is now out in the open and yesterday’s proven right. A detailed analysis of one needs to be primed for a long wait darling is comprehensively trashed. downside risk is essential to dealing recognising that you are doing so at Finally, a quiet sense of satisfaction with the “cockroaches in the kitchen very good prices. Investing in “fallen prevails – the investment manager sink”. Have the assets or brand been angels” is a low risk approach and the is vindicated by the stock settling at seriously impaired? Is a dividend cut gains can be signifi cant over a three a price even lower than his point of in the offi ng if margins continue to year time-frame even if the stock exit. Brokers seize the day by making remain depressed? Is the impact of does not regain its previous status as a round of thinly disguised “self- negative events — such as a labour a high-fl ier and soar to lofty heights. congratulatory” calls to clients as the strike, currency volatility or high What it certainly needs in abundance company fi nally hits a 52 week low. interest rates — likely to persist for is internal fortitude, a healthy dose of The current economic environment more than a year? Is the enemy within patience (self-belief, maybe) and the characterised by stubbornly high — the loss of a key manager, a failed willingness to focus on the long-term interest rates, a grievous fi scal new product, weak cost control — a performance record of the business. imbalance and political ennui is harbinger of an even more lethal hit Here is a candidate that clearly the perfect setting for the “Holi” in the months to follow? The nub qualifi es as a fallen angel in my book: bonfi re! Entire industriesIND are now of the scrutinyIA is to make sure that A highly predictable business with categorised as being leprosy-ridden the fundamental earning power of stable margins and very limited capital and fatal for prudent investors. A the business remains intact. If such requirements for future growth with wonderful example at the moment is be the case and the prospects of a a current market capitalisation of PSU banks with capital-equipment recovery over the next 3-4 quarters Rs 2,555 crore. Compounded annual manufacturers not far behind. No growth over the last nine years in net matter how bizarre such attitudes INVESTING IN “FALLEN ANGELS” revenues and net worth is just over may appear, the purpose for sensible CAN GIVE YOU SIGNIFICANT 10 percent, while the corresponding contrarians is to exploit the fi ckleness GAINS OVER A THREE YEAR number for post-tax profi ts is 16 of markets and fi gure out when to TIME-FRAME percent. The good news is that buy a specifi c company and at what ------dividends have compounded at 32 price. It is vital to point out that the percent during the same period! The
Corbis deluge of selling may take days, and seems reasonable, aim to buy the company has scrupulously avoided sometimes weeks, to exhaust itself stock either at the low end of its taking on even a single rupee of There are huge f there is an intellectual high in only for this reason. The incredible and regardless of how undervalued PE trading range over the last fi ve debt and has delivered an average opportunities in some buying neglected, undervalued swings in the emotional pendulum of the company may be, the price years or a meaningful discount to return on equity of 32 percent since Istocks, the joy of making money investment analysts can irreparably could well plateau or even decline book value. Be sure to review the 2003, with the worst year clocking stocks that have taken on widely followed stocks the crowd damage the perception of a company marginally before it fi nally turns up. ten year history of the company’s 21 percent! At the current price, the a massive hit because has turned against is even greater. among professional investors. While The best place to rummage for fundamental to avoid getting company is almost 20 percent off its of panic selling Most often, these opportunities are there is no rational explanation for the such opportunities is the daily list of carried by recent price behaviour. recent high and trades at 19 times the result of a short-lived earnings chain reaction this sets off , the fi rst to 52 week lows. Quite often, the list of Now that you have picked a beaten trailing earnings with an attractive By SANJOY BHATTACHARYYA disappointment or unexpected head for the gates are the day traders yesterday’s largest percentage losers down, large-cap stock that resembles dividend yield of 4 percent. During calamity that leads to panic selling. who survive on leverage and cannot is a great place to identify stocks in a “fallen angel” two further questions the last 5 and 10 year periods, the Senior management is keenly aware of tolerate even the most wafer thin the throes of a major decline. Now remain. First, what is the impact on company has delivered considerably the disastrous consequences of even losses. Next to press the panic button here is “Bhattacharyya’s Paradox” the company’s cash fl ow and fi nancial superior total shareholders returns a slight negative earnings surprise. are the investment advisors and built on the insight of many hard leverage or debt burden? Second, has compared to the market leader with Not surprisingly, this is what leads smaller, nimble-footed funds that need knocks in implementing this strategy. senior management objectively come marginally lower price volatility. to a reluctance to report bad news to showcase their consistency and Having identifi ed a stock that fallen to terms with the problem and are The company described above is and creates the temptation to cross boost quarterly performance. Finally, drastically, don’t rush to buy it! The they capable of coming up with a plan VST Industries (Rs 1,655 ).
the line by fudging the numbers. the big boys who fear being caught in a single most important consideration at that re-builds investor confi dence. Disclosure: This column is neither an off er John Templeton, the legendary no-growth situation ask their brokers this stage is to comprehend whether It is worth noting that institutional to sell nor solicitation to buy any of the securities value investor, chose to deprecate to get them out at any cost. The selling the reasons for the decline in price investors are slow to forget a snake- mentioned herein. The author frequently invests Sanjoy Bhattacharyya is a in the shares discussed by him. partner at Fortuna Capital the importance of quarterly earnings barrage that results ensures the stock stem from long-term considerations bite and their prejudice against a
38 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 39 Upfront/Olympics
Q How did you raise your £2.2 billion Q Olympics advocates often highlight can Rio learn in terms of areas budget from the UK private sector? a £476 million contingency fund that you would have liked more It’s vital to let people feel There were a number of diff erent but the actual budget was revised time and money to work on? streams of revenue, three principal up from £2.4 billion to £9.3 billion! The thing I’ve learnt the most during ones that we raised from the Why did the increase happen? my time working on the Games is they are part of the Games organising committee: sponsorship, £9.3 billion is the government just how important it is to make where we raised about £700 million; budget for the project, which really everybody in the community feel as The CEO of the organising committee of the London Olympics, Paul Deighton, says that the ticketing, where we raised about deals with the Olympic Park, the though they can be involved in it. £600 million; and merchandising, regeneration of Stratford, the main Because when they feel like they Games are all about community bonding where we raised about £100 million. transport and security costs. can be involved, they really join
By RANI SINGH The remainder came from sharing The cost of staging the Games, just in and are a part of it and we feel revenue with the International over £2 billion, was my budget and that at the moment, in the way that Q How have you gone about the management challenges? within a constrained budget in Olympic Committee from their own the organising committee’s and that people responded to our torch business of managing London The real management challenge, diffi cult economic times against sponsorship programme and from budget was entirely privately raised. relay which was attracting record 2012 diff erently from the way of course, is that this is an a background of an immoveable a share of the TV rights. The big But you’re correct; the £9.3 billion crowds everywhere it went—just it’s been done before? extraordinarily large and complicated deadline—we knew the opening ones over which we have control government budget went up, as you tremendous community celebrations I just set out to do it as well as I project with a scope that can only ceremony had to start on July are domestic sponsorship and say, from essentially four-and-a-half even when it was pouring with rain. possibly could. The key aspect really become clear several years 27, 2012—and doing all that with ticketing. Probably for me the major at bid time. The reason for that was So, my chief takeaway that I’d pass on of my leadership philosophy is, into the project, when you really the incredible amount of public, achievement of our projectIND was raising that whilst weIA won the bid, when we to them would be: At every possible fi rst of all, to be crystal clear on understand the detail of what has to media and political scrutiny that that much sponsorship in a time of looked at the scale of the opportunity stage, in every aspect of the project, what we’re trying to create. be delivered. And managing all that we get every second of the day. worldwide economic recession. for regeneration in East London open it up, let people be a part of it. Right through this project we’ve we decided to do it thoroughly. adhered very closely to the Q And if you had more time and promises we made in the bid Q Between the 90s and now, only money what would you tell Rio? when we won the Games: the 1996 Atlanta Games has broken I don’t want more time. The 1. To use the power of the even. In hard terms, what do you immoveable deadline is actually Games to inspire change. expect as an end fi nancial result? an advantage because it forces 2. To really put athletes at the heart From the organising committee you to make progress. It forces of what we do—because if athletes are perspective I expect us to break you to make decisions. enjoying the experience it transmits even. That’s what you aim at. We’re itself to all the other people involved. not particularly aiming to make Q G4S, contracted by LOCOG, 3. To use it as a showcase for London. a profi t but we’re aiming to make failed to provide adequate security 4. To use it to inspire young sure that we spend what we raised personnel for the Olympic Games people to choose sports. in order to put on a great Games 2012, to international and domestic Every time we’ve had a big so we, too, aim to break even. dismay. 3,500 army troops have decision to make, we’ve made been drafted in with 2,000 more it against these criteria. Q How can Rio, the host of the on standby. How confi dent are you Then we’ve been very focused on 2016 Summer Olympics, improve now of the security delivery? choosing the right people, getting on your managerial work? The safety and security of athletes and them to work together as a team, and PAUL DEIGHTON I can pass on to Rio what I think spectators is of utmost importance then really making sure that all the Age: 56 are the important things to get a to us. Providing security for an other organisations, both the private Designation: Chief Executive project like this right. You’ve got to Olympic and Paralympic Games is Offi cer, London Organising sector ones (our sponsors in the main), Committee of the Olympic and have a very clear vision, you have a big and complex piece of project and the public sector ones—that’s Paralympic Games (LOCOG) to move quickly at the beginning, management but we have the best central government, city government, Education: Trinity College, to make sure you get everything brains in the security business Cambridge University and local borough governments— done. You’ve really got to be working on this and I know that we Career: Chief Operating all work together because we all Offi cer and member of the decisive, build up the organisation will deliver a safe and secure Games. agree that this is such a wonderful European Management Com- and get the design right. Because opportunity to make Britain proud. mittee, Goldman Sachs, Europe. the seven years go by in a fl ash. Appointed a partner in 1996 To read the full interview, visit forbesindia.com
Q What were your biggest Q Resources are fi nite, so what John Gichigi / Getty Images for LOCOG
40 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 41 Upfront/Current Events
Coming on the heels of the spectacular opening ceremony at the Beijing Olympics, London had a tough act to follow. But Danny Boyle and his team more than matched Well Begun! up to the challenge By V KRISHNASWAMY
eginning with William a tuxedo-clad James Bond being Jacques Rogge, the President of the Shakespeare, whose The presented to the Queen. Then, the International Olympic Committee. BTempest inspired the “Isles of Queen, in a rose-pink dress, strode But much before that, with the Wonder” by Danny Boyle, the Opening briskly through the palace before global audience not yet connected Ceremony carried the British theme getting onto a helicopter and being to London through the telecast, the to the world through the three-and- transported over the streets of London thread was typically British with its half-hour marathon that got the and through the Tower Bridge to the sporting off erings like badminton, 30th Olympic Games off the block. Olympic Park. At that precise moment cricket and football alongside farms Coming on the heels of spectacular in East London, spectators could hear being shown in one part of the fi eld, openings at Sydney in 2000 and and see a chopper hovering over the which was converted into a montage Beijing in 2008 with Athens’ Grecian stadium. Quickly, it was back to the of rural English life. The scene history in between in IND2004, Boyle had fi lm on the screenIA once again, showing included wild fl owers, stone cottages a diffi cult task to match and a tough fi rst the Queen, and then Bond, with smoking chimneys, poppies, path to traverse. But the country’s plunging from it and into the stadium. barns and farms with cows, goats, history, Boyle’s own creativity and the Bond and the Queen, accompanied sheep and horses and clouds fl oating British genius across various fi elds by the classic Bond theme tune. around and a sturdy oak tree, that mixed with English humour and its The screen suddenly switched stayed on fi eld through the evening, penchant for daftness made for a to show the real queen in the same symbolising strength and longevity, great mix. Above all, it had 79,000 rose-pink dress—making for a very along with the national fl ags of 205 in the stadium and an estimated entertainingly fi lmed entry of the countries present at the Games. four billion TV audience across the ‘screen’ Queen with Bond on the fi lm Then there was the world famous globe, entertained and enthralled. and the ‘real’ Queen with the Duke Red Arrows, the Royal Air Force’s But the piece de resistance of of Edinburgh in fl esh and blood, to aerobatic team. Their stream of red, the evening was the sequence of the applause from the crowd and white and blue were also the colours
from £11 billion and £24 billion even as UK it was due to come in force. The Public and slanted footrest for a crouch start with the video cameras settled a dispute as Michael falls deeper into recession. But much to the Commercial Services Union called off a strike it rear-positioned leg at a 90° angle at the knee. Phelps was confi rmed a winner over Serbian DIARY relief of the Organisers, the demonstrators had set for July 26, the day before the Opening Experts say it generates an optimal starting swimmer, Milorad Cavic in the 100m butterfl y do not intend to disrupt the Games. Ceremony. The Union claimed that the Home profi le as the swimmer gets greater power by one hundredth of a second after the latter’s NOTES Offi ce had made commitments on job creation. when pushing against the starting block. coach protested against the result. Cameras A CRISIS AVERTED IN TIME Staff at the Home Offi ce, UK Border Agency, There is also an enhanced resolution confi rmed Phelps as the winner. It was Serbia’s Well, at least one crisis was averted before it Identity and Passport Service and Criminal of one millionth of a second. Called the fi rst medal and Phelps’ seventh gold. happened. The strike that threatened to impact Records Bureau were planning a strike in Quantum Aquatic Timer, its resolution is A PLATFORM FOR PROTESTERS the Games most was called off a day before protest of job losses. Since it was a day before 100 times greater than previous devices OLYMPIC ROUTE NETWORK A major event means a big platform. Not just for the Games opened, there were fears that it and is fi ve times as accurate. COMES INTO FORCE athletes and sponsors but also for protesters. might lead to chaos. The government had been North Korean players walked off the eldfi at Four years ago in Beijing, high-speed Starting at 6 am on Wednesday, July 24, the No less than 40 groups are planning to stage hoping for a High Court injunction but the Hampden Park. The match was delayed by 50 Transport Department of London declared that protests to highlight their grievances and Union called it off before one was granted. minutes and a LOCOG (London Organising “London has now become an Olympic City”. the “corporate dominance” of the Games. Committee of the Olympic and Paralympic That sure sounds dramatic, but it now means Other issues include the cost of staging the N. KOREA ANGERED AT WRONG FLAG Games) statement apologised for the mistake. that the Olympic Route Network (ORN) has event in times when austerity is called for. The women’s football competition kicked off came into force. The ORN includes 30 miles of Protesting groups include War on Want, even before the Opening Ceremony, and with OMEGA GIVES SWIMMERS Games Lanes, which are barred to the general campaigners against the placing of missiles in it came the fi rst major political ‘gaff e’. North AN EXTRA EDGE public. Transgression can cost as much as 130 the capital, local environmental organisations Korea was due to clash with Colombia in a Athletes strive for any small advantage pounds. The ORN, which is a general practice and Occupy London, which set up a camp Group G match, but the start was delayed and the swimmers seem to have reached in all cities for the duration of events like outside St Paul’s Cathedral earlier this by almost an hour, as the offi cials goofed- a new high in this regard. At these Games Olympics, Asian or Commonwealth Games, year. According to some of the groups the up by displaying the South Korean fl ag next the offi cial timers, Omega, have provided aims to make the transportation for Olympic estimated cost to the taxpayer is between to images of the North Korean players. The the swimmers a new patented, adjustable family, which includes athletes, offi cials and Opening Ceremony: Peter Macdiarmid / Getty Images; Twin Bryans: Sergio Moraes / Reuters; Bryans: Sergio Macdiarmid / Getty Images; Twin Opening Ceremony: Peter Swimming: Getty Images; Flag: Getty Images; Omega North Korea
42 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 43 Upfront/Current Events
bronze medallists in 2008, are top seeds this time. Also in the draw is the Scottish pair: Andy Murray, Wimbledon singles fi nalist, who plays with his brother Jamie. Venus and Serena Williams, the defending champions, are heavily favoured, as they gun for a third Olympic gold together. They also won gold in Sydney in 2000. Venus also won the singles gold in 2000. Serena won her Wimbledon singles title earlier this month and both sisters also fi gure in singles at Olympics. Poland’s Agnieszka Radwanska, Lisson Green Gang and the Church Town the No. 2 seed, who lost to Serena in Militants. These are neither social groups, Wimbledon singles fi nal, plays women’s nor music groups but notorious gangs in media, easier, but it causes great misery for doubles with younger sister Urszula. London. And on the eve of the Games, the the locals, leading to delays, re-routings and The sibling count should have been up Police have cracked down on about 15 gang even suspension of traffi c in some areas. to fi ve, but Alona Bondarenko was forced leaders in Central London, according to local to withdraw from the Olympics due to media. Some of these gangs are suspected FAMILY AFFAIRS injury. Her younger sister Kateryna will still to be involved in drugs trade and the police There are two sets each of brothers represent Ukraine in women’s singles. claimed they had discovered huge amounts of and sisters in the tennis draw and cocaine and cash in the raids. The operation they could well be on the podium. MAKING LONDON SAFE FOR ALL interestingly was codenamed Gabrim, after Twins Bob and Mike Bryan, of the US and The Mozart Gang, the Page Street Boys, the a knight in a sci-fi fantasy painting.
on a many young lad’s wig. There by streams of light, fi re and crackles. marked out as a star of the future. was also rain, which Boyle later These were juxtaposed with INDThe TorchIA was lit by seven young admitted he had planned for even Muhammed Ali, one of the best athletes chosen by seven legends if it had not occurred naturally. But known Olympians of all time, and of British sport: Lynn Davies, Steve rain it did, for a while. There also was the British National Health Service Redgrave, Daley Thomson, Shirley the London Symphony Orchestra. (NHS), one of the world’s most Robertson, Duncan Goodhew, The offi cial ceremony began when talked about health services. Kelly Holmes and Mary Peters. the world’s largest harmonically The evening had a touch of On the matter of carrying fl ags tuned bell was sounded at 8 pm everything from the British Isles and the teams marching in, India’s by Bradley Wiggins, the country’s that has invaded our lives: James fl ag was carried by Sushil Kumar, latest sporting hero and winner Bond bringing the Queen, “Mr Bean” while Usain Bolt and Sir Chris of the Tour de France. Rowan Atkinson playing to the Hoy carried the fl ags of Jamaica Then followed much else. theme of Chariots of Fire with one and Britain, respectively. Sir Kenneth Branagh, who stood fi nger on the keyboard, the classic Yes, the evening might have in for actor Mark Rylance, who Beatles numbers, ‘Mr Worldwide suggested that nothing about the show opted out due to the sudden death Web’ Tim Berners-Lee, Harry Potter was serious—entertaining though it of his step-daughter, appeared a creator JK Rowling, and much else. was—but it never became trivial. little later. Branagh recited what The evening was rounded off with a Yet not all was hunky dory. There Rylance was to do originally—the performance by Sir Paul McCartney. was a note of dissonance on Twitter lines from The Tempest, “Be not In the midst of so much activity, as Conservative MP Aidan Burley afear’d/the isle is full of noises…” the Olympic Torch ceremony tweeted that the Olympics ceremony which was Danny Boyle’s inspiration seemed to have been dwarfed. It was “multicultural crap”. His fi rst for the evening’s presentation. was almost forgotten, until the tweet said, “The most leftie opening The Industrial Revolution, with screen fl ashed pictures of David ceremony I have ever seen—more than workers in overalls and bosses in Beckham carrying the Olympic torch Beijing, the capital of a communist top hats, belching smoke amidst on a speed boat across a glittering state! Welfare tribute next?” And fi ve Olympic rings appearing in River Thames in a James Bond- then followed: “Thank God the mid-air, added to the parade. esque style, and then through the athletes have arrived! Now we can The pyrotechnics were one of fi nal journey from Tower Bridge to move on from leftie multicultural the highlights as they turned the Olympic Park. He was accompanied crap. Bring back red arrows,
Olympic Route Network : Paul Hackett / Reuters; London Safe: Getty Images Hackett / Reuters; London Safe: Olympic Route Network : Paul stadium into a spectacle dominated by Jade Bailey, a young footballer Shakespeare and the Stones!”
44 FORBES INDIA | August 17, 2012 Features/Enterprise A FLEETCAR NAMED MERU
INDIA
The radio cab service has the brand and the customers. So why is it still running up losses? on the Meru board and handles the Out of its fl eet of 5,500 cabs across off -the-stand cabs. Very often, no Meru investment for the fund. four cities, only 3,500-3,800 cabs are cabs were available in areas where By NILOFER D’SOUZA Those words are true, but so are currently operational. There have customers needed one. Industry hen it began service Customers, especially women, fi nd After six years, Meru is not yet the following facts. In fi nancial year been at least three incidents of Meru experts estimated that the radio in 2006, very few it safe to travel in a Meru cab and profi table. It has a high attrition 2010-11, on a revenue of Rs 150 crore, drivers striking work. Out of every 10 taxi business would reach up to people gave Meru fi nd it easy to book one. Cab drivers rate within its drivers’ ranks. Meru made a loss of approximately drivers that sign up with it, at least 30,000 cabs by 2017. (Today, there W radio cab service who were toiling away in rickety old “Meru is more of a venture Rs 45 crore and accumulated losses three quit and join rivals or choose are only three pan-India players, a chance. Most thought it was too taxis, have signed up to drive its clean, investment. The company had zero of approximately Rs 160 crore. to go back to conventional cabs. which represents only 10 percent expensive, and would appeal only air-conditioned taxis. It would seem revenues when we got in. And today So what lies beneath the business of the overall cab market. This is in to a small sliver of the commuting then that Meru has everything—brand, we have created an entire segment irony of a great brand that is he rapid expansion seemed spite of the fact that Meru has added market. They were all proven wrong. customers, and good technology—to where none existed,” says Divya losing money? Two factors: The Tlike a good idea when Meru tremendous capacity over the years.) In just six years, Meru has become become a profi table business. Sehgal, director, India Value Fund, extraordinary rate of expansion and launched in 2006. There was no Cab services work at a certain
Mallikarjun Katakol for Forbes India for Forbes Mallikarjun Katakol a well recognised urban experience. That’s where it all comes unstuck. the majority investor. Sehgal sits its inability to hold on to drivers. radio taxi service, only cruising or critical network size. If the service
46 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 47 Features/Enterprise
is available only in limited parts of market, Mumbai, has given it a lot could not make any money.” a city, it won’t gain in popularity. It of problems. Cab drivers like the The fact is, most drivers want won’t be fi nancially viable either, drop business, but the Mumbai to work for eight hours and then because the fi xed costs of setting Airport is smack in the middle of go home. In Mumbai, there have up a back-offi ce and maintenance the city, so the drops are at shorter been strikes by Meru drivers workshops will be too high to distances. This reduces earnings. complaining of long working hours. amortise over a limited fl eet size. Second, Mumbai has the lowest fares Many say they eff ectively have just So, the India Value Fund-backed among large cities. The minute there one non-working day in a month! management team at Meru built is a drivers’ strike, the utilisation So, drivers leave. And when its fl eet from 45 cabs in 2007 to goes down. According to internal it doesn’t work out at other cab 5,000 across Mumbai, New Delhi, estimates at Meru, in Mumbai even companies, they join back. Because Bangalore and Hyderabad. 500 cabs lying idle will put the drivers are in short supply, they can Just adding cabs isn’t enough; company in the red. Never mind if the do so easily. Meru has a team of 20 they need to be out running on remaining 1,500 are earning well. people, which only does re-recruiting the roads. Ronald Rosario, ex The challenge is to think outside of drivers who wish to join back. VP-operations of Meru cabs and the airports. Rajiv Vij, CEO, Easy Divya Sehgal of India Value current COO of taxiforsure.com, Cabs, says, “It is a wrong notion that Fund though has a diff erent point of says, “On an average, a cab driver the airport is the only business for view: “We don’t need to advertise in will spend 11 hours on the road to a radio taxi service. In Singapore, leading dailies and we’ve understood get at least four-and-a-half hours to cabs do a minimum of 28 drops a day the needs of the drivers pretty fi ve hours of a metered run.” These and in New York that fi gure is 52.” well.” He and Meru CEO Siddharth metered trips bring in the money. INDPahwa say thatIA in all cities other Consider the math: Meru owns THIS MODEL HINGES than Mumbai, Meru is on its way all its cabs and treats the driver as ON THE DRIVER to becoming EBITDA positive. a franchisee. The driver “hires” the Meanwhile, Meru is planning car from Meru for Rs 950-1,250 per GETTING ENOUGH to pare its fl eet size in the near day, depending upon the city. Each METERED TRIPS SO future and remove old cabs cab is purchased on loan. So, per THAT HE CAN PAY which are hitting the company car, Meru spends about Rs 15,000 MERU AND EARN with high maintenance costs. on EMI, another Rs 15,000 on repair WELL FOR HIMSELF About fi ve months ago, the and maintenance, Rs 18,000 on ------management at Meru announced fi xed administration services, for a a new line of business, Meru Plus. total of Rs 48,000, while it gets only In Bangalore, the average distance Meru Plus will not own any cabs Rs 30,000 (sometimes less) from a for an intra-city travel (one way) but will simply extend its brand driver on a fi xed basis every month. is 10 km. Given Vij’s numbers on and technology backbone to drivers This model hinges on the driver Singapore and New York, the business who will own the cabs. This is an getting enough metered trips so potential is between 280 and 520 km. attempt to make the business asset- that he can pay Meru and earn well light and move to profi tability. for himself. In addition, he has to eru has been tweaking its Will all these manoeuvres help pay for fuel losses every time the Mbusiness model all along Meru make money? Not unless cab is running without a customer. for greater effi ciency. Initially, the it fi xes its business model. Hence, cab utilisation is key. drivers were full-time employees Meru also needs to pare costs at “We did an internal study a few with fi xed salaries. But Meru the head offi ce. For example, the years ago,” says Kunal Lalani, founder found that the drivers were not chief fi nancial offi cer’s salary went and CEO, Mega Cabs, “and found that working hard enough. So to give from Rs 11 lakh in 2008 to more than you need to do a minimum of three- them an incentive, it moved to Rs 50 lakh in 2009—a wage increase and-a-half trips to be profi table in a the driver-franchisee model. of 354 percent. Such increases need city.” That means, three long trips “The fi rst six months, things were to be justifi ed, as it came when (typically airport drops and pickups) very good,” says Saleem Pasha, an the company was making losses, and a smaller one in between. ex-Meru cab driver from Bangalore, as it continues to make now. It is here the Meru’s biggest “But then things changed and we (Additional reporting Bharat Bhagnani)
48 FORBES INDIA | August 17, 2012 Features/Real Issue
and special investigations at Kraft of US law fi rm Baker and McKenzie, Foods, who had fl own over 4,000 km which counts FCPA cases among from Singapore for the meeting. its specialities. The fi rm will submit At the meeting, Mohit, the its report directly to the SEC. It canteen services provider, went may take a few weeks or at least a about detailing allegations of couple of months for the SEC to corruption and wrongdoing at rule on the nature of the violation. the company’s Baddi facility. Even as this intriguing case winds While Mohit conceded he was down towards its fi nal outcome in upset about the manner in which his the US, Cadbury India could face services were terminated, he said he had enough evidence to show the company had bribed government offi cials. He planned to make life diffi cult for the Cadbury, which was taken over by Kraft Foods in 2010. Six months later, in February 2011, in a fi ling with the US INDmarkets regulatorIA Securities and Exchange Commission (SEC), Kraft Foods disclosed that it had carried out a review of compliance systems at Cadbury, and admitted that it had found facts and circumstances that warranted further investigation in India. It also added that on February 1, 2011, the company had received a subpoena from the SEC. The subpoena, issued in connection with an investigation under the Foreign Corrupt Practices Act (FCPA) was related to a Cadbury facility that Kraft acquired in India. ANAND KRIPALU, managing director of Cadbury India Cadbury India The SEC had asked for headquarters in Mumbai information regarding dealings the wrath of the Central Excise with Indian government agencies Commissioner in New Delhi as and offi cials to obtain approvals well. Already, senior executives, related to the operation of that including Anand Kripalu, its managing t 2:20 pm on September facility and that Kraft was fully co- director, have been summoned to 6, 2010, an important operating with the investigation. the Excise Commissioner’s offi ce. rendezvous took place Immediately following the The offi ces of Cadbury India at the Taj Chandigarh. whistle-blower incident, Kraft Foods in Mumbai have been raided, A and computers and other SITUATION Rajan Nair, who is responsible for kicked off a detailed investigation security at Cadbury’s operations in of the case in India, led by Ernst documents confi scated. Cadbury India is in a regulatory mess after some of its India, was there to meet a man who & Young. It also sought the legal Four key senior executives, who had provided canteen services to the opinion of corporate law fi rm AZB & were directly involved in the case, By SAMAR SRIVASTAVA offi cials tried to bribe their way through important approvals company’s factory in Baddi, Himachal Partners. The reports of both Ernst including two who were executive Pradesh. Sensing the gravity of the & Young and AZB & Partners on directors on the board, have already situation, Nair had informed his the issue are with Forbes India. left the company in the last year. CY
boss Adrian Wong, director security Also, Kraft engaged the services Pal, the non-executive chairman of Getty Images
50 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 51 Features/Real Issue
Cadbury India, says, “We are aware of investment in plant and of the matter and whatever action machinery at the unit. had to be taken has been taken.” He The letter put offi cials at Cadbury declined to discuss the matter of the The origins of the mess India on the back foot. Not only FCPA investigation any further or and what is likely to happen were they unprepared to answer comment on the possible outcome of these questions, they knew they the Excise Department investigation. THE TRIGGER would have a tough time proving So what really transpired February 2011: Kraft Inc makes a regulatory fi ling with that this was indeed a new unit, the SEC, which states that it is being investigated inside the Baddi plant? for violations committed under the Foreign Corrupt thereby making their claim for a tax Practices Act at an Indian facility break untenable. Noted tax lawyer THE EXCISE SLIP-UP THE CONTROVERSIAL PROJECT Lakshmi Kumaran was engaged as In June 2009, Cadbury India set At Baddi in Himachal Pradesh, Kraft India initiated the company looked for a way out. a substantial expansion of its facility. On June 29, up a large extension facility at their 2010 they wrote to the Excise Department asking for First off , Kumaran advised exemption from paying tax on goods manufactured existing operations in the village of for a period of 10 years the company to not respond Baddi in Himachal Pradesh, churning THE TWIST IN THE TALE to the Excise letter. out 5 Star and Dairy Milk chocolates In an interview with Forbes India, The Excise Department replies in July asking for and colorful button-shaped Gems. details, including a “fl ow chart of the manufacturing he defended his advice. “I stand by process”. This puts the company in a fi x as the For the company, this capacity second unit at Baddi cannot be classifi ed as a my opinion. We had not violated the increase was a strategic investment. separate unit. Kraft India decides not to reply law and we could have argued our For not only did it expect to catch FALL-BACK PLAN case.” Instead, the company went up with galloping demand for its In November, Kraft India decides to separate the two about altering course and began units at Baddi. Through contractors it routes bribes products, it also knew it was on track INDto work on obtainingIA approvals to government offi cials for permissions required to receive a substantial tax break. for a new factory for the new unit. The undue haste Over the course of the next 10 DARK SECRET POPS OUT was due to the fact that to receive years, the management expected In September 2011, a disgruntled contractor alleges the tax breaks, approvals had to be bribes have been paid to government offi cials tax savings, to the tune of 60 obtained before March 31,2010. million pounds (Rs 521 crore). INVESTIGATION CONDUCTED And with it, began an On the last day of June 2009, the Ernst & Young is retained to investigate and elaborate game of subterfuge details payments made to contractors. Law fi rm, company wrote to the Central Excise AZB and Partners also submits a report. with government authorities. US law fi rm Baker and McKenzie is hired to Department. It said, “We are pleased conduct an investigation for the SEC As a fi rst step, company offi cials to inform you that we have set up a justifi ed the investments needed. In EXCISE DEPARTMENT new manufacturing facility at Baddi.” WAKES UP an internal email, Jaiboy Phillips, The letter requested the Directorate of Central Excise Investigations launches director operations, wrote that the department to grant them an its own investigation. Cadbury House in Mumbai is new plant and approvals would cost raided. Laptops seized and fi les taken away. Anand exemption from paying excise Kripalu, MD, has his laptop confi scated. He and 4.3 million pounds (Rs 37 crore). taxes for the next 10 years. several top offi cials are summoned to New Delhi That, in turn, would result in savings for questioning over the next few months Instead of granting approval, of 60 million pounds and an internal WHERE THE CASE IS HEADED as Cadbury had hoped, the Excise rate of return of 58.5 percent. Once Baker and McKenzie submits its report to Department hit back. After receiving the SEC it is almost certain to levy a fi ne. The It is here that bribes were paid Cadbury’s letter, the Central Department of Justice may also decide to criminally to government offi cials. Here’s how prosecute certain offi cers of the company. Excise Department responded Separately, the excise department is expected to the modus operandi worked. Bribes fi ne the company for unpaid taxes as an exemption with uncharacteristic speed. from paying taxes was never granted were routed through contractors A month later, it wrote back working in the Baddi facility and asking for details on the grounds often documentation was faulty. under which the exemptions were At times, it is alleged that these applied for. It asked Cadbury India unit was completely independent. contractors paid as much as 10 whether the goods were being The Excise Department even wanted times the amount to obtain routine manufactured at the location or a “fl ow chart of the manufacturing licences under the Factories Act. whether they were being simply process” to prove that goods were With the business case being repacked—to receive the exemption, being manufactured at the site. watertight, the company became so the company had to prove that the Lastly, it asked for details desperate to obtain these licences that
52 FORBES INDIA | August 17, 2012 Rs 50 lakh was set aside for bribes, in India, according to the Mintz according to an internal document. A Group, an investigative fi rm based former employee, who did not want in the US (see graphic). The most to be identifi ed, told Forbes India that WHAT famous case occurred in 2001 when these approvals should not have cost US legislation that makes it ChandramowliSrinivasan, a founding more than Rs 1 lakh, if done legally. unlawful for certain persons and president at AT Kearney in India, business entities to make payments According to a report titled to foreign government offi cials was personally fi ned $70,000 (Rs ‘Project Maxim’ prepared by Ernst to obtain and retain business. 38.6 lakh) for Rs 3.6 crore paid out & Young, plant manager Sanjay to government offi cials as bribes. Kurup paid Rs 25,00,000 to a WHY He is no longer associated with AT contractor for obtaining approvals. In the mid-1970s, investigations by Kearney. In other cases, companies the US Securities and Exchange Kurup left the company in 2011. Commission showed over 400 US have settled with the SEC and the US companies making payments in The 78-page report goes on to excess of $300 million to foreign Department of Justice. Some have state, “It is alleged that majority of government offi cials and political agreed to be fi ned a portion of their parties. The FCPA was enacted the consultancy contracts of 2009- to bring a stop to this. profi ts in exchange for being let off 2010 are entities through which on charges of criminal liability. government offi cials are bribed.” EXCEPTIONS Thomas Fox, a US-based lawyer Ernst & Young declined to comment The amount must be relatively with an FCPA practice, says for citing client confi dentiality. small, no more than $50-100 and Kraft to declare that it did not given to a low level government offi cial and must be recorded as know about the bribes paid by THE COOKIE CRUMBLES a ‘facilitation payment’. Cadbury India is not a defence. Meanwhile, Cadbury India went full IND“As the acquiringIA company, Kraft INDIAN speed ahead at separating the two VIOLATIONS will assume the liability, if any, for plants. The unit was legally separated, bribes which Cadbury may have paid. So far, eight instances of American new boilers ordered, a new high- companies running afoul of the Further under the FCPA, a company speed diesel tank was constructed FCPA in India have come to light. is required to perform pre-acquisition The most famous case was that of and staffi ng separated. The Ernst Electronic Data Systems (owned investigation into compliance with the by AT Kearney) where founding & Young report details money that partner Chandramouli Srinivas had FCPA, called ‘due diligence,” he says. was provided to contractors at to pay $70,000 to settle. Other Cadbury India, through cases include Dow Chemicals, each step that in turn greased the Westinghouse Air Brake Tech a spokeswoman, declined to palms of government offi cials. Corp., Diageo Plc, Textron Inc. etc comment despite multiple Internal emails show that company requests for interviews. offi cials were all along aware of the An emailed statement said, “A risks of separating these two units in INTERNAL EMAILS compliant and ethical corporate such a short time frame. For instance, SHOW THAT CO. culture, which includes adhering in February 2010 the company needed to laws and regulations in the to pump chocolate from Unit 1 to OFFICIALS WERE countries in which we operate, is Unit 2. In an internal email, Rajesh AWARE OF THE RISKS integral to our success. To that end, Garg, director, fi nance himself OF SEPARATING THE we are fully co-operating with the admits that tapping manufacturing TWO UNITS IN SUCH authorities on this enquiry. Since the synergies between the two units is a A SHORT TIME FRAME investigation currently is under way, “cardinal sin”. He fl agged the risk to ------it will be inappropriate on our part Kripalu, who eventually approved to discuss the details at this time.” it. Garg has since left the company. summoned to Delhi and grilled by In the months to follow, Cadbury All this came to a head last year excise offi cials for eight hours. India could well face a double when the Directorate of Central whammy, especially if the Excise Excise Intelligence decided to THE ROCKY ROAD AHEAD Commissioner also ends up levying investigate the company for violations. So what are the likely fallouts? dues and penalty from June 2009 In one raid that continued late Consider the past history. So far onwards. Whatever be the fi nal into the night, excise offi cials eight companies have made FCPA outcome, one thing is for sure: It seized Kripalu’s laptop. He was disclosures relating to their activities seldom pays to take shortcuts.
August 17, 2012 | FORBES INDIA 53 COVER STORY Ratan Tata’s Second INDIA Act He grew the Tata group into a world-beater. Now, with the Tata trusts, he wants nothing less than to change the world
By PRINCE MATHEWS THOMAS Hussain Fawzan One does not attain freedom from the bondage of Karma by merely abstaining from work. No one attains perfection merely by giving up work Because no one can remain actionless even for a moment. Everyone is driven to action, helplessly indeed, by the Gunas of nature The deluded ones, who restrain their organs of action but mentally dwell upon the sense of enjoyment, are called hypocrites The one who controls the senses by the mind and intellect and engages the organs of action to Nishkam Karma-yoga is superior, O Arjuna Perform your obligatory duty, because action is indeed better than inaction. Even the maintenance of your body would not be possible by inaction Shri Krishna to Arjuna in the Bhagwad Gita
54 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 55 COVER STORY COVER 56 FORBES INDIA|August 17,2012 because iteventuallyleadstoconfl latter, hetellsArjuna,isundesirable only outcomeispersonalsuccess.The action isguidedbyaggressionandthe there isSakamKarma, where all opposed tothis,KrishnatellsArjuna, for thegreatercommongood.As personal excellence,andisintended calm themind,allowhimtopursue This, KrishnatellsArjuna,will Karma—action withoutexpectations. The noblest,hesays,isNishkam tells Arjuna,hasgunasorqualities. be aNishkamKarma-yogi. Shri KrishnawantsArjunato cousins fromHastinapurand before Arjunagoestofacehis precedes thebattleatKurukshetra D meticulously whyRatanTata will co-founder ofINXNews,described year. TheseasonedJehangir Pocha, address thequestioninDecember last he turns75thisyear?Wetried to right thingsinpragmaticways. provides arelessonsindoingthe is importantbecausewhatit Ratan Tataandhismotivation argues, isdestructiveinthelongrun. on of we’ve documentedinrecentissues are others,whosestoriesofhubris nosed worldofbusiness.Thenthere seems likealifetimeinthehard- of who’ve chosenthefirst path—that one handaremenlikeRatanTata business, whatyouhaveonthe arguments intocontemporary Forbes Indiawhoremainfocussed Nishkam Karma—after what What willRatanTatadowhen That iswhyunderstanding If youweretoextrapolatethese Every action,orkarma,Krishna Sakam Karma,which,asKrishna conversation yoga. This epic Nishkam Karma- and theideaof on thesepassages well foramoment ict. would bethenaturalchoice. Noel Tata,whommanyhadassumed Mistry, asopposedtohishalf-brother pass thebatonhenowholdsto Cyrus Pocha hadthenpointedout, believing andsincereinhisdesire own successor,itisbecausehe is life’s workbyhandpickinghis the urgetotryandpreservehis presciently, “….ifRatanTataresisted an obscurelife.Wewerewrong. imagine RatanTatawouldsettle into It waseasythenformanyofus to and professionalthing,”hewrote. to do—andbeseendo—the right D N I his life’sworkisn’tdoneyet. And that Rockefeller Foundationwhen hesaid Achievement Awardinstituted bythe his acceptancespeechforaLifetime The first indicationofthatcamein IA But inDecemberthisyear,when a traditionalfamilyresponsibility. charge oftheTatatrustsaswell, of TataSonsin1991,hewasassigned trusts orcreatednewones. wealth inthecompanytoexisting then, thefamilyhasdonatedtheir wealth towardsphilanthropy.Since will thatdonatedallofhispersonal Before hediedin1918,drafteda Tata’s grandfatherSirRatanTata. the first ofwhich wasnamedafter of twobigandmanysmallerunits, trusts. Thetrustsareaconglomeration Tata groupandchairmanofthe U adopted thisasanoffi but increasedyieldsby40percent. Biharhasnow funded bythetrusts.Ituses30percentlesswater, project isoneofthemostsuccessfulprogrammes MORE FORLESS Intensifi TheSystematic Rice their storyremainsanuntoldone. most generousintheworld.But Tata trustsareeasilyamongthe10 million eachyear.Expertssaythe in theworldnow,disburses$180 Foundation, oneofthemostgenerous much sincethen.TheRockefeller if therupeehadn’tdevaluedas number wouldhavebeenhigher and institutions.Indollarterms,this exchange rates)tovariouscauses Rs 500crore($80millionatcurrent 2010 alone,theTatatrustsdisbursed group inaninterviewto said ofhisstintatthehelmTata successful orinnovativeenough”he aff as he’dhopedhecouldbybuilding people atthebottomofpyramid he hasn’tbeenabletotouchasmany ordable products.“Wehaven’tbeen actionless evenforamoment. When Tatawasanointedchairman This, inspiteofthefact,that Because noonecanremain a dualroleaschairmanofthe ntil now,RatanTatahasplayed by theGunasofnature action, helplesslyindeed, Everyone isdrivento cial programme. August 17,2012|FORBES INDIA Bloomberg cation .
57 Tata Trust COVER STORY
has the ability to bring together and is a challenge as well because LANDLESS GARDENS A landless farmer from Bihar tends to his vegetable garden on the rooftop. The galvanise corporate leaders across available data suggests there are trusts have implemented several such gardens in the world. The impact will be similar more than three million registered the state, helping more than 1,000 landless families to that when Microsoft founder Bill non-governmental organisations Gates retired from the company and (NGO), of which at least one-third rest of her community in Savda channelled all his focus on the Bill are active at any given time. Ghevra, a resettlement colony 30 & Melinda Gates Foundation.” “Unfortunately, in India it is kilometres east of New Delhi. AN Singh, managing trustee, diffi cult to fi nd partners who have the Buying drinking water, at Rs 7 for Sir Dorabji Tata Trust (SDTT), scale and capability to handle more a 20-litre bottle, is tough for families seconds the view. “There will than Rs 5 crore annually in grants,” that earn Rs 7,000 on average each be radical review of things.” says SDTT’s Singh. That is why Ratan month. It was easier for them to drink For many years now, Ratan Tata Tata insisted the trusts start with free water supplied by government has been part of a circle of people training some of their partners to tankers. When Bhavari Devi showed with philanthropy on top of their build scale. Tata has also argued the them the math in terms of the medical
Ganesh Lad / Fotocorp minds. This includes Peggy Dulany, trusts ought to work globally as well. costs they were incurring because “The real power lies founder of Synergos, a non-profi t “As a group, we are a global entity. the water they were consuming was in the trusts, that organisation. Dulany is David So why should the trusts be driven INDIA unhygienic, she acquired converts. is where it [power] Rockefeller’s daughter, the legendary by geography? Surely, we can expand “I now sell at least 1,000 litres rests. The trusts American industrialist who set up the mandate of the trusts,” says RK of water every day,” she says. have the moral the Rockefeller Foundation. In the Krishna Kumar, a close associate of Models like this helped the trustees influence over the past, Tata has been on the board of Ratan Tata, a director on the board headed by Ratan Tata understand whole Group.” the Ford Foundation as well. His of Tata Sons and a trustee as well. how social enterprise and the market RM Lala, former director of Sir Dorabji learnings from these experiences Like Ratan Tata, he will continue model as a strategic tool can be made Tata Trust and author of several books have been instrumental in shaping with his work at the trusts after his to work better. That seemed the best that trace the Tata family’s journey his thoughts over the years. tenure at the group ends. “In Africa, way to build a sustainable model for That he wanted to break from we can collaborate and have aligned the long term. So, they concluded, tradition is now obvious with the programmes with organisations while a Bhavari Devi ought not to be benefi t of hindsight. As early as in like the Bill & Melinda Gates weeded out completely, models of he turns 75, Ratan Tata intends to 2005, in an interview to Synergos, Foundation or the Ford Foundation, the kind she builds ought to be robust break tradition. While he will step Ratan Tata had said “Philanthropic but without compromising on each enough to not be subverted the way down from his responsibilities institutions in India still believe other’s sovereignty,” he says. the microfi nance business was. at the group, he will continue as they’re charitable and, therefore, must Ratan Tata’s insistence to break With this understanding in place, chairman of the Tata trusts. operate on shoe string budgets, that away from tradition prompted the Ratan Tata started to leverage his Nachiket Mor, former chairman creating an organisation is almost a board of trustees to challenge how network of relationships across of the ICICI Foundation for inclusive luxury. This needs to change—they they function currently. For instance, the world. There is speculation the growth and now the man behind have to recognise that a non-profi t investing in social enterprises. When Tata trusts are exploring a possible several innovations in rural fi nance has as much responsibility for being the microfi nance business in India, led partnership with Bill Gates. Their and healthcare, says, “This is a big professionally run as a corporate by Vikram Akula’s SKS, went belly up, mandate could possibly include setting moment for Indian philanthropy. He body.” But he also conceded it it compelled a pause until complete up a platform to advice philanthropists in India. The contours of this plan Tata Trusts’ Structure and Functioning clarity emerged on one question. make the owners of these enterprises was said to be discussed at a closed Should individual social enterprise rich,” says Sanjiv Phansalkar, door meeting he had with Bill Gates be weeded out completely? Should programme leader at SDTT. and Azim Premji of Wipro among Consists of two big Are Are funding agencies Have a fi ve year Work in six Give grants to institutions Work they only support social enterprises But there was evidence on others. “Though we have institutions trusts—Sir Dorabji governed and disburse plan, called major areas (TISS, TIFR), individuals with Tata Trust and by a board money, mainly to Strategic Plan, including (mostly scholars, for higher almost owned by groups, for instance honey the ground that favoured micro- that off er advice on philanthropy… Sir Ratan of trustees, ‘partners’, or NGOs, which sets the education, studies), for relief and NGOs. 600 collectors or farmer federations that enterprises in the form of people their repository of knowledge and Tata Trust—and chaired by who implement agenda for the health, media The share of grants to fi rst partners their allied, Ratan Tata the project on the coming fi ve & art and civil three segments is 25%, 6-7%, or NGOs. create and provide services aff ordable like Bhavari Devi. She heads experience set them apart, from smaller trusts ground years society 2-3%, and the rest to NGOs to the poor? “The Trusts handle Shudh Jal Ghar Samiti, which which others can learn,” says Sachin
public money. It cannot be used to sells fi ltered drinking water to the Sachdeva, the India director of the Trust Tata
58 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 59 COVER STORY
UK-based Paul Hamlyn Foundation. priorities include rural infrastructure and nutrition with a focus on The one who controls the senses maternal health and malnutrition. by the mind and intellect Interestingly, SDTT, the largest of the and engages the organs of action to Nishkam Karma-yoga trusts, is set to complete its second is superior, O Arjuna fi ve-year plan called Strategic Plan in March 2013. (See box for Tata atan Tata’s predecessors had trusts’ structure and functioning.) Rtheir hearts in the right place. The next fi ve-year plan promises to That is what prompted them to fund include each of these themes and the the setting up of iconic institutions agenda will be defi ned by Tata himself. like the Indian Institute of Science Detailed notes on what SDTT does in (IISc), the Tata Institute of Social fi elds like water have been prepared Sciences (TISS) and Tata Institute for the chairman. “There will be major of Fundamental Research (TIFR). thrust in these areas,” says Singh. That said, the diff erence though “I have been But executing all of this won’t be between what his predecessors involved with easy for a peculiar reason. When Ratan did and Ratan Tata wants to do and advised Tata had taken over as chairman of is a very fundamental one. several family the group in 1991, it was spread thinly Until recently, partners and philanthropies. INDacross too manyIA sectors. He weeded projects were chosen mostly on But none had the out unwanted companies, ousted “instinct” and decisions were based kind of emphasis internal ‘satraps’ who were becoming on “compassion”. Not surprisingly, on professional and too feudal and made an aggressive there were only four to six offi cials at financial integrity plan to go global. The outcome? From any time to co-ordinate with hundreds as the Tata trusts” the $5 billion turnover in 1991, this of ‘partners’ or NGOs. To Ratan MS Swaminathan, the father of India’s year, it is expected to hit $100 billion. Tata’s mind, it didn’t feel quite right Green Revolution and founder of MS What most people don’t know of Swaminathan Research Foundation and the system had to be changed. is that the Tata group is structured “Mr Tata has been enthusiastic in an entirely unique way. The Tata of products that make cutting-edge trusts control the group through their healthcare services, including long 66 percent majority stake in Tata distance surgery, accessible to an issue close to Tata’s heart. Sons, which in turn is the biggest the poor,” says Dr MS Valiathan, So the reforms, if you will, to long- shareholder in each of the companies. a renowned cardiac surgeon and time Tata watchers seem similar to Thanks to this shareholding pattern, academic and one of the trustees what he had unleashed in the Tata high growth in Tata companies at SDTT. “He has also been vocal group after he took over from his meant the Tata trusts grew richer. in his concerns about the lack of uncle JRD Tata. That, is the untold But that prosperity was beginning quality research in India. He has story. The agenda he has set himself to put pressure on the system. “There always talked about his hope that and the trusts is to bring “focus” was a concern among the trustees, India consistently produces Nobel into what was an “instinct” driven led by the Ratan Tata, that we were laureates in science and technology,” operation. Says Krishna Kumar, all over the place,” says a senior says VR Mehta, another trustee at his long time associate, “Mr Tata’s offi cial. The reasons were clear. The SDTT. The focus on research will involvement will bring sharp focus trustees traditionally belonged to see Tata trusts collaborating with and technological backup. The focus the Tata family, group insiders and MIT, or Massachusetts Institute will be on technological disruptions.” elders from the Parsi community. At of Technology, to set up research For instance, water is one of the any given point of time the trusts, centres in the US and India that will areas Rata Tata wants the trust to which acts like a funding agency, focus on frugal engineering, aimed put its energies into in the coming work with almost 600 ‘partners’ or
Amit Verma at serving the underprevileged, years. Other issues on his list of NGOs through whom the money
60 FORBES INDIA | August 17, 2012 COVER STORY
is utilised on projects that range he says, “Many NGOs have actually from his research institute that across six broad themes (see box). started complaining because some vindicated the fi ndings,” says Singh. That is why, soon after he took of them have lost their grants.” Today the Systematic Rice over, he started to invite experts like While that was necessary, Tata Intensifi cation project is one of the Vijay Mahajan to form strategic plans has made sure the trusts didn’t most successful programmes funded (the Sir Ratan Tata Trust was the fi rst lose out on “our compassion and by the trusts and is used by more than to adopt it in the late ’90s). As the fl exibility and more importantly, one lakh farmers across India. Its terms of some of the older trustees the ability to innovate and scale up success prompted state governments expired, Tata used the opportunity projects.” A Small Grant Scheme like the one in Bihar to turn it into to bring in scientists like MS was started in 2004 that gave grants an offi cial programme. “Unlike other Swaminathan on the board. Earlier of Rs 10 lakh to innovative projects, funding agencies that get rigid and this year, E Sreedharan, the man who including one to doctors from All toe the dotted line of proposals, built the Delhi Metro and transformed India Institute of Medical Sciences trusts’ offi cials give enough room the city, was inducted on board. The (AIIMS) who set up a successful to learn, add and omit aspects of a idea was to learn from people like and replicable low-cost rural project as and when needed,” says them, infuse fresh ideas and improve healthcare model in Chhattisgarh. Siddharth Pandey of CURE, a partner, accountability within the organisation. Similarly, when one of the partners which trained Devi and helped This too was a departure from the told the trusts about a unique rice her set up the micro enterprise. past when trustees were invited on cultivation programme that used the back of goodwill and their links to 30 percent less water, but increased INDBecause,IA whatever noble the family. Now though, each trustee yields by 40 percent, Swaminathan persons do, others follow. Whatever standard they has a three-year tenure that can be was called in for an expert’s view. set up, the world follows. extended. It is unclear, however, “His initial reaction was that it was who decides on the extensions. What not possible. But he deputed a team he Tata trusts have infl uenced is known though is that those who Ta new-generation of are on the board are a professional philanthropists. The Azim Premji lot. So, Swaminathan, for instance, Foundation chose education as the was on the board for over 10 years single cause to which it is dedicated before he vacated the position in to. The projects it chooses are 2009 because he is now an elected implemented by the foundation, as member of the Rajya Sabha as well. opposed to funding those in the space. But it is over the last fi ve Then there are those like Rohini years that the changes have been Nilekani, who along with her husband dramatic. The team on the ground and Infosys co-founder Nandan has increased to 25 from just six to Nilekani, have followed the Tata trusts co-ordinate with various partners. model. “I found it gives me a lot of Present and prospective partners leverage. I may not have the expertise are subject to intense vetting and to set up an institution myself. But I the emphasis on fi nancial reporting can still support diff erent causes by has gone up signifi cantly. Projects funding and mentoring others…. It now get reviewed every six months. “As a group, we is hard to throw a stone and not fi nd “If the milestones were not met are a global entity. someone who has been touched by by partners, grants are stopped,” So why should the their (Tata Trusts) work,” says Rohini says Phansalkar of SDTT. trusts be driven by who supports and chairs several He cites the examples of a partner geography?” philanthropy organisations including who made an incredulous claim— RK Krishna Kumar, director, Tata Sons Arghyam, which “promotes equity that the bills he’d run up over the and a trustee and sustainability in access to water”. “last four years have been eaten by From January next year, when
Getty Images rats”. Vijay Mahajan chuckles as Ratan Tata steps into the role full
62 FORBES INDIA | August 17, 2012 COVER STORY
time, he intends to reach out and bring possibility. “A stronger community of A Family Tradition together like-minded people who can philanthropists is needed. With Tata’s draw from the trusts’ expertise and set involvement, we look forward to Jamsetji Tata JRD Tata becomes up more agencies. He will also have opening partnerships with the trusts,” sets up Tata chairman of Tata & Sons 1868 Group 1931 1938 the latitude to plug into areas that says Ashvin Dayal, managing director, The Lady Meherbai D Tata Education need money, attention and expertise, Asia, at the Rockefeller Foundation. Trust & Lady Tata Memorial Trust (LTMT) Sir Dorab (Jamsetji’s elder son) started particularly in science and technology. Interestingly, many of these these two trusts in the memory of his wife In the past, he had tried to foundations’ presence in India Lady Meherbai, who died of leukaemia. The fi rst enables young women to go improve on institutions created with have dwindled over the years. The abroad and specialise in social work; the aid from Tata trusts, including the Rockefeller Foundation, for instance, second sponsors research into leukaemia. Bangalore-based IISc. As chairman whose projects in India are ‘valued’ of its council, he had pushed for at $20 million, now works through 1932 cutting-edge research there. In partners and doesn’t have a direct 2009, addressing an audience who presence. The Ford Foundation, Sir Dorab bequeathed most of his personal wealth to the newly registered had gathered at the Institute to which off ers grants of $15 million Sir Dorabji Tata Trust a few months celebrate 100 years of its existence, to Indian initiatives every year, has before his death. His wealth, then he said the institute must “demolish “Over the years, transited from supporting research estimated at Rs 1 crore, comprised INDIA substantial shareholdings in Tata Sons, hierarchy”. IISc should “strive to even as the fund to focusing on “exploring ways of Indian Hotels and allied companies, break new grounds instead of building size increased to engaging with both the government his landed property and his wife’s jewellery—including the Jubilee Till 1991 a fortress around itself”, he argued. hundreds of crores, and civil society to improve the diamond, twice the size of the Kohinoor. the trusts under Many more trusts are formed with That explains why the trusts are implementation of large-scale The trust establishes Tata family members keeping up the reportedly exploring a relationship the Tata family government programmes”. tradition of bequeathing wealth to 1936 Institute of Social Sciences with MIT to set up a research centre have been run in India’s changing economic status, in Mumbai. philanthropy. These include Jamsetji Tata Trust (1974), RD Tata (1990) that supports frugal engineering—a the spirit of public thanks to high growth rates over and the JRD and Thelma J Tata philanthropy.’ Tata Memorial Centre for theme that has been close to his the last decade has prompted many Trust (1991). Vijay Mahajan, social entrepreneur 1941 Cancer Research & Treatment, heart for a long time now. In fact, agencies to concentrate on “poorer” Mumbai and chairman of Basix 1991-Dec 2012 soon after he announced the launch countries, like those in Africa. But of the Tata Nano, the world’s with inequality still an issue in India, Tata Institute of Fundamental Ratan Tata takes over as chairman at where many parts of the country still 1892 1945 Research, Mumbai Tata Sons and Tata trusts. Under him cheapest car and considered widely do not have access to basic amenities, Jamsetji establishes JN Tata Endowment the Group saw its fastest growth, from a milestone in frugal engineering, accounts, Tata may take a leaf out of $5 billion revenue in 1991 to near $100 Scheme for higher education National Centre for the he was invited by US President their work. Bill Gates has raised and the Tata trusts will need to play a billion by the end of this year. It has so far supported more than 3,500 1966 Performing Arts, Bangalore Barack Obama to the White House. donated almost $1 billion for research still larger role in the coming years. scholars, including former president KR Narayanan, scientists Raja Ramanna, Reportedly, Obama asked Tata into malaria, tuberculosis and HIV/ Jayant Narlikar and Raghunath Mashelkar. The National Institute of to bring his expertise in frugal AIDS. Despite questions on the Human beings are 1988 Advanced Studies, Bangalore engineering into the US as well transparency of agencies to whom he bound by Karma Other than those done 1898 and collaborate with American has donated, experts in medicine say as Yajna (sacrifice). Sir Dorabji Tata Centre institutions. Soon after that meeting, the foundation has pledged $10 billion Jamsetji pledges half his personal Therefore, O Arjuna, do 1999 for Research in Tropical Ratan Tata pushed for the Jaipur over the next 10 years on research into your duty efficiently wealth (Rs 30 lakh, then £200,000), Diseases in Bangalore towards a “university or institute of Foot initiative, which until now has vaccines in these areas. It is signifi cant as a service or seva to me, research”. Indian Institute of Science set Free from attachment to up in 1909. helped 1.2 million amputees. The push because research into vaccines the fruits of work has given the Bhagwan Mahaveer would otherwise have remained (Additional reporting by Mitu Jayashankar) Viklang Sahayata Samiti a better stagnant. For pharmaceutical 1918 chance of entering America, where companies, this is a low margin WEB EXCLUSIVE: From Jan 2013 local manufacturers have resisted business and isn’t a viable one. Visit forbesindia.com to read about Sir Ratan Tata Trust set up. How Ratan Tata is gearing up Ratan, Jamsetji’s younger son, died its entry for fear of losing market to With the trusts looking to learn Ratan Tata will continue to be the for his transition in December at 47. Left directives for his personal wealth to be used for education, Chairman of Tata trusts even as he the much cheaper Indian version. and understand from international Tata biographer RM Lala’s health, art etc, for all Indians. hands over the reigns of Tata Sons As for the trusts’ association with best practices, including tackling insights on JRD and Ratan to Cyrus Mistry Tata’s leadership of the trusts the Gates Foundation, details are nutrition in Africa, collaboration A report from the ground: How
closely guarded for now. But by all with other international agencies is a the Tata trusts impact our lives Central Archives; Courtesy Tata Tata: Sir Dorabji Jamsetji Nusserwanji Tata, Opposite Page: Amit Verma Getty Images; This Page: Tata: Ratan JRD Tata,
64 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 65 66 Features/ FORBES INDIA|August 17,2012 M eyesore andwehadtocamouflage it. was greatbuttheproductan used anaircooler.Theperformance air cooling.Tillthenwehadnever architects suggestedthatweinstall ceilings andlongpassages.Our be airconditionedasithadhigh Ahmedabad, partsofwhichcouldn’t we movedintoanewhousein in theunorganised sector. There were onlymanufacturers nothing like anaircoolerindustry. started Symphony in1988, there was business by accident.Whenwe all overthecountry.Wealso went and by1990wehadexpanded to Gujarat andneighbouringstates 1989 weexpandeddistribution to fact, itwasarunawaysuccess. twice asexpensive,itcaughton.In was justRs2,000.So,despitebeing Rs 4,300,whileanormalaircooler was Rs35,000andouraircooler status symbol.Butanairconditioner owning anairconditionerwasstilla of themarketbecausein1980s performance caughttheimagination air conditioner.Itslooksandcooling sure itlookedexactlylikeawindow the Symphonybrandname.Imade fi can’t Imakeabetteraircooler? rst aircoolerinthemarketunder Here’s howithappened.In1987 Because itwassosuccessful, in The nextyearIintroducedmy That gavemeanidea:Why My Learnings My the aircooling and Igotinto real estatebusiness y familyisinthe and tactics that were the company’s original recipe for success for recipe company’s the were original that and tactics Achal Bakeri rescued Symphony by zeroing in on the products products inonthe zeroing by Symphony rescued Bakeri Achal BACK FROM BACK FROM THE EDGETHE Water heaters,roomfl products thatsoldaroundtheyear. seasonal, likewinterproducts,or products thatwereeithercounter- product companies.Sowegotinto Greaves, UshaandPolarweremulti- After all,ourcompetitorsCrompton only oneproductthatisveryseasonal. argument wasthatwecannotfocuson broaden ourproductrange.Their range. Customersalsowantedusto advising ustoexpandourproduct the timeofIPOmarketwas its ownpullsandpressures.Atabout once youlist,thefinancial markethas had movedintoalargerfactory.But we hadaddedsomemoremodels.We and in1994wehadourIPO.Bythen least itcoveredthewholecountry. distribution. Itwaspatchy,butat brand andhadasortofnational Symphony hadbecomeanational And so,twoyearsafterlaunch, was advertisedonTVinIndia. This wasthefirst timeanaircooler on thenationaltelevisionnetwork. air coolingcompany business inMexico,makingittheworld’s largest Symphony alsoacquiredanindustrialair cooling back toprofitability anddoubledmargins. Symphony Limited and focusingonhiscoreaircoolingbusiness products likewashingmachinesandwaterheaters WHAT HEHASACHIEVED: HOW HEDIDIT: THE CHALLENGE: DESIGNATION: AGE: Achal Bakeri air coolingbusiness company thatwasonceahouseholdnameinthe Thereafter thingsmovedswiftly 52 Chairmanandmanagingdirector, Bygettingoutofnon-allied To rescueaninsolvent Broughtthecompany our diff succeeded. Thereasonswere product intoalifestyleproduct. performance andelevateacommodity innovation indesign,featuresand long time,andyouaddvaluethrough there hasbeennoinnovationfora products, acommodityproductwhere Namely, youtakeeachofthese do whatwehaddoneinaircoolers. washing machinesandexhaustfans. mills, waterpurifiers, airconditioners, these otherproducts,twothings we couldn’tcompetewiththem. an entry-levelwashingmachine and distribution reach.Theyintroduced a hugevolumeadvantageandbetter and theyloweredprices.Theyhad competitors Videoconsawuscoming product sowedevelopedit,butour We thoughtitwouldbeacheap machine [exceptforthemotor]. world’s first all plasticwashing machine. Wehaddevelopedthe our ideaandwithitmarket. them out,establishedplayersstole glitches andbythetimeweironed features. Butwehadsometechnical sculpted form.Therewerenewsafety a waterheaterthathadnice same asbrandC.Symphonydesigned A wasthesameasbrandB was absoluteproductparity,brand they hadmetalcylindersandthere was thefirst ofitskind.Tillthen erent foreachproductcategory. None oftheotherproducts In eachoftheseweattemptedto In theprocessofdeveloping Similarly, welaunchedawashing For instance,ourwaterheater could havedonedidn’thappen. Our done there,therangeexpansion we the innovationthatwecould have ball intheaircoolerbusiness, so was thatwetookoureyeoff The otherthingthathappened succeeded, therewasfinancial strain. products. Asnoneoftheproducts money wentintomarketingthese went intodevelopment.Second, happened. First,alotofmoney D N I the Reconstruction] company. for IndustrialandFinancial We becameaBIFR[Board completely erodedournetworth. the otheronesdidn’tsucceed. So aircoolersaleswentdownand were focussedonotherproducts. our heels,weregrowingwhilewe competitors, whoweresnappingat In 2000wedidnotevenhave As aresult,by2001wehad IA total weburnedthroughRs50 crore. had runthroughourbankloans. In earned intheprioryearswas lost.We had writtenusoff .Allthatwehad become apennystockandthe market in theIPOwaslost.Ourstockhad to suppliers.Moneywehadraised We haddiffi cultymakingpayments family businessestopaythebonuses. We borrowedmoneyfromother enough moneytogiveaDiwalibonus. August 17,2012|FORBES INDIA
67 Alok Brahmbhatt for Forbes India Features/My Learnings
That’s when I had two options—to several owners before it wound up for Baba Ramdev in Haridwar. shut shop and be part of the family with a US private equity fi rm in This is something no one is doing business or to try and revive the 1999. I had visited this company, on an organised scale in India. This company. The easier option would International Metal Products Co is a virgin market. The potential be to shut shop, but for me this was (IMPCO), in 1992 when we started. is huge. We are currently talking a company I had started and my At its peak it had sales of $123 to Walmart to air cool their super personal identity was aligned with million, but the PE group had really centres in Central America. the company. Shutting shop was run it to the ground. They had sucked Over the years we have also refi ned not something I was willing to do the company dry and it had huge our manufacturing model to make it without giving it my best shot. debt. We bought it as is and because asset light. Now we don’t make any So we decided to focus on coolers of our BIFR experience here we had part of the cooler ourselves. Instead and exit from all the diversifi cations. the courage to get into something that we develop the product and make We cleared out inventory and we was in fi nancial diffi culty. We took the tooling. These are then given to did not manufacture anything new. in through the Mexican equivalent a moulder who gives us the plastic We started developing new models of chapter 11 and paid the debts components. We buy all the other of air coolers, products which were off with money sent from India. parts and assemble it in our factory. better than what we had, better than IMPCO gave us access to the US We did this till 2004-05 and then we what the competition had. We started market and a range of products that felt that bringing all the components creating new formats that did not exist Symphony had never developed. What to our plant wasn’t very effi cient—we till Symphony came along and started we had always produced in India weren’t adding a lot of value in the cutting the cost of manufacturing. were coolers which were in plastic, plant. We decided to assemble the The new models were crucial as smaller, portable units. The MexicanIND parts whereIA they are moulded. We we were able to get better realisations plant makes larger units made out of asked our moulders to come close to our plant. Now we have eight-nine “THE EASIER OPTION WOULD BE TO SHUT moulders who mould and assemble the coolers. Our people do quality SHOP. BUT I WASN’T WILLING TO DO THAT control. Our only investment is in WITHOUT GIVING IT MY BEST SHOT” the moulds and dyes. As of now, the ------gross capital block in our company, which has a turnover of Rs 300 per unit. Cutting costs helped us metal. There, whole homes are air crore, is just Rs 25-30 crore. further increase these realisations. cooled. You stick a cooler in the attic We’ve come a long way since our And that is how, between 2002 and have ducting all around the house. BIFR days. Today, at Rs 300 crore, and 2008, our net margins doubled Now in terms of technology the we are the world’s largest air cooling from 10 percent to 20 percent. Indian and Mexican coolers are the company. Our stock price rose from As we focussed only on coolers same. But here was an existing plant, under a rupee to Rs 1,672 before we something else happened. We here were developed products, here announced a stock split. Our market decided to expand into overseas were the tooling [moulds and dyes], cap stands at Rs 800 crore. Even markets. We started off with giving an the engineering drawings, the people today when we meet people from the existing manager the responsibility who had been doing this for 50 years. markets, they ask me why I don’t get of developing exports. Now we have To replicate that would have taken into other categories. But this time a whole team in India and diff erent a lot of eff ort and time. We would history is not going to repeat itself. managers in over 60 countries. have had to bring in people from After all, the penetration of cooling Our most signifi cant turning point outside India as that was an expertise devices [excluding fans] in Indian came in 2008. We got an opportunity not readily available in India. homes is 3 percent. Fifteen years ago to acquire a majority stake in a So now we have introduced it was half a percent. In China it has Mexican company that was stared by those products in India and made grown from 3 to 51 percent in the Adam Goettl, the man who had the a small start. People here are still same period. Imagine the upside if we fi rst air cooler patent in 1930. Goettl warming up to the idea of cooling can grow to even a fraction of that. had started the company and then sold at a large scale. Recently, we We have only seeded the market! it. Over the years it passed through cooled a 2 lakh square foot hall (As told to Samar Srivastava)
68 FORBES INDIA | August 17, 2012 ( ( 22 INDIA Best Under00 0A0 Billion
By CHRISTINA SETTIMI
gainst the backdrop of a fragile global economy, the makeup of our Best Under A Billion demonstrates why small and medium-size enterprises are considered essential to Asia-Pacifi c. Sales of this year’s 200 SMEs from 15 countries grew an average 48 percent last year and generated $47 billion in revenue while employing 370,000 people. But despite their size and rapid ascent, these are not fl ash-in-the-pan businesses. The average age is 24 years—publicly traded for 9 years. Among the 200 there are 46 making A their sophomore appearance, another 17 returning after a gap year. In total, 72 have appeared at least once on our list in the last decade. To be considered, companies must fi rst generate annual revenue between $5 million and $1 billion (US), have positive net income and have been publicly traded for at least a year. From that pool of candidates (900 this year) we weigh sales growth, earnings growth and return on SHIFTING WINDS equity in the past 12 months and over three years. We scrutinise the Some major sectors show change in a year. fi nalists to exclude companies that are thinly traded and those with accounting or major legal troubles. COUNT BY INDUSTRY 2012 2011 The growth of listed entities in China has been fastest in the world TECHNOLOGY HARDWARE & EQUIPMENT 23 21 in the years since the fi nancial crisis. Our combined China-Hong Kong SOFTWARE & SERVICES 21 23 contingent numbers 72, up from 65 last year; 20 of them return from CONSTRUCTION 20 11 last year. Changyu Pioneer Wine, a perennial favorite (see p. 78), has FOOD, DRINK & TOBACCO 19 10 expanded at a steady 21 percent clip the last three years and may grow off . BUSINESS SERVICES & SUPPLIES 11 18 Online travel service Ctrip holds the record for the longest consecutive RETAILING 10 5 streak on our list, at six years. Yet growth across all metrics lagged in CAPITAL GOODS 7 13 Ctrip’s industry, business services and suppliers, and a dwindling number DIVERSIFIED FINANCIALS 39 qualifi ed. That sector’s weakness was a big reason India’s total on the SEMICONDUCTORS 2 10 list fell to 23 from 35 last year. ((220000( Best Under A Billion ( (
US $MLN US $MLN US $MLN LAST 12 MONTHS LAST 12 MONTHS LAST 12 MONTHS NET MARKET NET MARKET NET MARKET SALES INCOME VALUE SALES INCOME VALUE SALES INCOME VALUE DHC SOFTWARE computer software $411 $67 $1,872 YUYUE MEDICAL EQUIPMENT (JIANGSU) manufactures medical equipment $186 $36 $1,340 M-MODE mobile media content and data application services $24 $4 $20 DONGBAI GROUP (FUJIAN) operates department store chain 339 51 407 ZHANGZIDAO FISHERY GROUP (DALIAN) breeds, processes and distributes seafood products 467 79 2,616 MSM MALAYSIA HOLDINGS refi ned sugar products 725 83 1,148 EAST CHINA ENGINEERING SCIENCE & TECHNOLOGY engineering services 373 44 1,456 ZHAOJIN MINING INDUSTRY gold mining 912 264 3,495 MUDAJAYA GROUP construction and property development 425 73 468 EPRO information technology services 25 9 548 ZIXIN PHARMACEUTICAL INDUSTRIAL (JILIN) cardiovascular and cerebrovascular drugs 147 35 873 SKP RESOURCES manufactures plastic products 137 12 99 FARATRONIC (XIAMEN) manufactures electronic base components 206 45 483 INDIA TECNIC GROUP manufactures plastic products 66 6 52 FORELAND FABRICTECH HOLDINGS manufactures fabrics 120 22 27 ADOR FONTECH welding electrodes and arc-welding products 31 4 26 UEM LAND HOLDINGS property development and construction 537 95 2,802 ( ( FRIENDSHIP GROUP (GUANGZHOU) department stores 708 58 724 AJANTA PHARMA manufactures pharmaceuticals 133 15 151 UOA DEVELOPMENT property development, construction and investment 194 121 548 GOLDEN EAGLE RETAIL GROUP department stores 511 193 3,934 ASAHI SONGWON COLORS pigments 46 4 20 XINGQUAN INTERNATIONAL SPORTS HOLDINGS manufactures shoes and soles 231 39 85 US $MLN HENGBAO magnetic and electronic cards and card products 123 18 643 AVT NATURAL PRODUCTS solvent extraction 47 11 52 NEW ZEALAND 2 pharmaceutical tablets, injections and raw materials 723 139 5,810 2Best Under A Billion HENGRUI MEDICINE (JIANGSU) COMMERCIAL ENGINEERS & BODY BUILDERS manufactures shipping containers 91 8 87 NZX operates a registered exchange and data business 43 11 272 0000 LAST 12 MONTHS NET MARKET HUMANWELL HEALTHCARE GROUP (WUHAN) family planning medicines 575 48 1,760 CORE EDUCATION & TECHNOLOGIES education software 321 63 592 PAKISTAN SALES INCOME VALUE HYRON SOFTWARE (SHANGHAI) software outsourcing services 62 10 298 EROS INTERNATIONALIND MEDIA produces and distributes movies 161 26IA 303 MILLAT TRACTORS agricultural tractors 297 33 189 MURREE AUSTRALIA JIANGNAN CHEMICAL INDUSTRY (ANHUI) explosives and emulsion agents 193 28 811 HALDYN GLASS manufactures glass containers 34 5 16 MURREE BREWERY alcoholic and other beverages 39 6 21 BREWERY Imaginechina ARB1 designs and sells motor vehicle accessories $264 $39 $678 JIANGNAN HIGH POLYMER FIBER (JIANGSU) chemical fi ber products 278 26 511 HEXAWARE TECHNOLOGIES information technology services 273 50 611 PAKISTAN OILFIELDS oil & gas exploration, drilling and production 295 136 962 PAKISTAN This brewery was originally CARSALES.COM1 online automotive classifi eds 172 65 1,466 LOVABLE JIUGUI LIQUOR alcoholic beverages 153 31 2,748 PERFECT WORLD INDAG RUBBER manufactures rubber products 42 4 22 PHILIPPINES established in 1860 to satisfy FORGE GROUP construction and engineering services to oil & gas industry 451 42 362 KANGMEI PHARMACEUTICAL Chinese medicines 966 160 5,463 CHINA / HONG KONG LINGERIE JUBILANT FOODWORKS1 fast-food chains 213 22 1,457 PHILEX MINING copper, gold and silver exploration 349 132 2,719 the unquenched thirst of the GR ENGINEERING SERVICES engineering, consulting and contractor 153 23 141 KINGTELLER TECHNOLOGY (GUANGZHOU) manufactures automated teller machines 118 28 520 The Beijing online game developer INDIA KAVERI SEED seed products 73 12 201 PHILWEB operates Internet cafe off ering gaming softwares 27 21 505 occupying British military. is a leader in 3-D massively The Mumbai intimate apparel While the Brits have been GRANGE RESOURCES mines and processes iron ore 421 222 584 LE SAUNDA HOLDINGS sells and exports shoes 199 25 203 KPIT CUMMINS INFOSYSTEMS software development and IT services 294 29 370 SM DEVELOPMENT develops real estate and invests in various securities 369 95 1,353 multiplayer online role playing manufacturer has found that while long gone, beer remains the LASERBOND manufacturing and reclamation of industrial components 14 1 14 LEE’S PHARMACEUTICAL HOLDINGS proprietary pharmaceutical products 51 11 234 games (MMORPG), an industry the majority of Indian women LOVABLE LINGERIE women’s underwear 26 4 104 SINGAPORE company’s most popular MACA mining and civil services 258 29 322 LIANHE CHEMICAL TECHNOLOGY manufactures fi ne chemical intermediaries 408 47 1,456 estimated to generate $6.1 billion prefer white cotton brassieres, MAFATLAL INDUSTRIES manufactures textiles 133 79 21 KREUZ HOLDINGS integrated subsea services to oil & gas industry 149 26 120 beverage, generating 70% of MATRIX COMPOSITES & ENGINEERING manufactures buoyancy products for oil & gas industry 200 36 160 LONGWEI PETROLEUM INVESTMENT HOLDING distributes fi nished petroleum products 493 64 139 in revenue this year. Its portfolio they are a fragmented market. MAYUR UNIQUOTERS manufactures synthetic leather 61 7 57 LIAN BENG GROUP residential, commercial and industrial construction 411 39 165 its sales—this despite the fact includes adventure games The company’s three brands—its that 97% of the country is MINERAL RESOURCES1 mining services and mineral processing 694 175 1,557 MIN XIN HOLDINGS banking, insurance, property, investments 40 39 244 MINDTREE software development and IT services 376 43 484 MICLYN EXPRESS OFFSHORE service vessels for oil & gas industry 175 57 529 Perfect World, Perfect World II namesake Lovable, Daisy Dee Muslim and forbidden alcohol, Robin / Getty Images Skjoldborg RAMELIUS RESOURCES gold mining 159 67 168 NEW SEA UNION TELECOM TECHNOLOGY (SUZHOU) communication network equipment 125 29 489 and Legend of Martial Arts. and College Style—take care of NAVIN FLUORINE INTERNATIONAL fl uorochemicals 142 43 56 SINO GRANDNESS FOOD INDUSTRY GROUP canned vegetables and fruits 153 23 93 and Pakistani law prevents RCG RCG franchise operator and retailer of athletic footwear 43 10 85 NEW WORLD DEPARTMENT STORE CHINA department stores 362 113 982 covering the high-end to the PUNEET RESINS1 polymer blends for rubber industry 11 1 4 SOUTH KOREA the company from advertising 1 contemporary and every consumer REA GROUP real estate advertising services 265 80 1,840 NINGBO YUNSHENG manufactures magnetic materials and electric motors 626 105 1,848 RPP INFRA PROJECTS1 infrastructure development 53 5 22 ABLE C&C skin care, makeup and body care products 287 24 571 it. The company’s expanded AUSTRALIA in between. Items are available beverage portfolio includes TOX FREE SOLUTIONS industrial services and waste management 154 13 284 PERFECT WORLD designs online 3-D games 463 153 60 RS SOFTWARE computer software 52 6 21 CELL BIOTECH special bioengineering products 20 5 46 Australia’s largest retailer of in about 10,000 retail stores. hard liquor and nonalcoholic 1 athletic footwear operates 148 WEBJET online travel booking service 53 12 246 PROPERTIES & RESOURCES DEVELOPMENT (SHENZHEN) real estate development and sales 213 41 635 TECHNOFAB ENGINEERING engineering-procurement and construction services 74 7 28 CELLTRION develops and manufactures protein drugs 242 146 4,532 soda and fruit juices. stores in the homeland and New CHINA / HONG KONG RAAS BLOOD PRODUCTS (SHANGHAI) manufactures blood products 90 32 1,033 TTK PRESTIGE kitchen appliances 205 22 676 E-CREDIBLE credit authentication services for e-commerce industry 14 5 66 Zealand. The company also owns 361 DEGREES INTERNATIONAL1 manufactures sporting goods 885 180 485 RENHE PHARMACY over-the-counter medicine 351 48 1,239 GAMEVIL develops and publishes mobile games 37 14 402 the Shoe Superstore chain of INDONESIA comfort footwear and, having 51JOB integrated human resource services 202 60 1,213 SA SA INTERNATIONAL HOLDINGS cosmetics and beauty products 825 89 1,811 CONSCIENCEFOOD HOLDING instant noodles 82 14 54 INFOVINE mobile phone certifi cation management services 13 8 45 acquired the country’s rights to ASIAN CITRUS HOLDINGS grows and sells oranges 219 172 666 SANAN OPTOELECTRONICS LED products 278 149 2,864 HARUM ENERGY coal mining 805 161 1,603 INNOCHIPS TECHNOLOGY electronic components 61 15 107 distribute the Merrell brand of BAOXINIAO GARMENT (ZHEJIANG) men’s garments 322 59 1,275 SEPTWOLVES INDUSTRY (FUJIAN) designs and sells Septwolves brand clothing 464 66 1,762 JASUINDO TIGA PERKASA business document manufacturer 56 9 74 INNOWIRELESS communication equipment 63 13 113 lifestyle shoes, opened its fi rst BONJOUR HOLDINGS cosmetics and beauty services 330 30 452 branded fl agship store in 2010. SHIJI INFORMATION TECHNOLOGY (BEIJING) hotel information management software 114 42 1,242 JAYA AGRA WATTIE rubber and palm oil plantation management and trading 71 20 150 KINX provides Internet connection and related services 18 3 51 CHANGLONG BIO-PHARMACY (JILIN HUINAN) biochemical medicines 44 8 49 SILVER BASE GROUP HOLDINGS alcoholic beverages 383 90 522 LONDON SUMATRA INDONESIA palm oil, rubber, cocoa, tea, seeds 517 188 2,112 KOOKJE ELECTRIC KOREA semiconductor and liquid crystal display equipment 177 23 136 CHANGYU PIONEER WINE (YANTAI) wine and other alcoholic beverages 918 303 7,458 SINCERE WATCH (HONG KONG) luxury watches and timepieces 144 18 138 METROPOLITAN LAND commercial property development 60 17 345 KOREA ELECTRONIC CERTIFICATION AUTHORITY accredited global certifi cation services 16 3 41 CHANGYUAN GROUP power-grid equipment and circuit-protection components 308 106 904 SINOMEDIA HOLDING television advertising planning and production 257 38 218 RESOURCE ALAM INDONESIA coal mining 235 50 453 MEGASTUDY provides education services 298 59 431 CHENZHOU MINING GROUP mines nonferrous metals 648 86 2,368 SL PHARMACEUTICAL (BEIJING) manufactures biochemical and chemical medicine 99 83 2,017 JAPAN MICRO CONTACT SOLUTION produces integrated circuit sockets 23 4 24 ABLE C&C CHINA ADVANCED CONSTRUCTION MATERIALS GROUP construction materials 141 17 15 SPLENDOR SCIENCE & TECHNOLOGY (HENAN) railway-signal communication products 55 15 492 EROS MAMIYA-OP MAMIYA-OP electronics and sports equipment 285 33 168 S.M. ENTERTAINMENT music recording production and management 124 20 813 SOUTH KOREA CHINA ANIMAL HUSBANDRY INDUSTRY biological products and veterinary drugs 452 72 983 TAPAI GROUP (GUANGDONG) manufactures cement 657 97 1,240 INTERNATIONAL MEISEI ELECTRIC communications equipment 110 18 143 SFA ENGINEERING automation equipment 678 77 800 This cosmetics company has JAPAN managed growth without CHINA GREEN AGRICULTURE fertilizers and agricultural products 184 34 107 TIANNENG POWER INTERNATIONAL battery products for electric cars 864 98 688 TOPTEC automated machines 174 17 211 MEDIA While its electronic equipment ND SOFTWARE nursing care facility and insurance software 109 16 98 much glitz or glam. It has CHINA SINGYES SOLAR TECHNOLOGIES HOLDINGS renewable energy systems 382 46 228 TOPCHOICE MEDICAL INVESTMENT oral health care services 50 11 576 INDIA division has been selling pachinko START TODAY operates e-commerce websites 386 94 1,552 SRI LANKA bucked the trend in its CHINA STARCH HOLDINGS manufactures cornstarch, lysine, corn-based products 469 36 149 TRAVELSKY TECHNOLOGY aviation information technology services 583 166 1,456 Capitalising on the superhero machines (a Japanese-style pinball MALAYSIA RENUKA HOLDINGS investment holdings 15 6 11 industry and skimped on game) regionally, the sports CRYSTAL-OPTECH (ZHEJIANG) optoelectronic components 69 19 672 ULTRAPOWER SOFTWARE (BEIJING) information technology 182 57 1,029 action fi lm genre, fi lm and BENALEC HOLDINGS marine construction services and civil engineering 70 32 293 ROYAL CERAMICS LANKA manufactures porcelain and ceramic tiles 54 15 74 fancy product packaging DEER CONSUMER entertainment company Eros division has been pitching its golf and supermodel cover CTRIP.COM INTERNATIONAL online travel agency 543 167 2,166 2 PRODUCTS USTC IFLYTEK (ANHUI) software 88 21 1,357 scored big last year with its shafts and golf-related products BOILERMECH HOLDINGS manufactures biomass boilers 49 6 63 TAIWAN girls and undercut the CHINA / HONG KONG DAHUA TECHNOLOGY (ZHEJIANG) security products 350 60 3,014 WESTERN RESOURCES HOLDING (SICHUAN) mining nonferrous metal products 50 39 1,002 Ra.One. It was an instant globally. Its customers range from CBSA information technology and electronic media content 17 4 27 APEX BIOTECHNOLOGY manufactures and sells biotechnological products 62 17 242 major players in pricing. consumers to original equipment Its most popular products DATONG GAS DEVELOPMENT (SICHUAN) commodities retailing, pipeline gas distribution 88 8 221 XTEP INTERNATIONAL HOLDINGS sportswear, including footwear, apparel and accessories 861 150 727 blockbuster setting an opening DIGISTAR information technology infrastructure 31 6 30 ASIA ELECTRONIC MATERIAL manufactures electronic materials 57 5 61 The company’s marquee day record, and it remains manufacturers like Callaway, Nike brand, Missha, is sold in are blenders and juicers, DEER CONSUMER PRODUCTS kitchen appliances 232 41 90 YGSOFT electric power computer software 102 34 1,020 EA HOLDINGS business intelligence and data warehousing 12 3 15 CAPELLA MICROSYSTEMS manufactures optoelectronic analog integrated circuits 46 9 183 one of the highest-grossing and Titleist, and its products can branded stores and online at sold domestically under DENGHAI SEEDS (SHANDONG) seed products 183 37 1,236 YIBAI PHARMACEUTICAL (GUIZHOU) prescription drugs and over-the-counter products 302 42 1,142 fi lms in the country. be found in 30-plus countries. HARTALEGA HOLDINGS manufactures latex gloves 304 66 1,016 ECLAT TEXTILE manufactures fabrics and garments 352 39 536 company-owned Beautynet. the Deer brand name. 1 2 1
LATEST TWELVE-MONTH DATA; NOT FISCAL YEAR-END RESULTS. ● ALL FIGURES ARE IN US DOLLARS. DATA AS OF JULY 13. NA: NOT AVAILABLE. COMPANY’S LARGEST SHAREHOLDER IS A FORBES LICENSING PARTNER. ● ALL FIGURES ARE IN US DOLLARS. DATA AS OF JULY 13. NA: NOT AVAILABLE. / Reuters; Arko Datta Matthew Borkoski / Getty Images Top: From LATEST TWELVE-MONTH DATA; NOT FISCAL YEAR-END RESULTS. ● ALL FIGURES ARE IN US DOLLARS. DATA AS OF JULY 13. NA: NOT AVAILABLE. ALL FIGURES ARE IN US DOLLARS. DATA AS OF JULY 13. NA: NOT AVAILABLE. SOURCES: WORLDSCOPE VIA FACTSET RESEARCH SYSTEMS; FORBES Behrouz Mehri / AFP Getty Images; Runstudio / Getty Images Top: From
71 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 74 ((220000( Best Under A Billion ( (
US $MLN LAST 12 MONTHS NET MARKET SALES INCOME VALUE EGALAX_EMPIA TECHNOLOGY integrated circuits $39 $8 $86 FLEXIUM INTERCONNECT manufactures fl exible printed circuit boards 250 38 687 GOURMET MASTER distributes coff ee, beverage and bakery products 378 37 1,117 HIWIN TECHNOLOGIES precision components and transmission parts 522 126 2,166 INSYDE SOFTWARE input/output systems for PCs and appliances 44 12 154 LARGAN PRECISION optical lenses 528 172 2,655 MACHVISION printed circuit-board components 18 5 54 NANTEX INDUSTRY synthetic rubber and latex 374 31 317 PILOT ELECTRONICS industrial computers and game machines 56 9 73 PRIME OIL CHEMICAL SERVICE leases oil tanks for chemical and oil products 16 10 72 SCAN-D CORP sofas and dining room furniture 44 8 68 STANDARD FOODS produces food, edible oil, dairy products and beverages 655 81 1,388 SUNFLEX TECH printed circuit boards 40 8 68 S.M. TAIWAN BENEFIT manufactures food and beverage factory production lines 56 6 55 ENTERTAINMENT TEST RESEARCH circuit boards and semiconductor testing equipment 129 32 324 SOUTH KOREA TSC AUTO ID TECHNOLOGY printers and relevant components 55 10 109 This independent record label WAYS TECHNICAL surface treatment of plastic casings of electronic devices 224 28 204 is one of Korea’s “big 3” in the industry, heavily vested in the WOWPRIME operates chain restaurants 254 26 995 Korean pop genre of music. Its top ZENG HSING INDUSTRIAL sewing machines 157 20IND 167 band, Girls’IA Generation, a 9-member THAILAND all-girl group recently voted Korea’s most popular musicians, LANNA RESOURCES coal production 412 33 279 generated revenue of $85 million, MASTER AD outdoor advertising media 20 3 27 or 34% of its 3-year sales. QUALITECH engineering services and construction 11 3 23 SUB SRI THAI warehousing services 13 13 104 UNITED PALM OIL INDUSTRY produces crude palm oil 47 12 107 WORKPOINT ENTERTAINMENT television program production 58 10 218 VIETNAM BINH DINH MINERALS titanium ore mining sites 15 4 28 DHG PHARMACEUTICAL pharmaceuticals, supplemental foods and cosmetic products 118 20 187 LAM SON SUGAR sugar, malt, alcoholic and nonalcoholic drinks 96 20 58 MEKONG FISHERIES processes seafood 30 3 12 SOCIETE DE BOURBON TAY NINH refi ned sugar, molasses and derivative products 97 26 107 TAN BINH IMPORT-EXPORT import-export operations 50 5 23 THANH NAM CONSTRUCTION & INVESTMENT engineering and construction services 19 2 3 VIETNAM CONTAINER SHIPPING provides marine port services 31 9 39 ALL FIGURES ARE IN US DOLLARS. DATA AS OF JULY 13. NA: NOT AVAILABLE. SOURCES: WORLDSCOPE VIA FACTSET RESEARCH SYSTEMS; FORBES
NAMES BEHIND THE COMPANIES The ten biggest share positions among the best under a billion. RANK SHAREHOLDER NAME COMPANY/COUNTRY HOLDINGS ($MLN) 1 ROGER WANG & FAMILY GOLDEN EAGLE RETAIL GROUP/CHINA/HONG KONG $2,725 GOURMET MASTER 2 SEO JUNG-JIN CELLTRION/SOUTH KOREA 1,332 TAIWAN 3 YUSAKU MAEZAWA START TODAY/JAPAN 736 Known as the Starbucks of Taiwan, 4 LI DENGHAI DENGHAI SEEDS (SHANDONG)/CHINA/HONG KONG 643 this company’s 85 degrees Cafes 5 TSAO TE FENG STANDARD FOODS/TAIWAN 559 are conducive to eating and 6 XUE XIANGDONG DHC SOFTWARE/CHINA/HONG KONG 485 lounging—food items accounted for 71% of sales last year. This year 7 DING SHUI PO & FAMILY XTEP INTERNATIONAL/CHINA/HONG KONG 449 the company is expanding to Hong 8 HOANG KIEU RAAS BLOOD PRODUCTS (SHANGHAI)/CHINA/HONG KONG 383 Kong, opening 5 outlets to add to the 9 ZHENG YUEWEN RAAS BLOOD PRODUCTS (SHANGHAI)/CHINA/HONG KONG 383 330 it has in Taiwan, 270 in China, 10 KAN WEN BIN WESTERN RESOURCES HOLDING (SICHUAN)/CHINA/HONG KONG 339 5 in Australia and 2 in the U.S. From Top: Reuters; News Bloomberg Top: From SOURCE: LIONSHARES VIA FACTSET RESEARCH SYSTEMS
76 FORBES INDIA | August 17, 2012 ((220000( Best Under A Billion ( ( GRAPE LEAP China’s biggest winemaker draws on a storied history to plot its future.
By SIMON MONTLAKE
n a gentle slope, parallel trestles of vines lead up to a lofty European- INDIA style house, one of several self-styled Ochâteaus in coastal Shandong, the biggest wine-producing region in China. Thick bunches of Riesling and Cabernet Gernischt grapes ripen under a hazy summer sky. Built in 2002, Chateau Changyu-Castel is run by China’s bestselling winemaker, Changyu Pioneer Wine of Yantai. Here a storied past meets ambitious plans to stay atop China’s burgeoning wine market. Changyu enjoys the kinds of rising gross margins that global winemakers can only dream of—79 percent in 2011 on sales of 90,000 tons of red and white wine, its main product line, plus brandy, sparkling wine and Chinese “health liquor.” Changyu’s net rose 33 percent to $303 million on revenues of $918 million, up 21 percent and tripling in fi ve years. It appears for a seventh yearÑfi fth con- secutivelyÑon Forbes Asia’s Best Under A Billion list. As with domestic rivals like Great Wall and Dynasty Fine Wines, the bulk of Changyu’s revenues derive from sales of cheap red wine. For all the talk of fi ne wines conquering China, the mass market remains a sea of plonk. In 2010, 72 percent of wines retailed for less than $5 a bottle, according to Access Asia, a consultancy in Shanghai. In most cities grape wine comes a
distant second after rice wine, or baijiu, as the “We try to raise our reputation at the high toast of choice at banquets. Only 1.3 percent end, while at the same time we’re marketing wine as a product for ordinary people.” by volume was priced over $10 in 2010.
Changyu has its eyes on this premium Photographs: Stephen Chow for Forbes
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category, which has been stoked by founder was Zhang Bishi, or Cheong series of holding fi rms in which senior any sharp contraction in consumer wealthy buyers of fancy imported Fatt-Tze, a Cantonese businessman management holds minority stakes. spending as China’s economy wines. Joint ventures like Chateau who made his fortune in Southeast Sun Liqiang, chairman and CEO, decelerates. A surge of wine imports Changyu-Castel, in which France’s Asia. From his base in Penang, where is the parent’s legal representative in late 2011 appears to have dampened Castel Group holds a minority his mansion is now a boutique hotel, on the listed Changyu’s board. shipments of domestic wine sales share, and estate wineries in other Zhang built a trading empire in Yantai remains its largest in the fi rst half of the year. provinces off er a way for Changyu Indonesia, Malaysia and China, and production centre in China. Great This could make it harder for to improve quality and reposition was dubbed “China’s Rockefeller” Wall and Dynasty also have vineyards Changyu to hit its sales target of 9.5 the brand, possibly for even higher by the New York Times in 1915, a there, but it’s considered home turf percent growth. Its stock is down margins. The company has quietly year before his death. By then he at Changyu. “In this area we are sharply this year after a big dividend acquired vineyards in Italy, Canada had thrown his support behind Sun defi nitely domi- nant,” Zhou, 48, payout in June. Hong Kong-listed and New Zealand without the Yat-sen, taking up an appointed tells Forbes Asia, before leaving for a Dynasty has also seen a dive. attention paid to Chinese purchases position in the republican assembly ten- day marketing trip in southwest Sun Jian admits that growth of trophy châteaus in Bordeaux. after the fall of the Qing dynasty. China. A Chinese MBA who started suff ered in the fi rst quarter but “We try to raise our reputation In 1892 Zhang founded Chang at Changyu as a management trainee, insists that sales of wine and at the high end, while at the same Yu Pioneer Wine near the thriving he’s held his post for 11 years and is other drinks have since picked time we’re marketing wine as a treaty port in Yantai, or Chefoo. tipped to succeed CEO Sun eventually. up. “I think the rest of the year product for ordinary people,” says The wines were sold mostlyIND to So far wineIA consumption in will see an improvement,” says Zhou Hongjiang, the company’s Coastal Shandong Province off ers some vineyard-view living. foreigners in China or shipped coastal cities in China far outpaces Sun, 46, who started out planting general manager. “We’re trying overseas. The company’s museum, that of cities farther inland, evinced vines as a 23-year-old intern. Up to to develop in both directions.” being sold, always a concern here. Changyu offi cials say that the built on the original winery site, by Changyu’s territorial breakdown 90 percent of wine sold in China Last year sales of imported wines, company’s distribution network displays a medal awarded at a 1915 of sales. In 2011, 85 percent of its is for gifts or served at banquets The company has including Changyu-in- vested wines, and market knowledge make it a international expo held in California. revenues came from the eastern for business and political elites. quietly acquired accounted for less than 1 percent of more suitable sales agent for major By the early 1930s Changyu seaboard. But China’s overall wine Periodic orders to party cadre company revenues. But Sun Jian, foreign wineries that want to build had fallen on hard times. It was consumption is hard to track, to curb excesses usually fall on vineyards in Italy, vice-general manager, who is in their brand in China. “We’ve talked nationalised after failing to says Edward Ragg, cofounder of luxury brands of baijiu. “When Canada and charge of negotiating import rights, to [potential] partners. They see repay loans to the Bank of China. Dragon Phoenix Wine Consulting you do business, to show respect New Zealand says that sales of imported wines Changyu as a heavyweight player Ownership passed in 1949 to the in Beijing. “There’s a massive you have to drink a product with have already doubled so far this in this market,” Sun says. COFCO, People’s Republic of China. Under scramble to get into the second- a certain value. If baijiu is banned, year, even before any partnerships the state-owned food giant that Maoist rule bourgeois wineries tier cities and beyond that.” grape wine is a good alternative,” are inked (he declined to name any controls China Great Wall Wine, stagnated. However, state-owned Winemakers are vulnerable to says Martin Wu, agribusiness ana candidates). “In the future it’s likely also markets imported wines. Changyu received a capital lyst at Rabobank in Shanghai. Changyu, like many Chinese that the share of imported wine Changyu has other grand plans. injection in 1954, and wines were Changyu’s premium wines are wineries, can produce only so will continue to grow. The trend To celebrate the company’s 120th served to foreign dignitaries in POUR IT ON not for the parsimonious. A 2005 much table wine from the country’s is clear. Changyu, as a distributor, anniversary it has earmarked nearly Beijing. That tradition has con- China’s Wine Market, Already The World’s Fifth Cabernet Sauvignon from its estate limited vineyard capacity and sees an opportunity to provide what $1 billion over four years to create tinued as Barack Obama and other Largest, Grew By 14% Last Year. outside Beijing retails for $95, which needs juice from abroad, as well our customers want,” he says. an international “winetropolis” world leaders make state visits. puts it in a category with a bottle 1,400 IN MILLION LITERS as the already bottled imports, to These are steps into highly in Yantai, where a few million China’s wine consumption of decent Bordeaux. At the château BOTTLED IMPORTS build out its desired dual market. fragmented territory. Last year residents sprawl between ocean revived in the 1980s, and Changyu 1,200 in Yantai tourists are led down into DOMESTIC OUTPUT Zhou’s team plans to open Chinese customs counted 3,863 and farmlands. Included will be a became the fi rst wine company to a cellar past rows of imported oak 1,000 hundreds of wine stores across importers, up 200 percent in fi ve research institute, another château, list its shares in Shenzhen in 1997. In barrels. Upstairs a small bottling unit China, where it will sell its branded years, according to Rabobank, a a wine trading centre and a tourist 2005 the city government sold a 33 800 and 20-ton fermentation vats can be wines and those of foreign partners Dutch bank specialising in the sector. town complete with hotels, a mu- percent stake in Changyu’s parent viewed from a glassed-in balcony. The 600 who grant exclusive import and Many bypass retail channels and seum and, naturally, bars. Offi cials company, Yantai Changyu Group, to impression is more of wine-themed distribution rights to Changyu. rely instead on direct sales to wine- say the project will be fi nanced from part of an Italian liquor company. An 400 tourism than serious viniculture. But
Within six years Changyu plans quaffi ng banqueters who want to retained profi ts and is on top of $300 additional 10 percent was divested 200 it allows Changyu to present itself as to open 3,000 stores, including impress guests. Importer markups million in capital expenditure in 2012. in the same year to the World Bank’s a pre- mium brand in a market that is 0 franchises. It says that it will on bottled wine can be as much It’s a far cry from Changyu’s roots International Finance Corp. The ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 still in its infancy. “We want to take prevent counterfeit wines from as three-fold, say trade experts. as China’s fi rst modern winery. Its parent company is controlled by a SOURCE: RABOBANK. the next step forward,” says Sun.
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that valued the business at $368 million. After suggesting it wouldn’t delist the Singapore company, Peace Mark did just that, however. TIME MACHINE That wasn’t the only surprise. In the fi nancial crisis aftermath of 2009 Pollyanna Chu, Sincere Watch’s third buyer in four years, Peace Mark became bankrupt. Tay sees even better times ahead Liam Wee returned as chairman and part of a new ownership group By RUSSELL FLANNERY that included L Capital Asia, an investment arm of LVMH, and Standard Chartered Private Equity. It bought back the whole company for a reported $81.4 million, a Tay Liam Wee and family got another bite from fraction of what it had sold for a the Sincere apple year earlier. The new owners added other prestige watch brands, and Chu expects to push Sincere INDsales were buoyantIA as greater China deeper into China, widely expected led Asia’s recovery. Hong Kong unit to become one of the world’s sales last year rose by 36 percent largest luxury markets in short to $143 million, helping to lift net order. The company currently has profi t by 76 percent to $18 million. 69 Franck Muller stores or sales Enter Pollyanna Chu, 53, a points in 14 cities, and is looking to watch enthusiast since her teens reach more than 20 cities in three and current CEO of Hong Kong years. As part of that it is exploring brokerage Kingston Securities, markets such as Inner Mongolia, who ranked No 32 on this year’s Heilongjiang and Xinjiang. Hong Kong rich list at $1.2 billion. “Franck Muller has been very In May Chu, for $186 million, supportive during our acquisition bought the private parent of Sincere process,” she writes to Forbes Watch from the 2009 consortium. Asia. “In our eyes the success Celebrations all around: Having sold of Franck Muller and Sincere is the company twice in four years, synonymous.” Chu says there are no Tay was feted in Hong Kong with plans to inject Sincere’s Southeast a symbolic twice-bitten apple. Asian business into the Hong “Sincere Watch was a big part Kong-listed subsidiary that is now of my life,” Tay, 53, e-mails. “I joining the Best Under A Billion. remember spending many summers She didn’t rule out acquisitions in behind watch counters learning the the future, however. “We have the
Virgile Simon BertrandVirgile for Forbes ropes. Doing business and having existing expertise, the network the entrepreneurial spirit has long and the capital base,” she says. eaders with a sharp founding family and is now in the retailers but also moved it outward and by the end of 2007 the Tays been ingrained in me, and I do Son Kingston, 27, a USC grad, will memory will see this year’s hands of an ambitious Hong Kong in the region. Sincere went public fi nally received an off er too good believe I will continue to be involved be running the company day-to-day as entry for Sincere Watch securities industry fi gure and her son. in Singapore in 1993, and a greater to turn down from Peace Mark, a in the business world in one way vice chairman and managing director. R of Hong Kong and recall Sincere Watch was formed in China spinoff listed in Hong Kong in big watchmaker and seller out of or another.” Meantime, the stock Yet don’t expect the busy Chu to earlier BUB listings—in 2004-05, 1954 by Tay Boo Jiang, who foresaw 2005. By that time it had become a key Hong Kong, which was looking market has welcomed Chu. After key stay clear of Sincere. “As a general to be exact—for Sincere Watch of a consumer spending boom in Asia. distributor for luxury watches made to expand in Southeast Asia. Now acquisition details were fi nished June rule, I am very passionate about any Singapore. Therein lies a story of a Tay not only turned Sincere into by Franck Muller of Switzerland. headed by the founder’s son, Tay 28, shares of Sincere’s Hong Kong- business that I engage in. Taking a business that was sold twice by its one of Singapore’s biggest watch Suitors were lured over the years, Liam Wee, the clan agreed to a bid listed unit have risen nearly a fourth. backseat role is not in my nature.”
82 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 83 Features/ 84 FORBES INDIA|August 17,2012 Cross BorderCross T face ofXiaomi.LikeJobs,he has serial entrepreneur,isthepublic phone ishot.RedApple million MI-Onesandcounting. The the companyhassoldmorethan3 hours. Lessthanayearafterlaunch 300,000 preordersinthefi went onsalelastfall,Xiaomireceived Chinese consumers:Whenthephone has attractedhugeattentionfrom power andareasonablepricetag in China.Thatcombinationofraw comparably equippedphonessold but withapricefarlowerthanmany dual-core processorfromQualcomm It’s ahigh-poweredphonebasedon droid smartphonecalledtheMI-One. believe Lei,thenextSteveJobs. smartphone company.And,ifyou of Xiaomi,China’shottest shirt-wearing billionairefounder Lei Jun,thejeans-and-black- that, you have togoChina. fi To themselves toSteve Jobs andApple. Lei, a43-year-oldinvestorand Beijing-based XiaomisellsanAn- Ladies andgentlemen,meet nd aguycrazy enoughtodo nerve to compare who would have the American entrepreneurs here aren’t many STEVE JOBS? STEVE D N I rst 34 smartphones—and attracting a cultlike following acultlike attracting smartphones—and CHINA’S By SIMONMONTLAKEinBeijingwithreporting by RYAN MAC in San Francisco Lei Jun is selling millions of groundbreaking millionsofgroundbreaking Junisselling Lei services—not unliketheway buyers topaymoreforvarious the costofhandsetbygetting a high-spec,low-pricephone. the previousmonthsdreamingof (Lin hasthree,Leitwo),hadspent both 43,marriedwithdaughters Xiaomi’s president.Thetwomen, and Googleengineerwhoisnow his friendLinBin,aformerMicrosoft off mobile browser,andYY.com,which both UCWeb,whichsellsapopular Stock Exchange.He’saninvestorin software firm, ontheHongKong later helistedKingsoft,anantivirus in 2004for$75million.Threeyears online retailerJoyo.comtoAmazon to solicitfeedbackfromusers. on MiTalk,theXiaomichatsite, followers inChinaandspendshours more than4millionmicroblog cheer andplaygames.Leihas revivals, wherediehardfanssing, ups thathavethefeelofreligious fans andholdsregularusermeet- launched anannualconventionfor male gadgethounds.Thecompany intensely loyalfans—mostlyyoung, ers areal-timevideoapp. Their bigideaistosubsidise Lei foundedXiaomiin2010with In hisfirst bigscore,Leisoldthe IA ent censorshipofsearchresults. mainland Chinainthefaceof persist- Witness Google’sdeparturefrom companies havehadtroublelearning: mises.” That’salessonthatAmerican “you alsoneedtomakecompro- the middlepath.”InChina,hesays, while Chinesecultureemphasises “Jobs wasascrupulousperfectionist, said inaninterviewwith he couldnothavesucceeded,”Lei in waysJobscouldn’thavematched. asserting thathecansucceedinChina wrath ofApplefanseverywhereby more,” hesaysofthecomparisons. very annoyed.ButIdon’tmindany- his Vanclfashione-commercesite. product launchesissimplyaplugfor asserting thathiscasualattirefor for instance,copyinghisdresscode, inspiration butspecifically denies, comparison. HesaysJobsisan relationship whenitcomestothe with Apple.Leihasalove-hate pany keepsinvitingcomparisons software fromtheAppStore. that AppleiPhoneuserspayfor One thingisforsure:InChina “If JobshadlivedinChina,Ithink Rather remarkably,Leirisksthe “I wasannoyedinthebeginning, It’s justonemorewaythecom- August 17,2012|FORBES INDIA Forbes.
85 Daniel Acker / Bloomberg Features/Cross Border
Xiaomi’s red hot smartphone takes on the Apple iPhone TALE OF THE TAPE in the fast-growing Chinese mobile phone market.
THE CHINA MOBILE PHONE MARKET Q1 CHINA MOBILE PHONE CHINA MOBILE PHONE SHIPMENT APPLE IPHONE 4S XIAOMI MI-ONE (MILLIONS OF PHONES) MARKET SHARE FORECAST BY OS (MILLION UNITS)
3.5 INCHES SCREEN SIZE 4 INCHES SMARTPHONE USERS 250 1,000 OTHER PHONES APPLE IOS 5 OS MIUI1 OTHERS SAMSUNG 200 MICROSOFT WEIGHT 800 17.8% 140 GRAMS 149 GRAMS 21.8%
$790 RETAIL PRICE $320 150 600 MOTOROLA 3.5% 16 GB STORAGE 4 GB LENOVO 100 400 7.8% ANDROID 8 MP CAMERA 8 MP APPLE HUAWEI 18.9% 50 APPLE QUALCOMM 200 9.8% DUAL-CORE CPU SNAPDRAGON A5 S3 1.5 MHZ ZTE NOKIA 0 10.1% 10.3% 0 OTHERS 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 1ANDROID-BASED. Iphone: Simon Edwards / Future Publishing Via Getty Images / Future Iphone: Simon Edwards SOURCE: CANALYS. INDIA the guy produces Jobs-like buzz. market. Qihoo has been giving which would put Xiaomi’s sources say. Ergo, he’s a billionaire. to carriers like Telefónica and make a profi t from hardware … so a The rapid early sales of the phone away a free version of its antivirus share at less than 5 percent. To stay in the billionaire’s club, Vodafone but that no deals have price war will not aff ect me at all.” A came largely through word of mouth, software for users who download But there is plenty of room for Lei is going to have to maintain both been signed to date. In China Xiaomi brave statement but clearly not true; with no spending on print or TV the company’s browser, a move expansion—both inside China the zealous consumer support for the has distribution deals with carriers there’s no getting around the fact ads. And the buzz continues: After that creates issues for Kingsoft. and elsewhere. One obvious company’s phones and his own cult of but sells about two-thirds of its that the company is hurt by lower selling 3 million phones to date, Even Lei’s detractors would lure: Xiaomi’s phone at $320 is personality. The constant comparisons phones direct via Xiaomi’s website. prices, just like everyone else. Xiaomi is on track to hit 5 million concede that the opportunity priced far below the $790 local with Steve Jobs, which might not Hans Tung, a partner in Qiming To hold its ground Xiaomi needs to to 6 million units by year-end. here is enormous. price for the Apple iPhone 4S. play well here, work to his advantage Venture Partners, notes that if retain the loyalty of users like Zhang Part of the mythology around China Mobile is the largest Even so, the challenges are daunt- in the domestic China market. Xiaomi hits annual sales of 6 million Jie, a 24-year-old magazine editor. Lei involves a highly public spat mobile carrier in the world, with ing, even for larger players. Nokia, “In a culture like China, we feel units, it would be approaching Zhang says he chose the phone for its he’s having with Zhou Hongyi, the 677 million users as of the end of Research In Motion and HTC are the need to have our own Jobs,” CEO of Nasdaq-listed Qihoo 360 May; compare that with AT&T struggling to stay relevant in a market says Wen Chu, CEO of Great Wall Technology, a $1.9 billion market with a little over 100 million as of dominated by Apple and Samsung. Club, a Lei-funded trade group. “IF JOBS HAD LIVED IN CHINA, cap security software fi rm. For one the end of March. The number two Xiaomi is trying to steer a middle “We want to see him succeed.” I THINK HE COULD NOT HAVE SUCCEEDED” thing, Zhou claims that Xiaomi and three carriers in China—China course between high-end rivals on That will not be easy. ------makes a profi t of nearly $100 per Telecom and China Unicom—also the one hand and cheap-as-possible “It will be incredibly challenging phone, disputing Lei’s assertion that are bigger than any US carrier. mobile devices on the other. for Xiaomi to execute an Apple $2 billion in annual revenue. impressive specs and describes its op- it sells the phone cheaply and will Moreover, Chinese consumers Meanwhile, Lei is getting rich. model in China,” says Michael But sustaining that growth will erating system as “cool and comfort- make up the diff erence with services. are moving rapidly to embrace In June Xiaomi raised $216 million Clendenin, managing director of be a challenge. What looked like able to use.” But he hasn’t spent any- Zhou thinks Xiaomi’s customers smartphones. Over half of all mobile in venture capital, the round that RedTech Advisors, a Shanghai-based a sweet spot in 2011 is becoming a thing on apps and says that if he had are suckers if they believe Lei. phones sold this year in China will be valued the company at $4 billion. consultancy. “As much as I admire maelstrom of competing handsets. the money he’d switch to an iPhone. Another source of friction: Zhou smartphones, rising to 76 percent next That’s more than the current market Lei Jun, he’s no Steve Jobs when it The price of a “good-enough” Android Clearly, Xiaomi has a long way leaked the news that Xiaomi’s year, according to Nomura. Topeka cap of Research In Motion. The latest comes to developing an ecosystem.” or Windows smartphone is down to to go before it can compete head- latest round gave the company Capital Markets says there will be 230 round boosts total capital invested The long-term goal is to follow just $100, with lower prices ahead. to-head with the company Steve a $4 billion valuation. While the million 3G users in China by year-end. in Xiaomi to over $500 million. in the footsteps of China-based “The payoff is enormous, but Jobs built. Lei is convinced that number was accurate, Lei says, the To be sure, Xiaomi is still small Investors include Morningside hardware makers Huawei and ZTE margins start to become very thin,” over time he can get there. Give leak made it harder to close the deal compared with its better-known Group, Qiming Venture Partners, and to enter the global market. says Mark Natkin, managing director him credit for thinking diff erent. with privacy-sensitive investors. rivals. In Q2 smartphone shipments IDG, Temasek and DST Group The company’s ability to move of Marbridge Consulting in Beijing. “Apple is a great company,” he Tied into the feud is the fact in China were 33.1 million units. founder Yuri Milner. Lei remains beyond China will be tested when Lei insists that competition from says. If you believe Lei, Xiaomi that Qihoo competes with Lei’s For the full year China smartphone the largest Xiaomi investor, with Xiaomi makes its fi rst move overseas smartphone discounting doesn’t might take it one step further. Kingsoft in the antivirus PC software shipments should hit 140 million, a stake of more than 30 percent, next year. Lin Bin says he’s talked hurt him. “We never planned to Additional reporting by Laura He
86 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 87 88 Features/ IS DIALLED IN IS DIALLED QUALCOMM FORBES INDIA|August 17,2012 E the Hilton’senormousfourth-fl comm builditsowngadgets? “No.” we have,”Jacobssaid.WillQual- inclination istoretainthemodel like TaiwanSemiconductor?“Our production tocontractmanufacturers rather thancontinuingtofarmout factories tokeepupwithdemand said. WillQualcommbuilditsown area wearelookingat,”Jacobs in serverchips?“It’scertainlyan seemed immunetothedrama. in June,the49-year-oldengineer ference atHiltonSanDiegoBayfront porters atQualcomm’sdevelopercon- company’s marqueecustomer,Apple. any ofhisminionswilltalkaboutthe key customer.AndneitherJacobsnor Samsung, whichalsohappenstobea competition from,amongothers, the companyisseeingintensifying might otherwiselike.Meanwhile, high-end smartphonesasthey who aren’tabletomakeasmany sold off 15percent—andcustomers, both shareholders—thestockhassince radio chips.Thenewshastroubled for itscutting-edgemobilephone that itisstrugglingtomeetdemand By fray abovethe company cellphone-chip keeps the HowCEOPaulJacobs nofuss. nophones, No factories, BRIAN CAULFIELD Then Jacobspausedtoglance out Will thecompanytakeonIntel And yet,amidaroomfulofre- Back inAprilQualcommwarned to float above itall. Jacobs somehow seems fray, QualcommCEOPaul ven inthemiddleof Cross BorderCross oor Qualcomm continuetoproduce profi in favourofitsown,keeping more ARM-based microprocessordesigns modem chipsbutskipsthecompany’s customers, Apple,usesQualcomm’s ominously, oneofitsmostsuccessful earnings expectations.More TSMC, forcedittooff er disappointing capacity atitsmanufacturingpartner, hit abumpearlierthisyear.Tight customers’, includingApple’s. is richerthananyofitsmajor margin ofmorethan60percent triangulation: Qualcomm’sgross or runningitsownchipfabs. business ofbuildingitsownhandsets while steeringclearofthemessy sold. Andthecompanydoesallthis royalties onnearlyeverysmartphone parts. Betteryet,Qualcommcollects contains $23.54worthofQualcomm Nokia. EveryAppleiPhone4Ssold phones fromSamsung,HTCand chips canbefoundinleadingsmart- 2011, analystsestimate.Qualcomm’s percent from$10.9billionduringfi fi will generate$15billioninsalesforthe concerns, businessisgood.Qualcomm tain hisZenlikecalm:Despiteallthe said. “That’sanenormousboat.” of theharbourbelow.“Wow,”Jacobs window attheglitteringbluewaters scal yearendinginSeptember,up36 That hands-off model,however, That’s aprofitable bitof There arereasonsJacobscanmain- ts foritself.Howlongcan scal the reasonswasthatourcustomers to Japan’sKyocerain1999.“One of in operatinglossesbeforeitwas sold biggest flops, rackingup$200million business. ItwasoneofQualcomm’s Paul ranQualcomm’shandset Qualcomm co-founderIrwinJacobs, questions. Underhisfather, the handset-hardwarebusiness? resist thetemptationtore-enter its ownfabs?Andcanthecompany of thechipindustry?Shoulditbuild growth ratessofaraheadoftherest Sailing throughchoppyseas Qualcomm CEOPaul Jacobs: For Jacobs,thosearen’tabstract protocol knownasCDMA,for “code comm wasbestknownforpushing a tion isyes.UnderIrwinJacobs Qual- predecessor—the answertothat ques- you investenough?’isthequestion.” of scale,thenyoucaninvest,but‘Can a scaleissue.Yeah,ifyouhavelot better wirelesschips.“Ithinkit’sjust have becomebigenoughtoinvestin customers Qualcommwouldnever with them,” Jacobssaysinaninterview felt likewewerecompetingwith Thanks toPaul’sfather,Irwin—his Forbes. Andwithoutthose D N I the fiscal yearendedSeptember and developmentjuggernaut. In from licensing—fundsaresearch of Qualcomm’srevenuesnow come a geyseroflicensingrevenues. the world’ssmartphones,unleashing technologies nowbuiltintomostof for thethird-generationwireless WCDMA—would becomethebasis version ofthattechnology—dubbed same amountofradiospectrum.A carriers tocrammorecallsintothe division multipleaccess”,thatallowed That gushofcash—aboutathird IA be amobilephone,too.” your heart,’”Jacobssays.“You’ll because youneedtomanage and says,‘Gotothedoctornow, bloodstream andlodgeinhiswrist. sensors thatwillsitinapatient’s Other researchersareworkingon camera imageswithvirtualreality. reality” softwarethatmeshesmobile pretty wild,suchas“augmented R&D. Someofthoseeff orts canget or 20percentofitsrevenues,on 2011 Qualcommspent$3billion, “Imagine yourphonerings August 17,2012|FORBES INDIA
89 Getty Images Features/Cross Border
The wild ideas don’t always work. separate processors and modems. Nvidia could be a bigger headache. Among the fl ops: Zeebo, a gaming Because Qualcomm’s wireless With the acquisition of wireless chip console for the developing world modems can now handle a broader company Icera last year, graphics Qualcomm helped develop, and range of protocols than competing chip designer Nvidia will introduce the SmartBook, cheap notebook chips, the Snapdragon processors have do-it-all chips that can support computers powered by smartphone been built into a wave of high-end both high-speed LTE networks processors. “They throw a lot of smartphones from Samsung, Nokia and slower third- and second- things against the wall and see and HTC, among others. Qualcomm generation networks early next year. if they stick,” says Will Strauss, grabbed 50 percent of the $7.9 billion For now Qualcomm’s weakest president of wireless market smartphone processor market in 2011. spot could be tablets. Led by Apple’s research fi rm Forward Concepts. Qualcomm’s biggest problem now: iPad, Credit Suisse estimates sales That hit-or-miss strategy has Meeting demand. That’s a side eff ect of tablet computers will grow to generated two major hits since Paul of the company’s “fabless” strategy, 169.7 million units in 2013, up Jacobs took over as chief executive in relying on contractors to make the from 110 million units this year. 2005. In 2007 Qualcomm launched its stuff Qualcomm designs and sells. The And while Qualcomm’s wireless fi rst Gobi chips, multiband radios that recent issue was a lack of capacity modems are an option on Apple’s can be confi gured to support networks to produce cutting-edge parts with iPad, the device’s silicon brain used by diff erent carriers. The rstfi features just 28 nanometers wide, remains Apple’s own A5X processors, chips were bulky—and confi ned to targeted at high-end smartphones. an ARM-based design comparable laptops—but Qualcomm shrank the That’s a problem that rivals Intel to Qualcomm’s Snapdragon chips chips and added new capabilities. and Samsung will never have; they built for Apple in factories owned That kind of dexterity is paying make their own parts. Yet despite INDby QualcommIA customer Samsung. off : Qualcomm grabbed 45 percent of Qualcomm’s size—it’s now the biggest Qualcomm will get a chance to get more of its parts into tablets later this year with the launch of Windows RT, WHY JACOBS CAN MAINTAIN HIS a version of Microsoft’s Windows ZENLIKE CALM: BUSINESS IS GOOD 8 operating system that can run on ------ARM-based smartphone processors such as Qualcomm’s Snapdragon. the $15.1 billion market for wireless chip company that doesn’t own its So far, Nvidia seems to have an edge modem chips last year. Thanks in own fabs—Jacobs has no plans to here. Microsoft unveiled Surface in large part to their ability to handle build or buy a factory. “Your costs June, a pair of tablets built around the growing welter of competing get set by how full you can make mobile processors supplied by Intel networks used by wireless carriers, the factory,” Jacobs says. “What and Nvidia. Google’s Nexus 7, also Qualcomm’s wireless modems are happens, when you run a fab, is you introduced in June, sports a 7-inch now built into all Apple’s iPhones end up worrying all of the time about, screen and a $199 price tag, less than and iPads. ‘They can ship the same ‘What am I doing to fi ll the fab?’ ” half the iPad’s $499 starting price. It chip, and it can be used with Verizon Qualcomm’s manufacturing hic- also uses Nvidia’s Tegra 3 processor. or AT&T,” says Strauss. “They’re cups, however, give rivals a chance Jacobs says a tablet built the only company in the world that to catch up. While Intel, which is around its chips will arrive with can do that right now.” Jacobs’ most promising to off er a chip able to the Windows 8 launch in October. aggressive move has been into the support the latest LTE networks The tablet will reportedly be built processor business. Introduced by year-end, could be Qualcomm’s by Samsung, although Jacobs in 2006, Qualcomm’s Snapdragon highest-profi le foe, smaller players declined to name his partner. chips are based on the same ARM- like Nvidia and Renesas Electronics “I think you’ll like the products instruction set used by most mobile could pose bigger problems, analysts when they come out,” Jacobs says. phones. Its chips, however, include say. Renesas has chips that can If it’s Samsung, that means one of Qualcomm’s multimode wireless compete, on paper at least, but Qualcomm’s biggest competitors modems, allowing phones using the they’ve been missing in action in will be forking over cash for one of chips to use less power—and take up the US market. Analysts see it as Qualcomm’s chips, again. We should less space—than chips that include a possible acquisition target. all have such complications.
90 FORBES INDIA | August 17, 2012 Forbes India Leadership Awards 2012 IN SELECT COMPANY
INDIA
JURY DELIBERATIONS for the Forbes India Leadership Awards
n the last Friday in July, the six eminent achievers who formed the jury for the Forbes India Leadership Awards met to pick the winners from a list of nominees in ten categories. The jury Obrought to the table a collective wealth of corporate experience in manufacturing, banking, consulting, private equity, corporate law and media. The process had started many weeks earlier, with the Forbes India editorial team whittling down a long list of nominees to short-lists of fi ve in each of the ten categories, backing each selection with hard data. (These short-lists will be released in our Independence Day special edition, which will go on stands on August 14.) The jury, led by KV Kamath—with KPMG, our knowledge partner, on hand to provide data support—went into a thorough dissection of each set of nominees over several hours, weighing not only fi nancial metrics, but also a host of quantitative parameters. The winners, all outstanding innovators with transformative leadership qualities, will be declared at a glittering awards function on September 28, and in a special edition of Forbes India that goes on
Photographs: Vikas Khot sale on that day. For more news on the awards, watch this space.
92 FORBES INDIA | August 17, 2012 KV KAMATH, Non Executive Chairman, ICICI Bank & Infosys
RAGHAV BAHL, FounderIND and ADIL ZAINULBHAI,IA Chairman- Group editor, Network18 India, Mckinsey & Company
ZIA MODY, Senior Partner, AZB & Partners
AKHIL GUPTA, Chairman, Dr JJ IRANI, Former Executive Blackstone Advisors India Director, Tata Sons
Hospitality Partner Knowledge Partner
For more details log on to: www.forbesindia.com/leadershipawards
August 17, 2012 | FORBES INDIA 93 Features/Cross Border
SILICON VALLEY’S UNLIKELY SAV IOUR INDIA Struggling to cash in on the social Web, Kleiner Perkins turned to the poster child of the fi rst dot-com bubble: Mary Meeker
By ERIC SAVITZ; Photograph by ERIC MILLETTE for Forbes
ary Meeker is after another on the perimeter sitting in the of the big central great room. centre of the “You have Matt Murphy, who Minternet, literally. is an expert on mobile and helped She’s in the big, glass-walled start the iFund at Kleiner. Randy conference room smack in the Komisar has been at a plethora middle of the brightly lit, high- of startups and helped build ceilinged ski chalet that is the businesses over the years, some of Sand Hill Road headquarters which I’ve been involved with,” of Kleiner Perkins Caufi eld & she says. “Ted Schlein knows as Byers, the most storied venture much about security as anyone capital fi rm in Silicon Valley. around. Bing Gordon was one Kleiner has backed an astonishing of the cofounders of Electronic number of important technology Arts and really has a very keen companies: Netscape, AOL, Sun understanding of user interface Microsystems, Amazon, Google. design and gamifi cation.” “Just look around the room,” Meeker still seems in awe she says, in her deep, rapid-fi re of the place, even though she staccato. Spinning her chair, the joined almost two years ago as former star analyst at Morgan full partner. “There’s Ray Lane, Stanley points to one offi ce on leadership. John Doerr, on
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thinking about big ideas, and yes, I’ve levels. But it made sense: Morgan actually had it commercially published seen this movie before, yes, I can make Stanley had taken a host of Kleiner and sold in bookstores. She also knows this call and get this done ... Al Gore … companies public; Meeker and technology: Before she invests, she Colin Powell … I could go on and on.” Doerr knew each other well. Her tries stuff out. Ergo, Meeker not only The awe is real. But so is the fact shift was the culmination of a 19- invested in the crowdsourced traffi c that Kleiner needed Meeker more year run picking stocks for Morgan’s service Waze but also has the app on than she needed Kleiner. Though clients. Now she gets to pursue her her phone and checks in when there’s Meeker’s Hoosier conservatism true love: building companies. an accident slowing traffi c on I-280. would never allow her to admit it, “I’ve always wanted to invest. Meeker is also willing to think she has played a key role in Kleiner’s That’s why I started working on big. Waze CEO Noam Bardin says bid to restore its reputation as Sand Wall Street in the fi rst place, back that while his team was thinking Hill Road’s top fi rm. Kleiner spent in 1986 when I went through bottom-up, fi guring out how to sell the post-bubble years investing, the Salomon Brothers training ads against its traffi c content, Meeker unsuccessfully, in other things: programme,” says Meeker. “My was thinking top-down, advising him nanotech, for instance, and green move to investing was delayed in to imagine how Waze can steal dollars energy. It brought in high-profi le part because I just loved what I was from the multibillion-dollar billboard partners lacking any real tech doing. ... I took a step back and said, and radio markets. “She immediately experience, such as Powell and ‘If I don’t do this now, I never will.’” saw the big picture,” he said. “Most Gore, while its heaviest hitter, Kleiner put her in charge of its VCs were thinking about why the billionaire John Doerr, was focused new $1 billion Digital Growth Fund. business won’t work, not how big it on biofuels and solar cells. She and her team have already can be. She looked at it analytically. That left players lower in the INDIA batting order to handle the new wave MEEKER’S MACRO VIEW: “MIXED TRENDS of Net startups—who missed chances WITH A NEGATIVE BIAS” to make early bets on the likes of ------Facebook, Twitter and Groupon. As a result Kleiner, once the undisputed invested half of the fund’s capital She said, ‘Look at how much money is king, is now just one of a half-dozen in about 20 deals, with stakes in out there that needs to fi nd a home.’” top-tier VC fi rms that include Sequoia a variety of high-profi le startups, For his part, Doerr raves that Capital, Andreessen Horowitz, including the streaming music Meeker is “a spectacular investor, Greylock Partners, Benchmark service Spotify, the payments service with a rare blend of intuition based on Capital and Accel Partners Square and the online retailer pattern matching over decades of work Meeker has done exactly what One Kings Lane. The fund also combined with hard-core analytics.” she was brought in to do: Capitalise caught up with deals it had missed Not that distractions haven’t on the big market opportunities that earlier, like Facebook, Groupon and cropped up. Earlier this year Kleiner Kleiner was missing. Post Sarbanes- Twitter—erasing a conspicuous hole was hit by an embarrassing sexual Oxley, tech startups have tended in the fi rm’s glittering history. harassment and gender discrimination to stay private longer. Companies suit by fellow partner Ellen Pao. As like Facebook, Zynga and LinkedIn eeker, 52, already stands out the fi rm’s highest-ranking woman, stayed private even as revenues Mas an elite VC. For starters, Meeker became an obvious person topped $100 million, preferring to she knows everyone in the Valley to defend the fi rm’s track record, but raise large venture capital rounds who matters. In a place where she can’t talk about the case nor is instead of going public. Kleiner, which people actually compare Klout she interested in getting ensnared had always been great at nabbing scores—Kleiner is an investor in in debates about the lack of female hot startups in their toddlerhood, Klout, by the way—Meeker has an representation in venture capital. was weaker on later-stage deals. unmatched contact list. Also key: Pao accuses Kleiner of steering plum And then along came Mary. She still approaches the world like a deals and board seats to male partners Kleiner’s decision to lure her startled fi nancial analyst. This is the woman and denying women opportunities many on both coasts. It’s exceed- who wrote “The Internet Report,” to advance. Kleiner has denied any ingly rare for a Wall Street analyst a seminal 1995 research piece that wrongdoing and issued a point-by- to enter a venture fi rm at its highest was so popular that Morgan Stanley point rebuttal of Pao’s claims.
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stint at Salomon Brothers she moved emerging internet economy. The THE SAND HILL to the research department at Cowen series started in 1995 with “The BOYS’ CLUB and eventually joined Morgan as a Internet Report.” Doerr says that PC hardware and software analyst one became “the Hitchhiker’s in 1991. Her long relationship with Guide to the dot-com boom.” Kleiner began soon after, in 1993, “There’s an entire generation of Just two years after she joined Kleiner Perkins, when Meeker picked up coverage of entrepreneurs who have grown up Mary Meeker has become the most powerful Intuit not long after Morgan took the on Mary’s research,” says Kleiner woman in the venture business. But the truth is, there’s not much competition. Kleiner-backed software fi rm public. partner Chi-Hua Chien. “You can Of the top venture fi rms in Silicon Valley, You can peg the start of Meeker’s line them [the reports] all up, and four have no women investing partners. That unique role in the growth of the the predictions, plus or minus 24 puts them way below an already low average. internet economy to May 7, 1994: months, are where things ended up.” According to the National Venture Capital Association, women make up 11 percent of the That morning the New York Times An excerpt shows how much investing roster at US fi rms. Andreessen ran a story about a new startup called she nailed it: “At a minimum, Horowitz, Benchmark Capital, Greylock Capital e-mail should become pervasive. and Sequoia Capital have no female partners. Mosaic Communications, founded by These Sand Hill boys’ clubs say they don’t the investor and entrepreneur Jim So should internet/web access: deliberately exclude women but profess they Clark, a former Stanford professor E-mail is the ‘killer application’ of can’t fi nd qualifi ed candidates—hard to believe who had created the computer the Internet today, and browsing given women make up more than a third of recent MBA grads. graphics workstation company Silicon through information services Of the leading half-dozen fi rms, the two with Graphics. Mosaic’s other founder, the ‘killer app’ of tomorrow.” women in their ranks are Kleiner and Accel a 22-year-old wunderkind named “The Internet Advertising Partners. Accel says 3 of its 20 investing pros Marc Andreessen, had created the INDReport” cameIA out the next year, in the US are women. Kleiner has 9 female investing partners out of 38, including Meeker. world’s fi rst consumer-friendly followed in May 1997 by “The The Midas List, Forbes’ annual ranking browser for the World Wide Web. Internet Retailing Report.” Once of the top 100 venture capitalists, included 5 Clark told the Times that Mosaic again she was dead-on: “The web women this year, which sounds pretty bad, except in comparison with 2011, when only 2 was targeted at computing’s next won’t displace traditional shopping made the list. At least the total is going in the big trend: Navigating cyberspace. and will remain a niche channel right direction. —Connie Guglielmo Meeker saw opportunity for some time, yet it will ramp knocking. She dialed her colleague rapidly in revenue and usage. Some Frank Quattrone, then head of segments will likely see relatively tech banking at Morgan, and signifi cant growth: We anticipate ou have to go far back in Mary suggested they meet with Clark and faster take-up in insurance, fi nancial YMeeker’s life to fi nd a moment Andreessen. “It was one of those services, computer hardware/ when she wasn’t investing. Meeker moments,” Meeker says. “I picked software, travel, books, music/video, was raised by a homemaker mom up the paper and said, ‘That’s it.’ ” fl owers/gifts and automobiles.” and a steel industry exec dad in Mosaic soon changed its name More than just another Portland, Ind. Her driven father to Netscape. It got funding from analyst, Meeker made herself an pushed her to be great at his two Kleiner Perkins, among others. And indispensable consigliere to CEOs and favorite things: Golf and investing. about a year later Morgan Stanley corporate boards across the Valley. Meeker became captain of her was the lead bank on its IPO, the Sometimes knocked for her close ties high school golf team. According deal that eff ectively launched the to the companies Morgan took public, to Charles Gasparino’s 2005 book, Internet into the mainstream. she certainly showed intense loyalty Blood on the Street, Meeker also took Meeker’s status as a stock- to the companies she supported. a class in investing while still in high picking superstar only grew as Indeed, she took considerable school, where she made her fi rst the internet bubble infl ated. heat for her unwavering faith in stock pick, a Minneapolis oil refi ner. Buy recommendations on Dell, some of her less successful picks The stock doubled in three months. Compaq, Microsoft and AOL even in the darkest days of the After a DePauw degree in 1981, all provided 10x returns. dot-com bust—it took a 97 percent Meeker spent a few years as a stock Then there were Meeker’s slide in Priceline shares before she broker at Merrill Lynch before getting research reports: Epic, chart-heavy backed off a buy recommendation an MBA from Cornell in 1986. After a and exhaustive road maps to the on the stock, for instance.
98 FORBES INDIA | August 17, 2012 Features/Cross Border
But attempts by regulators and and her colleagues spent hours will take her call—and they will take New York Attorney General Eliot with Square, “asking us probing my call because she recommends it.” Spitzer to go after her in the aftermath due-diligence questions and eating of the bubble failed miserably. pizza and cold sandwiches.” They funny thing happened after While fellow bubble poster child negotiated terms and had a handshake AMeeker’s early phase of Henry Blodget was kicked out of the deal before the night was over. The rapid dealmaking: She stopped. In securities business after privately investment was ratifi ed by Square’s the fi rst quarter of 2012 Meeker bad-mouthing stocks on which board the next day. Meeker and did zero deals. Not a penny. he had buy ratings, investigators Doerr, Rabois notes, “dropped Why? She thinks that private never laid a glove on Meeker. everything” to get the deal done. valuations are too high, especially She was more cautious in the Meeker likes Square because it does compared with public valuations, bubble years than many recall—for more than simply make it possible creating a potential trap for last-stage instance, comparing the period to for, say, fl ea-market vendors to take investors. In her latest report on the the 17th-century Dutch tulip-bulb credit cards. Square also provides state of the internet, she forecasts mania in a 1999 New Yorker piece. deep market intelligence for sellers. “mixed trends with a negative “There is the same supply and demand They can see all of their transaction bias” for the economy overall. She imbalance. The diff erence is that tulip information in an effi cient, organised also observed that, over the period bulbs didn’t fundamentally change the way, compiled in a database rather from 1980 to 2002, 2 percent of way companies do business. But when than entered manually from a pile of tech IPOs accounted for almost all is said and done, there will be many crumpled receipts. “This company has 100 percent of the sector’s wealth stocks that in hindsight look like tulip- the potential to be really big,” she says. creation. In short, Mr Entrepreneur, bulb stories.” Nailed that one, too. Waze CEO Noam Bardin confi desIND the deck is stackedIA against you. that he was wary of Meeker when But Meeker is paid to put money leiner’s approach to playing he met her. “My fi rst reaction was to work, so pauses can’t last that Kcatch-up to the web 2.0 that she was not going to be able to long. A few weeks ago she ended investment wave has been two- pronged. On the one hand, the MEEKER’S LATEST INVESTMENTS: LENDING company jumped into later-stage CLUB, CODECADEMY, DOCUSIGN rounds for fast growers like Facebook ------and Twitter that in another era would have long since gone pubic. get big deals through, that she was her deal drought with a $15 million And on the other hand, it has been not a heavy hitter,” he says. “At the investment in the online fi nancial site scouting for lesser-known companies beginning I was not so warm to the Lending Club. This month she took with a chance to go large. idea of Kleiner. But she brought John a stake in Codecademy, a site that A case in point: Square, a rapidly Doerr in as proof she was serious, and off ers online training in computer growing player in mobile payments. she brought Bing Gordon in, and she programming, and the electronic The company off ers a dongle that quickly changed my view.” He gave signature service DocuSign. plugs into smartphones and tablets them a week to close the deal, and they While valuations remain a little and turns them into wireless point- did. “They moved very fast. An ability out of whack, Meeker sees plenty of of-sale terminals. Now anyone can to do that at a fi rm like Kleiner was opportunity. In her recent “Internet take credit cards. The company’s very, very impressive,” says Bardin. Trends Report” Meeker runs founder is Jack Dorsey, one of Bardin notes that during the through a long list of businesses the co-founders of Twitter and “courting process,” Meeker talked being fundamentally changed a revered fi gure in the Valley. about her broad connections to tech- by the online world. News and Square COO Keith Rabois and investment-sector bigs. On that information. Drawing. Photography. remembers the afternoon in 2011 score, he says, Meeker has delivered. Publishing. Music. Video, home when Meeker, Doerr and another “That is one thing that has been entertainment and television. Kleiner colleague came to Square’s phenomenal. Mary knows everyone And so on and so on and so on. offi ce in San Francisco at 5 pm, a I would want to know. If I need an Bubbles come; bubbles go. day before the company planned to introduction, or a meeting, it is always Mary Meeker, on the other close a new round. He says Meeker there. People really respect her, they hand, is staying right here.
100 FORBES INDIA | August 17, 2012 INDIA Life/ Richard Cummins / Corbis MODERN ODYSSEY Empires have come and gone, but Greece’s appeal remains
APPRAISAL NUGGETS CHEAT SHEET Dark Pools A paper chair, A primer on illuminates accessories to diff erent fasting the hidden transport your traditions around workings of the gadgets in style the world stock market and more P/ 122 P/ 116 P/ 120 Life/Recliner
n days of yore, Greece was the It certainly has created doubts of brisk trade, started issuing their cradle of Western civilisation: around the common European own currencies in the 6th Century BC. Σ IBirthplace of tragedy and currency, I think, after an instructive Within a couple of hundred years, the GR Σ K comedy, the Olympics, democracy, visit to the Numismatic Museum, one drachma of Athens became—in the and Dionysian orgies. Even the of the lesser known—but nonetheless footsteps of Alexander the Great—one ancient Romans came to Athens worthwhile—historical attractions of of the widest circulated coinages to pick up culture and, until last Athens. Located on Panepistimiou, in history, until that great Greek year, Greece clocked in an annual the main drag, in the opulent former Empire collapsed and was folded TRAGEDY 17 million international tourist mansion of archaeologist Heinrich into the Roman one, around 31 BC. The birthplace of Western civilisation may be in the grip arrivals. Myself included. Schliemann (famous for excavating Walking about the historical Today the state of Greece is Troy), it has a collection of over centre of Athens, one comes upon of recession, but there’s still a lot to see and do there somewhat dishevelled, looking more half-a-million coins, spanning 3,500 the oldest agora—with monumental Text & Photographs by ZAC O’YEAH like the end of Western civilisation years of mercantile history. public buildings for political, rather than its beginning. The earliest Greek cities, centres religious, cultural and commercial INDIA
THE PARTHENON The renovations are taking for ever thanks to lack of funds. The Acropolis Hill, as seen from the Pnyx, the ancient assembly place on the Hill of the Muses
104 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 105 Life/Recliner
use, the oldest structures of which luxuries as well-off people are today. and the actual moneys, aurei and 5,000 drachmas. (An elderly waiter to get the freshest grub (it works in compared to the actual money you may well date to about 600 BC. And Eventually the Roman Empire too denarii, were gradually made of told me at that time, that two decades almost every country). So it follows might raise if you sold off these then there’s the ‘new’ marketplace, collapsed, because its vastness was cheaper metal mixtures—with less before, 5,000 drachmas would have that the single Greek word you need nations lock, stock and barrel. dating from the 1st Century BC, a drain on its fi nancial resources— gold and silver respectively—until been considered a decent monthly to memorise is “agora” (which is Part of the problem is related with a more exclusively commercial not just the faraway imports, but they practically turned worthless. salary.) Oh yes, and an undersized a generic name for markets), and to public spending above public layout of shops, public toilets and the upkeep of armies and borders beer in the cheapest bar in town cost you’ll always fi nd a good tavern. (If means. The showy 2004 Olympics a clock tower. This almost equally combined with weak emperors and housands of years later, once 1,000 then. However, walking around you’re phobic about the sights and cost Greece a bomb. From the ancient shopping mall is commonly lack of realistic long-term fi scal TGreece gained independence with wads of such high-denomination smells of raw produce, though, you airport, one takes the luxurious, known as the Roman agora. With planning. At its peak, the Empire (from Turkey) in the 1830s, money made a tourist feel rich. may catch, ahem, agoraphobia.) fast, and largely empty subway into the Romans came another universal simply didn’t generate enough the drachma was reinstated In the early 2000s, Greece adopted Yet even shady basement canteens Athens. Before 2001, it would have currency, the denarius, which held money to pay for its running costs, as the national currency. the euro. So on my most recent Athens are surprisingly expensive these been a slow journey on crowded, sway for centuries (and travelled By the late 20th century, the sojourn, in 2011, I felt like a pauper days. A not-particularly-lavish meal, infrequent and rickety buses; today as far as to Tamil Nadu, from GREECE HAS NEVER modern drachma too was caught in with a travel budget defi ciency. As far from the touristy Plaka (with you’re in the city centre some 20 where precious beryl and other REALLY BEEN A perpetual infl ation, and when I went all professional travellers know, the its touristy prices), cost me some minutes after getting off the plane. products were exported to Rome). COUNTRY WITH A LOT to Athens for the fi rst time—in the best and cheapest food is usually €20. The only thing that remains On the other hand, history is full Here, in this Roman agora, Indian TO EXPORT OTHER 1990s when it was still in use—it was not to be had where tourists eat, aff ordable is the cheap wine sold of these ups and downs. Nowhere is gemstones and aromatic spices THAN ITS PHILOSOPHY worth so little that I shelled out 100 but where locals go; according to in jugs; at €1, even a poet can it more obvious than among the would be traded, for the urbanites of AND ITS DRAMA drachmas for a postcard, 140 for the ancient travel wisdom, a traveller aff ord to get inspired in Athens. ruins around Acropolis hill: The antiquity were as fond of imported ------stamp. A basic meal set me back by should therefore headIND for the market (Top tip: AtIA the corner of the magnifi cent pillars and statuary streets named Theatrou and remind one of the prosperity that Sokratous, there’s a lovely wine cellar once kept Athens afl oat as a town SINTAGMA SQUARE, the center of modern Athens. The guards which you spot by the smell of fried of learning and arts, the visible patrol in front of the Parliament, dressed in national costume fi sh coming up the stairs. There’s no remnants of what has become our signboard and this old-style eatery common world heritage. The recent appears to have no specifi c name.) subway work unearthed more long forgotten ruins underground, istory now seems to be which have been fascinatingly Hrepeating itself, as it so incorporated into select stations. frequently does, with the economies Unfortunately, Greece has never of Greece and other south European really been a country with a lot to countries being far overvalued as export other than its philosophy
ANCIENT ROMAN BATHHOUSE This was recently discovered during Metro excavation works
106 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 107 Life/Recliner FACT FILE
Greece is part of the European Union, breakfast, and the rest of the day people so if you have a visa to other countries eat meat (usually pork or lamb), generally in Europe, you could consider a not accompanied by any healthy veggies detour to Athens. Qatar Airways but with freshly baked bread, and drink has affordable quick connections “vino” (usually signifying a resin-flavoured from most major cities in India. wine, also known as retsina, which is very refreshing once you have acquired the ACCOMMODATION in taste for it). If you ask for salad, it is central Athens typically costs in possible that you’ll be given a plate of the range of €50-100, although cheese and still no veggies. Having said hotels that are more luxurious that, I must also point out that some of the may easily charge over €200 most awesome eating experiences of my per night. If you take a break on one of the life were served in the taverns of Greece. islands, rooms can be as cheap as €20. One meal that is likely to imprint itself permanently on your stomach lining and TRANSPORT is simple and mind’s eye, is the mountains of grilled cheap, thanks to the metro. If lamb chops dished up at To Steki Tou you plan to go island-hopping, Ilia (το Στεκι του Ηλια; Eptahalkou 5), a you can take the metro from the very popular tavern where you sit under airport to the Piraeus harbour huge wine barrels or at tables in the and reach the docks in less than an hour’s narrow street out front. Apart from the time. From the metro, it is a very short chops (priced at €32 per kg) that are walk to the ferry point. There are hourly reputed to be the best in Athens, their departures to the nearer islands, and you meze (starters) are also exquisite, but can buy a ticket just before boarding. The there’s nothing much for vegetarians. most convenient island is the pretty Aegina You find this adorable restaurant quite (one hour by ferry; lots of departures even near the Thissio metro station and just a INDIA in off-season; €10 one-way). Ships to short walk away from the touristy Plaka. further out in the archipelago are less For robust and interesting local foods, frequent and it may be worth booking in you should head into the covered market, advance, especially if it is an overnight where you find a couple of eateries. Apart journey and you want a cabin. from the nameless basement I like to Piraeus itself is a fairly uninteresting frequent on the corner of Theatrou and place unless your hobby is ship-watching Sokratous, I’d recommend a meal at I and yacht-spotting, but as a harbour Ipeiros (Η Ηπειρος); its jolly proprietor town it used to be famous for its shady knows some English and loves talking taverns and hashish dens where rebetiko, food with foreign guests. Founded in 1898, the blues music of the Greeks, was the nearby Papandreou (Παπανδρεου) performed in the old days. Today there is also good, although you’ll have to aren’t so many dens around, but there’s a use sign language while ordering. lovely little 1920s tavern called To Steki In the gourmet range, classic-themed Tou Arteme (this is what it looks like Archaion Geyseis (Αρχαιων Γευσεις; on the signboard: το Στέκι τον Αρτέμη) arxaion.gr) on Kodratou 22 drew me full of memorabilia, near the fish market back for repeated meals. The name of (off Tsamadou) where you can enjoy a the restaurant is Greek for “archaic multi-course seafood meal, ouzo per the taste” and waitresses in togas serve kilo and hear rebetiko if you’re lucky. food cooked the way it would have been and its drama. Alcoholic beverages Delfi , inland from Athens, is an interesting in 500 BC; the recipes have all been and feasible day trip; plenty of buses collected from antique literature and and olives are among the few to the ancient ruins and the legendary ingredients are only such that were exportable agricultural products temple of the oracle. However, you may available in the agora market at that time. want to spend a few days lodging in worth mentioning, and the most the small modern village, which is just SHOPPING Of course, you can profi table industries are shipping and a kilometre away from the ruins: There buy souvenirs. But I have a tourism. Especially for people from are several small taverns and the view recommendation: Head for the from the hillside, across olive groves to poet-sandalmaker’s shop on northern Europe, modern Greece has the Mediterranean Sea, is enchanting. Agias Theklas 2, near the been synonymous with sun, sands corner of Hermou and not far from GREEK FOOD can be rather Monastiraki Square. Here a family of Greek and sloshed summer nights in cheap disappointing and dull, poets have been making handcrafted seafood restaurants, placing the especially when compared to leather sandals for the stars for almost a the culinary delights of century now. Of course, I just had to buy country fi rmly in the top 20 of the neighbouring Turkey, a myself a pair of John Lennon’s, the very world’s most popular destinations. situation not helped by the fact that same model that the Beatles star bought in waiters are often rude and unwilling to 1968. The price is according to size, so I, Traditionally, tourism has speak English. The typical Greek diet with size 44 feet, paid €30 for my contributed 15 to 20 percent of consists of coffee and cigarettes for Lennon’s. But there’s a lifetime warranty. the GDP. On top of what people pay for holiday packages, tourists
108 FORBES INDIA | August 17, 2012 European economy. So far this year, tourist arrivals have already dipped about 15 percent from last year. Tourists may not always be sensible, but they defi nitely are sensitive, and nobody wants to go to a place where you might not be welcome. For example, out of the 17 million that holiday in Greece each year, more than two million are Germans. Now Germany has taken a pretty hard line on the Greek economy, which resulted in the burning of a German fl ag by protesters. Generally, the Greeks resist foreign-imposed austerity measures because they feel that they have worked hard to save and behave, and it is the politicians who have ruined everything. But this particular anti-German display of hostility INDappears to haveIA led to an alarming loss of German holiday bookings. Some Greeks take it all with a pinch of humour. I heard somebody suggest that they should just sell off parts of the country; a few of the many islands so beloved to the tourists could, maybe, be traded against a debt write-off . But most people don’t see
PLAKA A popular tourist area with any reason for joy, and the graffi ti in old Greek ambience. The graffi ti Athens gets angrier and angrier. on almost every wall refl ects the people’s frustration In a normal year, Athens alone attracts six million tourists, thanks to its marvellous sights. The town is fl ood shops and restaurants, and had to cut down on staff to such an a fascinating blend of east and west. over 100,000 temporary jobs are extent that many of the fi nest must There are streets where you could generated in the summer’s peak close some of their halls. Partially swear you are in Mumbai: Posh shops holiday season, with a corresponding shut museums are not exactly going in crumbling buildings; fashionable infl ux of cash to the tax coff ers. to be a big hit with tourists, especially people in trendy cafes but turn a Building an economy on tourism at a time when televisions show corner and there’s a pucca bazaar. is always a fi ckle prospect. If images of thousands taking to the Crisis or no crisis, the Parthenon is the fi nancial crisis and political streets and clashing with riot police. still there, overlooking the town the instability of last winter was a dark way it always has. Unfortunately, the time, this summer doesn’t look recophiles from the euro crisis means that the restoration work much brighter, thanks to crippling Gcountries (the very countries on top of the Acropolis has more or demonstrations and the threat of that have pressurised Greece to less come to a standstill, with ugly “Grexit”, the looming exit of Greece adopt serious cost-cutting measures) scaff olding ruining tourists’ snapshots. from the European monetary union. are, for obvious reasons, hesitant Yet most of the tourists who do Already last year there were to book trips to what is rapidly go to Athens return happy. Except, ominous signs: Museums in Athens turning into the black hole of the that is, the ones who get robbed
August 17, 2012 | FORBES INDIA 109 Life/Recliner
by the notorious Athens Penix is to the right of DREAMING OF BETTER DAYS pickpockets; an elderly The windows of luxury department the church. There is not couple staying in the room stores around Sintagma Square much left of the Penix.” next to mine got picked “No, of course, it must twice in two weeks. First be a very old ‘Penix’.” aunty got her handbag looted “Not penis!” he says, looks at a historical monument, insulted and is about to lose and next uncle lost his his temper when I thank wallet with everything him for the advice and make in it in the subway. haste. The Pnyx turns out to be left of the church (the ther than that, tourists path on the right lands me Oaren’t inconvenienced in a stray dog sanctuary). much. During general All this reminded me of strikes, money might run Mark Twain, who visited out in ATMs, but if you carry in the late 1850s, on the enough cash for a few days’ fi rst American chartered boarding and lodging you tourist cruise through won’t starve. Taxis and buses the Mediterranean. may be off the streets, or He was on board to cover refuse to take credit cards (as the trip for a newspaper, a protest against VAT hikes), INDbutIA reaching Greece but the subway usually it turned out that the runs so that protesters can country was in quarantine reach Sindagma Square and nobody would be and join the riots. Luckily, allowed to go ashore. Greek strikes are short- Irked at having to see lived—48 hours tops—and the Acropolis through if you stock up on salami binoculars, Twain hopped and retsina, you’ll be fi ne. into a lifeboat at night and One of my favourite quiet scrambled on foot all the places in Athens, when way into Athens, bribed his I need to forget that I’m way into the Parthenon, stole in a big and bustling city, grapes from farms, and was is the forested Hill of the Muses, Walking there one time, I discover chased out of Greece by armed guards. right west of the Acropolis. There I’ve lost my way, going in circles on is no entrance fee and one can walk the paths. Luckily, I chance upon a erhaps for the fi rst time in its around for half a day, fi nd remnants lone carpenter repairing the park Phistory, Greece now needs tourists of the old city wall, the prison where benches, and although this Herculean more than tourists need Greece. As Socrates supposedly was incarcerated, task keeps him busy, he stops work long as we keep coming, this ancient or sit down and picnic at the Pnyx’s when I ask for the way to the Pnyx. land will bounce back to its feet. It’s antique arena of public assemblies “Ah, Penix! Yes, I show been defl ated by infl ation, perhaps, and debates. There are mystical places you Penix,” he says. but at the time of going to print, the dedicated to not only the eponymous “No-no, Pnyx,” I correct him. country hadn’t yet gone bankrupt. muses, but also the Nymphs and Pan. “Yes, Penix. Look, you go past So before it’s sold off to the Plato and Aristotle, and pretty much Socrates Prison, you will see that highest bidder, go and see what the who’s who of Western ideas, it was his prison thanks to the bars is left of the cradle of European would have walked these same paved in front, and then you will come to civilisation. By taking a holiday in trails through the quiet woods. It a church, you know what a church Greece you might actually be doing remains a popular place for romance, is?” he says and looks at me as if I your heroic bit to save the world a kind of Athenian lovers’ lane. might be mentally challenged. “The from a fi nancial meltdown.
110 FORBES INDIA | August 17, 2012 Life/Frequent Flier MY MANILA The Ascott’s Vincent Wee recommends seeing the city like a local
INDIA
Makati City in Manila, the Philippines
ilipinos are very happy people I particularly like is Fort Bonifacio. It Vincent Wee, and have a positive outlook used to be a large military base, but MD, The Ascott Limited (For India on life even when it is chaotic. the military vacated about 20 years F and GCC) There’s a positive energy amidst all ago. Developers are converting it to a the chaos going around in Manila. new hub within Manila, so there are prestigious and more established a lot of new restaurants. They have a areas for a foreigner to go to because RECOMMENDATIONS mix of regional Filipino restaurants other parts of Manila are a bit more My fi rst visit was 15 years ago, but I and quite a range of Western and chaotic. For fi rst-time visitors, it started going in my current capacity Asian cuisines. Sentro 1771 in the might be too much to absorb. If you in the last 15 months. The facilities Greenbelt area and Abe Restaurant are living there for many years then have changed a lot, and for the better. in Fort Bonifacio are my favourites. you can venture out into other areas. Manila itself is a business district, It is a relatively easy city to get around but if you’re a leisure traveller there in if you are used to travelling in TIPS are plenty of sights near Manila. Western cities. Taxis are the best way Be aware of people around you as You can go to a lot of large and to get around. They have a bigger there are pick pockets, which is no small islands, where the beaches version of autos for budget travellers diff erent from places around Asia. and waters are fantastic. It’s quite and meter taxis so you don’t have to be For the fi rst couple of days, start off aff ordable to live in some nice worried about being taken for a ride. in a more established area like Makati beaches. That is probably the best For foreigners, the Makati area is and stick to shopping malls. As you way to spend time in the Philippines. quite interesting. It’s a combination get more adventurous, you can branch When I go to a new city I like to go to of high street shopping and local out and go to the local markets.
places where the locals go. One place markets. It’s probably one of the more (As told to Nilofer D’Souza) Getty Images
August 17, 2012 | FORBES INDIA 113 Life/Appraisals BOOK: Dark Pools Scott Patterson illuminates the secrets of the stock exchange
By PRAVIN PALANDE
ver the last 20 years, Then there is Haim Bodek, technology has had a huge whose company, Trading Machines, Oimpact on fi nancial markets. used algorithms based on a branch Machines, not humans, power of artifi cial intelligence called transactions in the stock exchanges, expert systems, glued to his and with such tremendous speed that machine 14 hours a day. When his it has become diffi cult for regulators trades stopped behaving the way to understand markets anymore. they should, Bodek investigated Transactions happen in milliseconds, and realised the entire pool was and stock exchanges in Asia are contaminated with hidden orders investing in technology that will make that manipulate the trading system. even today’s pace seem turtle-slow. Bodek is one of the books’ In Dark Pools, Scott Patterson, a primary sources, and he is now freelance writer and staff reporter for talking to the authorities, explaining the Wall Street Journal, has created INDthat the systemIA is rigged. a lively journalistic account of the Patterson takes a very evolution of trading technology and pessimistic view of the future; the rise of machines. ‘Dark pools’ he contends this system is unfair are private, lightly-regulated stock to the long-term retail investor exchanges where artifi cially intelligent who is investing his retirement machines trade vast sums of money. money through pension funds. Dark Pools by Scott Patterson Patterson believes that much of He has a point, but the fact is that Random House Business Books the trading in the United States has pension funds and other mutual funds Pages: 354, Price: Rs 600 become a huge dark pool because are not upgrading themselves to meet traders have used technology to market realities. Regulators, too, create machines programmed to people who understood programming are behind the curve. The markets make money in a fraction of a second, to the extent that they could code will always have crooks, with or sometimes using unethical trading a stock exchange from scratch and without technology innovations. But practices like front-running and price eff ortlessly take on the might of a technology has also made markets manipulation, all while remaining very Goldman Sachs or a Morgan Stanley. liquid, and trades have become diffi cult to detect. These programmes Like Josh Levine, the teenage whiz faster, cheaper, even transparent. are built to recognise patterns, and kid with an extraordinary talent for Regulators simply need to catch up they learn from each other. Sometimes understanding and programming with the rogues and the crooks. they imitate algorithms and cause stock exchange technology. Levine This is exactly the kind of book market crashes, like the ‘Flash Crash’ was hired by Datek’s former chief that many Indian brokers are going of 6th May 2010 (where the DJIA trader Sheldon Maschler and to misinterpret, sparking appeals fell by 9 percent and recovered in created the concept of the Monster to regulators to either slow down minutes), which Patterson thinks was Key, which became Datek traders’ algorithmic trading in the Indian the result of algorithms gone berserk. ultimate weapon, monitoring and markets or, if possible, even ban The book has a nice cyberpunk feel trading hundreds of stocks at one it. And that would be sad. to it, and the author concentrates on go. Levine later created Island, a Dark Pools is a fascinating book the stories of individuals who either computer system that bypasses that will bring home to the reader wanted to make huge money or break the stock exchange and posed a how close we are to the world of the class hierarchy of Wall Street, real challenge to NASDAQ. William Gibson’s Neuromancer.
116 FORBES INDIA | August 17, 2012 Life/Recliner The Magic of Rangefinders Rangefi nders were once the most popular cameras in the world. MEHER MANDA takes you on a quick walk through history
ith early cameras, the could be set. Later, this was built into (Classic Leica designs are copied glass fi lm plates were so the camera: Rotating the focus ring even today for digital cameras!) Wlarge that cameras and on the lens let the rangefi nder overlay Contax, Canon, Konica, Olympus, stands needed to be carried around on images to achieve perfect focus. Nikon, Minolta and Rollei followed horses. Bellows shifted the lens back With Kodak’s Autographic Special with excellent cameras, marking a and forth, the image was viewed on a in 1916, the world was introduced to golden age for rangefi nders from fi ne ground glass, the photographer the concept of accurate focusing in a the ’40s to the ’60s. The legendary would duck under a dark cloth to compact, aff ordable body. A decade Henri Cartier-Bresson was known to see the image on the ground glass later, Leica created history with always use a Leica rangefi nder; Pablo clearly, especially outdoors. Then their rangefi nder designs, combining Picasso had a FED-2; Queen Elizabeth the ground glass would be replaced extremely good optics with small, II took her Rollei 35 everywhere. with fi lm, and the shot taken. rugged builds. They became the In the 60s, Single Lens Refl ex Film improved, became smaller; camera of choice for professionals. cameras (SLRs), with their through- so did cameras. But to become the-lens viewing, varied lenses, hand-held, they needed quicker, INDlonger focalIA lengths, and decreased more accurate focusing. Enter sizes, began to take over. Even so, the rangefi nder, a highly accurate some senior photographers still distance measurement device prefer the rangefi nder; their smaller, (already being used in cartography stronger build, simpler ergonomics, and weaponry). It used two lenses quieter shutter and Spartan feel in two windows, at a distance that makes them far more enjoyable and roughly mimicked our eyes. Via a fulfi lling. Of course, some love them mirror and prism assembly, the two simply because of their classic visual images overlapped within a single appeal. Today, a Leica rangefi nder 3A KODAK AUTOGRAPHIC SPECIAL (1916) viewfi nder; rotating a dial shifted is a valuable collectible. The 3A Kodak Autographic special (1916), mirror and prism, and when the a folding camera, was marketed as the A longer version of this piece appeared in images overlaid perfectly, the lensing first to be coupled with a rangefinder. Better Photography’s July issue.
LEICA II (1932) CONTAX 1 (1932) KODAK INSTAMATIC 50 (1963) YASHICA ELECTRO 35 (1966) The Leica II (1932) was the The Contax 1 (1932) was a 35mm The Kodak Instamatic The Yashica Electro 35 (1966) was first 35mm Leica camera with a rangefinder made by Zeiss Ikon 50 (1963) was the first one of the most popular cameras of built-in rangefinder. Originally the to compete with Leica. Though Instamatic rangefinder ever the 60s. It was an Aperture Priority Leica A (1929), it was sent back cheaper, and with a better to be marketed. Its popularity camera with a silent shutter. Known to the factory to be upgraded rangefinder system, led to several successive as the first electronically-controlled with a rangefinder and it was much heavier. models of the Instamatic. camera, its low price ensured its
Source: Wikimedia Commons Source: interchangeable lenses. popularity worldwide.
118 FORBES INDIA | August 17, 2012 Life/Nuggets
STYLE A Pick of the best, the latest, the On Message If you’re looking to project cool, the greenest, the quirkiest, the most Adamis Messenger Laptop Bag will give you that sophisticated, trendy touch. luxurious... that money can buy From Rs 3,500, adamis.in
STYLE INDIATablet Love The Capdase Protective Folio Felt Case comes with a felt cover- ing and an elastic band to cuddle your iPad and protect it from the TECH rigours of daily use and travel. stuff cool.com Slice of Life Downside? The Limebox HDD media player does not come with a wireless keyboard. On performance, it does well across a majority of audio and video formats, handling huge fi les easily. The picture quality is good, as the sound output is good too. All you need is an internet connection, and anyone from your younger sibling to your grandfather can access the internet. RsR 8,499, portronics.com
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On Paper Japanese designer Koji Sekita’s Watching You series features wonders like this chair crafted out of STYLE special paper (called vulcanised fi bre) which is cut using a press machine, Happy Feet then bent into sections to create a Sweaty feet mean discomfort, smell, and delicate honeycomb-like pattern. The possibly infection. The Adidas Climacool individual parts are fi tted together to claims 360° ventilation channels that reduce form a sturdy, lightweight structure. thermal stress and evaporate sweat, It is easy to transport, recycle and fl exibility (a soft midsole), and lightness. assemble , and can be extended to any Rs 7,999, adidas.com/in required length. With the right light- ing, it throws enchanting shadows around it. dramatic-re.com
All text and photographs courtesy Better Interiors, AV Max & T3 (This material is reproduced from T3 magazine and is the copyright of or licensed to Future Publishing Limited, a Future plc group company, UK2010. Used under licence. All rights reserved.)
120 FORBES INDIA | August 17, 2012 August 17, 2012 | FORBES INDIA 121 Life/Ammunition
CHEAT SHEET ON THE FAST TRACK Most fasting traditions are closely linked to the diff erent religions. Here’s a quick look at some
By UDIT MISRA & KP NARAYANA KUMAR
07
FOR WELLNESS While fasting for medical purposes, like before certain medical procedures, is a common procedure, fasting for weight loss is not recommended INDunequivocally.IA Many believe controlled diets are better than going without food for long durations. However, the Anti-Aging Fasting Program in Europe advocates calorie restriction to detox the body and slow ageing. Fasting programmes that 01 03 05 cater to the obese are also popular across the world, ISLAM CHRISTIANITY JAINISM especially in the US. These Fasting is one of the fi ve Christian and Eastern Fasting in Jainism is driven programmes help obese pillars of Islam. During the Orthodox Churchgoers by the ideal of non-violence. people take a step-by-step holy month of Ramzaan, observe Lent, a 40-day There are many diff erent path towards giving up currently underway, period of preparation for types of fasts. Santhara, food and living on water for observers abstain from Easter during which many which involves self- a specifi c period in order food, water and impure, fast or give up luxuries starvation, could be carried to burn the stored fat. lustful and base instincts. as a form of penitence. out to voluntary death. 08 02 04 06 AS A POLITICAL TOOL BUDDHISM HINDUISM SIKHISM Popularised by Mahatama Strict fasting is not advised Fasting is a key part of the Unlike most religions, Gandhi during India’s in Buddhism since it does religion; many fast nearly Sikkhism does not promote struggle for independence, not conform to the Middle weekly. On Karwa Chauth, fasting. It discourages it remains an eff ective Path delineated by Buddha, romanticised in Hindi this ritual, as it is not tool, as seen by the turmoil but some monks skip meals movies, women fast for believed to bring any generated by the Anna
Getty Images after noon to stay healthy. their husband’s wellbeing. spiritual cleansing. Hazare movement last year.
122 FORBES INDIA | August 17, 2012 TIP-OFF Peace Pipes Music lovers in the Capital are in for a delight. The third Raasrang World Flute Festival will be bringing in three days of magic, featuring performers like Karthik Vashist, Rajat Prasanna, Naveen Kumaralong, Nawang Khechog (a Grammy nominee and a monk), Burcu Karadag from Turkey, Nathalie Ramirez Tovar from Mexico, Shemyakina Asya from Russia, Pravin Godkhindi, Tagaram Bheel, Kusumakar Pande, Pintu Khan, Steev Kindwald, and an ensemble led by Dipak Sharma which will showcase wind instruments from North- Eastern India. There will be shorter versions of the festival in Kolkata and Thiruvananthapuram. krishnaprerna.in/rrff /program.php August 9 –11, Lotus Temple, New Delhi; August 12, Satyajit Ray Auditorium, Rabindranath Tagore Center, Kolkata; August 12, Vyloppilly Samskriti INDIA Bhavan, Nalanda, Thiruvanthapuram. — by Peter Griffi n
UDUPI COFFEE 2010 2012 F-INDEX Caff eiNation The cup that cheers continues to depress us. Since we last tracked prices in 2010, the cost of a cuppa in Udupi style restaurants, across cities, is up by at least 20 percent in the last one year, with prices up by Rs 2 to Rs 7. In these non-AC places, you AROUND could wind up paying as much as Rs 25. In local franchise chains RS 15 - 18 RS 25 like Cafe Coff ee Day and Barista, the cheapest brews would be around Rs 60. At the international chains, which source their FRANCHISE COFFEE beans from abroad, your minimum bill would be even higher. The ever-rising prices have given birth to a new trend, one seen in both the pseudupis and the upmarket chains: Mini cappuccinos. Au Bon Pain has one for Rs 21; Cafe Coff ee Day’s version costs Rs 22. They follow in the footsteps of McDonald’s, who fi rst introduced
C C O F F E E O F F E E the concept. Even in coff ee heartland, Tamil Nadu, mini-kapis, served in tumblers half the regular size, are getting popular. Perhaps inspired by Mumbai’s roadside vendors and their ‘cutting’ chais? Research: N Ramnath, Nilofer D’Souza AROUND AROUND RS 70 RS 80 Sameer Pawar Sameer
August 17, 2012 | FORBES INDIA 123 Life/Thoughts Thoughts on ASSAD
Those who have the The [Syrian] intelligence closest knowledge of agencies are running an Assad’s actions and archipelago of torture crimes are moving centers scattered away, and we think across the country. that’s a very promising OLE SOLVANG, HUMAN development. Regime RIGHTS WATCH RESEARCHER insiders and the military establishment are starting to vote The dictatorship tries to with their feet. create the myth that it’s US SECRETARY OF STATE INDIAeither them or all hell HILLARY CLINTON breaks loose. We fall into that trap by believing there is going to be a civil [The defection of Syrian war after the regime falls. General Manaf Tlass] MIDDLE EAST SCHOLAR signals the end of the NADIM SHEHADI Sunni-Alawite alliance, which was the keystone of the regime. Since The United States is the beginning of the against me, the West revolt, people have been is against me, many waiting for the Sunni regional powers and elite to defect, but it stuff their Swiss bank countries and the people stayed a rebellion of the accounts with money are against me, so, how poor, angry young men earned by staying in could I stay in this from the countryside. Hafez Al-Assad’s good position? The answer is, I Now as the rebellion graces, and everybody still have public support. creeps into the big else just scraping by. SYRIAN PRESIDENT BASHAR cities, it is becoming JAMES W. MICHAELS (INTRO AL-ASSAD more a civil war along TO 1995 FORBES STORY) sectarian lines, Sunni versus Alawite. Syria feels stronger MIDDLE EAST SCHOLAR Like a ship and a wharf, vis-à-vis its bitter enemy JOSHUA LANDIS the two go closer. The Baghdad and is angling only friend that’s left to replace Iraq as the for Syria from the USSR’s Red-armed In thug-ruled Syria whole world is Russia. Middle East “friend.” there are, essentially, CLAUDE ABBOUD, DAMASCUS MALCOLM FORBES (1980) two classes of people: STORE OWNER 200 or so families who Courtney Kealy / Getty Images Courtney Kealy
124 FORBES INDIA | August 17, 2012