All Newspaper editorials in one place – February 24, 2024



February 24, 2024

X factor

Courts must act against blocking of social media posts


That the use of Internet shutdowns and arbitrary curbs on free speech on social media have become a rampant tool for those in power is evident in the manner in which the Bharatiya Janata Party-led State governments of Haryana and Rajasthan and the Union government have dealt with the farmer protests. These State governments have used Internet shutdowns arbitrarily, and without adequate cause, using vague reasons related to the prospective breakdown of law and order and without any actual evidence to implement such shutdowns, thus failing the proportionality tests laid out in Anuradha Bhasin vs Union of India. The Union government, on the other hand, has used its oft-deployed device of issuing notices to social media companies such as X to block the accounts of those leading or even supporting the protests without even issuing the reasons to those who hold these accounts. In the past, X, when it was known as Twitter, did not accede to all blocking requests unless they ran afoul of its own rules or were not sufficiently issued with recorded reasons among other considerations. Twitter/X had also approached the Karnataka High Court to challenge several of the blanket blocking orders that were issued by the Ministry of Electronics and Information Technology during the earlier round of farmer protests in 2020-21. The High Court had, in a problematic judgment by a single judge, dismissed X’s petition, but later admitted an appeal by the firm and hearings are under way.


Unfortunately, X, ever since Elon Musk’s takeover, has not been publishing its transparency reports that indicate the number of legal requests made by Indian state agencies to block, take down content or accounts. By admitting that it has decided to withhold accounts and posts flagged by the government, even if it disagreed with these actions, X was giving up any recourse for its users affected by these actions. This is not unexpected; X under Mr. Musk is no longer a thriving platform for free speech that strives to promote discussion, information-sharing and even critique of governments. It now takes its cue from the views and business interests of its owner. But it is even more worrisome that the extant judgment in the Karnataka High Court has given credence to the idea that government authorities enjoy a wide berth in issuing content blocking orders without the need to provide notices to the originators of the content or even seeking account-level blocking without valid reasoning. It is hoped that X’s appeal in the High Court will definitively clarify the rights and obligations of social media companies over content on its platforms. As for the government, it does not seem to be concerned at all about what such actions mean to India’s reputation as a free, open and democratic society, a key reason for social media companies to operate in the country, beyond just the presence of a large consumer base.



February 24, 2024

On the long road

Current ground realities, and not past glory, will shape seat adjustments


After doddering for the past few months, the Opposition has got a shot in the arm with Samajwadi Party (SP) and the Congress finalising their seat-sharing agreement in Uttar Pradesh. This is a milestone in the long road to opposition unity that still remains distant at a national level against the BJP. The agreement sees each side gaining something in the bargain. The Congress has got a respectable figure, though out of the 17 seats that it will contest, not many hold much electoral promise against a dominant BJP. Sonia Gandhi will not be contesting Rae Bareli, which the Congress has won 17 times since 1952. Whether one or both of her children, Rahul Gandhi and Priyanka Gandhi, will contest, choosing between Rae Bareli and neighbouring Amethi, remains an open question. Mr. Gandhi is trying to bring his battle against the BJP to the heartlands of U.P. As for the SP, the alliance is crucial in sustaining its social base of Yadavs and Muslims which resists the BJP. The Congress and the SP have found their alliance not merely mutually beneficial but also critical for their survival. It should be noted, however, that an alliance is no guarantee of victory. In 2019, the SP-BSP alliance could not aggregate its individual vote shares of 2014, and ended up a distant second to the BJP.


The SP-Congress tie-up is the rare good news that the INDIA bloc needs, hit by attrition with the exit of two of its partners, the Janata Dal (United) in Bihar and the Rashtriya Lok Dal in Uttar Pradesh, in recent days. In West Bengal, the Trinamool Congress and Congress are again in talks, though the broad contours of the conversation have not changed. The TMC remains adamant on conceding only two seats in the State and wanting a seat in Meghalaya and two in Assam. Neither have the conditions that led to the breakdown in talks improved since then. Coinciding with the revival of negotiations, Congress State President Adhir Ranjan Chowdhury visited Sandeshkhali, which is the new battleground between the TMC and the BJP. Attacking West Bengal Chief Minister Mamata Banerjee, he called her the “queen of cruelty”. Opposition parties have not been able to announce seat sharing in Tamil Nadu and Bihar as yet. For the alliance to seamlessly work, the dominant partners in each State will have to cede ground to others, setting aside their own aspirations, while others will have to show the grace to accept the ground realities without basking in past glory.




February 24, 2024


New study points to welcome trend: Combination of steady growth momentum and moderate inflation continues


A report on the state of the economy, prepared by economists at the RBI, presents an optimistic assessment about India’s growth prospects. Based on high frequency indicators, it says that the economic momentum observed in the first half of the year is likely to have continued in the months thereafter. Growth for the third quarter (October-December) has been pegged at 7 per cent. This is higher than assessments by some analysts. Considering that the National Statistical Office has projected growth at 7.3 per cent for the full year, this would imply a growth of around 7 per cent in the ongoing quarter (January-March) as well. The report is also optimistic on the inflation front, terming recent developments as “favourable”. Retail inflation moderated in January, after being elevated in November and December. This continuing combination of steady growth momentum and moderate inflation is welcome news on the macroeconomic front.


On growth, there are several notable points. While some analysts continue to express concerns over the state of the rural economy, the NielsenIQ data cited in the report shows that the gap between rural and urban areas is narrowing — FMCG companies observed a 5.8 per cent growth in rural volumes and a 6.8 per cent growth in urban areas in the third quarter. Other indicators of private consumption such as passenger vehicles and two-wheelers are also showing healthy growth in both urban and rural areas. Alongside, real estate and construction continue to witness robust growth driven by household investments in residential real estate and public sector capital expenditure. The report expects investments by the private corporate sector to pick up and “fuel the next round of growth”. In his comments in the recent monetary policy committee meeting, RBI Governor Shaktikanta Das has also expressed optimism about private investments, noting that the “private capex cycle has turned up”. However, so far, investment activity has picked up only in a few sectors, and questions over more productive forms of job creation remain.


There is reason for optimism on inflation. In January, retail inflation fell to 5.1 per cent, down from 5.69 per cent in December. While there are upside risks to food inflation, Skymet, the private weather forecaster, has predicted a normal south-west monsoon. Economists at the RBI believe that “inflation expectations may stabilise and edge down.” As per the RBI’s own forecasts, inflation is expected at around 4.5 per cent in 2024-25. Jayanth Varma, member MPC, notes that these inflation projections translate to a real interest rate of 2 per cent, which may be considered high at the current juncture. However, Governor Das, and other members of the MPC, believe that the “job on the inflation front” is not over. Over the coming months, if inflation falls in line with the central bank’s projections, it could open up space for policy to pivot.





February 24, 2024

Small poll, large lesson

Supreme Court’s overturning of Chandigarh mayor election result carries a message of primacy of due process


With Lok Sabha elections drawing closer, the overturning of the results of the Chandigarh mayoral polls by the Supreme Court carries a message, or a warning, for political players. It took a relatively minor election of a municipal corporation mayor, for a term of one year, to lay down an important red line for those who would seek to bend due process to their will to win.


The attempt to hijack the election evidently did not bargain for SC scrutiny, with the Chief Justice of India perusing first the video tape of what turned out to be rigged polling, and then the ballot papers. At stake were 35 votes, and the parties involved tried to hide behind the very electoral process they were trying to subvert. The returning officer invalidated eight votes cast by members of the AAP-Congress alliance, tipping the scales for a narrow victory for the BJP. Ironically, the ballots he attempted to tamper with — marked with a cross — came back to haunt as the case reached the apex court. Now that the flawed election has been overturned and the candidate of the AAP-Congress alliance has been declared the mayor, it’s time to pause and reflect on the way ahead. Murmurs have already begun about the future course of action by the BJP, which has added three AAP councillors to its kitty. The CJI has also expressed concern about horse-trading during the hearing. While there are legal safeguards against defection in state legislatures and Parliament, municipal bodies are more vulnerable. The lawmakers did not anticipate, perhaps, that party politics would permeate local elections, originally envisioned as a platform for citizens to vote for individuals best suited to address day-to-day concerns. However, as was showcased in this election, local corporations have evolved into political hotbeds, mirroring the intrusion of politics into Panchayati bodies long ago.


The mayoral election may have been a small arena, but the stakes were painted larger. After all, AAP leaders had elevated the poll to the national platform by calling it the beginning of the victorious march of the INDIA bloc. This unsavoury episode has ended on a cautionary note: The integrity of the electoral process cannot be compromised, at any level. Too much is at stake.




February 24, 2024

Death and other details

Reopened investigation into Pablo Neruda’s death shows desire to understand history and icons better


In 1936, when the Spanish Civil War began, Pablo Neruda was posted in Madrid as a Chilean diplomat. His reputation as a poet had already been considerable, but the war would be a turning point in his career as an activist and lifelong Communist. When his friend, the Spanish poet Federico García Lorca, was executed by General Franco’s supporters, it would galvanise Neruda to greater political action. “I have been convinced that it is the poet’s duty to take his stand along with the people in their struggle to transform society, betrayed into chaos by its rulers…,” he wrote later. Whether his politics had a hand in hastening the Nobel laureate’s death soon after the 1973 military coup that overthrew the Salvador Allende government in Chile, has been the subject of a decade-long, international investigation. The recent ruling of a Chilean appeals court to reopen it is an attempt, yet again, to bring the issue to a closure.


The official position on Neruda’s death had always been prostate cancer. But the first seeds of doubt were sown by his driver, who claimed that he was poisoned, at the behest of the new regime, in the clinic where he had received treatment days before his death. Subsequent exhumation and multiple examinations by forensic experts confirmed the presence of a lethal bacteria, Clostridium botulinum, in his body at the time of his death. But it is yet to be ascertained if it was, in fact, what caused his death.

It is hardly surprising, given his gargantuan status, that Neruda continues to fascinate, and in recent days, divide Chile even five decades after his death. Recent evaluation has thrown up disturbing details of his treatment of the women in his life, including his daughter, who was born with hydrocephalus and died young. The attempt to demystify the circumstances of his death stems as much from a desire to know more of the past as to understand icons better — men and women capable in equal measure of tenderness and malice, solidarity and intemperance, greatness and failings.




February 24, 2024

What Are You Eating?

Ultra-processed food here to stay. Home cooking’s an antidote


Maharashtra’s Food & Drugs Administration will perhaps top popularity charts among nutritionists. It’s pulled up McDonald’s for mislabelling cheese analogues as the real deal. Accurate labelling is not just about being fair to customers, it also flags potential allergens. This incident feeds into the many problems posed by ultra-processed food (UPF).


Ultra-processed, ultra-dicey | UPFs usually have five or more ingredients, including additives that are not used in home cooking. Their range is staggering. It spans ice creams to meats used in fast food chains. They are convenient and attractively packaged. But they increase the risks of being struck by non-communicable disease. Hence the term junk food. It gives more calories for every mouthful but falls short of adequate nutrition content.


Economics of UPF | Junk food industry arose out of farming surpluses. The conditions still hold and the economics of transforming extra production into junk food is compelling. It’s a category that grows along with a country’s transition out of agriculture.


Mass and premium | A WHO report that brought out the affordability aspect of junk food partly explains its popularity. The years 2019 to 2021 were economically challenging in India mainly on account of the pandemic’s outbreak. In each of those three years, readymade and convenience food recorded a volume growth in double digits. It was out of sync with the larger story of economic distress. Wealthier consumers are moving away from UPFs, into more wholesome and organic foods. There are two opposing trends at play. But affordability is a factor hard to ignore in the mass market.


Solution at home | The most effective step food regulators can take is to ensure that UPFs are accurately labelled. And prominently. Consumer awareness is an effective shield. However, the best way to get nutritionally the most out of every mouthful is to enjoy home-cooked food. Without making it a social burden for women. India’s rich culinary tradition, based on a mix of fresh ingredients, will always be the real deal.




February 24, 2024

Case By Case

Kerala HC shows how judges can protect women’s rights


A judge expressed ‘shock’ that in Kerala, of all states, a woman was given ‘written instructions’ by in-laws to help conceive a ‘good baby boy’. And that for long, state depts ignored her pleas. The petitioner (39), married in 2012, was long tormented by in-laws and husband for giving birth to a girl, a ‘financial liability’ for the in-laws.


Home truths | Surely the judge knows that obsession for boys is unsurprising in modern-day Kerala? It’s no news the once matriarchal state is jauntily patriarchal today. Only recently, HC took the state to task for denying pension to a divorced daughter of a freedom fighter. In Sabarimala, it took an SC order for women to breach hoary temple customs. Kerala movie world’s vicious misogyny and abusive actors’ troll armies cannot have escaped the judiciary’s attention either. Kerala’s society can plumb patriarchy’s depths as effortlessly as any other. In January, a judicial officer took her own life – her notes alleged severe workplace harassment.


Court matters | Where Kerala stands out is in the fight in its women. That’s why they knock at court’s doors – especially on family matters, where those in most states would baulk. So, Anupama Chandran, a politician’s daughter, justly won back her child, ‘kidnapped’ by her parents. HC junked a govt dept ban on hiring women for jobs with night shifts. HC has often restored women’s rights. Even under socially embedded patriarchy so long as courts have women’s back, women can hope to have their rights realised.





February 24, 2024

Tap the Rush of Adrenaline Tourism

Adventure seekers are looking at supply side


India has always punched below its weight when it comes to domestic tourism. Within this sector, adventure tourism is virtually untapped. The 2020 Adventure Tourism Development Index ranks India 96th among 191 countries, below Bhutan (14th) and Nepal (67th). This is due to a lack of infrastructure, trained personnel, stringent safety guidelines, and a cohesive policy among GoI, states, private sector and local communities. But ‘adrenaline tourism’ is finally taking off, fuelled by rising incomes, diverse landscapes, social media-spurred enthusiasm, access to specialised gear and better work-life balance. Post-pandemic revenge tourism has also been a propeller. High-altitude trekking, biking, rafting, scuba diving and snorkelling, surfing, caving, glamping.… It’s no longer just about poolside and room service.


With the demand curve for adrenaline tourism rising, GoI must help the supply side. In 2022, the tourism ministry released the National Strategy for Adventure Tourism. It focuses on developing adventure destinations, training and certifying activity service providers and their staff, skill development and capacity building — and marketing. A sub-brand is being planned under the Incredible India campaign, as is a state ranking on adventure tourism. This can spur healthy competition, nudge private investment and promote sustainable tourism. On the safety side, a national-level rescue and communication grid is in the offing.


While no comprehensive data is available on the turnover of all adventure sporting activities, sports goods retailer Decathlon posted a 35% spike in India sales in FY23 at ₹3,955 crore, compared with ₹2,936 crore in FY22. Indiahikes, a trekking leader, had an almost 100% growth y-o-y in the last 10 years. India is sitting on an adrenaline tourism goldmine. Along with revenue, it can create jobs and promote fitness in a country with a growing graph of lifestyle diseases. The sector now just has to climb, glide, hike and swim ahead in a planned and sustainable manner to tap the growing rush.





February 24, 2024

Forest n. Large Area Covered with Trees


Hearing a batch of petitions that challenged the 2023 amendments to Forest (Conservation) Act (FCA) 1980, a Supreme Court bench earlier this week stated that states and UTs must go by the ‘dictionary definition’ of ‘forest’ — all statutorily recognised forests, whether designated as reserved, protected or otherwise — to determine whether any work can be approved on a land. Crucially, it directed GoI to get information from states regarding lands identified as forests based on lexical interpretation, as outlined in the 1996 Godavarman ruling, and that no zoos or safari parks can be set up in such areas without the court’s nod. The 1996 ruling expanded the definition of forests beyond those notified or recorded officially. It directed states to form committees to review what could be classified as forests as per dictionary definition. Only two states — Kerala and Assam — submitted theirs. According to experts, they are shoddy and lack ground-truthing and cadastral surveys.


Yet, without crucial data, Van (Sanrakshan Evam Samvardhan) Adhiniyam 2023 was passed. Petitioners in the case claim it would result in declassification of over 1,97,000 sq km of forests protected under the 1996 definition. They also rightly argued that setting up zoos and safaris in such ecologically important areas would open floodgates for the commercialisation of forests. The 2023 law has also been criticised as its cornerstone is compensatory afforestation, even though it can’t compensate for ecological costs of destroying a mixed forest.


The court ruling upholds the importance of transparency and accountability. States must provide data, and GoI must review them with an open mind. But, above all, both must consider forests a public good and commit to protecting them.




February 24, 2024

Carrot and stick

CCI’s ‘leniency plus’ will, hopefully, curb cartelisation


The ‘leniency plus’ scheme, which came into force from February 20, marks a significant step forward in competition law in India. It encourages individuals and companies involved in one cartel to disclose information on another cartel of which they are a part, by reducing the penalties with respect to both cartels. The provisions in this regard are spelt out in Section 46 of the Competition Act, and the recently notified Competition Commission of India (Lesser Penalty) Regulations.


Cartels are notoriously difficult to establish in law because of the covert nature of the understanding between competing businesses to fix prices, limit production, allocate markets or customers, or rig bids for public procurement, all of which are designed to reduce competition and increase profits for the cartel members. Thus, detection of cartels is often reliant on insider information or whistle-blowers. The basic purpose of the leniency plus rules is to encourage ‘informers’ or whistle-blowers in order to make the job of the regulator, CCI, easier in enforcing proper market behaviour. Leniency (or lesser penalty) and leniency plus provisions are a feature of competition laws in the UK, US, Singapore, Canada and Brazil. In India’s case, the penalties involved are daunting (as a proportion of net profit or turnover for the duration of the cartel’s existence), but providing material and timely information can potentially result in a 100 per cent reduction of the penalty in the case of one cartel and a 30 per cent reduction in another.


The new rules promise confidentiality to the informant. But the question, of course, is whether this carrot and stick policy will lead to the desired changes. Given the size of India’s economy and anecdotal indications of the existence of cartels, CCI’s track record has not been very good. It has not been able to realise even a fraction of the huge penalties which it has imposed upon the enterprises for their anti-competitive conduct. The existing leniency regime in India (for single cartel) has remained a non-starter. Enterprises are not willing to come forward and admit guilt. Not many which have come forward appear to have benefited from reduced penalty.


There is a downside to the proposed regime though. Unlike in the US, UK, Brazil and Canada, the law here does not provide any deterrence for providing wrong information. This creates apprehensions over possible misuse of the law to settle scores. The new rules would have to strike a balance between incentivising disclosures and ensuring that such incentives do not encourage malpractices. The regulator should inspire confidence with respect to maintaining confidentiality. It should be able to act decisively on the basis of information and reward whistle-blowers. A perception of being rigorous and even-handed could foster a culture of compliance. The leniency plus provisions are a step in the right direction. The ball is now in industry’s court. India Inc must come forward in good faith.





February 24, 2024

Byju’s spectacular meltdown

The edtech major promised a learning revolution, offering hope to millions of under-educated youth. Now, those dreams are shattered


The latest shenanigan at edtech giant Byju’s is an extraordinary general meeting (EGM) where sundry shareholders try to oust founder chief executive officer Byju Raveendran and his family. That power struggle is hardly the only issue with the company.


Byju’s faces an Enforcement Directorate probe for alleged forex violations. It filed FY22 (year ended March 2022) financials late, in November 2023, reporting losses of Rs 8,245 crore on revenues of Rs 5,298 crore. This follows losses of Rs 4,558 crore on revenues of Rs 2,298 crore in FY21.

It faces litigation in the US from lenders suing to recover $1.2 billion, and its US subsidiary has declared bankruptcy. It has reportedly sacked over half its employees — at its peak, it had 60,000. It has problems paying those who remain.


In January 2024, it floated a rights issue to raise $200 million. That rights issue was at an implied valuation of between $225 and 250 million.


This is a far cry from Byju’s peak valuation of $22 billion in March 2022. Byju’s has spent at least $2.5 billion in an acquisition and expansion spree, and now it’s finding it difficult to pay salaries!


The marquee investors who had pumped in cash earlier have pulled their representatives from the board.  The auditor, Deloitte, has also quit. There are allegations the Raveendran family sold large stakes, in off-market deals, while the going was good.


That’s quite a train wreck — from being the world’s most highly valued edtech unicorn to losing 99 per cent of that value in less than two years.


These things happen in the tech and startup ecosystem, though they are rarely as spectacular. But Byju’s spent enormous sums to build a brand — including sponsoring the Indian Premier League and the football World Cup. It’s no exaggeration to say it’s a household name. So the collapse is equally high-profile.


The tech ecosystem has had its share of scams and scandals — think Satyam, or Theranos — so that too is not unusual. We’ve seen a less spectacular version of this sort of collapse earlier, when Educomp, a listed edtech company, soared to heights before going bankrupt.


What is unusual is the industry that Byju’s (and Educomp) occupied. Education is not an industry in the normal sense — indeed schools and colleges are non-profits. Edtech   delivers education using digital technology, so while edtech is for profit, it services a non-profit sector.


Byju’s was, by far, the largest and best funded edtech in India, maybe the world. The implosion will bury edtech, so far as investor funding is concerned, for years, if not  permanently.

That is heartbreaking and it has policy implications that go beyond the negative externalities that result when a large business collapses. Byju’s positioned itself as the solution to a huge, unmet need. India has an under-educated population struggling for access to better education.


Conventional schools and colleges lack the capacity to fill that gap. Hence, the desperate competition to get into engineering and medical courses. On average, most of India’s workforce has 10 years of schooling or less.  The average school student has very poor reading or numeracy skills, according to Pratham’s surveys. Hence, the popularity of private tuition and the mushrooming coaching centres.


Every Indian family, regardless of religious affiliation, worships at the altar of education. Every lower-income family knows it is the only honest way to climb the ladder.


Byju’s exploited that genuine need and that insecurity to sell courses. Parents scraped together the resources to sign up their children. But because Byju’s did not deliver what it promised, the users have lost years of their lives learning little, while parents have lost hard-earned money and, in many cases, they’re struggling to repay loans.


Edtech offered hope that under-educated youth could leverage it to learn skills they did not acquire in classrooms. This is in analogy to the way fintech has pulled unbanked millions into the formal financial system.


A valuation of any business is based on projections of future earnings. The collapse of Byju’s valuation and the impact on edtech funding pulls down the “valuation” of the demographic dividend.


An under-educated population will earn less, which means lower gross domestic product growth through coming decades. That cold equation will translate into misery for millions.





February 24, 2024

Startup & family business governance

Boards must rely on and act upon early warning signals of behavioural aberrations beyond the boundaries of business sanity and neeyat


Some people hold a view that ideas on neeyat and governance are relevant only for well-established and listed companies. While the subject is relevant for them, governance is relevant also in startups and family-managed businesses. A metaphor might help to make the point succinctly — just as values and ethics must be addressed early on within families and schools, governance and business neeyat must be addressed early in startups and family businesses.


Enterprise is essential for national growth. Family businesses and small companies are the backbone of enterprise; sometimes I wonder whether they themselves realise how important they are. There are about 63 million enterprises registered with the government. Of these, a minuscule 20,000 have capital of more than Rs 10 crore. The media focuses on listed companies and startups. In terms of employment, income generation, and exports, the small and medium sectors are crucial. Several companies in India and overseas have been in the news for governance reasons in recent times: Unlisted startups (Byju’s and Paytm), listed companies (Zee and Religare), and foreign entities Tesla and Toyota Motors. Stuart Kirk wrote a piece in the Financial Times on January 27, 2024, wondering whether there was any correlation between better governance and company results. I responded by emphasising the obvious about the distinct and separate roles of the management and boards.


The kinetic energy of a company rests with the management, led by the chief executive officer (CEO). The management’s role is akin to the raw energy generated by the firing of fuel in the engine compartment of an automobile — innovative ideas pulsating with calorie-loads of human energy. To be effective, this energy needs channelising to the wheels of the automobile through the transmission: This is the role of the board. Boards and leadership groups are essential in channelising management ideas and energy for effective delivery to customer and community. A pleasurable car must have both a great engine and a matching transmission system. So too, an enterprise must have fine management with a great board. The board collaborates, yet provides a challenge to the management. It is not the board’s role to design or execute strategies and innovation, though individual directors may contribute through experience and debate.


Private-equity companies try to achieve the same effect. Since several private-equity executives have no hands-on business experience, the firms rely on experienced leaders as advisors. Why do some startup founders behave as though the private-equity providers should provide them money and let the founder do whatever he or she wants — BharatPe, Zilingo, Equally, the greed of some private-equity executives may pressure founders to grow exponentially. Sequoia is a respected and value-based private-equity firm, yet it considered ousting its former CEO Michael Moritz from the board chairmanship of a troubled fintech startup, Klarna, which it itself financed. Enterprise sans governance is prone to crashing.


Public markets provide a test of governance. Though imperfect, they are better than no test. India is proud that it has produced about 110 startup unicorns. Bravo. However, only 13 have faced the test of the public markets, accounting for just $1.5 billion out of a total of $4,200 billion; of the 13, only six are reported to generate positive operating cash flows, which is the most basic test of business acumen and success. All of these six positive-cash flow unicorns were founded around 2005, and have built an enterprise track record of almost two decades, and the average age of these six founders was 57 when they began. Startups often manage business for valuation. Family-managed businesses and startups have been combined in this piece about governance, though there are differences. For example, families manage businesses for legacy, with valuation as an outcome. An example of this, Beit Binzagr in Saudi Arabia, in a future column.


The innovative ideas in startups and family businesses would benefit by challenge and debate. Such action does not mean that the board is adversarial to management. As stated in my recent book (Inside the Boardroom, published by Rupa), behavioural aberrations beyond the boundaries of business sanity and neeyat must engage the attention of boards. If not, the question will continue to remain, what was the board doing?


In closing, a potentially controversial view. Courts rely on near-perfect proof and regulators rely on substantive evidence, but boards must rely on and act upon early warning signals. It is common that directors can hear the canary in the coalmine first.





February 24, 2024

Reduce the exits

To attract enough growth capital, India must help MNCs operate in a conducive environment


Nearly 11 years ago, in May 2013, Unilever announced the buyback of a 22.5% stake in Hindustan Unilever at a hefty 20% premium to the last traded price, resulting in an inflow of $5.4 billion. There were several other buyback offers around the same time—the fact that many multinational companies (MNCs) bought back shares to try and raise their ownership level to 75% signalled their confidence in the large and lucrative Indian market. Of late, however, there have been several instances of MNCs quitting India or scaling down their stake in their India subsidiaries. Last week, Novartis AG, the Swiss pharmaceutical company, said that it has begun a strategic review that will include an “assessment” of its 70.68% stake in Novartis India. Exactly three months ago, Astra Geneca announced it was exiting India as part of a global strategic review.


The biggest of such exits was the Holcim group’s sale of ACC and Ambuja Cement to the Adani group for $6.4 billion in September, 2022. Given India’s very promising growth story, it was surprising that Holcim wanted to exit, even though the official reason the group gave was its keenness to lower its carbon footprint. The exits from what is arguably the world’s fastest-growing market suggests not every global corporation is necessarily enticed by the Indian opportunity. While consumer-oriented MNCs in India have done exceptionally well as have those in the engineering and automobile spaces, the list of casualties is not small. Many telecom ventures were compelled to shut shop due to an unreliable regulatory environment. So, while a Maruti has been a roaring success, Vodafone, which has invested billions, is in bad shape. Again, CarreFour decided to wind down its operations after a short stint though some of that was due to its own internal problems. Many other pharma giants such as Pfizer, Sanofi, and GSK have either trimmed manpower or trimmed operations in core functions.


Some of the exits or downscaling are for internal reasons. For example, one can appreciate that Citigroup sold off its retail portfolio in India as part of a larger global re-organisation aimed at making the operations simpler. It is also entirely possible that some, like Whirlpool, which has brought down its stake from 75% to 51%, or a Thomas Cook which has pared its stake to 64% from 72%, are trimming their ownership as they want the stock to become more liquid. That is good news for local investors. If some are offering more floating stock, that helps minority shareholders.


However, one hopes these stake sales are not aimed at driving up the share price before a total exit. At a time when India is looking to attract foreign direct investments (FDI), the environment must be conducive. The fact is FDI in India has fallen over the past year even though the bullishness on the country’s prospects has increased. Net foreign investment in the year through September fell to $13 billion, calculations from HSBC Holdings showed, from $38 billion in the same period a year earlier. The PLI (performance linked incentive) scheme has attracted players like Apple, which is encouraging. But global corporations should be enabled to operate big businesses in the country, across sectors, in a stable regulatory environment. Importantly, the playing field should be level. Else, India may not be able to attract enough growth capital.


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