Despite a slowdown in the economy, Reliance Communications Ltd (RCom) appears to have thrived. If one takes its recently announced results into account, some very interesting facts come to light.

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First, while the entire corporate world was burdened by financial charges, RCom managed to recover not only the Rs938 crore it paid out during the nine months to December, but also managed to end the year to 31 March with a surplus of Rs787 crore. In other words, just between January and March 2009, RCom managed to earn over Rs1,724 crore as finance charges. It made money on money at a time most fund managers thought that it was the most difficult thing to do.

This translates into a 6.46% return on gross debt, which when annualized works out to a whopping 25.8%. While talking to financial analysts at an earnings conference call in January, group managing director Satish Seth had said: “Finance charges comprise of interest income and expense, foreign exchange gains and losses, including foreign exchange gains on bank balances and financial investments and amounts receivable from foreign subsidiaries. A composition of this is giving a net result of income."

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Also, look at the profit for ordinary activities before tax (PBT). During the nine months ended 31 December, PBT stood at Rs1,224 crore. The three months to March saw it soar to Rs6,135 crore. This means that in just three months RCom earned a PBT of Rs4,911 crore. While this represents just 6.4% on its capital employed, when annualized it works out to an impressive 25.7%.

Overall, RCom earned a PBT of 8% on capital employed. Finally, in terms of return on net worth, RCom earned a respectable 21%.

It just goes to show that when it comes to making money on money, global meltdowns mean little for adroit players such as RCom.


Power breakdown

An unexpected consequence of the economic downturn is that—more than ever before—state electricity boards are likely to show up some of the largest deficits in history. While the figures are not out as yet, bureaucrats and legislators are still fumbling for an escape route to hide the losses that have mounted.

The reason for their discomfiture is not hard to find. The downturn has caused many companies to cut back on production. That has meant poorer offtake of electricity. While it may be good news for urban and rural households, which have faced fewer power cuts in this sweltering summer, it has also meant lower offtake by the best paying sector of the economy—the corporate sector.

As may be known, the corporate sector actually subsidises power supply to farmers and rural folk, many of whom get electricity virtually free of cost, either because they steal power or because of populism, which has been fed and encouraged by politicians.

Politicians promise free power hoping it will bring in votes. And the corporate sector, followed by the urban household sector, pays high tariffs instead, as they must compensate for the dispensation of free or subsidised power.

How high are power tariffs for the corporate sector? Well, take one good example. Reliance Energy Ltd—which does not have to subsidise the dispensation of cheap power to the agricultural sector—is already the provider of the most expensive power to the corporate sector in Mumbai, for which it has a distribution licence. It sells power to business at a minimum cost of Rs10.41 per kWh. In many cases, the costs can be a lot higher. All of a sudden, with significantly lower cross subsidies available from the corporate sector, the cost of offering cheap or free power to the masses has begun to pinch.

Add this to India’s fiscal deficit and the number will be even more horrifying.


Slush funds

India’s bureaucrats must actually think that the country’s judges are dumb! How else can one explain their belated efforts to write to the Swiss banks asking for names of Indians who have accounts with them? Does any businessman or politician keep money in his own name? Were any of the Quattrocchi funds traced to any account held in the name of Ottavio Quattrocchi?

All these funds are normally kept in the names of companies which are listed in tax havens, which protect the name of the actual shareholder or operator.

What Indian bureaucrats and legislators should be doing is to join the global demand for more disclosure of shareholders of companies listed in these tax havens—St Kitts, Isle of Man, Channel Islands, et al. Merely writing to the Swiss banks will not be enough.

In fact, it is only after the Supreme Court took cognizance of the public interest litigation (PIL), asking for the government to begin tracing the list of people with accounts overseas, that the courts began asking the question this column asked almost four months ago.

How is it that a man (Pune-based stud-farm owner Hassan Ali Khan) who had four passports (some of them were obviously forged) was not kept behind bars? And how is it that in spite of the enforcement directorate producing details of bank accounts which showed laundering and transfer of funds worth $8 billion (Rs39,600 crore), not a single property of the person and his family was seized nor any application made to the banks overseas to freeze the funds?

Here’s hoping that some good will finally come out of these disclosures.

R.N. Bhaskar runs a company with significant interests in distance learning and examination certification and writes on corporate and business policy issues. Comments on this column are welcome at

Graphics by Ahmed Raza Khan / Mint