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Tuesday, 21 Sep 2021
Company Outsider
A weekly newsletter that keeps track of the business of companies
By Sundeep Khanna

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Question of the Week

Name the two people involved in the first mobile phone call in India?

In a week of non-stop action Air India finally found a couple of suitors as the Tata group and SpiceJet submitted financial bids for the ailing airline. There was also a breather for Indian telecom companies, particularly Vodafone Idea, as the government announced a relief package including a four-year moratorium on their dues. However, there was no such relief for Subhash Chandra as key investors in Zee Entertainment sought the removal of his son Puneet Goenka as the company’s CEO. And SaaS startup Freshworks headed for a listing in the US at a nearly $10 billion valuation.

Govt. helpline for private telcos

The much-awaited lifeline for the telecom industry finally arrived, with the Union cabinet approving a series of concessions for the sector. A four-year moratorium on dues, changes in the definition of the adjusted gross revenues to exclude non-telecom revenues in future calculations, 100% FDI through automatic route and the removal of financial constraints on spectrum sharing were the highlights of the package.

The measures bring immediate relief to Vodafone Idea, reeling under a debt burden of Rs 1.9 trillion, the bulk of it owed to the government. The temporary hiatus in payments saves the company from impending bankruptcy while giving it time to look for a strategic investor. But analysts warned that while the company’s immediate worries may be over, it is by no means out of the woods since the moratorium constitutes a deferral of payments, not a waiver. Companies will have to pay interest on the dues during the moratorium, and the AGR recalculation is only with prospective effect. That and the absence of a floor price for services has sucked some of the joy out of the relief measures. To be fair, the government has given telcos the option of paying their dues through equity. With the markets turning bullish on telecom stocks, Vodafone Idea for one will consider that option seriously.

Will the Maharaja come home to Bombay House?

The sale of Air India (AI) is proceeding along expected lines with just two bidders - the Tata group and SpiceJet was in the fray after the financial bids were received. Given SpiceJet’s precarious financials and the fact that the company’s bid appears to have been placed by its chairman Ajay Singh in his personal capacity, it would take a brave man to bet on it. That leaves Tata as the likely winner. If that happens, the wheel would have come full circle for the group which first set up the airline way back in 1932 as Tata Airlines, only to see it nationalized in 1953. But while it is a dream come true for Ratan Tata, whose earlier efforts at getting back into the pilot’s seat at the airline were scuppered by rivals, turning it around won’t be an easy task. AI has been unprofitable since a merger with the erstwhile state-run Indian Airlines in 2007-08 and has accumulated losses of Rs 70,820 crore as of 31 March 2020, losses which the ongoing pandemic would have further exacerbated. In addition, the group will have to consolidate the operations of Vistara and AirAsia are the two existing airlines in its portfolio, with the public sector behemoth. No easy task given AI’s scale and size.

Zee Heads for the Final Act

There’s trouble afoot for Puneet Goenka, CEO of Zee Entertainment and son of its founder Subhash Chandra. Two top investors Invesco Developing Markets Fund and OFI Global China Fund Llc, which together own 17.88% of Zee, are seeking changes at the top in the media company in which Chandra’s family stake is down to barely 4%. In a letter to the BSE, Invesco demanded the company hold an extraordinary general meeting and ask shareholders to vote on new resolutions. Prominent among these was the sacking of Goenka, removal of two other independent directors and appointment of six new independent directors.

Invesco’s move, which sent the Zee stock soaring, appears to have been triggered by developments at Dish TV, a note by proxy advisory firm Institutional Investor Advisory Services India Ltd (IiAS) and a 55% plunge in the value of Zee shares. A week ago, Yes Bank, the single-largest shareholder in Dish TV with a 25.6% stake, wrote to BSE that it had sought the replacement of five directors, including managing director Jawahar Goel, the younger brother of Chandra.

Surprisingly, the investors’ insistence on ousting Chandra from his companies comes after the Zee promoter’s announcement last month that he had paid off over 92% of his debts. Clearly, Invesco isn’t impressed.

Ok, no CEO for Tata Sons

On 15 September, a news agency carried a sensational report on how Tata Sons , the holding company of the multibillion-dollar conglomerate, was looking to create a new post of the chief executive officer to work with the chairman. As per the proposed plan, the CEO would guide the sprawling businesses of the group, while the chairman would oversee the chief executive on behalf of shareholders. A spokeswoman for Tata Sons declined any comment for the story while emails to Tata Trusts and Ratan Tata weren’t answered, so most newspapers ran the agency story.

The riposte came by the afternoon with group chairman Natarajan Chandrasekaran clarifying that no leadership changes were on the anvil at the company. Separately, Ratan Tata, chairman of Tata Trusts, too scotched the news saying: “Such speculation can only serve to cause disruption among a team that has been operating smoothly with impressive growth in market value.”

While that should scotch the speculations, for now, it is a mystery why the group did not respond in the first instance and waited for a day to issue the clarification, by which time the report had been carried in several publications.

Freshworks Promising Plans

For a change, an Indian startup is getting ready to test investors' appetite in the US. Freshworks, the software-as-a-service (SaaS) unicorn, filed with the US Securities and Exchange Commission (SEC) to raise nearly a billion dollars through a public listing in the US at a valuation of almost $9 billion. The 10-year-old company reported a 45% growth in revenue in 2020 to around $250 million, but losses rose more sharply to $57.3 million, up 84% over the previous year. That didn’t deter the company’s leadership team from rewarding itself generously, with the CEO, CFO and the CRO collecting over $39 million in executive compensation.

SaaS is the buzzword among investors looking for a variation on the tech-enabled service’s theme. The problem, of course, is that it has been considered a promising area for Indian firms for the last 10 years and most SaaS firms are still more promise than performance.

Coincidentally, TCS, a stodgy and traditional IT services firm, crossed $200 billion in market cap in the same week. Nor was this driven by promise. The software market leader posted Rs 45,111 crore in revenue for the last quarter and Rs 9,008 crore in profit.

Last Word

Last week was pretty eventful at Zomato. The company pulled the plug on its grocery delivery and nutraceutical business, and its co-founder Gaurav Gupta, who wasn’t really a founder, decided to take a new turn in his life and exited the company just two months after its much-hyped IPO. While It isn’t the first time a co-founder has quit an IT firm, Gupta’s departure could present a ticklish problem for Zomato’s HR when it comes to inspiring loyalty among its employees.

Answer to the Question

On 31 July 1995, the then Union telecom minister Sukh Ram and the then chief minister of West Bengal, the late Jyoti Basu spoke to each other using mobile phones. This is believed to be the first mobile call in the country. Here’s a delightful video of that call.

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