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The NDA II government has been emphasising the importance of scaling up the size of public sector entities. In the oil sector, the government initiated measures to merge the public sector oil companies to form a mega-corporation that would compare in size with global giants. It made a beginning, merging HPCL with ONGC. In the insurance sector, the government established the leader, New India Assurance, to go public and outlined the plan to merge the other three – National Insurance, Oriental and United India.

In the banking sector, Finance Minister Arun Jaitley has been hinting at such consolidation. It happened at last with the merger of Vijaya and Dena banks with Bank of Baroda on 01 April 2019. Of these, Bank of Baroda and Vijaya Bank have been performing well and Dena Bank was a laggard; it was under Reserve Bank’s prompt corrective action (PCA).

After the merger, Bank of Baroda would be the second largest public sector bank after State Bank of India.

Vijaya Bank had its origin in the North Canara district of Karnataka that was the cradle of several banks. It had a strong network of branches in the south with a high credit-deposit ratio. It has been known for its sound operations.

We began our banking operations with Bank of Baroda in 1962. I remember the dynamism of its young executives in the immediate years after nationalisation. Its Multi-Service Agency cell was extremely active in reaching out to small borrowers. Over a dozen term loans extended to us by BOB during the 1970s and 1980s were extremely helpful in nurturing a small business like ours.

With its exposure to global practices through its branches in several foreign countries, Bank of Baroda had well-laid systems and procedures. With the practice of appointing senior executives across PSBs, this expertise of BOB spread to other banks like Indian Bank.

For a while, there will be caution in not rationalising the branches or in employment. However, in terms of efficiency, these will be necessary, especially in the context of the large scope for automation and technology.


Big finance companies have been expressing interest to enter banking. In the south Shriram Group, Sundaram Finance and Cholamandalam at some point of time or other were widely believed to be good candidates for expanding to banking. Their extensive customer base and sound business practices were considered an excellent base for becoming banks.
The effort of such a large finance company like Indiabulls getting a banking licence was turned down. Reserve Bank was not inclined to issue a banking licence for finance companies engaged in share broking or real estate business when RBI opened up banking to private firms.

The route adopted by Indiabulls by getting Lakshmi Vilas Bank (LVB) merged with it seems to ease the way for its entry into banking. The merger will help Indiabulls
access low-cost funds. It will also help the 93-year-old LVB, burdened with a humongous 14 per cent gross NPAs and finding it difficult to go for frequent capitalisation.

At the end of March 2018, LVB had a net worth of Rs 2328 crore (with an equity capital of Rs 255.99 crore) and total liabilities of Rs 39,650 crore. Indiabulls was much larger with a net worth of Rs 12,891.45 crore and total liabilities of Rs 100,356 crore. The gross NPA for this large housing finance company was just 0.79 per cent. Indiabulls earned a net profit of Rs 2813 crore against the net loss suffered by LVB at Rs 630 crore.

LVB was promoted at Karur by seven local businessmen in 1926 and obtained a banking licence in 1958. It expanded its branch network beyond Tamil Nadu in the south and in other metros by 1974. The going was quite good up to 2000 when the operations were modest and manageable. But trouble started when the bank expanded by lending big to corporates. This demanded expansion of its capital base frequently, capital adequacy problems surfaced and NPAs increased.

For a while, Federal Bank evinced interest in acquiring LVB. An active group from Bengaluru bought shares from some of the promoter families. But the NPA issue could not be resolved. The extensive exposure of private companies such as Religare, the difficulty in collections and the consequent bulging of NPAs made the going difficult.

An easy escape route of other public sector banks playing the Good Samaritan was lost with the PSBs themselves struggling with NPAs and capital adequacy problems. Remember the ease with which such mergers were taking place earlier? eg. Global Trust Bank has taken over by Oriental Bank of Commerce; Nedungadi Bank by Punjab National Bank; Bank of Thanjavur by Indian Bank or Bank of Tamil Nadu by IOB. This escape route was closed with the focus shifting to merging weak PSBs with strong ones.

The merger will result in the new entity well-capitalized with a diversified retail business and opportunity to expand. This seems to fit in with the thinking in the
Centre to help enterprises to scale up.


I remember my interview in the early 1970s with James Raj who headed UTI in the initial formative years. Raj mentioned investments in companies predominantly coming from Gujarat and Maharashtra and the south accounting for less than six per cent. Those were also the times of permits and licenses. Brilliant leaders like R Venkataraman on the political side and civil servants like T A Verghese and Iravatham Mahadevan procured the necessary permits for a variety of industries and invited first generation entrepreneurs to set up industries.

In this process, they liberally encouraged the Tamil Nadu Industrial Investment Corporation (for small and medium units) and Tamil Nadu Industrial Development Corporation (for large companies) to extend equity participation. These forayed into new business investments involving large outlays as also in entirely new sectors. SPIC, South India Shipping Corporation, Titan Industries, Tanfac Industries, Tamil Nadu Petroproducts, JSW Steel… were launched with such equity support.

In the initial stages, such capital infusion was vital for industrial units set up with large outlays, eg. SPIC. Later the outlay for such development capital thinned with the popular governments concentrating expenditure on welfare economics. The contribution of government corporations was through the monetisation of land allotted. Thus, the share on joint ventures, which used to be around 26 per cent of equity capital in the initial decades, reduced to a token 3 per cent in recent decades.

Even these token investments have gained enormously in value when such companies expanded and grew. Look at the value acquired by TIDCO share in Titan Industries whose market capitalisation today is estimated around Rs 97,000 crore and TIDCO’s 28 per cent stake in it (more than that of the Tata group!) works out to around
Rs 27,000 crore. Recently L&T purchased the 3 per cent share of TIDCO in its subsidiary L&T Shipbuilding for
Rs 32.74 crore.

Look at the massive value of investments made by TIDCO in such bluechip companies like Titan Industries, TANFAC, JSW Steel, TPL… TIDCO has the credentials to be a prominent angel investor! It should monetise the value of such investments and liberally support new industries with venture capital.


Reliance Industries Ltd (RIL) had revenues of Rs 622,809 crore (44.6 per cent growth) and net profit of Rs 39,588 crore (13.1 per cent growth) during 2018-19. This private sector giant has three major business streams: refinery and petrochemicals, retail business and telecom business (Reliance Jio). Their refinery and petrochemicals business contributes to around 3/4 of the profit before interest in tax and the other two arms with the balance. During 2018-19 revenues of Reliance retail business was at Rs 130,566 crore.

The telecom business continued its thrust to expand. Reliance Jio set up records in achieving rapid growth of its customer base and touched 30.67 crore subscribers, more than 25 per cent of the total number of telephone subscribers of 120.54 crores at the end of the year. Despite offering low tariffs and introductory service facilities, the company earned handsome profits also from its telecom business.

Reliance helped the petroleum sector emerge the largest exporter even while the sector continues to account for the largest share of imports. This was built on the handsome margins the company has been able to generate on refining imported crude and selling it at handsome profits across the globe.


It appears a full circle: Ford Motors entered India in 1996 in collaboration with Mahindra & Mahindra. In the initial phase, Ford Escort cars were assembled at Mahindra’s plant at Nashik. I remember the glittering function addressed by the leaders of Ford and Mahindras while launching Ford India. This was the first mega investment won by the Tamil Nadu government. We titled the cover story, Jayalalitha wins Ford – but after race-to-the-bottom incentive wars. She offered generous incentives for large investments. The ability of the American giant to win such concessions made it easy for other global auto giants like Hyundai, Daimler Benz, Renault and Nissan to choose Chennai as the hub for production and export of vehicles.

The imprint of Ford was visible in the transper of state-of-the-art American management practices – systems, vendor development, standards in the safety of construction and the amelioration of a lot of community around the plant.

Ford’s choice of the mid-segment model in the initial phase proved a disaster. The company was not equal to the aggressive marketing of small cars by Maruti and Hyundai. As predicted by Management Guru, C K Prahalad, the Indian part of the JV, Mahindra, moved out. Despite the space created, the company did not record great performance. With the attractions offered by Gujarat two decades later, Ford set up a new plant at Sanand. Ford is estimated to have invested so far over $ 2 billion. After nearly two decades of production, the company produced a little over 2.5 lakh cars and almost two-thirds of these were exported during last year. Domestic sales were at 92,937 units.

There are reports of Ford getting back into a partnership with the Mahindras. A 51:49 joint venture, with the Mahindras as a major partner, is suggested. In this, the joint venture company is likely to take over control of the production capacity for 4.4 lakh cars and a little over six lakh engines as also of marketing the products.

Both the companies have a strong research base in Tamil Nadu. A joint effort by these will be initially concentrated on a new, mid-sized SUV for sales in India and outside. But the excellent infrastructure created by these two companies in R&D could be expected to be focused on electric vehicles. The strength of Mahindra and its knowledge of the Indian market conditions could well be married with the global reach and expertise of Ford.


TCS recorded the strongest revenue growth in 15 quarters during 2018-19, said MD & CEO, Rajesh Gopinathan. Revenue during the quarter was Rs 38,010 crore and net profit Rs 8126 crore. The year witnessed an annual revenue of Rs 146,463 crore and profit of Rs 31,472 crore. With order book at the end of the year at a record, the outlook for the current year is quite promising. The company announced a dividend of Rs 18 per share.


Infosys had an equally impressive year of performance. Through 2018-19 revenue from operations grew to Rs 82,675 crore and net profit Rs 15,410 crore was marginally lower (Rs 16,029 crore for 2017-18). MD & CEO, Salil Parekh, said that the focus on automation and localisation would help improve performance in the coming years.

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