Helping Indian Industrialists, Mr. Prime Minister
Ref: 0811-015
It is well known that India’s best breed of industrialists Tata (of TISCO and Tata Motors) and Birla (Hindalco) for over 5 decades are in serious trouble while taking up expansion overseas. Yes, they made serious errors and in normal course, they may not have deserved the help for their follies.
However, the circumstances are entirely different now. We are in middle of severest form of credit crisis. Although Tata and Birla are well known in India, they are not as much known overseas. Since almost all western banks are in trouble, they are unable to raise necessary finance their overseas acquisition – Corus (for Tata Steel), Jaguar (for Tata Motors) and Novelis (for Hindalco). They are now at the mercy of the foreign vultures.
Should India and Indians abandon these worthy Industrialists who created millions of jobs, made India independent in basic industries without foreign help, donated thousands of crores in charities in building temples (Birla Temple in Shahad, Kalyan (Maharashtra) is one of them), educational institutions like BIT (Birla Institute of Technology), Tata Institute of Social Science (TISC at Chembur, Mumbai) Tata Institute of Fundamental Research (TIFR), hospitals, schools, nurseries, Tata Consultancy Service (TCS) and what not for the benefit of Indian society regardless of cast, creed or color, and also paid thousands of crores of Income Tax, Excise duty, Sales Taxes, Professional taxes to the national and state exchequer for over 60 years?
It is now pay back time, Mr. Prime Minister and Finance Minster. India and Indians are not those ungrateful bastards. Those who helped this nation deserve all type of help when they are in distress.
It is causing sleepless nights to both Ratan Tata (in his early seventy) and Kumar Mangalam Birla (who is relatively younger). They deserve better retirement days. We have to make their lives better towards the fag end of their life in recognition of their contribution to the massive development of India and Indians as whole. These two industrialists never bothered about India’s deep divide religious fabrics while creating industries for themselves and millions of Indian back home. Without them, India would not have been 60% of what it is today.
Ratan Tata is going pillar to post for lousy $12 billions whereas Mr. Birla for paltry $5 to 6 billions to finance their overseas acquisitions. When the world is denying them these paltry sum, for its own reasons of bankruptcy, why not India with over $300 billions of Forex reserve which is earning lousy 1 or 2% interest and invested in bankrupt country like USA, help our own businessmen whose acumen is beyond doubt.
Charity begins at home. India as nation must help these two outstanding businessmen. They may not long for Bharat Ratna, Padma Vibhushan, Padma Bhushan or similar khitabs. They need material help at the time of their acute distress. If Indian Forex Reserve does not come to the help of India’s best industrialists, what is the use? Should we allow our Forex reserve for the use of Americans who has been simply wasting all resources and using them to create toxic waste.
Indian FOREX Reserve belongs to the Indians and must be used for Indians first and others later.
And I do not suggest that you give them free money. Give them the amount required as under after due scrutiny.
- Assess their requirements and be wetted by top financial institution.
- Work out how much amount they need
- Give them @ 5% in foreign currency non subordinated Convertible Bonds secured by the floating pari pasu charge on their respective enterprise.
- Such bonds may carry conversion rights at last 6 months average prices of their respective shares, exercisable only after 5 years.
- It may have buy back clause at 8% premium per year for the life of 15 years. This will help these guys to buy back the bonds when they are comfortable without diluting their equity stakes when the things improve.
- If the Government wishes, it may sell these bonds in the market with huge profit (because current stock prices are very low), after giving respective companies to buy back the bonds.
- When the things improve, they can raise the capital from the market to buy back these bonds.
- Give them loans repayable in 15 years due to depression prevailing all over the world.
- Ask them to pay special tax @ 3% after initial 5 years so as to relieve the interest burden during early phase of management. National exchequer may also be benefited for help rendered.
- Ask them to give India at least 5 hospitals and 5 Technical Institutes with full management rights vested with the respective group companies on purely voluntary basis. (we can trust them)
- Ask them to adopt at least 5 villages to make them into model town in next 15 years on voluntary basis. (again, we can trust them)
- Indian tax payers are not affected with this help. Their advance is fully secured and given to the industrialists they trust most.
This is the only way of really honouring our beloved industrialists. It is not going to set the precedents, if you are worrying about them. Even if it is setting precedent, it is a good one. It is one of the principles enshrined in the Constitution of India under Directive Principles of State Policy from Article 36 to 51. One of the article is quoted below:
Directive Principles of State Policy as enshrined in Constitution of India
38.
State to secure a social order for the promotion of welfare of the people.—’[(l)j The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life.
2[(2)
The State shall, in particular, strive to minimize the inequalities in income, and endeavour to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations.]
39.
Certain principles of policy to be followed by the State.—The State shall, in particular, direct its policy towards securing—
(a) That the citizens, men and women equally, have the right to an adequate means of livelihood;
(b) That the ownership and control of the material resources of the community are so distributed as best to subserve the common good:
By following above policy, the state will be preserving the jobs of the millions of workers in India
Mr. Prime Minister and Mr. Finance Minister, the time is critical. Do not even flinch while extending help. If you do not, their enterprises could slip into foreign hands, could cause huge job losses back home that may have devastating social consequences. The material resources of this country are in danger of losing to foreign hands, if our own people are not helped.
This is the appeal not only from this Kalidas (Anil Selarka) but also millions of investors in India. Read the following sample poll from learned investors from India and let them help you in forming your final decision. God Bless India.
Kalidas, Hong Kong
16-Nov-2008
Ref: 0811-015- Helping Indian Industrialists
Link to this page
Dear kalidas ji,
Why wait for the government? let us lend a helping hand.
From Bloomberg:
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Tata Motors Offers Depositors 11% to Help Fund Jaguar Purchase
URL: http://www.bloomberg.com/apps/news?pid=20601091&sid=aSudHZnWtUTc&refer=india
——————————————————
Similar news on Economic Times:
MUMBAI: Tata Motors Ltd has launched a fixed deposit scheme in an attempt to raise money from the public at a time of a serious liquidity crunch,
credit market seizure and unwillingness of banks to lend.
The maker of Indica and Indigo cars announced the scheme through a newspaper advertisement on Monday. Tata Motors will offer 10 per cent for a one year deposit with senior citizens getting half a percent more.
Tata Motors’ move comes when the company is fighting an uphill battle to raise cash. It needs money to pay down the debt raised during the acquisition of Jaguar Land Rover last year.
Tata Motors stocks slumped to near its 52-week low of Rs 122. It was trading at Rs 134.25, down 1.54 per cent, at 1:45 pm.
Girish, Pune (INDIA)
0812-001 Kalidas Replies to Girish, Pune (Monday, December 1, 2008)
Ratan Tata has run out of imagination. He is really having very poor Financial Advisers cum Brokers, Chartered Accountants and MBAs. He can raise the finance at 40% of the cost proposed by him on following basis.
Issue Convertible Bonds @ 6% CPN (Stepped down coupon) valid for 15 years Mandatorily convertible on following basis in 3 tranches. (Rs 5000 cr. 2500 cr and 2500 cr = US$ 2 Billion at today’s exchange rate – the amount required by him for Jaguar deal)
Tranche 1 – Mandatorily convertible on 1-Dec-2013 @ Rs 250 per share CPN 6% for first 5 years
Tranche 2 – Mandatorily convertible on 1-Dec-2018 @ Rs 500 per share. CPN reduced to 4% from 2-Dec-2013 till 1-Dec-2018
Tranche 3 – Mandatorily convertible on 1-Dec-2023 @ Rs 750 per share , CPN reduced to 2% from 2-Dec2018 till 1-Dec-2023 (Maturity)
There will be huge demand for this bond and will be outperformer if nothing goes wrong with his company. (Convertible bonds, being hybrid product, are always in greatest demand because they offer the advantage of debt and also equity. Dhirubhai Ambani made Reliance empire from this route only)
By resorting above method, he is achieving the following:
1. Interest cost is reduced by 5% in first batch 7% in second batch and 9% in third batch of 5 years. if he is raising Rs 10,000 crores, he can save Rs 500 crores per year (Total Rs 2500 crores in batch I), Rs 350 crores per year (Rs 1750 crores in Tranche 2) and Rs 225 Crores per year (Rs 1125 crores in Tranche 3). In all, he could have saved Rs 5375 crores and entire debt would have converted into equity.
The rupee bonds with 11% interest rate would not be attractive to NRI investors. They can buy Tata’s bonds with 24% yield from OTC market todayoutside India. It may appeal only to domestic investors.
Ratan Tata should help himself with creative idea to manage the debt. He is capable, but somehow, not reaching out the easy goal. He likes the tough game all the time.
Finance is an easy game to those who know it – very difficult, who are otherwise genius.
Girish
1 Dec 08 at 4:59 AM
Dear Sir,
Its a very nice article and the feeling are very subtle. But its a big doubt our Indian politicians are coming forward to save these good Industralist. They spend their time only thinking about how to make money for themselves only.
Rajmohan babu, Pointe-Noire, Congo
Rajmohan babu
18 Nov 08 at 2:33 AM
kalidas,
totally agree with you. these companies working towards building a stroner india deserve help from all the indians and the GOI. I wish good sense prevails over dirty politics and PM/FM help them. I have great respects for TATA who strived all their lives to do what is good for india. They never operated in unlawful manner, seeking favours from the Govt. A fine example would e IISc campus in bangalore. A great vision from these guys. The land they contributed for this institute is worh 1000s of crores.
We need to thank these companies! Else, there is every possibility that East India Company will start ruling india all over again.
thanks,
vijay hegde
vijay hegde, bangalore
18 Nov 08 at 1:28 AM
Respected sir,
As usual, a very good path breaking article. Simple, clear and elegant one.
Please answer my following question:
Why can’t you publish these articles in INDIA in daily financial newspapers, Magazines and on some good financial web sites?
I wish most of the Indians should get a chance to read these types of articles and bring some revolution of to the Indian financial systems ( PM/FM/RBI/SEBI).
Raj( Wipro), London, UK, 17/11/2008
0811-073 Kalidas Replies to Raj (Wipro) (Monday, November 17, 2008)
I tried number of times in publications like Economic Times, Times of India, Business Standard with no result. In Hindu (Business Line) it was published on 3 occasions. The business editors of all these so called business publications are duds, populist, non abrasive and would not permit writing having fresh style or thoughts. They are pedestrians and would like to publish what agrees with their mind set or ideology.
I therefore gave up. I do not want to break head with those retarded news editors.
Raj ( Wipro)
17 Nov 08 at 11:24 PM
Sorry, I am sekar from New Delhi, India.
sekar
17 Nov 08 at 10:25 PM
Sir, The idea is good. I have some reservations/doubts. First, any such help cannot be restricted to only these two groups. Secondly, when you (as an individual) could assess and mention the pitfall of overseas acquisition by TATAs even when it was proposed by them, the TATAs could not, despite (a) years of existence, (b) years of conservatism in their blood and (c) battery of chartered accountants was at their call for assessment of not only the new venture but also the emerging financial scenario across the world, let them atleast NOW say that they – ‘Yes, they made serious errors and in normal course, they may not have deserved the help for their follies’-; otherwise, without their specific request, Govt. of India cannot act.
sekar
17 Nov 08 at 10:25 PM
Dear Sir,
What a heart touching letter it is? I don’t have any words to express my feelings on the elegancy and delicacy of this letter. Truly path breaking idea for the Indian Capitalism.
) I Wish Government keeps 25Billion of its foreign exchange money for this. Sir please add IISc Bangalore which is first among the equals in Indian higher education started by TATA
Sir, I wish you send this letter to PMO/FMO . Tata truly needs it. But I doubt he would approach Government in first place. I wish Indian government sees it though your eyes and comes up with policy to help all foreign buyouts by Indian companies. Please suggest policy . Otherwise some industrialists with political clout would ask for Govt help though they might not need it
Shiva
Bangalore India
Shiva
17 Nov 08 at 10:12 PM
Sorry forgot to mention my city and country.
Kiran Patel, Mumbai. India
17 Nov 08 at 9:04 PM
Dear Sir,
I honestly believe this idea is path breaking. On the other hand, don’t you think this opens up a can of worms, as a lot of other companies too are sailing in the same boat.
Also in my humble opinion, I think that our PM and FM do not have the foresight or the will power to implement this revolutionary step!!
Your comments and gut feeling would be highly appreciated.
Kiran Patel
17 Nov 08 at 8:59 PM