(2)-IPO Plans for Bus service in the IT City – Part II

This is part II of the article IPO Plans for Bus service in the IT City – Part I. Please start reading this article from the first part, before proceeding with this part.


The reason and timing for BMTC to come out with an IPO seems justified – expansion plans. But the real reason is that the project is already underway for Bangalore Metro Rail Service. Once that is up and functioning, the BMTC revenues may be hit severely. Despite offering AC accommodation, people still try to avoid buses, while they prefer sophisticated metro rails. Not sure how many of you have observed Metro Rail in Delhi, many high class executives prefer to travel in Metro rail. Buses have another disadvantage of lengthy travel timings and traffic congestions. I have worked in London for a long time. Despite having excellent buses, Londoners still prefer metro rail for travel instead of buses.

The BMTC now wants to capitalize upon its performance, before it is hit by the metro rail of Bangalore.

Coming to Railways – why is it not coming up with an IPO?

Railway is one of the best available modes of income for government as well as for the employees. A big number of businesses are still dependent upon railways for survival. Railways is much-much larger than BMTC and has a country-wide presence. It is one of the biggest employers in the world – but that also comes with the problems of labor unions. It is usually said that if the amount of money, that the railway TTE and Railway policemen collect in the form of bribes, if that money starts to go to the railways, it will be able to build another similar rail network in just 3 years time. Another problem is with the funding that railways may indirectly get from the various business houses, for favouring them with the logistics and support in their preferred regions. Politics is another reason why railways will still remain under government. One of the most sought after portfolios in the cabinet, no wonder that just by announcing a train on a particular route will help a party make a big vote bank. Under so much pressure from the employees, so many unions and political parties backing up, so much from the indirect income, so much for the vote bank, there is no way the government would allow making it go public.

Another thing is that just by going public, no company can become better. How many of us had bad experiences with BSNL services and their non-responsiveness with our problems?

What exactly can be concluded from the above discussion? IPO’s whether from privately run businesses or government run organizations, are issued only under certain circumstances:
• When there is threat to the business
• There is no other source of money available for cheap
• When the company wants to capitalize upon its track record, though it may be aware of the future threat to its business

We common investors just look at the IPO as a quick buck making process. Things work if it clicks; else you get a refund check. Past records have no indications of the future opportunities or threats. No businessman or organization would be a fool to share his profit making business with others, until and unless there is a need or threat to his business.

Please read the comments and post your views and queries in the comments section which helps in open discussion and avoids duplicity of questions.

You may be interested in reading my previous articles. Here is the link to Table of Contents in a chronological order.