In a first of its kind IPO by a state-run transport corporation, Bangalore Metropolitan Transport Corporation (BMTC), that runs the city bus service in the tech hub, plans to raise money from the public to add luxury buses on newer routes. SBI Capital Markets Ltd has been appointed as the merchant bankers for the issue and it is expected that the issue will be completed by March 2008.
BMTC, the only profitable public transport corporation in the country, earned a profit of Rs224 crore on an income of Rs887.59 crore for the year till March 2007. It is the only government run Bus Corporation that is running in profit among all the major government run bus corporations in other metro cities. The IPO is expected to come in 2008, only after it makes its way through the bureaucratic procedures.
Many interesting things can be observed here:
• A government run organization in profit?? Seems like a miracle for India, but well, things do happen!
• Planning an IPO, shows the confidence the officials of this organization have in it
• SBI Capital Markets agrees to be the merchant banker for the issue, another positive sign
• Money raised through IPO to be used for expansion and further improvement in client (commuter) facilities
Same way, the Indian Railways have shown profitability, with Lalu Yadav given the entire credit. The moment railways showed profitability, people were all praise for Lalu and the railway department. People writing articles in newspapers or blogs on management and leadership made it hoopla. Everyone was admiring Lalu and his railway-men for transforming railways. There were proposals for railways to be made a public traded company and come out with an IPO, but the government disagreed. I also heard the news (may be a rumor) that one of the owners of India’s leading corporate house has issued the statement that if Railways is given to him for 2 years, he will transform the railtracks into that of gold.
People make noise only after one has proved himself. Swami Vivekananda delivered his lecture in America, only then the Indians realized the mettle of that individual. Rabindranath Tagore got praise and accolades from the British Government, then the public realized the potential of his work. One has to prove himself many times, then only people show trust in him.
Same thing goes with the companies or organizations. A company has to produce products that are better than the rest (or atleast at par with the rest) or services that perform better than the rest, then only are the people willing to bet money with it.
Everyone falls for successful companies and businessmen who have proved themselves atleast for a small duration of time. What they forget is that since the business has proved itself, the world knows about it. The real fun is in identifying businesses about which no one knows :- )
Well, whatever be the case, let’s concentrate our discussion to BMTC and Indian Railways. One has applied for IPO and wants to raise capital for further expansion. Other has also proved itself but it does not want to come out with an IPO. Both are government run organizations, both have labor unions and both work for the public.
Let’s have an initial level analysis of these two.
Lalu’s rail made good profits – credit is given to him. But was it his willingness for transformation or a market requirement?
It was the period when Indian skies were getting many new low-cost airlines. Initiatives taken by Air Deccan, followed by Spicejet, Sahara and other low cost carriers managed to woo away the middle class customers of railways to airlines. These were the people who had the benefit of emerging India, with enough disposable income making it affordable for them to fly. Who would be looking further to the railways for lengthy journeys?
The Freight business of railways was also expected to be hit. What was going on in the passenger segment could have soon been moved to the cargo segment. A typical example of this is the business model followed for Reliance Fresh Retail chain. They are looking forward to using airplanes to ship fresh vegetables from the villages in north to the retail stores in south within a matter of hours, maintaining the freshness of vegetable and other products.
Railways had to do something to counter the competition. Result – Lowering of AC charges, lowering of freight charges, a stick for non-performing employees and a carrot for the rest. Still having proved itself, Railways is not willing to come out with an IPO, while BMTC has already chalked out the plans for IPO.
Continue to Part II of this article
1 comment:
Post a Comment