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ECONOMY: DOWNTURN

Business At War

Corporate chieftains are working on strategies for surviving — and growing — amidst an economic slowdown

By V. Shankar Aiyar

Last month the government revealed a rather eloquent snapshot of the troubles haunting India Inc: industrial production grew by a mere 1.8 per cent in the first six months of 2001-2 over the previous year. And exports dipped by 2.3 per cent in the first five months.

It's not just industrial production or exports that have been hit. Companies borrowed Rs 35,018 crore from banks in the first six months of 2000-1. This year they have borrowed just Rs 20,894 crore. It's not that companies have opted for public issues and have thus borrowed less. Between April and September 2000, 83 companies raised Rs 1,807 crore. This year saw just two companies raising Rs 6 crore. Public issues worth Rs 21,000 crore are on hold.

Despite expectations, agriculture hasn't escaped the enveloping gloom. The poor monsoon in the south has led to a lowering of production targets. The CMIE last month trimmed its growth projection for agriculture from 7.5 per cent to 6 per cent, for services from 7 to 6.6 per cent and for the GDP from 6.3 to 6 per cent. Worse, it says even this growth is "not sustainable". Not surprisingly, the unspoken question at corporate corner offices is: where are we headed? BPL Telecom chief Rajeev Chandrashekar spells out the predicament of companies succinctly: "You have to bite the bullet to survive and at the same time grow through the gloom."

Infosys Chairman N.R. Narayana Murthy describes it evocatively as the "fog on the windscreen" which "makes driving difficult".

India Inc knows the feeling only too well. In the past eight months-much before September 11 happened-Indian corporate chieftains have been working on growth strategies, spending time in the trenches to rally the troops. india today presents a view from the frontline.

—with Stephen David, Sandeep Unnithan, Uday Mahurkar and Malini Goyal

	NARESH GOYAL Chairman, Jet Airways CHALLENGE: Rising costs, falling traffic RESPONSE: Cut costs, improve productivity

It's a turbulent time for aviation. Domestic traffic-already down due to corporate cost cutting- has dipped further after September 11 with cancellations by tourists and international travellers. Jet Airways too has lost seat occupancy from 16,500 passengers to 13,500 per day. Indeed, Chairman Naresh Goyal expects "a 20 per cent drop in domestic traffic".

But unlike global airlines which have handed out over 1,00,000 pink slips Goyal is not retrenching. Not as yet. "I don't believe it will help. Pink slips and wage cuts can be counterproductive," he says. There are no plans to cancel orders for aircraft either. The Goyal mantra is: improve productivity, address costs, rationalise operations and capacity. Add loyalty programmes, tie-ups with destination hotels and Goyal feels Jet Airways will clear the air pockets. "We are confident of our service quality. This is a patch but we are in for the long haul."

What do you do when you dominate the market, are registering single-digit growth (3.2 per cent across nine months in 2001) and want to grow amidst a slowdown? "Being dominant makes you defensive. Redefine the market and shift to the offensive," says Hindustan Lever Ltd (HLL) Chairman and Managing Director M.S. Banga. "Growth is a prisoner of the mind. You have to first evolve space for growth in the mind before you grow in the market." To appreciate Banga-speak consider this: HLL has more than 70 per cent share in the shampoo segment but that translates into just about "8 per cent of hair washes". Ditto with soaps. Two out of every three soaps sold are HLL brands. But only 20 per cent of the people who bathe use soaps. Banga's new diktat to HLL executives is: "We are in the business of hair wash not shampoos and personal wash not soaps."

Very simply, there is room for growth and HLL seems to have tapped some of it with a 7 per cent growth in sales in the quarter ended September 30. Says Banga: "We now have to capture the rest of the market." The challenge, he says, is to sell to consumers in rural India who don't see the need for soaps or shampoos. HLL is trying to communicate to them the connection between soap usage and good health.

But what about affordability? The answer is positioning, but as Banga says, it's not just about the cost. Studies conducted by HLL show that an arduous hurdle is the absence of privacy in rural India. The solution? Banga isn't telling. The clue: in the detergents segment, HLL came up with the laundry strategy. Yes, you could be looking at, well, Hamams across Lever's Hindustan.

	V.N. DHOOT Chairman, Videocon International CHALLENGE: Increased competition, falling margins RESPONSE: Reduce prices, push volume

V. N. Dhoot takes longer to reach the airport these days. Whether it is Mumbai or Mangalore, the chairman of Videocon International Ltd usually visits a dealer en route. The idea: to spread the value proposition personally to consumers. "We want to tell the consumer that Videocon is offering Japanese technology at sub-Korean prices." So Dhoot waits along with the dealer and explains this proposition to consumers as they make a choice. Says Dhoot: "I am addressing two levels: the dealer and the end consumer."

Given that sales grew by just 4 per cent in the first quarter (April-June 2001) and margins are under pressure, Videocon needs volume. And Dhoot believes personal calls help. He also realises that in a market where growth has been less than 10 per cent "affordability, specially when rural India is not spending or cannot spend, is a big factor". How does one improve affordability? For starters, by cutting costs to bring down prices. So you have Videocon offering a sub-Rs 10,000 model in every segment it operates in. Coming up soon: a colour TV for less than Rs 5,000. Dhoot is also tying up with banks to offer cheaper credit by sharing 50 per cent of the credit risk. Banks can lend to consumers against hypothecation of goods and half the risk is borne by Videocon. Dhoot says consumers will get cheaper credit as risk costs will be shared. "Consumers are willing to buy but they are looking for value for money," he says.

MetroScape

Bangalore Exhibition: Atul Sinha

Delhi Boutique: Azeem Khan Couture

Chennai Book Store: Landmark

Mumbai Water Sports: H20

A series of populist announcements puts Rajnath Singh in a spot. With Uttar Pradesh financially crippled, he stands to lose whether he implements the promises or not, writes INDIA TODAY's Special Correspondent Subhash Mishra in
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