5 Paisa - Features of indian stock market

As I look back it is ironical that we have a large undisciplined workforce and we blame this ill on the culture of unions whereas China, a communist country, has a disciplined workforce. It is well known how an industrialized state like West Bengal is today plumbing the depths of industrial darkness thanks to the union problems. Makes me wonder if this has something to do with our culture? Economic issues and ills do not raise our hackles or the hackles of our politicians. But religion and caste issues do. Remember the spontaneous national celebration in China when China was given the right to host the next Olympics? I do not remember any such celebration when we hosted the last Asiad. As a nation we lack pride and the result is mediocrity with the rare exception of a Narayan Murthy or Dhirubhai Ambani or Tendulkar or Vishwanathan Anand or Sunil Gavaskar. The fact is that the Chinese threat is real – not only because Chinese goods will flood Indian markets but because Indian manufacturing industry’s competitiveness in general, with few notable exceptions, may slip down further in the years to come.

But it is not all gloom and doom. On 8^th March I had the pleasure of listening to Mr. D. S. Brar, CEO & Managing Director of Ranbaxy Ltd speak on "Building a World Class Organization in India". The talk was under the aegis of Mahendra & Young Knowledge Foundation. He mentioned that Indian companies suffered from a lack of global vision, sub-optimal technology, higher economic costs (due to lack of infrastructure, corruption etc) and are driven by self-sufficiency (to try and do all things). What drove Ranbaxy’s vision to become a global organization was the fact that 99% of pharmaceuticals market was abroad. He also mentioned that labor cost which used to be as high as 25% of total cost in OECD countries in the 70s is down to 7% now thanks to technology and flexibility. As a result low labor cost is no longer such a big issue as it used to be in the 70s and 80s. Ranbaxy is in line to achieve its targets of US$1bn sales and sales of US$125,000/ employee by 2004 – a target that was set about five-six years back.

There are a few other examples as well. For example JK Files (part of Raymond group) which has about 35% of the world market in files. Bechtel, the global engineering major, claims that design & drawing work in India is being done at about 1/10^th the cost and about 3x faster than is done at their US offices. The experience of Kvaerner group is also identical. Aravind Eye Hospital in Madurai, according to Mr. Brar, treats 1.4m patients per annum and conducts 140,000 surgeries per annum (75% of these are done free of cost or at subsidized rates) and the hospital has a RoCE of 58%. With the right values, shared vision and its implementation it is possible to build global organizations in India. But the luxury of time is not there today. Indian companies will have to look at industries based on innovation and human capital rather than large manufacturing bases where China has stolen a big lead over us.

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