Get ready to revel in water
To alter a famous saying slightly: What’s in a name? That which we call water,
by any other name would smell as watery. Or will it?
That is not what connoisseurs of ‘fine water’ want you to believe. In India, where we regard water as water, the water enthusiasts are ready to sell it as clear, tasteless luxury in a bottle.
Dr Michael Mascha, an anthropologist turned water-connoisseur from the US, recently visited India to draw attention to water as an epicurean product. In Europe and the US, ‘natural’ (unprocessed—the special Bisleri ‘mineral’ water in our restaurants doesn’t qualify) and ‘premium’ quality water is a fairly sought-after product. Based on mouth-feel, mineral content, natural source, amount of natural carbonation—bottled water is graded. On one end, there is the almost neutral, soft variety called still water—which we have in India; and sparkling water that has a slightly bubbly mouth-feel.
Dr Mascha’s efforts have been to turn bottled water into an epicurean product. He travels around the world, talking about water, teaching people to acquire a taste for it and advices on ‘fine water etiquette’—which is about serving fine water with food. If it sounds as complicated as the elaborate cutlery deployed for stiff-and-starched high brow dinners—it is because it is.
He talked about pairing the right water with the right food. “You don’t pair wine and food randomly, do you? Why should water be different? I feel that the market and awareness for fine water now is at a stage that wine was 20 years ago. Now, people know more about serving wine; in the right container, with the right food. Fine water, in the next fifteen years, will see the same trajectory of development,” he adds.
So for subtle food like fish, you can have it with soft spring water. If you have red meat or game, you can go for water with a high mineral content. Having the right water really makes a difference in the taste, he claims. So does the right glass. After all, wouldn’t you feel bad if you are sipping water from a fine but plain glass while the person on the next table is being served champagne in a flute?
Similarly, there is the right water choice for the right drink. Going for whiskey? Spring water. And the list goes on.
Dr Mascha and Mr Naveen Luthra, director of Mulshi Springs Natural Drinking Water, claim that India is now slowly developing a market for ‘fine water’. “We can see in the premium segment, especially for the diaspora and returned NRIs who are interested in bottled water,” Mr Luthra says. But, he admits that it is a very niche segment, and even premium consumers do not experiment with water.
He compares premium bottled water to organic food—it is clean, pesticide-free, and can make a substantial difference in your health with regular use. Then there are special mineral waters, which have dissolved minerals like calcium or magnesium that are beneficial to health. We suspect that some ultra-health conscious individual just had an epiphany.
In case you are interested to experiment with water, Dr Mascha suggests starting with sparkling water. “You can start by ordering a bottle with some meal. That mouth-feel will give a different taste to your food,” he says. “I have conducted fine water workshops in many places and people have admitted that different kinds of bottled waters have different tastes, and they all give a different flavour to the food.”
However, Mr Luthra differs in his opinion of having sparkling water with Indian food. “The reason sparkling water hasn’t caught up in India is because it is slightly carbonated—which means it is acidic. Indian food is already so spicy. If a guy pairs acidic water with acidic food, he is dead,” he says.
So go for water. It is gourmet in clear, tasteless form; in a bottle. If you develop a taste for it, you may commission an extra wing on your bar.
Nifty may move between 4,830 and 4,915
Extending its gains for the second week in a row, the market settled at its best weekly close in five weeks on positive economic indicators, giving rise to speculations that the RBI in its quarterly policy review later this month might lower interest rates. Signs of easing of the debt situation in Europe also augured well for the market, which closed with a gain of 2% at the end of the week.
The prime minister’s comments about lower economic growth pulled the market lower on Monday. Global rating agency Moody’s upgrade of India’s short-term foreign currency rating and an 8.49% spurt in passenger car sales in December led the indices higher on Tuesday. But nervousness ahead of the earnings season saw the indices closing flat on Wednesday
Positive economic indicators were overshadowed by subdued dollar-revenue forecast from IT giant Infosys, leading to a negative close on Thursday. Firm global cues helped the benchmarks in achieving a green close on Friday. The Sensex closed the week at 16,155, up 287 points and the Nifty gained 112 points to 4,866. We may now see the Nifty making a range-bound move between 4,830 and 4,915.
In the sectoral space, BSE Realty index soared 14% and the BSE Metal index jumped 10% while BSE IT tumbled 7% and BSE TECk declined 4%.
Among Sensex stocks, Tata Steel (up 14%), DLF (up 13%), Hindalco Industries (up 12%), Sterlite Industries and Larsen & Toubro (up 9% each) were the top gainers. The losers were led by Infosys (down 7%), TCS (down 7%), GAIL India, Bajaj Auto (down 2% each) and Hindustan Unilever (down 1%).
The top advancing stocks on the Nifty were Reliance Power (up 22%); Tata Steel, Jaiprakash Associates (up 14% each), Reliance Communications and Sesa Goa (up 13% each). The main losers on the index were Infosys (down 9%), TCS (down 7%), HCL Technologies (down 5%), GAIL India and Bajaj Auto (down 2% each).
Led by a recovery in manufacturing output, industrial production grew by 5.9% in November 2011 after witnessing a 4.74% contraction in the previous month. The resurgent industrial production numbers are likely to boost the sentiment in the economy and may also help the RBI go for rate cuts in the near future.
Food prices fell for the second consecutive week as food inflation remained in the negative zone at (-)2.90% for the week ended 31 December 2011 compared to (-)3.36% in the previous week. The fall in the rate of price rise of food items since the first week of November is substantial, as it has plummeted from double-digit territory into the negative zone.
However, headline inflation, which also factors in manufactured items, has been above the 9% mark since December 2010 and stood at 9.11% in November 2011. Figures for December will be announced on Monday.
Notwithstanding its inability to open multi-brand retail for foreign investment, the government on Tuesday notified 100% foreign direct investment (FDI) in single-brand retail. However, in respect of proposals involving FDI beyond 51%, mandatory sourcing of at least 30% would have to be done from the domestic small and cottage industries which have a maximum investment in plant and machinery of $1 million (about Rs5 crore).
In international news, rating agency Standard and Poor’s (S&P) has lowered the sovereign ratings of nine Eurozone countries, including France and Italy, a move that reignited concerns over the fiscal sustainability of the region. The downgrades—announced after US markets closed on Friday—are likely to be a dampener for financial markets as investors are likely to sell euro, Eurozone equities and sovereign bonds.
New guidelines for public shareholding of listed companies may offer convenient exit route for some companies wanting to avoid public scrutiny
Corporate laws and frameworks are generally supposed to protect consumers and the society, at large, from any wrong doings incurred by a company. However, the newly revised guidelines of public listed companies drafted by the ministry of finance may actually provide an exit route to some of the companies which would prefer to avoid scrutiny and ire of shareholders and general public.
According to the revised guidelines, “all private sector listed corporates must have at least 25% public holding while listed PSUs should maintain a minimum public holding of at least 10%.” The deadline for this compliance is June 2013, roughly 18 months from now. The threshold was 10% in 2001, before being raised to 25% in 2006. However, there were relaxations in the regulations allowing companies to have promoter holding of up to 90% in most cases. This is the first time that the 25% public share holding mandate (and 10% for PSUs) will be strictly enforced by government authorities.
ICICIDirect.com had recently come up with a report naming as many as 18 potential de-listing candidates which may not comply with the new revised guidelines issued by the ministry of finance in August 2010. According to the report, some of these companies are “fundamentally strong multinational companies (MNC) [who] may not have the inclination to increase their public holding and may resort to delisting to have better flexibility in taking business decisions.”
Incidentally, some of the companies in the list had been covered by Moneylife in the past, namely: Oracle Financial Services (OFS), Kennametal India, Honeywell Automation, Fairfield Atlas and Gillette India.
Bigger companies like OFS, owned by US-based Oracle, have the resources to go private and it might opt for this route. According to the report, OFS might have to cough up as much as Rs3,986 crore for buying back its shares. Similarly, Novartis India, Honeywell Auto, Timken India, Thomas Cook and GMM Pfaudler have enough in their coffers to exit the market.
However, we learn from the report that there are some good companies which may not have the requisite funds to pay shareholders at time of delisting. For instance, 3M India, part of the well-known 3M and inventors of Post-It Notes, has only Rs267 crore on its balance sheet, whereas it would have to shell out Rs1,000 crore at time of delisting, assuming its market price is same as today. Similarly, local companies Blue Dart, AstraZeneca India, Swedish-based Alfa Laval India, Gillette India, Wendt India, Singer India and Kennametal India are examples of companies which, currently do not have the resources to exit and might have to borrow funds for this purpose. Further, Gillette India was cited as a ‘value destroyer’ in our 17 January 2008 issue of Moneylife.
We had covered Kennametal India in its reputed Street Beat section as part of the 26 January 2012 issue. The Moneylife team valued the company at Rs450, which is well below its current price of Rs789 (as on 13 January 2012). Hence, there’s a possibility investors will get a good deal in case the company decides to delist, if the price of the scrip doesn’t fall.
The report cites, “The chances of a delisting offer succeeding also appears higher due to a moderation in return expected by the public shareholders and the enhanced willingness to exit the stock even at a marginal premium to current stock prices.” Thus, some of the companies might want to take advantage of the new rules by exiting the markets, to focus on running their business, thus avoiding public scrutiny, endless compliance requirements and accountability.
The critical question to ask at time of delisting is whether a particular company offering a buyback is offering a “fair price” to the shareholders. According to the ICICIDirect.com report, “The case for delisting becomes stronger in the current weak trend prevailing in the equity markets, which has led to a substantial fall in stock prices providing an opportunity for such corporates to buy out the remaining stake with the public at lower valuations.” This may not be good news for investors who have bought shares in these companies at higher valuations during the market peak. Companies which have delivered poor returns for shareholders will obviously want to exit the market, further depriving of shareholders of any chance of getting back their capital.
It is not very good news to some companies either, as some of them, especially good ones, would be under pressure to offer securities to comply with the new requirements without having any regard to market conditions, which may in turn impact valuations that might prove to be harmful to shareholders.
Either way, we find that the new regulations do not provide an ideal situation for shareholders. Good companies do not generally delist as they usually make an effort to comply with regulations. The new regulations are merely giving a window of opportunity to companies who prefer not to be accountable to the public at large, and ultimately its shareholders.