ITC bleeding in trying to de-emphasise its image of a cigarette company
ITC Ltd, formerly Indian Tobacco Co Ltd, is known as a cigarette maker. However, over the past decade, the company has been trying to de-emphasise its image and present itself as a diversified conglomerate.

In this process it has merged the hotels business (ITC Hotels) and the paper business (ITC Bhadrachalam) with itself. This may have made sense but ITC’s foray into a variety of fast moving consumer goods (FMCG) products—from garments to matchboxes— has so far proved to be a disaster. During the last two years, it has lost about Rs10 billion on account of its FMCG and other ventures. Its cigarettes business, however, continues to support such adventures.

During the third quarter to end-December, ITC’s FMCG segment, excluding cigarettes, lost almost Rs1.30 billion. On the lower side, in the current quarter, the same is about Rs8.50 billion. Earlier, in June, ITC’s chairman YC Deveshwar declared that during 2008-2009 the company had invested close to Rs4.90 billion in its FMCG business, excluding cigarettes. He, however, did not want to reveal the investment figures for 2009-2010.

The Kolkata-based company forayed into the FMCG business nine years back with its lifestyle retail stores, Wills Lifestyle. Its FMCG business includes products like branded packaged foods (staples, biscuits, confectionery, snack foods and ready-to-eat foods), garments, educational and other stationery products, matchboxes, agarbattis and personal care products. 

ITC's effort to portrait itself as a diversified company is proving to be expensive. There is no let-up of the bleeding in sight, either. Losses also stem from its strategy of moving into highly competitive and money-losing businesses like garments and foods to start with rather than personal products.
- Pallabika Ganguly [email protected]

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IOL Netcom’s ex-employees continue to remain unpaid

Internet Protocol TV and Internet services provider IOL Netcom has still not paid dues to its employees. At the same time the company’s advertisings are appearing in many English dailies. Several employees who left the company due to non-receipt of overdue salaries are apparently still being left in the lurch.

Moneylife had earlier carried an article highlighting the non-payment of salaries and dues of many IOL employees. There still are many complaints against the Mumbai-based company pouring in to Moneylife. One employee in a particular complaint points out while their salaries remain unpaid from late 2008, the company has even failed to deposit the employees’ tax deducted at source (TDS) collection with the Income-Tax department. The complainant claims that the company neither issued any TDS certificates nor any salary slips for many employees.

Apparently, when some employees approached a political party, the Maharashtra Navnirman Sena (MNS), they were promptly given their dues. But other employees are not even being entertained by IOL. Recently, the company had posted huge advertisements in a couple of English dailies that are very particular on payments. This means IOL does have cash but does not want to use it for paying dues of its current and former employees.
 –Sanket Dhanorkar [email protected]
 

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Standardising PoAs: Long overdue development
It has taken at least five years for the Securities and Exchange Board of India (SEBI) to finally wake up to the harassment of retail investors through the instrument of the Power of Attorney (PoA). Ever since SEBI decided that secondary market trading would be compulsorily in dematerialised account (demat) form, it is almost impossible for a secondary market trader to even open a brokerage account or a demat account without a PoA which authorises the sale and purchase of shares or transfer of funds and securities, in or out of these accounts. Since 2005, we have been drawing the regulator's attention to the rampant misuse of such PoAs. We have also pointed out to the regulator, with specific examples how leading brokerage firms were including various clauses in the PoA that curtail investor's access to his/her own depository or bank account. Former SEBI Chairman M Damodaran told us in 2006 that he does not want a standard PoA that seemed to be prescribed by the regulator. Five years later, a SEBI discussion paper based on the recommendations of its secondary market advisory committee is suggesting some standard clauses as well as dos and don’ts in the structure and format of PoAs. It also wants to make it mandatory for the broker to ensure that the original and attested true copy is made available to the client—here too, we had repeatedly pointed out that retail investors are often unaware of having signed a PoA which is quietly slipped into bulky account opening forms of brokerage firms and depository participants (DPs).

The committee's prescriptions reveal the extent of abuse of the PoA system and probably explain why stock exchanges have recently launched massive media campaigns to educated investors on the danger attached to PoAs. SEBI's secondary market committee starts with basic prescriptions such as asking for the execution of a "specific PoA to facilitate transfer of shares for stock exchange related margin/delivery obligations for trades: on the stock exchange through the same broker".The discussion paper asks that the bank accounts and beneficial owner accounts that the broker is entitled to operate need to be clearly identified and transfer of securities will restricted to the clearing member-pool account or client-margin account of the stock broker only. An important recommendation, which again serves to highlight gross abuse of PoAs is this: the PoA can’t be executed in the name of any employee or representative of the stock broker/depository participant, but only in the name of the entity concerned. The rules plan to provide for SMS alerts when transactions are executed in investors' accounts. This is a good move and will immediately alert investors to unauthorised trades or activity in their bank and DP accounts. Another interesting feature is the mandatory inclusion of a clause specifying the "settlement of disputes arising out of the operations of the PoA" and also insisting that broker disputes will have to be settled under the bye-laws of the stock exchange or depository under which they have been executed. Finally, the guidelines prescribed also clarify that in case of a merger/demerger of the DP or the brokerage firm, the rights under a client's PoA cannot devolve automatically to the assignees, nominees or transferees without specific confirmation by the investor. These are all important first steps in protecting investors and it is shocking that it took five years of bitter complaints and litigation to get the regulator to recognise the harassment. The regulator must now ensure quick implementation and strict enforcement of these guidelines and review them from time to time to make the market safe for investors.
[email protected]

 

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