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Disgruntled employees allege IOL Netcom has been withholding salaries since January 2009, allegedly due to cash problems.
All is not well at IOL Netcom Ltd, an IPTV and Internet services company based in Mumbai. An ex-employee of the company complained that his salary has remained unpaid since June 2009. He reveals further that a lot more employees have not been paid their dues since January 2009. Several have left the company due to non-receipt of salaries.
A detailed search at consumer complaints forum website (www.consumercomplaints.in) threw up a whole list of similar complaints from disgruntled employees. They claim that the company has no funds to make the salary payments and that the figures mentioned in the company balance sheet are made up. The company balance sheet shows that the salaries are being paid. The company is also reporting profits for the June quarter, when employees are claiming that it is absolutely cash crunched. The company had reported losses for the past two years. In FY08 its net loss stood at Rs25.57 crore while in FY09 it suffered loss of Rs14.05 crore. The ex-employee also alleges that the company president, Siddhartha Srivastava, is turning a blind eye to the grievances of the employees.
When Moneylife contacted a senior official at IOL Netcom, he said the salaries had remained pending merely due to factors related to recession. He said, "There is nothing much to it. Given the recession, many companies were facing a tough time and we are also passing through that phase. On an overall basis, we are getting into a strategic investment mode where a few weeks from now a strategic investor is taking over. Nobody would have invested if they had no confidence in the company. Everything will work out pretty soon."
What is IOL Netcom and why are its problems newsworthy? It is the same controversial company that made news as owners of a 1% stake in Reliance Infocomm when it was part of Mukesh Ambani's empire. A certain Ashish Deora, a partner of the late Pramod Mahajan's relatives in the same company (then known as IOL Broadband), was under investigation in 2002 after being allotted one crore shares of Reliance Infocomm at a nominal one rupee per share. This was allegedly a quid pro quo for various permissions granted to the company to launch a Wireless in Local Loop (WLL) service, without paying the appropriate fees. However, the said shares were cancelled on the claim that he had not completed the work, but IOL walked away with the expensive fibre optic network that was laid in Mumbai and Delhi.
The company website is apparently in shambles and has been down for quite a while, showing signs of abandonment. The company's services too are fraught with issues. One particular complaint talks of low quality service with connectivity issues and server breakdowns. Notwithstanding the strategic investor claims, the company seems to be in a very bad shape.
- Sucheta Dalal with Sanket Dhanorkar [email protected]
Government has provided many benefits and tax incentives to the Shipping industry but in vain. Shipping companies have not made a mark in the past decade.
The shipping industry is somewhat of a blot on the India growth story. It hasn't added any significant tonnage in over 14 years as compared to the growth in most areas of business. And this, despite a large number of tax incentives, benefits and facilities doled out by the government in every annual budget over this period. In 1996, the industry carried 30% of India's foreign trade; this is now down to just 13% while the rest has gone to foreign shipping companies.
The world sea borne trade has increased by CAGR of 3.6% from 4900 million tonne in 1996 to 7000 million tonne in 2006, at the same time India's sea borne trade has also galloped by CAGR of 10% from 166 million tonne in 1996 to 471 million tonne in 2006, while our GDP has quadrapuled in the period to $ 1100 billion (2007); but Indian shipping has failed to take advantage of this growth. The overall capacity of Indian shipping increased by CAGR of just 2.2% from 7.05 million GT (Gross Tonnage) in 1996 to 9.06 million GT in 2007. This is mainly due to the greed of Indian shipping companies who are active in buying and selling ships at every profit opportunity, rather than expand the freight business. There are however a couple of exceptions such as GE Shipping and Varun Shipping.
Public sector companies like Shipping Corporation of India (SCI) had around 117 vessels of 5.1 million DWT (Dead Weight Tonnage) in 1996, that increased to 5.35 million DWT (87 vessels) in 2009. In effect, they added only 0.2 million of gross tonnage during last 14 years. Most ships purchased in this period were to replace old ships and maintain the age profile of the fleet – this too has remained constant in 14 years with no increase whatsoever. The present age profile is 18 years, which is the same as in 1996. The company’s annual investment has only gone into age profile maintenance.
In the shipping industry, tankers are usually replaced in 25 years and bulk carriers in 20 years. SCI Chairman S C Hazara told Moneylife Digital that the company plans to spend $ 4 billion on 68 ships by 2014. He says that 32 ships are likely to be delivered by 2012 and the remaining will come in by 2014 – this will expand SCI's capacity to 9 million DWT. By 2014, the average age profile of its existing fleet would have increased from 18 years currently to 23 years and will again need replacement and reduce overall capacity. In other words the same story will be repeated over and over again where new ships only replace old ones without any significant increase in gross tonnage. SCI's pervious chairman had also talked about expansion plans but did not delivery and capacity expansion. The saving grace is that SCI does not trade in its ships like other ship owners, but that is only because of the tiresome and time consuming process of getting approval from the shipping ministry.
However, there are plenty of trading opportunities for private companies. Ship valuations move in sync with the freight market, when the freight market slows down, ship valuations decline and offer excellent buying opportunities. When freight market improves, ship prices increase and private shipping companies are quick to sell off ships to make a quick profit.
Essar Shipping used to have 39 ships worth 1.5 million DWT in 1996, now their capacity is down to 1.39 milion DWT in 2007.
GE Shipping had 64 ships worth 1.59 million GT in 1996, it has doubled capacity to 2.84 million DWT with average age of 10 years in 2009 despite taking advantage of trading opportunity. This is probably due to their strategy of buying mainly old ships, which they are quick to trade. Varun shipping had 13 ships for 0.28 million DWT, it has more than doubled capacity in LPG carriers. Today they have 20 ships worth 0.63 million DWT. However, the two private companies were hardly able to create the capacity required to expand India's overall shipping tonnage despite large business opportunities.
Consider this: In 1996, Indian shipping company carried 10.4 % of general cargo, 14.5% of dry bulk and 54% of petroleum products and crude. This has declined to around 4% of general cargo, 8% of dry bulk and 26% of petroleum products and crude – the rest of the business has gone to foreign shipping companies.
Shipping ministry's plans for major investment in capacity have gone haywire. Whether it is boom times or depression, over a longer term, India's total tonnage has remained constant. For instance, between 1996 to 2004 the industry saw the deletion of 2.78 million tonne of capacity as against an addition of just 2.29 million tonnes.
This was followed by unprecedented boom in shipping time during 2005-08 when freight prices rose and triggered high valuation of ships. In fact, second hand ships were more expensive than new ships, which had a waiting period of two to three years for delivery. Consequently, that period say an addition of 4.99 million tonnage against deletion of 2.7 million tonnes. Yet, over the 14 year period, we are terribly short of what we needed to command a respectable shipping tonnage and that has reduced the share of Indian shipping to just 13 % of tonnage of total foreign trade.
–Dhruv Rathi with Amritha Pillay [email protected]