This too shall pass

Without doubt, 2008 has been a rough year for India Inc. But the low point wasn’t the 2 per cent contraction in the Index of Industrial Production in December; it was the Rs 7,000 crore fraud at Satyam Computer Services. It’s not as though Indian promoters have always had clean balance sheets or clean images for that matter.

But a scam of this magnitude was quite unbelievable.  In some ways  though, it’s not such a bad thing that  all the dirt is being unearthed.  Regulators should probably have demanded such disclosures earlier but from here on, it’s shareholders who need to be more demanding  while  managements must be more forthcoming.

Otherwise, they can’t hope to see their wealth grow. Already, after years of heady  growth, which no one believed would come to an end so soon, India Inc finds itself in a bit of a spot. In the midst of an economic slowdown that threatens to be a prolonged one, companies are struggling to  generate cash flows and stay profitable.

Suddenly, the confidence that drove  industrialists to acquire businesses that were twice as large as their own, has vanished. What remains  is the realisation that not all that buying made sense and that much of it may have been indulgence. There’s also the pain of restructuring these businesses and the lack of funds to do it with in a credit-scarce environment.  Companies are not too clear how to cope with this slowdown as we discover in our conversations with them. But they’re taking some hard decisions.

In all this gloom, the good news is that entrepreneurship in this country continues to flourish.  While the list of newcomers that made it to the BS 1000 club  in 2007-08 wasn’t as long as it was in the previous year, there are some outstanding success stories such as Arvind Rao’s OnMobile, which has snapped up a 35 per cent share in the mobile value-added space, and Shriram EPC which has managed to find a market for itself in an industry dominated by the biggies.

In fact, our Business Standard  CEO of the year, Meher Pudumjee, chairperson, Thermax, was selected by a distinguished jury, precisely for her ability to stand up to  competition without compromising on corporate governance.  In a year when corporate governance has been in focus for all the wrong reasons, Ms Pudumjee makes a terrific role model for aspiring entrepreneurs in this country.