www.livemint.com

EXCLUSIVE PARTNER

New Delhi, Mumbai, Bangalore, Kolkata, Chennai, Ahmedabad, Hyderabad, Chandigarh*, Pune* Saturday, October 1, 2011 Vol.5 No.234 `5.00 16 PAGES+ 20 PAGES LOUNGE + 4 MARKETS PAGES

SENSEX 16,453.76 æ 244.31 NIFTY 4,943.25 æ 72.20 DOLLAR `48.97 ® EURO `65.89 æ `0.75 GOLD `25,995 Æ `310 OIL $103.16 æ $2.40

It is unrealistic toexpect any person to

subsist on `32 per dayin these times. That,however, was not thequestion the apex courtasked of the PlanningCommission. Thecommission’s remitwas much narrowerand its now infamousaffidavit on the povertyissue reflected this.

The issue at hand isthat moral outrage andpolicymaking shouldnot be clubbed together.Two prominent NationalAdvisory Councilmembers, Aruna Royand Harsh Mander, havelashed out at PlanningCommission deputychairman Montek SinghAhluwalia on this subject.

The government is, inany case, committed tohelping the poor andpolitically there are nobarriers to this goal. Butmisplaced rage at whatare merely technicalexercises is clearly outof place. Such estimatesare not the last word inwhat needs to be done,but are importantingredients in thepolicymaking exercise.

QUICK EDIT

The `32rage

Mint is also available for R9.50 with Hindustan Times under a combo offer

SHARE SUIT

Chatterjee’sHaldia claimdismissed

BY ROMITA DATTA

romita.d@livemint.com·························KOLKATA

Capping a six-year-olddispute between US-based venture capitalist

Purnendu Chatterjee and theWest Bengal government overmanagement and control ofHaldia Petrochemicals Ltd(HPL)—a firm they jointlyfounded in 1994—the SupremeCourt on Friday issued a judge-ment dismissing Chatterjee’sclaim to 155 million shares thatwere to be sold to him by theWest Bengal Industrial Devel-opment Corporation (WBIDC).

The judgement, however,may not have any bearing onplans by The Chatterjee Group(TCG) to buy out WBIDC in HPLbecause the Trinamool Con-gress-led state government haslately taken a decision to sell itsstake in the firm. It is appointingan investment bank to conducta valuation of the firm. Howev-er, the timing of the state gov-ernment’s decision to cash outis surprising because HPL hasbeen making losses for years.

TCG would have seized con-trol of HPL had Chatterjeemanaged to buy the 155 millionshares from WBIDC as was en-visaged in a March 2002 agree-ment between the co-foundersof the firm. Several failedagreements later, WBIDC saidin July 2005 that it wouldn’t sellits stake to TCG, alleging thatChatterjee couldn’t fulfil hisobligations under a compositeagreement on the sale of thestate government’s stake andinfusion of fresh equity in HPL.

Thereafter, HPL sold 150 mil-lion shares to Indian Oil Corp.Ltd (IOC) in a controversialdeal that Chatterjee vehement-ly opposed. He had legallychallenged the share sale toIOC as well.

TCG moved the CompanyLaw Board (CLB), alleging mis-management and oppression ofminority shareholders undersections 397 and 398 of theCompanies Act. The see-sawlegal battle reached the apexcourt after TCG’s rejoinderswere quashed by the Calcuttahigh court. Nine months afterhearings ended, the apex court

said in its judgement issued onFriday that there wasn’tenough ground for filing a peti-tion under section 397 of theCompanies Act.

The decision is a vindicationof the erstwhile Left Front gov-ernment’s stand on HPL, ac-cording to a key WBIDC offi-cial, who did not want to beidentified. “Amid mutual mis-trust, the state governmentstood by its commitment to sellits stake in HPL to Chatterjee,but insisted that he made pay-ment for all shares at one go,”he said.

But as the relationship be-tween HPL’s co-founderssoured, the state governmentlined up a back-to-back dealwith one of India’s biggest pet-rochemical firms and made a“daring offer” to buy out Chat-terjee’s stake in HPL while thedispute was being heard byCLB, he added.

“The rights of TCG as ashareholder have in no waybeen compromised by the Su-preme Court’s order,” said Ani-ruddha Lahiri, president ofTCG. “What is of significance atthis point is that the state gov-ernment and TCG are workingtowards mutually resolving thedifferences, and HPL’s interestwill be best served by the pro-moters resolving their differ-ences quickly.”

The apex court’s orderwouldn’t lead to a rift betweenHPL’s co-founders, accordingto Partha Chatterjee, the state’scommerce and industries min-ister. “The state governmenthas decided to sell its stake inHPL in view of its current fi-nancial health,” he said. “Butbefore we sell our stake, we willconduct a valuation of the firm.We will closely scrutinize HPL’sfinancial results in the last fewyears.”

Asked if WBIDC would sellits stake in HPL at one go or re-tain some shares in the firm forbeing sold at a higher price af-ter it had turned around, theminister said no decision hadyet been taken.

The Trinamool Congress,which in May ended 34 yearsof the Left rule in West Bengal,has given TCG a free hand inrunning HPL, and has appoint-ed Purnendu Chatterjee chair-man. TCG now wants its man-agement control to be expan-ded to majority ownership be-cause, according to PurnenduChatterjee, HPL is planning toexpand its operations andbanks want “clarity on thefirm’s ownership” before com-

TURN TO BACK PAGE ®

Judgement may nothave bearing on plansbyTheChatterjee Groupto buy out WBIDCstake in Haldia Petro

FELINE FRACAS

The importance of being CharlotteBY ANANDA BANERJEE

ananda.b@livemint.com·························SHIMLA

It’s a muggy day for Septem-ber in Shimla and some-

where in the woods ahead ofVidya Athreya and SandeepRattan is a leopard, its pres-ence confirmed by the double-pulse beep signal on the hand-held tracking device.

And not just any leopard (orleopardess, to be precise). Thisis Charlotte, an adult leopard-ess who was radio-collared andreleased last September. Herbehaviour, it was thought atthe time, would provide valu-able information on human-animal conflict. Never beforehas a leopard, an animal that isincreasingly being found in ur-ban and suburban areas, beenstudied from this perspectivein Himachal Pradesh.

Athreya, a conservation biol-ogist, has been studying leop-ards in Maharashtra—a statewhere human-leopard con-flicts are becoming increasing-ly common—and Rattan is aveterinary surgeon based inShimla. They are looking forCharlotte’s radio collar in aleech-infested neck of thewoods outside Shimla. The col-lar, according to its makers, theNorwegian Institute for NatureResearch (NINA), should havefallen off in 52 weeks. Once re-

covered, it will be sent toNINA, where it will be decodedfor detailed temperature andactivity data. It is already clearfrom the tracking data thatCharlotte has survived, coexist-ing with humans in a 25 sq. kmarea, across the local adminis-trative blocks (or panchayats)of Dummi, Chedi and Bhont.

Charlotte’s story is an im-portant one—not just for her,but for all leopards. BetweenJanuary and September, asmany as 269 leopard deathshave been reported across thecountry, mainly as a result ofthe rising human-animal con-

flict, according to the WildlifeProtection Society of India.

Leopards are found all overIndia, on the fringes of villagesand human habitations, prey-ing off domestic livestock anddogs. This isn’t a new phenom-enon. The leopard is “oftenfound on the outskirts of vil-lages, carrying away villagedogs and prefers scrubby jun-gles to dense forests”, says anote in the Nashik Gazetteerdated 1883.

Athreya says that in Mahar-ashtra, leopards and peopleshare “croplands”.

“Once I asked a farmer wa-

tering his crop, if he had seen aleopard nearby. I knew a col-lared male was sitting some-where amid the sugar canefield not more than 20 metresaway. The farmer nonchalantlyreplied someone had seen onearound a few days ago. Wewent ahead without tellinghim, or the women pluckingtomatoes in the adjoiningfield, of the presence of thespotted cat,” she says.

Had they known about it,they may have wanted it cap-tured, or worse, taken mattersinto their own hands andkilled it. An increasing numberof human-leopard conflicts(which usually end badly forthe feline) have been reportedfrom across India, especially inOrissa, Chhattisgarh, Uttara-khand, Maharashtra, MadhyaPradesh, north Bengal and As-sam. On 23 March, a trappedleopard was burnt alive by anangry mob of 400 villagers inDhamdhar village in Uttara-khand. On 19 July, televisionchannels repeatedly airedfootage of a cornered leopardpouncing on a forest guard onthe outskirts of a village nearSiliguri in West Bengal as ef-forts were made to drive theanimal back into the forest. Inthe first week of September,CCTV footage showed a leop-

TURN TO PAGE 3®

India’s current account deficit widened to $14.1 billion from $12 billion in the year ago as the gap between imports and exports increased in the quarter ended June, the Reserve Bank of India (RBI) said on Friday. It remained almost unchanged as a percentage of gross domestic product (GDP) at 3.1%. The government wants to pull back the deficit to around 2.5% of GDP for the full year from 2.6% in the last fiscal. Economists, however, are sceptical as they expect the robust growth in exports to moderate in the second half of the fiscal as the US and European demand slows on account of global uncertainty.

Exports Imports Trade deficit

Net invisible receipts

Current account deficit (CAD)

CAD as % of GDP

Source: Balance of payments data released by RBI

THE GAP WIDENS

80.7

54.9

Exports Imports Trade deficit116.1

87.2

21.3

20.3

3.1

3.1

35.432.3

Q1 FY2011 Q1 FY2012 Figures in $ billion

12

14.1

Kingfisher isat the mercyof financialinstitutions

BY P .R . SANJAI

pr.sanjai@livemint.com·························MUMBAI

Neeraj Monga, executivevice-president and head

of research at Toronto-basedVeritas Investment ResearchCorp., wrote in September thatVijay Mallya’s United Brewer-ies Holdings Ltd (UBHL) andKingfisher Airlines Ltd are“teetering on the verge ofbankruptcy”.

Kingfisher Airlines execu-tives rubbished the report, dis-missing Veritas as a firm thatnobody’s heard of.

That’s not quite true. Mon-ga, reputed overseas for at-tacking companies followinginvestor-unfriendly practices,achieved a certain renown inhis country of origin afterscathing commentary on Reli-ance Industries Ltd and Reli-ance Communications Ltd. Be-fore that, he’d given similartreatment to Research In Mo-tion Ltd and Nortel NetworksCorp., among others.

Monga, 40, an MBA from theRichard Ivey School of Busi-

TURN TO PAGE 3®

Tracking behaviour: A file photo of Charlotte, an adult leopardess, beingradio-collared by Vidya Athreya (left) and Sandeep Rattan in Shimla.

PHOTO COUTESY: VIDYA ATHREYA

mint INTERVIEW

12 PAGES16 PAGE

Q&A:Samsung’s Jung Soo Shintalks about demand concerns >4

POLICY: Planning Commission mayreconsider poverty caps >2

MARKETS: Sebi wants to issue freshorder to MCX­SX >16

SIMPLY ECONOMICS: Goodbye toworking class solidarity >14

AHMED RAZA KHAN/MINT

LEADINGTHENEWS 03SATURDAY, OCTOBER 1, 2011, DELHI ° WWW.LIVEMINT.COM

mint

The importance of being Charlotteard close to Girishikhar Co-op-erative Housing Society, barely500m from the Sanjay GandhiNational Park in Mumbai. Yet,Athreya says, there is little dataon leopard attacks. “We knowlittle about conflict and whywild cats sometimes attackpeople,” she adds.

Most city dwellers presumeleopards are only to be foundin national parks and sanctu-aries, but wild animals cannotunderstand borders.

“In my study area, I havearound five adult leopards andfive adult hyaenas in 100 sq.km. Even with 10 large carni-vores in 100 sq. km, human at-tacks are extremely rare. Nodeaths yet, just a couple of ac-cidental attacks. In fact, in myarea, each year more peopleare bitten by rabid dogs,” saysAthreya.

Leopards have always beenaround people. In scrublandand woodlands, man and ani-mal use the same paths, espe-cially at night. And goats andpet dogs have always consti-tuted part of the diet of leop-ards. “I would suggest that thepresence of leopards near hu-man habitation cannot beruled out even during theday,” says Rattan. “This isonly possible because of thestealthy nature of these elusiveanimals synergized by exclu-sive camouflaging abilities.”

Yet, he adds, there havebeen no deaths in and aroundShimla from leopard attacks.

One reason for that could behuman behaviour.

At Powabo, a hamlet whereCharlotte was captured lastyear (the radio collar was thenfitted on her, and she was re-

® FROM PAGE 1

leased) after she went search-ing for a dog inside a house,most of the older generationappear comfortable with theidea of a leopard around theirvillage. The young are differ-ent. Leopards and hyaenas,they believe, belong in zoosand national parks. There istalk of trap cages.

At a recent conference, Her-bert Raffaele of the US Fish andWildlife Service, noted that In-dia has been able to conserve

most of its big fauna only be-cause of a rich socio-culturalvalue system that emphasizestolerance towards all species.

Large tracts of rural Indiaare home to a substantial pop-ulation of leopards, hyaenas,jackals, wolves, jungle cats,rusty-spotted cats and foxes,all living off domestic animalsand rodents. In central andwestern India, forest dwellersworship a large cat deityknown as Waghoba. The value

system itself, however, is un-der attack from urban valuesand sensitivites. By 2050, 55%of India’s population will beliving in urban areas, amount-ing to 900 million people, fur-ther squeezing the space forfree-ranging carnivores.

The popular solution, whenit comes to leopards, is reloca-tion, but that doesn’t work. Re-cent research on leopards inhuman-dominated landscapesshows that capture-and-trans-

location is an ineffective wayof dealing with free-ranginglarge carnivores. Leopards ex-hibit amazing homing instinctsand many animals will traversethrough densely populatedlandscapes to reach home. Asa result, translocation often re-sults in merely shifting theconflict to unaffected areas.Worse, the space vacated by atranslocated animal is likely tobe soon taken up by anotherwild leopard.

“One leopard, named Ajoba,around five years old, walked120km from the Malshej Ghatsto Mumbai, crossing a railwayline and the Mumbai-Agrahighway and taking 25 days tomake this long journey. Healso went into the populatedVasai industrial estate—weknew this because of his GPS(global positioning system)collar—but no attacks were re-ported,” says Athreya.

Leopards pose a uniquechallenge: contemporary sci-ence tells us that carnivores donot consider humans food, butthis does not mean the animalsare welcome in villages, leavealone towns and cities.

Experts say the ideal solu-tion is to maintain a respectfuldistance, keeping out of theanimal’s way. Most attacks,they say, occur in self-defenceand panic when the animal iscornered. Leopards are asscared of humans as humansare of them, so the first thing aleopard does when it realizesthat people are around is tohide and flee. The best way todeal with a chance encounterwith a leopard is to allow theanimal a little space and time.Experts also advocate that peo-ple traversing woodland andscrubland paths at night singor talk, even if only to them-selves. “Stray dogs are an openinvitation to the leopard. Dogs,goats and other domestic stockmust be driven into secure en-

closures well before nightfall.Ideally, enclosures must besome distance from homes, asleopards will venture close andwill stop visiting only whenthey realize no food is avail-able,” says Athreya.

A forest official in Himachaltakes heart from Charlotte’sstory.

“The results of tracking overthe last year show how leop-ards can live in proximity tohumans without conflict. Wewould like to continue moresuch studies across other partsof Himachal Pradesh and edu-cate the local people that theycan live with leopards in a kindof symbiotic relationship,”says Ashwanii Gulaati, princi-pal chief conservator of forestsand chief wildlife warden ofHimachal Pradesh.

Eventually, Charlotte’s col-lar doesn’t fall. Forget the col-lar, they haven’t even seenCharlotte, but they know fromthe tracking device that she isalive (the beep changes whenthe animal dies) and that thecollar is still on her (the beepchanges once the collar fallsoff, too). Athreya and Rattangive up their concerted searchand decide that the latter willconduct a weekly one instead.

Powabo16 Sep 2010

16 Sep 2011

Kamyana

Kholtu Rivulet

Dummi

Day timeNight time

The GPS receiver in the collar obtains location from satellite and stores it

VHF tracking facility

Sends theGPS location

via SMS to server

SMS modem/server

AccessdatabaseLeopard positions INDIA

CHARLOTTE’S TERRITORY

ToJammu

Naldehra

Powabo

Ganyog

ShimlaTo

Chandigarh

Shimla

NaldehraGanyog

HIMACHALPRADESH

Shimla

Leopard mortality statistics of India

2008

2009

2010

2011*

159

161

180

131

46

52

78

53

1

21

13

9

14

28

24

30

12

17

22

22

0

3

2

0

2

3

2

10

3

6

7

7

0

0

0

7

Poaching and

seizure

Found dead

Killed by

villagers

Shot by forest

department

Killed in road/train accidents

Died in rescue

operation

Electrocuted Killed by other animals

Others

TOTAL

*Last updated on 22 September Source: Wildlife Protection Society of India

VHF: Very-high frequency

Source: Vidya Athreya, Sandeep Rattan

237

291

328

269

www.livemint.com/wildcats.htm

A first­of­its­kind study,the tracking of leopards inHimachal Pradesh, aims atreducing the human­animalconflict.

VIDEOWWW.LIVEMINT.COM

Kingfisher Airlines is at themercy of financial institutionsness and former strategy con-sultant at Bain and Co., wantsto bring Life Insurance Corp. ofIndia and the Employees’Provident Fund Organisationunder his scrutiny apart fromunearthing corporate malfea-sance in India.

He said in an email interviewthat Kingfisher Airlines mayfind it difficult to raise the tar-geted `2,000 crore from itsrights offer. According to him,the airline needs at least `4,000crore to survive. “Airlines rare-ly earn their cost of capital overa business cycle. It’s the mostimportant business to greasethe wheels of global com-merce, but the worst businessto be in as a shareholder,” hesaid. Edited excerpts:

Mallya said you didn’t contact theairline while preparing the reportand got the calculations on aircraftleasing wrong.We are an independent or-

ganization and we take pridein our independence. To theextent lease calculation refersto the time associated withnon-cancellable leases, wehave quoted from the annualreport for FY11. Its page 74says, “Lease periods range upto 12 years and are usuallynon-cancellable”.

It is possible that some leas-es might have aged for a time,and hence, the remainder ofthe time period might be lessthan the contracted period atinception. For valuation pur-poses though, the time periodargument is irrelevant, becausewe use Kingfisher Airlines’ un-discounted non-cancellabledisclosed obligation from itsFY11 notes to the financial

® FROM PAGE 1 statements, which is based onthe weighted life of the existinglease agreements in place.

How do you react to Mallya’s re­sponse to shareholders at King­fisher annual general meeting(AGM) on Wednesday?(The) management is mak-

ing its best attempt to garnerresources in a cash-starvedbusiness. I wish them the bestof luck. It appears that the me-dia has made our research per-sonal to VM (Vijay Mallya). It isnot and was never intended tobe. We are just highlightingpoor governance and aggres-sive accounting issues rampantin Indian disclosure. While thesociety at large is focused oncorruption among the politi-cians and bureaucracy, recentevents have shown that a seg-ment of the Indian corporatesector is equally culpable.

Mallya clarified points of wor­ry—being a going concern, account­ing treatment of maintenancecosts, subsidy and statutory dues.Auditors raised the going-

concern issue and have subse-quently issued another opin-ion after our report, and a dayprior to the AGM, outliningthat it is not an adverse opin-ion. I think we can all read be-tween the lines. On mainte-nance costs—the company’sposition is untenable. The au-ditor outlines and we quote inour report that “the accountingtreatment is not in line withIndian accounting standards”.That’s all that matters.

As of the day of the annualreport, 25 August, the statutorydues were outstanding formore than six months. Our re-port was published on 12 Sep-tember, and then chief finan-cial officer (CFO) of UBHLgave an interview to the media

on 15/16 (September) and saidthat the dues were paid. Youshould confirm from the Indi-an authorities. I have to acceptmanagement’s disclosure atface value.

Mallya said he will personally stepin to provide a third level of com­fort to the lenders.No comments.How do you see Kingfisher Air­lines’ decision to exit the low­faresegment?No comments.What prompted you to pick King­fisher, while market leader JetAirways (India) Ltd also has ahuge debt burden of `13,000 croreand has been posting losses?We have not analysed Jet

Airways. So I have no com-ment on that specific situation.Liquidity is paramount forrunning a business—Kingfish-er Airlines is running out ofcash, and now has to sell its of-fice space to raise funds.What’s next? Based on theCFO’s comments to the media,it seems they have room for

three months. After that, it’sanybody’s guess.

All airlines are looking to raisemoney from equity, but can’t be­cause of market conditions.We have not raised any

questions regarding timing.We have looked at KingfisherAirlines as of a specific dateand found that the company isin duress and that it may notsurvive. That does not meanwe are saying that others arebetter/worse off. To suggestotherwise is unfair and preju-dicial to our research.

Do you doubt the promoters’ abili­ty to save the airline?The airline is at the mercy of

the financial institutions. Themanagement of UB Holdings istrying its best. Whether that issufficient remains to be seen.

What are the prospects of therights issue getting fully sub­scribed?The airline is approximately

60% owned by UBHL (includ-ing Mallya’s ownership) and23% by banks. Therefore, 83%of the funds have to come fromthe two groups. I do not be-lieve that the other 17% share-holders will subscribe to therights issue. A related party hasagreed to convert `709 croreOCDS (optionally convertibledebentures) into equity at thetime of the rights offering. Thatjust means that funds thathave already been committedand used up in the operationswill undergo a nomenclaturechange to equity. It would notamount to an injection of newfunds from the related party.

UBHL does not considerOCDS as debt anyway and thatimplies that for all intents andpurposes, there would be noreduction from the currentlyreported debt on the books ofKingfisher Airlines.

The banks have term loansoutstanding of approximately`4,500 crore, backed up by anequivalent amount of securi-ties owned by UBHL in UnitedBreweries Ltd, United Spirits

Ltd, Mangalore Chemicalsand Fertilizers Ltd, etc.Therefore, I assume unless thebanks can get additional col-lateral, they would not lendmore money. Will they sub-scribe to the rights? They will,if UBHL pumps cash funds inaddition to OCDS.

To what extent do you think theforthcoming rights issue of `2,000crore will provide relief?If the rights issue is priced at

the CMP (current marketprice) of `20 or thereabouts, itwill result in the issuance of1,000 million shares, in addi-tion to the 498 million sharesoutstanding. A cash infusion of`2,000 crore would be good forthe company. A non-cash con-version of unpaid dues to thebanks and OCDS will do noth-ing for the company’s financialwell-being.

How much of an equity infusiondoes it need?The company is planning to

change its business model. So,only the management knowswhat the ultimate size of theorganization needs to be tosupport a changed businessplan. The company needs up-wards of `4,000 crore to be-come viable. They need tohave a cash cushion of at least`1,000 crore and need to repaydebt of `3,000 crore.

What do you blame for the airline’splight—debt, management skills orcorporate governance?Debt and the current cash

burn rate. Airlines rarely earntheir cost of capital over abusiness cycle. It’s the mostimportant business to greasethe wheels of global com-merce, but the worst businessto be in as a shareholder.

Many Indian companies have gonethrough a bad spell. Is this a tem­porary blip for Kingfisher Airlines,considering Indian aviation’sgrowth potential?Growth per se does not

make for good business. Pric-ing power, competitive inten-sity and differentiation are all

the more important. Indiantelecom has growth, but nopricing power. Growth is alsoassociated with a requirementto undertake capital expendi-ture to meet that growth. If or-ganizations don’t have freecash flow to fund capital re-quirements, then the resultantequity dilution or debt in-crease is always detrimental toshareholder interest.

You are known for blunt reports onbig Indian groups. Do you do thatto attract attention?My research is based on

facts. It is also insightful, stra-tegically and conceptually. Noone has said that our facts arewrong. The intent is to be fac-tually correct and be objective.

Veritas is in the process ofdeveloping an India-focusedbusiness, given that there issignificant interest in emerg-ing markets such as India. Wespecialize in governance andaccounting-based research, inaddition to the usual funda-mentals-based analysis. Inmany instances, the Indianmarket is led by rhetoric ratherthan facts, and we are trying todispel the myths surroundingIndian organizations, so thatinvestors can make an in-formed decision.

What next?I would have thought inves-

tors and the media would raisequestions of the banking con-sortium, given that a sound fi-nancial system is the backboneof any economy. You can seewhat is happening in Europeand North America. Perhaps wehave taken Gandhiji’s monkeysto heart, and we do not want tosee, talk or hear of evil, evenwhen that evil is underminingour society at large. Endemiccorruption in India is not limit-ed to politicos and the babus. Ithas become the hallmark of oursociety and permeates all walksof life, including corporate In-dia, which has never been scru-tinized to the extent required.We will change that.

AHMED RAZA KHAN/MINT

Blunt views: Neeraj Monga, headof research at Veritas.