Whenever any news regarding investment in the state of J&K, by Indian business houses is around, a question strikes me; will Tatas, Birlas or others really come here? and if they come,”what would they invest in? (As we have seen in past, one of them winding up its already established telecom business), and more importantly why would they invest here, given the only road connecting the Valley with rest of India being often susceptible to extreme weathers.
Let’s suppose for the sake of argument, they come and put their money in a suitable industry with an eye on maximizing profits. The first thing they will do is to limit their market to this state or a few other northern states, courtesy huge transportation cost involved. Let’s again assume that the particular industry attains success. Immediately the next question is about profits earned by these companies. Where will they be used? Those may possibly not be invested back in the state given the company’s policy of investment in a particular state, unpredictable strikes, curfews and much more. In order to evade the unpredictable situation one would suggest harboring these companies in specially created Industrial Estates with in-house facilities including lodging. But for that the state government has to first put in a big investment, looking nearly impossible, which can be gauged from the attention it pays towards the much hyped Industrial Estate Rangreth Srinagar. So all this looks complex if not impossible.
Back home what is the possible way out? Reviving the sick industrial undertakings by infusing more capital, than forcing their closure can be one step. The other can be letting the already existing units (profitable ones) expand their business by raising capital from public. The first is usually not favored by the industry pundits, reason- their earlier reputation of being sick. If I don’t exaggerate the other looks very handy given the odds they face and still make good profits. These already established units (like KHYBER, KANWAL and others); though small can do wonders for our state because of their strong domestic footing, as well begun is half done. Provided they expand by infusing fresh capital and one of the best options is to go for a Public Issue than to take loans at a higher cost.
As we know, for expansion, a business needs capital and one of the sources is to raise it from public by way of an Initial Public Offering (IPO). J&K Bank, whose business turnover multiplied manifold after its IPO in 1998-99, can be an inspiration. (The IPO thought is not a bad one, nor is it a monopoly of only corporate giants only, because almost every corporate giant has raised capital initially by way of an IPO) Another plus point can be the fact that most of the established units here deal with fast moving consumer goods (FMCG), one of the rapidly growing sectors. The need for IPO becomes inevitable in present scenario of cut throat competition as expansion is a necessity for the survival.
Nevertheless, there are certain legal compliances & some disclosures to be made as per SEBI (Issue of Capital and Disclosure Requirements) REGULATIONS, 2009, as:-
- The company should’ve net tangible assets of at least 3 crore in each of preceding 3 full years (of which 50% held in monetary assets).
- Co. should’ve a track record of distributable profits for at least 3 out of 5 immediately preceding years.
- Co. should’ve a net worth of at least 1 crore in each of preceding 3 full years.
- Promoter’s contribution should be at least 20% of post issue capital.
Thus for these units, almost all of the above conditions are satisfied, so nothing should stop them from expansion. Going for an IPO, is no more a daunting task as it seems. You also don’t need any glassy structure with state of art facilities to be your Corporate Headquarters, a simple building with a slightly better than normal infrastructure and some corporate professionals (like CA’s, CS’s or Cost accountants) can do wonders, thereby providing new opportunities for youth.
More importantly if your business goes good, you can expand to other sectors as well, which will to some extent bring focus on our own businesses, than moving with a begging bowl towards Tatas, Birlas & others, who can only make politically motivated visits, speak for a day or two and then go the DoCoMo way, leaving stakeholders here with no ideas and Govt. with not a single word of regret.
By the way Tatas haven’t stopped producing salt although they are producing software. Also ITC, a tobacco Co. by origin is concentrating towards FMCG because business is not about producing steel & petroleum only. There are many untapped areas which our business minded people can concentrate upon.