When exchanges embrace and eat one another

When exchanges embrace and eat one another

Like their corporate counterparts, bourses world over, too, think being big is the only way to remain competitive

Jojo Puthuparampil

As traditional trading floors are becoming a distant memory, stock exchanges world over are trying to embrace and eat one another in order to expand reach and operations. The recent purchase of a 6 percent stake in the National Stock Exchange (NSE) by Morgan Stanley, Citigroup and private equity fund Actis is a brief act in a long consolidation drama being staged on the global financial markets, featuring leading bourses. The move by Morgan Stanley and others followed purchases of 20 percent in NSE by NYSE Group, Goldman Sachs, General Atlantic and Softbank Asian Infrastructure Fund (SAIF); as well as 5 percent in India's Bombay Stock Exchange (BSE) by German Deutsche Boerse for $910 million, and another 5 percent in BSE by the Singapore Exchange (SGX) for $42.6 million.

Against the backdrop of similar developments involving exchanges across the globe—NYSE's acquisition of Euronext, which runs exchanges in Paris, Amsterdam, Brussels and Lisbon; the Nasdaq Stock Market's pursuit of the London Stock Exchange (LSE), and attempts by NYSE and Nasdaq to form partnerships in Asia—these deals signal that the ongoing consolidation of global capital markets will gain momentum.

Bourses in India, whose gross domestic product grew 9.2 percent in the three months through December, second only to China among the world's major economies, are emerging active participants in the consolidation process. By picking up a stake in NSE after paying $115 million in cash, NYSE, the world's biggest exchange, made its first investment in Asia through the Indian market where the combined worth of stocks has risen 50 percent over the past two years to $820 billion.

What is happening in India is only a stray whiff emanating from a storm brewing elsewhere—almost all the world’s leading exchanges seem to be affected by the feverish consolidation contagion. LSE recently rejected a $4.2 billion take-over bid by Nasdaq. This was preceded by an unsuccessful bid for the London exchange by OMX, the Swedish Stock Exchange, in 2000. In recent years, LSE also rejected bids by Euronext by Deutsche Boerse, which runs the Frankfurt exchange, and by Macquarie Bank of Australia. In addition to the purchase of Euronext for $20 billion in June 2006, NYSE bought Chicago's Archipelago Holdings, a nine-year-old, all-electronic trading system, for $10 billion, in an effort to compete with all-electronic operations.

NSE, based in Mumbai and twice as big as BSE in terms of volume and value of the trade it carries out, handled a daily average of $2 billion in 2006. The 14-year-old exchange also dominates trading in equity-based futures contracts and owns stakes in the Indian National Commodity Derivatives Exchange and the Multi-Commodity Exchange. The transaction between NSE and the group led by NYSE and Goldman valued the Indian exchange at $2.3 billion. The deals involving the group led by Morgan Stanley and Citigroup will take foreign ownership of the NSE to 26 percent, the maximum allowed by Indian law. Morgan Stanley will buy 3 percent, while Citigroup will take 2 percent and Actis 1 percent.

"In a rapidly integrating world of financial markets, the partnership (with NYSE) brings together the strengths of institutions from North America, Europe and Asia. This alliance marks a significant milestone for NSE in developing a place for itself in the emerging global scenario. The global financial investors are amongst the most pedigreed institutions in the world, and will contribute to building value in the NSE," said Ravi Narain, managing director and chief executive officer of NSE, in a statement. The investment of NYSE, which has a market capitalization of more than $15 billion, is strategically important for NSE, he said.

"Indian exchanges are the best in the world when it comes to capital market transactions. However, local exchanges can learn from their foreign counterparts when it comes to derivatives and structured financial products," said Nilesh Shah, who manages assets worth $9.8 billion at Prudential ICICI Asset Management Company, based in Mumbai.

While the alliance with Goldman Sachs, which is a leading advisor to many of the world's major exchanges, will help NSE strategically, the deal with Softbank Asian Infrastructure Fund, which has over 60 portfolio companies in the region, will bring SAIF's extensive network of Indian as well as international relationships in the financial services sector to the advantage of NSE.

"Exchanges like NYSE already attract listings from around the world. Consolidation among exchanges across the globe would lend leading exchanges a stronger cross-border presence. Alliances among exchanges will also help investors better manage assets in foreign countries. As consolidation picks up strength, companies could list their shares in varied markets. But a listing in a different market would make sense only if it adds value to the stock in terms of valuation," said Vineet Suchanti, managing director of Mumbai-based consulting firm Keynote Corporate Services.

BSE, too, is aggressively forging alliances with foreign exchanges. The exchange has about 4,800 companies listed, a fully automated trading platform and nearly a billion dollars a day in turnover. Both NSE and BSE stand smaller in comparison with NYSE where $70 billion to $100 billion in shares trade each day. Though BSE is the oldest bourse in India, it trails behind NSE when it comes to attracting listings. It plans to sell 51 percent of its shares to partners and strategic investors in roughly 5 percent increments to enhance its operations and gain a technical edge.

BSE expects its alliance with Deutsche Boerse to strengthen its competencies, especially for trading in derivatives. The move in turn will help Deutsche Boerse to expand into Asia, and establish its presence in multiple time-zones and regulatory environments. Through the deal with the Singapore Exchange, BSE expects to capitalize on Singapore's position as a regional hub for derivatives and international listings.

"The Singapore Exchange is already listing a lot of GDRs (global depositary receipts) of Indian companies. Once the Indian rupee becomes a convertible currency - which is likely to happen in the near future – foreign exchanges such as SGX would be able to attract more Indian listings and increase trade," Suchanti said.

"Foreign exchanges are investing in India's long-term growth story," said Shah. "For Indian exchanges, tie-ups with their foreign peers would mean visibility, technology, and access to new financial products," he said.

Ownership

The Indian government lifted a ban on foreign ownership of exchanges in December last year. A single foreign investor can now own no more than 5 percent in any of the 22 stock exchanges in India. However, the total foreign ownership cap was raised to 49 percent under rules issued by the Reserve Bank of India. Foreign direct investment is capped at 26 percent, and foreign institutional investment at 23 percent.

Stocks on the Indian exchanges are some of the most richly valued in Asia, after the Sensex index of BSE jumped 45 percent in 2006. They are also volatile. The Asian market correction in the first week of March took some sheen off Indian stocks. Despite the volatility and fears of overheating, many argue that India's long-term economic prospects are too attractive for potential overseas partners to ignore. The efforts by foreign exchanges to form alliances with Indian peers mean that they would want to be a part of the growth the Indian market is likely to witness in the long run.

"Indian equities are most likely to continue to perform over a longer-term perspective, possibly much faster than many other emerging markets," said Shah.

Consolidation across the world

In fact, consolidation is becoming easier for stock exchanges now than ever before—through massive computers, fiber-optic cables, wires and satellite links. Consolidation also makes sense in many other ways. Clearing and settlement will continue to be cumbersome as long as exchanges remain fragmented. A large number of exchanges will also push up transaction costs. Consolidation makes trading easier for exchanges and brings in more liquidity. Bigger exchanges enjoy economies of scale that reduce trading costs, and attract more traders and listing companies. And as trading volume increases, it is easier for buyers and sellers to find one another. Added liquidity helps stock prices respond quickly to changes in supply and demand.

World over, shares are increasingly held by large institutions, who need added liquidity to manage huge trades; only large exchanges can offer this. Institutions are becoming sophisticated and cost conscious. Consolidation also brings a lot of transparency in transactions, which smaller bourses cannot offer.

Regulations

Tighter regulations make it difficult for US exchanges to compete with bourses in other countries, where regulations are not as stringent as in the US in attracting fresh corporate listings. For instance, the Sarbanes-Oxley law enacted in the wake of the Enron scandal makes company officials legally liable for the accuracy of their firms' financial statements. By acquiring foreign peers, US exchanges such as NYSE can serve listing companies that want to avoid harsher regulations in the US.

Like companies, stock exchanges also want to be 'big' to remain competitive in an integrated global economy. Those who don't join the race would just end up laggards. The purchases of stakes in Indian exchanges by their foreign counterparts reinforce this.

(This report was written a few years ago and the backdrop against which it was written has changed)

Of rash exuberance and its aftermath

Of rash exuberance and its aftermath

When irrationality becomes the norm rather than an aberration, the consequences can be perilous. The current crisis reminds why regulators and market players need to adopt a different approach

Jojo Puthuparampil

Sustained virtual growth of seemingly exotic sectors (for instance, home loans), driven by innovatively crafted assumptions (that realty prices will perpetually rise), leads to heightened confidence in the ability of the markets to thrive. Confidence, after a certain threshold, makes market players and subsequently investors irrational, leading to reckless indulgence in amassing hollow financial instruments (say, sub-prime debt) disguised as hallowed assets. After a while, when exuberance turns irrational and then insane, the titanic bubble of greed bursts, crushing the global financial façade under its weightlessness.

This, in a nutshell, is why the US banking and financial sector is badly battered and global financial markets are shivering (no one is guessing when the mess will be cleared). This also proved that even robust economies are under the jurisdiction of poetic justice (simply, this means whatever goes up will come down as long as gravity prevails).

No method in madness

Securitization—wherein cash-flows from a pool of underlying assets (such as mortgages) are turned into bonds, which are then repackaged and sold to investors as smaller slices—has been existing for over 30 years. But over the past five years, it turned into a dubious means to camouflage the huge exposure of exotic financial instruments, such as collaterized debt obligations (CDOs), to delicate underlying mortgages.

Securitization originally aimed to reduce risks—instead of banks holding every loan on their balance-sheets until it matures, risks would be sold and spread among a wider group of investors. But, of late, it has started betraying its grand motives, and became a coveted tool for revered financial re-engineers who mistook it for a magic potion to rake in exaggerated returns.

For one, securitization didn’t disperse risk effectively; when assets turned toxic, risks flowed back to banks’ balance-sheets. Two, it degraded credit quality by weakening lenders’ ability to monitor the status of the loans they write. The estrangement, and the subsequent widening gulf between lenders and borrowers, deepened the crisis.

Weapons of financial destruction

CDOs were just one of the myriad exotic instruments that lured and then trapped an entire generation of institutional and individual investors. Credit default swaps (CDSs)—contracts that insure against the default of financial instruments such as bonds and corporate debt—and structured investment vehicles (SIVs)—funds that borrow money by issuing short-term securities at low interest and then lend that money by buying long-term securities at higher interest, thus making a profit for investors from the difference—were equally glossy but lethal. As these instruments abounded, the distance between imagination and reality grew; nobody asked how many times they were re-repacked, and expecting gravity-defying 25% plus returns year after year ceased to be a sin.

Unprecedented damage

Bigger stars suck as much matter around them when they collapse. The present crisis is a colossal financial back hole, threatening to wipe the entire market cap growth that global markets underwent over the past decade.

It is also unprecedented for many reasons. Economic slumps lead to the death of companies; but this time, investment banks vanished en masse; the death of an exalted business model is even more shocking. Economies rebound when central banks tweak interest rates; this time, landslide cuts in rates announced by banks across the globe—along with massive bailout packages—did not stir even a minuscule ripple. Normally, economists and bankers fathom the depth of crises, though they may not come up with tailored solutions; now, it may take a few years before we approximate the extent of damage.

Be radical, else perish

An unprecedented crisis requires an unparalleled solution. Thirty years ago, everyone exhorted China to emulate capitalism to survive; today many wonder if China’s protectionist, authoritarian capitalism is a better alternative to US-style capitalism that helped lead many western economies to prosperity. Till now, markets were thought to be efficient, capable of fixing fair value and taking care of themselves. Today, banks shudder to lend without prudent regulatory norms.

Radical thinking can spawn unique solutions. For instance, London-based New Economic Foundation, which predicted the current crisis five years ago, proffer ‘deconsolidation’ as a means to reduce the chances of similar crises in future. Consolidation blew up the current crisis—banks are so big that when one slumps, everything collapses. If we slice banks into innumerable smaller entities, in times of distress, we will have many alternatives to resort to.

“Demerge banks to reduce the risks of systemic failure. Instead of further consolidation, the discredited financial institutions that have needed so much public money to prop them up during the credit crisis should be reduced to a size whereby their failure would not jeopardise the system itself,” it says. Any takers?

(This opinion piece was written when the mighty Bear Stearns, Lehman Brothers et al went belly up following arguably the biggest crisis in financial market history)  

It’s time the king of opulence brewed a different concoction

It’s time the king of opulence brewed a different concoction

It is early to write an epitaph for Kingfisher Airlines; but Vijay Mallya may have to pause, heed warnings and tread cautiously

 

Jojo Puthuparampil 

 

Those Bangaloreans who believe Vijay Mallya’s United Breweries (UB) group embodies the ‘spirit’ of the garden city are disheartened by the trouble brewing at Kingfisher Airlines (KFA). But those who are less empathetic feel the turbulent weather the airline has landed in is the result of feckless exuberance, or euphemistically fiscal indiscipline, at a time when the markets have been besieged by a spate of contagions—from sub-prime mortgage crisis to the spectre of defaults by once bellwether countries to shrinking fund flows and growth domestically, triggered by scams, policy paralysis, stratospheric inflation and a weak currency.

 

Importantly, the airline has hit an air pocket at a time when the group is facing tough competition elsewhere. For instance, though United Spirits (USL), the group’s flagship, exports liquor to over 37 countries and is the largest spirits company in the world by volume, selling 114 million cases a year and owning 21 millionaire brands (selling more than a million cases a year), it has already lost the coveted stature as the most profitable liquor maker in the country to Pernod Ricard India (PRI), the privately held local arm of French beverages major Pernod Ricard. Though USL’s beer brands still have nearly 50 percent market share in the domestic market, which is the second biggest in the world and the largest for whisky, with debts worth Rs 6,000 crore on its books, it rivals KFA (debt of around Rs 7,000 crore and accumulated losses of about Rs 6,000 crore) as a drag on UB’s financials. Rubbing salt in the wound, Kishore Rajaram Chabbria-owned ABD Distillers’ Officer’s Choice is expected to unseat USl's flagship product, Bagpiper whisky, as India’s largest selling spirit brand.

 

Decades of efforts to drive volume, overlooking margins and profitability, have taken its toll. A relentless focus on the low-price, high-volume segment where USL is the undisputed leader has also been proven to be wrong—while the premium segment has been growing at 25 percent over the last few years, the low-price segment has grown less than 16 percent.

 

Chinks began to appear in the king of good times’ armour much early. The group’s market cap has been eclipsed by the combined debt of its six listed companies—UB, USL, KFA, UB Holding, UB Engineering and Mangalore Chemicals—most of which has been spent on a spree of acquisitions, including Shaw Wallace in June 2005 for Rs 1,500 crore and Scotch whisky firm Whyte & Mackay (W&M) in May 2007 for Rs 4,800 crore. In addition, operating cash flow has been negative year after year; investment banks have swallowed words many a time after promising to infuse funds; aircraft leasing companies have reclaimed leased jets; oil companies have threatened to stop supplying fuel; tax bills have ballooned; and pilots have deserted KFA en masse. But Mallya, for whom risk-taking is a way of life, seems to brush these aside as minor roadblocks in his group’s ambitious journey to be a global major, by surpassing the likes of Diageo, the world's largest liquor maker, in scale and grandeur. 

 

Living ambitiously is a characteristic that distinguishes Mallya from most new-age Indian business magnates. For the same reason, he continues to fascinate most Indians who see him as the apotheosis of what they aspire to achieve in life. Zealously living up to his image of the flamboyant booze baron, Mallya, who placed the winning bid of £175,000 for the sword of Tipu Sultan at an auction in London and brought it back to India in 2004, has always excelled erstwhile rajas of the subcontinent when it comes to living in affluence—more than 20 residences across continents, including a $60-million villa on the picturesque island of Sainte Marguerite, half a mile off the French town of Cannes and those in Scotland, South Africa, New York City and California; three exotic yachts, one of which (Indian Empress) is among the world's larger (95 metres long) and most expensive (worth $89 million) cruisers; four private jets one of which is bedecked by a priceless Picasso; a 240-strong vintage car collection that includes Porsches, Bentleys, Maseratis and Ferraris; cricket and Formula One teams; and a stud farm at Kunigal in Karnataka whose history dates back, again, to Tipu Sultan.

 

Mallya shouldn’t be deprived of the credit for his larger-than-life accomplishments just for being his father’s son. Youngest child of an army doctor, Vijay’s father Vittal Mallya became the first Indian director of UB at the age of 23 in 1947. Founded by a Scotsman, Thomas Leishman, in 1915, UB was initially supplied liquor to British colonial troops in India. Vijay kept alive his father’s legacy by taking over the group’s reins at the age of 28 in 1983 when Vittal Mallya died of heart attack when he was only 59. While Vittal Mallya set the tone for expansive growth for UB by acquiring a slew of breweries and companies, including McDowell and Kissan, Vijay transformed the group in to a vast conglomerate of over 60 companies, spanning varied industries such as brewing, distilling, real estate, engineering, fertilizers, biotechnology, information technology and aviation.

 

All's well only if what one does ends well. Mallya, whose biggest ambition is to pilot an Airbus A380, burnt his fingers when UB group forayed in to civil aviation in May 2005. KFA, which envisioned to be ‘the biggest and the best’, was meant to be everything other domestic carriers were not—efficient and glamorous. Initially, Mallya personally picked cabin staff and instructed them to treat passengers as if they were guests in his home. And KFA loyalists relished hitherto unheard frills like goodies, valet service at check-in, live in-flight satellite television, and ‘the prettiest air hostesses’ in the sky.

 

But the going got tough very soon. And roughly six years after its flashy launch, KFA is a meek shadow of what it was supposed to be. The latest numbers are hugely disappointing—losses of Rs444.26 crore in the quarter ended December 31, 2011 and Rs1,027 crore in 2010-11.

 

However, KFA is not the lone loser in the domestic airline industry, mauled by rising fuel prices, a depreciating rupee and cut-throat competition. While IndiGo has remained an aberration (a net profit of Rs650 crore in 2011), KFA’s arch rival Jet Airways has been bleeding profusely and state-owned Air India has accumulated a debt of Rs42,570 crore (as of March 2011). The plight of domestic airlines is only a reflection of civil aviation industry’s perilous predicament elsewhere. For instance, in US alone, airlines have shed more than 130,000 jobs and lost close to $33 billion since 2000.

 

But all is not lost. A consortium of banks led by State Bank of India is ready to provide more funds if KFA arranges fresh equity of Rs2,000 crore, to help the airline maneuver near-term headwinds. Mallya has also received recapitalisation offers from two domestic investors for Rs800 crore in return for a 24% stake in KFA which will enable the airline to regain breath after tax authorities froze its accounts. And, considering the inherent strength of some of the group companies, Mallya’s personal wealth (more than $1.4 billion) and his uncanny ability to turn challenges into opportunities, no one is writing an epitaph for KFA yet.

 

But the close to one million who follow Mallya on twitter would expect him to pause, heed warnings and tread cautiously. After all, frugality is not a dirty word in India where a large chunk of the population still considers having a mingy meal of rice and lentil twice a day is opulence.

 

(This piece was written when mounting debt forced Kingfisher Airlines to ground half of its fleet)

Humans are closer to finding an Earth-like inhabitable planet

Humans are closer to finding an Earth-like inhabitable planet

According to a new study, discovery of multi-planet systems is much more likely than ever, hinting that one or more planets in those systems can be like Earth

 

Jojo Puthuparampil 

 

Astronomers have always been intrigued by exoplanets (planets outside the solar system) as they possibly offer a clue to finding an Earth-like planet in the outer space that supports life. According to a new study, published in Astrophysical Journal, humans are one step closer to finding an ‘inhabitable’ planet within the solar system. The study, based on data from NASA’s Kepler spacecraft which envisions to discover Earth-like planets orbiting other stars, says discovery of multi-planet systems is much more likely than ever, hinting that one or more planets in those systems can be like Earth.

 

The spacecraft, named in honour of the 17th-century German astronomer Johannes Kepler, has since its inception in March 2009 identified 1,235 planetary candidates in 997 host star systems. Of these candidates, 759 are confirmed exoplanets, including 54 that may be in the habitable zone, the region around a star where liquid water, and thus life, can exist. For instance, one of the newly discovered worlds, dubbed HD 85512b, lies at the edge of its star's habitable zone. According to the study co-author Elisabeth Adams, an astronomer at the Harvard-Smithsonian Center for Astrophysics (CfA) in Cambridge, Massachusetts, of the 997 planetary systems, 170 have multiple planet candidates, implying the chance of one or a few of them being Earth-like, possibly with life-supporting elements like water.

 

Kepler looks for Earth-size planets around Sun-like stars. It has an inbuilt photometer that continually monitors the brightness of over 145,000 main sequence stars which are known for longevity and stability. With the help of this photometer, it spots potential alien worlds by staring at a patch of sky and watching for dips in starlight caused by objects transiting their stars, as seen from Earth. For instance, if a planet’s orbital period is 10 days, it will pass in front of the parent star every 10 days, resulting in a dip in the light emanating from the star. This data is transmitted to Earth, then analysed to detect periodic dimming caused by extrasolar planets that cross in front of their host stars.

 

But simply seeing a transit isn't enough to prove a planet is involved. Some other phenomenon, such as a smaller star passing in front of its much larger neighbour, could be causing the main star to dim periodically. Therefore, astronomers rely on other methods such as ‘radial velocity’ and ‘transit timing variation’ to confirm that the spotted body is indeed a planet. In the study, Adams and colleagues ran a statistical analysis and found that, if a star system has multiple planet candidates, the confirmation step can be skipped, as most planet candidates in multi-planet systems are likely to be ‘real’ planets.

 

Discovery of multi-planet systems also helps astronomers look at multiple worlds that were born together to get a better understanding of planetary transformations and hence deeper insights into Earth’s formative years after the Big Bang.

 

Scientists are enthused by Kepler’s recent discovery of Kepler-22b, a planet about 2.4 times the radius of Earth, in the habitable zone of its star. They do not yet know if it has a rocky, gaseous or liquid composition, but they feel its discovery is a step closer to finding Earth-like planets. Kepler has also found two other planets with higher atmospheric densities, suggesting they have atmospheres of mostly water, and therefore conducive for life to sprout. Spotting water in any of the Earth-like planets is the biggest leg-up astronomers are expecting in their search of life elsewhere.

 

The findings of Kepler are supplemented by data from High Accuracy Radial Velocity Planet Searcher (HARPS) at the European Southern Observatory's La Silla facility in Chile. HARPS recently found 50 new alien worlds, including 16 ‘super Earths’. Astronomers use Doppler wobble technique which involves searching for wobbles in a star's light that indicate the gravitational pull of an orbiting planet. The method helps them find massive planets that orbit close to their host stars. In 2007, HARPS discovered a super-Earth, called Gliese 581d, that is believed to be lying within the habitable zone of its star.

 

Scientists plan to upgrade HARPS hardware and software and use the instrument to conduct a more refined search of nearby Sun-like stars for rocky Earth-like planets that could support life. They are encouraged by the fact that there has been a significant increase in the number of rocky exoplanets discovered by space missions, including Kepler and HARPS. They expect that in 10 to 20 years, humans should have the first list of potentially habitable planets in the Sun's neighborhood, according to another study by Michel Mayor, an astronomer at the University of Geneva in Switzerland. One of those would-be-discovered planets, they hope, may splash chemical signs of life—such as oxygen—in their atmospheres, helping unicellular organisms to evolve.

The art of taming a cheetah

The art of taming a cheetah

Aggressive pricing, a refined diesel engine and a long equipment list will help XUV 500 chase audacious customers

 

Jojo Puthuparampil

 

It was my first encounter with a cheetah. Till then, sitting astride a galloping spotted big cat, keeping my chin close to its furred nape and holding it tight around its upper torso, was my wildest dream. That way, I dreamt, I could sense the muscle movement of the fastest animal on planet. Sorry, we ain't talking about the king cheetah usually found in an African savanna. I found his distant cousin, though with metallic muscles, at Mahindra & Mahindra’s stable in Bangalore. XUV 500 (read as five double O), M&M’s first global SUV, is already on the prowl for daredevil customers.

 

XUV 500 reflects the ‘cheetah theme’ in every inch of its appearance—an imposing nose with jaw-like honeycomb grille, whisker-like bumper, eyeball-like headlamp cluster with LED day time lights that resemble claw marks, muscular wheel arches (the big bulge above the rear wheel makes it look like a cheetah ready to pounce on its prey), paw-likevertical door handles, rear lamps with tribal motifs etched on them, black D-pillar with vertical wound-like slashes and a central wooden console that reminds you a cascade against a savanna. The M&M research team, which spent four long years to develop and refine this theme-based SUV, has understandably done a good job. This beast is equally mighty as the spotted big cat—the 2.2 litre mHawk 140 direct injection diesel engine generates 33.33 kgm of torque and 140 bhp of power. This means it accelerates to a higher speed before you flap your eye lid and gallops effortlessly above 140 km per hour.

 

Once you are past the rather intimidating grille and inside the SUV, you feel at home because this one is more like a car than its heavier peers such as the Toyota Fortuner—on the driving seat, you feel inside the car and not on top of it. And the litany of features will just drive you dizzy—6-inch colour touch screen infotainment display; GPS navigation; integrated music system with CD/MP3, iPod as well as USB and Bluetooth connectivity; DVD player; gear indicators; six airbags (front, side and curtain); hill hold control (if you are on a hill slope, you can relieve the brake; the vehicle will not roll down); eight-way adjustable seats; steering-mounted cruise, audio, phone controls and voice command switches; glove box with laptop pocket; sunglass holder; conversation mirror; air-con controls and vents for even for the third row; and cup holders, charging points and reading lamps in all three rows.

 

The compact-looking SUV will impress you with its spaciousness—cabin space is phenomenal and head-leg-knee-shoulder room is just too much for even the six-foot-plus guys. In the second row, the third passenger will have enough leg room as the first and second ones do. The flat floorboard enhances the sense of spaciousness. In terms of space, the third row is as good as the likes of Innova, though even with additional touches like the AC vent, being a back-seat passenger can be challenging for a long haul. You can store stuff almost everywhere inside the vehicle—two glove boxes in the front; door pockets with umbrella holders and storing space even in the third row. There is hardly any boot space at the rear but if you push down the foldable seats, you will get a spacious boot area. For more space, you can fold the middle row of seats as well.

 

Once you start cruising, the powerful and refined engine makes the drive effortless—you only hear a subdued murmur—and the steering gives you ample feedback though the six-speed manual gear box (M&M is developing an auto variant) can be a tad notchy at times. Unlike its poor cousins from the Mahindra stable that are built on body-over-ladder-frame chassis, XUV 500 uses a car-like monocoque (where the vehicle’s body and chassis form a single unit)—the first home-made SUV to do so—offering better body control, handling and high speed stability.

 

The XUV's lower centre of gravity and longer wheelbase help you feel secure. Under the heavy wheel archers, the 17-inch tyres, with disk brakes on all four corners, emulate the cheetah's semi-retractable claws to offer extra grip while the car runs at reckless speed. They also nicely maneuver bumps and potholes. A well-insulated body ensures you are cut off from outside noise. The same engine powers Scorpio but XUV 500’s lighter weight results in brisk acceleration. Besides, the six-speed manual gear box with overdrive in the top two gears leads to 15.1 km per litre mileage, the second-best in any SUV.

 

There are negatives—the engine lags below 1500 rpm; the steering is clumsy at times and inconsistent around the corners; two-tone interiors look dull; detailing is fussy; plastic quality is not impressive and the nose has too many cuts. But at aggressive pricing—three variants in the Rs 11.2-12.5 lakh range (ex-showroom Bangalore), almost half the price of its bulky peers—it can give the likes of Toyota Fortuner, Ford Endeavour, Mitsubishi Outlander, Hyundai Santa Fe and Chevrolet Captiva a run and easily cannibalise the aging Scorpio.

 

A flurry of adaptations—large nostrils that allow for increased oxygen intake; enlarged heart and lungs that work together to circulate oxygen efficiently; a respiratory rate that increases from 60 to 150 breaths per minute during chases; a tail that functions more like a rudder-like means of steering—help the cheetah accelerate from zero to over 100 km in three seconds and run at 120 km per hour (the fastest among living animals). A long equipment list along with a strong diesel engine and unbelievable pricing will help XUV 500 chase audacious customers with equal élan. After all, nothing can match the feel of sitting astride a galloping big cat!

Once there were three Bellary brothers

Once there were three Bellary brothers

The story of Reddys’ meteoric ascent to economic and political stardom has all the ingredients for a Hindi potboiler. Here is the partly fictitious synopsis of a potential script. Would our story starved Bollywood directors be interested?  

Jojo Puthuparampil

Scene 1: Moment of epiphany (circa 80s)

In a sombre opening shot, the protagonist—a lean and dusky man in his twenties—says an earnest prayer against the dilapidated two-room mud house where he grew up.

As his father, a police constable, has now retired, he has to find the means of livelihood for his family, including two brothers. But there is hardly anything to look forward to for a college drop-out like him in Bellary, a dusty town 270 kms from Bangalore. So he is in desperate need of a miracle, a sudden shower of blessing from god; hence the morning prayer. At the end of the prayer he opens his eyes and in a sudden flash of epiphany decides to take up a lacklustre offer from a local chit fund to be an agent.

Scene 2: Learning the tricks (five years later)

The camera—the only device on planet earth that can travel faster than light—swiftly shifts to capture a close-up shot of Janardhana—our lead character is fondly called so by local people—chairing a board meeting of Ennoble India Savings and Investments India, a shady non-banking financial firm he has set up after spending a few years at the local chit fund.

During his stint at the chit firm, Janardhana has smelled money the way a domesticated lion smells a prey’s blood for the first time. By now he has collected a considerably big corpus from hapless investors, mostly daily labourers, rickshaw drivers and quarry workers, through dubious investment vehicles—ponzy, money chain and exotic chit schemes. His modus operandi is simple: lure the laity by offering stratospheric return on their investments and keep them in the dark as to how these schemes work so that when they eventually bust—which they surely will—he can come up with a circuitous explanation as to how they have failed and why he is not entitled to pay off the dues.

Knowing how media can lend legitimacy to his mala fide escapades, he also publishes Ennama Kannada Nadu, a daily newspaper. The growing richness has brought about palpable changes in his appearance and working style as well—he has put on weight; has entrusted the business’ non-core operations with brothers Karunakara and Somashekara, who have hitherto been making a pittance by executing petty civil contracts; and has roped in Sriramulu, an enterprising local dude, to micromanage mundane challenges while he reserves his time for macro machinations. He considers God as a close ally in the enchanting game of money swindling and continues to offer prayers to ensure uninterrupted divine benevolence.

Scene 3: Changing colours (late 90s and early 00s)

Our protagonist sulks; it is 3 am and he is still awake. The camera can capture the ticking clock, but let’s avoid the clichéd shot of a disheveled table with cigarette stubs and half-emptied whiskey bottles.

Janardhana’s chit fund has gone belly up with complaints of fraud and cheating to the tune of Rs200 crore and defrauded investors have started filing mass petitions. To disentangle themselves from the ensuing legal wrangle, Janardhana and his brothers seek political protection. After flirting with Congress for a while through Sriramulu, who has briefly become a Congress councillor in Bellary, the brothers jump on the BJP’s bandwagon as campaign managers for Sushma Swaraj—who turns out to be their ‘Lady Luck’—in her Parliamentary race from Bellary constituency against Sonia Gandhi.  Sushma loses the battle but the Reddy brothers—one of the trio’s assumed names—win her heart and patronage. 

Under Sushma’s aegis, Reddys, and Sriramulu, who has often been called Sushma’s adopted son, toil to build the BJP in Bellary, a Congress bastion since independence, and adjoining districts. They exploit the infighting in the district Congress; use Sriramulu, who belongs to an indigenous tribe, to woo Dalits who are a majority in the region; and win over villagers with health, education and sanitation programmes and by organising mass marriages. 

In the Bellary City Municipal Council elections, the Reddys’ efforts yield results as the BJP sweeps the Congress aside. The winning streak continues in Assembly elections as the BJP win three seats. Later, in the Lok Sabha elections, Karunakara wins the Bellary seat, wresting it from the Congress. The subsequent zilla panchayat, taluk and town level elections also prove to be a cakewalk for the Reddys and the BJP. Janardhana and his brothers are no more petty local chieftains.

Scene 4: The unbearable lightness of being demigods (mid 00s)

Our protagonist no more considers himself a mortal. He caresses his mirror image in a room full of idols of deities.

In a providential twist that catapults them to the big league, the Reddys foray into mining by buying Obulapuram Mining Corporation (OMC), with mines in neighbouring Andhra Pradesh, from a local mine owner for Rs5 crore. Soon iron ore prices start skyrocketing, driven by the international iron-ore export boom, especially the huge Chinese demand preceding the Beijing Olympics—prices soar to Rs3,000 a tonne from Rs200 in just a couple of years—and the Reddys make a killing. They migrate from mopeds to imported cars and helicopters. To get richer, the Reddys transcend partisanship and forge ties with YS Rajashekhar Reddy, the Congress chief minister in Andhra Pradesh; coerce YSR to allot 45 square kilometers of land to build a huge steel corporation in Kadapa, YSR’s home town; join hands with YSR’s son, Jaganamohan Reddy, to set up Brahmani Steels, a Rs25,000 crore steel plant; and secures 3,500 more acres for building a second airport in the district. Back home, at his sprawling mansion—ironically called Kutira or a cottage—Janardhana builds a gold chair worth more than Rs2 crore for reclining during afternoon siesta. To appease the god, he donates a Rs45-crore diamond-encrusted gold crown to the deity at the Tirupati temple.

Scene 5: The art of holding the government to ransom (late 00s)

When the camera zooms in, Janardhana swings in his gold chair. “God is great. He has given me all these riches,” he gleefully says. The receding hairline has become a hallmark of this nouveau mining magnate and larger-than-life political kingpin.

The Congress government in Karnataka led by N Dharam Singh appears shaky and sensing an opportunity the Reddys play a role in sanctifying the marriage of convenience between the BJP and the breakaway JD-S led by HD Kumaraswamy and use their money power to gather the support of MLAs to help the alliance topple the Congress regime. The Bellary brothers rescues the BJP when Yeddyurappa falls out with Kumaraswamy when the latter refuses to part with the CM's chair after 20 months as stipulated in their power-sharing agreement.

The Reddys metamorphose into kingmakers during the subsequent Assembly elections. They, along with Sriramulu, play a crucial role in helping the BJP garner 110 seats—BJP wins 23 seats of the 27 in four districts (Bellary, Davangere, Gadag and Haveri; five seats in the region are won by the Reddy family itself) where the Reddys spearhead the BJP’s poll campaign. And then pay Rs25 crore each to six independent MLAs to buy their support to take the BJP beyond the 117-seat mark for a majority and help Yeddyurappa realise his dream of heading the first BJP government in Karnataka. Yeddyurappa responsively obliges and grants ministerial berths to three of the kingmakers—Janardhana and Karunakara become tourism and revenue ministers, respectively, while Sriramulu bags the health portfolio. Somashekhar, meanwhile, becomes the president of the powerful milk federation in the state.

Conflating money and political muscle with startling brazenness, Reddys virtually transform Bellary into their fiefdom, ensuring that only pliant officers are posted there. OMC encroaches land of rival miners who are coerced to lease land to Janardhana’s company. Reddys extort 30 per cent of the proceeds for every tonne of iron ore extracted by other miners in Bellary district. They extract iron ore from government land as well and spread their illegal mining activities into the neighbouring Anantapur district in AP, disregarding the state boundary. To dodge income tax scrutiny, they transport bundles of currency worth hundreds of crore in trucks to undisclosed locations.

However, their relationship with Yeddyurappa turns vexatious when the chief minister decides to impose a cess of Rs1,000 on every lorry transporting iron ore from Bellary, to raise money for flood victims in the state. When the CM refuses to withdraw the cess, the furious Reddys round up BJP legislators close to them, shift them to posh resorts in Hyderabad and Goa—out of the reach of the CM and Arun Jaitley who is sent by BJP’s central leadership to broker peace—and hold the state government to ransom for two weeks. Eventually, Yeddyurappa bites the dust and is forced to sacrifice a trusted minister and Reddys emerge stronger.

Scene 6: Curt nemesis (present and future)

Janardhana attends the cremation of YSR, who died in a helicopter crash. For the first time in more than a decade, forehead lines betray his doubt in the same providential intervention which has transformed him from a pauper to the most powerful mining baron in post independent India.  

Retribution catches up. Former Supreme Court judge and Lokayukta Santosh Hegde submits a 25,000-page report with damning evidence against the Reddys and Yeddyurappa in the illegal mining scam. The judge’s report says Reddys have donated Rs10 crore to a trust managed by Yeddyurappa’s family members which also sold a piece of land to another mining company for Rs20 crore, far above the guidance value of Rs1.4 crore. It says the illegal mining in Karnataka will deeply affect ecology besides hitting the state exchequer hard. Mining companies in the state, including OMC, have failed to pay mining royalties to the government and encroached forest land, leading to systematic starvation of state-owned mining entities, the reports adds. The Supreme Court takes notice and orders a CBI probe into illegal mining by two companies, including OMC. Yeddyurappa resigns while Janardhana loses cabinet berth and is arrested by CBI.

This open-ended abridged script does not try to provide an answer to what will happen to our protagonist which will be earnestly attempted in a sequel. After all, who can conceive a Bollywood potboiler without a generous dose of suspense?

Bodyguard: Siddique’s glitzy tryst with Bollywood

Bodyguard: Siddique’s glitzy tryst with Bollywood

The mimicry artiste-turned Mollywood director is poised to mimic his friend Priyadarshan’s success in churning out Bollywood blockbusters

Jojo Puthuparampil 

Bodyguard is not Siddique’s first rendezvous with Bollywood. The ace Mollywood director, who is known for his breezy comedies, had earlier scripted Hera Pheri (remake of Malayalam film Ramji Rao Speaking), Hulchul (Godfather), Bhagam Bhag (Mannar Mathai Speaking) and Dhol (In Harihar Nagar), directed by his friend Priyadarshan. Siddique had directed the original versions of all these films, except Mannar Mathai Speaking, in collaboration with his childhood pal Lal—the duo was known as Siddique-Lal—who has over the years made his presence felt in Malayalam film industry as an actor and producer. 

In the tinsel world where relationships are short-lived Siddique is known for his enduring friendships. His prolonged collaboration with Lal is just one case in point. Though the duo broke off in 1993, Siddique later directed Hitler (1996) and Friends (1999) for Lal's production house Lal Creations (meanwhile, Lal returned to directing with two sequels to In Harihar Nagar—2 Harihar Nagar and In Ghost House Inn).

Siddique, who has been living with Bodyguard for five years making it first in Malayalam, then in Tamil (Kaavalan) and finally in Hindi, has begged off directing a Telugu remake, fearing another remake would drain his creative energy. The Malayalam version with Dileep in the lead and the Tamil adaptation with Vijay were box office hits though they have paled in comparison with the Salman-starrer which has emerged the highest grossing Hindi movie in the first week (Rs102.86 crore) and Bollywood's second highest-grossing film ever (Rajkumar Hirani's Aamir Khan-starrer 3 Idiots is the biggest grosser). Interestingly, it was also the highest opening day grosser and the biggest grosser ever for a single day, breaking the records earlier held by Dabangg, another Salman-starrer. In a bid not to replicate himself, Siddique has changed the shades of the lead character in each version—in the Malayalam film the protagonist is asked to become the heroine’s bodyguard; in the Tamil version he is duty-bound; and in Hindi he is a thorough professional.

R Mohan’s Shogun Films—which produced Gardish and Kabhi Na Kabhi that established Priyadarshan as a Bollywood icon—had earlier approached Siddique to direct a Hindi film. The director declined the offer as he wanted his Bollywood debut to be based on a theme that is universal. He was convinced that a romantic-action flick like Bodyguard, with an ample dose of suspense and clever twists, would appeal to the audience in the north. 

Siddique has started out as a mimicry artiste with Kalabhavan (which means ‘the house of art’), a travelling troupe in Kerala. In fact, most others who were part of Kalabhavan’s initial five-member mimicry team along with him in the early 80s later became names to reckon with in Mollywood—while Siddique and Lal established themselves as two of the finest directors in the history of popular Malayalam films, Zainuddin and Rahman went on to become a well-known comedians.

Interestingly, Siddique and Lal were initiated into films by Fazil, another mimicry artiste-turned director. The due were assistant directors under Fazil before making their directorial debut with Ramji Rao Speaking (1989) which was one of the highest-grossing Malayalam films ever. Curiously, Fazil—who has directed cult films like Manichithrathazhu (1993) which has been re-made in Kannada (Aaptamitra-2004), Tamil and Telugu (Chandramukhi-2005), Bengali (Rajmohol-2005) and Hindi (Bhool Bhulaiya-2008)—also introduced Mohanlal, arguably the finest and most prolific among Indian actors. 

Equally interesting is Siddique’s collaboration with Priyadarshan who has preceded him in migrating to Bollywood and making it big there. The first engagement of Priyadarshan (who has directed super-hit Malayalam flicks such as Chithram (it completed 365 days in theaters) and Kilukkam) with Bollywood was not very successful—Muskurahat (remake of Kilukkam), his Bollywood debut was a flop. Though his second Hindi film Gardish fared well at the box office, it was Hera Pheri, the remake of Siddique’s Ramji Rao Speaking, which has changed the destiny of Priyadarshan in Bollywood. The film, starring Sunil Shetty, Akshay Kumar and Paresh Rawal, has earned laurels as a landmark Hindi cinema and was a huge hit at the box office. Subsequently, Priyadarshan has successfully remade four of Siddique’s Malayalam films, emerging in the process as one of the leading Bollywood directors.

Bodyguard has come on the heels of a bevy of Hindi films which were either made by South directors or remakes of South films. AR Murugadoss’ Ghajini, the remake of the Tamil film by the same name, was one of the biggest hits in Bollywood. South actor-director Prabhudeva’s Wanted (2009), starring Salman Khan, also became a super hit (it is the second remake of 2006 Telugu film Pokiri). The success of these films was replicated by Rohit Shetty’s Ajay Devgn-starrer Singam, a remake of the 2010 Tamil film by the same name featuring Suriya and Anushka Shetty and directed by Hari. Ready directed by Anees Bazmee, starring Salman Khan and Asin in the lead roles, is a remake of the 2008 Telugu film with the same name directed by Sreenu Vaitla. Bbuddah Hoga Terra Baap and Force are two other recent remakes. 

Right from Vyjanthimala to Rekha (yes, Rekha appeared as a child actress in the Telugu social satire Rangula Ratnam in 1966 and made her debut as heroine in the Kannada film Goadalli CID 999 in 1969) to Sridevi, the trend of South actors making a huge splash in Bollywood has always been around. Deepika Padukone and Aishwarya Rai also made their debuts with Kannada (Aishwarya-2006) and Tamil (Iruvar-1997) films. Newer imports from the South include Asin, Genelia, Priyamani, Surya, Vikram and Rana. 

With the success of Priyadarshan and now Siddique in Hindi, Mollywood directors making it big in Bollywood is emerging a perceptible trend.

A portentous journey to Bangalore

A portentous journey to Bangalore 

Travelling by Indian railways can be perilous. It took 22 hours for me to realise 

Jojo Puthuparampil

The cabbie’s call comes in at 3 am, the most inappropriate time to disturb one’s sleep.  Abusing someone who perturbs your sleep is not yet a criminal offence in India; so I give vent to my seething annoyance by mutely shouting over the phone—well, an audible expression of anger will wake my wife and the consequences could just be unpredictable—at the cabbie using all the crude epithets I can think of.    

Why the heck is he calling up at so early when he is expected t pick me at 4.30 am and the train I am supposed to board will leave for Bangalore City Junction from Chennai Central only at 5 am? Yes, I am asked to join my entrepreneur friend for an informal discussion on a possibly lucrative business deal but the event is still eight hours away. In the wee hours, when traffic is minimal, even the most inept driver can leisurely maneuver the 10-km distance from Ashok Pillar—this huge, eponymous column of carved stone is a major Chennai landmark though I am not sure if it bears any of King Ashoka’s edicts like the better-known ones in Vaishali or Lumbini—where I reside, to Chennai Central in 20 minutes flat. So why this unsolicited call? What is he up to? 

Thiruvizha, as the cabbie’s name turns out to be, is new to Chennai; hailing from Tirunelveli, this is his first tryst with a metro city. Six months after being hired by Fast Track, he is still not sure which Chennai lane will take him to heaven and which one to hell.  By the time I make intermittent calls to explain in broken Tamil the route from Koyambedu, where he is stuck, to my place, it is 4 am. After taking a quick bath and kissing Anguru and Nunguru, the two little musketeers who make my life livable, I step out in to what seems like utter void to find yet another reason to rekindle the lingering morning annoyance—the maverick night rain has felled the neem tree, the last green shoot in the premises after housing society head honchos a few weeks ago ordered all the trees in the vicinity to be cut for strange reasons. Thiruvizha rings up to say he has finally located the street where I stay; I ask him to wait at the gate and grumblingly cross the half-lit, muddied pathway to the gate. 

I am at Central by quarter to five. A stark contrast to the bustling Chhatrapati Shivaji Terminus (yes, erstwhile Victoria Terminus) in Mumbai—the peninsular city where I have lived for more than 10 years is the most humane place in the world, let me say—Chennai Central is ghostly this morning. Hordes of passengers, glued on to the central hall’s cement floor (a benign offering from Indian railways: rent-free bed space), wearily snoring; the lone porter in red dozing; and the electronic sign board announcing arrivals and departures erroneously blinking. The giant, glittering Manappuram Gold Loan hoarding featuring almost all the bigwigs of Indian cinema—from Mithun Chakraborty to Akshay Kumar to Vikram to Mohanlal—is the only sign of life. 

It is now thirty past five; no sign of the train I am supposed to board and no announcement either. The sleepy duty station master tells me the train, which comes from Guwahati, is an hour late and that it may either be delayed further or get cancelled, and condescendingly advises me to cancel my e-ticket and re-reserve a seat in 12639 Brindavan Express that leaves at 7.15. I run to the ticket counter in first floor of the adjoining building but all tickets for Brindavan are already sold out. I have no option but to wait for the uncertain arrival of 12510 Guwahati-Bangalore. Beating my pessimistic expectations, however, the train arrives after two hours—better late than never, you know. But my hassles have just begun. 

A couple of hours into the journey, the train comes to a grinding halt. I slip in to a nap to make up for the lost sleep. When I woke up after roughly an hour the train is still where it was. By now, my 60 something co-passenger has—with the deftness of a chronicler of maladies—weaved a reasonably convincing story as to why the train is halted and what will happen next based on the information he has collected from the TTE, tea vendors and rail-side hawkers. The train is rerouted to Tirupati, he tells me bluntly, as a goods train derailed before Arakkonam, roughly sixty kilometers from where we are, due to a flawed signal. 


Why rail signals are almost always flawed? Why railway ministers seldom visit accident spots and are perennially morally irresponsible for the way the world’s largest rail network is ill-managed? Why the lives of millions of Indian rail travelers are taken for granted?  Why there hasn’t been a scientific study yet on the art of railway signaling with clear recommendations on how to better it? A litany of questions chokes my throat but who to ask?

The goods carrier’s carcass is expected to be cleared only by evening; hence a free trip to the temple town, roughly 160 kms from Chennai. After touching Tirupathi and crossing half a dozen more stations in Andhra’s Rayalaseema belt including Pudi and Renigunta, the train will reach Bangalore, though nobody is guessing when. “You paid only for a five-hour trip; but now you can enjoy a possible day-long journey without paying anything extra,” chuckles the chronicler. Cracking jokes amid adversity is not a sign of calm impudence but sheer frustration, my friend. 

As uncertainty wraps me like a thick blanket, I call up my friend to say I am indefinitely delayed but he says he will wait. I recline to re-read Fritjof Capra’s The Tao of Physics which I first read as a teenager more than 20 years ago. An exploration of the parallels between modern physics and eastern mysticism is not the right topic for reading while stranded in a train, but again I don’t have an option. 

The train trundles along the length and breadth of western Andhra, making way for other rerouted counterparts. As Capra unravels the curious world of sub-atomic particles which don’t actually exist but only show ‘tendencies to exist’, 12510 crosses Tirupati by noon. The IRCTC cuisine is not encouraging, but I need to be alive by the time the train reaches Bangalore; so I munch the elastic chapattis and what is supposedly potato curry.  After a reasonably long nap, I return to Capra whose compelling narrative is the only solace. In the world of quantum physics, Capra tells me, the only certainty is uncertainty; according to Werner Heisenberg, who penned the uncertainty principle, the position and momentum of a sub-atomic particle can never be accurately ascertained—the more precisely one property is measured, the less precisely the other can be determined. 

This journey has turned out to be unpredictable than the most impulsive elementary particle.  So let me finish Capra’s chronicle. Like a panicked investor who wants to curtail losses than booking profits during a crisis of stock market confidence, I consume the book nonstop. An hour later the train touches Bangalore City Junction—exactly 22 hours after the cabbie’s call annoyed me.  

Even after being ditched and delayed repeatedly, why did I still consider Indian railways as a travel option? I don't believe in omens; but, curiously, was the felled neem tree a portent of things to come? Also, once I was told there were no tickets in Shatabdi, which is allegedly more reliable, why didn’t I think of flying (in which case my travel time would have been just 40 minutes) or boarding a Volvo or simply driving my trusted WagonR? 

When perils await, wisdom deserts you.