Business Briefing 29/08

IRCTC clocks $1bn in revenues; Fortis acquisitions; Toyota’s small car…

For too long e-commerce has been a mantra and nothing more. It has taken the Indian Railways Catering and Tourism Corporation to change it. The state-run arm, which till some years ago was best known for serving horrid food on trains, logged $1 billion in revenues last year. Every third railway ticket sold today is booked online. They undertake a mind boggling 300,000 transactions every year. For a website that breaks down so often, and is so badly designed, to pull off such sales is an incredible feat. “This is the coming of age of e-commerce on the consumer side in India. It is no ordinary achievement. Should they upgrade the site to world standards, they can easily grow their revenues even further,” says Mahesh Murthy, who runs Pinstorm, an Internet consultancy. Consumer spending online is new in India. Indian air carriers log estimated online ticket sales of $3 billion a year. Apparel sales online (be it Shopper’s Stop or eBay) ring in about Rs 50 crore. Some Indian commodities portals do business worldwide of about $1 billion. Plus, at least two new big players are about to offer more than 3 million books online. All said, India’s online business is on the verge of take-off. However, three considerations are still holding e-commerce back. The first is the issue of privacy and net safety while using a credit card. The second is the logistical drawbacks that delay shipment of web transactions. And lastly, there is the issue of connectivity. Net penetration remains pathetic in India. However, with revenues reaching critical mass at long last, things could click sooner than you might think. The future could yet belong to smart firms that go online in search of revenues.

The race to lead the multibillion dollar organised healthcare business in India just got hotter, with Malvinder Mohan Singh’s Fortis acquiring ten hospitals from the pharma group Wockhardt for Rs 909 crore. The deal closes the gap between Fortis and market leader Apollo Hospitals which has a capacity of close to 10,000 beds. With the buy, Fortis has fast-tracked itself to its stated target of 6,000 beds by 2012. In one stroke, it helps the North India centric operations of Fortis gain a foothold in the lucrative southern and western markets. With deep pockets, thanks to the Rs 10,000 crore the Singh family netted by selling Ranbaxy to Japanese giant Daiichi Sankyo, and a healthcare market set to boom, Fortis is a firm worth watching.

It was a car that was supposed to end Maruti and Hyundai’s stranglehold over the Indian market. News of the world’s largest carmaker Toyota introducing its small car brand Daihatsu in India makes the rounds at regular intervals, and it has done so again. At the launch of its new SUV, Fortuner, Toyota executives again indicated that they’re “exploring” the option.  Entering the small car market in a country like India seems a no-brainer. But Toyota has been content with the high-margin SUV and premium sedan segments. A player known to be a game changer in any new market that it enters, Toyota prefers a slow-and-steady approach (Ohno quality circles again?) over a zip-zap-zoom India plan. Some senior executives, though, feel the company is five years too late to India’s small car market. Might it try to upstage Honda’s hybrid Insight with a new Prius?

The IMF and World Bank have often lectured developing countries on the need for prudent fiscal management. India’s high fiscal deficit has always raised concern among western investors, and has even injured its sovereign debt ratings. But now, the US Administration estimates that its fiscal outlook in the aftermath of its bailout packages is worse than expected.  President Obama’s Office of Management and Budget has raised its 10-year tally of deficits expected through 2019 to nearly $9 trillion, or close to nine times India’s current GDP. That would represent 5.1 per cent of US GDP. Obama has blamed past governments for this shaky state of affairs, but the deficit won’t come in the way of increased healthcare spending, he promised in the run-up to his election.

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