More fear than hope in industry eyes
More leeway in treatment of bad loans
Brands hold key to battle for mindspace

New Delhi, May 20: 
Corporate India isn�t in the best of spirits. That�s the message from a Confederation of Indian Industry (CII) business confidence survey that sees a bleak business climate in the six months to September, but says an upturn in exports will be a bright spot in the dark picture.

Of the 170 companies who spoke on the basis of what they went through in October 2000-March 2001 and what they expect in the first six months (April to September), 100 were pessimistic about their prospects. In percentage terms, a majority 45 per cent expect things to worsen, 32 per cent believe the weakness in demand will persist and only 23 per cent see a turnaround.

There is a sizeable section (37 per cent) which believes there will be bravehearts � companies which will buck the trend. A high 36 per cent is of the opinion that the present slowdown will continue, 27 per cent predicted tougher times and 37 per cent said they were getting ready to beat the blues with a series of cost-cutting and efficiency-boosting initiatives.

On exports, 48 per cent per cent of those polled said volumes increased in the past six months, and 56 per cent said they expect it to continue in April-September. While 24 per cent suffered a decline in volumes between October 2000 and March 2001, only 12 per cent expect that in the next six months.

Exporters say growing competition in the global markets could slow them down in their tracks. A high 61 per cent reckon price as the biggest problem, 42 per cent blame it on procedural bottlenecks, 36 per cent say the cost of credit is too high and 30 per cent feel hobbled by delays in customs clearances.

One of the most trenchant anxieties is a flagging US economy, which is seen by a large section of firms as something that will hit them in the short term.

The slowdown in companies, confirmed by CSO�s index of industrial production, has reconciled many to a pressure on margins in the short term and, perhaps, even a bottomline squeeze. But India Inc is counting on a reform-oriented budget and interest rate cuts to crawl out of the funk.

Much of the industry�s troubles are blamed on the lack of orders (51 per cent), poor sales abroad (31 per cent), global slowdown (34 per cent), high interest rates (43 per cent), inadequate working capital, reluctance to lend and poor infrastructure.

Tight fists

A majority of the consumer products manufacturers foresee a decline in general business in spite of strong production growth � an indication that people will be less inclined to spend. This will put pressure on profit margins in a knock-down effect that has makers of basic and capital goods running scared.

However, companies which manufacture intermediate goods and service firms are optimistic.


Calcutta, May 20: 
The Reserve Bank of India (RBI) has allowed banks to upgrade assets from sub-standard to standard if they perform well enough for a year after being revamped.

A sub-standard asset is a loan on which interest remains unpaid for two quarters.

The provisions made against these assets in annual accounts can be reversed after a year in a move which is part of an effort to relax norms on classification of non-performing assets (NPAs) � estimated at a staggering Rs 55,000 crore for the industry.

The changes, which come as a breather to banks, are expected to push up their capital adequacy ratio as well.

Other prudential guidelines on income recognition, asset classification and provisioning are unchanged.

A senior bank official said a sub-standard asset should not deteriorate during the year, which means the loan should be serviced on time.

�In case the performance is not satisfactory during the one-year period, the classification of the restructured account will be based on prudential norms before the payment schedule was restructured,� he said.

A senior Reserve Bank official said banks have been advised to classify loans where agreements on principal or interest are renegotiated or rescheduled after the commencement of production as sub-standard assets.

Sub-standard and doubtful assets cannot be upgraded unless it records satisfactory performance under the rescheduled or renegotiated terms.

In cases where commercial production has started but has not yet stabilised, it was left to the board of directors of those banks to decide whether there is a need to reschedule the loan and treat it as a standard asset, subject to certain conditions.

�Banks have told us that the old norms had been discouraging them from restructuring standard and sub- standard assets, but we believe the modified version will secure their repayments. The regulations have been reviewed in the light of the current international practices,� the Reserve Bank official further added.

So far, an asset was treated as sub-standard if:

The installments in which the principal was supposed to be paid is rescheduled for a specified period, provided the loan/credit facility is fully secured.

If the interest-payment plan is changed for a specified period, subject to the condition that the amount of sacrifice, if any, in the element of interest, is either written off or adequate provision is made against it. Even in cases where the sacrifice is by way of a write-off of the past interest dues, the asset should continue to be treated as sub-standard.


New Delhi, May 20: 
The opening up of the Indian market, and with it, the influx of a large number of brands jostling for the customer�s attention, is driving companies to focus more on brand goodwill.

Depending more and more on the goodwill of the brand to increase market share and consequently, profits, corporates, both multinational and Indian companies, are concentrating on customer-focused promotional activities rather than mass advertising. Though the budget for ad-spends are fixed for a given financial year, bills for promotional programmes can reach the skies depending on the type of programme the company wants for its brands.

Advertising campaigns are no longer restricted to television and newspapers but agencies also arrange street shows, get-togethers, film projections, school campaigns and celebrity shows, depending on the customers the product targets.

Rohini Jog, general manager, business development, Kidstuff Promos and Events said, �Companies are now spending 10 per cent of their budget on mass media while 25 per cent generally goes to promotional events.� She acknowledged events are costlier than mass coverage, but said these attract the specific clientele quite easily, adding the client�s bill can run from Rs 2 lakh to Rs 15 crore.

Kidstuff specialises in promotion among school children and youths. For Ponds, it came up with a Women�s Day programme for around Rs 3 lakh, while the �Britannia Khao-World Cup Jao� programme cost Rs 15 crore.

�We had a Rs 15 crore turnover last year and aim for a Rs 25 crore this year. Though our net profit was only 10 per cent during 2000-01, we will concentrate on our clientele and database rather than increasing profits,� Jog said.

Kanika Mathur, senior vice-president and director, Solutions said: �The promotional industry is very fragmented. It will mature with the market. Even now most of the business comes from segments like IT and retail. Bills are charged on the operational expenses. Last year we had a turnover of Rs 20 crore and expect Rs 40 crore this year.�

Navroz Dhondy, chief executive director, Percept said: �We were a public relations agency which also used to conceptualise mass media. But with changing times, we have created a group that can serve the client in-house.�

�Now, along with a media contact and advertisement team we have a celebrity management team, film productivity and event management. We look at integrated communication,� he added.

�In our kind of programmes clients even pay Rs 60 crore, but they get back five to six times more than what they pay.�


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