From bureaucratic whim to business sense

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New Delhi, Oct 1: directors on the company board, ensuring that decisions are taken based on sound business principles rather than on bureaucratic whim.

“The company keeps performing poorly, but there is no proper action taken. Once shareholders stand up and ask uncomfortable questions, the management won’t be able to get away with it,” says Romal Shetty, an analyst with KPMG.

Pradip Baijal, former disinvestment secretary and former Trai chairman, feels that putting the company in the public realm would also provide objective views on the company’s performance rather than the current subjective ones. “BSNL is a very big company. It is doing well in some areas, not so well in some, and badly in a few. The problem is that we in government assess companies according to our own notions, which is not right. The right approach is to put the company in the market and get the public perception,” said Baijal.

Employee unions, however, are not convinced as they continue to view an IPO as back-door privatisation. “No money through the IPO will come to BSNL, it will go directly to the government,” said BSNL employees’ union general secretary VAN Namboodiri. The company does not need funds as it has a Rs 35,000-crore cash surplus, Namboodiri added.

However, the flaw in Namboodiri’s argument is that the IPO would not be for immediate funds, but for future investment--important given the dipping profitability of the company. Secondly, the IPO is seen as a way to ensure that the company is run as a corporate entity, rather than as a government department, which as turned the extremely profitable company into almost a sick unit.

But little will be achieved on the IPO without the buy-in of the employees’ union and no one knows that better than the company’s CMD, Kuldeep Goyal. “An IPO has its advantages. No one can deny it. However, we are in no hurry and are trying to reach a consensus with the employees,” he said.

However, time is a luxury that BSNL does not have and the biggest loser as the company’s valuation erodes further is the government—and the taxpayer—itself. Analysts have valued BSNL at around $40 billion, which is roughly the same as the country’s largest telecom operator, Bharti Airtel. However, Bharti’s valuation is based largely on its earnings, brand and clarity of future business plans. In stark contrast, BSNL’s valuation primarily accrues from its fixed assets.