Cost cutting Indian ish-style

With corporate India bracing for an economic slowdown companies have started tightening their belts. First to come under the axe tend to be discretionary spending such as travel and entertainment and similar other ones such as advertising. Corporates have even begun squeezing their vendors to reduce costs per unit and bear a larger part of the inventory carrying costs. Thanks to the fall in price of commodities such as metals, the price of machinery and equipment too has fallen which has led most companies to take a close look at their capital expenditure plans to squeeze out savings.

All this is good news for their shareholders. After all boom times always lead to inefficiencies. When times are tough is when the maximum innovation happens and companies get leaner and fitter to compete on the world stage. However some Indian companies seem to be taking their belt tightening exercises a bit too seriously. Even as they keep their own aircraft for use of the top management ,some of India’s leading companies have taken the apparition of cost cutting to strange levels. Recently India’s largest private sector steel maker held a quarterly results conference at their office boardroom instead of a tony five star hotel followed by high tea as they usually do. Makes sense, to save on the hire charges at the hotel one would think. Except that it turned out that the meeting room did not really have the capacity to hold the number of journalists invited. Instead of a videoconference with the top management that runs the international operations (which account for two thirds of the consolidated turnover) the company had an audio call in. The company then took its economy moves to a perilous low when they decided to serve water only to the CEO and no one else!
The steel company that trades at a historical price to earnings ratio of less than two times but with economy in even serving water this writer was definitely left questioning whether the management knew that the earnings were going to turn into a loss instead.

Another company from one of India’s oldest and leading business families similarly had its quarterly results press conference where it announced its highest ever sales and net profits. The non ferrous metals company celebrated the achievement at the groups corporate HQ by keeping a mid sized bowl of cashews and badams for the legion of reporters that had thronged the results announcement. Needless to say the dry fruits couldn’t get around.

Recently a Tata group company announced that its profits had crossed Rs 100 crore for the first time in its history. But the company officials seemed reluctant to serve anything except tea at its results conference (coffee drinkers can go to hell). A jug of water hid well too was replenished only after very public and repeated admonishments. With the Raju revelations of fictitious cash and assets and profits one wonders whether one must read more into these attempts to save money on water!