Essentially this meant retreating from active work, family life and worldly trappings into a life of frugality and meditation, preferably deep in the forests, far from prying eyes. Call it the Indian idea of retirement, if you will. In fact, the concept of retirement varies from culture to culture. Sometimes it also depends on the loose change in the pocket to the snug cash balance with the bank. ET wrote about this inimitable itch (‘Vanaprastha at 50’) in its Cosmic Uplink columns about a week ago. Whatever the circumstances, ‘Vanaprastha’ has been a long-followed tradition in Indian society and is now becoming acceptable even to India Inc. Infosys co-founder NR Narayana Murthy wrote his own unique Vanaprastha software. Likewise, Bajaj Auto chief Rahul Bajaj decided to park himself in Parliament.
Sunil Bharti Mittal had announced in this newspaper a couple of years ago that he wanted to give it all up and do something completely new. In fact, as the first step towards achieving that goal, he has already decided to give up the grind of running the company on a daily basis and decided to instead focus on “mentoring, strategy and governance.” So, here’s some unsolicited advice to Mr Mittal on doing some nifty retirement planning.
And, a large part of that depends on the recently signed Vodafone-Essar deal. Here we go. The Ruia family threw a party on Thursday evening, on the lawns of their sea-hugging bungalow in South Bombay, to celebrate the completion of the Vodafone-Essar deal. Some old rivals, some old telecom competitors, some new players, bankers, consultants, promoters… they were all there. In the middle of the party came the time to make the formal announcements. Vodafone’s Arun Sarin made a telling statement: “This deal is not for us, not for Shashi (Ruia) or Ravi (Ruia); this deal is for the future generation. It’s for Smriti (Ruia, Ravi’s daughter), Rehan (Ravi’s son), Prashant and Anshuman (Shashi’s sons)!” What was he saying?
Reading between the lines, Arun Sarin could be requesting the Ruia family to hang in there, and not get into a hurry to sell their 33% stake Hutch Essar. One reason could be the stretched finances. After having paid top dollar for a 67% stake in the Indian telecom service provider, Vodafone might need some time to breathe before it can cough up another $5bn-odd for the Ruia stake.
And, maybe in the meantime improve the valuation of the company.
So, where does Sunil Mittal fit into all this? Well, at some point in the future, it is inevitable that Vodafone-Essar (V-E, as Hutch is now called) will have to look at the consolidation game. So, will Bharti. With Vodafone being the common thread between the two companies (Vodafone also owns around 4.5% in Bharti), and with both Bharti and VE agreeing to set up a common company to share the infrastructure, it will make eminent sense for all the parties concerned to agree to a merger. The merger will also be driven by the need for large, and continuous, dosages of capital infusion.
The merger, as things stand today, is bound to happen. Not today, not tomorrow, not even the day after. It’s going to take at least 2-3 years before the pot starts boiling. And, when it does, the valuations are bound to be higher than today. Under the exit agreement, Essar has the option to sell its 33% V-E stake for $5bn between the third and fourth year from today, or even a part of the stake at a price to be valued independently.
Given that the valuation would have soared by then, and with the Ruia family not actually running the company, it is quite likely that the Essar stake will be sold. That would clear the way for the merger to go ahead, Sunil Mittal’s stake in the merged company will be immensely valuable. Post the merger, V-EBharti will easily become the Number One telecom company in the country. As the pecking order stands today, Bharti tops the league tables, with V-E coming in at No 4.
The interesting question is: if he does opt for “Vanaprastha”, what will Sunil Mittal do with his stake? The mind boggles at the vast opportunities at his disposal. Mr Sunil Mittal, in effect, will be able to fashion his own Vanaprastha, with doses of entrepreneurship, stewardship and CSR. That’s corporate retirement, Indian style, for you.