However, the week witnessed another event of great significance to the investors namely the buying up of India World Portal site by Satyam Infoway a company, which made an ADR issue some time back. The deal involves a consideration of nearly Rs 500 crores to Mr Rajesh Jain an entrepreneur who started his venture only in 1995 with a capital of Rs 20 lakhs. Even though Indian public has no stake in either India World or Satyam Info, the deal has a message of great importance to the investors. It clearly indicates that the new formula for success is Technology and Innovation. Many investors would have wondered that if India World had been a publicly held company, they would also have reaped a part of the benefit that the entrepreneur Mr Rajesh Jain reaped.

The transaction has also highlighted the enormous commercial benefit that a good portal can provide to its owners merely by the traffic it generates. The lesson for the investors is that other things being equal a company having a clear Internet strategy, deserves a valuation higher than others. One never knows when a windfall can turn such a company into an India World. Some of those companies may not be industry leaders today but if their Internet strategy is sound, they may soon be. It is for this reason that Bank of Madura shares which are quoted around Rs 100 at a moderate P/E needs a second look.

This south based Bank is a small private sector Bank with a deposit base of only Rs 3013 crores as on 31 st March 1999. It has a small capital base of Rs 11.77 crores on which it earned a profit of Rs 30 crores in the year 1999. During 1998 the Bank had a marginally higher profit at Rs 34 crores which was achieved on a lower asset base. However, during the current year, the net profit of the Bank seems to be back on the upswing. It has during the first half of the current year earned a net profit of Rs 20 crores, up 16 per cent from the performance of the corresponding period of the previous year. 

Even though the financial performance has not shown any spectacular improvement, the low P/E ratio of around 4 at current price level makes the share primarily attractive. What is more important however is the promise for the future with some very attractive investments that the Bank has made in upgrading its services and exploiting the IT related opportunities.

The Bank has already made some progress in the marketing of Credit Cards under a tie-up with ANZ Grindlays Bank. The Bank has also decided to extend the marketing expertise that it has gathered in this venture to take up marketing of Insurance products as and when opportunities open up in the field. This would be relevant when foreign Insurance companies enter the Indian market after the passage of the Insurance Regulatory Bill.

Besides these traditional business lines, the Bank has distinctly moved into the Internet era by forging an alliance with Satyam Infoway to start a E-Commerce portal website. The Bank has made an investment of Rs 6 crores in a joint venture project for this purpose.

Additionally, the Bank has also decided to invest US $ 3 million in a venture capital project which will focus on the IT industry. The Bank is also in the process of floating a company for the purpose of exporting Banking software. 

These decisions indicate a desire to exploit emerging business opportunities in the millennium and if successfully implemented, can take the Bank ahead of its competitors. Even though the Bank would in most of these cases, depend on the technical expertise of its joint venture partners, it can leverage its own experience in the areas of Financial Marketing and Venture Capital to build a prosperous future for itself and its share holders.

The strength of being in the traditional industry with the vision and a perceptible action plan, makes this share worth considering for investment at the present price levels.

Na.Vijayashankar

3/12/99