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It was around this time that the unravelling of the Escorts telecom story - which would end up severely wounding the main tractor business - started.

In his "Chairman’'s Message in the annual report of 2001-02, Rajan Nanda proudly declared that Escotel was all set to "“become our strongest retail chain with the largest numbers of channel partners, customer base and third most popular brand recall"”. The company had an operating profit of 40 per cent of revenues.

But when the time for bidding for more circles came. Escorts decided to go it alone. A wholly owned subsidiary. Escorts Telecommunications Ltd (ETL), was incorporated in 2001. Though First Pacific believed in the enormous potential of the Indian market, it was facing financial stress back home. Bringing in a third partner would have helped.

Nikhil Nanda also believed Escorts should limit its own exposure and bring in other investors. He, however, was unable to convince his father that 40 per cent of, say, a Rs 10,000 crore business was much better than 51 per cent of a Rs 1,000 crore one.

ETL bagged four circles - Punjab, Himachal Pradesh, Rajasthan and East Uttar Pradesh (UP-East). It had signed the licence agreement in October 2001 and had already done much of the preparatory work to roll out services in 2002-03. The licences, spectrum (the two were not bundled as had been the case when Escotel had got the first set of licences) and investment in infrastructure required an enormous amount of money. ETL had to resort to high levels of debt, which was guaranteed by Escorts.

The bank guarantees on the balance sheet of Escorts for the telecom business soon amounted to nearly Rs 1,200 crore. The tractors business, which was ailing at that time, needed a lot of infusion of (unds, but there was none to spare. Rajan Nanda was advised against this move by many people within and outside Escorts. But he was firm on going down this route and made light of these concerns: “"I'’ve got the licences, this will bring in partners, everything is taken care of.”"

That did not happen and eventually ETL never started operations in the four circles. First Pacific decided to exit Escotel for good, which meant Escorts had to find money to buy its stake. The 9/11 terrorist attack in New York threw global business in turmoil and the global telecom sector was particularly stressed. Escorts was negotiating with global investment banks, but was not getting the kind of valuation it thought it deserved. Then a deal was struck with the International Finance Corporation for 60 million in eight- year debt and 20 million for 49 per cent equity but ultimately-this, too, did not go through.

Kohli quit Escotel in 2002 and joined Airtel. Things started to go downhill quite fast, with Escotel starting to post operational losses. Meanwhile, Escorts was facing a severe financial crunch, with banks refusing to lend money for working capital for the tractors business. “"Sell telecom, get rid of the guarantees on your balance sheet and we will lend for tractors",” was a constant refrain Nikhil Nanda had to hear. There was no getting away from the fact that the telecom business - Escorts’s first big foray into the services sector - would have to be sold

In 2001-02, ESCOTEL was doing well. What were its achievements?

A) Largest number of channel partners

B) Third most popular brand recall

C) Both (a) and (b)

D) Highest operating profit