Wednesday, December 12, 2012

Wrong said Fred!

$99 billion purchase of ABN Amro – suicidal!

To every proverb, there is an anti-proverb; and in capitalism too! Here’s what Fred Goodwin (CEO, RBS) said about the October 2008 purchase of ABN Amro, “We are happy we bought what we thought,” and this was the anti-statement from Philip Hampton, Chairman, RBS, “The ABN Amro acquisition can’t be undone… it was the wrong price, the wrong way to pay, at the wrong time and the wrong deal!” The two contradictory statements in a way, say it all. The consortium (RBS, Fortis and Santader) with synergy expectations of €2.28 billion annually, ended up overvaluing the financial entity and paid 3x of book value, a blood-freezing $99 billion; and this came at a time when other banks were trading at book value! ABN Amro had sold its LaSalle Unit to BofA, therefore it made no sense for the consortium to pay such a hefty sum for the under performing bank with emaciated Asian operations. It all came down to one reason – ego; of not allowing Barclays to win. Wrong price, wrong value, wrong time & well... a completely wrong deal.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Sunday, December 9, 2012

Hotel Riga (riga)

Overlooking the picturesque Opera Garden, this magnificent hotel is located in the heart of Riga, and is adjacent to the National Opera and Freedom Monument. Offering ease of communication, courtesy its prime location, the hotel is a short walking distance from most tourist spots. It’s probably one of the few elite hotels which cater to the need of those who love travelling with their pets. With its distinctive charm and hospitality, Hotel Riga would offer an unparallled experience of heritage, luxury and warmth.

The view: Hotel Riga provides a wonderful view of the city. It offers a beautiful sight of artistic buildings, which speak volumes about the city’s cultural heritage and a more than keen inclination toward art and architecture. Archi type: In the early days, the hotel’s building was destroyed during the war; it has since been refurbished and artistically done-up. The Latvians have restored the true essence of their art and have selectively depicted it through choicest furnishings throughout the hotel. Bon appétit: Fine dining and sumptuous meals can be savoured at the signature restaurant Palm Garden, which serves exquisite European cuisine. Other restaurants such as the Palm Terrace and the Lobby Bar are ideal for a drink and a light snack.

Around the corner: The hotel is well located and connected. It is no more than 500 meters from the central train station and even closer to the bus and tram stops. Paying a visit to a nearby art gallery or a museum would be the ideal experience. From under the carpet: People here are not very fond of outsiders and do not mingle a lot. The vacation would be a lot more fun if you go with a group of friends.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Friday, December 7, 2012

And ‘Sam sung’ a new song!

Shin brings useful capabilities to the job, but he will have to drive a change in SEIL’s positioning strategy

Thrift is a virtue on the fag end of the business cycle. So is multi-tasking, as that is the standard way of providing more value for the company. The leaders at Samsung seem to be leading from the front in that regard, if the recent leadership change in Samsung is anything to go by. After a stint of two years as President and CEO of Samsung South West Asia, H. B. Lee has moved on. Lee, who was a major in Business Administration from Seoul National University, had a prior experience of 31 years at Samsung Electronics. Under his leadership, the company was able to flex its muscles in the LCD segment and also captured the number one spot in the colour laser printer category (the company itself claimed a market share of 30.9% market share in India in September 2008). He has been replaced by Jung Soo Shin as the President and CEO of Samsung South West Asia Operations. However, unlike Lee, Shin would be multi-tasking, as he would also take in the responsibility of CEO and President for Samsung India Electronics Ltd. (Lee had no direct executive position in SEIL).

R. C. Chopra, senior adviser, CII, believes, “This is a proactive step and would enable SEIL to reap in the benefits of optimisation.” But one should not overlook the fact that India is a challenging market. Undeterred, Shin claims, “It will be my endeavor to leverage on the success achieved by my predecessors in this high potential Indian market and lead the Indian team to make Samsung a top electronics brand in the country.”

However, these are turbulent times and even Samsung Electronics Co. Limited is grappling to come out of it. It posted its first operating loss – a whopping $682 million for Q4, 2008. “The major reason for the loss was its memory chips unit, primarily due to massive falls in prices in October, November and December,” informed Kim Geesoo, Principal analyst, Goodmorning Shinhan Securities.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Thursday, December 6, 2012

Rs.3,600,000,000,000; and in just a month?!?

Will MCX continue to rise along the hyper-growth trajectory it currently is on? deepak patra explores...

While investment in commodities across world exchanges has reached sky-scraping heights, the same in India is just breaking through the ground! Having said this however, it is also a matter of truth that the growth of the segment, in the country, has been phenomenal over the last couple of years; much credit for which goes to the Multi-Commodity Exchange of India (MCX), which developed a ‘quality’ platform to enable commodity trading in India, while at the same time ensuring a healthy incremental advancement and maturity. But, the question in everybody’s mind at the moment remains – will MCX be able to live long and strong on the radar of global commodity traders, in precisely the fashion that Indian stock exchanges have managed to make that thumping impact on global investors?

Since inception in November 2003, MCX has come a long way to become the number one commodity exchange in India, clocking a mind-boggling monthly turnover of Rs.3.6 trillion on average, and garnering a total market share of 72%. No doubt, MCX has added the much-needed user friendliness and global linkage to the Indian commodity trading scenario, thereby widening options and offerings for the traders. But this is just the start of a long journey, as Joseph Messy, MD & CEO, MCX tells B&E, “The Exchange has taken pride in providing the necessary support and regulatory infrastructure for orderly use and functioning of the market. In that respect, considering the size of Indian physical market, we have a long way to go to ensure that benefits of this market percolate to all sections of the supply chain.”

Inorganic growth strategies have always been key to MCX’s rapid growth. The comex never seem to miss an opportunity to forge a tie-up with a global comex – be it in any symbiotic form – and therefore, this either helps in increasing its product portfolio or grants it an easy entry into foreign territories. 
 
 
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Wednesday, December 5, 2012

A risky cover?

LIC’s market investments are well timed, apart from IRDA norms

The flickering diya, embalmed by two hands continues to be trusted by millions. It is perhaps this power of trust bestowed upon LIC (Life Insurance Corporation of India) that has given it a strong competitive edge over its peers; reasons enough why it continues to successfully dominate the insurance sector, despite so much of private and foreign money flowing in.

Policy holders normally associate LIC with safe, secure investment and risk cover. So it would come as a surprise to many that LIC, the ‘black horse’ of the stock market (interestingly, whenever the stock market is in a problem, LIC is one of the companies approached by the government to infuse liquidity) has decided to invest a whopping Rs.170 billion in the market when the Indian equity market is perhaps in one of its worst phases; given that FIIs have deserted it (for the last one year they have been net sellers to the tune of Rs.572.5 billion) and the Sensex has plummeted by almost 55%. Insurance instruments are often known for their aversion to markets, and this move might have caused many policy holders to wonder if LIC is actually taking a step in the right direction.

Well this has in fact been the trend for quite a while. T. S. Vijayan, Chairman, LIC comments, “Yes it (LIC’s exposure to equities) is continuously growing. I believe, of all the listed companies’ market capitalisation, there may be around 4% with us. It is huge money.” Actually, the current market scenario presents a unique platform to build a robust portfolio and hold stocks for two to three years. LIC has always been a ‘long term player’ and considering the fact that valuations are attractive, LIC is leaving no stone unturned to buy at the current lower prices.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Monday, December 3, 2012

WORLD: RECESSION AND HYPE

Tell us please, where is recession?

So while NBER struck panic buttons and started calling some economic activity a “recession” somewhere in the middle of 2007, data was strangely not supporting their claims circumstantially.

From Q2 of 2006 till Q3 of 2008, we provide you the running figures of US real GDP growth finally available: 2.6%, 2.2%, 2.5%, 0.1%, 3.8%, 4.9%, 0.6%, 1%, 2.8%, and 0.5% respectively. Technically, the US has still not entered recession. It’s a similar case with Europe. And India and China are another story altogether. It leaves us stumped to the reasons why NBER might have played the soothsayer’s flute when none was required. Mark Mobius, MD, Templeton Asset Management, EuroFinance and some others have confirmed that recession, technically, has never happened. And NBER? They claim that they consider “a wide range of indicators of economic activity [other than GDP].” And how are these ‘wide range of indicators’ weighted against the GDP? Here’s the clincher: “There’s no fixed rule for how the different indicators are weighted.” Ah Shylock, beauty is in the eye of the beholder, and the devil lies in the detail.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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A brief history of character!

On January 20, 2009, Barack Obama was sworn in as the President of the United States; a commentary...
 
With tectonic shifts in the US politics power play, the long-standing question of US competence seems to be resurfacing. Let us clarify. That Bush was incompetent is not a Nobel Prize winning theory. But will US be seen again as an intellectually social nation, is the question! Not only Americans, but the whole world is waiting for Democrats to come to true power and refurbish America’s tainted image. Let’s be honest, US, through decades, has built its reputation on genuine achievements that took years of some prim and somewhat improper planning.

In contemporary history, it all started from the first nuclear weapon US gave to the world, through what is now known as the Manhattan project. Then came their Marshall plan in 1947 [officially the European Recovery Programme], which focussed on fortifying a stronger foundation for Western Europe, and warding off communism after the second World War. Beside these two war-oriented initiatives, the US also proved its competence in the field of science, technology and arts. This is evident by the number of Nobel Prizes that Americans grabbed – a jaw dropping 309 since 1906 [an average of 3 prizes per year] making it the top contestant in the race. America also developed remarkable institutions of higher learning [Harvard, MIT, Princeton, Yale] giving depth to what ivy league defined. Perchance the most appreciable move was the development of a society that redefined the meaning of melting pot. From the criminally racist days of Cassius Clay, most of US transformed uniquely to welcome all ethnic groups, religions and races.

Today, however, the scenario seems different and of course bleak, and the growing acceptance is that nonfeasance is a major risk to America’s global image. The last ten years have been enough to vividly showcase the scars America has received and encouraged. The Iraq war and the much publicised absence of mass destructive weapons was the key.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Sunday, December 2, 2012

Call ‘em American ‘Press’idents!

The ‘press’ loves US Presidents... [They’re their favourite victims!]

What comes to mind when the name ‘Bill Clinton’ is shot at you? Obviously, not the 4-day bombing campaign against Iraq (coded ‘Desert Fox’ in December 1998), not even his NATO bombing campaign against Yugoslavia (in 1999), not even one of his well-delivered speeches, and not even his crave for junk-food! So what’s it? (You know it already, don’t you?) But of course, Monica Lewinsky! Even today, the world remembers a nervous Bill Clinton’s interview(s) broadcasted across channels, the photographs of Lewinsky on tabloids, newspapers and posters... and worse, vile discussions everywhere! The ‘press’ overshadowed his reforms and fiscal & legal acts to brand him an ‘immoral’. But was he the only ‘presidential-class’ victim of the press?

For a long time in America’s democratic history, American Presidents, irrespective of their political parties; have condemned the media for being too biased against them. In payback mode, each time America faces a problem, the press blames it on the President. During the Civil War, Abraham Lincoln accused the press of favouring the Southern states, against his corrective initiatives. The 37th US President, Richard Nixon was impeached from office after the press was at his heels for his alleged involvement in ‘Watergate scandal’. Sadly, the press praised him little for putting an end to American involvement in the Vietnam War (having removed all of 543,000 US soldiers from Vietnam, 1973). He later confessed, “I gave them [the ‘press’] a sword and they ran it right through me.” Lyndon Johnson, Ulysses Grant, Harry S Truman, George Bush Sr. & Jr. & ‘all’ modern day US Presidents have faced the ‘negative’ publicity fire. [As per the widely circulated HNN Survey 2008, 61% respondents rated Bush Jr. as the “worst president ever”.]


Source : IIPM Editorial, 2012.An Initiative of IIPM, Malay Chaudhuri

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Friday, November 30, 2012

INTERNATIONAL TRADE: LESSONS FROM INDIA

Will others learn from India’s logic of not ignoring newer markets?

India’s clientele is also geographically diversified. It strategically eyed China and other developing countries in West Asia as its prospective consumer markets. As a result, when almost all the countries were suffering, India more than compensated any possible loss by dealing with emerging economies and mature economies alike. Today, China is India’s largest trade partner; trade value between the two nations touched a whopping $37.9 billion in 2007.

For now, the chance of India achieving the $200-billion export target set for 2008-09 looks slim, for that would call for India to grow at a stupendous 25% y-o-y (in these recessionary times?!?). Nevertheless, these are times to sustain and not really to grow empirically!


Source : IIPM Editorial, 2012.

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Thursday, November 29, 2012

MAHARASHTRA: MNS AGITATION

Raj is preparing his political 'parantha' in the name of Maratha

" While talking to B&E, MNS, VP, Vagish Saraswat accused Lalu of taking sides in Railway exams and discriminating against Maharashtrians. He said, "Advertisments for Railway exams don't appear in Marathi papers. How then do you expect Marathis to know about it?" Rubbishing such accusations, a senior Railway official said that the Railway Admission Board had come up with ads in Loksatta and Lokmat (Marathi) on November 3, 2007 and February 9, 2008.

Saraswat even said that during Lalu's current visit to Mumbai, MNS had tried to talk to Lalu, but when they failed, they were forced to take such a strong stand. All those who talk about being the saviours should not forget that reactive politics will not take us anywhere. Thousands have been burnt in this flame and many have lost their dreams. Raj Thackeray's politics may be able to take him somewhere but it will not take the people anywhere. And that is for sure.


Source : IIPM Editorial, 2012.

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Wednesday, November 28, 2012

Damn you Saddam!

If war could kill hatred, war doctrines should have received Nobel prizes; but perhaps one wouldn’t have to wait for even that to happen...

If mankind evolved from ‘Homo habilis’ to ‘Homo sapiens’ and if with each generation the complexity, intelligence and power redefined itself, the same can be attributed to the evolution of war. With passing time, the doctrine of war has redefined itself. And we found this special B&E double issue [on how to save capitalism through social responsibility] perhaps the rightmost forum to lament as usual on why war is the perfectly correct solution for peace... You actually believed that for a moment, did you? Well, insanely, so have some billions of the global population at one point of time or the other. But back to our laments...

The doctrines of war are jut not about war strategies but are like the eyes that saw and experienced changes in international societal system. When man was not even man and was more of an ape, he had to fight it out to survive. Being the weakest of the lot, [without any kind of expertise] it was only his shrewd mind that saw him through. Yet, that was perhaps the last time ‘men’ united to fight for their own survival, realising very soon that their biggest nemesis for all times would not be anyone else but their own brethren. That was when George Bush was born... Er, alright, we jumped the gun. He comes in much later [in our fourth story, actually. Pardon our impetuous nature.]

Fighting other species was perhaps far easier, it was fighting one’s own brethren that took the goat as that required constant upgradation of skills, and the realisation that ways and means would have to constantly evolve to kill that damn Saddam.


Source : IIPM Editorial, 2012.

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Tuesday, November 27, 2012

GLOBAL ECONOMY: SUBPRIME EFFECT

Beyond everyone’s forecast, European economies are now the biggest sufferers of the US subprime crisis

As a matter of fact it is estimated that repossessions have already doubled in UK and some other European Markets. The potential credit losses will by pessimistic calculations lower the aggregate capital adequacy ratio at European banks by about 150 bps.

IMF’s Global Financial Stability Report precisely brings out the fact that domestic banks in Eastern Europe have built large negative net foreign positions as credit growth has outpaced domestic deposits. Given the size of bank losses and disruptions in bank funding and securitisation markets, Europe certainly seems to be at a greater risk. It is not only UK or Eastern Europe, which is witnessing renewed symptoms of the crisis. Italy’s economy has started shrinking, its GDP went down by 0.3% quarter-on-quarter in April-June 2008. German economy too shrank by 0.5% during the same period. Moreover, the whole Euro zone economy shrank 0.2% during Q2 2008.

After this if the emerging economies, which have been so far resilient to the shock, do not jump into brainstorming to find a way out, very soon they will find themselves in the shoes of the European economies. Agrees Olsen, “Asian economies have been affected both directly, through their holdings of US mortgage-backed securities, and indirectly, via changes in investment and consumption patterns.” As a matter of fact the declining growth in US and Europe will have a negative impact on the exports of the emerging economies. In fact depending on the trade and financial links with the US, a 1% decline in US growth will lead to a 0.5-1% decline in the growth of emerging economies. Thus, instead of just waiting and allowing things to happen on their own, developing countries must find their way out of the ‘infectious’ economic crisis. Else, looking at the developing nations Jean-Claude Trichet, President, ECB will soon be heard saying, “I know what you thought...”


Source : IIPM Editorial, 2012.

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Sunday, November 25, 2012

Tyres sold in India are Indian!!!

This is the motto of tyre consumers in India as 3/4th of tyres sold in India are Indian!!!

 They clearly adopted a ‘go-slow’ strategy. Take Goodyear India for example, the third-largest tyre company in the world with a massive 17% global market share. Unbelievably, the same Goliath has a meager 6% market share in India! And now as a revival act, it plans to invest $20 million to expand capacity at its Aurangabad facility. Similarly, Bridgestone is mulling over setting up a truck & bus tyre manufacturing facility in India over the next 3 years with an estimated investment of $200 million. Clearly, they need to invest more...

Even the ‘technological’ superiority of internatinal players is fast diminishing as Indian players work hard ‘technologically’. Take Ceat for instance. It is scouting for a tie-up with Pirelli (Italy) in the truck & bus tyre category as Arnab Banerjee, VP–Marketing, Ceat, explains, “We are looking for a foreign partner and it is purely for the purpose of gaining the technological edge.” MRF too plans to expand its capacity with a capex of Rs.5 billion. However, there is a common challenge in the name of inflationary pressures on input costs in the auto & tyre industry, which is causing a slowdown in the industry. However, industry experts are positive about the future as Revati Kasture, Head, CARE Research, points out, “The tyre industry will register a growth of 9-10% in the next five years. The truck & bus and LCV tyre categories are expected to register a CAGR of 8% and 14% respectively.” Undoubtedly, there is a ‘goodyear’ awaiting for the Indian players. Hopefully it’ll bring smiles to global giants too.


Source : IIPM Editorial, 2012.

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Thursday, November 22, 2012

The Caribbean Monk Seal has been sealed

The fate of the Caribbean Monk Seal has been sealed, for good!

The seal was last seen in 1952 in between Jamaica and Mexico’s Yucatan Peninsula, never to be seen again, and, only now, to be officially declared extinct.

“There is increasing loss of habitat as animals are becoming extinct, leading to huge amount of degradation and fragmentation of habitat, which needs to be stopped, and due to prey biomass many species are becoming extinct. The Caribbean Monk Seal’s extinction is of even greater disgrace as the reasons are man made and that day is not far when humans will cause a lot of species to fight for survival. These days due to Toxic Waste all the marine species are endangered. This needs to be stopped sooner than we think because due to weakening of habitat we might also have to fight for our existence,” concludes a representative from the World Wide Fund for Nature (WWF).

Worldwide, population of the two remaining monk seal species is declining. We hope that we have learnt from the extinction of Caribbean Monk Seals and are able to provide for the protection of the Hawaiian and Mediterranean Seals which are on the verge of extinction. With just about 1,200 odd remaining, the threat to these species is very complex. We need to save them before they become entangled and drowned in marine debris and fishing nests.

Extinctions are happening at an alarming rate and it’s a pity to see that nobody really cares as we rapidly strip the earth of creatures that took millions of years to come into existence. Until then, let peace be upon the Monk Seal.
 

Source : IIPM Editorial, 2012.

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POLITICS: MINISTRY ALLOCATION

Is portfolio shuffling a born trait or can it be learnt? B&E’s deep review

Recently, Mayawati fired her Fisheries Minister, Jamuna Nishad, out of her dissatisfaction as he was found ‘allegedly’ involved in a mob attack that resulted in the killing of one policeman [One wonders how she forgot so fast the riots she allegedly incited against Reliance Retail’s outlets]. But she intelligently placed another Nishad leader in the Fisheries Ministry to ensure the Nishad community – which is a big caste in Uttar Pradesh and a key vote bank for Mayawati – stays with her. Though Yale might not vouch for it, gifting ministries to different party members and leaders is both an art and a science in India. Can this be learnt or is this purely a born trait?

Well, it’s quite tough to say. While previous research pointed to this being a born genetic trait of the species called politicians, recent findings also point to a shrewd species called businessmen that’s learning the ropes too fast...


Source : IIPM Editorial, 2012.

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Tuesday, November 20, 2012

Made a mistake? Make another...

Loan waiver clubbed with fertiliser subsidy proves the point

A debt waiver of Rs.60,000 crore is being seen as an important step to win over rural hearts, where the major chunk of the vote bank lies. And though this might appear to be a realisation of the farmers agony in the Delhi power circle, the only thing left to be said is that was ‘myopic’! The farmers would have benefited more, had the money been utilised to improve rural infrastructure. The agriculture sector requires revolution, not just reforms. On May 23, 2008 the loan waiver was increased to Rs.716.80 billion from Rs.600 billion. A re-estimate shows the number of beneficiaries have risen from 30 million small and marginal farmers to 36.9 million! But then it’s also no more a hidden truth that most of these farmers are not the real beneficiaries of these schemes as most of them have small or negligible land holdings. And for that matter, these farmers [with small land holdings] have to rely on local moneylenders.

Even India’s fertiliser subsidy has been increased by 135.5% [to Rs. 95,000 crore] this fiscal as the government seeks to shield farmers from rising international prices. A good thought indeed, but then lets understand it from below the surface. The shares of fertiliser firms like Tata Chemicals Ltd, Rashtriya Chemicals and Fertilisers Ltd, National Fertilisers Ltd et al rose by 7% after the announcement. This clearly shows that this increase will do more good to the fertiliser companies rather than to the end users. These subsidies, as always, will never reach the farmers and will be adjusted by the manufacturers & middlemen in the supply-chain. All looks perfect on paper. However, if they are not implemented well, they could produce more adverse effects than anticipated.


Source : IIPM Editorial, 2012.

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