Wednesday, December 12, 2012

Wi ran outta ca$h, Oh! Jush like datt...

Bankruptcies in US companies have continued...

History is a great teacher, but we are among the poorest pupils, aren’t we? For if we were to learn, the biggest bankruptcy ever, wouldn’t have happened as recently as last year. Yes, we are talking about Lehman Brothers, the global financial services behemoth that tripped over the weight of its own mountain of toxic securities and had a massive, fatal fall. It seemed that all prudent thinking people in the company had been handed over pink slips, the way the bank kept extending loans to people with dubious credit reputations. What were some of the best financial brains of the world thinking when they kept riding the inflating housing bubble till it said ‘Pop’? Your guess is as good as ours.

And in our obsession with Lehman, let us not ignore the some other mammoth companies who seemed to have an esoteric obsession with ‘11’. Billionaire investor Donald Trump is as famous for his classy hotels and casinos as for his trysts with business and personal bankruptcy. This year itself, Trump Entertainment Resorts Inc. has filed for Chapter 11, and Trump has himself stepped down as Chairman after major disagreements with bond holders. The company’s major failing has again been extreme reliance on debt and failure to understand market dynamics. The gambling industry in Las Vegas is teethering on the edge; for people are visiting casinos less and less in the slowdown. It’s unfortunate, since the company only emerged from bankruptcy in 2005. They need to really give up on their ‘gambling’ habits!


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

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Monday, December 10, 2012

Raj of the satraps

The elections this year is seeing a trend' parties vying for larger pie shun pre-poll alliances

The eleventh Lok Sabha was a defining moment for Indian politics. Despite emerging as the single largest party with 161 seats in 1996, BJP could not prove its majority. Who can forget images of Pramod Mahajan talking simultaneously on two mobiles, claiming confidently of having the required numbers? They were all false claims, as BJP simply did not have allies that could help it reach the magic figure. During the next two years, the party worked hard on stitching alliances. That heralded the era of coalition politics, which necessitated pre-poll alliances.

BJP again forgot this lesson in 2004, when it entered the elections with only five allies. The Congress by then had learnt from its past mistakes. Party Chief, Sonia Gandhi, quietly buried her party’s Panchmarhi resolution to fight all elections on its own and have no alliances. She personally visited regional satraps like Lalu Prasad Yadav and Ram Vilas Paswan, and forfeited own seats to have pre-poll alliance with their parties.

Cut to 2009: Both NDA and UPA are devoid of partners. Barring NCP, DMK and JMM, all UPA constituents are contesting against 'big brother' Congress. They were apparently irked by Congress’s political posturing refusing a national alliance and restricting itself to state-level alliances only. That put paid to ambitions of allies like the NCP to grow outside Maharashtra and of Samajwadi Party to grow out of UP.


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

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Saturday, December 08, 2012

Safexpress will need to proactively

Safexpress will need to proactively align with global best practices, says Pawan Chabra of B&E

If one goes by the numbers, the future of logistics in India certainly looks dazzling. In fact, according to a study done by Cushman & Wakefield, the Indian logistics industry is anticipated to grow at a healthy rate of 15-20% per annum (way above the average growth rate of 7-10% that the sector have had between 2002 and 2007) to reach a whopping $385 billion by 2015. According to a KPMG report, India’s spend on logistics activities is equivalent to 13% of its GDP, compared to less than 10% in almost all the developed nations. But then this necessarily doesn’t mean big business! The key reason for this astonishing big size is relatively higher level of inefficiencies in the system, with lower average transportaion speeds, higher turnaround times at ports and high costs of administrative delays. Players like Safexpress will need to take the lead in correcting this anomaly.

Moreover, the Indian logistics industry is dominated by unorganised players. Transporters with fleets smaller than five trucks account for over 75% of the total trucks owned and operated in India and make up 80% of revenues. Even the freight forwarding segment comprises thousands of small customs brokers and clearing & forwarding agents, who just cater to local cargo requirements. So, considering this, the biggest challenge for organised players like Safexpress will be to take the growth forward. In fact, “one can even see a major phase of consolidation in the sector in the coming times,” avers Pradhan.

No doubt Safexpress has generated a decent level of loyalty and trust towards the brand in the past few years, but with the sudden flurry of international behemoths like FedEx, DHL, TNT, et al, and considering their edge over domestic players, particularly because of their big pockets, players like Safexpress will definitely find it hard to retain clients.


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

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Friday, December 07, 2012

BARCLAYS: FINANCIAL DISCLOSURE

Questioning the ‘brilliant’ financial disclosure by Barclays...

Secondly, the increase in loans and advances of $175.99 billion also deserves credit for the growth in balance sheet growth. Worst, the true indicator of real earnings (Economic profit, which excludes opportunity costs) has fallen by a deplorable 23% as compared to the previous year to touch $2.51 billion.

Add to this the fact that even the cost to PBIT and the cost to PAT ratios have increased by 5% and 16% respectively, the issue of operational efficiency also casts a dark shadow upon Barclays’ performance. Thus, the underlying fact is that Barclays’ ‘happy’ revelation is all due to some unusual gains and earnings on certain ‘abnormal’ deals that won’t make their way into its books every year.

Agreeing to the thought, even an analyst at Brand Finance avers, “The bank has been criticised for not ‘marking down’ asset value and the investors are sceptical about banks like Barclays for declaring toxic assets!” Thus it is quite clear that the Barclays’ FY‘08 audited figures do not paint the real picture! Now for the ‘real’ asset – its shares on the NYSE have tumbled by 85.6% since December 31, 2007 to touch just $5.83 as on February 17, 2009; its Mcap falling by 80% during the same interval – all this despite the ‘extraordinary’ result announced?! Talking about the bank’s immediate agenda, an optimistic John Varley, CEO, Barclays explains, “Our immediate objective at Barclays is... manage the impact of the credit crisis...” Yes, we wish you all the best in your endeavours, but seriously Sir, sometimes even strong financials can have little impact on stock fortunes; and as for your shareholders, the ‘positive’ earnings may just have become a matter to mourn over!


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

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Thursday, December 06, 2012

STARBUCKS: REDUCTION IN OUTLETS

Over-expansionary policy is responsible for Starbucks predicament

And as situation for consumers in US worsens, a preferential move away from premium coffee was a natural outcome, a fact revealed by a January 2009 Adage survey which reported that 90% of Americans have trimmed their consumption of expensive coffee during these recessionary times (43% of whom were loyal to Starbucks!).

Consumers are only too happy to switch from Starbucks’ premium coffee to McDonalds’ cheaper alternative, especially at a time when liquidity has become dearer to them, similar to the drift of shoppers from Target to Walmart stores. “We will continue our efforts to elevate the Starbucks Experience and stay true to our core value,” asserts Wendy Pang, Spokesperson for Starbucks when asked about Starbucks’ future strategy. Clearly, the company for now is ‘not’ considering any price reductions to counteract the reduction in customer base... It clearly should think along logical lines, and price changes to revive demand is what comes to the mind of the informed! What say, coffee lover?


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

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Tuesday, December 04, 2012

WORLD: ENERGY CRISIS AND WHY EVEN WE COULD BE WRONG :-)

The lethargy to move to alternative fuel seems almost insane...

While billions of dollars are being spent in most nations for construction of highways, a fraction of similar investments for the creation of mass rapid railroad transport system running on gas (not gasoline, but hydrogen based gas) would not just drastically reduce the need for fuel oil, but would also help in creating a cleaner environment.

Reports state that India’s natural gas production is slated to touch nearly 170 million standard cubic metres per day by 2011-12. So, when natural gas and CBM can run power plants and vehicles, when an Iran or Russia based pipeline can meet the rest of the demand, why is such a price rise paranoia?

As the oil reserves near depletion in Middle East, the price of the same can only go up. A war between Israel and Iran might never happen but the fear factor of the same would continue to push the price northward. It’s time to exit this game theory of US (who perhaps benefit the most as the more the price of oil rises, more becomes the demand of dollar to buy the same). Let’s hope that the day gas becomes the preferred fuel is not far. And what would be proof of that? That’s easy. That would be the day an exemplary American President bombs a state called Bihar in India and claims he did it for saving the world from weapons of ‘gas’ destruction.


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

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Monday, December 03, 2012

TYRE SECTOR: TAX STRUCTURE

As Dunlop cuts production, other tyre manufacturers should consider following suit

More importantly, the inverted tax structure has been the topic of debate between the Government and tyre manufacturers in the country for years now. And why wouldn’t it be, when the raw material (natural rubber) attracts an import duty of 70%, whereas tyre imports attracts a significantly low duty of 10%? “The tyre manufacturers are against the inverted tax structure for years but the end of their problems is still not in sight,” laments Girish Solanki, Mid-Cap analyst, Angel Broking. And many players have already cut their production and are relying on exports as the only factor attracting them is the low cost of labour.

China can surely be an option which the manufacturers are eying on to shift their production facilities but the only point of worry is that the Government could lift the subsidies and with the ‘you cannot take your assets back’ policy present there, the tyre manufacturers are still in a situation of dilemma.

But economies like Malaysia and Indonesia can surely be a place to be in for the tyre manufacturers as “the cost of raw material is 20% lower than that of India,” added Solanki. Moreover, labour cost is more or less competitive (though India is at the supreme position). So tyre manufacturing in India is not feasible with the current tax structure and manufacturers should perhaps bet on new destinations to roll out their ‘hot wheels’!


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

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Saturday, December 01, 2012

Did I do everything wrong?!

Bush during his tenure has made many mistakes, but that doesn’t give us a chance to write him off

When I sat down to write George Bush’s legacy, the literature surrounding him was full of disgusted people who are ready to rip him apart, given a single chance. His eight year long tenure as the President of the world's superpower has in many ways made United States the most criticised one, with a future, which is as bleak as it was during the Great Depression. He deserves the wrath for the steps that he took and the attitude that he followed in implementing them. So strong has been the wave of hatred against him that McCain during his whole campaign tried hard to disassociate himself from Bush, so much so that he clearly made it a point to say, “I am not George Bush” and got cheers for saying so.

The disgust has been so high and disappointment so deep that Bush was set aside as a lame duck long before his tenure had begin to see its end. His departure, as they say, would cause pain and rethinking only in one part of America – Hollywood. Bush has been the punching bag for not only America but the whole world and he was a God sent opportunity for Hollywood, which has extensively used Bush as the face of comedy from the very day he came to the office.

Bush’s past, present and future are all painted in black (pun unintended). He started his presidency under clouds of controversy. Recounting of votes that brought him to power, pushing aside Al Gore, had been questioned. The doubts were that Bush used his brother to win the voters that were not supporting him. Then came the allegations about his past and his involvement in corrupt oil dealings.


Source : IIPM Editorial, 2012.

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Friday, November 30, 2012

Seriously, what's new in it?

To be able to maintain peace and security in Iraq, al-Maliki would need approval from the opposition

In what may lead to the withdrawal of American troops from Iraq, the outgoing Bush apparatus and the Iraqi government led by Nuri Kamal al-Maliki are close to signing an agreement that would lay out the setting under which American troops would stay put in Iraq for time being and a roadmap for their eventual departure. The draft text on the context came to Iraq's political council for national security full seven months after the negotiation for the same started. Concurrent commotion in Washington and Baghdad hinted that the agreement – formally called a status of forces agreement – is in its final stage.

If accepted, the text will be presented before the Iraqi Parliament, where it is likely to ignite argument among rival splinter groups resolute to secure partisan gain in advance of next year's regional and legislative vote. Policy-makers are under immense popular pressure to lock an earliest possible time limit for the pulling out of the US troops, as well as to guarantee the reinstatement of Iraq's sovereignty.

The preliminary draft asks for the troops to leave Iraq in a phased manner by 2011, “unless asked to provide training and support.” A shared commission would synchronise US military operations. The government will meanwhile assure co-operation during searches of homes and detention of suspects. However, it is far easier said than done. PM al-Maliki is looking for endorsement of the text by two-thirds of the 275-member National Assembly of Iraq.


Source : IIPM Editorial, 2012.

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Wednesday, November 28, 2012

Rahul attempts to fill fissures

The MP from Amethi needs to stand up to his Punjabi promises

If the great charming grandfather penned the Discovery of India, the heart-throb great grandson is actually out to discover India. With eyes glued on the forthcoming Parliamentary polls, Congress party General Secretary, Rahul Gandhi recently toured Punjab. The 38-year-old heir to the Nehru-Gandhi dynasty discovered many skeletons inside (and outside) the closets of Punjab Congress and the state’s government.

Rahul’s visit to the state, and more so, the Sikh holy shrine of the Golden Temple in Amritsar, affirms that the Gandhi family wants to build bridges with the Sikh community, ending an animosity, which began with Operation Bluestar in 1984. His grandmother, former PM Indira Gandhi, in fact fell to the bullets fired to avenge the operation. Rahul’s father Rajiv Gandhi, who succeeded his mother as Prime Minister, never visited the Golden Temple, but his mother Sonia Ganshi paid obeisance at the Temple in 1990. Rahul is the second member of the family to visit the holy Sikh shrine. Ignoring security threats, Rahul paid his obeisance at the temple adorning a saffron scarf besides partaking food from its langar.


Source : IIPM Editorial, 2012.

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PAKISTAN: TERROR ATTACK

Explosives laden truck rips apart Pakistan's security machinery

He said that 600 kilograms of highly explosive material – RDX and TNT – was used in the blast, leaving questions on how a six-wheeler dumper truck laden with a huge quantity of explosives could enter such a high security zone. “It was the first incident in the capital in which terrorists have used RDX and TNT explosives. Earlier they had used potassium. Aluminium powder used this time caused fire in the hotel,” informs Malik. Marauders chose to strike at a moment when a high-powered Pakistani delegation, led by President Zardari, was about to leave for New York. Pakistan's Prime Minister, Syed Yousuf Raza Gilani said the real target of the suicide bomber was the Prime Minister's House, where top political leaders & Chief of the Army Staff, Gen. Ashfaq Pervez Kayani were present. But the bomber could not reach there because of tight security arrangements. The Marriot is a mile from the PM's residence.

With the deadly attack, Pakistan now tops the list of countries suffering from suicide attacks.


Source : IIPM Editorial, 2012.

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Tuesday, November 27, 2012

Countering Frankenstein

 Bhattacharya's views on bandh makes him go against his party

Swimming against the tide is difficult. West Bengal CM, Buddhadeb Bhattacharya seems to be learning it the hard way. Being a member of Communist Party of India (Marxist), which over the years made bandhs and strikes an inseparable part of its culture, he was supposed to adhere to its ideology and the bandh culture. CPI (M) is the party that believes in protecting the working class by organising bandhs irrespective of the cost. But he shocked his party recently by opposing the bandhs. “Personally, I don't support bandhs. Bandhs do not help us or the country. Unfortunately, I belong to a political party. They call strikes and I keep mum.." he said. Bhattacharya it seems, had taken the Tata’s threat to withdraw from Singur due to farmers’ agitation, very seriously. Earlier too, his attempts to industrialise the state by setting up a chemical hub at Nandigram, were met with a bloody resistance by local farmers supported by Trinamool Congress and Maoists.

The party, predictably, rebuked Bhattacharya by reaffirming its faith in bandhs as an instrument of protest. “It was his personal opinion. Workers will resort to strike as long as capitalism and exploitation are there,” said West Bengal CITU general secretary Kali Ghosh. Others too tried to justify strikes by saying it was a common mode of protest even in developed countries. Bhattacharya however, hasn’t joined the issue with them. Though he is trying to fight the Frankenstein created by his party, few have seen the flip side of the incident. In parties like CPI (M) having iron-hand discipline, it is unusual for the cadre to come out against set principles of the party.


Source : IIPM Editorial, 2012.

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Monday, November 26, 2012

On second thought...

With rising disposable incomes & soaring aspirations, the second hand car market is on a roll

spirations have led man to the moon! The quest of being the best among peers is what spears a man ahead of the race. But all these desires come with lots of constraints – lack of finances being one of them. One such aspiration that has remained long unfulfilled for many Indians is the desire to own a family car. But no more! The second hand car market has made all those dreams of driving an opulent vehicle come true. The growing used car market across the country in the form of both organised and unorganised players is a testimony to the vast potential of this segment.

According to the Society of Automobile Manufacturers in India, the used car market currently in India stands at over one million units, almost as big as the new-car market (1.3 million units). But the used car market in India is highly unorganised, with the organised players accounting for just 20-25%. The main organised players are Maruti (True Value), Hyundai (Advantage), Ford (Assured), Mahindra (Automart India) & Honda (Auto Terrace). The situation is however, completely different in developed markets like the US and Europe, where organised players have grabbed nearly 90% of the used-car market pie. “Consumers’ decisions are fast getting influenced by the quality of after sales service and the value addition. An organised channel definitely adds to the value proposition with quality assurance through warranty,” assures Nikhil Kumar, General Manager Marketing, First Choice, M&M. Buying decision of a consumer really begins with scouring the used-car market for the best bargains. And it’s a known fact that very few Indian buyers pay an expert to evaluate the vehicle and mostly rely on personal mechanics and friends. Thus, a decision of going to an unorganised player might result in a redundant purchase.


Source : IIPM Editorial, 2012.

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Saturday, November 24, 2012

Un‘family’ar

Nirula’s acquisition has brought in welcome change. But the true test of survival starts now...

Like most legendary Indian companies with quality offerings but sans the advantage of scale, this one, too, found the going tough when global sharks like McDonald’s, Pizza Hut and Domino’s swamped the market with their QSR chains. And when Nirula’s found the going tough, it decided to take the M&A route with aplomb; but only as a target.

Nirula’s got off to a promising beginning in the 1930s, when the Nirula Brothers rolled out a restaurant in the heart of capital. Christened as ‘Hotel India’ it became the keystone of today’s Nirula’s. With lots of firsts to its credit, like introducing espresso coffee, snack bar, ice cream parlour – Nirula’s became the pioneer in introducing the QSR concept in India and created a platform for the modern QSR industry.

But the late 1990s saw the entry of Big Mac, KFC and several of their ilk and these players, with their 360 degree branding and massive expansion plans cornered Nirula’s. Add to this the lack of vision of entrepreneurs to take the brand on a pan India basis. Finally in June 2006, the Nirula brothers sold off their stake to Samir Juckreja and PE fund management company Navis Capital Partners.


Source : IIPM Editorial, 2012.

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Friday, November 23, 2012

Finally, a news without Carla

Sarkozy seems to be more of loose cannon than one bargained for

As they say, it was destined to fail from the very start. France’s presidency of the European Union (EU) got off to a wobbly start with Poland flinching at a key agreement and President Nicolas Sarkozy in a public row with European trade chief Peter Mandelson. Sarkozy, ever the lively leader, who had stated publicly, “France is back in Europe,” had seriously hoped that he’ll have support of the entire Europe in concentrating on five key areas when France took over the EU presidency from Slovenia. But nothing of the sort happened.

Sarkozy’s own attitude towards the job did not help either. His criticism of Mandelson – by holding him responsible for the economic woes of Europe – turned into a fight as Mandelson, in turn, launched a scathing attack on Sarkozy. Things got worse as Polish President Lech Kaczynski rejected the Lisbon Treaty.


Source : IIPM Editorial, 2012.

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Thursday, November 22, 2012

Lowdown on how to walk

Here’s B&E’s lowdown on how to walk the ‘green mile’ without losing your way!

Finally, Recycle: Anything that can be recycled. Even if recycling is not an option look for an alternative use of a product rather than dumping it. Besides these, there are other measures that one can take like using CFL bulbs instead of the regular ones, and walking to the nearby grocery store instead of taking the car.

Such is the impact of this revolution that it hasn’t stopped even film personalities from jumping into the fray. Says Sabbas Joseph, Director Wizcraft, “We are currently using the IIFA platform to talk to the world about global warming and climate change. All the stars including Mr. Bachchan, (ambassador IIFA) and Akshay Kumar (ambassador Green Global Foundation) have dedicated time to take up the fight against global warming. The stars are talking about how we can help fight against the problem. Mr. Bachchan is talking about going green while Askhay Kumar talks of planting trees, some others about how you must unplug your mobile charger and still others on why it is better to cool your room at 24 degrees instead of 22 degrees to make a difference. Adds Bittu Sahgal, Editor Sanctuary magazine, “Every time you go out to buy medicines or vegetables for instance, a shopkeeper thrusts a plastic bag in your hand and by accepting it, you add to a very serious problem. Even if each of us uses only one or two bags a day, the problem becomes gigantic in a city where millions of people live.” Point taken. Then with a sense of humour, adds Sahgal, “Carry a cloth bag, like your grandmom used to!

So the next time around your exhibitionist neighbour rolls out of his driveway in a brand new set of wheels, instead of going green with envy just dole out a lesson on living green instead!!


Source : IIPM Editorial, 2012.

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