Wednesday, October 31, 2012

Banks are facing a similar predicament today – the lying mirror!

Both public and private banks are facing a similar predicament today – the lying mirror! manish k. pandey discusses the dangers ahead, and how strong numbers during the past quarter were simply, just numbers...

A small data crunching allows us to easily figure out that the net repo volumes (funds kept by banks in aggregate with RBI at a paltry rate of 3.25%), at present stand at a staggering Rs.1.68 trillion. In fact, the situation seems to be touching alarming proportions when one considers how the amount parked under this window is more than double the new incremental deposits (about Rs.620 billion) brought in by the banking system during the year. “Banks fear a rise in non-performing assets (NPAs), so much that they are willing to sacrifice the [negative] differential in deposit rates offered to customers and the interest earned from RBI at reverse repo rates,” says Ashok Jainani, VP, Khandwala Securities. The average rate offered on one-year fixed deposits is about 7.25% currently, while the reverse repo rate is 3.25%! It clearly shows that banks are suffering a killing margin loss of almost 4% for every rupee being kept with RBI; a trend which, if it continues into the next quarter, has the potential to wipe out clean the past year’s profits of many banks within one quarter.

Even if one looks at the broader picture, one can easily figure out that NIMs have been on a declining mode for the last three quarters now. Amit Saxena, CEO, Planman Financial says that there’s worse in the banquet hall – the Incremental LDR (Loan-Deposit Ratio) has already fallen to an eight-year low of 14%. Evidently, the outstanding credit-deposit (CD) ratio of scheduled commercial banks has dropped below 70% for the first time in almost three years (The CD ratio currently stands at 69.01%, the lowest since May 2006 when it stood at 69.89%). Add to this the fact that the credit off-take growth too has come down to 16% – as compared to 25% a year back – and you start wondering whether the house that actually collapsed was insured or not.


Source : IIPM Editorial, 2012. An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Tuesday, October 30, 2012

Can CMD R.s. sharma save india’s most profitable company?

For decades, ONGC was a virtual monopoly when it came to oil and gas in India. Now, CMD R.S Sharma finds that players like Reliance and Cairn can outsmart and outrun it. ratan lal bhagat analyses his dilemma.

As the car virtually hurtled away from the Ahmedabad airport after an uneventful flight, my flight of fancy took over in an almost childish manner. Here I was, all set to see what so many had passionately described as Black Gold. The jolts that I encountered as the driver played footsie with the accelerator was bliss compared to the torture that the corporate communications guy had put me through; before he even made my office pay for the trip! My seniors had consoled me and persuaded me to persist badgering the PR guy. Their logic was: since he is a de facto government employee and since you are not Barkha Dutt, you have to persist. After months of frustration, I was finally headed towards an oil well being drilled by ONGC, India’s most profitable company. I was excited because I had heard many professionals and even journalists talk about the ‘high’ you get when you can see oil literally gushing out of a field. And I was silently thankful to R.S. Sharma, the Chairman and Managing Director of ONGC who personally facilitated this trip despite the incredible inertia displayed by his corporate communications people. It wasn’t exactly the same, but I couldn’t help recalling the first time I hired a cab to go on a date.

It was virtually an anti-climax when we reached the ONGC drilling site about 40 kilometres away from Ahmedabad. There was no gushing oil that I could see. Nor could I see men throwing their hard hats and cheering and cursing in a manner that resembles a confirmed bachelor suddenly discovering that he does want something! But, after the first bout of disappointment at not having seen what I had fantasised about, I began to see the complex web of pipes, equipment, hats, sucker rod pumps, et al, in a more sober and realistic light. And within a few hours, I got to actually first see oil definetly not gushing out as we see in movies-but quietly gurgling away in separators at the ONGC facility in Kalol near Ahmedabad.


Source : IIPM Editorial, 2012.

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Monday, October 29, 2012

Its huge and diverse work force

V. Mohandas Pai on how Infosys manages pressing issues related to its huge and diverse work force

B&E: You have a whistleblower policy in place to report unethical practices. How does it work? In an organisation as diverse as this, what is the company doing to ensure that people actually speak out when necessary?

VMP: The company recognises the value of transparency and accountability in its administrative and management practices and thus supports its employees making disclosures that reveal questionable accounting practices or audit matters. The Whistleblowers Policy at Infosys is committed to providing a work environment in which all employees can raise those issues and concerns free of discrimination, retaliation, or harassment. Employees can report their related concerns by anonymously sending e-mails or anonymous letters to the respective corporate counsel. They may also report to their supervisors, or if uncomfortable, to a supervisor’s supervisor.

B&E: Has Infosys actually evaluated the business loss it faces due to ill health in the work force?

VMP: Infosys has an ongoing focus on employee health and well being. A forerunner in the industry, we have an Employee Relations Program that ensures employees have a good connect with the organization. This award-winning program focuses on initiatives and campaigns that ensure a positive work environment (including inclusivity forums, anti sexual harassment initiatives), guide employees toward better work-life balance and lifestyle options, create special interest groups, organize events that connect employee families to the larger Infosys community and more.

B&E: Infosys has a hugely cross-cultural work force, which is considered to be a potential source of conflict as well.

VMP: We all have differences and commonalities. Some differences are obvious and need to be recognized for creating an inclusive work place. The principles and the goals of the Universal Declaration of Human Rights are at the center of our Diversity and Inclusion strategy. We are an Equal Opportunity Employer.


Source : IIPM Editorial, 2012.

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Saturday, October 27, 2012

A SWIFT STRATEGY!

the indian Automotive sector as a whole faced tremendous slowdown in demand but market leader Maruti Suzuki posted mind-boggling numbers. B&E Pawan chabra finds out what the company did differently in the last fiscal to achieve this feat

“In times of a slowdown, people do not prefer to take any risk. They prefer purchasing brands on which they have full trust, and in the automotive market, Maruti Suzuki comes on top on these grounds.” This is what Shinzo Nakanishi, Managing Director, Maruti Suzuki India had to say when asked how the company was able to post stupendous growth in the last fiscal and that too at a time when other auto companies were bleeding.

There is no denying that the Indian automotive industry has seen a slowdown in demand in the last fiscal, but the big daddy Maruti Suzuki, which sells every other car being sold in the country took everyone else by surprise by posting a mind-boggling revenue figure of Rs.20.85 billion for FY09, registering an increase of 16% in the bargain. Despite a 30% dip, Suzuki also posted a cool Rs.12.2 billion net profit, way better than its counterparts.

Maruti Suzuki was quick to identify the effects of slowdown in urban India. “We saw the slowdown hitting urban demand much before others did. So we immediately decided to expand our presence in the rural areas,” avers Nakanishi. The company’s expansion into the rural and the semi-urban areas helped the company to steer successfully from the slowdown blues. “The company bagged a 9% contribution from sales in the rural areas for FY09, which used to be around 3.5-4% till last year,” says Nakanishi. In fact, the decision also made a lot of strategic sense when estimates show that only 19 out of 1,000 people in rural areas own a personal mode of transportation, which leaves very little space for wondering why experts do not label rural areas with very high potential. Maruti Suzuki surely cashed in on this opportunity, but what does the company plan to do going forward with its rural dream?


Source : IIPM Editorial, 2012.

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Friday, October 26, 2012

Abiogenic?!?

Oil’s found between rocks!

King Hubbert predicted in 1974 backed by his Hubbert Curve theory that oil would go to its peak in 1995 and then it would start declining and will then exhaust gradually. But that did not happen. Oil demand steadily went down in 1970s and 1980s due to instability in oil producing regions and then drastically went up in 2000s. In between, the Association for the Study of Peak Oil and Gas, as well as two other stalwarts – Ali M. Samsam Bakhtiari of National Iranian Oil Company and Chris Skrebowski, founding Director of Peak Oil Consulting – further predicted that the peak in oil would occur somewhere around 2007. However, that again didn’t happen as oil reserves as well as production further went up (US International Energy data). The crux of the issue remains the same – when the hell would oil run out? The reason this question is important is to understand how much money and efforts should be invested in moving over to alternate/quasi-fuels. Allow us to give you the latest dope – oil is never going to run out! We don’t wish to sound off our blocks, but what we said, fortunately or unfortunately is reality.

Source : IIPM Editorial, 2012.

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Thursday, October 25, 2012

“We started with fewer products”

B&E: You have the highest retail presence and often in the same market you have more than one store. Doesn’t it end up in cannibalizing the sales of your products?

SS: No, I don’t think so, we have huge portfolio to offer and we design two stores in the same locality in different ways. Say for instance, in one store the first floor has lifestyle products and second floor, sports goods. In the second store, the first floor has women’s apparel and the second floor, men’s; It might sound very simplistic, but this is indeed the strategy that helped us to run our stores in same locality, phenomenally.

B&E: What understanding of the Indian market did you have when you entered and what strategies did you adopt at the initial stage?

AJ: When we entered, we saw that the sports market in India, unlike any other country was largely male dominated and so we thought that it’s not suggestible to launch our entire portfolio. We launched only those products which pertained to the choice of the male customer and we also kept our offerings limited only to cricket and athletics.



B&E: Tell us more about your future plans in the Indian market?

AJ: We have entered the kids apparel segment and we would be entering into several other segments also, but not compromising with the brand equity of Reebok. Our vision is to establish Reebok as a most loved fashion and sports brand in India and we would be offering whatever a consumer requires to dress up for all possible occasions.

B&E: What are the environment factors that are peculiar to Indian market, and in your opinion and must be taken care of?

AJ: As I said, in India the sports market was largely dominated by men; but within a decades time, there has been a radical shift as the focus also moved from cricket to other sports. This is a very good opportunity for organizations like us and then with changes in lifestyle, consumers are becoming more and more health conscious; so now being a sports brand, you will have to cater to all these needs.


Source : IIPM Editorial, 2012.

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Tuesday, October 23, 2012

More trouble lies ahead...

he recent mass upsurge against the CPI(M)’s anti- people policies in Lalgarh & other places has caught on in a big way in West Bengal. More trouble lies ahead...

The Superintendent of Police, East Midnapore district, Pallab Kanti Ghosh, had told B&E on June 15 that five revolvers, 12 pieces of improvised rifles, 21 rifles, six country-made pipe-guns, 1,566 rounds of cartridges and 99 desi bombs had been seized from Khejuri. But villagers, who consider Ghosh to be a protector of CPI(M) toughies, say this is just the tip of the iceberg and that the illegal arms and ammunition in the party’s possession are far in excess of what has officially been accounted for.

The courtyard of the palatial party office at Kalagechhia in Khejuri block, which was ransacked by non-Maoist mobs, is littered with burnt papers, official documents and party flags. The half-burnt BPL cards and identity cards of the NREGA beneficiaries, which should have been kept in the panchayat’s offices, were strewn all around. The scene at the CPI(M) Zonal Committee Office at Kunjapur was no different, except that it was under lock and key. The Kamardah party office had been razed to the ground. According to the West Bengal CPI (M)’s own admission, 60 party offices are currently controlled by the opposition Trinamool Congress. Its own men, say these reports, have resigned.

So which party or group mounted those raids? Says Swapan, the younger brother of Khejuri-based CPI(M) leader Makhan Panda, “Those who came to demolish our houses are CPI(M) workers and supporters. The TMC men did their best to save us and our property. CPM leaders Kamalesh Maal and Lalu Maal were in fact supervising the ghastly operation; and others like Himangshu, Prashanta, Nirapada, who killed and beat up innocent people, now have to pay the price”.


Source : IIPM Editorial, 2012.

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Monday, October 22, 2012

Water harvesting is the sole solution for this grave crisis

Water harvesting is the best way of tackling the drinking water crisis. We get sufficient water from rain, but we fail to replenish it. What is needed is good infrastructure and citizens’ resolve. So don’t let rain water go waste.

Experts estimate that rain falling on a house built in a 1,500 sq. feet area can generate enough water to serve a family of six. So collect it and preserve it. In towns where we have fewer open spaces we need boring wells to draw water from the earth’s surface. We can collect water by digging soak pits in our gardens and fields. These recharge the ground water and tube wells. We should also ensure a better garbage management system so that ecological balance is maintained and chemical wastes are deposited safely. Chhattisgarh leads India in water harvesting. Water management is an art and we should learn it. Thousands of litres of water are wasted every day because of overuse. To stop this misuse, we must use buckets in place of bath tubs. While brushing our teeth we must ensure that the tap is not open all the time. To wash our vehicle we must use wet cloth instead of bucketfuls of water. To preserve drinking water NGOs, industrialists and the youth should work together. If we don’t understand the importance of water then the crisis cannot be resolved. Bin pani sab sun (without water, there is nothing).

Water is a lifeline for people. And the crisis is felt mostly in summer. Drinking water has become scarce in big cities and rural India. In the hinterlands the situation is worse as villagers have to trudge miles to get drinking water. And in small towns there are many who wait for hours and hours for water tankers. Besides, there have been reports of water riots. All this has happened because we have failed to preserve rain water.

The crisis is further accentuated by depleting ground water levels. In many areas it has gone from 50 feet to 600 feet. Alarmed by the situation, water authorities are proposing a model legislation to prevent further erosion of the water table. The Central Groundwater Board carried out a survey and found that about 800 areas are in the danger zone. The water level has gone down drastically in Delhi, Punjab, Haryana, Rajasthan, Bihar, Madhya Pradesh, Gujarat, Daman and Diu, Andhra and Tamil Nadu.


Source : IIPM Editorial, 2012.

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Saturday, October 20, 2012

Buying fake peace

If Britain had stood up in Munich in 1938...

“You have only to look at the map to see that nothing we could do could possibly save Czechoslovakia from being overrun by the Germans.” Chamberlain, writing to his sister in 1938

History is filled with ‘ifs’ and ‘buts.’ Every country’s history has its share of ifs & buts. But there are some that decide the fate of the humanity. One such is: What would have been the shape of world if Neville Chamberlain had not appeased Hitler in his fledgling days. No wonder, like all ifs, buts too have trailed this question. However, there has been a sort of consensus among the historians that Chamberlain’s act was indeed an act of appeasement; however, historians vary on the possible reasons why he did so.

When Adolf Hitler got hold of the reign of Berlin, he desired to amalgamate all Germans into one Reich. In September 1938 after conquering Rhine valley and Austria, he turned his thought to Sudetenland, the German majority region of Czechoslovakia. Hitler ordered the mobilisation of troops along the Czech border. Earlier Hitler had already made all known about his repudiation to the provisions of the Treaty of Versailles. In these circumstances, the British Prime Minister, Neville Chamberlain, flew to meet Hitler at three occasions at his private mountain retreat in Berchtesgaden and in Munich in an effort to resolve the Czechoslovakia question. At Munich, Chamberlain midwifed an international agreement that Hitler should have the Sudetenland in lieu for Germany making no additional claims in Europe. Chamberlain was quoted as saying that it was “Peace in our time.”


Source : IIPM Editorial, 2012.

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Friday, October 19, 2012

IT’s dark knight

Raju’s fraud has seriously dented India Inc.’s image

We do want to match America in many aspects, but surely corporate scandals don’t belong to that list. Unfortunately, Ramalinga Raju, Chairman of Satyam brought India to the hall of shame this year itself when he admitted to cooking up account books of the company. He is now in prison for claiming non-existent assets to the tune of a staggering $1.6 billion. As Hitesh Agrawal, Head-Research, Angel Broking, points out, “The biggest dent that this Satyam episode has created is in the ‘trust’ factor of investors towards companies, auditors, reported numbers by companies, et al, which is an element that cannot be written in black and white, but is a practice that has to be diligently followed.” One lesson that we draw from Satyam episode is that formal corporate governance recognition in Indian IT industry in reality relies on ticking check boxes. Tech Mahindra (the IT arm of Anand Mahindra Group) has now picked the fraud stricken IT giant at Rs.28.89 billion. And Raju has lost all that he built in so many years by bowing to selfish personal interests.


Source : IIPM Editorial, 2012.

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Thursday, October 18, 2012

Land of the up‘set’ Sun

Sun must ideally go back to the negotiating table with IBM; it will be tough for it to survive on its own

If they are still part of the game 8 years later, Sun Microsystem's shareholders deserve a special reward for their patience. Or may be they need to undergo a detailed medical check up to assess the level of their sanity. They have seen the company's management perform miraculous deeds in these years. A stock that traded at around $250 in those days of the dotcom boom now trades at a pathetic $6.42 (as on April 13). It isn't a cake walk to achieve such numbers!

Not that shareholders are always napping though. Sun's stock dropped by a precipitous 23% on April 6, when talks with IBM for acquisition of the company (for a price of around $7 billion) were reported to have collapsed. It shows that IBM was a hope that shareholders were desperately latching on to, a hope that seems to be fading away now. There are a few smiling faces of course; in companies like Intel, HP and Dell, which would have found the going tough if IBM would have successfully taken over Sun.

More interestingly, the old guard seems to have come back into the reckoning. Current CEO Jonathan Schwartz was apparently in support for the deal while the founder, previous CEO and current Chairman Scott McNealy was against it. Speculation is that Schwartz may exit from the company now. Schwartz seems to be on borrowed time already. His strategy to make the company lead in open source hasn't yet paid off, and this deal was a ray of hope for him too.

Sun and IBM had been in talks for holy matrimony for over three months now but it is being said that the deal has been called off because there were differences with regard to the settlement price and some other terms of the agreement. For instance, Sun was reportedly eager that IBM staunchly go ahead with the deal even if the regulatory challenge over monopoly charges gets stiffer. “The reason for this deal not materialising could be the result of IBM not getting blown away in the deal heat and making a prudent decision in these tough times,” informs technology analyst Rob Enderle. Many analysts feel that Sun is making the same mistake that Yahoo! made about 14 months ago. As a coincidence, founders played spoilsport in both instances.


Source : IIPM Editorial, 2012.

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An illusion of a vacation?

Summer holidays are no more about fun-filled capers and lazy afternoons... there is a whole lot of work for the li’l kidos to do!

The memories of waking up early to catch up with friends, or at times lazing around the entire day at home with grandparents and siblings, or just dillydallying and reading umpteen comic books and postponing homework for the last days of the vacation, bring to mind the forgotten pleasures of summer holidays, cherished forever by all adults. But vacations for children these days aren’t quite the same anymore, as gaining popularity is a new ‘method’ of spending them – summer camps! Today, the desire of parents to make their kid an all-rounder is stronger than ever, and parents want to expose their children to a lot more than what a school does, that too as early as possible. “Apart from a good basic education, we want our 4-year-old daughter to excel at sports, maybe tennis, and have an edge over the rest. That’s why, we were very particular while selecting a school for her. Summer camps or activities are a great way of introducing them to several things. In fact, this sort of socialising is adventurous and we regret that it wasn’t there during our times,” says Himanshu Mathur from GE. While some people go for individual coaches and instructors for developing a particular skill-set in their kids, others go for camps that aim at bridging the gap between students in the same school as well as amongst other schools of varying sizes and statures. “Schools do a great job at building the real personality, but like all institutions that are competitive, emphasis is only on select students who keep representing the institution time and again, which ultimately leads to various untried and untested budding flowers,” says Pranav Chaturvedi from Summer Punch. His partner Asit Sharma further adds, “During the one month at Summer Punch, our very popular model at college level, called the Enhanced Negotiation Model (ENM), is toned and delivered along with memory builder seminars. Apart from such activities, various fun-filled options are also available that range from creative writing, debating and quizzing to dramatics, guitar lessons and salsa workshops.”


Source : IIPM Editorial, 2012.

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Wednesday, October 17, 2012

Warming up to reality

Fighting doomsday prophecies with Earth Hour

Remember being taught in school about global warming, greenhouse effect and how the melting snow-caps of mountains like Everest and Kanchenjunga will one day submerge our entire world? Most of us would have thought that this would not happen in our lifetime and it was equal to a scary innovative piece of fiction, but then, reality is stranger than fiction! What most of us chose to ignore was the fact that Mother Earth would not be able to carry our increasing burden for long. We have already started witnessing longer summers and shorter winters as opposed to what we might have had during our childhood. The effects of global warming are not just restricted to climatic and geographical changes, like glaciers retreating, rise in sea levels or ocean acidification, but would also affect our health and spread infectious diseases, adversely affect our ecosystem and also lead to natural disasters. So, are we doing enough to save our planet? Or, are we just going to sit back as complacent fools and wait to see when the end comes?

As individuals, and denizens of this planet, we must wake up and contribute to save our Mother Earth. ‘Earth Hour’ is one such example where people from all over the world turn-off their non-essential lights and electrical appliances for one hour on the last Saturday of March every year. This year the event took place on March 29, from 8.30 PM to 9.30 PM, and the participation increased from 35 countries in 2008 to about 85 countries and more than 2,400 cities this year.


Source : IIPM Editorial, 2012.

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Tuesday, October 16, 2012

Unhealthy numbers

India’s standing on most indicators of health has not improved, and the government has failed to play the role that was expected from it, says Vikas Kumar

Public health was one of the priority areas of the UPA government’s common minimum programme. But by the end of the regime, it has been another saga of broken promises and missed opportunities. And it’s thanks to health minister A. Ramadoss, who has squandered his precious tenure on petty squabbles with former AIIMS director, P. Venugopal, and hogged the limelight for all the wrong reasons instead of channelising his energy towards completion of six new AIIMS. Increasing public spending on health to at least 2-3 % of GDP was ambitious target of United Progressive Alliance. And the result is – a mere 15% increase in the allocation in the budget to Rs.165.34 billion.

The Common Minimum Programme states, “The UPA government will take all steps to ensure availability of life-saving drugs at reasonable prices. Special attention will be paid to the poorer sections in the matter of healthcare. The feasibility of reviving public sector units set up for the manufacture of critical bulk drugs will be re-examined so as to bring down and keep a check on prices of drugs.” However, Chemical and Fertiliser minister Ram Vilas Paswan admitted his failure to tame the pharma lobby to B&E, “The lobby is very strong. We had been successful in including 74 drugs in the price control list. However, we are shifting our attention to opening more and more government dispensaries.”


Source : IIPM Editorial, 2012.

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Monday, October 15, 2012

RACISM: THE US

Believe it or not, the world will witness the resurgence of a new era of racism than the end of it...

Yet the fissures run deeper than what is visible to naked eyes. Bruno Serato, the Presidential-themed restaurant owner in the Anaheim, White House, e-mailed his announcement to some of his several high profile customers that he has dedicated a special room to Obama as has been the customary in the presidential theme (in the past he dedicated similar rooms for Nixon, Reagon, Carter, Kennedy, Washington and Jefferson). But then this time, he literally got the shock of his life with strange and revulsive responses from some of his regular customers. Some of the replies indicated utter disregard for Obama. Later when Serato revealed some of the angry responses to the press, one read as follows , ‘I am not an Obama supporter, I could never be and as much as having an African-American in the White House could be a good thing, having one with Marxist ideals is certainly not a good thing! I will not be patronising your restaurant, much less the Obama Room.’ The next one goes as ‘Do not insult us with a Barack Obama room. … You have no idea whether he is a great leader or a hopeless socialist. You may regret your hasty judgement of what he will do to this country. May you remain Orange County’s hidden treasure with the emphasis on Hidden.’ The one as ‘you must be kidding? He didn’t do anything yet other than weaken our internal security. May be you could house all the Gitmo internees there instead.’

Moreover, tensions between the national and state security forces are not at all healthy for the US or its president. No one can kill an American President without involvement of someone from its own intelligence forces (read: Vantage Point). Obama’s failure to replace FBI director Robert S. Mueller reveals Obama’s hard struggle against racism. Muller was appointed FBI director in 2001 by former President, George W. Bush and was obvious to be replaced by someone nominated by the next President. When Obama pronounced his time tested aide Sandy Berger as the next FBI director, Muller didn’t agree to resign and made it clear that he intends to complete his first ten years term which will be over by 2011.

Read more.....

Source : IIPM Editorial, 2012.

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Saturday, October 13, 2012

Why Modi needs to be Modi’fied

Though crony capitalism is not the want, perhaps a modified model...

Nothing is right unless it gives results and nothing is wrong unless it fails to produce any results. There has been considerable criticism for state patronage in private business. It all started with the setting up Ratan Tata’s ‘prestigious’ Nano project in West Bengal. To encourage Ratan Tata, the West Bengal government agreed to provide a loan of Rs. 200 crore at a shockingly low interest rate of 1%. Tata (perhaps correctly) left West Bengal despite his “gun to the temple” theory; and entered straight into the alms of Gujarat. If the Left can do it right, the Right wants to do a Left it seems. This time, the Modi government has assured more gifts for Ratan Tata with a promise to provide a loan of Rs.9,570 crore (five times of what West Bengal promised) with an interest rate of 0.1% (whoa!!!) that is payable after 20 years. One wonders whether the Nano will also be made available on such lucrative rates to its customers. But wait, there’s more! Modi has also provided land worth another Rs.1,000 crore. Similar cases are strewn across (refer B&E’s Crony Capitalism issue, Feb 5, 2009). Eg, the Maharashtra government recently announced free land for all industrialists who agreed to invest in backward regions and hold 80% of the job for local people.

These incidences have drawn national attention and brought severe criticism for the government’s irresponsibility and lack of accountability. It is true that the government has spawned generations after generations of crony capitalists. But rather than blindly criticise the government and hack off the State’s connect with the private sector, this is a good time to ruminate and work out a better model of an efficient public-private partnership.


Source : IIPM Editorial, 2012.

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Friday, October 12, 2012

Catch ‘em wrong!

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

What would your impromptu reaction be, if ‘some’ aggrieved investor walked up to you, complaining about ‘some’ well known financial institution posting ‘some’ unprecedented loss during the year gone by? Chances are, you’ll hardly bother to offer him a dimeworth of condolence, forget empty words of solace! For isn’t it a norm these days, for banks to post ‘negative earnings’, CEOs to walk away with zero bonuses and employees to get jettisoned?! Now how about this exercise – what if ‘some’ investor walked up to you, complaining about ‘some’ well-known financial institution posting ‘some’ below-average growth in profits during the year gone by? Chances are, you’ll entice and cajole him into selling his shares (in that company) to you; for what better than a financial entity that can promise and deliver on profits even at a time when the world is tearing its hair apart on the brobdignanian losses that has come to haunt investors...

And this is where Barclays comes into the scene, like a fresh breeze, declaring financials for 2008 on a positive note (what a relief!), with net profits having risen by 4% to touch $7.54 billion and total PBIT ringing the $9 billion bell during FY‘08. Although these make Barclays’ performance sound totally ‘beyond expectations’ (which it is to an extent), the real story behind the scene is bound to give its investors few more wrinkles on their foreheads. And here we are not even referring to the huge 14% fall in EBIT over FY‘07 or about another worrisome 14% fall in diluted EPS for FY‘08; we’re referring to some abnormalities than only get more obvious on closer scrutiny.

Though the bank witnessed a great group balance sheet growth of 71% to touch $2.92 trillion (in FY‘08), but the credit for the same primarily goes to the fall in value of Sterling as opposed to the UK Dollar and Euro. 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.


Source : IIPM Editorial, 2012.

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