Thursday, May 30, 2013

Paradise Regained

Tucked away in a cul de sac at the tail end of a posh residential street in south Delhi, shimmers a magic portal. The gate to this world is always locked but a twisty side gate allows the intrepid to enter while a mustachioed guardian looks on through sleepy half closed eyes. At his feet lies a fawn bitch, just as sleepy with a litter of puppies attached to her swollen teats. I step over the dozy family and follow the dirt trail into this new world.

Red with rust and who knows if a little dried blood, wire fencing on both sides of the trail, close, meticulous and sharp, keeps all but the thickest skinned and desperate from invading this little island. A few more steps and the noise and smoke of the city leave you, like reluctant hangers on who know that they aren’t allowed any further.

Walk on further, and like a seductive temptress, the winding trail and green vistas draw you close. The winter sun seems a little brighter, the air a little sweeter and the songs, carried by a wind that seems to revel in this new found freedom, bring back memories of a Delhi whose gardens had birds once.

As the trail curves around the edge of a cliff, a startled mongoose darts across the opening and disappears in the brush. Beyond me yawns a valley, carved not by the gentle hands of all knowing nature, but by the myopic hunger of bull dozers and excavators that had once mined and ravaged this land down to its very bones. Here stand the high ridges of the ancient Aravallis, weather beaten guardians of Delhi, that had deterred invaders in the past and still strive to keep the heat and dust of the Thar from flooding the city and the rain clouds from going too far away. Mindless mining though had left this region pock marked and gasping for breath. Native flora and fauna had been decimated and driven off and an uncaring invader, prosposis julifera, better known by its notorious nom de plume – vilayati keekar had flourished on this denuded landscape. This tree, though greening the ground on the surface, does little to provide nourishment to the native fauna and instead acidifies the soil and degrades it. Barren and left for dead, this land was grabbed by settlers. Ramshackle shelters and slums rose on these grounds and litter and feces dotted the pockmarked grounds that had once been home to deer and partridge and had once nourished the city with oxygen rich air.

But that was nearly a decade ago. Two formidable institutions – Delhi University’s Centre for Environmental Management of Degraded Ecosystems (CEMDE) and Delhi Development Authority joined callused hands and decided to do something about restoring dignity and if possible a bit of the old charm to this ravished landscape.

It was not going to be easy. Mission near impossible, you’d think. But an unassuming man with a soft voice that masked steely determination and indefatigable reserves of enthusiasm and patience has today almost achieved the impossible. Aravalli Biodiversity Park, nestled between South Delhi’s urban environs in Vasant Vihar and the airport has been resurrected and is today a veritable paradise. The mining pits have a cloak of green, and the birds have returned. Last week, a morning’s birding expedition led by Dr Aisha Sultana, field biologist with Aravalli Biodiversity Park, identified nearly a hundred species of avifauna. And recent surveys have revealed the presence of more than 200 species of birds in the park. A stunning turnaround from the terrible low of thirty odd bird species that had managed to survive the mutilation of the landscape.

So what went into recreating this little Eden? I asked the man who made it all possible – Dr M Shah Hussain, Scientist-in-charge at the Aravalli Biodiversity Park. Having cut his teeth on the recreation of the Yamuna Biodiversity Park and kept his promise to his mentor, Professor CR Babu, Director CEMDE, of giving Delhi “a mini Bharatpur” in the Yamuna basin, Dr Hussain took on the challenge of restoring the Delhi ridge to its original splendor.

This was no easy task. Each floral species that had originally sprouted on these lands when untouched by the hand of man was painstakingly identified and planted. Then they had to be protected from the elements.

Encroachers, both animal and human had to be evacuated and all 692 acres of the designated park area secured. After eight long years of restoration the park has begun to acquire the look and feel of the scrub and deciduous forest that it used to be.

As I walked along the trail with Dr Hussain, he marked out species after floral species and highlighted the role that each played in the restoration process. Not only did the park, unlike other parks in the city, provide green cover but is also instrumental in refilling ground aquifers and maintaining the water table. Based on a self-sustaining natural model, the symbiotic relationship established between floral and faunal species will ensure that the park will continue to flourish “..with increasingly minimal economic support” said Dr Hussain. “Not only does this natural model neutralize pollution levels… restores the water table… but traps many micro fauna that can trigger diseases”.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall

Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
BBA Management Education

Wednesday, May 29, 2013

All Eyes Towards Astana

The direct negotiations offered by the Obama administration to Iran can find traction only if US stops shifting the goalposts, says Saurabh Kumar Shahi

The Annual Munich Security Conference is generally a mundane affair. A nice photo-op with sumptuous Bavarian meals, the conference does little more than improving the balance sheet of  Hotel Bayerischer Hof, which has hosted it since the days people did take a little interest in it. But this year, it was destined to come into the limelight. After all, it was here that the US Vice President Joe Biden revealed that if the officials of the Islamic Republic of Iran were determined and set for serious talks, the US would be in the position to reciprocate the sentiments through the direct talks over the country’s nuclear energy program. He added, for good measure, that the “negotiations are not merely held for the sake of negotiations.” Fair enough.

Iran's reaction to the statement was measured. Iranian Foreign Minister Ali Akbar Salehi maintained that the US must first prove its good intentions before the talks are undertaken. “They should not be aiming the gun on the one hand, while on the other hand, claim to be ready for talks and such contradictions must be resolved,” he added.

The upcoming P5+1-Iran talks in Kazakhstan will pave way for further direct negotiations with the US. However, the proposal as well as its seriousness needs to be analysed with measured excitement. The similar diplomatic maneuvers in the past have failed to bear fruit. However, a direct talk between the two nations, which severed ties following the 1979 Revolution, is indeed a big announcement.

But before that is achieved, the talks in Kazakhstan need to close the gap between the preconditions that both parties have set. Let's look at the last round. Last year in May in Baghdad, the P5+1 demanded that Iran scale back uranium enrichment to 20 per cent purity, which according to them was the most worrisome trend as far as Iranian nuclear program was concerned.  Mind you, Iran, a signatory of NPT, has the right to enrich it to further levels considering every reactor is under IAEA supervisions. The demand from P5+1 has no legal basis, but it is still a preconditions for the talks to progress.

However, in return, P5+1 expressed absolutely no desire of offering any relief from the unilateral or UNSC mandate sanctions. Naturally, Iran bid the next rounds of talks adieu at Moscow.

The gap between the demands still persists. Mahdi Mohammadi, a member of Iran's negotiating team, maintained that to start with, the US will have to accept Iran's “right to enrich”, followed by removal of all unilateral sanctions by US and of course EU.

However, the West has indicated that they will offer a better bargain this time. British Foreign Secretary William Hague let the media know that P5+1 will put what he termed an “updated and credible” proposal and admitted that the “need to make progress is increasingly urgent”. Similarly, Russia's chief negotiator, Deputy Foreign Minister Sergei Ryabkov, was confident that the talks will bring “if not an outright breakthrough – then serious progress”.

Under the circumstances, US' move appears curious. The appointment of John Kerry and Chuck Hagel is indicative that the US is willing to stick to diplomacy for the time being at least.

Says Abolqasem Qasemzadeh, a Tehran based expert who has watched the move closely, “Obama believes that the Islamic Republic of Iran is not one of the weak states of the Middle East, but on the contrary, enjoys the highest degree of military power among the regional Muslim states. In addition, Iran sways pervasive influence on all Muslim communities in the Middle East. The experiences of Afghanistan and Lebanon have taught the Americans that Tehran is the gravity center of any possible solution to many problems in the Middle East and assistance from the Islamic Republic is the key to resolution of those problems. Therefore, new signals sent by Obama for bilateral negotiations with Iran are serious and stem from the United States' assessment of Iran's position in the Middle East as well as the high influence that Tehran sways on the Muslim communities.”

However, there is another opinion as well. Some experts suggest that it is typical of the West to offer talks while tightening the noose of sanctions at the same time. In fact, interestingly, just a couple of days after Biden's announcement, US expanded the sanctions by bringing in more sectors under its ambit. Many Iranian officials suggest that this shifting of goalposts is chronic and is detrimental to trust building.

Russia on its part had devised a plan that appeared lucrative to the Iranians. Foreign Minister Lavrov revealed a “step-by-step” approach that can bridge the gap between both the positions. According to this plan, Iran was expected to revive negotiations to dispel the concerns of the IAEA and expect to be rewarded in the process by a partial removal of sanctions. Meanwhile, EU too drafted and revealed a separate three-stage plan. At least both these plans are not non-starters like the previous proposals. But how much traction will any of them find in the real negotiations will be interesting to see.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall

Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
BBA Management Education

Saturday, May 25, 2013

Skimming the surface

In 2009, all hell broke loose with a simple confession from Ramalinga Raju, founder and chairman of Satyam Computers, the fourth largest IT company in India with over 50,000 employees and business in more than 66 countries. He admitted that the company’s balancesheet carried inflated cash and bank balances of Rs 5,040 crore and non-existent interest income of Rs 376 crore as on September, 30, 2008.  Raju also admitted that there was an understated liability of Rs 1,230 crore on account of money that he himself had arranged.

It was a nightmare not only for Satyamites but the entire nation. It was the biggest corporate fraud India had known so far. One difference between this fraud and others was that the Satyam scandal was disclosed by its founder while other scams were busted.

The author of The Resurgence of Satyam Zafar Anjum raises key questions. Why would an iconic entrepreneur like Ramalinga Raju do something like this, and then admit his crime? What forced him into confessing at that particular time or was it to hide something even bigger? Despite close contacts with top corporate honchos in Satyam, Anjum has no answer.

Heavily drawing on the vast existing literature by Indian media, blogs as well as a book produced by Business Standard, The Satyam Saga, Anjum tries to reconstruct a narrative.

Scattered references to Satyamites who put up stiff resistance after the scam broke finds a mention in the book. Anjum quotes Mirzan Faizan, a Satyam engineer who had earlier worked in DRDO, as saying: “When one man created Satyam as an organisation of 53,000 people, why can’t 53,000 committed people rebuild one Satyam?” Had Anjum narrated more stories of such courage and defiance, the book would have been a better read.
However, for posterity, Anjum does record how Satyam recovered from the crisis. It narrates how people  in Satyam, the government and regulatory bodies reacted to the fraud and took measures to salvage not only the company but also India Inc’s image. But it would have been more realistic if author had engaged people at the bottom of the ladder.

In the epilogue, Ramalinga Raju is mentioned as being a shrewd man who knew by confessing to a crime he would escape harsher punishment. Raju leads a normal life in Hyderabad after spending two years and eight months in jail. Charges had not been filed against the co-accused.

As much as everyone, the author too wonders about the persona of Raju and seeks answers in management guru, Tom Peters. “Successful performers, for good and sometimes for ill, know how to play a role. They don a persona – a mask of leadership that command others to follow,” Peters is quoted from The Little Big Things.
Peters gives three examples: George Washington, Barack Obama and Bernard Madoff – who weaved the mother of all frauds in modern financial history. “I think Raju’s case is similar to that of Madoff’s,” sums up Anjum.
On Madoff, Peters says, “It was a product of a very carefully concocted persona acted out without let-up or slip-up for decades.” It sounds true in Raju’s case too.

However, The Resurgence of Satyam brings out the communication strategy devised by its team to keep afloat and  rise from the ashes and how the team was engaged in segregating and classifying news in the media as truth, half truth and rumours.

The other important issue is that one would have expected Anjum to question how the Mahindras went on to acquire a stake in a company that was opaque and fraught with fraud,  listed on Nasdaq and was facing class-action suits in the US?


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall

Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
BBA Management Education

Friday, May 24, 2013

Faulty Forensic labs

New forensic labs are vital for speedy justice

Since last couple of weeks, there have been protests going on all across the nation demanding quick and fast justice delivery. This is not the first time when a criminal is scott free due to delays in our judicial mechanism. Without any apprehension, the entire onus of delays lies on the courts which are struggling with less manpower and insufficient resources. And then, further going down is our investigative team, which again is equipped with stone-age facility and faces huge shortage of staff. Amidst all these loopholes, one peripheral of justice delivery mechanism that is largely getting ignored is our investigation laboratories. In simple terms, cases linger on for ages as the investigating teams fail to present sufficient scientific evidences on time. And, the reason for the same is the sorry state of our forensic labs.

Against conventional notion, forensic labs not only help in providing clues for criminal cases but also for civil and statutory cases. Today, forensic labs are called-in for cases related not only to murder, rapes and assaults but also for thefts, property disputes, document verification, forgery tests and truth analysis. As of now, we have less than 30 forensic labs where cases coming in for investigation from all corners of the country. On an average a single Forensic lab handles only 4000 cases annually while the demand for the same runs in tens of thousands per forensic centre! Moreover, only a handful of these labs are equipped enough to handle such large inflows.

As per a media report, around 4000 cases of sexual assault on women are yet to be solved at forensic level itself! These cases are pending from last 2-3 years. The problem gets augmented as one gauge through the vacancies at these forensic labs, still more than 100 seats are vacant (especially those at technical positions). There are labs where even “sufficient amount of chemicals required for several tests” are not even available. Even cases related to corporate fraud, computer fraud, child paternity cases and DNA tests are in the queue waiting for their trial, which can’t be moved even by an inch without forensic reports. Such poor state of infrastructure not only delays the cases but provides ample time to the culprits to tamper and dodge the evidences and in many cases even steal and damage the evidences, thus, leaving no scientific evidences of their crimes. Moreover, given the sophistication with which crimes are committed (and technologies with which the evidences are tampered) forensic investigation has become evident to prove the verity of samples in possession.

Numerous cases like Aarushi-Hemraj murder case, Nithari serial murders case, Priyadarshini Mattoo Case and many other similar cases got delayed because of inadequacy of labs. In spite of these cases attracting media-attention and public outcry, no much heed was seen as most of the vital clues were either destroyed in the process or most of important investigative reports were waiting their turn in various labs across the nation!


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles

Friday, May 10, 2013

Two-witter!

The US State Department wants employees tweets to be reviewed for two days before they are posted

The US State Department has recently decided to tighten the screws on State Department employees participating on the social media – more particularly on Twitter. The State Department has passed an order wherein employees have to submit their tweets two days in advance for an internal review before tweeting the message from their Twitter account. Further, the time for review of posts in other forms of media like blogs, articles and books would take around 5, 10 and 30 days respectively.

Without doubt, while a two-day review of employees’ tweets sounds hilariously insane (for example, it might take eight days to exchange two tweet messages with a colleague and get respective replies), what made more news than the actual State Department decision was the slamming they received from global media. Nicholas Kristof from The New York Times, for example, called the decision “the dumbest idea ever”. Alec Ross, Secretary of State Hillary Clinton’s Senior Advisor for Innovation, defended the decision, claiming that the two-day delimiter is only an outer window for approval which is much lesser than the earlier 30 day period – and that most tweets would be approved much earlier. There’s also the view that such a rule has been reinforced due to a recent tweet of a department employee on an anti-Muslim video, which unfortunately ended up instigating public anger in Cairo and was also used subsequently by the Republicans in their campaign against Obama. Irrespective, the fact is that there seems to be quite some similarity between the State Department and the censor-loving Chinese Communist Party, which also considers all its citizens akin to its fellow workers.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles
 
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall

Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
BBA Management Education

Thursday, May 9, 2013

Shifting your focus to match customer needs

It is critical for organisations to adopt a scientific approach to understanding how they can meet customer needs, and to firmly ingrain a customer-focused culture throughout the organisation

We have often heard the phrase, “Customer is king”. While it is self-evident that higher satisfaction levels give a company an edge over sales, company growth and reputation, what it really does in the long term is to ensure that existing customers stay happy, resulting in better relationships and happier employees. Customer-focused companies are more attuned to the market and better able to stay ahead.

I refer to Harley-Davidson’s customer focused culture as one of the best in the world. It is the longest, continuous manufacturer of motorcycles in the US and has outlived nearly all of its competitors. In the twenty short years since Harley-Davidson started its Owners Group programs, it has grown to over 500,000 members & each of them own at least one motorcycle. The question to ask is: Is there any other consumer product in the world that will prompt customers to travel over several continents to be part of a group experience? Customers and employees alike take great pride in their affiliation with the company and this continues to make Harley-Davidson one of the great success stories of our time.

There is simply nothing – nothing – more important than getting to know the needs of your customer in a detailed and scientific manner. In the words of Michael Dell, “By spending time with your customers where they do business, you can learn more than by bringing them to where you do business”.

80% of companies believe they deliver a superior customer experience; however, only 8% of their customers agree. Why? Your customers are looking for maximum value when spending their hard-earned cash, particularly in this economy. The customer experience requires the active participation of everyone in your organization. This is where the word “Satisfy” comes into play. What it means is that your company is providing nothing more or less than what the customer expects. Creating a customer-focused culture is a proven strategy for both short-term success and long-term growth.

Going by the industry’s best practices, let me share with you some key insights into what will really work for you or your company.

1. Make a list of the values you’d like your company to exemplify. Then, examine your current culture, and ask yourself if those values are apparent in your company and driving your everyday efforts. 2. Before you can convince your company’s end customers of your focus on satisfaction and service, you need to convince an even more important customer audience – your internal customers – the employees who represent your company to the world. Talk with all your employees about corporate values and ask for input and suggestions. 3. Customer focused companies constantly seek and document feedback. They have a system to analyze and feed this information back into the loop so that response is immediate and not an annual feat 4. A strong customer orientation also demands that the company treats customer complaints positively. They not only make toll-free numbers and helpdesks available, but also staff it with knowledgeable people to work on them. 5. This means that they get back to these customers within an acceptable time frame So how does one tell if the customer is truly on your side? Most companies survey their customers in some way, shape or form – formally or informally. After decades of forms, interviews and focus groups, studies have shown that in gauging a particular customer’s overall satisfaction, a single question is needed to provide a fairly accurate answer: “Would you recommend us to your family, friends and colleagues?” If the answer is “Yes,” you are meeting or exceeding that customer’s expectations; if it’s “No”, it’s time to get to work.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles

Tuesday, May 7, 2013

There’s much to fix between the piers

A raft of infrastructure issues is affecting the growth and prospects of our ports. In the face of capacity constraints, lack of connectivity and inadequate mechanization, ports are burdened with excess traffic they can’t handle

India’s vast coastline, stretching around 7,500 kms, is home to 13 major ports and around 200 non-major ports. These are spread across the nine maritime states that stretch along the country’s western and eastern corridors. Considering that about 95% by volume and 70% by value of the country’s international trade is carried on through maritime transport, ports in India are expected to demonstrate efficiencies to sustain the demands of growing international trade. Even otherwise, modern seaports the world over play the role of logistic hubs in the global transport system, integrating the supply chain and offering a competitive edge to exporters and importers.

Historically, ports were measured on their ability to accommodate ships and other modes of transport effectively and efficiently. Contemporary developments in transportation, however, dictate that emphasis shift to the ability of ports to fulfill new roles in the logistics era in the context of operating within integrated global supply chain systems. Ports are therefore expected to demonstrate efficiencies that help to cut total logistic costs and improve the overall competitiveness of exported and imported products.

Unfortunately, even in the wake of India’s growing maritime trade in the world market and the unprecedented growth in bulk commodities and containerized trade, major ports in India have failed to expand capacity and develop facilities commensurate with the growth in trade. In FY2011-12, Indian exports accounted for $303.7 billion, logging an annual growth of 21%. Meanwhile, imports grew to $488.6 billion, a 32.1% growth. This rapid growth in trade can be sustained only if the port infrastructure keeps pace with the increasing volumes of cargo. Indian ports, over the past decade, have seen a sharp surge in traffic, which has almost grown four-fold to 9.7 million TEU (One TEU represents the cargo capacity of a standard intermodal container, 20 ft. long and 8 ft. wide) in 2011, from 2.4 million TEU in 2001 - a growth of 395%. But our port-handling capacity is way short when compared to the throughput of major ports globally. Even the 9.7 million TEU handled by Indian ports last year represents just 8% of the global benchmark ratio for economic output and one-twelfth of global container traffic averages. Given that the Indian economy grew 7.8% for fiscal 2012, ports in India are in urgent need of capacity augmentation in order to meet the country’s growing economic needs and also to grow our share of international trade.

Over the last decade, our average annual growth rate of port cargo volume has been about 10% and container traffic is projected to grow to 40 million TEU by 2025. But India’s ports are ill-equipped to meet this surge in demand as they have not been able to significantly ramp up their capacity and efficiency. As a result, our ports are congested and lack cutting-edge facilities. Till date, no Indian port is capable enough of handling large container vessels. Thus, most of international cargoes are off-loaded at Colombo or nearby ports and then transported to India in bits and pieces. This very incapability robs Rs.10 billion from traders. Even the custom clearance at ports increases the transport time by an average of 84 hours. Not surprising that the World Bank has ranked India’s port infrastructure at 3.86 in 2010, where 1 stands for extremely underdeveloped and 7 for well developed.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles

Monday, May 6, 2013

What happens when you mix drinking & flying?

With the recent Diageo deal, the UB group has got some much needed cash to reduce its interest costs. But as major group companies continue to struggle with unfathomable debt loads, the only freely flowing commodity is advice!
Issue Date - 30/12/2012


In late 2005, UB Group Chairman Dr.Vijay Mallya had remarked in a media event that people often asked him what link he saw between the liquor and aviation businesses. And his answer was, “They both make you fly!”

Amusing, yes. But that doesn’t go too far when it comes to explaining the synergies between the two businesses. There were definite branding synergies for Kingfisher in aviation, but not operational ones, as is evident in hindsight. In one of his interviews to a leading pink daily, former UB group CFO Ravi Nedungadi also accepted that he had warned Dr.Vijay Mallya that the airline, which he was planning to start, would be a drain on finances. Over the years, despite his best intentions, Nedungadi’s views have proved prophetic beyond imagination.

As on date, Kingfisher Airlines, which was once India’s second largest domestic airline by market share, is standing on a debt pile of $2.5 billion. According to a statement issued by the company, the exposure of various group companies towards Kingfisher Airlines as on March 31, 2012, stood at an equity investment of Rs.21.14 billion, loans and advances of Rs.10.48 billion, other receivables at Rs.2.09 billion and corporate guarantees to banks/aircraft leasors at Rs.89.25 billion. “Before getting into the airline business, they missed the trick that the airlines business is completely different from their other ventures. It requires a continuous flow of funds & also the skill to stay floating in a volatile environment”, affirms an aviation expert from a leading consultancy on condition of anonymity. State Bank of India, the largest lender to the airlines, has already warned that the airline’s promoters should bring in a minimum of $1 billion (about Rs.54 billion) from any source by the end of November.

Add to this the fact that the UB group is already quite stretched financially, and you begin to wonder if Kingfisher’s current plight could have wider ramifications. Recently, the UB group clinched a deal with Diageo, the world’s largest spirit maker, which will allow the latter the option to take its stake in United Spirits Ltd. (USL) to 53.4% for around Rs.111.66 billion; due to which promoter shareholding in USL will fall from 27.8% to 14.9%. USL issued 10% additional preference shares at Rs.1440 per share to Diageo.

Can this injection of around $1.1 billion in funds help script a revival? Before answering that question, we must take a look at USL itself, the group’s flagship company. It is the largest spirits company in the world by volume; selling 122.75 million cases for the fiscal ending March 31, 2012. For Q2, FY 2013, USL posted a standalone topline growth of 24% yoy to post revenues of Rs.22.21 billion, aided by a one time sale worth Rs.3.15 billion of bulk spirit stocks. Adjusted for the same, sales growth stood at 6.4%, which was way below the 8.9% estimate of analysts. PAT for the quarter declined by 73.4% yoy to reach Rs.392.7 million. Furthermore, USL is weighed down by a debt of close to Rs.90 billion with a D/E ratio of 1.9, and is finding it difficult to even access working capital financing. According to a research report from Angel Broking, “USL’s bottom-line is expected to grow at a CAGR of 103.4% over FY 2012-14 due to the lower interest costs on account of substantial reduction in debts post the UBH-Diageo deal.” So the best that can happen is that USL will work with somewhat improved margins and ROI.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles
 
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall

Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
BBA Management Education

Friday, May 3, 2013

29 suitors, 1 tuxedo

RBI should have 29 different interest rates for 29 different states based on their growth patterns and the globally-practised Taylor’s law

The RBI’s interest rate fixing in India is a scattershot approach, which assumes that the country is uniform, which is not the case in reality. A uniform interest rate, therefore, is a wasteful proposition in a country that varies from the prosperity of Punjab to the utter neglect and backwardness of Tripura – both economically and socially. Progressive states like Punjab, Haryana, Gujarat, Maharashtra, Tamil Nadu and Karnataka have high per capita income, low level of hunger, better infrastructure and low poverty rate, thus inspiring confidence in the minds of investors. On the other hand, states like Orissa, Rajasthan, Bihar, et al find it difficult to attract investment. In this light, the current system of blanket interest rate/lending rate is clearly out of sync.

Instead of implementing a uniform pan-India interest rate, the RBI must impose higher interest rates in states that offer business opportunities to investors on a platter and offer discounted rates for investors opting to invest in regions that are still not progressive. Gujarat is another manufacturing power house, but unlike Punjab, it is an industrialized economy with a very high growth rate and should attract higher interest rate from RBI. If we focus on the growth trend line among these states, we figure out that between 2006-07 and 2011-12, Haryana (growth rate between 17.1% and 21.66%), Tamil Nadu (growth rate between 12.98% and 20.44%), and Maharashtra (growth rate between 11.39% and 20.38%) are among the forerunners of the country’s growth trajectory. Thus, RBI should push up the lending rates in proportion to the growth pattern in these states.

On the other side are middle income states like Andhra Pradesh, Kerala and West Bengal. Andhra Pradesh is mainly driven by agriculture (even though there is a considerable concentration of IT and manufacturing units in and around Hyderabad), Kerala is driven by agriculture and tourism, while West Bengal is languishing with hundreds of sick manufacturing units. These states are mainly agriculture-based, where high interest rates can further exacerbate the problems that they face. Even though Andhra Pradesh and Kerala had a decent run in growth with 2011-12 growth rates being 14.82% and 17.94% respectively, they have some distance to go to catch up with more advanced states. West Bengal, on the other hand, has had a middle-of-the-road growth projection between 13.65% and 18.6% in the last 6 years.

The laggards are the BIMARU states and North East with low per capita SDP and low growth rate. The longer this impasse endures, the harder it will be to recover. Bihar (which is at the bottom of the table), however, has started a recovery of sorts, clocking 20.39% growth in 2011-12. However, it is on small base that can wither away as the base expands. Orissa, with 8.49% growth (2011-12), Jharkhand with 11.89% and North East with a consistently depressed growth rate of below 10% are consistent bugbears for our policy makers. Needless to add, interest rates must be lowest in these zones that badly need a breath of fresh air on structural reforms.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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ExecutiveMBA

Thursday, May 2, 2013

“Let us do something big first!”

He makes an energy drink named ‘Five Hour Energy’, and his company Living Essentials has a current annual turnover of around US $1.3 billion. Forbes magazine has named him amongst the richest Indian billionaires in the US. In this interaction with B&E’s Onkareshwar Pandey, Manoj Bhargava talks about Indian and US politics and his decision to donate most of his wealth to charity.

B&E: You basically hail from Lucknow. Tell us more about your life’s journey from Lucknow to the US?
Manoj Bhargava (MB):
I would prefer to say little because I have had little attachment to my personal life. I was born in Lucknow and studied at the Mayanagar School till class 6. After that, my father decided to send me abroad. So for preparations, I spent three years in Mussoorie, while my Dad went there in 1967 only. My father had a big publishing business there. It was called Upper India Publishing House, which published books taught in various colleges. My father had written many books under the Bhargava De name. But with time, everything went downhill, though he was still among the top people in Lucknow. Our grandfather was a leader from the Awadh region. He used to get many hand-written letters from Mahatma Gandhi, who had also sought the help of our grandfather in those days. Even after out grandfather’s demise, many leaders from various political parties used to come home. Even Chief Ministers and Ministers used to frequent our house before and after being sworn in for support. That’s all more or less how it was. Afterwards, we moved to Philadelphia in the US, and I finished my education from there.

B&E: Tell us more about your initial days in US. Were things smooth from the beginning?
MB:
In those days, you could not take money abroad. We had nothing when we reached there, but we were very happy and made up our mind to work hard. A new beginning had to be made all over again. We started from zero again. Everyone finished their education there, and except me, everybody had a graduate degree. There too, illiteracy is not considered good. I think that there are two types of education. One is just to take a degree. And then begins the second type of study – the study of life. Bookish studies do not pay much, they act as only a base in life. Then you have to build your own house on that. If you study at Doon, IIT, and IIMs and still don’t know much about life, what is the use of such an education.

B&E: Today, you are the richest Indian in America. How did this success come about?
MB:
We create an energy drink, which we call 5-Hour Energy. If you’re tired, you can take it and your exhaustion will disappear. It works for five hours, and after that you will return to your normal state. Last year, in the US, we sold 50 Million bottles of this drink. It costs $3 per bottle, or nearly Rs.165. I thought that if I am doing something, it has to be special. To make something new and special, you have to invest a lot of time and energy. So after talking to nearly two thousand people, we decided to start the business. Initially, the company manufactured the drink in big bottles. Later on, I thought that it’s a headache to buy the big bottles, so we created a smaller bottle. We kept on improving it. Today, the sixth generation of ‘5-Hour Energy’ is out in the market. The retail turnover of our business today is around a quarter of a billion dollars.

B&E: You came from a well to do family and there was no shortage of material possessions. Can handling this kind of wealth be difficult for people at times?
MB:
I studied for nearly 12 years. After school I thought about the reasons why one needs to earn money. What should one do with it? That thought kept me occupied for a long time. Everyone has different kind of goals. I am not a show off and I do not have a thing for too many material possessions. There’s a saying in our land, that we don’t spend time, time spends us. We don’t indulge, indulgence indulges us. Still, if someone doesn’t learn and isn’t careful, he can’t be called intelligent.

B&E: Being a non-US trader, did you face any challenges there? If so, how did they impact your business?
MB:
(Smiling) When you get down to wrestling, you have to do it with someone else. You can’t do it alone. I just thought that we have to do this and just started. We didn’t care about what will happen ahead.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles