Showing posts with label Lehman Brothers. Show all posts
Showing posts with label Lehman Brothers. Show all posts

Tuesday, February 5, 2013

INDIA INC.: Q3 PERFORMANCE

A 34% rise in India Inc.’s Q3 profit may bring smiles to many, but it’s nothing more than a statistical jugglery of an ultra-low base founded in the third quarter of FY2009. Though things have started looking better, India Inc. still has miles to before they can really celebrate by Deepak Ranjan Patra

More than a real performance, the truth behind the superb bottom-line showdown in the third quarter is the statistical jugglery of base-effect. Low-base in the third quarter of the last fiscal, which was also the worst quarter during the current slowdown due to the turmoil in the financial industry caused by the sub-prime crisis and followed by collapse of giants like Lehman Brothers, is the particular reason that made India Inc. look bigger and better in Q3 this year. However, going by a quarter-on-quarter (q-o-q) analysis, net profit of the 467 companies mentioned above show a negligible growth of just 1.72% over the previous quarter. The only consolation for corporate India is the fact that it managed to break the q-o-q downward trend it had been witnessing since the first quarter of the current fiscal.

But then, not all is well with whatever small growth India Inc. managed in the last quarter over the second quarter. Apart from Tata Steel, TCS and NTPC, no other company among the top 10 profit makers has witnessed a bottom-line growth of over 5%. Worse than that, profit after tax for three of them have gone down in Q3 over Q2 (including a 40% fall by the country’s largest public sector units- ONGC. SBI and Wipro are the other two) and two of them have grown less than 1%, stating that big brothers among the Indian companies have failed to deliver; leaving it to the small and medium companies with smaller base to do the job. Even the numero uno in the country in term of profits, Reliance Industries, (RIL) too has shown a hairline rise of merely 4%.

However, a report card revival in the small and mid-cap companies is probably the biggest fact to be cheered about in corporate India’s results for the last quarter. Despite their low-base, one should not take away the credit from companies like Hindustan Copper, AIA Engineering, Areva T&D and Panacea Biotec et al, which have seen their bottom-line growing by over 100% in the last quarter on a quarter-on-quarter basis. Not to mention that the small and mid-cap companies have also got a strong back from big investors like the Foreign Institutional Investors (FIIs). As per a study conducted by CNI Research on small and mid-cap companies, FIIs increased their stake in as many as 322 companies in the last quarter. In 259 of those companies, the FII’s raised their stake by up to 2%.


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

For More IIPM Info, Visit below mentioned IIPM articles.
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Sunday, February 3, 2013

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!

Enron and Worldcom were two other dubious names at the dawn of this century that investors would remember with horror and trepidation. Accounting frauds at these companies, which were done by executives at multiple levels to hide the burden of debt on them, led to further investor billions going down the drain; and the government bringing out its much publicized Sarbanes-Oxley legislation to prevent further frauds.


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

For More IIPM Info, Visit below mentioned IIPM articles.

 
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