Thursday, March 28, 2013

B&E Indicators

The world is Enjoying a new ‘Super-Cycle’

The world economy has enjoyed a super-cycle twice before and it is now experiencing the third driven by the industrialisation & urbanisation of emerging markets, and global trade. But at the same time, one cannot underestimate the challenges faced by the world economy because of the recent recession. In fact, the policy dilemmas are acute: monetary tightening, intervention, even capital controls are all on the agenda.

It’s an expanding world

In 2000 the world economy was $32 trillion in size. Even, following the global recession and financial crisis, the world economy is almost twice the size it was a decade ago. There was a significant contraction as a result of the crisis and global recession, but now the world is back to its pre-recession peak. In fact, based on conservative growth assumptions, this could rise to $64.7 trillion next year.


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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Monday, March 25, 2013

Chronicles of India’s FDI Travails

After a long and Gruelling Paper Trail, POSCO got a Clearance by The Ministry of Environment & Forests recently. Does this Indeed mean more Clarity for Future FDI Projects in India?

January seems to be assuming a special significance for The Pohang Iron and Steel Company (POSCO). It was over an year ago on January 28, 2010, that Posco was placed in an elite league by the Canada-based ‘Corporate Knights’ magazine and ‘Innovest Strategic Value Advisors’ at the World Economic Summit in Davos. This was the list of 100 companies that are likely to survive the next 100 years, broadly based on “the strength of their relationship with stakeholders, value of their innovations and probity of their financial actions”.

This year, on January 31, 2011, POSCO was ‘rewarded’ for its survival instincts in India. Environment Minister Jairam Ramesh, who has been widely perceived as an exceptional minister due to his disregard for exceptions with respect to companies and environment issues, decided to indeed make an exception with POSCO and give it conditional clearance (despite committee recommendations to the contrary)! That, in essence, meant a shot in the arm for POSCO’s survival bid in India and a great step forward for the 12 MTPA steel plant in Jagatsinhpur, Odisha and some $12 billion in FDI for India.

For Ramesh, it is a redemption of sorts, ever since he developed an anti-development image since he refused to give clearance for the Vedanta Aluminium mining project in Niyamgiri. For companies looking to pump in FDI in India, it is a case study to cherish, as one company manages to negotiate through India’s legal, political & bureaucratic maze. But they would also like to understand what factors were so starkly dissimilar in the two cases of POSCO and Vedanta. When it came to looking at economic rationale for these two projects, it’s like finding hay in a haystack! What factors led to Ramesh viewing them in different perspectives? The answers run into multitudes of pages of government and legal reports, company responses, community perspectives, NGO interventions, political motives, et al. B&E attempts to decode the fine print in as concise a form as possible.

The ‘Green’ Angle
Both projects were reported for environment violations by separate panels under the environment ministry. Around 3,586 acres of land sought by POSCO is government land and the rest was private land. Within the government land, around 2900 acres is deemed forest land (as per ancient records), but a report by Meena Gupta, part of the four member panel under the ministry confirmed, “Though POSCO is also to be located on forest land, the area recorded as forest is mainly sandy waste...” But other committee members felt that forest land should not be diverted at all. In the environment context, POSCO did not have the luxury of making violations, since work hadn’t started! But concerns were highlighted in the report, like possible scarcity due to water supply to the plant from Jobra barrage & destruction of flora & fauna due to the captive port at Jatadhar Muhan, which is so close to Paradeep.


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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B&E Indicators

A year of landmark deals

With corporate debt raisings, IPOs and the qualified institutional placements (QIPs) helping companies fund their acquisition plans, India Inc. made some of the largest deals ever in 2010. In fact, the largest M&A deal of the year by an Indian company – Bharti’s acquisition of Zain – was among the top 10 deals of the year globally. India Inc.’s appetite for strategic M&A too quadrupled over 2009 to clock $49.78 billion in 2010.

M&As and PE investments rebound

In fact, it has been a rebound year for Indian M&As and private equity (PE) investments after the weak activity levels India Inc. saw in 2007. While cross border M&As topped the chart and were up by 498%, deal values almost trebled to reach an all time high of $18.32 billion in 2010 (up by 173% over 2009) on the domestic front. PE players also returned to market in a significant way with PE deals touching a 6.3 billion mark in 2010.


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, March 17, 2013

Reveals the Path to Sustainability

Chairman and CEO, ITC Ltd, in an Exclusive Conversation with B&E’s Bhuvnesh Talwar & Ashutosh Harbola reveals the Path to Sustainability

B&E: What major challenges do you see in today’s business environment?
YCD: Today’s business environment continues to be challenging in the light of our aspirations, vision and increasing competitive forces. Partners in the value chain that were once insignificant are becoming important. It is very dynamic in nature and one thus needs to keep a tab on it.

B&E: Can you recall any major failure that ITC as a brand has faced in the past?
YCD: There have been some setbacks but they are bygones and need not be remembered. The current challenge is to create new businesses on a ‘greenfield basis’ in the face of intense competition. I can’t remember any company like ours which has created a plethora of successful brands in such a short span of time. This is both a challenge and a measure of success.

B&E: How crucial do you think is the role of CSR?
YCD: As I see it, CSR would be a source of competitive advantage for those who do a better job of CSR than those who ignore it. But people ask me, is this the right time for it? Well, it is always the right time as we need to innovate continuously. However, there should be an incentive system in place to achieve.

B&E: How do you view the Indian economy faring in areas of sustainable development?
YCD: In my view the current model of economic growth on which India is succeeding may not be able to carry the demands of growth and sustainability in the future. The current growth has come at the cost of environment and increased divide between the rich and poor. So sustainability, in terms of the impact on social and environmental capital, has to be an integral part of the economic progress we make in the future.


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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Monday, March 11, 2013

Why History is Against Crony Socialism & Crony Capitalism

Each time a year or a decade draws to a close, hacks and pundits shamelessly use words like tumultuous, turbulent, momentous and what not. Events that would not even find a footnote in history become momentous occasions that would transform everything. For a relatively new democratic nation state like India, every decade since the 1950s has been a defining one. The 1950s saw Nehru disarmingly wrap India Inc. around his web of socialist ideals while Dr. Ambedkar fought a heroic battle against revisionists to reform the Hindu Civil Code. The 1960s saw the dismal humiliation of India by China, the last famine that India witnessed and the beginning of the destruction of the Congress monopoly. The 1970s saw India Inc. being smothered by crony socialism even as Indira Gandhi and Jaiprakash Narayan fought an epic battle that nobody won. The 1980s saw India Inc. get just a whiff of freedom from stifling controls and Indian cricket finally broke free of its British Imperial legacy even as the soul of the nation fought what then seemed like a losing war against secessionism and insurgency. The 1990s saw economic opportunities multiply even as multiple and multiplying sectarian and secessionist violence of the most brutal kind struck blow after blow against the very Idea of India.

How would you sum up and characterise the post Y2K decade ?(Yes, do you now recall how hacks and pundits were hell bent on categorising Y2K as something more apocalyptic than the most terrible visions of Nostradamus? And yes, how many of you do actually remember the Y2K frenzy?)

Being a hack and also having no shame in proclaiming myself as a self proclaimed pundit (as most fellow Indians do!), I would say this decade going by saw three things: the rise and rise of brazen crony capitalism (replacing the crony socialism) of the 1970s and 1980s and the simultaneous rise and rise of a wave against pathetic governance masquerading as populism; ethnic assertiveness or plain simple goondaism. Both are waging an epic battle; the first to enable some elements of India Inc. to take India back to some kind of paternalistic and pseudo-democratic corporate feudalism and the second to take India back to plain simple feudalism. Or not. The battles are being waged in earnest and often viciously; but I doubt if even Bejan Daruwala, hustling his annual dose of narcissism for Rs.295 a shot, can actually say who will win the war.

Back in 2001, India Inc. and middle class India were shaken by the Ketan Parekh scam; almost 10 years after SEBI was formed to prevent such scams and the venerable UTI almost collapsed because it invested your and my money in exorbitantly overpriced equities prompted by God knows who. Of course, please don’t forget the Tehelka scam the same year. The subsequent years saw scam after scam – small and big; the first real telecom scam and the petroleum pump scam to name just two. After 2004, when the aam aadmi UPA government under the unquestionably honest Dr. Manmohan Singh came to power, India witnessed a bizarre situation, where genuine pro poor schemes and plans marched in tandem with gargantuan scams. One of the biggest scams, though hardly talked about now, is the manner in which the government was enriching corporate India at the expense of poor farmers through that fancy thing called Special Economic Zone (SEZ). And nothing seems to have changed even as the decade comes to a close.


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, March 10, 2013

Chandrashekar Hariharan, CEO and Co-founder, BCIL

Chandrashekar Hariharan, CEO and Co-founder, BCIL

B&E: What has been the recent trend in growth of the industry?
CH: The shift toward voluntary compliance in the building industry is heartening. The CII IGBC has alone received applications from totaling a massive 750 million sq. ft. in all for both commercial and residential buildings. This drive from the private sector has been primarily led by their own perceived need to build brand profiles with such ethical, eco-sensitive initiatives. This number is growing. The IGBC has targeted reaching 1 billion Sft of such certified green buildings by 2012.

B&E: What changes in the legal and regulatory framework can ensure fast paced large scale development of the industry?
CH: The simple expedient of every Town Planning department in India, in every state, district and tehsil headquarters must ensure that no plan sanction is offered without solar heating systems for every building for hot water, CFLs and LEDs only for all lighting, STP and reuse of all treated water in every multi-dwelling building, regardless of whether it is residential, commercial, hospital or for tourism purpose and use of only 5-star rated energy-efficient pumps and other high-induction appliances in buildings.

B&E: What's the kind of investments you have made or planned and what are your turnover targets for green building projects in the next 3-5 years?
CH: BCIL's vision has continued to be mainstreaming sustainability, from the time of its inception in 1995. The organisation's Mission 2020 now has set a path that will help to achieve 20 percent growth annually to reach 20 million sq.ft. of sustainably built green spaces, with the impact of what we offer to reach a minimum of 200,000 people.


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

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Wednesday, March 6, 2013

GENERAL MOTORS: NEW AVENUES

GM has long realised that it cannot wish away India if it plans to stay in the Asian reckoning. But while it has been a leader in China, the intensely competitive Indian market is yet to take off for GM. Pawan Chabra drills and grills GM’s MD Karl Slym for a deeper look into how the company plans to change that orientation

Slym accepts that one area where GM lags is its production capacity. But he’s clearly working on that. GM has already made investments to the tune of Rs.11.25 billion to increase its capacity at its two plants in Halol and Talegaon. GM will be expanding its Halol car facility from 85,000 units to over 1 lakh units per annum while converting it into a commercial vehicle hub. The Talegaon plant has a current capacity of 1.4 lakh vehicles on a three shift basis and the company expects to take the capacity to 3 lakh in the second phase. Sumit Sawhney, Vice-President – Sales & Marketing, GM India reveals some more figures to me, “The company has invested over $1 billion (Rs.45 billion) in the domestic market so far and the company will remain deeply committed to this market even in the coming times.”

Be that as it may, I’m more interested in one tactic Slym is trying to pull off, which could turn out to be the market maker for years to come for GM.

Does india really matter at all in front of china?
For the uninitiated, GM India has joined hands with Shanghai Automotive Industrial Corporation (SAIC) in February this year and will soon be bringing products from the SAIC portfolio to the Indian market. After the announcement that GM India will sign a JV agreement with SAIC (JV partner for GM in China as well) in December, the company made its plans for the LCV market very clear.

Considering the fact that SAIC is the market leader in the Chinese automobile circuit (the largest automotive market across the globe) and operates in JV with two top global brands (GM and Volkswagen), the JV is expected to make a lot of buzz in the coming times in the Indian market as well. GM China sold close to 1.83 million vehicles in 2009 alone (more than the 1.5 million units sold by the entire Indian passenger car industry for FY 2009-10), a rise of a close to 67% over 2008. It took hardly 12 years for the company to become the largest foreign carmaker in the China. In India, there is still some way to go. The company sold 41,971 vehicles in India during the period from April to September 2010, which puts it at rank 5 behind Suzuki, Hyundai, Tata and Ford in terms of absolute volumes (SIAM).

Slym elaborates on the initial plan, “We will launch close to six new products along with 15 fuel variants over the next 24 months.” GM will also mark its entry into the CV market at the 11th Auto Expo expected to take place by early 2012. It is believed that five of the products will come from the SAIC portfolio – two LCVs, two sedans & one SUV. 


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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Tuesday, March 5, 2013

North Block Moves

UPA hopes there will be no trouble once the verdict is out but is leaving little to chance, says B&E’s Pramod Kumar

The ghost of Ayodhya is looming large on the minds of the ruling coalition. In the last meeting of the Cabinet Committee on Security (CCS), chaired by the Prime Minister, Home Minister P. Chidambaram was briefed about the possible deployment of paramilitary forces to handle the turbulent situation in J&K and to tackle the Maoists. Someone raised the question of possible deployment of security forces in the wake of the upcoming verdict of the Allahabad High Court on the Ram Janmabhoomi issue. The meeting was unanimously chaired to discuss that the government could not afford to repeat the mistake of the Narasimha Rao government. Caution was the need of the hour. During the meeting, Chidambaram briefed the CCS members about preparations of the Home Ministry to tackle any sort of situation that might arise after the court verdict.

The government has listed 35 sensitive cities where communal harmony could be jeopardised. Therefore, an additional secretary-level officer has been deputed to monitor the situation particularly in Gujarat, Maharashtra, Karnataka, Madhya Pradesh, Chhattisgarh and Uttarakhand. The Centre has sent an advisory to these states to be on their guard.

The Centre has assured Uttar Pradesh of all help in case things threaten to get out of hand. Though the government has clearly stated that it is not possible to send 400 battalions keeping in view the tight security arrangements for the Commonwealth Games, it would try to do its best to provide all the support that the UP administration might need.

Sources in the UPA reveal that the government has conducted a survey through local Intelligence agencies. What concerns the Congress think-tank is the political battle that will be fought. The party has sought parallel reports from state Congress units. On the basis of these reports, Sonia Gandhi has advised the government to make foolproof arrangements to handle any eventuality.

The BJP and RSS are understandably hopeful of making political capital out of the issue once more. The Congress believes that if the verdict goes in favour of the Waqf Board, then it would be easy to handle the situation.


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

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Nordic brings back the old ghosts

Tighter monetary policy has not only weakened domestic demand in Nordic’s biggest economies, but has also put a brake on region’s overall growth momentum. Is Nordic slipping back into recession? Manish K. Pandey

Several investors in western Europe, particularly in the Nordic region (comprising of countries like Sweden, Denmark, Norway, Finland, et al), are busy rejigging their portfolios these days. Raison d’être: Ghosts of a double-dip recession, who had disappeared as green shoots of recovery started popping up, have once again started haunting the region.

Tighter monetary policy has not only weakened domestic demand in the region’s two biggest economies, Norway and Sweden, but has also put a brake on Nordic’s overall growth momentum. While Norway’s real GDP contracted by 0.5% during Q1 2010, Finland too remained in a full-blown recession in H1 2010 (Finland’s GDP contracted by 5.4% in Q4 2009 and by 0.6% in Q1 2010) as firms pulled back fixed investment spending on the back of falling export demand. Even Sweden’s economy, which was the first to rebound in 2009, has lost its winning momentum. GDP growth in Sweden is expected to slow down from 4.2% in Q2 2010 to 2.1% in Q3 2010. What’s more?

Unemployment has also risen in Denmark (from 3.9% in Q3 2009 to 4.3% in Q1 2010) and Norway (from 3.2% in Q3 2009 to 3.5% in Q1 2010) while staying at record-high levels in Finland (at 8.8%). So, is Nordic slipping back into recession or is it just a halt before the growth finally picks up in the region?

Though Eszter Miltenyi, Senior Press Officer at European Central Bank finds an excuse to get away from bringing in the real picture of the region by saying to B&E, “we do not comment on particular countries’ economies of the euro zone,” there are still many who are bold enough to speak the truth. “The region will tip back into a shallow recession in early 2011. Growth momentum will fade as the recovery stalls in key trading partners. Although Denmark, Finland & Sweden have strong trade links with each other, most of their trade flows outside the region to Germany, US and UK. And as Germany and UK are expected to see mild recessions in the first half of 2011, things would really weigh heavy on the Nordic region’s exports,” Christine Li, the London based economist at Moody’s Economy.com tells B&E.

Further, if Europe’s sovereign debt crisis deepens, the demand from Nordic’s trading partners could suffer longer than expected. Dismal economic news from US and western Europe too implies that the global recovery is fragile and growth is inconsistent. This means a lot more trouble is on its way for Nordic countries in the near future. No doubt, public finance was strong across the Nordic when it entered the 2008 financial crisis, but the situation has changed today with region’s major economies like Denmark, Sweden and Finland struggling with massive budget deficits. But then, are policymakers really aware of the financial storm that perhaps might hit them anytime soon? If yes, what are they doing to avert the danger?


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

The tax holiday provided to Indian IT companies at the dawn of this century was historic and path breaking, as it enabled the industry to reach the enviable stature that it enjoys today. But retaining this tax holiday doesn’t make sense from a futuristic perspective by Ashutosh Harbola

Understandably, the government’s point of view is that the sector is self sustaining and its time to provide incentives to other sectors that need them more. The total revenues foregone by the government due to tax holidays for the IT and ITES Sector are `269.76 billion for the fiscal year 2009-10 while overall revenues foregone on account of corporate and non-corporate tax concessions are estimated to be `842.97 billion. After all, the government needs to scale up its budget size, cut down expenditure on interest payments and invest in agriculture and other unorganized sectors, which constitute 90% of the workforce in India.

Still the IT industry is moving to the SEZ’s now to grab tax benefits. But small and mid -sized companies will never be able to make it there because of high land cost and higher tax rates. BPOs will have to look for newer destinations as it will be a tough survival call for them indeed. Companies who deal in volumes are moving to the special economic zone. Praveen Bhadada, Manager-Consulting, Zinnov Management Consulting Pvt. Ltd. feels the impact is minimal at around 2-3% as he says, “Cost savings that the companies are able to generate operating out of India are far greater as compared to the tax burden that this withdrawal may result in.” Moreover, Indian IT companies need to urgently move up the value chain and provide lines of business and executive management related offerings. This decision against extending the tax holiday could actually push the fitter ones to make the inevitable evolution. So it does appear that the IT industry is raising unnecessary alarm on the issue; though it may be argued that smaller players may need protection. Goyal of Pitney bowes India agrees, “Indian industry should be able to reap the dividends of the reference architecture they have created by early mover advantage.”

Financial subvention for weak industries is logical and desirable, so that they may achieve their potential. But after these industries reach a certain scale, it enters the realm of protectionism, which helps no one. The Indian IT sector must take several key steps to take the next leap forward. In our view, pushing for STPI extension isn’t one of them.


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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Saturday, March 2, 2013

JAIDEEP BHATTACHARYA, CHIEF MARKETING OFFICER , UTI MF AMC

Jaideep Bhattacharya, Chief Marketing Officer of UTI AMC in an exclusive interaction with B&E

How has MF industry evolved over the last five years and what kind of growth do you foresee in the near future?
The MF industry has grown at a rate of 31% (CAGR) over the last five years. During the last one year the industry has grown by around 65%. We expect the industry to continue to grow at the same rate in future as well. Though the growth has been fairly good there is a need to further augment equity assets which is predominantly retail. The main purpose of evolution of mutual funds is to bring the retail investor to invest in the capital market to enable them to reap the benefits of diversification.

What should a retail investor expect from mutual funds?
MF products are vehicles for investing in particular asset or category. The risk-return of a MF scheme depends on that of the underlying assets. One may invest in a liquid scheme for short investment horizons, debt schemes for regular return and equity schemes for long term growth.MFs are efficient tools of diversification across assets and categories.

What marketing initiatives have you taken to attract investors?
UTI MF was the first in the industry to launch a product called UTI Wealth Builder Fund-Series II which invests across 3 asset classes – equity, debt and gold followed with innovative campaigns. The marketing campaign effectively utilised the Mumbai Dabbawallahs to carry the product literature to each and every household in the city. 5,000 Dabbawallahs of Mumbai are associated with a huge amount of trust as they carry food from households for the working community. UTI Wealth builder Series-II collected nearly Rs.2.85 billion, five times more than any other NFO launched at that time. Besides, UTI has tied up with NSE to buy & sell UTI MF units through NSE terminal, extending UTI’s reach to more than 1,500 locations through more than 1,50,000 NSE terminals.


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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