Friday, November 30, 2012

INDIAN BILLIONAIRES: WEALTH EROSION

With billions of personal dollars eroded, the foul market has gatecrashed into many a billionaire party...

Then there is his younger brother, Anil, who comes second in list of personal wealth loss victims. While his five companies – R-Com, R-Cap, R-Infra, RNRL and Adlabs lost a total of $53.7 billion between January 8, 2008 and October 24, 2008, he saw a personal wealth erosion of a gigantic Rs.1,902 billion to touch just Rs.399.5 billion as per market reports! For him, it was perhaps all about walking in the shadows of his older brother! Real estate tycoon and DLF’s Kushal Pal Singh was the next big loser with his total wealth of Rs.2093.7 billion having been reduced to a mere Rs.285.5 billion in the time interval mentioned above. For K. P. Singh’s fotunes, B&E analysis proved how an 85.4% fall in DLF’s adjusted stock value lead to an almost equivalent 86.4% reduction in K. P. Singh’s personal coffer value. As on November 11, 2008, as per B&E estimation, his wealth stands at Rs.438.1 billion, still 80% short when compared to his brightest day in 2008!

Proud we were when Forbes announced that India really had the largest number of billionaires in Asia (52 of them). Today, the epidemic struck market is sure to reduce this huge flock to just a handful by the time Forbes comes out with its list of billionaires next year. In total, as a financial market expert confirms, “The group of top ten Indian billionaires have lost more than $425 billion in personal wealth. And this may just get worse considering that recovery is still some months away…” Between January 10, 2008 and November 11, 2008, L. N. Mittal (who controls over 47.5% stake in Arcelor Mittal) has lost a tear-jerking $35 billion. His net worth today stands at just $11 billion. Then there are other promoters who have lost a great deal with the market playing harlot to the whims and fancies of global turmoil – Tatas have lost $25.4 billion, Ramesh Chandra of Unitech is worth just $0.73 billion today (having lost a blinding 95.5% of his wealth since Jan 8), RP Goenka & family promoters have washed their hands off more than $900 million (their value now is just $980 million).


Source : IIPM Editorial, 2012.

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Thursday, November 29, 2012

The best environmental practices

The best environmental practices of leading countries, should be replicated in India too...

India’s position has been quite consistent in recent years, ranking 120th in 2008 and 118 in 2006. We covered more countries (149) in 2008 than in 2006 (133), a couple of which came in ahead of India, so the ranking is really the same. India’s relatively low ranking reflects not only the limits faced by all developing nations but also problems of governance. India does poorly in comparison to others at the same level of development meaning that it is managing environment and sustainability challenges less well than others who face similar situations. India receives low marks on a range of issues. The country’s scores on sanitation and indoor air pollution are among the worst in the world. Protection of habitat and land conservation also emerge as areas of subpar performance. More generally, India faces serious air pollution problems in its cities and significant water issues, reflecting challenges related both to quality and quantity.

We see, as noted above, to cover the full spectrum of pollution control and natural resource management challenges that governments across the world face. We build on an assumption that there are two fundamental objectives when it comes to sustainability - (1) protecting human health from environmental threats and (2) ensuring the vitality of ecosystems. We put equal weight on these two goals and then track indicators in five policy categories water, air pollution, biodiversity and habitat, productive natural resources and climate change as well as relevant sub-categories that policymakers must manage.

We recognise that the rankings depend on the weights one puts on the different categories, but we believe that the model we have developed is a useful starting point for understanding governmental performance both holistically and on an issue-by-issue basis. Frankly, the overall ranking of a country is not that useful to study. What is important is how a country does compared to those in its peer group – other countries that are similarly situated in terms of environmental challenges and level of development.


Source : IIPM Editorial, 2012.

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Monday, November 26, 2012

Hi! I was Bill Gates. Let me tell you about my past, present & future.

steven philip warner, assistant editor, b&e, collides with many people within the gates fraternity for a stunning insider account of the man who re-coded the world... and we follow it up by a smashing one-on-one interaction with the man himself, the one they call...

Well, i don’t know what you all call him; or rather, I think I know too well. You, and I know of him as Bill Gates. That part is simple. He is/was called Trey by his close family members [Trey, as in three, as he was III in the line of the Gates tree]. Many Microsoft insiders also address him as BillG. Leave family and the closest of closest friends, he chooses to talk to people he ‘chooses’. It is rarely otherwise. And that point kept nagging me while my team and I were hounding his offices, Microsoft and what say you, to get him to ‘choose’ us. I had good reasons. The man was on the cover of TIME last month, wasn’t he? He’d ‘chosen’ to write a treatise on what he termed ‘Creative Capitalism’, solutions to help those billions left behind. So when the Bill & Melinda Gates Foundation wrote to us all of a sudden, out of nowhere a few days back, it was like a most smashing and pleasurable bolt from the blue. I was informed that Microsoft in Seattle, USA, had forwarded our interview requests to the foundation too, and they were rushing in to us the minutes of the meeting between Bill, Melinda and Buffet, where they describe the reasons for the billions in grants to the foundation and also the reasons the foundation is focused on specific areas.

$29 billion is what Gates has given since 2000 to his own foundation in this quest. That is, apart from his own services at the top – on June 27, 2008, Bill Gates relinquished [and not ‘resigned’: Bill says he hates to use that word] his official day to day duties at Microsoft and joined the Bill and Melinda Gates foundation ‘full-time’ [“I’ll still be involved part-time with Microsoft, but my full-time job will be at the foundation,” Bill shares in our exclusive interview later on]! You add another $40 odd billion that he’s made his best friend of recent times [17 years till date], Warren Buffett, give to the foundation, and you have the makings of the greatest philanthropist in the history of mankind.


Source : IIPM Editorial, 2012.

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Sunday, November 25, 2012

What makes this business worth keeping for the Modi camp?

After selling off his telecom business to Idea and speculations rife on the sale of his mobile business to Sony Ericsson, B. K. Modi is still betting big on mobile retail. surbhi chawla analyses what makes this business worth keeping for the Modi camp?

“This is a very lucrative category, and Hot Spot is best in most of the things. For instance we are very strong on the product mix side,” avers Sanjeev Mahajan, CEO, Hot Spot. Hot Spot also has a healthy product range with mobile phones in all ranges from Rs.1,000-50,000. Not only this, Hot Spot has an edge in the mobile accessory market, with margins of over 50% in the category. Here Hot Spot has taken the lead by launching its own private label in Bluetooth devices, batteries, chargers, memory cards & fashion accessories. Given the fact that the accessories market is growing phenomenally and the margins too are kind, the move has been spot on. Little wonder, that although it has only been six months since Hot Spot has entered this domain, 20% of their accessory sales have now started to come from their own private label.

Another ace for Hot Spot is its service proposition. States Mahajan, “There is a huge gap in the service side of this market and we believe that the key to this market lies in developing the service network.” Currently, Hot Spot has close to 100 service centres and around 250 franchisees for services. But the edge is being lost as The Mobile Store is also offering a similar service model. With the shelf life of a mobile handset dropping to under a year and the replacement market growing at a phenomenal pace, developing an on-going relationship with a customer could prove to be crucial in the times to come. The Future Group promoted mbazaar, too has similar plans. “We would be looking at adding more value adds to the customers like offering them insurance, after sales services, et al,” states Rahul Rajamudhiah, COO, CorvergeM, Mobile & IT-related division of Big Bazaar. One cannot, however, deny the fact that the competition in the sphere of mobile retail is gaining momentum by the day and although Hot Spot was the first one to enter this category, the likes of The Mobile Store and Subhiksha Mobile are way ahead in the total tally of stores and it would have to speed up its pace to be present in strategic locations to have an edge over them.

Hot Spot also needs to up its marketing activities as players like Subhiksha Mobile & The Mobile Store are very aggressive on the marketing & advertising front. Also the fact that Hot Spot that talks about being brand neutral is actually perceived by many as being a Nokia Priority dealer (as it pushes Nokia more aggressively than other brands), might just come in the way of its neutrality positioning. In particular, Hot Spot now needs to aggressively brand itself in the mobile retail market, or it will lose out on the edge that it has managed to create for itself in mobile retail, just as they lost the first mover advantage in the mobile handsets business.


Source : IIPM Editorial, 2012.

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Saturday, November 24, 2012

Why ‘Power’ Hungry pols deny ‘power’ to people

Our policy makers can’t even manage thermal power. How will they manage nuke power?

Some members of the Indian Parliament may have been looking for long term ‘financial’ security during the debate on the recent confidence motion. That sure helped the UPA government survive. And now, spin masters of the Congress are going to project the nuclear deal as something that will bring electricity to the humble house of the aam aadmi. Indian politicians crave ‘power’ at any cost; Indian voters too crave for ‘power’, albeit of a different kind, the kind that helps the electric bulb glow. So will the nuclear deal help the aam aadmi access power? Not by a mile if the present policy regime – completely subverted and perverted by corporate wars, vested interests, outright theft, loot and corruption and blind sided regulation – continues.

Let’s look at some facts. In the Tenth Five Year Plan, the target capacity addition was 41,000 MW. The actual achieved was just about half of that – 21,000 MW. Such ‘small’ discrepancies do not bother our policy makers. The target for the 11th Plan was raised to 78,000 MW. That means India needs to add 16,400 MW of power capacity each year between 2007 and 2012. The actual achieved in 2007 was less than 5,000 MW. Even if the performance improves from now on, don’t expect the 11th Plan to add more than 40,000 MW. In effect, assuming demand growth to be constant, India Shining would have created a shortfall of more than 60,000 MW in just 10 years. We all know that demand growth has been much higher since 2003 when the Indian economy started growing at 8% to 9% every year.

Now you know why you and your family, office, factory and shop face such devastating power cuts day after day. Thanks to these shortfalls, ‘power’ remains as elusive for the Indian villager as the PM’s post for L.K. Advani.


Source : IIPM Editorial, 2012.

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Thursday, November 22, 2012

RACISM: ABORIGINALS

An apology is good; money, better

The Indian children in Canada were dragged to Christian schools where they were forced to forget their indigenous culture, language, religion and customs. They were separated from their families, leading to drug abuse and personality disorders. Some 1,60,000 students passed through these religious schools between mid-1800s to late 1960s.

Ergo, is an apology well started? Yes! Enough? Absolutely not! Governments must encourage unequal advancement of the socio-economic development of these groups. And why? Statistics by UN as well as global governments clearly prove that these groups have low records in all socio-economic indicators – be it education, health or economic conditions.


Source : IIPM Editorial, 2012.

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Hey King, how ‘bout a last waltz?

The occurrence of the sub prime crisis and oil price hike at the same time defies conventional theory and logic

While Mr.Bush might browbeat the world into believing that it is the insatiable appetite of India and China for food and fuel that is to be blamed for the exponential rise in the price of both, a closer scrutiny of the chain of events as well as a glance back at US history of instigating global turmoil would reveal that things are actually far more intriguing than what they actually seem.

The US modus operandi has always been to instigate a political crisis in a land obviously rich in mineral resources – act as a ‘saviour’ in that ‘crisis’, spend tens of billions during the course of the event, unleash an economic or military blitzkrieg, reduce the mineral rich state to rubble, call a UN General Assembly meeting, make the world pay for the reconstruction of the destroyed places, the contracts of which would go to US backed companies, increasing demand for construction material to be supplied by US, in turn reviving the US economy. Simple!

The world knew for long that ‘Saddam Hussein’ and ‘Weapons of Mass Destruction’ were just lame excuses. The real reason was to take control of one of the largest global oil reserves and thwart further attempts to trade oil in euro, as that would have been the death knell for the biggest brand US has created, i.e. the dollar. Presently, while Bush would like us to believe that the US too is suffering much due to the oil price hike, what is not told is the way the US is profiting through windfall profits from Iraqi oil and from huge refining margins its companies are earning.


Source : IIPM Editorial, 2012.

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Wednesday, November 21, 2012

Man Friday? Or just a Better man?

How does it feel to be proudly called the ‘Man Friday’ of the company, then terribly blamed to be a gambler in a CEO’s disguise and finally dethroned being accused of gifting credit crisis to the bank…this man has taken it all!

Robbie Williams once sang Better man which begins with “Send someone to love me... Keep me safe from harm, from the pouring rain...” Really, imagine the recent event at Wachovia where G. Kennedy Thompson was forced out of his CEO office, and you can’t find a more appropriate connection. He was considered the turnaround man for an ailing bank called First Union and just a few days back, he was blamed of being incompetent and blamed for credit crisis hitting Wachovia Corp. And the rationale behind the expulsion? Thompson, former CEO, Wachovia Corp. was tagged as a gambler for his hopeless acquisition of a Californian conservative mortgage lender called Golden West Financial Corp., during US’ real estate boom in 2006. Thompson tried changing the fundamental rule of investing – buy low and sell high, and there he stands, not only out of the boardroom, but also of the premises of the fourth largest bank of the country. When B&E contacted Wachovia’s officials, they declined to comment on the recent events and one spokesperson, Damon Ford’s response was that, “Wachovia’s economists do not comment on Wachovia, but only provide objective and broader responses about various economic topics!”

Born on November 25, 1950 in Clarksville, Virginia, Ken Thompson is married to Kathylee Thompson and is blessed with three children. He got his BA degree from the University of North Carolina in 1973 and then completed his Masters in Business Administration from Wake Forest University in 1975. Starting his career at First Union Corporation in 1976 as the manager of New York loans office till 1980s, he rose to the position of Chief Executive Officer in 2000; and after the merger of First Union with Wachovia Corp. he became the President and finally the CEO in 2003.


Source : IIPM Editorial, 2012.

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Tuesday, November 20, 2012

South Africa...

...a tourist spot. Not much more for Bharti!

“Sour grapes!” Just a few days back, the mobile behemoth had bid for a 51% stake in South Africa’s largest telecom player, MTN at $21.7/share, implying a fair price of $20.7 billion (and a premium of 20% higher to MTN’s shareholders). A $50 billion dream-deal (in-principle a Bharti-controlled structure as decided on May 26, 2008) was in the making. Two weeks later, the dream has literally become “sour grapes”! Surely, Bharti has done more than just read BCG’s July 2007 report that proved “how M&As valued beyond $1 million destroy twice as much value”! So, what’s there in the secret cellar that urged Bharti to back out?

The primary reason – lack of synergies. As a spokesperson from the company justifies, the collapse of the deal was because “this convoluted way of getting an indirect control of the combine would have been just a compromise for minority shareholders of Bharti. Moreover the synergies were not real!” It was also about the price here, which didn’t afterall appear ‘fair’! In order to seal the deal, the company had to procure ‘internal’ funds and leverage its balance sheet to a mind-boggling $40-45 billion – huge for a grossly overleveraged company (which has a debt/equity ratio of a dangerous 43.2!). Finally, with Singtel refusing to pay-up $10 billion, Bharti had no means to make procurement of funds a safe bait.


Source : IIPM Editorial, 2012.

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Sunday, November 18, 2012

PROFILE: RAHUL GANDHI

The AICC General Secretary tours the country to enlarge his constituency

Congress strategists like Ahmed Patel and others say the Gandhi clan does not need cooked up surveys or an orchestrated media exposure to help their case. Rahul Gandhi has been around on the Indian political firmament for less than a decade.

His ‘Discovery of India’ and the accompanying media coverage, his party hopes, will help the Congress-led UPA government to return to power in the next General Elections.

For instance, the situation in Bundelkhand region was highlighted and brought into immediate political focus only after Rahul’s visits. Mayawati’s aggressive reaction on Rahul Gandhi’s visits to Dalit families clearly indicates her apprehensions that the young Gandhi is capable of denting her Dalit vote base. Congress leaders admit that UP Chief Minister Mayawati poses a real threat to the Congress vote bank.

Initially, this 38 year old, single, media shy, scion of the Nehru- Gandhi family, was as reluctant to join politics as his father Rajiv Gandhi. His decision to join politics in 2004 and win the Amethi constituency the same year has given a new lease of life to Congress workers, who always galvanize themselves in the name of the Gandhis and Nehrus.

By sleeping in a Dalit’s hut for a night recently. Rahul is enjoying, by his own admission, a re-discovery of India. But whether all this helps the Congress would be on evidence shortly.


Source : IIPM Editorial, 2012.

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Wednesday, November 14, 2012

Corrupt sports

All forms of bribery present here

It is a general notion that corruption in sports governing bodies is limited to developing countries only. But not quite, though. The highest governing body in sports, International Olympic Committee had accepted bribes- in the form of cash, entertainment, business favors, travel expenses, medical expenses, and even college tuition fees for members’ children. There were seven high level inquiries held into the Olympic Games city-bidding process recently.

It includes US-based probe into Salt Lake City 2002 Winter Olympics; an Australian enquiry into Sydney Olympic Games, an investigation in Japan and 2012 Olympic Games in London. There are 30 or more than a quarter of suspected delegates in IOCs own enquiry. The US Olympic Committee Ethics panel probe into Salt Lake City bid, in which $1.2 million was paid to IOC delegates to secure their votes. David F. D’Allessandro, President of John Hancock described the Sydney Olympic Games bidding process as a “clear cut” case of bribery and denounced the IOCs response as a “classic cover up”.


Source : IIPM Editorial, 2012.

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Sunday, November 11, 2012

Money generated by Indian Premier League

The kind of hype and money generated by Indian Premier League (IPL) is simply astounding. Even better, it is becoming a classic case of Bollywood and Cricket merging to propel Indian sports towards the league of really big bucks. But are things as rosy as they look?

Everybody knows about how Sania Mirza has taken the ‘business’ of tennis to new heights. The humble yet brilliant Vishwanathan Anand routinely earns crores every year through chess matches. Others like Jeev Milkha Singh (golf), too, have become dollar millionaires. So, as the Indian economy gallops ahead at a scorching pace, sports is also becoming big business.

But one thing is unmistakable. While sports like racing, football, golf and chess do have a bright future, it is cricket that rules as the unchallenged emperor. Says Amita Sarkar, Head, Media & Entertainment division, FICCI, “No other sport can match the popularity of cricket in India. The other sports have a future, but it is a long way from now.” Just look at this comparison: When the Indian hockey team won the Asia Cup, they got piffling money rewards while when India won the first T-20 World Cup (cricket), Dhoni and his band of merry boys were showered with cash prizes, which also resulted in protests by the hockey players for a stepmotherly behaviour.

Amidst all this hype, hoopla and media frenzy, one question that keeps cropping up repeatedly is: Have people like Shahrukh, Preity, Mallya and Mukesh Ambani made a wise decision by investing such huge amounts in teams and players? And will they be in a position to recover their investments in the future? Equally important, Sony has bagged the telecast rights of IPL for a mind boggling $1 billion. Will the channel be able to recover the money it has gambled on the new 20-20 format? If history is any guide, then the head honchos at Sony surely have some thinking to do. In an exclusive interview with B&E, Ashish Kaul, the then Executive Vice-President of Zee Network explains the economics of IPL and how tough it will be for Sony, “It is only BCCI who is going to make money out of IPL. By no means Sony or WSG will make money.


Source : IIPM Editorial, 2012.

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Saturday, November 10, 2012

BAA: DEBT ISSUES

BAA needs to sell one of its airports to cater to regulators as well as its alarming debt situation

Now for the bad part. With BAA, Grupo Ferrovial has also taken up debt amounting to a whopping $20 .2 billion. “According to me, Ferrovial, being a private company has no prospect of a rights issue. So, they will just have to keep selling off their non-core assets but there are not many of these remaining,” comments David Bentley, MD, DJB Associates, UK. Recently, Grupo Ferrovial sold World Duty Free, to Italian retailer Autogrill for $1.1 billion, which has surely helped.

Selling off one airport could handle both issues for BAA. But the question is which one? The departure of an airport like Gatwick (the busiest single runway airport in the world) wouldn’t make much of a difference to the debt situation, as a legal clause prevents another runway to be built on it till 2019. And in the case of an airport like Heathrow, selling it would be tough, as it becomes a politically sensitive issue. Clearly, from here, Grupo Ferrovial has to play its cards right.


Source : IIPM Editorial, 2012.

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Thursday, November 8, 2012

Of sleazy schemes

Increased outlays for NREGP will increase corruption

The road to hell is almost always paved with good and even noble intentions. One couldn’t but help wonder about this truism after reading the likes of Aruna Roy and many other well meaning activists passionately defend the National Rural Employment Guarantee Programme (NREGP). All of them – barring some die -hard jholawallas – agreed that there were serious flaws in implementation of the scheme that had resulted in most of the money not reaching intended beneficiaries. In some districts, just 3% of the targets were achieved as corrupt contractors, bureaucrats and politicians made merry at the expense of the poor unemployed people of rural India. Most activists like Roy do admit that there is some truth to the allegations made in the CAG report that too much of the funds meant for NREGP have been siphoned away. And yet, they insist that the NREGP must now be implemented in every district of the country (Indeed, the implementation has already started). Their solution: plug the loopholes that marked the faulty implementation of the scheme as witnessed in the last few years.

If you look at analogies, it would go something like this: murders and rapes keep happening with alarming frequency in a neighbourhood, despite the presence of police personnel. If activists were part of the solution to this crime wave, they would advocate that the murderers & rapists will soon stop committing crimes! How different are the corrupt Indian contractors, bureaucrats & politicians from murderers & rapists?


Source : IIPM Editorial, 2012.

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IIPM : The B-School with a Human Face
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Inflation heads high…

RBI’s cautious stance on managing inflation is all the more welcome

The results are out. “Curbing inflation remains the highest priority for the Reserve Bank of India.” Amidst heightened global uncertainty, the Governor of Reserve Bank of India, Yaga Venugopal Reddy, maintained status quo on all policy rates thereby avoiding any tit-for-tat interest rates cut after the Fed slashed rates by 75 basis points. It is an expected move as the government does not want to couple robust economic growth with high inflation. Considering the factors in the domestic & global economy, the move centring on liquidity, curtailing inflationary pressures & managing growth are very much in line. Banking analysts are of the view that RBI’s emphasis on price stability & well anchored inflation, ensures a monetary & interest rate environment, which is conducive to the continuation of the current growth momentum. They feel that maintaining status quo is indeed the best thing they could have done. However considering the rate differential, RBI would be forced to cut interest rates in the near future, for if it does not, then the deluge of foreign exchange flows would lead to a corresponding increase in rupee circulation within the economy and thereby lead to higher inflation and still higher interest rates.

Politically too the government needs to show concern over inflation. Knowing for sure that while growth may not beget votes, inflation will surely lose them, a cautious approach is being adopted.


Source : IIPM Editorial, 2012.

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IIPM : The B-School with a Human Face
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