Wednesday, December 12, 2012

IT’s dark knight

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

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


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Sunday, December 9, 2012

Man proposes, God refuses...

Protectionist policies will save your companies, but only for so long as they don't beg for euthanasia!

The only 'right' turn in international trade today is, the 'American turn'; all others will fetch you a 'wrong-turn' ticket! Allow us to sound a tad out of proverbial tune here, but isn't that the truth? When the US government wanted the US economy to move from better to best, it allowed everything from offshoring to H1B visas, and God allowed it. Then, when it was time to save the world (and America of course), it is putting in place all sorts of protective policies, one of which was the American Recovery and Reinvestment Act of 2009 on February 17, 2009, a massive $787 billion stimulus package; and God is allowing it! So how is this a vile definition of 'protectionism'? Section 1110 of the Act reads: “None of the funds appropriated or otherwise made available by this act may be used for a project... unless all of the iron and steel used in the project is produced in the United States”. Clearly, this "buy American" clause for worse, will firstly erode the competitive edge of the so-called American MNCs, and secondly, it will only encourage more such 'protectionist policies' from other nations in retaliation! There would be tall import trade barriers set by even emerging economies. Finally, lack of growth in local consumption, would force the US government to 'liberalise' its policies. But, the emerging economies would maintain the roadblocks; for isn't 'ego' a crucial 'international trade' trait?

Yes, our predictions sound far too pessimistic, but allow us to justify. The third largest economy in the world – China, has already taken the 'American turn'! And this seems justified, for why should China behave like a Third World nation and stand challenged by US hegemony? So there it is. On one hand, ensuring that an American MNC like Coca-Cola stands no chance in growing big on Chinese lands and on the other voicing out loud the purpose behind acquiring a First World MNC – Rio Tinto.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Friday, December 7, 2012

Ma‘chines(e)? No! Ja‘pain’ese!

Toyota & Honda are in trouble... And now, they have new leaders too! But really, have the batons been passed onto the right man? Will they deliver?

Two companies, Toyota Motors Corp. & Honda Motor Co. – the former worth an awe-inspiring $99 billion, and the latter sitting pretty at a tubthumping $42.9 billion on the bourses... Two companies, hailed to become the next auto super-agents... Two companies being run by seasoned professionals, making billions for their shareholders... (Snap!) End of dream; now wake up!

Two companies, which have under-delivered after a better-than-ever optimistically forecasted 2008-09. Talk about share price? Toyota’s has plummeted by a considerable 44.39% to touch $60.66 (March 3, 2009; NYSE) in the past two years & Honda’s has seen no better days either, scrambling at $22.83, a fall of 38.45% in the same period! Talk about earnings? After recording a heroic $99.66 billion in operating profits in the past half-a-decade, Toyota is finally letting-off gas, having lost $3.69 billion in Q3, FY2009, a figure further estimated to swell to a painful $4.9 billion for FY2009 (for the records, it’s Toyota’s first ever annual loss since 1950!). As for Honda, it reported a deplorable operating loss of $40.19 billion in the last quarter of 2008 alone, enough to reduce its cumulative operating gain of $40 billion in the past half-a-decade to shame! Now let’s talk about leaders, about not-so-young leaders in their 50s... and both seem to have a lot in common in this regard too!

Where on one hand Akio Toyoda (grandson of Kiichiro Toyoda, founder of Toyota Motor Corp) walked-in as the new President of Toyota, Honda named outsider Takanobu Ito as the CEO & MD, replacing Takeo Fukui, who’d been in charge for the past six years... Heading the two biggest names in the ailing auto industry is not a job too easy during times when the world seems to have chosen to shut their garages forever! At present, the situation for Ito seems to appear less troublesome, all thanks to Honda’s ‘hallowed’ absence from the heavy-truck segment.
 

Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Get set for the 16th Lok Sabha polls

 Most religions thrive on miracles. In India, it is a miracle that Indian democracy itself thrives on miracles; rather perhaps it is a miracle that Indian democracy survives and thrives despite the political system and politicians. As the nation gears up for the Lok Sabha elections, you don’t need to be a pundit to realise that the polity and voters are hopelessly fragmented. The next Lok Sabha will be peppered with regional and local parties with 5 or 10 or 15 seats dictating terms and blackmailing their way to pelf and plunder in a fractious and incoherent coalition government. Ever wonder why India gets unstable coalitions in times of grave economic crisis? It was a joke led by the late Charan Singh in 1979 when OPEC dealt the second Oil Shock. It was the sham led by the late V. P. Singh in 1990-91 when the Indian economy virtually collapsed. It was the farce led by Deve Gowda and I. K. Gujral in 1996-97 when East Asia faced a meltdown. Who will lead the next farce? Here is my choice of probable candidates:

l Chand Mohammed aka Chander Mohan: He will fulfil two crucial criteria: unity between Hindus and Muslims and the importance of dynasty in Indian politics. Besides, like Manmohan Singh, he can’t even hope to get elected!

l Raj Thackeray: No one else can revitalise democracy the way he can. Imagine goons of MNS chasing MPs from Bihar and UP through the Central Hall of Parliament.

l Mani Kumar Subba: This gentleman too will fulfil two crucial criteria: India is open to outsiders and democracy is a gamble. This man is allegedly a citizen of Nepal on the run; so at least he will ‘run’ a government. More importantly, he will use his famous lotteries to allocate portfolios to coalition partners.

l Pramod Mutalik: If democracy can be fun, this will be the ultimate thing. Imagine a debate between this staunch defender of Hindu culture and the redoubtable Renuka Choudhry. TV News channels need only do live telecast of Lok Sabha proceedings to get record TRPs.

l Pinarayi Vijayan: He will achieve what no Prime Minister in modern India has ever been able to achieve. This committed Marxist will issue a decree that will completely ban commissions from foreign companies for winning contracts (Of course, the ‘cause’ will be exempt).


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Wednesday, December 5, 2012

SUBHIKSHA: TURMOIL

Subhiksha must adopt a franchise model, but first it needs money real fast!!!

And industry experts believe that the retailer will have some tough time finding the desired funding. Under the new plan, the company also plans to fire some from its current workforce of 15,000 employees (both direct and on contract).

When B&E interacted with Subramanian last year, the company was targeting a store count of 2,300 and a turnover of around Rs.45 billion, which now certainly seems to be a distant dream for the company. Even if Subhiksha is able to arrange the desired liquidity it will not be easy to gain supplier’s confidence. The company may lose some of them even as it starts clearing outstanding debts. One only realises the true value of credibility when it is lost.

The basic problem with Subhiksha’s business model is that even after being established on the ground as a successful model in the Indian market, they missed out on the critical aspect of raising liquidity. Big retailers like Bharti, Future Group, Reliance Retail et al, have already realised the potential of Subhiksha’s business model and announced ventures on similar lines. But Subhiksha should opt for a franchisee model once it survives this period. Going for a franchisee model will definitely improve the growth of the company and it will emerge as a much stronger player in the industry. It should not worry about loss of control in such a model, since no frills models can survive on sub-optimum service levels. And for a man like Subramanian who likes to try new things and has seen many ups and downs in his business, trying a franchisee model will be a useful advice, as there is a low fear of failure.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Monday, December 3, 2012

Er, yoga doesn’t make the list

Here’s the latest on the goofy side; gyms claim they can make energy

All poor Einstein did was create a few energy laws. Humans have found utterly goofy ways to make it PR news. The Independent and New York Times document the existence of agencies who believe that the energy problem of the world rather than having its solution in coal, water, wind, or nuclear sources, has a readymade answer inside the modern gymnasium. Over more than a century, humans have spent billions of dollars, have devoted billions of hours of hard work, and even thousands of lives to build huge dams, thermal power stations, nuclear plants, wind mills to produce power, a quintessential hallmark of a civilised society. Little did they know [sic!] that the same electricity could be produced by exercise bikes, rowing machines and tread mills that would convert kinetic energy to electrical energy!


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Sunday, December 2, 2012

(Mis)judge all!

Judges should be appointed...

A debate drawing global attention today is on whether judges should be elected or appointed. Supporters of electoral process defend it quoting democracy as the keyword. But here, we’re talking about the judiciary, not the glam and glitz business! Many intelligent judges would lose to many public-seeking non-intellectuals (who could manage to draw public attention!).

Amongst the few who follow the electoral process are the states in US, where state-court judges participate, raise funds, and do everything possible to gain popularity as politicians [plain intellect be damned!]. Sadly, judges in the highest courts of justice are also chosen by the same old electoral process.

For example, the International Criminal Court (ICC) elects popular judges who can win 66.67% of 108 votes. Moreover, a hefty annual package of above $170,000 during their nine years tenure only works to attract corrupted & powerful judges or those close to the ruling class even without adequate qualifications or experience. Electoral process in the International Court of Justice (ICJ) is worse.


Source : IIPM Editorial, 2012.An Initiative of IIPM, Malay Chaudhuri

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Friday, November 30, 2012

Why India tries, and others cry

Will others learn from India’s logic of not ignoring newer markets?

Almost all economies across the globe are facing the negative tide caused by the recent financial crisis that first struck US, and in a rather harsh fashion. And just as unbelievable as this one sounds, all of them could have easily avoided such an ill aftermath. India on the other end is only facing some mild side effects of the mayhem that found its epicentre in US. So where is it that they all went wrong, unlike India? The answer is simple – greed!!! Surprised? Well, what better than a $13.7 trillion economy to have strong trade ties with? And for every other country, that meant partnering with the mighty United States of America and get blind to every other economy!

India’s export catalogue is highly diversified – dominated by products like handicrafts, textiles and leather, which undoubtedly suffered due their falling demand falling in global markets; however, the overseas sales of engineering goods, metals and petroleum products rose during the same period.


Source : IIPM Editorial, 2012.

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Thursday, November 29, 2012

Loose cords, disunity at large

For the upcoming assembly elections, parties face a tough time

Politicians and party workers generally work together during election time. But that doesn’t seem to be the case for the upcoming assembly elections in MP, Chhattisgarh, Rajasthan and Delhi. While parties in Rajasthan are facing problems because of new faces in Chhattisgarh. Congressmen are encircling ex-CM and senior politician, Ajit Singh Jogi. Rate of formation of groups is at its peak in MP and Congress has lost hope in Delhi.

Both Congress and BJP are trying to bring in new faces in Rajasthan and are facing internal conflicts. While leaders from respective parties disagree that there is any kind of tussle within the parties, no one can deny that Congress is divided into blocs. State president close to 10 Janapath, has asked for removal of people above 70 years of age. Although, there has been no official acceptance, it shows cracks are appearing within the party. Jats want to see their person as the CM, yet BSP wants a Muslim to hold the seat. Conflicts again. Meanwhile in Delhi the situation is different. Congress is not too sure of their win this time. Why else would Sonia Gandhi not utter a word about Sheila Dixit winning the seat, which she had so fervently done five years back.


Source : IIPM Editorial, 2012.

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Wednesday, November 28, 2012

Are Corporate Social Responsibility acts really the way corporates portray it?

Are Corporate Social Responsibility acts really the way corporates portray it? Not really! A. SANDEEP, EDITOR, B&E does a reality check...

No wonder that stinkingly fraudulent companies like Enron (biggest contributor to Bush’s campaign in 2000), WorldCom (CEO Ebbers got the maximum sentence in corporate history; 25 years... Enron’s Skilling missed the record; he got 24 years 4 months), Tyco (wiped off the most wealth ever) et al gregariously top the CSR contribution lists too.

Umpteen reports, like the definitive PricewaterhouseCoopers’ Sustainability Survey Report, have year after year vindicated that ‘providing contributions to society’ does not even find mention in the “Top Ten Reasons Companies Are Becoming More Socially Responsible”; or Stanford University’s Social Innovation Review that benchmarked the finding that CSR “is just a placebo” where investments are “particularly unlikely to pay off...”; or Michael Porter, the father of strategy, who blasted CSR as being just “a PR game.” And it’s not that intelligent social spokespersons were ever confused. Even Paul Gilding, Executive Director (formerly) of Greenpeace International, spoke up, “CSR, despite its emotional appeal, is and always was a bad idea. It’s intellectually weak, and doesn’t work anyway.” Oh yes, before I forget, with an operating income exceeding a mind-boggling 5.1 billion taka, and a net profit exceeding an eye popping 1 billion taka (a thunderous 20% profit margin), this year’s Nobel Peace Prize Winner, Dr. Muhammad Yunus, founder of Grameen Bank, isn’t too hell bent on CSR either, but on profits! Social development was, in reality, never the job of corporations, but of governments; to whom firms pay incredibly huge amounts of taxes. It is incredibly outrageous that governments can even think of forcing capitalist corporations to undertake CSR; a strategy that is clearly now being used to hide the government’s lamentable achievements – including the example of the absurd move in India to force private players to undertake the superficial ‘affirmative action’ by providing non-merit oriented quotas in employment.

CSR should never be forced, but should be a matter of personal democratic choice. With more than 400 million Indians living below the poverty line (UNDP statistics), successive Indian governments have magnificently embraced CSR in the only way they have ever known – by being ‘C’alumnious (abusive) ‘S’currilous (shameless) ‘R’apscallions (rogue scoundrels)! So the next time your CEO comes up with the hallowed CSR sermon, you could fulfil your social responsibility by taking him on a memorable date to show him the classic strategy documentary ‘The Corporation’, where the late Peter F. Drucker snaps, “If you find an executive who wants to take on social responsibilities, fire him... Fast!”


Source : IIPM Editorial, 2012.

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Tuesday, November 27, 2012

ARGENTINA: BOND BUYBACK

With bond buyback Argentina raises fears of another economic collapse

In fact, this is only a bit lower than the level (53%) immediately before the 2001 mayhem which had seen the economy shrivel by 15%, unemployment rate mount to 21% and poverty engulf 56% of Argentines. Moreover, the current estimate also does not include $23.5 billion in debt held by the holdouts (those who refused to accept the terms of the 2005 restructuring). If this is included, the ratio is surely over 60% of GDP.

So, while Moody’s has lowered its outlook on Argentina from ‘positive’ to ‘stable,’ S&P has cut its rating from B+ to B. Raison d’être, the risk premium on Argentine bond has soared to 670 bps. Accepted, the cost of servicing of debt has been low in Argentina, but even so, to service its debts, the government needs to find an extra $2.5 billion in 2009. Certainly Argentina’s forex reserves, which stand at $47.8 billion, provide a great cushion, but, then how long? Principal & interest payments are to climb from about $14.6 billion this year to $18.6 billion next year and $17.1 billion by 2010. Even the galloping inflation has further raised the spectre of economic crisis. While government data puts annual inflation at 9.1%, private estimates place it above 25% (S&P). In fact investors have already shown signs of nervousness. Result: A capital flight of $8 billion in 2008. Certainly after six years of rapid growth (8.3%), Argentina once again seems to be standing at the verge of another economic collapse! And if this time it takes a wrong course, nothing will save it. Not even a good rain at the Pampas!


Source : IIPM Editorial, 2012.

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Monday, November 26, 2012

Gas problems? Wait for worse...

Bio-terrorism adds to the global fear of organised terrorist attacks

Barring a few developed countries, almost all countries remain highly vulnerable to the new form of terrorist attack, bio-terrorism, defined as spreading and injecting virus, bacteria or other germs (called biological agents) in people to cause illness, even death. Such agents, which are abundantly available in nature, have been the most sophisticated and recent form of identified terror attacks.

But bio-terrorism is not new; biological agents were used much before World War I. Many German agents, including Dr Anton Dilger, had developed Anthrax and Smallpox to attack America as early as 1915-16. Even America began developing biological weapons in 1942 after then President Roosevelt financed its new developments. Later, realising legal viability and international codes of conduct – especially after North Korea accused Western powers of using deadly biological weapons in the Vietnam War – Nixon shut down most of these facilities in 70s. And finally, global efforts were taken in 1972 to prevent production, stock and sale of any biological weapons globally.


Source : IIPM Editorial, 2012.

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Thursday, November 22, 2012

Gay pride surfaces on the streets

Gay pride surfaces on the streets of India and around the world...

People in several countries have accepted gays as a part of their society and have given them the rights and respect due to any individual in the society. The Indian society is having problems in accepting homosexuals, bisexuals and transgenders, yet there are people who consider them to be a part of the society, and Himanshu, who works with an NGO that is fighting for gay rights, happens to be one. “I don’t think that anyone should have a problem with homosexuals, they are normal human beings. When the ancient Greeks did not differentiate between people based on their sexual orientation, then why should we fix ourselves to certain rules, which we have made for our own benefit?”

In the current scenario if someone dares to think beyond the set rules then he or she is not welcome to be a part of the community anymore. If a person’s son or daughter turns out to be gay then sadly many go ahead and disown them, throw them out of the house, or worse force them to mask their true selves and marry people of the opposite sex, thus ruining lives of not one but of two people!

Most gays abide by the norms of the society, silently hoping that some day they would be able to make their lives better, live the way they want to live, and be the person they want to be, and not what others want them to be.


Source : IIPM Editorial, 2012.

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ARGENTINA: INFLATION

Argentina’s government grows bizarre; inflation, as per them, rocks!

To make matters worse, the government has increased tax on soya bean exports from 35% to 45% and also is imposing tax on other farm products including wheat. This has led to widespread agitation and blocking of supply of agricultural products. This has created huge upward pressure on the food prices. But all is hunky dory as per the vivacious President Cristina Farnandez. The rise of inflation in May, according to the government, was just 0.56% over the previous month. INDEC, the government ‘statistician’ institute, hilariously claims that the major cause of inflation is the rise in education and health care costs.

When Cristina Farnandez de Kirchner (above) succeeded her husband as President, she promised to bring many changes. One couldn’t have imagined that the most fantastical change would be a statistical one. Argentina will continue to suffer till it takes long term measures to revive its economy. To say policy changes are imperative is almost akin to kid-speak. The first step is actually accepting the problem!


Source : IIPM Editorial, 2012.

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Tuesday, November 20, 2012

Baby, it’s the leg

Researches reach ridiculous depths

The world is still unable to come up with solutions for killer diseases, which are engulfing the world. But researchers in renowned universities globally seem to be on a roll squandering money in findings that border the ridiculous. Sample this: Odours produced by 131 different species of frogs when they are stressed [University of Adelaide]; number of photographs that should be taken to make sure that nobody in a group has his or her eyes closed [Australian Commonwealth Scientific & Research Organisation]; the ultrasonic velocity in cheddar cheese when affected by temperature [Universidad PolitÃocnica de Valencia & Universitat de les Illes Balears]. How can one miss the interesting finding of the famous Stockholm University which propounded that beautiful humans are more preferred by chickens!!! Wait, we’re not done yet.

A new research by Newcastle University shows that women prefer taller men for good one night stands, and shorter men for committed relationships.

How can findings like what’s so funny about humour be of any help to mankind especially when it is funded by not just one organisation but three at a stretch.


Source : IIPM Editorial, 2012.

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Monday, November 19, 2012

Dropping trust

Losing faith in Indian market

Investors are demanding stocks in India more than in any of the other largest markets of any developing countries across the world. Moreover, the price-to-earnings for the entire market fell by 33% as foreign investors turned net sellers.

However, investors are losing faith in Indian market, even after the Sensex leaped 13% from its March’08 figure, as most Indian corporations are producing lesser commodities compared to its counterpart BRIC. Even India’s GDP is growing slower compared to other BRIC countries.


Source : IIPM Editorial, 2012.

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