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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