Friday, August 31, 2012

Silver cloud, dark lining!

Slowdown is over and the outlook is bright. Still, India Inc.’s profitability has taken a hit in the very first quarter of the fiscal when the country is expected to grow at 9.4%. Avneesh Singh analyses the reasons for the dismal show

Rs 1894.78 billion! This was the amount that corporate India raised in the last fiscal through private placement of corporate bonds. Interestingly, it’s the highest amount that India Inc. has mobilised in this fashion in any single year during the past decade; a clear indication of how positive the global investors are in their outlook towards corporate India. But are Indian companies measuring up to expectations? Or are they are just playing on their past reputation?

Well, if the first quarter performance of India Inc. is anything to go by, the answer is much in the negative. Though gradually recovering demand, both in domestic and global markets, has come to its rescue, India Inc. is struggling to deal with rising input costs and thus facing the problem of declining bottom-lines. There is no doubt that a few companies have showcased stupendous results, but the poor performers outnumber them quite convincingly when one considers the overall performance. For example, when B&E looked at the cumulative result of 475 of the BSE 500 companies (whose first quarter ended on June 30,2010), the result was a surprise. Though cumulative revenue of these companies for the quarter surged by18% on a year-on-year basis to `7.4 trillion from `6.2 trillion in the corresponding quarter of the previous financial year, their net profit after tax has declined by 11.85% y-o-y to `624.43 billion from `708.35 billion that it managed to mop up in the first quarter of FY’10, which was even more trouble ridden.

Moreover, the situation looks worse, when we make a quarter-on-quarter comparison. In that case, the revenue advantage seen earlier is also missing. As per the cumulative data for the above mentioned companies, total revenue has gone down by 7%, while profit has taken a hit of 22%. But then, as industry experts put it, the cumulative results should not be much of a surprise as industry heavyweights like Maruti Suzuki, Tata Steel, Reliance Infra, Jaiprakash Associates et al, which form a large chunk of India Inc.’s total revenue, have performed poorly during the quarter. As confirmed by Navin Agarwal, CEO – Institutional Equities, Motilal Oswal Securities Ltd., “Only 6 companies (out of the 30 BSE Sensex constituents) have reported higher than estimated profit after tax.”
 


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Thursday, August 30, 2012

INTERVIEW : SUDIP NANDY, ARICENT CEO

In an exclusive with virat bahri, Aricent CEO Sudip Nandy talks about how focus has been one of Aricent’s key strengths and how they will leverage it to enhance value proposition and growth prospects for the future

B&E: Isn’t giving up the IP a concern for you at times?
SN: No, there are some IPs which we create if they are standards based. When we work with the customer they would want the IP. Not only that, they prevent us from working with main competition for a long time. They say you will not work with so and so at all. We try and say that we will not work with competitors for 1 year or six months, or we will not work with the same team or on the same project. Non-compete becomes a critical ask for our customers and we have a huge negotiation on this topic.

B&E: You talk about the differential play on the design front with respect to telecom services and handsets. How far do you think it works in a price sensitive market like India?
SN: Over time it will. Right away we will probably only be contributing towards making networks more efficient so that fewer calls are dropped. And as 3G comes, there will be an entirely new set of users, which you can call power users. Even if there are 2-3% of such subscribers who want more band width and applications, the number would translate into 25-40 million customers; is a huge number even for a Vodafone or an AT&T. That will be more 2-3 years down the line, when they want differentiation not just in terms of availability and speed, but also with the features and experience they get. Today, from the operator’s side it is more like a land grab – about getting subscription numbers right. Number portability will bring more options to customers. The focus will be then on segmenting into high paying and low paying. Also, how do I keep the high paying customers and do more for them will be an area of concern. It has happened in other markets and will happen here. Look at how Bharti and Vodafone have launched the App store even though there isn’t much money coming from it at the moment.


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Monday, August 27, 2012

INDIAN POLITICS: CONTROVERSIES

Pawar’s request for being relieved of his post is an irresponsible move

From going soft on Israel for its occupation of and raids in Gaza, to almost inviting Saudi Arabia to mediate in Kashmir, from putting up in a 5 star hotel instead of his official accommodation to delving into ‘cattle class’ innuendos – Tharoor had many a field day. The final nail in the coffin was the IPL imbroglio, when he was accused of a kickback through his fiancée in return for his efforts to bring the Kochi franchisee together.

Now we have Sharad Pawar and his latest plea for abdication of responsibilities. The good part was that he has himself admitted that he has bitten more than he can chew and requested Prime Minister Manmohan Singh to reduce what he called ‘burden’ (i.e. his ministry of agriculture, food and consumer affairs)! And what he doesn’t call burden, obviously, is his involvement with BCCI and now ICC as its newly appointed president. Obviously, the lives of some 410 million people living below the poverty line and vying for Pawar’s attention do not matter as much as the fortunes of the richest sportspeople in the country and around the world. And neither does it seem to matter that inflation is wreaking havoc with the lives of ordinary Indians across the country, and able leadership is the need of the hour. If cricket is his priority, can Pawar abdicate politics for good and stick to his favourite pitch?


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Friday, August 24, 2012

THE WATER ISSUE AT PALAKKAD BEING ONE OF THEM FOR COKE

POST THE PAST PR DISASTERS FOR COCA COLA & CADBURY – WHICH THEY ENDED UP MANAGING WELL – THE CURRENT TIMES CHURN UP NEWER ISSUES, THE WATER ISSUE AT PALAKKAD BEING ONE OF THEM FOR COKE

Similar to Coca Cola’s earlier pesticide controversy, Cadbury’s worms’ issue will be a commonly cited case in consumer activism in India. The batch of Dairy Milk chocolates numbered 28F311 was special, one that Bharat Puri, then Director, Sales & Marketing, Cadbury India, would never forget all his life. Flashback to 2003 – from the four factories in India that churn out approximately 8,000 tonnes of chocolate every day, came those ill fated chocolates with batch number 28F311.

We are talking about the worm-infested batch that triggered a crisis for the company that had enjoyed a lengthy romance with Indian customers. Moreover, the timing of the controversy couldn’t have been worse as it was during Diwali (when Cadbury sells almost 1,000 tonnes of chocolates). The net profit for the year ended December 31 dipped by 37% to Rs.456 million compared to a 21% increase the previous year. John Bradley, author of ‘Cadbury’s Purple Reign’ and then head of marketing for Cadbury in Canada affirms, “The affected consumers were very upset, and we compensated them well, but their usual reaction was to shop for their chocolate elsewhere rather than organise Cadbury boycotts.”

Damage control wasn’t easy and the challenge in front of Cadbury was to be seen as a responsible and pro-active company to win back the lost sheen. And the company left no stone unturned. The company got a clean chit for its two plants from Maharashtra Food and Drug Administration and also started paying heed to logistical support. “My Indian colleagues persuaded the bean counters to not spare one rupee in the packaging solution,” adds Bradely. The team starting rolling out 360 degree advertisements by roping in Amitabh Bacchan because of the high level of trust he had with the Indian public. Bharat Puri even went personally to media offices across the country; meeting journalist and answering hostile queries with patiently explaining the issue. Apparently, this worked! Lesson learnt, honesty pays...


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Thursday, August 23, 2012

ACTIVISM INFLUENCE PROMOTER ANIL AMBANI TO DO SOMETHING INDIA RARELY WITNESSES

THE RELIANCE POWER IPO THAT BECAME INDIA’S BIGGEST EVER IPO, SAW INVESTOR ACTIVISM INFLUENCE PROMOTER ANIL AMBANI TO DO SOMETHING INDIA RARELY WITNESSES – DILUTE HIS STAKE TO SUPPORT INVESTORS

Shareholder activism is not much in evidence in India. There have been some cases of shareholder activism by institutional investors such as the erstwhile Unit Trust of India but these have been few and far between. As for individual investors, they belong to two categories. The first category consists of the less informed and even less interested investors who are the “fill it forget it” types. They forget about the investment after filling the application forms for investment. The second category, miniscule smaller in number, reads company reports, analyses financial statements and raises issues at Annual General Meetings. Their activism helps companies to focus on essentials, but because it is sporadic and not sustained, it does not translate to shareholder activism of a scale that good governance warrants. We must also guard against personal agenda driven interventions amounting to shareholder adventurism masquerading as shareholder activism. Genuine well-intentioned shareholder activism, which India needs more of, will come only with investor education leading to investor involvement in the functioning of companies. Until then, institutional shareholders could be in the vanguard of shareholder activism, and not vote with their feet.




 
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Wednesday, August 22, 2012

Internal consumption will be the key driver

Faced with the rising fiscal deficit & inflation, it will be a challenge for policymakers , both on the economic as well as political front, to spread the economic benefits

Indian economy’s 7% average growth since the beginning of this millennium has surprised many. A truly miraculous journey, India has been treading its own distinct path, and an unparalleled, non-replicated model unseen elsewhere.

Unlike its Asian peers that followed low-cost, low-technology, labour-intensive, export-led manufacturing growth, India grew out of its technology enabled services. A huge demand for services and products by its young and growing middle class population drives a strong internal consumption economy, along with high domestic savings rate. And a big government spending on developing infrastructure completes the script for long-term continuous growth story. Also, the vibrant “rural economy” brought some insulation from global turmoil. Datamonitor estimates that the domestic consumption makes upto three-fourth of India’s GDP.

An enterprising populace will keep firing the economic engine. The country’s agriculture, its largest labour-oriented private enterprise, the small traders and a large self-employed workforce will bring greater economic resilience. India’s socio-political setup and its long democratic tradition binding its pluralistic society enable it to grow with such diversity, unlike other societies with vastly homogeneous population. However, internal security concerns arising from Maoist activities and terrorism still pose a threat to its united fabric.




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Tuesday, August 21, 2012

Can we invest in some vision please?

Two issues have engaged pundits in recent days. The first one relates to the Supreme Court verdict that seems to have gone against Anil Ambani. Apart from furious number crunching, the verdict has also triggered a spate of stories on the role of lobbyists used by India Inc. to win battles and wars in North Block, South Block and many other blocks that stand as sinister reminders of a feudal and oligarchic India that refuses to fade away. I am not joking, but I think I now know more about Nira Radia than Nusli Wadia! And honest to goodness, I know some ambitious young television journalists who seem to be confused about who is who between the two!!!

The second debating point was triggered by the stubbornly persistent foot-in-the-mouth disease of Environment Minister Jairam Ramesh who trashed Indian policy and Indian policymakers while visiting China. This has led to a spate of stories on the strange ability of Indian ministers to say things which embarrasses the UPA government. Oh yes, I got to read dozens of delicious ‘recall’ stories about how the tweet about flying cattle class was the beginning of the end for Shashi Tharoor.

All the sound, fury, punditry and polemics generated by the two controversies have missed – as usual – missed the central issues that need to be addressed: What should be the relationship between India Inc. and the government? And, what should be India’s strategic posture when it comes to China? The stark reality is that there is a very depressingly familiar lack of vision and a long term plan on both counts. And both India Inc. and policymakers are equally guilty of this short-sightedness.

Not one account of the ‘lobbying wars’ unleashed by the Ambani brothers seems to acknowledge and accept the fact that the corporate sector and the government work very closely together in the US, Japan, South Korea, Brazil, Russia and China. That is a reality no amount of moral grandstanding by columnists will erase. You must be living in a fool’s paradise if you think Embraer, Lenovo, Huwaei, LG, Hyundai, Toyota, Honda and numerous others have become global powerhouses solely on the basis of entrepreneurial genius and without any active as well as clandestine ‘State’ support. In India too, the corporate sector and the government have a cosy relationship. Like elsewhere, policymakers in India often take decisions that brazenly favour the corporate sector – many might say unjustifiably. The problem is, India Inc. and the government are happy with short term gains in the form of tax breaks, cheap land and other freebies. Ask yourself this one troubling question – with the tens of billions of dollars of market capitalisation, how is it that no Indian business house has managed to become a serious player in the telecom equipment business? Or in the IT server business? Or in the serious infrastructure business where Big Boys play day and night?


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Monday, August 20, 2012

PAKISTAN: UNENDING BETRAYAL

Pakistan openly continues sponsoring terrorist activities against India. Why should India even talk with Pakistan then?
 
July 2006: Terror strikes in Mumbai local trains in July 2006. Prime suspects – SIMI, Lashkar-e-Toiba and ISI.
July 2008: Indian embassy destroyed in Kabul by terrorist attack, killing 58. New York Times confirms ISI involvement. Pakistan denies all accusations.
November 2008: Terrorists land on Mumbai shores from Pakistan and randomly fire at and bomb various targets, killing 173. One terrorist captured alive confirms Pakistan establishment’s complete involvement. Pakistan denies everything, and promises (again) to handover gangster Dawood Ibrahim and terrorist leader Masood Azhar if India provides “evidence.” India does, Pakistan doesn’t!

The list of Pakistan’s hellhound extremist orientation is clearly unending, yet what remains unbelievable is America’s continued financial support to this failed state – on December 2009, in the latest tranche, Pakistan received a $7.5 billion US aid package to ostensibly strengthen counterinsurgency and counterterrorism operations. Much of this will be used against India; some against US too.

If US representatives, on May 3, 2010, can humiliate Iran (a country that has no intentions of becoming a nuclear armed state; and one that openly denounces terrorist activities) by walking out of the UN assembly when Iranian President Ahmedinejad starts speaking, then why shouldn’t India too openly humiliate Pakistan (a certified nuclear armed state, openly supporting terrorism) by walking out of nonsensical peace talks? On May 7, 2010, Hillary Clinton commented, “Somewhere in the Pakistan government are people who know where Osama bin Laden is.” Good morning Ms.Clinton, the Ambien seems to be wearing off finally.


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