The market regarding the realty sector and companies

In the midst of the general concern and uncertainty in the market regarding the realty sector and companies like DLF, the company’s Group Executive Director Rajeev Talwar is optimistic of a more evolved market & consistent supply in the coming years. In this exclusive with virat bahri of B&E, Talwar talks about DLF’s downturn adjustments and future vision. Some excerpts

B&E: What potential does DLF see in middle income/affordable housing?
RT: Due to our legacy, it is high income, because our locations and plots are extremely valuable. We are taking projects and seeing to it that we launch at the most competitive levels in order to make them value for money housing. Revenue growth should come. Government talks about Rs.10 lakh and above as mid-income. In tier 1 and super metro cities, it should be probably above Rs.50 lakh. Land here is usually controlled by government or it becomes very valuable if it is in private hands too.

Therefore your cost of acquisition becomes high. It therefore becomes impossible to give you what is normally called affordable housing or middle income housing below Rs.20 lakh. But Rs.10-20 lakh homes, even below, will be available for the poor. If housing costs Rs.50-75 lakh as mid-income housing in the super metros; in a tier 1 city it will cost Rs.45-60 lakh and going down to a tier 3-4 cities, you will get good homes at even less than Rs.20 lakhs. Since we are not in those cities and towns, I don’t think it will be possible for DLF. Our value housing even below Rs.5 lakh and Rs.10 lakh will be adjunct to the service category of our mid-income and high income group housing in super metros & tier 1 towns. Due to our name, quality, & location in the heart of the town, we tend to be in the upper end, but certainly, we also provide housing for the economically weaker section. Those will also be coming & will be costing anywhere between Rs.5-20 lakh depending on their proximity to premium locations.

B&E: Downturn increased debt levels significantly. How have you managed them over the past year?
RT: Some time after 9/11 in the US, everyone thought there was no end to the upswing. When it did come, it caught everyone by surprise. They weren’t unmanageable levels of debt for us but the only concern was how do you reduce the rate and increase the tenure. There was so much commercial paper in the market prior to that. Anywhere from 120-180 days seemed to be a long cycle till the time we realized that a good long cycle commercial paper or debt is of a period from 3-5-7-9 years. The second lesson was to reduce the interest rate. Our debt from under 1 year has increased to 3-5 years in tenure and also has portions of 7-9 years. At the same time, from 11.98% interest level, we have already come down to 10.5%. In real estate, people ask whether your debt levels are high or going higher. The fact is that there is so much of embedded value in your assets that debt is not something that you are normally so worried about, till the time a company is so highly leveraged that it cannot meet its development requirements (front flow) or its overhead costs for its normal cash flow. For us, thanks to various policies before and therefore very far-sighted policies even to take care in a downturn where you have a steady rental inflow of income, we have been through that much more easily. It’s already established that whatever overhead developmental costs or interest costs we have are well met from our usual leasing and launch businesses; so DLF doesn’t face pressures that some other overleveraged companies may face.

Read more....

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.

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)

3G in India

3G in India is clearly too expensive on a rational and logical basis

The impact of the prices paid in India will result in an increase of capital employed for Idea, Bharti and Reliance of roughly 3.0%, 3.4% and 10.4% compared to the 255% increase for Vodafone. The immediate impact on the ROCE is to reduce the returns in the range of 0.2% to 0.9% which is relatively benign compared to the damage inflicted in the UK. Furthermore, unlike the UK, the Indian operators will be able to deploy their networks more cheaply and achieve greater performance by jumping to 3.5G in the form of HSPA. The spectrum will be used immediately to relieve congestion on the 2G voice networks and India will quickly emerge as the centre of innovation for low cost smart phones, applications and new mobile business models. The auction winners will not have to wait 10 years before they can start earning a return. Indian 3G prices for Mumbai, Delhli and Kolkata were certainly high and above expectations but they were not anywhere near as exuberant as those of the UK or Germany.

As regards the business case for the 3G spectrum, the 3G spectrum in India is both about voice and mobile broadband. Accessing the Internet from handsets i.e. the small screen will be a much bigger phenomena in emerging markets compared to developed countries. This is already apparent in some markets such as Egypt, Morocco and the Philippines. What matters now in India is not how much was paid for 3G spectrum, and as a classic “sunk cost” it should have little bearing on future decision making, but how quickly can a more rational market structure be established. Greater certainty over the future regulatory environment, including 2G spectrum pricing, along with consolidation and an end to the brutal price war will have a far more pervasive impact on future returns than the prices paid for 3G spectrum.

Read more....

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.

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)

TELECOM: APP STORES

Telecom players in India are flocking to the ‘app store’ band wagon. But it’s an idea much before its time, as masses don’t even know the ‘app’ from the ‘store’ says b&e’s Surbhi Chawla

Is it the latest outcome of the competitive dynamics in the sector? RCOM denies the same, and states that the reason for them to come out with an application store or RWorld 2.0 (as they refer it) is driven by 4 C’s – customer experiences based on smartphones, content localisation & SNS generated content, contextual search for content across all Voice, SMS & Data and lastly, clear and simple pricing. Though much of the details in regards to this particular endeavor are not available as of now, one is sure to hear from RCOM and the others (including Airtel) in the times to come. Already there is news that Vodafone is also planning to have its global application store available shortly, and the ones who have already taken giant leaps in this segment would be looking at newer means to create a buzz around their offering. But is this entire strategic exercise worth it at all? It’s noteworthy that even internationally, the likes of Verizon, AT&T, et al have launched application stores, but they have not been able to reap dividends for them. Traditionally those are the handset vendors such Apple and Research in Motion (of BlackBerry fame) who have managed successful tactical application of stores models. So why are Indian operators vying to make their mark in this sphere?

The reason behind this is quite simple. Call rates have been hitting rock bottom because of per second billings and most operators are finding it hard to defend their revenue share. The sector has been hammered badly in the first two quarters of 2009-10. Still, the optimism is back with the industry posting a 4% increase in the revenues making the total tally stand at Rs.397.56 billion for the quarter that ended on December 31, 2009. But the wireless segment could only manage a 0.7% increase (at Rs 265.64 billion) in revenues. Hence it would not be wrong to deduce that the overall outlook for the sector has not undergone a sea change as the worst is far from over for them. Telecom service operators also realize the same and to increase their revenues and more importantly their bottom lines, their strategy has been to aggressively push their Value Added services (VAS). The implicit assumption is that customers aren’t as conscious about pricing of VAS as they are with respect to call rates. 

Read more....

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.

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)

 

“It might be a jagged recovery with false starts along the way...”

Is the current stock market rally in India for real or is it just another bubble before a plunge?

B&E: Is the current stock market rally in India really a building block for the next bull run or is the momentum just short lived?
MM: Yes, the rally is the beginning of the next bull run. The market is forming a bottoming structure which will be very volatile, so we can expect substantial downturns along the way. The fundamental fact, however, is that currently a base is being built for a long-term bull market. One thing to remember is that with the high volatility we experience these days, bull markets can go and come in a relatively short period of time, so you can have a number of short bull and bear markets before a large base is built for a longer term steady bull market.

B&E: What about other markets, particularly emerging markets? Are they also on the same track?
MM: All emerging markets are up substantially from their low points.

B&E: What impact do you think the current political developments in India will play on the stock markets in the medium to long term?
MM: The political developments have been very positive for the market since businesses, both foreign and local, see the opportunity to build infrastructure, extend schooling, housing and health care, and provide the predictable rule of law, which businesses need to thrive.

B&E: There are many economists who believe that the shape of economic recovery is going to be W. What’s your take on the same?
MM: It will be more like a number of W’s... a jagged recovery with false starts along the way might be possible.

B&E: Is it the right time to invest in stock markets or should a retail investor still wait for some time before taking the final plunge into the stock market?
MM: The best time to invest is when you have money. No one knows exactly when there will be a bull or bear market beginning or ending. We do know, however, that bull markets last longer than bear markets and bull markets go up more than bear markets go down. You are thus better off being in the market than out. However, that does not mean that you should blindly buy when there is a lot of bullish excitement. Cost averaging into the market is important with an extended one or two year time frame putting in the same amount month after month.

Read more......

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.

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)

Then came competitors criticising their weaknesses

First came the slowdown avalanche, they continued climbing... Then came the storm, they climbed further... Then came competitors criticising their weaknesses; but they’d reached the summit by then! B&E’s manish k. pandey & deepak r. patra closely analyse how the ‘best’ got the better of the ‘worst weathers’, and a lesson for those with ‘weak feathers’...

B&E attempts to bring out some key facets of competition beating business strategy in a slowdown by analysing the strategies of Indian companies that are actually doing better than their competition in their respective industries. In selecting our elite list of companies, we have considered the all important benchmark of profitability, both in terms of absolute figures and yoy growth trends, for the nine months ending December 2008 (till figures are available). Apart from one exception in the real estate sector, we find that all these winning companies have posted double digit growth rates in profitability. Now let us analyse what these winners have done in their respective sectors to shine in the current not-so-bright times.

The telecom leader is clearly Bharti Airtel. TRAI may have given it a thumbs down on network congestion (read more about it in the Corporation on Tata Teleservices in this issue), but the company continues to rule the market in terms of subscriber base at 91.1 million (at the end of February 2009). Sunil Bharti Mittal, CMD, Bharti Airtel Limited, said on the performance, “Bharti Airtel continues to lead the telecom growth story, adding customer and revenue market share despite intense competition. Bharti’s strategy of extensive roll out ahead of competition, especially in new villages, has yielded rich dividends.” What also keeps Bharti in the black is the fact that it has leveraged its pioneering advantage to get the cream of customers, which helps it even as telecom ARPUs in general are going down. Dipesh Mehta, telecom analyst, Khandwala Securities, comments, “ARPUs for the company have fallen for the company like other telecom companies, but they have not fallen drastically.” Moreover, the perception of Bharti of being a quality service provider continues to go heavily in its favour. Years of brand building are now bearing fruit.

The automotive sector, on the other hand, has been decisively lead by two wheeler giant Hero Honda. Pawan Munjal, MD & CEO, Hero Honda Motors Ltd. proudly affirms, “An unprecedented share of over 57% in the domestic motorcycle market particularly when the industry has been witnessing a massive slowdown... is reflective of the strong fundamentals of this company.” Being the market leader in the executive segment definitely has its advantages; more so in the era of discretionary spending; and the company sports some best sellers in this segment like the Splendour and the Passion. New product launches like the 150cc Hunk Premium and variants of the Glamour and the CD Deluxe last year are also doing well for the company. Also, the rural push that the company has made over the years seems to be delivering results now. That’s why Hero Honda is gloating over a 10% increase in sales yoy in March, while key competitor Bajaj reported a decline of 14%.

Read more......

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.

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)