Monday, March 18, 2013

“Mismatch in Reforms is Causing Avoidable Adverse impact on Economy”

Ram V. Shahi, Former Power Secretary, Government of India, shares The Dynamics between Power and Coal

Ram V. Shahi, post his tenure as Power Secretary, has been associated with various organisations as head of their energy advisory boards. In an exclusive interview with B&E, he shares the interdependence of the coal and power sectors

B&E: How will the cess of Rs.50 per tonne levied on coal affect power tariffs in the short to medium term?
RVS: The cess of Rs.50 per tonne on coal will have an effect on the cost of power generated in coal based power stations in the range of 3 paise to 4 paise per KWhr. Its effect at the level of consumer tariff, however, will be of the order of 5 to 6 paise per KWhr in view of transmission and distribution loses. This cess, which will lead to revenue, on a national basis, of the order of Rs.30 billion per year, will go towards encouraging Green Energy. In this very budget, Service Tax on Transmission has been abolished. Therefore, positive impact of abolition of Service Tax would be about 5 paise per unit if we consider inter-regional transmission of power. Thus, additional burden on account of coal cess is more or less offset by the concession in Service Tax.

B&E: How will the move to allow open auctions for coal mining blocks affect fuel availability for power plants and what will be the effects on consumers?
RVS: The proposed initiative for coal mine development by allotting coal blocks on the basis of competitive bidding is a positive one. However, the criterion for evaluating bids should be the cost of producing coal rather than any premium that the mine developer may be asked to offer to the Government. Development of coal blocks through the process of competitive bidding should be on the same basis as the Scheme of Ultra Mega Power Projects. The objective should be low cost power by way of competitive bids for coal as well as power projects. Obviously, consumers will benefit from less expensive power supply.

B&E: If the pending Bill on Coal reforms which will allow private players to mine coal for non-captive usage is passed, will it bring about much needed power shortages under control?
RVS: While the power sector reform has moved forward, commencing from the historic legislation Electricity Act 2003, followed by several other policy initiatives, coal sector reform process has remained stagnant at the point when the Bill on coal was introduced in Parliament in 2001. Therefore, the present legislative initiative is a welcome move of the Ministry of Coal. The power industry is heavily dependent on coal just as coal industry has the largest consumers in the power sector, to the extent of 75% of its production. The present mismatches in reform initiatives are causing avoidable adverse impact not only on power sector but on economy as a whole. Therefore, coal sector reforms have to catch up fast with the actions that have happened, and will happen more rapidly, in the power sector.


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

Posted by at
Labels: , , , , , , , , ,

Tuesday, March 12, 2013

The Property Burst in the Wake of the 2008

Irish Economy was on a High Growth Trajectory for more than a Decade now. But the Property Burst in the Wake of the 2008 Financial Crisis sent Ireland into its Worst Sovereign Debt Crisis. Kenneth Thompson, The Irish Ambassador to India, In an Exclusive Interview, Shares the Larger Picture of the Ireland Economy

B&E: Do you believe that the Irish government can face the kind of backlash from government employees and unions as seen in Greece and Spain?
KT: The public servants in Ireland have had pay cuts since 2008 between 5 to 15%. Despite that, there have been no major protests as the people understand that we had a property bubble that burst and the second biggest problem is the deflation that Ireland is facing right now. Unemployment has risen sharply as many people have been laid off in the construction sector. The prices have sharply come down with electricity prices falling by 25% and gas prices by 23%. Housing prices have come down by 35-40% while office rents have fallen by 50%. So the positive side to all this has been that the average expenditures on an individual level have also come down.

B&E: Ireland has one of the lowest tax rates in the world with the corporate tax rate at just 12.5%. How do you justify such low tax rates in the current situation of such high public debt?
KT: Ireland not just has a very low corporate tax rate but one of the lowest personal tax rates as well. Our basic personal tax rate is 20% while it is 41% at the higher end which is paid by a very small number of people. Such low tax rates give the government the flexibility to raise the tax rates in times of crisis. In terms of justifying such rates, the tax rate is uniform for every business be it your corner shop or for every individual. It is the same for foreign investors as well. So, it has helped in bringing huge foreign investment in Ireland over the years. In fact, according to a latest research, Ireland had the highest per capita investment in 2008 in the world. MNCs account for a huge proportion of jobs in Ireland and they also contribute to 80% of our exports. Hence, the people realize that the low corporate tax rates result in job creation and high overall tax revenues which the government then spends on welfare programs.


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
Posted by at
Labels: , , , , , , , , , ,

Thursday, March 07, 2013

The Kid in Liz

One thing that Liz Hurley can’t sleep without is reading an Enid Blyton book! The English beauty revealed that her biggest literary influence were books by this children’s author. Liz still tucks up with Noddy and Big Ears, and has also converted her son into a fan. Liz was reading Famous Five en route to India and Tweeted regretfully about forgetting her book on the plane. Whether we’re reading Enid Blyton books at 45 or not, let’s hope we manage to look as glamorous as Liz does at 45!


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

Posted by at
Labels: , , , , , , , , , ,

Wednesday, March 06, 2013

How about riding the green wave?

Though Carrier was one of the early entrants into the residential AC segment in the country, it somehow got overshadowed when rivals arrived. However, it’s clawed its way back into the sweepstakes by sheer market tactics. B&E does a walkthrough across Carrier’s strategic plants and plans

As we entered the production facility of Carrier Air-conditioning & Refrigeration Ltd (Carrier India) situated at Narsinghpur in Gurgaon (the plant is an exact replica of their China plant), we realise that we were venturing into a territory that had remained under wraps for years. There’s a reason we’re a-visiting the 20 acre plant. While at one point Carrier was the undisputed number one in India, with the likes of LG, Panasonic, Samsung, and even Voltas, Godrej, Videocon, Whirlpool et al coming into the AC market big time, Carrier’s market shares have steadily declined. Now, with a new MD, Gaurang Pandya, and with renewed efforts, Carrier claims to be clawing its way back – and we took up the offer of checking them out.

Our swift steps inside the plant are matched by Krishan Sachdev, Director Marketing & Strategy, Carrier India, who humours us, “People often ask us why our air conditioners (ACs) have larger structures than others? Our answer to this question is simple – we put in more components in our product.” This is actually that time of the year in the AC industry, when humour works better than anything else – well, sales start dipping at around this time of the year, and by the time winter hits, sales falls down to close to negligible amounts. This time around, while till the middle of the year, sales were growing at a thrillingly healthy rate of around 25%, due to the unexpectedly heavy monsoon, sales crashed within a month to abysmal figures across the industry. This is reflected in the Index of Industrial Production (IIP) too. While the consumer durables share of the IIP peaked at around 47% in June 2010, the same has fallen expectably to below 10% since then. But the year per se has been kind, what with the astounding heat wave experienced last year running into this year. As per Consumer Electronics and Appliances Manufacturers Association (CEAMA) figures, the AC market in India sold 3.5 million units in 2009; and has had a yoy growth of 15% this year. The Centre for Monitoring of Indian Economy (CMIE) reported recently that refrigerator and AC sales combined will rise at 24.4% for 2010-11 as compared to 18.8% in 2009-10.

MD Gaurang Pandya knows these figures by heart; and he’s betting on the fact that this year, Carrier’s sales (which makes up around 45% of the total India group sales of United Technologies, the parent company) will beat the forecasts. Although Pandya has just replaced Zubin Irani (who has been promoted to the position of Senior Managing Director of UTC Corporation in India) as MD of Carrier India, he is not new to the company. Pandya has in the past held many senior positions, hopping around functions like finance, operations, and sales & marketing. “I am really passionate about ACE”, says Pandya, 33, as we settle down in his office inside the factory premises. ACE stands for Achieving Competitive Excellence, and is Carrier’s in-house six sigma approach. “The difference between other approaches and ACE is that it’s more customer-centric. It takes inputs from the customers at all levels and then puts it back into the system,” he tells us. But is that enough to beat the flagrant competition? Pandya defends that this customer centric approach has helped Carrier India move ahead swiftly in the last few years (at a CAGR of 15%). For the financial year ending March 31, 2010, the company has recorded a turnover of Rs.8.9 billion and a net profit of Rs.835 million.


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

Posted by at
Labels: , , , , , , , , , , ,

Monday, March 04, 2013

Dutch changed the rules of the economic engine

Robert Schipper, Executive Director, Netherlands Foreign Investment Agency talks to deepak ranjan patra about how the Dutch changed the rules of the economic engine

B&E: You consider Netherlands to be a ‘bridge-head to Europe’ for companies looking to access the European markets. Can you elaborate?
RS: The Netherlands has had a tremendous geographical advantage and has physically been the trade and transport hub for north-western Europe, its industrial heartland. The Dutch have centuries of experience in transporting goods into and outside Europe. The port of Rotterdam and Schipol Airport are the leading logistics hubs in the world. We speak the main languages of Europe and our population is fluent in English, the language of modern trade and business. To add to this, the Netherlands has a business-friendly regulatory framework and an internationally oriented tax system that makes it advantageous for foreign companies to set up here and conduct their European business from the Netherlands. In fact, many cross border transactions are routed through Dutch holding companies because of the tax advantages we offer and our efficient manner of doing business. A wide treaty network ensures that companies based in the Netherlands avoid double taxation, effectively helping international operations in the Netherlands to become profitable. Therefore, both physically and financially, the Netherlands is a great entry point into Europe, one of the world’s major markets.

B&E: You have worked in various key positions for NFIA in many countries including USA, Japan, Hong Kong and Singapore. How difficult or easy, in terms of regulations and processes, it is to invest in India vis-à-vis other countries?
RS: One can look at FDI in two ways. One way is that it is necessary to protect your indigenous industry from foreign competition. India has been able to do that since it has a large home market. The Netherlands, on the other hand, has never been in a position to do so and has always been an open economy. Since the Dutch had to access foreign markets to sell our products, we also had to open our doors to foreign companies. This has made our companies very competitive and spawned some of the early multinationals like Philips, Shells, Akzo Nobel and Unilever, some in cooperation with the UK. In a globalizing world I believe that no country can afford to live alone anymore.

India has clearly been benefited by globalization since it opened up in the early ‘90s and we can see the success stories like the IT/ITeS sector. Indian companies have also been tremendously successful in the global economy since they were allowed to expand out. I am confident that in the future, many global players will have their origins in India.


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.
Posted by at
Labels: , , , , , , , , , , , , ,

Saturday, February 09, 2013

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.


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.
Posted by at
Labels: , , , , , , , , , , ,

Friday, February 08, 2013

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.


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.

Posted by at
Labels: , , , , , , , , , , , , , ,

Wednesday, February 06, 2013

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. 


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.

 
Posted by at
Labels: , , , , , , , , , , ,

Monday, February 04, 2013

“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.


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.
Posted by at
Labels: , , , , , , , , , ,

Friday, February 01, 2013

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) 


 
Posted by at
Labels: , , , , , , , , , , ,
Subscribe to: Posts (Atom)