Wednesday, December 12, 2012

Ah! Billion-dollar hat!

Ross Perot will ever regret ‘one’ missed chance...

Some mistakes are never compensated in life! And that perfectly holds true for Ross Perot. It was in 1979, when Ross Perot, the then head of Dallas-based EDS made an open offer to purchase a $2 million software entity known as Microsoft. Gates declined the offer as he wanted a fat-pig worth $40-60 million for his giant brainchild, but Perot bluntly walked away. Mistake made, and which will never be rectified. Cut to 2009, that company Microsoft, is valued at worth a most blinding $177.4 billion and Gates is the richest person in the world, with a net worth of $40 billion, almost twice Perot’s value. But all’s well that ends well, for even experts like Richard Ptak, Managing Partner, Ptak, Noel & Associates LLC, agree to that effect.


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

For More IIPM Info, Visit below mentioned IIPM articles.

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Sunday, December 9, 2012

ELECTIONS: ALLIANCE

The elections this year is seeing a trend' parties vying for larger pie shun pre-poll alliances

This also made a Indo-US Nuclear Deal-bitten Left Front tie-up with disparate parties like BSP, TDP, TRS and JD(S) to form a Third Front, even as Lalu, Paswan and 'old foe' Mulayam Singh Yadav have joined hands to form a Fourth Front. NDA, on the other hand, is no better, with Biju Janata Dal walking out; its old ally Shiv Sena openly courting NCP and dominant partner in Bihar, JD(U), repeatedly ranting against BJP’s new Hindutva face – Varun Gandhi. So, is the era of coalition politics over?

Not really. In fact, the current political situation is somewhat similar to 1989 or 1996, when a number regional parties came together to fight against Congress and BJP. With both BJP and Congress failing to enhance their support base, regional satraps are sensing blood. “It''s going to be a bloodbath after the elections. Small parties, who are haggling with national parties over seat distribution, will demand their pound of flesh in the run up to formation of next government,” claims a BJP General Secretary. Congress leader Kapil Sibal, justifies the trend by describing it as burgeoning aspiration of regional parties. “They want to have a bigger role at the centre and the national parties want a bigger pie in the states. UPA was a conglomeration of secular parties. We hope to come together again after the elections,” he asserts.

BJP has its own set of calculations. Riding on a high profile campaign, it hopes to emerge as the single largest party. “Once the President invites the single largest party, regional chieftains would automatically rally behind it. We will once again provide stable government for the next five years”, claims Amitabh Sinha, National Convener of BJP’s election campaign for the current elections. But, won’t that be a re-enactment of 1998-like situation when Vajpayee had to wait for two days to get letter of support from Jayalalitha, the AIADMK Chief? All eyes therefore, will be on the incumbent President. Whether she invites the single largest party or the single largest political alliance, will be something to be watched keenly.


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

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Friday, December 7, 2012

A ‘Safe Express’way, but for how long?

Safexpress will need to proactively align with global best practices, says Pawan Chabra of B&E

As Victor Hugo once said, ‘There is one thing stronger than all the armies in the world, and that is an idea whose time has come.’ And logistics is an idea Indian companies need to take up fast. Efficient supply chain management solutions have been critical to the success of many companies globally, notable examples being Dell, McDonald’s & Walmart. In India’s industrial growth, however, logistics has been a critical stumbling block. The industry is still at a nascent stage, and there have been various questions asked on transparency, as a senior AFL official comments on the condition of anonymity, “In logistics, it’s important to religiously maintain transparency with clients, which we think most Indian companies don’t maintain.”

That makes companies like Safexpress, the market leader (at least in the Indian market) in good stead for this sector, which seems to have bottomless potential at present. The company has also been able to do the same successfully so far. But going forward, the industry is set to see a major transformation phase and considering that the biggest challenge ahead for Safexpress will be to maintain its leadership position. Will it or will it not be able to do so, is definitely a daunting question!

The company clocked a decent Rs.500 million turnover for the fiscal year ending March 2008 and is expecting the number to touch the Rs.650-700 million mark in FY 2009. All thanks to the huge untapped potential in the Indian logistics market and partly because of the unique services that the company offers. “We will be a Rs.1 billion organisation by 2010,” Vineet Kanaujia, General Manager – Marketing, Safexpress confidently tells B&E. Certainly, it’s quite a surprise to see a company sprint at a time when almost all the big corporate names are in love with red ink. But then you can’t be so sure of the safety of Safexpress’ dream run to 2010 as Tanuja Rai Pradhan National Head – Research & Business Analytics Group, Cushman & Wakefield asserts, “There will not be much happening in the sector till 2010 as with the slowdown in the air, logistics has also taken a hit. However, the long term picture of the sector is still bright.”


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

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Thursday, December 6, 2012

Pledges we fear...

Companies need to be proactive with disclosure of pledging

When the regulator bares its teeth, which it has done post the embarrassment of Satyam, all are guilty till proven innocent. Market regulator Securities Exchange Board of India (SEBI) has enforced a directive to companies, which makes it mandatory for them to disclose the amount of equity that promoters have pledged over a certain period of time. Ever since the mandate came into being, numerous companies have come out in the open and disclosed details of their pledged equity. While Tata Group disclosed details of pledged shares of Tata Steel, TCS, Tata Power and Tata Teleservices (Maharashtra) Ltd.; Reliance ADA Group also divulged details of RCOM & R-Infra shares. Others like Kingfisher Airlines (43.8%), Shoppers Stop (33.10%), Unitech (49.48%), Parsvnath Developers (63.88%), et al, have also opened their accounts in public. So should investors be fearing more Satyam-like situations in the coming future?

In a bull run, excesses are not uncommon. But some of them do go over the top. The story of Tata’s excesses with Corus and JLR is well known. Habil Fakhruddin Khorakiwala, Promoter & Chairman, Wockhardt, is a stark example at the moment, who has pledged 43.11% stake of the company with IL&FS and IDBI. As slowdown looms and asset prices fall, the company is finding it difficult to service the debt (debt-equity ratio is currently 2.28:1) and they have kept their headquarters as a collateral and are also looking at selling some non-core assets. Wockhardt made some audacious acquisitions in the last two years and is now paying the price.


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

For More IIPM Info, Visit below mentioned IIPM articles.


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Wednesday, December 5, 2012

Growing, growing, gone...

Over-expansionary policy is responsible for Starbucks predicament

Recession is casting its depressive effects on stress buster lattes and cappuccinos too! Yes, at least the American born, world’s largest coffee-chain Starbucks, is proving the same. The coffee chain is passing through a lean tunnel and has further decided to cut on further fat, errr... Starbucks outlets. It announced to follow the slimdown policy over the forthcoming quarter, on a worldwide scale on January 29, 2009. Here is where the question arises: why the reduction, for isn’t coffee retailing recession-proof?

Starbucks has announced a closure of 300 stores (200 stores in US) and a further reduction of 7,000 names from their employee base. Add this to store closures announced in July, and we would stand witness to 991 outlets doing the disappearing act! Further analysis of this problem makes clear the fact that the issue at hand is clearly self-inflicted; a problem that worsened at the onset of recession as even Howard Schultz, CEO, Starbucks confessed. Around 70% of the stores that are on the red list were those opened after 2005; clear indications of a ‘wrong’ over-expansion drive.


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

For More IIPM Info, Visit below mentioned IIPM articles.

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Monday, December 3, 2012

THE CITI NEVER. . .

Adversity is a great teacher, and is an opportune time for some leadership lessons. US Gen. George S. Patton, who won many accolades during World War 2, was famous for his handling of adversities in warfare. During one operation in Sicily, he is said to have told one of his lieutenants that he had complete faith in him. To prove it, Patton went home and, you guessed it, slept! He used to famously quote, “Never tell people how to do things. Tell them what to do and they’ll surprise you with their ingenuity.”

Not letting down his board’s belief, it seems Citigroup CEO Vikram Pandit’s classy ingenuity – and that of his valued predecessors – has not only surprised, but even shocked the damned pants of Citi’s investor groups. Look at their performance on the ingenuity scale – for an organisation that had enviable smashing profits of $24.5 billion in 2005, the six months ending June 2008 have been pure genius – a killing loss of $7.6 billion! With one top US institution filing for bankruptcy (Lehman Brothers), the other (Merrill Lynch) being taken over by another (Bank of America), and the IMF estimate of gross losses suffered by the industry because of the sub-prime crisis crossing a gut wrenching $1 trillion, is Citigroup – one of the worst hit institutions in the US – going to be the next disaster on the West Coast? Boasting an asset size close to $2.1 trillion as on 2008 [double that of, say, India’s GDP], if Citi falls, Patton or no Patton, nobody’s going to sleep again for many months!

Not the least Victor J. Menezes, retd. Senior Vice Chairman of Citigroup, who reverted to us commenting, “I do not wish to get involved in any such media interactions concerning Citibank.” Truly speaking, the problems that Citigroup had piled up for itself were there for everybody to see; and as surprising as the analysis might be, the fact is nobody was ready to bell the billion-dollar pig and send it to the butcher’s. That Citi’s future is in grave danger can be easily viewed from the way share prices have plummeted. It’s a massacre on the bourses, with Citi’s share price falling from $55 in January 2007 to a pathetic $14 on September 17, 2008!

On September 15, 2008, Citi’s shares plunged by 15%, & on September 16, by another 7%, as news of Citi’s exposure to Lehman’s bankruptcy came to light. Lehman named Citigroup amongst its “largest unsecured creditors,” with a numbing $138 billion of Citigroup’s money tied up in unsecured Lehman bonds. Consider that Lehman’s gross outstanding debt is $613 billion dollars! So Citi is exposed to almost an unbelievable 23% of Lehman’s crash!


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

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Sunday, December 2, 2012

Hey! I’m leavin’ dude…

As Dunlop cuts production, other tyre manufacturers should consider following suit

The tyre industry in India has evolved in myriad ways in terms of technology over the years. So much that they can withstand some of the rudest shocks that Indian roads can throw at them. But unfortunately, there is one huge, long bump the Indian tyre industry may not be able to shield itself from; the economic one.

The sector (forecasted on a growth path for at least 5 years as recently as May, 2008 by CARE) is not going through its best times. Dunlop’s suspension of production at its Shahgunj facility is a case in point. More importantly, Dunlop’s move has again raised questions on India’s credibility as a viable destination for manufacturing tyres.

Going by figures, the tyre industry posted a CAGR of 9.69% during the time frame of 2002-2007, in a situation where almost 40% of the industry’s turnover comprises of exports and the rest 60% is the replacement market. And as auto expert Murad Ali Baig asserts, “There is enormous scope for the tyre industry as against every vehicle, the replacement demand is very huge in India.” So, fundamentals of the industry are undoubtedly very strong, but with recessionary pressures and prevailing slowdown in the auto sector, the tyre industry has also taken a beating. Exports are bound to fall for the tyre industry in the period of this economic meltdown.


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

For More IIPM Info, Visit below mentioned IIPM articles.

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