Monday, September 10, 2012

SENSEX: BULLS’ RALLY

While Dalal Street is flying high on a bull run, downside risks weigh heavy calling for a correction in short term

Worse, the ongoing high growth trend is also not a very clear one as in-depth analysis of the forecasts suggest that growth is not across the board. It is restricted to selective sectors like Materials, which alone is expected to provide 45% of the incremental profit. As a matter of fact, expected profit growth for Nifty companies excluding the Materials sector (where growth forecast for companies like Tata Steel is pegged at as high as 39%) is just 12%. In such a scenario, it’s really difficult to say for how long the recently sparked market euphoria will continue.

Another aspect which served as a catalyst in increasing investors’ faith on India Inc. was certainly the superb industrial production figures of July released in September. In fact, the Sensex breached the 20,000 mark within a couple of trading sessions after the Central Statistical Organization data showcased 13.8% rise in IIP (revised to 15.6%) for July. In a way the sharp rise from 5.8% in June to 15.6% in July boosted the predictions of a GDP growth of over 8.5% for the year, making India an attractive investment destination for the European and the US investors where growth is still at a meagre 1% - 2%. But then, with the release of the IIP data for August, the upbeat sentiment seem to have taken a big dent now as the Sensex on October 12 rolled down 136 points after the CSO informed that IIP growth in August declined to 5.6%. Such an erratic behaviour on part of industrial production coupled with ongoing high inflation of around 10% is not only hampering the country’s growth forecasts, but also ensuring a volatile stock market.

But then, corporate outlook and economic outlook are not the only problems for the Sensex, its valuation too is a critical aspect that needs correction. Going by reports, while the P/E ratio of the Sensex represents a 10% premium to its historical 10-year long-term average at 15.8x (times) expected EPS for FY12, in terms of price-to-book value, valuations are at a 15% premium at 2.9x FY12 expected book value. Moreover, RoE (return on equity) at 17.8% is lower than the long term average of 18.7%. Bulls may still try to justify that the valuations are lesser than January 2008 and are realistic, but no one can deny that these factors should not be ignored for long if IIP keeps fluctuating this sharply jeopardizing the country’s growth targets and thus distracting the FIIs.

Over the last couple of quarters, the Indian stock market might have recovered on strong grounds of economic recovery, but the 2,000 point spark of last month was purely backed by FIIs. And going by the track records, a bullish trend on FIIs buying is certainly the worst thing to rely on. More so, when the market is riding high on forecasts and the realities are at the doorsteps to be factored in. So today, undoubtedly, even the best of the experts, though bullish about the Indian stock market in the long term, are cautioning investors about a choppy time in the short term with a downside risk of 15-20% correction. In other words, cautioning about phase out of the September effect.


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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Saturday, September 08, 2012

EXCLUSIVE INTERVIEWS WITH:CEOS AND TOP MANAGEMENT OF INDIA’S LUXURY AUTO GIANTS

The Indian Luxury car market is on the verge of exploding, led by the increasing affluent class. this has catapulted Germany’s big 3 into an internecine and long drawn war. Is their any winner in sight yet? B&E’s Sanchit Verma Gives an incisive sectoral update on the current relative sales figures, positioning issues, production plans...

The scenario is similar with Audi. The more technology oriented German player revised its 2010 targets to 2700 (from 2300), having exceeded expectations by clocking 63% growth with 2178 cars sold in Jan-Sep 2010. This was the best sales performance for Audi ever in India, which shows how it is also gradually climbing the sales ladder. In fact, Audi India’s countrywide vehicle sales in September 2010 grew to 292 cars as compared to 205 units sold in September 2009. If one were to see the Jan-Sep 2010 period, Audi sold 323 units of its Q7 and A8 branded cars during this period; these brands stand at par with the Mercedes-Benz S-class & SL Roadster, which clocked 343 and 421 units respectively in the same period. “We are confident that we will achieve annual sales of 3000 cars, which is more than our revised target of 2700 cars,” said Michael Perschke, Head, India Operations, Audi.

In all, these three have posted total sales of 7178 units between them in the April-September 2010 period, a phenomenal growth of 84% yoy. But the reality is that going forward, all these luxury car makers are now attempting unique strategies that are brilliantly differentiated on one hand and classically positioned on the other.

Pricing and financing differentiation: Pricing matters in India! If you’re selling in India, the faster you understand the concept of value for money, the better for your sales. Take BMW for instance. On October 5, 2010, BMW launched BMW Financial Services as a new business entity in India; this firm is a 100% subsidiary of the BMW Group and will operate as a Non-Banking Finance Company (NBFC) as per the Reserve Bank of India (RBI) norms. In 2010, we’re informed that the BMW Group will invest $50 million (Rs.2.3 billion) in this arm. The reasons are quite obvious. The financing arm is to make the product more accessible to a wider audience. Look at how superbly BMW’s positioning has changed in recent times to accommodate the lower-upper class of Indian society. BMW’s recent advertisements are already offering the 3-Series at an attractive EMI of Rs.19,999 a month. Imagine the potential such a move holds, where hundreds of thousands of well earning middle management in as many Indian companies suddenly become potential customers. K. Kumar, India Manufacturing Head, Deloitte India, echoes this view to B&E, “The most important factor to expand this segment would be to put these cars within the reach of the upper middle class consumer.” Mirroring BMW’s strategic move, Daimler (the parent company of Mercedes-Benz) also announced that their financial services arm will start supporting India sales.

But BMW already has the first mover’s advantage, because while BMW’s financial arm is ready and active as of right now – and the festive season is the most critical of all times – Mercedes’ financial services are likely to be available only by next year. Audi still hasn’t expressed any views towards launching any financial services arm, as their current strategy encompasses significant investments in branding and marketing, exclusive dealerships and after sales service for the upcoming year. Evidently, this financing round is being won by BMW hands down.


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face


 
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Thursday, September 06, 2012

Addicted to love and much more

Spotted in an Armani Privé gown at the Emmy Awards, Claire Danes seemed different. Struggling to make time from her exciting, romantic life with husband of one year, Hugh Dancy, all that this dame finds time for is decorating her new country home in New York’s Hudson River Valley. Danes is twinkle-eyed, living her ‘little girl’ dream playing house and fussing over wallpaper and light shades, and is left with no time for the silver screen. Quite preoccupied with her married life, acting can wait its turn (so we hope)!


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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Wednesday, September 05, 2012

Legal/political intervention is a must!

The term ‘Dalit’ is unconstitutional as per Article 341. But the usage can still be seen across the country. Legal/political intervention is a must!

To a point in 2008 in Chhattisgarh, when finally the state government ordered the district collectors and its departments to immediately stop the usage of the Dalit term in their documents. This was done after an elongated series of requests made by the National Commission for Backward Classes. The reference point for this request is irrefutable and even shocking. The Commission proved that the usage of the term Dalit was unconstitutional. The Constitution defines this specific class (of Dalits, if we may) under the well documented Scheduled Caste (SC) category; this is as per Article 341 of the Constitution. Only the President of India, as per Constitution, can include any new term to address the SC category. In short, the term Dalit does not exist in the Constitution; and for specific reasons we have mentioned.

Post Chhattisgarh government’s move, the Dakshina Kannada district police officials in Mangalore also decided to avoid the usage of such a clearly pejorative term. Mangalore, which had been particularly infamous for its discrimination, showed this rare understanding that went against the convention.

Now, a similar course is being experienced by the term ‘Harijan’. As recently as in August 2010, the Parliamentary Committee asked the government to stop the use of the Harijan term – which has been alternatively used for Dalits; and in fact was introduced by Mahatma Gandhi himself. The committee argued that the term is deprecating the status of the underprivileged sections of society. As per the committee, the ministry had previously issued a circular in 1982 asking the state governments and Union Territory administrations to issue instructions to the concerned authorities not to use the word Harijan in scheduled caste certificates.

However, given current blatant usage of both the terms – Dalit and Harijan – across India, these examples are aberrations at best. American constitutional laws, re-modelled during the reconstruction period after the Civil War, had provisions to protect freed black American slaves. The US government has also previously banned the Negro term, and made the usage of the term a punishable offence (of course, till the time Obama identified himself comfortably as being a Negro).

Recently, the United Nations Human Rights Council’s (UNHRC) declared discrimination based on the caste system as a human-rights abuse. But surprisingly, the Indian government is trying to get the word ‘caste’ removed from this UN draft. To the contrary, the UNHRC is now even considering ratifying a draft recognizing the persecution of Dalits worldwide.

In this scenario where political will is found wanting, the legal will needs to be strengthened. The Supreme Court should declare the usage of the term Dalit a nationwide offence. Closing this dark chapter of history is critically important; and it has already been delayed by a long and painful 63 years since Independence.


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Tuesday, September 04, 2012

REAL ESTATE: INTEREST RATES

Yes, we can! RBI must move immediately to ensure banks charge logical rates

While the RBI might succeed in demotivating new home buyers from taking loans, the past home buyers would slowly be pushed to the brink of defaulting, if not insolvency.

As per a recent study by CRISIL, the share of bad loans to total loans in banks, which was 2.3% in 2009 is likely to swell up to 4% in 2010; the same is further expected to rise to 5% in 2011. The final effect will be both economical (As per May, 2010 figures, total bank loans equalled Rs.305,325 crores) and psychological (as asset demand would crash).

The solution? Delink home loan rates from other base rates. Force banks to ensure that each home loan’s base rate remains at the original cost at which the bank procured the money (to then give it to the home loan customer). By arbitrarily increasing home loan rates across even old loans, banks are doing their mite to destabilise the economic situation. An RBI move is required right now.


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Monday, September 03, 2012

“We serve close to 4,200 global customers out of our India centres”

Cable and Wireless (C&W) set up the first ever telegraph line between india and london in 1870. C&W worldwide’s nick lambert, managing director, global markets, reveals to B&E’s Swati Sharma why being a “Mission Critical Integrator” is extremely critical to him

B&E: Since inception 130 years ago, how has the journey been so far?
Nick Lambert(NL): From a telegraph company to having a ringside view of the evolution of technology, we have successfully developed and deployed our business solutions within the burgeoning communications marketplace. With 500,000 route km of sub-sea cable capacity and presence in over 153 countries, our journey has been both exciting and challenging. Today, we aim to become the first choice communications integrator serving mission critical needs of large multinational telecom users. We work with large corporations, multinational companies, governments, carrier customers and resellers providing a range of high quality managed voice, data and IP based services and applications across the UK, Asia Pacific, India, Middle East & Africa, Continental Europe and North America.

B&E: What is your core strategy for such vivid expansions worldwide?
NL: Our aim is to be a mission critical communications integrator. To achieve this goal, we are working closely with our customers and differentiating through a pragmatic customer service model that is ‘right first time’, stable, proactive and responsive. We continue to evolve a market-leading product suite of advanced network-based services and solutions for large users of telecom services, focused on our next-generation network and Multi-Service Platform technology. Furthermore, we’re looking at increasing the share of revenue generated by our strategic product set of Data, IP and application services, which attract higher margins and are in greater demand than products such as traditional voice and legacy services; and finally, and quite importantly, we continue to increase our focus on emerging markets in Asia Pacific, India, the Middle East and Africa to capitalise on increasing demand for telecommunication services.

B&E: But didn’t the slowdown hit you hard?
NL: The recent economic meltdown compelled most organisations globally to take a long hard look at their business value chain and make new plans for the future. Spending decisions were postponed as a result. Companies started paying more attention to considerations such as Total Cost of Ownership (TCO), Return on Investments etc. Transformation projects were held back. On the brighter side, smart businesses tried to look beyond the current troubles – to the inevitable growth curve beyond. In the last four years, Cable&Wireless Worldwide has realigned its priorities to focus on delivering global network services to the largest corporate customers. We have concentrated on long term contracts and wider spread of customers across a broad array of vertical industries – financial services, manufacturing, global logistics, retail, high-technology, government, construction and telecommunications (carrier customers).


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Saturday, September 01, 2012

Credible leadership and corporate governance

Competition today has forced organisations to overlook the importance of values, ethics, credible leadership and corporate governance. they simply hinge their hopes on luck. wrong. Dr. Jamshed Jiji Irani, Director of Tata Sons and Chairman of the Board of Governors, IIM-Lucknow, writes about those elements, which if considered first, would result in fair profits.

Profit is about “Corporate Governance”
Nowadays, “Good Corporate Governance” is very much in the news, and is being demanded from various quarters. There is a drive towards the “Triple-Bottom-Line”. The practice of “Triple-Bottom-Line” – financial, social and environmental – is being taken up by the more enlightened business houses in India and abroad.

The opposite of “Good Corporate Governance” is apathy. Unfortunately, too many of us take the easy alternative under the pretext that, I on my own, cannot make a difference. The truth is exactly the opposite. Even a drop in the ocean can make a difference. Very often, this attitude of apathy is an excuse for not taking a correct stand or for avoiding an initiative to fight corruption.

Another reason which is given for not taking appropriate action, is that we are restricted by the prevailing laws of the land. Once again, nothing can be further from the truth. It can be demonstrated that even under the prevailing laws, which in some cases are definitely restrictive and archaic. It is possible with vision and determination to take actions which can have far reaching impacts.

Profit is about “Leadership with Trust”
The right leader can make a difference. We do not have to go back to the very obvious examples in the political history of great men such as Mahatma Gandhi and Nelson Mandela. Even in a much more restrictive sphere of industry and civic administration, there have been very significant examples in the recent past where one person at the helm, has made a tremendous difference on the performance of an entire organisation. These people gave back to the organisations which gave them respect and made them feel proud to be what they were.

It is well accepted that those organisations and corporations which create ownership and a feeling of belonging in the rank and file, are the best able to stand up to the competitive environments in which businesses find themselves today. The crucial feature is how does one build this culture in a world which is today awash with cynicism and skepticism. Such attitudes do not help any one or any organisation to get ahead and succeed. Therefore, this ‘trust-deficit’ has to be taken head on. The Tata organisation is built on trust, and its motto is “Leadership with Trust”.


Posted by at 10:05 AM
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