Mira Inform

Monday 3 June 2013

BI-WEEKLY COLUMN FROM MINESH GANDHI, MANAGING DIRECTOR, MIRA INFORM PRIVATE LIMITED

· GOOD NEWS – U.S.

As per recent newspaper headlines in U.S., home prices accelerate by most in seven years while surging consumer confidence pointed in some resilience for the economic recovery. The data also suggested the two segments could act as buffers as the broader economy faces the pinch of belt-tightening in Washington. The S&P/Case Shiller composite index of 20 metropolitan areas climbed 10.9 % year over year beating expectations for 10.2 %. This was the biggest increase since April 2006.

· NOW, INDIAN BANK OFFICERS : MORE CAUTIOUS

In India, bank officials would be more cautious in granting loans, following the 1 year imprisonment sentence mooted to a mooted to a former Indian Bank Chairman for granting a loan without adequate security. The loans granted against collateral turn sour as in the case of Kingfisher. Mallya cancelled the power of attorney on the pledged shares !

· ESSAR GROUP

Recently, Essar Group got a sanction of $ 400 m for its working capital needs from two Chinese banks. Three of the top 5 banks in the world by market capitalization are Chinese.

· INDIAN PHARMA COMPANY RANBAXY FINED

Ranbaxy, now owned by Japanese Daiichi was made to pay a $ 500 m because the US FDA found that the company has falsified data. Daiichi plans to sue the Singh brothers for not disclosing full information prior to sale of their holdings in Ranbaxy. The one who came out of on top was the whistleblower who pocketed $ 48 m.

· SOME US DATA – DIFFICULT TO BELIEVE !

1. Back in 1980, the US national debt was less than one trillion dollars. Today, it is rapidly approaching 17 trillion dollars. 2. During Obama’s first term, the federal government accumulated more debt then it did under the first 42 US presidents combined. 3. The US national debt is now more than 23 times larger than it was when Jimmy Carter became president. 4. If you started paying off just the new debt that the US has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184000 years to pay it off. 5. According to the World Bank, US GDP accounted for 31.8 % of all global economic activity in 2001. The number dropped to 21.6 % in 2011. 6. The United States has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.7.According to The Economist, the United States was the best place in the world to be born into back in 1988. Today, the United States is only tied for the 16^th place. 8. More than 56000 manufacturing facilities in the United States have been permanently shut down since 2001.9. According the New York Times, there are now approximately 70000 abandoned buildings in Detroit. 10. There are less Americans working in manufacturing today than there was in 1950 even though the population of the country has more than doubled since then. 11.Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.12. In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 % combined.

· CHINA’S DEBT

As pointed out by Charlene Chu, a Fitch analyst, total debt to GDP in China has hit levels where a red flag needs to be raised. Cheap credit is a trait that marks most of financial crisis we have witnessed till date. The next economy that is inviting a financial crisis is China.

· JAPANESE ECONOMY

The Japanese economy has witnessed two long decades of stagnation and in a bid to revive economic growth, the Japanese Prime Minister has taken some extreme and high risk steps. The Bank of Japan has pledged to double its monetary base. The Japanese government is overburdened with debt.

· RESERVE BANK OF INDIA MAKES LOAN RECASTS DIFFICULT FOR FIRMS, BANKS

RBI says banks should set aside more money, promoters have to be liable for compensation for losses lenders incur.

· CASH TRANSFERS IN INDIA BOOST SPENDING ON EDUCATION, HEALTH : STUDY

Present government’s move to shift to direct cash transfers from subsidies, set to be a campaign plank in the next general election, received a boost from a study released recently which showed such an initiative led to an improvement in savings and spending on education and health.

· SUZLON Q4 NET LOSS WIDENS TO RS 19127.20 M

Wind turbine maker Suzlon energy Ltd’s fourth quarter net loss widened to Rs 17127.2 m from the year-ago net loss of Rs 3002.40 m. Non-routine costs including forex loss, asset impairments, tax credit reversals added upto Rs 11000 m.

· TATA MOTORS NET DROPS 37 %

Tata Motor’s fourth quarter net profit fell by a less than expected 36.7 % as the robust performance of its Jaguar Land Rover Automotive PLC unit helped the company to make up for flagging sales at home yet again.

· SAMSUNG’S SUPERFAST 5G

Samsung has successfully tested superfast fifth-generation (5G) wireless technology. It will enable users to download an entire movie in one second. The new technology will be not be ready for the market before 2020.

· IGATE SACKS PHANEESH MURTHY OVER RELATIONSHIP WITH EMPLOYEE

Phaneesh Murthy, sacked by software service provider iGate Corporation, as president and chief executive over accusations of improper sexual conduct and an allegation of sexual harassment by a female employee. Murthy will contest the matter if staffer goes to court.

I N S P I R A T I O N A L

Peter Drucker, the legendary management consultant and author says about teamwork : The leaders who work most effectively, it seems to me, never say ‘I’. And that’s not because they have trained themselves not to say ‘I’, They don’t thin ‘I’, they think ‘We’, they think ‘team’, they understand their job to be to make the team function. They accept responsibility and don’t sidestep it, but ‘we’ get the credit….This is what creates trust, what enables you to get the task done.”

The bottom line is that it’s easy for any organization to say…. “We value teamwork.”

L A U G H !!!

Once a peon of an office trying to speak in English to a guest. Then the guest appreciate him and told “From where you have learned to talk English?” The peon replied “I have learned, ‘You Understand?’ from our MD, “I love you” from the TV and ‘Good Morning’ from our receptionist madam.

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Saturday 18 May 2013

BI-WEEKLY COLUMN

· MITTU CHANDILYA NAMED AIRASIA INDIA’S FIRST CEO

Chandilya, 32, moves to AirAsia after headling Aisa-Pacific services at recruitment firm Egon Zehnder International.. This 32 year old management consultant will start at AirAsia on 1^st June. Mittu had tweeted, will be “coming home to change Indian travel and make it affordable”.

· NIGERIA UNDER ATTACK

Nigerian President Goodluck Jonathan has declared a state of emergency in three states after a series of deadly attacks by Islamist militant groups. Militants from Boko Haram have been blamed for most of the violence which has left 2,000 people dead since 2010. The Islamist group, whose name means “Western education is forbidden” in the local Hausa language, is fighting to overthrow the government and create an Islamic state in the north.

· FOREIGN ACQUISITIONS : BITTER PILLS FOR PARENT COMPANIES

Indian companies making foreign acquisitions due to ability to raise funds at cheaper rates overseas created difficult times for the parent companies. Some examples are :Corus (Tata Steel), Orient Express (Indian Hotels), Novelis (Hindalco) and Repower (Suzlon). In these cases, most of the costly investments were impaired and the losses of the foreign subsidiaries eroded the profits of the parent entity, as well.

· MISUSE OF CONFIDENTIAL CUSTOMER DATA

Bloomberg is the licensee for most widely used terminals in financial institutions. The company has been in the news recently as it has been receiving a lot of complaints over its journalists having access to sensitive data of the terminal users. The users include central banks from across the world. Sensitive data include private messages and trading activity details.

· VODAFONE TAX ROW

India took a step closer towards an amicable settlement of the tax dispute with Vodafone Group Plc in a move that is likely to be welcomed by foreign investors.

· ICICI, HDFC BANK, AXIS FLOUTED NORMS

Lenders found to have breached compliance with KYC (Know Your Customers) norms, violated norms on sale of investment products. An investigations conducted by the Reserve Bank of India into three private lenders and revealed that they may not have been involved in laundering but there can be instances of tax evasion. The inquiry folled allegations by online magazine Cobrapost.com that these lenders were involved in a ‘nationwide money laundering racket’. The Reserve Bank probe found a nexus between the lenders and cooperative banks for large value cash transactions and violations of norms on the sale of gold and other investment products.

· RANBAXY – ‘SYSTEMATICALLY VIOLATED’ GOOD PRACTICES : WHISTLEBLOWER

Ranbaxy Laboratories Limited ‘systematically violated’ good manufacturing practices, says the whistleblower whose alert led to a US proble, a day after India’s top drugmaker agreed to pay a hefty $ 500 mil to settle charges over its adulterated drugs.

· JLR POSTS STRONG SALES IN APRIL

Jaguar Land Rover Plc, UK subsidiary of Tata Motors Limited reported strong sales in April. Sales of Jaguar cars rose 12 % to 4711 vehicles in April while Land rover sales gained 12 % to 23,792.

· NAWAZ SHARIF REACHES OUT TO US, INDIA

Pakistan’s incoming prime minister Nawaz Sharif reached out to India and the US, pledging to strengthen relations after thumping victory in landmark elections. His biggest challenges are likely to be closer at home – fixing the economy and tackling Islamist militancy.

· STOCKS ARE GOING UP !

As said, Fed is making them go up. Here’s David Rosenberg in Canada’s Financial Post : The US Fed has always been important in influencing trends in the financial market even if the economic effects have been far less than dramatic. This influence has actually strengthened in recent times to the extent that the correlation between the Fed’s balance sheet and the direction of the stock market which was barely 15 % before all these rounds of quantitative easings began four years ago, is 85 % today. By way of comparison, the time-worn correlation between the market and corporate earnings has remained unchanged at around 70 %. The Fed is trying to bring the overall cost of capital down to a level that would be consistent with a – 2.2 %. Fed funds rate which is where the rate actually should be based on current inflation and the still-huge amount of excess capacity in the economy.

Fed has given the economy more money – QE 1, QE 2 and now QE 3. In the current version of QE, they print up extra $ 85 billion a month and pump it into the banking system. The money has not done much for the real economy but it has done wonders for stock prices. The Dow has more than doubled since ’09. It’s up this year too – hitting record after record.

· THE ECONOMIES : EUROPEAN & JAPANESE

The European economies are moribund. Their experiment with a common currency has failed. The Euro has only succeeded in making the stronger economy of Germany, stronger. The peripheral countries grew weaker. The forced austerity in the peripheral countries is slowing their economic growth. The Euro may inevitably collapse. Japan which has taken the baton of pump printing from the US and plans to create and pump in $ 1 trillion is beset with an aging population and a shrinking domestic market. It is seeking investment opportunities in large emerging markets and has the technology and the productive skills as well as the money, Domestically, its currency and its assets are not an attractive proposition.

· BANKS READY TO MOVE DEBT TRIBUNAL AGAINST KINGFISHER AIRLINES

Steps marks the last round of a bitter battle in one of corporate India’s high-profile loan default case. The State Bank of India led consortium of 14 bankers is ready to move the debt recovery tribunal on selling the assets of grounded Kingfisher Airlines Limited after filing a claim – making the last round of a bitter battle.

· STATE BANK OF INDIA, CALIFORNIA OPERATIONS UNDER SCANNER

Bank’s subsidiary told to provide for all bad loans, streamline KYC norms, US regulators to review affairs in June. The California based subsidiary of SBI, the nation’s largest lender, has been forced to clean up its books and tighten procedures after US regulators took exception to certain banking practices.\ mainly related to loans turning bad, avoiding the setting aside of money for such bad assets or posting for them and even making fresh loans to borrowers to repay off old debts.

I N S P I R A T I O N A L

From Jeff Keller, Author of the bestseller ‘Attitude is Everything’ : A positive attitude – optimism, expectancy and enthusiasm – makes everything in business easier. A positive attitude boosts you up when you’re down and supercharges you when you’re already “on a roll.” A positive attitude is never automatic. You have to work at it ! (for summary of excerpts : e-mail me – mineshgandhi@mirainform.com)

L A U G H !!!

A man walks into his boss’ office and says, ‘sir, I’ll be straight with you, I know, that the economy is not good. But I have other companies that are after me. I would like to ask for a raise.” After a few minutes of haggling, the boss finally agrees to give him a 5 per cent raise. The boss than asks him, ‘By the way, which are the companies that are after you?’ The man replies, ‘ The electric company, the water company and the telephone company’.

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Friday 19 April 2013

Bi-Weekly Column

· GOLD

Gold pride of Croesus and store of wealth since time immemorial has turned out to be a very bad investment of late. A mere two years after its price raced to a nominal high, gold is sinking – fast its price has fallen 17 % since late 2011. New York Times says, now, thinks are looking up for the economy and as a result, down for gold. A prospect that drove investors to gold – have so far proved to be unfounded. Goldman Sachs became the latest big bank to predict further declines, forecasting that the price of gold would sink to $ 1390 within a year, down 11 % from where it traded, recently. Societe Generale of France last week issued a report titled, ‘The End of the Gold Era,” which said the price should fall to $ 1375 by the end of the year and could keep falling for years.

· CITIGROUP : NET PROFIT RISES

Citigroup net profit rises 30 % as fixed-income unit beats estimates. Net income rises to $ 3.81 bn, revenue increases to $ 20.5 bn from $ 19.4 bn in the same quarter last year. This is the third biggest US bank. CEO Corbat is firing workers and closing branches as he seeks to make Citigroup more efficient.

· INFOSYS’S RESULTS

Infosys Ltd declared its fourth quarter and full year results for the financial year 2012-13. The revenue growth was lower than the guidance. The operating margins were the lowest in history. The company saw an increase in attrition levels. Most importantly It gave growth guidance for next year which is lower than NASSCOM’s guidance for the entire industry. It declined to give earnings guidance.

The fundamentals for the Indian IT industry are strong over the long term. Infosys is a company that has the necessary cavalry to take advantage of these opportunities.

· POOR GOVERNANCE IN INDIA

India is likely to be considered a failing BRIC viz. Brazil, Russia, India and China due to poor governance. Prime Minister attributes about compulsions of working with coalition partners. A lot has been written about the mess made in the telecom sector, once considered a success story and a matter of pride. Great example of poor workings of Government companies are Air India, BSNL and MTNL. MTNL’s net worth is likely to be wiped out this year. BSNL is expected to suffer a Rs 10000 mn loss.

· STRIFE IN SYRIA HALTS BHEL’S RS 2000 MN PROJECT

The civil strife in Syria has affected state-owned Bharat Heavy Electricals Ltd with work on the 400 mw Tishreen power project awarded to India’s largest power generation equipment maker, coming to a halt. India has offered a line of credit of $ 240 mn to the Syrian government for financing this project.

· SIEMENS TO CUT OVER 3000 JOBS IN INDUSTRIAL DIVISION

German engineering giant Siemens – is planning to cut over 3000 jobs in its industrial division as part of a vsst plany to save six billion euros as it faces falling profits.

· JP MORGAN MAY PICK UP STAKE IN BHASKAR GROUP’S DILIGENT POWER

JPMorgan Asset Management may invest around Rs 8150 mn in the Bhaskar Group’s Diligent Power P Ltd indicating renewed interest in India’s electricity sector.

· LODHA DEVELOPERS TO RAISE RS 19500 MN OF BANK LOANS FOR PRIME MUMBAI PROJECTS

Lodha Developers Ltd has tied up Rs 19500 mn in bank loans for three projects at prime locations in Mumbai even as banks remains wary of the real estate sector because of its various struggles in the past few years, mainly with declining sales. The long-term loans for Lodha’s projects are primarily for financing their construction.

· L&T TO ACQUIRE 50 % OF L&T – KOMATSU

Engineering and Construction Company Larsen & Toubro Ltd will acquire 50 % stake in L&T-Komatsu Ltd held by Komatsu Asia and Pacific Pte Ltd and Pacific Pte Ltd – a wholly owned subsidiary of Komatsu Ltd, Japan.

· SBI RAISES ONE BILLION DOLLARS VIA BOND SALE

State Bank of India has mopped up one billion dollars in an international bond sale programme according to one of the merchant bankers Citigroup Inc.

· KKR SET TO ACQUIRE ALLIANCE TIRE GROUP

Private equity frim KKR and Co has agreed to buy a controlling stake in Mumbai based Alliance Tire Group from Warburg Fincus Lic for an undisclosed sum.

· IMF SAYS INDIAN ECONOMY HAS BOTTOMED OUT, RISKS REMAIN

The International Monetary Fund said that growth in the Indian economy has bottomed out and would recover on the back of improved external demand and recent policy moves by the Indian government.

· INCOME INEQUALITIES

Alarming rise in income inequalities is one of the biggest dangers in the world today. It is bad for economic growth and also leads to socio-political instability. In an article in Business Insider about the distribution of wealth in the US. The top 1 % of Americans control nearly 40 % of the country’s total wealth. The bottom 80 % together own merely 7 % of America’s net worth. The wealth inequality in the US has never been so worse since the 1920s

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L A U G H

On a sign outside a lawyer’s office : “Where there’s a will, there’s a way. Where there’s a way, there’s a law. Where there’s a law, there’s a loophole. Where there’s a loophole, there’s me. WALK IN.