Tuesday, November 20, 2012

INVESTORS: TRUST

Losing faith in Indian market

India is also the only one among the BRIC nation’s where economic growth is forecasted to slow down again in 2008. Analysts estimate 2008 earnings to be lowest among the BRIC. Even the industrial output growth slowed to a 6-year low and thus further lowered the trust of foreign investors.

The ray of hope among these dark clouds is the latest Business Week report. In its ranking of 50 most innovative companies, two large India-based conglomerates (Tata & Reliance) figure prominently on the list. Moreover, no other BRIC country had even one entry into the Top 50 list. This should encourage India polity to pay heed to investment related issues and boost industrial growth or will it?


Source : IIPM Editorial, 2012.

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Monday, November 19, 2012

Maximum m-cap for shareholders!

Which companies eroded the maximum m-cap for shareholders! B&E’s Gyanendra Kashyap investigates...

IT companies, which contribute to around 11.2% of the Sensex profits, were the worst hit. The BSE IT index has gone down a massive 24% (yoy). Ironically, the quarterly results of these companies have been better than the market expectations but not delightful enough to restore the much needed investor confidence. For the last couple of months, the direct correlation between the BSE index and the rupee-dollar rate is all the more visible.

Allow us to show you the chain reaction: the weakened dollar caused the decline in the top line growth, pressurised the bottom-line thus leading to a fall in the stock prices thereby the market capitalisation too. But there’s another side to it too. “In order to hedge their open position, the export oriented sectors [including IT] hedged themselves to forex derivatives and suffered losses there too,” opines R. K. Gupta, MD, Taurus MF.

The free fall of the Sensex in the last quarter of the financial year (post 18th January 2008, after having touched the 21K mark on 10th January 2008) further dampened the market dynamics. It is an irony that FIIs, who were net purchasers to the tune of $17 billion till the end of 2007 have become net sellers to the tune of $2.62 billions till date, (it is no wonder that during the free fall in the month of January, the FIIs were net sellers to the tune of $3.18 billion). The market has corrected by approximately 23% in Q4 and the earnings, though on a positive note, have been below expectations. In the same quarter, the Indian market has underperformed most global markets by a significant margin. The BSE delivered returns of 19.7% and at the same time, 8 out of 30 stocks delivered negative returns; pharma behemoth Cipla had a negative return of 6.8%, while IT giant TCS topped the list with a negative return of 34.1%. Auto majors Tata Motors and M&M posted negative returns of 14.3% and 10.8% respectively. India perhaps is the only country where stock falls never result in CEO kickouts. Will it change in this coming year? We’re rolling on the floor laughing at our own question... We’re sure you’re too!


Source : IIPM Editorial, 2012.

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Thursday, November 15, 2012

Burning the midnight oil

MNCs are lining up procurement plans, but only an aggressive retail strategy will enable them to make inroads

This genre of oil draws quite a few parallels with crude oil currently, only, it is of the edible kind. For one, it is becoming a critical component of the Indian economic scenario, with projections of the sector reaching a phenomenal annual turnover of Rs.980 billion in 2015. And then, just like crude oil, India faces a critical problem of rising prices and demand-supply gap currently. Demand is increasing at 20% per annum (as per All India Food Processors’ Association). Part of the problem is that around 45% of edible oil is being imported. In response, the Government has imposed a ban on export of edible oil till March 16, 2009. “We must meet the demand of the country first and at present, edible oil has a big market in our country,” feels Subodh Kant Sahai, Minister for Food Processing Industries.

Considering that the Indian domestic market is teeming with potential, there are clearly visible trends showing an optimistic response by companies within and beyond our borders. The $88 billion Cargill from the country of Uncle Sam seems to be bent on living up to benchmarks in India too. “We will be venturing into new segments and we will be leveraging a lot of our global strength, which has enabled us to create an edge,” reveals Siraj A. Chaudhry, ceo, Refined Oils India, Cargill. Leveraging its global strength and bucked up by its phenomenal set up, which includes three state-of-the-art refineries; Cargill, with its brand Nature Fresh, is on a spree to double its turnover in the edible oil market. And the group believes that to cash in on India, it becomes necessary to bank on its global outsourcing model, like 50-60% of raw material is outsourced by Cargill from their parent company, which has enabled them to produce at a very low cost. With the Government not imposing any restrictions on import of raw material, players from usa, like Cargill & Agro Tech (of Sundrop fame) are scouting for raw material outsourcing destinations in places like Indonesia and Myanmar.


Source : IIPM Editorial, 2012.

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Saturday, November 10, 2012

The silence of the lambs...

While the West is both excited and paranoid about India’s potential, the average Indian is still not empowered as the polity continues to wither India’s intrinsic potential...
 
As the first decade of the twenty-first millennium is nearing end, it’s time to take stock of a nation which in less than one and a half decade has travelled a long distance from the verge of bankruptcy, to be among the most promising economies of the world. Probably no other country has travelled such a long distance in such a short period. In less than two decades’ time, the perception of many of the First World countries about India have changed from pity for a starving Third World struggling nation to respect and awe for one of the fastest growing economic and military powerhouses who has an insatiable appetite for energy and cross border acquisitions. Probably it doesn’t take much time perhaps for perceptions to change.

Very few sitting in India would not hold countries like France in awe. And even fewer sitting in this part of the world would believe if one is to say that an average Frenchman or a British is today as much paranoid about the increasing clout of the Indian economy and Indian Inc as outsourcing to India is becoming a key issue in the US presidential elections. Out on a casual walk on the streets of Paris, chances are high that an average Indian would first of all be asked if he is a Pakistani or a Bangladeshi. Even before the shock and the sheer disgust of being equalled with a Pakistani or a Bangladeshi overwhelms one, the realisation dawns that however much India might go ahead in the race, racially the Indians, Pakistanis and Bangladeshis would still be the same for an average European. So when one visits those places, quite often one has to take the pain of explaining that ‘we are Indians and not Pakistanis.’ Prompt would come the reply, ‘What are you doing here then? There’s so much happening in your own country!!’ If your are on an educational trip, the sarcastic smile would be complimented with a shocking reply, ‘Thank God you are not here for a job’ or ‘What is there to learn from France or Europe? Don’t you see how they are busy splitting it all up in the name of unity?


Source : IIPM Editorial, 2012.

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Friday, November 09, 2012

BUDGET: PERFORMANCE-BASED BUDGETING

Budget process governed by 3Es - economy, efficiency & effectiveness

The world’s most successful countries like Australia, New Zealand, Singapore, Malaysia, UK, France, US, Canada etc. use quality/efficiency/effectiveness indicators to prepare government budgets. Most importantly, international institutions like the World Bank and IMF provide technical and training support to countries that want to adopt performance budgeting. For India, the largest democratic nation, it is high time we incorporate such a model. India then can aptly compare itself globally with key indicators, the way most developed countries have done so. Setting key social, economical and political achievements, it can frame strategies at a micro-level to attain them. In the present conventional budget, where there is no link between budget appropriations and outputs delivered, India can identify its desired outcome by preparing appropriate approaches incorporating a path to progress towards the budget.


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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