Wednesday, October 10, 2012

LIC: INVESTMENT

LIC’s market investments are well timed, apart from IRDA norms
 
The investment may seem to be huge, but considering the Rs.8.06 trillion asset portfolio of LIC, out of which it is entitled by IRDA norms to invest 35% in equity along with mutual funds, corporate loans, FD, et al, the investment amount is reasonable enough.

A simple evaluation shows that out of the 35% allowed in equity et al, even after Rs.170 billion investment in the equity market, LIC would still have a surplus of Rs.2.6 odd trillion, which it can utilise for corporate loans and fixed deposits. In addition, LIC is all set to raise its fresh premium income by around 40% in FY ‘10 from the current Rs.110 billion (thanks to PSUs, which are expected to raise gratuity liability cover from Rs.0.35 million to Rs.1 million). Of the promised investment amount, Rs.40 billion would be infused by the end of March 2009. LIC has equity investment of about Rs.2 trillion in listed entities.

The only hurdle which LIC could face is from the IRDA (Insurance Regulatory & Development Authority), which caps the firm’s exposure in individual firms at 10% (LIC’s stake in several companies exceed the limit) earlier the limit was 20% (down from 30%). LIC has exceeded the limit and it will have to lobby with the IRDA to relax investment norms (as it has done for infrastructure companies). Apart from this bolt from the regulator, LIC’s aggressive investment in the bourses seems logical and well timed. That should be a boon for policy holders who have gone for equity linked plans.


Source : IIPM Editorial, 2012.

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Tuesday, October 9, 2012

MANGALORE: MORAL ILLITERACY

And behave; the Indian arrives!

And similar is the case for incidents of clear hooliganism and mob attack against the disadvantaged. While the public has struck work at schools, colleges – there have been torch-rallies and even hunger-strikes – and while several workers have been arrested – even those linked to BJP, Bajrang Dal and Shiv Sena – the fact is that the government never often releases extremely strong media statements condemning the attacks and warning Indians not to take such unlettered acts up.

It is extremely unfortunate that in today’s India, a traffic drive by the local traffic police to enforce traffic rules garners higher media hype – and advertising budgets by the government – than efforts to educate the illiterate Indian populace to immediately desist from undertaking definitely illegal behaviour.


Source : IIPM Editorial, 2012.

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Monday, October 8, 2012

NEPAL: ARMY

Government needs to build consensus for the merger of the armies

However, there is a third point of view. Nepali journalist Khimi Thapa, for instance, feels there is nothing really wrong with a merger if it is done in a broad based manner. As Thapa pointed out to B&E, the Maoist government almost never bothered to take the Army Chief into confidence before coming up with the proposal. “This is the root of the tension that persists between the government and the NA,” said Thapa; adding that it was no mean task to integrate the PLA’s 19,000 combatants with the NA.

The NA is not at all certain that the merger will take place in accordance with internationally recognised norms. The army is especially against the PLA commanders’ move to retain their ranks and want their own guerrilla chief, Nanda Kishore Pun 'Pasang'. With so much going against it, the government would do better to backtrack on its proposal till a consensus is reached.


Source : IIPM Editorial, 2012.

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Sunday, October 7, 2012

Alex Li, VP, HSB (Home & SMB), Lenovo India

B&E: What product segments will you bet on in the coming time and what customer expectations will you particularly address?
AL: The mobile computer space is growing at a fast pace. Undoubtedly, there is an influx of innovative PC products in the market at present. Innovation drives from an increase in demand and after identifying the need for new advanced products. Having said this, it is important to understand that notebooks, netbooks, tablet PCs and even smartphones are products that perform different functions for different users, as applicable depending on their computing usage. Lenovo India recently reaffirmed its mantra of innovation by launching a slew of youthful and trendy notebooks for the Indian consumer. These include the new Z-series Notebooks - Lenovo IdeaPad Z460 and Lenovo IdeaPad Z560 that offer mainstream performance and multimedia features and the Lenovo IdeaPad Y460 and Lenovo IdeaPad Y560, which offer consumers with an unprecedented array of entertainment features.

B&E: How do you see the Desktop market in India? Will it experience an upward or a downward shift? And what are your plans for the same?
AL: More than traditional desktops, the All-in Ones segment is the segment that is really expected to grow reasonably well, as these products are sleek, save a lot of space and are highly energy efficient. Lenovo is a clear leader in the All-in-one space with a market share of 56%. In this segment, our latest offerings include the slim, light, delicate and stunningly beautiful Lenovo IdeaCentre A300, Lenovo IdeaCentre B500 -the futuristic mean machine, with cutting edge entertainment features, and two great desktop replacers, the Lenovo IdeaCentre B300 and Lenovo C200. The Lenovo IdeaCentre A600 and Lenovo IdeaCentre B500 received widespread acceptance from retail partners as well as consumers. These products are slim, sleek, stylish and affordable and can compete with traditional desktops. We are betting big on the All-in-one segment and will continue to launch feature rich, sleek, fully loaded products at an opportune time in the market.


Source : IIPM Editorial, 2012.

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Friday, October 5, 2012

Yes, No, No, Yes Minister!

Holding Multiple Ministries Often defeats The Very Purpose of Holding Them

A big problem that has been prevalent in India since Independence is that the national polity has always overestimated its potential. That is perhaps why taking up multiple ministries has become a norm rather than an exception in India. There are around a dozen ministers currently holding more than one portfolio.

The issue has also become contemporary, especially after the highly efficient, capable and effective Human Resource Development Minister Kapil Sibal took over the additional responsibility of the Ministry of Communications and Information Technology. Both are very important ministries and Kapil Sibal has the wherewithal to lead the two ministries. But then, he is an exception when compared to other ministers.


Source : IIPM Editorial, 2012.
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Thursday, October 4, 2012

HOW POLICYMAKERS ARE DESTROYING THE GREAT INDIAN TELECOM DREAM

The Indian Telecom Industry has been a Benchmark in the way it has made Mobile Services available to the Common Man. But Corruption & Ineptitude at the Government level continue to take their toll on both Confidence and Bottomlines. Akhilesh Shukla analysis how long this can continue...

“A message needs to be put across that howsoever high and mighty a person may be, no one is mightier than law. And if a public servant indulges in corruption, the punishment would be severe enough to make him regret the moment he decided to eat the forbidden fruit’,’ said VK Jain, Special Judge for CBI cases in 2002; while sentencing former Union Telecom Minister Sukh Ram, who indulged in blatant corruption by favouring a private telecom company at a cost of Rs.16.8 million to the public exchequer.

However, eight years down the line, the high and mighty at the government level continue to misuse their powers and authority to mint money from the telecom sector by hook or by crook. Despite the seriousness and severity of the allegations, they haven’t felt the need to regret too much, barring ongoing public humiliation due to the media outcry. The Rs 16.8 million scam by Sukhram looks very miniscule in front of the Rs.1.4 trillion loss to the government under the shameful 2G scam, for which present Union Telecom Minister A. Raja is the main accused. The tainted minster is still continuing in his office thanks to coalition politics, at least as this magazine goes to print.

The irony here is that the difference in the size of the two scams mirrors the kind of growth the sector has witnessed over the last decade and a half. Since 2002, the industry has grown by more than 100 times as far as the subscriber base is concerned. The overall Indian telecom industry is estimated to be worth around Rs.1.6 trillion by the end of FY 2010-11. Telecom services have reached the common man successfully, with overall teledensity at more than 56%, while in urban areas it has comfortably crossed the mark of 100%. Private operators have been at the forefront of this transformation, with over 80% of market share between them. In parts of rural India, people still do not have basic amenities like electricity, consumer durables, literacy or even two square meals a day, but cell phones have successfully penetrated such villages. Indian telecom companies work on some of the lowest tariffs in the world and their scalable and cost effective practices, like Bharti Airtel’s outsourcing-based business model, are global benchmarks.

Unfortunately, the manner in which regulators and policy makers in India have handled this sector has severely hampered business confidence. Corrupt practices and ineptitude on the part of the government have been rampant throughout the evolution of this sector. While the sector has surged past expectations despite this fact, one wonders – for how long can the telecom goose continue to lay its golden eggs?

The entry of Reliance Infocomm (Reliance Communication today) is a case in point. The alleged nexus of former Telecom minister Late Pramod Mahajan resulted in the entry of Reliance Infocomm, then under Mukesh Ambani, in the lucrative industry. Reliance allegedly used the loopholes in the regulations and offered mobile services in the country using subsidised Wireless in Local Loop (WLL) technology. Industry sources claimed that Mahajan’s close relative was given 1 crore shares of Reliance Infocomm at the rate of just Re.1. The company, saving a huge amount on license fees (which were paid by the incumbents earlier), used it to offer handset at Rs.500 and calls as low as 40 paisa per minute, which resulted in other telcos bleeding money and being compelled to bring down tariffs in tandem. Later, Reliance Infocomm was dragged to court and fined. Reliance was also charged of masking incoming international calls as local. According to the charge sheet, the company transmitted over 75.2 million minutes of ISD calls as local calls, evading Access Deficit Charges to the tune of Rs.320 million.

The 2G spectrum scam has put the government in the eye of storm in the current winter session of Parliament, as opposition members continue to demand the resignation of Raja. Licenses were provided at nominal charges based on 2001 rates. When transcripts of taped conversations were leaked, names of several top politicians and high profile journalists came to the fore; including high profile corporate lobbyist Neera Radia, owner of a few PR firms including Vashnavi Corporate Communication, Vitcom consulting et al. The CAG report also blasts TRAI for being a mute spectator when these misappropriations were ongoing. The 2G spectrum was given for as low as Rs.16.50 billion for an all India license covering 22 circles. After getting the spectrum, most telecom operators sold minority stakes to foreign companies at three to four times the price at which they bought the license. Tata Teleservices sold 26% of its stock to Japan’s NTT DoCoMo fot $2.7 billion. Similarly, Unitech sold 60% of the stake in Unitech Wireless for Rs.61.325 billion, for a license they had acquired a few months back for a mere Rs.16.5 billion.

It seems that Raja took this sorely to heart in his second stint as telecom minister, as he set about designing the 3G and BWA spectrum bidding. In fact, looking at it from purely the government’s perspective, the 3G spectrum bidding has highlighted the telecom ministry’s previous short-sightedness with respect to this key sector to an extent that is unprecedented. The recently concluded auction left telecom operators bleeding, but has singlehandedly helped the government reduce the current financial year’s fiscal deficit (as a percentage of GDP) to 4.7% from 5.5%. In all, the government earned a whopping Rs.1.063 trillion, over three times the original estimate of Rs.350 billion. 


Source : IIPM Editorial, 2012.
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IIPM : The B-School with a Human Face
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What’s with the Cowboy hat?

An obsession to follow the big ticket retailers of the West and a booming Indian middle class was suicidal for most Indian retailers in the initial years of organised retail. Overexpansion and poor inventory management, coupled with a slowdown, brought them to their knees faster than expected

If all the big ticket retailers in India have one thing in common, it’s surely the lack of knowledge about the rationalisation of capital expenditure. Before the slowdown, none of the retailers paid heed to the concept of store rationalisation, which includes working capital management and cost optimisation. In fact, from 2005 to 2007, retail was considered to be the most promising sector with a growth of 20% and 37% respectively for the year 2006 and 2007 (according to a KPMG Report).

Riding the crest of were senior Ambani’s titanic retail plans with Reliance Fresh. Having the huge financial base of Reliance Industries as back up, the retail top brass never realized the importance of store rationalization or reducing inventory costs. Where working capital crunch was not a problem, the political parties did the needful. Oppositions came from West Bengal, Tamil Nadu, Jharkhand and Uttar Pradesh with allegations that Reliance is trying to connect with the consumers directly and closing the business of other channel members. Reliance developed a Wal-Mart kind of image for itself, without factoring in the alienation it was causing the other players.


Source : IIPM Editorial, 2012.
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