Monday, October 08, 2012

Next G8: Star Cruise

The summit will also include paragliding, water sports, bungee lessons

With passing time, experts now concur that French premier, and (hyper)active G8 member Nicholas Sarkozy has started looking – and behaving – eerily similar to Sylvester Stallone [Go ahead, give it a try; identify sweet Nick in the photograph]. Funnily, this behavioural similarity extends to the whole G8 belt [US, Japan, Germany, France, UK, Canada, Italy, Russia and Ethiopia... er, alright, if you caught us on this, read on, you seem to be interested], with almost every member contributing his Shylockian best to behaving like a spoilt celebrity during every summit, finally achieving nothing. So we did what we do best [no no, not that; Bush does that better] – we analysed the progress report of the past few summits to decipher what exactly has been achieved in terms of contribution to least developed nations!

G8 summit in Birmingham, England, 1998: Protesters for the first time were formally allowed to give a written letter, which requested G8 to work on the heavy debt burden of the third world. Letter accepted, case dismissed! Nothing much was discussed, leave of course the letter. Cologne, Germany, 1999: To prove that they were worried about poverty, an ‘officially’ undisclosed amount was sanctioned. According to World Bank, the ‘sanction’ was so small that it wasn’t enough to even provide five bread loaves per person per year per poor country. Okinawa, Japan, 2000: Aid amount invested in projects: Close to nil; evidently because of billions spent on militarisation of north-east Asia. Genoa, Italy, 2001: Progress on debt cancellation: Nil! Massive protests took the blame, rather than the G8 members.

Kananaskis, Canada, 2002: Among many important issues, NEPAD [New Partnership for Africa’s Development] was also on agenda. $64 billion was requested, but only $6 billion was sanctioned. The reason? Russia requested – and was presumably given – $20 billion for the upkeep of the Russian nuclear stockpiles.

Source : IIPM Editorial, 2012.

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posted by Editorial at 11:50 AM

Saturday, October 06, 2012

“TRAI Can’t Force QOS norms on Operators”

Satyen Gupta, former Principal Advisor, TRAI

Telecom Regulatory Authority of India (TRAI) played a pivotal role in the great Indian telecom success story. The body keeps a close watch on the quality of services offered by the telecom operators to millions of wireless subscriber. However, there is little that the regulator can do when it comes to implementation of these norms on the ground level. Former Principal Advisor to TRAI Satyen Gupta spoke to Akhilesh Shukla about the MNP and regulators role in implementation of QoS norms.

B&E: The churn rate in India is very high, especially in the prepaid segment. Do you think MNP would be able to further escalate the churn rate?
Satyen Gupta (SG): Truly speaking, MNP would not have a major impact on the churn rate in the telecom space. The little churn that we could see would be on the front of high value postpaid subscribers. Most of them are corporate executives or business class people, who need to be connected 24x7. These people need quality service. They have all the reasons to port if they are dissatisfied with the existing service provider. The service provider has to make investments to retain them; otherwise they will see a decrease in top line.

B&E: How would the implementation of MNP impact the service providers?
SG: The marketing budget of telecom operators would significantly go up after the roll out of MNP across the country. The operators have to communicate and educate subscribers about its USP at regular intervals to remain competitive. Investment has to be made on the front of improvement and maintenance of QoS. At the same time, they have invest in retention of dissatisfied subscribers, especially high ARPU ones.

B&E: 3G and MNP were expected in India for quite a long time. Do you think the delay had any negative impact on the sector?
SG: The delay of both the services did not have much impact on the Indian telecom sector. Both the services were present in one form or the other. People looking for high speed connection while on move have already subscribed to EDGE services (2.75 G) for the handset. Similarly, high speed data cards, offered by the CDMA operators, have fulfilled the need for faster internet on mobile platform. Similarly, the dual SIM phones have bridged the gap for subscribers looking for a new operator while retaining the existing number.


Source : IIPM Editorial, 2012.

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posted by Editorial at 5:40 PM

Friday, October 05, 2012

How Late is Too Late for Toyota?

Etios can prove to be a Fortune Changer for Toyota in the Indian Market. But there are Challenges Galore that are Hell-Bent on Proving why the Jap’s Slow-Coach Small-Car Strategy may work Against It.

Early this year, Akio Toyoda, the chieftain of Toyota became the bad guy for doing the right thing – recalling 8.5 million vehicles over safety concerns. First, he was abused across continents. Then, after being verbally clobbered by the US Congress, he was slapped a fine of $16.4 million. Beat his audacity – Toyota paid the fine without submission of any wrongdoing on May 18, 2010. Since then, there have been (f)acts that have gone much against popular expectations. First, the Japanese carmaker announced a fresh round of recalls on November 4, 2010 (of 135,600 Passo and iQ cars in Japan and Europe to fix the vehicles’ power-steering system). Second, Toyota’s financials have remained sound despite the pepper sprays. During the first half of a trouble-marred 2010, the company sold 3.72 million vehicles worldwide – an increase of 18.7% as compared to the same period a year back. As far as earnings were concerned, it recorded an unexpected 15.5% y-o-y rise in topline to touch $117.45 billion during H1, 2010, with bottomline improving drastically (from a loss of $679 million during H1 2009, to $3.51 billion). There was more good news to follow.

While the company’s m-cap remains close to the $120 billion mark (the same as it was 12 months back), the investors have found a new reason to smile about. On November 5, 2010, the company announced an increase in net income target for FY2010-11 to $4.3 billion. The secret – as experts agree – is Toyota’s new low-cost model for emerging markets, which begins with the Etios launch in India in early December 2010.

Many suggest that Etios may face the same fate as the Toyopet did way back in 1957, when Toyota tried to introduce it in US. The suffix “pet” suggested that it was the small, compact sedan that Americans were yearning for. What followed however, was shocking. In three years, the Toyopet had sold only 1,913 units and the company was forced to withdraw the failed car from US. The sentiment in India is similar today. In the present times, it is understood that a compact car (the A2 segment) is likely to work wonders in the Indian auto market. For the records, 72.8% of the 9,22,281 units of passenger cars sold in India till September during FY2010-11, belonged to this very segment. So can the Etios do for Toyota what the Altos and the Swifts did for Maruti or what the Santros and i10s did for Hyundai? Etios is the next big step which can establish Toyota’s dominance globally, and for a long time to come. Call it clever, but it starts with the toughest of acid tests – convince the Indian consumer. But the biggest question is – can it?

To imagine that the magic could happen overnight would be foolish. While Maruti today accounts for 55.03% of the sales in this category, having sold 369,466 units in the A2 segment during Q1 & Q2, FY2010-11 alone, the #2 Hyundai has 22.74% of the segment, with sales of 152,664 units during the same period. More so, both have been celebrated brands for over two decades for the price-sensitive Indians. Toyota on the other hand, is simply recognised as a brand in just the Rs.1 million-plus bracket, which includes the A4 segment (where it holds an 18.99% share; data for Q1-Q2, FY2010-11) and the Utility Vehicle (UV) segment (22.31% share). And even if Toyota manages to challenge the might of the Marutis and the Hyundais in the sub-Rs.0.5 million platform, finding the right price level, while maintaining decent margins will pose a challenge to Toyota, as Hiroshi Nakagawa, MD, Toyota Kirloskar confesses to B&E, “Pricing will surely play a very strategic role in the success of the compact car Etios, as convincing the value-conscious Indian consumer is the toughest task in the world.”

But if the Spark & Beat could save GM’s day in India, and if Figo could come to broaden Ford’s consumer base, why discount out Toyota? Out of the 46,603 units sold in India by GM during the past two quarters, 74.52% belonged to the A2 segment. And of the 48,002 units sold by Ford India, 79.54% were from the same category. It is largely the entry into the A2 segment by GM (in 2006 with the Spark) and Ford (in 2010 with the Figo) that boosted their Indian market shares in the passenger vehicle category, which currently stand at 5.32% and 4.02% respectively. Perhaps the Etios will help improve Toyota’s low market share (of 0.57%) in the Indian passenger vehicle market too!


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
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posted by Editorial at 12:03 PM

Monday, September 10, 2012

Hell Dorados

Post the frenzied activity that begins in any sector opened up in the Indian Economy, many entrants, including the larger ones, lose out due to lack of long term strategies and inability to adapt to business dynamics. Ultimately, market forces take them off road, putting paid to all the aspirations that convinced them to enter the sector in the first place

Terms like intense competition, mergers and acquisitions and low margins are not new to Indian market by any chance in today’s day and age. After all, the Indian economy is labelled as one of the most lucrative on the global charts. That is precisely why, as numerous sectors like telecom, aviation, retail and insurance opened up one after another; a number of Indian business houses ignored all considerations of synergies, potential growth impediments or possible gloomy scenarios and took the plunge, led by the Tatas, Birlas, Ambanis, Mallyas, et al.

History has repeatedly taught an important lesson that these players seemed to have missed. The story of El Dorado, the mythical ‘City of Gold’ that captured the fancy of European explorers, gained popular appeal in the early 15th century. Multiple expeditions were undertaken in vain to discover this city; till better sense ultimately prevailed, two centuries later! The fact is that a number of Indian businesses have also been victims of two precarious beliefs w.r.t. the so called sunrise sectors – one that the sheer depth of their resources would ensure that they prevail over every eventuality in the sector concerned and second that their stupendous success in their current businesses automatically made them the best bets for these new business opportunities.

Be it television manufacturing that saw a frenzy of competition in the early 1990s and eventually led to many manufacturers exiting or the telecom services sector, wherein new entrants in the industry like MTS, Uninor and Videocon have been disturbing the margins of the big boys like Reliance and Bharti Airtel to the core, such instances abound. In fact, some of the new entrants in telecom are realising that they themselves face a hard time. The fact is that with the huge number of players per circle now and the continuously ARPUs (Average Revenue Per User), it’s only a matter of time before consolidation happens. In retail, we saw the entry of players like Reliance and Birla along with some zealous competitors like Subhiksha and Vishal Megamart. Most of them faced the perils of untethered expansion and had to shut down stores. Subhiksha and Vishal Mega Mart ultimately went belly up. Similarly, entrants into aviation like Air Deccan and Sahara had to bow out of the race as they found their margins getting unsustainable due to myriad reasons. And despite the consolidation phase that passed them by, the remaining players have found it just too hard to keep their balance sheets in the black.


Source : IIPM Editorial, 2012.
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posted by Editorial at 4:36 PM

Monday, September 03, 2012

OUR MPS ALWAYS HAVE A CONSENSUS ON PERSONAL GAINS AND DIFFERENCES ON NATIONAL IMPERATIVES!

Recently, a much awaited bill with respect to our honorable members of Parliament was given a nod! The bill seeking a three-fold hike in MPs’ salaries from Rs 16,000 to Rs 50,000 and increase of 200 per cent in their allowances was passed. Besides this, the daily allowance of every MP when he or she attended Parliament during session was doubled; constituency allowance and office expense allowance also saw a two-fold growth; and conveyance allowance saw a four-fold growth. In all, this hike entails an annual expenditure of Rs 146 crores and an expenditure of Rs 118 crore on payment of arrears!

However, a lot has been deliberated and written on this issue, and many arguments and counter arguments have been put forth with respect to this bill. Without getting into that argument, what I found most interesting was the manner in which the MPs built their consensus on this particular bill. It was amazing to observe how everyone got united, seemingly forgetting their personal and political differences, and lobbied for the raise. Political parties whose ideologies, in normal circumstance, rarely synchronize with each other, were seen singing the same tune. Rashtriya Janta Dal along with Samajwadi Party (SP), Bahujan Samaj Party (BSP), Janata Dal (United), Shiv Sena and Trinamool Congress were seen to be on the same side. While some other parties didn’t join this unison directly, they were not seen opposing the move either. In fact, despite the first round of salary raise (an increase of Rs 10,000 along with increased perks compared to the current allowance MPs receive), almost all members of the Rashtriya Janata Dal (RJD), Samajwadi Party (SP), Akali Dal, Janata Dal (United), Shiv Sena and Bahujan Samaj Party demanded a further hike. Parties like Bharatiya Janata Party (BJP) and others refrained from participating in the debate.

It is no secret that our political parties – who generally are habituated to never come to any consensus on any given issue – were seen creating no fuss or roadblocks when the issue was all about their own personal interest. It reminds me of a similar phenomenon that happened a few years back, when the Supreme Court directed the Election Commission to frame stringent laws regarding rejection of nomination papers for people with criminal background. There again, our MPs were found voicing their protests – to the move of barring criminals from standing for elections – in unison! On being asked to reveal their criminal antecedents (for the uninitiated, we have more than a fourth of our Parliamentarians facing some form of criminal charge) along with their assets and educational qualifications while filing their election nominations, the entire political class came together, rejected the notification, and without much debate and discussion, sidelined the proposal. In the same lines, our parliamentarians got together when a proposal was mooted to nationalize the money kept by Indians in Swiss bank accounts – and blatantly ignored the same without any discussion, for all the possible obvious reasons!

Most interestingly, amidst all this, the much awaited and hugely important Indian Medical Council bill got passed without any debates or discussion. And why not, when almost all parties were on the same side of the field over salary rise, such debate would have diluted the momentary united spirit! And mind you, this medical council bill which got passed was enacted 76 years ago! Though it took a long time to pass this bill, even after knowing the kind of rampant corruption that exists in the Medical Council of India, not many bills are as fortunate. Almost every time, it is the same old story. Our honorable parliamentarians only wear their respective political ideologies when it comes to significant bills which directly or indirectly affect the most significant stake holders of the country – i.e its citizens. What is even worse is that with an average attendance of around 60%, the parliamentarians do not even feel the need to debate upon such significant bills which have been pending for years. Be it the pesticide management bill 2008, the seeds bill 2004, the coal mine amendment bill 2000, the communal violence bill 2005, the representation of people bill 2006, the insurance law bill 2008, the TRAI bill 2008, the railway property amendment bill 2008, the drugs and cosmetics bill 2007, the motor vehicle bill 2007, the National Road Safety and Traffic Management Board Bill, and numerous other bills – all are still pending just because of a lack of consensus!


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posted by Editorial at 3:31 PM

Saturday, September 01, 2012

Iran: The war is over, finally!

With the Obama administration playing down the Bushehr reactor issue, US finally accepts Iran; B&E brings out a completely hidden fact of the timing of the State Department’s pro-Iran statement

“We recognize that the Bushehr reactor is designed to provide civilian nuclear power and do not view it as a proliferation risk!” With this one statement on August 13, 2010, Darby Holladay of the US State Department created history by changing a decades’ long policy stand of United States towards Iran. The statement was brilliantly timed, given the propensity with which Israel was preparing to attack Iran’s nuclear plant. The statement also defined a historic moment in US-Israel relations, by communicating to Israel that the US was no longer ready to blindly accept any anti-Iran tirade.

These voices from the Obama government express an opinion considered improbable just a few months back, when US was said to be on the brink of attacking Iran. In February 2010, Obama had warned, “Despite their (Iran’s) posturing that their nuclear power is only for civilian use, they in fact continue to pursue a course that would lead to weaponization.” Given such a negative statement, the current US stand is momentous.

For the trained political analyst though, the past year should have been enough to give much evidence of what was around the corner in not only Obama-Iran relations, but most importantly Obama-Israel relations. Last year, when US Vice President Joe Biden, during an interview with ABC Sunday, announced that US would not “stand in the way” of Israel attacking Iran, US President Barack Obama had immediately backtracked asserting that US had “absolutely not” given any go ahead to Israel for attacking Iran. Obama had reiterated further, “We have said directly to the Israelis that it is important to try and resolve this in an international setting in a way that does not create major conflict in the Middle East.” For Israel, that was bad news, and not just because of worsening political relations with US – Israeli fighter crafts would have had to pass over Iraq to attack Iran; and Iraq was under US control then.


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posted by Editorial at 12:01 PM

Friday, August 31, 2012

Billions of dollars investment increase; what’s up with agriculture?

It’s magnanimous and astounding, but agriculture of all the sectors has seen huge increases in private and public sector investment in the past five years. B&E does a quick news synopsis and update of the investment scenario in the agricultural sector and commentates on visible issues by Angshuman Paul

We’ll jump straight out of the chaff. According to the Annual Report 2009-10 of the Ministry of Agriculture, the public and private sector investment in agriculture has been steadily increasing since 2004-05. While public sector investments in agriculture have increased from $3.61 billion in 2004-05 to $5.5 billion in 2008-09 (52% increase), private sector investments have increased from $14 billion in 2004-05 to $25.5 billion in 2008-09 (82% increase).

While the general think has been that agriculture has slowly been losing out its sheen – both at the grass roots level (more and more farmers preferring to migrate to cities) and at the corporate level – the actual figures allude to a situation that seems clearly quite to the contrary. Not only has the agriculture sector been able to attract investments, it also has been able to do the same across the value chain – right from the fields to the point of value added disbursement.

On afterthought, this shouldn’t have been that difficult to forecast, as much of the planned investment is arising purely because of the clear cut rising gap between the demand and supply of food items like cereals, pulses, edible oil and sugar. Consultant and industry body estimates that the rising gap will further give birth to a plethora of service-providers and firms that would try to develop newer business opportunities between the consumer and food-manufacturer.

Data from FICCI corroborates this perspective – FICCI research claims that the food processing industry in India would reach an astonishing size of `1 lakh crore by the end of 11th plan. And in this food processing chain are involved grading, sorting and packaging (GSP) service providers, venture capitalists, and other food processing firms. At the front end of this supply chain, organized retailers are targeting consumers with attractively packaged processed agri-commodities; and at the back end, are companies specialising in setting up cold chain facilities. At the vanguard of these opportunities are some of the biggest names of India Inc like Tatas, ITC, Reliance who are consciously linking to Indian farmers in various ways.

Star Bazaar (the hypermarket formats of Tatas) has recently collaborated for setting up a supply chain of UK’s Tesco that will ensure exports of agri-commodities from India. Reliance Fresh is building a logistics business that includes a massive cold storage operation; this should be operational by 2011. Tata Chemicals has set up a banana ripening centre in a joint venture with Irish company Total Produce. Christened as Khet Se, this venture was started in 2007 and within a time span of three years it has managed to grow at more than 30 per cent. And these are the top examples that signify the impetus driving the sector currently.


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posted by Editorial at 1:30 PM

Wednesday, August 29, 2012

PHARMA: MID SIZE COMPANIES

Ever since the growth models of the 1990s began to elude the big guns of Indian pharma, a sordid phase of consolidation seems to have set in; raising fears of total disaster for the players. However, there is a light at the end of the tunnel with an interesting clutch of mid-sized players showing the way towards future sustainability and growth.

So where and how did the good times for the mid-sized players begin in this scenario? It all started in 2005 when the patent regime was enforced in India. At that point of time, these companies were small entities and found the going even tougher. On one hand, they were battling the patent regime and on the other they faced stiff competition from global and Indian giants. Some went into oblivion but others decided to fight hard and reinvent themselves. Necessity ultimately became the mother of invention and these companies began to develop smart business models that thrived as the best were faltering. As mentioned earlier, Arch Pharmalabs became a `12 billion entity by manufacturing just three API's. Similarly, there is another company that is now doing very well and has a turnover exceeding `6.5 billion. Unimark Remedies was founded in 1983. Till 1995 its primary business came from marketing drugs of large pharma and chemical companies. Soon, the company realised that after being in the industry for almost 12 years, its team knew which products were selling like hot cakes in the market. With this assumption, the company took the plunge into the API manufacturing segment. After tasting success as an API manufacturer, Unimark Remedies decided to tie up with competitors by asking them to manufacture products that Unimark could no longer do on a large scale. In turn, Unimark started selling such APIs based on a profit sharing agreement. Unimark has so far filed for 12 patents and is doing very well.

Another success story is that of Acharya Chemicals. This outfit was founded in 1974 with an initial capital investment of `40,000. It started its production with a few products like Benzyl Benzoate IP and Methyl Nicotinate IP/BP. The plant set up was with two 50 ltr. and 20 ltrs distillation assemblies along with 1 centrifuge, 3 vacuum pumps and 1 water ejector. In its pursuit to innovate the company came up with an R&D lab in 1980. Despite the small size, Acharya Chemicals had huge ambitions. Although it operated in the API and clinical trial domain, it soon realised that the future lay in contract manufacturing. After a tie up with a giant Swiss pharmaceutical company till 1999, it realised that its core strength was in Chemistry. Starting with a capital of `40,000 today the company has a turnover ranging between Rs.300 million and a cumulative production capacity of around 200TPM of Chemical Entities. Aurobindo Pharma, which had humble beginnings in 1986, has now become an inspiration for many pharma companies. Bulk actives are Aurobindo’s core area of competence. It has become an internationally reputed name. In 2009, Pfizer entered into a deal with Aurobindo Pharma for contract manufacturing of 39 drugs. Since 1986, Aurobindo has invested significant resources in creating infrastructure for APIs and the results are showing. As of August 2010, Aurobindo Pharma expects its revenues from US to go upto $350 million as compared to the $200 million last year. The crux was that these players carefully chose their areas of competence and pursued them with unbridled aggression.


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posted by Editorial at 2:33 PM

Friday, August 24, 2012

“Our concern was – How do we manage our rate of debt?”

In the midst of the general concern and uncertainty in the market regarding the realty sector and companies like DLF, the company’s Group Executive Director Rajeev Talwar is optimistic of a more evolved market & consistent supply in the coming years. In this exclusive with virat bahri of B&E, Talwar talks about DLF’s downturn adjustments and future vision. Some excerpts

B&E: Market reports are highlighting the fact that DLF missed its targets for FY 2009-10. What is your view of the company’s performance?
Rajeev Talwar (RT): This question (by analysts) is unreasonable on two grounds. Firstly, is it due to lack of knowledge about the recession in the developed economies, including Japan, and downturn and meltdown in the other economies? That should answer one half of your question – why the targets were missed. Secondly, real estate is a hugely complex and intricate business. People talk at times of a price bubble in booming economies. There was no price bubble (in India) at all. There was a mere gap between demand and supply. It may take a gestation period of less than an year for a particular processed product in the manufacturing sector; in this sector it takes very often 4-5 years between conception to delivery. Whenever economies boom and there is no regular supply chain, there is bound to be a price rise due to shortage of housing or office space. If the economy grows at 8%, then the CAGR of real estate sector should be around 20%. That is the reason for demand-supply gap and increase in prices and speculators coming in. On the other side, in a downturn, people’s jobs are affected, emotional security is affected; there is an immediate drop in interest to acquire. Downturn and slide is much greater in the real estate sector. We were certain that there is bound to be a tight leash on targets of sales and revenues in downturn. But expenditure targets have to be exceeded, since that is the time when you have to concentrate and focus on execution and delivery. Construction in the last 1 year, which had dropped down from peak levels of 65-70 million sq. ft. (msf), a large percentage of construction in the private sector to 40-41 msf has picked up again to around 56 msf. So we are focusing on execution and in better times to come they would reflect better deliveries and constant supply.

B&E: How do you see the demand scenario picking up now?
RT: A good economy which is coasting along, hopefully a good monsoon, better crops, lower inflation and pressure on RBI reduced to hike up rates and possibly to go back to a low interest economy regime – if that happens, one sees a growing confidence from consumers and strongest demand from the residential sector. A good economy will also reflect that the corporate sector is getting stronger, which will reflect itself in increased demand for office space. In retail segment, while last year’s festive season was good, a good period of economic growth will shore up confidence among people and if there is a good festive season this year, the next fiscal should see some growth signs back in the retail segment.

B&E: What potential does DLF see in middle income/affordable housing?
RT: Due to our legacy, it is high income, because our locations and plots are extremely valuable. We are taking projects and seeing to it that we launch at the most competitive levels in order to make them value for money housing. Revenue growth should come. Government talks about Rs.10 lakh and above as mid-income. In tier 1 and super metro cities, it should be probably above Rs.50 lakh. Land here is usually controlled by government or it becomes very valuable if it is in private hands too.

Therefore your cost of acquisition becomes high. It therefore becomes impossible to give you what is normally called affordable housing or middle income housing below Rs.20 lakh. But Rs.10-20 lakh homes, even below, will be available for the poor. If housing costs Rs.50-75 lakh as mid-income housing in the super metros; in a tier 1 city it will cost Rs.45-60 lakh and going down to a tier 3-4 cities, you will get good homes at even less than Rs.20 lakhs. Since we are not in those cities and towns, I don’t think it will be possible for DLF. Our value housing even below Rs.5 lakh and Rs.10 lakh will be adjunct to the service category of our mid-income and high income group housing in super metros & tier 1 towns. Due to our name, quality, & location in the heart of the town, we tend to be in the upper end, but certainly, we also provide housing for the economically weaker section. Those will also be coming & will be costing anywhere between Rs.5-20 lakh depending on their proximity to premium locations.

B&E: Downturn increased debt levels significantly. How have you managed them over the past year?
RT: Some time after 9/11 in the US, everyone thought there was no end to the upswing. When it did come, it caught everyone by surprise. They weren’t unmanageable levels of debt for us but the only concern was how do you reduce the rate and increase the tenure. There was so much commercial paper in the market prior to that. Anywhere from 120-180 days seemed to be a long cycle till the time we realized that a good long cycle commercial paper or debt is of a period from 3-5-7-9 years. The second lesson was to reduce the interest rate. Our debt from under 1 year has increased to 3-5 years in tenure and also has portions of 7-9 years. At the same time, from 11.98% interest level, we have already come down to 10.5%. In real estate, people ask whether your debt levels are high or going higher. The fact is that there is so much of embedded value in your assets that debt is not something that you are normally so worried about, till the time a company is so highly leveraged that it cannot meet its development requirements (front flow) or its overhead costs for its normal cash flow. For us, thanks to various policies before and therefore very far-sighted policies even to take care in a downturn where you have a steady rental inflow of income, we have been through that much more easily. It’s already established that whatever overhead developmental costs or interest costs we have are well met from our usual leasing and launch businesses; so DLF doesn’t face pressures that some other overleveraged companies may face.




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posted by Editorial at 4:42 PM

Wednesday, August 22, 2012

US POLITICS: AFRICAN AMERICANS

African Americans still struggle

Recently, Rep. Artur Davis lost his bid to be the first black governor of Alabama, which was the latest in a series of defeats for African American politicians for state wide offices this year. More shockingly, he lost by a 62% to 38% margin, that too, after being the favourite in exit polls held in the run up to the election.

It would be too simplistic to consider this as a race problem in itself. Davis in fact lost in counties with a majority of African Americans, and was criticised for not reaching out to his own community and its power brokers. Moreover, seats are less at the top and there are fewer black candidates who are in contention for the same. Also, Obama had the ability to rally a large portion of America behind him. Few politicians of his ilk seem to possess that calibre today.


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posted by Editorial at 3:58 PM

Monday, August 13, 2012

“We will enter the interactive space”

And if you are thinking about the rationale behind the move, this is what Amit considers a need!

B&E: Among all businesses that you have handled so far which one do you think you enjoyed the most?
AG: I enjoyed all of them. In fact, I am very much part of all of them, but from day to day perspective I run Playwin and as such is more involved with it. Playwin keeps me on my toes constantly. It’s a very dynamic business as it keeps on changing quickly and drastically, both from the consumer perspective as well as the regulatory perspective. Thus, I have to keep a close watch on things around.

B&E: One particular business area that you would like to handle and get involved intensively in the near future?
AG: I think for us as a group there is lot to be planned in the coming years. Currently, there are few areas where we are not strong or are not present, for instance, interactive space. This is one area where we would like to strengthen going forward and I think that will happen soon. In fact, this is something in which I want to get involved personally. We’re working on it and a couple of announcements are in the pipeline. May be in the next 6-9 months you might see a lot of things happening in this regard.

B&E: What kind of growth is expected from Playwin in the next one year?
AG: Playwin business has grown rapidly over the past seven years. But currently there are a lot of changes happening on the regulatory sides as the government is working on to put together a regulatory framework for this industry. So, once we get little more clarity on what’s happening there, we would be in a position to really figure out things. Otherwise, as of today, our growth rate has come down to a single-digit number, which, unless there are some drastic policy changes, is not going to change in the near future.


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posted by Editorial at 12:33 PM