September 7, 2009

Succession planning in India – Corporate and Political

Since the era of LPG (Liberalization, Privatization and Globalization) has set in India and the Indian masses both in its hinter and heartlands have been exposed to the Western world, a direct or indirect comparison has ran between the West and the East spanning a plethora of issues ranging from day to day life (like why doesn’t India use dishwashers) to more long ranging ones (could brain drain be reversed). Among these, the issue of succession planning in Indian organizations has got most prominence from time to time, the issue has again become media’s darling with the sudden and tragic death of Y. S. R. Reddy and the talks of Y. S. J. Reddy to be his heir apparent. At this stage, let us try and trace the roots of what differs in terms of succession planning between these two parts of the world.
Cultural Ethos and way of life
Let us compare an average life of an Indian with a Western male, an Indian more or less shall follow the four ashrams of the Vedas - till about 25 he shall pursue his education, till about 45 or 50 (in case of lower and middle classes this age spans at times up to 60) he shall spend his life working, then till about 70 he shall worry about getting his off springs married and settled and then he shall live his remaining retired life.
While a westerner will be on his own by 16 or 18, would have completed his high school by then. He will then separate from his parents to find and mark his own identity. By the time he turns 30, he would have more or less scripted his coming life.
The common thing between these two lives is a search for a home to stay in. For an Indian it is a 2 bedroom flat for a westerner an apartment.
Note the stark difference - getting a child settled (i.e. to make sure he gets a job and a spouse) is more or less a responsibility of an Indian parent but in US that is not the case. These are primarily individual’s decision with a little influence of his family. – This is the root cause of why we see a son as an heir apparent to his father unlike in the west.
Add to this the caste system, the joint families, a society that does not freely permit (forget about encourage) innovation and free style and we have – ‘like father like son’. Viola!
Put in other words, taking a parent’s role is an ‘option’ for a child in west and an ‘implication’ for a child in east.
But then what about meritocracy and professionalism
An often quoted criticism regarding Indian style of succession planning is that it forsakes meritocracy and professionalism. Let us examine this argument and see if it has got merits.
On the face of it, we see that many a bright professional managers see a glass ceiling in their organization because they cannot reach beyond a certain point in the organization, same applies to Indian politics, a congress leader as talented as Priyaranjandas Munshi or Shashi Tharoor or Jyotiraditya Scindia cannot fathom getting a top job at Congress.
Also, it is not the case that the professionally ran Western business has always prospered, not all the companies which formed a part of S & P 500 in 1975 are a part of S & P 500 in 2009. Reason – the multi dimensional nature of environment in which activities like politics and business are carried out, in which succession planning and leadership are but just one dimension of the environment.
Though I have not researched, but it may also turn out that professional management is no better at running an enterprise as family management.
Now, look at a few examples of Indian polity and business where professionalism and grooming through the cadre is considered a big advantage against a family back drop.
Sudhir Maheshwari (Chief of Staff at Arcelor Mittal) plays as critical a role as Laksmi Mittal himself, Bikham Agarwal (Executive Vice President (Finance)) who joined Laksmi Mittal back in his first plant at Indonesia is as good and as important as Aditya Mittal. All of ADAG and RIL’s ventures are manned by professional managers (often poached from competitors) and not family kins.
Narendra Modi was a General Secretary with BJP before becoming the Chief Minister of Gujarat (without a family back drop) Manmohan Singh is an academician first and a PM later (and is nowhere near to a politician)!

September 5, 2009

Indian Art Market?

Indian art has been around for over 5,000 years — a complicated and lively reflection of the country’s countless historical, religious and political developments.

Now as a stock market, the respondents are talking about rebound, boom and bust in the Rs. 2000 crore Indian art market, with a new lot of young and first time buyers, revival in the purchase of high-end art by collectors and the entry of Korean and Chinese buyers and investors in the market. Instead of looking it as a collection out of passion excellence and fantasy for creativity, now all the galleries in the sumit are looked as more of an investment option.

When stock markets experience a downswing, investors search for more profitable alternatives, and alternative assets that improve the risk-sdjusted return on their portfolios. But indian art index has a (–)ve market beta and 0 correlation with the S&P 500, another intersting investment for a well diversified portfolio.

Did we ever try to probe into reasons for the decline in Confidence levels in the once-booming market for Indian art? (Dropped by 63% since October) Is it lack of awareness or is it the trickle down effect of recession in the West? Moreover the problems that auction house are facing are high holding cost of inventory. And some galleries cannot liquidate their inventories, as they have used their artworks as collateral to borrow money from banks for expansion. It is yet to be seen how long would it take for the Indian art market to rebound, go for global expansion in full phase and arouse an interest of more foreign investors? How justified are the art collectors, when they claim that because of fall in Indian art market, it has come down to realistic levels and that makes buying easier now than a few months ago when one had to pay inflated prices?

We think that there is a need to promote art education, museums should be more active and discussions and seminars should be held.

What do you think taking into consideration the historical background of Indian art market and boom and bust and expected boom in Indian art market.

Share your viewpoint!

September 4, 2009

Lost in the woods of Finance- think how about this one???

Just look at the graph the history of 06-07 is set to be repeated in 2010 Mar-May Era.Think about the same scenario the big bull is set to return next year but before that investors will have the pain. Similar patterns on the chart Metals throbbing to take one large leap. Before it crashes out

September 2, 2009

Current Decision on Sugar a thumbs up for the cos?

We recall a statement from a fund manager. "Our fund did really well when others had gone down by 90% of their wealth, we managed to safe guard 40% of it y-o-y: - Simply it means they lost their NAV by 60% but in order to present a rosy piture to the investors they changed the perspective.Perception plays the most vital part in today's world

People tend to overlook their own common sense but try to borrow others idea. This is where people get stuck. Indian Investors are prone to this habit. People who made smart money are the ones who invested at the correct price or the one's who used simple common sense. I guess the second group made larger amount. Friends re visit the development on Sugar stocks and discuss what worse is stored from here or theoretically unsystemati lies in the sector. The sweetness is here to stay for quite some time but imagine what are the negatives that can make the sweet story go bitter.

Keep discussing and posting the ideas on our mail.

September 1, 2009

Effect on Courier Firms

The Rs. 8000 crore express courier services, industry with 4500 odd courier companies has been forced to drop pace, with the slowdown in retail finance activities.

The cause is not too difficult to interpret. The BFSI segment gave the industry business such as delivering welcome kits, debit and credit cards, contract notes, policy documents, dividend warrants, annual reports and mutual fund statements. But credit card volumes have fallen 20% in recent times, thanks to credit aversion among banks. Things are no better with ULIP or direct equity investment by retail investors. As such, express courier market leader Blue Dart and Express It, which used to derive 25% and 90% of their business respectively from the BFSI sector, are hit to a larger extent.

Even pricing is a crucial factor in this industry. The low-margin, high-volume business largely means that economy of scale is very important to survive in this business. Also in the express courier segment, having a broader national presence helps.

Festive deliveries, such as DHL’s Rakhi Express for delivering rakhis during the rcently concluded festival, haleem during the Ramzan period by Gati courier offer as occassional booster to business. And recently Blue Dart has initiated Money Back Guarantee plans like Domestic Priority1030 and Dart Apex 1200 which ensures that documents and small shipments are delivered the next business day to selected regions at 10:30 a.m. and 12:00 p.m., or else the money would be refunded. Airline companies like Deccan is also toying with the idea of Cargo and Express Logistics Solutions within the country.

With their ability to track individuals and their addresses, credit collection on behalf of banks for a fee, and KYC forms are newer areas in which they could venture out. Yet the future is not bleak. As the government plans for financial inclusion, bank accounts are expected to swell to 600 million, up from 300 million. With banks moving towards automation and setting up more ATMs, debit cards show the promise of providing a lot more business.

But there is another risk from automation and digitalization, as in the near future the complete financial kit could be downloaded from the internet itself. We think that the courier companies need to revamp their strategy and need to work in close knit with packers and movers.

Share your views!

August 31, 2009

Uncontrollabe Natural Factors or Drought of Ideas or Lack of Management Mechanism??

The dredge from exports and foreign investment may have moderated, looking at 6.1% GDP growth in 1st quarter but the drought has emerged as a new major challenge in India. As the primary industry is hurt, the rest of the production chain will experience the flow-on effects. For instance, a sharp decline in farm output is expected to reduce demand for transport and storage services, and the supply for exports could also drop sharply. It would have a cascading effect onto hydro electric generation, ground water levels, inflation, automobile sector, fishery industry recharging of reserviors and many more allied industries. Even gold import has decreased by 90% as high prices prevented the people and drought further acting as a spoilsport.

Drought has even emerged as another terrorist for heaven of India, J&K which has losses of over Rs. 400 crore due to it. Agriculture production is likely to fall by 14% - the third highest fall in foodgrain production since 1964-65 and expected to impact the GDP by around 60-100 basis point.

The state governments are demanding that the limit of 100 days assured employment under the NREGP be extended to 200 days as a drought-relief measure. 20% cut in salary by Mumbai office bearers of Congress Working Committee in the face of drought is presumed to act as a panacea. Governmet promised that every BPL family would be entitled, by law, to 25 kg of rice or wheat per month at Rs 3 per kg. Let’s learn some facts that are government really serious enough?

The Maharashtra government has sealed its ambitious plan to develop a Rs. 300 crore statue, tallest in the world once it is completed to honour the state's biggest hero, Chhatrapati Shivaji. Is it really justified when the state is grappling with huge debt and drought in 2/3 of its area? And where dozens of impoverished farmers struggling with debt and poor rainfall have killed themselves in southern India in recent weeks, leaving behind families plunged even further into poverty. And how can we forget the Vidharba mishap? The mockery is that government establishment is still debating on actual number of people living below poverty line. The previous rounds of fiscal stimulus are now tickling down the economy, providing a notable boost to activity, but what about the rising fiscal deicit? “Kahin Barish to Kahin Sookha”. While Western UP is relling under severe drought but Eartern UP is under floods. But these floods are not due to rains but are caused due to excessive flow of water from Nepal. Now what would you call it: unforseen natural calamities or …?

Wih drought turning into reality, and speculation and hoarding spiralling food prices, the agriculture ministry is planning to amend the Prevention of Black Marketing and Maintenance of Supplies of Essentia Commodities Act (1980) such that centre can take action against hoarders of food grains directly. But that amounts to treating the symptom than the disease as the government is yet to come up with a comprehensive drought management mechanism.

What shall the government do further to mitigate the adverse impact arising from climatic changes? (Food for thought: Establishment of, foodgrain banks, village seed banks, water banks, feed and fodder banks, and village knowledge centres, ….. and what else!)

As the government faces a sea of questions, the nation thirstly awaits solutions.

Share your views!

August 27, 2009

Talent: Sprinting or going for a sell-off

Have you ever thought of a business model where you ask people to pay 20,000 and get trained. Than you tie up with your friends company or you probably know someone put the crowd for three month internship where you recieve 7000 stipend per person you send. And than you ask the company to kickout 40% of the people so that you can send the next lot. Many companies have started this business model where HR and the person ties up.

Friends an appeal just do not fall into this trap. Also never send any money/draft to a person who states that he belongs to so and so company if you send a draft to us you will get a call and than we will return your money. Indian law does not allow such provision where companies charges you for conductiong your intrview.

So beware of this trap and do not forget to spread the same. If you come across any such companies name please mail it to your friends and also report it to Police/Ministry. Write to us @