Showing posts with label IIPM FACULTY. Show all posts
Showing posts with label IIPM FACULTY. Show all posts

Monday, September 10, 2012

Missing the Multiplier

Independent India has seen the MSME sector grow by leaps and bounds and is proving to be the most promising and reliable sector for job creation and poverty alleviation in India. Despite an elaborate and dynamic policy framework, the road to the next level for MSMEs continues to be hindered largely due to the lack of adequate and timely credit.

The Micro, Small and Medium Enterprises (MSME) sector is widely considered to be the engine of the Indian economy. Constituting over 80% of the total number of industrial enterprises, it serves as the backbone of the nation’s industrial development. However, since independence, it has been suffering from some fundamental problems (poor credit availability, low level of technology, less skilled manpower, low production capacity and others), which have been the major roadblocks in its endeavour to scale up.

Globally considered as the driver of all economies (developed & developing) and a medium for promoting equitable development, SMEs in India contribute significantly to the manufacturing output, employment and exports of the country. According to the 4th All India Census by GoI, Ministry of MSME, it is estimated that in terms of value, the sector contributes 45% to manufacturing output and 40% to total exports. The sector is an umbrella for around 30 million units (both registered and unregistered in both manufacturing and service enterprises) and is the biggest employment provider after agriculture; providing employment to 59 million people (2006-07), which is supposed to grow to around 70 million by 2010. Producing more than 8000 products for national and international markets, SMEs’ contribution to India’s GDP has risen three-folds from 6.04% in 2000-2001 to 17% in 2009-10, and is expected to reach 22% by 2012.

Of all the problems faced by MSMEs, non-availability of timely and adequate credit at reasonable interest rates is the most significant. Despite its commendable contribution to the nation’s economy, SMEs do not get the required support from the concerned government departments, banks, financial institutions and corporates, which hampers its competitiveness in the national and international markets. One of the major causes for low availability of bank finance is the high risk perception of the banks in lending to SMEs and consequent insistence on collaterals (despite strict RBI guidelines not to insist upon collateral against a loan), which are not easily available with these enterprises. Manas Kumar Nag, CGM-SME, SBI, adds another perspective to the problem, “Generally, SMEs coming for loans are not aware of their financial position, which leads to lack of transparency and hesitation from our side.” The problem is most acute for micro enterprises and first generation entrepreneurs requiring small loans. Let us look at the options that are available to them.

In the year 2000, the Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched by the Government of India to provide collateral-free credit and strengthen the funding system to facilitate smooth flow of credit to the SME sector. To operationalise the scheme, GoI and Small Industries Development Bank of India (SIDBI) jointly set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Both the existing and the new enterprises were eligible to be covered under the scheme. Under this scheme, the lender should give importance to project viability and the borrower should avail the credit facility purely on the primary security of the assets financed. The Credit Guarantee Scheme (CGS) reassures the lender that, in case of any default by the unit that availed collateral free credit facilities, the Guarantee Trust would reimburse the loss incurred by the lender up to 80 to 85% of the credit facility.


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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Tuesday, September 04, 2012

Much ado about the ‘General’ @ Motors!

An IPO in the pipeline means that the US government could be well on its way to make a swift exit from running GM. This portends positive tidings for GM, which is recovering on the numbers. But a far more daunting challenge is looming up on the horizon. By Pawan Chabra

As General Motors (GM) filed for the Chapter 11 reorganisation process in the Manhattan New York federal bankruptcy court on the June 1st, 2009, the world saw another giant on its knees (literally!) after the collapse of Lehman Brothers in September 2008.

The ‘GM way’ was way off mark, and it has taken its own toll in no time for the Detroit giant; with the Japanese onslaught led by Toyota making matters worse. In fact, the demand fall experienced by the company was the worst in its history since World War 2. However, understanding the importance of the automobile industry and GM in particular for American pride, America Inc. and American jobs, the Barack Obama Administration decided not to take the Lehman Brothers way and instead keep GM alive by picking up a 60% stake in return for a significant additional oxygen infusion of about $30 billion. As the American president said on the GM restructuring initiative last year, “Our goal is to get GM back on its feet, take a hands-off approach, and get out quickly.”

The upcoming IPO of the company is a right step in the same direction – getting out. Government intervention surely saved America’s largest automaker and more importantly, millions of jobs associated with it. Undoubtedly, GM has made a speedy recovery going against what was expected by many industry experts at the outset. For the uninitiated, the company filed a profit of $2.2 billion in the first half of 2010 rather than guzzling it at a rate of $1 billion a month, the way it had been doing in the pre-bankruptcy period. As the US Treasury is reportedly looking at shedding close to 20% of its stake in the company, the fact of the matter is – while it will give investors a chance to complain by choice (unlike the earlier case where the US government used the taxpayer’s money to fund GM’s bankruptcy), the Government will continue to hold a substantial share in the company for the short-run, at least. But market watchers are of a view that government will like to move out as soon as possible.

Meanwhile, the strategy to make the China operations as a launching pad for India and other emerging markets has done wonders in no time. Apart from the fact that GM China emerged as the biggest foreign car manufacturer in the country last year, the only 12-year-old subsidiary of the company is very close to overtaking US in sales volumes. For the record, GM sold 1.83 million vehicles in China in 2009 with a whopping rise of more than 67% over 2008, while it sold 2.07 million vehicles in 2009 in US. No wonder, it has chosen Shanghai as the headquarters of its international operations.



 
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Saturday, September 01, 2012

MINING ITS WAY AHEAD

Despite a fall in profits in the last fiscal, nmdc is still among the top 20 profit makers in the country. But will the honeymoon continue for the mining giant? Deepak Ranjan Patra finds out...

It operates in the remotest of the areas in the country, surrounded and obstructed by Naxals and struggling with problems that the big bosses of corporate India can hardly imagine. But still, it gives its competitors a run for their money. Backed by such undying zeal, NMDC is one of the best mining companies in the country and it ranks 18 in the B&E Power 100 list, despite having a year that can be called disastrous for the company.

On the face of it, the results announced by NMDC for the last financial year may seem deceptive for many as profits for the particular fiscal year stood at `34.47 billion, down by over 21% from `43.72 reported in the previous year. But then, the fall in profits resulted more due to external disturbances that caused operational roadblocks for NMDC. As Kumar Raghavan, Executive Director (L & CC), NMDC, says, “In the beginning of the financial year (May, 2009), the Essar pipeline was blasted by the Maoists at several places, placing NMDC under great strain on evacuation of iron ore.” The kind of pressure that was created by the event could be understood from the very fact that the particular pipeline was one of the evacuation means for nearly one-third iron ore for the company’s largest projects at Bailadila, Chhatisgarh. Though the company tried its best to run the show smoothly, the event resulted in a drop of around 12% in the company’s iron ore sales to 25 million tonnes from 28.52 million tonnes in the previous fiscal.

However, the management of NMDC showed extreme character to brush aside the external hurdles during the year resulting in one of the best quarterly results in the company’s history during this period of the current fiscal. NMDC’s Q1 profit increased by a mind-boggling 94% to `15.04 billion from `7.74 billion in the year-ago period. Sighting significant rise in domestic sales as the key reason, Rana Som, CMD, NMDC said, “Improved physical performance coupled with higher prices, transparent pricing systems and improvement in evacuation resulted in the company posting a high net profit in the first quarter.”

Another reason for its success in the recent years has been NMDC’s tremendous ability to operate at the lower end of the cost curve. As explained by Paresh Jain, Analyst, Angel Securities, “At $7.2 per tonne, NMDC’s operating cost is one of the lowest in the global iron ore industry. The major reason for such low costs is the proximity of the company’s mines to ports and railways.” Moreover, to strengthen the advantage further, NMDC is now planning to build a 10 million tonne slurry pipeline from its Bacheli project to the Vizag port, which, as expected by Paresh, would help the mining company maintain its margins.



 
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Friday, August 31, 2012

TO EARN PROFITS, ATTRACT INVESTORS!

Global Investment Guru Jim Rogers, who Co-Founded the Quantum Fund along with George Soros (The Fund Returned 4,200% in ten years, as compared to the S&P 500’s 47% in the same duration), believes that commodities are a strong investment avenue for indian firms, and that the govt. should cooperate to make india inc. more profitable

When the economy gets better after the ongoing recovery mode, commodities will go up. And even if it doesn’t get better, commodities will remain the hot favourite, as governments would press to print more currency and whenever the government has done that in the past, real asset prices tend to go up, be it rice, wheat or natural gas. In the present situation, a credible investment and productive capacity for 25 or 30 years in the commodity field will be excellent whether the economies get better or they don’t. Most of the commodities tend to be fruitful but for the near future that is 2 to 3 years, agriculture will be a golden call.

With the recent mergers and acquisitions (M&As) activity heating up the Indian market, like any other economy, Indians are shelling-out a little extra for the target company. But these M&As are of no sense as they normally destroy value. Forget about making-profits with these deals. If an Indian company can, it should rather invest in the stock market over M&As as there is a lot of liquidity in the Indian market and a huge potential in stocks. So stocks are the right way to go if you want to make profits.

Talking about the comparison between India and China, when returns are considered, the Chinese market will outperform India in the short-term, but with India allowing foreigners to invest in the Indian market, India will be a much better market in comparison to China in the long-term. But considering the manner in which the government behaves and acts on important economic and corporate decisions at present, I am not really sure that the government in India actually means good. But if it does, India is really the place of more interest. Hence, for the time being, China is the preferred destination and Chinese companies would be my desired targets.

Talking about profit-making in the farm & agricultural sector in India, at present, a lot has to change. There has to be definite reforms in different sectors in India to unlock their potential specifically in agriculture, where India can be a leader in the global economy, as India has the soil, weather & location. Unfortunately, the government is ruining agriculture with all kinds of restrictions and despite thousands of Indian farmers committing suicide every year, the government is allowing the restrictions to develop. A farmer in India cannot have more than 5 hectares of land and these Indian farmers can never compete with their counterparts sitting in Australia and America. A farmer in India has the potential to own 10,000 hectares. The Indian government should open up the agricultural sector, so that it becomes much more competitive.


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Thursday, August 30, 2012

THE CAPTAIN OF THE SOUTH KOREAN SHIP

AFTER BEING THE CLEAR #2 IN THE INDIAN PASSENGER VEHICLE SEGMENT FOR OVER 11 YEARS, THE TIDE SEEMS TO BE TURNING IN FAVOUR OF ITS CLOSEST COMPETITORS. CAN H. W. PARK, THE CAPTAIN OF THE SOUTH KOREAN SHIP, STEER IT CLEAR OF THE MANY ICEBERGS ON THE WAY? BY PAWAN CHABRA

The market leader has even announced a plan to stage a comeback in the Indian market, starting with the launch of the Alto K10, coupled with five CNG models (of the SX4, the EECO, the WagonR, the Alto and the Estilo models), and the automatic A-Star. But even Shashank Srivastava, CGM – Marketing, Maruti Suzuki India, confesses, “A lot depends on how many units of the Nano does Tata Motors plan to sell in the Indian market.”

The issue of capacity crunch is also keeping many Hyundai investors on tenterhooks. Currently, its Sriperumbudur (Chennai) plant, with an annual manufacturing capacity of 600,000 units, is operating at full capacity. But as insiders quote, the auto major has an option of stretching it to 670,000, by modifying the assembly lines. The worrying fact is – Hyundai has not revealed plans to do that. Hyundai’s Saxena says, “If there is more demand for our products, we will possibly look into it. But I don’t think there will be a need for capacity expansion this year, perhaps not even in 2011.” But despite this, Park has good news for his investors.

Hyundai will land some hard punches on its competitors with the launch of its small car (reportedly scheduled for 2012), that will be positioned in the A2 minus segment, which would then be in direct competition with the Alto. The product is expected to bring high volumes to the company, which will then help it claw back market share in the domestic arena. Park reveals, “We are in the development stage of the model and it is going very well. However, I can’t comment on the time frame of the launch in the Indian market,” says Park. To this, Saxena adds, “While our small car will not compete with the Nano, when we are looking at such a model, we are looking at high numbers...”

Most likely, even though Tata Motors will again displace Hyundai as the #2 player for some more quarters to come, one cannot deny that Park still leads one of Hyundai’s most profitable overseas subsidiaries, which is also the #1 exporter of passenger cars from India, with exports of 285,658 units in FY2009-10 (64% market share in exports, while Maruti and Tata command a much lower 33.1% & 1.5% respectively). In fact, production figures prove how after Hyundai China (production volume of 570,309 units in 2009), the Indian subsidiary, with an output of 559,880 units in 2009, is the most important for the Chaebol.

Whether or not Park manages to retain the silver sceptre, the domestic market will remain key to Hyundai’s future. With the domestic market size growing by the day, fragmentation is inevitable. He has to focus on profitable volumes (and not ranks), with the key adjective being ‘profitable’ (given that currently, for every Nano that Tata Motors manufactures, it makes a loss due to capex depreciations). Park’s job as a CEO is to keep the volumes high and profits thick. For now, he is doing that. Tata Motors may focus hard on the Nano and critics may write volumes about how the product will ensure a second spot for Tata Motors, but experts opine that such low-priced products with wafer-thin margins, can hardly give companies a sustainable lead. There will be much more botheration for Park over the next couple of years in the form of Bajaj-Renault’s ultra low-cost car, FIAT’s model below the Punto and Volkswagen’s small car. But he needs to remember that increasing capacity is key, focusing on the Indian market with good margin products is important and keeping his investors happy (with profits) is religion. And for the sake of this religion, Park should not fret over giving away the runners-up trophy.


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Wednesday, August 29, 2012

Style Police catches Sonam!

Sonam Kapoor’s co-star in Saawariya, Ranbir Kapoor, consciously toyed with the imagination of women as he danced with just his towel on, but Sonam herself recently came close to some inadvertent skin-show. At a promotional event organised for her upcoming film Aisha, Sonam nearly had a wardrobe malfunction incident, when it was noticed that she was having a rather tough time keeping her pants on. For someone who has been working very hard on being a style diva, such an event would’ve been disastrous!


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Tuesday, August 21, 2012

Losing power in transit

T&D losses and power theft have to be addressed in a flagrantly strict manner – arrest the power stealers and publicise their conviction

In April first week, Delhi Chief Minister Sheila Dikshit promised that there would be “no power cuts in the capital this summer.” This promise held well for one week in some localities. In other states, the less said about power the better.

As per a recent report, the Planning Commission has revealed that the combined losses of public sector discoms, which were to the tune of Rs.40,000 crores in 2009-10, could swell up to a shocking Rs.68,000 crores in the current financial year. It has been widely seen that the reason for such huge losses is because of faulty T&D (transmission and distribution) systems. The fact is that more than one-third of electricity supplied gets lost in T&D and a similar substantial part is stolen. Presently, the T&D losses can go up to 40-50% in many states; compared with China where the figure is less than 3%. India’s T&D losses are the highest in the world as per a report by WRI.


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Monday, August 20, 2012

Big, fat, hairy & audacious...

Quite a few global IT giants have proved that it takes just one big killer product or application to enter the Fortune 500 league. Finacle was supposed to be that for Infosys! Today, it contributes just about 4% to Infosys’ revenues. What went wrong? by Virat Bahri

The reputation of a thousand years could be built in one hour, as per an old Japanese proverb. Or one product, when you look carefully at the leaders of the technology industry today. Consider this: Microsoft for Windows, Google for search engine, Oracle for its database application, Apple for its iPod (whose success led to their latest killer product – the iPhone) and SAP for its SAP ERP software.

If one analyses the contribution of these iconic products to the revenues of these companies, one can conclude that while a diversified product portfolio is important, one big, formidable and audacious play is all a company needs to move from being good to being great.

Apple to apple comparisons (pun unintended) with Infosys may be a tough call, since the company has charted a different growth path. But when the company’s core banking product Finacle (launched in 2000) begin to gather rave reviews in the Indian, and the global banking space, many speculated that this was the killer application that would take Infosys into the league of greats.

If you measure Finacle by that yardstick, you are liable to be disappointed; since in revenue terms, the product’s contribution to Infosys’ total revenues is just around 4% for FY 2009-10! So it is not Google Search or Microsoft Windows. But a combination of vision and a certain degree of good fortune have been instrumental in Finacle reaching a turnover of $208 million in 2010 from $48.6 million in 2005, a CAGR of 33.74%. Meanwhile Infosys’ revenues are $4.804 billion for the year ending March 2010, and growing at a CAGR of around 23.7% over the past four years. But amidst the growing clutter, can Finacle retain its growth trajectory for the long term. B&E engaged in an exclusive interaction with Infosys Finacle global head Haragopal M., who discussed Finacle’s evolution and future ambitions.

Launched in 2000, Finacle was a right product at the right time for the Indian market at least. That was because Indian banks did not have any integrated platform at that time, and there was a strong need for providing anytime anywhere banking. This was in contrast with the developed world, where legacy systems were in place, which is why the core banking transformation started in Asia Pacific. That has provided Indian banks with an advantage as well, since their efficiencies have gone up quite phenomenally. Hargopal cites the transformation that core banking solutions have brought for Indian banks with some figures, “Average bank spending per capita of customer is around $76 in global banks, whereas a bank in India spends around $11-14. Indian GDP increased by 184% from 2000-2010, bank deposits rose by around 500%, lending increased by about 300-350%, but scale of banking staff has gone up by a mere 5%.”

Finacle has positioned itself on the propositions of scalability, richness of its functional software, flexibility, efficiency and execution capability. The company upgraded itself very quickly from being an ISV to a one stop consulting partner for all the needs of the clients. The major challenge was to integrate the system, piece by piece, even as the client’s regular operations were going on. As Hargopal puts it, “It’s like changing the engine of a Boeing during a transit landing flight!”


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Saturday, August 11, 2012

An ‘objectiveless’ and timid budget

Shortage of a hundred and fifty million rural employment jobs. Shortage of twenty five million urban employment jobs… Additional Rs.1 lakh crore required to replace urban slums… And Rs.10,000 crore required every year for five years to give justice to every Indian by ramping up the judiciary… Another Rs.20,000 crore required every year to make universal primary education a reality and have equality in education opportunities… And additional Rs.10,000 crore required annually to give some basic access to health facilities… Welcome to India. A country where the hospital beds to population ratio is 1:1422, ranked 161 alongside sub-Saharan African countries, against an ideal ratio of 1:333 prescribed by the United Nations. A country with 2.4 million temples but only 1.4 million temples of education i.e. schools… A country with 30 million cases pending in courts, making life hell for the common man who wants justice, because our courts have only 12 judges per million population compared to 120 judges per million in the developed world.

In the middle of such an environment, what’s the role of an annual budget? Is it to maintain status quo or to give the world a robust signal that we are committed to our people – the 45 crore people who earn below $1.25 a day? If the objective is to maintain the status quo, then Pranabda has delivered a perfect budget, as loudly proclaimed by each and every member of the equally objectiveless and visionless industry organisations like FICCI, CII and ASSOCHAM etc. They were too happy that the entire stimulus package had not been withdrawn. As it is, the spokespersons aren’t independent intellectuals. They are timid business men – however rich they might be – scared to ever speak against the government as their businesses are at stake! In most cases, they aren’t even capable of commenting on the budget, such low is their understanding. But they are the people who give the bytes and that’s what next days headlines look like in papers indirectly and directly owned by them and mostly run by sold out editors or editors intellectually incapable of analysing a budget or how it needs to be. So the verdict that they have given is thumbs up!

The man on the street, of course, has no voice. And his concerns are of no importance to politicians or media. Media has no vision to effectively and constantly focus on their cause in order to effect a change. They are more interested in rapes, murders and sex, which keep the readers confined to intellectually dumbed-down dustbins of these media houses.

The truth, however, is that if we were to look at this budget from the perspective of people – those 45 crore that I mentioned above and another 35 crore who are just marginally better off – then this budget is a hoax for them. Allocations to the best scheme of the Sonia government, or for that matter any government in ages – the NREGA scheme – wasn’t even increased enough to cover the inflation! What was done was a mere increase from Rs.39,000 crore to about Rs.41,000 crore. At a point of time when the common man is being made to pay an astoundingly scary Rs.50 per kg for sugar and Rs.100 per kg for dal, when the food inflation has touched horrific proportions and when they were looking up to the budget for some relief, forget immediate relief measures, there were no signs of any long run relief either in this budget. No lip service even to stop hoarding. No measures to stop speculation in food. No recommendation of strict punishment to the hoarders and no announcement of using the country’s huge forex reserves to import basic food necessities to increase supply and reduce prices. In other words, totally shocking. The reference to the aam aadmi went missing. It was clearly a budget for the mango people who live in India and not the aam aadmi who lives in Bharat.

The long-run steps to increase agriculture growth through a new green revolution got a token Rs.400crore. Nothing could have been more hilarious. Now, NBFCs (non banking financial institutions) can open banks and Rahul Bajaj must be very happy with his part of lobbying. But the real requirement of financial inclusion, which reaches a rotting low of less than 200 million people compared to the required 900 million people, still remains unsolved.


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Friday, August 10, 2012

EXTEND TAX HOLIDAY

A NEEDED STEP TO MAKE HOUSING A REALISTIC PROPOSITION

In order to support developers’ efforts of promoting LIG/MIG housing projects, there is an immediate need for a tax holiday under section 80-IB (10) to make LIG/MIG housing a more realistic proposition. For the same, the cut-off date for eligibility should be further extended and tax holiday eligibility, based on project completion condition, should be restored. Even the tax holiday benefit under section 80-IA (4) (iii) is only for industrial parks notified up to March 31, 2011. We suggest that the time limit for notification of industrial parks under the New Industrial Park Scheme 2008 should be extended up to March 2015 as during the slowdown in 2008–2009, there were certain delays in the execution of the projects.

Integrated townships projects should be given incentives at par with infrastructure and single window clearance mechanism should be introduced for such integrated townships to ensure efficient execution. Integrated township projects deserve infrastructure status since while developing integrated townships, developers also develop the infrastructure comprising of roads, lighting, water drainage systems, et al, in and around the township.

Measures such as tax incentives should also be extended to developers who take initiatives for improving social infrastructure through Slum Redevelopment Projects/ Dilapidated Housing / Social Housing. Growth in commercial space during 2007 and 2008 was driven primarily by IT and ITeS sectors. But following the slowdown over the last two years, IT spending, particularly in the BFSI sector, has been hit. Therefore the minimum tenant requirement should be reduced to 10 units. Also, the time limit for notification of industrial parks under the New Industrial Park Scheme 2008 should be extended up to March 2015 and benefits under section 80-IA should be extended to developers.

Further, section 56(2) – section 56(2) of the Act should not be made applicable to the transfer of immovable property. In addition to the existing deduction of up to Rs.100,000, a separate limit up to Rs.200,000 deduction should be permitted for repayment of principal portion of housing loan for self occupied residential property.

Read more....

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