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Transcript of Finxpress december 8 2013
December 8, 2013
Volume 20
FinXpress Special Edition
Continuing from what was started during summer internship , the editorial
team brings forward a special edition of FinXpress geared towards concise
company and financial knowledge to assist the seniors in their final place-
ments and wish them luck . As a result, various on campus visiting companies
have been covered and important insights on various on going financial hap-
penings have been published.
A number of significant events occurred during past few months as well various
companies and their JD’s to help seniors n deciding about the various job op-
portunities offered to them. Do look over the ‘News of the Week’ section for
further noteworthy news. The ‘Market of the Week’ covers the latest trends in
the market this preceding week.
We hope you enjoy the various articles in this edition of FinXpress. We look
forward to your comments, acknowledgements and your criticisms regarding
our online magazine. Do let us know if you want to have any additional section
(s) in our special editions of Finxpress.
Happy Reading!!!
Regards,
The Editorial Team
FinNiche Club
From The Editorial FinXpress
Volume 20
Dec 8, 2013
FinXpress
Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.
FinNiche
December 2013 Page 1
CONTENTS
From The Editorial
ICICI Bank
Wipro
TE Connectivity
Mind Tree
Accenture
HSBC
Gartner
Michelin
Axis Bank
Cognizant
Deloitte
Mu Sigma
In focus
News
Page 2
Companies
ICICI Bank is India's largest private
sector bank with total assets of Rs.
5,367.95 billion (US$ 99 billion) at
March 31, 2013 and profit after tax Rs.
83.25 billion (US$ 1,533 million) for the
year ended March 31, 2013. The Bank
has a network of 3,536 branches and
11,162 ATMs in India, and has a
presence in India and 19 countries in
the form of subsidiaries in the United
Kingdom, Russia and Canada, branches
in United States, Singapore etc.
Main groups in which ICICI is operating
are Retail Banking, Wholesale Banking,
SMEAG, Operations Group, Rural &
Inclusive Banking.
Awards:(2013)
ICIC Bank has been one of the
rec ip ien ts o f the Corporate
Governance Asia Annual Recognition
Awards 2013
ICICI Bank won 'Best Banker -
Efficiency & Profitability' by the
Sunday Standard Best Bankers
Awards 2013.
ICICI Bank won the Asian Banking &
Finance Retail Banking Award 2013
for the Online Banking Initiative of
the Year
ICICI Bank wins awards under the
categories of 'Most Innovative Bank'
and 'Most Innovative use of Multi-
Channel Infrastructure' at the Indian
Bank's Association's BANCON
Innovation Awards 2013.
For the 4th consecutive year, ICICI
Bank won the Celent Model Bank for
the next generation technology
oriented banking solutions.
ICICI Bank was awarded a "Special IT
Innovation Award" by Lenovo -
NASSCOM and CNBC-TV18.
ICICI Bank was the winner of "6th
Loyalty Awards" for My Savings
Rewards.
Key Drivers :
Technology Capital: Investments in
technology, Focus on customer
convenience
Human Capital : Attract the best
talent, Build a meritocracy based
system, Grooming potential leaders
Speed Capital :Strategic agility,
Institutionalize speed of response,
Develop innovative products and
services
Culture & Organisational Structure:
Continuous re-evaluation to meet
business objectives in a flexible
structure
Key Milestones:
2000: ICICI Bank becomes first
Indian bank to list on NYSE; acquires
Bank of Madura
2000: Entry into insurance
2002: Merger of ICICI and ICICI
Bank
2003: Beginning of international
scale-up: first overseas branch in
Singapore
2007: Acquisition of Sangli Bank
2010: Merger with Bank of
Rajasthan
2012: Roll out of twenty five 24x7
Electronic Branches across 18
locations
FinNiche
ICICI BANK
December 2013
Page 3
Companies
Corporate Social Responsibilities:
In the words of KV Kamath, Chairman
of ICICI Bank
“At ICICI group we strive to ensure that
India’s growth is inclusive not just in
the communities it touches but in the
diversity of opportunities it offers”
Elementary Education:
Work to improve the quality of schooling
processes and outcomes in the public
education system in India.
School and teacher education reform
programme in Rajasthan
Chhattisgarh Curriculum and
Textbook Development
Sustainable Livelihood:
India has an urgent need to create
employment opportunities for those
below the poverty line. The Foundation’s
first steps in its sustainable livelihood
initiative will be to strengthen two Rural
Self-Employment Training Institutes
(RSETIs) in Udaipur and Jodhpur, run
by ICICI Bank.
Primary Health:
Goal is to improve the delivery of health
services to remotely located and low-
income individuals and families.
Strengthening Convergent Action for
Reducing Child Under nutrition
Nutrition Security Innovations
Programme
Finance :
Goal is to ensure universal financial
inclusion.
Universal Access to Finance
Effective and Affordable Risk
Management Solutions
Poverty alleviation through ICICI
Group companies
Future Plans:
In the month of Jan 2013
"Under the bank's foreign expansion
plans, we will open branches in
Australia, South Africa and Mauritius.
We have sought Reserve Bank of India's
(RBI) clearance and the same is
awaited," as said by Managing Director
and Chief Executive Officer Chanda
Kochhar at the bank's Annual General
Meeting on Monday. The bank will also
open a full-fledged branch in China,
where it already has a representative
office
In the December 2012
Unlike other banks which use Facebook
only for promoting their products, ICICI
Bank is looking at social mediums, such
as Facebook as engagement platforms.
The basic objective is to take
convenience to a new level by allowing
customers to avail a host of banking
services on Facebook itself while
socializing. With a fan following of over
9.5 lakh within 10 months and a couple
of nice innovations on the social
platform, India’s most technology savvy
bank, ICICI Bank is showing other
banks and companies how relationships
can truly be built using the new world of
social media.
Recent News:
Buy ICICI Bank, Axis Bank; sell ITC:
Rahul Mohinder, of viratechindia.com
recommends buying ICICI Bank with
a target of Rs 1205 and Axis Bank
with a target of Rs 1310
ICICI Bank may touch Rs 1190:
Mayuresh Joshi Mayuresh Joshi of
Angel Broking is of the view that
ICICI Bank may touch Rs 1190 and
Tata Steel may go upto Rs 440.
L&T, Maruti, ICICI Bank top 2014
bets: Sandip Sabharwal, Market
expert
FinNiche
December 2013
Page 4
Companies
Wipro Limited (formerly known as
Western India Products Limited) is
an Indian multinational information
technology ,consulting as well as an
o u t s o u r c i n g s e rv i c e c o mp an y
headquartered in Bangalore, Karnataka
in India. The company today has
147,000 employees serving over 900
clients with the presence spread across
57 countries. Wipro is the third largest
IT services company in India. It helps
customers to do their businesses better
by leveraging the industry-wide
experience, deep technology expertise,
comprehensive portfolio of services and
a vertically aligned business model.
On 31 March 2013, its market
capitalization was 1.07 trillion ($19.8
billion), making it as India's 13th largest
publicly traded company. Azim Premji is
the major shareholder in Wipro with
over 50% of shareholding.
Wipro is globally recognized for its
innovative approach towards delivering
the business value as well as its
commitment to sustainability. Wipro
champions focus on optimum utilization
of natural resources, capital and talent
for the best results. Today they are a
trusted partner of choice for global
businesses looking to ‘differentiate at
the front’ and ‘standardize at the core’
through technology interventions.
In today’s world, Wipro is well
positioned to be a partner and co-
innovator to businesses in their
transformation journey, help identify
new growth opportunities and facilitate
the foray into new attractive investible
sectors and markets.
Milestones
Wipro, one of the world's most trusted
brands, is a name with a long history.
Here's a snapshot of Wipro’s journey up
to date:
Established in 1945 as Western
India Vegetable Products Limited in
Amalner, Maharashtra
IPO for capital in February 1946
Ventured in to the fledgling IT
industry in 1981
Established software products and
exports subsidiary, Wipro Systems
Ltd. in 1983
Pioneers in marketing indigenous
Personal Computers in 1985
Established a Joint venture with GE
in 1989
Entered IT services in the 1990s -
we were among the pioneers in
developing the ODC (Offshore
Development Center) concept
Software business assessed at SEI-
CMM Level 5 in 1998
Listed on NYSE in 2000 (NYSE:WIT)
The first company in the world to be
assessed at PCMM Level 5 in 2001
Entered the BPO business in 2002
Entered the Eco-energy business in
2008
Spirit of Wipro
The Spirit of Wipro is the core of Wipro.
It is rooted in its current reality, but it
also represents what Wipro aspires to be
thus making it future active. The Spirit
is an indivisible synthesis of all three
statements. It means manifesting
Intensity to Win, acting with sensitivity
and being unyielding on integrity.
FinNiche
Wipro Limited
December 2013
Page 5
Companies
TE Connectivity, Ltd. designs and
manufactures highly engineered
solutions that connect and protect data
and power. The company serves
customers in more than 150 countries
in a variety of industries including
automotive, data communication
systems, consumer e lectronics,
telecommunications, aerospace, defense
and marine, medical, energy and
lighting.
HISTORY
O n J u n e 2 9 , 2 0 0 7 , T y c o
International was split and Tyco
Electronics, along with Covidien,
became separate, independently-traded
public companies. The new independent
company was known as Tyco Electronics
Ltd. On March 10, 2011, the company
c h a n g e d i t s n a m e t o T E
Connectivity which the company says it
feels is more relevant to its position as a
component and communications
manufacturer. On February 16, 2006, a
group of institutional investors, part of
an existing lawsuit against Tyco
International, sued the company to stop
its proposed breakup plan.
STRUCTURE
As an independent company, TE
Connectivity serves four major markets
(as of 2011):
Automotive (31%)
Broadband Connectivity (26%)
Energy and Industrial (29%)
Consumer (14%)
Sales by region (as of 2011) were:
Europe/Middle East/Africa (35%),
Americas (32%), Asia—excluding China
(18%), China (15%).
VISION
E L I V E R I N G C O N N E C T I V I T Y
INNOVATION
Demonstrating strategic vision and
pragmatism, our leadership team drives
TE to become the company customers
turn to first to meet their connectivity
needs. Their forward thinking focuses
on the important global trends that
count on connectivity—and will be
accelerated by it.
BUILDING A GREAT COMPANY WITH
STRONG VALUES
We believe there is more to building a
g r e a t c o m p a n y t h a n s t r o n g
performance. It takes an unwavering
commitment to core values and the
highest standards of ethics and
integrity. At TE Connectivity, we are
dedicated to four key values.
INTEGRITY
We must demand of ourselves and of each other the highest standards of individual and corporate integrity. We safeguard company assets. We comply with
all laws and company policies. We are dedicated to diversity, fair treatment, mutual respect and trust.
ACCOUNTABILITY
We honor the commitments we make, and take personal responsibility for all actions and results. We create an operating discipline of continuous improve-
ment that is an integral part of our culture.
TEAMWORK
We foster an environment that encourages innovation, creativity, excellence and results through teamwork. We practice leadership that teaches, inspires
and promotes full participation and career development. We encourage open and effective communication and interaction.
INNOVATION
We recognize that innovation is the foundation of our business. We challenge ourselves to develop new and improved ideas for all that we do. We encour-
age, expect and value creativity, openness to change and fresh approaches.
FinNiche
TE Connectivity
December 2013
Page 6
Companies
In August 1999, Mindtree was co-
founded by ten IT industry experts
f r o m C a m b r i d g e T e c h n o l o g y
Partners , Lucent Technologies,
a n d W i p r o . M i n d t r e e i s a
global information technology solutions
company with corporate headquarters in
New Jersey, USA and Bangalore, India.
The company has 28 offices located in
USA, Sweden, UK, Germany, France, Sw
itzerland, Belgium, Australia, Singapore,
China, UAE and India. With 12,000+
expert engineers, the company is earning
revenues over USD 430 million.
The economic downturn after the dot-
com bubble burst made the company to
expand its offerings into information
technology services It provides
consulting-driven technology solutions
to help businesses and societies flourish
which makes it a strategic partner to
over 40 Fortune 500 enterprises. The
company is listed on Bombay Stock
Exchange and National Stock Exchange,
currently trading at 1372.80 on BSE (as
on December,5, 1 PM) with revenues
over $436 million USD (Sept, 2013)
Mindtree and its employees (Mindtree
Minds) are guided by its values:
collaborative spiri t , unrelenting
dedication and expert thinking which
helps to see possibilities where others
see a full stop.
The company has flourished under the
leadership of Krishnakumar Natarajan,
MD and CEO who received the
Bloomberg UTV, CEO of the year, under
the emerging companies category in
2011. To add to its honour, the company
has been selected by Forbes Asia as one
of the ‘200 Best Under A Billion
companies’ of 2012, Ranked 19 in the
list of top 25 best employers in India and
ranked second among the IT companies
by AON Hewitt best employers' survey
2011. Best corporate governance in
India for 2012 by the World Finance
magazine.
Mindtree caters to broad range of
industries which includes, banking,
capital markets, consumers and
communications, consumer packaged
goods, independent software vendors,
insurance, manufacturing, media and
entertainment, retail and travel and
transportation.
Its services includes, analytics and
information management, application
development and maintenance, EAI
BPM, consulting, cloud, digital business,
engineering research and development,
independent testing, infrastructure
management services, mainframe and
midrange, mobility, SAP services and
technologies.
IT Services
Mindtree has helped global organizations
gain competitive edge by leveraging the
right mix of technology, people, and
processes to achieve strategic objectives.
Its team of business, process and
product experts ensures that IT
initiatives are tied to business
imperatives through quantifiable
metrics. Its approach is consultative and
business-led: first understand the
business challenges and define the
goals, then identify and implement the
appropriate technology solution.
Solutions provided by Mindtree to
various industries are: Bluetooth,
corporate lending, digital video
surveillance, MindTest, mKonnect,
mPromo, mSales, MWatch, secondary
sales platform, store portal and
VMUnify.
FinNiche
Mindtree
December 2013
Page 7
Companies
A c c e n t u r e p l c i s
a m u l t i n a t i o n a l m a n a g e m e n t
c o n s u l t i n g , t e c h n o l o g y
services and outsourcing company
headquartered in Dublin, Republic of
I r e l a n d . I t i s t h e w o r l d ' s
largest consulting firm measured by
revenues[2] and is a constituent of
the Fortune Global 500 list. As of 31
August 2013, the company did a
revenue o f $28.6 Bi l l ion with
approximately 266,000 employees
serving clients in more than 120
countries.
Combining a solid understanding of
business processes with deep industry
knowledge and implementation rigor,
Accenture Technology Consulting gives
IT leaders practical solutions tailored to
address their most crucial business
challenges. Accenture common equity is
listed on the New York Stock Exchange.
Accenture helps its clients create value
and architect change through unique
spectrum of management consulting
services: Analytics, Business Process
Management, Cloud, Risk Management,
Mobility, Operations, Smart Grid,
Strategy etc.
Accenture has wide spread presence
across all industries including,
aerospace and defense, agribusiness,
banking, automotive, capital markets,
chemicals, communications, health,
retail, travel etc.
IT Strategy
The company’s comprehensive IT
strategy services help organizations
shape the direction of IT over the next
three to five years to maximize
shareholder and business value. It assist
organizations in developing:
A comprehensive IT strategy,
including IT opportunity assessment,
shareholder value diagnosis and IT
investment prioritization
IT s t rategy for mergers and
acquisitions, due diligence, divestitures
and carve-outs
Strategies for all key components of IT,
including information strategy, IT
sourcing strategy, IT systems strategy
and IT infrastructure strategy
Information and Data Strategy
It help its clients to build the foundation
for effective decision making by first
identifying the critical information
needed to run and grow the business;
and then by de ve l op ing and
implementing a strategy, architecture
and processes for sourcing, managing,
governing and securing that information,
both within and outside the firewall
Enterpr ise Arch i tecture and
Application Strategy
Through Enterprise Architecture and
Application Strategy services, the
company creates a flexible and
actionable road map that guides the
selection, deployment, operation and
refresh of a company’s application and
technology landscape.
Whether overhauling a single business
system or defining an entirely new IT
solution and service architecture, our
comprehensive approach provides
practical and industry-specific
roadmaps that can help your businesses
grow and achieve cost-effective IT agility.
Key elements of this work consist of
enterprise architecture planning,
governance, operating models, industry-
specific architectures, and both custom
and framework-based enterprise
architecture development.
FinNiche
Accenture
December 2013
Page 8
Companies
HSBC Global Technology (GLT) is part
o f H S B C , h e a d q u a r t e r e d
in London, United Kingdom. The GLT
network is spread across 6 offices in 5
countries.
The first GLT was set up in April 2002
in Pune, India with a mandate to
develop software for the company. The
main purpose of GLT is to provide
technology solutions and services to a
large spectrum of customers spreading
across multiple business functions and
geographies
In their strategy, they outline their
vision – to be the world’s leading
financial services company. They want
to be the first choice of their customers
and for their employees. If HSBC can be
the best place to bank, and the best
place to work , they will have built a
sustainable business that will deliver for
the long term for their customers,
colleagues, shareholders, and society at
large. They take great care when hiring
new people because they know that the
talent, creativity and dedication of our
employees drive our success.
Their Core values
Dependable – do the right
thing
Open – to different
ideas and cultures
Connected – to customers,
community, regulators and each other
HSBC has its set up for analytics team
in Mumbai. This is in addition to
expanding its investment banking and
equity broking team.
The new analytics team, which started
operations in 2004, supports the
group's global investment banking
operations.
Currently, the group's analytics teams
are based out of New York, Mexico City,
London, Paris, Dusseldorf, Hong Kong
and Tokyo in addition to India.
Analytics in HSBC
Analytics involves data analysis,
s t r a t e g y d e v e l o p m e n t a n d
implementation, forecasting and
reporting. It forms the information basis
for strategic planning by the senior
management for businesses and enables
effective decision making to satisfy
business needs and requirements, along
with addressing unforeseen challenges
The HSBC Analytics Business service
provides an opportunity to work on
advance analytics offerings globally,
covering multiple aspects of banking
such as:
Advanced Data Mining and Modeling
M a r k e t i n g a n d C u s t o m e r
Development Strategy
Risk and Fraud Management
Strategies
Product and Portfolio Management
Business Analysis, Reporting and
Insights
Information Management
M a r k e t i n g a n d C a m p a i g n
Management
Operations Analytics
FinNiche
HSBC Analytics
December 2013
Page 9
Companies
HSBC, with its headquarters in London,
is one of the largest banking and
financial services organizations in the
world. HSBC's international network
includes about 9,500 offices in 86
countries in Europe, the Asia Pacific,
the Americas, the Middle East and
Africa. Within this, the lender has 16mn
customers and 1,240 branches in the
UK. With listings on the London, Hong
Kong, New York, Paris and Bermuda
stock exchanges, shares in HSBC
Holdings are held by around 200,000
shareholders in 100 countries.
HSBC is also aiming to become the
leading provider of exchange-traded
funds (ETF) in the short term, and
launched over 30 ETFs in 2010. In
February 2010, HSBC Global Asset
Management announced it was to
launch two ETFs following Chinese and
BRIC indices, with the possibility of an
additional ETF tracking a Japanese
index.
SWOT Analysis
Strengths
Europe's largest banking group
Hong Kong and the UK's largest bank
One of the most highly capitalized
banking groups in the world
Large geographical and market reach
Weaknesses
HSBC was at the forefront of the US
subprime crisis as a leading subprime
lender in the market before the crash
and has suffered during the economic
crisis
Facing potential claims over a number
of charges that it engaged in
fraudulent behavior
Opportunities
Post-crisis strategy is to concentrate
on emerging markets
The group is looking to become a
leading provider of exchange traded
funds
Profit before tax rose by 15% y-o-y in
2011
Threats
Impairment charges have remained a
threat, weighing down on capital
Divestment drive could lower
earnings in the short-term
Total operating expense rose by 10%
y-o-y in 2011
IB at HSBC - STG
Global Banking and Markets is the
investment banking arm of HSBC. It
provides investment banking and
financing solutions for corporate and
institutional clients, including:
Investment banking
Corporate banking
Capital markets
Trade services
Payments and cash management
Leveraged acquisition finance
It provides services in equities, credit
and rates, foreign exchange, money
markets and securities services, in
addition to asset management services.
Global Banking and Markets has offices
in more than 60 countries and
territories worldwide, and describes
itself as "emerging markets-led and
financing-focused"
The Strategic Transactions Group
(“STG” or “The team”) is a team of highly
qualified professionals providing
advisory services on critical transactions
to its major corporate clients worldwide
by collaborating with, and supporting
the global advisory team across regions
(EMEA, Asia-Pacific and Americas).
FinNiche
HSBC IB
December 2013
Page 10
Companies
Gartner, Inc. founded in 1979, is an
American information technology
r e s e a r c h a n d a d v i s o r y f i r m
h e a d q u a r t e r e d
in Stamford, Connecticut, United States.
It was known as Gartner Group,
Inc until 2001.
Gartner, Inc. (NYSE: IT) is the world's
leading information technology research
and advisory company. They deliver the
technology-related insight necessary for
their clients to make the right decisions,
every day. From CIOs and senior IT
leaders in corporations and government
agencies, to business leaders in high-
tech and telecom enterprises and
professional services f irms, to
technology investors, they are the
valuable partner to clients in over
13,000 distinct organizations. Through
the resources of Gartner Research,
Gartner Executive Programs, Gartner
Consulting and Gartner Events, they
work with every client to research,
analyze and interpret the business of IT
within the context of their individual
role. It has 5,700 associates, including
more than 1,435 research analysts and
consultants, and clients in 85 countries.
Originally a private company, the
Gartner Group was launched publicly in
the 1980s, then acquired by Saatchi &
Saatchi, a London-based advertising
agency, and then acquired in 1990 by
some of its executives, with funding
from Bain Capital and Dun &
Bradstreet. In 2001 the name was
simplified to Gartner.
In the course of its growth, Gartner has
acquired numerous companies
p r o v i d i n g r e l a t e d s e r v i c e s ,
including Real Decisions (which
became Gartner Measurement, now part
of Gartner's consulting division),
and Gartner Dataquest (Gartner's
market research firm). It has also
acqui red a number o f d i rec t
competitors, including NewScience in
the late 1990s, Meta Group in 2005
and AMR Research and Burton Group
in early 2010.
Gartner offers world-class, objective
insight on virtually any area of IT.
More than 900 expert analysts cover
1,200 topics across the IT landscape
Gartner analysts are based in 26
countries and speak 47 languages
Gartner analysts have an average of
12 years experience in their specific
field
Gartner insights are drawn from a
critical fact-base not available anywhere
else.
Each year Gartner manages:
Interactions with clients in 12,400
distinct organizations world-wide
319,000 one-on-one client discussions
12,000 vendor briefings
FinNiche
Gartner
December 2013
Page 11
Companies
Gartner’s rigorous research process and
proven methodologies provide the
foundation for unbiased, pragmatic and
actionable insight.
Gartner can be the difference between
success and failure in the outcome of
their clients critical IT initiatives
Gartner can helps clients save
thousands or millions of dollars on
purchase decisions and operating
budgets
Gartner is the key to their clients
success in IT
Gartner bring together Research insight,
Benchmarking data, problem-solving
methodologies and hands on experience
to improve the return on their client’s IT
investment. They follow three methods
for that
UNDERSTANDING: We know the
issues you face
80% of the Fortune 500 use Gartner
for their key technology initiatives
We deliver business value in over
1500 high-impact initiatives a year
CAPABILITIES: the data, tools and
capabilities to help
Gartner solutions address the
specific needs of each industry
Every solution makes use of our
performance benchmarking data
We employ seasoned consultants,
with an average of 15 years experience
EXPERIENCE: we help you deliver tangible re-
sults
Our clients spend 38% less than their peers
for the same workload
Gartner Contract Optimization
services help our clients realize hundreds of
millions of dollars of real and
measured savings annually
Consulting engagements help clients improve
performance and reduce risk
FinNiche
Gartner
December 2013
Page 12
Companies
Michelin is a Tire manufacturer based
i n C l e r m o n t - F e r r a n d i n
the Auvergne region of France. It is one
of the two largest Tire manufacturers in
the world along with Bridgestone. In
addition to the Michelin brand, it also
owns the BFGoodrich, Kleber, Tigar,
Riken, Kormoran and Uniroyal (in North
America) Tire brands. Michelin is also
notable for its Red and Green travel
guides, its roadmaps, the Michelin
stars that the Red Guide awards to
restaurants for their cooking, and for its
company mascot Bibendum, colloquially
known as the Michelin Man. Among
Michelin's numerous inventions, there is
the removable tire, the pneurail (a tire
for trains made to run on rails) and the
radial tire technology now used in
modern "green tires" that reduce fuel
consumption.
Since the early days of MICHELIN
brand, we have been following a unique
concept in research and development –
to develop and produce tires with
outstanding overall performances. We
won’t improve one key performance
without improving simultaneously all
others. MICHELIN tires, therefore, are a
blend of high performance, combining
with no sacrifice the fundamental
benefits of every MICHELIN tire: High
Safety,More Mileage, Fuel saving
Michelin have always been the high
running company with 1,13,400
employees as on December 31, 2012
dedicated to the growth of the
organization. From its inception till
now Michelin has produced 166 million
tires, close to 10 million maps and
guides have been sold, 970 itineraries
have been calculated by ViaMichelin. It
has recorded net sales of € 21.5 billion
which shows that why it is the second
best tyre manufacturer. It has a Global
presence with 69 production facilities
in 18 countries on December 31, 2012.
It has marketing operation in more
than 170 countries.
Its global market share is 14.6%
recorded in 2012. It is at the No.1
position in the world in energy-efficient
tires. Its share is 52% in the
consolidated net sales. It is No.1 in the
world in radial tires as well as
retreading. Its share is 31% of the
consolidated net sales. It is also No.1 in
the world for Agricultural, Aircraft and
Earthmover radial tires. MICHELIN
travel partner is No.1 in Europe for
maps, guides and digital travel-support
services. MICHELIN Lifestyle has sold
more that 15 million licensed products.
Its share is 17% of the consolidated net
sales.
Michelin came to India almost a decade
ago and today markets its range of
tubeless car radial , tubeless and tube
type bus and truck radial tires. Michelin
in India offers Product for India Market
for Passenger Cars, Truck & Bus, Two
Wheeler & OTR (Off the Road).
FinNiche
Michelin
December 2013
Page 13
Companies
Axis Bank is the third largest private
bank in India and offers an entire
spectrum of financial services to
customer segments covering the large
and small corporate, MSME, Retail and
Agri business. It is first new generation
banks to begun its operations in the
year 1994 promoted by UTI, LIC, GIC,
NIC ltd. A brief review of each vertical
under which the Bank operates is given
below:
RETAIL BANKING: It is a key driver for
Bank’s growth strategy and it offers
retail loans and accepts deposits which
have seen a healthy CAGR of 26.3% over
last five years. Added to this, it is also
the largest issuer of debit cards in the
country by making it a key player in the
ever increasing card market. Travel
Currency cards & Portfolio Investment
Schemes (PIS) are some of the attractive
offers rolled out to lure the NRI
consumers. Along with this Axis Bank
Privee caters to the HNI with its advisory
services and personalized investment
needs.
BUSINESS BANKING: Cross-sell of
transactional banking products, product
innovation and a customer-centric
approach have succeeded in growing
current account balances and
realisation of transaction banking fees.
It is also an SEBI registered custodian
which offers custodial services to both
domestic and offshore customers.
CORPORATE CREDIT: It has pioneered
a unique model of cross selling products
to the corporate like loan syndicate,
trade finance & treasury business. Keep
in mind the weak macroeconomic
indicators; Bank confined its exposure
only with positive outlook industries and
positive credit rating.
TREASURY: Bank continued to be a
dominant player in placement and
syndication of Rupee denominated debt.
During the year, the Bank arranged
debt aggregating to Rs. 145,461 crore
and retained its top position in
arranging Rupee denominated debt for
the fifth consecutive calendar year
FINANCIAL INCLUSION: Initiatives like
opening no frills account, micro
deposits, Chhota-deposits and micro
insurance, besides being an active
player in the remittances market. It is
also playing an important role in the
direct benefit transfer and disbursal for
various government schemes.
C O R P O R A T E S O C I A L
RESPONSBILITY: Bank’s initiative of
“Reduce, Reuse & Recycle” was able to
reduce wastage and able to recycle
almost 8.7Tonnes of paper since its
inception. Besides this Bank also
manages a Foundation which is funded
by 1% of bank’s profits and in turn
helping around 17 NGO’s to provide
sustainable livelihood. Along with this
foundation also deliver in various
initiatives like education, poverty
elimination & health care.
FinNiche
AXIS BANK
December 2013
Page 14
Companies
Cognizant is a member of NASDAQ 100,
S&P 500 and is ranked among the top
performing and fastest growing
companies of the world. It is a leading
prov ide r o f Bus iness process
outsourcing, Information Technology
and Consulting services. Cognizant
enables its clients to make their current
operations as efficient and effective as
possible and also by making them invest
in innovation.
Originally founded as an in-house
technology unit of Dun & Bradstreet in
1994, Cognizant started serving external
c l i en ts in 1996 and now i s
headquartered at Teaneck, Bergen
County, New Jersey, USA. The latest
innovation is coined as SMAC (i.e.
Social, Mobile, Analytics and Cloud)
which is now being increasingly
embedded into the IT architecture of its
c l ients. Taken together, these
technologies can enable the creation of
hyper intelligent software platforms that
address myriad issues, from sales to
customer service to the design of new
products to the management process.
Cognizant Business Consulting (CBC)
provides strategic and operational
consulting services and drives business
solutions for clients. Currently this
profile is operating under the following
verticals as mentioned below
BANKING FINANCIAL SERVICES
Financial Services business segment
serves leading financial institutions
throughout the world. Its clients include
banks, investment firms and insurance
companies. In 2012, this segment
represented approximately 41.3% of our
total revenues. They primarily cater to
the following segments
BANKING services by assisting the
clients areas like Retail Banking,
Wholesale Banking, Consumer Lending,
Cards and Payments, Risk Management,
Investment Banking and Brokerage,
Asset and Wealth Management, and
Securities Service. In addition to
A p p l i c a t i on De ve l o p me n t an d
Maintenance, the services increasingly
in demand in this sector include EIM,
Testing, Customer Relationship
Management, or CRM, Enterprise
Resource Planning, or ERP, BPO, IT IS,
and Business and Technology
Consulting.
INSURANCE services are catered to
clients through operations likes
B u s i n e s s A c q u i s i t i o n , P o l i c y
Administration, Claims Processing,
Management Reporting, Regulatory
Compliance and Reinsurance. We strive
to improve the sales and marketing
process, both by deepening direct retail
c u s t o m e r r e l a t i o n s h i p s a n d
strengthening interactions with
networks of independent and captive
insurance agents, often through the use
of social and mobile technologies.
HEALTH CARE
For the year 2012 Cognizant’s
h e a l t h c a r e b u s i n e s s s e g me n t
represented approximately 26.3% of its
total revenues. The following are the
industries which are served by
Cognizant
FinNiche
COGNIZANT TECHNOLOGIES
December 2013
Page 15
Companies
HEALTH CARE work with many leading
global healthcare organizations,
including healthcare payers, providers
and pharmacy benefit managers. This
industry today faces the dual challenge
of improving the quality of care while
lowering the cost of care and making
healthcare affordable to a larger
population which is driving their
business. They partner with clients to
enable their systems and processes to
deal with the retail orientation of health
care, such as the support of individual
mandates and the adoption of mobile
and analytics solutions to improve
access to health information and
decision making by end consumers.
LIFE SCIENCES division assists its
clients by driving their innovation and
virtualization in growing their business.
Life Sciences solutions help transform
many of the business processes in the
life sciences value chain (Research,
Clinical Development, Manufacturing
and Supply Chain, Sales and
Marketing) as well as regulatory and
administrative functions and general IT.
MANUFACTURING/RETAIL
This segment represented approximately
20.4% of total revenues by catering to
the following industries.
MANUFACTURING/LOGISTICS division
caters to needs of clients by making
them more productive, competitive and
cost effective. Its service areas include
service areas include Warehouse and
Yard Management, Transportation
Asset Management, Transportation
Network Design, Global Trade
Management and Analytics. Power
generation sector, industry trends
include the continued drive toward
energy conservation, including “smart
meter” installations, the need for better
grid reliability and security, regulatory
changes.
RETAIL/TRAVEL/HOSPITALITY caters
to growing needs of the retailers by
making them a provision for multi
channel models and impact of SMAC on
consumer interaction.
CONSUMER GOODS segment is
propelled with the need of consumer
goods companies to accelerate product
innovation to remain competitive and
deliver top-line growth, the continuing
drive to optimize global sourcing and
supply chain management.
OTHER SEGMENTS
This comprises of the Communications,
information, media & entertainment as
sub segments and accounts to 10% of
company’s net revenue.
COMMUNICATION segments address its
clients to keep pace with the change in
technology by introducing new products
and services, and improving the
customer satisfaction and service.
I N F O R M A T I O N / M E D I A /
ENTERTAINMENT is enabling its clients
to transform their business by means of
the digital platform. Services are
provided in critical areas such as the
Digital Content Supply Chain and
Media Asset Management. Digital
Distribution, Workflow. Automation;
Intellectual Property Management, Anti-
Piracy Initiatives; and Operational
Systems
FinNiche
December 2013
Page 16
Companies
About Deloitte
“Deloitte” is the brand under which tens
of thousands of dedicated professionals
in independent firms throughout the
world collaborate to provide audit,
consulting, financial advisory, risk
management, and tax services to
selected clients. These firms are
members of Deloitte Touche Tohmatsu
Limited (DTTL), a UK private company
limited by guarantee. Each member firm
provides services in a particular
geographic area and is subject to the
laws and professional regulations of the
particular country or countries in which
it operates. DTTL and each DTTL
member firm are separate and distinct
legal entities. Each DTTL member firm
is structured differently in accordance
with national laws, regulations,
customary practice, and other factors
and may secure the provision of
professional services in their territories
through subsidiaries, affiliates, and/or
other entities.
Financial Advisory Sercvices(FAS):
Deloitte has a Financial Advisory
Services (FAS) function which provide a
focused set of valuation consulting
services to clients covering a wide range
of industry segments. Specific areas of
focus include business & intangible
asset valuation, cost segregation,
machinery & equipment valuation,
construction advisory, real estate
financial advisory, and lease advisory
services.
Timely strategic financial advice is the
linchpin of all transactions that take
place in today’s rapidly evolving
c o m p e t i t i v e l a n d s c a p e .
Deloitte understand this and assist in
identifying opportunities for, or risks to,
our clients' interests, which accompany
most F inanc i a l adv i so ry ( FA )
engagements.
Their FA practice takes on an industry
vertical approach. It draws upon its pool
of experts both in India and abroad
specializing in various industries and
integrates this with its global knowledge
base thereby delivering strategic and
financial solutions to assist clients
through every phase of the economic
cycle.
Their integrated approach which
involves combining skills to develop well
-rounded solutions based on a full
understanding of their cl ients ’
ambitions, business and environment
extends a clear commercial advantage.
Our edge lies in our ability to formulate
multi-disciplinary teams and deploy the
same at short notice to deliver results.
Their clients include corporate, large
national enterprises, public institutions,
and successful, fast-growing companies.
They offer services in a number of
industry verticals ranging from
corporate finance, transactions,
valuations, forensic & dispute resolution
and reorganization with a focus on
helping their clients increase value.
Inside Financial advisory the main areas
are:
Corporate Finance Advisory
Forensic and dispute advisory
M&A Transaction services
Reorganization services
Valuation services
FinNiche
Deloitte
December 2013
Page 17
Companies
Mu Sigma is an analytics services
provider. The firm’s name is derived
from the statistical terms “Mu (μ)” and
“Sigma (σ)” which symbolize the mean
and the standard deviation respectively
of a probability distribution. The
company is ISO 27001 certified. Mu
Sigma is headquartered in Chicago,
Illinois, with its main delivery centre in
Bangalore. Mu Sigma provides services
to more than 75 fortune 500 clients in
several distinct industries.
Mu Sigma was founded by Dhiraj C
Rajaram, a former strategy consultant
f o r B o o z A l l e n
Hamilton and PricewaterhouseCoopers,
in 2004. In 2008, Mu Sigma raised its
first institutional investment round of
$30 million from FTVentures (now FTV
Capital). In April 2011, the company
raised an additional $25 million
from Sequoia Capital. In December
2011, the company announced a $108
million round of financing from Sequoia
and private equity investor General
Atlantic.[4] In February 2013, Mu Sigma
received an investment of $45 million
from MasterCard, which placed the
company over the $1 billion (Rs. 5,400
crore) milestone.
The vision of the company is to —
”Enable businesses to institutionalize
data-driven decision making”
Analytics and data-driven decision
making have been well recognized as a
distinctive competitive advantage in a
world of Big Data and increasing
business complexi ty . However ,
organizations are challenged with
scaling the use of analytics and making
it an integral part of all business
decisions. Mu Sigma addresses this
critical need and enables organizations
to institutionalize analytics and Decision
Sciences in a sustainable manner.
Mu Sigma solutions are divided into
various horizontals and verticals.
Some of the verticals are:
Banking, Financial Services and
Insurance
CPG and Retail
Pharmaceuticals
Healthcare
Technology, Media& Telecom
Mu Sigma works with multiple business
functions including Marketing, Risk and
Supply Chain. Horizontals include:
Marketing Analytics
Supply Chain Analytics
Risk Analytics
FinNiche
Mu Sigma
December 2013
Page 18
In Focus
Indian policymakers have concluded that
the worst of India's economic woes are
behind us. One only wonders where such
optimism stems from. When the economy
started to weaken in 2011, policymakers
persuaded us that India had seen much
worse and told us not to self-flagellate.
However, when things began to look
considerably worse than expected,
policymakers convinced us that things are
so bad that they could only get better.
Optimism of this nature has allowed
policymakers to postpone solving many of
India's long-term challenges. The financing
of our current account deficit (CAD) via
foreign equity inflows is a classic case in
point. Policymakers today believe the
financing of India's CAD through foreign
equity inflows is a safe option. They
corroborate this belief in two ways.
First, the value of foreign equity holdings in
Indian companies between September 2007
and September 2013 has been on a gradual
uptrend, pointing to stability of holdings.
Second, concentration levels of foreign
equity holdings (85% of foreign equity
holdings are in only 50 companies) have
remained consistent over this period. This
led policymakers to conclude that foreign
equity investors are deeply in love with
Indian equities which they will hold in
perpetuity.
A deeper analysis, however, reveals some
interesting facts. Foreign holdings in "core
sectors" (telecom, power, engineering, PSU
banks) have declined by $48 billion as the
profitability of several companies has
slowed in line with India's economic growth.
Fortunately, this capital hasn't left the
country given holdings have increased by a
similar amount in "islands of
excellence" (sectors such as consumer
goods, IT, pharma and private sector banks)
which have been relatively immune from
several macroeconomic pressure points.
From these actions, it would be safe to
conclude that foreign equity investors buy
companies that compound earnings and
dump those companies that don't. The fact
that a company is incorporated and listed
in a growth market like India appears to be
completely incidental. Now, it is well
understood that one of the key reasons why
foreigners have invested heavily in Indian
equities is because of the high return on
equity (ROE) Indian companies generate.
The ROE of Indian companies has started
to decline, however, due to the decline in
the ROE of "core sectors". It is interesting to
study what impact this has had on the
currency, given higher ROEs is the key
reason why foreigners have chosen to invest
in India in the first place. Actually, a cause
and effect relationship has repeated itself in
all emerging markets globally irrespective of
the size of a country's' CAD.
Thus far, foreign investors have been — and
are likely to be — patient for good reasons.
Every time the economy hiccupped and
foreign investors sold the "islands of
excellence", they ended up buying these
stocks back at a significant multiple to the
price they sold them at.
The lord of one of these "islands of
excellence" — who also happens to be the
CEO of HDFC Bank — has often reminded
foreign investors of their follies. His
expositions detailing the stupidity of foreign
investors have served as a reminder that
well-managed Indian companies can
withstand several years of serious policy
mismanagement.
FinNiche
Why Foreign Investors Are Staying The Course
December 2013
Rudy Gopalakrishnan
Economic Times 5 Dec, 2013,
04.27AM IST
Page 19
In Focus
In the last two decades, there has been
much written and said about "two Indias" -
called India 1 and India 2 in the new
millennium, and EMT and HMT India
(English- and Hindi-medium) in the 1990s.
One India was largely in the metros and
large towns - the entry point for most
multinational brands, and where the early
adopters of new products were located. The
second India was where the early majority
of the market exists, and the markets
where scale could be achieved. India 2 was
always seen to be looking up to India 1 and
adopting things a 'bit' later. However, mixes
needed to be somewhat adapted for the
local conditions and communication needed
to go beyond the brand to layers of emotion.
However, Amartya Sen and Jean Dreze's
book India: An Uncertain Glory reveals the
emergence of an interesting phenomenon.
At one level, the greatest optimist about
India's development can get depressed
reading the book, as it reveals the economic
and social inequality the growth model has
bred. It clearly questions the 'Gujarat'
model of development. That is something
government and economists need to
consider as they plan for the nation in the
years ahead. However, a second interesting
facet is hidden within the numbers, and
that is worth pursuing. A new "two Indias"
is emerging.
Nandan Nilekani did hint at this in his book
Imagining India when he pointed out a
double hump - a camel in India's
demographics. He said: "By 2025, North
India's population will be very young with a
median age of just 26; but the median age
in South India would be 34 - similar to
Europe's in the late 1980s."
The statistics in An Uncertain Glory make
for interesting observations. Just as an
indication, let's compare numbers for the
four "Bimaru" states (Bihar, Madhya
Pradesh, Rajasthan and Uttar Pradesh)
representing North India and the four
South Indian states of Andhra Pradesh,
Karnataka, Kerala and Tamil Nadu. The
Bimaru states account for about 450
million people, and the four South Indian
states, about 250 mn.
Let's first look at affluence levels. The
average monthly per-capita household
expenditure for North India across the
states in both urban and rural regions is
much lower than the India average of Rs
1,984 and Rs 1,054 respectively, while for
the four southern states, it's largely higher.
The same is true about the penetration of
consumer items like televisions and two-
wheelers - and for latrines within the
premises too. The average South Indian
family has a better quality of life than its
Northern counterpart.
The difference on social indicators is just as
stark. The fertility rate in 2011 - births per
woman - on an all India basis is 2.4. For
the northern states, it's between three and
3.6; for the southern states it's 1.7 to 1.9 -
perhaps explaining Nandan Nilekani's age
divide observation for 2025. The percentage
of women in the 20-24 age bracket married
by 18 in India overall was 47.4 per cent in
2005-06. The comparative rates for the four
north Indian states range from 57 to 69,
and for the south Indian states 15.4 to 54.8
(the highest is for Andhra Pradesh). The
same story emerges if one looked at
indicators like female labour force
participation and proportion of women
among organised sector employees. Even
when it comes to the female-to-male ratio in
the 0-6 year age group, Rajasthan and
Uttar Pradesh are well below the national
average, while all the southern states are
well ahead. The story is the same across
literacy, education, health and other public
services indicators.
FinNiche
The New "Two Indias"
December 2013
Madhukar Sabnavis
Business Standard 5 Dec, 2013 9:50
PM IST
Page 20
In Focus
The numbers may not be definitive but
indicate that the North and South are
evolving as two different economies, and
could be treated as different countries. It's
already well known that modern trade is
more evolved in the South than the North.
And basic infrastructure is also superior in
South India versus the North. Marketers
have been historically sensitive to the
cultural difference between the two regions.
And mixes have often been adapted for the
same - from language to caste to modifying
rituals in advertising and even products to
suit local tastes and needs. Mass media has
evolved in an isolatable manner and so
made the creation of distinct
communication easy.
However, as we move forward, this new
dimension to the "two Indias" story could
provoke fresh, fundamental thinking in
marketing. It would be facile to say that
more evolved market mixes would suit the
South and that of more developing markets
be adapted for the North, based on the
indicators mentioned at the start of this
piece. These numbers just indicate that the
South is ahead of the development curve
compared to the North, and is growing
older.
However, it may be interesting to consider
different tasks in these markets and
develop both marketing mixes and
communication palettes accordingly. This
recognises that the two markets could be at
different stages of evolution for the same
category. There could be a penetration task
in the North and a consumption task in the
South; it could be a transactional task in
the North and brand affinity-building in the
South.
Even the tonality of communication and the
role of larger purposes assigned to brands
could be different. As the South is older,
brands should be less irreverent, yet able to
stand for larger purposes including social
causes given the market is more evolved,
especially educationally. Some brand
stances that work in the West today could
be more easily used in the South for brands
and categories that are more evolved in
those markets; the North may still need
some basic market development concepts.
The greater presence of modern trade in the
South means different shopper behaviour,
at least for a core segment, and hence
different media opportunities to drive brand
-building.
This thinking is still nascent and could take
firmer shape in the times to come. The
evolution of India's demographic, economic
and social indicators shows that there is
another way to unbundle India in the
future to extract greater value for brands
and businesses. Something worth thinking
about.
FinNiche
December 2013
Page 2 1
In Focus
Pick-up in exports and decline in gold
imports are likely to keep the country’s
current account deficit lower during the
rest of the fiscal compared to the same
period last year, India Ratings today said in
a research report.
“We expect the CAD to be lower in the
remaining quarters of the FY’14 than the
corresponding quarters in FY’13 in view of a
pick-up in exports and a significant drop in
gold imports,” it said.
In the July-September quarter, CAD
narrowed to $5.2 billion or 1.2 per cent of
GDP against $21 billion or 5 per cent of
GDP in the same period last fiscal.
Gold imports in Q2, 2013-14 dropped to
$3.6 billion from $16.4 billion in April-June
quarter due to hike in duties and other
measures taken by the government to curb
the inward shipments of the commodity,
the report said.
The report believes that despite the uneven
global recovery, the momentum witnessed
in export growth will continue in the near
term as there are signs of improvement in
both the US and the core economies of euro
zone.
According to a recent estimate by the
International Monetary Fund, the US
economy is expected to grow at 1.6 per cent
in 2013, while Germany and France are
expected to grow at 0.5 per cent and 0.2 per
cent, respectively.
“An improvement in the demand conditions
in advanced economies coupled with rupee
depreciation is helping merchandise
exports,” the report said.
Merchandise exports increased 11.9 per
cent to $81.2 billion in Q2 FY’14 from $73.9
billion in the first quarter.
Depreciation of the rupee has improved the
competitiveness of Indian exports,
particularly of textiles and textile products,
leather and leather products and
chemicals, the report added.
It further said that though some increase in
import growth in the second half of this
fiscal is expected, it will be limited due to
stable crude prices and lower gold imports.
However, the report said that due to the
nuclear deal with Iran, tensions in West
Asia are likely to ease leading to reduced
volatility in crude prices.
FinNiche
CAD likely to remain lower in Q3 and Q4: India Ratings PTI
December 4
December 2013
Page 2 2
In Focus
Our Nation over the years has been fed with
the theory that PPP model is some kind of a
magic wand which will solve all issues of
infrastructure deficiency plaguing our
country. My own experience tells me that
this notion is far removed from reality.
Across sectors we are seeing slow and
steady demise of this once celebrated
model.
Before we examine reasons for this sorry
state of affairs it may not be out of place to
mention the various Models in Vogue:
Design–Build (DB) – The Private Sector
designs and builds infrastructure to meet
Public Sector Performance Specifications.
The cost overruns are transferred to the
Private Sector.
Operations and Maintenance (O & M) – in
this model the Private Sector operates
publicly owned assets for a specified period.
Build Own Operate (BOO) – The Private
Sector finances, builds owns and operates a
facility for Public Sector.
Build Own Operate and Transfer (BOOT) –
The Private Sector finances, builds,
operates and transfers the asset to Public
Sector after a specified period.
Why PPP?
To my mind the basic reason why our
policy makers over the years pushed for
PPP model was to tap the efficiency and
management skills of the Private Sector.
The other fundamental reason was to cut
red tape and improve flexibility.
Government bodies are bound by inflexible
rules and regulations which makes decision
making very difficult. The PPP model was
supposed to change the rules of the game
ensuring speed of implementation and
avoiding cost overruns. In addition to
maximising efficiencies and innovations of
Private Enterprise PPPs can provide much
needed Capital to finance Government
Programs and Projects, thereby freeing
public funds for core Economic and Social
Sector.
Inspite of all these noble intentions and so
called support from policy makers why is
this proving to be a failure? The Private
sector is now no longer as enthusiastic as it
was in being a “Partner in Progress”.
Surface transport Ministry is giving PPP
model a decent burial and reverting to EPC
contract. We keep reading about the
struggles of Reliance pertaining to Gas
Exploration. The fate of Power Sector is well
documented. The success stories, can be
counted on finger tips.
The Public Private Partnership (PPP) model
was supposed to be a collaborative model
between Govt. Agency and the Private
Sector. It is anything but that. The
Governmental entity arrogates to itself the
power of Auditor and Investigative Agency
all rolled into one. The Poor Private Sector
partner is treated as trash and is left
wondering whether it was a crime to bid in
the first place.
The atmosphere of distrust prevailing in the
country has further aggravated the
situation. The Babus are religiously
refraining from taking any decision. They
smell a rat where none exists. Talk to any
senior bureaucrat and the standard refrain
is – why take decisions which will be
questioned at a later date. We have been
taught “Not taking a decision is a bigger
crime than taking a wrong decision‟. The
opposite seems to be true as far as Govt.
bodies are concerned. We have never seen
any „Babu‟ being penalised for not taking
decisions. On the other hand you have
countless cases of bureaucrats facing wrath
of Investigative agencies. Even officers, long
FinNiche
Is PPP a failed model? Atul Chaturvedi
Economic Times 2 Dec, 2013, 11:02 AM IST
November 2013
Page 2 3
In Focus
retired are questioned. K. C. Parakh,
Shyamal Ghosh are some names which
readily come to mind. I am sure they must
be ruing the day they decided to join the
Govt. service.
The inflexibility of the Govt. partner in a
PPP model can go to silly extremes, A few
years back someone narrated an interesting
incident. As part of the PPP Service
Agreement the Private Party was supposed
to provide a certain quantity of assets. As
the project progressed it was realised that
the contracted quantity of fixed assets
would not be required for the next five
years. The Private Party requested the Govt.
Agency to give them authority to defer the
purchase at it would amount to locking
Capital. The Private party went to the
extent of suggesting that they are willing to
securitise the Govt. Agency in the
intervening period and procure the asset
when required. Not only was this simple
request not accepted but the private party
was levied penalty and the project
completion certificate was withheld. If this
be the attitude how can this model survive
in the long run.
The PPP model in its current ‘avatar’ needs
to be given a decent burial or suitably
tweaked to respond to changing Economic
& Political environment of our country.
Govt. Agency and the Private Sector have to
be partners in progress and not
adversaries. The bureaucrats manning the
Govt. Agencies need to get down from their
high horses and should be equally made
accountable for the success or failure of the
Projects. If Private Sector can fire executives
for non-performance what stops Govt. from
demanding same from its officers. All this
requires a change in mindset.
It’s high time we woke up from our slumber
or our Infrastructure would remain frozen
in time.
FinNiche
November 2013
PAGE 24
NEWS
TO become rich, poor countries must
enlarge their productive powers,
mobilising workers, absorbing new
technology and accumulating capital.
They must expand what economists call
the “supply side” of the economy, which
determines how much a country can
produce, and therefore how much it can
earn and spend.
The other side of the economy—
demand—can also intrude on the story. In
the course of development, poor countries
often struggle to keep spending in check.
They are prone to inflation and trade
deficits, which must be financed by foreign
borrowing. Sometimes these excesses
result in a financial crisis that leaves
demand in the dumps and supply in
disarray. Simply put, successful
development entails expanding supply as
quickly as possible without allowing
demand to grow even faster.
China’s policymakers fret a great deal
about the supply side of their country’s
e c o n om y . T h e y wo r r y a b o u t
accommodating the flow of rural migrants
to the cities, amassing the physical
infrastructure appropriate to their
ambitions, and upgrading the country’s
technology. Such concerns fill their five-
year plans and 60-point plenary
resolutions.
Critics of China’s growth model, in
contrast, tend to focus on the demand
side. This is not because China’s
spending is too strong. On the contrary,
China’s domestic demand has fallen short
of supply in 22 out of the last 23 years,
and inflation last year averaged under 3%.
China’s critics worry instead about the
composition of China’s demand.
Household consumption accounts for too
small a share and investment looms too
large. If this imbalance is not corrected,
they argue, China may eventually suffer
from an investment bust, causing a sharp
slowdown in spending—perhaps even a
contraction.
Among the most prominent critics of
China’s economy is Michael Pettis of the
Guanghua School of Management at
Peking University. Investment, he points
out, accounts for a dizzying 48% of
China’s spending Investment plays a dual
role in development, adding both to
demand and, when projects reach fruition,
to supply. But China’s high rates of
investment are nothing to celebrate, Mr
Pettis argues in a recent book. They are
both excessive and misdirected. As a
consequence China is misallocating
capital on a grand scale.
Much of the investment is financed by
bank loans and other kinds of debt. In
principle, it should create useful assets
that have a higher economic value than
the liabilities incurred to finance them. But
if the investment is misconceived, the
debts will prove difficult to repay. Perhaps
four or five years from now, Mr Pettis
believes, China will reach the limits of its
“debt capacity” and suffer a sharp
slowdown in capital expenditure.
Consumption will not be able to
compensate for this drop-off in
investment, Mr Pettis argues. Household
spending accounts for only about 35% of
China’s demand. Thus even if it were to
grow by about 10% a year, it would
contribute only 3.5 percentage points to
China’s growth. This simple arithmetic
once prompted Mr Pettis to predict that
China’s “average growth in this decade
will barely break 3%”. He was even
prepared to bet on it, entering into a
lighthearted wager with our Free
FinNiche
China’s investment binge : unsustainable?
DECEMBER 2013
—- The Economist
Page 25
NEWS
Consumption is suppressed by a variety of
mechanisms that deprive households of
income and transfer it to corporate
borrowers. The most powerful, in Mr
Pettis’s opinion, is the cap the government
places on the interest earned by
household deposits in banks. One might
think that low interest rates would
encourage consumption by reducing the
reward for saving. But the evidence
suggests that Chinese households save to
meet certain goals, such as making a
down-payment on a home. If saving yields
little, they simply do more of it.
Mr Pettis thinks of this “financial
repression” as an invisible tax on
household saving, which might amount to
as much as 8% of GDP. In a thought
experiment, Mr Pettis imagines China’s
government taxing half of household
income to build bridges to nowhere. This,
he rightly points out, would be unfair to
households and a colossal waste of
resources. But it would not lead to
unsustainable debts, as he claims, since
the bridges are financed with taxes, not by
debt.
China’s investment binge can endure
because the saving that China taxes
exceeds the investment it subsidises.
Many of China’s companies are heavily in
debt. But as a country, China consistently
spends less than it earns, generating a
current-account surplus and adding to its
foreign assets.
China is, then, living within its means. And
those means are now considerable. It
produces over $8 trillion-worth of goods
and services, without undue strain on its
capacity. There is little question that
capital does not always go to the most
deserving investment, and that the lives of
China’s citizens would be more
comfortable if consumption played a
bigger part in the economy. But China’s
capital stock still seems more productive
than Thailand’s or South Korea’s. And
even if investment is stripped from the
figures and countries are ranked solely by
the remaining components of GDP
(namely consumption and net exports),
China is still the world’s second-biggest
economy.
Whatever its flaws, the development of
China’s supply side is undoubtedly
impressive. It boasts an industrious,
m o b i l e w o r k f o r c e , i n g e n i o u s
entrepreneurs eager to absorb new tricks
and serviceable, even occasionally lavish,
infrastructure. The demand side of its
economy, if China’s critics are to be
believed, is more precarious. But it is hard
to think of a developing economy that has
been held back for long by a shortage of
demand.
FinNiche
DECEMBER 2013
PAGE 26
NEWS
The current account deficit for the three month period of July to September 2013 has come in at $5.2 billion or 1.2% of the gross domestic product (GDP). This number is so good that it prompted the Reserve Bank of India(RBI) to release the numbers a month earlier than scheduled. In technical terms, the current account deficit is the difference between total value of imports and the sum of the total value of its exports and net foreign remittances. Or to put it in simpler terms, it is the difference between outflow (through imports) and inflow (through imports and foreign remittances) of foreign exchange . The current account deficit for the April to June 2013 period had stood at 4.9% of GDP, whereas for the July to September 2012 period it had stood at 5% of GDP. Also, this is the lowest current account deficit that the country has seen since the period of three months ending June 2009. A high current account deficit is not deemed to be good for a country primarily because it means that the outflow of foreign exchange is much greater than its inflow. So in India's case it means that the outflow of dollars is much greater than the inflow of dollars. This means a greater demand for dollars than supply. Hence, those who need dollars sell rupees to buy them. This leads to a situation where the value of the rupee falls against the dollar. This is precisely what happened between May and August 2013, when the rupee went from around 54 to a dollar to almost 69 to a dollar. When this happened, Indian importers had to pay a significantly higher amount in rupee terms, for what they were importing. India produces very little oil and imports nearly 80% of its requirement. Hence, the oil marketing companies had to pay a higher amount for the oil that was being imported. But these companies are not allowed to sell cooking gas, diesel and
kerosene at a price which is greater than the cost price. The government subsidies them for this under-recovery. This adds to the expenditure of the government and hence, leads to the fiscal deficit going up, which has its own set of problems. Fiscal deficit is the difference between what a government spends and what it earns. There are two ways of controlling the current account deficit. One is to ensure that the country earns more foreign exchange than it was doing in the past. The other is to clamp down on the demand for foreign exchange. For a government it is always easier to clamp down. Hence, the government went about increasing the import duty on gold. The duty is now at 10% in comparison to 2% earlier. Another rule, which required a gold importer to re-export 20% of all the gold that he imported, was also introduced by the government. These two significant changes ensured that gold imports came down dramatically. Gold imports during the June to September 2013 period stood at $3.9 billion, down nearly 65% from the same period in 2012, when it had stood at $11.1 billion. In the period of April to June 2013, the gold imports had stood at $16.4 billion. This dramatic fall in gold imports is a major reason behind this fall in current account deficit. In absolute terms the fall in gold imports has been $12.5 billion($16.4 billion - $3.9 billion) between the three month period ending in June 2013 and the three month period ending in September 2013. The current account deficit for the April to June 2013 period was $21.8 billion. For the period July to September 2013 period, it has come in at $5.2 billion. The absolute difference is $16.6 billion. Of this nearly $12.5 billion or nearly three fourths of the fall has been because of lower gold imports. A fall in the value of the rupee
FinNiche
Is the fall in CAD a fall in the Gold Demand?
DECEMBER 2013
—- Vivek Kaul, FirstPost
PAGE 27
NEWS
products. The major fall in current account deficit has been because of a massive fall in gold imports. And this has meant that the demand for dollars to buy gold has gone down dramatically as well. This has been one of the major reasons for the rupee increasing in value from around 69 to a dollar in end August to around 62.4 to a dollar currently. The current account deficit was around $87 billion last year. With the clamp down on gold imports, the finance minister P Chidambaram has said in the recent past that he expects the current account deficit to be less than $56 billion in the financial year ending March 2014. Does a fall in gold imports also mean a fall in demand for gold? India produces almost no gold of its own. But things are not as simple as that. It is worth remembering here that gold imports were banned in India until 1990. At that point of time, gold smuggling was a fairly lucrative operation. As a recent article in The Economist points out “India consumed only 65 tonnes in 1982. Until 1990 imports were all but banned. Bullion had to be smuggled in and its price within India was about 50% higher than outside it.” Gold smugglers are also using neighbouring countries to get gold into India. A November 17, 2013, report in The Times of India points out “In the past few months, over 50kg of gold worth more than Rs 15 crore has been smuggled across the Indo-Bangladesh border alone. Sources in Directorate of Revenue Intelligence (DRI) said Nepal too has come up on the radar with some recent seizures on the border. Sources said this was only a fraction of what was being smuggled through these borders.” A report in the DNA quotes Somasundaram P R, managing director
(India), of the World Gold Council as saying “ demand in neighbouring countries such as Thailand has increased and some of this may be because of India demand.” The point is that a clamp down on gold imports leading to a major fall in gold imports doesn't necessarily mean a fall in gold demand. These are two difference things. An increase in gold smuggling has huge social implications. It is worth remembering that some of the biggest mafia dons of Mumbai in the seventies and the eighties started as gold smugglers before getting into other illegal activities. That apart, there are financial implications to this as well. A major reason why Indians buy gold is to protect themselves from inflation. Over the last few years the consumer price inflation(CPI) has been higher than the interest being paid on fixed deposits and other fixed income instruments. In this environment, gold has looked like a good bet given that it has given positive returns in each of the years between 2002 and 2011. Hence, buying gold was a perfectly rational thing to do at an individual level. The Indian financial system is rigged towards helping the government borrow money at low interest rates (You can read the complete argument here). Given this, it is not surprising that Indians are fascinated by gold at an individual level. Though at an aggregate level it has led to major problems. One of the problems has been the weak deposit growth of banks. This basically means that deposits have been growing at a much slower pace than loans being given by banks, due to the fact that people have been diverting their savings into gold and real estate, in the hope of beating inflation. And this in turn has led to higher interest rates. With the government clamping down on gold imports, the hope was that it would lead to people saving more money in bank and other fixed income deposits. But is that
FinNiche
DECEMBER 2013
PAGE 28
NEWS
A recovery in the rupee is giving Finance Minister P Chidambaram rare relief in his battle against a threatened credit rating downgrade to junk status by reducing pressure on the government's subsidy bill. Still, the minister can only meet his fiscal deficit target of 4.8 percent of GDP by rolling over a substantial amount of subsidy spending into next year's budget and by finding big savings elsewhere, two senior finance ministry officials said. ‘ But a 10 percent rise in the rupee - which slumped to a record low late in August - means Chidambaram can at least reduce the amount of subsidy spending that gets pushed into next year's budget to $12 billion from a previous estimate of $15 billion, these officials said. Other budget headaches mean he will have to find about $8 billion in savings from budgeted spending plans to meet the deficit target, they said. The sources, who have direct knowledge of the budget issues or have been briefed on them, declined to be identified because the revised budget numbers are not yet public. Chidambaram wants to put the house in order before the 2014 election campaign kicks off and the U.S. Federal Reserve begins cutting its monetary stimulus. National elections have to be called by May 2014 and emerging markets are on edge as investors speculate on when the U.S. central bank might reduce its economic stimulus, which could prompt capital to shift into U.S. assets. Chidambaram has said the fiscal deficit target is a line that will not be crossed as he seeks to fend off the threat from Standard & Poor's to downgrade India's sovereign credit rating, currently clinging to the bottom rung of investment grade. The budget is under pressure on a number of fronts; subsidy spending on
fuel, food and fertiliser has blown out, economic growth has slumped to its weakest level in a decade and a programme to sell state assets is in tatters. The government had initially budgeted spending of about $36 billion for subsidies, but that swelled to $52 billion when the rupee hit its record low. Reflecting the economy's weakness, net tax receipts in the first seven months of the fiscal year are about 7 percent higher than the year-earlier period, the slowest pace in four years and well below the full-year budget target of 19 percent. This could create a budget hole of some $2.4 billion. We will need savings of up to 50,000 crore if the shortfall in tax receipts is between 10-15,000 crore. Expected income of $8.8 billion from the sale of government stakes in state-run companies looks increasingly out of reach. Based on the sales price and oversubscription, the sale will raise around $270 million, which would take the total amount raised so far from state asset sales this fiscal year to about $500 million. The government still hopes to bring in nearly $3.5 billion more by selling its remaining stake in Hindustan Zinc Ltd and Bharat Aluminium Co (BALCO) before the end of the fiscal year. Chidambaram also hopes to make savings by strictly implementing rules on allocating funds to other ministries, which will slow down how quickly they receive the money. The revenue position will be clearer by the end of December, by which time Indian companies will have deposited their advance tax payments for the third quarter. The government expects major savings from ministries like drinking water and sanitation, rural development, defence, trade, communications, power
FinNiche
Rupee recovery gives rare relief to FM
DECEMBER 2013
—- Reuters