Welcome To The World Of IIPM: March 2013

Thursday, March 28, 2013

Can we See Some Accountability... Please?

While there are Mixed Reactions over The Impact of SC’s Verdict on P. J. Thomas’ Appointment as CVC, The Nation Actually needs to Focus on Politicians who run The Show.

The office of the Central Vigilance Commission (CVC), the apex vigilance institution, has lately been in the news for all the wrong reasons. In a first of its kind in India, a three-member Supreme Court (SC) bench on March 3 quashed appointment of P. J. Thomas, a 1973-batch IAS officer of the Kerala cadre, declaring it as “un est” in law.

Thomas’ current woes date back to a palmolein import case in 1991 when he was the Food Secretary in the Congress-led UDF government in Kerala. In 1996, the Left government in Kearla had ordered a vigilance inquiry into the cabinet decision taken by the then Congress-led Government to import 15,000 metric tonne of palmolein oil, which allegedly caused a revenue loss of Rs.20 million to the state. Thomas was selected to the post in September, 2010, by a committee consisting of the PM, Union Home minister P. Chidambaram and Leader of Opposition, Sushma Swaraj.

Meanwhile, with the Prime Minister accepting responsibility for the “error in judgement” as the final signing authority that approved Thomas’ appointment as CVC, the move has just become a blessing in disguise that Thomas would like. According to Thomas’ counsel Wills Mathews, Thomas has now moved to SC challenging the very legality of the verdict that set aside his appointment as CVC. “The constitutional provisions mandate that the matter be heard by a five-judge bench as opposed to the three-judge bench that handed the verdict in this case. Moreover, the selection of Thomas was carried out by a government committee and the error has been accepted by the PM himself,” Mathews told B&E. When asked about the future course of action, Mathews said that since the error had been committed by the Union of India, it was for the government to rectify it. “Once the mistake is corrected, Thomas will automatically be reinstated,” he said.

Amidst all this chaos also lies a threat to the confidence of whistleblowers who had utmost faith in the CVC when it came to reporting matters pertaining to corruption in government offices. For Dhanraj Singh (name changed on request), a whistleblower involved in bringing the Chairman of a CPSE to book after he took matters to the CVC, “Reporting matters to the CVC is not a routine affair and takes a lot of courage to go ahead with pursuing the matter due to the constant fear of consequences.” While getting matters attended to has been a cause of concern, there is also sheer disappointment when one finds that the appointment of the highest anti-corruption authority was taken lightly. “The anxiety among many of us is on how future complaints will be treated,” Dhanraj adds. Alongside this sense of disappointment within a section of “honest” government servants, there is also a separate school of thought. “The Apex court’s verdict annulling the appointment of the CVC has come as a major jolt to the government and we can expect an overhaul in the manner in which the anti-corruption watchdog functions. We expect more sincerity from the CVC now,” says another whistleblower on condition of anonimity.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Tuesday, March 26, 2013

Can Opportunity Reveal their Genius?

Buoyant car sales offer an Unprecedented Opportunity for The Indian The Auto-Component industry to ramp up its Investments and Innovation. Can they meet The Demand?

From its small beginnings in the 1940s to the spectacular growth over the last couple of decades, the Indian auto component sector has come a long way. In fact, the industry is one of the front runners for grabbing the global auto components outsourcing market estimated to be worth $700 billion by 2015. As India’s consumption story for cars is expected to remain strong, component manufacturers are gearing up to meet the challenges and demands set by the automobile sector. “The automobile industry is growing at a pace of 30% vis-à-vis the economy growth of 8-9%, so there is bound to be a correction sooner or later. However, the last three years have been full of surprises and we hope the growth will continue,” says Anil Gadi, Executive Director, Shriram Pistons. Car sales for fiscal year ending March 31, 2011 are forecasted to grow by at least 25% from a year earlier, according to the Society of Indian Automobile Manufacturers (SIAM).

According to the Automotive Component Manufacturers’ Association (ACMA), an industry body, the total passenger car production in the country will jump four times to reach nine million cars by 2020. On the other hand, the Indian auto component industry is expected to also grow by over four-fold to $113 billion by 2020. “India would be among the top five vehicle producing countries in the world by 2020,” says Vinnie Mehta, Executive Director, ACMA. A recent ACMA report puts the turnover of the auto component industry at about $26 billion in 2010-11, up 18% from $22 billion in 2009-10. The report states that 40% of the auto component industry is dominated by body and structural products, 20% by engines and exhaust, and 10% each by suspension and braking parts, transmission and steering parts, electronics and electrical and interiors.

However, the road to growth is not without hiccups. The Indian auto-component industry is up against challenges such as lack of good infrastructure, increasing input costs, et al, which could slow down growth. ACMA estimates that an investment of $35 billion must be made over the next decade to help car makers realise their targets. But the parts industry invested a measly $1.7 billion in 2009-10, half of the required rate.

Doubts over the sector’s ability to cope with the unprecedented demand have a strong basis. The second half of 2010 was characterised by long waiting periods at car dealerships of popular models. For instance, Maruti Suzuki Swift had a waiting period of over three month while the recently launched Polo from German car maker Volkswagen had a waiting period of over six months. Industry veterans ascribe the reason for the delays to component shortages, which adversely impacted the production cycle. Take, for instance, the case of utility vehicle maker Mahindra, which suffered a 10% production loss in the first quarter of FY 2010-11, mainly due to shortage of components like tyres, fuel injections and castings. At the other end, players like Maruti and Volkswagen were forced to keep consumers waiting because of the inability of their vendors to supply components as per schedule. Similarly, Volvo Eicher Commercial Vehicles also took a 20% hit in the production numbers, as their component manufacturers were not able to match pace with the orders.

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Monday, March 18, 2013

Banking on Retail to Grow Fast

From a Development Bank IDBI Bank Changed its Course to a Schedu-led Bank in 2004. Since then, its Retail focus has Given it Enough dope to Become India’s 17th Fastest Growing Company.

The genesis of this entity can be owed to the inspiration sought from Industrial Bank for Reconstruction and Development (IBRD) set up in 1945 to reconstruct countries devastated post World War II. It was set up in 1964 as a wholly owned subsidiary of RBI and has to its credit building some of the biggest financial corporations in India today like NSE, the Stock Holding Corporation of India, the Export Import Bank of India and the Small Industries Development bank of India (SIDBI). But for IDBI Bank, which became a full fledged scheduled bank from being a ‘development bank’ in 2004, such laurels did not suffice. An entity which used to generate 70% of its total business from the corporate sector, has achieved one of the most successful transformations in India Inc.’s history to give its retail business an equal footing – not only in terms of products, but marketing and investments too.

During the last fiscal, IDBI Bank registered a mind-boggling 97.9% growth in its operating profit. Net interest income grew to Rs.22.67 billion in FY10 as compared to Rs.12.39 billion in the previous year, translating into a growth of 82.9%. Going deeper, the bank’s net profit grew 46% (year-on-year basis), fee based income increased by 53%, deposits grew 36%, advances grew 38%, aggregate assets rose 29% and the total business of the bank registered a growth of 37%. Interestingly, this happened during a period when most of the Indian banking giants were still recovering from the slowdown blues. The financial year 2010-11 has already witnessed IDBI Bank’s aggression in terms of marketing and promotional activities. The year has been special for IDBI Bank owing to its renewed focus on retail banking as it has realised the powers of numbers well on time, and also about how to survive the cut-throat competition.

In fact, IDBI has been a major ground level innovator and fast mover, quite unlike a government entity. Some of its major initiatives are aimed at taking it on a very long term growth trajectory especially in retail banking. Firstly, to attract more retail business and achieve its goal of lowering cost of deposits, it has gone a step ahead of competitors by waiving charges on many of its current account and savings account (CASA) services including account closure, ATM Interchange, demand draft cancellation et al. Secondly, it has taken the tactical move to install 100,000 point of sale (PoS) machines to get hold of the mass by facilitating higher financial inclusion. Thirdly, it is ramping up its branch-wise penetration. It is setting up around 250 new branches to increase its tally to 1,000 branches and plans to set up between 4,000 to 5,000 ATMs in the next three years. Not just in distribution and marketing, the bank is contemplating major capital raising in the near future to enhance its financial inclusion objective. As per R M Malla, CMD, IDBI Bank, “As part of IDBI Bank’s financial inclusion strategy, the bank may consider raising equity capital, thereby diluting the Government’s stake over the next 12-15 months.”

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Tuesday, March 12, 2013

In the Pink!

Recently pop-star Pink was at a chat show and when asked the secret to her glow, she revealed that she was eating for two of late! While the media has been abuzz with rumours of Pink being on the way to motherhood, she has stayed tight-lipped about it as she has previously suffered a miscarriage. She also mentioned that a doctor inadvertently let it slip that she’s expecting a baby girl!

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Thursday, March 7, 2013

10 years to Clean up The Ganga

The NGRBA needs another 10 years to Clean up The Ganga; Will it be Too Late by Then?

The World Bank has stepped forward with an offer of $ 1 Billion to help save the Ganga, but is lack of funding the main obstacle? Not, says Ms Rama Rauta, Convener of Save Ganga Movement and expert member of the NGRBA. “It’s bureaucratic apathy and lack of political will that stands in the way. For example, there are plenty of STPs, but there’s no power. The STPs thus don’t work, and untreated effluents go right into the river again.” She believes if the decision-making powers lay in the hands of scientists and environmentalists instead of politicians, “we could have cleaned out the Ganga 10 times over by now!” A couple of thousand crores have been expended to date – though the government spends nearly as much on the Ardha Kumbh and Maha Kumbh Melas periodically – but the squalid state of affairs only point to inefficient use of Operation and Maintenance (O&M) funds.

What hope is there for the Ganga? There is, in the River Thames in England. Says Dr. Nitish Priyadarshi, Geologist and Lecturer in the Department of Environment and Water Management at Ranchi University, “Thames, which remained polluted for many years in the wake of the Industrial Revolution and rapid urbanisation, is now pristinely clean.” Rakesh Jaiswal also mentions River Rhine as a good model to learn from. “It is just a matter of having the will and working together.” Dr Priyadarshi reiterates.

Indeed we have no choice but to work together to salvage the Ganga, if we expected to be bestowed with salvation by this river from the heavens any longer.

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Wednesday, March 6, 2013

Rana Kapoor

Managing Director and CEO, Yes Bank, speaks to Avneesh Singh about how the six year old bank has grown commendably over the years and looks forward to making it even bigger given the opportunities in India

Within a period of six years, Yes Bank’s Rana Kapoor has made much judicious use of opportunities; at this juncture, with the focus being on brand building, Rana reveals his views on how being a new entrant feels:

B&E: How is the banking sector performing in totality? What do you think will be the future scenario ?

Rana Kapoor (RK): The banking sector, in my opinion, is positively tuned. Be it the private sector or the public sector, the constant motivation has been to progress further. Statistics say that foreign banks are a little quiet, private sector banks are pacing fast and the public sector banks are also gearing up. Thus, the future scenario seems to be promising.

B&E: RBI has been very strict with its monetary policy. What are your views on it?

RK: I think the monetary policy of the RBI is very much on the expected lines and balanced as well. It is absolutely clear that they want to anchor inflation without compromising on growth. There is a growth plus inflation management chapter and RBI is taking care of that. The steps of RBI also signal that there is a belief in the system that inflation cannot be only managed by monetary or fiscal actions. It also requires management through supply side economics. As a nation we need to increase our production either through new capacity addition or full utilisation of installed capacity and finally, make sure that the demand pull is normalised.

B&E: Being a relatively new entrant in this sector, how are you competing with the big banks?

RK: I think there are abundant opportunities in India. For a young bank like ours, which has been growing exponentially at almost 75 to 80%, it is terrific. Thus, with a free footing along with agile management systems and good credit systems, we ideally should respond to the growth opportunities. So, whether it is the large, medium or even the small corporations, our turnaround time is a very important differentiator. We can turnaround most of the credit proposals within two to four days. But the crux of the matter is that we have to grow in all aspects and different segments of the economic parameters.

B&E: Financial inclusion does not comprise microfinance only. It has other products lined up as well. But your bank has bene looking only at microfinance... Or are there other products too?

RK: With a meagre experience of six years, we are going through a lot of transition in management and strategy. So we have to make use of the most important bread and butter opportunities which are coming from wholesale and commercial banking. The linear earnings from those businesses are being invested in branch banking, SME banking and also across the board in terms of deposit management. This will provide sustenance for a long time because the top line in the bank is very good. We now have to work towards making it completely SME driven and consumer driven in the next 5 years to come.

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Monday, March 4, 2013

“Our global strategy fitted beautifully"

Ford India President & MD Michael Boneham has worked tremendously hard on his India basics since appointment. In an exclusive interaction with sanchit verma, Boneham talks about Ford's new outlook towards India

B&E: What was your initial reaction when you were informed by Alan Mulally to handle the Indian operations?
MB (Michael Boneham): Firstly I have been a previous manufacturing director for the region of Asian Pacific & Africa; so I had a good understanding of India and I have come over here a number of times and spent time over here. I thought I have a good understanding of India but in reality I didn’t, because Chennai is not India and India is not Chennai. For me, I was always very excited about the opportunity because I knew that India was going to become very very strong in Ford's plans globally. Three years ago, we were still in the process of putting that strategy together and working on the strategy and trying hard to get a vehicle into the heartland of the Indian market. That was certainly a small car because 70% of vehicles in India are small cars and we have never done that in India before. We have done well in the segments we are in but those were small segments. And what we were, was being a niche player, a very interesting niche player; and that was what we didn't want to be any more. We wanted to be a major player. So obviously for me as an individual, it’s challenging. My boy is in Australia and it's the most difficult separation. So overall, the opportunity and challenge which the Indian market gave me is fantastic. I couldn’t think of a better place to be in.

B&E: During the economic breakdown when GM announced bankruptcy, Ford managed to survive. Can you share your experience of those times?
MB: Everyone suffered to an extent through the global financial crises. It was not only the car industry; it was the total industry; the global economy which faced difficulties. For Ford, we started with a better plan which Alan Mulally initiated. During the crisis, we were heavily into restructuring, looking at volume, doing balancing, getting capacity as per demand, looking at our global product range and making it from the fuel efficient perspective. We were taking our profile from being a truck manufacturer to a motor vehicle manufacturer, where we went through the segment range. We all started significantly on the journey and borrowed over $20 billion to fund our products right and that was when the credit markets were open and available to us. That was a smart move when the economy came down and it enabled us to come though the very difficult period. We were very proud of the fact that we did not use any government funding in US. If you look at the turnaround and the way we moved very quickly from what was the most devastating and the most difficult period for the global economy and the industry in 2008-09 to $2.3 billion dollar profit in Q1 this year.

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