Welcome To The World Of IIPM: April 2013

Saturday, April 27, 2013

“The challenge is to judge prices of diesel & petrol”

Vishnu Mathur, Director General, SIAM, talks to B&E about what automakers feel about the trend towards dieselisation

B&E: The market dynamics in relation to petrol-powered and diesel-driven cars is changing in favour of the latter, mainly due to the big price differential between the two fuels. How does the automobile industry view this shift?
Vishnu Mathur (VM): The government should provide some more clarity with respect to the pricing policy of both the fuels so that automobile companies can plan accordingly. One of the biggest challenges for the automobile industry this year is how to judge the future price movement of diesel and petrol.

B&E: Will it be a more desirable thing for the automobile industry if the price disparity between diesel and petrol is reduced?
VM: Clearly, there is a need to bring some parity between petrol and diesel prices. The government should focus on reducing the price differential between petrol and diesel because if it continues to widen, it will not be good for the industry and the overall economy. At this point in time, diesel is very artificially priced and it cannot hold on forever. There is a need to implement a step by step program to rectify this scenario. As per our study, out of the total diesel consumption in the country, only 13-15% is consumed by the farmer community for which diesel is subsidised. What is happening in the process of taking care of this 15% is that the fuel is getting subsidised for the other 85% as well. The biggest question in front of the government today is how to take care of this 15%.

B&E: However, considering the fact that diesel will continue to be cheaper than petrol even in future as the government may prefer to keep it subsidised at some level, do you believe it is better for the industry to sell more diesel cars in the long run?
VM: Diesel is the future technology. Not only because of the fact that it is cheaper and more fuel-efficient than petrol. If oil companies can invest in new technology for this fuel and lower the sulphur content, cleaner diesel technology will be beneficial for all. Even though the percentage difference in the prices of petrol and diesel hasn’t changed much, it is only during the past one year that the market scenario has become such that the demand for diesel cars have gone up substantially.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face

Wednesday, April 24, 2013

Misinformed media

Morphed videos, tampered pictures, and misinformation drive Western media reporting on Syria

International media coverage on Syria is often based on flimsy grounds. A report of a 3-year old child battered by Assad’s forces and having bruises all over her body was covered in hundreds of western media outlets that created nothing short of a storm in a teacup. This media campaign’s entire basis was nullified after 3 days when it was found out that the girl child’s identity and her battered condition was nothing but a figment of imagination.

It isn’t entirely surprising. Top notch media giants like CNN, BBC and France 24 report from second hand sources regarding Syria. Most interestingly, the main material for such ground-reality-check stories is sourced from a UK-based NGO called The Syrian Observatory for Human Rights (SOHR), which is partially funded by western governments. Most of the Western media houses, including the likes of BBC, The Guardian & The Telegraph rely on a man named Rami Abdulrahman of SOHR for Syrian stories. However, in a shocking revelation, it was unearthed that this man doesn’t exist on the roster of SOHR!

Due to the lack of primary sources of information, the reportage is often full of contradictions. For instance, a reporting spree that sustained for 10 days narrated a back-to-the-wall situation for Baba Amr and its people, who were trapped in their houses against a counter offensive by Syrian forces, which was supposedly creating a humanitarian crisis there. The Syrian army supplied this piece of information as Western journalists were barred from being in the country for a first hand conformation. The report was covered in the most distinguished houses like CNN, France 24, The New York Times and The Washington Post. However, the Syrian Army changed their stand with counter claims that the civilians were relocated to safe zones! While the media as well as the Free Syrian Army admitted that there were hundreds of armed fighters in Baba Amr, every armed fighter who died in the battle was somehow shown as civilian to swell the number of civilian causalities. More interesting, however, is the story of ‘Syria Danny’, a 22-year-old British citizen of Syrian descent, who travelled to Homs during the year end and started appearing as a witness on western media channels, especially CNN. His daily ritual would include videos showing him ducking as shots were fired in the background, while he begged for armed intervention from the West and Israel. His, as well as CNN’s, luck ran out when a video appeared exposing how he asks his friend to start firing when he goes live and how footage from Libya was used. Similar wrong reporting appeared in BBC too!

Similarly, one Mousab Azzawi, claiming to be working for SOHR was paraded by BBC and CNN during live programs for no less than two months. Later, it was proven that the fellow had never seen even the inside of the SOHR campus, leave alone working for them. In the same month, a blog purportedly written by a lesbian woman in Syria, which described among other things, the massacre by Syrian forces, was picked by all the above mentioned visual and print outlets. A month later, it was revealed that the owner of the blog was one Tom MacMaster, an American studying in Scotland.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Saturday, April 20, 2013

World economic outlook 2012

The global recovery is threatened by intensifying strains in the euro area and fragility elsewhere. Financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated. This is largely because the euro area economy is now expected to go into a mild recession in 2012 as a result of the rise in sovereign yields and the impact of additional fiscal consolidation.

No respite in 2012

Global growth prospects dimmed during the fourth quarter of 2011, as the euro area crisis entered a perilous new phase. Activity remained relatively robust throughout the third quarter, with global GDP expanding at an annualized 3.5% – worse than the September 2011 WEO forecast. Growth in the advanced economies surprised on the upside, as consumers in the US unexpectedly lowered their saving rates and business fixed investment stayed strong. The bounce back from the supply-chain disruptions caused by the March 2011 Japanese earthquake was also stronger than anticipated. Growth in emerging and developing economies slowed more than forecast, possibly due to a greater-than-expected effect of macroeconomic policy tightening or weaker underlying growth.

China leads emerging countries

Total business spending on fixed assets, such as factories, machinery, equipment, dwellings, and inventories of raw materials et al, which provides the basis for future production, picked up pace in advanced economies during Q3 2011. However, emerging economies saw a slight decline in the spending. China topped the list with 47.8% spending while India managed to spend 32% of the total investments on fixed assets. One of the prominent reasons for declined spending in emerging nations is the lack of business confidence created due to lackluster demand, high inflation and interest rates, ambiguous investment policies. Once these issues are sorted out, emerging world will hopefully be back on track.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Tuesday, April 16, 2013

US housing market report

With US facing the fears of a double dip recession, investments in real estate remains sluggish. However, continuous fall in home prices and mortgage rates have brought in a great opportunity. Though the post-crisis over-cautious approach of lenders and borrowers is still playing spoilsport, current valuations and demographic dynamics may soon change the scenario.

Housing crisis continues

Housing boom in the US that began in the late 1990s led to an exponential growth in home sales. In fact, the demand remained quite strong during the period and outpaced the supply of new built as well as old homes on sale. As per reports, average sales of houses stayed at around five million per year. But with the economic crisis coming into picture, demand dipped thick and fast from over five million to less than four million. Since then, inventories have been on a painfully slow drift downward as a drop in demand offset much of the impact of the collapse in home building. However, by August of this year, combined new and existing homes listed for sale have fallen to 3.6 million units, having completed roughly 70% of the journey back to normal.

Mortgage payment at record low

With a sharp dip in mortgage rates, US Families have to leash out very low rates out of their income to pay for mortgages. As per Freddie Mac, by October 7, 2011 mortgage rates have fallen to an average annual level of 3.94%. Assuming the use of a fixed rate mortgage with 20% down, it will make the median mortgage payment on a single family existing home just 6.9% of per household personal income, compared to an average of 14.4% since 1966. While this presents a downside market, it also emphasises on the long-term gain that one can achieve by investing in the cheaper than average houses locking in cheaper long term financing available at present. Because, any demand pull in future will also pull these prices up.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Monday, April 15, 2013

Keep the recourse ready

For JSW Steel, the mining ban in Karnataka has had significant short term implications. Although temporary, they do hold valuable long term lessons

Abad quarter can come once in a while as an aberration. But sometimes, even aberrations have a tendency to outdo themselves.

For the $7 billion JSW Group, the second quarter of the current fiscal is a case in point, for the company suffered a whopping 71% dip yoy in its net profit. In the midst of a legal quagmire over availability of iron ore for its 10 mtpa (million tonne per annum) Vijaynagar plant, its production level has also dropped to half its original capacity. JSW did post higher sales and production numbers, but its Profit After Tax (PAT) still shrank to Rs.1.27 billion from Rs.4.45 billion for the same quarter last year. The turnover and net sales for the second quarter stood at Rs.82.42 billion and Rs.76.25 billion respectively, showing a growth of 33% yoy, mainly due to a higher volume and an improved sales realisation. EBIDTA for the quarter is Rs.13.32 billion, up by 15% yoy. The company has posted a net profit after tax of Rs.1.27 billion after considering foreign exchange translation losses.

The shortage of its prime raw material iron ore is the main reason why the company is facing this perilous situation. Ironically, there is little that the company can do at the moment. After the SC order to ban mining in Bellary, Tumkur and Chitradurga in Karnataka after the controversies over significant iron ore degradation in the region, a number of steel companies have been affected. For JSW Steel, which is planning to take the capacity of its mega steel plant in Vijaynagarto 12 MTPA by 2014 (10.2 MTPA currently), the impact is much greater. Although the SC allowed NMDC to mine 1 million tonnes per month from its two minesa and allowed e-auctions of 1.5 million tonnes every month, the output is far from adequate for the steel producers. Due to that, the prices of the ore have also gone up drastically. As an alternate measure, the company is attempting to source some amount of iron ore from neighbouring Goa, Orissa & Chattisgarh. In August, production levels at the Vijaynagar plant dipped to 28% owing to the shortage, which officials say have improved to about 50 to 60% levels in October. “High procurement cost of iron ore from neighbouring states and the subsequent e-auction basis to sustain an optimum level of steel production from its Vijayanagar plant, the company’s cost of production went up by Rs.1,500 per tonne in Q2 FY12 as against Q2 FY11,” JSW’s group CFO Seshagiri Rao shared with B&E. The company’s production was lower at least by 4,50,000 tonnes due to acute shortage of iron ore and higher procurement cost of iron ore also increased the cost of production of steel by about Rs.1,500 per tonne during the quarter.

JSW took the cue from the Supreme Court permissions and procured 2.08 million tonnes in the e-auctions. But the company is yet to improve capacity utilisation significantly from existing levels as the receipt of the e-auction material is taking a considerably longer time due to procedural delays and logistical constraints. They have received only around 18% of the supplies committed. No wonder then that the company is forced to revise its outlook for steel production further downwards to 7.5 mtpa (crude steel production, original guidance 8.75 mtpa) and 7.8 mtpa (saleable steel sales, original guidance 9 mtpa) for the full year ending March 2012.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Saturday, April 13, 2013

B&E Indicators

Growing rural-urban divide

After a phase of robust growth, the Indian telecom juggernaut appears to be slowing down. The number of net mobile connection additions in May 2011 was about 35% less as compared to March 2011. Further, the gap between urban and rural teledensity has widened over the last decade. This is evidenced by rural mobile teledensity of only 35% as compared to urban mobile teledensity of 156% in June 2011.

Slowdown in growth in rural areas

The gap can widen even further as rural growth slows. It’s evident that the urban markets are almost saturated whereas, there is a lot of untapped demand in rural India. Thus, additional investments are required for rolling out services to the unconnected population in rural areas. Moreover, with India’s broadband penetration being abysmally low at about 1%, investments are needed to deploy 3G services and meet the latent demand for broadband across India.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Friday, April 12, 2013

Can optimism change reality?

Becoming The #4 Globally in Terms of Sales Volumes is not an Easy Task. Not even for The Largest Korean Carmaker. But having Achieved that, how fast can it Grab The #3 Spot?

This summer started on a rather busy note for Land Securities Group. The commercial realty giant has been put in charge of changing the neon light-lit gigantic 1,250 sq. ft.hoarding at Piccadilly Circus (London’s equivalent of Times Square) to an LED screen (which will be ready by October this year). It is a rare event. Those signboards do not change often (the last time it happened was 17 years back!). So what landed Land Securities a new customer willing to pay a massive $3.29 million-a-year for the space? Call it economics – unable to convert failure mystically into cash-flow, Sanyo, the earlier client, was forced to give up the space to a car company, Hyundai Motors. Taking up the billboard is a metaphorical move for the Korean car-maker, and clearly goes beyond catching the attention of the 56 million visitors who flock to Piccadilly, every year.

It’s a move that personifies Hyundai’s attempts to finally break into the top three carmakers of the world. Nobody believed they could do that. Many still don’t. Well, nobody thought the Sanyo billboard would ever be taken over by another company. That’s how metaphorical it can become...

And that’s how a company strives to ensure a perception change within the global audience. For starters, before the turn of the new millennium, the Seoul-based outfit was regarded as just another manufacturer of affordable hatchbacks. No more. Thanks to huge dollars spent on its marketing and advertising strategies, the company has witnessed astounding high growth across many markets over the past two years.

Today, together with its sister company Kia Motors, Hyundai looks all set to break into the top three ranking of the world’s auto market (in sales volume). How soon will that happen? Very, if it continues to grow the way it did in 2010. The company recorded total sales figures of 5.74 million units in CY2010 – a y-o-y growth of 23.97%. It was the highest growth recorded amongst the five largest automakers in the world. While Toyota’s sales rose by 8% (to touch 8.55 million units), GM’s rose by 6% (8.39 million), Volkswagen’s by 13.5% (7.14 million) and Ford’s by 19% (5.31 million). Taking advantage of the streamlining that Ford went through in 2009 & 2010, the Hyundai-Kia combination ran past it to occupy the #4 spot in CY2010. But rising further will be a much bigger challenge.

As per estimates by IHS Global, Hyundai will remain where it is even when 2011 ends. The Korean company, having sold over 2.1 million vehicles during the first four months of 2011, is well on its way to clocking total deliveries of 6.3 million units during CY2011 – a y-o-y rise of 9.76%. On the other hand, Toyota is forecasted to sell 8.6 million units, GM – 8.5 million & VW – 7.5 million. Good news is – when 2011 ends, if all goes well, Hyundai will be much closer to the #3 spot, with the deficit between the Korean and the #3 VW reduced by 1.2 million units.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Thursday, April 4, 2013

B&E Indicators

Asian liquidity remains solid

Liquidity remains solid for non-financial, speculative-grade companies in Asia. The region’s Liquidity Stress Index was 12.3% in June, unchanged from May, and far below the 37% high it hit during Q4 2008 amid the global economic recession. In fact, the Asian Liquidity Stress Index has remained near its current level since the start of 2011 and is at its lowest levels in three years.

A low probability of default in the region

The high level of corporate liquidity in Asia suggests a low probability of default for the region’s speculative-grade companies. In fact, there were no defaults during the first half of 2011. Even the Asia-Pacific (ex Japan) trailing-12 month speculative-grade default rate has remained at 1.7% since the beginning of 2011. This situation, coupled with manageable refinancing needs, indicates that the default rate will continue to stay low for the rest of the year as well.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Monday, April 1, 2013

How Competitive is Africa Today?

While The world clocked an Average GDP growth rate of 4.2% over the last decade, Africa grew at an Astonishing 5.2% pace. In Fact, Africa’s Continued Economic Upsurge gets a boost from The Fact that its recovery from The Global crisis has been faster than has been the case in many other parts of The World. B&E analyses The African Competitiveness.

Lack of diversification

Although the growth of African economies as a whole accelerated in the past decade, their export growth rates continued to lag behind that of other developing regions, thus further widening the gap between Africa and the rest. In fact, Africa’s share of global exports plummeted from 4.1% in 1981 to 1.7% in 1998, only rising slightly to 2.4% in 2009 (in 1948 Africa’s share of world trade was 7.3%). What perhaps ails the African exports is the lack of diversification, be it in terms of commodities or destinations. While 80% of Africa’s export today consists of oil, minerals and agricultural commodities, 70% of the continent’s exports is directed towards US and the European Union, thus making African economies more vulnerable to external shocks.

Room for Improvement

The twelve distinct pillars of the Global Competitiveness Index (GCI) take into account the fact that countries across the globe are at different stages of economic development. In an international context, it is observed that both North Africa and Sub-Saharan Africa are outperformed by Southeast Asia, and all the BRIC economies. A bird’s-eye view of the global listings in terms of GCI shows that only three countries from the African continent figure in the first half of the overall ranking (Tunisia, 32; South Africa, 54; and Mauritius, 55). It is apparent from the chart that the largest dispersions among the African countries are in terms of macroeconomic environment, health & primary education, and market size pillars.

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist). For More IIPM Info, Visit below mentioned IIPM articles