Monday, October 8, 2012

This is my road ahead...

Bill Gates writes about his theory of creative capitalism... inputs coordinated by B&E’s Ruchika Chawla

Capitalism has improved the lives of billions of people – something that’s easy to forget at a time of great economic uncertainty. But it has left out billions more. They have great needs, but they can’t express those needs in ways that matter to markets. So they are stuck in poverty, suffer from preventable diseases and never have a chance to make the most of their lives. Governments and non-profit groups have an irreplaceable role in helping them, but it will take too long if they try to do it alone. It is mainly corporations that have the skills to make technological innovations work for the poor. To make the most of those skills, we need a more creative capitalism: an attempt to stretch the reach of market forces so that more companies can benefit from doing work that makes more people better off.

There’s much still to be done, but the good news is that creative capitalism is already with us. Some corporations have identified brand-new markets among the poor for life-changing technologies like cell phones. Others – sometimes with a nudge from activists – have seen how they can do good and do well at the same time. To take a real-world example, a few years ago I was sitting in a bar with Bono, and frankly, I thought he was a little nuts. It was late, we’d had a few drinks, and Bono was all fired up over a scheme to get companies to help tackle global poverty and disease. He kept dialing the private numbers of top executives and thrusting his cell phone at me to hear their sleepy yet enthusiastic replies. As crazy as it seemed that night, Bono’s persistence soon gave birth to the (RED) campaign. Today, companies like Gap, Hallmark and Dell sell (RED)-branded products and donate a portion of their profits to fight AIDS. (Microsoft recently signed up too.) It’s a great thing: the companies make a difference while adding to their bottom line, consumers get to show their support for a good cause, and – most important – lives are saved. In the past year and a half, (RED) has generated $100 million for the Global Fund to Fight AIDS, Tuberculosis and Malaria, helping put nearly 80,000 people in poor countries on lifesaving drugs and helping more than 1.6 million get tested for HIV. That’s creative capitalism at work.


Source : IIPM Editorial, 2012.

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Saturday, October 6, 2012

...And Why MOIL Should Think Twice About its IPO!

It’s India’s Largest Manganese ore Producer and a Mini-Ratna PSU too. But with Rs.17 Billion free Cash Reserves Lying Unused, one wonders why The Government wishes MOIL to go for an IPO?

Imagine yourself hundreds of meters below the ground level in a mine where explosions take place on a daily basis to break rock blocks, and tonnes of ore are extracted using the same route that is used by the miners as passage. Imagine trying to take sane journalistic notes at the same depth, with visions of the worst underground mining accident movies slamming across your mind. Well, that’s what MOIL does to you; or rather, did to us, when we attempted a real as-is-where-is story by going deep inside MOIL Ltd’s (formerly known as Manganese Ore India Limited) Kandri mines near Nagpur, India. It would be a slanted view if we were not to accept that in reality, leave our fervent imagination aside, MOIL has more or less achieved global standards in mining operations – the company has been the winner of the National Safety Award, now for many years continuously. To that effect, the mining behemoth also holds the trophy for the longest accident free period. But then, simply having a great safety record is not guarantee enough for an IPO to be successful – and that too when it’s your first IPO ever! For MOIL, the upcoming IPO of 33.6 million shares for raising around Rs.12.38 billion, is being viewed very positively by the industry, yet, for reasons that might go against MOIL.

But more of that later. First, MOIL’s strategic issues. The first gargantuan hurdle MOIL faces is its legacy – it’s a century old company (established in 1896 as Central Province Prospecting Syndicate) and has for most of its existence, stuck headfast to legacy management procedures, structures and vision. Yet, during the last decade, the company has hit the right chords and grown aggressively. Since financial year 2005-06, MOIL’s top line has grown by a mind-boggling 200% from Rs.3.6 billion to Rs.10.87 billion in the last financial year (2009-2010). Of course, FY 2008-09 was even better with Rs.14.39 billion as revenues. The key factor for the company’s long term success has been, without doubt, monopoly government facilitated access to mines – the reason why MOIL now caters to more than 50% of the country’s total manganese ore demand.

On the positive side for MOIL, manganese apparently has a fantastic future. After iron, aluminium and copper, manganese is the world’s fourth most used metal. CARE Research points out that 90% of the world’s manganese production is used for desulphurisation and strengthening of steel (30 kgs of manganese is required for producing 1 tonne of steel). Thus, the manganese ore industry is directly related to the volatility and the cyclicality of the global steel industry. The domestic steel demand is expected to grow at a CAGR of about 9.2% during the period FY11 to FY15. India’s steel production, which is around 70 MT at present, is expected to grow to 120 MT by that time. Correlating these figures appropriately, it’s clear that the annual demand for manganese ore in the country could grow to 4.1 million tonne (MT) by FY 2012 itself from the existing level of 2.4 MT at present. But unfortunately MOIL does not appear to be prepared enough to make the most of the opportunity. As per K. J. Singh, CMD, MOIL, “The company is set to increases its ore production to 1.5 MT from the existing 1.1 MT by FY2015 at an investment of Rs.7.68 billion.” And the basic reason, perhaps, is the slower pace in the development of new mines as against the robust demand. What’s more interesting is the fact that 7 out of 10 mines operated by MOIL are around a century old.


Source : IIPM Editorial, 2012.

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Friday, October 5, 2012

FIIS: JEOPARDISING INDIAN ECONOMY

Heavy Inflows of FII Money, Falling Exports due to Rising Rupee, And Widening Current Account Deficit! India is now walking on the same lane that Once Brought in the Asian Financial Crisis in 1997.

The RBI is currently increasing its base rates by around 25 to 50 basis points in almost every fiscal policy meeting to absorb the excess liquidity that was injected by the government to the economy earlier to lift the country’s GDP growth rate to over 8%. But in the process, it is drawing a higher inflow of foreign funds to the country’s economic system. As of now, the spread between India’s 10-year bonds and the US 10-year treasuries is standing at a record high of 5.7%, making India a hot destination for the overseas investors. In fact, considering the fact that RBI is still to reach to a peak in terms of interest rate hikes, India even stands as a better destination for FIIs as compared to other developing Asian markets where inflation is well under control (see chart) and hence chances of rate hike is lesser than India.

On the other hand, such a rush of FIIs to invest in the Indian market has created another hassle for the apex bank. As Bodhi Ganguli, Economist, Moody’s Economy points out, “All foreign-currency purchases by the RBI will have to be fully sterilised now to prevent from adding excess liquidity to the domestic economy.” But then, considering that India’s foreign currency reserve has grown over 5% from $256 billion to $269 billion between August 27 and October 29, the job in the hands of RBI does not seem to be an easy one. And if the country’s Broad Money (M3) is an indicator to be considered, then RBI is certainly struggling on this front as India’s M3 has grown by nearly 4.1% during that period to Rs.60.68 trillion (as on October 22) from Rs.58.30 trillion (as on August 27).

Many economists believe that the Asian crisis was more due to faulty policies than by market psychology. Taking a lesson from that, today, when global investors have become opportunists, Asian and Latin American developing nations have already imposed capital or currency controls to safeguard themselves against the unholy day. However, the Indian regulators have so far avoided such measures stating that they will act only if the inflows are “lumpy and volatile” or disruptive to the economy. But the billion dollar question remains, when was the last time we saw non-volatile hot money that was non-disruptive for an economy?

Add another paradoxical situation and one starts realising the gravity of the monetary side of our economy. Previously, the gold market and the real estate market together were negatively correlated to the stock market (that is, money would flow either to stock markets or to safer options like gold/houses). As things stand today, the correlation is positive. One of these will have to give pretty soon.

However, for the time being, the country can be in solace as the Planning Commission is still confident that these inflows can be absorbed by the country’s huge current account deficit. Interestingly, this was one of the reasons that in their race to attract foreign capital inflows, in 1997, the East Asian countries doomed their exports, which deteriorated their current account position and finally brought in the crisis by almost killing the value of their domestic currencies. India, at present, if not close to that position, is headed in the same direction. As noted economist Paul Krugman has argued, only growth in total factor productivity, and not capital investment, can lead to long-term prosperity. Thus, for a long term benefit of the country’s economy, today, Indian regulators must let go of the short term market benefits and put a check on the hot money flow. Else, sooner or later, India will end up being the epicentre of yet another Asian financial crisis.


Source : IIPM Editorial, 2012.
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Monday, September 10, 2012

INMATES: VOTING RIGHTS

It’s a burning debate across the World – destroy the sin or the sinner? The issue of voting rights for criminals is a key aspect of that debate. The IIPM Think Tank looks at how various countries approach the issue, and why the prisoner-bashing attitude might not be so wise

And between these extremes, Australia, France, Finland and Greece are some nations with limited restrictions over the felons’ voting rights; typically based on the length of the sentence, nature of the crime committed or the type of election.

But things have been changing recently in some US states. Connecticut and New Mexico liberalised the laws with regard to voting rights in 2001. Nevada abolished the five year post-sentence waiting period and Maryland has passed a resolution to automatically restore voting rights for one-time offenders after release. However, Utah and Massachusetts restricted voting rights of inmates while Colorado and Oregon barred federal inmates from voting. Since 1975, while 13 states have liberalised their laws, 11 have imposed further restrictions.

On March 30, 2004, the European Court of Human Rights became quite vocal on this issue. It criticized UK for having laws that bar inmates from voting; terming it as gross violation of human rights. It further ruled that “any devaluation or weakening of the right [to vote] threatens to undermine [the democratic] system and should not be lightly or casually removed.” Even influential international treaties including Article 5, section (c) of the Convention on the Elimination of All Forms of Racial Discrimination and Article 25 of the International Covenant on Civil and Political Rights, which ensure that citizens have their fundamental rights intact, favoured voting rights of inmates. A recent survey of the American people by APSA reveals that 80%, 68%, and 60% of respondents want to see restoration of voting rights of ex-felons, probationers & parolees, respectively. Over 800,000 American felons have got their voting rights back since 1997.

It’s time for India, being the world’s most populated democracy, to give explicit importance to this issue of felon voting. As we said, it may not affect our parliamentary makeover much; but relaxing restrictions may contribute in some degree, howsoever minimal, to the reformation of such inmates.


Source : IIPM Editorial, 2012.
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Saturday, September 8, 2012

CORRUPTION: INDIAN BUREAUCRACY

Corruption remains our Achilles Heel. Indian vigilance departments should now start employing innovative ground-level Anti-Corruption Tactics to reduce the incidence of this malaise

The whole idea of Zero Tolerance Policy introduced by the government apparently is falling flat. Initiatives like Whistle Blowers Bill, Right to Information Act, Action Plan on Vigilance, transparency in tendering and contracting, e-Governance and similar other policies are being dodged easily.

Even the most tested and tried concept of ombudsmen (sometimes called Chief Vigilance Officers) has not been enacted till now. The Administrative Reforms Commission (ARC) set up in January 1966 under Morarji Desai recommended a two-tier machinery – a Lokpal at the Centre and one Lokayukta each at the State level for redressal of people’s grievances. That remains a recommendation even after 44 years. As per late Prof. C. K. Prahalad, the cost of corruption to India till now has been Rs.2.5 trillion.

India now needs radical ground level tactics to curb corruption. Interestingly, in Philippines, where corruption among customs officials is quite high, the government has innovatively made them work on drawer-less tables under closed-circuit television (CCTV) cameras to fight the so-called “open drawer” racket. Similarly, in Nepal, airport officials are given trousers with no pockets. In US, Obama – when he was senator – innovated the compulsory usage of cameras in police cars in Illinois.

Should India employ similar tactics? Of course, and more. The vigilance commission should not simply track corruption but should attempt to entrap government officials by clandestinely offering bribes. Those who fall for such traps; arrest them. Over time, even corrupt government officials would stop accepting bribes believing an offer could well be a vigilance investigation in progress.


Source : IIPM Editorial, 2012.
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Thursday, September 6, 2012

The Eva Morales plan!

After almost three years of niggling arguments with Eva Morales, Bolivia’s President, Naveen Jindal finally convinces Bolivia to sign on the dotted line for a possibly mammoth global coup of a deal; B&E analyses the critical road blocks and opportunities going forward

When Bolivian President Eva Morales picked the pen and signed over 3000 acres to Jindal Steel and Power Ltd (JSPL) – a Rs.110 billion company, a unit of the Rs.700 billion O. P. Jindal Group – it was a considerably large step in the last mile effort for industrialist and Parliamentarian Naveen Jindal to finalise one of the most critical global. For records, JSPL is investing Rs.100 billion in setting up a steel and power plant in Bolivia. Bolivian President Evo Morales signed legal documents granting JSPL the required land for a number of their projects, including that for steel, DRE, iron-ore pelletisation et al, a few days back.

That JSPL has become globally notable of late is actually not know to many in India. The Boston Consulting Group listed JSPL in its list of ‘Global top ten value creators of 2010.’ As per BCG’s global “Threading the needle: value creation in low growth economy” report based on Total Shareholder Return, JSPL is the world’s second largest value creating company. Last year, Forbes also included JSPL in its Fab 50 listings. But the Bolivia deal has been hanging since 2007, when – after announcing that JSPL will invest $2.1 billion over eight years for developing the world’s largest iron and steel mines in El Mutun, which has reserves to the tune of 10 billion tonnes – things went into a limbo as the government, after handing over the initial 1000 acres, refused to hand over the remaining requested land to JSPL. In a quid pro quo, JSPL did not advance the investments into Bolivia... till the Bolivian government gave an ultimatum last year to JSPL to either take it or leave it.

It is to be borne in mind that the investment made by Jindals in Bolivia is the largest of its kind. After last month’s final agreement, the Jindals have started the required operations for developing plants in El Mutun and Santa Cruz district. It is expected that both these projects will ready for operation by the next three to four years. On the other hand, though the Bolivian government has granted the additional 3,000 acres for the project to take off, the company still requires 5,000 acres of land to set up the complete infrastructure of the steel plant, including a power plant in the vicinity. Chattisgarh in-charge of JSPL, Pradeeep Tandon, commented to B&E, “Prior to this, we got the rights from Latin America for iron-ore mining for 40 years as well as setting up facilities to produce 1.7 million tonnes of steel, 6 million tonnes of sponge-iron and 10 million tonnes of high quality plates.” Navin Jindal, Executive Vice Chairman, JSPL, also commented on the earlier rankings, “It reiterates the confidence that our investors have in us and it further inspires us to keep growing like this.”


Source : IIPM Editorial, 2012.
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Wednesday, September 5, 2012

The sting of consumerism

From medicine to poison, here’s how honey’s sweet image transformed

A plethora of medicinal uses and properties have been attributed to honey as the centuries have rolled. Many have hailed it as a natural substitute to medicine and the ‘tasty’ way of strengthening one’s immunity. Centuries ago, the Egyptians quite literally adopted its medicinal value by using it to dress wounds and embodying the dead. The Maya people of Central America consider the bee sacred and use its wax for culinary purposes. Even the world wars saw the hives being squeezed to their last drop. But today, a bottle of honey is carrying much more than just honey.

The Centre for Science and Environment (CSE) recently carried out a shocking research, which revealed that many prominent honey brands sold in India, including the likes of Himalaya Forest Honey and Dabur Honey, contain beyond acceptable levels of antibiotics. Samples of 10 Indian brands and two imported brands, namely Nectaflor of Switzerland and Capilano Pure & Natural Honey of Australia, were tested at random with Nectaflor emerging as the most adulterated. The CSE report states that traces of Oxytetracycline, ampicillin, erythromycin, ciprofloxacin and even erythromycin were present in the samples. These antibiotics inevitably have hazardous repercussions on consumers’ health.

Many physicians like Dr. Bhola bemoan that “these antibiotics, if consumed regularly, could induce resistance to antibiotics.” This would create a superbug, which acclimatizes the body to the medicine, leaving the patient with no other choice but to consume more quantity of the drug. The superbug would further damage immunity, which ironically is honey’s prime medical feature. Children below five years of age, who are used to daily consumption of honey, could even face dire consequences like organ damage.

The adults also leave their kidney, liver and bones exposed.The antibiotics are finding their way into honey as a consequence of a despicable chain of retail bullishness. The beekeepers are forced to supply larger quantities of raw honey, hence forcing them to feed the bees with drugs to expedite the process. The regulatory bodies are fielding unacceptable double-standards to allow the murky and vicious practice to go on. Mr. Arvind Kumar Singh, President and CEO of Little Bee Impex (an export oriented company) states, “The export and domestic market standards are different”.


Source : IIPM Editorial, 2012.
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Tuesday, September 4, 2012

The mane issue!

While men have begun to take pride in being metrosexuals, ladies are letting go and hoping to redefine sexy and be proud of their body hair!

The mere mention of hairy women irked Yudi. In his mind, the thought of women drew a pretty picture of ladies with smooth and soft skin. Yudi would be turned off at even the thought of women with facial or body hair! Never mind that he hailed from Jhajjar, a village where probably conventional methods of hair removal are a far-fetched idea and even if there was an option, the masses would abstain from availing of the offer! It astonished him as to how among his circle the topic of discussion would inevitably veer to ladies with body hair; he always quickly withdrew from such conversations before they got any grosser!

With all due respect to the preferences of men like Yudi, one can’t help but wonder: Didn’t nature intend us to have body hair? In a recent research, it has been observed that a lot of women, regardless of how people feel about them, prefer to be as natural as possible (no, we aren’t talking about birthday suits... yet!). Not only have women joined hands for the cause, there are now forums supporting women who feel awkward due to excessive facial or body hair. Campaigns such as ‘We Can Face It’ was designed specifically to support women with unwanted facial hair. Renowned comedian Shazia Mirza went ahead and featured a show called @#$% Off, I’m a Hairy Woman! on BBC. She also put her out-of-the-box thinking on display, when she had hairy women walking the ramp for her, wearing ‘sexy’ underwear made of body hair! I think we need to cut some slack here for the ladies. It is a tough job after all. Temporary hair removal techniques such as shaving, waxing, depilating, epilating, sugaring and threading are not only cumbersome and painful but are also riddled with ugly possibilities of cuts, scars, and skin pigmentation.


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Monday, September 3, 2012

Sequels for Sallu

Fresh from his break-up after a six-year relationship with Katrina Kaif, Salman Khan seems to have his hands full with sequels – movie sequels, that is. He’s bagged four big upcoming sequels, namely, those of Wanted, Partner, No Entry, and also of Mr. India with Boney Kapoor. Safe to assume that Salman is handling the break-up much better than Kaif, who was recently driven to tears by being quizzed about it...


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Saturday, September 1, 2012

Mayank Pareek, Managing Executive Officer - Marketing & Sales, Maruti Suzuki India

B&E: Amongst all auto majors, Maruti was best able to withstand the slowdown period. The secret(s)?
MP: One of the major factors that has worked in our favour in this case is our network expansion in the rural areas. We decided to go to the rural markets much before competition realised the potential. So, when other players were busy tapping the rural consumers, we were targeting the rural markets to generate future growth for the company. If a Lehman Brothers files for Chapter 11 in a developed market like US, it will hardly affect the consumer who is living in a Tier-III city in the Indian market. Once, close to 3% of our total sales used to come from rural markets but today, the percentage has risen to 18% and that too in a span of just two years. We have even broken many myths. In fact, 2% of our total sales come from villages which have less than 200 people! All in all, the rural strategy has worked well for us.

B&E: What is the progress on your planned R&D Centre at Rohtak?
MP: We have earmarked close to Rs.25 billion for the R&D project at Rohtak. We have already purchased land for the same and aim to build a world-class test-track on it. The central idea is to conceptualise, test, develop, design and manufacture a car for India in India.


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