Tuesday, July 31, 2012

Stocks Perform Better if Women Are on Company Boards

Companies with women on their boards performed better in challenging markets than those with all-male boards in a study suggesting that mixing genders may temper risky investment moves and increase return on equity.
Shares of companies with a market capitalization of more than $10 billion and with women board members outperformed comparable businesses with all-male boards by 26 percent worldwide over a period of six years, according to a report by the Credit Suisse Research Institute, created in 2008 to analyze trends expected to affect global markets.

The number of women in boardrooms has increased since the end of 2005 as countries such as Norway instituted quotas and companies including Facebook Inc. (FB) added female directors after drawing criticism for a lack of gender diversity. The research, which includes data from 2,360 companies, shows a greater correlation between stock performance and the presence of women on the board after the financial crisis started four years ago.
“Companies with women on boards really outperformed when the downturn came through in 2008,” Mary Curtis, director of thematic equity research at Credit Suisse in Johannesburg and an author of the report, said in a telephone interview. “Stocks of companies with women on boards tend to be a little more risk averse and have on average a little less debt, which seems to be one of the key reasons why they’ve outperformed so strongly in this particular period.”

Risk Aversion

Net income growth for companies with women on their boards has averaged 14 percent over the past six years, compared with 10 percent for those with no female director, according to the Credit Suisse study, which examined all the companies in the MSCI ACWI Index. (MXWD) The net-debt-to-equity ratio at companies with at least one female director was 48 percent, compared with 50 percent at all-male boards, and the study showed a faster reduction in debt at businesses with women on the board as the financial crisis and global economic slowdown unfolded.
While female representation increased to 59 percent last year from 41 percent at the end of 2005, countries such as Japan and South Korea are lagging behind the U.S. and Europe, which has added female representation the fastest over the six-year period.
Larger companies have a higher proportion of women on their boards, as well as those in the health-care industry -- 73 percent have at least one female director -- and industries close to consumers, the study shows.
Health-care and consumer companies “are slightly more defensive companies anyway, but even within that we found that stocks in the health-care sector and the consume-staples sector, which had some level of gender diversity on the board, were generally outperforming their peer group,” Curtis said.

Not Promoted

The materials and information-technology sectors have the highest percentage of male-only boards, both at more than 52 percent, according the report.
“Traditionally some industries have just never really been seen as the domain of a woman, like some of the mining industries or heavy-capital goods industries,” Curtis said. “Women haven’t generally been promoted through the ranks of those industries and then made it up to board level.”
The group 2020 Women on Boards, which is pushing for 20 percent female directors by 2020, has identified more than 200 companies that lack a single woman on their board, including Sarasota, Florida-based Roper Industries Inc. (ROP)

Female Candidates

While Roper Industries, which makes engineering products for the water, energy, transportation and medical industries, doesn’t have an open slot for a director, the company is “more than willing to consider female candidates for the board and would be anxious to find one that would fit in,” Chief Executive Officer Brian Jellison said in a telephone interview.
In the U.S., 36 percent of companies still have no women on their boards of directors, according to a report by researcher GMI Ratings on gender diversity released today. The average corporate board has about nine members.
“Multiple academic studies have concluded that diverse corporate boards exercise more diligent oversight,” Michelle Lamb, author the study, said in a report. “They have better attendance records than homogeneous boards, and they invest more effort in auditing when the complexity of the business warrants heightened scrutiny.”
Facebook, the world’s largest social networking service, based in Menlo Park, California, appointed Chief Operating Officer Sheryl Sandberg as its first female director about a month after its May initial public offering.
(Source: Bloomberg)

Monday, July 30, 2012

Singh’s $400 Billion Power Plan Gains Urgency as Grid Collapses

India’s worst power-grid failure in a decade exposed the urgency behind Prime Minister Manmohan Singh’s bid to attract $400 billion in investment and ease an electricity deficit that is holding back economic growth.
Seven states that are home to more than 360 million people were plunged into darkness early yesterday as power networks collapsed, possibly after too many provinces simultaneously purchased electricity beyond their scheduled allowance, Power Grid Corp. (PWGR) of India Chairman R.N. Nayak told reporters. It took about 15 hours for 80 percent of services to be resumed.

The blackout “was a fairly large breakdown that exposed major technical faults in India’s grid system,” Subhranshu Patnaik, a Gurgaon-based senior director at Deloitte Touche Tohmatsu India Pvt., said yesterday. “If this were a simple demand-supply problem, the grid operator would have intervened to strike a balance. Something went terribly wrong which caused the backup safety systems to fail.”
Businesses and households across much of Delhi, Haryana, Punjab, Himachal Pradesh, Uttar Pradesh, Jammu and Kashmir, and Rajasthan states had to turn to generators, while services on New Delhi’s metro and Indian railways were suspended for several hours. Traffic signals failed, jamming roads for morning commuters.
“Power supply has been restored to all states and the situation is near normal now,” Power Grid’s projects director, I.S. Jha, said by phone yesterday. “We will have complete normalcy once thermal plants resume complete generation.” Jha said Power Grid, the world’s largest transmission utility by capacity, had brought electricity from the eastern and western regions to reconnect services.

$400 Billion

Prime Minister Manmohan Singh is seeking to secure $400 billion of investment in the power industry in the next five years as he targets an additional 76,000 megawatts in generation by 2017. India has missed every annual target to add electricity production capacity since 1951.
Power cuts are common across swathes of India as the country battles an average 9 percent shortfall in meeting peak power demand that the government says shaves about 1.2 percentage points off annual economic growth. The affected states are responsible for about 37 percent of electricity consumption, according to the Central Electricity Authority.
“This again highlights how poor infrastructure remains the biggest drag on the Indian economy,” said D.H. Pai Panandiker, president of RPG Foundation, an economic policy group based in New Delhi. “The power sector remains too over-regulated. Unless private companies are allowed greater involvement, the problems are going to remain.”

Inflation Driver

Improving infrastructure, which the World Economic Forum says is a major obstacle to doing business in India, is among the toughest challenges facing Singh as he bids to revive expansion in Asia’s third-largest economy that slid to a nine- year low of 5.3 percent in the first quarter.
Tussles over policy making with allies in the ruling coalition, corruption allegations and defeats in regional elections have weakened Singh’s government since late 2010.
The Reserve Bank of India has blamed infrastructure bottlenecks for contributing to the nation’s price pressures. Most analysts forecast the central bank will refrain from cutting rates in today’s monetary policy decision. Indian consumer-price inflation was 10.02 percent in June, the fastest among the Group of 20 major economies, while the benchmark wholesale-price measure is more than 7 percent.
The grid failure occurred at 2:32 a.m. local time yesterday, Nayak told reporters. Nayak will lead a government committee to investigate the cause of the disruption and will report in 15 days, Power Minister Sushil Kumar Shinde said.

Trains Halted

The failure is “a prime example of India’s infrastructure not being up to the mark,” said Mumbai-based analyst Rohit Singh at IDBI Capital Markets Services Ltd. “India needs to get to the point where one failure to the grid doesn’t take down an entire region. That should be the goal.”
About 150 trains were delayed across northern India, according to Neeraj Sharma, spokesman for the region. New Delhi’s airport didn’t have to cancel any flights as it switched to back-up power supplies, spokesman Kapil Sabharwal said.
Yesterday’s outage was India’s biggest power failure since 2001 when the same northern grid collapsed leaving homes and businesses without electricity for 12 hours. The Confederation of Indian Industry, the country’s largest association of companies, estimated that blackout cost companies $107.5 million.
Indian Oil Corp. Ltd. (IOCL)’s refineries in north India were unaffected by the outage as they have their own power stations and distribution lines, refineries director R.K. Ghosh said by telephone. Indian Oil, the nation’s biggest refiner, has crude processing plants in Haryana and Uttar Pradesh states in north India.

Reactors Trip

Nuclear Power Corp. of India Ltd.’s five units in Rajasthan tripped this morning after the outage, G. Nageswara Rao, director of operations, said.
It will take up to 36 hours to restore the units, Rao said in a phone interview from Gujarat, adding that the company’s two units in Narora in Uttar Pradesh were working after they faced some disturbance earlier.
“We need to find out exactly what happened so that we can make India’s grid safer and more secure,” Gopal Saxena, chief executive officer at BSES Rajdhani Power Ltd., a unit of Reliance Infrastructure Ltd. (RELI) that supplies western and southern parts of the capital with electricity, said in an interview.
“When one or two states draw too much power at the same time, the grid breaches its transaction frequency, which is what may have happened,” said Power Grid’s Nayak.
(Source: Bloomberg)

Area under paddy cultivation shrinks in Bengal's rice bowl

Sheikh Rabiul of Boromuriya village at Golsi block in Burdwan district has scaled down area under paddy cultivation by over one-third this year.
Of his little over seven acre land, approximately five acres have been used for sowing paddy. Traditionally a rice farmer, he is now considering opportunities to sow cash crop in the rest of the land.
Burdwan is the rice bowl of West Bengal, producing three paddy crops a year. But lack of remunerative prices during the last couple of seasons forced a large number of farmers in the region to reduce sowing area under paddy in this kharif season.
“Last year, I produced close to 300 bags (of 60 kg each) of paddy. I could only sell 100 bags while the rest is still lying with me,” Rabiul told Business Line.
The 35-year-old farmer could not repay the loan last year and is now borrowing money from private lenders to sustain the current season. “Another bad season and I will be in for real trouble,” he says.
Procurement system
Over and above the regular issues related to agri-marketing opportunities, Ms Mamata Banerjee-led West Bengal Government’s decision to drive middlemen away from the market and put rice mills in sole charge of procuring paddy from farmers, added to the liquidity crisis.
As the State Government fixed support price for paddy without much back-up on rice procurement end, rice mills landed in a cash crunch and did not pick up the produce from farmers.
In the end, farmers were left at the mercy of the open market. “We are unable to offload our last year’s produce. We are, therefore, holding on to the stock in anticipation of getting better price by selling it in the open market this year,” said Salauddin Mullah.
Poor rains
The steep rise in fertiliser prices and poor rains have only worsened the situation.
“Price of key fertilisers such as di-ammonium phosphate and potash and pesticides has more than doubled in the last one year. The price that we are getting does not even help us cover our production cost,” he said.
The delayed monsoon is also likely to impact productivity of the crop. “Transplantation has to be done within 18-22 days of sowing of the crop; otherwise, yield will get affected. But, for transplantation, we need good rains,” said Nazib Sheikh, another farmer.
According to the District Agricultural Officer, close to 10-15 per cent of the transplantation work has been done in the district till date, against 30-35 per cent last year. “Transplantation will pick up soon as the water from DVC dam will be released this week,” he said.
(Source: Business Line)

The pill pushers

Amit Kumar was 22 when he was hired by a big pharmaceutical company as a medical representative in 1994. After 45 days of training, his sales target was fixed at Rs 75 lakh for the year. He visited several chemists in the area assigned him to find out who the popular doctors were and what medicines they were prescribing. Soon he had a list of 200 doctors with high “prescription potential” and started calling on them. Straightaway, Kumar received “subtle and indirect” requests. “Most doctors had an assistant or compounder who would convey to me the need for certain items.” The next day, these items — a laptop or a refrigerator — would reach the doctor’s clinic.
The game got bigger with time. Once, when his colleague was pitching calcium products to an orthopaedist, the doctor said abruptly: “I am busy whitewashing my house; it is a very expensive affair.” The message couldn’t have been more direct. The next day, the company got the job done. Another time, his company had organised a medical conference in a Delhi five-star hotel. Accommodation at the hotel was paid for, but doctors had to pay for the food — on a previous occasion, one doctor had treated his friends to a lavish dinner at the company’s expense. But that didn’t help, found Kumar, as one doctor “had made around 40 international calls from the hotel”. “Doctors know that medical reps wants something from them,” he says sardonically. “And so they want something in return.”
* * *
Indian pharmaceutical companies spend around 7 per cent of their turnover on market development. With domestic sales of Rs 60,000 crore, their annual marketing budget works out to Rs 4,200 crore. As companies cannot advertise prescription drugs, a large chunk of this money is spent on marketing directly to doctors. There are about 700,000 doctors in India; so the amount works out to almost Rs 250,000 per doctor per year.
The Indian market is cluttered with drug makers. Till 2005, India recognised only process patents, not product patents. Indian companies were free to make any drug in the world so long as they tweaked the process a little. Even this rule was seldom enforced. The idea was to keep medicine costs low. That did happen, but the fallout was 20,000 pharma companies, many operating out of garages, and hundreds of brands for the same medicine. In such a fragmented market, heavy-duty marketing with the doctor is the only easy way out. Thus, most mid-size and large companies have 4,000 to 6,000 medical representatives on their rolls.
The result is over-prescription. Amit Sen Gupta, joint convenor of Jan Swasthya Abhiyan, a coalition of civil society organisations working in the field of healthcare, says this is the reason doctors continue to prescribe cough syrups, though “no medical student is taught to prescribe them. Cough syrups are a throwback to the 1960s.” Indiscriminate prescription of antibiotics, he says, has made India a major source of superbugs. When doctors write expensive drugs, patients do not buy the recommended dosage and run the risk of under-medication.
It starts with small gifts such as a pen or a notepad. Flattery is an indispensable tool of a medical rep’s trade. A consultant psychiatrist remembers the area sales manager of a pharma company would keep calling him “senior doctor”, though he had just started out. The drug maker offers to take care of chores: paying the bills and taking care of children’s school admissions. Within no time, the gifts start to become larger: cars and even overseas junkets for the whole family (sold as medical conferences at exotic locales). Sen Gupta recently found that a drug maker had sponsored a doctor’s son’s education in the US!
Amitabh Saha, a psychiatrist who has worked with a pharma company, remembers the wedding of a fellow psychiatrist’s daughter. Doctors from across the country were on the guest list. “A pharmaceutical company had paid for everything, from the sangeet to the pheras,” he says. Another doctor in Mumbai asked the medical rep for — and got — a pair of Siberian Huskies for his son; each costs around Rs 35,000.
An executive in a domestic pharma company, who heads the sales teams for Tamil Nadu and Kerala, says very few doctors refuse. “The most popular offers are sponsored trips to conferences and vacations for doctors and their families. It is not uncommon for bigger pharma companies to book 100 rooms in five-star hotels where conferences are being hosted for doctors.” Cash and gold coins are accepted, but consumer durables and cars are not favoured these days, he says. Some companies target senior doctors — in this extremely hierarchy-conscious profession, it is the surest way to popularise your product. Only, the benevolence of senior doctors doesn’t come cheap.
A recent report of the Parliamentary Committee on Health and Family Welfare, tabled in the Rajya Sabha, found that expert opinions needed for drug approvals were ghost-written by companies that had sought the approvals. Reports sent in by different experts on a drug were found to be exact copies of each other — down to the errors! These opinions are submitted to the Central Drugs Standard Control Organisation which uses them to approve or reject applications to launch the drug. There was “ample evidence” to suggest that these expert opinions were “actually written by the invisible hand of the drug companies and experts merely obliged by putting their signatures”, the report concluded.
The third cog in this well-oiled machine is the chemist. His shop is where the medical representative gathers market intelligence: the prescription preferences of doctors, and whether they are recommending his medicine. (Some even pose as patients and ask others what the doctor has prescribed.) He can also be induced to sell a particular company’s medicine, though the doctor may have prescribed another brand. But, in comparison to doctors, the chemist gets crumbs. The medical rep may give him a few free samples which he can sell to unsuspecting customers. Particular brands can be pushed, says Lucknow-based chemist Sanjay Chauhan, only in the case of over-the-counter medicines which don’t require prescription and therefore the upside is limited. “While doctors might be sent to Singapore on vacations, we don’t get any benefits,” laments Raj Singh, owner of Rathi Medicos in New Delhi’s Vasant Kunj.
* * *
Doctors and pharma companies say the claims of the parliamentary committee report are exaggerated. On May 27, Aamir Khan’s show Satyamev Jayate turned the spotlight on “corrupt” doctors. His guests included the owner of a pathology lab who admitted to overcharging patients because he had to pay commission to doctors. Former Medical Council of India chief Major General (retired) Som Jhingon confessed to resigning in a year as he was unable to run the council in a disciplined manner, and K K Talwar, chairman of the board of governors of the council, revealed that since 2008 not a single doctor’s licence had been revoked even in cases of malpractice. Doctors all over the country were up in arms against Khan. Indian Medical Association Secretary-General D R Rai asked for an apology from Khan for “having defamed and given one side of the story on [the] medical profession.” Khan refused. The association did not respond to questions sent by Business Standard.
A senior doctor, who is a member of the Indian Association of Paediatrics, says doctors are often undecided about which brand of a drug to prescribe. This is where marketing comes in. The problem, if there is one, has been created by the government which has allowed so many pharma companies to come up. Visits to medical conferences, he adds, are “simple marketing, not a nexus. As long as it doesn’t cross the limit, a gift is just a goodwill gesture to strike up a friendship”. A psychiatrist says not more than 10 per cent of psychiatrists in the country accept gifts, so it’s wrong to malign the entire fraternity. Some doctors insist that visits to medical conferences are serious business and not family vacations in disguise.
On July 18, this lakshman rekha (sacred line) was the subject of deliberations between three important lobbies of the industry — Indian Pharmaceutical Alliance, Organisation of Pharmaceutical Producers of India and Indian Drug Manufacturers’ Association. “Calendars, notepads and pens act as brand reminders,” says D G Shah, director general of the Indian Pharmaceutical Alliance. “But when you take the doctor on a cruise, it is unacceptable.” Shah is lobbying with the department of pharmaceuticals to instate an ombudsman, a man of integrity, with the Indian Pharmaceutical Alliance willing to bear the entire cost.
Pharmaceutical companies say their interactions with doctors are unavoidable and harmless. “Doctors are taken for seminars and conferences, which is important to educate them. Even in developed countries there are such activities known as continuous medical education,” says Lupin President (India and CIS) Shakti Chakraborty. “Marketing is the very soul of the pharma industry,” adds R C Juneja, CEO of fast-growing Mankind Pharma.
The government, which has received complaints of a nexus between doctors and drug makers, is working on a code of conduct for pharma companies and medical reps. “There have been a couple of meetings and we will soon notify the code,” says an officer in the department of pharmaceuticals. The plan, as of now, is to keep the code voluntary, but the government may consider making it mandatory if self-regulation fails. “We will watch for another six months as industry bodies have assured us that self-regulation will work,” the official adds. According to sources, the code proposes to curb even the number of samples given to doctors by a pharmaceutical company.
Self-regulation is nothing new. In 2009, Indian Medical Council had barred its members from accepting gifts from pharma companies. Juneja of Mankind says curbs or self-regulation cannot work as the government does not have the means to monitor it. Some hospitals know that popular opinion is on the boil. One Delhi-headquartered chain has written a 50-page code of conduct for its doctors. Manipal Hospitals, which operates 17 hospitals, has created a corpus to help its doctors travel abroad on educational trips. “Doctors shouldn’t be tempted to accept any inducement,” says CEO Rajen Padukone. But a lot still remains to be accomplished.
(Source: Business Standard)

Look who's talking

You may know all about the internet, a world of bits and bytes formed from the interactions of people and machines. But are you ready for the ‘internet of things’, a network where machines talk to each other? Using the wireless modes that we now use for communication such as GPRS, wifi, 2G, 3G and LTE networks, machines are increasingly blipping bytes to each other. You could get your home appliances to do your bidding even when you are out of the house. At another time, a pacemaker could warn you about an odd heartbeat and the nearest hospital.
It is this internet of things that will be key to the data strategy of telecom operators in India. Buffeted by regulations, corruption and punishing margins in voice, telecom operators can’t wait to increase their revenue from data usage.
In their arsenal are machine-to-machine (M2M) services that will eventually make machine internet a reality. Setting aside the science-fiction connotations, M2M applications are growing roots across the world. Some countries are mandating the use while others are adopting these ad hoc. India, though lagging, could catch up fast if telecom operators can get their pitch right.
IN A NUTSHELLTelecom operators can’t wait to increase their revenue from data usage. Here’s how they are looking to gain the early mover advantage
  • # 1 The story so far
    The adoption has been slow. For now meter reading, surveillance, vending or other point of sale machine systems, remote monitoring and fleet tracking are the first set of M2M services being put to use
  • # 2 Future promise
    Information gathered by the machine about the machine or data entered into it pushed to a system, guided by a programme, for analysis. Current uses can be extended to telematics, telemetry, smart homes and gadgets
  • # 3 Example of M2M application for consumers in India
    Handygo Founder and CEO Praveen Rajpal says its mobile commerce application, RockASAP, which powers Airtel Money is an instance of end consumer M2M use. “It could extend to mobile vouchers in m-commerce and tracking fund disbursement in m-governance,” says Rajpal
  • # 4 Evolution curve
    Berg Insight, the wireless analyst, says the most significant market development in 2011 for M2M was the breakthrough of cellular M2M communication in Asia-Pacific, thanks to China. South Asia, including India, is at an early phase of adoption
According to the independent wireless analyst firm Berg Insight, the most significant market development in 2011 was the breakthrough of cellular M2M communication in Asia-Pacific. The number of M2M subscribers in the region increased by 64 per cent to reach approximately 34.5 million, fuelled massively by China with a base of about 21 million. The EU and the
US have about 30 million and 27 million respectively. Berg noted that South Asia and Southeast Asia were still at an early phase of adoption with few M2M subscribers in countries like India.
Najib Khan, chief marketing officer (enterprise services), Bharti Airtel, says that the early adopters will be enterprises because of the problem-solving nature of M2M services. For the machines to transmit information over long distances, they will need a SIM card to ride the airwaves over long distances. This makes the role of the telecom operator in M2M services indispensable.
Operators as consultants
M2M communication has been enabling automation, control, information relay and analysis of that information for those who adopt it. Indian consumers are still some time away from a smart home that is being enabled by some of AT&T’s applications such as security camera monitoring, remote door locks and home appliance controls that would get mapped on smartphones. Before consumers in India can dream of smart homes like the $113 million one that belongs to Bill Gates, it will be enterprises that will be the early adopters. M2M services which increase efficiency and solve business problems are what telecom operators are banking on to fuel their consultancy bids.
When donning their problem-solving hats, the operators don’t want to be just network providers but end-to-end solution providers to businesses. M2M will be their way to bring in empirical data for analytics and monitoring that companies can use to get answers to operational and even strategic problems. The ensuing automation will cut out errors and manual labour at the same time.
However, the adoption has been scattered so far. For now, metre reading, surveillance, vending or other point of sale machine systems, remote monitoring and fleet tracking are the first set of M2M services being put to use. In India, M2M is restricted to vehicle tracking and metre-reading. These are not even a blip on the evolution of M2M services. “You can do this on SMS and don’t need end-to-end strategies for these,” says Naveen Chopra, director, Vodafone Business Services.
Udit Shanker, CEO, TeleDNA, an M2M application provider, says, “Most of the applications in M2M today are still pull-based. People have to pull information relayed by machines. True M2M conversations are those which are automatically pushed for perusal and need no human intervention.” Adds Ashish Gulati, country manager, Telit Wireless Solutions, a global provider of M2M modules and services, “Monitoring and smart metering have been deployed over the last five years. For now, radio cabs, asset tracking by logistics companies and even point-of-sale use of handheld devices by microfinance, courier and retail agents are what M2M is being used for.”
Volume game
Not only is M2M being used for the most basic of purposes in India, it is yet to get critical mass. And volume is what this segment will survive on. Chopra says that M2M implementation does away with manual intervention and errors, saving costs and manpower. However, it will be volume-driven.
Sridhar Pai, founder and CEO of Tonse Telecom, a telecom and M2M research company, says “The data traffic from one SIM generated by M2M is very little. Only when devices are wired up on a large scale will M2M services yield substantial revenue.”
“Metre-reading using M2M would be one relay of info or ping an hour per million customers. Otherwise, just a staid once-a-month metre-reading will provide the utility company with no additional knowledge. Hourly pinging by metres gives the company data to understand how the city uses its electricity every day which it can correlate to its boilers and generation,” Chopra adds.
It is the need for volume that is driving telecom operators to approach it as a part of their enterprise business. “There will be companies who will come to us for connectivity alone, but the real value for us from M2M will come when we can provide analytics, when we can work with system integrators and device manufacturers to provide consulting beyond wireless connectivity,” points out Chopra.
For Airtel, M2M is a big part of its MATES (mobile application tools for enterprises) strategy. There are applications that are hosted at the customer’s end. It has already seen 10-15 per cent of its B2B data revenues generated by its M2M assignments in the last three years. Applications are in the realm of automatic metre reading, mobile finance, point-of-sale or vending machines and vehicle tracking. To convince its clients, it has enabled complete M2M services at all its towers that monitors fuel consumption and also prevents theft. It is one of the advanced uses of M2M — telemetry — which can monitor any product out on the field, from gensets to vending machines.
Some of its functional M2M services include managing Bangalore Traffic Police’s database of vehicles and traffic violators on smartphones given to all 650 officers. As a result data from two million cases can be pulled out in two minutes. With the Odisha State of Road Transport Corporation, Airtel has installed vehicle tracking and a passenger information system within the buses for commuters, all operating through SIMs.
Vodafone will look to enabling push M2M services in the long term. “The M2M conversations could feed the client’s SAP system to generate diagnoses,” Chopra says. Take visi-coolers used by soft drinks companies. Today, most FMCG companies can track these fridges that provide in-store branding and preserve their product’s shelf life at the retailer’s. “But it is only the tip of the range of possibilities,” adds Chopra.
He cites how M2M between the company’s backend server and a device in the fridge can indicate how many times the door is opened or the fluctuations in temperature as a result of that. “Imagine the feedback that the beverage company can give to its fridge provider — it can ask for anything from sturdier door frames to compressors better suited for the region. In short, such empirical data can lead to more relevant customisations,” Chopra explains. Instead of being just cost centres, these machines from all over the country can help the company operate more efficiently. The SIM devices can be retro-fitted on the devices as well.
Vodafone is turning to its international repertoire to preempt M2M demand in India. BMW, for example, uses Vodafone’s M2M analytics for remote car diagnostics and even concierge services.
Chopra says, “We happen to be one of the leaders in M2M best practices, with a 200-strong team stationed in Germany that work on M2M applications, run the platform, develop new services, roadmaps, evolution curve, and relevance in different countries.” Vodafone India then wants to bring in this team’s consultancy mindset and the understanding of M2M to the country. Just like BMW, car manufacturers in India too could look at M2M to get around the challenge of operating a wide service network in India. SIM-enabled cars could alert the manufacturer’s service centre about, say, a vehicle overheating in far-out places. The vehicle user would then get a message asking her to pull over and pour water in the radiator, avoiding a bigger crisis. Gulati says, “Telematics in M2M would combine not just navigation but information relay about the vehicle’s health as well.”
Vodafone has already started developing a platform to be unveiled by the end of October. For Vodafone, it will provide a dashboard to maintain the M2M set-up of the clients and remotely diagnose any problems in the SIM-enabled machines. This is where the billing and customer service will also be hosted. “The platform can tell clients if they need to send a person to fix the machine at all,” says Chopra.
Tata Docomo spruced up its non-voice services last year with people in both the central and circle offices. The team would activate mobile payments, remote diagnostics, mobile education — different uses that M2M can be put to. “One can either use a SIM or NFC (or near field communication is the next generation short-range high frequency wireless communication technology which enables the exchange of data between devices build with this technology) for such interactions,” says Sunil Tandon, head, non-voice services, Tata Teleservices.
In some developed markets, there are other wireless solutions such as ZigBee etc for smaller areas. Tata Teleservices is conducting focus groups to understand the needs of the market. The sectors such as BFSI, manufacturing and BPO have remote surveillance needs which it would address first. Tandon says that remote diagnostics by which doctors can be informed about a patient’s vital statistics and as a result, warn the patient of any irregularity would be an area it would concentrate on as well. Like Vodafone, it is putting in place a platform to integrate billing systems and manage features to support the internet of things.
Survive in an ecosystem
Any internet carrier can enable an M2M ecosystem. For those that need SIM cards, mobile operators are the most important link in the chain. But device manufacturers and software companies are also indispensable. Airtel works with 25 software vendors to customise applications. Khan of Airtel points out that original equipment manufacturers such as white goods brands would need to embed chips or SIM into their products to enable such an environment. Chopra says, “Even for B2C M2M applications, I will still have to talk to the equipment providers.”
Gulati of Telit Wireless Solutions says Telit hopes to play a bigger role because M2M communications need different capacities and products from man to machine interactions. It recently bought Calixto Solution, a Bangalore-based electronics product enablement company, to develop applications for both the B2B clients and retail consumers. “The infrastructure is already in place. So stakeholders need to invest at the product level. We are waiting for more and more machines to join the wireless network,” says Gulati. TeleDNA is one such value-added service provider for telecom operators which is readying a framework or a platform for those operators that might not have a proprietary one. The server or platform deployed at the operator’s end would handle both billing and customer service, says Shanker of TeleDNA. But network speeds will also play a role, something that 4G and LTE might redefine for India, he adds.
Revenue streams
The telecom operators can’t wait for the rollout of the next wave of technology. M2M and enterprise solutions provide an assured stream of revenue according to experts. “It binds them to the solution provider because it manages more than just the network,” says Shanker. Chopra of Vodafonei agrees: “M2M pitches will have to be made to the CXOs of a company because they have to see its relevance for their business and not just one function. We want to be in the consultancy space, because it allows us to have more conversations for services rather than negotiations. The relationship with such end-to-end solutions reduces the need for churning out.” Vodafone will bank on its global enterprise clients to deploy M2M solutions once its platform is ready.
While sales force, logistics and metre-reading are often traffic-based revenue models, providing M2M as part of their enterprise solutions will allow operators to either sell the platform and system to the clients as a capital investment and charge for annual maintenance or rent out their back-end platform for the daily running of the systems they put up for the client.
Till then consumers can get an idea of the things to come with the help of smartphone applications such as the just-launched Chirp by a British developer that allows links to be shared via sound on a phone’s loudspeaker. The stated objective of the founders: to enable anything that carries sound to carry data such as doorbells, saxophones, car horns and so on.
(Source: Business Standard)

In Gujarat, rural consumers cut spending on leisure

For Rameshbhai Thakur, a resident at Chhatral, a small town located some 20 km away from Gandhinagar, high inflation is not a great concern.
The only impact of inflation, says Thakur, who works at a nearby Nirma plant, has been on leisure and entertainment. “We now watch only one movie in a week against two or three some six months ago.”

Thakur’s is not a unique case in Chhatral, or in most small towns in Gujarat, one of India’s largest states.

The town, which houses around 10,000 people, speaks for itself. Chhatral greets you at its entrance with a series of solar-powered street lights and a posh new high school. Adding to that, almost 20 per cent of the locals have relatives staying abroad (mostly in the US). “Indeed, prices have risen due to inflation. But that has not stopped the locals from buying their Pepsodents and Pantenes,” says Ramnikbhai Metdiya, who runs one of the largest provisions stores in Chhatral.
India’s wholesale price inflation rose 7.25 per cent in June, much above of the Reserve Bank of India’s five per cent “threshold level”. Consumer price inflation stood at 10.02 per cent in the month. The country’s gross domestic product growth slowed to a nine-year low of 5.3 per cent in the March quarter, triggering fear that the economy is slowing down sharply.
Metdiya, however, says residents in Chhatral would not compromise on shopping. “In the last couple of years, consumerism has picked up here so much that one would not like to compromise on his shopping.”
The rise in the town’s purchasing power is mainly attributed to two things--first, land appreciation due to industrial development nearby areas (Chhatral is close to heavily industrialised Mehsana and Kalol) and second the presence of a Gujarat Industrial Development Corp (GIDC) industrial estate in Chhatral.
“Today, even the farmers wear jeans here,” says Kishore Patel, former sarpanch of the town’s Gram Panchayat, referring to Chhatral’s economic progress.
Says Pratapji Thakur, the sarpanch at Chhatral Gram Panchayat: “Most of the farmers in Chhatral have sold a couple of bighas from their land bank, turning rich overnight recently. Today, every house has a two-wheeler and over 20 per cent farmers own four-wheelers in Chhatral. We also have local branches of HDFC Bank, Dena Bank, Bank of Baroda, SBI (State Bank of India) and ICICI Bank, resulting in considerable savings.”
Rural and small town consumers in Gujarat generally share the views of Chhatral residents in terms of consumption. They agree that inflation has put them under pressure, but are still upbeat on spending for consumer goods.
Dhruv Patel, who studies at an engineering college in Kalol, an industrial town near Gandhinagar, says he has cut down on eating out due to price pressure. “Six months ago, we would be frequenting these new restaurants twice a week. But now, it has come down to just once or twice a month,” says Patel.
Monsoon in India is 22 per cent below normal so far, Gujarat being one of the worst hit states.
According to Y K Alagh, a renowned economist and a former member of the Planning Commission, rural consumption in Gujarat remains high as inflation has had a mixed impact on farmers in the state. “At 42 per cent, Gujarat boasts of a higher proportion of non-rural population against a national average of 30 per cent. This means more and more rural areas are getting influenced by urban consumerism. Adding to that, food inflation has also resulted in rise in incomes for farmers in Gujarat, thereby, strengthening their purchasing power. This has made sure that rural consumption in Gujarat remains high,” says Alagh.
Mahesh Patel, a medical store owner Singarva, near Ahmedabad, will agree with Alagh. “Consumers continue to buy costly branded items, although the quantity of purchase has reduced. Our sales are not much affected,” says Patel. Locals maintain the spending on personal care and food items is difficult to curtail in the current lifestyle. However, some say they feel the heat of inflation, which forced them to postpone plans to buy expensive durable goods.
Dinesh Patel, who lives with a family of five in Singarva, says the high prices of food items and reduced earnings from the farming business have brought him and many of his fellow residents in the town to reconsider their spending. “There is already much pressure on our pockets due to high prices of routine consumption goods. Very less is left for saving. We are holding back spending on items like fridge or television or tractor for now,” says Patel, who has about eight bighas (around 18,600 square metres) of land.
A town of 15,000-16,000 people, located about 10 km from Ahmedabad, Singarva has agriculture and animal husbandry as main activities. Nearly 45 families from Singarva depend entirely on farming — mainly paddy, bajra and wheat.
“It’s difficult to cut spending on regular items like powder, hair oil, etc. We have cut our vegetable purchases instead, as prices have shot up sharply,” says the wife of a local resident.
(Source: Business Standard)

Quantum MF rakes the moolah as industry cries foul

Talks of how to "restore" growth to Indian mutual fund industry have accelerated ever since the Prime Minister Office's showed its keen interest to revive the industry in June this year.
Industry officials are unanimous on the point that lower penetration of mutual fund products, equity products in particular, is increasingly becoming a function of low fees being paid to distributors which is as low as 20-50 basis points, thanks to abolition of entry load in August, 2009.
 
According to them, this is creating hurdle in reaching out to potential investors in the country and as a result of it barring a select few big names in the fund management industry none is profitable.
Amid this, Quantum Mutual Fund, one of the smallest fund houses in India with an assets under management of barely Rs 200 crore, has bucked the trend and emerged as a profit making house within four years of starting its operations. And interestingly, for the fund house, which has a low-cost-model and is not dependent on distributors to sell its products, there is no look back as it continues to remain in the black.

The seven year old Quantum, founded by Ajit Dayal - former deputy chief investment officer of US-based Hansberger Global Investors; after making losses in the first three years, posted its first time net profit, though a meagre amount, of Rs 0.17 crore in 2009. This only moved north in the following years to Rs 3.47 crore in 2010 and Rs 4.94 crore in 2011. The fund house, which follows July-June accounting year, is all set to post profits in 2012 too.

"Investors are bothered about returns and not costs," says Jimmy Patel, chief executive officer (CEO) of Quantum Mutual Fund. If I charge my investors 25 bps less but give 50 bps higher return or which is comparable with my peers, investors look at me, he adds.

Currently, Quantum has six schemes in its kitty. Four in equity category, two gold funds and one each in hybrid and liquid segment. The much-hyped expense ratio on these products ranges from as low as 25 bps in gold funds to 1.25 per cent in its long term equity fund. This attracts attention as in an active diversified equity fund this is industry's lowest expense ratio.

Over 60 per cent of Quantum’s assets are into equities at around Rs 120 crore. Dhurva Chatterji, senior research analyst at Morningstar India, says, “Higher percentage of equity assets help fund houses and Quantum is benefitting out of it as fees are higher in equity schemes.”

Fund tracking firm, Value Research has given its highest rating to Quantum’s long term equity fund which puts the scheme amid big names of the industry.

"Though mutual fund is still a push product in India but we don't push our products. We erect stalls participate in exhibitions to meet potential customers and communicate to them what is equity investment all about and then send informative and educative articles to customers," explains Patel. After 2-3 months the fund house does a re-check with customers to get feedback and if they show interest one-on-one communication is arranged with them.

"As a result, the investor comes to us and starts in a small way. We have a small ticket-size of Rs 500 for first time investment. Later we ask whether they would like to do systematic investment (SIP) of systematic transfer plan (STP). We found that people start with Rs 500 and then they convert themselves into an SIP or STP and get married to us," he says.
Secondly, we maintain transparency and even we tell investors whenever we do mistakes. "We tell them up-front that invest for a long term else don't come. Moreover, we candidly explain that we do not give fancy returns but returns which are satisfying,” adds CEO.

This is why, Quantum has 4 per cent as exit load if investors move out within 6 months, 3 per cent till a year, 2 per cent till 18 months and one per cent between 18th and 24th months. Interestingly, at a time when suggestions are being floated to re-invest the exit load amount back to the schemes, Quantum has already been doing it which has benefitted the continuing existing customers.

It's a long-drawn-exercise but assures sticky assets to fund house. "Fortunately, after five years we are seeing that inflows," observes Patel.

At a time when industry is witnessing continuous decline in folio numbers, Quantum saw its investor base rise by over five-folds. Moreover, during the last three years when industry saw 10 per cent erosion in assets, Quantum's assets got more than doubled from Rs 92 crore in 2010 to Rs 190 crore in 2012.

According to Chatterji, “Quantum stayed away from distributors and still managed to grow with decent rate as they continue to bank on low cost model. However, such a process takes considerable long time.”

Quantum has its in-house out-bound and in-bound teams which take care of customers and process their queries and applications. In Mumbai, the fund house has put up hundreds of drop boxes too where customers put their filled application forms. It is also trying to replicate this in Pune. Recently, it opened its Chennai office too to cater to the southern part of the country. Majority of its customers are from the West and the South.

However, such a model has its limitations. According to chief marketing officer of large fund house, who requested anonymity, “No doubt, Quantum has successfully managed to sustain its low-cost business model without distributors. Moreover, for a specific limited region or a city such models can be implemented but for a wider market, it may not prove successful. Such a model prevents the fund house from joining the league of rapidly expanding fund houses.”

Independent experts agree. “That is why Quantum’s presence is not much in tier-I or tier II cities and is focused on large cities,” they add.

To address the issue, over the last one year Quantum is aggressive on its online marketing which has now showing results. More than half of the transactions are happening through fund house’s online portal which is quite significant and helping in keeping the costs further low.

“It's a paperless portal where no papers or signatures are to be submitted,” says Patel. Investors can open their folios and can start investment. One just needs to have internet connection and payment gateway attached with your bank or debit card and pre-paid cards too. As of now, 49 banks have been attached with the portal for facilitating transactions.

This is helping the fund house to further cut its costs. But again as in case of the exit load, Quantum is planning to pass on the benefits to its customers.
(Source: Business Standard)

32 million sq ft of office space expected to be absorbed in 2012: Jones Land LaSalle report

The global economic slowdown is pushing corporates to postpone their expansion plans, which is bad news for the office space leasing segment in India.

Even though construction activity is expected to continue at a fast pace which would mean 19% higher completions in 2012 compared to the year before, take up of space is expected to remain subdued during the year, says a new Jones Land LaSalle report called Indian Realty - Through the Looking Glass.

"We expect 32 million sq ft of office space to be absorbed in 2012, registering a decline of 12.5% over 2011," says the report.

The year 2011 saw record completion of office space projects as well as take up of space. About 37 million sq ft of space was absorbed in 2011, higher than the previous peak of 33 million sq ft achieved in 2008.

Major Indian cities saw strong preleasing of office space in under construction buildings. Many corporates decided to consolidate their office space by vacating more than one smaller spaces in central business districts of cities and instead taking up one or more larger spaces in cheaper secondary and suburban districts.

A decline in absorption is expected in 2012 because of corporates postponing their expansion plans. "Demand from domestic occupiers, although robust so far, is also under question due to concerns over domestic economic growth, delays in policy reforms, a projected slowdown in corporate earnings and moderately high core inflation. However, large IT occupiers seeking to consolidate or relocate are expected to generate significant demand for IT SEZ and IT buildings in peripheral districts," says JLL in its report.
(Source: Economic Times)

Hard work pays off for Wockhardt: Habil Khorakiwala, Chairman, Wockhardt

Habil Khorakiwala, 70, chairman of generic drugmaker Wockhardt, says that the company's near-death experience has taught him lessons that he hopes will last generations.

"We have decided not to touch derivative instruments. Some bankers still come to us with such products. I tell them, I don't want to risk my organisation in my lifetime or in my children's lifetime," says the septuagenarian chairman, much chastened after foreign exchange losses three years ago that almost drove his company into bankruptcy.

As a result pharma multinationals were hovering around for easy pickings, hoping to scoop up a firm that happens to be one of the fastest growing generic drug makers in India.

In April 2008, Khorakiwala, who founded Wockhardt in the early sixties, the company was then known as Worli Chemical Works, announced its first ever loss, due to a mark to market loss of Rs 581 crore on account of the huge devaluation of the rupee even as in the same year sales grew 35% to Rs 3,593 crore.

On Friday, when ET met him, a day after he completed a Rs 1,280-crore deal with Danone for Wockhardt's nutrition business, a confident Khorakiwala spoke candidly of his past troubles which are now behind him. Over the last two years, Wockhardt's debt-equity ratio has come down significantly from a high of 5.5:1 to 1.9:1, which will be below 1 after the money comes in from Danone.

The stock has seen an exponential rise, jumping almost 200% in the last one year a sign, analysts say, investors have started re-rating the company.

Acknowledging the role of his immediate family and his top management team for standing by him as he struggled to steer the company back into profitability, Khorakhiwala is certain that the turnaround is complete as a series of sales of non-core assets that included hospitals and the nutrition business helped pare debt even as core operations improved.

Generics, the core business, has consistently delivered, even during its troubled years post 2008.

Its Ebitda margins over last three years have thus showed a consistent rise. In 2011-12, it was about 31%, while in the previous year it was 24%. In 2009-10, it was 18%.

Wockhardt has about 70% of its sales accruing from overseas, mostly the US. Hedging is par for the course for companies with forex exposure. TCS, Infosys hedge as a matter of routine.

"We deliberated. We have a large portion of our business coming from overseas. It is neutral for us and we are not managing currencies. You burn your hands once then it takes time to recover," he says. A business runs on its inner core and inner strength, he says and for Wockhardt the only challenge was the "financial challenge", and therefore could be resolved.

"We never had a business challenge. We remained very focused," Khorakiwala said.

BDO Haribhakti Group chairman Shailesh Haribhakti says Khorakiwala always maintained his equanimity." Habil Khorakiwala was calm and composed in our first meeting in early 2009.

He clearly understood the problem and told us that the only way to come out of the crisis is by improving operating performance and getting rid of non-core assets. This is what he did and today Wockhardt is a great turn-around story," says Haribhakti.

During the troubled years, its stakeholders held faith. The suppliers allowed Khorakhiwala more leeway, extending his credit while he ensured that all his employees got their salaries on time.

"Not once did any of our employees get their salaries reduced or delayed by even a day," Khorakiwala says. To plug the loopholes in the finance team, which almost wiped his company, Khorakiwala took some tough measures including changing the finance team.

During those difficult days, all eyes were on costs. "We reduced the operational costs everywhere," he says. It was not by belt tightening alone. "Wherever there were inefficiencies, people themselves took action." Thus, Wockhardt managed to prune costs in the manufacturing area by 10-15%, by pruning one layer of people from the five layers tuned into the manufacturing arena.

For a year, Wockhardt decided to freeze hiring and costs were pruned in sales and marketing organisation. "If you see my balance sheet of last three years and see the balance sheet before the crisis, you'll see a reduction in expenses today," says Khorakhiwala.

"Khorakiwala is an extremely sharp person. He has piercing insights about business. He is also a very tough person, because it is not easy to run a company when you have debtors hounding you every day. He could have cracked up and sold the company, but he didn't. Khorakiwala has taken risks and that has paid," said Sujay Shetty, head of Life Sciences at PwC.

Khorakiwala says his organisation was reinvented, as people found a way to manage with fewer resources. Around the same time as the foreign exchange losses exploded in its face, the R&D wing was working on a range of products in several areas.

Fortunately, some of these products in the pipeline have started to materialise. Metoprolol, the cardiac drug got the nod from USFDA. In anticipation of the nod, Khorakiwala took a huge bet by building an inventory and thus could at once supply to US drugstores when it received a nod from the regulator.

"We created inventory in advance before we got the approval. So when the opportunity came, we took the advantage. It was a risk but the upside was significant," he added. "We took a call, including keeping R&D and drug discovery processes (that cost money) intact. It's a big call. Usually that (R&D spends) is the big casualty," when companies are in trouble.

The company's corporate debt restructuring was painful after some creditors, notably hedge fund QVT which had invested in its foreign currency convertible bonds, dragged them to court.

The value of shares had fallen and the bondholders wanted the money back. The company offered shares, which was rebuffed. Had they taken it they would have been rich now, says the chairman of the company which has seen the stock price gain over 250% this year. Wockhardt is paying QVT and others in installments.

The US business is growing at a brisk pace. In the US, Wockhardt in 2011-12 notched up revenues of $370 million as against $230 million in 2010-11. In 2009-10, sales in the US was just $120 million.
(Source: Economic Times)

IndiGo airlines owner to foray into retailing at Metro stations, highways

 InterGlobe, which owns budget carrier IndiGo, is now making a foray into retailing at Metro stations and on highways. Its subsidiary Inter-Globe Retail has started opening shops at Delhi Metro stations with an investment of Rs 20-22 crore, and toll highways are next on the list. Carrying the US chain of stores under brand name 'Hudson News and Cafe', these stores would be offering travel essentials like food items and magazines.

InterGlobe had tied up with Swiss firm Dufry (which owns the brand name Hudson) to bid for duty free shops at Indian airports. While it has so far not opened any duty free shop and will bid for the new Mumbai airport, the group decided to use this franchise at Delhi Metro Rail Corp (DMRC) and highways. Moreover, airport duty free area bidding is a long-term affair and the InterGlobe-Dufry combine did not want to wait for years to make a start in India.

"About 20 shops have already opened at Metro stations and we will have 40 stores in the next two to three months. We have a 15-year concessionaire period with Delhi Metro for these stores. We are also going to have these stores at toll highways. They will meet the requirement of travellers by providing reading material, confectionaries and other impulse buying stuff," InterGlobe Retail director, Siddhanta Sharma, said.

While the group won't have a store on the Anil Ambanicontrolled Airport Express Line (which is currently closed for safety fears), there will be a shop on the Sector 21 Dwarka station's regular DMRC line. Like Metros abroad, the group estimates that 3-4 per cent of people using Metro stations would be using these stores. As of now, the InterGlobe Group has no plans of bidding for stores at airports, railway stations or highways abroad. For that, global company Dufry will tie up with local companies.

InterGlobe's IndiGo airline is the biggest budget carrier. Last month, its domestic market share was 26 per cent — just snapping short of Jet-JetKonnect's combined share of 27.4%. While the airline gives it visibility, the group controls almost all aviation-related activities like running a bus travel agency and providing software for selling air tickets to airlines.
(Source: Economic Times)

Delayed monsoon powers sales of inverters, batteries

Sales of inverters and batteries jumped about 30% for the quarter to June, as a delayed monsoon pushed up power consumption in energy-deficient India.

Manufacturers of power backup systems say they expect good profits this year, as the increase in sales will offset the rise in input costs due to a weak rupee.

The country's largest battery maker Exide Industries said growth was robust despite a 4%-5% rise in prices. "In the power inverter market, including batteries, growth has been 25%-30% in the first quarter compared with the corresponding quarter of the last fiscal," said executive vice-president, marketing and sales (industrial), Subir Chakraborty.

Growth was driven largely by higher consumption in southern India, he added. Manish Pant, managing director of inverter maker Luminous Power Technologies, said first-quarter sales grew manifold and the company plans to double capacity at its Baddi and Gagrit facilities in Himachal Pradesh.

"This has been a unique year where prices remained stable. Input costs of copper and lead increased due to rupee depreciation. But prices were good," Pant said.

India does not generate enough electricity to meet the rising demand from urban areas and industry. The shortage becomes acute during the summer months, forcing households to switch to power inverters.

The domestic market for inverters this year is expected to touch Rs 2,000 crore while that for batteries is estimated at Rs 5,000 crore.

Microtek International's national sales manager Sumit Datta said, "This summer has been great for Microtek sales, which grew about 25%." Datta added that the industry was forced to increase prices by 10%-15% due to dollar appreciation. Enthused by higher sales, some manufacturers have started tweaking their sales strategy.

For instance, Luminous has introduced 'haats' or markets in the rural areas of UP, Bihar, AP and Rajasthan to promote its products. The company has also launched solar-based lighting and power storage systems. Exide Industries' Chakraborty said the company hopes to garner a larger market share this year with its new range of inverters.

Inverter maker Microtek has introduced high charging and multiple battery compatibility features in its products. "With a lot of wealth creation happening, power backup solutions have turned into a utility business from being a lifestyle and luxury business," Luminous' Pant said.

Sunday, July 29, 2012

ICICI Bank net up 36%, beats estimates as corporate & retail loans boost profit

ICICI Bank, the second largest by assets, beat market expectations with a 36% jump in its net profits as corporate lending jumped and retail turned in a profit even as the industry-wide rising bad loans cast doubts about sustaining growth.

Net profit rose to 1,815 crore for the June quarter, from 1,332 crore a year ago. Analysts expected a profit of 1,730 crore. Shares rose 2.35% to close at 928.20.

"They have been delivering on their guidance consistently so far," said Rajat Rajgarhia, director, research, Motilal Oswal Securities,

"In fact, this time they have done better than their guidance in profits and interest income. They are managing the risk environment well. If the weak economic growth continues, it will have a bearing on the industry as a whole, and some share of it may get passed on to ICICI Bank as well.''

Its net interest income, the difference between what it paid for deposits and what it earned from lending, grew 32% to 3,193 crore. The bank's yield on advances rose to 10% from 9.25% last year, boosting its net interest margins, a measure of profitability, to 3.32% from 3.01% in the March quarter.

"We have not relied too much on high cost deposits this time," said Chanda Kochchar, MD and CEO, ICICI Bank. "Having crossed the threshold 3%, we would maintain it at 3% or above for this year."

ICICI Bank, under Kochhar, has stabilised earnings and reduced risk after it went through months of instability during the credit crisis.

It shrunk its balance sheet and sacrificed growth for a few quarters to clean up its balance sheet. It has renewed focus on retail lending.

While business climate has improved since the Lehman Brothers crisis, the banking industry is being stressed due to rising bad loans in the infrastructure sector, with restructuring expected to rise to 2 lakh crore this year.

The bank has shown an improvement in its asset quality, with net NPA ratio down to 0.61% from 0.91% in the previous year. The bank restructured loans worth 380 crore last quarter, while it sold loans worth 430 crore extended to Kingfisher Airlines to a debt fund set up by SREI Venture Capital.

"The numbers are impressive, however, no bank is out of the woods," said ASV Krishnan banking analyst, at Ambit Capital, "Every quarter ICICI Bank would make additions of about 1,000 crore to its non-performing loans and restructuring portfolio.''

Shoes that don't pinch: Rise of the humble shoe in fashion food chain in India

Caroline to shoe salesman: I'll take this one. (Hands over her credit card, which is maxed out and hence, declined) Salesman (icily): Ma'am, the credit card is over the limit. C: It can't be. I don't have enough shoes! (From a sitcom Caroline in the City)

If you want to answer the proverbial chicken and the egg question vis-a-vis women and shoes, "How many shoes does a woman need", this is as good as it gets. If Imelda Marcos needed 1,060 pairs (some reports say 2,700), there's the recent case of US-based hedge-fund titan Daniel Shak suing his ex-wife and pro poker player Beth for amassing 1,200 pairs (mostly over $400). Daniel has since dropped the lawsuit but Shak claimed that she bought the shoes to fill the void in her loveless marriage.

But this is not just about women's shoes. May be Indian women are filling a void, may be men have just discovered that there's more to shoes than one pair but footwear is one of the fastest growing consumer segments in the country. Given that the per capita consumption of shoes in India has gone up from 1.1 shoes a year in 2011 to about 2.5 shoes per year, we could soon have our very own shoe senoritas.


Sole to Sole

A February 2012 Assocham report said that the Indian footwear industry is growing at a compound annual growth rate (CAGR) of about 15% and is likely to reach approximately Rs 38,700 crore by 2015 from the current level of around Rs 23,600 crore. The reasons are plain vanilla: growing fashion consciousness, increased disposable income among India's urban middle class (45% of overall footwear market), low production cost, blah blah. But the real story is the rise of the humble shoe in the fashion food chain.

Designer Ravi Bajaj had lamented, "Fashion starts from the waist up with the shoes being relegated to the background." Even blogs tracking Indian celebrities' coming-of-age fashion consciousness point out that well thought out looks falter at the feet. Shoes, like feet, till now have been on the backburner. Not for us the Carrie Bradshaw cult of Manolos (yes, she's on first name basis with her shoes) or the bunion-causing nosebleed heels of Victoria Beckham.

But Deepika Gehani, creative head of Genesis Luxury Fashion that brought in Jimmy Choo — one of the first luxury shoe brands to come in to India in 2009 — says that it's changing now. "Earlier, new, aspirational consumers entered the designer segment through handbags. But in many cases, shoes are becoming an entry point today. Shoes have become the new handbags," she says. In three years of Jimmy Choo in India, they have five exclusive stores in three key Indian luxury markets — Mumbai, Delhi and Bangalore — nothing compared to 50 stores in five years in China.

Fashion designer and style blogger Akanksha Redhu — who was part of red Shoe Soiree project for Steve Madden's India launch — ranks shoes at No 2 after bags for accessorising a look. "Shoes have their unique place in dressing that will always be the same but the amount of focus that place is now receiving is increasing," she says. When Indians Shoe Shop

The Assocham survey noted that buyers upgrade their shoe collection every two months and usually spend about Rs 6,000-8,000 every four months on branded footwear. Business consultancy Tecnova India — it assisted Christian Louboutin enter India by surveying the market for them — found out that while women purchase 1 branded pair of footwear per month, men purchase a pair per quarter.

"Women usually shop in the more unorganised sector because of lower prices but it's the men who are driving the growth of the branded segment," says Kanchan Lall, associate vice-president, Tecnova India. She adds, "Luxury footwear market [starts at Rs 15,000] is not more than 1-2% of the total market, while the premium segment [starts at Rs 5,000] occupies 15-20% of the market and is growing faster," she says.

Redhu says that though women have started paying more attention towards their shoes/heels, they are yet to shell out big for shoes. But they also never had the choices. Agreed Blahniks (available on beStylish.com) and Kirkwoods haven't come to India but with the Louboutin entry, it has become a "hot" segment.

Apart from the shoes with the sole of the devil, the recent entrants are Steve Madden, Paul & Shark, Tod's and Bally. Ermenegildo Zegna, Louis Vuitton, Burberry, Hermes, Chanel, Gucci, Salvatore Ferragamo, Bottega Veneta, Armani, Versace, Hugo Boss offer their line of shoes.

McQueen and YSL are available through TSG's Kitsch. Multi-brand designer shoe store Mumbai-based La Scarpa, meaning the shoe in Italian, also offers exclusive brands starting at Rs 15,000 to Rs 1,20,000. Come September, Reliance Brands will open its first Kenneth Cole outlet.

"The need for luxury shoes in India has become very critical," says La Scarpa's Bhavna Radhakrishnan, whose passion for shoes fuelled the setting up of this store in Mumbai's Grand Hyatt.

Touch & Heel

Radhakrishnan says that even though the Indian consumer's awareness on luxury shoes is limited, there's a set of buyers that know their shoes. At La Scarpa, women go for Givenchy, Chloe and Dsquared, men opt for brands like Artioli and Alessandro Dell Aqua. "Women buy shoes depending on the style factor and unique design sensibilities. For men, comfort and necessity are the driving factors," she says.

Italian brand Tod's that retails at Rs 21,000 to Rs 61,000 entered the Indian market in 2008. They have one boutique in Delhi, while in Mumbai it works on home shopping with top clients and socialites. "India, probably more than others, is focused on special initiatives as they love exclusivity," says a Tod's spokesperson. This explains their recently launched custom-made service in India. Tod's adds, "Indian consumers know perfectly well what they want to buy and they pay a lot of attention on the balance between quality and price."

Shoe Mantar

Retail Consultancy Technopak Advisors say that it's still early days for luxury in India. "Most of the brands are present here just to be a part of the growth story and not for the present market size," says a spokesperson and adds, "Getting good quality retail property and sourcing from local vendor are also challenging."

Figuring the Indian buyer out is more difficult. Gehani says, "Understanding the psyche and the preferences for footwear of the Indian luxury consumer is something that we have studied and analysed over the years." Jimmy Choo doesn't showcase any of their exotic skin line in India as its banned here. "But exclusive India-themed products have done very well for the brand in the past, adding to brand loyalty with our customers," she says.

Fancy Footing

Manolo Blahnik had once said, "Shoes are the quickest way for women to achieve instant metamorphosis." And the Indian women are heeling! The average heel size in India is going up with most metros preferring heels upwards of 3 inches, as a buyers' study shows. In fact, the women's and kid's segment of the market currently at 30% and 15% respectively is growing faster than the men's segment.

In the West, shoes are a big part of the popular culture. There are books trying to figure out the obsession with shoes. Some claim shoe-shopping releases the feel-good hormone, dopamine. Others say that women in heels assume a primal mating pose called lordosis — butt lifted, back arched — which is sex on stilettos!

But the most compelling is the 'size' theory. You can balloon from a size zero to a 14 in your dress, but your feet always stay size 5 or 6 as the case maybe. There it is the reason — 'instant gratification'. Or as Carrie Bradshaw says, "The only way to break free was to move from one addiction, to an even bigger one... shoes." And we are just getting started.
 
Six luxury shoe brands and why they are at the top of the foot locker
Manolo Blahniks

Or as known in the shoe circuit, the Carrie Bradshaw shoes. How a newspaper columnist manages shoes upwards of $450 is anyone's guess but the popular soap Sex & the City was as much about sex, the city as about the shoes. 'Manolos', as Carrie called them, are synonymous with luxury. You Know It's a Blahnik From its high, slender heels. If it's feminine and with almost nosebleed heels, it's probably a Blahnik.

Christian Louboutin

The reigning champion of heels, Louboutins are favoured by most celebs. His styles are classic yet innovative. In fact, it unleashes the power of heel that gives a leg-lengthening effect. You Know It's a Louboutin Because of red soles, trademarked in 2007. Also beware of fakes

Alexander McQueen

McQueen shoes are not for the faint-hearted. One of his iconic and his last shoes — The Armadillo in 2009 — blurs the line between fashion and art. It's a ten-inch heel that makes you walk 'en pointe'. You Know It's a McQueen Because it exists on the edge of style with strong fetish overtones

Roger Vivier

The French fashion designer and the creator of stiletto heels was called the "Fragonard of the shoe" and his shoes "the Faberge of Footwear". His design: extravagant. He designed the shoes for Queen Elizabeth II for her coronation in 1953. But pilgrim pumps is his most iconic design. You Know It's a Vivier Pump From the single, oversized toe buckle, the slip-on shoe has an understated glamour. It's also the most copied shoe in history.

Jimmy Choo

Started by Malaysian born shoemaker Jimmy Choo (a misspelling of Chow in his birth certificate) and Vogue accessories editor Tamara Mellon, who recently exited the company, Jimmy Choo is all about handmade perfection with ultra feminine styles. You Know It's a Choo When you look at the details — Choo shoes are known for flawless crafting and seamless blending of soles, tie-ups and fabric.

Nicholas Kirkwood

Many call him the man who can be Louboutin. The British shoe designer is winning over the Hollywood celebs and is creating a style that, like Louboutin, is hard to miss. You Know It's a Kirkwood By an almost architectural aesthetic. The footwear is innovative and truly unique.
(Source: Economic Times)
 

Samsung adopts mobile phone business strategy for consumer durables

Samsung has restructured its electronics and appliances business to create two sales verticals in a bid to replicate its mobile phone success in the Indian consumer durables market where it trails LG Electronics.

Samsung Electronics India now has two sales verticals-one selling products to distributors, stand-alone multi-brand outlets and Samsung brand stores, and other focusing only on national and regional retail chains.

The restructuring is the brainchild of BD Park, who took charge as MD of Samsung India in January, after successfully building the South Korean firm's mobile phone business as the second largest brand in the country and overtaking market leader Nokia in the smartphone market.

HK Seo, head of Samsung's consumer electronics business, said, "This will be a win-win situation for both the company and channel partners by re-organizing our business around the sales channel with dedicated team for channel management and products."

The move is a first of its kind in the Rs 37,000-crore Indian durable industry, where companies organise their business on product segments. Samsung Electronics, for example, earlier had two verticals-one for audio-visual products like television and music players and the other for home appliances such as refrigerators, washing machines and air-conditioner.

Mahesh Krishnan, who was the head of home appliances business, has been re-designated as the head of distributor channel while the erstwhile head of audio-visual business, Raj Kumar Rishi, now heads the retail chain channel.

They will report to Seo and Park.

Each of these two verticals will have separate heads for audio-visual products, home appliances and air-conditioners and separate teams for product management, supply channel management and sales planning.

Seo says the change in sales approach will help the firm meet the needs of the large, widespread and growing multi-brand outlet world as well the specialised needs of the large format retail channel.

Analysts say Samsung's move is a testament of the growing importance of key accounts like big retailers and regional stores.

"This will help Samsung interact closely with the customer, understand their needs and provide customer intimacy," Debashish Mukherjee, partner, consumer goods and retail, at AT Kearney, said. "However, execution and processes become important otherwise some product categories may suffer," he added.

The company tried out this channel-led strategy in the mobile phone business two years back, which led to rapid expansion of market share. The move allowed the company to have better relationship with the key sales partners, dealers and retailers, understand their need and build customised sales promotion strategy around them, company officials said.

Having replaced Nokia as the largest smartphone player in the country following the success of the Galaxy range, Samsung now hopes the new strategy will help it better LG in the Indian durables market.

Samsung has already overtaken LG in overall revenues for two consecutive years, thanks to its rapid growth in the mobile phone market. The company says it is the market leader in flat panel television segment and the second largest brand in home appliances.

Under the new structure, Samsung has given higher responsibility to a lot of executives for leadership roles and it plans to expand the sales team.

At the regional level, there will now be two branch heads for audio-visual products and home appliances to grow the business in multi-brand outlets under the regional manager who will report to Mahesh Krishnan. There will also be key account managers at the region and branch level who will push sales to the national and regional retail chains under the leadership of Rishi.

Samsung India last year clocked Rs 20,000 crore revenue across both mobile phone and consumer electronic business and is targeting 25-30% growth this year.
(Source: Economic Times)

Sesa Goa to produce 10 MT iron ore from Liberia in phase-I

Vedanta group firm Sesa Goa is targetting to produce 10 million tonnes of iron ore in the first phase of production from Liberia's Western Clusters project on the back of higher-than-estimated reserves.

"Drilling is going on full swing, every where we are getting positive signs. By the end of 2013-14 financial year, we will make the first shipments. We have divided the project into two phases and in the first phase, production target is of 10 million tonnes (MT)," Sesa Goa Managing Director P K Mukherjee told PTI.

The Goa-based iron ore miner had acquired 51 per cent stake in project in Liberia (in West Africa) last year for about USD 90 million (Rs 411 crore). This was the first overseas acquisition of the company.

Mukherjee added that the reserves at the Liberian project are likely to be three times higher than original estimates of one billion tonnes and the company would ramp up production from the project by up to 30 MT in the second phase.

"The reserves are higher, may be three times more than original estimates... During the second phase, it (production) would get ramped up to 30 MT. The second phase production will begin 2-3 years after 2013-14, so by 2015-16 or 2016-17 it should happen," he said.

The iron ore miner, which had begun exploration of the asset during April-May this year, is planning to invest Rs 400-450 crore on the project this year.

The Sesa Goa MD, however, said that capital expenditure plan for the project is still underway and this year's money will largely be spent on payment to the local government, exploration, equipments and other related studies for the project.

"This financial year, we are expecting total cash flow of Rs 400-450 crore (on the project) but that does not mean it is the total capex. The total capex will be much higher," he said, adding that a decision on capex will be taken by December.

Talking about Sesa Goa's plans to set up a steel mill in Jharkhand, Mukherjee said that the company is looking to sign a memorandum of understanding (MoU) for the project with the state government in a month's time.

The company, which is planning to set up a steel plant of 1.5 MT per year capacity in the mineral-rich state, has started acquiring land for the project on its own, he said, though he did not reveal the investment plans for the project.

Sesa Goa already has a prospecting licence of an iron ore mine in West Singhbhum district of the state for carrying out mining operations.
(Source: Economic Times)