The 10 worst property investments ever

I read the post on times , and felt like sharing it. Read the story here

Indian Army : Do you have it in you

Well that was just for fun , but seriously speaking if nothing changes soon, Indian Army would soon reach to this condition. If you are reading this and you believe that you have it in you then Indian Army is waiting for you.

I would also like to pay my homage to 'Sam Badhur' the war veteran and the best strategist Indian Army has ever seen , his legacy will continue long after he is gone.

Though time for Automobile Industry

The industry which seems to be most affected by the growing inflation and the related economic developments is the automobile industry. According to the industry reports the industry is going to face a downfall in demands and consequently a negative growth for most of the companies.

The rising steel prices had already hit the industry hard and the companies had to increase the prices of most of their models by Rs 20 thousand to 30 thousand. Now in the current scenario the government has increased the cost of petrol substantially and inflation figures have led RBI to increase the REPO and Rev REPO rates, prompting the banks to increase their intrest rates. Therefore their is no rewards for the customers to go for a new purchase of vehicle.

The automobile industry robust growth came in recent years from the growing middle class who had increased 'disposable incomes' and therefore they were investing in four wheelers . Now the fuel costs have increased and the increased intrest rates of banks means higher EMI's , these two factors are new deterrents for the new customers.

The industry has to come up with new and innovative ideas to promote their vehicles in the current situation . Having said this i am reminded of the recent MARUTI Vagon -R ad and also INDICA Zeta ad, these two ad speak of the new 'LPG KIT' which the company has fitted into the cars and these come to the customers at no extra cost. Now this is VALUE for the customers. the customers know that the fuel cost have increased and this is a way to beat it ( by using LPG kit ) and the fact that the company provides this for free is an incentive for the customers.

In another ad a small girl is ready to sacrifice her ice cream for the fuel of the car, but eventually she realizes that her parents are a Maruti user and therefore she need not sacrifice. This Ad tries to convey that if you are a maruti user you need not worry about the rising fuel costs.

Overall in my opinion the industry is surely going through a though time , the industry has to come out with products , offers and promotion schemes that has the ability to affect the mindset of the customers in such a way that they become ready to buy the products in spite of all odds.

"People will forget whatyou said, they will even forget what you did, but they will never forget what you made them feel." Maya Angelou

India Fastest Growing

India Fastest Growing Large Companies
1) HCL Infosystem
2) IVRCL Infrastructures & Projects
3) Shriram Transport and Finance
4) Idea Cellular
5) Simplex Infrastructures
6) India Cements
7) Pantaloon Retail
8) Larsen& Toubro
9) Infrastructure Devlopment Finance Co.
10) Jindal Steel and Power

India Fastest Growing Mid Size Companies
1) Electrotherm (india)
2) BL Kashyap & Sons
3) Glenmark Pharmaceuticals
4) Mphasis
5) K.S Oils

India Fastest Growing Small Companies
1) Sun TV Networks
2) Indiabulls Financial Services
3) Shri Lakshmi Cotsyn
4) Bombay Rayon Fashion
5) Cholamandalam DBS Finance


Reff: Business Today , www.businesstoday.in

Biggest Oill spill , Heaviest punitive damages and now biggest reprieve

The incident which i am reffering to is the The Exxon Valdez oil spill, the oill spill which has been considered as the worst in history in terms of the amount of crude oil released into the ocean.

On March 24, 1989, the tanker Exxon Valdez, en route from Valdez, Alaska to Los Angeles, California, ran aground on Bligh Reef in Prince William Sound, Alaska. The vessel was traveling outside normal shipping lanes in an attempt to avoid ice. Within six hours of the grounding, the Exxon Valdez spilled approximately 10.9 million gallons of its 53 million gallon cargo of Prudhoe Bay Crude. Eight of the eleven tanks on board were damaged. The oil would eventually impact over 1,100 miles of non-continuous coastline in Alaska, making the Exxon Valdez the largest oil spill to date.

The bulk of the oil spilled from the Exxon Valdez was released within 6 hours of the ship's grounding. The general trend of the oil was south and west from the point of origin. For the first few days after the spill, most of the oil was in a large concentrated patch near Bligh Island. On March 26, a storm, which generated winds of over 70 mph in Prince William Sound, weathered much of the oil, changing it into mousse and tarballs, and distributed it over a large area. By March 30, the oil extended 90 miles from the spill site. Ultimately, oil would extend more than 500 miles from Bligh reef, oiling shorelines in Prince William Sound, the Kenai peninsula, the Alaskan peninsula and Kodiak island. Oil impacts in the Prince William Sound region were the most severe.

The worlds worst oil accident was followed up by rescue and remediations programs which lasted till 1992-94. This matter was taken to the court by the active environmentalist and the fishermen of that area.

A federal jury in Alaska awarded $5 billion in punitive damages in 1994. A federal judge later reduced the punitive damages to $4.5 billion, and the appeals court further cut it to $2.5 billion

Exxon Mobil, the largest U.S. company by market capitalization, then appealed to the Supreme Court, arguing it already had paid more than $3.5 billion for the spill. The court on Wednesday threw out the record $2.5 billion in punitive damages By a 5-3 vote, the high court ruled that the punitive damages award should be slashed -- limited by the circumstances of the case to an amount equal to the total relevant compensatory damages of $507.5 million. This has came as a big relief to the company.

In the current situation the general US public believes that the company is making windfall profits on the surging price of crude oil i.e the reputation of the company is not good , now if we combine the current ruling which has bailed the company out of punitive compensation then the overall reputation of the company in the minds of the coustomer doesnt seem good. Will this have effect , yes definately, today the customers are becoming more conscious of their environment. If they together decide to buycott a company they can, therefore EXXON today seriously needs to indulge in some P.R activities pertaining to environment, it's not like that the company is not committed for the environmental cause but the company needs to be more vociferous in the current situation.

For Advertisers timing does matter

While watching the Asia Cup Match between India and Hong Kong today I noticed a interesting thing, during some part of the game when India was batting ( may be around 22-37 overs ) there were only a few ads. And the ads which were shown were mainly of the channel , i.e of Star Sports programs. During this short span of time there were some ads shown , I recall these were of Polo mint , Havells and Fashion Bazaar and that’s it .
Now why this is important, well I was reminded of an important Advertisement lesson , that not only the advertisement should be creative enough , but it should be placed in such a manner that it should get maximum exposure and impact the audiences in a manner that help in ‘brand recall’.
Now considering the present example I don’t think that the product would have got maximum ‘reach’, but as far as the recall is considered the timings couldn’t have been better. There were minimal ads and thus no clutter , I was even surprised at times that during the over break there were no advertisement breaks. Therefore the advertisements were able to get maximum attention and top ad recall,( at least in my case they did ) and they served the purpose for which they were aired.

On a lighter note

For all those investors who have seen the market falling from 22K to 14K today

Made in China : Still a Taboo in India

Yesterday i went to a mobile shop , my 'moto' got stolen recently so i was looking for a new mobile phone. there i observed that the customers were unwilling to purchase products made in China as if they do not trust the goods made in China. The example in this case was of a mobile phone, the mobile boasted of features like Wi Fi , Bluetooth , 1GB memory card to name a few and all this for a paltry Rs. 5000. But at even at this throw away price the salesperson was not able to cajore the customer to purchase this handset. The reasons are quite obvious the customers have no faith in the product performance,they are not sure about the longevity of the product . whereas in contrast NOKIA is the most trusted brand across all the SEC classes in India.

Now intrestingly most of the Nokia spare parts, accessories and some handsets are made in China. So the question here is whether the bias is against the Brand or whether it is against the country. The answer is quite obvious the trust is on the Brand irrespective of the place of origin.

I am reminded of one more incident , when Armani moved all its manufacturing units to China , there were wide spread agaitiations against the company by its loyal customer base, many went on to the extent that they sewed the stores alleging that they had sold them counterfake material. as Armani could not be made in China . They simply could not digest the fact that Armani could be made in China.

Today its universaly accepted that China is the manufacturing hub of the world, and the cost advantage it provides is unmatchable. But as far as products without a known 'BRAND' name and with the tag "Made In China" is concerned, they still remain a big no-no in India and most Indians are unwilling to purchase them.

What is Sale Leaseback

According to definitions , a sale leaseback is an "arrangement in which one party sells a property to a buyer and the buyer immediately leases the property back to the seller. This arrangement allows the initial buyer to make full use of the asset while not having capital tied up in the asset. Leasebacks sometimes provide tax benefits. also called leaseback"

The largest and highest profile sale and leaseback arrangements usually involve land and property, however a wide range of assets are sold and leased back. The main requirement is that they are capital assets that may sensibly be the subject of a long term lease.

In my previous post I had mentioned about the sale leaseback in the aviation industry , lets look closely how does this work in this industry .

Air line companies book their order for planes wit either Boeing or Airbus at a particular price , this price label is termed as 'list price', air companies always manage to get significant discounts on the list price of the aircraft they buy. So instead of $60 million ( 258 crore) for an Airplane they pay as little as $45 million( 193 crore)

Now these airline companies sell this aircrafts to another leasing company like GE Capital Aviation Services (GECAS) at a profit of $1 to $5 million . The leasing company then leases the plane back to the company on a long term lease of 5-10 years.

In the Aviation industry it is an innovative method of accounting as well , the purchase of planes which would have shown in the books of accounts as a Capital Expenditure now looks as a Operational Expenditure , thus addressing to their Cash Flow ploblems. But even these innovative ideas are not helping the industry to show profitability to their stakeholders.

Indian Aviation Industry in Turbulent Times

Last year seemed to be the year which belonged to the Airlines Industry in India. With the growing income of the middle class and comparatively lower air fares promoted more and more Indians to fly. But come the last quarter of 2007 and 2008 the situations have dramatically changed. The airline companies which posted a moderate profit in 2007 have all been now bleeding . Nearly all the companies have reported losses. According to the industry figures India’s airlines lost Rs. 4000 crore last year (Rs. 40 billion ), the situation is in fact so grim that the industry experts believe that the airlines can loose cumulatively Rs. 8,000 crore in the current year.
Now the most important question what are the factors and situations which have lead the Industry to this state. Aviation Turbine Fuel (ATF) , the refined form of Kerosene that powers the turbines on jet aircrafts , has brought this high flying industry to its knees. The prices of ATF’s have increased nearly 77% , and this figure is after taking into account the very recent 5% duty cuts on ATF.
All the measures of Airline Industry like online reservation , route rationalization , providing midnight routes , innovative accounting practices like ‘sale leaseback’( read about it in my next blog ) that could enable the company to become profitable and report higher margins have resulted in void because of rising ATF prices.
As a thumb rule for every hour the plane is in air it consumes 3,000 litres of fuel which at the current price of 70/ litre works out to be 2.10 lakh add to this other operating costs and then we can clearly analyze that for every flight the earning to expenditure ratio is very low. To add to the woes of the industry the increasing inflation has resulted in lesser discretionary travel spends ,where as the capacity of the industry grew by over 26% the passenger growth is only to the tune of 11% so as a result most of the flights are flying emptier. All these factors have lead to bleeding of most of the national carriers.
So the question arises that whether the industry heading for repeat of happenings of 1996 when eight airlines , including the then largest private sector carrier East West , Damania and ModiLuft crashed in a manner that these companies lost in oblivion .
The answer to this seems to be currently no because airline industry is more important to the government today than it was way back in 1996 and government could not allow this happen once again , so what can be the possible solution ?
The central government can take steps to ensure reduction of the fuel surcharge ( although it comes into state jurisdiction ). State governments are minting money on ATF’s sale. The government can also ensure that ATF comes into the status of “declared goods” on which the maximum sales tax applicable is 4 %. This would not only help the industry to reduce their losses but also lead to reduction of air fares and thus would lead to more and more Indian’s taking the aerial route.

Is Inflation going to hurt Country's Growth

Today when i watched Mr. P chidambaram the minister of finance he was cutting out a sorry figure in front of national broadcasters, he was evidently looking a worried man, even from watching his facial expressions one could easily make out the difficult phase he is going through , the reason ...... well the inflation figures are out and it has broken a record it had set 13 years before and now it has reached 11.05%.
The minister announced that some strict actions will have to be taken to curb the growing inflation. If we look closer, and analyse this statement , does he intend to say that he is ready to sacrifice the 9- 9.5 % GDP growth to curb the growing inflation.
Let us look closely , If the monetary control actions which he is talking of need to be implemented then RBI will have to steps in and increases its Lending rates ( CRR) .The banks will have no choice but to pass over this increase in intrest to the final customers. ( The concept here is that if interest rates are increased then it will lead to lesser money in the market , less money would be there in the hands of customers , therefore lesser demand by customers , when the demand is less the price will fall . In other words its all about Demand and Supply ) Last time when RBI increased its CRR by 1/4 points then the banks did not increase their lending rates, but considering the current situations RBI can increase the CRR by 1/2 to 1 points according to experts. As a result banks will pass over this increase in intrest to the final customers.
Corporate India which has many projects in the pipeline needs funds to shape them up , considering the most volatile and weak situation of the equity market , companies do not want to raise money via IPO's , and their 2nd option of raising money through debt would also become very expensive because of the increased intrest rates.
this is the problem in front of our finance minister , he has to walk on this delicate line and make decisions, decisions which have to please all. ( Read the Left ,Opposition ,General public and Industrialist )

World's costliest office spaces

CBRE released the list of the world's costliest office spaces. Mumbai slipped to the fourth place while Delhi jumped up to 7th position. According to the company the fall in Mumbai's ranking is not due to falling rentals , but because during the same time in other places like London and Moscow the rental increased exponentially.

the complete list is shown alongside

Value is ' in '

In India, in the recent months inflation has broken all records. In fact it has skyrocketed past its own record which it had set 7 years ago. The price of every commodity has risen in the past six months or so. To compound to the misery of the general public the price of petroleum products were increased substantially. These developments have resulted in the proper allocation and careful spending by the Indian households.
For me it the most appropriate time for ‘brands’ to make an impact, in the current situation where planning is high and the funds are less the customer look for the brands with ‘maximum utility’. I do not intend that in happier times customer were not seeking ‘maximum utility’ but in the current situations the concept of “ value for money ” is more stressed upon . Most of the customer today are seeking maximum value in their purchases, this is the time when a brand can stand up and proclaim itself as the most value delivering brand, or augment its existing position in the minds of the customers as the most value delivering brand . This is the time when even the retailers like Big Bazaar and Subiksha can make an impact as large discount stores who can provide maximum value.
To sum up the situations might look gloomy, but in reality its an opportunity for the companies and their brands to stand up and deliver , to be known for their ‘value’ and perhaps reinvent themselves,
the situation can be summed up by the saying “ every cloud has a silver lining ”

Location Based services : Are they really the next big thing

New York time reported that mostly human beigns are habitual by nature and generally do not preffer moving out tounknown locations and most people can be found in one of just a few locations at any time, and that they do not generally go far from home.(Read the article here )

What does that mean to the Maketier , this means that the 'location based services' would be the next big thing in the world. With the help of technology and marketing skills the marketier would be able to market the exact product at the exact place to the customer or if we look the other way , the customer can look for the product and service with the help of technology ( may be Google area search ). But the key criteria here would be to remain on the top of the locations based services searches.

Mr. Thakrey does it Again

Today I was going through the news when a particular news item caught my attention. The news was about Mr. Bala Saheb Thakrey , and his so called ‘clarion call’ to the Hindus to form militant organizations to retaliate to the extremist who particularly belong to the Islamic sect.
Off late the man and his son has been in the news for all the wrong reason and the current episode doesn’t seem any different, the man seems doesn’t think what the repercussions might follow if the hindus start doing what the man urges them to do, to me it’s a classical case when a person has a ‘diarrhea of words’ and has ‘congestion of ideas’ .
Extremism can lead to no solutions ,it would only lead to bloodshed of our follow nationals . Today if Hindus do it then tomorrow it would be Sikhs then Christians . Eventually it would percolate to the sects in a religion and then sub sects and eventually the country which is social, secular, democratic will be ruled by guns and grenades , where everyone would be a lawmaker and will have the law in their hand and would be ready to remove grudges with the help of a grenade .
Mr. Thakrey should remember that the power of the literature is immense , it helped many nations to gain independence , help overthrow many oppressors and have lead the countries to a new dawn , it has been rightly said that a “pen is mightier than a sword” , but in this case I really wonder how could the holder of this pen write this.

Pfizer : Beating the line, long after the snake has passed

The classical stament holds so good here, that there's no use beating the line after the snake has passed , the act in which Pfizer is involved in , trying to counterbid Daichi offer made to Ranbaxy. Sources at Ranbaxy have confirmed that there is no going back on the deal and the deal with Daichi is final and agreed upon.

It is true that the company (Pfizer ) and many other competitors were caught sleeping and taken by surprise when the news of takeover was announced.

Daichi wants to increase its shareholding in the company to 51% for which it wants to make an open offer to the market.

whereas Pfizer, the world's largest drug maker, may bid for the about 65 percent of Ranbaxy held by institutions and public shareholders.

well the scene is set for a battle royale for the India's no 1 generic drug maker company.

Ranbaxy : End Of an Indian Dream

If you ask someone that is it possible that a company which is the number one in pharmaceuticals in India , a company which is aggressive, ruthless and fast moving . A company which has the most number of brands among local companies in the top 20 pharmaceutical products and above all a company which posted a pretax profit of 10 billion rupees on sales of 74.2 billion rupees in calendar 2007, would be put on blocks , then the answer which you will possibly get that it is not possible , but the truth is that Ranbaxy , the Indian grown generic pharmaceutical giant has been bought over by Daichi Sankyo, Japan's second-largest drug maker company for 368.5 billion to 495 billion yen ($3.4 billion to $4.6 billion), or 147.4 billion equivalent to 198 billion rupees.
In one of the biggest buy outs of any Indian company by an MNC, Japanese major Daiichi Sankyo has picked up the promoters - Malvinder Singh and Shivinder Singh's - 34.8% stake at Rs 737 per share in drug maker Ranbaxy Labarotaries. This also means the complete exit of Ranbaxy promoters from the company. However, Malvinder Singh is expected to continue to head the management as per the agreement between the companies for sometime. This transaction to me seems to be inspired by the western models in which the promoter build business and then sell off when the valuations of the companies are the highest , but this thing was particularly absent and unseen till date. This is the reason why it came as a rude shock for many. Ranbaxy was one of India’s earliest entrepreneurial companies to stop the march of multinational drug companies and thus the sale mark an end of era in pharmaceutical industry.
If we look at the benefits or the synergies the two companies want to achieve then we see that Ranbaxy could enter the Japanese market through this deal and get access to Daiichi’s long list of drugs and superior technology. Daiichi on the other hand could gain from Ranbaxy’s wide presence across the globe and its low-cost production facilities, but one of the great merits of the deal is that Ranbaxy operates in multiple countries and has wide market reach and penetration.
Now why did the promoter sell it off ? well this answer can be given only by them but if we look at their business portfolio then we see that slowly they were also building their non – pharma empire. The promoter group has presence in Healthcare ( Fortis Hospitals) , Diagnostics ( SRL Ranbaxy – Pathology Labs) , Financial ( Religare ) and Travel ( Regius Aviation , unlisted ) . The question is that whether the money would be used up in building in one of these business . Their Financial company Religare has grown almost 20 times in the last three years , Fortis hospitals have also earned 525.04 crore rupees in FY 07 and in FY 08 400.98( in 9 months ) so their business other than pharma were also growing , coming back to their pharma business in last three years, intense competition from local companies had whittled profits in US market, while its new drug research programme has not paid even after 20 years in existence. At the same time, its clout in domestic market has also vanished. With patents act coming into force in 2005, Ranbaxy can no longer copy and launch new drugs in India. Several Indian firms like Wockhardt, Sun and Zydus Cadilla have mastered this act making market place less profitable, this might be one of the reasons for the promoters exit.
Whatever the reason may be being an Indian and being from the same Industry vertical I personally didn’t like the news , you may call me emotional but you should remember that we people who are from the biotech / microbio/ pharma field have been always aspiring to work for Ranbaxy , an Indian grown multinational company which had given the big pharma giants a run for their money and not a company owned by a Japanese giant , yea the nationalistic feeling has crept in the business decision at least for me

Apple Launches its new iPhone 3G & 2.0 software

Apple computers CEO , Mr Steve Jobs launched the next generation of iPhone and its 2.o software version. Using this new software the users can install 3rd party softwares which are not approved or verified by Apple Inc. a feature which was hugely missing in the earlier iPhone.

The phone is now capable of incorporating 3G network which will boost the browser speeds 2.8 times. Although there are not many changes but a few cosmetic changes made into the handset here and there . The adopters of iPhone 3G will be able to choose between 8GB and 16GB models and, according to Apple, can expect improved audio and call quality across the board. ( More about Specs. click here)

The best part of the story is that Apple wants to launch this product ( 8 GB) at $199 only . The strategy of Apple now seems that they want to operate in a 'mass market' so the pricing strategy seems to be now of that of 'market penetration' instead of the initial market skimming.

It has to be remembered here that when Apple initially launched its iPhone it was on a premium price ( $450- 500) and then it had reduced the price of the phone within weeks( $300-350). This had led to widespread criticism of the company and many loyal customers had protested against it. In response to it Apple had promosed a waivier of price over their next Apple product purchase .

Well we Indians will have to wait a little longer to own this piece of beauty , Apple plans to launch iPhone in India in early 2009 , but the good news here is that it would only cost around Rs. 10,000. The product with similar features in India can be currently purchased at around 20-25 K . How the market and the competitors react to this price and create barriers for Apple and how Apple reacts to it would be something worth watching.

Slow Down in Industrial Production

Finance minister Mr. P Chidambaram yesterday released the IIP data , the data showed the relative fall of levels from 12% to 7.5% in the current quarter , if we compare it with the same time period at the corresponding year then the index was close to 11.6 % .
Well the relative slowdown in the industrial production has been largely attributed to the growing cost of raw materials , high production arising due to sky rocketing fuel prices and the falling dollar prices against the rupee.
Predominantly India has been a Service sector driven economy, but it has to be noted that the strong industrial production has to be mainatined to sustain 8- 9 % annual GDP growth . Without a strong manufacturing sector the growth rate is not sustainaible, also it would also result in India becoming a more imort oriented country which would again hurt India.
So to sum up , the productions might be down but lets hope that its just a temporary phenomenon and this should not last long to hurt Indian Manufacturing sector .

Marriage of the Competitors

Recently WSJ reported that two arch rivals BMW and Mercedes would be teaming up to source their raw materials together so as achieve efficencies in their SCM and reduce costs overall. Well the thought process sounds good, the two companies together will have more orders and thus will be able to negotiate better deals. this would also ensure that they would have fewer suppliers and these suppliers would be nurtered so as to develop a 'structural bond' with the companies resulting in the employment of better management production and operations techniques like the JIT .
The only grey area in this is the reaction of the loyal customer base of customers , but as long as they get world class products who cares .

Is Dettol overextending its Product Usage ?

Today i saw an advertisement of Dettol , in which the ad was promoting the use of Dettol as a disinfectant to clean floor.
According to theories of marketing one of the ways of increasing the sales of a particular brand is by promoting multiple usage of it. The marketer tries to teach the customer multiple usage of a product in a view that the customer would learn one of the new ways of product usage and use the product more. This would result in increased demand of a brand .
The current adv of Dettol seems to be motivated by the same thought , but the question to be asked is whether Dettol is doing it correctly ?

For years Dettol has been synonyms with a brand which has been used as an antiseptic against cuts and bruises , fit for use on human body . the brand has been also used and promoted to be used to disinfect the nappies of babies , this was also fine coz it promoted the mildness yet the strong disinfective nature of the brand.

But now whn the executives of Dettol are promoting the brand as floor cleaner the question to be asked is whether they are doing the right thing . Dettol never comes in the evoked set of customer when they consider floor cleaners , secondly it is also questionable whether the customer consider it strong enough and as effective as the products likes Domex etc. which are positioned exclusively in this segment boasting of the same product attributes .

To conclude I think that dettol might not only loose in this segment but also in its home turf where customers might confuse it as a floor cleaner or an antiseptic and Savlon might have been waiting for an opportunity like this