Wednesday, December 12, 2012

AMERICAN BUSINESSES: BANKRUPTCIES

Bankruptcies in US companies have continued...

Enron and Worldcom were two other dubious names at the dawn of this century that investors would remember with horror and trepidation. Accounting frauds at these companies, which were done by executives at multiple levels to hide the burden of debt on them, led to further investor billions going down the drain; and the government bringing out its much publicized Sarbanes-Oxley legislation to prevent further frauds.

With GM now staring at the road to bankruptcy, that too, after borrowing extremely precious time and money from the US government, the issue of corporate bankruptcy is as relevant as it ever was. The examples are many, and span across sectors and throughout history, with companies like Pacific Gas and Electric Co., Texaco, Inc., Financial Corp. of America, Refco Inc., Delta Airlines & IndyMac Bancorp, Inc. on the list. Bloopers like flawed strategies, dubious reputations of top executives, failing to move with the times, et al have been the usual culprits.

Chapter 11 is not such a bad place, provided you don’t intend to stay there! Professor Michael A. Roberto, Professor of Management, Bryant University, Rhode Island, comments to B&E, “Chapter 11 bankruptcies in the US enable firms to restructure their obligations to creditors. In doing so, the company has the potential to emerge from a bankruptcy with a more optimal capital structure, a more reasonable debt load & less burdensome labor contracts.” Delta Airlines is a perfect example. The airline was burdened by high costs and weak revenues, so it took bankruptcy protection. After a restructuring that lasted around 18 months, the airline brought itself out of the Chapter 11 successfully. So it’s not that bad, Wagoner, oops sorry, you’ve been kicked out! Not that bad, Mr. Fritz Henderson! 


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

For More IIPM Info, Visit below mentioned IIPM articles.



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Sunday, December 9, 2012

Madgascar III: Coup d’état

Madagascar faces an uncertain political future

In the African scheme of things, what is better than a coup d’état? A bloodless coup d’état! Watching the regime of Madagascar's ex-President, Marc Ravalomanana, come to an end was like sitting through a Sophocles tragedy in all its acts and nuances. In Madagascar, the protagonist – the king – deliberately turned a blind eye to the aspirations of his subjects and deaf to those aides who unsuccessfully tried to convince him that he was in deep mess.

Ravalomanana, too was warned in advance. But he didn't pay much heed. It is not that there was no case against the incumbent. He used his office to secure a near-monopoly of the dairy business in Madagascar and started to carve out an empire in tourism. In fact, the largest hotel in the country – constructed by the Chinese – was owned by him. That was too much for a nation, where 70% of its populace lives on less than $1 a day. But that does not necessarily mean that the power snatcher, Andry Rajoelina, had the mandate of the people. Experts believe that this ex-disco jockey is an untried leader who is too full of himself and is evidently disapproves of democratic establishments. At 34, he is full six years short of legal age for becoming President. Rajoelina, who doesn't even have two years of political exposure, led a rebellion in the capital Antananarivo that forced Ravalomanana to vacate office, after a majority of the army turned against him. “He is a non-starter. An upstart with little political experience; he also lacks the support of any political party,” says Stephen Ellis, an African affairs expert at the Free University Amsterdam, while talking to B&E. “With the exception of perhaps the metropolitan mob in Antananarivo, his support base is unsustainable,” adds Ellis.


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

For More IIPM Info, Visit below mentioned IIPM articles.

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Friday, December 7, 2012

A shameless nation of freeloaders

 Many of you must have barely read or heard about the latest shenanigans stalking Jawaharlal Nehru University (JNU) – the Mecca, Medina, Vatican and Chaardham of Left wing civil service aspirants masquerading as activists and wannabe academicians. One student even earned his 15 minutes of fame by threatening to jump to his death. Many student leaders have been rusticated for disrupting the sale of prospectuses for the academic year 2009-10. They, and their supporters, have declared war on the JNU administration. Why? Three ostensible reasons. First, JNU wanted to 'commercialise' the campus. Second, it wanted to install electricity meters in hostel rooms. Third, it increased the cost of the prospectus by a 'staggering' Rs.80 to Rs.200 each. This hike comes after 10 years. When student leaders launched an agitation, JNU announced that there will be no electricity meters and no 'commercialisation'. It also announced a free prospectus for a candidate below poverty line. But the student leaders were adamant. They insisted that 'poor' students cannot afford Rs.200. The stalemate continues.

This brouhaha reveals two deeply disturbing things about India – the farce that is higher education in India and the shameless manner in which middle class Indians crave for freebies. Of course, the political class happily exploits both to suit its ends; ensuring that 'quality' higher education becomes a slave of 'patronage' and the real poor of India get lemons; while the middle class and the rich walk away with all the freebies (subsidies). Take JNU as the classic example of these symptoms. Are the student leaders serious when they say that aspiring students cannot afford to pay Rs.80 more for a prospectus? Out of curiosity, I went to the JNU website and checked out the fee structure. Hold your breath; even you can't believe this happens in India!

If you are a B.A (Hons), M.A, M.Sc or M.C.A student in JNU, the total annual fee that you pay is about Rs.330 – inclusive of fees for sports and cultural activities, I-card, Library use, et al. That works out to less than Rs.30 a month. If you are an M.Phil, M.Tech or Ph.D student in JNU, the total annual fee is a princely Rs.355 or so; still less than Rs.30 a month. This island of ''academic excellence'' and bastion of socialism also has many fine hostels where the admission fee is a mind boggling Rs.5. The annual fee, including electricity, water and other facilities for a student opting for a single room is about Rs.700. That works out to less than Rs.60 per month. So you have a JNU student pursue higher studies at less than Rs.100 per month – including a stay in the hostel use of library, newspapers, electricity and what not.


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

For More IIPM Info, Visit below mentioned IIPM articles.

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Thursday, December 6, 2012

Catch ‘em wrong!

Questioning the ‘brilliant’ financial disclosure by Barclays...

What would your impromptu reaction be, if ‘some’ aggrieved investor walked up to you, complaining about ‘some’ well known financial institution posting ‘some’ unprecedented loss during the year gone by? Chances are, you’ll hardly bother to offer him a dimeworth of condolence, forget empty words of solace! For isn’t it a norm these days, for banks to post ‘negative earnings’, CEOs to walk away with zero bonuses and employees to get jettisoned?! Now how about this exercise – what if ‘some’ investor walked up to you, complaining about ‘some’ well-known financial institution posting ‘some’ below-average growth in profits during the year gone by? Chances are, you’ll entice and cajole him into selling his shares (in that company) to you; for what better than a financial entity that can promise and deliver on profits even at a time when the world is tearing its hair apart on the brobdignanian losses that has come to haunt investors...

And this is where Barclays comes into the scene, like a fresh breeze, declaring financials for 2008 on a positive note (what a relief!), with net profits having risen by 4% to touch $7.54 billion and total PBIT ringing the $9 billion bell during FY‘08. Although these make Barclays’ performance sound totally ‘beyond expectations’ (which it is to an extent), the real story behind the scene is bound to give its investors few more wrinkles on their foreheads. And here we are not even referring to the huge 14% fall in EBIT over FY‘07 or about another worrisome 14% fall in diluted EPS for FY‘08; we’re referring to some abnormalities than only get more obvious on closer scrutiny.

Though the bank witnessed a great group balance sheet growth of 71% to touch $2.92 trillion (in FY‘08), but the credit for the same primarily goes to the fall in value of Sterling as opposed to the UK Dollar and Euro.


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

For More IIPM Info, Visit below mentioned IIPM articles.

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Wednesday, December 5, 2012

Bestselling blockbusters

 Reading the future of books and movies...

Salman Rushdie presented the world his magnum opus – Midnight’s Children – in 1981 and more than 25 years later, people are still bewitched by this tale. Not only did it bag the ‘Booker’ of Bookers last year, but now Deepa Mehta is planning to bring it to life on the silver screen. Filmmakers have often looked to books for inspiration, but Midnight’s Children is understandably no ordinary book. Deepa, along with Imran Khan as her lead star, and Salman Rushdie himself by her side, paying extraordinary attention to the making of the film, might just be able to succeed in recreating this intricate, magical story; though it’s no menial task. Yet complex scripts haven’t deterred filmmakers as yet! Innumerous books have been made into films, and as the trend keeps growing, one wonders if writing books, while keeping films in mind is their ticket to money and fame?

With over 1,000 films churned out of our country alone, it’s no surprise that books are often made into movies, and when it’s one like Sarat Chandra Chattopadhyay’s Devdas – just one film is so not enough to do the book justice! After Shahrukh Khan’s much-lauded performance as Devdas just 6-7 years ago, the new talented kid on the block, Abhay Deol, is now out to paint the character in a more modern but equally inebriated hues in Dev D. While Vidhu Vinod Chopra had masterfully recreated another of Sarat Chandra Chattopadhyay’s book – Parineeta – he is now betting his money on the story Five Point Someone by Chetan Bhagat. Titled 3 Idiots, the film has Aamir Khan in the lead role. Another of Bhagat’s book – One Night @ the Call Center – was made into the very forgettable film Hello. Vishal Bharadwaj brought Shakespeare’s stories to the common people in India through his films Maqbool and Omkara. And the film which has finally got our countrymen seriously into the race for the Oscars – Slumdog Millionaire – is also based on a book – Q & A by Vikas Swarup.

Read more.....

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

For More IIPM Info, Visit below mentioned IIPM articles.

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Monday, December 3, 2012

Gas them all, we say!

The lethargy to move to alternative fuel seems almost insane...

In Japan, while Honda rolled out its first hydrogen powered car, another Japanese company, Genepax, has gone one step ahead in making a prototype which runs on water by extracting the hydrogen for fuelling the engine. This should be seen in the background that hell-raisers (economists, if we may) now claim that the price of oil could even touch $200 per barrel in months to come. And though it might be too early to prefigure the shape of things, one thing is for sure, that the short journey to a new world where the need to plead and live with a prayer for oil price to come down, has already begun.

Yet, the real question is whether the energy problem is really so grave or is it simply a result of inertia of developing countries to strive for alternatives. And especially so in developing economies like, say, India. A report by the Global Environment Facility of the UNDP on India’s Coal Bed Methane (CBM) extraction potential states, “It is estimated that in India, the largest coal producer in the world, there are around 20,000 sq km of area where CBM capture could be carried out and that the country’s recoverable reserves of methane are 800 billion cubic metres, with a gas production potential of 105 million cubic metres a day over 20 years.” Compare this with Saudi Arabia’s daily production of oil which stands at 9.5 million barrel per day.

The reality is that many underdeveloped and developing nations have similar sources of alternative energy; yet, fail to see the potential. If most of the major metropolitan cities turn to CNG as the standard fuel for all public transport systems and private vehicles, it would reduce the oil demand significantly.


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

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Sunday, December 2, 2012

Save ‘their’ souls?

Ratan Tata seeks a special contingency fund to be created by banks to rescue Indian companies who have taken dollar and euro loans. A script not so hard to decipher!

Unlike what B&E’s successive critical analyses of various big ticket acquisitions of the Tata Group would suggest, we actually admire Mr. Ratan Tata. Yes indeed Sir! Your quest for global conquests has been the stuff of legends. We are truly enamoured by the visionary aggression with which you have led the Tata group.

So our mental state was understandable when we read a few days back that he is seeking special funds in banks. Our first impression was that Tata is perhaps planning to now buy out a bank or two! But then we found out that it was a proposal for ‘select’ Indian banks to create a special contingency fund to rescue ‘credit-worthy’ Indian companies from despair, if the dollar & euro loans they’ve taken are recalled or have to be repaid in a hurry. That’s because the global crisis might compel many foreign banks & institutions to refuse to extend or roll over loans after December 2008. Hmm... surely no company could be more credit worthy than the Tata Group, right?

Two years ago, B&E had the temerity to suggest that the double whammy of a falling rupee and falling demand and profitability for steel could make the Corus acquisition unmanageable and saddle Tata Steel with unprecedented debt.


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

For More IIPM Info, Visit below mentioned IIPM articles.

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