Friday, August 31, 2012

STRATAGEM INTERVIEW : INTERTEK

He works for a company that makes a billion simply by certifying other companies. Mark Loughead is the COO at Intertek, whose first-half revenue for 2010 rose by 4.9% to £652 million. B&E met Mark up to question him on the future of the certification business by Neha Saraiya

B&E: Especially in the Indian context, certification is perceived more as a kind of marketing gimmick which companies adopt without actually paying attention to the customer’s benefit. How do you plan to change that perception?
ML: Well, all this belongs to the changing environment. But we, as a company are trying hard to create much more value to the entire process of certification so that our business could be more effective in nature and beneficial in cost. This will even lure other companies to seriously think of it.

B&E: So are those only big companies that are implementing certification in their products and services or are even the smaller players considering this option as a serious business?
ML: Surprisingly, not only big companies, but even small and medium companies are willing to implement certification standards. Like textiles for example. They want to be in the process of keeping the technology in a different position and still make the maximum use of it.

B&E: On another front, many companies often associate certification as a CSR activity and don’t actually think of it as a true responsibility?
ML: Well, certification is an important part of the whole policy process and it is very demanding. For example, there is no actual US government policy or legislation demanding that there cannot be child labour. It’s all about the policy and it matters how the concerned management thinks. People are only ready to move up from their current position and the companies to set up a standard. It is all formed within our thinking processes.

B&E: Within the next two years time, how do you see this market performing particularly in India?
ML: Currently, almost around one third of our business comes from America, Europe and Asia. But going forward, we see ourself at a very good point in India. We are still working on it, making acquisitions and developing teams.

B&E: Apparently, you have a typical glocal strategy...
ML: As we are a global company having 90% of our operations outside India, we need to effectively run our local operations at various global locations using local people. When we decide to sell any of our services globally, then we have to understand the customs and needs of the nation in which we operate. It’s only after understanding the local needs, that we implement our testing skills.


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Thursday, August 30, 2012

Time for a New Look Cabinet

The manner in which the chattering class is reacting to the massive corruption that is being unearthed in the run up to the Common‘wealth’ Games can be described in two ways: it is either charmingly naïve or disarmingly sanctimonious. Either ways, we again hear clarion calls from all and sundry on the need to change the ‘system’. Since change should begin at the top, here is a new look Union Cabinet that Manmohan Singh can wave at the nation with a brief mention of some key ministers and ministries:

• Lalit Modi becomes the Union Finance Minister. I don’t know what will happen to India’s finances (Though I guess you can take a guess!). But one thing is for sure. Hundreds of millions of Indians will start watching the Lok Sabha TV channel because cheerleaders from South Africa with micro mini skirts will start dancing on the aisle of the Parliament.
• Suresh Kalmadi becomes the Union Minister of Mines. This will ensure that his team of officials, advisors, friends and partners will think that all of India is an open cast mine and start digging up everything, everywhere. The aam aadmi is anyway used to the mountains of dirt that will start flying all over.
• Vijay Mallya becomes the Union Foreign Minister. His fellow Karnataka citizen S.M. Krishna may have mucked it all up. But he will be different. The moment Shah Mahmood Qureshi-the Foreign Minister of Pakistan starts opening his ‘loud’ mouth, Mallya will unveil the latest Kingfisher calendar. That will lead not only to peace, but also a jaw dropping spectacle. Who knows, even the Taliban might decide that women in Afghanistan can go without veils.

Arundhati Roy becomes the Union Home Minister. The first thing she will do is send Digvijay Singh on a Marco Polo like journey to discover the ‘root causes’. Then she will join the Gandhians with Guns in the jungles of Chattisgarh and draft a new internal security doctrine. The primary objective of the doctrine will be that at least 100 security personnel are killed every week in ambushes. Of course she won't be satisfied with that. She will have the Gandhians with Guns chop off the limbs of those who dare oppose her visions of a pastoral paradise. Since she has since long seceded from the Indian Republic, she won’t even have to take the oath of office.
• Mamata Bannerjee becomes the Union Civil Aviation Minister. I don’t know what you will do, but I will surely rediscover the joys and ecstasies of traveling by train.
• Lalu Prasad Yadav becomes the Union Surface Transport Minister. All Indian roads will start looking like Hema Malini’s cheeks. And there will be no question of any tongue in cheek.
• Prakash Karat becomes special envoy to America. Since many Americans are anyway convinced that Barack Obama is a closet Marxist, Karat will do wonders to Indo-American relations.


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Monday, August 27, 2012

Behold the ultimate sacrifice

Pawar’s request for being relieved of his post is an irresponsible move

Democratic governments are supposed to be of, by and for the people. But the way some politicians in power in our great country end up, we may only want to believe the ‘by’ part with reasonable degree of certainty. When they leave, the only thing that the Indian electorate perhaps misses is some more well deserved moments of infotainment!

No prizes for guessing the most famous case in recent times — Shashi Tharoor of course! The edgy Congress tolerated his criticism of Nehruvian foreign policy, which he described as “more like moralistic running commentary”.


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Friday, August 24, 2012

WATER, SWEET WATER...

THE SIGNIFICANT DROP IN GROUNDWATER LEVELS DUE TO COMMERCIAL ACTIVITIES, CONTINUES TO BE THE REASON FOR WORKABLE ISSUES BECOMING JUDICIAL MATTERS

Even as India experienced its worst drought in the last 40 years in 2009, the Coca-Cola Company continued to extract precious groundwater from water-stressed areas across India – severely hampering access to water for communities around its plant, including farmers.

While Coca-Cola is busy spending hundreds of millions of dollars globally to manufacture an image of itself as a company that is a leader in “water conservation”, the reality on the ground tells a very different story. Coca-Cola is a major contributor to the water shortages in some of the areas in which it operates.

Coca-Cola has located many of its bottling plants in India in areas that were already water-stressed. When asked to share the environmental impact assessments it says it conducted prior to locating these plants, the company refuses, citing “legal” and “confidential” reasons.

In the village of Kala Dera near Jaipur, ground water levels have dropped by over 22 metres in the nine years since Coca-Cola started operations in the area. They dropped just 3 metres in the nine years prior to Coca-Cola’s arrival. A study by The Energy and Resources Institute (TERI), funded entirely by Coca-Cola and forced upon the company by an international campaign, concluded that Coca-Cola was a significant contributor to the water crisis in Kala Dera, and recommended that Coca-Cola shut down its bottling plant, relocate the plant or bring in water from outside the area.

The company has chosen to ignore the study and its recommendations. In the village of Plachimada in Kerala, one of Coca-Cola’s largest bottling plants in India has been shut down since March 2004 as a result of the community accusing the company of water depletion and pollution.


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Thursday, August 23, 2012

RELIANCE POWER : AN ACTIVISM PRIMER

THE RELIANCE POWER IPO THAT BECAME INDIA’S BIGGEST EVER IPO, SAW INVESTOR ACTIVISM INFLUENCE PROMOTER ANIL AMBANI TO DO SOMETHING INDIA RARELY WITNESSES – DILUTE HIS STAKE TO SUPPORT INVESTORS

On February 11, 2008, investors operating in the Indian stock market short-circuited Anil Ambani group company Reliance Power’s maiden appearance on the bourses. After accomplishing the country’s biggest ever IPO, the company was scheduled to debut on the tickers on that particular day.

The opening bell rang and with it started the misery for all those investors. The stock, which was issued at Rs.450 per share and was expected to offer a return of at least over Rs.300 per share on listing, slipped to an intra-day low of Rs.355.05 and finished the day at Rs.372.50, 17% below the issue price. Though Anil Ambani, Chairman, Reliance ADAG, made a killing of around Rs.25,000 crores from the IPO, his investors, who were very enthusiastic to get a slice of the IPO, were seen rushing to offload their shares. So much so that the Sensex itself dropped 863 points with the motion and the Financial Times in London wrote: “It’s only when the tide goes out... that you discover who has been swimming naked. Few are caught in quite such an alarming state of undress as Reliance Power.”

It was not that RPower was the only share to list at a discount at that time, there were few others as well, but the problem with the particular scrip was its size and pedigree. Backed by Reliance’s track record of delivering returns, the issue had created a record by attracting bids worth Rs.752,000 crores while there were shares worth Rs.11,700 crores on offer.

“The primary market was on a high at that time. About 10% returns on listing was kind of an unsaid norm prevailing in the market. And Ambani’s stock meant a lot for the public. When smaller IPOs were offering big returns, investors were quite sure of generating a handsome return from the RPower IPO. Moreover, the market sentiments were also quite positive for the power sector. Riding on all these factors, the issue was oversubscribed a mammoth 73%,” says Jitendra Kumar, Fund Manager, Taurus Asset Management Company. Investor confidence was so high that in the grey market, the share was pegged between Rs.700 and Rs.900. But its debacle on listing made every one run for cover, and the grey market activities came to a standstill.

But then, the investors’ problems did not stop there; the main problem was yet to come. In order to invest in the RPower IPO, most of the investors had withdrawn funds from other investment positions and transferred the same into RPower. Moreover, as an article in Knowledge@Wharton suggested: “Many investors had borrowed at high interest rates to buy Reliance Power shares. A back-of-the-envelope calculation [based on the lending rates prevalent then] shows that the share would have had to list at Rs.600 for them to break even. What happened was a disaster for these speculators. Many are refusing to pay up. And there is turmoil in the illegal betting shops in cities like Rajkot and Baroda.”

The situation was even worse in many other cases (applicants who applied for less than 225 shares) where investors were not even allotted shares. They kept on losing in returns on their investment for near about a month. And by the time they got the refunds, there was very little hope left in the market to earn some quick profits to make up for the losses as the market itself had slipped into the hands of the bears due to lack of demand and increased global recessionary pressure. During the IPO, Anil Ambani had repeatedly promised that investors will not suffer, and what unfolded post the IPO was absolutely the opposite. The situation provoked some investors and high net worth individuals (HNIs) who suffered heavy losses in the particular IPO to move ahead and ask the market regulator, Securities and Exchange Board of India (SEBI), to carry on a probe for any foul play by the promoters of the IPO.

Anil Ambani cried foul and released a statement in the media complaining that rival business groups were intentionally trying to undermine the group’s fair name and reputation. But then, the harm had been already done, and people had started losing faith in the RPower stock, at least during that particular period.

Considering the gravity of the situation, the RPower Board soon announced that it was ready to offer 3 bonus shares for every 5 held by shareholders. What was more interesting in that announcement was the fact that all shareholders were entitled to the bonus shares except the promoter groups, Reliance Energy and Anil Ambani’s personal investment vehicles, which meant Anil Ambani was compensating investors’ losses by diluting his own stake in the company. The move brought down his stake to 40% from 45% on the day of listing. And for those investors who had held onto their stocks despite the turbulence, it certainly was a moment to cheer. The move, while reducing the stock price by 40% for retail shareholders to Rs.269 per share, also ensured that in general, every stockholder’s individual net worth increased considerably due to Anil’s stake dilution.

Experts like erstwhile SEBI Chief M. Damodaran may not consider the investor outcry in the case RPower as a true form of activism, but there is probability in the fact that this investor activism was what had made Anil Ambani do something rarely – if ever – seen in Indian promoters.


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Wednesday, August 22, 2012

PRASHANT SHARMA, LEAD ANALYST, COMPANY & MARKET INTELLIGENCE, DATAMONITOR INDIA

Faced with the rising fiscal deficit & inflation, it will be a challenge for policymakers , both on the economic as well as political front, to spread the economic benefits

A strong financial system with a prudent central bank at the helm of affairs insured the economy from any global upheaval, as witnessed in the aftermath of the sub-prime crisis. The fiscal deficit, together with inflation, will be India’s major challenge in 2010–11. The combined deficit will continue to be in double digits. India will look at divesting the huge value locked up in its vast public sector enterprises, and also at public-private partnerships and selling services licenses like the recent 3G auction for telecom services to bridge this gap. Exports have rebound, but it was on last year’s lower base. Managing the growth with stimulus withdrawal will pose another challenge. Datamonitor believes spreading economic benefits uniformly and an inclusive growth remain the biggest economic and political challenge.

Overall, in 2010 and beyond, the economy is likely to remain strong on the domestic front with internal consumption as key growth driver. Supply side especially food distribution system could bring challenges and poor monsoon turnout will add as a major concern. Business confidence level of both domestic and foreign investor is strong. Datamonitor expects the softening of commodities prices, benign interest rates and a normal monsoon forecast auguring well for the Indian economy, and with small pauses amidst challenges, its growth run will continue.
 

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Tuesday, August 21, 2012

The Global Sales Division of Toshiba-Carrier Corporation

The Senior Vice President and Chief Marketing Executive of the Global Sales Division of Toshiba-Carrier Corporation reveals his company’s India roadmap to B&E’s Surbhi Chawla & Neha Saraiya

B&E: India being a highly competitive market, what would be your strategy to stay ahead of the race?
Akio Ozaka: The Indian market is evolving, with consumers understanding and demanding new technologies and features. The Toshiba range is comprehensive, with air conditioning solutions ranging from residential to light commercial to commercial applications. Our focus and expertise lies in providing consumers air conditioning, which is solution-oriented and not just about installing a cooling product.

B&E: What are Toshiba’s future plans for the Indian market?
Akio Ozaka: India is an extremely important and a growing market for us, and we are quite hopeful of writing a success story in coming times. Toshiba in India has registered a cumulative annual growth rate of 66% from 2005 to 2009. We would like to continue that momentum and make our products available to a wider section of consumers, backed by our cutting-edge technology. We are looking at growing our customer base beyond the metros in satellite towns and mini metros. Today, the Indian consumer has evolved and makes better informed decisions, which can lead to a preference for innovative products and solutions.

B&E: Are you planning to roll out any new products for the Indian market in the near future?
Akio Ozaka: Yes, we do plan to launch a new range of air conditioners later this year in India.

B&E: What is the present dealer network penetration of Toshiba and how do you plan to augment this?
Akio Ozaka: We plan to have a deeper penetration in the market and stay connected with our customers at all the possible touch points. Thus, we are aspiring to have a strong dealer network across the country.

B&E: What are your other plans for the future?
Akio Ozaka: The company will focus on maintaining and consolidating its position in the market, leveraging a diversified product range with the latest technology, and establishing a solid footprint.




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Monday, August 20, 2012

Why US sanctions are useless

With China around, US sanctions against Iran, N.Korea and Sudan are useless; US has to get China on its side to force a solution

There are some uncanny commonalities between Kim Jong-il, Ahmadinejad and Omar al- Bashir! All three heads of states have been in the international spotlight for the wrong reasons; and all three care two hoots about US sanctions because of their magnanimous trade associations with China, a country that deals with any country it wishes to, despite any sanctions against those countries. China is Sudan’s largest trading partner, Iran is the second largest supplier of oil to China, and China is N.Korea’s largest investor and trading partner. Unless US gets China on its side, none of these countries will care to sit down on the discussion desk.

In a secret visit to China in May 2010, Kim apparently came with a begging bowl for finance, food and fuel – and in return vowed to reignite dormant international nuclear disarmament talks, which were hosted by Beijing and shunned by Pyongyang for over a year. In February 2010, US and Canada achieved a valuable ceasefire between the Sudanese government and Darfur rebels. The bitter and bloody conflict, which claimed 3,00,000 lives and compelled 2.7 million people to become refugees in the last 7 years, has hopefully finally ended under US pressure and Chinese goading. If the US wants the slippery Omar al-Bashir – Sudanese President indicted by International Court of Justice for war crimes – to stick to his agreement, they have to use China to enforce the same. And if US wishes Iran too to start cooperating, China’s the answer.

Not that this absolves China of its past – China has regularly supplied arms to Bashir and to Iran; and has even played a major role in North Korea and Pakistan’s nuclear bomb development. But then, those horses have already bolted.


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