Saturday, March 28, 2009

Crompton Grief, DLF Unlimited

Crompton Greaves lives up to its name. It wants to leave the non-promoter shareholders greiving. All surplus cash left in the company is going to be used to buy out a family company. Usual Indian corporate story. No different from what DLF now wants to do by buying out its family owned company called DLF Assets Ltd (DAL?). First create a family owned company to distort the listed company financials. Then, after some time, use the vehicle to siphon out cash from the listed company. Use friendly audit firms to give valuations, certifications etc.
Shattered accountants ki Jai Ho!!
RBI helps out the banks by diluting the reporting and asset classification standards. How nice. You change the name of the disease and all is suddenly well.
The Institute of Shattered Accountants of India joins the party by diluting (scrapping?) the MTM norms, so that the Indian companies can still show profits in the financial years ending March 2009 and 2010. Of course, this will all be blessed by the equity research analysts, who will live up to their reputation of endorsing the management dialogues and keeping their jobs alive. With balance sheets going to be available only by September, no one will know what the Shattered accountants have done to the shareholders.

Tuesday, March 24, 2009

Thank you, Mr. Tata, for the Nano

The Nano is welcome. Let it also result in the government banning auto rickshaws, share autos ( a demon vehicle with a prize for polluting the atmosphere, peculiar to Chennai and other tier 2 and 3 cities) and their ilk. In cities like Chennai, it will also hopefully result in two wheelers going to extinction. All in all, the Nano should result in safer roads, so long as vehicles with less than 4 wheels are banned. Let it start with Chennai where the autos ( more costly than the Bombay taxis) make life miserable no matter whether you are in it or outside it. Chennai can also let go of the other family vehicle, the two wheeler (typically carrying 4 passengers).

Thank you , Mr Ratan Tata, for making this possible. May all of Tata Motors financial troubles vanish with the booking amounts that you are sure to rake in.

Sunday, March 22, 2009

IPL- Tamasha - Tax the BCCI

The TV channels are going at it non-stop as if the IPL is the only thing that matters. In fact, by this blatant play for money, the BCCI is drawing attention to itself and the money hungry cricketers. With the IPL a haven for retired and has been cricketers from abroad and sons and nephews of local big wigs, does it really matter whether IPL is on or off?
I strongly feel that it is high time that the income of BCCI is subject to taxation. In these tough times, there is no reason for the BCCI to sit on a cash pile which serves no purpose to anyone in the world.
Personally, it is much better if such an event is held in UK where distances are small, weather better and daylight hours are long. And, gate revenues should be better there.

Thursday, March 19, 2009

Minority be damned... Have money, will write laws

If you need further proof that the law is written for the rich, do not look very far. In a column for MoneyLife, I had raised the topic of the “Differential Voting Rights” bearing shares that are used as a tool to cheat the non-promoter shareholders. Telco had proposed such an issue on a ‘rights’ basis, which bombed. In that issue, I had mentioned about Jagatjit Industries, where one of the two promoters had issued ‘preferential’ shares to himself, carrying DVR. The interesting thing was that in this instance, each share carried 10 votes!! So, for a small amount of outlay, the person gets control of the full company. The matter went to court, which has upheld that the issue in question is perfectly legal.
So now there is legal sanction for oppression!!

Saturday, March 14, 2009

Satyam- Where Angels Fear to Tread

Many companies are reported to have given an EOI for Satyam!! Amazing what gets in to heads of foolish CEO's who gamble with shareholders' money. I bet every CEO only wants to put in a bid to become a conversation piece at a dinner and hence this vanity.
The very idea of a 'Strategic Investor' in Satyam is funny. It is also interesting to see the media faithfully reproduce this terminology without even pausing for breath!!
A strategic investor comes in when someone else is already owning the company or managing it efficiently and the so called strategic investor has some business reason to make an investment.
In this case, any one who comes in cannot come in without total control. It has to be a buy out.
Of course, buying this company is more foolish than it looks. The company is today being guided by three blind men appointed by the government. None of them have any clue about what is going on, but look respectable to the outside world. The sooner those wise men exit and some one who has a stake comes in, the more the likelihood of the company surviving in some form.
As it is, it looks very unlikely that this company will survive in any meaningful manner. People leaving, no clue of its liabilities, no assets visible and the key men still loyal to Ramalinga Raju for sure. Business will also desert this company as no one with any kind of stake is at the wheel.
L&T is stuck with an interesting problem. One wonders whether the company's board actually wants to buy this company at all or it is one man's whim that is driving everyone around. Being a 'professionally' managed company with an unholy history, no director will oppose the CEO when he makes a fervent plea to 'protect' the money that is already down the drain.
Satyam should be wound down as quickly as possible. Banks have lent money to the company under some stupid notions. I cannot imagine an IT company that does not have money to meet its salaries!! The money lent by bankers is a goner for sure. The only way for them is to ever green this loan after some foolish buyer steps in.
No one is minding the store at Satyam. The government appointed Board is a joke. No employee wants the Board either. Every business head would have been aware of what went on and would be a liablility to every new acquirer. Ignore them and the company is worthless!! A classic hobson's choice!!
The company's business seems to be disintegrating rapidly, with people and clients leaving in droves. If someone were to pay Rs.50/ per share, he would have to spend around Rs.800 cr to just to get around 25%. At this price, it makes no sense at all. Even if you leave it in the bank, it will earn you more than Rs.80 cr!! The liabilities and the legal tangles in Satyam will make sure that it will be many years before one can see any returns. It would be easier to take away some key people and do business afresh!!

Thursday, March 12, 2009

True Lies - Inflation and all that

The media faithfully plays up the government statistics saying that inflation has touched a seven year low. What the media does not tell you in so many words is that this inflation number is of use only to equity analysts, economists and the likes. This has no reference to day to day living.
In day to day life, you will see inflation going up sharply. Food prices are rising at record levels (rice, sugar etc). The fall in petrol price or in price of steel and cement is of no relevance. Or if a "budget" hotel room rate (The Economic Times believes that a 3K to 8K per room night is budget) drops down. In fact on seeing the ET report about the range of the room rates for budget hotels, my son asked me whether 8K as 'budget' hotel rate means that it refers to the 'budget' of Bill Gates!!
The media is mindless and parrots views of vested interests.
Inflation in day to day living is going to shoot higher. And according to me, India is already in a recession. My count is that we will probably see a contraction in GDP by around five percent in the year 2009-10. I hope I am wrong, but street signs point to a deep and long lasting recession in India.

Wednesday, March 4, 2009

Indian Pyjama League

The cricket tamasha in India is getting more enjoyable. Mr Lalit Modi cannot bear to see the elections derailing his circus. With the economy sliding downhill, the elections would actually be doing the IPL a big favour. I am sure that this year there will be no corporate takers for the IPL circus. With the tickets priced at unaffordable levels for mortals, sales were dependent on corporate generosity. This year, even the corporates would have to do a rethink.
The TV channels have a field day talking to the Home Minister on a mundane subject like cricket. And the Home Minister, who is never shy of generous sound bites, goes to length to explain!!
What fun it is. The IPL cricket is such a flawed format that it does not arouse any passion or support from the viewer. Only the media goes overboard since they have a vested interest!!
As far as the cricketers are concerned, they might miss some easy pickings should the IPL not happen this year.

Open air toilets- Shooting the breeze

The above link takes you to a piece on the lack of sanitation facilities in India. I grew up for most part of my life in a chawl in Mumbai. We had three families on the floor sharing one toilet. We were amongst the better off chawl people.

At Chennai, where I now live, the city has grown with total absence of any kind of town planning. Apart from the old city which ends at Adyar at South Chennai, there is now sewage line. There are soak pits which have to be frequently emptied in to trucks which cart the load away and dump it in to the Bay of Bengal.
I think India will NEVER change in this respect. Town planning will be always absent. Politicians will rape the real estate in cahoots with the builders. Why can we not move to a simple system of not giving building permits without the infrastructure in place first?
At Chennai, for new buildings, one is supposed to pay an infrastructure fee @Rs.100/- per sq ft. This is simply an additional payment to the local body and no return benefits are assured for this money.
I do not see any politician with the will to put things right. There used to be a builder in Chennai called Alacrity, who had to wind down since he did not believe in paying bribes and also insisted on all the workers who worked in the building industry to be eligible for all benefits like provident fund etc,
I think that the biggest enemies of India (outside the elected officials and government servants) are the builders.

Tuesday, March 3, 2009

Smart Money

The distribution of free television sets in Tamilnadu is going on in full swing. Yesterday, it was in my neighbourhood. Unfortunately, I was not eligible for one. It was interesting. A maidan with the party flags. A party honcho giving away the cartons with color TV. They carry it and walk two streets away, where there is a buyer at Rs.2000/- per set. The government has perhaps paid around Rs.5,000/- or so per set. Turns out that most people already have TV sets, so they do not need this one. The "buyer" apparently is from the suppliers' side. This is again sold to the government at the higher price!! A lovely scheme, much like the ones I have seen in my working years, in some companies.!! Everyone wins. Screw the tax payer.

Sunday, March 1, 2009

Free and Unfair Elections ensured.

The President of India's decision in the matter of the Chawla affair (Election 'Commission') should not shock anyone. After all, we are used to politicians brazenly taking law in to their hands. This is now institutionalised.
The papers are full of advertisements by government owned PSU's splashing images of Sonia Gandhi, Manmohan Singh and assorted polititicans. These advertisements should be paid for by the Congress Party or the UPA. None of these ads are for furthering the commercial interests of the company concerned.
So, let us forget the law of the land. The person in power writes the rules. TV Channels and newspapers will not dare to raise these issues. They also need government patronage to survive.