Thursday, March 28, 2013

Still very Stuck with a ‘P’rofound ‘E’xuberance

Though Sensex has been Correcting itself Since Last November, at Current PE, it looks Overvalued. And with Jittery Corporate profit growth Forecasts, it is surely due for Further Correction.

24.15 was the PE multiple (price to earnings) of Sensex when the BSE benchmark scaled its lifetime high of 21,005 for a day in November last year. At the same time, that was the value which made many analysts act like disciples of Yale professor Robert Shiller calling the market movements “irrational exuberance” (Author of Irrational Exuberance Shiller, using Cyclically Adjusted PE model, had claimed at the peak of dotcom bubble that markets are overvalued and soon it succumbed to the bubble burst bringing glory to the author). And as we know since then, the Sensex has rolled down 12.21% to close at 18,439 on March 14, 2011. But the million dollar question that still worries a common investor is that, with the Sensex PE reading 20.02 currently – against 10-year average (quarterly) of 18 – can we say that the index is operating at a sustainable value or is it just a breather before another major correction?

Before getting into the details one first needs to understand what does PE multiple of an index stand for? In simple words, Sensex PE at 20 means Sensex is now valued at 20 times the cumulative earning power of its 30 constituents. Even if it sounds arbitrarily high for a common investor, in true terms, it is nothing new for the Sensex, more so for that the index has sustained over this value for over 18 months between 2006 and 2008. So, what is the problem that we are talking about?

Well, it’s actually the change in conditions, both economic and market. The most critical fact about the PE multiple of Sensex is that it is based on the anticipated earning power of the companies and while the economic conditions were suitable in 2006-07 to achieve rapid growth, it’s bleak at present. Although the reviving demand, both in the domestic market and globally, will provide Indian companies a boost in sales, the real task is to maintain the kind of profit margin that they are used to. If a substantial rise in raw material prices in the last year was not enough to dampen the momentum, rising crude oil price (already gone past $100 per barrel) is ensuring that the corporate profit in the coming months falls below market expectations. And the trend is already setting in. Considering the quarter-on-quarter cumulative net profit of Sensex companies in 2010, the growth quotient has fallen from 15.41% in the March quarter to 8.45% in December, threatening the market confidence and of course, the future value of the index.

In fact, discounting for the negative sentiments, the Sensex, which offered a mind boggling 157% between March 2009 and November 2010, has already lost over 12% since then. Whereas, global indices like Dow Jones Industrial Average and S&P 500 have advanced 4.3% and 6.3% respectively during the same period. For that matter, despite being on the receiving end, other BRIC benchmark indices have confined their losses to 6 to 8%. In fact, the Russian RTS index has gained a mind-boggling 18.5% during the same period.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Monday, March 18, 2013

“We Need a Real Estate Regulator”

Kamal Khetan, CMD, Sunteck, has taken Sunteck to Unimaginable Levels Within a decade. He talks to Mona Mehta about The Present and The Future
Sunteck Realty started their business in 2000 from Mumbai and have gone on to become Mumbai’s second largest real estate player with a plethora of premium offerings in the residential and commercial segments. Kamal Khetan, the founder promoter and present Chairman and Managing Director of the Sunteck Group, reveal the success model of the story and the fast changing real estate landscape in the country in an exclusive interview:

B&E: How do you rate Sunteck Realty’s performance on the financial front and what have been the kind of targets achieved till now and also set by you?
Kamal Khetan (KK): Our financial performance this year has been extremely good. The cumulative sales are Rs.1.43 billion (bn) and customer advances stand at Rs.4.35 bn in September 2010. We continue to achieve higher volumes and higher sales realization across our projects. This is a growth of about 40% over the corresponding period last financial year on revenue. We are confident of achieving our target of FY11 and have targeted cumulative sales of Rs.20 bn by year end out of which, we have already achieved more than Rs.1.6 bn till date. On all projects, we are achieving a minimum premium of 25% to 30% in each market.

B&E: What has the major focus of the top management in terms of managing cash flows especially when home equity is increasing with regards to loans? What has been your overall growth strategy so far?
(KK): The company remains focused on acquisitions it also believes in utilizing each rupee generated from internal accruals for further acquisitions. Our cash flow remains strong and our volumes and price points are only growing. We don’t believe that the increase in home equity (required for home loans) is impacting the volumes or price point of our products.

B&E: How do you believe that the real estate industry has evolved over the years in India and what are the major policy or institutional changes required in the near future?
(KK): The real estate industry will continue to be a high growth sector, with a significant potential not only to provide homes and business locations but also sustainable employment. In the medium to long term, we expect the industry to benefit from newer construction technology, design and building automation, as well as green technology. We expect to form larger partnerships with government and local bodies to develop comprehensive high density developments with requisite infrastructure and public amenities for all. We believe that the country requires a real estate regulator. This will help in making the sector more organized and customers and stakeholders to gain confidence in the industry.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Tuesday, March 12, 2013

B&E’S POWER TALK SERIES

Head – Marketing, Dhanlaxmi Bank in Conversation With B&E’s Mona Mehta

B&E: How critical is marketing for the regional private banks? How is Dhanlaxmi Bank dealing with it?
SM: For a bank, which is a new entrant it is imperative that the consumers know about the bank and what it has to offer. In a cluttered and non-differentiated market capturing a share of mind is difficult. And it is even more challenging to build an imagery of a modern and a contemporary bank (where people had a perception that it is a co-operative bank). Every initiative has been a combat to the perception that the market had about the bank. The colour (purple) that the brand sports, differentiates itself from the blue and red colour palette in the market place. Meanwhile, Dhanlaxmi Bank has recently launched its signature branch at Prabhadevi in Mumbai. The branch has a new bright contemporary design. The customer journey in the branch gives an experience of openness to the consumers. Every message in the branch talk to the consumer, listen to their story and give them a solution. In fact, now we have decided to use the same design, look and feel in all the new branches that will be added to the existing network.

B&E: Over the past year or so the bank has become really aggressive in increasing its customer base. What are your plans to support the cause?
SM: In the past 18 months the effort has been to build the brand imagery. Various on-ground initiatives have been taken for the same. To take the bank from one region, where it is a household name to the other parts of the country, where it is almost unknown – the challenges are multiple and varied. On one hand the task is to re-assure the customers that while the brand has changed, the core remains unchanged; on the other hand the objective is to create awareness about the brand and get consumers to the bank. So, various micro-marketing initiatives have been rolled out for the 275 branches across 16 states. Every branch has been given a calendar of events to be implemented. The effort is to link the marketing initiative to generate leads and get a better return on every rupee spent. In its 83-year history, the bank has started implementing marketing initiatives only during the past 18 months. The marketing strategy for every region varies as per the business objective. On a larger scale there will be a national advertising campaign.

B&E: You are currently expanding in a jiffy. How are you ensuring your brand visibility in those parts of the country where the bank has just arrived?
SM: We are investing aggressively for the on-ground activation programs in catchment area of our 275 branches and educate consumers on the new brand, products and services that the bank has to offer. The 100 plus new branches that we will launch in the next financial year will be as per the new look and feel. All the branches that we re-furbish will also be as per the new branch design.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles
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Thursday, March 07, 2013

Vulcanos Erupt at 145 Decibel...

When Several AK-47 and Vulcanos Erupt at 145 Decibel...

A firecracker is a Class-7 explosive, and if it doesn’t meet the prescribed norms, it could be classified as an explosive. Another prime concern is that the manufacturers do not print the decibel output of a firecracker on the packet. This leads to further ambiguity pertaining to the noise impact of the cracker.

Otorhinolaryngologist Dr. Ajit Man Singh of Max Hospital, Saket seconds that the inflated noise emissions could be potentially harmful to the ear. “Children and senior citizens are most vulnerable,” he says. The thorny truth is that even noise-free zones like hospitals lie exposed. Max Hospital, for instance, is surrounded by residential colonies where joyous residents celebrate Diwali with synergetic passion. But therein lies another problem. While the SC had Okayed manufacturing 125dB output crackers, it subsequently imposed a noise restriction of 55 dB in residential areas. Thus further complicating things for the already inefficient enforcers.

Diwali in India is more than just a festival of Hindus. It’s a celebration that reflects communal harmony, to say the least. But as the beautiful sparks and rockets juxtapose and disappear into the night sky, the constant ‘explosion’ resonating in the background is anything but a symphony. Come to think of it, the unnecessary bass has been added to Diwali only after a certain evolution in technology. After all, the people of Ayodhya did celebrate Lord Ram’s victory over Raavan by lighting up the city, with no peculiar soundtrack in the background...


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Wednesday, March 06, 2013

Taliban was not only willing to hand over Bin Laden to the US

Documents suggest that in the years leading to 9/11, Taliban was not only willing to hand over Bin Laden to the US but also warned the latter of an impending terrorist attack

For example, an ISI official told visiting US Congressmen that “Pakistan will always support the Taliban”. This “policy cannot change”, he continued, because “it would prompt rebellion across the Northwest Frontier Provinces, the Federally Administered Tribal Areas, and indeed on both sides of the Pashtun-dominated Pak-Afghan border.”

It is now common knowledge that the US had been asking the Taliban to hand over Laden since 1999. These discussions stopped only a week before the 9/11 attack. However, the US was so adamant on its stand that Laden be tried by the Department of Justice— and not in a third country as Taliban suggested— that Taliban refused to hand him over. Officials described it as a missed opportunity. The former CIA station chief Milt Bearden said, “We never heard what they were trying to say. We had no common language. Ours was, ‘Give up bin Laden.’ They were saying, ‘Do something to help us give him up’.” Bearden added, “I have no doubts Taliban wanted to get rid of him. He was a pain in the neck but this never clickedwith us”. The US thought it was “unreasonable” on Taliban’s part to ask for evidence indicting Laden. Taliban, on its part, even cautioned the US that Laden was planning a big attack on American soil. In fact, former Taliban foreign minister Wakil Ahmad Muttawakil maintained that his repeated warnings, delivered because of apprehensions that the US would respond by waging war against Afghanistan, had been dismissed. US officials admitted to this fact but said that warnings were dismissed because they were “hearing a lot of that kind of stuff”.

Declining the Taliban’s offer to have Laden handed over shows that the US rather followed the policy of regime change well before the 9/11 happened. India was considered to have joined Russia, the USA and Iran in a conjunct front against Taliban, which enclosed aid for Northern Alliance, including “information and logistic support” from Washington. Former Pakistani Foreign Secretary Niaz Naik claimed that he had been informed by senior US officials as early as in July 2001 that military action would be taken against the Taliban by the middle of October. Readies had already been coordinated with Tajikistan, Uzbekistan, and Russia. Naik also said that “it was doubtful that Washington would drop its plan even if Bin Laden were to be surrendered immediately by the Taliban.”


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles


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Monday, March 04, 2013

HP’s perspective on the quarterly numbers

Sunil Dutt VP, HP India PSG reveals HP’s perspective on the quarterly numbers to virat bahri of B&E

B&E: How are your initiatives towards SEC B & C faring?
SD: Changes in ownership patterns, increase in customer requirements and a need for a level playing field are the factors driving IT demand in the SMB space. The break-up of the market indicates that the top 4 metros still account for a majority of PC consumption, but smaller towns are registering higher growth in demand for PCs and this is expected to continue over the next year as well.

B&E: How does HP plan to leverage its channel relationships as the market grows at a rapid pace?
SD: HP has the largest channel partner network across the country. It is HP’s endeavor to constantly evolve and improve its processes for its esteemed business partner community and relevant channel associations. We have also integrated feedback from them to enhance service processes to ensure real measurable impact. This year, our channel strategy has evolved where profitability took center stage and the new distribution model has been devised to ensure that everyone in the channel makes assured front-end margins. With the new structure and systems in place, no longer shall the market operating prices depend on the volume of business a partner does. It allows partners to focus on creating a strong value proposition for customers rather than spending time negotiating prices and discounts with suppliers. With assured margins, the T1 and T2 partners will be encouraged in deploying more resources on channel engagement and market expansion of their HP business. Hence our goal is to ensure that our partners are satisfied and we continue doing business in a profitable and cordial manner. 


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.


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