Auditors and an election

After the great Indian "balle(o)t" circus (GIBC) which rolled by in the early part of this year it is now the turn of the Institute of Chartered Accountants to have their triennial exercise. As with the GIBC this has its share of masala, with contestants hosting parties to canvas for votes wherein you have free flowing wine, belly dancers and promises of sharing the powers of office once elected.

In the past 60 odd years since this profession was brought into being by an act of parliament, there has been a lot of water that has flowed under the proverbial bridge(global trust bank, loan melas, satyam, MCD etc). But what has amazed me this time around is the amount of money being flashed around and the willingness of some to be hypnotised by the same. The more one sees a democracy the more one feels disenchanted that money rules (obama - fallen prey to money - cannot get any of his stated policies rolling and when the dust settles down on this "postponed" crisis the rich would have gotten richer and the poor well they would be dead i guess!!) or brute force (mayawati - an IAS officer thought it better to commit suicide rather than resign?).

Maybe the process of democracy has to be reviewed and a better system wherein there is a continuous appraisal of the elected needs to be constructed? One starting point of appraisal is a report on how every "petition" by the electorate was disposed and in what time frame and how the affected vote on the resolution of the issue agitated in the petition. readers are encouraged to expand on this.

google and how its tackling the recession

Do you use chrome? The web browser from google? If yes have you at times had to experience a "broken link" message whenever you are looking to access a new url? This has been happening just too often recently with me to be taken down as internet bandwith problems. So it looks like google is engaged in some underhand dealings with its clients who pay per click to google for directing any traffic towards them.

Above are two images taken a minute apart. The first time I tried to access the site it said "broken link" but when i persisted with the same url - it went through. If instead of persisting with the url entry in the address bar I had taken the easier option of clicking on the view cache option - google would show the traffic as directed by them to the site and charge them for the same. There are other insidious ways - for example when you are typing a website url - chrome suggests - now we are used to "inline complete" with IE browsers. So we happily click on this "suggestion" and the poor website ends up paying for the "click" to google because this is technically a search made which resulted in a "click" via google servers.

google is most welcome to prove otherwise. To imagine what they would do if allowed to take over our os's is anybody's guess.

Clubs, schools and education..

Increasingly we find "premium", "world", "exclusive", "international", "holistic", "360degree" adjectives when it comes to schools. This is akin to clubs where the criteria for admission are predefined like all male, all with a particular title, all smokers, etc etc. Here the unspoken criteria for most of these schools is the money - if you can afford it - welcome!! This creates an exclusive club of the moneyed and an aspiring group who want their child to be part of this "club" because the criteria is money and not education. After all it is for an education that the kids are going to the school - so how can education be the criteria for admission in the first place?!

Personally I would prefer the school nearest to place of residence as that allows for more extra curricular activities without a lot of time spent on travel as traffic is an issue in most metros today. Boarding schools are not discussed as they are a separate breed and require different parameters like psychological effects of separation etc. There is a saying in tamil - a child which studies will study anywhere!! So dont perpetuate this ranking of schools but as parents participate more in the education of your child and you will be surprised that the ranking of the school does not matter.

refer earlier blog http://forsec.blogspot.com/2009/02/home-schooling.html for more..

missing children and the sarva siksha abhiyan (SSA)

In my yearly visits to the hinderlands in Tamilnadu I had remarked at the increased traffic of school kids in the past 5-7 odd years. This was a program started by the erstwhile BJP government and its effects were seen immediately in Tamilnadu.

I find the reason for that now. Check out http://www.hindustantimes.com/News-Feed/tamilnadu/Making-schools-fun/Article1-481150.aspx .

The movement was so taken to heart by many IAS officers who as collectors of districts would personally directly monitor the daily attendance levels of the schools in their district. So it not surprising for me to see so many "missing" children on their way to school all those years back!! The BJP got two good things to the country - Kalam as chief motivator (he was no machiavalli to be called a president !! - chk out http://forsec.blogspot.com/2009/08/water-finds-its-own-level.html) and the SSA - the true impact of this will be felt in the next decade when all these people bring a much needed moderation to the political and social fabric of this nation.

Maybe India will be shining after all!!

From the HT article it is clear that Tamilnadu has shown maximum progress while other states have lagged behind. That does not mean there is no progress - it just shows since personal interest by the powers that be has not been applied, the effects are to that extent muted. But everywhere in India one sees the missing children on the way to school!!

doobye

So the excesses of capitalism takes its toll. The latest being the emirate of Dubai with a $80Billion hole in its balance sheet. Without any concrete policy measures on how they are going to stimulate demand in their local economy one doesnt see how the bond holders will ever be paid back unless of course big brother Abudhabi were to pitch in with the required moolah. It was so pathetic watching big professional investors saying that this was a surprise as they always "expected" Abu Dhabi to bail Dubai out!! Sounds familiar doesnt it? If the US government is stupid enough to not let the rich lose any money - why would any other self respecting capitalist allow that to happen?!

Hence this is a major inflexion point for the doomsayers that all will fall down if one falls down. So Dubai cannot fail or else for most of the expats in dubai to borrow the catch phrase of the emirates "fly buy dubai" - it would look more like "bye bye Dubai".

doob - in hindi means to sink..

Dont go with the herd Mr Hirohisa Fuji

As the yen appreciates the call for intervention from vested interests and so called stakeholders of "growth" gets louder by the day. It is clear that a bout of deflation is a must if Japan has to come out of its lost decade and a half which might become the lost double decade!! As noted earlier by me - Japan can still manage to come out of this shining if it were to only:

1. Convert 30% of Yen debt into $ denominated debt

2. Pay off the newly created $ liabilities with its mountain of US treasuries

3. Use a part of its US treasury assets to buy up SEZ's in the middle east and other Asian countries with large local consumer demand.

By including these SEZ's into the GDP of Japan going forward - they can to some extent negate the negative effects of the appreciating Yen and also at the same time maybe avoid the double issues of debt trap and also get rid of some of the $ assets which today hang like an albatross around anybody's neck who is unlucky enough to hold them!!

So Mr Fuji (btw is it a double "ii" or a single "i"), dont listen to these economists of "growth" - because they are only looking to feather their nests - the public be damned and how does it matter if your country is also pushed into the abyss? Be the pioneer in shepherding your country through the diagnosis of deflationary doom by using this as an opportunity to pare down your mountain of debt and $ assets.

In hope of a sovereign fund action from Japan soon!!

Brother Vs Brother - Charade continues

As the case between the Ambani brothers reaches the concluding arguments, as a common man who will be impacted to the extent this will affect my power costs, one has been following this charade.

It bemuses me that a lot of facts have been allowed to be agitated by the Supreme court which as far as I am aware a body which only allows appeals on points/ interpretation of law or on the understanding of the constitution. The only new issue being debated is whether a NELP guideline or a direction of a ministry of the Government supercedes an agreement between private parties. On the background of the Indian constitution this is a no brainer - obviously the government dikat runs over any private agreement. DUH!

At the same time the supreme court cannot ignore the rights of an individual and in this case millions of shareholders as well. The best solution is (again based on existing law)

1. The government rate is to be applied only for computation of taxes due to the government - hence government interest is protected in full.

2. the rate to be paid by RNRL to RIL should be what was agreed in the family agreement - no more no less.

3. Based on 2 above NTPC also pays the enhanced tax but buys gas at lower rate.

CASE CLOSE!!

Of course the issue of who will pay the enhanced tax due to the government remains? As RNRL is the person to pay the tax as the end user it stands to reason that they would bear this.

So why are M/s Jethmalani, Salve and Parasar making such elaborate arguments when as people who have taken an oath as officers of the court to help the judge arrive at the truth they should have closed this on day one. Maybe the incentive of money is really strong to keep the argument alive!

Medical tourism

Recently my mom was hospitalised in Israel for a "gall stone". The hospital there was getting ready for an operation for which the estimated bill raised with the Insurance company was approx. 8 Lacs INR. Things so panned out that she recovered from the "stone attack" within 24hrs and landed in India and after consulting the doctors here got the gall bladder removed from a Government Hospital.

Just to compare the costs - Apollo (considered 5 star in healthcare) would have cost 10% of the Israeli hospital. And the Government hospital cost 5% of whaat Apollo would have cost or in other words it cost 0.5% of what the Israeli hospital would have cost!!

The whole experience from consultation, investigation, admission, operation and discharge was completed like in a conveyor belt system. The crowds there are to be seen to be believed!! The nursing staff were very helpful and as its the norm - most government hospitals are also medical schools - you have a bunch of students following the doctor in his rounds, who also impart some knowledge to the patient as to what they did during surgery.

The rooms had flat screen TV with dish cable to boot!! Breakfast was served with the morning newspaper. Lunch, dinner and tea were on the dot both with respect to time and taste. All fine vegetarian fare. There was no expectation of a tip and even when one was offered the same was refused!!

Oh by the way did I mention that all the services are FREE for the poor of the nation? These rooms come at a princely sum of INR300 per bed per day. Compare that with the 45000/- per day in Israel!! JAI HO!!

Feeling claustrophobic - just open the window!!

A buddhist monk in Myanmar did just that - only problem was he was in an aircraft ready for take off!! The pilot was one surprised guy to see the chute deploying as he was carrying out the pre flight checks. Luckily nobody nor any property was damaged and the flight left 7 hours latee.

This begs a serious question with respect to air safety. What stops a similar event from occurring when the flight is in motion? In the backdrop of terrorism it acquires a very dangerous connotation as one doesn't need to carry any weapons on board. The terrorist needs to just make sure he gets to sit next to the emergency exit rows and the rest they say is history!!

So next time just make sure that you are the one sitting in the exit row seat!! :-)

how to make 4000 into 5000?

Ask Booz Allen and NACIL!!

extract of their report at http://www.livemint.com/2009/11/17234955/Booz-drafts-Rs5000-cr-savings.html?pg=1

"Going by Booz Allen’s three-year cost-cutting plan, the airline will be able to save at least Rs400 crore by March 2010, another Rs1,400 crore by March 2011 and yet another Rs2,300 crore by March 2012, he said. “The three-year cost-cutting plan will help Air India to save about Rs4,100 crore. Together with the revenue-enhancement measures, which will be executed immediately, cost cutting would yield Rs5,000 crore savings in next 18 months,” said this executive."

I never knew that "increase in revenue" can be clubbed under "cost cutting". This is akin to real estate company ads which have become more and more desperate recently. sample this "100% sold out - call 99xxxx for some select apartments" LOL. What levels people will sink to - to misguide the public!! more public money down the drain. the government is better off just selling this junk crate that flies!!

life of ahimsa..

MY LIFE IS MY MESSAGE - Gandhiji

There is a Q raised on this - "Does it mean that, his message must be carried out in the same way, only with our life" - FB user

Interesting Q. Actually the British never killed him - it was a post independence free indian who killed him. To look at this spiritually - once ShriKrishna's work was over he was felled by a hunters arrow and so was Gandhi by an assassins bullet as his work was over. But these are only "physical" things. The true abiding teaching of both are relevant even today!!

The "munna bhai" movies have rekindled the mahatma's message in a new generation of Indians and citizens of the world who otherwise didnt know HIM or his message other than from history text books.

There is a clamour every year for giving Bapu a Nobel peace prize. I personally feel that he is beyond any committees reach to "honour" him. If however Indians feel a certain lack in not being so honoured - it is their individual and collective lack and not that of Bapu. Just as our Gods dont need any defending when they are painted by MF Hussein, the one true torch bearer of Ahimsa doesnt need anybody's stamp of approval for the way he lived his life! The best approval or award people can give the Mahatma is by remembering him and trying to lead ones life the way he lived his!!

Even Martin Luther King who put in practice so effectively Gandhiji's teachings fell to an assassins bullet. An elephant is worth a million alive as well as dead - it is true of people who tread the path of ahimsa. Gandhi alive made the British get in touch with their inner self. Gandhi dead helped India escape the clutches of divisive Right wing politics. Similarly within 4 decades of Martin luther king's death the US has its first afro-american president. (Btw king was awarded the Nobel peace prize!!)

The other issue that people in the spiritual path find difficult to digest is that "you meet the death the way you led you life" - so how does one reconcile the violent end met by "Ahimsa Gandhi"? Would any other form of death be befitting of great champion warriors? For warrior he was - and very unfair at that too! His choice of weapon was such that there was no counter known to conventional warfare!! The only reply was to surrender!!

In memory of a great World Citizen. Om...

relentless march of capitalism..

SEBI released its guidelines for SME's getting listed on SE's

Let us analyse the guidelines para by para:

SME Exchange/ Platform:

Ø 1. Companies listed on the SME exchanges would be exempted from the eligibility norms applicable for IPOs and FPOs prescribed in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR).

Instead of a blanket exemption - those provisions seen as onerous could have been exempted. Looks like some vested interests need a quick turnaround in this to create the next "big" thing in investment banking(IB).

Ø 2. In order to have informed, financially sound and well-researched investors with a certain risk taking ability, a minimum IPO application size of Rs. 1 lakh would be prescribed.

All the more easier for these IB's to sell rubbish as most of the HNI's dont have time for research as they are busy making money. Only professional investors have the time to separate the rubbish from the good but they are anyways investing before the same is marketed by the friendly neighborhood IB.

Ø 3. The minimum trading lot would be Rs. 1 lakh.

Why?

Ø 4. An upper limit of Rs. 25 crore paid up capital would be prescribed in order for a company to be listed on the SME platform/exchange and a minimum paid up capital of Rs.10 crore would be prescribed for listing on the main boards of NSE and BSE.

What about those companies with paid in capital of less than 10Cr currently listed in the exchanges and who have no problems in meeting all the current requirements? Why are they being allowed to be exempted from takeover and public offer norms? This is the vested interest part discussed in point 1 above.

Ø 5. The offer document will have to be filed with SEBI and the exchange. No observations would be issued by SEBI on the offer documents filed by the Merchant Bankers (MBs).

Kindly elaborate puhleeazsee...

Ø 6. The MB to the issue will bear the responsibility for market making for a minimum period of three years. MBs would be allowed to do market making along with a disclosed nominated investor (like PE, VC, HNI and QIB). Under this arrangement, all the stock being bought and sold as part of market making will ultimately get transferred to the disclosed nominated investor with whom the Merchant Banker has a contractual agreement. Merchant Banker would have to disclose their intention of this arrangement and have it approved by stock exchanges where the issuer SME is listed.

Why this provision at all? Isnt the past lessons very clear that when a group of people corner a portion of shares of a company they will always manipulate its price? The better option would have been to deepen the bond market for these SME's instead of a charade of an IPO.

Ø 7. Certain well capitalized registered entities like Venture Capitalists may be allowed to have a contractual agreement with the Merchant Banker to share the burden of devolvement of underwriting obligation.

Well capitalised - Would you consider RIL to be well capitalised? Kindly define the parameters instead of some adjectival drivel.

Ø 8. During the compulsory market making period, promoters/acquirers will be allowed to dilute their shareholding only through offer for sale or to an acquirer and not to a market maker.

It would be so convenient that every time a promoter sells there is a matching buyer who has been "recommended" the stock by an IB!!

Ø 9. SEBI regulations on Takeover (Substantial Acquisition of Shares and Takeovers Regulations) will not be applicable to acquisition of shares through Merchant Banker /Market Maker provided that the Merchant Banker/Market Maker does not have the intention of taking over the management and there is no change in control (direct /indirect) of the company.

Well I dont intend to take over but as it so happens one fine day Narayan Murty decides to step down in the name of succession planning and viola the MB/ IB's man becomes the new chairman. convenient aint it?

Ø 10. Merchant Bankers who have the responsibility of market making and have a firm allotment made in IPO for purpose of market making may, at their option, be represented on the board of directors of the company in view of the commitment of market making subject to agreement of the issuer. However this will not be mandatory on the Merchant Banker.

Excuse me - come again - it is compulsory on the issuer to "offer" a Board seat and it is not compulsory for the MB to accept the same? Now how is this different from what one fears in point 9 from happening?

Ø 11. No separate category of Merchant Bankers will be created.

Why not? This only strengthens point 1 above - you can however bet that once the creme de la creme of the SME's have gone public a separate set of MB's would be allowed as the current MB's wont be bothered with the REAL SME's now will they?

Ø 12. Merchant Bankers will be required to ensure that the issue is 100% underwritten. However only a minimum percentage (15%) of the issue size will be mandated to be compulsorily underwritten by the Merchant Banker itself.

Now why is the 15% limit allowed I WONDER?

Ø 13. A minimum number of investors (say 50) shall be specified for the IPO only. There shall be no continuing requirement of maintaining the minimum number of investors. However, compliance with the requirements of Companies Act, 1956 needs to be ensured at all times.

LOL..- better to call this the back door way for all the PE/ VC managers who are stuck with their lemons to sell on the great Indian share mandi!!

Ø 14. No separate registration will be required for brokers intending to service companies listed on the SME exchange/platform.

What service do brokers directly provide companies currently i would like to know? As far as I am aware they provide services to the INVESTOR community to buy or sell stocks - period. Is this the unintended slip that shows the level of vested interest drafting the guideline that SEBI even forgot to remove the "private comments" of the MB/ IB/ VC/ PE before making the document public? LOLOL

Ø 15. Companies listed on the SME exchange/platform shall compulsorily migrate to an equity exchange/segment (main board) on exceeding the Rs 25 crore post issue paid up capital limit. Further also, if follow on offer/rights issue results in triggering of the above limit (of Rs. 25 crore) then the company would have to migrate to the main board.

First instance of principle of natural justice and application of LOGIC i guess - DUH

Ø 16. Companies listed on the SME exchange/ platform of an existing exchange may send to their shareholders a statement containing the salient features of all the documents as prescribed in section 219 (1) (b) (iv) of Companies Act, 1956. This information shall also be displayed on the website of the exchange. Further the Company shall compulsorily maintain a website on which this information can be displayed.

Many main board companies themselves dont do this. Now why insist on this for SME's I WONDER?

Ø 17. Investors with holdings of value less than Rs. 1,00,000 (such reduction in the holding may have been due to fall in prices or his having offloaded a part of the holdings previously), are allowed to off load their holding to the Market Maker in that scrip. (provided that the investor sells his entire holding in that scrip in one lot). Market Makers will be authorised to buy these shares from such investors.

Makes managing points 6 & 8 that much easier. !! LOL..

Ø 18. Preparation and submission of financial results (as mandated in the listing agreement) on a “half yearly basis” for SMEs, instead of “quarterly basis”.

Why cant they publish them monthly - what are they saving here? Any company has a status report daily in any case and so dont see the need for this relaxation.

Ø 19. All the provisions of clause 49 (corporate governance) need to be complied with.

First sensible guideline but then a true case of too little too late??

In short a pathetic attempt at pulling the wool over the investors eyes and coming from the market regulator - this is a new low for Indian capitalism!!

The biggest scam in this is the paid in capital as the benchmark. For eg. a company like MRF has a paid in capital of 4 crores. But its market cap is in excess of 2400Crores. So should not the definition be a combination of paid in equity and market cap say paid in equity of 25 crores and a market cap below 500crores or some such thing? DUH!!

Capitalism - can i have some Mo(o)re..

Oliver Twist wanted some more and we all want Moore. But really do we?

The entire movie was just his view and his path towards defining capitalism as "evil" - nowhere did he attempt to get to the root cause of all the current financial problems - consumerism and plain greed.

If the investors were not greedy (playing the lottery) and lapped up all the questionable deals that wall street sold them-

If people had not borrowed endlessly against their homes to finance a lifestyle they could ill afford (did banks really think that they could sell all these homes to recover)

If people had not lived like there was no tommorow

and so on and so forth..

The one thing he did show up was the 2nd bill of rights - which in my opinion for all the right reasons wasnt enacted - simply because they were the confused utopian rambling of a president who had gone soft after the years of hardship his people had undergone during the 2ndWW.

I mean looking at the list would make communist China blush:

- jobs for all!!

- money for all human needs and needs also includes recreation!!

- farmers to sell their produce at good rates (what will happen to all the middlemen?!!)

- free enterprise - now when was the last time that was there?

- housing for all (heard about lustron?!!)

- healthcare for all - ???

- education for all

- old age care for all

of course the original bill had a lot of adjectives like good, adequate, decent etc - now who is to decide on these measures? to be fair to FDR if he had lived to make this dream of his a reality maybe most of these adjectives would have been ironed out and maybe Moore would not have had an opportunity to make a film on the evils of capitalism but rather he would have made a film on the evils of communism!!

Now the confused mixed economy approach of India has worked for the past 62 years without a recession - with a 40% opening up of the economy we are into our first recession and stimulus package!! So a comparison of communism, socialism, mixed economy and capitalism would have been more academic, less dramatic but more truthful with respect to what Moore wants us to believe - that capitalism is "evil". It aint evil but definitely it is over rated. It also cannot provide the untold riches to all - there is place for only one king and he doesnt take too kindly to another on his turf or become king on his watch!!

The rich are the getting richer and this is aided and abetted by the political class which is financed by them in the form of loose fiscal policy and other covert policy measures which act as effective trade and competition barriers!!

It is at times like these that when one looks at what is happening in India and wants to thank ones stars for being born in this mixed economy which is so confusing that even recession so far has been confused from entering here in all its despair and depression!!

Can i have some more of this confusion please..

Cost or Price?

Henry Ford had this to say when he talked about mass producing his car:

"Our policy is to reduce the price, extend the operations, and improve the article. You will notice that the reduction of price comes first. We have never considered any costs as fixed. Therefore we first reduce the price to the point where we believe more sales will result. Then we go ahead and try to make the prices. We do not bother about the costs. The new price forces the costs down. The more usual way is to take the costs and then determine the price; and although that method may be scientific in the narrow sense, it is not scientific in the broad sense, because what earthly use is it to know the cost if it tells you that you cannot manufacture at a price at which the article can be sold? But more to the point is the fact that, although one may calculate what a cost is, and of course all of our costs are carefully calculated, no one knows what a cost ought to be. One of the ways of discovering…is to name a price so low as to force everybody in the place to the highest point of efficiency. The low price makes everybody dig for profits. We make more discoveries concerning manufacturing and selling under this forced method than by any method of leisurely investigation."

Not surprisingly the only company that follows it to the heart in the US is walmart and no special prizes for guessing that they are one of the enduring value creators. Ford itself lost its creators message somewhere along the way. The only other large scale follower of this is China - the manufacturers ask you whats the price you want for the product and then they arrive at that price by a matching cost structure.

Of course the big difference between Ford's time and now is that - there was only one acceptable quality for a car ie the T-ford. unlike the explorer, mustang etc etc today. Similarly for the chinese there are multiple quality levels - so you can have a battery priced at INR5 costing the manufacturer INR1 that lasts for 5hours and you can have a battery priced at INR11 costing INR3 but that lasts for 5 days.

So is Ford's thought process outdated today? I dont think so - the main underlying theme of his thought was that make a product at a cost that it will sell for. In todays world - nobody wants to sell at a price that will make the product sell - they want super profits and obscene salary costs to be added to the price of the product and make it "not sell" - and then they say there is a recession. Funny aint it?

I had always counseled that the price for any article is what the buyer is willing to pay - nothing more nothing less. This helps the cash to flow and one to remain in business - what do you think?

one more monument of corruption

The dedicated flyover to the airport in Hyderabad is built so poorly that driving on that is like driving on a giant sandpaper !! At places the 4 lane elevated road becomes a 2 lane with the remaining lane on each side just disappearing into the abyss. (currently a lot of rumblers and other so called safety directions are in place - but how long before somebody speeding by just goes off - the edge - literally!!). One explanation is that this flyover is still "work-in-progress" and these spots are likely "merge/demerge" arms yet to be built!! hope so..

Another poor attempt at design is the amount of curves in the flyover which willy nilly bring down your speed to sub 40 levels. For the money and time spent they could have instead made a metro on this route!!

Another harbinger of waste - only cars and airport bound buses can use this. In a capital starved nation to spend this amount of money (est of 600 crore) and use it only for one use is criminal to say the least. The airport is still seen as an elitist mode of transport where 97% of the population is still dependent on rail, bus or just anything that is available - and you go and build an elevated expressway at the cheap rate of INR50+crore for every km and deny its use for 2 wheelers, 3 wheelers, other non-airport bound commercial traffic etc. is a sure recipe to lose an election.

A similar fraudulant exercise is underway in delhi with a dedicated line to the airport. This line will run from the city centre to the aiport. an extension(1km) to delhi's largest subcity (dwaraka) is also planned. but a crucial link to gurgaon which is just another 6km's would save more than 50% of the estimated 1 lac vehicles which move from west/nw delhi to gurgaon besides connecting the airport. Why this crucial link between west delhi and gurgaon is continually ignored is anybodys guess.