(News collection for Management studies)

Volume: 02           Issue: 110          24-November, 2009 – Tuesday            Pages: 8

Focus : The New Manager -Management
Learning from the Indian experience -

Students and firms are keen on understanding the country’s unique style.

It is now an established fact that the Indian market is vital for the success and growth of any global enterprise. If that be the case, what are the lessons to be learnt from the Indian experience?

The interest in studying Indian corporate case studies is increasing globally, say experts.

According to Ajit Rangnekar, Dean, Indian School of Business (ISB), there is a huge gap in global management education as far as the nature of case studies is concerned.

“Till recently, great ideas in business came to us from the West. But during the last 10 years, Indian industry has undergone enormous change and there are many lessons to be learnt from here,” he told The New Manager.

Taking note of the significant contribution of Indian industry, ISB, in association with the Richard Ivey School of Business of the University of Western Ontario, recently set up an exclusive case development centre.

Recruiters and students of management also feel that lessons from the Indian context can enhance the quality of management education and help managers in tackling India-specific market challenges, says Savitha Mahajan, Deputy Dean, ISB.

The premier business school now has a number of case studies including that of the use of data warehousing as a strategic tool at Bharti Airtel (under technology management in mobile telephone services); the professionalisation of Ujwal Bharati, a pharmaceuticals company; the corporate share valuation of Bharti Airtel in 2008; the success story of Swagruha Foods in Vijayawada (Andhra Pradesh); and on Ashta Chamma, the biggest small movie ever made.

Apart from business schools, the multinational companies are also showing interest in finding out how things are managed “differently” in India, says Carol Stephenson, Dean of Ivey.

Twenty-five top business schools in the world have shown an interest in such studies, she added.

Experts from other business schools also agree on the importance of using lessons from Indian case studies.

“Till recently, professors and industry experts used to quote from their practical experience in industry while teaching management students. Now, the focus is on actual, field-based learning,” says Dr Sitaramayya, Director, IBR Institute for International Business Relations.

“At IBR, we quote extensively from Indian case studies and are in the process of developing some vital case studies,” he adds.

As Indian managers increasingly take up global assignments, the rich and diverse learning from Indian examples would be of great help, he asserts.

DAY FOCUS:  Focused by J.Deepthi, 1-Sem MBA (09D61E0011)

Foreign Direct Investment -Industry & Economy - Real Estate & Construction -Government - Policy
Govt may do away with lock-in period for FDI in real estate - Dept of Industrial Policy and Promotion framing new rules.

Setting the stage for easier FDI norms in the real estate sector, the Government is considering a proposal to do away with the three-year lock-in stipulation for repatriation of foreign investments in SPV projects.

Industry observers say the move will draw foreign investors — which had avoided project-level or Special Purpose Vehicle funding because of the lock-in condition — into the sector. This will benefit both unlisted as well as listed builders, including such players as DLF, Unitech, Parsvnath Developers, and Ansal API.

At present, portfolio investments do not come with a lock-in clause. The condition is only stipulated for Foreign Direct Investments. Sources said that the condition of a three-year period (from completion of minimum capitalisation) had initially been imposed as a deterrent against speculative investments when the sector was opened up for foreign investment.

In the current context, however, it was felt that there is no similar clause in other sectors, with the exception of Defence. Hence, the Government is considering scrapping the lock-in condition. Other conditions pertaining to minimum area for development of serviced housing plots or construction development, as well as minimum capitalisation norms (Press Note 2 of 2005) are likely to continue. Sources said the Department of Industrial Policy and Promotion (DIPP) — the nodal Department for framing FDI rules — is also seeking the view of the Urban Development, Housing and Finance Ministries on the issue.

When contacted, a senior official of a large real-estate company told Business Line that dispensing with the lock-in condition would help infuse more capital into projects. “The restriction with regard to repatriation was a deterrent for some foreign investors. If the condition is removed, it will be easier for developers to get more capital for their projects,” the official said, on condition of anonymity.

On the flip side, an analyst pointed out that the move could worry some realtors as their current FDI partners may now find it easier to repatriate investments in projects even before the three-year period is up. “It should not be an easy-come, easy-go policy,” he cautioned.

The Parsvnath Developers Chairman, Mr Pradeep Jain, felt that, depending on the execution, if the project generated internal accruals, the investor would now be free to repatriate his original investment. “I think, it will be good for the sector as a whole…The cost to the project will come down,” he said. At present, under Press Note 2 (2005), up to 100 per cent FDI is permitted on automatic route in case of integrated township development, housing and construction development activities. This is subject to certain conditions: Minimum area to be developed under each project in case of serviced plots is 10 hectares; minimum area to be developed in the case of construction development project is stipulated at 50,000 square metres (built-up space).

Besides this, there is a minimum capitalisation requirement of $10 million for a wholly-owned subsidiary and $5 million for joint ventures. Although there is a blanket lock-in period stipulated for repatriation, investors are allowed to exit in specific cases, with prior permission of the FIPB.

Corporate -Indian Oil in pact with NPCIL for 1,000 MW unit

Indian Oil Corp, the nation's largest oil firm, will set up a Rs 10,000-crore nuclear power plant in association with Nuclear Power Corp of India Ltd."We have signed a memorandum of understanding (MoU) for setting up at least one 1,000 MW nuclear power power plant with NPCIL,'' IOC Director (Business Development), Mr B M Bansal said.

NPCIL will be the operator and take at least 51 per cent stake while IOC is contemplating taking either 49 per cent or 26 per cent interest. **Nuclear power gives us a good opportunity to become an integrated energy firm,'' he said."We want to gain experience and may be at a future date we may set up nuclear plants on our own (when the sector is opened up).'' IOC may invest Rs 1,000 to Rs 1,500 crore as equity in the project with NPCIL, he said, adding nuclear power project offere d assured returns unlike the company's refining business that is subject to highly volatile margins.

Techno-commercial modalities, including source of nuclear fuel and site would be decided over the next six months. "We have requested NPCIL to involve us in an approved project so that the project is constructed by 2014,'' he said adding it may take six years to build a project at a site already not approved.

Banking -Money & Banking - Credit Cards & Debit Cards - Credit Market
Credit card volumes shrink as banks turn cautious - DEFAULT EFFECT

 With many banks closing inactive and unproductive accounts in their credit cards portfolio, the total credit card base in India could shrink by 8 per cent to 2.26 crore by March-end 2010 compared with 2.47 crore as of March-end 2009. Credit card issuers are likely to remain hesitant in issuing new cards due to the increasing delinquency rate in the country, according to a survey carried out by consumer payment processing company, Venture Infotek.

Tighter norms - “Earlier some banks aggressively marketed credit cards. However, in the last one year or so, delinquencies have increased substantially. The RBI’s timely intervention has ensured that banks don’t employ strong-arm tactics to make recoveries.

“So, banks have tightened their due diligence norms for issuing new cards. Awareness about debit cards has increased significantly with the spread of ATM networks. Moreover, customers don’t want to live beyond their means. Hence, they find debit cards useful for conducting transactions,” said Mr P. K. Bansal, General Manager, Union Bank of India.

Market share - Though ICICI Bank tops the league table with respect to the number of credit cards in circulation, its market share, however, declined to 28 per cent (70 lakh cards) as of March-end 2009 from 33 per cent (90 lakh cards as of March-end 2008), according to the survey. It has estimated that the bank could end FY-10 with a credit card base of 55 lakh. As of March-end 2009, SBI and Citibank’s credit card base had shrunk to 27 lakh (36 lakh as of March-end 2008) and 25 lakh (34 lakh) respectively.

According to the survey, the card base of India’s largest bank and the foreign bank are seen coming down further to 25 lakh and 18 lakh respectively by March-end 2010. The survey, however, expects HDFC Bank and HSBC to grow their credit card base to 41 lakh (from 40.30 lakh as of March-end 2009) and 40 lakh (35 lakh) respectively.

ICICI Bank, HDFC Bank, HSBC, SBI and Citibank have over 80 per cent share of the Indian credit card industry. Despite the decrease in the credit card base, credit card spends rose in FY-2009 with travel services such as airline and railway tickets and transactions via the Internet being the primary drivers. The average annual credit card spends jumped by 26 per cent to Rs 26,461 during the year 2009 from Rs 21,049 during 2008.

The ongoing economic slowdown and cautious attitude towards spending money could see the debit card base increase by 26 per cent to 17.32 crore by March-end 2010 from 13.74 crore as of March-end 2009. In FY-2009, the average annual debit card spends at merchant point-of-sale terminals increased by 10 per cent to Rs 1,350 from Rs 1,222 in FY-2008.

Corporate -GVK Biosciences ties up with Bayer CropScience

Contract research firm GVK Biosciences on Tuesday said it has entered into an agreement with German firm Bayer CropSciences for conducting research in the field of crop protection.

"Under the terms of agreement, Bayer CropSciences will integrate GVK Bio's capacities in the early part of its discovery chemical process,'' GVK Biosciences said in a statement. The objective of the agreement is to speed up the search for promising active ingredients for innovative crop protection products, it added. With a budget of euro 649 million for R&D, Bayer CropScience is one of the leading innovative companies in the a gricultural industry.

Regulatory Bodies & Rulings - Money & Banking - Financial Markets
Market volatility poses valuation problems: IRDA - Guidance note soon on migration to Basel II norms.

 The Insurance Regulatory and Development Authority (IRDA) has indicated that migration to the marked-to-market regime for investment valuation is posing major problems.

The IRDA Chairman, Mr J. Hari Narayan, said, “We have problems with Basel II investment valuation.”

He said that this was in view of the excessive volatility in the asset values witnessed. High volatility in the asset prices tends to make solvency ratios of the insurance companies swing. Solvency margin is the excess of capital and value of assets over the insured liabilities.

Consequently, the IRDA, he said, was working out a cut-off date for the valuation. Insurers, both life and non-life, already filed their respective solvency reports with the regulator on a quarterly basis.

Currently, insurers value assets on a book value basis. Solvency accordingly tends to get understated. Based on asset valuation guidelines, insurers are currently expected to maintain a solvency margin of 150 per cent.

Migration to Solvency II

However, in the case of the Solvency II regime as prescribed by the International Association of Insurance Supervisors, assets are expected to be valued on a market-value basis.

IRDA’s stand on the valuation also implied that the regulator was expected to move into a regime in line with the banking sector, prescribing a held-to-maturity (HTM) category of securities. The Reserve Bank of India (RBI) allows banks to mark up to 25 per cent of their demand and time liabilities on an HTM basis.

But Mr Hari Narayan also indicated that life insurers would be expected to quickly migrate to the market consistent embedded value (MCEV). The MCEV estimates the future profits of an insurer on the basis of its past premium flows. Studies for migration of life insurers had already been completed, he said. He added, “A guidance note will be issued soon.”

For the non-life insurers, studies were still under way, he added. Only after these studies non-life insurers would be allowed to migrate to the Solvency II regime, he said. Asked whether policy holder funds would also be included for valuation purposes for insurance companies planning Initial Public Offerings, Mr Hari Narayan said, “We are still examining the issues and are in consultation with actuaries for the purpose.”

Slower growth

Earlier, Mr Hari Narayan, speaking at the Insurance Brokers’ Association said the breakneck pace of growth witnessed in the insurance industry in the past was over. “A growth of 10 per cent on a CAGR (compounded annual growth rate) basis over the next five years is more realistic.”

But he added “We are nervous over the current state of the stock markets and wonder whether the pace of growth is sustainable.” The nervousness stems from the fact at least 60 per cent of the policies are in unit-linked products that have a substantial component of investments in equities.

Agri-Business - Rice, wheat stocks at more than buffer norm: Pawar

Allaying the fears of acute shortage of foodgrains that could disrupt Public Distribution System programme, the Government on Tuesday said the stock position of both wheat and rice is much more than the required buffer norm.

As per the current stock position, availability of wheat stands at 300 lakh tonnes against the buffer norm of 162 lakh tonnes, the Agriculture Minister, Mr Sharad Pawar, informed the Lok Sabha during Question Hour. Similarly, rice stock is at 172.11 lakh tonnes while buffer norm is 52 lakh tonnes, the Minister said.

“There is no shortage of foodgrains for the PDS as well as for other welfare schemes like Mid-Day meal. Ample rice and wheat is available. This was possible because of very good crop last year,’’ he said. But, the real worry is about open market availabi lity.

As the paddy crop has been less by 15 million tonnes this year so far as 299 districts went without water due to no rainfall and to ensure that prices remain under control, the Government has taken several measures including banning export and liberalisi ng imports of foodgrains.

The Centre has also provided Rs 1,000-crore special incentives to Punjab, Haryana, Uttar Pradesh and Bihar in terms of additional diesel and power subsidy to enhance rice production during the rabi crop season.

Logistics -Air India focusing on cost cutting

Cash-strapped Air India is focusing on cost reduction of Rs 1,500 crore and revenue enhancement of Rs 1,200 crore as per its turnaround plan and the government would infuse equity into the airline in the next few years, the Rajya Sabha was inf ormed on Tuesday. The airline's turnaround plan has been broadly divided into 0-9 months, 9-18 months and 18-36 months and has been segregated under operational efficiency, product improvement, organisation building and financial restructuring,'' Civil Aviation Minister, Mr Praful Patel said in a written reply.

He said the National Aviation Company of India Limited (NACIL) was mainly focusing on cost reduction (to the tune of Rs 1,500 crore) and revenue enhancement (of Rs 1,200 crore). The plan also envisages manpower cost rationalisation, fuel management, ro ute profitability enhancement and non-traffic revenue enhancement. He also said that Air India has rescheduled delivery of three Boeing 777-300ER aircraft beyond 2010 and 27 Boeing 787 aircraft beyond contracted delivery period commencing April, 2011. The airline had also proposed to lease out three new Boeing 777-200L R aircraft. -

Govt/States -‘India needs 50-cr skilled manpower by 2022’

India needs about 50-crore of cumulative skilled manpower by 2022, of which Maharashtra alone needs 5 crore, a senior Maharashtra Government official said. “The country needs about 50-crore of skilled manpower but there is a huge gap today. At present, India has a training capacity of only 30-lakh people and the need of the hour is aggressive vocational training,’’ the Principal Secretary, Department of Hig her and Technical Education, Mr J.S. Saharia, told PTI.

The Department has already presented a road-map to the Chief Minister and the Governor highlighting the measures needed to improve the quality of vocational education that would be system-relevant and employable, Mr Saharia said. Industry players should join hands with Government bodies in this regard, he said. 

Cement - Cement sales revive in October

After a lull in the last three months, cement sales seem to have picked up in October as real estate demand revived post-monsoon.

HolciM group Holcim Group companies – ACC and Ambuja Cement – have registered a rise in their despatches in October.

ACC sales were up to 1.69 million tonnes (mt) from 1.63 mt recorded in September while its production rose to 1.71 mt from 1.64 mt.

Ambuja Cement despatches were up seven per cent at 1.46 mt (1.36 mt) and output rose to 1.50 mt (1.38 mt). Though both the companies have added to their inventory, the improvement in demand will probably take care of it, said an analyst. However, ACC sales were down marginally at 1.69 mt (1.70 mt) and production was down at 1.71 mt (1.74 mt).

Aditya Birla group -Aditya Birla Group cement sales, which include Grasim Industries and UltraTech, sales rose 11 per cent to 2.819 mt compared to the same period last year. Production was up 12.5 per cent to 2.93 mt, the company said in a statement. The Group did not disclose its September performance.

ACC and Ambuja Cement closed higher by 2 and 0.74 per cent at Rs 748 and Rs 89 on Friday, while Grasim Industries and UltraTech Cement moved up two per cent and one per cent, respectively, at Rs 2,180 and Rs 769.

Shree Cement - Shree Cement sales were up at 7.01 lakh tonnes (lt) against 6.80 lt recorded in September and it higher by 12 per cent year-on-year basis. JK Lakshmi Cement registered a nine per cent rise in output at 3.35 lt compared to 3.65 lt recorded in the same period last year, while sales rose seven per cent at 3.40 lt (3.63 lt).

Most of the cement company shares on BSE were down, as the benchmark Sensex shed 491 points on Tuesday. Shares of ACC and Ambuja Cement were down six and five per cent each at Rs 701 and Rs 85. Grasim Industries and UltraTech Cement fell 0.22 per cent and four per cent to Rs 2,176 and Rs 740, respectively. Shree Cement and JK Lakshmi Cement were down two per cent and one per cent at Rs 1,542 and Rs 122, respectively.

MANAGEMENT TIPS: KEEP UP WITH CHANGE

There is no way to stop the world from changing, so follow these tips to keep up and ahead of the game.

Don't fight change. You can't stop markets, trends and technology from changing, so learn to go with the flow.
Adopt a predictive managerial style. Don't wait for things to happen to make a move. Anticipate problems and provide contingency plans.
Test your contingency plans. Waiting for disaster to strike is a dangerous way to find out if your emergency plans will hold. Test them out from time to time to fine-tune them and make sure they're still relevant.
Identify the positives. Even the most negative changes can have positive aspects to them. Being able to identify and maximize them can help make adapting less painful.
Be quick to adapt. Learn to adapt to changing situations quickly and be able to change plans on the spur of the moment if the situation requires it.
Stay tuned to external factors. Your business is affected in many ways by outside factors. Keep abreast of these so you can anticipate any sudden market changes that would affect how you need to manage.
Put in place a Research and Development plan. Encourage innovation and creativity to stay ahead of the demand for newer and better products and services.
Keep an eye on the competition. Don't let the competition get the best of you. Keep up-to-date with what they're doing and use it to your advantage in managing your business.

Focus – Day Tip The good and bad of the world depend on your conduct which in turn depends on your thoughts.