(News collection for Management studies)

Volume: 02           Issue: 121         18-November, 2010 – Thursday      Pages:9

Focus Logistics – Shipping/Ports
Coastal shipping may be thrown open to foreign lines - Initially, only containerised cargo likely to be allowed.

Indian coastal shipping services are proposed to be thrown open to foreign shipping lines.

However, to begin with, the plan is to allow foreign flag vessels to carry only containerised cargo along the country's coast.

All other types of cargo will be reserved for Indian ships, according to a note circulated by the Director-General of Shipping here on Monday, to seek feedback from stakeholders in coastal shipping.

Cabotage for

non-containerised cargo

According to the note, Cabotage regulations, under which coastal cargo is reserved for Indian ships, will continue for all other types of cargo except containerised cargo.

The Shipping Secretary was expected to announce a draft coastal shipping policy yesterday at a meeting of costal shipping service operators in Mumbai. However, since Parliament was in session, the proposals in the draft policy were issued in the form of a note by the Director General of Shipping.

Stakeholders are required to submit their suggestions by November 30, a Shipping Ministry official said.

In phases

The Shipping Secretary, Mr K. Mohandas, said the proposed policy will be implemented in phases. He said it is an action plan with a time-frame for implementation by the DG Shipping, Ministry of Shipping and other Ministries.

Beneficiary

According to the note, the relaxation in cabotage is expected to be implemented by this fiscal itself.

The immediate beneficiary of the proposed policy, once implemented, will be the new container terminal at Vallarpadam near Kochi.

The terminal promoted by a joint venture majority, owned by DP World, Dubai, and is expected to be commissioned by next month, has been seeking relaxations from cabotage.

The Vallarpadam terminal will be able to do transhipment of cargo engaging foreign flag container carriers.

According to trade estimates, annually around 1.2 million TEUs of Indian cargo is transhipped through Colombo alone. If this traffic can be handled at Kochi, there will be a substantial saving in transit time and costs for Indian shippers, it was argued by supporters of the Vallarpadam terminal.

Indian shipowners have been opposing the Government's move to allow foreign shipping to operate costal services.

Mr Anil Delvi, Chief Executive of Indian National Shipowners Association, said “we have already made our stand on cabotage very clear. It is for the country's interest and the development of shipping tonnage that the coastal cargo has been reserved for national flag carriers.”

In several counties coastal cargo is reserved for domestic carriers. “It is only a proposal now. We are sure the Government will take into account the industry's views”, he said.

Carrying empty

The proposed policy, while allowing foreign lines to carry containerised coastal cargo, prohibits them from carrying empty containers between two Indian portsThe proposed policy also suggested relaxation in manning norms for coastal shipping and providing financial incentives to acquire vessels for coastal service. It has also recommended freight preference to Indian ships in coastal trade. The right of first refusal price band has been increased to 10 per cent to 25 per cent. This means Indian companies can quote up to 25 per cent higher freight than their overseas competitors.
 

SPECIAL FOCUS

Impact of Globalization on Indian Financial Services Industry  (Contributed by K. Bhanu Teja , 09D61E0013)

Reforms of the financial sector constitutes the most important component of India’s programme towards economic liberalization.  The recent economic liberalization measures have opened the door to foreign competitors to enter into our domestic market. Deregulation in the form of elimination of exchange controls and interest  rate ceilings have made the market more competitive.  Innovation has become a must for survival.

Many  of the providers and users of capital have changed their roles all over the world.  Financial intermediaries  have come out of their traditional approach and they are ready to assume more credit risks.  As a consequence, many innovations have taken place in the global financial sector. Which have its own impact  on the domestic sector also. The emergence of various financial institutions and regulatory  bodies have transformed  the financial services sector from being a conservative industry to a very dynamic one. In this process this sector is facing a number of challenges.

Growth in financial services (comprising banking, insurance, real estate and business services), after dipping to 5.6% in 2003-04 bounced back to 8.7% in 2004-05 and 10.9% in 2005-06. The momentum has been maintained with a growth of 11.1% in 2006-07.

Impressive progress in information technology (IT) and IT-enabled services, both rail and road traffic, and fast addition to existing stock of telephone connections, particularly mobiles, played a key role in such growth.

      Because of Globalization, the financial services industry is in a period of transition. Market shifts, competition, and technological developments are ushering in unprecedented changes in the global financial services industry. Organizations in this highly competitive and increasingly regulated industry will especially need to focus on making themselves more:

Ø      Adept to face increasing transaction volumes, regulation and the integration of previously disparate global markets

Ø      Agile at identifying and managing risk

Ø      Operationally efficient

Ø      Customer – centric

Ø      Optimized in both business & technology

In this scenario, spearheading IT initiatives has become critically important.

Major spending initiative priorities tend to focus on automation to reduce costs and lessen risk, along with using BPO to gain efficiency and allow internal IT organizations to focus on strategic initiatives. Delivery of these capabilities at a high efficiency level but at low costs is one of the major success factors for any financial services business.

OBJECTIVE:

The objective of the present paper is to  examine the status of Financial Services Industry in India and to study the challenges before this industry due to globalization

          To enhance their competitive advantage in this changed environment, financial services institutions are increasingly harnessing new technologies to provide superior customer offerings and streamline internal processes. Today's dynamic marketplace demands that financial services providers emphasize on technologically advanced, feature-rich solutions, that can operate in real-time and with the highest degree of precision and reliability.

Information technology is increasingly being considered as critical to the strategic direction and the day-to-day operation of financial services firms.

Growth in financial services is being bolstered by the opportunities of demography, emerging markets and ever more innovative products and services. Yet, organisations also face the challenges of mounting competition, more complex regulation and ever more exacting customer expectations. Effective growth strategies are therefore likely to cut across all operating processes and functional boundaries. Key priorities include ensuring that the business model takes full account of customers’ needs, tax, financial and regulatory considerations and the organisation’s capacity to change the way it does business. In turn, the objectives and criteria for success need to be clearly measured.

                    A survey of more than 250 financial services executives carried out by PricewaterhouseCoopers in 2006, found that respondents believe that existing customers will be their main source of organic growth. Creating operations that can retain and deliver profits from customers through their lifetime will demand a significant investment in data gathering and relationship management and may therefore require a shift in the prevailing cost-income model. This includes a re-think of training, reward and performance management strategies including a move from volume-based incentives to rewards geared to client satisfaction and the profitability of the customer over the lifetime of the relationship. Success will also require timely and insightful metrics on customers’ evolving attitudes and preferences.

The  Financial Services & banking industry is changing at a fast pace. These changes are throwing up fresh challenges like managing complex technological divergence in a converging market. Banks strive to constantly offer more to the existing customer base. To achieve this, they emphasize on more targeted technology investments and high-quality service. To remain competitive, financial institutions will have to renew their commitment to investing in new technology strategically -- to reduce costs, improve efficiencies, and boost revenue-generating initiatives.

Taking full note of these challenges, OFS puts together its banking practice to help financial institutions improve enterprise performance, comply with regulatory mandates, boost operational efficiency, and better serve their customers through OFS’ spectrum of solutions and services derived from proven track record of domain expertise.

The Challenges

Among the key IT challenges facing the Financial Services industry today is:

• Preserving investments in old systems while leveraging new technologies to drive down transactions costs, expand and improve customer service
• Integrating enterprise wide disparate systems to gain operational efficiencies
• Substantially reducing time for deployment of new systems
• Reducing IT costs and obtaining better ROIs for new investments in the long-term

                Only a carefully thought out long-term IT strategy backed by execution, implementation and support capability can meet these challenges successfully.

Today's financial services firms face mounting pressures on all fronts:

• Credit markets are creating industry turmoil
• Tightening credit guidelines that threaten revenue streams
• Growing reporting and risk management obligations like Sarbanes-Oxley, Know Your Customer and Basel II
• The difficulties of sustaining growth in overly-saturated markets
• Innovative products that address the needs of a diverse client base such as retirees and young emerging and ethnic segments
• Growing concerns over customer data security and identity management
• Increasing competition not just from traditional competitors, but from other organizations that expand their service offerings
• The complexities that arise from mergers and acquisitions and from expanding into the global marketplace

          Whether we are trying to maintain competitive advantage, looking for ways to position our self better for mergers or acquisitions or expanding into the global marketplace, the challenges are as complex as they are varied. And while we deal with these fundamental concerns, we are met with increasing demands from investors, regulators and customers.

           How do we succeed in this environment? The first step is to ensure that we have the infrastructure and solutions to support our business strategy. With the right systems in place, our organization can more rapidly comply with regulations, operational risk and security issues. We can also open up new product offerings, reduce customer turnover and minimize fixed costs and maximize productivity. In addition, the companies can leverage outsourcing opportunities to reduce overhead, while still enjoying the scalability they need to support future growth or new initiatives.

The process of globalization has paved the way for the entry of innovative and sophisticated financial products into our country.  Since the Government is very keen in removing all obstacles that stand in the way of inflow of foreign capital, the potentiabilities for the introduction of innovative international financial products in India are very great.   Moreover, India is likely to enter the full convertibility era soon.  Hence, there is every possibility of introduction of more and more  innovative and sophisticated financial services in our country.

Realizing all these factors, the Government of India has initiated many steps to reform the financial services industry.

Ø      The Government has already switched over to free pricing of issues from pricing issues by the Controller of capital issues.

Ø      The interest rates have been deregulated

Ø      The private sector has been permitted to participate in banking and mutual funds and the public sector undertakings are being privatized.

Ø      The Finance Act, 1992 has brought into effect large scale amendments in the tax structure of long term capital gains.

Ø      The Finance Act, 1994 has given a further boost by lowering the lock – in period from 3 years to 1 year, in order to get the entitlement as a long – term capital asset.

Ø      The SEBI  has liberalized many stringent conditions so as to boost the Financial Services Industry.

In this changed context, the financial services industry  in India has to play a very positive and dynamic role in the years to come by offering many innovative products to suit the varied requirements of the millions of prospective investors spread throughout the country.

DAY FOCUS:  (Focused by K.Mounika- 09D61E0030)

Private Banks -Money & Banking - Mergers & Acquisitions -Markets - Financial Services

Axis Bank arm to buy unit of Enam Securities in all-share deal - Deal size: Rs 2,067 cr; swap at 5.7 shares of Axis for one of Enam.

The deal Post-merger, Enam shareholders will own a 3.3 per cent stake in Axis Bank
The merger is likely to go through in six months' time, subject to approvals
In the April 1-October 20 period, Enam Securities reported total income of Rs 182 crore and profit before tax of Rs 77 crore
Axis Bank posted a 38% rise in net profit at Rs 735 crore in the Q2 of 2010

Following in the footsteps of its peers ICICI Bank and HDFC Bank, Axis Bank has decided on a bigger play in the equity capital markets and investment banking space.

The private sector bank on Wednesday announced that a major chunk of the businesses of home-grown financial services firm Enam Securities will be merged with a wholly-owned subsidiary of the bank in all-share deal.

According to the scheme of arrangement, Enam shareholders, mainly Mr Vallabh Bhansali, Mr Nemish Shah, Mr Jagdish Master and Mr Manish Chokhani, will receive 5.7 shares of Axis Bank for each Enam share held.

According to Ms Shikha Sharma, Managing Director and CEO of Axis Bank, the transaction is worth Rs 2,067 crore. The valuation takes into account revenue, assets such as people, brand, and business relationships, and the business model, she added.

Details of merger

Post-merger, Enam shareholders will own a 3.3 per cent stake in the bank. Mr Bhansali, Co-founder and Chairman, Enam, will be inducted on the board of Axis Bank as an independent director, subject to approval of the bank's shareholders and the RBI. Mr Chokhani will be the Managing Director and CEO of the subsidiary.

A slew of businesses — investment banking, institutional and retail equities and related business such as distribution of financial products and a non-banking finance company — will be carved out from Enam Securities and merged into the bank's wholly-owned subsidiary, Axis Securities & Sales Ltd. The bank will also demerge its investment banking business to this subsidiary.

Axis Securities and Sales Ltd was set up in December 2005 to market credit cards and retail asset products.

The merger is likely to go through in six months' time, subject to the necessary approvals, said Mr Bhansali, at a news conference on 17^th November,2010.

Net current assets and fixed assets aggregating to Rs 300 crore will be transferred from Enam Securities to the bank's wholly-owned subsidiary. “There is minimal business overlap and the merger is a very good strategic fit,” Ms Sharma said.

Post the merger, Enam will be left with businesses such as asset management (which predominantly provides portfolio management services), and insurance broking.

“The whole management of Enam is migrating with the business and therefore synergies will start from day one. To call this an acquisition is wrong. This is a merger. The character change to both partners is huge,” said Mr Bhansali.

Both parties to the transaction have signed a non-compete agreement whereby the promoters of Enam will not enter the business that the bank's subsidiary is in for a period of five years. Further, Axis Bank can use the Enam brand name for two years.

“It is a good deal for Enam. They were probably one of the last Indian merchant bankers looking out for a deal which has now happened,” said Mr Arun Kejriwal, founder, KRIS Research.

Macquarie was the sole advisor to Axis Bank and Mr Anil Singhvi, Head of I-Can Investment Advisors, was advisor to Enam.

Climate & Weather -Agri-Biz & Commodities - Coffee
Global warming brews trouble for coffee growers – In kodagu, higher temperatures, pest attacks destroy 35% of crop.

“Excess rains and changing weather patterns have led to warm summers, and wet or nil sunshine winters leading to crop ripening early”

A great degree of uncertainty still exists with regard to how individual coffee producing countries get affected and how climate change will impact its overall coffee production.

India (coffee growers – stakeholders and Coffee Board), in its submission to the International Coffee Council (ICC) in September, said arabica farms in India are already experiencing the negative effects of global warming.

Indian Scenario

In the Kodagu region, some areas have seen rainfall drop by one-third, from 106 inches per year to 70 inches, dramatically changing the ecosystem and growing conditions.

With higher temperatures, too, infestation of arabica plants by the white stem borer has destroyed up to 35 per cent of the crop, and robusta plants, immune to that pest, have been hit instead by the coffee berry borer.

Growers who had never given a thought to irrigation in such a wet climate have had to dig deep, high-volume wells, lowering the water table in the region.

The Union Government is helping farmers monitor the life-cycle of the borers so that a means to fighting them effectively can be designed.

According to Mr Marvin Rodrigues, Vice-President, Karnataka Planters' Association (KPA), weather patterns in coffee growing regions in India has changed in the last three to four years.

“During north-east monsoon, we used to get rains, but not in excess. Excess is to the tune of 30 to 40 per cent,” he added.

“Excess rains and changing weather patterns have led to warm summers, and wet or nil sunshine winters leading to crop ripening early and coffee processing getting affected due to lack of sunshine,” he further added.

Quality -    As temperature rises, coffee ripens more quickly, leading to a fall in quality. According to Dr Peter Baker, from CABI, if temperatures rise by 3 degree centigrade by the end of this century (some experts believe an increase of up to 5 degree centigrade is possible), the lower altitude limit for growing good quality arabica coffee will rise by roughly 150 feet (46 m) a decade.

This is 15 feet a year, meaning that areas that are currently too cold for growing coffee could become suitable.

Yields hit -Temperature increases affect different aspects of the metabolism of coffee trees, such as flowering, photosynthesis, respiration and product composition, which in turn affect coffee yields. Temperature increases will favour the proliferation of certain pests and diseases, as well as permitting their dispersion to regions where they were previously not present.

Global output - As a result of all the changes in the environment, there is a distinct possibility that fewer parts of the world will be suitable for growing quality coffee. If this were to happen, current trends in concentration of production could become even more pronounced. This in turn could make global production more prone to high fluctuations, as any severe disruption in output from one of the major producers would drastically curtail global output.

MANAGEMENT TIPS:

 GO ABOVE AND BEYOND

Managing people isn't just about getting the job done. To truly be a great leader, sometimes you need to go above and beyond what the job calls for.

Lead by example. You can talk until you're blue in the face, but the best way to get a point across is to be the model to emulate. Let employees follow your lead.Get your hands dirty. Sometimes you need to show your employees that no one's above doing unattractive tasks.Make a difference to your employees. Don't just be a generic manager — stand out as a leader and role model for your employees.Gain your employees' trust and respect. You'll have a much easier time managing employees when they respect your rules and boundaries and trust your leadership.Be empathetic to personal problems. Whether it should or not, what happens outside of work can have a big affect on the quality of work produced. Be sensitive if employees have personal issues that keep them from concentrating on work.Be unique as a manager. Every position demands something different and you should be proud to be adept at your particular role rather than trying to emulate other managers.Remember that ethics matter above all. Be honest and reliable in all of your business and personal relationships.Be on the lookout for new ideas. You never know where your next great inspiration will come from.Get to know your employees. Learn more than just their names. Get to know your employees' family backgrounds, likes and dislikes. Doing so will make you more personable.

Focus – Day Tip If you speak truth and practice righteousness you will attain the highest state..