Sad but necessary

Rahul Dravid's omission from the one-day side

Everybody is bound to be surprised and there will be hues and cries whenever any senior is dropped from the side. However, what we should remember that if we have to find another Sachin, Sourav or Rahul, we have to pick the youngsters in their prime years. Remember, if Sachin had not been picked up for a tough tour for Pakistan when he was just 16, we would not have discovered India's greatest batsman. If you don't pick the youngsters right now, they may be disheartened and loose their intensity. Change is always painful but we need to accept it, keeping in mind the future particularly because big 3 will definitely not be there for 2011 World Cup.

(Published in Letters to the Editor, The Hindustan Times, Mumbai, 30th October 2007)

Depreciating Rupee: Does it really help exporters?

Abstract

Exchange rates and exports have always been discussed in tandem. Whenever Rupee depreciates, Government become alert as any strengthening of rupee makes the exports costly because of which they loose their competitiveness. Reason given is that this has an adverse affect on the country’s Balance of Payments Surplus and it pulls down the economic growth. Lobby of the exporters also stands up and tries to make its voice heard in the corridors of the Union Government. Hence, this paper has been written with the objective of finding whether there is any relationship between the growth in exports and the depreciating Rupee.

Introduction

In last few days, several articles have been written about the appreciation of Rupee and its effect on the competitiveness of the Indian exports.

This is due to the RBI’s policy of letting Rupee to rise in order to tame the inflation. Till now, whenever Rupee appreciated, RBI intervened by buying the dollars from the market and releasing the equivalent amount of Rupee in the economy which increased the money supply. An increase in the money supply to a particular extent is fine but subsequently it leads to inflation – too much money chasing too few goods. With Indian economy already having a high level of inflation due to supply side constraints, any attempt by the RBI to stem the appreciation of Rupee would have increased the supply of money and hence inflation. That is why; RBI stopped buying dollars which caused appreciation in Rupee.

People have differing views about RBI’s policy. One view is that on account of the appreciating Rupee, our exports will loose their sheen and the trade deficit will increase. Another view is that the appreciating rupee is an indicator of the strong growth of our economy, which has resulted in higher FDI and FII inflows, and there is no harm in what RBI is doing currently. Exporters need to pull on their socks and focus more on cost reduction and quality improvement. In the long run, it is the competitiveness that matters and not the depreciation in Rupee.


Overview

If we observe the trend of Indian exports, India has exported goods and services worth $ 125 bn in the financial year 2006-07 which was just $ 2 bn in 1970-71. Thus exports have grown at a Compounded Annual Growth Rate of approx. 12% p.a. Currently the share of India in the World trade is about 1.5% which is expected to cross 2% in 2009. Similarly, the average exchange rate was Rs. 7.56 per USD in the year 1970-71 which has increased to Rs. 45.25 per USD in 2006-07. The lowest level which the Rupee had touched was in 2002-03 when the average exchange rate was Rs. 48.40 per USD.

Analysis

An important question is that if the Indian exports have grown over the years at a steady rate, has depreciation in Rupee played some role in it. Can the exchange rate explain the variance in the exports?

To find out the answer, investigative studies have been carried out by the author through regression analysis based on data of Rs./$ exchange rate and exports denominated in USD. Dependent variable (Y) is the growth in exports and independent variable (X) is the depreciation in Rupee.

Study I

The period of study was taken as FY 1971-72 to FY 2006-07 i.e. sample size of 36 years.

The results showed that there exists a moderate degree of negative correlation between the depreciation in Rupee and the increasing exports with a correlation of -0.43. Coefficient of determination is 19% which indicates that 19% variation in the growth of exports can be explained by the depreciation in Rupee which means that remaining 81% variation remains unexplained by depreciation in Rupee.

However these results cannot be given much significance as in pre-1990 scenario our economy was not an open one with many trade regulations and exchange controls. It was in the beginning of 1990s that several economic reforms were introduced which involved the deregulation of exports. Also, Rupee was made fully convertible on trade account in February 1993 and on current account in August 1994.


Study II

Keeping in view these facts, another analysis was carried out for the post-reforms period - FY 1993-94 to FY 2006-2007 i.e. sample size of 14 years.

This time the coefficient of correlation is -0.72¸which indicates high degree of negative correlation with 51% of the variation in the growth of exports being explained by the depreciation in Rupee.

The analysis showed that there is negative correlation between the two variables under study however; the extent of explained variation was more in second study. Also, both of these tests have shown significant linear relationship through F Test.

Interpretation and conclusion:

Though both of these studies have got some merits and demerits, we can conclude that that either there is high or moderate degree of negative correlation between the growth in exports and the depreciation in Rupee. It doesn’t matter which study you give importance too, unless the correlation is significantly positive, which hasn’t been proved.

However, as explained earlier, prior to the introduction of economic reforms, our economy was constrained by several rules and regulations and thus the figures of exchange rates and exports may not show us the true picture. In that case, Study II stands out and its results can be considered significant which indicates that there is high degree of negative correlation between the growth in exports and the depreciation in Rupee.

Thus, it can be said that in the long-run, exporters should not get worried whenever Rupee appreciates and, if they keep their thinking hats on they will keep getting better and better and exports are going to increase at a healthy rate.

Further, RBI’s policy of allowing the Rupee to appreciate should be seen in the right perspective. Any appreciation in the Rupee indicates growing strength of the Indian economy with several implications – some positive while some negative. Important thing is whether positives outweigh negatives.

On a lighter note, who would like to buy just a US Dollar by paying 40 Rupees!!

Acknowledgement:

Author is thankful to Dr. Thomas Mathew and Mrs. Jaskiran Arora for valuable help provided during the preparation of this paper.

References:

1. The Economic Survey 2006-07 – www.indiabudget.nic.in
2. Reserve Bank of India’s website – www.rbi.org.in
3. Ministry of Commerce’s website – www.commerce.nic.in
4. “Exports, more than rupee's worth”, Rohit Pandit, Business Line, 25th May 2007

Drivers of Shareholders' Value

“Economic Value Added measures the profitability of a company after taking into account the cost of all capital. It is the post-tax return on capital employed (adjusted for the tax shield on debt) less the cost of capital employed. Companies which earn higher returns than cost of capital create value. Companies which earn lower returns than cost of capital are deemed destroyers of shareholder value.”

- Infosys’s Annual Report (FY 2005-06)


Introduction

The most important objective of Financial Management is the maximization of shareholders’ value. After reading this, the first question which comes to our mind is that how do shareholders know that the company to whom they have entrusted their hard earned money is efficiently utilizing it and thus, creating value for them. We have always read the annual reports of the companies to find out information about their ‘top line’ and ‘bottom line’. We also have various financial ratios for our aid like Return on Capital Employed (ROCE), Return on Net Worth (RONW), Earning per Share (EPS), Dividend per Share (DPS) etc.

In 1890, Alfred Marshall introduced the concept of Residual Income, which can be arrived at by subtracting the charge for the capital employed from the operating profit. In the beginning of the 1990’s, Stern Stewart & Co. came out with a modified way of calculating Residual Income suggesting accounting changes with respect to depreciation, inventory, research and development expenditure etc., for arriving at the figures of operating profit and capital employed. With this, the term – Economic Value Added (EVA) was introduced on which the firm has the copyright.

Many studies have been carried out to find out whether these measures really contribute to the shareholders’ wealth. However, since EVA was introduced as an indicator for shareholders’ wealth maximization, it has been a focal point for majority of the studies. Also, many Indian companies like Infosys, Hindustan Lever, Tata Steel, Godrej etc. have adopted EVA and are mentioning about it in their annual reports.

This paper is another attempt to find out whether EVA really explains the value accretion for the shareholders. Are we better off by removing the focus from EVA and concentrating on traditional measures like ROCE, RONW, EPS, DPS etc.?

Objective

The primary objective of this paper is to find out what drives the shareholders’ value. The study has been conducted to find out the correlation of the measures like ROCE, RONW, EPS, DPS, Cash Flow from Operations and Economic Value Added with Market Value Added (MVA).

EVA and MVA

As the introductory paragraph of this paper suggests, EVA is the surplus profit after accounting for all the expenses including the cost of capital. We have always looked at the figures of Profit after Tax to find out whether a company is performing well or not. However, what we forget is that the shareholders invest money in a company in expectation of some return. So, the basis for evaluation should be whether the company has earned over and above the minimum required rate of return by the investors. If there is surplus after accounting for this opportunity cost of equity, the company is creating value for its shareholders. If not, then it is destroying value. In other words, value is created when return earned by the firm is more than its cost of capital or firm invests in the projects with positive NPV.

EVA can be calculated through any one of the following methods:

· Profit after Tax-(Cost of Equity*Net Worth)
· Operating Profit after Tax-(Weighted Average Cost of Capital*Capital Employed)
· (Return on Capital Employed-Weighted Average Cost of Capital)*Capital Employed


As JHvH de Wat (2005) puts it, EVA is an internal measure of performance that determines MVA, which is an external measure of performance.

MVA can be calculated by subtracting Capital Employed from the Market Value of the firm. Another variant is subtracting Net Worth from the Market Capitalization of the firm. MVA states the value addition at a particular point of time, hence it is a stock variable where as EVA is a flow variable.

A company can be an EVA and/or MVA positive company by:

· Increasing revenue
· Reducing operating costs
· Efficient utilization of assets
· Raising funds at cheaper cost

Literature Review

Stewart (1991) had carried out a research to find out the relationship between EVA and MVA. This study was done by taking average EVA values for the years 1987 and 1988 of 613 companies in USA and then comparing them with their MVA values for 1988. The study found an r² of 97% between the EVA and MVA values for the companies with positive EVA while this correlation was insignificant for the companies with negative EVA values. Finegan (1991) took a sample of 450 companies in USA and found that average values of EVA could explain 61% of the variance in MVA whereas the similar figure was 44% between the change in EVA and change in MVA. He also observed that this r² was 47% between ROCE and MVA. Dodd and Chen (1992) found ROA as a better driver of shares returns as compared to EVA.

Stern (1993) found out that EVA is the best measure that drives the shareholders’ value with an r² of 50% with MVA. The next important driver was ROE with an r² of 25% with MVA. Lehn and Makhija (1996) also studied the relationship of share returns with ROE, ROA, Return on Sales (ROS), EVA, MVA and CEO turnover. Correlation was found to be highest in case of EVA however, CEO turnover also affected the shares returns. O’Byrne (1996) used measures like capitalized EVA (EVA divided by the cost of capital), NOPAT and free cash flows and correlated with them with market value divided by the invested capital. He found NOPAT as a better indicator with an r² of 33% compared with 31% in case of EVA. However, changes in EVA values explained 74% of the changes in market value over a period of 10 years. Uyemara and others (1996) studied MVA’s correlation with EVA, Net Income, EPS, ROE, and ROA over a period of 10 years. r² was highest in case of EVA (40%) followed by ROA (13%). It was least in case of EPS.

Grant’s (1996 and 1997) study of 983 companies showed that of Standardized EVA (EVA divided by Capital) had an r² of 32% with Standardized MVA (MVA divided by Capital). The data taken was for the year 1993 and he also found that the correlation was higher for positive EVA companies. Milunovich and Tsuei (1996) studied the correlation between EVA and MVA in the US information technology industry for the period 1990-95 and found an r² of 42%. EPS was judged as the second best measure with an r² of 34%. Kramer and Pushner (1997) established that lagged levels of NOPAT explained MVA better as compared to EVA. This correlation was found higher even when changes in NOPAT were correlated with changes in MVA. According to Biddle and others (1999), Net Income was found to be the best measure to explain share returns. Majority of these studies were focused on US companies. Griffith (2004) concluded that an investor or analyst using EVA or MVA measures to forecast performance would have experienced significant losses. Ferguson and others (2005) also doubted that adopting EVA improves stock performance.

JHvH de Wet (2005) analyzed the database of 89 South African companies and observed that the Standardized Cash Flow from Operations (CFO divided by the Invested Capital in the beginning) had an r² of 38% with the Standardized MVA (MVA divided by the Invested Capital in the beginning), which was found to be the best driver as compared to the Standardized EVA (EVA divided by the Invested Capital in the beginning), ROA, ROE, EPS and DPS. He also observed that correlation of EPS and DPS with MVA was insignificant and thus questioned the logic of using EPS and DPS for valuing the shares. Roji George (2005) analyzed the data of 21 Indian banks for the period 1999-2003 and concluded that there is a positive relationship between EVA and productivity and negative relationship between EVA and NPA.
Research Method

This analysis was carried out over a period of 10 years on 25 companies which form part of BSE Sensex. Though Sensex comprises 30 companies, 5 companies were eliminated because of the inadequate information available as these companies were listed post 2001 while the study period was April 1997 – March 2006. The reason for choosing companies from Sensex was its reliability in terms of the selection of the companies as only those companies are selected which have a listing history of at least 3 months with sufficient trading frequency. This helps in efficient discovery of price which in turn helps in calculating an accurate value of MVA, Beta and the Cost of Equity.

The regression analysis was done to establish the relationship of MVA with EVA, ROCE, RONW, EPS, DPS and Cash Flow from Operations.

Different measures which were used for the analysis were:

· Standardized Market Value Added (Std. MVA), which is MVA/Avg. Net Worth
· Standardized Economic Value Added (Std. EVA), which is EVA/Avg. Net Worth
· Return on Capital Employed (ROCE)
· Return on Net Worth (RONW)
· Earning per Share (EPS)
· Dividend per Share (DPS)
· Standardized Cash Flow from Operations (Std. CFO), which is CFO/Avg. Capital Employed

Database used was CMIE’s Prowess and Business Beacon from where the values of Avg. Market Capitalization, Avg. Capital Employed, Avg. Net Worth, risk-free return, market return, beta, profit after tax (net of non-recurring transactions), ROCE, RONW, EPS, number of outstanding equity shares, dividends paid and cash flow from operations were taken.

MVA was calculated by subtracting Avg. Net Worth from Avg. Market Capitalization. Value of debt was ignored while calculating MVA because India still doesn’t have a well developed corporate debt market which would have created problems in terms of availability as well as the reliability of the data.
EVA was calculated as follows:

EVA = Profit after Tax – (Cost of Equity*Avg. Net Worth)

where,

Profit after Tax was net of non-recurring transactions.

Cost of Equity was calculated using the Capital Asset Pricing Model, where:

Cost of Equity = Risk-free return + Beta*Market Risk Premium

For calculating risk-free return, average of maximum and minimum yield on 364-days Treasury bill has been used. Beta values have been taken from BSE website and Prowess. Market risk premium has been taken as 7% for the period 2002-05 and 8% for the period 1996-2001, as representative figures being used by some of the companies in Sensex.

Research Results

Analysis establishes that RONW has the strongest correlation (0.59) with Std. MVA with an r² of 34.79%. Standardized EVA comes second with an r² of 28.57% followed by ROCE (r² of 12.92%). Much sought after ratios like EPS and DPS have shown insignificant correlation.

Conclusion

The regression analysis suggests that RONW is the most important variable which explains 34.79% of the variance in MVA, which is not a surprise since shareholders should value an enterprise, based on the return what they are getting on their invested money, which proves that it doesn’t matter whether the company retains or distributed its earnings, so long it is being utilized for productive purposes.

EVA values do have an impact on the MVA of the companies. It takes into account the opportunity cost of capital and it is proved that increase in EVA does add value for the shareholders. ROCE also has some impact, however EPS, DPS and Std. Cash Flow from Operations have shown insignificant relationship.

Thus Return on Net Worth and Economic Value Added emerge as strong drivers of the shareholders’ value.


References:

· Biddle,G.C., Bowen, R.M. & Wallace, J.S., “Evidence on EVA,” Journal of Applied Corporate Finance, Summer 1999, pp 69-79
· Damodaran, Aswath, Corporate Finance (Theory and Practice), John Wiley and Sons Inc., 2nd edition, pp 812-822
· Dodd, J.L. & Chen, S., “EVA: A new panacea?,” B & E review, July – September 1996, pp 26-28
· Durant, Michael W., “Economic Value Added: The Invisible Hand at Work,” Credit Research Foundation
· Ferguson, Robert, Rentzler, Joel and Yu, Susana, “Does EVA improve stock performance profitability?,” Journal of Applied Finance, Fall/Winter 2005, pp 101-113
· Finegan, P.T., “Maximizing shareholder value at the private company,” Journal of Applied Corporate Finance, Spring 1991, pp 30-45
· George, Roji, Prema C. and Kurien Bijo E., “Value Addition at South Indian Bank Ltd.: An EVA Analysis,” Udyog Pragati, Vol. 30, No. 2, April-June, 2006, pp 1-9
· Grant, J.L., “Foundations of Economic Value Added,” 1997, New Hope: Frank & Fabozzi
· Grant, J.L., “Foundations of EVA for investment managers,” The Journal of Portfolio Management, Fall 1996, pp 41-45
· Griffith, John M., “The True Value of EVA,” Journal of Applied Finance, Fall/Winter 2004, Vol. 14, Issue 2, pp 25-29
· Kramer, J.K. and Pushner, G., “An empirical analysis of Economic Value Added as a proxy for Market Value Added,” Financial Practice and Education, Spring/Summer 1997, pp 41-49
· Kramer, J.K. and Peters, J.R., “Economic Value Added and Cost of Capital,” Journal of Applied Corporate Finance
(http://207.36.165.114/Denver/Papers/KramerPetersMFA02.pdf)
· Lehn, K. and Makhija, A.K., “EVA and MVA as performance measures and signals for strategic change,” Strategy & Leadership, May/June 1996, pp 34-38
· Milunovich, S. and Tsuei, A., “EVA in the computer industry,” Journal of Applied Corporate Finance, Spring 1996, pp 104-115
· Myers, Stewart C. and Brealy, Richard A., Principles of Corporate Finance, Tata Mcgraw Hill, 7th edition, pp 322-325
· O’Byrne, S.F., “EVA and market value,” Journal of Applied Corporate Finance, Spring 1996, pp 116-125
· Ross, Stephen A., “Capital Structure and the Cost of Capital,” Journal of Applied Finance, Spring/Summer2005, Vol. 15, Issue 1, p5-23
· Stern, J., “Value and people management,” Corporate Finance, July 1993, pp 35-37
· Stewart, G.B., “The quest for value,” 1991, New York: Harper-Collins
· Uyemura, D.G., Kantor, C.C. & Pettit, J.M., “EVA for banks: value creation, risk management, and profitability measurement,” Journal of Applied Corporate Finance, Summer 1996, pp 94-109
· Weaver, Samuel C, “Measuring Economic Value Added: A Survey of the Practices of EVA Proponents,” Journal of Applied Finance, 2001, Vol. 11, Issue 1, p50
· Wet, JHvH de, “EVA versus traditional accounting measures of performance as drivers of shareholder value – A comparative analysis,” Meditari Accountancy Research, Vol. 13, No. 2, 2005, pp 1-16

Websites:

www.sternstewart.com
ww.financeadvisor.com

Acting affirmatively

Finally, India Inc. has come with the proposal to support affirmative action enlisting steps like paying stipends to students from backward class, imparting training on entrepreneurial skills and imposition of cess on corporate profits to fund elementary education. However, they have made one thing clear that they will not accept any quota of jobs in the private sector. This seems to be a very well thought out strategy as in the absence of these initiatives, Government may force them to reserve jobs for people from backward classes, which may adversely affect their operational efficiency.

This should serve as a food for thought for the elite institutes in India imparting technical and management education particularly IITs and IIMs, who are also opposing the proposed reservation policy of the Government for the students from backward classes. As we know that students desirous of getting admission in these institutes have to clear entrance examinations viz. CAT, IIT-JEE etc. and there is cut-throat competition for achieving this.

What these institutes should do is to be a mean as well as the end. Rather than giving the direct admission to these students from disadvantageous section, with concession in marks secured, these institutes should help them in cracking these entrance examinations. These institutes should organize pre-examination training courses for these students. These courses have to be very similar to what being offered by training institutes like IMS, Brilliant Tutorials, Career Launcher etc. These training institutes provide wholesome training which helps in tackling not only the written examinations but also subsequent selection rounds of Group Discussion and Personal Interview. However, they charge hefty amount which only well-off students can afford to pay and thus, others loose an opportunity to practice well.

IITs, IIMs can utilize their rich experience in the field of education and impart these courses at the cost or even free by leveraging their cash reserves. These courses can be short-term with duration ranging from one month to three months and these being offered at different centres across India, where their entrance examinations are held. In fact similar approach is being followed by majority of the Public Sector Banks during their recruitment for the posts of clerks/probationary officers, with training classes being held before the examinations. Though this will entail additional administrative efforts from these institutes but still it is better than providing reservations at the cost of merit. Further, such an initiative will also be fair to the students from general category, who toil hard to get admissions after spending huge amount.

This will help in creating a level-playing field for all the students irrespective of their caste and economic well-being. Even students from disadvantageous section will support this action as they will be proud of getting admission though their hard work rather than a Government policy. These classes will also help them in their personality development. Also, Government will take this initiative very positively and may not ask these institutes to enforce reservations.

IITs and IIMs should remember that they have been established by Government and they cannot overrule boss’s wishes. What they indeed do is suggesting their boss, various alternatives like these, how are they going to implement them and how is it going to benefit the masses, with a clear message – “We have reservations for meritorious students”.

Profits can improve universities

Apropos the article "Why a university must not go to the market," (Business Line, May 21), a university can really gain a lot of benefits after going public. We all know how infrequently the syllabus is revised in Indian universities. Also, most of them are still running only traditional graduate and post-graduate courses rather than profession-oriented courses of the kind demanded by industry. Once they go public, there will be professional managements looking into these important aspects.

Further, shares can also be issued to the faculty members and administrative staff who will be the owners and thus give their best. And as the focus will be on profits as an entity similar to a company, attractive compensation may be offered to the faculty; this may attract the younger generation towards teaching, as finding committed young people is a major problem faced by the teaching profession.

There should not be any concern with respect to increase in fees too as, with such increases, the number of scholarships can also be increased. Overall, the benefits will definitely outweigh the losses.

Understanding ratios.....!

Often many of us try to fight with the numbers that appear in either the newspapers or the annual reports of various companies. However, we are always dealing with the absolute numbers and hence, the analysis of that company on stand alone basis or comparison with its peers is not possible.

Let me take an example. Recently one of the newspapers carried this information about the performance of the top 10 companies of India and China last year in terms of sales and profits:

Sales ($ bn) Country Net Profit ($ bn)
288 China 40
128 India 10

If we have a look at the absolute numbers of the companies in both the countries, we will arrive at the conclusion that Chinese companies are more efficient. However, by saying this we will be ignoring the fact that Chinese companies are also having higher turnover (sales) which is contributing to their additional profits.

This is where ratios come to our rescue. In this case, if we find a relationship between the Net Profit and Sales, we can observe that Chinese companies are earning a return of 13.89% [(40/288)*100] on their sales whereas Indian companies are earning a return of 7.82% on their sales. So, we can interpret that Chinese companies are earning Rs. 13.89 on every Rs. 100 of sales while the corresponding figure for the Indian companies is only Rs. 7.82.

In other words, Chinese companies are incurring a cost of Rs. 86.11 (100-13.89) for Rs. 100 of sales whereas the corresponding figure for the Indian companies stands at Rs. 92.18. This cost has been incurred with respect to the purchase of raw material, manufacturing, wages and other operating costs. This also proves that Chinese companies are relatively cost efficient as compared to their Indian counterparts which has been substantiated by various reports mentioning about China’s emergence as an effective low cost destination for manufacturing and services.

We have been able to get this insight because of the use of these type of ratios which establish relationship between two absolute numbers so as to enable us to make meaningful analysis and comparison.

Corporate Non-governance

Government's attempt to increase its nominees on the board of Public Sector Banks is a step taken backwards. Earlier, it had directed these banks to go for their board's approval before taking any decision on raising the interest rates. This is unjustified keeping in view the increasing importance of corporate governance. Indian companies have been successful in acquiring the companies and raising large-scale funds from abroad because of the high standards of corporate governance showed by them. Either the Government should rethink its decision or it should also instruct SEBI for ignoring the corporate governance norms.

Don't Pass this Word!

Yesterday, I was logged into my bank account through internet. First time, I was asked to enter my Customer ID and password. Later, I was prompted to enter my second password, this one for validating the transaction. That gave me the food for thought.

Have you ever thought, how many passwords one needs to remember now a days? If you want to check your e-mail, there is a password and in case you have multiple e-mail accounts, so multiple passwords too. As mentioned internet banking requires password. You ATM card will have a PIN number, another password. Same is the situation if you want to get an airline or railway reservation through internet. Forget all these, in the morning when you reach your office and start your office computer, which will also ask for a password!

Imagine how to remember so many of them. You can’t have one password for all the transactions as one mistake and you have everything on stake. And if you forget one, definitely some problems for you.

I discussed this problem with one of my friends who agreed with my point of view. He found solution to this problem and prepared an excel file. He wrote all his transaction IDs and passwords in this file. Off course, since this was one of the sensitive files so he decided to make this file password protected.

You will not believe. He called me yesterday to tell that he is not able to remember the password for that excel file!!!

So, how many passwords do you have?

Ashok Raina and Doordarshan!

"India loose its 2nd wicket. Ashok Raina gets out on 29."

Wondering when did Ashok Raina join Indian cricket team? Ask Doordarshan. This was the news flashed on DD News when India and West Indies were playing their 3rd ODI at St. Kitts. One thing is for sure that the person responsible for this either hates cricket or is a great fan of Ashok Kumar – cinestar of yesteryears because every kid knows about Team India and its members.

Anyways, let us come to the issue. I am talking about the quality aspect in broadcasting. Though these kind of mistakes occur every now and then on any channel or publication, I was thinking whether, over the years, has anything changed on Doordarshan (DD)?

Not much. Deluge of new channels and innovative technology used by them has forced DD to innovate. Not only has it introduced many channels, there have also been some improvements in the telecast and presentation. Particularly, it's news where we were used to see the map of India with some clouds over it. Now, we have more options. We can also see a world map! It has also managed to attract lot many sponsors now.

Actually, except 'Ramayana', 'Mahabharata', 'He-man', 'Spider-man' and off-course kid's favourite 'Shaktiman', we have not seen anything great on DD. Even the movies which are shown on the weekend have already been shown on other entertainment channels. Also, who can forget every over of 5 balls, whenever a cricket match is telecasted on DD.

So, why are we seeing this laxity? If other channels have dramatically improved themselves, why DD could not? However, it had got some different ideas. It had made compulsory for all the cable operators to show some of its channels. After all, this is not a solution. At least it should think about those people who do not have access to cable connection or DTH service.

All said and done, there is something which I have not seen on DD for last few years i.e. 'Rukavat ke liye khed hai'. Have you? Do let me know.

Surprisingly Public Sector Banks!

No matter whatever is the topic we discuss whether it is in economics or business or trade, first half of 90s always comes out as a distinct period. That was the period when we adopted the path of economic reforms or popularly known as the advent of LPG: Liberalization, Privatization and Globalization.

Of course, even banking industry wasn't untouched and what we see now is something which public sector banks (PSBs) could never have imagined and which has become their nemesis. Yes, we are talking about the advent of private banks, the huge market share that has been captured by them and the slew of innovative products being offered by them. Whether it is personal loans, housing loans, fixed deposits, credit cards or corporate lending, they appear to be ruling everywhere.

Who is in fault for this sorry state of PSBs? Of course they themselves are responsible. Being in business for so many years, they could not foresee the future and they kept on leaving the ball thinking that the game is a 5-day Cricket Test Match. However, on the other hand, private banks came out with a professional approach - proper and innovative thinking, hard selling and proactive customer relations armed with latest technology, taking it as a One Day Cricket Match and keeping in mind that an experienced player always prepares in advance, changes the tempo according to the match situation and plays accordingly. Within no time they took the match away from PSBs.

Today, private banks are providing those services, which we could, only dreamt of. If you want to pay your electricity bill, you need not search for a Bill Collection Centre. Instead go to the nearest branch of the bank in which you have account and give them the instructions. Moreover, that's to be given only once! Further, if you need talk-time, don't talk to vendor, go to the nearest ATM and get recharged – cellular phone as well as you! You can also pay your direct tax, service tax and insurance premium in the same manner. If you want an accident insurance cover and a credit card, there is no need of going to an insurance company first and a bank later on. You will get this accident insurance cover free of cost once you apply for a credit card. Also, if you want to undertake any of the above-mentioned transactions, you need not move! Just log on to the Internet: Click of a mouse and it is done!

It is ironical that private banks have forced PSBs to think that a working man/woman needs 8 to 8 banking and Internet Banking. He/She may want to check his/her account balance through his/her cellular phone. Still if one doesn't get time, at least that person can go to the nearest ATM after working hours, which is just at a 2 minutes drive from his/her home. And why ATM in night? Now, 24 Hours banking facility is also available! Let us not forget the Anywhere Banking facility, which has also been initiated by private banks.
Private banks have been a pioneer in providing all these services. Here, it will be worthwhile to mention that foreign banks have also come up with innovative products and services but they are yet to garner a major market share.

However, it does not mean that PSBs have been just spectators. They have definitely made some progress. The question to be asked is that are they too late? Were they sleeping? If after so many years one of the PSBs feels that it needs to change its logo so as to give it a fresh look or so as to give an international appeal, one can only be amazed at this approach. Take another example. A PSB feels that it needs to surprise people with the advertisements that it has the largest number of ATMs in India! So many years after the establishment, it is not a surprise at all. The point being made is that if it is trying to make people realize about this fact then there has been definitely been some deficiency in its approach towards the customers. That's why they don't know this fact. Why did all the PSBs take so much time to realize that cost of a transaction through an ATM is far lesser than that through branch banking!

Instead of being leaders, PSBs have been followers. But it is well said: Better late than never. Gradually PSBs are waking up and realizing the importance of a customer-centric approach.

Criticisms go along with praises. At least PSBs have been able to percolate to the rural areas accompanied by an increase in priority sector lending, which private banks have not been able to do. The probable reason is the low level of social responsibility of business on the part of private and foreign banks. Another notable thing is that by and large PSBs have been ethical as compared to their counterparts in private sector. For God's sake, they don't resort to gangsters or force a common man to sell his kidneys to recover loans. In case of private banks, the fine print is often more dangerous than the bold print on agreements with the customers. What we need is strong corporate governance norms that do not restrict themselves to filling and filing of forms and returns. What we need is good banking practices and clear customer relationship. If not, what is the difference between a Dubai or Karachi based don and a foreign or private bank.
Hence, PSBs are understanding the rules of the game. But now, do they need to score a six on every ball or can they manage by scoring 5 runs an over. Only time will tell this.

It's all about fundamentals!

Now a days, it does not matter whether we read The Times of India or The Economic times. Headline is same. It is about our lovely and respectable 'Sensex' – God for investors! Finally, it has gone down. Not only that, it has also taken many people along with it!

What has happened? Till recently, it was a party time for the investors over last many months. Even beers had come out of the jungle to accompany bulls. People kept on buying in frenzy as if a discount sale was going on. It hardly mattered which share it is. I had heard, "Valuations are attractive", "Fundamentals are strong, you see!" People were talking about the Great Indian Growth story, huge quantity of foreign exchange reserves and many more positive factors. Thank God! The only thing they were not talking about was Indian cricket team's good performance. They even ignored rising oil prices.

Now, scenario has changed. Market has crashed. Nothing has changed about India, its growth, competitiveness and foreign exchange reserves are also still intact. Again somebody said, rising oil prices is a concern. But is it a newly discovered phenomenon? No. It always existed, even during the good times.

Same lot who were making quick bucks earlier are now out on the road, burning Finance Minister's effigy in spite of knowing that he is not the proprietor of Sensex. After all they have to take some blame on themselves. They were on a wild treasure hunt.

It is not a million dollar question – finally, who gained? Since, it is a zero-sum game, somebody must have won. Who? My guess is as good as anybody's. FIIs! Statistics tell us they are selling. It cannot be just because of a draft put up on a website for public comments. These kind of rules are not made overnight. Intelligent investors can always foresee them. So, why this blood bath? Are we witnessing another scam or is it a profit maximization strategy of FIIs. I have got a food for thought. What do you say?