All that Bashing: RG

Apparently i must have uttered something unforgivably stupid to get a - "so where'd you pick it from? RG quote?"

I am no RG fan, do not see him as a Prime Ministerial Candidate but the poor guy gets really bashed up thanks to his speech writing team these days. What should he do to please you, dear voter? 

He innocently calls an Operating System a 'default program' just so that everyone understands [If India is a Computer, Congress is its default program]… gets bashed up!

Okay! Point noted you are a country of geniuses and the 'Nerd Quotient' in speeches got upgraded.. Then buys the licensed version of the Sheldon Cooper App [the escape velocity of Jupiter to Dalit audience]…. gets bashed up!

Then a little lesson about the marriage of 2 imperfect sciences Psychology and Economics [Poverty is just a state of mind]... gets him bashed up!

 

Some more famous pearls of wisdom:

·         I am not averse to politics, but that does not mean that I am going to join politics.

·         If I am incompetent, I am useless, the people of India will see that.

Oh so the speeches should now be tailored keeping the audience in mind? So much for just one vote each! Isn’t it easier to import refugees to vote in bulk – no speech required. 

Young India seeks youth leaders but more of Jyotiraditya Scindia, Sachin Pilot, or Omar Abdullah kinds, they have some work to speak for them. You need to show experience on your resume even for a job as a handy man but none required to be a national leader. No real academic cut-offs too [you may want to throw in some fake qualifications here and there, in a pseudo name of course] 

Isn’t it easier to criticize and bash then to actually work in public life but the attempt on hard research for looking for ‘public service’ came down http://youtu.be/WOVIyEYy8eY and 

 

[Ilustrative image- credits to the original photographer]

‘Aggressive media strategy’ shouldn’t get anyone votes, aggressive public service should. A famous family name shouldn’t make someone a Prime Ministerial Candidate, proving their capabilities should.

And finally this is why the opposition shouldn’t need an election campaign at all….

http://youtu.be/Ln2XAhYFNSU

On Sale till the Shelves are full

A 'developing' country to an 'emerging' market to an nation that is expected to match growth rates of higher end peers in the next 5 years [that comes with a caveat - minus any global melt], India's come a long way.

And that's alongside a highly sentiment driven market [not that any market isn't, but we seem exceptionally touchy]... Evident by what's been happening this year...

• Markets went conservative, worrying big FIs burdened in the US
• That was followed by worrying about the European Debt
• Adding to the list was Chinese Inflation and interest rates [as if our own were not enough]
• The fresh Korean Shelling
• And yes, then the Govt. worries grace a the scams [2G, CW games and now the Home finance fiasco] 

The last few mentions made notable [de]contributions to the markets this time of the year when the west anyway pulls out of the markets to book the year end.

So how do we see it.....
Check our [quite likely] valuation losses each day and worry or 
Stop making the P&L each day and instead see which hopeful names show enough discounts in price that we can buy like it's an end of season sale.

P.S: This one is dedicated to the last few full  of worry conversations with a few folks....

Seeing through the [Dressed] Window

We live in the world where yore not guilty till your caught. With a corporate scams history like us, we don’t have to look overseas for examples. Like, you might think you hold tight a blue-chip name and you like what you see printed in the financials and then one fine sunny day, snap! You wake up to newspaper reports performing a surgery on those very financial [mis] statements, leaving you either furious [read desperate] to quit and book a loss or wait with Buddha’s patience to see where the Government or some other cash rich corporate takes the scrip in sweet time.

The Wall Street seems to be now [finally!] full with such and SEC plans to come down heavily on the ‘window dressed’ financials. The American market regulator recently voted 5-nil on the new proposed amendment to the securities law adding further disclosures to financial statements for the caterpillars [i.e. financial intermediaries] now butterflies for the last two years [i.e. Bank Holding/ Financial Holding Companies].

More about the back drop:

This comes from the US regulators alongside the backdrop of a few failing financial intermediaries causing an industry pressure leading into a pack of falling cards like crash for the industry during the fall of 2008.

Here a few failed ‘dressed’ balance sheets seemed understated on debt just before the Q. end wherein a few billion Dollars showed as sales instead of financing thanks to a repo transaction. Hence the strong looking balance sheet could not come to rescue the firm from bankruptcy.

The Proposal:

These added disclosures aim to create more transparency around ‘short-term’ borrowing arrangements. Under the proposal, all companies would have to reveal in their regulatory filings both the average and maximum amount of debt they had each quarter.

The FIs would be required to provide, in a separately captioned subsection of Management’s Discussion an analysis of financial conditions and operations w.r.t. its short-term borrowings, including both quantitative and qualitative information.

The proposed amendments would be applicable to annual and quarterly reports, proxy or information statements that include financial statements, registration statements under the Securities Exchange Act of 1934, and registration statements under the Securities Act of 1933.

This means companies would have to disclose debt more frequently and reveal more information about borrowing arrangements they use. They would also have to inform the investors of business conditions that may make it difficult for them to borrow and why debt levels fluctuated during the financial period reported.

Conforming amendments are also proposed to Form 8-K so that the Form would use the terminology contained in the proposed short-term borrowings disclosure requirement.

SEC has taken this proposal for public views for 60 days considering the feedback, SEC will re-vote to see this proposal through legislation.

Not just that…….

SEC has also gotten even more investor friendly by intending to issue interpretive guidance to investors to better understand the disclosures on liquidity and capital resources, analysis of financial conditions and impact of operations on liquidity and funding risks facing the companies.

Guidelines on implementations have also been planned for the companies to aid them in adhering to the said rules for disclosing debt. With a bottom line aim is to convey that financing arrangements can no more be used to mask financial engineering.

What this really changes:

Regulatory changes more often than not, follow any financial fiasco to build future immunities.

Like all others in the real world, the regulators convey to understand that disclosures to do not eliminate the act, unless penal provisions are attached, but would indeed make it difficult.

This move globally once in vogue, will impact though to limited extent local subsidiaries and will provide investors across the globe with more first hand information, so even more reads for the savvy guys…. ‘Vigilance is the price of liberty’ they say… that explains.

From Economies to Economics……

As RBI talks of the shift to base rate for retail lending, Banks not too surprisingly look for Sunset** until next year.

The Base Rate regime is a noble and internationally used interest regime introduced by RBI for retail lending for banks w.e.f. July 1, 2010… the base rate is arrived vide a set formula that takes into account the cost of lending and cost of operations of the banks vis-à-vis the arbit [so believed] erstwhile BPLR [Benchmark Prime Lending Rate].

BPLR is supposed to be arrived at in a non transparent manner as a lot of determinants were in the unknown to the outsiders, the determinants of the base rate are pseudo public and moreover competitive amongst banking sector players.

Another reason why banks wouldn’t like the base rate is quite a chunk of lending happens at sub-PLR [to an elite group of people/ mostly body corps- ‘aam aadmi’ excluded], but now with the base rate regime, only priority sector lending per monetary policy can borrow at sub-base.

How this affects us: Most of us borrow at BPLR, that would change to base rate, generalizing the outcome, we hope to pay lesser interests that will be more competitive and you’d [almost] know why that’s the number you’re asked to pay.

Downside may be if you’re a part of the ‘sub- PLR’ club or ‘the terms of my loan are too complicated’ club.

Why the sunset….. the banks will have to convince existing @ BPLR borrowers [reality check sub-PLR] to change terms to base rate = loosing/ reshuffling of business for banks. This shift for existing contacts might not come easy and banks’d need time. Plus the rate becomes transparent and cost linked with a capped profit element [Come on…banking is a business and just like any business they are here to make money…. think from the other side of the fence].

Looks like borrowers will continue to borrow [marginally a little less may be to begin with grace à teething issues sunset or not], but all in all, credit will continue to be needed- the predicted growth numbers suggest, that in turn means, need for more deposits i.e. savers in demand…

** P.S:
1. JIC info…. Sunset clauses are restraining/ conditional/ limiting clauses inserted to temporarily alter the applicability of a stat.
2. Exactly when it is thought I’d write about travel this is what i come up with [is why this is called random thots]

May I know your good ‘Number’ Please……. [huh??!]

Here’s new on ‘personnel’ related infra, its called ‘Aadhaar’- a project by UIDAI [Unique Identification Authority of India], UIDAI is a office setup under the planning commission.

‘Aadhaar’ is a project to allot a 12 digit Unique Identification Numbers to all citizens in India. Here’s more on it:

Why the Numbers:
We are a very unique nation in more than many ways, including our problems. There are two major themes leading to why there is a dire need for a clear, precise and transparent identification system:

1. To be able to identify the actual people for whom the Govt. designs socialistic schemes [be it education, public distribution system, commercial subsidies or any of the likes] vis-à-vis who and how much of dissemination actually reaches.

•  Actual identification of the poor [Below Poverty Line- BPL] for any Government initiatives i.e.  identification of TA [Target Audience - for non savvy folks].
• Identity of this kinds helps TA in many ways, most of these people lack proper identity documents refraining to be able to avail basics like cell phone connections, access to banking network, back ground checks for employment, rationing entitlements to name a few.
• To check ‘pilferage’ from the socialist schemes [these very obviously happen] you see the tax payers pay for such schemes and hence it becomes necessary to identify who actually reaps those benefits [actual TA or the distribution machinery itself or someone who’s managed to ‘con’ the distribution machinery – thanks to invention of under table processes for procuring identity documents ]

2. To restrict entry in/ access to country’s stream for people with illegitimate backdrops/ purposes
• Irony of the situation here is at the time when people BPL find it agonizing to obtain and produce proof on their genuine identity [read existence] we have a whole lot of people with convenient access to procure identity documents [a lot of ‘media sting operations’ have proven this]. So your native domestic help might struggle but a sleeping cell doesn’t.

Commerce behind this:
• Budget Allocation for the project is a whooping INR 19 Billion
• Though the projects seems in ‘bidding’ stages, this means serious business to IT and Connectivity service providers- once the bids open a lot of ‘order books’ will call your attention.
• Completion [though phased] will optimistically mean more savings flowing back into the economy increasing retail banking base and hopefully tax payers base as well.

Time-lines:
Project completion target is August 2015 for all 600 mn IDs to be issued, dissemination of the first set starts somewhere between August 2010 and Feb 2011.

Kudos, How this would do us good:
• A lot of developed countries entitle ‘social security’ based on this model
• People BPL don’t such face lack of infrastructure but also a double whammy of relatively expensive access to basic amenities/ distribution, this is far fletched effect of ‘pilferage’, so subsidized infra is moved out of the public distribution and moves into the blacks and is sold higher than market prices, this is not just ration, it holds good for reserved quotas for education/ travel, industrial/ agricultural subsidies and Credits.
• Since we check pilferage, we check corruption and to top it up we identify people we can not track as non-citizens.

Lows:
Well the thought is noble and some noble thoughts do really sail through to reality…..

Referring to the other groups of the likes of: the MAPIN fiasco years ago, PAN holders [i.e. identified tax paying population] vis-à-vis people who actually make money in the land, KYCs and how far they get, Ration cards issued pitched against rationing proceeds or against the grey/ black market.

Coming from a country that survives on crisis management and crisis managers being looked upto, there’s little too early to talk about the virtues of planning and courage to plot plans vis-à-vis execution on the same plane. Despite that India’s growth and potential is recognized globe over and there seems no stopping the Asian giant where it comes to Infra development either.

Moreover, Govt’s initiative increased spending towards infrastructure development shows commitment. Hoping ‘Aadhaar’ lives up on the execution front as well, we’ll soon see ourselves quoting our numbers.

Catch 22

RBI has not been much appraised off late by all and sundry about its role in capping inflation [let’s leave curbing it alone for a while], making yesterday a little cautious.

A 25 bps hike each in the short-term lending and borrowing rates and CRR [now 6%] to suck out about $ 2.5 Bn liquidity but cautiously not enough to corner borrowing assuring growth impetus for the industry. This seemed in line with street’s expectation showing a rather flatish response [most were happy going by flat is higher than a dip]. Further, 25 bps hike also made for repo [now 5.25%] and rev. repo [3.75%] and bank rate remains the same 6%.

As for prospects, the Central Bank foresees growth projections at an optimistic 8% for the f.y. and 2010 GDP growth per expectation shows between 7.2 to 7.5% and inflation expectations reach 5.5% for the yr and medium term at 3%.

All said and done, though conservative the policy looks good per dilemma between RBI’s inflationary expectations vis-à-vis those of the MoF. With demand building up and supply’s under pressure the 25 bps hike looks welcomed but against the inflation story a conservative 50 bps looked in the making- catch 22 indeed......now you know where from Hamlet got the "to be or not to be is the question".

When SEBI gets Savvy

Not just the investors but the markets at large appreciate SEBI as it came up with a few most rational reg moves on the disclosures and time-lines front....

Listed Companies now need to disclose Quarterly results within 45 days of end of a quarter as against anything upto 60 days or even for- ever that a lot of Companies took to come up with Quarterly numbers.

Further, 45 days for as at Half year end B/S and bi-annual Cash flows to be out for the benefit of investors' judgements alongwith annual audited financials to be out within 60 days of yr end.

The regime only gets better with IPOs to be listed with in 12 days as against the earlier 22 from the date of close of the offer to mitigate market fluctuations risks for bidders.

So also for MFs, NFO duration reduced to half and only for 15 days for Schemes to re-open for on- going transactions.

Issures [Cos and Fund Houses] have to provide ASBA facility compulsorily to QIBs as well.

While the new improved time-lines for disclosures would keep investors best informed to take better risks adjusted calls, the offerings related eager moves suit the liquidity of investors better.

SEBI off-late seems to gotten v. savvy  [ read ever more sensitive] towards investors' interests.... for good, so far.