Wednesday, April 29, 2009

Intermediate Time Period - In Vicinity

In my previous post I have emphasized primarily on the development methodology and working of a the XYZ Company. I am highly satisfied with your response and hence would continue analyzing the Company further. I would appreciate further assistance from the readers.

Coming on the topic, having a stream-lined batch flow is a very good approach looking at the straight way of producing with a predefined and processes to follow. This kind of approach gives a very well structured and organized way for production of goods. This leads to optimization of production capability and experience of workers.

Above saying is truly seen from Macro point of view, going on a micro sense we can analyze the way the production take place. This kind of Streamlined development leads to a very high level of production optimization.

Also this approach has an important advantage of knowing the stages of production process, this helps in analyzing the prototype produced. This can be used in optimizing the the prototype which will be then used as input in the next process.

Going on the Research phase, at micro level having a very inflexible and rigid process flow it is very difficult to change the process flow and hence optimization takes place compromising the effectiveness it may have produced when a process slot may have been replaced. The system at macro level looks very structure and organized, but in micro sense this leads to a very huge amount of cost as the byproducts produced are discarded. This is due to the fact that utilizing them may require process deformation, which is highly discarded as well as discouraged.

But changing the production methodology is also not done in this scenario. This would require a huge training and development of manpower to understand and implement the new methodology.

hence the companies tend to use the same methodology, but try to optimize the other resources so as to cut the cost. This started by using the technique of Bulk-buying. Here a company used to buy raw materials in bulk. This used to decrease the total cost of purchase. This lead to a very high, fast and sophisticated process development where a large capacity was input and output was in huge masses. This process yielded good results but the main problem of By-products was still prevailing.

Would emphasize on the other important properties in my next blog.

Do comment if u like the approach and do keep reviewing and helping me in this work.

Tuesday, April 28, 2009

Older Scenario Part I - Production Strategy

We always have come across the same kinda rules when forced to follow.

The same is the situation with the Corporate World. The scenario can be well explained with our resistive nature to change the path we are following even if the new path may provide a cost-cutting way. That is why Change Management has always been given epitome importance while restructuring(once in a century or even scarce) the company.

Changing the methodology of working involves one of the most daunting task to educate the internal customers(employees) about the new system and its methodology.

Having a several hundred years of existence,the Technique was known as the Mass Production, which was then highly simplified and implemented by Mr. Henry Ford the technique is also know as division by labor. Manufacturing companies started using a fresh new technique to provide a strong impetus to production and processing.

In this technique, always there was a streamlined-batch flow of data(goods as inputs) to produce outputs. The scheme got immediate recognition, as before this the production took place using some Ape-Intellectual Methods. These were random methods with less to do with certainty, usefulness and predictability.

After advent of Mass Production the total input cost decreased by a huge ratio, taking in consideration the historic method used. The most important advantage was the advent of Machine Age replacing the long practiced Manual Production. Also the output at a certain stage was highly known due to the rigidity and inflexibility of the process.

Having a clean and precise flow, the input went through several stages of and several workers, each assigned their own task with one depending on the output provided by his immediate predecessor. The method used to be rather irrelevant where one used to depend on other for input leading to rather most vague BATCH feeling. This is because this production process is highly inflexible and hence it is difficult to alter the design or production process. Also the yield is highly finished in nature, making it hard to make changes the output. Also this lead to wastage of some goods in form of by-products to say.

Companies have been wasting their resources and benefits which could have been used in some other work.

Would like to have reviews about the post and any improvements as well as corrections from your side will be taken care of!!!

XYZ Company

Here is a company which has undergone rigorous changes in due course of recession or any other phenomena.

We will analyze the various changes it came through during period of recession.

Changes may be Forced or Adapted and Regular-to-do fixed time changes.

How a company restructures itself to adapt to new technology after recession and all other mechanism.

I would like my visitors to help me access this company profile and add their valuable inputs to the post if I am not able to touch those points!!

Happy Reading and stay INTERCEPTED!!!

Monday, April 27, 2009


Acquisition means buying of one company by another called as the target company. An Acquisition may be friendly or hostile. In former case, the companies cooperate in negotiations leading to both side willing to merge. But in later case, the acquisition of target is somewhat unwilling to be bought or the target's board has no prior knowledge of the offer.

Acquisition in most cases refers to the purchase of a smaller firm by a larger one. Sometimes however a larger firm may be acquired by a smaller firm. This is known as Reverse Takeover.

Acquisition may be by purchasing of shares, and therefore control of the target company. Ownership control of the company in turn conveys effective control over the assets of the company. This form of transaction carries with it all the liabilities accrued by the business in the past.

Another form may be by buying the assets of the target company. The cash the target receives from the sell-off is paid back to its shareholders by dividend or through liquidation. A disadvantage of this structure is the tax that many jurisdictions impose on transfers of the individual assets, whereas stock transactions can frequently be structured as like-kind exchanges or other arrangements that are tax-free or tax-neutral, both to the buyer and to the seller's shareholders.

These acquisitions may lead to changes in Earning per Share(EPS), changes may be positive or negative. In one case the EPS may increase this is a case when a company with higher P/E ratio acquires one with low P/E ratio. In other case EPS decreases, when a higher P/E ratio company is acquired by a lower P/E ratio marked comapny.

Sunday, April 26, 2009

Asia - modest recovery in 2010: IMF

According to International Monetary Fund(IMF), Asian economies will witness a modest growth in 2010 due to the stronger export demand and stimulus spending by IMF.

I my previous post, IMF has increased the Power Quota Shares of some Developing Asian Economies to catalyze the development process both in Macro and Micro ways. Since The Great Depression in 1930, Trade in Asia have got its worst setback with a exponential decrease in the trade market.


The report exposes a risk of fall in global demand to more lower levels. This can be due to Economic Imbalance in stronger nations and its continuation. But the most important factor is to restore an economic balance in these economies with increase in exports ratio as a source of growth. Protcetionism has also been given due consideration so as to boost trade ratio in economies like India and China, in particular.

Saturday, April 25, 2009

IT and Bank Sector Weakening

The outlook for the country’s IT sector remains bleak given the lacklustre performance by its large players during the quarter ended March 31, 2009. With the massive fraud hit Indian Techy Market, the place once known to be a powerhouse has seen a very huge deceleration in performance in last several quarters.

Recovery in Business Sentiments seems to be sluggish enough, leading to increase in pressure over billing structure resulting in lower volumes and hence eroding the revenue.

India Infoline IT analyst Rajiv Mehta

There has been a decelerative trend seen in the development activities in the country's top IT companies including IT-majors like TCS and Infy.

Adding to the crundh is the failing of Bank sector to perform, even when the indicators of RBI have been slashed to bare minimum.

ICICI Bank, India's largest in the private sector, has reported a 9.6 per cent drop in net profit after tax at Rs 3,758 crore (741 mn $) for the year ended March 31, against Rs 4,158 crore ($820 million) for the year before. Bank has however earned a higher net interest income by almost 15% y-o-y.

Friday, April 24, 2009

Worst and The Best Chief Executives(CEOs) ever

Known well for their business acumen, Software czar Bill Gates, legendary investor Warren Buffett and Apple's Steve Jobs have been named in American best ever known CEOs.

The list of '20 Best CEOs' complied by US publication Conde Nast Portfolio is topped by auto maker Ford Motor's Henry Ford, while financial services major J P Morgan's J P Morgan has cornered the second place.

Bill Gates has been named in one of the most strategically influential people of all times because of his clear-cut decisions and ability to adapt to conditions.

Oracle's Lawrence J Ellison has emerged as the highest paid chief executive in the US with a pay packet of USD 556.58 million in 2008, approx. He was followed by Ray Irani, the Chief Executive of Occidental Petroleum has a stipulated compensation of USD 222.64 million.

Seeing an Indian perspective Indira Nooyi, the CEO of PepsiCo. has been included in the top 500 CEOs ever.

Comming to the darker side:

In times of recession many countries have been hardly hit, some even getting Chapter 9 or 11 Bankruptcy, in the race were the biggies like Lehmann Brothers and Citi Group. Others included Wachovia and Bear Stearns. Known as the Crusader to Titanic-like giant CitiGroup, Indian born, Vikram Pundit was unable to stear down the title and has been included in 'Top 20 worst CEOs'. The CEOs were lead by Lehmann CEO, Dick Fuld.

According to the report, Salary of Indian-born is about 1$ in contrast to last years 38.2 million USD.

Thursday, April 23, 2009

World Bank - India and China crusaders of Global Economy

Firstly it was IMF and now its World Bank................

Yes you got it right!!

CHINDIA is now backed by the worlds two most important institutions- International Monetary Fund and the World Bank.

The eptome Bank on Thursday in a press release said

According to their reoprt of the World Development Indicators,

According to the reports, initially the emerging economies used to contribute 36% of global output in 2000, it has now increased to 43%, the difference has been highly compensated by CHINDIA, upto 5%. The contribution has been significant from our side. Also to say was the Investment in BRIC countries. It increased by 50% from 2004(present stats).

Looking forward in near future, more than 80% of the concentration of KPO will be in CHINDIA out of which 70% will be influenced by India. Looking at the latest advances and recession, India is hoped to increase the count of 7 in Fortune 500 significantly in near future.

Bretton Woods System

Bretton Woods System of Monetary Management established the rules for financial and monetary relations among the world's major industrial states in mid 20th Century. It was the first fully negotiated plan of its kind so as to govern and emphasize the monetary stimulus of the global economy. The International Monetary Fund(IMF) was established by the planners of the Bretton Woods so as to regulate international monetary activities.

The basic feature of this Management System was an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a predefined fixed value with minor deviations. Considering US Dollar as the major Currency of exchange, the allied countries had to exchange the funds through US Dollar so as to maintain currency approximation.

The basic aim of Bretton Woods was to disburse power and influence among the countries and to bring out countries ready to lead the global economy after Great Depression and World War 2. In initial times the favored mechanism was to impart Capitalism. For a pur Capitalistic Economy intervention of public sector was very important. In initial cases France demanded for state intervention leading to a lesser Capitalistic environment.

All the participating governments at Bretton Woods agreed that the monetary chaos of the interwar period had yielded several valuable lessons.

So as to keep the global economy away from the chaos it has just emerged from. So as to implement this strategy many of the most vital trading options were to be sacrificed. Trade in the 1930s became largely restricted to currency blocs. These blocs retarded the international flow of capital and foreign investment opportunities. Although this strategy tended to increase government revenues in the short run, it dramatically worsened the situation in the medium and longer run.

Seeing and experiencing the above impact, countries started to consider the importance of Government Intervention in Economic matters.

The various activities included in the Charter of Bretton Woods System are:
  1. To understand and simplify Fixed Rate Changes.
  2. To understand the complexity of Trade.
  3. To design a Charter for effecient working of International Monetary Fund.
  4. To plan Financing of Trade Deficits.
  5. Reconstruction and Development of Developing Nations.
Bretton Woods was a very important part in restructuring of Financial and Economic global system. But it had an implication which led to high imbalance in Balance Of Payments. Also the Dollar to Gold ratio started to weakening when France demanded Gold supervised by US. There were many other factors and many more implications.

So as to mitigate the above condition's impact a parallel monetary system was implemented for all Traded Funds by International Monetary Fund(IMF). The system till now is implemented and various consequences have been handled successfully with an active cooperation and assistance with leading NGOs.

Tuesday, April 21, 2009

BICS to gain largest IMF Quota Shares

The International Monetary Fund(IMF) has been developed to stabilize international exchange rates and facilitate development with an macroeconomic perspective. It also provides its members with financial and technical assistance.

Brazil, China, India, South Korea and Mexico will recieve the largest share of fund from IMF so as to fasten the speed of economic development in these key economies. The 5 nations will be among the 54 nations which will recieve extended shares once the 2008 reforms will be implemented. While these 54 countries will get an increase in quota shares of 4.9 percentage points, 135 countries will see an increase in voting share of 5.4 percentage points due to the combined effects of the increase in quotas and basic votes. Quotas basically are the voting powers of a country in the 185 countries drafted committee.

The final verdict will be done in the Conference of Finance Leaders and Governors from 24th to 26th April. The other issues included are the Rebalancing of Countries in 2011, this may include strengthening on Developing countries hold in IMF quotas.

This capital quota share hike has been due to the double-punch the Developing economies have to bear including the Crashing of Internal Capital Indices along with recessionary acts leading to weakening of Gross Domestic Product(GDP). The major notion behind this initiative is to influx more capital in these economies.

Many other strategic steps including development of a riskfree investing environment and enhancement in analysis of risk and linkages in the real economy and financial sector.

Reverse Merger or Reverse Takeover

Reverse Takeover is the Acquisition of a Public Company by a Private Company to exit the complex step in going public(Launching of IPO). The result of this acquisition leads to developing up of a new Company with change credentials in accordance to the Private Company.

In this process the Public Company is also referred to as Shell Company. The Private Company Purchases control over Shell Company.

The transaction involves the private and shell company exchanging information on each other, negotiating the merger terms, and signing a share exchange agreement. At the closing, the shell company issues a substantial majority of its shares and board control to the shareholders of the private company. The private company's share-holders pay to the shell company by contributing assets they have in the private company to the shell company.


  1. One of the basic advantage includes the possibility of commanding a higher price for a later offering of the company's securities.
  2. Going public through this process allows a company to become publicly held at a lesser cost, and with less stock dilution than through an initial public offering(IPO).
  3. There will be no need to influx more capital to go public.
  4. Also going through an IPO includes the conditional supervision of market which may be quite volatile at times, even the senior management has no control over market conditions.
  5. In addition, during the tenure of putting an IPO together, market conditions can deteriorate, making the completion of an IPO unfavorable.

  1. As the private company is new, it may be a case when it may be unknown to pending lawsuits and unforseen liabilities.
  2. Shells may sometimes come with angry or deceitful shareholders who are anxious to "dump" their stock at the first chance they get.
  3. Reverse Takeover only introduces liquidity in the previous private company if it has a bonafide public interest in the company.
The major use of this takeover is the influx of liquidity in the system and the broadening spectrum in Capital Markets.

  1. ValuJet Airlines was acquired by AirWays Corp. to form AirTran Holdings.
  2. The game company Atrai was acquired by JT Storage.
  3. US Airways was acquired by America West Airlines.
  4. The New York Stock Exchange was acquired by Archipelago Holdings to form NYSE Group.

Monday, April 20, 2009

PM, Tata, Ambanis among the powerfuls

Prime Minister, Manmohan Singh, Opposition Leader, L K Advani, Mukesh Ambani, Anil Ambani, the Corporate CZAR of the Country, Ratan Tata including the Batting Maestro, Sachin Tendulkar have been added in the Country's 50 most Powerful people by American Magazine, TheBusinessWeek.

Others in the list include: (Happy Go Clicking)
Congress President Sonia Gandhi, Gujarat Chief Minister Narendra Modi, Congress leader Pranab Mukherjee, music maestro A R Rahman, BSP chief Mayawati, Olympics gold medallist Abhinav Bindra, Security and Exchange Board of India (SEBI) Chairman C B Bhave, Communist Party of India (Marxist) General Secretary Prakash Karat, Mahindra and Mahindra's Managing Director Anand Mahindra, steel czar Lakshmi Mittal, telecom tycoon Sunil Mittal, Indian Premier League Chairman Lalit Modi and Indian Space Research Organisation's Chairman G Madhavan Nair and bankers -- K V Kamath and Deepak Parekh also feature in the list. also feature in the league of 50.

As being viewed, Satyam Scandal has influenced the Rankings very strongly.

The years rankings have been highly volatile with short-term changes drastically changing the List in every form.

Also in the list are the eites like:

RBI chairman D. Subbarao, Rashtriya Janata Dal Party's Lalu Prasad Yadav, Infosys Chief Mentor Narayana Murthy, Wipro's Azim Premji, TCS Chief Subramanian Ramadorai and Google India's Managing Director Shailesh Rao.

The list has been drafted on the basis of success and popularity of the respective elites, and their advancements in the upcomming year.

Thursday, April 16, 2009

IMF speaks on Recession

Seeing the current economic scenario there is a need of rigorous Fiscal and monetary Stimulus Packages all round the world. The Financial Sector needs to be brought in confidence again with some good economic and strategic policies.

International Monetary Fund

New IMF analysis published on Thursday shows recessions tied to financial crises, such as the current one which has its roots in reckless bank lending to the U.S. housing market, are more difficult to shake because they are often held back by weak demand.

Worse to add to this situation is the weakening of the strongest economies. In this fiscal quarter the downturn has been more than previous quarters giving a clear negative trend till the end of this year.
Analysts have predicted the Recovery period to come in phase by the end of the year.

The fund's analysis also says that emerging market economies, including those with sound economic policies, are not insulated from recessions beginning in major economies since they are often accompanied by a drop in exports and capital flows.

Clearly, given that capital flows are an important ingredient for emerging economies, it is most likely going to be the case that the recovery will not be possible without a recovery first taking place in advanced economies.

Stephen Danninger, a senior economist in the IMF's research department

According to the research the may last longer by a 1.5 times then expected, giving a deviation of atleast 40%(A very big figure to think of).

The analysis suggested that the combination of financial crisis and a globally synchronized downturn is likely to result in an unusually severe and long-lasting recession the IMF said.

Adding to the heat is the Downgrading of the Developed Economies. Turning to emerging economies, the IMF said the current level of financial stress in emerging market countries has already hit peaks seen during the 1997-98 Asian crisis.

This also been due to abrupt variances in the Capital Market and the Currency Burden they have to come up with.

In the Last Words the IMF hinted the emergence of some Developing Economies as Powers by the end of t his Turbulent Recession.

Wednesday, April 15, 2009

Satyam to Tech Mahindra's Venturbay Consultants, Complete review

Indian IT Industry got a fierce setback when Satyam Chairman, Mr. Ramalinga Raju, opened up his original documents and their values leading to the "Biggest Fraud in Indian Corporate Inc.".

Raju admitted that the financial statements of the company were cooked up from last 10 years.

Confession Letter of Mr. Raju.

On 6th January, Mr. Raju made a shocking confession that he had fudged accounts to the tune of over Rs. 7,100 crore.

On the same day, the Satyam’s stock crashed down by 70 percent to Rs 52 from Wednesday’s high of Rs 188.70. It had a client list that boasted of Fortune 500 companies.

The chairman’s acceptance about the fraud in balance sheet puts question mark over the corporate practices of companies in India. He states that Satyam’s balance sheet as on Sep 30, 2008, carries an inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 reflected in the books). Further, it carries an accrued interest of Rs 376 crore which is non-existent.

The PricewaterhouseCoopers was auditor of the company. It also poses a big question over the credibility of auditors.

As the bidding for Satyam enters the last lap, bidders have a few more hurdles to clear before the bids are admitted.

Before submitting the bids, bidders will have to waive the right to legal recourse in case the board decides to reject their bids. The bidder will have to prove its financial ability to bring in the total acquisition funds (TAF) within four days of winning.

The final bidders will have to furnish additional two irrevocable and unconditional performance bank guarantee of Rs 5 crore and Rs 100 crore. This will be refunded to all unsuccessful bidders.

Upon completion of the process, the new investor will be locked in for three years.

The various bidders who went on to the final step were
  1. Tech Mahindra - Locked the deal with Rs. 58 per share
  2. L&T - Locked their patrt with Rs. 46.5 per share
  3. Wilbur Ross - LOcked their bid at just Rs. 20 per share
  4. Cognizant - Pulled off.
Spice Corp, IBM and iGate were among those confirmed names that dropped out of the race after showing an interest in the company. iGate decided to drop out of the race for Satyam after concerns on falling revenues and not enough clarity on customers and margins. Spice Corp claimed that the bidding process lacked transparency and pulled out of the race.

The Satyam board has selected Venturbay Consultants, a subsidiary of Tech Mahindra as the highest bidder to acquire a controlling stake in the company, subject to the approval of the Company Law Board.

Tech Mahindra would pay Rs 1,900 cr within the next four days for the 31 per cent stake in Satyam and Satyam would operate as a special purpose vehicle until Tech Mahindra raises its stake to 51%.

Tech Mahindra would infuse Rs 1756 cr ($351 mn) based on the exchange rate of 50/$.

Monday, April 13, 2009

Tuesday, April 7, 2009

Bold Actions Of G20 London Summit

As I recognize it, there remains a debate between those who believe that the current economic environment compels a dramatic rethink of the foundations, systems and structures upon which the global economy operates, and those who believe that such sweeping reforms are both unnecessary and politically impossible.

In short, there are those who seek to begin the process of crafting a ‘new Bretton Woods’ and those who seek to ban the use of that phrase altogether.

In my earlier post, I wrote(scribbled) about "the global financial sector is in need of structural reform". I believe that the current economic crisis provides an opportunity to reshape the global financial system in ways that more accurately reflect the global nature and risks inherent in 21st-century banking, finance and capital flows.

This G20 gathering represents a true ‘free market’ where there is competition for ideas, creativity and leadership. It provides the perfect opportunity for a 21st-century successor to the intellectual and creative leadership of John Maynard Keynes to emerge.
To be successful, it is imperative that the United States play an active leadership role at the London Summit. The US has a unique role. The failure of the US to assume a leadership role, especially with the presence of President Obama, would undoubtedly be seen as an
opportunity missed.

The most innovative and bold structural proposals have come from Europe, where a recent report by the High Level Group on Financial Supervision in the EU, under the direction of Jacques de Larosière, contains some very worthy, realistic and detailed recommendations.
Unofficial groups, such as the G30 Financial Reform Working Group chaired by Paul Volcker, have similarly issued reports which I urge summit participants to review carefully and consider seriously.
The proposal is important because it seeks to address the systemic nature of risk, which underpins the existing financial system, and also because of its inherent inconsistency.
Given the magnitude and scale of the issues now confronting summit participants, those officials tasked with its preparation should not feel bound to adhere strictl to the agenda and working groups created four months ago.
Now is not the time for caution, but rather the time for bold assertion of leadership, ideally by the United States, but hopefully with the collective support of the global community.

Friday, April 3, 2009

G-20 London Summit

India's Prime Minister Dr Manmohan Singh outlined his hopes for G20 London Summit in a statement before he travelled to the UK.

In it, Dr Singh said the G-20 has an important role to play in addressing the global economic and financial slowdown by taking coordinated and purposeful action.

The report said as follows:
"It is important that the Summit took credible decisions to reverse the current slowdown and to instil a sense of confidence in the global economy"

The statement set out a number of issues that Dr Singh views as requiring particular focus. The need to:

  1. Ensure the adequate flow of finances to the developing countries to overcome the reversal of international capital flows and not retard progress towards the "Millennium Development Goals"
  2. Avoid protectionism in the trade of both goods and services
  3. Facilitate trade finance
  4. Reform and restructure international financial market

Dr Singh emphasized that the time has come for the international economic and financial architecture to reflect contemporary economic strengths.

Although the meet do provide some of the most required stimulus to Global Economy with a power-packed 1.1t$ stimulus, the summit was the least to bother for India.

Seeing India as the 4th most strong country of G20, expectations were more on accomplishing goals concerning all Developing Countries including BRIC(Brazil, Russia, India, China). But the Summit was more like a G8(G7 + Russia) + China affair with India as a spectator to some extent.

The only good thing which happened was the statement by our PM:

"We need no more foreign help to strengthen our nation by asking IMF to interfere but would like to help IMF by providing an AID if required "

Though the outcome of the meet was not in India's favour many of those "so-called respectable people" wrote it to be a path breaking success for India.

It is clearly visible in the link that its US who is leaning not India.