Archive for Finances

admin | August 19, 2015
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The Chinese Way of working out ROI and the Start Up Valuation

Over a period of time the world is wondering as to the justification that the Chinese planners have while investing in huge( rather wild shot ) infra investments . A similar set of questions do crop up when we see the mind boggling valuations that are placed on the newly start up e business ventures , particularly in distribution and marketing e businesses .

The questions and dis belief is based upon a strong belief in the existing set of the parametres of evaluating an investment decision and if you view these valuations and investment decisions from your existing set of norms and standards, you will never find them attractive and will find them crazy!

For instance, China views political and strategic advantages as a part of returns and thus places a long investment period to evaluate and justify its viability. The period that they seem to have is much much beyond the standard 10 to 15 years . They also view the jobs created in domestic market and its fall outs as well as boost in trade and commerce, political strong hold etc as a part of their returns. Than only the setting up of an entire city on a foregn land or building roads over the Himalayas can be justified. Their way of understanding and managing Macro Economics need to be studied more carefully in order to know our competitor.

As far as the new found crazy valuations of e retail businesses are concerned, the investors also know that such high valuations are not to be justified in a short run. They are also not naive to believe that there is a near certainty of someone offering them a better price in near future.

What they seem to be aiming at is a strong foothold over the market that these companies cater to, the criticality of the market that they cater to and the real estate investment that they need to make to be in the market place . The pre requisite for keeping such criterias for justifying the investment decisions is to have a very very long time frame for justifying the investment. It is clear that they too have a really a very long time horizon to evaluate their investments.

Who these investors really are, is a matter of guess and my guess will be as good or as bad as yours !!

Category: Finances, General, Political |
admin | January 18, 2015
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RBI V/S NPA

This is a constant struggle that one is viewing almost ever since the lending started.”The major risk that the borrower takes the risk of losing his capital ” is something that we all understand. Similarly, the Lender also takes a risk of losing its principal and interest thereon, if and when the things go bad.That’s the way a balance is struck and the business of lending goes on and prospers.

The issue that RBI Governor Mr Rajan has raised is that there are many borrowers who either willfully default or do not try hard enough to honour their commitments to the lender. These are the borrowers who want the lenders to suffer and sacrifice first.This attitude is the point that irritates the lenders. To follow good etics is the bare minimum that should be expected and if found wanting, due and strict actions should not be delayed.

However, at the same time, the lenders too need to improve their quality of lending and monitoring. Timely identification of a likely default situation , continuing monitoring even when the going is good, extending a helping hand when needed re some of the things which are wellknown, well talked about but scarcely practiced.The situation of an NPA is so much scarry to the lenders that many a times they jump on a agreeing to debt restructuring proposal or putting excessive pressure of recovery leading to a stand off and precipitate NPA.

I feel there is a need to look at the issue of reducing NPAs at a holistic level and come out with some innovative plan of action Otherwise “Smart” promotors will keep on playing the game of ” Heads I win and Tails you Lose “.

Category: Finances |
admin | January 17, 2015
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Petrol Prices.. A relief , more to GOI Exchequer !!

The recent nose dive of the petroleum prices have surprised ( happily ) almost all of us . The experts have now come to a stable view that it is not just the lower demand due to slump in the world economy but there is also an over supply position from the producing nations leading to this steep and steady fall in petrol prices

Lower petrol prices would help in reducing the costs and inflationary pressure in the importing countries like India ..but the Indian government has preferred to smartly increase the excise duty on Petrol.. and has passed over only a marginal gain to the consumer. The full effect of the petrol price reduction thus is not passed over to the consumers and hence the pressure of inflation will not reduce to the full extent directly.Though the excise collection will enable the Government to check its deficit significantly and thereby control the inflation. In other words, the money supply will not rise due to lower deficits, thus controlling inflation.

These are the choices of the Macro Economists and they have played the game smartly.

But my concern is Simple like a common man. The Concern is… will the government reduce the excise when the petrol prices go up. Please keep in mind hat this is not a long term phenomena.. the prices will bounce back as soon as there are signs of recovery globally and the producers will than hit back with controlled production. A question like this need to be asked right now and a a soothing assurance from those in the Power need to be obtained. If this is not done, consumers will keep paying higher excise for a long long time.

Category: Finances, General, Political, Taxation |
admin | September 22, 2014
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PERFORMANCE AUDIT …. WHY NOT FOR LISTED COMPANIES ?

I was reading the recent book ” not just an Accountant ” by Vinod Rai .
An excellent book, worth a read for all auditors, in particular . It narrates the plight and complexities of the task of an auditor very lucidly.

one thing which I clearly noticed was that the real complex findings of the CAG emerged out of the Performance Audit that the CAG is called upon to perform as an auditor . The reason is simple. He is supposed to audit the Revenue and expenses for and on behalf of the people of India. It is the matter related to spending public funds and use of public resources.Hence he is called upon to look at the propriety aspect of the expenditure and conduct performance audit.Quite rightly so .

I am sure you will agree that even the large and listed companies, to a huge extent use public funds and resources. Why should we shy away from getting the Propriety aspect of the audit and performance audits when it comes to regulating audit requirements of such companies . Who should conduct such audit, what should be the Terms of Referance, periodicity and circulation of such reports etc can be brought out for debate and serious mind needs to be be applied at relevant level sonner than later .

Category: Finances, General, Political, Uncategorized |
admin | September 3, 2014
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IPOs…..People are about to welcome you !!

The recent upswing in the sentiments has resulted into a rapid rise in the share market index . this is a welcome state to be in, for a longer time . But the trend is more or less continuous since nearly four months or more .
the analysts will agree that the PE ratios are rising beyond or near dizzy limits. Even at this stage the good sentiments are showing a growing trend ( thanks to good monsoon, some solution to coal block blockages and the initiatives of the new NDA Government ) . The investors will soon realise the high PE implications and will be a bit worried about the future. In order to keep their appetite duly satisfied, new issues of convertible debentures, equity shares or large Private equity deals will be sought after.

Category: Finances |
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