Tuesday, June 30, 2015

Clarity in annual reports of companies

The annual report of Bajaj Finserv Ltd. for the year 2014-15 gives the comparative movements in the price of company's share and BSE Sensex. The annual report is available on the net. The comparative graph finds its place on page 41. Both movements are indexed to 100 as on 31-03-2014 and therefore the picture is clear. http://www.bajajfinserv.in/downloads/8-annual-report-14-15.pdf

However, Sundaram Finance Ltd. has made a confusing presentation in its annual report for the year 2014-15 (page 25).  The same length of space on Y-axis represents Rs.0 to Rs.2000 for the share price and 6500 to 9000 for S & P CNX Nifty. In the process, the very purpose of the graph is defeated.

SFL's annual report for 2013-14 did not have this problem because comparative proportionality was maintained on Y-axis (page 23), namely Rs.400 to Rs.700 for the share price and 4000 TO 7000 for S & P CNX Nifty. http://www.sundaramfinance.in/app_documents/companyinfo/annualreports/2013-2014/SFLAR201314.pdf

Updated on 2nd July:

Response from Sundaram Finance Ltd.:

Dear Sir,

This has reference to your email of 30th June 2015.  We have noted your observations for future Annual ReportsThank you. 


K Rajagopal
Senior Manager (Secretarial)
Sundaram Finance Limited
21, Patullos Road
Chennai 600 002
Tel: 044 2888 1236
Email: rajagopal.k@sundaramfinance.in

Indian managers and scams

Following is extracted from The Hindu dt. 29th June.

"“Personality traits of Indian managers like their perseverance, their flexible attitude and their people management skills were clear winners in their favour,” said James Agarwal, Managing Director, India and Thailand BTI Consultants/ Kelly OCG, adding that their education and their intellect also tipped the scams in their favour. The trend was strongest in Europe he felt."

I hope that the coloured portion is an inadvertent mistake!

Sunday, June 28, 2015

PM's Mann ki Baat

The Indian Express reports,

"“All over India, no one is ready to listen to ‘Mann Ki Baat….Everyone wants to listen to voice of people in the programme,” said Azad, Leader of Opposition in Rajya Sabha. 

Speaking soon after the ‘Mann ki Baat’ programme was aired, Congress leader Ghulam Nabi Azad expressed disappointment over the “failure” of the Prime Minister to speak on Lalit Modi controversy. "

If no one is ready to listen to Mann ki Baat, how did Azad find out what was not covered in the speech? 

Though the Congress party or Sonia Gandhi's minions lack credibility to talk about governance and ethics, it ill-behoves the prime minister to be stoically silent on the misdemeanours of Sushma Swaraj and Vasundhara Raje in what is called as Lalitgate. The country cannot afford to have Manmohan Singh II. 

Friday, June 26, 2015

Constructive vs constructionist interpretation

Two judgments pronounced recently, wholesomely look at laws in a constructive way without resorting to strict constructionism. (Constructionism is a method of interpreting the law strictly in a literal way in a dictionary sense.) One judgment is from the US Supreme Court in the petition against the Affordable Care Act, better known as Obamacare. The Court upheld the validity of subsidies extended by the Federal Government notwithstanding the carelessness evident in drafting of the Act.

The New York Times says,

"The question in the case, King v. Burwell, No. 14-114, was what to make of a phrase in the law that seems to say the subsidies are available only to people buying insurance on “an exchange established by the state.”

Chief Justice Roberts acknowledged that the plaintiffs had strong arguments about the plain meaning of the contested words. But he wrote that the words must be understood as part of a larger statutory plan. “In this instance,” he wrote, “the context and structure of the act compel us to depart from what would otherwise be the most natural reading of the pertinent statutory phrase.”"

The dissent is more entertaining than logical. The NYT continues,

"In dissent on Thursday, Justice Antonin Scalia called the majority’s reasoning “quite absurd” and “interpretive jiggery-pokery.”
He announced his dissent from the bench, a sign of bitter disagreement. His summary was laced with notes of incredulity and sarcasm, sometimes drawing amused murmurs in the courtroom as he described the “interpretive somersaults” he said the majority had performed to reach the decision."

The other decision is from a Delhi Court. In a complaint filed against Smriti Irani, the Metropolitan Magistrate, Alok Jain has held that acceptance, in limine, of technical objections in the form of lapse of limitation period in a criminal case tend to defeat and deny substantial justice. The Court has loftily spoken that "procedure is meant to subserve and not overrule the cause of justice".

Thursday, June 18, 2015

Are women less corruptible?

Most people believe that women are less corruptible than men. Indian Railways have it as a policy that ticket booking counters will be 'manned' only by women as much as possible. Their intention is to reduce fraudulent allotment of tickets ans consequent black marketing.

Trust in feminine honesty is universal. Many believe that Lehman Brothers would not have collapsed in the 2008 global crisis if it had been Lehman Sisters. More female CFOs and CEOs might have averted the economic crisis altogether. Popular view is that women are less greedy and greed was the main cause of the financial crisis.

 According to The Economist magazine, Indonesian President has named an all-women nine-person committee to suggest candidates to replace Corruption Eradication Commission (KPK) leaders. Such is the unshakable faith in feminine honesty.

Our cognitive dissonance is heightened when our belief is nettled by episodes involving leaders like Sushma Swaraj and Vasundhara Raje in what has come to be known as Lalitgate. The only female prime minister we ever had was known for her sharp practices. "Corruption is a global phenomenon" was her anodyne to soothe public anger over rising corruption. Our only woman-President was not known for integrity.

Where does all this lead us? Has the Almighty in His (Her?) majestic impartiality ensured that men and women are equally susceptible to all Seven Deadly Sins namely Greed, Gluttony, Lust, Pride, Envy, Sloth and Wrath?

Sensex and corruption

The stock market has become upbeat this week. This is because the market has started recognising that the NDA government also is corrupt and therefore corporate activities meant to make unlawful gains will not be resisted by the government.

If the government exhibits its capacity to ride out the present crisis without any damage, sensex is poised to go further north. Narendra Modi's sphinx-like deportment is another bullish factor.

Indians are now saddled with the ticklish choice between corrupt Congress and bribable BJP. Sensex's sustained rise is assured.

A setback for RBI?

RBI is one of the few central banks which ensure scrupulous compliance with various norms pronounced by Bank for International Settlements (BIS). BIS is an international organization that fosters global monetary and financial cooperation and serves as a bank for central banks. RBI is legitimately proud of its record of complying with the requirements of BIS even unmindful of being ridiculed as being holier than the Pope.

RBI, therefore, was not pleased when the Basel Committee on Banking Supervision (BCBS) recently released an assessment on Basel III implementation by India and South Africa, on behalf of BIS. India has been assessed only as “largely compliant” regarding implementation of the Liquidity Coverage Ratio (LCR) standard whereas South Africa has been assessed as compliant. Assessment grades are 1) compliant (L), 2) largely compliant (LC), 3) materially non-compliant (MNC !, exclamation intended) and 4)non-compliant (NC).

Earlier, BCBS had assessed the implementation of Hong Kong and Mexico as compliant for LCR standard. LCR is defined as the proportion of High Quality Liquid Assets (HQLA) to total net cash outflows over the next 30 calendar days under defined conditions of stress, expressed as a percentage. LCR came into effect on 1st January, 2015. The minimum requirement for banks is 60% now, progressively increasing by 10% every year. Thus, LCR has to be 100% by 1st January, 2019. It is worth noting that Basel III gives more prominence to liquidity and thereby corrects an unintended mistake that occurred in earlier Basel documents, a mistake that was realized only when quite a few banks started going bankrupt during the 2008 global crisis despite the apparent promise of adequate capital.

To qualify as HQLA, assets need to be unencumbered in addition to being easily and immediately convertible into cash without loss of value. Hence these assets satisfy the criteria of low risk, ease & certainty of valuation, low correlation with risky assets, listing in developed & recognized exchange, active & sizable market and low volatility.

The reason as to why India is not assessed as (fully) compliant in relation to LCR is that RBI treats State Government Bonds as HQLA whereas BCBS gives this status only to Central Government Bonds. RBI has taken up with BCBS that State Government Bonds in India satisfy the requirements of HQLA and as such must be treated as high quality liquid assets. BCBS is not yet fully convinced. It appears that the view of BCBS is not without merit. RBI may take consolation from the fact that banks’ investment in State Government Bonds is much less when compared with Central Government Bonds. Nevertheless, it is not a pleasant situation for RBI which jealously guards its reputation as a fully compliant constituent of BIS, to be told that some other central bank is implementing a part of Basel III in a better way. It will be interesting to watch if RBI would modify its position on State Government Bonds.

Tuesday, June 16, 2015

Shashi Tharoor and Ahimsa

Shashi Tharoor never fails to impress. Look at his tweet given below.

So, Sunanda Pushkar assaulted herself. Or, Tharoor allowed someone to assault her.

. I have never assaulted anyone in my life, human or animal. Do not pursue your politics through lies, please.

Sunday, June 14, 2015

Should Sushma Swaraj resign?

There is no reason why Sushma Swaraj need not resign. She has knowingly helped Lalit Modi in his travel from England to Portugal while at the same time GOI is pursuing a criminal case against him through Enforcement Directorate. This cannot be dismissed as a humanitarian act as sought to be justified by the minister. This is not just a political indiscretion. The minister has committed an act which smacks of impropriety and cronyism if not outright an act of corruption.

There is a web of association between Lalit Modi and Sushma Swaraj. Her daughter was in the legal team that assisted Lalit Modi in the passport case. This is like Nalini Chidambaram arguing a case against GOI when Chidambaram was a minister. If the latter is improper, so is the former. Of course, the Chidambarams have been more egregious and consistently so ! As a Supreme Court lawyer, Sushma's husband handles the cases of many persons at least some of whom look for quid pro quo from the minister.

Is demanding the minister's resignation prudish? Perhaps Manmohan Singh's ministers did incomparably worse things. But UPA is not a sanguine benchmark. If one minister is allowed to escape from consequences of an improper act, we can expect other ministers to be equally reckless and morally deficient under the cloak of humanitarianism. Humanitarianism, real or ostensible, cannot be an excuse for criminal infraction, habitual or stray.

Thursday, June 11, 2015

Why single out Sun TV?

Kalanidhi Maran, the promoter of Sun TV, has raised a salient question in his letter to I & B Minister, Arun Jaitley. Criminal cases are pending against many channels and their promoters like disproportionate assets (Jaya TV) and 2G scam (Kalaignar TV) apart from Sun TV. It is interesting that Marans do not mind making an inconvenient reference to their uncle's channel. Blood is not thicker than water when commercial interests are at stake. Why should the government think of withdrawing licence only from Sun TV? Is this not arbitrary discrimination?

This is a fair question raised by an unfair party. Dayanidhi Maran as a minister enabled his brother's channel to enjoy an unfair advantage over other channels by wholesale misuse of BSNL connections. Serial entrepreneur, C.Sivasankaran was arm-twisted to sell his stake to a Malaysian company which invested in Sun TV. These allegations are now tested in courts of law and CBI is presently convinced of the veracity of these charges. (CBI is  chameleonic and therefore its views are politics-dependent.)

A murderer cannot claim that he should not be arrested before all murderers in all murder cases are also arrested. Government infrastructure is too weak to take simultaneous action against all offenders. Nonetheless, a beginning has to be made.

Arun Jaitley is known to be accommodative with politicians of all hues. So he is opposed to Home ministry's move to withdraw security clearance of Sun TV. There is substance in Ram Jethmalani's assertion that no concrete steps will be taken against economic offenders as long as Jaitley continues as minister. Economic crime and commercial success will go together thanks to political patronage. What Manmohan Singh tolerated in his cabinet, Arun Jaitley is tolerating in the entire economy. Acche din door ast.

Added on 12th June:

Subramanian Swamy has written to the prime minister regarding the suspected role of Arun Jaitley in appointment to Vigilance Commission. Swamy has alleged that Jaitley was unauthorisedly allowed to attend the meeting of the committee of P.M., Home Minister and Leader of Opposition which recommended appointment as of T.M.Bhasin, former CMD of Indian Bank as Vigilance Commissioner. There is a stray allegation against Bhasin that he manipulated the CR of one GM of Indian Bank to favour another GM for promotion. The allegation may or may not be credible. But Jaitley's role is receiving adverse notice of persons like Ram Jethmalani and Swamy. Is Arun Jaitley a devil's advocate?

Monday, June 08, 2015

Takeaway from IITM imbroglio

IIT administration has re-recognised the Ambedkar-Periyar Study Circle (APSC); the IIT Director has regretted that the issue had been mishandled. He has fallen short of tendering an unconditional apology as demanded by APSC at least so far and at least as known to the public.

Does this mean that the imbroglio has been sorted out and everything is hunky-dory once again? No, the situation has only metamorphosed from an imbroglio to a snafu. Things have been so badly mishandled that it is time to realise that IIT and its constituents are not a repository of wisdom.

The chronology of events is a series of misadventure, thoughtless action and spineless response. Obscurantist casteism, divisive communalism, corrosive ideology, procedural non-compliance, knee-jerk reaction, abject surrender, sensational media and promiscuous politicking have been the salient features of this sordid drama.

APSC had been fanning reverse-casteism and communalism taking cover under select quotes from Ambedkar and Periyar. When an official from the HRD Ministry sought the views of IIT administration in connection with an anonymous complaint received by it, the latter instead of reverting to the ministry with its views, plunged into action by derecognising APSC ignoring all procedural protocol. The omni-present media, ever on the qui-vive for opportunities to sensationalise, grabbed the chance to pounce on IITM in their vaunted mission to protect "freedom of expression".

The unlikeable likes of Arundhati Roy immediately saw red and, in a fit of clairvoyance, figured out the 'conspiracy' between the Hindu right-wing and 'greedy capitalists'. Vituperative voice was raised against the unholy nexus between neo-liberal economists and antediluvian communalists. Truth of course was a matter of little importance in their shrill argument.

As events were inching towards a finale, the Director returned from abroad and with the benefit of 'his higher wisdom' made an institutional about-turn and regretted the happenings. He was oblivious to the sinister message his action was sending to the student bodies. The message was stark and unequivocal. "Do whatever you want to do and as long as you mix your action with platitudes on casteism and communalism, you have every right not to be questioned."

Tuesday, June 02, 2015

CAT's dubious conclusion

There appears a report in Times of India dt. 3rd June which totally demolishes an earlier finding by Central Administrative Tribunal that there was no pressure from Shashi Tharoor or others on the doctors conducting autopsy.

The report is given below:

"CAT rubbished Gupta's claim and rejected the charge of interference levelled against Tharoor. It said the "email sent by Shashi Tharoor, then Union Minister, to Dr Rajiv Bhasin, on January 26, 2014, and the notice dated June 2, 2014 issued by Dr Adarsh Kumar, member secretary, Medical Board, AIIMS do not reveal anything to show that any pressure was put on the applicant to submit a tailor-made autopsy report in Sunanda Pushkar's case". 

Sources, however, said Dr Adarsh Kumar, who was also a member of the board of doctors which conducted the postmortem (of Sunanda Pushkar), has also written to the health minister supporting Dr Sudhir Gupta. He reportedly claimed that the board was asked to state the manner of death as "natural". Pushkar was found dead in her room at a five-star hotel in Delhi on January 17, 2014. "

With Dr.Adarsh Kumar admitting that there was undue influence being exerted on the autopsy panel to term the death as natural, CAT's conclusion is proved to be contradictory to facts. Would CAT reconsider?

The only conclusion we can draw is that the former minister was so powerful that he could get away with murder even in a literal sense.

CRR and Repo rate

A PTI report  says,

"Dismissing IBA’s demand for a CRR cut to better help banks reduce lending rates, RBI Governor Raghuram Rajan on Tuesday said the mandatory ratio would continue to fetch them zero interest, and cutting the key repo rate in fact helps them better to reduce cost of funds.
“I don’t understand this discussion on CRR or the cash reserve ratio that sometimes comes up...this is a question that some bankers raise occasionally, saying cut CRR. I think it should be recognised that CRR is primarily a monetary instrument,” Rajan told analysts and researchers at a post-policy con-call.
It can be recalled that Mr. Rajan had in April termed the demand for CRR cut as ‘irrelevant’. Even after this, Indian Banks Association (IBA) Chairman and head of State-run Indian Bank T.M. Bhasin had called for a CRR cut.
“If you want to reduce the cost of capital and reduce lending rates, the more direct instrument to use is the policy rate which we have used,” Mr. Rajan said, adding that a 1 per cent cut in the CRR would help improve a bank’s cost of funds by 0.08 per cent, while similar reduction in the repo rate had the potential to reduce it by an equal measure.
The Governor added that the mandatory cash reserve ratio (CRR), under which the banks have to park 4 per cent of their deposits with the RBI as a mandatory solvency measure, would continue to fetch no interest for them.
“It is absolutely necessary to keep it uncompensated because that is the way we essentially drive the monetary policy transmission through the credit multiplier,” he said.
“We have surplus liquidity in the system as there has not been much credit offtake so repo window does not give banks any advantage as we don’t borrow from banks at this point. So, the CRR window helps us bring down cost of funds.
“We expect and will request 0.5 per cent cut in CRR which would release about Rs.40,000 crore in the system,” Mr. Bhasin said. He repeated the same in a statement in his reaction to the policy on Tuesday.
Retorting to this, Mr. Rajan said, “which is more beneficial? A 25 bps (repo cut) or a 25 bps CRR cut that the bankers keep talking about. Clearly, it is the 25 bps cut in the policy rate. I don’t understand this discussion on CRR that sometimes comes up.”
SBI had been repeatedly lobbying for a CRR cut and there was a very strong exchange of words between the past SBI Chairman Pratip Chaudhuri and the former RBI Deputy Governor K.C. Chakrabarty regarding the same. Mr. Chaudhuri had even demanded abolition of the CRR terming it as dead money."
RBI Governor's view is puzzling and apparently obstinate. RBI can consider reducing CRR alongwith a drop in Repo rate. It is not an either-or issue. If Cash Reserve Ratio is brought down from the existing 4% , banks will have more funds to lend and therefore interest rates for borrowers will come down. RBI's intransigence on CRR is self-defeating. It is not an issue of which instrument (CRR or Repo rate) is more beneficial or more powerful. RBI needs to look at them as complementary tools.

Update on Mrs.Tharoor's death

Dr.Sudhir Gupta had all along been complaining that the Director of AIIMS pressurised him to term the death of Sunanda Tharoor as 'natural'. AIIMS now proposes to replace him as the Head of Forensics Department.

Dr.Adarsh Kumar, member secretary of the medical board that oversaw the autopsy, has now alleged that he and others in the forensics department were pressurised by the Director of AIIMS to categorise the death as natural.

There are many pointers to the tragic truth; but the wilfully blind refuse to recognise any of them.