Saturday, August 29, 2015

Patels' belligerence

General Douglas MacArthur in his celebrated farewell address to the US Congress said,

"history teaches with unmistakable emphasis that appeasement but begets new and bloodier war. It points to no single instance where this end has justified that means, where appeasement has led to more than a sham peace. Like blackmail, it lays the basis for new and successively greater demands until, as in blackmail, violence becomes the only other alternative."

If the government goes soft on the demands of Patels in Gujarat for reservation, it will open the floodgates for similar unjustified demands from many other communities across the nation. The mischief needs to be nipped in the bud. Will Narendra Modi stand firm? Or, as The Economist asked in another context, "Does the prime minister prefer talk over deeds?" Will it be "Lights, camera, inaction!"?

Friday, August 28, 2015

Interaction on Marketing

I was asked to speak to 42 Marketing Managers of Indian Bank on 'Marketing mantra for the digital age'. As I normally do not speak on marketing, I made elaborate preparation for the 2 1/2 hour session. I also came up with what I called the 6-Ts of digital age marketing.

The session was eventually cut short to 2 hours since the bank's MD addressed the managers longer than scheduled. When I finished my talk, the participants cheerfully clapped. I did not know whether they agreed with what I was saying or they were happy that the session was over.

In the event, I forgot to mention the 6-Ts which was supposed to be the centre piece for my discussion !

Wednesday, August 26, 2015

'Prescient' Time

Time magazine in its issue dated 31st August, 2015 declared, "China isn't headed for serious trouble anytime soon".

Ian Bremmer, the author of the article 'The China Decade', must be cursing himself now! Should we start talking about "The decadent China"?

Monday, August 24, 2015

The dragon drags everybody down

It was sheer mayhem in Dalal Street on Monday (24th August) morning. It was dismally colourful too. Even before the brokers could recover from the Monday morning blues, they began seeing red all over the place. It was one of those rare occasions when all 30 stocks in BSE S&P Sensex were in the red.

Dalal Street was not unique. Markets melted all over the world. These markets included commodity, currency and capital markets. Copper, nickel and oil found new lows. It was as if the pit was becoming bottomless. Chinese gravity was pulling everything down.

What was the origin, what is the course and what is the prognosis of this calamity? The epicenter is obviously China. China’s CSI 300 index spurted to 50% over 1st January, 2015 by 30th June, 2015. After that, it was all downhill. Now all the gains have been erased. Overemphasis on infrastructural development resulted in idle capacity of buildings, airports, bridges etc. (Moral: Economics in the long run does not brook any excess even in activities that are good in the short run.) Domestic demand started sliding. Exports slackened because many parts of the world are experiencing distressing fall in aggregate demand.

China is the largest or second largest economy in the world depending on whether you employ PPP (purchasing power parity) or not. Its GDP is about $18 trillion under PPP which is slightly in excess of America’s. It is obvious that any threat to such a massive economy will pose systemic hazard all over the world. This is exactly what is happening. China is a ‘too big to fail’ economy. Any misery in China is a body blow to rest of the world.

India is not de-coupled from China. Companies like Tata Motors and Tata Steel are devastated by the Chinese chaos. RBI Governor’s optimism that ‘the Indian economy is full of possibilities, even as much of the world is mired in pessimism’ is a bit of a stretch.

Are we in for a long term downturn? It is difficult to say. For every silver lining in the cloud, there are multiple forebodings. We were hoping that the US economy is well on its way to recovery. But the Yuan devaluation and its aftermath have thrown a spanner in the works or ,as the Americans say, thrown a (monkey) wrench in the works.

It may sound alarmist to fear that a currency war among various nations is in the offing leading to a Greater Depression than what was witnessed in the years 1929-33. However, let us not forget that uncertainty is the name of the economic game and nothing is ruled out in this age of the imponderables. To twist the Murphy’s Law a bit, even the unlikeliest event may yet happen.

Monday mayhem

Stock markets all over the world are going through an excruciating phase. On 24th August, global value of shares has shrunk by nearly US$ 10 trillion, almost the size of China's GDP. This loss on a single day is colossal, averaging around 6% in various stock exchanges.

China's market continues to sink despite the government permitting pension funds to invest 30% of their funds in stocks. This permission was given on 23rd August. It is ironic that communists in India are crying wolf over the Indian regulators permitting Employees Provident Fund Organisation to invest 5 to 15% of their incremental funds in equity. EPFO may have incurred substantial loss in their equity investments already. Bitten once, will it become twice shy? We can expect the communists to gloat over this development.

US $ is appreciating against all currencies save Yen and Euro. Japan and Europe will find their exports falling because of this. Federal Reserve Board of the US may postpone its intended increase of prime rates. Global uncertainty is escalating. RBI's moves will be worth watching.

Sundar Pichai jokes

Copied from the Net:

Since the current CEO of Google is Sundar Pichai, who is a Tamil Brahmin, there have been so many jokes made, related to it! Here are some Tambrahm jokes. If Google was a Tambrahm scenarios:

Search: Starbucks locations around me
Google: Ask Amma to make you filter kaapi

Search: Today's news
Google: Ean da? Unga Atthula The 
Hindu paper varaliya inikki?

Search: 'Mission Impossible' show timings in city
Google: Periya Tom Cruise fan a da ni? Poi Padi da!��
Search: Hair cutting salons near me
Google: Today is Friday/ Tuesday, go tomorrow!

Search: Hindu baby names 
Google: If it's a boy, Thatha peru, girl Paatti peru.

Search: How to travel the world in ten lakhs 
Google: World travel'a? Shut up! Put 5 lakhs in fixed deposit & with remaining 5 lakhs, buy gold!

Search: Career options 
Google: Engineering + MS, Engineering + MBA or CA

Search: Holiday destination 
Google: Kovil

Search: Healthy food
Google: Thayir Saadham

Search: Recipe for chicken 65
Google: Error 404, not found

Search: What's special in December?
Google: Katcheris & Kovil Prasadam

Search: Swear words
Google: Abhistoo, Shaniyan, Kadangaara

Search: Restaurants
Google: ' Did you have your shower or no?'

Search: Honeymoon ideas
Google: Suprabhatham at Tirupati

Search: Lyrics for latest film song
Google: Song lyrics- a? Modalla idhu kathukko, " 
Vishwam Vishnur Vrashatkaro" ( Vishnu Sahasranamam) ��
Search: Groom
Google: Did you mean groom with M.S. & employed in USA?

Search: Best wedding destinations in the world 
Google: Keep calm, it's Aadi Maasam now.

If Google was a Tambrahm:

-The logo would have a panchangam & refuse to work during Rahukaalam & Yamagandam!

- The OO's in Google would be replaced by Vadu Maangas in their logo
-  The number of results will always be multiples of 108
-  Neighbor's son's & daughter's Maths & Science scores will be visible on the home page
- Android's new releases will be named Paalpayasam, Kozhukattai, Parupputhengai, Jaangiri, etc.

- Google 's voice will be a Maami's voice
You get the point ������


Punch line of the day !!
Even the Cash-Rich Google has to take 'Pichai' from India.

Sunday, August 23, 2015

Virtual Parliament

Anguished by the washout of the monsoon session of our parliament, Chetan Bhagat has suggested that it is time that we explored the alternative of having virtual sessions of parliament. This is a welcome suggestion that will certainly prevent the culture of holding legislature to ransom.

Such a move will enable all parliamentarians to participate more effectively. Transparency will improve. This will also encourage the legislators to seek the views of informed professionals on various matters without the fear of being ridiculed. Outsourcing for expertise while the ownership will be with MPs will be good for the nation's development.

Parliamentarians used to physical wrangling will not like this idea. But they have no right to practise the dog in the manger policy of neither they will do their duty nor will they allow others to do theirs.

Friday, August 21, 2015

Appointments in Public Sector Banks

Persons from private sector were appointed as MD & CEO and non-executive Chairman of Bank of Baroda. Bank unions predictably criticised the move. The stock market equally predictably reacted by posting a 12% jump in the bank's share just on one day. The price has softened subsequently.

There are merits and demerits in this move. What is astonishing however is the subsequent clarification from the Finance Ministry that the new policy of utilising talents from private sector applies only to the top five PSBs. MDs and EDs of other PSBs will be selected from the pool of PSB officers only.

What could be the rationale for differential treatment of the top five banks? Normally experiments are conducted in smaller organisations and if successful, they are repeated in the larger ones. What the Finance Ministry is doing is counter-intuitive.

Thursday, August 20, 2015

Opinion of the Supreme Court

Sometimes, the opinions expressed by honourable judges border on the hilarious. During arguments in the Kerala liquor ban case, the Supreme Court judge, Vikramjit Sen, probed the counsel for the state government and said, "In some States, rice left over from the afternoon is soaked in water and taken the next day. It produces a nice (sic) stupor. So what purpose do you serve with this ban... Where are we going with this ban?"

So what is the message? Unless rice is banned, liquor cannot be banned?

Tuesday, August 18, 2015

New York Times' report on Amazon

In an address to students of Princeton University in 2010, Jeff Bezos, the promoter cum CEO of Amazon distiguished between 'gifts' and 'choices'. Gifts are what we are endowed with. Choices are what we make of them. He advised that in life choices are more important. He concluded by asking,

"How will you use your gifts? What choices will you make?
Will inertia be your guide, or will you follow your passions?
Will you follow dogma, or will you be original?
Will you choose a life of ease, or a life of service and adventure?
Will you wilt under criticism, or will you follow your convictions?
Will you bluff it out when you're wrong, or will you apologize?
Will you guard your heart against rejection, or will you act when you fall in love?
Will you play it safe, or will you be a little bit swashbuckling?
When it's tough, will you give up, or will you be relentless?
Will you be a cynic, or will you be a builder?
Will you be clever at the expense of others, or will you be kind?"
Bezos emphasised the importance of kindness. It was therefore surprising when The New York Times screamed in the title of an article that Amazon is a 'Bruising Workplace' and went on to quote many employees, past and present, how they cried in their workplace. Bezos' kindness apparently is more in the form of tough love.
John Rossman, the author of "The Amazon Way" had said about Amazon that 'it is the greatest place that I hate to work'. Compared to Amazon, Microsoft is a country club!
Amazon is the most valuable retail marketer with market valuation of $250 billion. Bezos is the fifth richest person in the world. He has made Amazon more nimble and more productive , but harsher and less forgiving. The triumvirate of 'Bureaucracy, Profligacy and Lack of Rigour' is the company's bete noire. 
According to NYT, Amazon believes in 'purposeful Darwinism', survival of the fittest employee on an ongoing basis. Employees have to be at their best every day. Amazon is where overachievers go to feel bad about themselves!
Amazon is essentially data-driven. 'Data is incredibly liberating'. Employees are at once flattered and intimidated by data regarding how they serve the customers.
Even more surprising than the NYT article is Jeff Bezos ' response. He has advised all the employees to read the article and take up with company's HR department if they feel pressured, harassed or frustrated by the company's rigour. He has claimed that Amazon is not what the newspaper describes.
The company's 14 leadership skills are:

Customer Obsession, Ownership, Invent and Simplify, Are Right A Lot, Hire and Develop The Best, Insist on the Highest Standards, Think Big, Bias for Action, Frugality, Learn and Be Curious, Earn Trust, Dive Deep, Have Backbone - Disagree and Commit, Deliver Results

NYT's linkage of these principles to Amazon's practices is interesting:
"Of all of his management notions, perhaps the most distinctive is his belief that harmony is often overvalued in the workplace — that it can stifle honest critique and encourage polite praise for flawed ideas. Instead, Amazonians are instructed to “disagree and commit” (No. 13) — to rip into colleagues’ ideas, with feedback that can be blunt to the point of painful, before lining up behind a decision."

Bezos has disagreed with the NYT portrayal of Amazon and has deplored what he called its portrait of “a soulless, dystopian workplace where no fun is had and no laughter heard” and said, “I don’t think any company adopting the approach portrayed could survive, much less thrive, in today’s highly competitive tech hiring market.”

Which company will accept that it is tough on its employees?

Sunday, August 16, 2015

More on "Indradhanush"

The ambitious policy designed by Department of Financial Services in the Ministry of Finance to revitalise public sector banks (PSBs) has been named 'Indradhanush' which means 'the rainbow'. Like VIBGYOR, the new policy contains seven colourful parts. It is claimed by the Department that this is the most significant reform in Indian banking after the nationalisation of banks which took place in the year 1969. (The policy wrongly quotes the year as 1970!)

The parts are creatively named in alphabetical order, ABCDEFG. These respectively are Appointments, Bank Board Bureau, Capitalisation, De-stressing PSBs, Empowerment, Framework of Accountability and Governance Reforms.

Appointments: The post of Chairman and Managing Director (CMD) has been split into two, as is the trend globally to promote better governance. The two posts are non-executive Chairman and MD & CEO. Chairman will focus on policy whereas MD & CEO will look after the operations in a bank. The process of selection to these posts has become 'more transparent and meritocratic'.

Bank Board Bureau (BBB): BBB which is likely to be operational by 1st April, 2016 will be in charge of selection of non-executive Chairmen and Executive Directors of PSBs. BBB will engage with PSBs in formulation of growth strategies. This is a new approach and its effectiveness remains to be seen. BBB may enable all PSBs to become one large 'Learning Organisation' if BBB is able to transmit successful strategies from one PSB to another.

Capitalisation: The policy says, "If we exclude the internal profit generation which is going to be available to PSBs (based on the estimate of average profit of the last three years), the capital requirement of extra capital for the next four years up to FY 2019 is likely to be about Rs.1,80,000 crore. This estimate
is based on credit growth rate of 12% for the current year and 12 to 15% for the next three
years depending on the size of the bank and their growth ability. We are also presuming that
the emphasis on PSBs financing will reduce over the years by development of vibrant
corporate debt market and by greater participation of Private Sector Banks."

It is noteworthy that the government hopes for / is reconciled to reducing role of PSBs in future. Government proposes to fund PSBs to the extent of Rs.70,000 crore in the next 4 years including Rs.25,000 crore this financial year itself.

De-stressing PSBs: Finance ministry intends to take more steps, jointly with RBI, to enable PSBs to improve recovery through better monitoring. Government will facilitate early commissioning of infrastructure projects. All these measures will reduce the stress on PSBs. (In a lighter vein, 'De-stressing PSBs' also means giving less importance to PSBs viewed in the light of previous paragraph. A Freudian slip?)

Empowerment: Government has promised to avoid interference in the working of PSBs. PSBs will enjoy full functional freedom. This is a crucial element of policy that will determine the future of PSBs.

Framework of Accountability: A new set of Key Performance Indicators for top management has been announced. There is 80% weightage for quantitative factors and 20% for qualitative ones. ESOPs for top management is under consideration. Intentions are good. Is it possible to prevent window-dressing by banks? Trade unions which are of course losing their strength and perhaps significance too have already questioned why only the top management should get financial incentives.

Governance: More Gyan Sangams will be held. Strategic initiatives like consolidation will be considered.

'Indradhanush' concludes by saying, "The Indradhanush framework for transforming the PSBs represents the most comprehensive reform effort undertaken since banking nationalisation in the year 1970.
Our PSBs are now ready to compete and flourish in a fast-evolving financial services

Finance Ministry has forgotten that banks were nationalised in 1969 and not 1970. 

Saturday, August 15, 2015

New experiment in public sector banks

GOI has come up with a new policy called 'Indradhanush' ('rainbow') with a 7-point agenda for public sector banks. One of the points is not to be inhibited by present practice of appointing only public sector bankers as chiefs of such banks.

Many wondered whether executives accustomed to sumptuous salaries would like to serve PSBs. At last, the government has succeeded in roping in P.S.Jayakumar to be MD and CEO of Bank of Baroda which is among the largest three banks in India. Ravi Venkatesan, former Chairman of Microsoft India will be the non-executive Chairman of Bank Of Baroda. This is quite an experiment, having both Chairman and MD from private sector.

Will the experiment succeed? Prakash Tandon who was the first Indian to head Hindustan Lever Ltd. became Chairman and Managing Director of Punjab National Bank in early seventies of the last century. He was not a banker otherwise.Though he tried to change the bank's bureaucratic culture, he was not a roaring success partly because the government control on the bank was tight and unrelenting. The government has now assured that it will not interfere in the functioning of PSBs.

P.S.Jayakumar is not new to banking. As a Citibanker, he was interestingly once the Head of Balance Sheet Optimisation in Asia-Pacific region of Citibank. Optimising the more intractable imponderables in public sector culture may be more difficult. At present, he is the MD of VBHC Value Homes. An M.Com. from University of Madras, he is also an MBA from XLRI, an ACA and an alumnus of London School of Economics.

Unlike Bank of Baroda, PNB, IDBI Bank and Bank of India will not have the benefit of fresh blood from private sector. The experiment in (or with?) Bank of Baroda will be keenly watched.

Words of Wisdom - Independence Day thoughts

Irresistible and chastening thoughts from Pratap Bhanu Mehta:

Never before was such immense possibility held hostage to mightier pettiness, great historical hope stymied by little men.

Independence, it seems, was the project of replacing the shackles of being colonised by the shackles of our own politics.

Time is not a free good. Each year’s delay wastes the prospects of another generation, squanders another possibility.

It is possible that the world is our oyster, but we cannot transcend the narcissism that cannot see beyond the nose.

The party of India’s Independence is also the source of its deepest corruption and monumental stupidities. It acts as if it did not lose the last election, but the election was stolen from it.
Every pathology that India suffers from — a vulnerable banking system to corrupt cricket to the agriculture crisis — has the active connivance of that party. If anything, the brief debate in Parliament reminded us why India was right to boot it out.

The Congress even pooh-poohed one of the rare occasions where India’s industry actually made sense and appealed to Parliament to function. It will be said of the Congress under Gandhi — in victory it displayed corruption and hubris; in defeat, pettiness and destruction. This is the party that carried the flame of independence.

Whatever the prime minister’s politics and psychological makeup is, it is not parliamentary. The PM is incapable of handling an assembly, with its rough and tumble questions.

But you almost get the sense that there are insuperable psychological obstacles in dealing with the Opposition. It also comes from the party’s own narrow conception of strength. It confuses strength with bombast, not recognising that artful compromise can add to strength. Like the Congress, it has also not understood that our besetting vulnerability is declining institutions. No ego, whether it comes from dynastic entitlement or a plebiscitary mandate, can substitute for institutions. The PM could have so easily occupied the high ground. Instead he took the low road and reduced himself to the level of his opponents.

Instead of matching idea with idea, leadership with leadership, tactful coalition with interesting alliances, political adversaries match sin for sin, abdication for abdication, and obstruction for obstruction.

For a brief moment we will enjoy that marvellous spectacle that a Parliament lit up for Independence Day presents. But we will also wonder whether the glitter is there to deceive.

One Rank One Pension

It is not fair on the part of government to inordinately delay actual grant of OROP. This is an election  commitment of NDA. Mere repeated reiteration of the commitment without actual delivery is not a welcome practice.

True, there are bound to be difficulties in calculation. Government has already taken more than one year in this exercise. So this justification does not wash.

There are differences in terms of duration of arrears payment. NDA's commitment was open-ended and therefore ex-servicemen's expectations got escalated. Ex-servicemen cannot be penalised for this.

The government should immediately think of releasing arrears atleast as per its calculations without making it final. Else government's sincerity will become suspect.

Wednesday, August 12, 2015

Sushma Swaraj's outburst

There is a lot of truth in what Sushma Swaraj told the parliament today. Why were Quattrochi and Anderson let off easily? Hands of Sonia Gandhi and Rahul Gandhi are obviously not clean. The government should investigate all those corruption cases which engaged the nation's attention during Congress and UPA regimes. Narendra Modi has no right to go soft on any alleged criminal acts involving Sonia Gandhi, Shashi Tharoor or anybody else.

At the same time, these criminalities cannot justify any inappropriate behaviour on the part of Sushma Swaraj or the chief ministers of Rajasthan and M.P. They need to resign or they would deserve to be sacked.. India is not so talent-challenged that these three are indispensable.

Janus-faced justice

We have reached an unfortunate state when it is impossible to have faith in judiciary. Dayanidhi Maran is supposed to have misused his ministership to set up 'a telephone exchange' in his house to be of use for Sun TV channel. The alleged shenanigan occurred when he was Telecom Minister during 2004-07. As long as he was in office, the misuse of power, if any, was not noticed and therefore no action was taken.

After 2007, many reports started appearing regarding his alleged misuse of office which amounted to criminal acts also causing loss to the exchequer. After UPA lost power, CBI became active in investigating the alleged criminal offences. A powerless poor person would have been taken into custody straightaway and cases filed in the courts of law (perhaps we should not call them courts of justice). The hapless person could not have sought judicial intervention and he would be rotting in jail.

But Dayanidhi Maran is neither powerless nor poor. So he would be treated differently. The Madras High Court at last decided that CBI could take him into custody to facilitate investigation. But the Supreme Court, as the apex court, does not want individual liberties to be tampered with. For the Supreme Court, the matter is simple: If there had been financial loss to the government, Maran would now pay it up and be done with it. Simple and Solomonic! Can we hope that the apex court will be so conscious of civil liberties in all cases!

Justice Vaidyanathan of the Madras High Court is now reduced to an ignoramus of law. He audaciously referred to his 'judicial conscience'. Following are his words of ignorance:

He said: “My judicial conscience prevented me from enlarging the petitioner on bail.”

“I find that the petitioner [Dayanidhi Maran] has been involved in serious offences, wherein allegations of corruption, cheating and causing wrongful loss to the exchequer of the government to the tune of crores of rupees, have been attributed.”
The judge said: “I find prima facie the exact role of the petitioner being the Union Minister for Communications and Information Technology, in misusing his office for his wrongful gain by obtaining telephone connections illegally in the name of BSNL officials…”
Earlier the judge found “considerable force” in the Additional Solicitor-General’s contention that when a number of undertrials were languishing in jails even for petty offences, Mr. Maran should not be extended any special concession by enlarging him on bail, as serious allegations of corruption, cheating and causing wrongful loss to the exchequer have been made against him.
It is not clear how a person with 'judicial conscience' was allowed to become a High Court judge. The damage that was sought to be done by Justice Vaidyanathan has been undone by the superior wisdom manifesting as Supreme Court judges.
In the Supreme Court, Attorney General Mukul Rohatgi, appearing for CBI referred to the facts of the case to stress that it was a huge corruption case and said, "Maran used clout in government to fix lines for use of the huge media house Sun TV that his family runs."
Justice Thakur and Justice Gopala Gowda could not tolerate this nonsensical argument. They almost asked, "So what?" In other words, what is wrong if a minister misuses his power? Who are the lesser mortals to question him?
"Is it a matter of prestige for you to arrest him? Nobody should get away after causing public loss. .. but custodial interrogation?. How did you assess the 1-crore loss? You say no bills were raised. Anyway he is willing to pay? You raise the bill now and he will pay up," Justice Thakur thundered. 
Such is the court's concern for civil rights. As long as  we have 'considerate' judges, no harm will come to honest people like Dayanidhi Maran.

Wednesday, August 05, 2015

RBI's call on uncertainty

Yet another monetary policy review by RBI took place on Tuesday, the 4th of August. RBI schedules most of its monetary policy reviews on Tuesdays.

Policy rates and Reserve Ratios remain unaffected. Inflation expectations by households (three-month ahead and one-year ahead) are inching up. This could be one of the key factors that precluded reduction in policy rates. After all, it is not a secret that expectations by households are more realistic than those by professionals.

What was surprising was the Governor's optimism on reduction in uncertainty.
" Significant uncertainty will be resolved in the coming months, including the likely persistence of recent inflationary pressures, the full monsoon outturn, as well as possible Federal Reserve actions."

Don't we know that no sooner that one uncertainty is resolved, than another one readily crops up? For example, the declining trend in oil prices may see a drastic reversal if and when the IS takes over some oil fields.

The Governor also made a debatable comment on merits of a committee. According to him, the proposed Monetary Policy Committee will come under less external and internal pressure than the Governor. Really?
Committee's independence depends on its members. If most of the members are nominated by the government, it is self-delusional to expect the Committee to be really independent.

It appears that the Governor prefers an 'accommodative stance' towards the government.

Monday, August 03, 2015

Speaker's role

Lok Sabha Speaker, Sumitra Mahajan suspended 25 Congress members on 3rd August for five consecutive sittings for persistently and wilfully obstructing the House. It is the Speaker's responsibility to ensure that the House functions in a conducive atmosphere and therefore whoever obstructs the proceedings need to be shown the door.

If anything, the Speaker had delayed her action inordinately. The House has not functioned for a week because of the melee caused by Congress. The Speaker has erred by suspending only the foot soldiers while the abjectly misleading leader, Sonia Gandhi has not been evicted.

This is not a confrontation between one party and another. It is an issue of allowing an important wing of democracy, the legislature, to function. The Speaker has at last woken up to her responsibility and done what she is supposed to do. Better late than never.

Chairman of the Rajya Sabha also should exercise his lawful authority and evict the disruptionists. It is not a question of which party is in power and which is in opposition. Citizens of the country expect their representatives in the Parliament to do their work and their work is certainly not to disrupt the Houses.

It is shocking that The Hindu claims that the Speaker's action is abdication of responsibility. If taking lawful action against unruly elements amounts to abdication of responsibility, we should all abdicate our responsibility.

Cholamandalam Investment and Finance Company - 37th AGM

CIFCO's 37th AGM was at The Music Academy (the main hall), Chennai on 31st July. The attendance was much thinner than the one for IDFC the previous day.

Shareholders were mainly concerned about the dividends declared by the company despite handsome financial results. The dividend payout ratio (the proportion of dividend to earnings ) is as low as 12% for 2014-15. The company is following an increasingly conservative policy vis-a-vis dividends. Company's Chairman, M.B.N.Rao, sought to justify this saying that the company is conserving funds for future business. Can the same argument be not advanced to reduce emoluments to top management?

The company has raised Rs.500 crore from one Dynasty Acquisition (FDI) Ltd. as compulsorily convertible preference share. A shareholder wanted to know the identity, owners and address of this company. The chairman did not respond. Raising Rs.500 crore from just one entity and not sharing details about this entity does not speak well of the company. (This was clarified by the company's MD on 3rd August when it was taken up with him. The Managing Director clarified as under:

"1) Why Rs.300 crore FCCPS was shown as a part of issued capital as on 31st March, 2014 and not 31st March, 2015. The amount was converted in 2010 itself.

When preference shares are redeemed, the redemption acts as an automatic extinguishment of issued capital. However, the same position is not the case when preference shares are converted in to equity shares – this does not automatically result in an extinguishment of the issued capital. We would need to apply specifically for capital reduction approval. Therefore, we continue to carry the issued capital in our books. However, subscribed  / paid-up capital will turn to zero upon conversion.

2) Who are the owners of Dynasty Acquisition (FDI) Ltd. ? What is the address of the company?

Dynasty Acquisition (FDI) Ltd., is a Foreign Corporate incorporated in Mauritius. 100% of the beneficial interest in Dynasty Acquisition (FDI) Ltd. is collectively owned by the following private equity funds:

Apax VIII-A L.P., Apax VIII-B L.P., Apax VIII-1 L.P. and Apax VIII-2 L.P (collectively, "Apax VIII funds").

Address of the Dynasty Acquisition (FDI) Ltd.:33, Edith Cavell Street, Port Louis, Mauritius" ).

It is interesting to note that Dynasty Acquisition (FDI) Ltd. will make capital gains of nearly 75% on conversion into equity in September, 2015 if the share price continues at the present level. Being Mauritius-based, the beneficial owners will be exempt from capital gains tax also. 75% Return in one year is a bonanza.

At the beginning of the meeting, the Chairman took shareholders' permission to have his speech which was circulated as read. One shareholder objected and insisted on the Chairman reading it. Thus, twenty minutes were unnecessarily wasted.

Sunday, August 02, 2015

Making AGMs purposeful

Annual General Meetings are supposed to enable shareholders to get to know their companies better and to give suggestions for better performance of the company. The Board of Directors and the top management may not agree with all suggestions, but they are expected to consider the views of shareholders objectively and also to respond to them.

Sadly, what is observed in many AGMs is the unfortunate fact that a lot of time is wasted over petty issues and consequently major issues are ignored. Thus, AGMs like our Parliament become dysfunctional. It appears that the Boards are only too happy that most discussions focus on peripheral issues like compliments. Some shareholders engage in filibustering giving scant respect to time.

Some meetings are held in small venues. We don't know whether these companies want to discourage members from attending the meeting.

Most Chairpersons do not even attempt to regulate proceedings in a purposeful way. Recently, a well-known company held its AGM in the smaller hall at The Music Academy, Chennai. Many shareholders had to keep standing. The Chairman was insouciant to the melee that was happening outside which interfered with the meeting whenever the only door was opened which was quite often. Was the Chairman doubly happy?

Vital questions posed by the shareholders are left unanswered. Recently, a question was raised about subscription of Compulsorily Convertible Preference Shares with a face value of Rs.500 crore by just one entity. The Chairman preferred to ignore this and was waxing eloquent on conservation of capital by keeping low the dividend payout ratio.

There are a few shareholders who are present in almost all AGMs in Chennai and who make it a point to speak and expose their ignorance. It is a pity that neither the Chairman nor other shareholders object to conversion of AGMs into semi-comic shows.