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.
http://www.sundaramfinance.in/app_documents/companyinfo/annualreports/2014-2015/sflar201415.pdf

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 30^th June 2015.  We have noted your observations for future Annual Reports. Thank you. 

Regards

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!

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. 

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".

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 1^st January, 2015. The minimum requirement for banks is 60% now, progressively increasing by 10% every year. Thus, LCR has to be 100% by 1^st 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.