Is there something wrong with ICICI?

(My first interactions on issues of Banking. Though i am not well versed with Banking sector as a whole, but my comments on banking are more from an economy and effect-on-economy perspective. Full article on http://www.livemint.com/2008/09/22083329/Is-there-something-wrong-with.html)

Hi Tamal,

What happens when a growing economy de-regulates critical sectors and industries? I am not against de regulation, infact i am a proponent for it. However, i am commenting upon the trend of market skimming. The pattern that emerges when a critical sector is de regulated and FDIs allowed to flow in, is that there are quick investments in the economy. Most of this investment is attractive, not necessarily sustainable. Attractive means immediate or medium term profit based investments. Long term investments require rigour, discipline, intent and time. They would not be attractive initially and would give you average benefits over the medium and long term. They are not a function of Sales Targets and Pressures. In trying to skim the market and extract the most in profits and Dividends many companies only create a small affluent urban base.This is unsustainable in tough conditions when the small base doesnot deliver. I dont intend to say exactly the same about ICICI bank. However, your point on wholesale versus Retail deposits and structured derivatives and high growth and leveraged equity avers to the thought. I do think that ICICI bank is one of the biggest pillars and powerhouses of the financial eco system, but one gets the feeling that ICICI bank could also have bet it wrong.

Thanks Manas

Of Infrastructure and Capital Statements II

(extending the discussion with Raju Narisetti, the Editor of Mint, my views on the bad quality of the infrastructure is extended thru ths discussion. http://blogs.livemint.com/blogs/romanticrealist/archive/2008/09/01/killer-roads-in-india-and-rethinking-the-death-penalty.aspx?CommentPosted=true#commentmessage )
Hi Raju
Capital Punishment is a compelling thought. However is that a panacea of the corruption evils? Hardly! In my views, i tend to agree with Arm Chair guy. The bad quality of roads is just the precuror. From environment to poverty to health care, education and business and more... bad governance prevails everywhere.Corruption is omnipresent! To take the points i suggested a little further
1. As a corporate executive i have metrics, tolls, reviews and score card. I am evaluated on the basis of that.
2. For a business as large as 1 billion people and a trillion dollar economy, where are these management/administration fundamentals? Who does the check? Where are the audit reports
3. Media has been up in arms trying to go after such issues, but that is more from a sensationalizing stand point.Good media is impartial and we seriously need media to start educating the millions.
4. There is this office of the president/governor.That to me is a complete drain on the exchequer unless they can take the position, of safeguarding the public interest. Can they do the audits?
5. I again come back to my previous claims. Socially responsible people need to review and evaluate the government and the officials...Media is to be the voice of the people / neutral medium and the enabler is to be the gubernatorial offices.
I know the constitution doesnot provide any framework on this.. But then we need to start some where.
Finally on the roads infrastructure front, extending Arm Chair guy's thoughts... If a Samsung can Guarantee its TVs, the road contractors must guarantee the quality of their work. If it fails within the guaranteed time, they need to redo without being paid... Manas

Subhiksha: A perfect "go bust"

(Having observed the operational dynamics of Subhiksha, 2 years back, it had struck me that this was not a sustainable mode of working. Over the next 2 years that seed has actually taken long roots. In fact many of the retail chanels in India are not on sustainable models and are trying to over spend each other. This post, happened after 7/8 days of the Retail Realism one and bear my thoughts and ideas substantially if not fully)
Read article at http://www.livemint.com/2008/09/05001546/Subhiksha-not-paying-some-bill.html
In continuation to an article that appeared in Mint some time back.. "bringing back retail realism" (http://www.livemint.com/2008/08/27002851/Bringing-back-retail-realism.html) , I had listed out a number of points on just how high and how much the retail exuberance is irrational. Subhiksha to me is the best and the biggest example of "how to get retail management wrong". To list down the bullet points on this
1. Unmindful Expansion: Subhiksha took a lot of pride on matters of number of stores opened per day/per week/per month...
2. ... without Consolidation: Very few stores would have been profitable in terms of cash flows
3. Flouting all possible rules in Retail management.
4. The staffing and the personnel quality was pathetic but the pay was very good.
5. The terms of business were not always ethical or right minded.
6. Whither Inventory management?
7. Footfalls, turnaround and turnover being the guru mantra: Subhiksha never understood its customers
8. The only USP was discounts... hardly a sustainable competitive edge!
9. Your vendors only have a limited leash...expecting infinite credit cycles to make up for your ROIs is hardly good vendor management
10. Downstream supply chain was not integrated. Bulk buying is not a source of advantage.
11. Diffused focus: Subhiksha sold fresh vegetables, medicines, groceriezs, mobile phones, accessories and more.. where was the focus? How robust was the business model and the manpower to handle such diversity?
Now i hear CDIT format stores under the Subhiksha aegis... When will you learn Mr. Subramanian? Bottomline: No one "buys out" a sick horse. At this rate... Mr Subrmanian.. you would go bust!

Realty Sector, Investments and a possible growth story

(This post deals with a view about realty sector players in the Indian Market,especially DLF. Read full details at ... http://www.livemint.com/2008/09/05003413/DLF-yet-to-start-work-on-Mumba.html)

Hi Madhurima

No one contests the financial might and lobbying abilities of the collossus, DLF.However in the regime of increasing interest rates and plataeuing consumer demand, (read recessionary symptoms/ slowdown), i am not surprised that DLF is going slow.

1. As of now, it seems that DLF has invested more than it is comfortable with in a horizon which is uncertain. Consumer demand is not exactly the shade of pink it used to be.

2. While partnerships with other real estate cos, would help DLF tide over the credit/cash crunch, yet the cash flows from exiting projects would not be as promising.

3. There would be some inventory (ready to move in, unsold properties) which DLF would be stuck with.

4. Hence the delays and slow execution...

5. Compare it with players such as Indiabulls etc, who donot have significant inventory at hand. Hence they can continue to invest, from their P&L standpoint.

6.One thing that really beats me is most of the projects that are being advertised, are targetted to the Medium High level consumer. We havent heard of mass housing schemes. Thats where most of the real estate companies are missing the trick.

7. Mass housing solutions (i remember Brazil having done one of these projects successfully) would be key to spurring growth in this sector in the years to come.

8. Besides, the development at the tech parks and SEZs that has happened has been much unplanned and infrastructurally bottled up. One just needs to see the Cybergreens/Gurgaon and Hyderabad at peak hours to understand how badly the projects were concieved.

9. Bottomline... Cos like DLF will have giant successes and those irritating nags that will be a cash drain. DLF probably needs to look at more economical solutions catering to wider audience solutions in "building India".

Thanks

Of Infrsatructure and Capital Statements

( .. furthering the course of discussion on the pathetic quality of roads in India, this was a post that i had written in reply to Raju Narisetti's (editor in Chief, Mint) editorial piece on pathetic road infrastructure in India. Click http://blogs.livemint.com/blogs/romanticrealist/archive/2008/09/01/killer-roads-in-india-and-rethinking-the-death-penalty.aspx?CommentPosted=true#commentmessage for the story)

Hi Raju

Off all things, i cant imagine why you would have to toil in some obscure hill way, a Highway 58 or something. Did you miss the roads outside your home/office/club/mall/market etc? If my memory does me fair justise, the utility of tax payers money diminishes by exponential degrees as you move out of Delhi/or the state capitals.And i am still talking Delhi! We dont have a concept of time value of Money in India else the amount that we lost in the traffic jams and on roads would be incomprehensible. It takes only one good monsoon to show how poorly off we are in the quality of road infrastructure. As far as your China comparison is concerned, the common perception of India's GDP growth is that we loose 2% growth opportunity because of infrastructural shortages and shortcomings (whether be road, electricity, water, or any other). So when India was scorching at 9% GDP growth, the common perception was we could actually do a 11% and we were loosing 2% to these bottlenecks. I wonder if China works on discounting their infrastructure. Responsibilibity and accountability go hand in hand: Thats as far as i understand is a universal principle. Universal, right till about it steps to the Indian Policy makers. This may sound crazy and indeed as a action point radical , but who audits the government. Are there any scorecards for the governments and policy makers. Inside the parliament, its just as good as a thief judging the theivery of another. Why cant we have a group of business icons/media people/environment specialists/economists/ social activists, take a yearly account of the policies and the governments? A public death penalty is not as much the answer as an answerable system is. In a mature world, i would vote for rational assessments instead of radical penalties.

Thanks

Regards