Monday, September 10, 2012

“Our strategy is to achieve sustainable high quality growth”

In a tête-à-tête with B&E’s Mona Mehta, P. R. Somasundaram, Managing Director and Chief Executive Officer, Lakshmi Vilas Bank (LVB) speaks about the growing importance of retail banking in the Country and the bank’s expansion plans to exploit the opportunities coming its way.

B&E: Lakshmi Vilas Bank outperformed all other South Indian banks in financial year 2009-10 by posting 52.71% growth in operating profit. What are your expectations from the current fiscal?
P. R. Somasundaram (PRS): In FY2010-11, LVB is planning to increase its total business (deposits and advances) by over 30%. And the bank is moving ahead strongly to achieve the objective. It has posted a strong 66% growth to increase its operating profit to Rs.537.30 million. In fact, we expect the current financial year to be significantly better than the last one (in terms of multiple parameters) as we are now leveraging the macro environmental opportunities available through internal transformational steps.

B&E: You just said that the bank is eyeing for a 30% growth in overall business this year. How are you planning to achieve the same?
PRS: Last year, while our deposits grew by 23.28%, advances increased by 19.88%. For us, the key is to achieve an absolute growth, and establish a sustainable trend, which will lay a platform for accelerated growth in future. Growth driven by process changes rather than purely opportunistic steps will determine our strategy.

B&E: You currently enjoy a high net interest margin (NIM) of 3.66%. But with deposit rates heading north under inflationary pressure, how are you planning to maintain the same?
PRS: This is a common challenge for all the banks. But our relationships are strong in the key markets allowing us to pass on the higher cost. Besides, our recent success in CASA (Current Account, Savings Account) build up has helped us to protect our margins. We are also looking forward to widen our funding sources by targeting new markets with shorter response times, and providing personalised services.

B&E: At 3.31% of net advances, Non Performing Assets (NPAs) are weighing high on LVB’s balance sheet. How are you planning to deal with the menace?
PRS: We have been working on it constantly. If you go through our Q1 results, as on June 30, LVB has managed to reduce both its gross and net NPAs to 4.27% and 3.31% respectively from 5.12% and 4.11% as on March 31, 2010. Our target is to bring down the net NPA level to below 1% within the next 18 months and we are on the right track. We are working on process changes and credit monitoring to improve our credit quality. Also, our credit monitoring and recovery efforts had been very reactive in the past, but we are now keen to make it highly pro-active.


Source : IIPM Editorial, 2012.
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Saturday, September 08, 2012

Aniruddha Bahal’s The Emissary is a rocking chariot ride

Whether narrating the exhilarating chariot races in Olympia or vividly describing Alexander’s encounter with the Persian army on the banks of the Granicus, the story has the intrigue and action going thanks to Bahal’s keen eye and breezy pace.

And finally, the Indian connection in the book – Alexander’s famed marched into the country – would be sure to have the Indian reader hooked. Bahal’s take is interesting as he highlights how Alexander did not exactly fail in his mission in India. The Emissary is a great mosaic of all the basic human emotions seen through the epic lens of Greek history. His research and background (acquired after that remark from Sir Naipaul) make the read light for the reader but that doesn’t mean writing the novel was an easy task.

When asked if writing a contemporary or a historical novel is harder, Bahal says, “Well, it ultimately depends on what the context and period is. The Emissary took a lot of research about that period that finally resulted in the writing of the book. A contemporary novel like Bunker13 on the other hand perhaps comes easier as the writer would be familiar with some of the milieu at least. He might even draw some of the characters from personal experience. For a novel set in a different era you don’t have those advantages.” But despite all of that, Bahal’s latest work is commendable, if only because of him being an Indian writer to have a go at this genre of writing with such gusto. In fact, a sequel is in the works. And if you acquire the taste for the historical after finishing The Emissary, you’d probably keenly wait for it.


Source : IIPM Editorial, 2012.
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Tuesday, September 04, 2012

Dynamics of this business

All lost some, some lost all. Everybody evolved (Hopefully). Change in the air now, with new strategies being adopted by retailers to enable them to better manage the dynamics of this business. But can this misery-inspired ingenuity help organised indian retail produce the numbers that have eluded it so far

According to FICCI, there are approximately 200 malls in Delhi and NCR region and out of that, only 20 are profitable. So what makes the other 90% of the malls struggle to make profits? Retailers Association of India (RAI) claims the four major problems are poor site selection, vertical expansion, commercialization issues and lack of professional advice. Vertical expansion relates to vacant malls with multiple floors and a certain recipe for disaster is to have a shopping centre in a poor site (very few stores and not many footfalls) with a large number of floors. When Bharti-Wal-Mart decided to open its first cash-and-carry joint venture store last year in Amritsar, it avoided opening in a time-honoured malls with multiple floors.

The impact of poor commercialization can be understood from the fact that apparel retailing, which forms the second largest (food being the first) in terms of value in the retail industry, has been growing at 14% till August 2010; whereas it was estimated to grow at 19% if there was no slowdown (a Confederation of Indian Textile Industry study). Poor commercialization in terms of over-spending on ad-budgets is blamed as the reason for such poor growth. Comparatively, food retailers played it safe and brands like Bhart-Wal-Mart managed commercialization issues very well. Rajneesh Bhasin, present MD of Borges India Private Ltd., who was spearheading the setting up of the Bharti-Walmart store, elaborates to B&E, “The store was opened when slowdown was at its helm and we knew that we have to commercialize it. For instance, to keep costs down, 80% of goods were sourced locally.”

To combat poor conversion ratio of investment to revenues, it’s necessary to hedge the increasing working capital requirement and this can be done by managing not only rental costs, but also by sourcing goods from local vendors and saving cost of logistics. It’s no wonder that retailers are today even opening stores on a revenue sharing basis with property owners, which lowers down rental expenses. However, going a step ahead, Pantaloon from Kishore Biyani’s stable has adopted a deft-strategy in post slowdown era. The group has saved costs by not filling the gap created by attrition on the front end. On the other hand, for all the private label brands, the group has created a common sourcing level for Big Bazaar, Food Bazaar and Pantaloon. “We are also leveraging a common platform for advertising all our ventures and this has been able to save our costs by 20% during the last quarter,” adds Vineet Jain, GM – Sales & Merchandising (North Zone), Future Value Retail. Future Group is now focusing more on private labels for their higher margins and increasing appeal for customers.

In all probabilities, private labels or in-house brands with their economical pricing attract consumers more and all food & grocery retailers, who were earlier cashing in on established brands, are apparently going gung ho on creating private labels post-recession. But if private labels can emerge as a remedy to the horrible growth during slowdown then why didn’t it save retailers in Europe who have been thriving on private labels? According to Planet Retail (London-based research consulting firm), the share of private labels is the highest in Europe, where private label penetration has reached 53% in Switzerland, but retailers in these countries were also affected by recession. “Retailers in European countries failed during the slowdown because of their failure to manage local logistics and increasing cost of sourcing,” comments Gibson G Vedamani, Founder & MD, Retailers Association of India. One reason why, post the economic meltdown, just moving on to ‘private labels’ is not the end of the strategy win game. Retailers across the world are also focussing on cost optimization in sourcing such private labels.

So does that mean that in the next five years, we won’t see a luxury retail growth or even normal retail expansion in metros (where the markets, apparently, are saturated)? Jeremy Hackett – the creator of British premium brand Hackett, which recently ventured in India, gives us a shocker, “I think India has a market for luxury but it’s in a very nascent stage so it’s not safe to bet big here initially.” But that is also akin to seeing the glass half empty instead of half full. That is, if the organized retail penetration, which is currently at 5%, will only reach only around 10.4% in India (as per the critical KPMG forecasts), one has to realise that seen in the Indian context, 10.4% is quite significant. If by the same critical forecast, sales grew by a mere 8% in 2009 till July 2010 (compared to 34% in 2007), one has to again realise that compared to global averages of negative retail growth, 8% is godly. In other words, while luxury retail clearly is out of context in the coming years, normal retail expansion in metros might be there, but the growth will be two-folds in tier II and tier III cities and even rural areas. Those are the regions that will contribute significantly to make India the most attractive emerging market for retail investment – with the AT Kearney eighth annual Global Retail Development Index being a benchmark India would one day hope to top. The key words, if you missed them, are ‘one day’... and that is surely not today!

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Monday, September 03, 2012

HOUSES IN ASIA...BUT NOT THE BIGGEST YET!

UTV IS NOW ONE OF THE LARGEST PRODUCTION HOUSES IN ASIA...BUT NOT THE BIGGEST YET! CAN RONNIE SCREWVALA AND HIS TEAM MAKE UTV THE FACE OF INDIA TO THE MEDIA WORLD? B&E’S SHEPHALI BHATT PROVIDES A DEEP INVESTIGATION FROM RIGHT INSIDE UTV WITH EXCLUSIVE INTERVIEWS FROM UTV’S TOP MANAGEMENT

While Ronnie was in the media business purely due to his passion for working in the industry, Chandra had a completely different agenda; he was a thorough-cut businessman looking for profits (“I wanted to see a business opportunity ahead of its time and back it up passionately,” Chandra shared with B&E). So while Chandra followed up each and every innovative business idea with investments into a wide array of businesses to form a behemoth group (that today has interests in the realm of media, technology, entertainment, infrastructure, education, cricket and precious metals; Essel is even the world’s largest packaging company today), Ronnie was trying to convince others (like Chandra’s competitor Murdoch and Warberg Pincus) to invest into UTV – Star TV’s investment in UTV became the first ever foreign investment in media in India’s corporate history. Over time, Ronnie bought Vijay TV, sold it off again to Murdoch, then started Hungama, sold even that to Disney, and somewhere along the line, crossed over from being a ‘media professional’ to being a passionate businessman – just like Chandra. Ergo, today, though their business histories have inevitably diverged, comparisons have as inevitably come together. Subhash Chandra started it all, attempting to make India the face of Asia to the global media world. Ronnie seems to have taken up the initiative from a parallel end. But can Ronnie go the whole hog and finish what Subhash Chandra started? That’s the cutting edge question facing the media world today.

While Chandra’s ascent was largely credited to satellite TV, Screwvala’s most unputdownable claim to media glory is obviously movie production, marketing and distribution, wherein his company now is remarkably the largest production studio in South Asia, having produced widely acclaimed movies like Jodha Akbar, Rang De Basanti, Rajneeti, DevD, A Wednesday, Wake Up Sid and Kameeney. UTV has gone a step further to become the first Indian production house to co-produce a Hollywood movie with 20th Century Fox – M. Night Shyamalan’s The Happening (which grossed $170 million at the global box office). It co-produced two Hollywood movies with Fox Searchlight in 2007 – The Namesake directed by Mira Nair and I Think I Love My Wife directed by Chris Rock. The company also managed notable co-production agreements with Sony Pictures Entertainment and actor Will Smith’s Overbrook Entertainment. In addition to that, Walt Disney has been an integral investor in UTV and holds more than 50% of its shares.

Read more.....

Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Saturday, September 01, 2012

Why isn’t India banning National Geographic?

In Jan 2010, NatGeo was warned by the I&B ministry for deliberately exhibiting wrong maps of India and was threatened with stringent action if non-compliance was continued. Let off then, NatGeo continues its misrepresentation! What does the government plan to do now?

If the government is so serious about ensuring that the national viewpoint of Indian geography does not get distorted, then the government should immediately enforce the maximal allowable punishment on the entities that continue to knowingly publicise clearly illegal maps and images representing flawed Indian boundaries. The NatGeo example is just one part of the story; CNN, BBC, Lonely Planet, CIA, US State Department and Wikipedia make up the other ignominious bunch that have no qualms about distorting Indian boundaries in maps that are freely available in India.

If the government is really serious about putting an end to this long continuing issue, we say ban the perpetrators and take the maximum allowable action for such clear and deliberate misrepresentation. The Indian government doesn’t need to look far to understand which Indian act these agencies are violating. Well, that’s India’s Independence Act, passed on July 1, 1947, that defined the sovereign and indisputable boundaries of India!

Yes, India has had wars with Pakistan and China. And yes, we have won some and lost some, in the matter of speaking. Irrespective of that, India has never forsaken its sovereign – and one should mention perfectly legitimate – rights over territories that are illegally occupied by Pakistan and China. Ironically, the Pakistani Constitution even today doesn’t recognize the PoK as part of Pakistan while India symbolically has 25 assembly seats reserved in the J&K assembly representing PoK legislators. Expectably, these 25 seats have remained vacant for a long time. And with respect to our border dispute with China, even in 1954 when the then Indian Prime Minister Nehru clarified the distinct Indian border to China, the then Chinese Premier Zhou Enlai had emphatically stated that China had no claims over Indian controlled territory (although official Chinese maps even at that time showed 120,000 square kilometres of Indian territory as Chinese; later China claimed even the Aksai Chin range post the 1962 Sino-Indo war).

In other words, as per law, no map representing India should show the Indian boundaries any different from what is represented by the official Indian government map through the Survey of India (which shows the complete north-east areas and the state of J&K as parts of India, resulting in India even sharing a border with Afghanistan, at least on paper).

Apparently those rules don’t apply to NatGeo, even post the strictest of warnings by the Indian government. In January 2010, after NatGeo had aired a wrong Indian map in a programme covering population density of rhinos, the I&B Ministry passed an official covenant mentioning, “National Geographic Channel has violated Rule 6 (1)(h) of the Programme Code. Strict compliance to this direction has to be ensured by the National Geographic Channel. Any further violation may entail stringent action.” The July 2010 issue of National Geographic, in a story titled Pakistan’s Heartland Under Threat carries a map of India that clearly misrepresents Indian boundaries. The August 2010 National Geographic issue repeats the mistake, this time in a story called Grassland Kingdom, covering the Kaziranga National Park (see maps, previous page). Both these issues are being freely sold within Indian boundaries.


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