Friday, August 31, 2012

Mending legal loopholes can make India the pioneer of surrogacy tourism

Dr. Nayna Patel, who pioneered surrogacy in India, highlights the exhaustive procedure involved in allowing a woman to become a surrogate mother. “As giving birth is a very emotional thing in a woman’s life, we don’t permit every woman for surrogacy. The most important criterion is that she should be married with at least one child of her own. So, apart from having the experience of pregnancy, it would ensure that the surrogate mother easily relinquishes the child to the contracted parents,” said Dr. Patel.

“Women who approach me to become surrogate mothers belong to the lower strata of the society. We have a lot of NRIs who come in need of surrogate mothers. So, it’s almost like an exchange system – a womb in exchange for a large sum of money!” said Dr. Patel. A surrogate mother can earn about three lakh rupees. A gynecologist at Batra Hospital, Dr. Bela brought forth a striking aspect. “Surrogacy laws in India have many loopholes. I’ve seen a lot of problems occur with respect to money,” she mentioned.

While the legal experts sort out the rules of this new industry, a proposed bill prohibits contact between the surrogate mother and the child. Surrogacy tourism could be an invaluable cash resource for our economy. Creating a legal space for it might wash away the stigma attached to it too, making people realise the goodness of this deed.


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Thursday, August 30, 2012

How long will Yahoo! survive?

From misjudged partnerships to acquisitions of misfits, Yahoo! has done all to curdle its business model & jeopardise its future. Time is less & dollars are precious. Can Carol Bartz fight inevitability? by Steven P. Warner

Sixty-one year-old Carol Bartz, the CEO & President of Yahoo! Inc. is a Texas Tower. Hard to ignore, she has been an exemplar of success, personally & professionally. Having seen a tough childhood, she worked as a 75 cent/hr teller at a bank, played a cocktail waitress while at the University of Wisconsin, and was diagnosed with breast cancer on her 2nd day as the CEO at Autodesk Inc. Many had written her off, but she returned to office after just four weeks of medical leave. 14 years later, when Bartz left Autodesk, its revenues had grown by over 400% to $1.5 billion – incredible growth for a company that only focussed on 2-D and 3-D technological designs. Bartz had insisted on maintaining that “core focus” all along.

Her next job was to restore order in the house of Yahoo! (she was appointed as the its CEO in January 2009). Many called it Dutch courage. They were right. Today, Bartz rates her first year at the job a “B-minus”. But such mea culpa won’t help her cause. She needs to have an answer ready for investors who have an enigmatic poser for her – “What is Yahoo!?”

Vexatious is what you would call Yahoo!’s financials for the past two years. Even the last quarter was disappointing. On July 21, 2010, Yahoo! reported a stagnated quarterly topline growth. Its revenues for Q2, 2010, stood at $1.6 billion, 0% change y-o-y, a time when rivals like Google reported a 24% rise in topline. At a time when ad-spends had started increasing, Yahoo! had failed to suck dry the opportunities. But this was just a trailer. As per estimates by Oppenheimer & Co., Yahoo!’s annual revenues will fall y-o-y by 28.7% to touch $4.64 billion for FY2010. Spencer Wang, Analyst, Credit Suisse tells B&E from New York, “We believe the 2Q10 results highlight our longer term concerns surrounding the relevancy of portals & monetisation. Yahoo! attributed the revenue shortfall to a late quarter pullback in ad spending. We remain concerned about the potential for share losses in display to newer competitors. In addition, usage metrics remain on a down trend. This is worrisome and may suggest Yahoo! has not solved its relevancy issue .” True, Yahoo!’s page views record has worsened over time. It was down 4% in Q2, 2010, as compared to 0% in Q1, 2010, +2% in Q4, 2009 and +5% in Q3, 2009. Jordan Monahan, Analyst at Goldman Sachs in the US, adds to B&E, “Yahoo! may prove the canary in the media coal mine who first signals a slowdown. Other media companies have reported/cited no slowdown. We suspect that many advertisers view Yahoo! display as a more discretionary buy than online/offline mass media.”

Over the past few years, Yahoo! has lost direction. Bartz started with promises – slashing jobs by 5% (till date), closing down NPAs like its Personal dating and GeoCities sites, cutting Marketing and R&D costs (total opex for FY2009 fell by 23.3% y-o-y to $3.21 billion, a figure that is forecasted by Goldman Sachs to fall by 8.7% to $2.93 billion in FY2010). But even today, much remains undone.



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Wednesday, August 29, 2012

NOKIA: LEADERSHIP UNDER SIEGE

In a span of four years since Kallasvuo took over as CEO of Nokia, the company remains the overall mobile phone dominant market leader. But of late, the leading handset manufacturer finds its position growingly threatened by competitive trends. Clearly, a major transformation is in order, and the sooner the better. by Virat Bahri

Recession was a rude awakening for many. But the problems for Nokia actually began when the smartphone category caught the fancy of consumers in the high-end segment globally — a segment where Nokia has been unable to find its footing till date in front of competitors like Research In Motion and Apple. Smart phone sales grew at a brisk 48.7% to 54.3 million units for Q1 2010 (17.2% of total mobile terminal sales) according to Gartner. But interestingly, pure smart phone player RIM made a maiden entry into the top five. The company still dominates the low-end segment, but the margins there are very hard to get, as competitors are springing out from all nooks and corners (in India itself, Micromax has gained so much ground in no time, with other players like Karbonn, Lava, Spice, Onida, et al locked in internecine pricing battles). Morningstar analyst Joseph Beaulieu has increased the fair value uncertainty rating for Nokia to high from medium in June this year. “While its scale still gives Nokia considerable cost advantages, these have become less relevant as software expertise and the ability to create a viable developer ecosystem grow in importance,” Beaulieu says.

Alarmingly, Nokia’s operating system Symbian also continues to lose market share to rivals like Android and Iphone OS, with market share at 44.3% in Q1 2010, compared to 48.8% for Q1 2009. Nokia hopes that the Meego platform based on Linux (being developed with Intel) is expected to address their problems on the software front, but that will take some time. The Symbian^3 powered Nokia N8 will be the last N-Series device to use Symbian, though the OS will still feature in the mid-range. “Although Nokia’s mid-tier products sold well, Nokia lacks a high-volume driver in the high-end. MeeGo-based devices and other high-end products will not rejuvenate Nokia’s premium portfolio until the end of the third quarter of 2010 at the earliest, and Nokia will continue to feel pressure on its average selling price (ASP) from vendors such as HTC, RIM and Samsung,” says Carolina Milanesi, research vice-president, Gartner. Lower than expected ASP and competitive market has compelled Nokia to project a flat market share, but a slightly lower value share for 2010, compared to 2009.

In the current market situation, offense can only be the best defence. Even its worst critics would admit that Nokia’s cash situation remains quite healthy and it still has the market reach that competitors could kill for. The way forward is to be nimble, and for that the company management has recently divided operations into mobile solutions for high-end mobile computers and smartphones — mobile phones for feature rich mobile phones and markets — which will handle all go-to-market strategies. Moreover, Nokia is a leader under siege, and its best bet forward has to be leading the market trend rather than bucking it. Kallasvuo’s transformation strategy was on target, but it still has to clear the test of the market.


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Tuesday, August 28, 2012

“We are collectively working towards facilitating more financial inclusion”

Nipun Kaushal, Head – Marketing, ICICI Prudential AMC talks about the need to educate investors

After high-flying challenging careers at Future Group, Hero Honda, Maruti Udyog, Citifinancial, Nipun Kaushal feels religiously responsible at ICICI Prudential AMC in doling out his role of generating marketing strategies, customer acquisition and retention. In a candid conversation with B&E’s Mona Mehta, Kaushal discusses the past, present and the road ahead for MF industry in India.

How has the Indian mutual fund industry evolved over the last few years?
Today, as we see our country poised for taking a quantum leap towards progress, we realise that MF as a category can serve as a catalyst to trigger an individual’s progress. MFs are now seen as a way of bridging the need gap between the dominant desire to progress and how to make it a reality. The industry too is collectively working towards facilitating more financial inclusion with the support from channel partners and regulators alike. The category today has the most competitive and cost efficient structure in place, which we believe is extremely favourable for the final investor. MFs have been extremely transparent with high disclosure standards which help investors in their process of due diligence. This industry has thus become an intrinsic and essential part of financial inclusion which facilitates wealth creation and progress.

How is ICICI Prudential AMC planning to gain a competitive edge?
All AMCs are working collectively towards providing investors with the knowledge of the category and how long term investments in MFs will benefit them. Healthy competition because of increasing number of players will mean increased awareness of category and innovative product offerings for investors, all of which will help make India a more mature and progressive financial solution-providing destination. However, at the same time, I would also like to emphasise that only AMCs that are willing to commit long-term infrastructure, focus on investor interest and provide resource bandwidth will witness growth. As far as our competitive edge is concerned, it lies in our endeavour to introduce products that fulfill an existing need gap. We offer the investor a bouquet of funds to choose from. Depending on his specific need, the investor can take his pick from the array of products on offer.


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Monday, August 27, 2012

DEREGULATION POLICY: IRRATIONAL

The govt deregulates oil prices – and takes the most dangerous step in our economic history to become a disaster prone ‘oil-shock’ economy

Though open market systems are good for oil companies (particularly private players like Essar Oil and Reliance Petroleum, who are at a disadvantage w.r.t. public sector players), it brings volatility at the consumers’ end. Immediate lessons by India can be derived from the Chinese energy market, which is based on the principle of managed-market-based economy. Gasoline prices are strictly controlled. Even the prices of key energy resources like coal are not free for the markets to decide. The National Development and Reform Comission (NDRC) of China openly interferes with the petroleum prices. The last time NDRC revised the wholesale price was in November 10, 2009.

The reality is when oil prices increase, it increases the overall cost of the economy. Moreover, when prices of crude oil go up, it also directly or indirectly increases the cost of other commodities. India has a huge consumption of around 133.40 MT of crude oil. The main reason why India was less impacted by recent recession was the controlled crude oil price policy. Imagine over 400 million middle class Indians paying for petrol at a rate of over $100 per barrel. Even India had no control over oil prices till 1973, but it didn’t pay rich dividends. One would remember that a belligerent decision to deregulate petrol prices was taken in 2002 but the government had to revise its decision later. A good parallel can be drawn with our stock markets. Till the time Indian stock exchanges were independent and separated, they were stable; the moment they were opened to the foreign players, they became volatile and left the investors vulnerable. Increase oil prices for all you must, but deregulating oil prices is clearly not the need of the hour; not now, not in the next few years – the government should immediately reverse the decision.


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Saturday, August 25, 2012

THE B&E / IIPM THINK TANK INDIA ACQUISITION REPORT 2010

This study was undertaken purely to analyse the changes in market capitalization, revenues and net profits of Indian companies acquiring other Indian companies/foreign companies. The results went against all known research till date and were more eye opening than we could ever imagine... or you could!

We have to confess – despite the hype that we’ve created, the findings are pretty short (and you’ll find them if you rush to the end of this story). And you’ll obviously find all the comprehensive tables and statistical research on our website. What was painstaking was the calculation, authentication, validation, tabulation and factor analysis of the performance factors (share price movements, revenues, net profits) of 152 companies over seven years in this decade! During our expansive study, we immediately noticed two anomalies in even notable global researches. One was that a significant number of researchers failed to differentiate between the concept of ‘Mergers’ (when two or more companies ‘merge’ to form one single entity) and Acquisitions (when an ‘acquiring’ company buys significant equity stake in a ‘target’ company). The second anomaly was that we failed to notice relevant research reports coming up targeting Indian M&As. A few did, but these were more or less a handful considering that total Indian M&A spend during 2007 had reached $100 billion! (IndusInd Consultants’ estimates for 2007). Though the next year saw a fall in M&As, $41.2 billion – which was the total amount spent in 2008 by Indian companies in M&As – represented a rise of 47.5% over 2006! (Source: Grant Thornton Report, 2009). There were 766 M&A deals signed by Indian companies during 2008. Given that, we decided to undertake a comprehensive research that would analyse Indian acquirers (acquiring target firms; we deliberately did not consider mergers) in the past and provide details on success or failure conditions and parameters. The research was exhaustively statistical and the results, quite stunning (for better understanding, please read the first two paragraphs of the methodology section before proceeding ahead).

First, the part we did not cover; in other words, mergers. Mergers destroy shareholder value – no questions about them. Dr. Ulrike M. Malmendier, Stanford University & Prof. Geoffrey A. Tate, Wharton School of Business 2003 found that “The empirical results on returns to mergers… suggest that mergers may not create shareholder value…” An AT Kearney study in 2003 proved that “…few mergers actually create shareholder value…” Scott Christofferson, Robert McNish, Diane L. Sish McKinsey & Company, 2004 concluded that 70% of mergers failed ‘to achieve revenue synergies’. An Accenture report quoted that “most M&A transactions ultimately fail to create shareholder value… many destroy it!” Tom Herd, Arun K. Saksena & Terry W. Steger, Accenture, in another report, concluded similarly that “less than 30% of M&As actually create value that is noticeably higher than the industry average…” Dorian Swerdlow & Harrier Engel, of Booz Allen Hamilton supported this in their paper by concluding that “most mergers ‘will’ fail!” Danzon, Epstein, and Nicholson from National Bureau of Economic Research (M&A in the pharma and biotech industries, June 2004) proved that mergers, for small firms, are primarily “exit strategies for firms in distress.” In general, merged firms that merged had “slower growth in operating profit in the third year following a merger.” Thus, mergers may be a response to trouble, and not an effective solution for large firms, they concluded.


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Friday, August 24, 2012

A WAKE-UP CALL FOR THOSE WHO DISBELIEVED IN THE POWER OF EMPLOYEE ACTIVISM

JET AIRWAYS FIRED AND RE-HIRED THOUSANDS OF EMPLOYEES AFTER MUCH DRAMA IN LATE 2008. SO WAS THE INCIDENT A WAKE-UP CALL FOR THOSE WHO DISBELIEVED IN THE POWER OF EMPLOYEE ACTIVISM?

“Perhaps the Airline Management could have implemented significant salary cut across the company which could have solved the situation instead of shaking employee morale across the board,” says John Siddharth, Aerospace Analyst at Frost & Sullivan to B&E. Of those sacked, half were cabin crews. The rest were ground and maintenance staff, junior managers and fresh recruits. The common fact however was that they were all serving the six-months probation period.

Jet was faced with immense criticism and opposition by various organisations and political parties over the sacking. The fired employees took to the streets in Mumbai, Delhi and Chennai, by holding dharnas and demos. However in Mumbai, Maharashtra Navnirman Sena (MNS) chief Raj Thackeray did its bit to rescue the axed employees. “When I returned after my round flight on Wednesday (October 16, 2010), I saw many of the sacked employees demonstrating at terminal 1B of the New Delhi airport,” recalls Neha. The aggrieved employees attacked the booking counters at the three airports – Mumbai, Delhi and Chennai, and discouraged passengers from buying air tickets. “Employee Activism should have been taken seriously by Jet. The complete stir only earned the company a dent on its reputation,” adds John. Jet, for the past two financial years had been in the red. It made Rs.6.54 billion in losses during FY2007-08 and was headed towards a bigger disappointment in that period. The layoffs were a means to curb the rising operational cost, which had even exceeded the total inflows for the past two years. It didn’t work, rather, it backfired making the case for what we call ‘firing mismanagement’. Those who were sacked, were let go without a reason, and even their guarantee money (Rs.55,000 payable after three years of joining) wasn’t returned. The manner in which the management executed the process forced Naresh Goyal, the Jet Airways chief, to made a public apology, taking vows of his late mother. The fired employees (in New Delhi) were invited to the Park Inn Hotel, where Goyal spoke to them confirming “no knowledge” of the action and reinstated them to their posts. “The employees were called individually and were handed over a letter of apology each,” confirms an employee who had faced Jet’s sniper squad. If employee activism works, this one did.

But what followed was expected. Most of the reinstated employees were confirmed sans a confirmation letter, and during the months that followed were either retained at lesses costs to the company or were fired in small numbers, just enough to avoid a media backlash all over again. Dubey of IndiGo recalls, “Some of my friends at Jet were demoted to ground duty with a much reduced salary and they replaced the ground duty staff.” Even one of Neha’s firends who is currently with Oman Aitways, was then amongst those fired. She was taken back in, allowed to work for about six months more, got confirmed, but was then fired again.

Finally, the Jet management got its wish. But this episode of employee activism teaches CEOs what a firing mistake is and what lessons employee activism can teach the management. Jet’s management learnt it well. So they say, “Mismanage firing, and they’ll come at you – the employees!”


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Thursday, August 23, 2012

She did it again!

Once a teen sensation, Britney Spears is now the latest Twitter sensation! The pop princess overtook actor Ashton Kutcher just last week, and has now left Hollywood super stars way behind with a mind-blowing following of five million people on the social networking site. Not too long ago chastised by many for being irresponsible and an absolute wreck, the 28-year-old has slowly but surely regained control of her life and is now definitely back at the top of this Circus!


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Wednesday, August 22, 2012

PRAFULLA GHADAI

Orissa’s Finance Minister talks to B&E’s Subrat Swain about how private investments will help orissa grow

B&E: We have seen a lot of MoUs being signed between large business houses and the State government over the last 10 years. But for some reasons, most of the projects have failed to materialise. How do you plan to tackle this issue?
PG: The global recession has a bearing on the investment decisions of the large business houses, within or without the State. But with signs of recovery in the global economy in sight, it is expected that the projects would take off very soon. And signs of that happening can already be seen. So far, out of 49 companies which signed MoUs with the State government, 29 mineral-based companies have already started production.

B&E: What are the concerns of the prospective investors?
PG: The State government is conscious about the concerns of the investors and has put in place a single-window clearance system. A land bank is also proposed for faster implementation of greenfield projects. We also have the best Ressetlement & Rehabilitation policy in India.

B&E: What are the pro-growth plans that the State has implemented?
PG: We are laying emphasis on capital investment in both communication infrastructure and irrigation. That should work the magic.

B&E: What is your single largest achievement in terms of providing employment for youth in Orissa?
PG: Our skilled workforce now have employment opportunities within Orissa in the new greenfield ventures and so the educated youth are not forced to go outside the State in search of jobs.




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