IIPM ARTICLE BROADCAST: March 2013

Thursday, March 28, 2013

“Sometimes, we Wonder why We are in The Airline Business at all!”

Operating costs have always been The Biggest Hurdle to Profit-Making for Domestic Airlines. It was no Different with Jet Airways. Sudheer Raghavan, CCO, Jet Airways, talks about how Jet Worked to return to Profitability since FY2007-08, and on The Most Recent Taxation Policy Recommendations by The Government.

Life in the domestic airline business has been characterised by pain. Since the start of FY2006-07, airlines in India have been caught in a dust-storm of ever rising fuel and operational costs, unfriendly taxation policies, crippled infrastructure, negative earnings, high debt and pricing issues. Although matters have improved over time, during the past five financial years, airlines in the country have burnt money to the tune of $4-4.5 billion. Even the once very profitable and India’s largest private carrier Jet Airways scampered around for the past three years with its tail on fire. No more. Good news is – compared to any time during the past five years, Jet’s P&L account looks healthier today, with net profits for the first nine months of FY2010-11 – amounting to Rs.13.42 billion (having recorded Rs.20.36 billion in negative bottomlines since FY2007-08). Even its balance sheet will appear prettier starting FY2010-11 – with the company set to reduce Rs.10 billion of debt each year, starting 2011, which will reduce its debt load from the peak of Rs.130 billion that it has accumulated so far. And much of this turnaround story has been scripted since Singapore-born Sudheer Raghavan stepped on-board Jet Airways in September 2007, as its EVP – Commercial. Today, Raghavan, leads Jet’s commercial activities as its CCO and handles everything from commercial strategy-making to cargo handling, e-commerce, marketing & customer services. Who better than him to quiz on the cost-cutting strategies that Jet undertook to become a leaner, more logical flying machine, and the policy headaches that still stare at the airline.

B&E: IATA agrees that multiple taxes and others levies have already been killing the profitability of airlines in India for a long time now. And at present, thanks to Union Budget 2011-12, we have the newly proposed hike in Service Tax. Will the airlines pass it all on to the passengers?
Sudheer Raghavan (SG): The hike in Service Tax will directly impact the profitability of the airlines. So, in this regard, we are left with little option but to allow the price of the ticket to reflect the impact. All the burden will have to be borne by the consumers, as the airlines – whose balance sheets are already over-stretched – are completely helpless. Even the stocks of listed airlines dipped after the budget increased the Service Tax on air travel by 2% from the present 10%. The industry needs relief, and not additional taxes.

B&E: So, do such multiple taxes put your airline in serious financial dire straits?
SG: Yes. Not just Jet Airways’ but the entire sector’s future is questioned. We already have so many taxes; and by imposing more of them, the policy makers are shackling us. We are in the industry that is affected by everything – weather, volcano and many more natural calamities. And to add to those, now, our policy makers are increasing and adding new taxes. Sometime, we wonder why we are in the airline business at all! With costs and taxes rising, prices will rise, and demand will fall – how are we to become a healthy sector then? And all that while on one hand, after some tough years, we are trying to get more efficient and recover costs. Why labour the airlines with this massive tax? The policymakers have to understand our situation.

Read more...

Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)

Monday, March 25, 2013

“Europe was not Worth The Hard Work we Put In!”

Natalya Kaspersky, Chairman & Co-Founder of Kaspersky Labs and Infowatch, The Leading Anti-Virus and Data loss Protection Software group in the European and Chinese market Expresses her concerns over the Global it Security market, and The Past and Present of her Group Companies, to B&E’s.

B&E: Of late, much is being discussed about the market for technologies that will help control corporate information flow and protect IPRs. Do you have a positive feeling about this growth?
Natalya Kaspersky (NK): Yes, absolutely. The current market trend tells us that data protection is increasingly becoming the prime concern for any firm, due to the rapidly growing amount of data. Problem is, this growth is happening in an unstructured manner. So, you end up losing valuable information. WikiLeaks is an example. The solution to this problem is to curb leakage of intellectual property. And to achieve the same, the first thing to be done is to put in a lot of effort to first recognise what exactly you want protected.

B&E: You are also the CEO of InfoWatch, a company whose goal is to deal with information leakage and where you hold a controlling stake. In October 2010, the company launched a new software called “Infowatch Traffic Monitor Autolinguist”. What is so new about the product?
NK: Actually, Autolinguist is not a very new product, but it effectively helps to categorise and protect vital information.

B&E: Your company has also been active in the Middle East markets of late. How has the response been so far?
NK: Middle East has reacted positively. We started targeting the Middle East markets effectively, only last autumn, and therefore it is too early to speak of results. Also, we need to understand here that the business of data leakage prevention is rather a cyclical one, because people first want to try the offering. This usually takes 3-4 months. Then comes the issue of payments. Companies take some time to finalise contracts because usually, the deal sizes are well in excess of $100,000, a sum which many are not comfortable parting with. So, they end up deciding to buy only the limited editions. But having said that, the fact that we do have ongoing projects in the Middle-East, is already a great beginning.

B&E: You are the #1 anti-virus brand in Europe. To understand that you achieved it in just three years, speaks volumes about how smooth your growth in that region has been. Has your growth across all product categories been this easy in Europe?
NK: Actually, I would not give a thumbs up to our journey in Europe being an easy one. Bringing about changes in mindsets in Europe is not an easy task. In Europe, there are different regulations in different countries. So, our basic assumption that all nations in EU would react similarly to our plans and offerings was wrong. There, local laws dominate decision-making and this differs from country to country.

Read more......

Monday, March 18, 2013

B&E Presents India’s Fastest Growing Companies 2010

For many years people carped that Dhirubhai Ambani was less of an entrepreneur and more of a manager who ‘managed’ the environment to make RIL a success story. But the fact is that RIL grew and grew faster to virtually leave behind all venerable old business houses in the country in a jiffy and at the same time won the hearts of many, who invested their hard earned pennies in the company. And that is the truth.

Call it ‘irrational exuberance’ or simply greed, every investor at the market place, at all times, stays on a hunt to pin himself up to a new bee that promises to deliver some real quick honey. And that’s where the league of the fast and the furious prove there hegemony. They may not be necessarily big, but with their uncanny ability to fly as the phoenix, they become the darlings of the investors. So, if Benjamin Franklin believed, “Without continual growth and progress, such words as improvement, achievement, and success have no meaning”, for an ordinary market man, continual growth without the ability to outperform others does not deserve an action called ‘investment’. And this finally made us look for the bunch that drove investors crazy this year on basis of their fast track growth.

After considerable brainstorming and some number crunching (alright, we admit it: after a lot of number crunching and soul searching!), the editorial team at Business & Economy decided to seal this issue with a KISS! Before you get us wrong, our kiss harks back to that old cliché that says, Keep It Simple, Stupid! In this age of information overload and overdose, people often tend to forget that simplicity and brevity can never be matched by jargon and mumbo jumbo when it comes to explaining things. And the final pristine fact is that truly, there can be no other factor more important than the topline growth of a firm... across industries, across geographies. But then, growth can be deceiving as well owing to the base effect. So, while keeping our research confined to BSE 500 companies, and considering the growth in revenue between FY2009 and FY2010, B&E presents India’s 100 Fastest Growing Companies both in terms of relative growth (year-on-year) and absolute growth (additional revenue generated).

Read more....

Tuesday, March 12, 2013

CANON INDIA: RETAIL LAUNCH

Two years ago, We Criticised Canon for Belligerently Focusing on R&D Investments and Innovation when the Market didn’t seem to have a taste for it. Two years thence, We realise that Canon India’s CEO Kensaku Konishi somehow has managed to pull it off, Despite all Criticism. How? This one’s just to Answer That Question!

And the standard army plan seems to be working with Canon being on the receiving end of much optimism in some categories. In laser printers, their market share has jumped from 3-4% in 2006 to 35-36% (laser printing as well as laser multi-function category) by end 2009. In the camera space, the company recorded a market share of 16% in the point-and-shoot category and 32% in the digital SLR category in the April-June quarter this year in terms of unit shipments (IDC). In the digital SLR category, Canon is in a virtual duopoly with Nikon, which had a market share of 52% for the quarter. The copier segment is another space where Canon has been making stellar gains, with market share increasing to 25% from 23% last year. However, there have been reversals as well for Konishi. In the digital camera space Canon has in fact fallen behind both Sony and Nikon, for it was the leader in the digital camera category in September 2007 with 24% market share according to IDC. Similarly, Canon has also been unable to make much headway in the inkjet printing space (market share at around 13.4% for quarter ending June), and would like to make more major gains in that area.

These aren’t the moot issues at the moment for Konishi, though. It’s a market at the early stages of growth, and market positions may get exchanged several times till there is a relative equilibrium at maturity. What matters is the position that Konishi can build for Canon in this period, in the physical space as well as in the consumer’s mind. Growth rates are strong in both its key camera and printer divisions – the former led by rising aspirations and disposable incomes of Indian families and the latter getting a boost from the rapid rise in PC penetration in India. In the quarter ending June 2010, point and shoot and digital SLR sales have grown by 17% and 69% respectively y-o-y.

Read more.....

Monday, March 11, 2013

INTO MY DRAWING ROOM... AND NO MORE?

The appearance of mobile phones into our lives has started to blur the lines between what is private and what is public at an alarming rate

Just for an example look at what youngsters are doing on Facebook. I am assuming that most people who are on Facebook are attitudinally young. It has become a complete ecosystem where the youngsters do far more than just status updates. From events to places visited to playing games to endless chatting, youngsters keep finding newer ways of interacting and connecting.

If that was all, then it should not have been an issue. The real issue is the amount of private moments, desires and emotions that are posted on online spaces for the whole world to see. There is no dearth of moments people are posting: honeymoon pictures (always private), private parties (not open to all), and even family reunions (is everyone on one’s friends list interested?)

So how is this blurring of public private space going to affect the world of branding? And why should the world of branding be even interested? Well there is are two issues credibility and authenticity that we will have to battle.

Social media has always been seen as a more influential medium than conventional communication channels. Opinions and conversations posted on Social Networking sites are more trusted and valued. I am not sure in coming days this will remain as sacrosanct as it is portrayed today. Will you trust the comments from a group of ‘friends’ who in your opinion have been more open than others?

The second issue is of authenticity. Brands always want to build authenticity in their DNA. Part of building authenticity involves keeping things private, hidden, secret. Will this new all baring, all sharing audience respect this attitude from brands? Will the brands be eventually forced to abolish the line between private and public that they have held sacred become a liability? As always, maybe the emerging reality will lie somewhere in between!

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2010.

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

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM B-School Detail
IIPM makes business education truly global
IIPM’s Management Consulting Arm - Planman Consulting
Arindam Chaudhuri (IIPM Dean) – ‘Every human being is a diamond’
Arindam Chaudhuri – Everything is not in our hands
Planman Technologies – IT Solutions at your finger tips
Planman Consulting
Arindam Chaudhuri's Portfolio - he is at his candid best by Society Magazine

IIPM ranked No 1 B-School in India
domain-b.com : IIPM ranked ahead of IIMs
IIPM: Management Education India
Prof. Rajita Chaudhuri's Website

Unleashing the Green Potential

United Nations Environment Programme (UNEP) has stated that “No Other Sector has such a High Potential for Drastic Emission Reductions then the Building Sector”. India can be a Major Contributor to it if its Green Building Revolution picks up but for that, Government Policy and Private Sector must work in sync.

The oldest existing and still followed definition of a green building is that given by the Office of the Federal Environmental Executive in US as “the practice of 1) increasing the efficiency with which buildings and their sites use energy, water, and materials, and 2) reducing building impacts of human health and the environment, through better siting, design, construction, operation, maintenance, and removal throughout the complete life cycle.” The genesis of the green building concept might appear to be a consequence of the evolution of the 1990s global warming paradigm, green buildings existed much earlier. London’s Crystal Palace and Milan’s Galleria Vittorio Emanuele II, both built in the nineteenth used roof ventilators and underground aircooling chambers to regulate indoor air temperature. However, it was the OPEC oil embargo in 1973 that proved to be the first catalyst. With gas lines stretching for blocks, few American experts started to question the complete reliance on fossil fuels and thus began serious level researches into energy efficient buildings. Today, with climate change and energy security at the forefront of global negotiations, developing countries like India are fast hopping onto the bandwagon. But, a lot needs to be achieved by government to unleash the potential of the sector and make a huge impact in securing India's energy future.

Currently, buildings globally use 32 per cent of the world's resources in construction. They are responsible for around 40 per cent of global energy use and generate up to 30 per cent of global Green House Gas (GHG) emissions. The United Nations Environment Programme (UNEP) has stated that “no other sector has such a high potential for drastic emission reductions” than the building sector, and the Intergovernmental Panel on Climate Change (IPCC) has identified that buildings offer some of the most cost effective and expedient ways to reduce GHG emissions. Recognizing that energy use and air pollution are intertwined with India's sustainable development, the NDA government enacted the Energy Conservation Act, 2001 (ECA 2001) which promotes energy efficiency and conservation domestically. The Act mandated the creation of the Bureau of Energy Efficiency (BEE), imparting it the authority to establish an Energy Conservation Building Code (ECBC). BEE issued the first ever National Building Code of India (NBC) in 2005, but the issues of energy efficiency were marginally addressed in it. However, in 2007, the Ministry of Power together with BEE issued ECBC —the first stand alone national building energy code in India. Though it currently stands as voluntary, ECBC establishes comprehensive minimum energy efficiency requirements for building envelope, lighting, HVAC and electrical system installed in buildings.

Read more......

Thursday, March 07, 2013

Rajiv B. Lall

Managing Director and CEO, IDFC, Defends his Strategies to B&E’s

Started in 1997 to help finance the country’s infrastructure development, Infrastructure Development Finance Company Limited (IDFC) is now India’s leading integrated infrastructure finance corporation. This year, it was also post-haste awarded the status of an NBFC. And now, the company has made its growth intentions clear by putting forward an ambitious plan to raise Rs.34 billion via infrastructure bonds during the current fiscal. CEO Rajiv B. Lall speaks to B&E’s:

B&E: You obtained the status of an NBFC in June this year. How has life changed for IDFC after that?
Rajiv B. Lall (RBL): The best part of it is that as an NBFC, we are now allowed to raise funds from both public and overseas. And thus, we are planning to raise around Rs.30 billion in the near future. This will also minimise our risk of liability management.

B&E: Your bond offering, which ended on October 22, came at a time when Sensex was at a 2-year high and the primary market was gaining ground. What was the rationale behind issuing a debt instrument at a time when equity was on a high?
RBL: Our bonds are almost risk free as the government itself is the largest shareholder in the company. At the same time, the returns offered by us are also higher. It now depends on the investors to see whether they want to invest in this or not. But before that, investors must look into a few facts like our NPAs and PAT growth rate et al. Currently, at 0.15% we have one of the lowest NPA rates among the finance companies and our bottom-line has grown at a CAGR of 28% over the past 5 years. Also, IDFC’s post tax return on assets stands at 3.5% and I am certain that we will be able to sustain such profitability in the future.

B&E: Do you think the rate of interest that you are offering to your bond investors are lucrative enough to generate a warm response?
RBL: Certainly. The rate that is offered by us is very competitive. We are offering an interest of 8% in two schemes, while the rate of interest is 7.5% in two other schemes. That too at a time when we have a AAA rating on our bonds, which many do not get in this country. This rating implies that our bonds are safe investments and with this interest rate, I think, we are definitely competitive.

B&E: Still, what is the guarantee for these bonds?
RBL: Cash flow of the company is the underlying security for our bonds. However, debt servicing not only depends on the cash flow, but also on leveraging of the balance sheet. And we are one of the most under leveraged companies. That is the reason why we are AAA rated. Also, you can have a look at our 13-year track record in terms of management, capital structure and growth trajectory. They all account for support of the bond.

Read more.....

Wednesday, March 06, 2013

DOMESTIC AIRPORTS: R-ADAG

One year back, Reliance ADPL came out victorious on its new turf of airports development by winning the bid to develop 5 airports in Maharashtra. B&E meets Reliance’s top executives to get the mid term progress report by Swati Sharma

The company has also hired a team of experts from New York based consultants Louis Berger Group and Knight Frank that will be laying the future road map for the development of airports with the investment reaching beyond `5 billion already in line for the next three years. “Modern regional airports will boost tourism, stimulate the aviation industry and create business opportunities for us and we believe that they will catch up soon in times to come,” Ravi Radhakrishnan, Business Development Manager at RADPL tells B&E. RADPL is now bidding for the new international airports in Navi Mumbai, Pune, Noida and Goa with the projects pegged at `240 billion, apart from non-metro airports in Gujarat and Andhra Pradesh.

But there are a few critical challenges: some financial, and some because of the external environment. Currently, the returns on investment have not been high from the five airports owing to overall low traffic (of passengers; and consecutively, airlines) and as a result, other sources of revenue like food and beverages are also not very lucrative. The issue of demand, which RADPL seems to have analysed, still has some blank spots. Some are quite straightforward. For example, Baramati as a regional airport is targeting Mumbai and Pune clientele. However, Baramati is just a 2.5 hours ride from Pune, putting a substitute road travel option a big competitor to airlines operating Pune-Baramati flights, therefore ensuring that such airlines operate lesser flights.

Vidya Basarkod (CEO, RADPL) comments to B&E, “The challenges in development of smaller airports also include limited traffic and the high cost of mandatory infrastructure & security and limited sources of aeronautical & non-aeronautical revenue.” The government, though, has (or rather, had) attempted to be proactive. The government had granted waiver for landing and parking charges to aircrafts with less than 80 seats operated by domestic scheduled operators and helicopters of all types. The government apparently did this to ensure encouragement of smaller aircraft operations to regional airports. But strangely, there was no obvious connection of this made with regional airports, as the small aircraft operating airlines simply chose the metropolitan or ‘trunk’ routes over regional destinations. Now, AAI is demanding that this waiver policy be revoked, as it didn’t serve the original intent of motivating traffic to regional airports.

Read more.....

Tuesday, March 05, 2013

The Bald Eagle and the Arabian Mirage

As America shapes its Iranian discourse on the flawed logic of Arab’s Persian mistrust, Tehran has the last laugh on the Arab streets, says Saurabh Kumar Shahi

Peter the Great, the Tsar of Russia, used to take on Sweden quite frequently, during the days of latter’s dominion in Scandinavia, and used to get thrashed every now and then. During one of those hundreds of defeats, he is purported to have said to his gloomy general, “Be not concerned! Eventually the Swedes are going to teach us how to fight.” And that is what happened. Peter managed to stop the Swedes’ Eastward march by learning the tricks of the trade from the Swedes themselves.

The 2010 Arab Public Opinion Poll by Zogby International and Maryland University says the same about Iran. After being whacked by the US all these years in propaganda warfare, the Iranians seem to have learnt the tricks and have successfully applied them on the US itself.

This magazine for quite a long time has maintained that the policy debates and discourses about Iran in the US are warped by a number of “myths” and “misinformation”. This misinformation mainly concerns the functioning of the regime, its domestic and foreign policies, its outreach and its power – both hard and soft. Among these scores of misinformation, the most significant one that has been driving the Tehran discourse in Washington is through strenuous diplomatic exploit, the US can isolate the Islamic Republic of Iran, both regionally and globally. And how do Americans believe that they can achieve this? The entire gameplan to isolate Iran in the Gulf is based on a proposition that since Iran has a deep-rooted Persian identity and that it adheres to Shiite Islam unlike many of the countries in the region, it will always be viewed with mistrust, if not outright resentment, by West Asia’s mostly Sunni Arab populace. The poll suggests that these assumptions are just that – assumptions. Not only is this unchallenged but is, in fact, diametrically opposite to what Arab street thinks.

The Iranian discourse was propelled by the proposition that this supposed mistrust and antagonism against Iran in the region can be played up to convince Arabs that a nuclear-armed Iran is more dangerous than the obviously nuclear-armed Israel.

“The suggestion that the US has a staid and tactically dynamic alternative to isolate Iran in its region is, evidently, not new – it is mirrored in efforts by the Clinton, Bush, and Obama administrations to build a regional federation to ‘contain’ Iran, encompassing ‘moderate’ Sunni Arab nations along with Israel. But this conception has gained a larger toehold of late, beside claims of ‘rumblings’ that fresh sanctions have started to kindle domestic political strain on the Iranian regime,” says Jim Lobe, a Washington-based Iran analyst.

Shibley Telhami released the results of his 2010 Arab Public Opinion Poll, conducted annually with Zogby International. One must also keep in mind that Telhami holds the Anwar Sadat Chair at the University of Maryland and is a non-resident fellow at the Saban Centre for Middle East Policy at the Brookings Institution. So it is very clear that he can be anything but a “pro-Iranian” voice.

Read more.....

Saturday, March 02, 2013

Nippon’s vision 2015 and its overseas expansion

Satobumi Taguchi, Deputy General Manager (Paper Trade Dept.), Overseas Division, Nippon Paper Group, Japan, talks to B&E’s Gyanendra Kumar Kashyap & Ashutosh Harbola about Nippon’s vision 2015 and its overseas expansion.

B&E: Digital process outsourcing are digital in nature. Don’t you feel such processes are a threat to the paper and pulp industry?
(ST): The use of such process is increasing among the business fraternity. But you need a leaf of paper as a proof of any document and that’s where you take a print for the same. Globally, numbers show a rise in the consumption of paper, even when there are CD-ROM and hard disc. So, I won’t consider it as a possible threat.

B&E: You were mulling to buy an Australian firm. Has the deal been materialised?
(ST): Australia has a commercial publishing market with sustainable growth and low domestic productiom ratio. We have acquired the firm (Paper Australia from PaperlinX) for $459.98 million. While the completion of the deal provides us an opportunity to expand our business into Australia, we will certainly plan to leverage from the deal to create a global presence.

B&E: You import 9% of soft wood and 60% of hard wood from different countries and a big chunk comes from Australia. Don’t you think Nippon is too much relying on Australia?
(ST): As far as Nippon is concerned, about 14% of the total supplies were met from our own plant. Furhter, I feel there is no such relation of dependence on any specific country. Buying is a different factor, but due to our presence in different categories like pulp manufacturing, paper mills etc, we have a wider pool to choose from. Australia is a big supplier and we have great relations with that country. Also, the deepening relationship with PaperlinX will contribute to our overseas expansion in the near future.

B&E: The demand of pulp supply is shifting from North America and Europe to Asia. Don’t you think China is coming up as a big competitor?
(ST): So far as the Asian market is concerned, we export to Singapore and other Asian countries. This is a part of our strategy and precisely a weak-link as far as China is concerned.

B&E: Of late, prices of soft wood and hard wood have risen to $1,000 and $850 per tonne respectively. Don’t you think these high purchasing cost is affecting your profit margins?
(ST): It’s not the soft wood or hard wood, prices of other raw materials and shipping costs have also risen significantly. Be it fuel or anything. But, what gives us an advantage is that we are not only in papers, but also into manufacturing pulp. That’s why our profit margins are not that affected.

B&E: The paper and pulp industry can get into bio-fuels that could solve a lot of power needs and even economical also. Your comments?
(ST): I think this is the next big thing a paper and pulp industry should get into. In fact, more and more renewable energy sources can be created and as our responsibility to the nature, we also need to pay attention to that point.

Read more.....