THE TALE OF TWO 'CITI'ES...

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If the whopping $10.42 billion losses for the nine months ending September 30, 2008 were not enough, Citigroup has once again reported a net loss of $8.29 billion for the fourth quarter of 2008 – its fifth-straight quarterly deficit in a row. Revenues at $5.6 billion are heavily affected by write-downs and losses in securities and banking. This also includes $6.1 billion in net credit losses, which surely means that Citigroup is actually moving on similar lines to meet the fates of many (like Lehman Brothers and Merrill Lynch) who have already fallen flat in their bouts against subprime devil. In fact, today Citigroup is one of the biggest unsecured creditors with a sickeningly shocking $138 billion (an unbelievable 23% of Lehman’s gross outstanding debt of $613 billion) unsecured exposure to the Lehman collapse! Even for the full year 2008, Citigroup has reported a net loss of $18.72 billion against a net profit of $3.62 billion in 2007. Moreover, Citigroup’s share that has plunged over 77% last year on the US bourses (more than 43% in the year through the day of announcement of split), which points out to a further deteriorating situation.

Considering this, the possibility of a revival of this financial conglomerate appears somewhat bleak. Even if the restructuring process ends up without any problems, where the heck on earth will Pandit find a buyer for these limping assets of Citi Holdings amid the dismal state of economies where the loan losses will only worsen. However, on a positive note, instead of attempting to cut costs by not only throwing out employees but interestingly by controlling colour copying, printing, et al (which Pandit tried a few months back), the group has seriously taken up some restructuring plan which if successful can really be a ray of hope for the dying Citigroup.

Meanwhile, the group has also named former Time Warner CEO Richard Parsons (who ran Time Warner from 2002 to 2007) to head its board of directors, replacing Chairman Win Bischoff. But how different will he be from his predecessors is still a big mystery! Moreover, we shouldn’t forget that he was the one who saw the brilliant supernova merger between Time and AOL. Brilliant because the post merger entity which had a combined value of $247 billion at the time of merger in 2000-01, is worth a mind numbingly low $58 billion today. But Parsons may be valuable to Citi for at least one reason: his proximity to US President Barack Obama (he was one of 17 members of Obama’s Transition Economic Advisory Board). Interestinly, Treasury had become one of Citigroup’s biggest investors last year when it acquired $52 billion of preferred shares in the group under the Troubled Asset Relief Program. However, it’s still unclear what the relationship will be between the Treasury and Citi.

So, under such circumstances the best-case scenario for the Citigroup will be a orderly managed sale process of its assets under Citi Holdings (if in case it finds any suitor). Else we can only hope that Pandit does not have to face the situation that former Citi CEO John Reed faced recently. Reed, who engineered the Travelers deal with another former Citi CEO Sandy Weill in 1998, had confessed to the Financial Times in April 2008, “The specific merger transaction clearly has to be seen as a mistake,” and he was unclear whether the company’s model or management deserved the greater share of blame for its problem. God forbid, if in case Pandit has to face such a situation, he might be equally clueless in the blame game that follows!

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Source : IIPM Editorial, 2009

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

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While the biggies were biting dust...

IIPM set to beat economic slowdown

While the biggies were biting dust, fighting against all odds the ‘defensive stocks’ managed to create wealth for their shareholders, says Gyanendra Kashyap

Lord Byron, English poet and satirist remarked, “Adversity is the first path to truth”. True to his words, the adversities of the stock market in 2008 in a way challenged almost every myth present at the market place. And now, the investor fraternity in retrospect would rather prefer to forget the ‘heroics of the bear’ in 2008. It is true that with the collapse of the stock market, asset prices and commodities an unprecedented fear psychosis gripped the minds of the investors; yet despite all these adversities the truth is ‘2008 was actually not that bad as has been painted!’ Sherman Chan, Economist, Moody’s Economy.com, justifies, “India’s economic performance remained surprisingly solid in the first three quarters of 2008 due to robust domestic demand. GDP climbed 7.6% year on year in the September quarter; an enviable outcome compared with neighboring economies, many of which have entered recession or at least experienced a significant slowdown.”

If the stock market (Sensex) is considered as the only economic parameter which decides the fate of the economy (and foreign investment) then the performances of HUL, Godrej Consumer, Glaxosmithkline Pharmaceuticals, Zandu Pharmaceuticals and Hero Honda which have respectively delivered returns to the tune of 14.7%, 20.6%, 10.9% , 7% and 15.3% are worth considering. Don’t just go by the numbers if you consider that they are smaller, because numbers are often deceptive, understand the contextual essence. The stellar performances have come at a time when the stock markets were held hostage to possibly one of the worst crisis in recent times with foreign institutional investors pulling out more than Rs.530 billion and the benchmark Sensex crashing by a whopping 51.2%.

In a so called bear market when wary investors play defensive, the fast moving consumer goods (FMCG) stocks and pharma stocks have outperformed the benchmark index to emerge as the best performers. An analysis by Centre for Monitoring Indian Economy (CMIE) brings forth the point that in 2008 out of the 20 top performers 7 belonged to the FMCG sector. Despite the inherent weakness and competition in the market, their calculated strategy of pushing volumes and price increase seems to have paid off. In the present scenario HUL is amongst the few stocks that have managed to evade value erosion; as a matter of fact the market capitalisation of HUL on December 31, 2008 was pegged at Rs.276.45 billion as against Rs.239.17 billion on January 1, 2008. Though the absolute increase in market capitalisation may seem marginal (Rs.37.28 billion), considering the fact that behemoths like Reliance Industries, Wipro, Grasim Industries, DLF and Reliance Infra have eroded wealth to the tune of 53.2%, 54.6%, 67.6%, 73.6% and 74.53%; 15.56%; wealth apprehension definitely calls for a round of applause.

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Source : IIPM Editorial, 2009

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

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1500-plus IIPM students placed across the country with 44 bagging international offers
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A ‘Color’ful clutter buster

1500-plus IIPM students placed across the country with 44 bagging international offers

With Akshay ‘Khiladi’ Kumar, agreeing to host the desi version of Fear Factor Extreme with thirteen damsels, there was no way that Indian audiences could resist keeping their eyes off it! Khatron Ke Khiladi along with other differentiated content like Jai Shri Krishna and Balika Vadhu marked the entry of Viacom’s new GEC – Colors. The Indian audience, which just about had enough of kitchen politics, song & dance-based reality shows and were fed up with the laughter challenges of the world, welcomed this fresh wave of content that this channel offered. Colors instantly bagged the number three spot in the GEC race and is still going strong (last few weeks, it’s at No.2). With new serials like Dancing Queens up its alley, this one plans to continue its upward stride. But fame is fickle. Stalwarts Zee and Sony will not sit idle for long...

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Source : IIPM Editorial, 2008

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

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Real world is not the place that an online player like Info Edge would want to be in at the moment...

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But this ‘virtual entity’ isn’t without its share of recessionary headaches either, writes Neha Sariaya...

What does the term ‘garage’ got to do with every successful entrepreneurship venture? Internationally of course, you’d have heard of names galore who made their mark in their home garage, but in India? Well, wonderfully, here too, the situation is no different! You’ll get the drift of our argument when you finish this paragraph... When you are born to succeed as an entrepreneur, you learn a thousand ways to achieve your ends, or rather start your golden journey. And Sanjeev Bikhchandani, MD and CEO, Info Edge (India) Ltd. certainly had a few of those tricks up his sleeves. And what degree of solidarity in vision are we talking about? When dotcom startups fell all around like nine pins during the turn of the millenium, Sanjeev’s virtual brainchild held its spot tight, and grew with every passing year. Of course there were the hiccups, but fighting his way to make the most of opportunities was much that he learnt having started operations in the servant quarter above his garage paying Rs.800 as monthly rent in 1990 (Hey! Wait! Did you miss that one? He started operations in the servant quarter above his ‘garage’!)

It is 2008, and his once small dotcom startup can boast of current assets of Rs.646.6 million (as on March 31, 2008). So what was the first to-market mode that the company followed? “We used to take job ads and make direct calls to our clients just like direct selling of a product. It was then a small company with a few people working for it. After we took funding the first thing we did was to move to a new office and started off different teams for different functions like marketing, technology etc,” reminisces Hitesh Oberoi, Whole time Director & Chief Operating Officer, Info Edge. As far as expansion to frontiers beyond was concerned, Oberoi adds, “We expanded to other cities beyond Delhi, and also enhanced our offerings and changed our prices.” Today, when you measure the brand awareness quotient of the company’s first online portal, naukri.com, to the blooming of many others under its umbrella such as Jeevansaathi.com, 99acres.com, Quadrangle.com, Brijj.com and the latest being Shiksha.com, one can safely conclude that it has been quite a journey. Even Ankit Kedia, Analyst, Centrum Broking, agreeingly voices out, “They enjoy the first mover advantage till date. The company has a brand name and a large circulation. Thus they enjoy the biggest pool of resources...” And the proof of dominance? Today, naukri.com has been able to retain its no.1 spot and has witnessed a growth rate of about 56% over the years with a market share of 50% followed by competitors like Monster.com and Timesjobs.com which accounted for about 35% and 15% of the online job application marketpie during 2008.

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Source : IIPM Editorial, 2008

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

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India Inc. is apparently sitting on a goldmine

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Well, this may be true for a few companies in the emerging markets, but businesses and industries in the global north (US, UK et al) are willingly avoiding infrastructural changes. And why is that? Here comes the Kwai river bridge. For polluting companies, interestingly, it is cheaper to buy carbon credits than to invest in environment protecting and technologically advanced machinery or in related innovation. Think about the hilarious situation. While as near as in July 2008, a unit of carbon credit was trading at above €33, currently, the same unit is languishing at €16. That basically means that companies belonging to developed economies, that have huge amounts of spare cash (more so as they refused to invest all along in greener technology) can buy even surplus carbon credits in the currently underpriced market for future indiscretions. Such companies might have the audacity to become bigger polluters in the future (based on the bank that they are creating of purchased carbon credits) or might have the temerity to even sell these surplus credits, once their per unit price appreciates, to book magnanimous profits.

It is but apparent that the enormous amounts generated by the so-termed Kyoto style trading has benefited the biggest industrial polluters the most, both in the past (when carbon credits purchase was just basically a licence to forego green investments) and in the future (when they’ll easily be able to forecast how much bigger their emission can be). But having said that, the fact is that all this gives no reason why India should not benefit from such an easily available source of foreign exchange.

India Inc. is apparently sitting on a goldmine. And why India is falling behind China in numbers is not because the companies have opened their eyes to the pitfalls in the carbon trading market. It is simply because of the general lack of awareness that India Inc. has been somehow losing on the opportunities to monetize carbon credits. For starters, ask yourself. If you’re a top manager in any company, do you even have an idea where exactly to register to start carbon trading? Do you even know how, say, non-manufacturing entities can also register and earn millions in carbon trading? If your answers are close to being negative, don’t be surprised, as a majority of India’s CEOs fail to pass muster and the test too. KPMG confirms in their November 2007 report (Climate Change: Is India Inc. Prepared?) that only a measly 21% of top CEOs in India had taken steps to mark out their ‘carbon footprint’.

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Source : IIPM Editorial, 2008

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

For More IIPM Info, Visit below mentioned IIPM articles.
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