Tuesday, January 15, 2013

Are the financial services companies misleading customers ?

The aggressive marketing by financial service providers despite the serious financial crisis the world saw in 2008-09 makes on the think if the banks have reallty learnt lessons from the earlier event. Here are some of the examples:

1. The bank calls a customer whose loan value is about 30 % higher than the property value(due to the massive drop in asset prives) if they would like to avail of a special offer of deferment of instalment payment of one month due to festivities.

2. The exchange houses in Dubai started a campaign when the India rupee depreciated from Rs. 12 to Rs. 12.5 against Dirham encouraging people to remit aggressively. This campaign lead to a number of indivisuals borrowing for remitting back to India. This has lead substantial loss for such remitters as the rupee further depreciated to Rs. 15. Would the regulator ever take the exchange houses to task ?

3. A self employed professional who have had no significant income for over six month receives a call from his bank for generous offer both for car loans and personal loans. What is the role of  customer intelligence analytics  department of the banks ?


Thursday, February 11, 2010

Let's stop vandalism and destruction of public property

The city of Mumbai is under siege by a political party under the pretext of the release a movie. The protest against a particular actor and his forthcoming movie has also led to destruction of a few cinema halls. A year back, a number of poor north Indian taxi drivers were attacked and their taxies were damaged. We see our buses and trains burning as a symbol of public protest. Destruction of public properties become the visual symbol of any such protests.

Vandalism is also taking another form. Every year self styled moral policing by some fascist forces against valentine's day also leads to destruction of shops and restaurants. Young girls were attacked in a town a year back for visiting pubs. A well known painter's paintings were vandalised and due to threats by political miscreants, he is forced to stay out of the country.

While a democracy allows every citizen the right to protest, does it give a free pass for vandalism and allow a free for all destruction of public properties. More often than not, such destruction is instigated by political parties. This happens since there does not appear to be any punitive measures. With the press catching perpetrators of such crime quite clearly on their camera, can such evidences not be used for strict criminal action ?

Since the state governments as also central government have completely failed to take action, can the honourable supreme court step in and end this menace.

Wednesday, February 10, 2010

Mentor a Start up

The financial meltdown of 2008 has left a lasting impact on the job market. While many people lost jobs, it also has brought in a fundamental change in the employment markets. A large number of young students can no longer assume that a job follows completion of their graduation. In the last decade we have also witnessed growth without any significant increase in job growths. This phenomenon brings in a new challenge, youngsters would have to go on their own. This entrepreneurial journey is challenging and perhaps be made some what easier by mentoring.
I would therefore urge that we start a mass movement of mentoring new entrepreneurs. All large companies should make it a part of their corporate social responsibility. All experienced professionals should make this as a part of their professional mission to help at least one start up either individually or preferably in a group of complementing skill sets. They can also become angel investors in these start ups. The usage of professional expertise of the mentors to train the start ups, bridging in through financial support as also network/social support which may open up market opportunities, would build in confidence of the entrepreneurs and would provide a framework for success. Just imagine the ripple effect of such a movement. This can not only create a large number of self employed, it will also have an efficient and effective start ups providing a base for a more competitive economy.

Saturday, February 6, 2010

India - We require more new cities.

Over the last few months there have been constant rumblings by the MNS and Shiv Sena about the status of outsiders in Mumbai. The point of attack are the North Indians. A few years back it was the South Indians. Often the frustration has been on account of over crowding of Mumbai and the presuure on the infrastructure. Even a balanced politician like Sheila Dixit had expressed concern over the crowding and pressure on the infrastructure of Delhi. While the MNS and Shiv Sena make political capital out of this, Sheila Dixit quickly retracted due to the expected political fallout, though her observations were right on mark.

Naturally a country which has been growing at a rapid pace, with a demographically favourable younger population and reduction of dependence on agriculture for employment, would have large impact on urbanization. We have been witnessing this over the last three decades. Wherein in the sixties a number of large industrial townships came up with the PSU model of expansion, the process has relatively slowed down with growing privatisation of industry.

It is important that we create new cities by planned expansion of existing large towns. We also need to create new towns where the pressure of land acquisition would be less. The central India offers vast tract of land with relatively low density of population and offers substantial opportunity. Every large state should come up with at least three to five alternates for their current over crowded and over stretched cities.

The government should also tighten its policy implementation. During the mid 90s when a number of private sector banks and also IDFC were licensed, the registered offices were distributed in a number of mid size cities. However, the intent was quietly killed and every one conveniently placed the corporate office in Mumbai. Do we need such a geographical concentration in a net worked world ?

Friday, January 22, 2010

Life - Teachings from the game of cricket

1. For a big score, you have to have patience in shot selection, leave the good balls and wait for the bad balls to score. In life you have to have patience and take decisions while waiting for the right opportunity.
2. When playing do not get over awed by the reputation of the bowler, but judge based on the quality of each delivery. It's your technical skill and experience which helps you survive the good balls. In life it means that you can meet adverse situations by your knowledge, skills, patience and hard work.
3. When your team is in problem, you need to have loads of patience and staying power to take your team out of problems.
4. Life is a test match and not a T-20. You need technical skills, endurance and tenacity to survive and thrive.
5. When you lack confidence, it reflects in your game and so does in your life.
6. Respect the opposition, but do not get overwhelmed by them and find smart ways of winning.
7. A short lapse of concentration can cost a great innings. Similarly a rush of blood decision can cost your career.
8. The success in cricket depends on the contribution of all the team members and support staff. Similarly in life to be successful, you have to build a winning team comprising your professional team members and support groups including family members, friends and professional associates.
9. Don't be satisfied with your tall score in the previous innings. Always be hungry for more. 10. Often you end a great innings due to a rash or lazy shot due to boredom. In life you may take a drastic decision of changing your job and moving away from a potentially great career due to a short and boring phase. Be careful to avoid such a costly decision.

India - Management Learnings from the Roadside Vendors

I always have a great sense of appreciation for the roadside vendors in India particularly with respect to their management style. I strongly believe that a keen student of management can learn many a tricks from these vendors. The first is managing the business environment and the external challenges. They handle the local authorities, the police, and the local mafia as also the economic challenges of the complex hafta payments. Second is the perfect management of credit sales and good collection system without any legal documentation and back office credit administration. And most of them do not have a formal financing system financing their working capital requirements and yet manage their cash flows. The local panwalla is a perfect example where along with the art of making pan, the panwalla also efficiently enters the credit transaction in his small note book. Third is the salesmanship and the ability to maintain high level of customer relationship. Think of the vendor who sells you books and magazines on traffic lights. Even though he may be hardly literate, he is able to convince you to buy the latest bestsellers. Be it the panwalla or the roadside dhabawalla, they have a steady set of loyal customers and they also understand the customer preferences quite well. The panwalla is famous for knowing the intricate requirement of its regular customers, where your favorite pan or your brand of cigarette is dispensed to you on your arrival without you even specifying your requirement. Fourth is the flexibility in pricing. Look at the vegetable vendor or the fruit vendor, who effectively manages a zero inventory at the day end through a sophisticated flexible pricing model determined largely based on customer loyalty and the day end flexible pricing without the announced happy hour pricing of the sophisticated organized sector retailers. Fifth is the ability to compete with strong competitors with established shops and stronger financial muscle power. This happens largely on account of the first four factors and the tenacity of the vendors and the will to succeed.
It is perhaps a subject for intensive research which will bring in many interesting answers of the success of the spirit of Indian enterprise at the bottom of the pyramid. The true spirit of "pucca business in kuchha".

Investment Philosophy-Learnings from the Financial Crisis of 2008

1. At least 15 % of your net worth should be liquid, i.e. cash or bank deposits or low risk treasury bonds. This gives you opportunity to take advantage of market distortions and interesting deals when cash is king.
2. Sell in good news and buy in bad news.
3. Don't leverage for investments in financial instruments.
4. Total leverage should not be more than 0.25:1 leaving out the occupied residential property.
5. Avoid long dated bonds as you carry high degree of liquidity as also market risk.
6. In real estate investment, focus on income generating assets only.
7. Follow the policy of asset allocation: how much money you should be putting in risk assets like real estate and equity.
8. Check the stability of your cash flow. Predict the range of high, average and low by using probability factors.
9.Set aside six months' of household expenses including mortgage payments in a separate bank account outside the minimum 15 % of liquid assets.
10. In equity,once you achieve the profit target, sell at least 50% of the holding.
11. Always have at least 25 % to 50 % of your equity holding giving you a good dividend yield.
12. Constantly watch for the sectors going out of favour and ensure exit before re-ratings.