Monday, October 08, 2012

Vijay Mallya and other top Kingfisher executives and investigate...

As if the problems with global fuel prices weren’t enough, Kingfisher has gone ahead and undertaken strategies that only seem a do ‘and’ die effort. How is Mallya even sustaining the unbelievable losses quarter after quarter? B&E’s Shashank Tripathi and Angshuman Paul meet Vijay Mallya and other top Kingfisher executives and investigate...

But look at what Kingfisher is doing on the other side. Frighteningly, amidst all this bloodbath, it is all set to commence its international operations in September 2008. The Daily Bangalore-London and Bombay-London flights would commence by September 3, while the Bangalore-San Francisco flight would soon follow. The company has even planned to start flights to New York, Singapore, Hong Kong and the Middle East shortly after that. Mind you, company has planned all this at a time when most of the international carriers have either cut their flights to numerous destinations or are planning to do so.

This at a time when international airlines are cutting left, right and centre. According to figures, three big airlines, American, Delta and United, have been cutting down their services dramatically. Where American Airlines plans to reduce 86 flights in November, Delta plans to cut 68, while United has decided to cut 266 flights per week as well. Moreover, other regional airlines flying in America are all set to slash over 1,200 weekly commuter flights. In fact, the Los Angeles International Airport (LAX) has seen a drop of 16.4% in flights in the last one year. If you thought this was worrying Kingfisher, you won’t even catch a whisper of that! Kingfisher is planning to provide their international fliers with what they call ‘better than world-class amenities’. The Kingfisher First cabin would feature an in-seat massager, touch screen controls, mood lighting, noise cancellation headphones by BOSE and in-seat chargers and USB connectors. Furthermore, an on-board chef would prepare international cuisines as per the passenger’s demand, while a well-stocked bar with a bartender in the lounge-like arrangement would make the experience more delightful. Quality is what they are boasting. Suicide is what it seems to us!

As per Airbus’s website, Kingfisher’s order-list stands at 71 aircraft, out of which 10 have been delivered. There are growing concerns that Kingfisher might need to further delay or cut deliveries to avoid losses. Where in heavens is the money coming from for Mallya? During all these years, the United Breweries Group has been supporting the losses of Kingfisher Airlines. When we caught up with Mallya’s speech at the Farnborough International Air Show, UK on July 17, 2008, he was still resolute, “The UB Group has huge cash flows which will see Kingfisher through turbulent times. Kingfisher is well funded. It has optimised its operations and therefore we are not nearly as vulnerable as our competitors.” But with losses amounting to thousands of crore, optimisation still remains a chimera.

Kingfisher Airlines recently raised a loan of Rs.1,000 crore from ICICI Bank to support its escalating expenses as the condition of UB Group appears to deteriorating. This can also be quite apparent from the fact that in the past one month, the share price of United Breweries Holdings Ltd. has plummeted petrifyingly. It has dropped from Rs.1,255 on October 31, 2007, to Rs.279 on July 23, 2008. The Air Deccan share, which was at a high of Rs.335 on December 19, 2007, is languishing at a deathly Rs.79.65 on July 23, 2008.

Worse, without an intelligent hedging strategy against oil price hits [for example, Southwest Airlines in 2007 locked into oil at $51 a barrel], Kingfisher is being hit fatally on a daily basis. Is the worse just around the corner? Senior Aviation Analyst Brij Bharadwaj tells us, “Although survival in today’s scenario depends upon how deep pocketed you are, if the current trend continues, there might be no Kingfisher Airlines next year.” One might forget that at one point a couple of years back, Mallya was also fighting hard to take over Sahara Airlines [when Jet was still in arbitration]. A few months ago, Mallaya was in talks with EADS to revive its single piston engine aircraft manufacturing business. There was also news that he has pledged a personal stake of $200 million to the US-based Epic aircraft to develop very light jets. Added to this is Mallya’s recent failed bid to take over Spicejet. Is Mallya flailing arms in a dying attempt to save Kingfisher? How long will shareholders of the UB Group allow cross subsidisation of unbelievable losses? Is there anything positive Mallya can really look forward to in his airlines? Oh yes, the Kingfisher ladies do smile pretty, but as Cat Stevens puts it, “Girl, it’s hard to get by just upon a smile.” Seriously Mallya, where do you think you are going?!


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.

 
IIPM : The B-School with a Human Face

Saturday, October 06, 2012

We’re Saved!

Assange’s Arrest Notwithstanding, If this is the Worst WikiLeaks has Against the United States, The World is Saved!

Post Assange’s arrest on December 7, 2010, in UK on suspected rape and molestation charges brought up by two Swedish women, if one were to read released copies of the women’s original police statements, it would be hard to decipher the reasons for which Assange has been arrested – or even charged. The women’s transcripts document not only that both the women consented in full knowledge to having physical relations (on different dates, of course) with Assange, but also that both the women had initially gone together to the police station to simply force Assange (who apparently could not be contacted otherwise by these women) to take a medical test for sexually transmitted diseases – as at least one of them believed that the condom Assange had used during the physical session with her had broken down. And why blame Assange? Apparently, he knew about the alleged breakage during the act and refused to stop despite being told to do so – and this is evidently an offence under Swedish law.

Should that be considered an immediately arrestable crime? Well, the Swedes and Interpol (the International Criminal Police Organization) think so. It’s more amusing to imagine that the Interpol, which seems to have fallen over itself in arresting Assange, hasn’t acted in similar haste in other arrest warrant cases, a notable one being of Roman Polanski, who has literally been ignored and is moving scot free in France for years despite having already been convicted in US courts on rape charges involving a 13 year old girl, and despite having had the so-called red alert notices issued against him by Interpol time and again. And the most hilarious part in all this is that Interpol’s international headquarters is right there bang in the middle of France, in Lyon.

The answer to this is that while the French government protects Polanski despite his frivolous behaviour, the UK government sees the Assange arrest as an opportunity to bend its back to satisfy the Americans.

Having said that, the fact is that whatever has been churned up by WikiLeaks till date against the US establishment actually works to the benefit of the Americans and in fact does their image more good than harm. While the world used to imagine a deep, sinister cabal of US diplomats conspiring and conniving to assassinate high-profile leaders, the 2,50,000 US diplomatic cables released by WikiLeaks thankfully reveal none such matter – and whatever negative has been revealed, was already in the know of the global media.


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.

 
IIPM : The B-School with a Human Face


 

Friday, October 05, 2012

Sustainable Capitalism is the food

CSR is Passe , Sustainability is in. And B-Schools alike are Waking Up To This Fact. B&E’s Amir Moin writes on why for The Moment, Sustainable Capitalism is the food for thought For Sustaining Capitalism

B-schools today stand at a juncture where they have the historic opportunity of giving the gift of ‘sustainable capitalism’ to the world. It will be a system that will not just ensure profit maximisation but will also make people (the society as a whole) better-off. And there are steps being taken in this direction. Starting the new MBA batch of 2011-13, students at the IIMs will be solving case studies discussing Maoists rebellion and the displacement caused by large industrial projects. Students would also visit villages in remote areas, for the purpose of making this an experiential exercise and help solve issues of the villagers. In fact, The Indian Institute of Planning and Management (IIPM) has been in this race, teaching concepts of sustainable development, ever since its inception in 1973. Even today, all students enrolling for any of the institute’s post-graduate and under-graduate programmes are taught concepts such as ‘Survival of the weakest’, ‘Trickle-up effect’ and ‘Happy Capitalism’. In an exclusive conversation with B&E, Dr. Ranajoy Bhattacharyya, Professor of Environmental Economics & Intl. Trade, The Indian Institute of Foreign Trade (IIFT), expresses his concern on the lack of such an initiative. “Sustainable capitalism is a rare concept where human welfare and profitability are very closely related. This is separate from CSR. In our B-schools, the issue of CSR has been largely taken care of. But, it is in the field of environment management where there is a scope for a lot more to be done. Embedding sustainable issues and policies in corporate strategies is not necessarily a CSR issue; it makes a lot of business sense as well.”

This very year, CEOs of 29 global corporations, including the likes of Accenture, Infosys and Boeing collectively produced a report titled Vision 2050 on behalf of the World Business Council for Sustainable Development. The report lays out a pathway leading to a global population of some 9 billion people living well within the resource limits of the planet by 2050. The deep-rooted significance of the vision fostered by these CEOs may appear promises on paper, but it is a start. According to a survey of global CEOs commissioned by Accenture in 2010 for the 10th anniversary of the UN Global Compact held in New York at the end of June, while 93% CEOs voted for the fact that “Sustainability issues are critical for the future success of their business”, an overwhelming 96% promised that “Sustainability issues will be fully integrated into the operations and corporate policies of their respective companies”. But the warning here is that the performance gap (what is needed and how much is being implemented) in dealing with sustainability issues has only increased over time – from 27% in 2007 (survey by McKinsey in 2007) to 32% in 2010 (survey by Accenture in 2010). This therefore calls for b-schools to make the much needed change in curriculum to include the topic of Creative Capitalism, as Dr. Mukesh Kumar, COO, Vedanta Aluminium says, “A business cannot prosper unless it realises the presence and contribution of the society. It is now an imperative for B-schools to imbibe sustainability aspects in the course content. In times to come the demand for inclusive growth will become even more pressing” says Kumar.


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face

Monday, September 10, 2012

“We are moving to electronic platform funding”

Manas Kumar Nag, CGM-Small and Medium Enterprises, State Bank of India

State Bank of India (SBI), being the largest lender in India, has the benefit of a wide and deep presence in the Indian market. This also reflects in its performance with respect to extending credit towards MSMEs over the years. SBI has in fact emerged as one of the biggest contributors to meeting their financial needs in a profitable way. Manas Kumar Nag, CGM-SME, SBI talks to Bhuvnesh Talwar and shares the dynamics of the company’s SME business in further detail:

B&E: What is the eligibility criteria that you have defined for SMEs to avail loans with SBI?
Manas Nag (MN):
MSMEs comprise of manufacturing, trade and services organizations. We have various customised schemes/products for different groups of borrowers. Therefore, eligibility would be as per the scheme. However, broadly speaking, we apply the Know Your Customer (KYC) concept, which includes identifying whether the borrower falls within the definition of micro, small or medium category and assessing the business activity and the borrower credentials to see whether the business can generate sufficient income. We have presently an internal system of rating, which is a prerequisite for sanctioning loans above Rs.25 lakhs. We have certain hurdle rates below which we do not sanction loans.

B&E: What are the major loan/credit products/schemes that you have launched for SMEs, in consideration of their diverse needs?
MN:
We have several customised schemes and products and also have tie-ups with industry majors for funding vehicles or construction equipment or healthcare products. In addition, we also have schemes like Doctor Plus/School Plus, which are specifically tailor-made for such groups of borrowers.

B&E: The default rates for these products are generally a cause for concern. What has been your experience?
MN:
Default rates are very low in certain schemes and in others, they are higher. For example, we have found that our doctor plus scheme has a much lower default rate as compared to our transport plus scheme. The nature of activity, choice of borrowers and the area of operation are the factors that determine the rate of default.


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face