November 28, 2016

Insightful article on Indian govt's illegalising old currency notes


This is a very insightful commentary on the move by the Indian government in early November tp make illegal the use of existing 500 rupee notes and 1,000 rupee notes.


https://ajayshahblog.blogspot.in/2016/11/problematic-terms-in-demonetisation.html

Problematic terms in the demonetisation debate

by Anirudh Burman.

The Government's move to demonetise Rs. 500 and Rs. 1000 notes, and place restrictions on withdrawals, exchanges and deposits has attracted both appreciation and criticism. This piece analyses the framework of this discourse and its implications for the economy and society. Terms like "demonetisation", "corruption", "inconvenience and hardship", "implementation" form the basis of this discourse. Interestingly, most of these terms have originated from the Government itself. This piece argues that by confining ourselves to these terms, we fail to grasp the true nature and impact of this measure.


The economic context


The Indian government's move to withdraw the legal tender status of Rs. 500 and Rs. 1000 notes has had widespread effects on the economy. Holding these beyond a certain notified date will be
illegal. Those left with these notes after December 31 will lose their wealth by a corresponding amount. There are daily reports of the plight of urban daily wage labourers, farmers and those in unbanked areas.

The economic impact of this measure is being contested. A great piece by my colleague Suyash Rai argues that the costs of imposing this measure far outweigh the benefits are likely to affect the poor and under-banked areas disproportionately and may have a modest impact on corruption at best. Others have played down the likely impact on the poor and rural areas. They have supported the demonetisation as a courageous and bold step towards a larger effort at wiping out endemic corruption and black money.

What is already safe to assert is that for better or for worse, there has been large-scale disruption within the economy. Print and electronic media, social media, daily conversations are consumed with conversations around the principle and implementation of demonetisation, and around issues of corruption and black money. Yet, most of this discourse follows a predefined framework, using terms and nomenclatures propagated by the Government. The framework of this discourse is problematic, and this framework itself may have deleterious effects on our society.

Problematic term: "Demonetisation"


Characterising the government's move as "demonetisation" is the most problematic fallacy of the current discursive framework. In this case, the Central Government has said that the RBI will refuse to honour its promise to provide legal backing to Rs. 500 and Rs. 1000 currency notes. They will effectively refuse to honour the property rights of those holding them. Every time the RBI issues a currency note, it adds a liability to its balance sheet. By refusing to honour these notes as legal tender, the RBI will extinguish its liability towards persons holding them, in effect enriching itself. In addition, substantial restrictions have been placed on exchanging old notes for new, withdrawal and exchange of money. This is a substantial interference in the rights of people from accessing their own money. This is expropriation, not demonetisation.

In its broadest sense, expropriation refers to a taking of certain items or goods by the government by refusing to honour the property rights of those holding such items or goods. Bank nationalisation was an act of expropriation. The Indian government refused to honour the property rights of the owners of banks and transferred the ownership of the banks to itself.

Land acquisition is an act of expropriation.  The government expropriates the property rights of individuals. Land reforms undertaken in the 1940s and 1950s were acts of expropriation where property held by zamindars was transferred to the states by virtue of laws passed by them.

The Vodafone tax demand by the Indian government has been alleged to be an expropriatory action as Vodafone's income is being expropriated by imposing an allegedly unfair tax on it. Expropriation need not be an absolute taking or extinguishment of property rights in all cases.

Even a high degree of restriction or interference with property rights has been held to be expropriatory in many jurisdictions worldwide. Therefore, the Government and RBI's decision to (a) withdraw legal tender status, and (b) impose severe restrictions on withdrawals from one's own account is definitely an act of expropriation.

This act of expropriation is singular, given the nature of the expropriation and the views of the political party in power. Two of its cabinet ministers favoured a debate early last year on whether the word socialist should remain in the Preamble to the Indian Constitution and its ally the Shiv Sena demanded the removal of the word (link here)! This same Government is now justifying this expropriatory act as a moral imperative.

The nature of the expropriation is much more problematic. There are at least three ways in which this expropriation is remarkable:

  1. In most cases, property rights of certain defined individuals or classes are expropriated. The owners of banks were identifiable individuals, and so were the zamindars who were expropriated when land reform laws were passed. In this case, it is not so. Property rights across the entire economy are being expropriated without distinction. At the same time, there is no single identifiable person who is being expropriated. This is likely to have societal consequences I will elaborate later.
  2. Governments usually expropriate rights, or assets - like wealth, mineral resources, land, intellectual property (through compulsory licensing). In this case, the medium of exchange in society is asset being expropriated. This is an expropriation of cash, not wealth. This is singular in the annals of expropriatory actions by governments worldwide. Many governments have demonetised currencies to combat hyperinflation, but no one has withdrawn legal tender status on currency notes in times of normalcy, and imposed restrictions on an individual's ability to hold cash at the same time. In an economy that is almost completely cash driven, and where most households hold Rs. 500 and Rs. 1000 notes as means of exchange for sustenance, this is bound to have serious repercussions.
    Money is not just a medium of exchange and a store of value, it is also, as has been argued, a source of social prestige and psychological security. In a cash-based economy like ours, people primarily derive social capital and psychological security from money in the form of cash. This expropriatory measure has therefore arguably extinguished or imperiled the social prestige and psychological security of those who relied on cash money to provide these for them.
  3. Governments usually expropriate the rich to redistribute to the poor (at least ostensibly) or to create benefits for the public good (roads, highways, etc). Bank nationalisation expropriated the rich bank owners so that Indira Gandhi could use banks as agents of poverty reduction. Land reforms were done to expropriate zamindars and redistribute land to the poor. In other countries, governments expropriate owners of oil fields and mineral deposits so that the government can channel the benefits from such resources for the public good. Since this expropriation is economy-wide, everyone's medium of exchange is being confiscated/ restricted regardless of whether they are rich or poor. However, the main brunt of the expropriatory action is on the poor. There are two main ideas being talked about with regard to what the government might do with the windfall in order to redistribute wealth to the poor. To clarify, neither the Government nor the RBI have stated or clarified on what they intend to do, and what legislative changes will need to be made. It is however worthwhile to discuss these as the two broad ideas that are being discussed -
    1. The government may improve its fiscal situation and use the fiscal space to provide income tax relief/ loan waivers. The poor are not going to benefit from income tax relief since only 4 percent of India's population pays income tax. The Sixth Economic Census of the CSO (March 2016) finds that only 2.3 percent of non-agricultural establishments received financial assistance from financial institutions. This number is likely to be the same or even lower for agricultural establishments. Loan waivers are therefore going to have minuscule impact, and benefit only those who are well-off enough to access the formal financial system.
    2. The government may, through some legislative jugglery, recapitalise banks and kick-start lending. Again, the gains are going to accrue mostly to the rich and the middle class. It is debatable as to how the unbanked and expropriated 40 percent would reap the benefits of any bank-led redistributive measure since 40 percent of the country is unbanked (Census 2011).

This is therefore, a unique expropriatory measure that expropriates from everyone in society to benefit those who suffer the least "inconvenience" from the expropriation (more on this later).
Discussing this step as an expropriatory measure brings to the fore legal protections and requirements that are concomitant with expropriation: what is the legal authority for taking away the
property of individuals? Is compensation due to those who have been expropriated and if yes, in what form? What due process is applicable to expropriatory measures taken by the Government? Coining this expropriation demonetisation is putting lipstick on a pig in its truest sense.

Problematic term: "Corruption"


Equally problematic is the way this expropriatory action has re-defined the "corrupt" and "corruption". All preceding actions against corruption taken by the Indian State in the past have been against those who have either evaded taxes or earned money by committing illegal acts. The issue was that certain people either evaded taxes or did something they were not supposed to, and such people had to be identified and punished. The voluntary disclosure scheme followed this overarching principle by encouraging people who did not pay taxes to come forward. The same principle is at play in the issue over identifying people who have stashed their illegal money abroad, and in the identification and prosecution of officials violating the Prevention of Corruption Act.

This expropriatory measure has the potential to re-define how people think about the corrupt and corruption. For one, the focus is now on confiscating corrupt wealth and black money. Identifying the corrupt and identifying individual acts of corruption has taken a backstage. Expropriation itself has become a mode of punishment. It is being suggestively implied that society has a chance to start again with a clean slate if black money is wiped out. The complete failure of the state to act against corruption is being used as an excuse to infuse society with a new kind of morality.

Second, corruption has now become a crime without a perpetrator. Multiple people I have talked to situate themselves as victims of corruption. A landlord who has built an illegal flat does
not give his tenant a lease-deed and accepts payments only in cash told me he was proud the Prime Minister had taken this step on behalf of honest people like him. An auto-wallah who confessed to driving without a permit and did not agree to go by meter railed against the corrupt during the duration of my journey. An Uber-driver praised the expropriation repeatedly while he ferried me. Close to the end of the ride he nonchalantly told me he had to drive carefully since the police had impounded his license the previous day. While these anecdotes hardly constitute statistical evidence, they are indicative of the fact that people go to great lengths to justify their actions as moral and honest.

However, the logic goes, everyone else must be corrupt if corruption is endemic enough to justify this kind of measure. This discourse is elevating the widespread cynicism and hatred against politicians, bureaucrats, the police, big business, small business and the media. Everyone feels like a victim and everyone else is suspect. But no one is a perpetrator or an agent. Everyone wants to sock it to the rich and the corrupt though no one knows who they are. So it is acceptable to take some punches yourself if the corrupt suffer in the process. The Government is at once elevating the pitch for shared sacrifice while also (most probably and hopefully, unintentionally) exacerbating the conditions for social and institutional distrust. Issues of class envy and class conflict are already coming to the fore and may get further magnified in the future.

This, in turn, is likely to create a collective psyche where no individual or institution can be trusted. No one is deserving of empathy since their corruption might be the cause of your suffering. This is happening even though the Government is at pains to explain that this will be one among many previous and future steps against corruption. By re-framing corruption as a crime without an agent through this singular action, the Government has perhaps unwittingly created the conditions in which the nature of discourse regarding solving corruption in society changes permanently.

This is a simple expropriation at its core. The object and effect of this measure are predominantly expropriatory. The confiscation of black money is an incidental benefit by design. The rhetoric of sweeping up black money and the design of the expropriatory measure do not match up to each other.

Problematic terms: "Inconvenience"


It is inconvenient to have to switch to a mobile wallet and stand in an ATM queue for 2-3 hours once a week. Many people I have spoken to are ready to suffer this inconvenience if it helps achieve the stated objective of finishing off black money in the economy. When individuals who depend on their daily wage to feed themselves and their families are laid off, this cannot be called an inconvenience. The tribulations of agricultural workers and small entrepreneurs cannot be called an inconvenience if their enterprise fails due to the lack of liquid cash. Sectors of the economy that function largely in cash are suffering disproportionately compared to those with access to plastic money and mobile wallets. There is an attempt to normalise and standardise the way the effects of this expropriation are to be thought about by using this one word to describe the depth and diversity of suffering within the economy.

There is a breadth of literature on the impact of income shocks on those who are at the lower end of the poverty line. Income shocks push many just above the poverty line back into poverty. They also push many into debt, since their savings are not sufficient to sustain themselves. Small incidents like an unanticipated illness have an outsized impact on their long-term well-being and potential for growth. The current actions of the Government have administered just such an income shock on the poorest.

The Government should have taken much more aggressive measures to protect the worst affected economic classes in society, but calling this suffering an inconvenience allows it to paper over this failure. Had the Government instead defined the consequences of this measure as a "scarcity" of currency, corresponding actions may have been discussed, and some implemented. Government actions and popular discourse during times of scarcity are motivated by a desire to ensure everyone has adequate rations to sustain themselves.
 
Scarcity creates its own social dynamics. It creates new intermediaries in the market - when food is rationed, black marketeers emerge to supply food at above-market prices. After this expropriation, intermediaries are delivering white money for black for a commission. The war against corruption is creating new forms of corruption.

Mobile applications with horrifying names like "Book my chotu" are advertising hired help who can go stand in queues for those who can afford it. Most troublingly, scarcity changes relationships in society by creating new power dynamics. Hitherto bankers were service providers. Now they are agents of rationing. They have asymmetric power compared to those standing in the queues before them. It is a credit to them that they are still providing services under conditions of extreme difficulty. On the other hand, like any agent of rationing, they are now exposed to mob fury and mob violence. The customer has now become a beggar. His/her money is locked up in a bank. The psychological security gained from holding money that I alluded to earlier has vanished. Whereas earlier he or she could demand service, now they pray they get to exchange\withdraw money, and can suffer at the hands of a capricious banker.

Conclusion


Some have argued that even if the Government wanted to take this step, it could have been timed better. But what is a good time for extinguishing property rights? Any time is equally good and equally bad. Others have argued that the step has been implemented badly. But expropriatory actions are judged first and foremost by the validity of the expropriation itself. We have been too quick to assume the validity of this measure and debate its implementation. As long as the terms of the discourse are set by those who introduced the measure, we will also be confined to their predefined moral straitjacket of honesty versus corruption, sacrifice versus timidity and sincerity versus venality. Empathy will be a casualty.

The Government has framed this step against corruption as a moral question. Should we not ask a moral question of the Government: Is it ethical for any State to expropriate the predominant means of exchange from everyone in society, especially in a poor cash-dependent economy?



The author is a researcher at the National Institute for Public Finance and Policy. 

November 10, 2016

Effect of Tata-Mistry spat on investors in Tata Group companies

FPIs lose over 5% on their holdings in 9 major Tata Group companies

As of this Tuesday’s (November 8) closing prices, foreign portfolio investors (FPIs) lost 83.15 bln rupees due to shares held by them in nine key Tata Group companies and the ongoing battle between Tata Sons and Cyrus Mistry.

Since October 24, when Mistry was ousted from the chairmanship of Tata Sons, FPIs have seen their investments in the nine companies lose 5.5% to 1428 bln rupees from 1511 bln rupees.

The highest loss has been in the shares held by them in Tata
Consultancy Services Ltd.

On the basis of Tuesday’s closing price, the notional loss of FPIs
from their holdings in TCS has been to the tune of 48.46 bln rupees,
followed by the  notional loss in their holdings in Tata Motors to the
extent of 14.78 bln rupees.

This is seen from an analysis of shareholding data of FPIs in nine key
Tata Group companies. The analysis compared the collective value of
FPI holdings in the 10 companies as of October 24 with the value as of
Tuesday, based on their holdings as of Sep 30.

The nine Tata Group companies comprised of Tata Chemicals Ltd, Tata Communications Ltd, Tata Consultancy Services Ltd, Tata Global Beverages Ltd, Tata Motors Ltd, Tata Power Co Ltd, Tata Steel Ltd,Titan Company Ltd and Voltas Ltd.

Shares of these Tata Group companies have fallen from 2% to 17% sincebOctober 24, with Tata Global Beverages having fallen the highest at 17.3% to 127.5 rupees from 154.1 rupees and Titan Company having declined the lowest at 1.7% to 371.2 rupees from 377.6 rupees.

TCS’ share price has fallen by 6%. FPIs held a collective stake of 17%
as of Sep 30 and the value of this stake has fallen to 765.71 bln
rupees as of Tuesday’s closing price compared with 814.17 bln rupees
as of Oct 24 closing level.

In Tata Motors, where FPIs collectively held 26.1%, their holding
value has come down to 407.23 bln rupees from 422.01 bln rupees.
Shares of Tata Motors are down 3.5% since the day of Mistry’s ouster
from Tata Sons.

After TCS and Tata Motors, the highest value loss for FPIs are in TatabPower, Tata Chemicals and Voltas where they have seen their
shareholding value getting eroded by 6.54 bln rupees, 3.28 bln rupees
and 2.71 bln rupees.

In the remaining four group companies of Tata Global Beverages, Tata Steel, Tata Communications and Titan Company, FPIs have lost 2.51 bln rupees, 2.17 bln rupees, 1.44 bln rupees and 1.26 bln rupees
respectively.

Non-FPI institutional investors have also lost heavily in the
Tata-Mistry spat. Their holding value in the nine Tata group companies
has fallen by 6.4% or 47.36 bln rupees to 742 bln rupees from October 24 to Tuesday.

These institutional investors have lost 14.69 bln rupees in TCS, 8.19
bln rupees in Tata Motors and 6.21 bln rupees in Tata Power.

October 27, 2016

Biocon's Jul-Sep results analysis

Last Thursday (20-Oct-2016), I did the Jul-Sep quarter results analysis for Biocon Ltd, for the organization I work for currently. Here is what I contributed:

Earnings Review: Biocon Jul-Sep PAT at 1.47 bln rupees

Bio-pharmaceutical company Biocon Ltd recorded a consolidated net profit of 1.47 bln rupees in Jul-Sep, the recorded as against a net loss of 106 mln rupees in the year-ago quarter. The profit growth was aided by a sharp rise in sales and lower raw material costs.

Consolidated net sales of Biocon grew nearly 20% on year to 9.40 bln rupees in the September quarter, driven by a steady 17.1% growth on year in revenues from its largest product segment of small molecules to 4.03 bln rupees and a sharp 34.4% on year increase in its biologics product sales to 1.56 bln rupees.

Biocon's revenues from research services and branded formulations business segments recorded year on year growth of near 16% and 14.5% to 3.03 bln rupees and 1.37 bln rupees respectively.

The company's net profit was in line with estimates. An average of estimates of nine brokerages had pegged the quarter's net profit at 1.46 bln rupees. Net sales was below the average estimate of 9.85 bln rupees.

Chairperson and managing director of Biocon, Kiran Mazumdar-Shaw was quoted in a company statement as saying that the company's performance in Jul-Sep was led by strong growth across all its verticals. "Expansion of our biologics footprint in emerging markets and licensing agreements boosted the revenue further," she said.

The growth in small molecules was driven by sales in emerging markets of Africa, West Asia and South America and to India based customers servicing the needs of the US market. Biologics vertical, the company said, saw strong growth of 26% at nearly one bln rupees on account of sales in emerging markets of Africa, West Asia and South America.

Operating margin of the biopharmaceuticals company jumped up to 25.2% in the September quarter from 21.2% in the year-ago quarter. The 400 bps rise in operating margin was chiefly due to a 6.3% fall on year in cost of material consumed to 3.18 bln rupees.

Total expenditure was up 13.7% on year to 7.82 bln rupees. Research and development expenses in the September quarter was 6.8% of sales, up from 5.3% in the June quarter.

Finance costs increased 2.2 times year on year to 65 mln rupees and the tax payment was 48% up on year at 417 mln rupees. 'Other income' was up 69% higher on year at 384 mln rupees in Jul-Sep.

Shaw said Biocon's insulin Glargine pen launched in Japan was well received in the September quarter with prescriptions beginning to gain traction. The quarter also saw the European drug regulator accept for review

Biocon's application to market its biosimilar Trastuzumab co-developed by Biocon and Mylan.

The company received a tentative approval from US FDA for its generic drug, Rosuvastatin Calcium tablets. The company also said that its facilities in India had completed regulatory audits by MCC South Africa and US FDA in the September quarter.

From the June quarter, Biocon's net profit was down 11.9% and its net sales was down 4.2%.

October 26, 2016

Re-blogging an old blog post (28-Feb-2012) on Tata Sons

Re-blogging an old blog post (28-Feb-2012) on Tata Sons

http://natant.blogspot.in/2012/02/life-in-financial-markets-tata-sons.html

ife in financial markets: tata sons issues Rs 58 crore worth of preference shares to 9 people including ratan tata

Here is something that is of some relevance to shareholders in listed Tata Group companies which they won't get to know of immediately under the disclosure norms of the listing agreements with the National Stock Exchange of India and BSE. 
On December 30 last year (2011) and January 2 this year (2012), Tata Sons, the holding company for all Tata Group companies, issued 5.78 lakh new 7.5% cumulative redeemable preference shares of Rs 1,000 each to nine people, as per the mandatory statutory filings made by the company under The Companies Act, 1956 (as amended till date). 
Issued at a par value of Rs 1,000 each, the preference shares issue fetched Tata Sons a sum of Rs 57.78 crore in cash. Prior to issue of these preference shares, the paid-up preference shares capital of Tata Sons was Rs 4,089 crore, made up 408.9 lakh preference shares of Rs 1,000 each. The paid-up equity share capital of Tata Sons, as of January 2 this year (2012) was Rs 40 crore comprising of 4 lakh equity shares of Rs 1,000 each.
Of the new Rs 58 crore worth of preference shares issued at par,
-- Rs 25 crore worth preference shares was issued to Narotam S Sekhsaria, founder and promoter of Gujarat Ambuja Cements who headed it till six years ago,
-- Rs 11.52 crore worth of preference shares was issued to Noshir Adi Soonawala, a Tata Group veteran,
-- Rs 10 crore worth of preference shares was issued to Ratan Tata,
-- Rs 6.16 crore worth of preference shares was issued jointly to Ravi Kant and Arti Kant. Ravi Kant is a Tata Motors veteran,
-- Rs 2 crore worth of preference shares was issued to Arunkumar R Gandhi,
-- Rs 1 crore worth of preference shares was issued jointly to Praveen P Kadle and Chetana P Kadle,
-- Rs 1 crore worth of preference shares was issued to Farrokh K Kavarana
-- Rs 0.6 crore worth of preference shares was issued jointly to Jamshed J Irani, Daisy J Irani and Zubin J Irani,
-- Rs 0.5 crore worth of preference shares was issued jointly to Simone N Tata & Noel N Tata.



October 20, 2016

Analysis of Hindustan Zinc's segment results in Apr-Sep FY17




​​
Silver sales growth of 26% spurs Hind Zinc Apr-Sep financials

The silver lining in the otherwise falling trend in Hindustan

Zinc Ltd's sales and profit was the silver metal itself.

    An analysis of the September quarter results declared by the miner today

revealed silver's rising contribution to the company's revenue and earnings

before interest and tax.

    In Jul-Sep, the miners's revenue from silver sales increased sharply by

25% on year to 4.82 bln rupees aided by steady production and around 30% on

year increase in silver prices. Revenue from zinc and lead declined year on

year by 14% and 10% each to 27.0 bln rupees and 5.0 bln rupees respectively.

    This trend extended to, and was accentuated in, the first half of

2016-17. In Apr-Sep, silver revenue rose 26% on year to 8.4 bln rupees while

zinc sales fetched 46.2 bln rupees, 25% lower than the year-ago period.

    Volume growth in the first half of 2016-17 was 6% on year to 196 mln

tonnes in silver, while zinc and lead volumes contracted by 37% and 17%

respectively.

    An analyst said the fall in zinc and lead volume and sales was on

expected lines and silver production was expected to increase as well. If the

company management wants to, it can ramp up the silver production from around

450 mln tonnes to 730 mln tonnes, he said.

    Operating margin from silver held steady for the miner in contrast with

falling margins in zinc and lead.

    The earnings before interest and tax in silver in the September quarter

was 3.8 bln rupees, giving a margin of 79.2%, down just 30bps from the

year-ago quarter. The EBIT margin in zinc, lead and other metals, taken

together, in Jul-Sep fell 600 bps to 37.9%.

    The first half of 2016-17 saw a higher difference in the EBIT margin

growth rates. EBIT margin in silver went up sharply on year by 250 bps to

78.6% on year, while that in zinc, lead and others fell by a steep rate of

1010 bps to 29.3% year on year.

    The company said in its earnings statement that integrated silver

production was up 6% on year in first half of 2016-17 despite lower mined

metal, on account of significantly higher production from Sindesar Khurd

mine. "For the full year, integrated silver production will be higher than FY

2016", the company said.

    In 2015-16, the revenue from silver had increased by nearly 17% on year

while revenues from zinc, lead and other metals fell 6.2%.



September 07, 2016

Internet use depends on connectivity speed as much as on price tariffs

Internet use depends on connectivity speed as much as on price tariffs. A recent global 'state of the internet' report indicates India's performance is dismal.

In FC last week:


September 06, 2016

#ThisDayThatYear circa 2009-Sept-6

https://natant.blogspot.com/2009/09/life-in-general-oh-gujarat.html

September 06, 2009

life in general: oh gujarat!

The tragedy that has engulfed the state of Gujarat in India since March 2002 is of unprecedented proportions. 

Here is Harsh Mander in Hindustan Times a few days back:

http://www.hindustantimes.com/Closure-yet-so-far/H1-Article1-448967.aspx

Closure, yet so far

Of the many failures that characterise the polity and society in contemporary Gujarat, probably the most dangerous is the unprecedented extent of the arrest and collapse of processes of authentic reconciliation, because of which wounds refuse to heal. People of diverse faiths live side by side or in segregated ghettoes but in an uneasy, warped, brittle truce, without the restoration of genuine trust and normal social and economic intercourse.

The State remains openly hostile to a segment of citizens only because they belong to a different faith from the majority, reflected in raucous and openly prejudiced sectarian taunts in speeches of senior elected public leaders. They cast aspersions on the patriotism of Muslim citizens, parody their supposedly pervasive practices of polygamy and breeding large families, decry the alleged slaughter of the cow despite deep reverence towards her by Hindus, and claim their wide sympathies with terrorist violence.

Muslim ghettoes are routinely discriminated in public services, Muslim youth are picked up almost randomly on charges of terrorism and their deaths in ‘encounters’ or extra-judicial killings are explained away by State authorities with rarely even the façade of any credible evidence of their terrorist links and the circumstances in which it became necessary for the latter to take their lives without the due process of law. Their Muslim identity is accepted as reason enough to believe that they must have been terrorists, and terrorists do not deserve the protection of law.

There are few organised social and political spaces — official or non-official — in Gujarat today, for fostering forgiveness and compassion. There is instead a frightening communal chasm, accepted or actively fostered by the powerful political, administrative, business and media establishments. This engineered divide is growing exponentially between people of different religious persuasions. An ominous subtext characterises re-engineered social relations: new realities of settled hate, settled fear and settled despair in all villages and urban settlements that were torn apart by the gruesome mass violence of 2002. Gujarat continues to be a society bitterly, and some now grimly fear, permanently divided.

After the communal bloodbath that accompanied the vivisection of the country as it seized its independence, leaving a million people dead, there have been thousands of riots, or episodes of mass clashes between people of Hindu and Muslim faith, and pogroms, resulting in the loss, according to one painstaking estimate, of at least 256,28 lives (including 1,005 in police firings). It is remarkable that despite this recurring communal bloodletting during and after the traumatic partition of the country, there has been no systematic structured official (or even significant non-official) processes of ‘truth and reconciliation’, to help perpetrators and survivors of hate violence come together; to see and speak to each other; acknowledge their crimes and failings, their hate and fear, their grievances and suspicions; to seek and offer forgiveness, trust and goodwill; and ultimately help bring closure and eventual healing.

Given the enormity of contemporary threats posed by a deliberately fostered communal divide and violence to the very survival of secular democracy in India, fuelled further by the manufactured global ‘war on terror’, it is imperative today more than ever that systematic, sustained processes of reconciliation and justice in communal relations between sporadically embattled people of diverse faiths and ethnicities in India are established.

The Indian people have arguably had more experience than most through millennia of living with diversity. Therefore, even without organised processes of reconciliation, there are usually natural spontaneous processes of reaching out and healing that follow bouts of sectarian violence. There may be debates about whether without structured modes of facilitating reconciliation for survivors of the cataclysmic Partition violence of 1947, there has been adequate closure for families that experienced the agony and permanent uprootment from and the irreparable loss of their loved ones and homeland.

My own parents and their extended families lost their homes amidst hate, slaughter and arson in a region of the country that became a part of Pakistan in 1947, and their grief of loss remains dormant more than 60 years later, just below the surface. Perhaps we needed much earlier to bring together people who lived with the violence from both sides of the border, to share truth, discover their common burdens of suffering and privation, and thereby find the spaces for individual and collective forgiveness.

In other communal conflagrations that I have witnessed and handled in small district towns as a district administrator, I have observed that within days of such mass sectarian upheavals, persons of goodwill and compassion reach out from each community and others grasp their outstretched hands gratefully. There are spontaneous individual and collective expressions of remorse and grief at the loss suffered by the other community, and of compassion, through which processes of social and personal healing set in.

By contrast, the defining feature of Gujarat after the 2002 massacre is its frozen compassion. It is the determined absence of remorse both by the State and among many segments of the people, the conspicuous absence of social and political processes of reconciliation, and a resultant persisting bitterly unreconciled divide and distrust between the estranged communities. It is not surprising, therefore, more than seven years later, that what is most scarce in the parched earth of allegedly vibrant Gujarat is reconciliation and empathy.

Excerpted from Fear and Forgiveness: The Aftermath of Massacre (Penguin)

Harsh Mander is Convenor, Aman Biradari. The views expressed by the author are personal.

Personal finance Apps for Indian investors - far and few

A feature story I wrote in FC a couple of days back - www.mydigitalfc.com/opinion/manage-your-money-personal-finance-apps-378

Personal finance Apps for Indian investors - far and few

Money management or personal finance management is not just about
investing. There are other critical elements involved as well. It includes
the management of your money outflows through spending. It also covers the inculcation of a habit of monitoring of your total financial networth on a
regular basis.

If not monthly, you should monitor you financial networth on a quarterly or
yearly basis at the least. This should be a comprehensive monitoring
encompassing two main elements – one, a categorywise break-down into
investments, cash-on-hand, bank savings and deposit account positions; and two, an asset-class distribution of your savings and investments.

There is no dearth of web portals and mobile phone apps offering you
advanced features to help you invest across asset classes such as equities,
debt and gold and platforms such as stock exchange trading and mutual funds. These portals and apps not only give you the ability but also spare no
effort in providing every bell and whistle in their offerings.

No after-sales service for investors

But there is a short supply of advanced portals and apps offering
post-investment money management or advisory tools. A vast majority of
brokerages, including the large ones who are otherwise technologically
advanced, do not help much in this vital sphere, and neither do the large
banks. Their current features in post-investment personal wealth management apps are very raw, and do not go beyond the raw basics.

But in the last one year a beginning has been made ith a handful of firms
(brokerages, firms and information technology startups) beginning to offer
mobile apps  and web-based apps which allow users who download them to keep
an eye on a large gamut of their personal finance lives.

According to Rahul Jain, executive vice president-personal wealth advisory
at Edelweiss Broking, "A lot of our personal wealth advisory clients were
coming back to us and telling us that while they were getting a lot of
advise on where to invest no one was telling how their investments were
doing and no one was providing them advise on risks seen from an entire
personal finance perspective." Jain said he and his firm realised that they
had to couple their existing advisory tools with with an expense-management
tool or a money manager application to make their advisory service more powerful.

Concurs Amar Choudhary, CEO and co-founder, Finaskus, a firm providing
automated financial planning and investing service for retail services.
"Investors are increasingly seeking awareness of not just the returns they are getting from their investment and but also how their investments are doing in different cuts," says Choudhary.

What the Apps do?

Financial Chronicle Research Bureau takes a look at the features being offered by a few of the new breed of technology-savvy firms which have taken the lead in post-investment and personal finance management arean. So
far, these money manager Apps are smartphone based applications available for download for phones running on Android, Apple and Windows platforms. Web-based apps or portals are still not easy to find.

Walnut and Money View are two personal finance management mobile Apps which were launched last year with basic features which have got upgraded with some new features over the last one year. A couple of months back Edelweiss Broking went live with a free money manager App called WealthPack which works like an automatic money manager.

These are Apps developed by Indian companies incorporating the terminology and language used in the communication sent by financial or other companies in the domestic financial ecosystem. There are far more similar Apps globally targeting users of other countries. It is, therefore, important to
differentiate between domestic and international Apps.

Moreover, so far, these Apps are free. It is possible that they will become
chargeable in the future and to download them you may have to pay anywhere
upto Rs 300 or more, depending on the scale of the features offered and the
technology used.

The first and the foremost thing all these Apps do is scan through the text
messages (SMS) on your smartphone. The Apps' software then identifies the
SMSes which have come from your bank, brokerage firm, utility company,
credit card issuer, digital wallets (such as Paytm, MobiKwik), radio taxi
companies (such as Meru, Easy Cabs and Uber) and similar other entities.

After this, the features depends on the Apps' own programming strengths
kick based on the algorithms built into the software code of the App. The
Money View App, for instance, says it tracks your bank SMSes and tells you
where and how you spend your money. "With the daily expense manager, you
can analyse your spends using graphs and charts," it says.

The Edelweiss App has algorithms written to cover 50-odd banks and credit
cards. Apart from these, it covers billers such as Airtel, Vodafone, MTNL,
Credit Card Billers, MTS and others.

The Money View App says it also keeps track of your taxi, movie and train bookings, which the other two Apps would also end up doing as a part of their total offering.

According to Edelweiss' Jain, his firm's App aims to integrate their investments with expenses, and work out an advisory around it. "The spending pattern among many young people is that if they make, say, Rs 1.00
lakh they spend Rs 1.10 lakh," says Jain.

Picking up from the text messages in your smartphone, the basic framework
in these Apps allows you to see an overview of your expenses, investment,
inflows and account balances. Depending on each App's algorithms, the transactions are categorised automatically. That which can not be categorised are simply called 'uncategorised' which you can then edit and specify the category you want the transaction to go into.

"In our App, you can manually add your cash spends as well. You can even
change the categorisations if you think the App's algo has wrongly categorised it," says Jain.

The analytics abilities of any App can vary and watch out for these because
this is what caters to your primary purpose of understanding your personal
finances by going beyond a simple investments overview.

What you should demand from a money manager App?

A simple feature such as historical month-end values of bank accounts, and
monthly inflows and outflows is of great value for you if you want to
understand where your money is coming from and where it is going.

It is imperative that the App you choose should offer you charts or tables
which show a historical trend of your expenses, inflows and ATM
withdrawals. Some of the Apps available today are already offering
monthwise charts for a period extending upto six months. But a longer
period analytics is preferable and keep a lookout for an App that digs
deeper into the past and shows you the trend visually in charts.

Ability to export statements is also a must for any useful App. "We are
also going to soon add budgeting and goals in our App. You can tell the App
that you would not like to spend more than Rs 20,000 a month on restaurant
bills or you tell it that you a budget of Rs 1 lakh in a month," says Jain.
The App will send you alerts when your limits come close to being breached.

There are, however, severe limitations in what the Apps dependant on your
smartphone's text messages can do. It can not integrate your investment
holdings in your demat account for the simple reason that a vast majority
of depository participants do not send SMSes on the holdings value at the
end of a month or even a quarter. All you have is the trading portal from
where you can get this by logging in. There is no automatic seamless
integration so far.

Finaskus' Choudhary takes the expectation further and says, "It is nice for an investor to see how he has created total wealth over the last few months or years. But how about breaking down the trend by asset class?" Even within an asset class, it helps an investor to know how his direct equity investments are faring and how his mutual fund investments are faring
separately.

Analytics algorithms will be the new game changer for investors in their
personal finance management. Companies and banks in the domestic financial system are already spending significantly on analytics but with the sole objective for using it for marketing and pushing financial products.

Customer service for investors gets imparted secondary importance. But new tech startups which have made a lead through the money manager Apps such as Money View and Walnut are likely to expand their features and try and capture the missing elements.

In the payments world, the changes are more rapid. The banking regulator,
Reserve Bank of India, recently upgraded the payments ecosystem by going live with its unified payments interface (UPI) App which makes your
smartphone do things on funds transfer and other payments, which existing
digital wallet providers like Paytm are already offering in various forms.

Towards the end of last year, the Citi banking group convened developers
from India around the globe to unveil innovative digital banking solutions.
As per a press release issued by Citi in November last year, in India it
received a record high number of registrations for solutions ranging acrossbevery area of banking and financial technology including mobile payments, investment banking, wealth management, financial inclusion, savings and personal financial management.

August 27, 2016

Smallcap stocks losing traction?

A story I wrote in FC over a week back:

Last couple months saw smallcap stocks underperform largecaps

Small cap stocks, which were outperforming mid cap and large cap
stocks till a couple of months back, have started losing price
momentum, and have been underperforming in the last few weeks.

A Financial Chronicle Research Bureau analysis of the benchmark
indices revealed the benchmark small cap index, Nifty Free Float
Smallcap 100 to have fallen by 1.3 per cent, month to date, whereas
the Nifty Free Float Midcap 100 has gone up 1.4 per cent and the large
cap Nifty 100 index has stayed flat with a marginal 0.1 per cent
increase.

Going a little further, from the end of June till Wednesday, a similar
underperformance by the small cap index is detected. It has delivered
a 3.3 per cent return against the 8.4 per cent and 5.1 per cent
returns presented by the mid cap index and the large cap index.

After taking a severe beating in the first quarter of the current
calendar year, the small cap index had bounced back in the second
calendar quarter with vigour.

From the end of March to the end of June, the benchmark small cap
index supplied investors with a very high rate of return of 19.0 per
cent, as compared to the single-digit returns of 8.3 per cent and 7.5
per cent given by the benchmark mid cap and large cap indices
respectively.

This had a ripple effect on the performance of mutual fund schemes
investing in small cap stocks. In a research note early this month,
Crisil Research said, "Small and mid-cap funds were the toast of
investors among equity mutual funds in the quarter ended June. The
category, as represented by Crisil-Amfi Small & Midcap Fund
Performance index, gained over 11 per cent for the quarter and was a
consistent performer over most periods analysed."

But the superlative performance of small cap stocks had come after  a
grilling first calendar quarter during which the small cap index dived
by 13.6 per cent. The mid cap index, in that period, went down by 4.8
per cent while the large cap index was down just 3.2 per cent.

The profit growth in financial year 2015-16 (FY16) was the sharpest in
the listed universe in small cap companies and the price surge in the
June quarter was primarily a reaction to that.

With valuations reaching their peaks, some analysts said a correction
was expected. The last few weeks' underperformance is, therefore,
reflecting the sobering down of expecations from small cap stocks.

Month to date, 61 companies in the Nifty Smallcap 100 index have given
negative returns, and 39 companies have managed to be in the positive
returns territory.

The worst month to date returns in small cap stocks of Nifty Smallcap
100 index were seen in Unitech (-25.2 per cent), Jaiprakash Power
Ventures (-18.3 per cent), Jaypee Infratech (-14.8 per cent),
Balrampur Chini Mills (-13.5 per cent) and Bajaj Hindusthan Sugar
(-13.1 per cent).

Bucking the trend and gaining the most in the smallcap index universe
were Delta Corp with a month to date return of 25.4 per cent, followed
by JK Tyre and Industries (20.0 per cent), Escorts (18.9 per cent) and
S H Kelkar & Company (18.1 per cent).

July 26, 2016

Q1 results analysis: maintenance work for IbHF

Maintenance work in Q1 for IbHF

Profit growth rates were sustained but net profit margin took a hit


Average  operating profit growth rate of previous four quarters was
sustained by Indiabulls Housing Finance, one of the largest three housing
finance companies in the country, in the first  quarter of current
financial year 2016-17 (Q1 of FY17).

IbHF announced its consolidated financials for Q1 on Monday which, as per
Capitaline database, showed  a 35.0 per cent year-on-year (YoY) rise in its
operating profit to Rs 1,028 crore. The Q1 growth rate was a little higher
than the average growth rate of 32.0 per cent in the preceding four
quarters.

But in absolute value terms the operating profit came off the all-time high
operating profit level of Rs 1,112 crore recorded in the preceding quarter
of Q4 of FY16.

The housing finance company said in a earnings update statement that it had
sold loans worth Rs 1,114 crore in Q1 of FY17, more than double that of Rs
522 crore in the same quarter of previous year.  Its loan book stood at Rs
82,070 crore at the end of June, compared to Rs 59,960 crore a year prior
to that.

The incremental disbursals in Q1 of FY17 was driven by non-corporate and
mostly-retail housing loans which contributed 77 per cent, 100 basis points
more than the year-ago quarter's share.

Corporate mortgage loans share also went up by 100 basis points to 23 per
cent, while the share of commercial vehicle loans went from 2.0 per  cent
last to almost nil. IbHF noted that the housing loan disbursal in Q1 was at
an average ticket size of Rs 25 lakh with an average loan-to-value ratio of
71 per cent at origination.

The consolidated net profit of IbHF in Q1 increased by 23.2 per cent, YoY,
to Rs 630 crore, which was the third  highest rate of growth in the last 10
quarter. It also equalled the 23.3 per cent average growth rate in the
immediately-preceding four quarters of FY16.

The profit margin, however, took a bit of hit in Q1. Capitaline data placed
IbHF's profit after tax margin (PATM) at 28.1 per cent, which was the worst
PATM in the last 10 quarters. It was lower than the average PATM of 30.0
per cent in the preceding four quarters of FY16.

In Q1 of FY17, the housing finance company earned a yield of 12.43 per cent
while its cost of funds was 9.25 per cent. The loan book growth of IbHF was
at a spread of 3.18 per cent in Q1, the same rate as in the previous two
quarters of Q4 and Q3 of FY16.

The gross non performing assets (NPA), as a percentage of total loan
assets, of IbHF stayed flattish at 0.84 per cent at the end of June this
year, compared to 0.85 per cent at the end of June last year. The net NPA
too remained unchanged at 0.36 per cent.