IIPM ARTICLE AND PUBLICATION

Tuesday, March 26, 2013

Rakesh Rewari

As the number of MSMEs grows at a Brisk Pace, SIDBI’s mission of Providing Timely and Adequate Financing only gets more Daunting. Rakesh Rewari, Deputy MD, SIDBI, discusses The Bank’s plans with Mona Mehta

Rakesh Rewari, Deputy Managing Director, SIDBI, who possesses 38 years of experience in commercial & development banking with leading financial institutions and banks in India, covering a wide range of activities relating to MSME (MIcro, Small and Medium Enterprises) financing, venture financing, technology financing, entrepreneurship, micro credit & incubation funds, is a busy man these days. In a tête-à-tête with B&E’s Mona Mehta, Rewari reveals how SIDBI is grappling with the challenges faced by MSMEs in India.

B&E: How are you handling the tight liquidity scenario post RBI’s credit policy announcement? Specifically, how are you supporting MSMEs?
Rakesh Rewari (RR): SIDBI has provided timely financial support to the MSME sector during the global financial crisis and economic slowdown to overcome their liquidity problem. During FY 2009-10, SIDBI provided additional support to MSMEs, such as need-based restructuring of debt, coverage of loans up to Rs.10 million under credit guarantee, providing customised risk capital to MSMEs and setting up an e-platform called NSE Trade Receivables Engine for E-discounting (NTREES) for discounting of MSMEs receivables on real time basis. Further, the bank accorded greater thrust to sustainable development of the MSME sector by way of, inter alia, promoting energy efficiency, clean production credit lines, Green Rating, et al.

B&E: But are you also addressing the issue of inefficient energy use in the MSME space?
RR: To improve productivity and competitiveness of MSMEs through energy efficiency (EE) measures in their production process, the bank upscaled its EE financing by contracting bilateral Lines of Credit (LoC) from Japan International Cooperation Agency (JICA), Kreditanstalt fur Wiederaufbau (KfW) and French Development Agency (AFD). Some of the notable EE initiatives of SIDBI include providing collateral free credit to Mumbai taxi owners to replace their existing petrol taxis with CNG fitted taxis, special refinancing to Delhi Financial Corporation for assisting more than 600 LPG fitted auto rickshaws at Chandigarh, financial support to Bhartiya Micro Credit to provide 500 rickshaws to disadvantaged persons in and around Lucknow and financial assistance to Friends of Women’s World Banking for providing 50,000 solar lanterns to micro entrepreneurs in Manipur and other states of North Eastern Region.

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

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Monday, March 25, 2013

B&E This Fortnight

INTERNATIONAL
ECONOMY & BUSINESS STRATEGY

Who’ll buy Twitter?

The social media landscape has suddenly been set ablaze with a tug of war between technology titans Google and Facebook. And this time the reason is Twitter. Strategically, Twitter will give a leading edge to the technology barons. The run up to the acquisition is much obvious as the site has lately picked up on the social media circuit and is adding nearly 30 million users every month. Even its revenues are expected to double by 2011. Therefore, Facebook and Google are eyeing this opportunity to boost their market share and leverage the huge subscriber base following twitter. Orkut, Google’s initiative which majorly lost its subscriber base with the launch of Facebook is also looking forward to this buyout. Google was even in talks with Groupon but the developments ended with the latter raising money from venture capitalist. Google & Facebook want total access to Twitter’s data to make use of the real time information, which is an integrated part of their portfolio offerings and have been indexing the tweets by the users. However, it will certainly be interesting to watch the valuation of Twitter which is estimated to be around $10 billion, way ahead of what the analyst speculate. Twitter was valued at $3.5 billion last year when it raised money. It will be an interesting buy for both companies to back them with a big fan following.

Pepsi’s skinny woes!
US food and beverage giant Pepsi Co. posted a disappointing Q4 results with income falling by 5% as compared to Q4 2009 figure. The company’s net income declined to $1.37 billion in Q4 2010 from $1.43 billion in Q4 2009. Though the company is extremely optimistic about the synergies emerging from the acquisition of its main bottlers apart from the $3.8 billion takeover of Europe’s biggest dairy products company, Wimm-Bill-Dann Foods, it has baffled analysts with unsatisfactory guidance for 2011 amidst rising input costs. Meanwhile, rival Coca-Cola has reported a three-fold surge in its profits in Q4 2010. Considering that the recent launch of ‘a new skinny can’ by PepsiCo has invited criticism from NEDA, its CEO Indra Nooyi has all the reasons to rework her strategy.

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Monday, March 18, 2013

Bringing out the Mettle in The Metal

Hindustan Zinc has gained from consistent increase in productivity and efficiency, besides favourable market conditions.

Over eight years have passed since the acquisition of Hindustan Zinc by Vedanta from the Indian government. And going by the results, the Anil Agarwal owned group has been able to progressively give it global size and scale, while keeping it internally strong. The most certain evidence of that is the way the company has emerged post the slowdown.

HZL showed a huge jump of 41% in net sales yoy for FY 2009-10, when it posted sales of Rs. 80.16 billion. Profit After Tax grew by 48% yoy for the period and stood at Rs.40.41 billion. That was admittedly from the low base of the previous year, where the company saw a decline in toplines and bottomlines owing to recession. For the half year ending September 2010, the company has registered net sales of Rs.41.13 billion (growth of 24.58% yoy) and profits of Rs.18.39 billion (growth of 11.24% yoy). The margins were lower than expected due to high stripping costs, storage costs and cost of power owing to higher cost of coal.

COO Akhilesh Joshi comments to B&E, “The key reason for the growth is volume growth as well as improved efficiencies.” In all, Vedanta has invested around Rs.100 billion through HZL. Production capacity increased to 879000 tonnes per annum (TPA) for Zinc (from 169000 TPA in 2002) and 85,000 TPA for lead (from 35000 TPA in 2002). Going the integrated route has been another key contributor to increased efficiencies. Through investments in exploration, the company has added 152 million tones of resources over the years as opposed to depletion of 26.3 billion tones. In FY 2009-10, the company expanded ore production capacity to 8.60 million tonnes per annum through expansion in the Rampura Agucha mine. It also commissioned the 210,000 tonnes per annum Hydrometallurgical Zinc Smelter at Dariba Smelting Complex. In addition, it has developed captive power capacity of 394 MW. The acquisition of Anglo Zinc, when completed, will add significant capacities, and make it the world’s largest zinc producer; besides improving its exposure to European and African markets.

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Tuesday, March 12, 2013

Bonding with Bonds Peaks

World Bond Markets have been a Major Source of Capital for the Governments and Corporate Entities in the Developed World for over 5 decades now. But, Global Recession spurred Government Bond Issuance and hence Developed World Economy moved towards Borrowing through Bonds while banks continue to Struggle

Bonds take over banks

The importance of bond markets as a source of finance increased with greater significance during the recent economic downturn as companies diversified away from relying on banks for funding and many governments increased borrowing to fund their increased spending obligations for the massive economic stimulus to their economies. Amounts outstanding on the global bond market increased 10% in 2009 to a record $91 trillion (see figure). Domestic bonds accounted for 70% of the total and international bonds for the remainder while the same remained at 87% domestic and remainder international in the year 1999. US remains the largest bond market with 22% of the total global bond market and 39% of the total domestic bond market in the world followed by Japan with 18% of global domestic bond market.

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Monday, March 11, 2013

Succour Punch

A 15-Point Plan has been in Place for Decades for the Uplift of Muslims but it has Led to no Visible Improvement in The Community's Lot

Beyond political speeches and public posturings lies the truth. The ruling class has paid lip service to the community for decades and large sections of India’s Muslims have struggled to keep up with a nation on a rapid growth curve. Even the Prime Minister’s 15-point programme, devised to eradicate the problems of the minorities, hasn’t been of much help.

Says Nafees Ansari, Former Principal of Zeenat Mahal Government Senior Secondary School, “In our country, formation of committees is the only solution. These committees take forever to diagnose an ailment. The process is so lengthy that by the time a treatment is prescribed the ailment either takes a new shape or becomes incurable.” She further adds, “The 15-point programme is no different. The suggested remedies remain on paper.”

Dr. Zafar Mehmood, Chairman, Zakat Foundation of India and former bureaucrat, echoes the same sentiment. He was associated with the Sachar Committee and is now aggressively pursuing the implementation of minority welfare schemes. “Solutions are available. The problem is at the bureaucratic level. The bureaucracy does lacks the need will,” he says.

Dr. Mehmood says: “There is need for proper monitoring of schemes. The ministry of minority affairs has now appointed state-level monitors in the hope that this would speed up implementation.”

Praising the work done in Moradabad district of Uttar Pradesh, Dr Mehmood says: “Excellent work has been done in this district but the situation is rather disappointing in the rest of the country”.

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