Tuesday, December 20, 2011

IIM Placements are like cattle fairs?

While the country debates the moral hazard of politicians in making a strong Lokpal, I would like to draw your attention to another instance where a similar moral hazard is always ignored. If you are a young graduate, or any one else looking for a job your would know what I am talking about.  You guessed it right, this is HR professionals telling them to not focus too much on the money part, or to sticking around for a long term and career vs job BS. Another personal anecdote is a recent rant by a the HR head of a certain reputed group, frustrated because he found not takers for job offers from his group companies at India's premier B School, comparing placements to cattle fairs.

One would do well to try to identify agency costs to what one reads or hears in the media these days. 

Thursday, December 08, 2011

Jubilant Foodworks - Dominos India

Feel cheated by Dominos India. Had recently ordered Pizza Mania (which a a set of 4 pizzas). To our surprise there was not cheese on the pizzas but was loaded with mayonnaise. When we called up the store, the store person at first refused to agree but when we pressed him he agreed that the cheese had been replaced with Mayonnaise. 

Their reason for using it is that it is cheaper than cheese. However it is taking unsuspecting customers for a ride.  Mayonnaise is 50% Oil and 50% Egg, so they are not only feeding you more fat but even god won't help you if you are a vegetarian. Nowhere on their menu or website is this fact disclosed. Had they done this is the US, they would be facing huge class actions and criminal suite. Now I am okay with mayonnaise, however if this is their standard of disclosure than I am not sure what kind of chemicals they are putting in their products. 

While the stock of Jubilant Foodworks has been shooting for the sky (Its market cap which is over $1 billion, is interestingly 50% of the market cap of the parent company - remember Jubilant Foodworks is India franchisee of Dominos, as it gets a high PE multiple) I am not going to order any more pizzas from Dominos.

Sunday, November 27, 2011

Is Cyrus the best choice for Chairmanship?

We have all read glowing tributes about Cyrus Mistry, the new Chairman in waiting, of Tata Sons, India's most respected business conglomerate. He is not too old but is mature enough, has the right credentials, comes from a certain community and represents the largest shareholder.  All very good and he may turn out to be a good Chairman, however I have seen no analysis of why he is the number one choice.  As a small minority shareholder, I would like to know 

  • Who all were considered for post of the Chairman? After all a committee was formed for the search
  • And why is young Cyrus, best choice out of all the others considered or not considered
Why is there so much secrecy on the process? After all Tata's are supposed to be transparent and open. Or maybe I am expecting too much? 

Sachin misses out again on his 100th hundred

Arrhh! he missed it again! Twice!!!

Everything was aligned
  • No pressure test with India already up 2:Zip in the 3 match series
  • Perfect conditions for batting
  • Huge run chase
  • Home conditions
  • Thousands of cheering fans
He came close, but could not get past the nervous nineties in the first innings. The cricket gods even gave him a second chance, after the pitch surprising started to spin on the 5th morning and WI collapsed in their second effort to give India a whiff of victory. All nicely set up to for Sachin to blast a ton and take India to victory with his 100th International hundred.. But it was't to be. Sachin missed, getting out early to a delivery that stopped on him. And India could not close out the win despite useful contributions from a number of other players. 

Australia, here we come...

Thursday, November 24, 2011

Sachin Scores 100th ton at Wankhede in Mumbai?

As if truck loads of talent and some luck wasn't enough, Sachin, it seems has additional help for scoring his 100th century at his home ground in Mumbai. The powers that be have made sure that pitch curators craft a perfect pitch to make sure he gets to the landmark at his home ground.

When it comes to Sachin, every thing else is secondary. 

Wednesday, November 23, 2011

Vikram Akula resigns from SKS Micro Finance

Vikram Akula, the star face of Micro finance movement in India. has quit the board of SKS Micro Finance, a company that he founded. Akula's company changed thousands of lives for the better, freeing them from the monstrous local money lenders by providing them seed money to start or support their micro enterprises. However, with one strike of regressive policy by the state government of AP, where SKS had majority of its 'tiny loans' business, brought down the company to its knees.

When SKS was listed last year, there were many detractors who said that an MFI should not be run with a profit motive. Would be interesting to find out, what have these guys done to provide financial inclusion to the underprivileged. To be sure, SKS was making loads of money, but it was pumping it back into the system to provide more loans to the poor. Any money that shareholders would have made would not have been from the pockets of the poor (No decent sized listed company in India has high dividend yields).

If government, wanted to decrease the interest rate charged further, then the right way would have been to encourage creation of hundreds' of more SKS'. Increased competition would have brought down interest rates by forcing these companies to innovate and reduce their costs or perish.

Perhaps the trigger was malpractices by some unscrupulous players and unfair collection processes deployed by some lenders.The solutions was to identify culprits and put them behind bars for violating the law of the land. But with its poor regulation the government has thrown the baby out with the bath water. 

Sunday, November 20, 2011

Cricket loses out to Kabaddi?

The recent cricket matches between India and England and now India -WI have drawn poor response from spectators. While some of this was expected due to the heavy cricket calendar and string of defeats in England immediately preceding, the nearly empty stands have been surprising.  While, I pretend to care less about the results (vs earlier) I still am saddened to see India lose and am egging them on to win from the comfort of my living room. In contrast the IPL drew huge crowds.  This raises important questions for the administrators and players alike

1. Are the glory days of test cricket over, despite continuous cries for the purest format from the players because at the end a sport would survive only if there are spectators? 
2. Is ODI format destined to become irrelevant with Players wanting Test Cricket and Spectators wanting T20's? 

For India, importantly, this may be a chance to try popularize other sports. People are already trying to innovate in hockey to revive the game. Similarly there is brewing interest in other traditional and non-traditional sports. Kabaddi, for example.  It was interesting to witness huge in-stadium crowds for the kabaddi world cup organized in Punjab. While a part of the crowd may have been herded in by the gov't, it was massive.by any standards. Also, it helps, if team India is doing well. India emerged world champs in Kabaddi, on expected lines.

Perhaps, real acid test for cricket in India would be the series down under. India need to do well to stem decline of interest in the game

Thursday, November 17, 2011

Everonn close to raising $100 Million from PE?

As reported by BS, Everonn may be close to raising $100 million from private equity players including Carlyle and New York Life capital partners. If true then this would be among the largest PE investments in education sector. At current market price of Rs 298, it has a market cap of about $115 million dollars. However, I would be surprised if Everonn is able to pull it off due to the following reasons

1. Carlyle has burnt its fingers in the past in another Indian education company, which it self has fallen out of favor due to fears on corporate governance. With Everonn's recent problems, including arrest of the former CEO and also deferring of the open offer and poor Q2 results, PE players won't get any where near the company

2. The open offer was to be at Rs 528, almost double the current price. The sharp decline in price would prevent any preferential allotment due to SEBI restrictions on pricing (higher of average of last six months or last two weeks)

Also, NIIT, which is a venerable Indian education training company, is three times the size of Everonn and is available at less than $100 million after adjusting for its 25% stake in NIIT Technologies. And, Educomp, despite concerns on debt is also available at a lower PE of 6.5.

The deferring of the open offer is really worrisome and could see the stock really tanking to lows seen in 2009. 

Tuesday, November 15, 2011

Everonn Q2 FY12 Results: Revenues slump 26%, PAT in negative territory

Everonn announced its results for the the 2nd quarter (July-Sept 2011)  for FY12.  The effect of the recent turmoil was visible in the results. Revenues dipped 26% YoY to Rs 79.5 Cr from Rs 108 Cr last year. Decline in revenue and  massive increase in depreciation and interest costs pushed Everonn  into a loss with a PAT of negative 3.7 Cr versus 15.5 Cr of profit in the corresponding quarter of FY11.

After Educomp, Everonn is the second education company to disappoint the market this week with poor results. Everonn's share price fell over 5% in today's trade. Educomp's stock has already fallen 25% over the last 3 days. 

Friday, November 11, 2011

Educomp Q2 FY12 Results: Profit slumps 78%

Educomp today reported Q2 FY12 results and surprised negatively on the profits. The profit after tax came in at Rs 13 Cr which was 78% lower than corresponding quarter of last year (Q2 FY11 PAT was Rs 58 Cr). This despite the 16% increase in revenue.

Profit was impacted by 37 Cr of forex losses and an almost fifty percent jump in interest cost to Rs 31 Cr for the quarter  What is of concern is Rs 1908 Cr of debt on the books of the company and the muted growth rate in the School Learning Solutions which consists of the flagship smart class business.

Further the jump in debtors, inventories and provisions is a matter of concern, as is the increase in Loans and Advances.

Post Script: Educomp reported 28% growth in smart class segment which is impressive, but overall numbers are a matter of concern and do not inspire confidence.  Given the high debt, investors are likely to stay away from this counter till FCCB's are paid off and overall debt comes down. The de-leveraging would keep growth rates low in the short to medium term .

Monday, September 26, 2011

Aptech For Sale?

The news of Aptech being up for sale has been doing the rounds for a few days now. Here is my (re) take on why the deal would be difficult. Bulk of Aptech's 600 Cr market cap can be attributed to its investment in China (22% stake in BJB career education). Buying Aptech would be tough for a strategic investor  (unless BJB itself were to buy out Aptech to gain entry in India)

Any private equity investor would face two scenarios
a) No clarity on IPO of BJB career education:  Private equity guys hate uncertainty and and since Aptech has a minority stake in BJB Aptech would have a limited say in getting it to IPO. Also, a PE investor in Aptech would not be able to perform due diligence on BJB which forms the major part of the valuation making the deal virtually impossible

b) There is certainty on IPO of BJB Career Education:  In such a case, Rakesh Jhunjhunwala is better off waiting for the IPO to happen rather than selling out pre IPO.

In my view, best case scenario for Aptech, if possible, would be to sell off its stake in BJB pre IPO to a private equity player (would happen at a discount to IPO price). Pay out the proceeds as dividend and then sell the company.  Selling off stake in Aptech before the above happens would be very difficult unless done at a discount to current market price.

Tuesday, September 20, 2011

Google Doodle Wants You To Try Google Plus

Google is making a big push for Google Plus (Google+). Just sign in to your google account and go to google.com. Notice the big arrow, almost forcing you to try out Google+. This is communication/marketing at its unabashed, purest best.

Monday, September 19, 2011

Buffett Tax

President Obama intends to impose a Buffett Tax on wealthy Americans after Warren Buffett said he found it absurd that his tax rate is lower than the tax rate of his secretary and that he is willing to pay more.  Obama's new proposals seek to impose minimum tax rates and remove loopholes in tax code by lowering deductions available to people with over 1 million in annual income.

The president hopes to increase effective tax rate for wealthy Americans. Even though those earning more than 1 million dollars annually fall in the 35% tax bracket, income from investments is taxed at 15%. Given that major part of earnings of the wealthy is from investments the current effective tax rate is lower for them.

However, there is also a line of thinking that the effective tax rate, calculated as above is not correct as the companies (where the wealthy have investments) are themselves taxed at much higher rate (marginal rate is 40%) and the 15% taxes on dividend income is over and above the corporate tax already paid on income earned. In effect, the actual effective tax on income from investments is as high as 40% + 15%*(1-40%) = 49% and not 15% as calculated by Buffett (unless his companies are exempt from paying taxes)

Saturday, September 17, 2011

Why is the world facing an economic crisis?

Just trying to make sense of the current economic turmoil that the world faces today. 

1. The developed world has a problem of low growth. What makes things worse is that many of the developed economies are over-leveraged. 

2. Because of the de-leveraging there is going to be lower cash for reinvestment delaying the onset of growth. 

3. Given the fact that many countries (in the developed world) are trying to de-leverage at the same time compounds the problem. The world is counting on China and India to pick up the slack in demand but that may not be enough. 

4. While China is large much of its economy is dependent on exports to the developed world and exporting to China is not the simplest thing to do. And India is struggling with high and sticky inflation and policy makes are having a tough time trying to reduce inflation as well as maintain growth. 

5. While the world may have the capability to emerge from this crisis without a string of defaults, given that the alternative is on the table makes it even more difficult to do so. This is like a bank which may have capability to avoid bankruptcy but is likely to fail because even a perceived risk may cause a run on the bank. 

6. There is risk of sovereign default by a number of countries in Europe with many even predicting a default by United States. The fact that many large economies are in a similar position a default by one could trigger a contagion by triggering pulling out of money by investors or raising borrowing costs even more. While United States may not technically default as it can print its own dollars, monetization of debt would lead to severe devaluation of currency and cause havoc

7. And so the cycle continues.  

Governments worldwide are trying to breakout of this vicious cycle, through injections of Quantitative Easing but last couple of rounds have not helped and because of the already high debt there is only so much these countries can do. 

Monday, September 12, 2011

The Curious Case Of Manipal University!

Manipal University has inducted Mohandas Pai to help turn itself into a global business of scale. Only time will tell whether Mr Pai (former CFO of once revered Infosys) would be able to do that at Manipal only time will tell. However there are more than a few things that I am amused as well as curious about.

First the company (for profit) that is being talked about is Manipal Universal Learning (MUL) and not Manipal University (MU)(not for profit trust) so its amusing to find the two names being used inter changeably in common and business media.  Another curious thing and partly amusing is that the valuation of MUL (in every media report)  is still one billion dollars. I have been hearing about this for the past 4 years and it is still the same. During the period, Educomp rose from $ 0.5 billion in terms of market cap to over $2 billion in valuation and has come crashing down to less than $0.5 billion despite growing the business to over 5 times . Wonder what MUL has done during the period. But I guess being unlisted has some advantages in preserving valuation

Was reading a recent article on moneycontrol (http://www.moneycontrol.com/news/features/manipal-universitys-new-courseaction_585036-1.html) on Manipal's new course of action. What amuses me is that the very same things (capitation fee, NRI quotas, profit in education) that are derided elsewhere are very conveniently made to sound like panacea for the education sector. May be they are, I am not passing any value judgement however I am amused at the contrast of views expressed with such ease.

To be sure, for-profit companies in India still cannot legally (atlease not directly) run formal education institutes. Even MUL mostly owns universities outside of India (50% of the business on last count) . Of the remaining majority comes from running learning centers for Manipal Sikkim University (legal on paper but not sure if it is in the spirit of the law).

Also given the deficit of corporate governance in India's education sector wonder if MUL would gain more from Mohandas's clean image thanks to Infosys or Mohandas's image would be affected. I am curious if he would gain anything from speaking to a certain JJ Irani about his recent experiences at at the helm of  a listed  education company, that was increasingly being touted to be the next big thing.

Thursday, September 01, 2011

JJ Irani Resigns as Chairman of Everonn

JJ Irani, who was roped in by the company to improve its image in terms of corporate governance, has resigned from the Board following allegations of graft against the MD.

Its a huge blow to the company. The stock is stuck today at the 20% lower circuit with no buyers. 

Tuesday, August 30, 2011

Everonn MD arrested by CBI on graft charges?

NDTV and WSJ reported that MD of Everonn, P Kishore has been arrested by CBI in an alleged case of bribery and tax evasion. This brings into sharp focus the corporate governance practices(or lack of it) at Indian companies at a time when corruption is a hot topic around the country and Investors are likely to jump ship at slightest hint of any malpractice. 

Everonn has been consistently performing well in the recent past in terms of its financial performance and had improved its image with induction of J J Irani as non-executive chairman of the Board. If true, these reports are a huge blow to that effort by the company. 

Wednesday, August 17, 2011

Google Motorola Deal

Google has agreed to acquire Motorola Mobility Holdings Inc (MMI) for over 12 billion dollars. This comes on the heels of Google losing its bid to acquire Nortel's 6000 patents which were sold to a consortium of its competitors for $4.5 billion.  Deal amount of 12 billion for Motorola's potentially 25,000 patents seems to be a great deal for Google. The operating company, with close to run rate of over 12 billion (with consensus 13.5 at billion dollars for the year 2011) in annual revenues, is virtually free.

This is a great deal for MMI's share holders as they got more than 60% premium to the the closing price prior to deal announcement.

What I suspect however, is that Google will spin this out in a couple of years, post it has had a chance to seal rights to these patents and bought these off MMI. Google is not a hardware company and should remain that.  

Wednesday, August 10, 2011

So why did US Treasury yields drop post the ratings downgrade?

So if US treasuries are not risk free, then why are the yields falling and there continues to be a huge demand for US government debt?

The answer is that it is not about absolute but about relative levels of risk. The perception (or reality) is that if the US government is risky, then lending to any other government is perhaps riskier. And the difference (in perceived risk) just became even more pronounced.

What is probably going to happen is that US domestic funds would continue to buy treasuries (as they would have a tough time trusting any other country) even though investors from outside of US (and their respective central banks) would start to pull out of reduce incremental exposure to US debt.

Sunday, August 07, 2011

US Downgrade and its Implications?

S&P downgraded United States this week confirming what the world already knew that lending to the United States is not entirely risk free. One does not need to be an economics PHD from Harvard or have the seat of power in Wall Street, to know that one cannot keep taking debt forever to finance excess spending over one's earnings. While the United States may not default, at least technically because it can inflate away its debt by printing money, the resulting loss in value of the dollar would essentially mean a default to the lender.

The fact that Moody's and Fitch have not downgraded their credit rating has no meaning (weren't these the ones, including S&P, which were merrily rating stacks of sub prime junk mortgages as Triple A and when the bubble burst testifying that the rating was merely their opinion and investors were essentially foolish in believing them). Confidence has been shaken and that is enough to strike fear in the hearts of the investors.

Now, in the last few years during each recession, the risk averse investors took shelter in US treasuries. Where will they park their money now? Gold is one easy choice. Emerging markets anyone?

Tuesday, August 02, 2011

Aptech Is Up For Sale?

CNBC reported today that Aptech may be up for sale, and that its promoters may be eyeing partial or complete exit.  Rakesh Jhunjunwala, often dubbed India's Buffet, holds over 32% in the company and stands to make a decent return over his investment of 6 years. At its current price of 135.80, the company has a market cap of Rs 6.62 billion (Rs 662 Crore). However, I believe that any deal would be tough and here is why:

Aptech, which acquired MAAC last year, to increase its leadership in the multimedia training business in India, derives bulk of its valuation from its investment in China (BJB Career Education) where it holds about 22 percent stake. BJB had filed for a US listing but plans were deferred due to market conditions. It was also rumored that BJB's recent performance (or lack of it) and material difference in numbers on translation of accounts from statutory to US GAAP before filing may have been the real reasons the listing did not go through.

Which is what makes any deal very difficult. Even if a private equity or strategic investor were to believe that it can drive the India business of Aptech (which would be difficult, as it faces tough competition from market leader NIIT and a string of other new players with deep pockets, including Pearson (JV with Educomp) and Everonn), it would not have any control on the destiny of the China investment except hope to cash out, as and when the IPO happens. A portfolio investor can take such a bet but not a private equity or strategic investor which wants control. 

Monday, August 01, 2011

Sticky Inflation In India - Quick Question

This may be a novice economics observation but I am curious to know if the current monetary tightening in India is going to solve the problem of inflation. It is oft-repeated that prices have risen because of supply side issues. The logic of monetary tightening is that it would lower demand, lowering pressure on price. However, if it is supply side constraint, demand may slide down but supply would be further lowered. This would lead to sticky inflation even as growth (proxy for demand) expectation gradually decreases, as we are witnessing today.

There is probably no magic wand, but India need to work on the structurally improving supply by improving infrastructure and eliminating delays and inefficiencies in the system. With government muddled in one crisis (read scam) after another, reform process has come to a screeching halt. 

Thursday, July 28, 2011

Corruption in India - Quick Question

This question may be quite irrelevant, however I am curious to know if the level of corruption has systematically  gone up (versus say 20 years ago, and not just in terms of quantum of amounts involved ) or is it more visible these days because of greater media scrutiny? I am inclined to believe that it is the latter however the former appears equally likely. 

Tuesday, July 26, 2011

Number of Higher Education Institutes in India (Colleges and Universities)

The detailed breakup of higher education institutes (Colleges + Universities) in India (as of December 31, 2010) is given below

Google has quietly changed the background color of sponsored ads (top of page) . It now appears to be closely merged with organic ads making it easy to confuse it with the top organic result.  No doubt, this would bring in more  clicks to the search giant. To be sure the background color is not white and the segment says that it is Ad, but the new color scheme makes it easier to miss it. Check for yourselves

Saturday, July 09, 2011

Google+ Invites

Logged in this morning to find out that I had access to Google+. I am excited and a little scared at the same time. Already adding people in circles (On facebook I only accepted invites). With facebook I know I can shut it out any time (actually don't log in frequently).However with Google+ I think it is going to be tough. I am always on gmail and with +  link right on top ribbon, it is convenient and tempting to sneak a peak (maybe even share).

The interface is neat (very, infact) and google has done a great job at interlinking its other services (already shared items from Picasa and Reader). Will be interesting to see, how Google link- in third party apps (Big draw on Facebook) which would increase its utility value to people. If it will and do it well, I think it will become a serious competitor to FB. If I was with FB, I would already be thinking of advancing the IPO.

PS: Just deleted my Orkut account (the only online social network I was active on at any time)


Monday, July 04, 2011

Is this the beginning of the end for Facebook?

Was watching a TV series based on mythology (Dwarkadheesh - running on Imagine TV) which set me thinking. Most of the villians in Indian Mythology initially started out as good people and through powers granted by God became greatly successful. However they eventually met 'Hamartia' (http://ancienthistory.about.com/od/drama/g/Hamartia.htm) when they lost track and became villains instead. They were eventually brought down by powerful miracles or avatars which otherwise seemed innocuous to the all powerful villain.

The situation is similar to modern large successful corporations. When these become very successful they tend to lose sight of what made them great. Often innovations which initially look innocuous bring these giants and this happens as these companies stop being good and become villains. Take large companies which become virtual monopolies as an example. Their profiteering leaves space for new smaller companies to innovate and lure away wary customers. Was wondering if hubris has set in for facebook as well and would it lead to Hamartia. Constant wielding of power by this virtual social monopoly has left many people disenchanted (case in point the new facial recognition feature) and were only too willing for to switch to an alternative. The answer may be negative in this case but they better watch out.

Friday, June 24, 2011

Groupon IPO Analysis

Much has been written about the $420 million loss reported by Groupon in their pre IPO filing. While one would have liked to see a positive number already, frankly, it is tough for a company which grew at 2241% last year (from ~$30 million in 2009 to ~$713 million in revenues in 2010) and revenues in Q1  -2011 are already over 644 million (vs 44 million in Q1 2010)

Off the 420 million loss, roughly half is acquisition related, non recurring, one time loss. Balance costs includes cost of about 242 million in Online marketing primarily to acquire subscription customers (like you and me) who subscribe to their daily coupons. Much of this is also likely to reduce in proportion once the growth rates fall to less than 100%.  (they already have over 83 million subscribers across 43 countries)

Similarly, G&A costs as a proportion of revenue would also likely, go down as it gains scale in the new markets that it is establishing itself in.

What is interesting in their filing is that they have netted off these expenses and shown a non-gaap measure called Adjusted Consolidated Segment Operating Income (adjusted CSOI). Various financial reporters and experts have panned them for this, accusing them of trying to rewrite acconting rules or trying to mislead investors.

On the contrary, I believe that Groupon is justified in this as 1) this is normal practice to show non-gaap measures to remove effect of special circumstances and show how numbers would be like in steady state and 2) it is really meant for the benefit of experienced investors and equity analysts who can use this information to build their future projection. The adjustments too are clearly marked and the filing clearly explains as to why the expenses being adjusted are not normal runrate expenses.

Now, just annualizing Q1 revenues puts them in revenue runrate of $2.6 billion a year. However given their growth rate, I suspect that they can easily end up in the range of $4-5 billion for the year 2011 or more. At these levels the asking valuation of $20 billion does look attractive.

What remains to be seen is how grabbing an early lead in number of subscribers, leads to a sustainable competitive advantage (with all the clones gunning for the same pie)

Wednesday, June 01, 2011

Sania Mirza in finals of French Open

Sania Mirza just reached the finals of the Fresh Open in the womens doubles category along with Vesnina defeating Huber and Raymond

Monday, May 23, 2011

PPP in Education

It has been reported that government wants to expand PPP in education (and healthcare) sectors in the 12th Five year plan. While increased focus and allocations are welcome, government must introspect what has happened to existing schemes. The ICT@Schools scheme is one of the most successful schemes to date with several thousand of schools being enabled with IT labs, lower teacher absenteeism and better academic performance due to participation by companies such as NIIT, Educomp, Everonn etc. However, lately these companies are staying away from such tenders as the scheme is marred due to excessive delay in payments by state governments. While these private players put in upfront capital to create infrastructure and take servicing responsibilities the least they can expect is timely payments. The average receivables/payment cycle for most of the companies is over a year with some states not paying for even longer durations leading to expensive capital being stuck in these contracts. In the last 12-18 months none of the large players has taken up new schools contracts. Even though some new players have emerged the pace is no where near what it used to be over the first half of the 11th plan.

Similarly, despite much fanfare the PPP scheme for model schools is floundering. Top areas for improvement for these PPP schemes are 1) tendering process b) timely payments c) recognizing that the private sector's main motivation is creating shareholder value

One excellent scheme that is doing well is the one for vocational skills. National Skills Development Corporation is a fantastic structure for encouraging private sector capacity creation. It has already given soft loans to over 30 projects including to Everonn, which aims to train 15 Mn people over 10 years. The aim of NSDC is to train 150 million people by year 2022 vs current total capacity of less than 5 million per year. NSDC's target is part of overall target of the government of creating 500 million skilled people by the year 2022. NSDC provides primarily soft loans to private companies with no further interference. No doubt, some of these  ventures would fail to achieve target capacity but NSDC would achieve large numbers at fraction of the cost otherwise required.

Saturday, April 23, 2011

Everonn- NSDC Deal Analysis

Everonn recently announced a deal with NSDC to train 15 million people over the next 10 years. While one must congratulate them for being ambitious, there are a few things that we note

1. Reading most media reports leaves you thinking that NSDC will pay for the training. Incorrect! NSDC is not going to pay for the training; it is only providing low cost funding, as soft loans (and equity) to create capacity. The 15 million number is based on a 10 year business plan, which is largely an excel exercise at this stage. This is not a 15,000 cr contract with NSDC as reported in the media.

What must be noted that Everonn trained about 2000 people on vocational skills last year and aims to scale this up to 2.5 lacs in FY12 itself. Pretty steep climb in my view. Especially given that not too many people have been able to scale up vocational training, NIIT and Aptech being exceptions. And NIIT, over 30 years has only scaled up to training 5 lac/year.

2. Everonn is targeting an average fee of Rs 9000 per student. Though it sounds low, the propensity to pay (even this low amount) for training in the target population is likely to be a major challenge

3. 15 million means over 10 years implies that in the 10th year, they would be training at least 2-3 million. Given that India makes 30 million babies a year, this is 7-10% of the annual incremental population, implying 10% of population being trained by one company. Given that they are targeting service sector skills only, the implied share of target segment is huge

4. They hope to make profits in the first year despite a steep ramp up. Unlikely, given that initially the sales and marketing costs are going to be very high

That said, the fact that they can call themselves a government (or at least a semi government) organization is a huge positive and would give them credibility in the market. What remains to be seen is whether this advantage, comes with any baggage as well.

Wednesday, April 20, 2011

Anna Hazare Praises Narendra Modi

Don't understand the fuss about Anna's praise of Modi driving development in Gujarat. Per Gandhi, one must separate the man (or woman) from his (her) actions. This usually applies in reverse (ie for bad actions). However, fact is that there is development in the state run by Modi, and he is widely seen as the man responsible for it. So what is wrong in praising a good result achieved by a person?

Sunday, April 03, 2011

April 2, 2011 - What a day! What a fantastic day

Saturday, April 2, 2011. The day would forever be etched in Indian psyche. it is the day India won the cricket world cup for the second time, after a gap of 28 years. It was same day in 1983 that kapil's devils had done the country proud. this one is equally special

Friday, April 01, 2011

Gmail Motion

Have you tried the new Gmail Motion yet!

Google's this years April Fool prank, clearly it fails to fool you. Nice idea but execution is not that great. Best pranks leave you thinking that this is possible and then make you realize how fooling you were to believe so. As soon as I hit the landing page of Gmail.com I knew that this is an April fools prank. That apart the videos and stories are incredible and appear like a kids prank rather than a prank targeted at majority gmail users.

Monday, March 28, 2011

Ricky Ponting steps down as Australia Captain

Cricket World Cup 2011 performance took its first big toll today with Ricky Ponting stepping from his position as Captain of Australian Cricket Team. With this decision, he has perhaps avoided an early end to his career as otherwise, there is a chance that he may have been dropped from the team itself.

By voluntarily stepping down (as alleged by him) he has hit another master stroke following his ton in the quarterfinals. But it remains to be seen if he can rebuild on this

Friday, February 18, 2011

Investing in Formal Education In India?

Investing in Formal Education In India? My thoughts on risk!

As an investor in the education space, I sometimes ask other investors who are investing in Formal education space in the country, whether they have built in risk of regulation clamping down on the popular "innovative structures"  (aka services and real estate companies attached to institutes) and almost without exception they look at me with disdain. They clearly see no risk (or some who do, many would not know how to model it in their valuation and simply believe in the greater fool theory) . Or they get opinion from a advisor/lawyer who makes a living out of advising companies to take this route, sidestepping regulation.

It turns out it was silly of me to expect them to see this risk. Many of these foreign investors, who operate out of the country take recourse to these innovative structures (well silly me again! these are in fact quite standard) to operate out of the country through their advisory arms, which are set up as independent companies, apparently to give investment advise (to themselves!)

Sorry guys (and girls) the joke is on me!

Should Microfinance be regulated? And the role of Media!

As part of my daily routine I checkout VCCircle, and generally, the quality of its articles is good (certainly way better than majority of print media). But I think this particular post reeks of hypocrisy.

Lets replace, the Micro Finance sector with the media sector. You would agree that role of Media is to inform objectively. I am sure that many in the media industry sensationalize news at the least, not to mention a few, that fabricate their own. Many would say that the media sector has a huge social obligation, including online.

I would like to ask Shahad and others in the media industry who are not happy with high salaries in microfinance,  how would they view regulation on salaries in the media industry. I suppose owners would be happy. Let me put it differently, would they agree to a cap on profits on this sector. Maybe even, be mandated to become 'not for profit' like education sector is in the country. We all know how being 'not for profit' has helped in educating the masses in India.

What Say?

ODI World Cup 2011 - Opening Ceremony

Saw portions of the the opening ceremony for the ODI World Cup 2011. Coming on the back of spectacular opening ceremonies in India, for the commonwealth games and in China, for the Asian games, the entertainment value of the ceremony itself was a low.

Perhaps, the real story lies elsewhere. For a  nation, where cricket is religion, getting a taste of the biggest event in the sport and the overflowing enthusiasm were the real highlights of the event. Unlike India and China where the events were showcased up as proxies for nation's coming of age, there was no hoopla about the organization. The enthusiasm is rightly focussed on sport and it shows (from all reports in the media). Bangladesh take on co-hosts India (where the biggest news/buzz is the lack of buzz about the ODI World cup) in the opening tie, it is a chance to showcase that they belong at this stage

Sunday, February 13, 2011

The Medici Effect: On Innovation

On Innovation

Innovations are most commonly found at intersections. If innovation is chance driven, combining two unrelated subjects, exponentially increases the chance of new innovative associations (which makes for radical innovation rather than incremental innovation)

How to increase chance of innovation by leveraging intersections?

1. Consciously combine unrelated concepts
2. Work with people with diverse experiences

Effective Brainstorming

Contrary to popular thinking, 'N' people brainstorming together come up with lesser number of ideas than 'N' people thinking individually. This happens due to 'blocking' (In groups, peoples' short term associations get blocked by others)

Source: The Medici Effect

Tuesday, February 01, 2011

FT MBA Ranking- IIM-A Ranked 11th and ISB ranked 13th

Indian B Schools are making it big at the world stage. IIM-A has been ranked 11th and ISB has been ranked 13th in the global survey of leading B Schools. What is fantastic is that ISB is only 10 years old institute (when it figured in the top 20 it was only 6 years old) and IIM-A's PGPX program (for which the ranking applied) is only 4 years old.

While there are numerous areas where these schools can improve, one cannot doubt that these schools do attract quality students and in turn they provide superb learning environment including world class faculty.

Maybe an Indian school in top 10 next year. Cheers to that!

Sunday, January 30, 2011

11th Five Year Plan - Plan Versus Actual Spending On Education

In one of my earlier posts, I had pointed out a 5x increase in allocation for education for the 11th five year plan (2007-2012), by the Government of India. This was a welcome change for a sector that had been severely lagging, despite everyone wanting to do something about it. With a progressive education minister, one hoped that things would improve and improve fast. However, while there is definite action, the pace still leaves much to be desired. Many of the bills introduced are still languishing, for a reasons best left unsaid on this blog. Perhaps a telling graphic is the one below, which plots the Planned outlay vs Actual expenditure for the 11th five year plan. The fourth year is coming to an end and has let a huge gap to be filled in the last year.

  1. Of the total plan outlay of  Rs 273 K Crore, only 28% i.e. Rs 87 K Crore was spent in the first 3 year (2007-2010)
  2. Planned expenditure by Central government during FY11 (as per budget) is another Rs 42 K Crore. 
  3. Assuming all of this money is spent as planned, this leaves a gap of 186 K Crore for the 5th year, i.e. in FY12. This amounts to 58% of the total 5 year outlay, is almost one and a half times the spending in the first 4 years and more than four times the Planned expenditure for FY11. 

Government has ambitious plans for increasing reach of education in India.  It is aiming for universal education at the school level and for increasing the gross enrollment ratio to 30% for higher education by 2020 (vs 12% currently). One can already see that they are going to keep pushing these targets back. Many in the government hope that private sector would pick up the slack. However no one in the government is ready to provide clarity on allowing For-Profit Education. Philanthropy, the only legal model of private education currently, alone would not fill the gap.

Wednesday, January 26, 2011


Pre-commitment can be a pretty useful tool. What is there was a device that allowed you to precommit to you doing what you want to do and then made sure that you tried your best to do the same. It would for example stop you from eating a double fudge chocolate ice cream when you are trying to get back in shape or in the financial world, make you stick to your sell the stock when the price falls 10% or rises to reach your goal. We would not have traders turning into long term investors.

Such a device would not let you fall for short term rewards and sacrifice long term gains. I for example would get up sharp at 7:30 am (time of my first alarm) instead of 9 am every day (20 minutes past the second alarm on my smart phone). Image, my smart phone would get up and spray water on my at 7:35 if I am still in bed. Or a bed which starts to fold up and roll into the wall. Imagine the possibilities with precommitment

Friday, January 07, 2011

Those who saw CAT 2010 'results' are unethical?


The above word does not even begin to describe the CAT Convener Prof Himanshu Rai's statement calling the students who saw their results through legitimately logging into the CAT website before the officially announced date for declaration of results.

Instead of saying 'Mea Culpa' he says the following "This has shown them in a bad light as people. They are certainly not the kind of people IIMs would like to have in their institutes and definitely not the kind of leaders we are looking forward to make in the future,"

I mean, not only are IIM's not accepting that they goofed up (...again, after last year's fiasco) and admit that they are poor managers of IT systems but are accusing the young curious minds. If at all the guys who first saw the results may have been more curious and nervous about their results, while many of the others who heard about it and logged would have done to to find out if IIM's were that stupid. Many of those who apply to IIM's are from the IT industry. This is the second decade of the 21st century. Even kids know that confidential information is to be put securely on a website.

This is like you give a gold coin to a person and then call the police and say he is a thief. Or imagine, a large company is bidding for a tender and 'accidently' mails out the quote to all its competitors and then accuses them of unethical behavior for quoting lower.  Why? You were not supposed to receive a letter.Even, If you received were not supposed to open it. Even if you opened it you were not supposed to read it. Did you not see the letter was marked "confidential" . Now that you saw the number you should have bowed out and not quoted. Not only this you should have sent back a cheque for a million dollars as penalty for corporate espionage and be disqualified from all future tenders. 

A whole lot of crap!! Isn't it? Ek chori aur doosra sina jori!

Mr Rai, have some humility at least. Please accept that the IT guys managing the system f**k*d up. You need not even say that IIM professors are bad managers (and know zilch about IT security and managing). Students would still keep applying because IIM's are a great sea of knowledge that students can gain from. Or are we hoping for too much?

Tuesday, January 04, 2011

Citibank Fraud: FIR against Pandit

MD of Helion Ventures has filed a police complaint against Citibank which names several senior officials of Citibank including Vikram Pandit. Farcical as it may sound, it is sounds like sweet justice to hundreds of small time investors and other customers of these big banks, who in the past have faced harassment at their hands, but were too insignificant to draw attention. 

In Sanjeev Aggarwal, who earlier had founded Daksh, there is a guy with enough clout and credibility to create adequate nuisance value for Citi. One of my friends told me that he was happy about the FIR as Citi had, in the past overcharged his account without informing him, an amount that he could not recover as he gave up after repeated reminders to Citi's customer care. I too had been charged an insurance fee without my knowledge on my Citi Credit Card, a scheme that I had not opted in to, and had to fight tooth and nail to recover the charges. These may be small amounts for Citi but these hurt an ordinary customer just as much. 

For Sanjeev though, it is more than money at stake. For a GP (General Partner) at a private equity firm credibility is supreme. Which LP (Limited Partner) would now give money to a GP, who got conned out of his life savings by a small time private banker. We feel sorry for you Sanjeev and hope you recover your money at least. 

For Citi more than the fraud amount, loss of credibility and delays would hurt them more, especially in the retail segment and needs to take immediate steps to regain customer confidence. 

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