Competition in Personal Loans Market Driving Interest Rates Lower

Not sure if you have noticed, but the number of calls I am getting, offering a Personal Loan at low rates has increased multi-fold. The number of spam emails is also increasing.

The interest rates have fallen sharply as well. Loans that charged 15-18% annual interest rates in the past, are now being offered at 12.5%. The offers also include discounts on processing fee.

Interestingly this has happened despite the fact that RBI has not yet decreased interest rates. But this is likely an impact of the prevailing liquidity in the market. Of the various banks, Stan C seems to be offering the lowest rates on personal loans (checked online and this phenomenon is happening in UK market as well). 

Anyways, if you are looking for a personal loan, this is perhaps a good time to consider taking one. 

Khobragate: Notes to Self and Importance of context

US View:

1. A case of violation of rights to fair and equal pay, and a case of mistreatment of domestic help 
2. Tough to sympathize with the high flying diplomat that breaks US laws 
3. Indicative of social inequality in India 
4. Cavity search: Standard Procedure

Can't argue against that. However the view in India is different. 

India view 

1. Case of a powerful nation throwing the book on an Indian national
2. Hard to sympathize with someone (the maid) who gets paid more than an average IT programmer in India 
3. While Indians have faults (which need to be discussed separately), but they definitely need to draw a line on humiliation, even if it comes from the most richest national in the world 
4. Cavity search as humiliating as Rape (Just as calling someone 'Monkey' be branded as being racist in another famous situation) . US cannot get away with it hiding behind 'Standard Procedure' tag. To further rub salt into (emotional) wounds, it was supposedly for Khobragade's own protection. Cavity search is de-humanizing for anyone, let alone a self respecting woman, who thought that through education and hard work, had left behind the tag of being untouchable and being low caste in India and come to United States, the land of equality and supposed fairness for all.  
5. US diplomats get away with murder (remember what happened in Pakistan last year, where a diplomat shot dead 2 Pakistanis and was allowed to go back to US), while here another diplomat is being charged for visa fraud. If this is not double standards then what it is. 
6. Can think of several big wigs in the US corporate world who mis-represented facts (US sub-prime crisis) who have never been touched or arrested, let alone cavity searched. Seems there is an alternate set of laws and 'Standard Procedures' for them. Ironically, a certain Preet Bharara is a vocal, local champion crusader against such people, who should have empathized with Khobragade's angst and humiliation as he hails from India, is believed to be acting 'whiter than white' and going after a few famous Indians in his quest for a political office. 
7. The same Preet Bharara which vouches for US legal system and champions US laws, is seen as being implicit in breaking laws in India  and seemingly does not think it is a crime to do so. 
8. Last while US lectures Indians on morals and ethics, it needs to see itself in the mirror and remember it is home to racism, atrocities and distrust against minorities at even the swankiest of places (against mexicans, african-americans, asians, Pakistanis, even the chinese are not spared and are stereotyped) and regularly justify religion and racial profiling of people. Its history is littered with crimes against humanity. Still not convinced, think Hiroshima. 

Anyway's my note to self is to be mindful of the context. What is okay in one place and time may not be okay in at another place or even same place at a different time. 

Are markets being rational or irrational with these stocks?

Someone shared the following information with me. Showing it verbatim 

____________________________________________________________________________

Markets can stay irrational longer than investors can stay solvent, said Keynes and it is as true today as it was when it was said. There are aberrations that leave the most astute investors stunned. Please find below 10 such stocks that have risen or fallen contrary to market expectations, defying logic.

1. Jubilant Foodworks: Here is a case of “analyst proposes market disposes”! Jubilant is holding on to it fort despite a 40% earnings downgrade this year and notwithstanding expensive valuations (37x 1-yr fwd earnings was sustained thro the year) that implied expectations were sky high. Surprisingly, the stock fell only 1% YTD. FY15 EPS estimates, which were Rs44 in Jan 2013, were cut to Rs32 by Nov 2013. Furthermore, estimates for same store sales (SSS) growth for FY15, which were at 22% YoY in Sept 2012, were cut to 12% now.

2. Just Dial listed at 40x PE in May 2013 and enthused the markets further by being re-rated to 60x+ PE within six months. Guess it is cheap at 16x currently, but not to forget that this valuation is at 16x sales and not Ebitda or Earnings!

3. The stock prices of Mindtree, HCLT, TECHM, Persistent, and Infotech shot up 100-150% this year. In sharp contrast, FY15 earnings upgrades for these companies were only 15-30%. Still interesting, these earnings upgrades were almost entirely due to currency and not due to improvements in the business outlook for these companies. Therefore, there is no major change in growth assumptions. However, what defies logic is not the sharp upward move in these stocks. BUT, it would be interesting to inquire why these high ROE/ROCE companies with relatively clean managements traded at <10x few="" for="" past="" pe="" span="" the="" years="">

4. Westlife still finds takers at 150x+ PE, and it is only a franchisee, not even a brand owner. Going by the Jubilant example, earnings expectations do not seem to matter. The stock already discounts years and probably decades of robust growth. The last time I saw a stock at ~150-200x PE was Wipro in 2000, 13 years down and still 30% shy of its peak!
5. Bajaj Auto’s market share in 2W has almost halved in three years. A couple years back, the difference between the mkt shares of Bajaj and TVS in domestic 2Ws used to be 500bps (Bajaj @ 20.5%, TVS @ 15%). Now it is down to 200bps (Bajaj @ 13.5%, TVS @ 11.5%). Bajaj Auto is up 100% in three years. Bajaj’s export volumes that are close to peak margins may have aided the stock. However, is it not pertinent to ask why Bajaj has not been penalised for failing to protect its domestic turf?

6. Axis Bank – the MSCI havoc: With no FII headroom, the Axis stock collapsed after it was removed from the MSCI India Index. Furthermore, NPAs worries etc amplified the “fear” factor. The stock corrected from Rs1500 in May 2013 to May 2013 to

7. HDFC: Despite one-year forward book value growing by 48%, the stock has returned zero returns in the past 38 months. How can one forget the blurb “cumulative NPA of just 3bps since 1977” that sustained its appeal? Not to forget the various stakes — 1) 22% stake in HDFC Bank, which is up almost 100%; 2) stakes in HDFC Life (from loss of Rs2.75bn in FY10 to net profit of Rs4.5bn in FY13): AMC (profit up from Rs2.1bn in FY10 to Rs3.2bn in FY13), HDFC Ergo - General Insurance (from loss of Rs0.9bn in FY10 to net profit of Rs1.5bn in FY13) where profits are up massively in the past three years.

8. United Breweries – Scottish and Newcastle entered into an alliance with UB Beer in Dec 2004. Since 2004, the stock is up 60-80x. Ebitda margins did go up from 6.5% in FY04 to 14.5% in FY06. However, since then, for the past eight years, Ebitda margins have remained flat at ~12%. Scottish and Newcastle was acquired by Heineken in Jan 2008. Since Jan 2008, UB Beer is up 130%+. There were considerable expectations about growth opportunity in India, given under-penetration and a young population etc. However, in the past five years, volume Cagr was 12.3% (lower than many other FMCG categories). In fact, in FY12 and FY13, volume growth slowed to ~5% pa. And lo and behold, despite all these factors, the stock re-rated from 40x to 90x PE in the past five years! Logic, where art thou?

9. ITC – Consider this: ITC’s five-year Cagr in (sticks) = Philip Morris’s 2.2% pa vs. ITC’s 0.4% pa. Furthermore, dividend yield of Phillip Morris is 4.5% in dollar terms whereas that of ITC is 1.6% in rupee terms. Nonetheless, in the past three years, the ITC stock was up ~90% whereas the Phillip Morris stock increased 45%. This is not even adjusted for buybacks by Phillip Morris and ESOP dilutions by ITC.

10. Decimation of the PSUs: The “navratnas” do not seem to sparkle anymore! Not surprisingly, these companies seem to be languishing close to or below their list price. HPCL is below its listing price of 1992, IOC is at the same levels as 2003, Power Grid’s price is the same since its IPO listing in 2007, and Coal India is below its IPO listing price in 2010. And do not forget MTNL, which is below its 1993 listing price !!

How to spot a valuation bubble? .. and profit from it!

Look at the following chart to decide if you are tracking a bubble (forming or bursting) to profit from it and avoid huge losses.

UBER Promo Code for India: Get Free Rides on Luxury Cars

UBER launch in India brings luxury cab rides to the common man. Get rides on Mercs, Beamers, Audis and other luxury cars in India. To promote new users to sign up, UBER offers free credits to first time riders. Visit the following link and follow the instructions to sign up and get free credits and free rides:  https://uber.com/invite/uberequt

Or signup with the promo code - UBEREQUT to get free credits  to your account. You can then use other promotion codes (if available to get additional discounts). UBER has been recently launched in India. and is already available in cities like Bangalore, Hyderabad and Delhi/NCR. Install the app to see if it is available for your city yet and travel in style.


My free rides so far on UBER have consisted of

1.  Honda Accord
2. Mercedes S Class
3. BMW 5 Series
4. Toyota Fortuner
5. Toyota Camry

Update: Jan 9 : Got a free ride on BMW 7 Series
Update: April 12 - Uber has launched UberLux in a few cities. UberLux would have marginally higher pricing versus normal. Meanwhile you can continue to enjoy the promo fares for now. Got an Audi-8 on the way back from dinner today. Sweet! - Perfect Dessert


Update: UBER is offering rides on a Helicopter  (in Bangalore - Saturday June 14, 2014, Mumbai - Sunday - June 15)

Update: UBER has launched UberX in India with rides at Rs 15 per KM. Ouch.... (for other cabs)

Update (October, 14): Uber has dropped prices of UBER Black service as well. The per km charge is now just Rs 18. It seems they are actually paying luxury car owners (merc & audi cab owners) over and above the money they make through the rides

Update: July, 15 - Uber is now available in 17 cities  - Added seven new cities - Coimbatore, Mysore, Vishakhapatnam, Bhubaneshwar, Indore, Nagpur and Surat

Visit the following link and follow the instructions to sign up to get free credits and free rides: https://uber.com/invite/uberequity

CTET Details Announced - Next Exam on February 16, 2014

CBSE has announced the date for the CTET (Central Teacher Eligibility Test). You can check out further details here. The format of the test remains the same as last time as last time. Last time, despite the increase in time limit just 11% test takers had managed to clear the exam. Remember one has to score over 60% to clear the exam. Several coaching institutes are now offering programs to help teachers prepare for this exam. NIIT, India's largest education company and is the most trusted name in the field of education and training, has also launched a program for CTET Coaching in Delhi, Gurgaon and Ghaziabad this year. The program details look interesting. Anyways, best wishes to all teachers preparing for the exam!

Important Dates
The exam date is February 16, 2014 for both Paper I and Paper II
The last date for submission of online application forms is October 31, 2013
Print out Confirmation page should reach by November 7, 2013

CTET Coaching In Delhi, Gurgaon and Ghaziabad

 CTET (Central Teacher Eligibility Test) Certification is now a mandatory requirement for teaching jobs in Government Schools. Even leading Private Schools now prefer CTET certified teachers for recruitment and for determining their pay scale 

The CTET certification not only gets employment, but is also a benchmark of pedagogical skills. However, the exam is very competitive. as is reflected in the pass percentage of aspirants. Less than 10% test takers have cleared the exam in previous four attempts. In fact in 2012, just 1% of aspirants cleared the exam. The qualifying threshold is 60 percent score

Next CTET is on February 16, 2014. 

NIIT, which is India's largest education and training company, is conducting 'The CTET Advantage” Program for CTET Coaching. The intensive program will help Pre/In service teachers prepare for the Central Teacher Eligibility Test. 

Program  Highlights:
Intensive mentoring on Pedagogy and Concepts	Faculty comprising domain experts and  CTET/ NET qualified  professionals
Well researched courseware	Multiple practice tests in real examination environment
Personalized coaching using ‘Critical Mistakes Analysis’ methodology	Dedicated portal with lessons on demand and assessments
Specific techniques and strategies for cracking the exam	Special workshops on resume writing and interview skills

Click here for further details

The program also prepares you for HTET and UPTET. You can call them on  +91-9717493803 or +91-9717492474 to register

For further information: email at ctet@niit.com with your contact details or Register at: www.niit.com/ctet

Best way to limit Gold imports?

Government has recently raised duty on gold imports to 8% in a bid to reduce gold imports. High gold imports have been contributing to India's high current account deficit. But the increase has had an opposite effect. Government should now threaten to reduce the duty to zero. Imagine if you want to buy gold and there is this threat by government to reduce duty on gold, what would you do? 

Government should keep the markets in limbo. This uncertainty and threat would work against gold buying and investors would defer their decision of buying gold to a later date reducing gold imports and further fueling a decline in gold prices.   

Infosys enters IT Training?

It is reported that Infosys is entering IT education segment with plans to spin off its Mysore campus into a training arm. Lets look at the possible reasons for Infosys to take this step

• Infy cannot afford to keep thousands of people in training so the campus, which it had inaugurated only a few years back with much fanfare, is underutilized and is looking at the skies for much of the time. 
• Infy wants to monetize its real estate holdings 
• Convert a cost centre into a profit centre 
• Does not want to lay off training staff, which might be a PR disaster, so has got made them masters of their own fate 
• Infosys really believes that training segment is a real money spinner (
• Perhaps it was inspired by an ex Infosys employee who now heads an education company in the neighborhood or maybe it wants to get back at him for deserting infy a few years back

Whatever be the reason, it actually could be positive for players such as NIIT and Aptech for the following reasons 

• Some people, who had written off IT training market, would take note and start believing there is a future still 
• Improves the image of the Indian education sector which has been punished due to corporate governance issues at some prominent listed companies ultimately benefiting those who have a better image 

The Cobra bites again!

All the companies that were punished for poor corporate governance must be laughing today as India's cream of financial sector giants, many of whom manage funds, brokerages, equity research houses that championed better governance in public and indulged in malpractices on the side, were exposed today by Cobra Post.

I am surprised today by inclusion of Tata AIG in the list. I guess more pained than surprised. I used to work at at Tata Company before and prided in the fact that Tata's were above this malaise. But before we pass judgement, we must look inside. We will discover that we are all a little dishonest, but like to believe, at most times, that we are honest and are better than the rest. We cook up stories, hang on to anecdotes of our honesty and overemphasize others' dishonesty.

S&P CROSSES 1600

S&P crossed 1600 levels for the first time ever in early trade today.  Stocks opened strong on news of faster than forecast jobs addition in April. 

Quick Question: Is US pressuring India with new visa proposals?

Are the new norms proposed for temporary worker visas directed at Indian IT companies, part of pressure tactics by United States to get more concessions for US companies from India? 

Yes

• US is indeed pressuring India to open up more sectors including insurance
• India is encouraging more exports and accelerating reforms to encourage exports as it wants to reduce CAD
• Unemployment amongst tech workers is low in the US, so why the high rhetoric on tech worker visas 
• ....

No

• Overall unemployment in US is still high 
• .....

HCL to get impacted by delayed joining dates of freshers?

HCL has been deferring joining dates of freshers, it hired at various campuses across the country. Some of these offers were made as far back as august-september - 2011. With no sign of joining letters students have taken to protests to press for joining. Now what can students do. Its tough these days for freshers to get hired. Rationally they should be be reskillling/upskilling themselves to get a better shot at being hired. But no one or atleast many do not want to pay for training and keep living in hope that they will get hired and trained by companies. Its a chicken and egg problem.

"Short Term Gain, Long Term Pain"

Anyways, HCL did it to make sure that its utilization rates improve and that it can show improved margins. Afterall growth is slow for the industry (although HCL is doing better than most). Over the last few quarters, HCL has surprised the street with higher profits riding on margin improvement and its share price has increased. However, they miss out on one important point. At some point HCL would need to hire freshers, to improve its cost pyramid. However, if I am an excellent student, the kind that HCL would want to hire, I would be wary of appearing for interview because I do not know if HCL would honor its offer letter. What stops its from deferring joining dates again. I would not be surprised if many campuses, especially the good ones, shut their gates to HCL this year. 

What prevents this bad karma spilling over to lateral hiring market. People would start demanding a premium to join HCL as it would increasingly be seen as not being friendly to new hires. 

This from a company that says 'employees first'. What message do HCL's customers get from this regarding management's integrity? 

What's good in the short term, may turn out bad for them in the long run? Anyone who's done DCF knows that for companies a large proportion of value comes from the long term. Will the new management at HCL wake up and do something to prevent value deterioration. 

Effect of this is already being felt in the stock market by HCL in the last few days. Despite tremendous improvement in profits (up 70%) this year, HCL stock is down over 10%. They are trading at a less than 12 times profit/share run-rate  

India Higher Education Statistics - Part 2

A . Enrollment by Mode of Delivery

1.  In Class  - 46,430 institutions  - with total enrollments of 21.7 million
2. 197 institutions provide distance education - total enrollments of 4.2 million


B . Enrollment by level of Study

1. Graduate (undergrad)  - 16.2 million
2. Post Graduate  - 2.2 million
3. Phd Degree - 0.1
4. Diploma - 3.3

India Higher Education Statistics - Part One

The following data is for 2012

1. Number of universities  - 659
2. Number of colleges  - 33023
3. In addition there are 12,758 institutions categorized as Diploma granting institutions
3. Total Students Enrolled in Higher Education - 25.9 million (implies Gross Enrollment Ratio  of ~18%)


Of the total 46430 institutions, almost 64% is Privately owned and account for almost 59% of all enrollments


Source: 12th Five Year Plan, UGC

Educomp Selling Its Stake In IndiaCan to Pearson?

There is rumor of Educomp selling its stake in its 50:50 JV with Pearson. IndiaCan has been losing money hand over fist, ever since the investment. In the first 9 months for FY13, it reported revenues of Rs 83 Cr with EBIT loss of 34 Cr. In my view, the JV was doomed from the beginning but more on that later. 

In current state, any money that Educomp would get for its stake in this venture would be more than welcome, especially since Educomp is reeling under piles of debt (over 2000 Cr as of December 31, 2012) . 

In reality, Pearson should be asking money from Educomp to take over this stake in IndiaCan. Year over year, the revenues have almost doubled but losses have remained almost as much  (loss of 34 Cr in 9MFY13 vs loss of 42 Cr for 9MFY12), which means that even on marginal basis, the company is hardly making any money.  Sale of stake by Educomp's is not going to magically start delivering profits. 

If Pearson wants to enter training business in India, it would do well to look at other companies (even listed ones) which are available at very attractive valuations, and while profits are depressed for them at this stage due to slow hiring across sectors, at least some of them have shown that with volume recovery, their business model can deliver large profits. 

There was no 2G/Coal Scam?

Telecom ministry's primary objective is to increase the penetration of telecommunication services in the country. If we start with that motive, all the talk of a scam of selling national resources at low values to telecom companies starts to appear to be on a weak wicket.

Now, there is a possibility that money had changed hands to favor certain parties over the other which should be investigated. However, what is unfortunate is that CAG (implicity) wants the government to act as profit/revenue maximiser and not worry about what it means to the public.

I believe the national auditor is committing a mistake, and it is rather, ironical that while the national sentiment derides companies for making excessive profits, even if they are good corporate citizens and at the same time calls the Government's policies which try not to increase revenues, but seeks to improve the reach and to reduce the cost of services to its citizens as being scams.

In reality, government's role should be to act as a catalyst for growth and not to act like a monopolist and extract maximum revenue for every service or resource it allows to be used its constituents.

Similar argument applies to the what has come to be known as the Coalgate Scam. How can a nation which cries about lack of power and electricity accuse policy makes for allocating fuel supplies to power generators    when the government owned monopoly provider is unable to fulfill that demand.

Lets all step back and try to see the bigger picture. This is not a defense for corruption which must be condemned. However, we must be careful to not throw out the baby with the bath water.

Satyamev Jayate - Organic Food

Satyamev Jayate took on an important issue today, which affects us everyday without us realizing the ill effects that it causes to our health. Our food has been poisoned by excessive use of pesticides and harmful chemicals. You can watch the episode here (Toxic Food -  Poison on our plate). To know more about the effects of pesticides on our health, which include cancer, increases risk of neurological defects such as Parkinson's disease, causes congenital defects in children, affects fertility in males etc.  Please read the Wikipedia article here

Fortunately there are companies providing healthy, organic food options right at our doorstep. For example there is an company providing Organic Food right inside your office cafeterias, that too at reasonable prices. Companies such as American Express, GE, HSBC  etc provide organic meals at their office campuses in Gurgaon and Hyderabad. The food is catered by Organic Express, a two year old venture, started by alums of ISB and IIM. Organic Express currently provides organic food in over 15 locations in Hyderabad and Gurgaon. More details on Organic Express, which uses the highest percentage (>70%) of organic content in their meals, in India and perhaps in the world, can be found on their Facebook page. 


The latest episode was very pertinent and hope this sparks an organic food revolution in India. Happy Eating!!

CCI Imposes 6000Cr Penalty On Cement Manufacturers!

Kudos! CCI found some gumption and imposed a heavy fine on 11 cement companies, which they found guilty of collusion and cartel-ization . However what is ironic is that this was done on the basis of a complaint by builders association. Wonder who will investigate the cartel among the builders themselves. Despite severe cash crunch faced by these builders and leverage to support land banks, the real estate prices go up every month, like clock work. 

The eleven cement manufacturers, on whom the penalty has been imposed, are ACC, Ambuja Cements Limited, Ultratech Cements, Grasim Cements now merged with Ultratech Cements, JK Cements, India Cements, Madras Cements, Century Cements,   Binani Cements, Lafarge India and Jaypee Cements.

Educomp's FCCB Repayment Could Trigger 200+ Cr Loss

Educomp announced today that it had tied up loans of $155 million to repay its FCCBs that are coming up for redemption and also for further capex. In addition, it also announced that it had further raised 10 million in FCCBs from IFC and dilute further equity of up to $50 million and Rs 149.5. Would also allot additional equity ($15 Mn) and warrants ($40 million) on a preferential basis to promoters at a price of Rs 193. Which is at a premium to current market price.  The shares are today trading 9% up at Rs 149 on the back of this news.

There is a surprise waiting for Educomp's investors in Q1/Q2 in the form of a loss of almost $32 million dollars of redemption premium on FCCBs, that they had (it appears) not amortized over the duration of the FCCBs + further loss of about Rs 50-60 Cr on unamortized component of MTM loss on 78.5 million dollars of FCCBs that were outstanding for a total loss of over Rs 200 Cr.

What may comfort the investors is the share allocation at a premium to FIIs (at Rs 149) and the proposed allotment to promoters at Rs 193 (equity and warrants) . However the loss in Q1 or Q2 (depending on when the FCCBs are repaid, would offset these notional gains from allocation at premium.