Three days of euphoria at Samanvay 2008, the annual B-fest of DoMS IIT Madras, finally reached its termination with the valedictory function. The session was presided by Shri N. Vittal, Former Central Vigilance Commissioner and Shri T.S. Krishnamurthy, former Chief Election Commissioner as Chief Guests.
Shri N. Vittal who is from the IAS cadre of 1960 batch, addressed the gathering on ‘Models for Inclusive Growth’. He started with explaining how due to variety of reasons some words become buzz words and with due course of time become clichés. ‘Inclusive growth’ was one such buzz word at the beginning of this year. There was another growth which gathered some attention, the growth at the cost of damage to the environment. But ‘Inclusive Growth’ remained the buzz word for all political and other reasons. The history can be traced back to 20th century which was dominated by ideological differences between two super powers, US & Soviet Union. Communist countries believed that state must control & command and centralized planning was the better strategy. But in 1990 when Soviet Union collapsed, communist countries accepted that for achieving growth and economic development, market forces should prevail. This in turn led to the idea that private sector and not the government should be allowed to play significant role in the economic development. Hence, the technological & IT revolution followed and world became flat with increasing globalization. But not everyone was benefiting from the process of globalization. Many voices of discontent were raised for- the mom & pop stores who lost to the massive organized retail stores, the domestic labour intensive processes which could not stand the onslaught of multinationals and so on.
The liberalization & anti-liberalization fight was so intense that NDA government which launched the ‘India Shinning’ campaign lost the election to UPA government. The present government’s initiatives like Rural Employment Guarantee Act and Rural Development missions have been launched to focus on aam admi. That’s how inclusive growth became a buzz word today. The inclusive growth as such left two categories of people untouched – Rural areas and the minority section including muslims and dalits. Inclusive growth can also be looked up from geographical point of view where in few cities and states have been left behind. Talking about possible solutions to the problem of Inclusive growth, Shri Vittal stressed on need of clarity in our thinking so far as underlying values are concerned, 80-20 is widely accepted management observation and it can be applied in policies to discourage the lack of effort by people. Shri Vittal stressed on developing a new business model for inclusive growth but should not encourage populist initiatives like reservations etc. Private Sector should play a bigger role through its CSR initiatives. Shri Vittal concluded by saying that on the issue of inclusive growth, we can apply our knowledge and find solutions which ultimately lead to greater prosperity.
Shri T.S. Krishnamurthy addressed the gathering on ‘Democracy & Good Governance”. Shri Krishnamurthy recalled how with fall of the Berlin wall and The Soviet Union, the democracy became fashionable. But many western nations use democracy not in its true form but as a tool to further their own purpose. Democracy when started originally in Greek and Roman establishments was more participating but over the period of time it has changed. Has the democracy in India and many other countries, achieved its purpose? Democracy as such creates more hindrances for growth but yet it achieved some success in few countries primarily due to affluent nature of these countries. Moreover democracy has to suite the culture of the country also. India has been praised as the largest and the most successful democracy in the country but we still have many people in rural areas, who lack even basic needs of survival. Shri Krishnamurthy believes our democracy is in danger. We still follow old British style of governance, while they have changed, we haven’t. Corruption, lack of transparency, sub-national authoritarianism, misuse of media etc. all these factors are denigrating our democracy. Shri Krishnamurthy concluded by saying that “we need more introspection to improve the quality of governance in the country”.
In the end, Prof. L.S. Ganesh, HoD, DoMS IITM, expressed deep felt gratitude to the Chief Guests for enlightening the students and gathering on such contemporary issues. He reinforced his belief in the new generation of students that they will sensitize with all sections of the society. With that Samanvay 2008 was declared closed.
Vishal Chourasiya
Tuesday, January 15, 2008
Sunday, January 13, 2008
Jyotika – Lets Spread the Light
“Jyotika”, a student and Goodwill Foundation initiative, endeavors to bring light in the lives of visually impaired girls. Department of Management Studies, IIT Madras, organized a Jyotika Event during Samanvay ’08 to create awareness among students. The program started with a very touching video manifesting the lives of visually impaired. Shivani, the coordinator from DoMS, then welcomed the participants (visually impaired students) from Goodwill Foundation.
Goodwill Foundation works towards the welfare of visually impaired women and trains them in Carnatic music, Computers, Handicrafts etc. The participants from Goodwill Foundation then won the hearts of audience with their songs. The audience present in house packed MRC were so moved, they even started clapping to the tune of the songs. In the end Prof. L.S. Ganesh handed over the contribution money to the foundation as a token of appreciation. Prof. Ganesh expressed deep satisfaction over the student’s initiative and stressed on the fact that more such social initiative should be taken by students in MBA institutes all over the country.
You too can do your share of help. For more information on Jyotika and Goodwill Foundation visit here
http://www.jyotika-letsspreadthelight.blogspot.com/
Goodwill Foundation works towards the welfare of visually impaired women and trains them in Carnatic music, Computers, Handicrafts etc. The participants from Goodwill Foundation then won the hearts of audience with their songs. The audience present in house packed MRC were so moved, they even started clapping to the tune of the songs. In the end Prof. L.S. Ganesh handed over the contribution money to the foundation as a token of appreciation. Prof. Ganesh expressed deep satisfaction over the student’s initiative and stressed on the fact that more such social initiative should be taken by students in MBA institutes all over the country.
You too can do your share of help. For more information on Jyotika and Goodwill Foundation visit here
http://www.jyotika-letsspreadthelight.blogspot.com/
Saturday, January 12, 2008
Gurcharan Das Inaugrated Samanvay '08
Samanvay 2008, the B-fest of DoMS, IIT Madras started off on a high note with the inauguration of the event and the keynote talk by the chief guest Mr. Gurcharan Das. Though he has held esteemed positions in many organizations, he is best known as the author of the book ‘India Unbound’ and as a feature columnist in the Sunday Times of India.
Mr. Gurcharan Das talked about the new emerging India - the opportunities and the challenges that lie ahead of it in the 21st century. Although India still has a long way to go, he was hopeful that India will find its glory once again. He started off by describing the basic qualities of good CEOs. He stressed on how important it was to be humble, and at the same time be determined and ambitious. Though it may sound like a paradox, if one thinks about it, it is a very rare combination but one which will ensure success.
He then talked about the story of India’s growth and explained the factors which contributed to this rapid rise. Some of the important factors include the increase in GDP growth, slow down in population growth, rise in literacy levels, rise of the middle class and decline in the poverty rate. The rising investment and productivity levels also contributed a lot to this growth. When the middle class will form 50% of the total population, there will be a tipping point of sorts as far as the politico-economic situation of the country is concerned.
One important thing to remember is that even though the story of a country’s growth is common, the model for India has been unique. The drivers of growth in India have been different compared to other countries. While the growth of SE Asian countries was based mainly on export, manufacturing and investment, India has a strong domestic consumption and its strength lies in the service industry. He explained that the world needs another big consuming economy and India can nicely slip into that role. The benefits of a domestic-led model are obvious. It has insulated the country from the volatility in the global markets. However, according to some, India seems to have skipped the industrial revolution and has jumped directly from the agricultural age to the information age.
There are many reasons for India’s success. A few of them include having a strong list of globally competitive and competent companies. Some of them include Reliance, Ranbaxy, Infosys, Tata Motors, Bharti, ICICI etc. These are companies which ‘other countries would die for.’ Also the vibrant private sector space has led to the decrease in the number of bad loans to less than even 2% while China has around 20% bad loans.
On the other hand, however he said that the public space is not fully developed. Although we have a dynamic democracy and a free, lively media and press, poor governance is still a serious problem. This included not only the corruption in the government, but also apathy in the education and health sectors. One out of every four teachers does not show up, and out of those who show up one out of two doesn’t teach. The same is the situation in hospitals. The government companies and institutions unfortunately still run on ‘rishvat’ and ‘sifarish’ rather than growth and excellence. He also said that there is a problem with the way populist subsidies are announced and implemented. Populist subsidies in themselves are not a problem if the money actually gets to the right people. Currently there is also a lack of money to put into infrastructure development. China invests 6 times more than India into infrastructure. This is an area where India lacks China by a large margin and India will have to quickly address this issue in order to become a world-class economy.
Another interesting development which has happened in the country in the last 3 decades was the relation between the public institutions and growth in the country. Thirty years ago, India had an enviable bureaucracy, judiciary and a police system. But the growth was very slow. Now the growth has accelerated to a better level while the institutions have eroded in value. So an important question which needs to be asked is whether India is rising despite the State and what possibly can be done about it. One more important question to answer would be what then explains India’s economic success? One reason could be that even slow reforms do add up. Once the middle class forms a considerable part of the population, the reforms are also likely to speed up. Another important factor is the liberalization of the young minds. He explained with a story from his book as to how even a small boy in a tea-stall in a village aspires to become rich and famous like Bill Gates. This ‘decolonization’ of the mind, he said, will go a long way in helping India reach the peak. Also losing the inhibitions of using a ‘foreign’ language like English will definitely contribute in a global economy where English has become the language of trade and of business.
Mr. Das stressed that for every country there is a specific sector which contributes to a major part of the growth and becomes a source of competitive advantage over other countries. For Britain it was textiles, for India it is the knowledge economy.
Looking forward, the expected growth rate will be around 7-8% because he felt that democracy will not permit more than 8% growth. Coupled with a 1.5% popln. growth, India will reach a per capita income equal to that of US by 2066. The economy is on autopilot and it will require an event on the scale of a nuclear war to stop the engine. The big story of the 21st century is not 9/11 or terrorism but the rise of India and China in the global scene. The Theory of Convergence will further ensure the bridging of the gap. A major reason why this convergence hasn’t happened in the last 50 years and is happening now is globalization. Economies of developed and developing countries are now linked.
He also talked about the demographic dividend and the doubling of the labour force in the next 20 years. This coupled with higher savings and investment rates will translate into higher GDP growth. This demographic advantage will ensure that India’s growth will be more long term than that of China.
Again reverting to the topic of the importance of the middle class, he said that by 2040, the middle class will form 50% of the population. This will ensure that the political power centres in the country will start listening to this huge and powerful group of people and thus there will be a change in governance patterns. While looking at the factors which contribute to high growth, it was also important to list out those factors which could stunt the growth of India in the coming years. Some of them are fiscal deficit, weak infrastructure, bad governance etc. He said that India desperately needed a second Green Revolution. Other sectors which need a lot of improvement include the power sector and labour.
So the bottom line is that the Indian prosperity is on autopilot and it would require nothing less than an Act of God to stop the juggernaut. The government sector cannot be ignored. Governance reform will take its time but can be expected to speed up. Human capital will continue to expand based on private initiative and will play a major role in driving the economy.
Kirtan Acharya
Mr. Gurcharan Das talked about the new emerging India - the opportunities and the challenges that lie ahead of it in the 21st century. Although India still has a long way to go, he was hopeful that India will find its glory once again. He started off by describing the basic qualities of good CEOs. He stressed on how important it was to be humble, and at the same time be determined and ambitious. Though it may sound like a paradox, if one thinks about it, it is a very rare combination but one which will ensure success.
He then talked about the story of India’s growth and explained the factors which contributed to this rapid rise. Some of the important factors include the increase in GDP growth, slow down in population growth, rise in literacy levels, rise of the middle class and decline in the poverty rate. The rising investment and productivity levels also contributed a lot to this growth. When the middle class will form 50% of the total population, there will be a tipping point of sorts as far as the politico-economic situation of the country is concerned.
One important thing to remember is that even though the story of a country’s growth is common, the model for India has been unique. The drivers of growth in India have been different compared to other countries. While the growth of SE Asian countries was based mainly on export, manufacturing and investment, India has a strong domestic consumption and its strength lies in the service industry. He explained that the world needs another big consuming economy and India can nicely slip into that role. The benefits of a domestic-led model are obvious. It has insulated the country from the volatility in the global markets. However, according to some, India seems to have skipped the industrial revolution and has jumped directly from the agricultural age to the information age.
There are many reasons for India’s success. A few of them include having a strong list of globally competitive and competent companies. Some of them include Reliance, Ranbaxy, Infosys, Tata Motors, Bharti, ICICI etc. These are companies which ‘other countries would die for.’ Also the vibrant private sector space has led to the decrease in the number of bad loans to less than even 2% while China has around 20% bad loans.
On the other hand, however he said that the public space is not fully developed. Although we have a dynamic democracy and a free, lively media and press, poor governance is still a serious problem. This included not only the corruption in the government, but also apathy in the education and health sectors. One out of every four teachers does not show up, and out of those who show up one out of two doesn’t teach. The same is the situation in hospitals. The government companies and institutions unfortunately still run on ‘rishvat’ and ‘sifarish’ rather than growth and excellence. He also said that there is a problem with the way populist subsidies are announced and implemented. Populist subsidies in themselves are not a problem if the money actually gets to the right people. Currently there is also a lack of money to put into infrastructure development. China invests 6 times more than India into infrastructure. This is an area where India lacks China by a large margin and India will have to quickly address this issue in order to become a world-class economy.
Another interesting development which has happened in the country in the last 3 decades was the relation between the public institutions and growth in the country. Thirty years ago, India had an enviable bureaucracy, judiciary and a police system. But the growth was very slow. Now the growth has accelerated to a better level while the institutions have eroded in value. So an important question which needs to be asked is whether India is rising despite the State and what possibly can be done about it. One more important question to answer would be what then explains India’s economic success? One reason could be that even slow reforms do add up. Once the middle class forms a considerable part of the population, the reforms are also likely to speed up. Another important factor is the liberalization of the young minds. He explained with a story from his book as to how even a small boy in a tea-stall in a village aspires to become rich and famous like Bill Gates. This ‘decolonization’ of the mind, he said, will go a long way in helping India reach the peak. Also losing the inhibitions of using a ‘foreign’ language like English will definitely contribute in a global economy where English has become the language of trade and of business.
Mr. Das stressed that for every country there is a specific sector which contributes to a major part of the growth and becomes a source of competitive advantage over other countries. For Britain it was textiles, for India it is the knowledge economy.
Looking forward, the expected growth rate will be around 7-8% because he felt that democracy will not permit more than 8% growth. Coupled with a 1.5% popln. growth, India will reach a per capita income equal to that of US by 2066. The economy is on autopilot and it will require an event on the scale of a nuclear war to stop the engine. The big story of the 21st century is not 9/11 or terrorism but the rise of India and China in the global scene. The Theory of Convergence will further ensure the bridging of the gap. A major reason why this convergence hasn’t happened in the last 50 years and is happening now is globalization. Economies of developed and developing countries are now linked.
He also talked about the demographic dividend and the doubling of the labour force in the next 20 years. This coupled with higher savings and investment rates will translate into higher GDP growth. This demographic advantage will ensure that India’s growth will be more long term than that of China.
Again reverting to the topic of the importance of the middle class, he said that by 2040, the middle class will form 50% of the population. This will ensure that the political power centres in the country will start listening to this huge and powerful group of people and thus there will be a change in governance patterns. While looking at the factors which contribute to high growth, it was also important to list out those factors which could stunt the growth of India in the coming years. Some of them are fiscal deficit, weak infrastructure, bad governance etc. He said that India desperately needed a second Green Revolution. Other sectors which need a lot of improvement include the power sector and labour.
So the bottom line is that the Indian prosperity is on autopilot and it would require nothing less than an Act of God to stop the juggernaut. The government sector cannot be ignored. Governance reform will take its time but can be expected to speed up. Human capital will continue to expand based on private initiative and will play a major role in driving the economy.
Kirtan Acharya
Tuesday, January 8, 2008
Samanvay 2008
Department of Management Studies, IIT Madras proudly presents its annual B-School fest, Samanvay. Celebrating synergy, that connects all living creatures and the samanvay in the universe since its evolution from big bang, is core to our B-feast. But this year Samanvay is about something else too, it’s about having fun seriously. Fun is an integral part of DoMS culture. We believe in having fun while doing serious things and that’s the modus operandi at DoMS. What could be the better way than to celebrate this spirit with plethora of events where there is something for everyone?
Scheduled between 11th -13th Jan 2008, Samanvay ’08 promises to be a mega-event with Mr. Gurcharan Das invited as Chief Guest. Mr. Mark W. Vannette, Operations Manager, EDC-India, Caterpillar Inc. and Mr. B. Manivannan, Zonal Manager South zone- LIC, are invited as special guests. As India Inc. is taking on the world with M&As (Tata Motors’s Land Rover winning bid is the latest proof of the growing appetite), the implications of these deals should be understood thoroughly. Hence, Samanvay ’08 will host a panel discussion on “The Great Indian Takeover” with eminent personalities from industry and academics. Also as the importance of management education is increasing, now is the time to look at some of the myths and the realities associated with it. A second panel discussion will focus on “Management Education in India: Are there dreams and are we pursuing them?” with Directors from ISB, MDI, XLRI and industry representatives. In addition to this, Mr. P.C. Narayan, Professor, IIM Banglore, will also take a session.
Apart from regular events, Samanvay this time will host a very special event “Outbound at Dawn”. This promises to be a major crowd puller wherein executives from corporates and press, along with students will test their team building skills in forest and Lake of IIT.
Be there to celebrate the spirit of synergy and fun at Samanvay ’08.
Vishal Chourasiya
Thursday, November 22, 2007
Mr. Srinivasan Suresh, Ex CFO, Emirates Airline, holds forth on the subject of Mergers & Acquisitions at the Department of Management Studies, IIT M
The Corporate Wisdom forum of the Department of Management Studies (DoMS) invited over Mr. Suresh Srinivasan, Ex CFO of Emirates Airline, for a session on the intricacies of Mergers & Acquisitions (M&A).
Mr. Srinivasan began by telling about the journey that Emirates had traversed from its inception to its present when it is the fastest growing airways and the 2nd most profitable airlines company in the world. Emirates actually started off as chain of travel agencies. After working as so for many years, it felt that it needed to enter into other travel-related businesses. So it gradually entered into several businesses over the years, starting from ground handling at its airports, holiday package selling, and catering services, to
cargo logistics business in the UAE and overseas. During the course of this growth, it acquired a stake of 44% in SriLankan Airlines and a ground handling business in Singapore. During each of these acquisitions Emirates asked itself whether the companies being acquired fit into its group and would they make sense over the long-term.
Starting off on the subject of acquisitions, Mr. Srinivasan said that acquisitions can take place in many ways. A public company would charter a different route than a private company. That was because public companies need to take into account the interest of its stakeholders. This is all the more important because as a company grows and goes public it starts diluting its stake and when its managers get ready to plan for an acquisition there is no single entity that guides them to ensure optimal returns for its stakeholders.
The diversification patterns in India are however are more succession-driven rather than expansion-driven as a large chunk of companies are family businesses. But good companies that succeed at integrating acquired companies concentrate on the areas that they need to expand into and then look for players in that industry. A company after acquisitions might still not acquire the critical mass it requires to be a reckoning force. In such circumstances it can go for a Joint Venture (JV).
Describing the process of a typical acquisition, Mr. Srinivasan said that a company interested in acquiring another first gives an intention of target to one it’s interested in. Then a Non Disclosure Agreement (NDA) is signed between the two. After this, an Expression of Interest is given to the target company after which financial advisors for this process are appointed. This part forms an important component as the financial advisors bring in great expertise thorough their experience, knowledge and networking and help in analysis of financial and technical details to ascertain the compatibility of the two companies. They help create an Information Memorandum specifying the details of the possible tie-up. After that the interested company appoints legal advisors.
After these steps are over, the selected suitors are invited by the target company and given a separate room that contains its confidential data, for the process of due diligence. After the creation of the Draft Share Purchase agreement, the valuation of the target starts. This is a very important stage during which the person-in-charge at the target company keeps the entire management and the head of all business units posted about each detail of the process. Similarly, the target company’s accountants need to be in the loop as there are very stringent guidelines for writing off goodwill. After that the interested company meets with the clients of the target company.
Commenting on what could go wrong during M&As, Mr. Srinivasan gave the example of the Tata-Corus deal as a successful deal and said that an acquisition could only succeed if it is proactive and has a strategic focus. That might be the reason why only about 60% of the mergers succeed. To succeed, the acquiring company must work on synergies right from the word go and try to materialize them within
1 year. Many times this requires letting go of restructuring of the new entity, a strategy with Emirates has successfully followed.
Explaining that the process of valuation of a target company is more of an art rather than a science, Mr. Srinivasan said that it is never going to give a correct value. What actually matters is who makes the valuation. He told that the process of valuation of a privately-held company was different from that of a public company.
Mr. Srinivasan then talked about the three most popular routes of valuation: using Net Asset Value (NAV), the Earnings Multiple and Free Cash. He commented that while NAV was the most preferred, the Earnings Multiple path was good for a listed company. He showed graphically that Free Cash method gave the highest range of valuation, and then came in the Earnings Multiple method, and the lowest range was usually given by the NAV method. This was followed by a detailed explanation of the technicalities of each method, where Mr. Srinivasan pitched in with his expertise and related examples on a spreadsheet, elucidating the areas where each method could be applied, the data required and the entire process of calculation.
Also touching upon mergers, Mr. Srinivasan emphasized that it was a way for better and efficient corporations to takeover not-so-well firms. With regards to merger, he spoke about the Event Study methodology and the Postmerger comparison studies.
Mr. Srinivasan said that acquisition could be a regulatory nightmare with so many policies and regulations in place such as the Companies Act, Income Tax act and the MRTP act.
Holding forth on JVs, he said that no premium was attached to them, unlike acquisition. They actually started with mistrust of the partner with the problem being that of who will control the joint entity. As a result, in almost 90% of the JVs one firm buys out the other. He also said that in case of JVs accounting profitability was not an indicator of the success of the JV. For this purpose, Mr. Srinivasan gave the
example of Emirates wherein when it found that ground handling charges in a new location were exorbitant it quickly opted for a JV with a local company and benefited from it as both worked towards supporting each other and realising synergies. JVs follow the route of a Memorandum of Understanding between the interested companies, a business plan, a JV agreement, a shareholders’ agreement and then finally the incorporation of the jointly operated firm. JVs are actually a very easy route to synergize as partners can dissolve them immediately and walk out.
After such a dedicated effort towards explaining M&As and JVs, Mr. Srinivasan fielded questions from students. On being asked the reasons for Emirates venture into airline as well as the hotel businesses, both of which are very capital-intensive, Mr. Srinivasan replied that the strategy succeeded because Emirates had no worthy competitor. Moreover, the hotel business had been outsourced to a highly respected firm in that business, which ensured that it was managed professionally in the best possible manner. He agreed that it might have been difficult in the face of competition.
On being quizzed about his thoughts on the Kingfisher-Air Deccan merger, Mr. Srinivasan asserted that it was a very good idea at least for the present as they could consolidate and work well. They already hold around 39% of the market and the deal seems to be working fine for both. However, no one could say for sure whether the combine will be able to weather the terrain of aviation well in the future.
When questioned how different a hostile takeover was from a friendly one, he said that the only difference was the initial doubts and negativity about a forced takeover by the targeted firm. Giving the example of Arcelor- Mittal, Mr. Srinivasan told that once the stakeholders get convinced it becomes a easier path to tread on.
A question raised about the preference of cash for stocks in order to pay for an acquisition was answered by saying that a seller will obviously force a cash payment as its stake will dilute in the future and it may not be able to dictate terms later. As a result, targeted companies during acquisitions preferred cash to stock payments.
On being asked about the future of the Air India-Indian Airlines merger, Mr. Srinivasan said that individually the companies would have gone down. It was a good decision on the part of the government to merge them. This would help them majorly in the number of aircrafts that the joint entity would have.
However, he wondered how their inefficiencies would be reduced without any job cuts. An answer to that could be to recruit lesser and lesser over the coming years.
Answering the last question of the day, Mr. Srinivasan said that apart from the PE multiples, EBIDTA was also a good parameter of valuation.
At the close of the session, Mr. Srinivasan gave away the award of the best question to R. Balaraman, and the 1st and 2nd prizes for the previously-held quiz on M&A to Vivek Jain and Neha Barnawal, a new practise put into operation by the Corporate Wisdom team. At the end, the Corporate Wisdom team signed off by thanking Mr. Srinivasan for sparing time and giving profound insights and knowledge about M&As.
Kunal Lal
DoMS Interface Team
Class of 2009
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