Record as you go...

Update on portfolio performance

2010-03-23T14:41:00.003+05:30

I had on the eve of Diwali posted about my portfolio and performance and promised an update in 6 months. So here goes - The market has c moved 2.37% in 6 months. Whew that is proof of the discussion I was having with my wife and she was cribbing of how its tough to trade in the markets in the last months with even seasoned traders struggling to get a grip on the movement. My view was that there was sideways movement with random volatility and this is proof of that. Anyways, my personal portfolio has increased by 5.66% while for the first time I think my Mutual fund portfolio has beaten both my portfolio and the market by clocking in a 7.48% return.

I had identified shipping, hotels, agri inputs and some specific stocks as inputs. I have actioned on those. Missed out big time on a specific stock I had identified in consumer side and a pick on the financial services I think I have entered at a wrong time. Else I am fairly happy with my picks and I should see better returns.

I am at a loss for themes and stocks now. Looking at a certain area but haven't managed to research it well. I am still unsure of infra or power and I think the execution risks are still underpriced.

Training

2010-02-08T20:01:00.003+05:30

Gone are the days when people spent decades with a company and moved through ranks and then the company took care to ensure the employee was trained for the next role, invested in getting them up to speed and the HR team probably had a big role alongwith the team in which you worked to ensure this happened. But with shortening spans of employment tenure, people shifting across different organisations and careers I am sure it is a nightmare for an organisational HR to take care of this. The skill sets are different, they are measured and recorded of where you stack up in a different way, the record of how you stacked up in the past place is never available, so IMHO training is being neglected in big manner or is being delivered in a way which is inherently flawed and badly targeted.

In my short career I have been with 2 large organisations and 1 small upcoming business, changed 3 careers and don't remember when I was trained for a specific skill set. My learning has been on the job mostly and on the softer skills - its training by watching your boss- more an apprentice model. So if you got a great boss and you could watch and pick up the skill, you honed yourself well. I was lucky I had some incredible bosses and picked decent selling skills, client management skills and people management skills. I am a reluctant cold caller and hate making a sales call on the phone but put me in front of a client and I will breeze through.

Every year in the offsite, during the appraisal discussion I have fought, pleaded, cribbed, requested for more training in areas where I feel a need - it just doesn't come through. I think its to do with the growth in the market, then business couldn't think of training people -you had to execute and the last 1 year we were surviving. We could have trained and made our people ready but we didn't know if we needed them then, if we could hold them or they would stay when things turned around - so we didn't train.

Now I have decided I have to tackle this myself - depending on the company is stupid. The technical skills are the easiest to capture although India is still way behind on offering specific short term courses which are friendly for working executives at a good time payoff. I am more scared/ worried/ occupied of where I can get those softer skill sets. I need a good feedback to understand shortfalls - a self appraisal should always be backed up by a 3rd eye. Post the identification, I am unsure of how to get them. I have written in the past about getting a mentor but I am unable to put into practice.

This is something I need to crack, I have specific requirements of areas I need to build on for the time I intend to be within the corporate world and then as an entrepreneur. Any ideas are welcome and leads appreciated. Will update once I have a game plan on this.

Dubai....

2010-01-24T13:31:00.004+05:30

So extending my maniac day trip culture to outside India, I did what counts in my books as a day trip to Dubai last week. First the rants :

1. No, not all people flying to "gulf" are malayalees...so don't assume I speak/ understand the language
2. So you probably got your job as an office in the customs department through reservation, bribing or sheer luck.....so if you don't understand what investment banking is and why I need to spend only a day in various countries after flying for hours together, its not my fault....its an existential question I ask myself too, but that doesn't absolve you of your dumbness
3. No, just because your bag is overloaded and mine isn't, I will not agree to carry your liquor and duty free stuff for you...yes we are all sons of the great mother India, but there ends our brotherhood...
4. And please someone tell me how can I break the jinx of sitting very close to a baby which feels like bawling every time I am desperate for sleep on a airplane? I love kids, and all that but please please please....

Ok now back to what I wanted to say....

It amazes me how the city has changed, I was there 2 years ago and boy it looks different. Billions ( trillions? don't think) of dollars have been invested and it shows. As my local contact said, Dubai offers western lifestyle, Indian culture, Arab belief in some things and proximity to India...better to stay there than in India...Has the downturn affected it, yes it has, you can feel it, but I am a believer in the sense that capital gets reallocated and infrastructure gets used - let others have access to it...and I think Dubai will go that way too....it will be back to its path to glory sooner than all of us scenario builders see it...

But the shock of completely illiterate/ low educated Indians going there in hope, the anticipation of redemption from a life of no hope in India to a better future, the knowledge that it might be back breaking work but visit home is just 2-3 years away and the scene back home will show the results of the hard work keep people going. Those last phone calls from the aero bridge, plane seat,the looks at the immigration stamp, the looks given to that boarding pass...I didn't realise what was a 4 hour trip for was a life changer to a lot of people...make it lot more back home who were related to those people....

On the return leg - the emotions were different - frantic buying at duty free, stuff for everyone without burning too much of the cash which can buy more back home, the 2 weeks/ months planned at home...it was a melee of emotions..

I found it very interesting, the range of human emotions, a cacophony of languages - the underlying thoughts seemed same. I was a snob in bits, the rants emerge from there, but as a person who has seen middle class life, I could not help but identify with some of those emotions. Have we failed as a country to educate this mass, create options to earn a decent living while living with loved ones, the quality of life .... but then those are questions I don't/cant/ want to answer...I am running my own race...

Narayan murthy, the Infosys founder, once said that it takes the sacrifice of a generation to uplift a family's standard of living, I would also add education and luck to that mix but I think what I saw was a plane load full of people who had sacrificed the happiness that proximity to family brings, the joy of being with people like you, walking the same streets with your kid as the ones you did with your parent to ensure the quality of life goes up for everyone....It was hope that one day you will return to what you love and this is a means to that end. Maybe not all felt that way, I am sure a few did...

End to an eventful year

2009-12-31T16:53:00.003+05:30

whew that was quite a year...started on a very pessimistic note...life changed. I understood how it feels to stare at lack of job security, how to persevere and knock, knock and knock again and once more to get that business. How heavy the loan burden feels when you know mentally that it has a high chance of being around for the entire tenure it was supposed to stand in the first place....

Realised scenario analysis that we did never captured a lot of scenarios, new words like black swan, new normal, too big happened and I searched for a bailout myself...

Resolutions were to look at life in a different manner, lead a more balanced life, get some exercise, do good to others not so privileged but when it came to survival, that's all one did...

Learnt its so very easy to keep the morale high, take failure, try again, smile when other hit it well during good times and how self belief, esteem and faith are so important and only saviours when all chips down...

Learnt still not sure how to deal when loved ones fight their own battles without success and experience pain and you in turn feel helpless, when you lose loved ones, when you gain new parts in life...obviously growing old doesn't mean things come automatically ( it never felt that way, but thought it would be easier) , you still need to learn new tricks...

Learnt once more to join organisations and not people or teams - realized organisations are living organisms and evolve and kicked self for taking so long to understand when the Profs said so in the first class...

Bottomline - realized life is all about small events with people who matter, experiences which enrich. Salary slavery seems serious trouble...medium term goals required to increase things which matter.

Happy new year to you all and as most of the beautiful women in beauty pageants wish - AND WORLD PEACE!!

Bangalore International Airport - My view

2009-12-24T18:09:00.004+05:30

Given I did about 70 flights out of Bangalore in the last year and the criticism I had in the past and in light of the review committee of the Karnataka State Assembly coming out with a damning report about the airport I thought I should come out with an update of my view.

The airport has improved from the initial days, its a smooth working, efficient airport and when I make this statement this is from the view of a business traveler who takes the first flight out, comes back by the late evening flight - I usually have a boarding pass and not much carry on luggage. So on the airside, I think the airport works beautifully. I can remember 4 instance when my flight was late and most of them were weather related. They claim 20 mins to get you out of the airport on landing (not sure where I read this but) and they do an awesome job most times. The CAT system to let planes take off in Fog have not been installed and you will find technical discussion why it is not and whose fault but that's a pain point.

The online security check of the baggage has removed a touch point and is now the norm in most large airports and I think works quite well. The baggage handling system is fairly good and I have never had too much trouble.

The biggest crib, trouble and pain point is the terminal - It just is too small for an airport of this size - The check in lines burst at seams now that travel is picking up. Its very messy with all those Queue control systems and I pity the airlines. The security check point on the domestic side is a major bottle neck - and when 8 flights with roughly 1000 people need to be checked through the system creaks. on days like the last few weeks when fog has descended on us in Bangalore- God help you if you are traveling - there is complete anarchy. The queues extend way beyond what BIAL has ever planned for, imagined or thought of I think. To be fair to them, I see the BIAL team managing the line along with the airlines gate executives but still, if someone tells me this airport can manage growth for the next 3 years- I am very doubtful. I think if something is not done about this, we will be back to the state the old HAL airport was with lines stretching to outside the airport.

Once post the security, if I am traveling with Kingfisher, my favourite airline (I seriously think they have pampered me silly, every time I travel abroad I am reminded of how much they have raised the bar on both inflight and ground treatment) - am blissfully unaware of the chaos since I am in a cozy lounge. Else welcome to chaos country. They have opened more toilets, not sure if they are still sufficient but have never had trouble. But charging points is still an issue - they have these weird stands with plug points - not enough mister when there are 3- 4 guys jostling for the point since they are badly placed. The chairs are grossly not enough. There are far too many stores, great - you want me to go give business to your retailers, but you are also taking land given by the government who also are funded by tax rupees...so if I don't want to give them business, please give me a seat to sit. It will be very kind of you.

On the Taxi front, they have managed to crack it, its a fairly efficient system, but you should hand it to the BMTC vayu vajra service, it is simply superb. Although I am still unsure why the heck they can put something which tells me when the next bus is leaving so that I can make the decision before the trudge all the way to the bus stand.

Also give the employees, the cops, the support staff some place to eat. I keep seeing this shanty type eatery and have heard people crib about it.

On the international side, the airport has managed to clear much of the chaos I think. The immigration process is smoother and the whole process seems far streamlined.

Overall, I hate the terminal side interaction if I am not in the lounge, the airside seems to be good since it seems majorly efficient...if only they could do something with the terminal, BIAL would be a fantastic world class airport from the good airport it is in my books.

And last piece - would I like the name to be changed, the local culture to be depicted - I would say "do it now" - not because of jingoism or regional chauvinism but we have a great medley of culture and rich history in India. Every single touch point we use to depict it, generate curiosity, teach about it to others, will allow us to develop better as a soft power....go on, depict the glory of stone we have in aihole, pattadkal, badami, the greenery in uttara kannada and dakhsina kannada, the wild life of bandipur, nagarahole, the tibetan monastery, single rock cut statue at sharavanabelagola, the basadis, the dome at bijapur.....we are a rich diverse state...lets help people explore and learn, let BIAL be the door to introduce some curiosity.

Portfolio update

2009-10-17T22:57:00.003+05:30

I am an active investor - try to stay invested in the long term and have 2 portfolios - one a mutual fund portfolio and the other an active stock portfolio. I have in the past updated about the progress, so on the threshold a Samvat 2066 an update how both did over the last Diwali to Diwali period.

My MF portfolio has gained 93%, while the stock portfolio is up 137% - I have always maintained that my stock portfolio has a higher Beta than my MF portfolio since the stocks I track are usually mid caps, high growth, high risk stocks, while my MF portfolio is more balanced. So the higher return is good. ( slight technicality - I havent adjusted both for dividends received - so these numbers are off by that- but I dont expect the result to alter drastically)

I enjoy investing and some day hope to invest to make a living. I think I haven't spent the kind of time I usually like to do before I invest in a stock. And I am getting better at building a pyramid on the stock and also not jump when I see huge price movements. Watching stocks one picked go down by 70% was gut wrenching but believing in the company and averaging has helped my portfolio to creep close to good gains. This gives me confidence in my stock picking. I still need to experiment with larger amounts of capital ( more to see my behaviour when the market tanks - I want to understand how I will react).

My themes for the next year - Agri inputs, Hotels, Shipping and a few stock specifics. I am getting concerned with the infra, banking and power sector valuations. I have no clue about pharma and have a slightly vague view about auto ancs and IT. Keep a watch, will post a 6 month review.

Does a customer matter?

2009-10-17T22:32:00.003+05:30

This is a result of a chat I was having with Dhammo...

With most government services in India, it has been my experience now but I had not joined the dots to see the pattern. Getting enrolled into a new service is a breeze but try making a change or something which is slightly out of ordinary with a government service and wham the Gods of red tape get invoked and woe betides you.. let me give you examples....

1. So you have a landline with BSNL and now want to change it from your fathers name to your name - Why would anyone want it - I can think of countless reasons - You want to setup a ECS from your account to pay the bills, you want a proof of address are a few - end of matter, you will visit the office a few times, fill a few forms and then follow up. But try surrendering the old phone and getting a new one - it will happen in a few days and very efficiently

2. So you have a gas connection and want it shifted : you should hear to what Dhammo is going through - they will want a proof that the transfer order you got is genuine, but try getting a new connection - should be lot simpler

3. You want to change you rag tag paper book Driving licence to a smart card : ( for this I want to give out my villainous laugh!!) - try applying afresh ( still hard to get a licence - not cause of your driving skills but due to the random processes)

I can go on but you smart readers have got the drift. I think this is because, the customer orientation is very low in most of these places. There is a pressure to streamline processes which have the maximum impact and footfalls, new customer acquisition is a thrust area where you directly compete with private sector - so those processes get streamlined sooner, get watched for complaints and efficiency but those odd jobs get lost. Prof. Thiru, my marketing prof at IIM-B used to tell us that the real customer orientation and service should be checked by testing these out of ordinary requests. ( His favourite for a hotel was - call late night - ask for curd rice to be prepared from 'not hot' rice, fresh curds, with a little garnishing within the next 20 mins!!)

While I think the government has a long way to go in this matter, the private sector also struggles. 'My manual says so' is the attitude I run into. So all you consultants out there, doing BPR - keep this in mind the next time. Pareto is ok but the rest 20% also matters in customer service..

In praise of the government departments...

2009-09-19T20:19:00.003+05:30

We have been programmed to expect less from the government services but there is a change, am not sure what is driving it and God knows that the change can be faster but yeah my once in a blue moon interaction with them is not a pain anymore. I have been a critic far too often on this blog but let me be constructive once more....

BESCOM - the erstwhile KEB, ages ago I remember standing in long queues waiting to pay the bill, waiting for the engineer to order some staff to be sent over for some work when a meter had blown. Cut to a few days ago, one fine morning ( over a weekend, thanks for small mercies) - we realised only our home was without power, so went to the local BESCOM office and lodged a complaint. First, the lady at the counter insisted we should have called and not personally gone, 15 mins later a team arrived with tools and diagnosed that the cable from the pole to the house has given way and cant take the load. It would involve road digging et al which would take time, so immediately gave an alternate cable connection overhead and asked me to get the permanent thing done over the next few weeks. all in a flat 30 mins. Brilliant I thought, but the best was yet to come. Late in the night around 10:30 we got a call from BESCOM, a guy asking us what the issue was. We told him it was resolved in the morning itself. The said whoever took the complaint had forgotten to mark AM next to the time of the complaint and he had to attend it and not let it for the next shift. Brilliant, I was blown away. Guys in the S6 sub division, thanks for the brilliant service, I am amazed and pleasantly shocked !!!

A few days later I had to go pay my BWSSB bill, so post dinner, walk I took and went to the local office. They have an automated machine now, touchscreen and all...I had used my pessimistic logic that it might not accept old notes, so took new notes...but the machine refused to accept. A helper appeared from nowhere and said since not all people could get new notes, the system accepts old notes and new notes it usually rejects !! and then he pulled out old notes from his pocket, swapped my notes and voila work done...he thanked me for using the services and left....I usually have a ECS for most of my bills, this was the only one left but after this experience maybe I will take the walk every month

We shifted homes recently, so my BSNL connection had to be shifted, BSNL screwed up big time and my brother had to make visits across 4 offices twice and then it took ages before the connection came through. All this while, knowing we had shifted newly, both airtel and tata indicom guys had already visited us with a immediate connection and we had refused. So a day after the connection came, it got disconnected. I sent a stinker e-mail to the person incharge and voila next day connection is back.

Paying property tax used to be a shady affair. I remember days as a kid when the BCC, the earlier avatar of BBMP guys would land up and ask for a bribe to reduce the tax or else pay up and my father coolly telling them to levy the full tax and he would pay. SAS has helped, but the beauty this time was the online payment - went online, paid, receipt generated, work done - took me 3 attempts and 40 mins but it was done...They also got a reporting system for offenders and 4000 people were reported by neighbours for wrong reporting. All this was in a confidential way an I am given to understand, no harassment since the complaint was matched with the GIS records.

Could each of these interactions be better? they could, fine tuning the touch points, the interactions, the technology but they are light years of where they were. we are still behind developed countries, but yup sometimes even my cynical self and pessimism goes away...

Keep up the good work guys...

What does brand 'Me' stand for?

2009-05-31T18:23:00.003+05:30

Straight out of B-school and the painful placement process we have in the IIM's ( its awesome in a good year and really bad in a bad year!), you are mostly bothered about the company you join, the pay and mostly other random things like location, will there be right accommodation etc rather than the role ( mostly standard job descriptions don't do justice to most roles in terms what they entail unless its a straight forward role like sales manager). But in days where you are likely to shift jobs, shift companies and shift careers I think it is very important for you to personally stand for something as a professional. If you are in professional services, more so as some part of the relationship stays with you and a large portion with the company but as you grow the ratio changes. So who "You" are as a professional and stand for what determines the interaction with the client too.

So I keep thinking what is it that I might stand for in the minds of my client after 5 years of being a service professional and what is it I might want to change to become a better one.

What I am currently -

1. Analytical approach : I am fairly analytical with what I do, have consistently looked at data and can wring stuff out of data. This has been a winner for me till now but I am sure once I grow further this might need to be more of looking at analysed data and coming up with insights. The transition is important and will be key to growth I think

2. Approachability : I am sure most clients will rate me high on this aspect. Most of my clients still are in touch with me and after our professional engagement have been friends and business acquaintances. This has allowed me to build a decent network and given the nature of work I intend continuing to do, I think this is an asset which should stand in good stead.

3. Industry knowledge : Given my commerce background, I claim no or very low deep understanding of any industry ( I think if you as an engineer or a pure science graduate choose, you can get a slightly deeper understanding of atleast one industry), but I have worked in a host of industries - Auto components, Jewelery retailing, General retail, FMCG, Power equipment, Government advisory - and I have some insights in most of these industries which gives me a broad range of frameworks to work with when I am trying to grasp newer industries

4. High ethics : I still remember the orientation at IIMB which cemented my position on this - when Prof RT Krishnan said the simple test for most things is to figure out if you would be comfortable doing an activity if someone else was watching it. Positioning is different from lying I think. Use facts to strengthen your arguement and stay your position is what I follow. In the longer run, standing up for the right way pays off ( I hope, dont know for sure :) but it has not hurt me till date)

5. Organisation : When I work with a company, I have usually high affiliation with what it stands for, I might not like so things ( fairly par for course) I make it known, try to be constructive but external, you can be sure I will put my best foot forward to be what my organisation stands for.

What are areas I need to work on :

1. Time management : I still think I am poor at managing my time and that is mostly linked with my own efficiency cycle - which swings. If I could stamp out my own inefficient cycles, I think it will be better in terms of what I can do and achieve.

2. Need for sounding board : I need a sounding board at the beginning of large tasks where I can set a broad set of objectives and plan my tasks planned out, most organisations are bad in this and this leads to me needing time to get a cohesive package together - I need to figure out a way to work internally on this and get an algorithm together

3. Multi tasking - My 2 years in investment banking now has helped on this, but I can be a lot better - I still don’t use the right tools for this I think. Need to get this right

Words....

2009-04-05T20:44:00.005+05:30

One of the gifts my father gave me was my love for reading. For me even textbooks were more reading material and I used to read up all text books of my neighbors the day the books were issued at school (ok don't call me a freak and wipe the smug smile). I started reading magazines and would read most weeklies and the graduated to reading anything I could lay my hands on in the library....although now work and general tiredness have cut down on my reading ( I surely don't read as much as I did or as much as lets say Dhammo), I still do...

I can think, read and write in 3 languages - Kannada (my mother tongue and a beautiful language), English and Hindi. I can read and understand Sanskrit but I don't think in that. Can understand lil bit of a lot of other languages.....and I have read in all these languages and some words stick for the beauty and the depth of meanings that they can conjure...some that really stick in my head are : (short list across languages)

Kannada :

Daaridra Vyraagya : It literally means the renunciation felt when poor..such an awesome concept. You can renunciate when poor, when its not so much of a choice and its easy...renunciation when you have everything is what is difficult. Which is why Rahul becoming the Buddha is such a powerful act, or Ashoka quitting after Kalinga war or Bahubali giving up when he has his brother Bharata at his mercy. I read these words first when I was reading Mankuthimmana Kagga by DVG and I think I spent a day thinking about this word. By the way if you are a Kannadiga and can read, please read Mankuthimmana Kagga, its an enriching experience.

Nityotsava : literally translated means Daily celebration but can mean eternal celebration. Such a strong concept - life is an eternal celebration, to wake up every day to celebrate it. I heard this in Nissar Ahmed's Nityotsava - where he speaks of the evergreen forests being the daily celebration in honour of the motherland. Such an awesome word and concept

English:

Aeon : Maybe it is us Indians who can appreciate the depth of time and the continuum that brings with it. Wikipedia says the Indian mode of measuring time is probably the most articulate amongst. Maybe we Indians can take more crap doled out by life due to the karmic view, the length of time we understand, the cycle of life you are tuned to believe. Aeon is an indefinite period of time...

Pedantic : means to be ostentatious in ones learning. The day i heard this definition from a dictionary, I said what does ostentatious mean and then spent days thinking if one could be ostentatious in learning anything? - coming from a culture where you are expected to respect vastness to things to learn and learn humility about ones shortcomings in knowledge, I never understood this concept :)

Sanskrit:

Dwirepha : is what Kalidasa calls a bee. It literally means two "Ra kara" and is derived from the word Bramara - the two "ra karas" in the word. Its such an awesome concept to take a word and play on the word construction to create a new word

Paadapa : means a tree, means someone who drinks water from the feet - shows a brilliance of understanding the structure of the subject referred to derive the word to represent it. I also think it shows the depth of scientific understanding which existed in our culture, because I think the western world conducted experiments where plants were sequestered and fed water to the roots, shoots, leaves separately as late as a few centuries ago to conclude that it was indeed through the roots plants took in water....we had a word maybe 3000 years old to represent the same concept...

Sukhashayanpruchikka : is another word by Kalidasa from Abhigyana Shaakuntala - this world literally refers to the person who wakes you up to find out if you slept well. Its such an awesome notion I cant even voice what I feel about this word, think of it, a peaceful nights rest, to be woken up someone with a concern of how well you slept and if you were comfortable.....so different from the random noises my alarm makes bringing in thoughts of how the day would turn out to be.

Anyways, am sure there are millions of words in the many languages I know, their usage by those wordsmiths, the poets and gifted writers, which I will never learn or know....but some words stick with you...let me know a few you have spent time flipping in your mind, rolling your tongue and using to communicate a thought...

Buying health insurance - India

2009-02-26T21:21:00.002+05:30

The cost of treatment will keep going up, I think that is a statement that one can make safely. There are multiple reasons why one should budget a larger sum in the course of your life planning - lifespans have tended to increase - Average lifespan for Indians is ~65 (check data?), while lifestyles have changed to better - they have also brought lifestyle diseases, diagnostic tools and medical procedures have improved and are far widely available - so even if by a stroke of bad luck if you were to end up with one - chances that you will be treated and most probably survive are higher - bottomline - you might live longer, get treated for diseases and might spend money on medical procedures.

Research has shown that one of the reasons why families stay in abject poverty or take major knocks on income levels is a sudden spend on medical expenses - given the poor social security net that we have in India - The ESIC does a good job I must say, but for a majority of middle class urban public who will want to get treated in a good hospital ( quick diversion : while the government has nearly exited the health space by proxy, it still is active and some of the hospitals I have seen serve the poor and needy extremely well - whatever the drawbacks in the system, it is serving some purpose and can go a long way still), the cost can be very high. A few days stay, a few diagnostic procedures, 2 visits by the specialist, a minor surgery can lead a healthy bill, if not a healthy person!!, of 30-40 k today. A major illness will notch up bills upto 2-3 lakhs - ok enough of the obvious what am I trying to say - don’t gamble with your health, stay healthy and plan for the worst - go buy health insurance

Why you should not depend on the health insurance provided by your employer :
So your kind employer has tried to be concerned about the business of your health and has provided a group insurance and covers your family too, it’s a good beginning…but go out and buy a good health insurance independently….reasons :
a. When you shift companies, you lose the cover - any event in between two stints is not covered - in the era of job hopping this is a reality which you cannot ignore, with my healthy regard to the angels who dwell human resources land, you can expect to be without a new cover for a few weeks or months
b. No claim bonus accrual : a healthy record leads to no claims bonuses which get accrued to you, in a company scheme this accrues and gets distributed, a good long record goes a long way in getting you a best deal -while some insurers allow you to shift no claim bonuses, most don’t - so start early build a case
c. Some insurers will not cover pre existing illnesses or will cover only post a period of look out - so if lets say you have hyper tension, then for a period of 3 years this will not get covered or a partial cover is given. So if you have aged parents, then while the company usually arm twists and get pre existing illnesses covered, the cost of that is built into the premium you or the company pays - so an early starts ensures you get covered
d. Buying health insurance in India, where the insurers are acting like the spawn of satan and denying the benefits or playing dirty when it comes to elderly people is very painful. You will usually find conditions like the whole family needs to buy a cover, or the highest amount is capped, or the illness get excluded -the list of woes is long - bottomline build a case, buy early - problem with company cover is you can never carry it through
e. Buying insurance after you have had a major illness is next to impossible - start when you are healthy, the insurance company will be decent enough to atleast remember the hard earned money you parted in good ole days and humor you for sometime without being spawn of satan
f. Usually company provided schemes do not qualify for tax breaks - this is a perverse incentive - go figure
g. The cover will expire when you retire, see if you can ever buy cover at that time….build the history..thats my theme….

So go buy a health insurance, I bought it from Star Health insurance and am fairly happy, although I think I underestimated the cover I need. Dhammo in his post came up with a large number - 20 times annual earnings - I think the insurance company will think I will be drug company specimen if I ask for such a large cover. My approach - estimate 30-45 days stay in a hospital + a specialist visitation fee + medicines at similar amount and some more - for a city like Bangalore this number is like 6 lakhs I think - go buy that first for your parents - you can start at half that if you under 30, and increase it to that level by the time you 40. This is my broad thumb rule

(I had resolved to post once a week this year- its been 5 weeks now without a post - the market mayhem and general conditions playing a havoc on mind, time and life... it will be slow coming...please keep visiting, there shall be posts! Thanks for being around)

It must be a wretched feeling....

2009-01-13T22:58:00.003+05:30

This is a theme I have been feeling for the last few days and I had to blog it more for personal record and in the middle of a working week, I must be mad to be doing this...

Have you ever thought what it must feel to be lonely? to not be able to say your thoughts out? the only sounding board available is self? I was watching this movie, 'stardust' and a part goes where the guy says who wants to be immortal, it must be lonely.. when the Kraken is found dead in Pirates of the Caribbean, it supposedly has a sad look in its eye, one of the characters says, it must be sad to one of your kind...Ice age 2 , the mammoth goes into a melancholic mood when he discovers he is probably the last of his kind....A friend came back from a Vippassanna (Spell right?) and was in total silence for 7 straight days, it isn't being lonely, but still for me communication is atleast a part of not being lonely....

When ever I keep thinking of entrepreneurship, this theme haunts me....the idea is your baby, you need to believe it to the hilt, you might be the only person to believe it first, convince a team who trust your vision and deliver and then go to the butchers of such dreams - the VCs/ the bankers/ consultants who will try to see the risk and caveat any upside....scared of the success that they might get right by accident...

It must feel lonely, it must be a wretched feeling.....one wise man told me when i was lot younger - prove yourself and your ideas to self, for you will spend a longtime proving it to others....right now I am others...I need to keep moving to the other side..

The problem of clutter....

2009-01-11T19:48:00.003+05:30

In the corporate world, the cost of complexity and clutter is underestimated. It is captured in various cost lines, in various forms of inefficiencies that show up and the sub optimal decisions which are made...

Let me give you an example : one of my previous clients had manufacturing plants in nearly each state. The dynamics of the product were such and also the tax laws had necessitated that but then the contracts had a take or pay clause with contract manufacturers, so to avoid paying for products not taken, managers fear saying that you see, they would produce and then pay and transport the product half way across the country, when the closest plant was in the next town. And since you could not transport half a truck (the SKU had low volume) they would also transport a SKU which was in the made in the plant itself!!! The managerial bandwidth that went away in managing all this nonsense was so high, by the time we were trying to unravel it, no one knew why any of those activities were even happening.....so complexity had its costs and led to lack of clarity in thought process...

Why am I rambling? right now I am feeling the clutter killing my thought process...multiple streams of flux is killing my bandwidth and that leaves a lot to be desired in the end result...blogging is already suffering, i mostly snap and walk around dazed....need to declutter soon....results will follow...Its time to revisit fundamentals and ask hard questions from self....

THIS TOO SHALL PASS....

2008-12-30T23:40:00.002+05:30

what an year it has been...it truly drove home the point the little prayer tries to make - give me the strength to change what I can and to accept what I cant...as one of my friends said : Macro eco is the luck factor you cant change in your life and if you are from the finance field, all I can say mates is the moral of that story we should remember all times - "THIS TOO SHALL PASS"

But to create a personal note, this year probably has driven home a lot of points in life, the highs of closing large deals, agony of things falling away, best laid plans coming to a naught, the insignificant feeling and the lack of control on lots of things but yes, as the year comes to a close, as I told a few people, for the first time, clarity has occurred in career life : Simple truth realized : acquire skill sets, make great friends, deleverage, build capital, enjoy the journey while moving closer to the ultimate goal of starting out by self....I dont have an idea, but the scare of being on own in the unknown without trappings of an organisation behind self is gone...yes the map is not the terrain but yeah hopeful this surrogate pain will show way...

Personally I always told myself : one day I shall create an organisation which will provide employment to 10000 people - 50000 lives touched - but starting small (driven home by the humility felt in this mayhem) I think I should try to change atleast 1 life : My favorite cause has been education and I have been regularly donating money, Come new year : let me see if I can do more...

When I was 25, the goals I set myself as Prof Ramc would call : ghosts to set at rest by 35 : Tick off basic assets accretion, Investible surplus of 1 cr, work for self, be a role model to atleast 1 person : all slightly superfluous goals but on way for 1, nowhere close to 2, clearing mental cobwebs for 3 and not started on 4...so 5.75 more years....looks like i stand a decent chance :)

and more easy events to tick over the next 18 months:
1. See the pyramids
2. Get involved in the community - will probably assist some school build some assets - a library maybe - I hopefully know enough people who will buy me books :)
3. Plant a tree - a small anecdote about this...when this thought came to my mind, my mind immediately did a ROTI - Return On Time Invested- i realized I had sold my soul to the banker in me - A tree is to me my version of being able to think about someone else other than me...being able to measure growth in cms/ inches in a year and not seconds/ days - my penance in patience
4. Get back to playing chess - a game which I stopped playing since it brings back very painful fond memories
5. Scan all the photos in my home : memories are too precious to be let to the mercy of the elements

So ask me how I did a year from now...

Till then, its just another BRN ( big round number!!) 2008, hope there is peace, joy and happiness all around..

observations from Europe

2008-11-02T19:38:00.003+05:30

I did a whirlwind trip of Europe on work, screwup by Lufthansa meant I spent time in Paris, Munich, Brussels & Frankfurt instead of heading straight to Brussels, a place i have spent time in the past and have come to love. Brussels to me is the bangalore equivalent of Europe ( or should it be vice versa?) multi cultural, close to larger cities but with a distinct lovable personality of its own....

Its been 6 long years since I spent my last stint in Europe, so some changes I noticed...

1. There are beggars on the streets : I stomped around Europe last time and none of the main cities seemed to have them, some in Paris, but that was also very rare. This time, it was in your face, people at corners, reminded me of what a foreigner might face in India, women with kids, kids chasing you and youngsters with no apparent reason to be begging....what changed? Was astonished and my local contacts, they blame it on the new nations in EU, the slowdown and illegal migration but yes they too seem to notice the change

2. Understanding the demographic dividend - a lot of research reports talk of the youth and the push that will give India as a nation. Any public place in India will have screaming kids and across age groups, then you see youngsters on the verge of marriage and you know this engine is going strong for a few decades atleast....I roamed around in the streets of Brussels and the large other airports and only place I saw kids was Terminal C of Frankfurt and you guessed it right , thats where planes to India were departing from. Else, the concern of a greying economy, the strong social safety system and its future working, its impact on business, the world view that will emanate from Europe will be very interesting to watch

3. Investment in infrastructure : a constant thing you will hear from foreigners is the construction which seemed to be going on in China and India.... but what surprised me was the amount of construction I saw in Brussels, ofcourse, neighbourhoods looked vacant, the airport terminal too big for the number of passengers but the constant spending on upgradation, not general maintenance mind you, is so huge, I came back even more convinced we India need to do more. Our public planning systems are letting us down and our politicians doing us a disservice in planning public spending. The private sector is also not too behind, take the Bangalore Metro as a example, I have lost count of when they shut down half of MG road in Bangalore and Navayuga is taking all the time in world to even build the basic pillars....the full fledged metro is far away....no accountability is killing all of us....

4. Spoilt by Taj : I have in the past spent a lot of time at Taj palace, Mansingh road, Delhi and trust me they have spoilt me. I stayed at the Airport Sheraton in Brussels and while I have no complaints, the small touches by Taj, the personal warmth simply make every stay that much more comfortable. I am sure if they can get it right, the hospitality industry from India can rule the world.

5. The growing irritation about Muslims : The one thing I thought very highly of Europe was the sense of fairplay and their ability to recognise another culture and work with it. To a level, I think Europe is ahead in terms of such refinement but this time, the number of people who spoke to me of growing disenchantment with the local muslim populace was surprising...as one person said, I am ready to accept their practices, but are they ready to accept me? I used to think the ghettoisation of muslim communities was a very India specific phenomena due to our peculiar vote bank politics, but seems its a larger issue... I am not sure of the causality, but the clash of civilizations seems a larger issue and on the ground far widespread...

6. Queue control : a minor issue, I was standing in the queue at Brussels and when someone tried to barge in the lady manning the counter just stood up and asked the person to join the queue....that simple act increased the sanctity of the queue, in India the person at the counter somehow doesnt think its his job to manage this part of the equation and leads to situations. We Indians due to our scarcity mentality have a disrepute for being able to stand in a queue but I think the other part of the equation is also required.

Bottomline, I had my doubts about India slowing down and all the fear mongering in the media about our economic prospects, but I came back more convinced that India, if we help ourselves, politicians willing, bureaucracy moving its wide bum (I would be happy if the last 2 dont add anything as long as they dont screw up) we will move forward....

Death of a tradition?

2008-10-20T15:15:00.000+05:30

Typically a language is not a standalone entity. It coexists with a culture, a way of life and comes bundled with folk tales, proverbs, folk songs, literature, slang, mythology. There is also the script, the grammar, pronunciation which are the building blocks of a language but I am not going to talk about them here. I am more concerned with the first few things I referred to. Ofcourse there do exist languages which might not have all the elements, but I am concerned about every single one of them

Supposedly we have 6912 active languages today ( Source: Ethnologue) and more on the verge of extinction every day. So everytime a language is lost we lose each of the elements I named. There are scholars and researchers about loss of languages and their preservation and efforts are on, but I feel every stone in the foundation is important…. Ok that was a long preface to what I wanted to say

I have friends from Bengal and the joy that arrives (and the sluggishness if I may say so) in their lives with the arrival of Puja is to be seen to be believed. Navratri or Dasara is a celebrated widely in India and the pandal culture of Bengal, the dandiya culture of Gujarat, the ram lila in parts of North India are all distinct forms of celebrating the same sentiment - victory of good over evil and worshipping the feminine form of 'shakti' ( although I am itching to deviate here and talk of how this is derided by certain cultures as 'pagan" I Desist). Karnataka has a very distinct form of celebrating Dasara - days of pooja - I remember Saraswati pooja, where my books got all the attention, to Ayudh Pooja, the day when we as kids got together and cleaned the vehicles and worshipped every form of tool , to vijay dashami a simple pooja to seek blessings - a part that never was practiced in my own home but have seen is the "Doll arrangement". It is a unique form of depicting mythology, themes from the texts and anything considered worthwhile….. As a kid although I have seen such arrangements I never appreciated it.

This time, I kept thinking, it’s a part of our tradition as Kannadigas (maybe a sweeping generalization, not sure if the practice is so prevalent in North Karnataka or in other Dravidian states) but I don’t see the sensitivity to this dying aspect of a festival. Also I kept wondering how and why is it that we don’t have such things on a grand scale in the form of pandals like we celebrate Ganesh festival or why didn’t it evolve into the Pandal culture of Bengal - Giving it a public form might bring back this practice of our culture which served a interesting purpose of being educational while fun.

As an aside, the practice of "doll arrangement" is associated with some wonderful songs in Kannada movies, so if it doesn’t revive very soon, those movie clips will be the only record of this bit of culture….hope it doesn’t come to that

Chit funds - basics

2008-09-27T12:03:00.002+05:30

I did a post once -of-p2p.html and keep getting queries about chit funds... so here goes a post which captures the basics of chit funds. (Disclaimer : I claim to be no expert in this and is purely based on my participation in them a few years ago)

A chit fund is a purely Indian invention of accessing money. To that extent I have in the past compared it to peer-to-peer lending. A few people come together, pool a fixed sum of money for a fixed period regularly and every month based on the need, the money is taken by a member. Lets work with an example : Chit A is for 12 months of 1000 each, so the pool available is 12000 (a small technicality, if there are 24 people in the group then 2 chits will be available that month and so on). So all people pay the money to either a designated person or to the chit fund or operator, and then people who require that money bid for it. So if I were to say bid for Rs 1000, then I will get 12000-1000. I now keep paying my 1000 monthly. What happens to the 1000 I paid? - usually a small portion of it goes to the chit fund/operator as charges. The rest are divided amongst the group in either of 2 forms - as a cash payout or as a deduction from the next payment due. Also there is a variation where there is something called a double chit, which is essentially all the bid amount is collected and is available to the group to bid, so that the time period for which you pay the chit is reduced.

What determines the bid amount - multiple factors but most basic is the cost of carry and the demand for money from amongst the group of members. So the bid amounts are usually higher in the initial stages and keep falling, in large chits mostly towards the end bidding does not happen and base bids are fixed. Also most chit have a reserve price and a minimum tick. The demand and supply works differently - if a group consists of mostly businessmen who are looking at short term funding the rates tend to be higher compared to group of housewives - basic concept of benchmark rates and the return that people can get on the money that they took out of the chit. People ask me why shouldnt they just go start a recurring deposit in a bank - both inculcate the same regular saving habit. Simple answer - power of compounding and higher return. Typically if the group you belong to is of people who bid higher then the return on your investment is high and a RD pays you interest in the end, a chit fund is immediate.

But the fundamental laws of finance - risk and return correlation run true here - higher bids mean people are desperate for that cash, which in turn means strained finances (not an issue if it is a temporary cash flow problem) but if it is long term - one runs the risk of default. Also the other problem is of chit fund operators absconding with the money. so the due diligence that you should carry out is check on the operator first and then your group members before you start. Dont bid unless you need the money and have a good use in mind which will pay you more than what you paid them.

The industry is now regulated, so check if the chit is registered and then step into it. Stick to the biggies, there might be safety in numbers. Avoid mom-pop setup unless you trust those guys with your kids.

so it serves them right?

2008-09-20T00:24:00.001+05:30

A lot of my friends speak to me about the current market mayhem and the feeling they seem to have is it is wrong for tax payers money to be used to bail out the excesses of a few 'rich spoilt bankers - let them fry in hell'. yes I am one of that creed of bankers, those arrogant self professed 'masters of universe' as Thomas Wolfe put it.... but hear me out...

what did these bankers do which has brought the great market to its knees? a simple concept called leveraging....using 26 bn dollars as in the case of Lehman to create a balance sheet of ~400 Bn...thats the beauty of the system and this is not the forum to explain what was happening...

Just that, remember when these same bankers were driving up prices of that corner plot (directly by investing or indirectly by giving money to that builder to build his land bank) we didnt hear too many cribs from people who flipped that apartment they bought during construction for a 50% return in 12 months....or when these banks needed backend support on research and spawned a few 100 of KPO's in India creating jobs or giving those great IT companies large amount of business....remember financial services probably has the largest trickle down effect after pure manufacturing in terms of ancillary jobs created.... so lots of wealth was created...

and where did this wealth come from : the main investors in all this were supposed to be hedge funds and sophisticated investors who knew what they were getting into (different point that I dont think anyone knew what the heck was happening) and ofcourse those pension funds - again with well paid fund managers...so hopefully some wealth got shifted in this process..... a lot of it got destroyed but was it all created by this swell of financial engineering....

so dust to dust is what has happened....and as it is said great fortunes are made in the ruins of financial markets and realized in bull runs....so keep investing.... dont listen to the experts on TV, do your research or else just buy an index fund...and while you are it, spare a thought to all those people who lost jobs, lost pots of money....a fool and his money part ways, but it still hurts to be a fool...

and yes, when we were back in school, Lehman, Bear, Merrill were the ones we dreamt about....great institutions having been through 100+ years seen the great depression, the meltdown, the dot com crash....gone...RIP

What governments jobs do.... a positive side effect...

2008-09-07T20:06:00.002+05:30

Most kids in India today would'nt want to be caught in a government job (when I say a government job here, please read it as quasi government, public sector undertakings, nationalized banks and such) but a small thought crossed my mind the other day. Our generation, the post liberalization, middle class generation is aiming higher, dreaming big and trying to reach out we should realize that a major part of this is due to our education ( oh yes, there are cribs there too, but still the base is education). Our education irrespective of public/ private schools etc was mainly possible due to the stability of earnings offered by these government created jobs in our parents generation... combined with the middle class interest in education and the quest for a stable 'service sector job' parents skipped meals, gave up promotions, stuck to lower paying jobs just to keep their kids education intact. Basic necessities like books, food, private tutions, cycles/ bikes to school were all financed by the salary of these government sector anchored jobs. The government created a large working middle class which created our generation of 'aspiring to beat the world to reclaim our spot under the sun' generation.

So it is quite understandable that even today a government job is something to clamour for. The fight for reservations, the huge army of clerks, peons, sweepers, gardeners that have been created will hopefully push more and more people out of the 'safe zone' of a government job. Ofcourse there is the whole side income which a government job creates, the sense of power, the 'mai baap, ji hukum' sense…. The perks of being government, but yes the government has served some purpose.

It takes a generation of stable job to take a family out of poverty to middle class ( not withstanding 'acts of god' like medical emergencies, loss of wealth due to bad habits, low financial education that leads to low capital creation, etc) and probably takes a generation of entrepreneurship to lift a family to the 'rich category' - the disconnect I see in my own case and many of my friends is we have gone through the former phase, but have very little clue of how to do the latter - we lack role models in close circles, capital large enough to allow the freedom of a large gestation period and maybe the ability to take a risk and bite the bullet….

But yes, the above view probably helps me think, the taxes I pay is doing something to the country since a large part of it is being used to pay this army of government employees…. Since I don’t see the roads, don’t have enough power, lack basic infrastructure or a social security system being created…… yes it’s a sorry view to take, but atleast I get less frustrated !!!

Follow up on "The Pygmy Effect"

2008-09-03T16:41:00.001+05:30

(Reader Warning : Long post ahead - this is in reply to Aditis comment on my last post - Pygmy effect)

Hey Aditi, welcome back was afraid I had lost a reader, and thanks for taking time out to comment, and apologies for not having replied back on the previous ones….

Here goes : Why pick on the family owned entities : I don’t think I have too much of a hope for the government entities… they served a purpose in the planned economy stage and are probably tied down due to vicious cycle of their own (some of them are fantastic organisations mind you - there is a nice theory on their second level contribution to the economy - subject of my next post), you have highlighted a few reasons and there are many more… I am a born capitalist when it comes to matters related to capital finding its own way and demand being addressed (my socialistic tendencies are there but as one of my well known Profs told me "if u think you are best suited to earn money then do that damn thing, leave social upliftment to the ones more qualified to do it, if money is all u can contribute so be it!!!". There is a role for a regulator but mostly the I love the concept of a market, make it competitive, let labour and capital flow freely and then magic happens

But the decision to analyse the family owned firms is (my guess here on the number) probably 80% of the enterprises in India are family owned or controlled and unless they are able to come out of the cocoon of treating the business as an extension of family and self, ( don’t know your background, but in corporate law, what I am saying is similar to the divorce of management and ownership or what we call the lifting of corporate veil but more on a financial and operational control part is what I want) the companies will not grow…. Why do I want them to grow : multiple reasons - industrial cycle follows a predictable pattern : unorganized sector - few organized - many organized - large companies/ small unorganized - niche warriors with large companies - multiple smaller but larger than stage 3 companies. In the past when you had tariff barriers, information asymmetry, no 'global supply chain', the market and the competition was largely local and we could get away. But since we are opening up and largely the world trade is becoming freer, this phenomena is both an opportunity and a risk…. If you are not large, you might be the largest organised player in India but in the global industry cycle you are already in 4th stage and risk getting wiped out and even if I assume we will be able to graduate to the next stage and occupy niches, there is lot to be done……..

Size gives a different swagger to your moves, opens up your mind (makes you reckless also!!), allows you to see at an opportunity differently, allows you to setup systems, attract professionals, attract capital, beat down the bank which will offer you PLR when you are a 30 cr company and will offer you PLR -300 bips when you 300 and then allows you name your terms when you are 1000 and will restructure loans to suit you when you are 3000 ( don’t believe me, check the CDR packages doled out in this country in the last downshift we saw - case study a few steel companies, oil companies). Economics 101 teaches us about Scale and Scope economies - a critical mass sets off a chain reaction - talent attracts talent, money attracts money, opportunities attract opportunities

And on the other note, why are professionals important : a entrepreneur serves a purpose in the birth and evolution of an organization, his/her intolerance to status quo and creativity gives birth to a business, his hunger for more gives fillip to grow and his/her 'animal instincts' (its an economic term :) ) keep the economy growing when both fiscal and monetary policy are screwed up…. So by definition, they come with vision…. Some prodding is required to enhance its coverage and scope, this is the void advisors (pseudo, proxy, quacks, intelligent, experienced, effective, gyan giving - various forms of consultants!!) come in…. A professional on the other hand is by definition mostly attuned to a systems mindset - setup/ follow/ break systems mode….not a radical free thinker…. The fear of failure for most professionals is what he feared when he gave his last entrance exam but for an entrepreneur it is that order which if it did not materialize would have meant 30 employees going without salary and his precious wealth vanishing…. The reactions are different in the face of adversity and the capability to visualize is different. I once was presenting to a very successful entrepreneur and told him they will need 800 cr to meet his vision, he said 'Why not' but it had taken me 15 days to convince his whole management team to even persuade them to let me present this to him :)

And on the visionary note : they are far and few I agree…… but there are levels in visionary behaviour I think - like sports which starts are second division to olympics/world cup level - you need to define the level you want to operate…. My advise is "everyone jump 3 steps on the vision, atleast then we will have a few more nationally important entities (and Olympic gold!!) . 'Cutting corners' is by definition an dangerous area, but one of the IAS officers I worked with used to say, "only thing which is atleast light shade of grey is the word illegal, both immoral and unethical are new shades which can be called 'invisible grey' " - So in this I will go by what my B-school taught me - don’t do that thing which you don’t want your mother to read in the next days newspaper - my sole test :) else we are all prisoners of choice - the master piece 'Bhagvad gita' was born out of doubt and the problem of choices to be made.

And lastly, is profit a byproduct of vision or can that be the vision? Yes it can be your vision, but I would say it’s a gulli cricket level vision, if you defined your vision as "I will make 100 cr profit in year 2010" (unless you are making 1 today). A business in my mind, a tool/ a purpose/ a calling of a higher order that cannot be just confined to profits, but profit is an essential ingredient and probably not the end result, its just one of the many measures…..

And on a lighter note, yes maybe a tinge of disappointment, I keep telling my friends if my grandfather had been a land grabber or even a normal bribe seeking government employee rather than the well respected but not well paid writer he was, I would also have been employing people like myself rather than peddling my wares to the corporate world :) so yes, ovarian lottery worked in a different form in my case…..now its left to the rich/influential father in law to do the trick - hope I atleast get a consolation prize there :) !!

The pygmy effect

2008-08-19T23:36:00.004+05:30

Indian companies by global standards are small in size.... in terms of turnover, balance sheet and scale of operations. This has roots in history to the planned experiment with socialism, the licence raj which curtailed growth in its own way, the romantic notion of self sufficiency through small scale industries, the fabled piece of legislation the Monopolies Restrictive Trade Practices Act. But these would be immediate identifiable causes, slightly offbeat would be the late arrival of industrialization to India but during the rule under colonialism which anyways had perverse intentions to not let Indian companies grow large. I also think of two reasons why probably Indian entities never grew too big...

1. Lack of capital formation : India was and is still a rural driven agrarian economy. In such cases capital formation is closely linked to the productivity of the land, which in Indias case is led by the monsoons. Monsoon failure meant subsistence. Also the water tight compartments of castes around professions meant that the rich trading community and the artisan community were different, so while India gave birth to financing systems like Hundis, chit funds and micro entreprenuership, modern notions of shared ownership did not take off. Even when the modern company form took root , we had the relic which a lot of people wouldnt have heard of called the controller of capital issues.... so lack of capital meant, companies remained small...... financing expansion through internal accruals which anyways were suppressed to pay lower tax or thorough bank debt which came at phenomenal costs. Add the Indian aversion to debt and its a potent cocktail of capital deficiency which would kill large scale global ambitions.

2. The 200 cr barrier - The Indian entrepreneur is hands on (I have great respect for them - more about it in a later post) and likes to be in control. So usually the organization is an extension of his/her personality. Also since most Indian promoters never diversify their personal balance sheets from that of the company, maintaining control becomes essential to ensure safety of personal wealth and family standard of living (again a perverse tax incentive means a posh bungalow, a swanky super car and the summer getaway are all financed by the company as a perk!!). A very easy way of exercising control is through filling up the company with family members - bottomline your ability to procreate is the barrier to growth and since blood is thicker than water, professionals never succeed in such companies, so every small decision ends up with papaji/lalaji/chairman/ founder or whoever is the head.....growth gets squeezed. I usually ask a question to ascertain if this is a problem with companies when i first start working with them - do you know which debtors you wrote off last year? if the answer is names of debtors i have an issue, if the answer is something like we had a review / we have a policy - then yes, systems have taken over.... and why do i call it the 200 cr barrier - most Indian companies cant seem to get out of this vicious cycle and get stuck around that number - if you broke through that, then according to me you have built a middle management which runs the company.....All you then need is a visionary!!!

If Indian companies have to dominate the world stage, grow large and enhance their reach globally, I think somewhere they will need to address these 2 issues.

(and before you start commenting - I know there are well run professional companies in India - L&T et al, but if you remove the family conglomerates, I can count such companies with ease....)

Miss you....

2008-07-30T22:55:00.001+05:30

You shall see the world through my eyes as I saw it through yours long ago….

There is no self made man, every single instance shapes him… you shaped 18 years of it.

You always knew more than I did but never were afraid to learn from me.

You never let me win the game of chess or play those spinning cricket balls just because I was a bad loser, but you taught me to win.

You never were happy when I came second but were the proudest man in the room when I stood eighth when I was eighteen.

You had less then than what you gave us but more happy when our faces lit up with smile.

You always knew where I hid but never found me at once.

I was scared of your temper but saw it only once and that changed my character forever. I saw when you hurt at my mistakes but was hurt more to never do it.

I learnt to dream, push harder, aim higher but never once forgot the right way so that I would lose sleep

You pushed me harder; to challenge myself but to trust my abilities… risk what is mine, to not fear the unknown. To dream higher but never from a weak foundation

My love for water, the outdoors, the stock market and books I know where I got from….

My love for family, my respect for elders but the courage to call a spade a spade, my empathy for those in need – values I learnt at home…

I was a friend before I realized I was a son and when I realized I was a son I lost a friend, this is to my father, who left us 10 years ago, to what I hope is a better place, since with even those small things missing, it was still heaven here…

In the land of the color challenged...

2008-07-19T10:17:00.003+05:30

when we were small kids we used to play this game of colors.... one person was out of the group, and would name a color and people who had that color could walk over to the other side, more like a free passage, those who didn't would then try to reach the other side without getting caught, if you did then you are out..... I used to consistently get out....becoz... now i know, i didn't know what color was being referred to....

move forward by a few years, I get stumped when people call out colors and say things like ecru or beige or algae green.... I feel lost.... for some reason I am color challenged... not color blind mind you, just challenged and i suspect its more in being able to name them.... for me its the primary colors and maybe some standard other colors and then its light or dark..... i cant identify parrot green vs. algae green or brown vs. beige. ecru or milky white to curd white or elephant grey vs ash grey or jet black vs. clear black ( i don't even know they exist, so how can i recognise them?)....

I am not color blind mind you, I am what you can call color ignorant :)

So the next time you meet someone who talks about colours in two shades, light or dark, and
is slightly confused with any other color than blue.... you have met me or one of my kind.... please show some kindness and talk our language...

save me from the serial killers....

2008-07-17T21:59:00.002+05:30

There has been an explosion of daily sitcoms in Indian television, family fights, saas-bahu serials, corporate wars but mainly woman characters, adultery - every possible theme running across years beams into households captivating the imagination of the women viewers and the men too (although the latter will not be caught dead discussing about it!!!) - but give me a break.... I come home tired wanting to watch something which can be fun, informative (yeah even after 10-12 hours of just business related thinking at work, I still watch CNBC and NDTV profit, so sue me!!) but the TV is taken over at 8:30 and till 10 PM , mostly the time I would have reached home or just before dinner am subject to this torture........

Don't mistake me, its not that I have anything against these, each has his/ her own poison, but this is literally my poison!!!! I cant see wailing women, overacting, conniving acting as though they will bring the world down and pseudo commentaries about what is happening in our society thru this nonsense.....

aarrrggghhh the family that dines together stays together they say...... if this nonsense doesn't end soon, either my dinner time will be very late in the night or the family doesn't dine together.....

Ektaaa kappooor (or whatever her the latest form of name her spelling has morphed into) and all your ilk , I curse you solitary confinement with 1500 days of continuous crap you are dishing out....

Some questions...

2008-07-06T13:06:00.002+05:30

I kind of like the philosophy Hinduism propounds ( don't ask me what it is, there are just too many, so pick up something that suits you!!!) - not that I am religious - am more as someone once told me, karmic than dharmic - but I find it interesting that a single religion can allow thoughts where you can consider yourself one with God ( Advaitha - literally meaning 'not double'), dwaitha (literally meaning - two different ) and vishistadvaitha ( a form of advaitha - where thought goes that while in human form humans and God are different, once you reach God, you become same) - most religions I have basic knowledge of do not allow such wide spectrum of thoughts ( mind you : I am probably a novice in this region , so please feel free to correct me , will be really glad to learn more here). But then what gets my goat and given the fact that these thoughts have been with us for maybe 1500 years, why did we treat a section of our society so badly? I am a Brahmin, so while I can understand the power that might have resided in the caste due to knowledge, what I fail to understand is when we could be so tolerant to religious thoughts ( remember : belief based persecution is what is most prevalent in human history) , how is it that we failed to uplift the sections of society we left behind?

Even assuming there was no higher intention, someone should have moved these sections just for the power...why did it not happen at all? Interestingly, as a caste, while maybe Brahmins excelled in knowledge and maybe that allowed them to adapt to changing conditions sooner, my guess would be that most Brahmins would be the working middle class even today...so it was not money that drove the so called 'upper caste' to this...

I am all for affirmative action, maybe even reservation, maybe priority over natural resources as our beloved 'toothless' prime minister wants us to believe... but correcting a mistake does not mean you make the same mistake...

Update on BIAL

2008-06-29T10:57:00.003+05:30

I had an earlier post on BIAL and had noted how somehow the airport had not lived upto the expectations of many. Now that I have made a few more trips, I am beginning to see the airport come into its own... I read somewhere them claiming that a passenger will alight and be out in 20 mins... i actually timed it yesterday and i was out in 12... it helped that we used the aerobridge and and being a platinum on Jet my luggage gets priority, but yes it was impressive... in 20 Min's I was out of the airport, into a taxi and halfway to the trumpet changeover....

The toilets issue still remains, not sure what they can do about it, the check in counters is a mystery to me.... They seem to have ~65 (or was it ~50) counters, but I end up spending more time in a queue than the old airport, not sure what is happening here.... Traditional queuing theory suggests that single queues with multiple counters are more effective than multiple queues, and that has been put into practice here, but still it doesn't seem to work.... hmm I need to look at this tomorrow when I travel again..

The seating area is woefully short I think, we Indians are not too used to forming a single file line , usually 2 lines get formed, and close to the boarding counters, there is a vague formation of chairs obstructing the line formation...... somewhere I think the commercial area to seating area is sub optimal.... The number of options to eat is large, but the work flow is not well thought out of, for E.g : people collect their coffee etc outside the cafe near Gate 1 and that impacts the boarding at Gate 1 , near gate 3 there is this vague obstruction of a small bill board which impacts the movement of people ( its bang in the middle of no where!!!)

And dudes - where are the charging points for laptops ?

But bottomline, the airport seems to be improving in leaps and bounds every time I travel, hopefully, we will have one to boast of....

Bengaluru International Airport Limited - BIAL - a shame

2008-05-31T18:38:00.002+05:30

I have traveled from the BIAL twice now and I am so thoroughly disappointed with what is the result of a >15 year wait, i think the citizens of bangalore have been cheated by government apathy, profiteering private enterprise who give a damn to the customers comfort.....here are my observations....

Good ones first :

The road with all the media outcry is looking good.... there is still some work left in patches but it is in place. I live in south bangalore and its about 63 kms from where I live, so it seems like a mini picnic - it took me an hour to travel this distance, not in peak traffic ofcourse, that might take sometime more
The look is that of a international airport.... suvarnabhumi, brussels , dubai - they look swank- this with the glass and open light looks so
Unlike the old HAL airport, there is some space here.... but my concern is has someone thought of future - why didnt we think of a multi level parking in one shot?
The aerobridges look cool

Now the cribs :

They have very few toilets and hello , the whole damn place is water logged.... this is a new structure damn it, why cant we have a few more toilets......
Who the hell is globe ground ? - BIAL says lufthansa has a stake and they are global partners who will provide international level ground handling - my foot - my flight landed at 12:30 yesterday night - after been delayed by an hour and then we waited for 20 mins in the plane since globe ground guys could not align the step ladder with the plane door - it took them 6 attempts. 4 guys were just pulling it back and trying to align it..... hello whatever happened to those tractors or vans which used to pull these around. Then we got down to find 2 buses for a plane full of people. Kingfisher, with its plush couches in buses has set the bar too high and here the same people were forced to pack people in as sardines. And then the heights they brought in Tempo travellers..... and then the driver gets confused and drops us off at a gate which is locked.....so here we have 4 elderly people, a lady with a bawling baby and another couple with 2 sleepy kids with other weary business travelers who probably have clocked a 18 hour day trying to catch someones attention to get the door opened.... and then trudge for 100 mts to sneak into another door... Look at what has happened - since one of the service providers messed up kingfisher and BIAL both ended up with a bad name.
Business travelers need charging points for both a laptop and phone - hello people when u built a new airport, didnt any of those bright consultants tell you about this? holy cow.... AAI does better these days
They have 10 gates which is good... but then hello you cant have me run around gate to gate trying to check where my flight is boarding - what happened to those tv screens which gave departure information? they have i think 2 or was it three....
At 1:15 in the night, we tried getting out of the parking lot and they have one counter which is being run manually - so I was stuck behind 14 vehicles - 10 mins wasted.... can someone plz think of the value of my time at 1:30 in the morning?

There are lots more..... since I do like 2 flights a week, I will keep posting...Hopefully for my city, they will get their act better.....

Sad part, everyone who has come back from hyderbad says the airport is magnificent.... so here we lose out again. Congrats GMR, pity a Siemens , L&T, Zurich airport cant get it right!!!

some random notes...

2008-03-08T20:48:00.003+05:30

The 60k cr payout to the farmers led me on the same stuff I am sure you have read ad nauseum in the business press - how this will kill our banking system, about moral hazard, about how farmers will need to pay bribes to access this, how the ailing co-operative banking system will be dealt another death knell and all that. But then I also said ' if I can feel happy about the 40k tax I will save next year, and this is not life or death for me, unlike for some of those farmers I have no right to be sitting in a cozy room and spouting such crap. But I am still asking, why isnt the systemic issues not being addressed, why is there no market? when will we the middlemen who although are serving the cause of market makers are taking too high a toll on the system, about 80% of the credit in the system is unorganised - why not address it.... some questions I will not answer. For a country that votes, has a voice will we never demand these ? Will we need another 6 decades to redeem our villages....

Markets go up and down - its been a fortnight of pain for the markets - I am yet to read any report which tells people to start a SIP in a decent mutual fund and if the so called India story is intact to ride out this period of pain and volatility. If you can pick stocks, go ahead. nothing beats this time.

For what could have been - still think of those names we thought of

Some things I have been thinking of writing havent got around to - comparison of the in flight entertainment of Kingfisher and Jet, investment in public transport system, why the hell should I pay toll for roads, user development fee for airport when I pay tax - where in mighty hell is it going and so much more.....

Parting shot : to realise the value of time : everytime you are getting pained, are feel rushed... hold your breath and count down the seconds with the help of a timer in your watch or cell phone - see if you can hold it for more than a minute..... you will realise how long one minute is.... make use of it, dont rush....

So which market will I focus on…

2008-02-24T19:23:00.000+05:30

In my last avatar as a consultant, I have done typical market entry strategy studies for industries as varied as diamond jewellery, motor cycles, auto components and trucking. One question which you would invariably grapple with and try to answer was should I enter this product/service market, if so which geography/customer segment and in what order….

Assuming that the answer to the first question was a yes, the next was to answer the geography/segment and that used to be the toughest in my mind. Markets invariably tend to follow the pareto principle, where a few large clusters (either geographical or customers) will aggregate to most of the demand. So the normal response is to hit the largest market first. I used to look at this and wonder is it the right strategy, since in my mind it always used to be the most competitive also. So my question was, when you are entering a market where rapid growth can allow you a good toehold, should you get into a headon fight? The obvious answers entrepreneurs would throw at me was, dude we will get in, wean away some share from every player or from the weakest player and voila - I have got sales since a small share in a large market might still be in absolute numbers large. I had two problems with this

If you are so good and have a marketing team which can pull off this approach, why not go to the second rung markets and develop them and improve your hold? Why get into a competitive war, which invariably leads to pressure on margins – higher ad budgets, higher discounts…
Execution – its very easy to say I will gain market share, but rarely do we see huge swings in market shares, how viable is it to glean away marketshare from players in a stealth mode? If it is so easy, why the heck are you not exposed to it also?

I never could convince the managements that they need to look at the second set of cities/ markets ( Salem, Nagpur, vizag…) instead of heading into Mumbai, Delhi, Kolkata, Bangalore by default…Very rarely can you come up with strategies which can make use of longtail based strategies with a low cost delivery model, or a bottom of pyramid strategy which then makes it geography independent in a country like India since the proportion of urban and rural poor is a huge number.

Yes, I heard the same stories, small town customers shop from larger towns, disposable incomes are low, market size low, people are not aware, I am a luxury/ top rung product/brand blah blah blah…but I have come to believe it’s the failure of the operational machinery and the marketing machinery which might truly not know how to work with these markets.

The reason why I got thinking about this is also very interesting in my mind. Indian IT companies are going through a trying period – slow down in the largest market, currency appreciation, cost inflation, benign tax structure change etc. And I was looking at our arm chair business analysts writing about the shift towards Europe to create headroom. Interesting today most of the large IT companies have similar sales mix – 60% US, 25-30% Europe, 10-15% Japan/Rest of Asia /Australia. I said hey, I have seen this before, the pattern is the same, domestic/ export doesn’t matter managements finally always move to the largest market, will follow herd strategy and move in the same cycle, very few take the other path to grow.

So I ask myself for the IT companies– isn’t there a market in the gulf countries? Why isn’t anyone focusing on South America? What about the African countries? Why not Vietnam? I agree these markets will not be ready to accept the Indian tag, might be lower on realization, might be difficult terrain to operate due to language issues – but did large competitive organizations get built following a standard recipe?

Doing this needs a different enabler structure in the organization – a HR which can manage issues which will arise, an operations team which can manage widely different operating models, a front end which sells very differently, a strategy setup which can identify these opportunities and can build sustainable advantage around such ‘discovered markets’. Competing on price, incremental changes are far easier and failure on building the eco system forces to follow the set path.

Maybe, I should run this test and see if investors reward different behavior ? and what time the market takes to accept a company is different and the results are sustainable….

My view on Indian Manuacturing and why you should invest there....

2008-02-16T20:16:00.003+05:30

My basic degree is in commerce, professional training in Company law and my post graduation in management..... so its surprising I have spent so much time in manufacturing plants... I might have been a good engineer, I will never get to know, but I still love the look and feel of a manufacturing setup....

Most people who track the stock markets and keep track of that beast called the IIP will notice that the Decemeber number is lower, the last quarter has seen some slowing in the corporate earnings and I have started to hear how maybe the earnings growth will come down from the mighty numbers that drove the stock market frenzy to a large extent... But wait I have a theory about this....

A few quarters ago when the media and the so called protectors of "common man" were in a frenzy about inflation and the big daddies in the government were saying how some of this is supply led and how monetary measures would be ineffective, what they were saying was, we were heading up a capacity constraint in most of the agriculture related and manufacturing related sectors. So what was being done - the government/ RBI took measures to cool down the economy ( about which I have huge issues about how they went about it, but thats for a different post) , but what were industries upto during this phase? My guess (and here I am risking to make a statement without much analysis on data) is that corporates are building capacity. Manufacturing capacity is lumpy, takes time to come on tap and usually comes with a lag.... people who have analysed cyclical industries will see patterns of boom and bust driven by a cycle of - system inventory going down - capacity shortage - huge capacity addition - system inventory going up - price war - bam Bust ! - something similar is happening in India, capacity is coming up. But unlike the cyclicality, i think the Indian manufacturing industry will use this to improve their margins...How?

Most Indian manufacturing units are small compared to global standards, and although the best part of the last decade has been the improvement in efficiency , most of it I believe are work practice led efficiency gains, not technology led. So you had relatively small units with high shop floor efficiency driving profit improvement. Now the scale of operations for Indian units is changing, so people driven partly by tax breaks, are moving to places like Baddi, Rudrapur, Haridwar etc and setting up larger units and invariably with better technology. So the next wave of improvement is set to be driven by technology led efficiency ( and the assumption here is that the efficiency gains from work practice led improvement will not be lost ). Larger better technology led factories with scale economies slightly offset by additional logistics costs will keep the manufacturing margins high. So I would suggest look closely at those schedules in the Balance sheet and profit and loss, see Q-o-Q profitability improvement, remove seasonality and bet on Indian manufacturing for the next 3-5 years. ( Red Flag : Keep away from industries like Two wheelers, paper - where I think the segment might not be viable due to market dynamics for sometime). And you know what is the hidden zing you might get from all this - a one time bonanza since most Indian manufacturing is on the outskirts of cities (Peenya in Bangalore, Ambattur in chennai?, Mumbai) where land from the smaller factories will be freed up since manufacturing will become difficult to carry on since they will become closer and closer to prime residential areas.... so they will setup SPV/ spinoff companies, develop this real estate and push more of the production to the larger factories.

There is still one more wave after this where efficiency will come into play and that is the logistics improvement in factory gate - to intermediate distribution- to last mile distribution. Efficiency in terms of road infrastructure, de-bottlenecking out check posts ( remove the damn things you guys!!!!), warehousing, professional distributors etc. But these require fiscal measures and process improvement in this country..... and with what I think is the most inefficient goverment in the last decade at helm I dont see anything happening.

So bottomline - spend time on research, buy good Indian manufacturing companies and make some money.

There is an SEZ angle, outbound M&A angle and domestic market development angle to all this.... that might be part II to this post....

Happy new year

2008-01-03T22:40:00.000+05:30

Dear readers,

Wish you and your loved ones a very happy new year. May this period bring joy, happiness and put you closer to what you seek in life.

I know a lot of you are regular, I dont know who you are or what specifically I write you like, but keep visiting. When I started to write about 6 months ago, I barely had a hit in few days, now a days I clock about 3-4 a day. Some of you comment and others mail me. I thank you.

I have been very tied up with my new job, so have come down to one post in a week, so here is my new year resolution - I will try to post atleast 6 times in a month.

Thanks for all the support, do write to me or leave a comment.

Portfolio diversification

2007-12-31T22:29:00.000+05:30

I look at my current portfolio, do some analysis and think these are the few diversification I will make over the next few months ( or the year maybe) -

I have a decent exposure to debt - but that is primarily in the form of my provident fund which earns me 8% ( think that's what it is now). No short term debt ( have some , but a convoluted Overdraft on that is what is my working capital for a lot of expense I am incurring now). so should I increase my debt portion? not sure I want to do it. I will need some cash as backup and they will primarily go to create a OD with some debt backing them
Commodities - this will be the next big thing in India ( it already is) - but I don't trade commodities. ( here my attraction is in the agri related commodities and not ferrous/ non ferrous metals). Agriculture has lagged in our economy for far too long. Given the fact that 60% of the population is dependent on it and we need to secure our food security, I expect movement on this area , more out of force than genuine concern. Its a 2-3 year play and should be very rewarding. I am still not sure how to play this, but will keep you posted
Gold - I think this is an asset class I will need some exposure to. I can do it either thru physical gold, Gold ETFs and through a hybrid fund like DSPML which invests across the gold value chain. I am not sure if physical makes sense, but will evaluate the other two.
Commercial real estate - I think this will create a cash flow scenario. Also , when I say commercial real estate, its basically a small office/ shop version - This will need me to put down some capital and leverage hard. I am hoping the real estate will fall further to allow me to pick some up. This will need lots of cash, I might just have to team up with a few friends ( assuming they are willing). Here once the REITS come in, I should be able to build an exposure, but I think that is atleast 13 -15 months away in India.
Some other slightly weirder ideas - like financing a moveable asset like a mini truck, or some small microfinance institution, or something.

Keep in mind that I don't have huge sums - I am assuming here, I will find like minded people and find the right opportunities. I want to take slightly larger risks, diversify the cash flows and see if I have to guts to take the opportunity given by the Indian economy to the build capital for myself.

Anyways, My dear reader, thanks for visiting me. Some of you are regulars I know, some land up through some search engine. Keep coming back, leave a message to let me know who you are, ask if you want me to write about something you feel I am capable of having an opinion worth airing...Keep me in business. Wish you a very happy and prosperous happy new year.

Lessons for Entreprenuers - Marketshare vs. cashflow

2007-12-30T23:13:00.001+05:30

If you are an entrepreneur, you should learn a few lessons from the current saga unfolding in the Air Deccan- Kingfisher saga. The whole episode has a lot of lessons to learn in corporate strategy – a model which worked elsewhere might not work in another as the conditions are not the same – so a low cost model in a country where most of the costs you face are the same as a full service carrier will not be the same as a south west or a Ryan air success, so think through. In game theory, we have games modeled called ‘battle of attrition’ where the first person to blink loses everything and the person remaining in the game get abnormal returns – in the airline business, that is what happened – where on the last day when Deccan was to make money, It was being priced out of the market.

But all those lessons are what have been written ad nauseum elsewhere. I look at Captain Gopinath and think of lessons for entrepreneurs. A visionary entrepreneur, who on the first counts made the right moves – built a strong team, entered the market and exploded it, had financial investors who believed in him (Ladhanis), changed the right parameters of the model (ticketing software, yield management software) and created history – but now sadly he has lost control of the baby that he gave birth to – having ceded control to Kingfisher. I think at sometime an entrepreneur has to choose whether the dream is larger or his control over the concept and I respect Capt Gopinath for the decision where he has let the dream grow, albeit with a changed identity but it will survive. Many Indian entrepreneurs can never see themselves two steps away from the company they gave birth to….

But then I ask myself how an entrepreneur can not have to go through this divorce – this premature rupture of control, of giving up the dream u built – remember the best returns are available when more and more people believe in the concept, the company and the team. So the longer you hold stake and mould the concept better it is. Remember, most Indian promoters hold substantial stakes in their companies and a slow dilution at multiple points over periods is the way to maximize wealth. The basic feature which most investors and books on investing will stress is – cash is king – topline is myth, bottomline is reality – so don’t chase marketshare at the cost of profits – I am not sure there are too many successful models where you have 60% marketshare, make losses and then due to scale economies start making money ( The other industry that comes to mind is the Newspaper industry – where larger you are ad revenues supposedly will flow in, so you have the gimmick of invitation pricing et al). Guard against managers who run and chase marketshare, it’s easy to throw money and gain marketshare, but you can’t throw money to get profits –Remember the goal of any entrepreneur should be to create an organization that not only survives him, but can’t be around after he is gone. A year in the life of a human being is long but compared to a life span of 65 years, it is small, and then for a company which is supposed to exist for centuries to come – what is but 2 years of slower growth to make the foundation stable.

I am sure people will talk of how the opportunity might go away – but that is the traders’ view of the world – an investor/ entrepreneur should believe in the power of the vision – work towards that outlive the people who saw it – yes it is difficult, non sexy, masochistic, painful and is guaranteed to give bouts of self doubt – but isn’t that the beauty of building great organizations?

Ads that get on my nerves...

2007-12-16T12:44:00.000+05:30

Sometimes a few ads just get me irritated.... I have already cribbed about the veneta Cucine ad sometime ago.... this time -

Its I think the Aveo Uva - ( Notice I cant even seem to recall the brand name!!!) - anyways this is with Saif Ali Khan offering a stranded Rani mukherjee a lift on the roadside and then school kids rush in..... so what get me pained? In India, we lack the culture of safety. I don't have the stats but maybe 10% of users use seat belts in the front seat and maybe very few in the back.... so how can you cram 4 ( or was it 5) kids in the back seat of a car? of course, we are a nation who will turn a blind eye to 15 kids in the back of a rickshaw, so why the heck are you getting ruffled you might ask.... my only answer will be, lets move forward.... would GM have made a similar ad in the US? so why show such things in India?

The other ad which to me is puzzling is the shiny slim phone ad where the lady move through security metal detector and it beeps.... she is hiding a metal phone and the security guard cant find it.... why? becoz the stupid guard doesn't run the detector on the back...... duh , give me a break.... ( although due to association, I first thought it was airport security - now I think there is nothing to give that impression) ...... so down with dumb security guards and copy makers....

Investing in mutual funds – building a balanced portfolio

2007-12-09T23:12:00.000+05:30

I have in the past blogged about going about investing here. I will jump a step and write about building a balanced mutual fund portfolio. I will address the debt side of mutual funds in a separate post on building your debt portfolio, so this post refers to only equity funds. Some steps I think are critical –

1. Get the funds right – Portfolio theory and investment theory says, diversification helps – the same applies for a mutual fund portfolio too. So you should plan to build one. And Remember this is going to be long time bound, non exciting, non sexy action which will make you cringe when the guy in the next cubicle is boasting of his 70% profit. But trust me, if you are not a gun in stock picking and don’t have time, go for mutual funds. A well balanced portfolio needs to have these funds I think

a. Core equity funds – Here you should have two sets of funds : one a bottoms up stock picking type with a large cap bias and will usually be stable in their returns and move with the Sensex or Nifty. The second should be a good growth fund that bets on the growth stocks. Remember although growth stocks tend to be the mid cap/ small cap stories, a growth fund targets returns and not capitalization. This should be a large chunk of your portfolio maybe ~40%. In case you are investing for the sake of tax saving in ELSS funds, then add them here.

b. Index funds / Exchange traded funds based on the index – This will allow you to ride the market direction with a lower expense load. Choose from a wide range of index funds or ETFs available. Keep in mind that if the core equity fund you chose has a largely the same companies as the index fund then you are losing the benefit of an exchange fund and losing on the expense. This should be ~20%-25% of your portfolio

c. Contra fund – This takes bets on stocks which are currently out of favour with the market. Use these funds to give that occasional punch to the portfolio and this should be about 15% of the portfolio.

d. Thematic / Go anywhere funds – These are funds with a mandate to go anywhere, invest in any story and take concentrated bets or diversify. In a volatile market like India these are funds which, if nimble, will make money due to emerging themes. This should be about 15%of the portfolio

e. Sector funds – These take concentrated bets on a particular sector. Ride the momentum and languish when the sector goes out of flavor. Send in 10% of the portfolio here.

2. Getting the mode of entry right: I would suggest you setting up a SIP on the core equity funds and the thematic funds, while sending those sudden bonuses and one time investments into the contra and sector funds. Remember the latter will increase the risk of market timing.

3. Watch the loads: some funds levy a higher entry load while others link it to an exit load with period of investment. ETFs and index funds have a lower load structure. Remember, loads eat into your returns.

4. Monitor your portfolio regularly: I would suggest a quarterly review, with a rejig once/ twice a year. Don’t touch your MF investments for 3-5 years atleast, see them grow. Use a good portfolio tracker like the one you find on sites like www.Valueresearchonline.com

5. Options – You will find Growth, bonus and dividend options. Dividend will have reinvestment and pay out options. Forget all these, remember, if u don’t need the money, choose growth and if u need the money choose dividend payout. The others don’t matter; they are a vestige of a period long bygone where taxation was an issue. But remember, if you investing in a ELSS fund to save tax, it makes sense to always choose the dividend option, since every investment is necessarily locked out for 3 years. You don’t have an exit option.

6. Forget the NFO’s go for good old tried and tested funds – very rarely do new ideas come to the market, when they do go for new fund offerings, else just invest in funds which have a track record. Although past performance in no guarantee of future, atleast it’s a better option than the new unknown

7. Close ended fund or open ended – the spate of NFO which claim to be better because they are close ended and hence give the fund manager a better control on investments , although true a little bit, is driven by the change in rules for amortizing the expenses. So cut through the crap, go for old funds, open ended and with a track record.

8. Throw your advisor out of the window if the first recommendation he makes is to invest in an NFO, unless he has very strong reasons about what is new about the fund and how there are no such funds available already.

9. Remember the difference between absolute performance and relative performance – All Mutual funds will boast of how they outperformed the market, but they are referring to relative performance to the index they chose to be benchmarked against. So if the index fell by 150% and they fell 149% they will still claim to have done better. And remember to include that load when you are calculating the returns. Me and you are bothered about what is the absolute performance… go back open the 7^th standard mathematics text book and learn how to calculate simple returns if you are not sure..

Happy investing , in a country where financial assets are a piddle , use this mode till you feel comfortable to venture alone in the jungles of the Indian equity market

Analysing my investment performance...

2007-12-01T10:29:00.000+05:30

Although I regularly track my portfolio and juggle around my portfolio, the last 10 weeks I have actually monitored it closely since I am trying to decide if it is worth spending time on research. Every stock pick I do takes me anywhere between 8-10 hours of research and digging that much time these days is becoming a fairly difficult, with the increasing work load... so what are the results...

During this time the market ( defined as Nifty) has given a return of 17% ( all return figures are absolute and inclusive of transaction charges - not taking into account any tax which needs to be paid if i book profits now)

I have a mutual fund portfolio, which is probably 3.5 to 4 times larger than my stock portfolio and that returned about 19% during the same period.

My stock portfolio on the other hand has returned ~37% during the same period. This is post the entry costs... So my own stock portfolio is doing better. But wait, the risk profile is not the same across these 3 things. While Nifty is mostly large cap, my MF portfolio is a mix of large cap, small cap and some minuscule debt. On the other hand my stock portfolio is more of mid to small caps... so based on risk return equation maybe they are all running their own races well enough. I think come new year, I will re jig my MF portfolio, there are some laggards and shift the money to better options.

But still, is it worth doing my own stock picking, I think I will keep trying this for another year or so, see the results and then decide... I will update this in about 2 months time again... so keep coming back.

Is Infosys the next HLL

2007-11-24T12:27:00.000+05:30

As a student of business history, as someone who took a shot at being a strategist and a novice investor I find this line of thought interesting…. Bear with me while I try to articulate what I am thinking….

HLL (now HUL) was (is?) a dream company to many bright minds in India, it launched dreams – the beauty secret of film stars, one which made dark south Indian men chase their fairness dreams, brightness to our clothes – gave us Rin Brightness, Lalithaji, Liril girl and set a generation of women to dream… A generation of marketers were born, a slew of products unleashed – one senior executive once told me – in the early 80’s there were 4 good schools which churned out good managers – IIM – A, B, C and HLL.. It has given Indian Industry many CEO’s, many more middle managers who will lead Indian Industry in the years to come…. To borrow a line, it went where no marketer went, deep into the Indian hinterland... back in 1980 when fads like “Bottom of Pyramid” were still not around; they unleashed campaigns in rural India, with bullock carts peddling messages of hygiene, cleanliness and Lifebuoy…

It was a darling of the investors, gave fantastic returns, it was one of those blue chip stocks people held… I cant find any number on the holding, but it gave returns for a long time and was a staple of most portfolios…

Infosys, the company born out of the Indian middle class dream, the success story of Indian economic liberalization, the company which made ‘global delivery model’ , ‘flat world’ well recognized words, while it did not spawn the IT industry it’s the most recognized child of the industry. It made millionaires out of middle class families and gave a wealth creation a chance to gain respectability in our hypocritical society..

It too was a darling of the investors, every quarter results of Infy sets the market tone, it was the stock which is keenly tracked by the FIIs , opened the NASDAQ with a bell from mysore… its languishing now, for a year, IT has not driven markets, returns have not kept track… will it follow HLLs footsteps?

Mr. Market ( to borrow Ben Graham’s reference to the stock market) is fickle, runs behind momentum, flavours of the season ( infrastructure, real estate now ) are what excites it, but these two companies need to succeed… they are refreshing oasis of professional management established, led, managed companies in family driven companies in India. I have nothing against family managed firms, I work with them, but the rise, flourish and continued existence of professional companies is what will keep the dream of middle class professionals like me…

The day I stopped a tram in its track....

2007-11-17T20:01:00.000+05:30

And before you guys start thinking I did something our Indian film heroes regularly do with their little finger on the left leg with ease and say so what, let me explain.....

I went on a student exchange to Belgium. I was with Solvay Business School, University of Brussels. I loved my stay there ( and the Belgians, I think they were wonderful!). My hostel was about a km from the university campus and was an awesome place. More of a living community, with people protesting against war, sun bathing( when the damn thing came out), coffee with music and music performances... sigh those were awesome days. Anyways, back from the detour.

The Belgians are probably the most courteous people I met on my trip to Europe ( I saw, trekked, traveled to some 7 countries!!). On the main signals, there are anyways pedestrian requests, where you request for the traffic to stop, which then turns red to let you pass. On most other roads, all you need to do was to step near the Zebra crossing and the vehicles would stop to let you go. You acknowledge their courtesy and off you go..... it took me a while to get used to cars stopping completely to let me pass.... I would usually be dumbstruck as to why the heck are they stopping :) problem of upbringing...

And one fine day, I was listening to Bob Marley on the discman, having hot waffles and out I step on the street from the pavement and realise a huge gush of air around me ..... and then I realise, the tram which was on the street stopped to let me go.... jackass that I was :) I apologised to the driver, acknowledged and moved. And surprise he didn't swear at me nor did the others who were waiting to cross....

Now lets play that scene in Indian frames... Deepak steps on the street, driver says "B#@$%^, iski to aaj main le loonga" and pushes the throttle, wham, passengers say " sahi hua saale ki dimaag thikaane aagaye" and then me, with a few handicaps (not the golf types mind you) would be seeking treatment and sympathy!!!

I think about this and try to attribute why we Indians will not let people cross even when the signal is red.... vehicles do a 'creeping acquisition' of the Zebra crossing, swear, spit,scream and honk... I tell myself maybe we are an aggressive race, maybe we are trying to catch up on lost time under the sun, maybe people have urgent work, maybe population trouble leading to too much competition leading to high levels of aggro behaviour but its plain lack of culture I decide, lack of courtesy and respecting someone on the road.... I might be guilty of the same conduct, but trying to change...

All about managing money...

2007-11-15T13:34:00.000+05:30

Am down with a bad cold and fever.... so some random tidbits/ observations :

You make money by taking concentrated bets - if you are convinced about a stock and can lose all the money you are investing in it, then bet a substantial portion of the portfolio in it. Remember - a 100% return on a 10% part of your portfolio is not much if the others are averaging 25% - A study says, most people in the Forbes richest 400 made it there because of the one big idea that worked for them. So spend sometime, research and come up with a few bets u think will work
Once money reaches a critical mass - passive income keeps you going if you harness the power of compounding. So while the attraction of being frugal might not seem great, frugality when you still can ( read : no wife, no kids, no huge medical bills, lifestyle diseases) pays well when you want to party later - so make that large sum of money and build capital
Use Leverage - Debt is a bad thing. I plays on your mind and creates chaos in times when you want to splurge. But then when investing using debt prudently will allow you to add that zing to your effort to build a passive income stream. Set a level , say you will use 20% of your current income to service debt, that should allow you to get 10X of that money to invest, club it with your capital, which is usually 25% margin and voila you have an asset of 12.5X. Remember - don't use this for stock market investing or debt or commodity. Use this for real assets where the return is higher than the cost of debt
Protect your capital through diversification - Before you think I am joker who has lost it due to fever, ( Pt 1 says - take concentrated bets, and here I say otherwise) - The same study also says that on an average over 3 centuries ( or was it some lower number of years?) only 20% of people remained in the next Forbes 400 richest list. The ones who did diversified. This is simple, once you have capital built, diversify and protect it from cyclicality.
Don't self medicate - Since you will not operate on your loved one and will seek a doctor, why do you think you can invest on your own? ( Yeah we know you made 100% on the stock market last week, my pet fish can do better in this market bozo!!) - so set aside a part of your portfolio to be managed by the ( so called !!) experts - Mutual fund ( for aam junta like you and me) , Portfolio managers ( for creatures of higher living) and maybe own fund manager ( Read : Azim Premji , Narayan Murthy , Anil ambani etc who can setup a private equity fund from their dividends)
Don't forget leakages - Shoddy government working, death, taxation and transaction charges are the only certainties in life - cant avoid the first two, don't let the latter two kill the return % ( and you thought love was also a certainty?)
Don't forget to have fun - All the bloody money in the world is to let you have the choice to say "No I don't want to do that crap, maybe something else" - so work towards freedom of choice.

Vodafone - a irresponsible corporate citizen

2007-11-11T19:22:00.000+05:30

If you move around in Bangalore these days, you will notice the advertising blitzkrieg that has been unleashed. I have no problem with advertising, but when some enthusiastic Area sales manager/ marketing manager thinks he has to be innovative and goes overboard I get pained. So what is the issue?

To create what in marketing parlance " a new marketing asset" vodafone has splashed the trees in Bangalore with metal ad boards which have a metal angle which needs to be nailed to the tree and the ad juts out. While vodafone did nothing to help these trees grow or maintain them, it makes full use of this. This damages the tree ( to whatever little extent - I don't care) , and encourages other businesses to do the same. In no time I am sure, the trees in Bangalore will have this all over and we can bid goodbye to the trees. When you pay for getting your message across, its advertising, when someone else writes to give you exposure its publicity, but when you make use of public property , its Vandalism - and Vodafone is no less than our irresponsible political parties....

Get a mentor now....

2007-11-01T17:55:00.000+05:30

One of the things one should surely do is get a mentor. Remember, you need not have one mentor, but multiple mentor. The critical thing why you need a mentor is to show you the 'bigger picture'. Sometimes you get so engrossed in what you are doing, you lose focus of what it is that you set out in the first place for. So where all should you get yourself a mentor -

1. Life mentor - A person who will straddle your personal life and career and helps you articulate what you see yourself to be when you are maybe 45 and have hopefully higher callings in life and not just that big house, corner office, faster car, smaller phone and snazzier gadget

2. Career mentor - One who will help you move towards a long term goal in your career. The assumption here is that your current job is a step towards it and not the one which will lead you there. This applies more to the MBA friends I have who are chasing larger goals and are using the current job to get a skill set - E.g. - I come from a family with no business background, so I might join a startup to understand how they work if I want to startup on my own. But my mentor needs to be one who has done similar things and has started up

3. Job mentor - This person serves the need of the hour and helps you acquire the skills in the current job and helps you move through the organizational clutter. This person need not necessarily be from the same company, but from the same field

So where do you look for a mentor? - in the networks that you have built over a period of time. If you are the type who does not network, ask friends to refer you. Don't expect a high level of involvement from the mentor straight away. Most probably the person will evaluate you before he decides to spend his time where all you offer in return is the feeling of reminding him/her of what he/she was in a younger time.

Remember to do your home work when you approach a mentor, a mentor is not for cribbing but to act as a sounding board. Define your objectives, look at the problem, generate options, do an analysis of the pros and cons and then approach your mentor for advice. Trust me this is important in your own development. Acknowledge the impact mentors have had on you when you succeed, that's the best you can give them.

Make sure your mentor understands your life situation, goals and ambitions ( this is for the first class of mentor i specified) and job, career respectively. Don't hide what you think are the mistake you made, your weakness and strengths. After all they need to help you climb mountains. Respect their time, the effort they are putting in. You maybe a hotshot and the next Bill Gates but this person is fulfilling a purpose.

Some mentor/ mentee relationships quickly move to a co-learning level. Offer what your best, that is what will change the perspective you have about life/ career/ job from what your peers will have.

I have had some fantastic mentors, I can just pick the phone, tell them the mess I am in and they are there to offer me support. I can share my achievements and see the happiness and be thrilled. I have very little to offer to some of them, but hope some day I can pass this along...

The 4% inflation myth!!!

2007-10-23T23:22:00.000+05:30

( unrelated : I do a lot of offline writing , so will post more regularly. Hopefully the quality will improve )

One of the myths you hear when you plan your finances is to take into account the inflation. If you are financially educated , you would have heard the difference in real and nominal rates et al. But have you ever bothered what is the inflation rate applicable to you?

If you live in India like I do, then the mai baap government doles out a figure called WPI - wholesale price index which is what the whole business press creates a ruckus about, but when the heck did you and me buy in wholesale? There is a CPI - consumer price index and rightfully its different for different set of people, but then that comes with a lag. This is not a discussion about the pros and cons of various inflation indices. I will reserve that for a boring chat with some of you who are both statistically and economically inclined.

My limited point is - when you planning for the kind of money you want, think of a factor called "lifestyle inflation" - If the hierarchy of needs were just needs, comfort and luxury - remember they will keep getting redefined. Yesterdays comforts are today's needs and today's luxury will be tomorrows comfort. I come from a class and generation of kids who learnt cycling using rented bicycles.... I don't see those shops these days. So bottomline use your imagination and budget for higher expense on essentials

The other factor to factor ( !!) is remember that your life goals will also change - A few days ago i rediscovered how much I love to travel, that I want to see more countries. My current count is 9, and I want to atleast increase it 45. So my plans better take that into account. So what is your life goal - space travel?

As a generation - am not sure we will stick to an organisation for 3+ decades ( that ~11000 working day!!! - subtract sick leave and earned leave ) - since you will change jobs, career - plan for expenses for upskilling/ reskilling yourself. Those will be significant expenses. Also I think since the stress is higher, crutches of a joint family are missing, other social support systems missing - we will burnout sooner - so get the period right

Am sure there are others - all these are stuff which are like inflation, so don't factor a bland 5% inflation the government wants you to believe....

What my MBA gave me and what it did not...

2007-10-19T20:10:00.000+05:30

4 years after my MBA , when I was as usual giving gyan to a wannabe MBA , I thought it was time for introspection – what did my MBA give me, what did it not and what was on offer and I could not take out –

What MBA gave me –

Confidence & perseverance – I always did well in my studies, it was in B-school that I got stretched and boy was it a stretch !!! nightouts, deadlines, competition prepare you well for a corporate job where you are expected to hit the ground running. So although I am sure I will not know most things, I know I can learn and get upto speed to reach where I want.

Respect for different working styles – I was brought up in the work hard and the Indian middle class work ethic. But then you reach school and meet extra ordinarily intelligent people, people with smart working aspects, some with questionable work ethics and you see all of them doing well. Learning to work in teams with diverse styles and learning certain skill sets helps immensely. Also you realize the value of ethics and make choices

Network – My MBA plugged me into a network of extremely smart people. Friends who can open doors for you and push your limits in understanding stuff. Living on campus, having discussions about hundreds of unrelated things helped create a perspective which is very different

Audience – I talk to CEOs and promoters on a regular basis. Advise them about business decisions and get treated as an intellectual equivalent. Although I might serve them a limited purpose and I have miles before I reach the levels of some the fantastic CEOs/ entrepreneurs I have worked with, the learning has been awesome – this wouldn’t have been possible without my MBA

International exposure – I went to Solvay business school in Brussels on an exchange programme and it was an eye opener on both hard and soft aspects. I worked in teams which had people from Vietnamese, Chinese, Italian, Moroccan, Spanish and African origin. And boy was it a lesson in communication and respecting cultures. I will post a different post on how it helped me appreciate India better.

What my MBA did not give me –

Assistance in career decision – Most European and US business schools have career counseling setups. The placement setup in Indian schools is most job process focused. If you need counseling the seniors and alumni need to be accessed. With the week alumni network that we had, this was a definite drawback. Would it have helped maybe, maybe not – but am sure would have liked to have access

Industry interaction – Indian B-schools and Industry I think share a love-hate relationship. Students try to get the industry to sponsor, come to interact, setup chairs but then industry rarely responds. Some of the best classes I had, was when we got an industry person to add to what was being discussed in a case. Maybe the growth in the Indian industry leaves very little time for such things and maybe alumnus don’t really appreciate what the school did for them

Breaking the stereotypes –India is about stereotypes. Science is better than commerce, an engineer is better at quant, an accountant is not creative. MBA made me realize and acknowledge when I was getting influenced by a stereotype. But did the school do enough for all of us to break these, am not too sure.

What my MBA offered but I did not utilize well:

Access to a large library / resource: Most times I think running around took away time to explore the library. Increasingly I am believer in reading what has been written about a subject and chiseling my own views. I didn’t have time

Engaging the profs : Each one them with the eccentricities is a person who could have developed/ destroyed ones interest in a subject. Could I have been a marketer? Could I have been a quant trader? Do I love market research I will never know, didn’t spend enough time trying to find out.

Understanding a subject vs. cracking a system: when you are in a hyper competitive environment and the top 1% percentile is greater than the population of many European countries, one is forced to look at the end but not enjoy the means. I could have learnt a lot (I did learn a little!!) but then the focus got shifted to cracking the system and getting those marks.

This list will grow. Maybe 6 years from now I will have a different view. Do let me know what falls in these three buckets when you look back at your own MBA. If you are an aspiring MBA applicant, watch out for these. Am sure learning by watching others helps you avoid what that famous saying says “ Those who do not remember the past are condemned to repeat it”

So you want to start investing.....

2007-10-10T19:38:00.000+05:30

go right ahead, you should, after all there have been tomes and tomes written about how inflation eats into your savings and how you should invest in equity blah blah blah. So here is a checklist of what I think you should be doing -

Do you have a clue about what your expenses are? - this is because most of us have a good idea of the income - so get a hang of the disposable income - then how much you dispose every month and see what you have left to invest ( * Note - I am not going to talk about a plan that you need to have before you invest in - thats for a different post)
Setup an emergency fund - the funds in this should cover anywhere between 3-6 months of your expenses. I suggest you send this money into a fixed deposit or a liquid fund. Ask your bank to setup a overdraft on this money - so that if ever required you draw down immediately while earning interest
Get insured - medical and life - this ensures your lifestyle remains the same ( how much insurance to buy - another post - or will link to some good reading)
Whatever is left - split the money into 3

Money you surely want in a year or two - send this into debt products - a bank FD, a Fixed maturity plan, a debt fund - depending on what you are comfortable with
Money you dont want for the next 3-5 years - invest in a mutual fund - select base funds which will form the core of your portfolio - start a systematic investment plan on this and forget about using it - review this monthly and a thorough review quarterly/ half yearly
Money you can afford to lose and will not lose sleep if you lost it - take it and invest directly in shares - but come to this step only if all the above are done

Now how to select a fund , a stock etc - I shall post sometime soon..

some random ramble....

2007-10-07T00:52:00.001+05:30

Why the stereo type - Have you watched the veneta cuicine ( did i get the spelling right?) - Its an animated ad - with a jingle going " its a funday cooking in a veneta cucine ......" the maid is shown as a black woman while the rest of the family is of a different colour - How did anyone approve this ad? Yeah as a country we are not so touchy about racism, but I think this was in poor taste

I read some article which had brought a similar observation - The Singapore girl on the Singapore airlines represents the ethnic look and feel of the average woman in Singapore, but on none of the Indian airlines would you see the air hostesses seem like the average woman in this country - mostly fair woman is what you would see. No wonder " Fair & Lovely" has a large market!!!

What to do when you quit a job?

2007-10-06T20:13:00.001+05:30

This is a post that is a follow up on my learnings from job post - People asked me how do you exit a company.

I have exited a company thrice by now and each one was an experience in itself. When I quit the Bangalore stock exchange - people were happy for me as I was heading to IIM-B and they wished me luck. Even now when people from the Exchange meet me, its a family feeling and they are proud of where I have reached.

Coca Cola, my next employer was the worst exit till date for me. I quit and I thought I indicated quite well why I quit. I was asked to deliver on a few things before I left and ensure the thinks I was working on did not completely fall through. My last 30 days were far more chaotic than what most people on 'notice period' would have. The HR people kept dilly dallying and my notice period writeoff (90 days in all and I served 60+ days). I was told by my department it will get waived but ultimately I shelled more than 2 months take home for they actually took stuff like PF, canteen money etc from me while cashing my leave ( 45 days) at a piddly basic rate.

KPMG was very nice and professionally done. And the exit was so smooth, its a pity they put their best face when I was on my way out. So what are the lessons

1. Speak to your boss first when you have decided - have an official chat and an unofficial chat ( the latter if you share the rapport)
2. Immediately speak to your Head of department and tender the resignation in writing copy marked to HR - Get your HR to tell you the procedures and get your boss/ HOD to tell you what is expected of you before you leave
3. Create a backup of all your work and cross reference them for future use within the organisation. Leave notes where required - Trust me being a good employee also shows great professionalism
4. Inform the team you work with ( when , depends on the understanding with your boss/ HOD) and ask if there is anything that they need from you - You might work with again so leave a good taste - Also people reference these days through a lot of things - you never know the guy in the next cubicle might be the guy they call!!
5. Start your signoffs sooner than the last day. It usually takes time. So dont wait for the last day. Leave your contact details - let people know where they can find you.
6. Keep in touch with people who were good friends - to put it differently, keep in touch with people you know will be of any assistance. Remember its quid pro quo - if you are useful to them, they will be of use to you.
7. If you had a mentor in the organisation - stay in touch - my guide from coke is still my best career advisor, the manager I worked the best in KPMG is still my guide when I am stuck.
8. Every organisation builds you professionally - acknowledge the good part, leave constructive feedback ( most organisations dont take it well - so dont criticize too much!!) and see the people in the organisation different from the organisation

Action points on the financial front

2007-10-02T17:49:00.000+05:30

I have been investing in the market for a long long time, but had stopped in the middle for some years during my MBA and then for sometime during my first employment primarily due to lack of investible funds. Then about 3 years ago I started investing and have been regularly. Then somewhere, I decided to actively plan my finance completely. So I have been trying for a complete coverage - not just on the assets side but also on the liabilities side. I used my bonuses to pay off my education loan well before time, then took a loan to put that down payment on a flat and paid it off with the next bonus. Now I have a loan taken to fund my brothers education and I will let it run its course, since the cost of prepaying that loan is very high.

I have a SIP running every month - and I juggle around which funds I invest in based on how my portfolio is looking. I take turns in investing in a base fund like Fidelity equity, HDFC equity then shift to growth options like Reliance growth, Reliance Regular savings fund, Magnum Global and then sector/ contra bets like magnum contra, DSPML Tech, Bank BEES.

I have investments in equity directly. Most of them are shares not owned by the funds I own. Its also to do with the thought process of benchmarking my own stock picking skills over the fund managers :) , Will post how I did in about a years time.

Right now, I think I have a low insurance cover. I want to buy term cover - have explored the options, just need to execute it. Actually, I will increase my insurance cover drastically over the next 2-3 years, but primarily term covers with residual cover after the premium payment period if possible.

I need to brush up on my derivatives front and start investing there - but that is the target for April 08 - when I estimate I will have more investible funds ( read - can also lose more!!)

Need to evaluate if I should take a pension plan anytime soon and how it will work out.

Investment in commodities is also on the horizon - but need to think through.

Primarily - I want to setup a sizeable passive income stream which will contribute to my investment corpus soon.

In case I seem to have missed out on some very obvious things - leave a comment, will be grateful.

A sub optimal way of investing

2007-09-29T19:38:00.000+05:30

I have had banking as a sector to invest for a long time, but due to time constraints, have not been able to research on the sector and identify the right candidates. While the obvious ones stand out, I would still like to research before I invest. So as to not lose out on the opportunity, I invested in Banking Benchmark exchange traded fund ( BANK BEES). My average cost of entry has been Rs 684 (adjusted for brokerage and divindend) , the current rate is 807 - over 3 months thats a return of 17.98%. Which is quite Ok I think. The other way I could have participated in this is through a banking mutual fund. The average category return is ~22.5%. If I were to adjust the entry load that most funds would levy, it comes down to 19.45%. So I have lost about 2.3% for not having invested in an actively managed fund.

I got thinking, I am sure there would have been better returns if I had spent time on researching, but given the fact that I am not too sure of evaluating banks ( you cannot go by the traditional way of researching companies to evaluate a financial institution) and since I did not have the time, I took a lazy way out. Maybe I should use those hours I clock in the flights on reading up on such things and researching. It will be time worth spent. But first I should get my sleep quota, which I try to fill in on the flights.

But I am still bullish on banking, will post on my picks...

Reinventing the wheel in financial inclusion

2007-09-23T12:43:00.000+05:30

Financial inclusion seems to be the latest buzz word. I have been hearing it over and over again in the last month or so and it seems to be everywhere. This is financial services own "bottom of the pyramid"story, and as usual our press has taken to it - the latest flavour of the month.

Micro finance and micro credit have become big money spinners, while RBI seems to be coming up with an innovative plan of accrediting village money lenders to bring them into the mainstream financial system. Micro credit has drawn some flak for what people claim are exorbitant rates that they seem to charge. Do they? am not too sure, I take the argument that the Micro finance institutions dole out about high cost of delivery and the related crap. There is scope for lower rates, it just needs more competition but I don't think regulation is the way to go.

But coming to my main observation. The main hitch that most of these organisations claim is the lack of grass root level staff who can assess credit risk and effectively deliver the services. The typical last mile problem faced in a B2C industry. But for those who are old enough to remember, Indian Banks used to have a 'pygmy collector' who used to go around to small businesses and such daily and collect money and deposit to the bank next day. The pygmy collector used to get a small commission ( i think, am not so sure), knew the market like the back of his hand and had tremendous linkages. Why didn't the Indian banks use this system to reach to the "financially excluded"? Why not revive this scheme ( am sure it still exists in a few banks, but as usual waiting to be discovered by the ICICI , HDFC banks of the world) - Bring it on, let them loose, and see the low cost deposits swell and see that level of inclusion soar.......

As an aside :

I think I have become a weekend blogger, new job barely leaves time to exist.... but will try to be proactive...

Where is the error?

2007-09-16T00:35:00.000+05:30

I use a fundamental analysis mode to shortlist stocks and then watch them for sometime to get a feel of the range in which they seem to move and then buy in....I seem to manage to get good set of stocks into the watchlist... but then I seem to be going wrong in my execution - while I picked Gujarat NRE coke, IVRCL and RNRL at the right time, I missed out on Crompton Greaves, ICICI and Sesa Goa.

I am trying to understand why I finally execute the trades I do and the ones I dont - still not very sure. The other problem is the target price I have - once I hit 30% return, I get jittery and some how feel like its time to exit, while the stock might be headed higher ( E.g - ACC ) - I need to improve my target pricing, which will hopefully also let me understand the margin of safety on a stock.

I am stuck with a dud currently - Federal Mogul goetze - its more than 45% down from my acquisition price and will do some research and dump it very soon - didnt cut my losses in this stock - I could have done it when I was 25% down but then that figure looked daunting - stupid move - Will post what my thinking was, and why I think I should move out in a different post.

Current on the watchlist - Manugraph, ICICI bank and Vijaya Bank

Lessons learnt in each job....

2007-09-11T23:48:00.000+05:30

I have been in my new avatar as an investment banker for close to a month, its been exciting, tiring, interesting and all those good things you can say about a job... This is my third role post my MBA and this got me thinking.... this post actually is a notes to myself, because I want to actually list what I learnt in each place and a private note on the screwups .... so here goes -

1- Corporate -

Initiative is rewarded- no structured learning happens, so if you think a step needs to be taken to meet a goal take it - speak to your boss, he might want credit if it works, it is always good to let them take credit. Finally as long as he is fair, you will thrive.
Politics is prevalent - dont let it ruffle you- use it, dont play dirty , but dont spare the jerks
People are important - technical stuff anybody can learn - people will bail you out where knowledge might fail - and people teach you stuff which you might take years to learn by yourself
Dont forget the obvious - stating the obvious might lead to the best result

2 - Consulting

With access to the net - information is abundant - make intelligent connections - When searching in google, the most obvious string might be the best
Communicate communicate communicate - there is no such thing as over communication within your team and with your manager
Solve the problem - but first know what it is - A problem might be the symptom -
Structure your moves - Sometimes the only value might be structure to remove the clutter
Read the text books - They didnt write those fat books for nothing!! but learn from the team
Presentation is as important as the content ( forgot this last week :( )

3 - Ibanking

Multi tasking - Compartmentalising your capability to work is important
God is in detail ( has been important in all jobs, but impact will be higher in this role)

I am sure there will be more in the third bucket. Note that I am not talking about the technical skills like presentation making, financial model making, industry landscape generation etc... they are job specific and you anyway learn them.... I want to record the softer skills, so that I dont forget....and these become second nature

So , if some of you who have worked with me want to contribute, pl feel free to add......

Eighth wonder of the world - Bangalore Roads

2007-08-27T19:09:00.000+05:30

I am amazed by the state of bangalore roads, I have to give it to the new government, they have been asphalting the roads at atleast a pace I have never seen before in my short life span...The last time I remember such frantic action was post the JH patel government was replaced, the state of roads then was something I will never forget...

So whats the problem? I think the average life of a Bangalore road is about 5 months, that is if it was laid before the monsoon, if during the monsoon as of now, then about 3 months, if post monsoon, maybe 6 months , but when you are on an average spending ~ > a crore / km for a stretch, dont you expect better life?

I dont buy the crap of rains, we are not the only country that experiences tropical rains and I dont buy the nonsense of lack of engineering talent, resources we are spending enough I think....

I am sick of this corruption, while maybe I should find out using Right to information if there was any independent quality check, was there any performance guarantee etc..... crores and crores of rupees spent on roads can be spent on education maybe, primary health more so, child nutrition or 100 other things...but am sure the road contractor lobby and all the ministers who are in cahoots with these guys will never let this happen.. I am depressed :(

In all why did I call Bangalore roads the eighth wonder - it represents the pits of public corruption, heights of public apathy, the engineering wonder of showing us the moon surface every single day, enriching the doctors due to slip disks, helping reduce population by creating accidents and teaching us the strength of chemical bonds ( or lack of) in bitumen !!!!

Its in the DNA to succeed for startups.....

2007-08-24T23:12:00.000+05:30

I am a sucker for taking my transactions online. Some make my life simple, some give me grief and some just plain irritate me. But yes, some surprise me....

I travel by air nearly once every week.... I have nearly taken all my air bookings online...I have tried Cleartrip, yatra, makemytrip, flight raja, indiatimes at sometime or other. While some have got the front end right ( flight raja, cleartrip), some backend ( yatra) some have got the full package going.... I booked with cleartrip once and ended with a ticket/ invoice with no fare calculations. Unlucky for me, this was a business trip where I had to claim this fare. So off I went to hunt for this invoice. Hell begins.... it took me 9 mins in the customer care Q to speak to the executive, who would speak to me and assure they will send me the invoice but nothing happened. 6 calls, 4 mails later... I gave up. Lost Rs. 12000 due to this...

The other instance, I tried insurancemall to buy insurance, was not satisfied and posted on this blog. Manish Jaiswal the CEO and MD, commented and took note of my rants. I was surprised. If I were to compare cleartrip and Insurance mall, insurance mall stood out by miles, and even when I have not given them my business still...

I think its in the teams and the DNA to succeed... to take finicky customers and still serve them. You might get funding from the biggest funds , you might have fancy founders, you might have a fantastic technology, swanky offices but if it is not in the team, every single one of them to serve the customer - you cant succeed. In this liberalized environment , you will not survive. I might be one in a billion for you, but i am still the centre of my universe....

PS: Guys try out insurancemall, and let me know if you like the service. I might have been an aberration!!

Buying insurance online - my experience with insurance mall

2007-08-11T21:35:00.000+05:30

I am generally not a good person to sell anything to. I have an inherent need to have lots of data and with financial products, due to my training and the time I have spent in the market, I usually ask a lot of questions. Most of the new age 'financial advisors' don't manage to answer me and my interactions with them are restricted to the first transaction only. The list of such transactions reads like the who is who of the financial advisors today

1) sharekhan - they have lost the opportunity to cross sell anything to me, the guy usually calls in the middle of a work day and doesn't follow up
2) HDFC bank - They still do not understand I have a salary account, my forex transactions, a loan account and a large amount of my funds which are in the FD form with them. So if they had a profiling software, I should come up high, but I doubt if they have anything. So when I approached them for investment, what does the dude do? ask me to invest in NFOs of mutual funds and gives me a list of new funds. While i have nothing against investing in new funds, they better fit my investing framework. And the person from HDFC bank just could not measure up.
3) ICICI direct - These guys are slightly better - when the person who interacts with me
understands he does not know what I am asking, he acknowledges the fact and gets back in 30 mins. Keep up the good work guys, most of my investing offline is shifting to these guys.
4) personalfn - these guys were good, but since I travel so much and insist on meeting guys mostly on saturday mornings , I think this guy gave up.

Ok, the reason for this post - My new company does not have a health insurance, so I was looking to buy one. So I land on the insurancemall site. It is supposedly the best site to buy insurance online and has got wide coverage. So off I went. They have a very nice feature to compare premium and some basic features. But since I wanted more information, I tried the live chat, but could not continue. So they followed up with a mail, so back I went. Tried the live chat, and wanted details about some of the policy fine print. So the person on live chat put me onto a customer care executive who called. He had a transcript of the chat till then ( which shows someone has thought a bit about the business process!!) and started out. While he had the basic information, I wanted to know about the fine print. He tells me it was not available and he would get back. Am still waiting.

So will I buy insurance online, no sir , I think I will stick to my friendly insurance agent and buy it through him. But I will use the insurancemall.in site to look up premiums. Now if only my agent can stop being an agent and convert to a broker and offer me choice of companies from whom I can buy insurance, I will appreciate it.

Maybe I should just give him this idea :)

Updates

2007-08-11T21:31:00.000+05:30

Back after a long absence, courtesy my job shift. A quick update, I had applied through investorhelpline.com to get my unpaid principal back from lloyds bank and people, it works. I received the cheque in about 15 days. Am thrilled to bits, its a small amount, but still any money is welcome :), so if you have not got your dividend cheques, bonus shares, annual reports or any query approach the company first and if it is unresolved, approach these guys.

Pl spread the word around, its time someone held our corporates responsible.

Tracking your expenses

2007-07-15T20:41:00.000+05:30

You know your income, but do you know your expenses? If you were to approach a trained financial planner, he/she would usually would want to establish the amounts you are spending. While some of the expenses are annual ( insurance payments, tax payments, renewal fees), monthly ( rent, utility payments), some weekly and some sporadic. You should also not miss out on those expenses which are unplanned. Capturing those unplanned shopping trips and long drives which burnt 1K worth of fuel are also important. The important part is to capture them and include them in your financial plan.

While most control freaks like me would logically have an excel sheet, going into details in an excel sheet is a very tedious thing. I found this excellent site www.expenseview.com where it allows setting up expense accounts and tracking them. Check it out, its worth a try.

Why am I trying it? I am planning to buy some term insurance and would like to get a hang of how much I am actually spending and on what. Although I have a fairly good idea in big buckets, knowing the details will help me understand how these expenses will behave over the next few years ( shopping is a very small component now, am sure it will explode ;-) ). With greater income, I am trying to see if I can flush in more money to my investments.

Let me know what you think of expenseview.

Are Indian Chit funds equivalent of P2P lending?

2007-07-07T21:50:00.000+05:30

This post is primarily triggered by this new (?) concept which is taking off in the west - called Peer- to-peer (P2P) lending. While there are a lot of technicalities involved , at a stripped down level, the concept is - there are a group people who want to lend and there are a group of borrowers. P2P is primarily trying to bring these two through low costs media like internet and social network sites like facebook in the US. So why the need to invent a new mode of lending?

When I want to earn some interest on my savings, ( I would invest in equities !!) but for the portion that needs to go into the debt part ( you should should should have a balanced portfolio mind you!!) I keep them in banks. The banks give me x% and then lend it to corporates and other people who need funds at x+ delta %. The additional interest is called by Net interest margin figure ( NIM) in the analyst statements check it out. The spread is supposedly to cover for the various costs - admin, sales, Delinquencies, salaries etc..... but most banks make a lot of money in profits. While as a shareholder , I wouldn't mind, as a customer from both sides , I would like low cost options - enter P2P lending.

I think it will work fairly well in the US and in other countries with well developed credit rating systems. To be eligible for a loan on most P2P lending systems you need to have a minimum credit rating and even then even if you have large outstandings then you do not qualify. The network charges some admin expenses but the net as a medium will lower the costs significantly. Typically the network will also ensure they get a collection agency to collect ( unlike in India, I assume these guys are not goons !!) and report any default to the credit rating agencies.

So the most important component , the credit score is missing in India. CIBIL , the credit bureau has started in India, but a guy like me who has had no bounced cheques, no credit roll over, a fully repaid education loan, partly paid personal loan will still get treated like the same jetsam/flotsam who have multiple defaults.... so P2P is a far call in India still...

But chit funds, where few people get together, pool a sum of money for a fixed period and one of the participants gets the kitty by bidding for it , is quite similar a setup I think. while currently I think chit funds are being regulated by RBI ( need to check!) , I think its a wonderful instrument for people who do not have access to normal banking channels but have a good social network. Also maybe this model needs to checked by our uber cool Micro finance institutions and not try to become proxy banks and increase the costs...

Caught in an investment bind

2007-07-06T20:33:00.000+05:30

Right now I am evaluating a few investment opportunities :

1) locking in some returns by going into a close ended fund heading into redemption in the next 18 months
2) some value picks which came through my filters- where I have not been able to research my them : Currently evaluating : Areva T&D ( has made a move over the last 2 days - maybe a missed opportunity), the other value pickers favourite - Kirloskar Oil engines ltd, Paramount communications, Prajay Engineers, birla corporation.... hmm, where will I go, will study over the weekend
3) An exchange traded fund ( Whats that? - will post the next time) in a sector where I think there is a lot of opportunity.
4) Safe haven investment - bag the blue chips - L&T, SBI, Reliance

Whats the catch - I dont have money :-) ..... so much for planning. I have just booked about 115% + annualised returns on some cement investment ( avg holding 30+ days) - While I still hold some cement stock and am impressed with their pricing power, if it reaches further levels, i will exit further and see if I can move my profits elsewhere.... but atleast till 2009 beginning, I will love the sector - what will happen then - supposedly some supply will come through easing the pricing power.

And as an aside, my experience with my investment in Fixed Maturity Plan of HDFC has been good. If this continues, maybe I will move a higher amount to the FMP mode. ( I intend to post about FMPs and ETFs sometime very soon. Maybe I need also check out if there are any index funds in the sector I am targeting - Good news - SEBI has capped fund management fees at a lower level than active managed funds....

Investor grievance redressal

2007-06-23T22:49:00.000+05:30

If you are an investor in India where shareholder democracy is a still born child and companies frequently ride roughshod over the rights of investors, we need some activism. While class activism took off in the west long ago, India is yet to see anything of that sort. Hedge fund activism is now the inthing. Funds like Efficient frontier ( not able to find the link) have forced a discussion about the leverage being carried by vodafone and are atleast forcing a discussion.

The regulatory mechanism in India has improved by leaps and bounds in the last decade. But have we achieved anything for the individual investor is the question. And when I mean by investor here is not just the equity investor but also the debenture instruments and public/ company deposits. Debenture trustees have failed their mandate in India, rarely have they been able to carry out the duty that their role envisaged.

In case of equity investors multiple avenues exist - you could complain to the stock exchanges ( which have a investor cell - funded by various internal sources), or SEBI. Complaints like non receipt of dividend, demat requests, bonus shares, annual reports ( its your right as a shareholder to receive them!!!) and such others. You could also write to the cells of NSDL and CDSL and try to resolve this.

In case of public deposits, the authority for this was (is?) the Company Law Board (CLB) which passes the orders. NBFCs and for those who are old enough those teak, sheep, plantation companies ( remember guru kiran, Anubhav et al?? ) are regulated by RBI.

But there is another glimmer of hope, check out www.investorhelipline.in its run by a group called Midas Touch investor association and supported by the Ministry of Company affairs , Govt of India. While the government has nothing much to do and has no association to this site, I think the group has done a wonderful job of helping investors out. Till date they have helped resolve 730 cases, which is remarkable. While it might seem very small, remember this is when they have no legal power ( as in punitive) to pursue the cases but still ave managed this. Good show guys, keep up the good work.

So if you ever get stuck with some issue and company is playing hardball, you know who your friends are.

"Development of a fair, transparent, efficient capital market having a participative, enlightened and an empowered investor." is what investorhelpline says its mission is, lets clink glasses to that

Responsible blogging

2007-06-22T21:52:00.000+05:30

I did not think my blog would be visited by people who do not know me. So if you look at my posts on portfolio advice, they will seem not too deep. I was analysing the page hit statistics and realised 7 of the 10 hits I had till date was when peoples searched for Bhavishya Nirman bonds. I am not sure I gave enough data to people to decide if they were looking for this. Notes to self - I will write slightly detailed posts and post my analysis also. I think I owe it to my readers. Leave a note if you want to see some detailed analysis of the deep discount bond.

Alternate careers?

2007-06-22T21:31:00.000+05:30

some days I ask myself if I had not chosen the current path what would I have done ? hmm... I love law - I think its quite interesting but realised it will never fit the scale of my ambitions, I never had any aptitude for the artistic variety ....

I think I would like to do research but yes, It has to wait till I fulfill my wealth creation ambitions - its not the selfish for self kind but to reach levels like the robber barrons or maybe the old wealth families in India but that I think would take a lifetime :-) but just in case, I want to get into academics , but it has to wait.

I will resume my post about portfolio building again , as promised I will check out fixed maturity plans. I was asked by someone what are the good company deposits available now - I think Bata and Raymonds are offering about 11% pa, but I would refrain now as banks like ABN Amro and Karnataka bank are offering 10.25% and 10% respectively for 400 days ( pl refer to the disclaimer in my first post!!!!) , so its not very prudent to go for an unsecured instrument for 75 basis points.

Inbound consumer markets , outbound manufacturing....

2007-06-20T22:09:00.000+05:30

someone asked me what kind of organisations are using consultants for market entry strategies in India - my two bits worth

Inbound companies into India are in the consumer markets - the current flavour is retail - people trying to see how to benefit from the fabled ' middle class' ( this seems to be the second coming for the great indian middle class - most FMCG companies fell for the per capita consumption growth story the last time !!) , so most of the companies in consumer markets are inbound stories - luxury retail ( designer jewellery, accessories et al), branded retail

On the other hand the gut wrenching efficiency drive that the Indian manufacturing companies went through in the 90s has left them lean and mean, low debt :equity ratios, access to cheap capital for the first time (???), strong domestic growth and sights well set on the foreign shores.... so they are aiming at the 'developed' markets - buying goods 'higher in the value chain' , buying brands, buying products at a higher stage of evolution ( flavoured water anyone? ) to understand how the business dynamics work or trying to be global players trying for value. So most of these industries drive the outbound market entry strategy.

Interestingly in the latter case, most firms which were family owned have brought in professional managers to drive this and given the overall level of skill available within the organisation ( quality is available, its the quantity which is an issue) consultants are called in...

what do you think?

Company deposits - a calculated risk

2007-06-19T20:58:00.000+05:30

I posted about the deep discount bonds last time, that assumes that you have money for long term debt options. While most people will suggest that if you are ready to lock funds for periods like 10 years, then go for equity, my suggestion is to keep a healthy mix of debt and equity unless you are a very short term investor (defined as 1 year horizon).

I am also assuming that you have already looked at the standard options like the Bank FDs, Post office schemes etc.

The other option available if you are open to a higher degree of risk is you should be looking at some company deposits to bolster your portfolio returns. Keep in mind that most of the company deposits are unsecured in nature and any loss will land you with Zero money in most cases. having got that flag away, lets focus on how you can add this thing to your portfolio - 2 sites which seem to have a good list are moneypore and Bajaj capital. Check only companies which are profit making and have a history of dividend payment and long history of fixed deposits. As per law, a statutory adevertisement is to be released by the company, check this out, this gives information about the company, its history and operational details etc. My personal tenure for most of these is 1 year, I usually review the companies performance and review whether I need to renew or not. Always check the credit rating for the instrument. If there is no credit rating ( not probable) or has not been revealed steer clear.

What can you expect from these investments - maybe +1 to +2 % on interest rate on AAA rated instruments for a year over the bank deposits, but in the current scenario the gap has reduced.

I will post about that new kid on the block Fixed Maturity plans next, keep reading....

Return of the sith with bullshit?

2007-06-16T23:09:00.000+05:30

Back from a long break, hoping to blog more often from now on.

I have been reading Bill Bryson - A short history of nearly everything - Dhammo said, hope atleast these people landed in heaven - how true. Some of the guys mentioned have pushed the frontiers of our knowledge to limits which have seriously enriched the homo sapien understanding of the world.

As an aside, I intend to look at investment opportunities in this blog, so if you looking for some investment analysis, keep visiting.

Since I have been a great fan of Benjamin Graham, I believe in maintaining a very balanced portfolio - debt and equity in the portfolio. I still have not mastered the balancing bit and hope to setup some rules for myself, so that I can effectively book profits in a bull market and cash on capital appreciation.

I am trying to build a balanced portfolio and will share some of the instruments I am using to this effect.

Lets start with debt - I will write about some interesting options on the fixed income side and then move to the equity side.

NABARD has launched the Bhavishya Nirman Bonds - the current one on tap has a fairly good yield for a debt instrument of 10 year tenure. It is a deep discount bond/zero coupon bond with a face value of Rs . 20000 and a tenure of 10 years, issued at a price of 8250 if you are a retail investor. Its an unsecured instrument mind you, so maybe the premium is justified. I need to check out the current t-bill yield but locking in a pre tax 9% quarterly compounded yield is fairly good I think. If you can take that kind of a tenure then investing in this makes sense.

Although the option of holding this investment in demat form exists, trading on the BSE is in physical form and in market lots of 50 , which is slightly large. I have not checked the trading volumes of deep discount bonds but the option does mean you have some liquidity. Odd lot trading was something from the era of paper trading and am not most guys understand it today.
Should one invest in a deep discount bond ? The main advantage is that you avoid the re-investment risk, and (need to check on this!) the tax treatment - where the interest is considered capital gain and not income, helps if you are in the higher income bracket.

check it out at www.nabard.org.

Disclaimer : This is not an investment advice, you should speak to a qualified financial planner and tax consultant before acting on this post. This represents my view and my view only, not of my organisation, my parents , my pet fish or any other entity living, dead, fictional or otherwise.