TCS and Ferrari - A strange combination or is it?

At 2 pm on race day when rubber hits the road and the world's eyes are on the race track – TCS is ready to deliver certainty with speed for Ferrari- even at 350 km per hour Cutting-edge solutions delivered with speed and precision and the constant search for excellence and innovation had led to a partnership between the makers of one of the world's fastest and most famous red car and Asia's largest software company. TATA Consultancy Services and Scuderia Ferrari have crossed yet another milestone on their journey, completing three years of a successful relationship. In 2004, in a unique initiative both the companies had come together where teams of engineers and specialists from TCS provided IT and engineering services and assist in the development of the Formula 1 racing car and the Ferrari sports car. The F1 car is the most complex and advanced car platform in the market, packing research in aero dynamics, engine technology, brakes, tyres and modelling to name just a few. An F1 car is a feat of engineering in many domains. It has more in common with a jet fighter than it does with a normal car. Experts compare it to a moving solutions platform that tests not only the stamina of the drivers but also mechanical and electronic systems that have to perform under levels of extreme stress. Goalposts shift dramatically every moment and pressure to deliver is a constant. From car electronics to safety, aerodynamics to trouble-shooting, TCS works with the F1 team to provide IT-based solutions before, during and between races. A Formula 1 entry, as part of Ferrari's technology team is a feather in the cap for TCS, showing that the Indian industry leader is now part of an elite group that is driving the future of technology worldwide. Collection and processing of millions of data elements with speed and accuracy is daily business at Scuderia Ferrari, the Maranello, Italy-based home of the car manufacturers. While glamour and speed is what attracts millions of viewers to the races, a lesser-known fact is that increasingly, TCS has also delivered cutting edge engineering solutions to several customers in Europe in the automotive, aerospace, heavy engineering and automation domain. TCS remains the first and only Indian company to enter the F1 stadium alongside the most famous occupant of this global arena.

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It’s not size, but quality & price that matter!!

At a time when the economy is growing, it's not surprising that corporate India's need for capital to finance expansion and acquisitions too has increased manifold. Consider this: In CY 2007 till date, the total amount of capital raised from the primary market has reached a whopping Rs 12, 041.68 crore. But June 2007 will be remembered for witnessing India Inc's largest fund-raising exercise ever. Of the total Rs 12,041.68 crore raised till June 20, nearly Rs 10,000 crore has been raised in June alone.
A couple of issues are lined up to hit the street, where more than Rs 13,000 crore will be mobilised from the primary market in June alone. This will take the total resource mobilisation in June 2007 to more than Rs 25,000 crore. Also, nearly 17 issues which has got approval from the Securities and Exchange Board of India (SEBI) will shortly hit the market whose total fund-raising plans are around Rs 7,400 crore.

Says Girish Nadkarni, COO-Institutional Banking & Institutional Equity, IL&FS Investmart: "The Indian IPO market has become really strong with variety of companies from different sectors approaching the primary market for raising capital. There is a huge potential in the Indian IPO market and the total capital raising activities in 2007 will surpass all previous figures. Liquidity in the Indian market has never been a major issue as most of the money has been coming from institutions." In CY07, it is not the number of issues that mattered the most, but the sheer size of each issue, which grabbed the headlines. Market players expressed a lot of concern about these mega issues, which could potentially suck out the available liquidity in the market. But to everybody's surprise, these mega issues did not have any negative consequences on other activities of the capital market.

Shrugging off liquidity concerns, mega issues of DLF Ltd and ICICI Bank's follow-on public offer (FPO), which is currently on, received good response from various categories of investors.

The Indian market has proved it several times that those issues, which are well priced, were able to successfully sail through, receiving good response from all categories of investors compared to those issues, which were overpriced. Market experts say size doesn't matter but the quality of the company and pricing decide the success of any IPO.

According to Arun Kejriwal, director, KRIS Capital: "The expectation of investors on post listing is a key factor for the success of any IPO. If the issue is well priced and investors think that they can make money post listing, those issues have received good response from investors."

Citing the example of ICICI Bank, Kejriwal says, "The ICICI Bank FPO is the single largest issue by any company in India. Still, it received good response from investors on the first day of subscription. But at the same time if we take the example of Cairn India, it got poor response from investors, which was considered overpriced."

Most of the issues in CY07 generated more response from the qualified institutional buyers (QIB) category, which one could easily argue is because 50% of the total issue size is reserved for them. But if we carefully see the figures, with special focus to oversubscription in this category in each IPO, one fact which is proved beyond doubt is the confidence reposed by foreign investors on the long-term India growth story. But on the other side it also reveals the stark reality of the hegemony enjoyed by these institutional fund houses over the Indian market.

Source: The Financial Express

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ICICI played mindful and tricky game in pricing its FPO

As I was pretty tired yesterday evening, I didn't get a chance to go through business pages, which is unusual, but sometimes it happens. Being an auxiliary activity for me since last two years now, equity market has become a very real part of my daily life. It so happens that in late evening a friend of mine conveyed me that ICICI has declared its price-band and its 885-950. My first reaction was "oh my God its another DLF, it has put an aggressive price as well". But as I started going through its RHP and other news, I realized it's mindful and tricky too!

Huge money is involved in market, talented minds too… Institutional buyers are getting smart and the firms smarter…

Well, for all those who are wondering what I am talking about, read this, where I've put whole saga about ICICI FPO in financial and technical terms.

If you have even niggling idea about equity market and how it goes, you must be knowing, its more unpredictable than a cricket match where India plays and much more vulnerable than wendy house made in sand-heap at sea-sore and much more filled with floating information than any page of well known matrimonial site.

When you go finding about ICICI FPO in news, amid all brouhaha, you'll be left confused. I am trying to make a point here.

Somebody said to me once, if you have to find how rich a person is, don't look for his branded cloth, watch, perfume or tie; instead look for his shoes… the idea is very clear, if you have to find how a firms fundamentals are, don't look for those orbits where everyone is managing beautifully, but look for how it is performing where others concentrate very little. Look how fundamentally strong a company is where others don't care…

When it comes to ICICI, I read somewhere its Hinterland to foreign soil, and it certainly is.

With a strong franchise, the parent bank has its growth drivers firmly in place. Offering a wide range of products from credit card to mortgages, the bank is a clear market leader in the retail segment, which constitutes about 65 per cent of its loans.

While the retail market has grown in the range of 30-40 per cent over the last three years, ICICI Bank has consistently beaten the industry with a 60 per cent growth each in 2004-05 and 2005-06, and 39 per cent in the last fiscal, a slowdown mainly due to fluctuation in interest rates.

The retail market is expected to grow at 20-25 per cent in next few years and going by the past track record ICICI Bank should outpace the industry growth rate. Brushing aside the rising interest rate impact on loans, Kalpana Morparia, joint managing director, ICICI Bank, said that the bank expects to grow its retail business profitably.

After making its presence felt in the urban retail segment, the bank is turning to opportunities in the rural sector. Though the urban retail segment will continue to be the bank's growth engine, ICICI Bank wants to reach the consumers in the hinterland, not serviced by banks currently.

"We feel that if properly serviced, rural areas can offer greater opportunities than even retail," says Mulye. To grab this opportunity, the bank has formed a multi-product and multi-channel strategy primarily by partnering with various micro-finance organisation, self-help groups and even corporate targeting the retail as well the SME customers.

Also, looking at the big volumes of cross border M&As, growing aspiration of Indian companies to have a global size and to meet the needs of the NRI population, the company is looking forward to enhance its international presence. Currently, the bank has the largest international business among Indian banks with presence in 18 countries outside India.

Currently, this forms 19 per cent of its total consolidated balance sheet. Going forward, the bank will also focus on the international retail i.e. fees and liability (deposits) generation business. It already has a 25 per cent market share in inward remittance market of $28-30 billion.

In total, banks shoes are firm and robust and certainly a branded one.

There is real good scope for good medium/long-term returns, given the prospects for the core banking business, strong brand value and possible contributions from the insurance subsidiary. Moreover ICICI strategically has provided Rs. 50 discount to lure retailers, which certainly is a plus point and it diminishes downside risk to a large extent. Unlike Vishal retail, here the scenario of having " too good a news is a bad news" can be ruled out, as its huge issue size won't let it oversubscribed in double digit in any case in Retail section.

Having said all that, one cannot expect it to grow overnight, may be in adverse situation its price may come below issue price in short term, but when it comes to medium to long term story, its only win situation. Be there, and remain firm for a longer period. You'll get reward.

The bank was expected to be mindful in its pricing strategy of the fact it is following close on the heels of one of India's largest initial public offerings last week. DLF, the property group, raised $2.25 billion. Yet the deal is still far behind the benchmarks set by China. Industrial and Commercial Bank of China, China's largest bank, raised $19 billion last year. That tells how far Indian equity market has to go to mature globally.

Also read ICICI meant for medium to long term investor.

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Why should we welcome the stock market crash

Economics assumes that human beings are rational. But human reactions to stock market movements are utterly irrational. When markets rise, everybody cheers. When markets crash — as has been the case for two weeks — everybody moans.

A hunt for culprits often ensues. No such hunt is ever announced when the markets are rising. In past scams, when manipulators like Harshad Mehta and Ketan Parekh sent share prices through the roof, they were hailed as geniuses and became celebrities. Some market experts cautioned that the markets had shot up to insane levels. But this plea for sanity was widely dismissed as stupid, and ordinary housewives and college kids bought frenziedly in the belief that share prices could only go up.

However, when the markets inevitably fell, the hero-manipulators were suddenly denounced as villains. They were accused of the dreadful sin of rigging markets, and thus misleading small investors. Ironically, no investor complained as long as the manipulators rigged prices upward.

The complaints began only when the manipulators were unable to rig markets any more, and prices crashed. Truth be told, the real public complaint against Harshad Mehta and Ketan Parekh was not that they manipulated prices upward, but that they failed to manipulate it upward forever. For that, this could not be forgiven.

The underlying assumption of small investors is that share prices should rise forever. Now, if the price of rice, sugar or petrol rose forever, the small investor would complain bitterly. Yet he seems to think it perfectly fair that share prices should go up forever, and very unfair if share prices crash. How greedy and hypocritical humans are!

Consider the current moaning over the stock market crash. The fall of the sensex from 12,624 to 10,400 represents a sharp 20% decline within two weeks. But few people seem to remember that sensex was at just 9,390 at the start of 2006. So, even after the crash last Monday, the sensex was still up 10.5% since the start of the year. No bonds or fixed deposits could give such a high return within five months. This point escapes the CPI(M), which sees the market crash as reason enough to stop pension funds from investing in equities.

Remember that the sensex was around 5,000 during the last general election in 2004. It then slumped to 4,282 on panic selling. From that low point, the sensex tripled in two years to 12,624 on May 10, 2006. That has been a bonanza, fuelling speculative frenzy. So, the 20% correction is to be welcomed. Stock market valuations remained stretched by historical standards, though not by developed market standards. If the sensex falls all the way to the 9.390 level at the start of the year, the market would still have yielded enormous gains to investors since 2004.

The long run prospects of the economy are excellent. So, some investor exuberance is understandable. Yet such exuberance needs to be tempered by sharp corrections from time to time. This sends the valuable message that exuberance is no substitute for judgement.

Human beings quote many aphorisms that they seem to forget when they enter the stock market. All that glitters is not gold. Don’t be penny-wise and pound-foolish. Look before you leap. There is no such thing as a free lunch. Better safe than sorry. A fool and his money are soon parted.

All who invest in markets must remember these aphorisms. Risk and reward go together. If there were no risk, there would be no market reward. Share prices represent subjective judgements of the day, so bouts of euphoria and depression will necessarily drive share prices up and down.

Marxists find this terrible. They deplore “casino capitalism”, and lambaste foreign institutional investors (FIIs). Marxists cannot bear to acknowledge that FII pressure has sparked capital market reforms that have made Indian markets among the best in the developing world, far ahead of China or South Korea. FIIs were earlier reluctant to invest in a market where one-tenth of all paper share certificates were forged, settlements were delayed for months on end, and thin turnover facilitated rigging by big brokers (and by companies before every public issue).

But after capital market reforms, FIIs have flooded in. They have invested in all emerging markets, but disproportionately more in India. They have favoured companies with good governance and transparent accounting, rewarding these traits for the first time (earlier, the ability to rig markets was rewarded most). Stock market reforms and FII inflows have hugely improved the ability of Indian companies to raise equity finance for expansion. This has reduced their dependence on debt, thus reducing interest rates as well as over-leveraged balance sheets.

The CPI(M) can see none of this. It believes only that foreign devils are making millions and paying no tax. So it demands a capital gains tax and an end to the Mauritius treaty that has been used as a tax loophole by FIIs. The CPI(M) seems unaware that Mr P Chidambaram is in fact taxing dividends and capital gains in ways that have made the Mauritius loophole irrelevant, and so ensured that FIIs are indeed taxed.

Dividend tax is now paid by companies rather than recipients; so FIIs cannot avoid it. A transactions turnover tax is being collected in lieu of capital gains tax. This brings all investors including FIIs into the tax net, and the Mauritius route has been rendered irrelevant. Domestic crooks used to avoid capital gains tax through benami small accounts, but now cannot escape the transactions tax. Thus Mr Chidambaram has ended tax avoidance and evasion, brought FIIs and Indian crooks into the tax net indirectly, and created a level tax playing field between domestic and foreign investors. That is a considerable achievement.

So, our problem today is not untaxed FIIs. It is the notion that markets should rise forever. They will not, and should not. We need sharp dips, not Marxist controls, to remind investors from time to time that stock markets have risks as well as rewards.

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