Sunday, May 20, 2012



1.       NEWS : The worsening Position of NPAs has at last woken up Bankers. They are meeting today at the IDBI Towers in South Mumbai to take a Fresh look at Corporate Debt Restructuring. Some points, the Bank Chiefs propose to look at are – (i) Incompetence of Management (ii) Diversion of funds by Management (iii) Misuse of Funds – and consequent NPAs falling on the Banking sector, forcing Debt-Restructuring – which, given these factors, is merely postponing the inevitable bad Debts. Conversion of Debt into Equity / Preference shares is one option they propose to look into – according to News.

VIEWS : it is good that Bank Chiefs are discussing these critical issues. Any bank, which has given a loan, exceeding say, Rs.10 Crores, must conduct its own review of the quarterly Results of the company, which must include not only the income statement but also an interim Balance sheet. While some Companies are preparing their Balance sheets quarterly, which is a very healthy practice even for Managements, to know where they stand, many companies are either not publishing their Quarterly Balance sheets or are not reviewing them adequately.

The Loan given to  a Corporate by a Bank is an asset / NPA for the Bank and the Bank must be concerned about it. The Companies also must be concerned especially about their own NPAs, much more frequently than Banks. Many companies have huge assets, which are NON-PERFORMING. In respect of PSUs (Not PSBs), the Non performing assets are very large. Government must be very concerned about such Non-performing assets of PSUs. There is no plan even – to identify such NPAs of PSUs.

Likewise, in Private sector also, there are assets which are never put to any use, nor is there a plan to use such Non performing assets in near future. This aspect must engage the attention of the Government and Bankers both, especially, if the Companies are defaulting in their loans to Banks.

The 2nd aspect is – when a Corporate is experiencing stress and the stress is visible in its quarterly results, the Banker must become wary and must analyze the results from his end – on what exactly is happening – is there a genuine market problem; is there sheer incompetence; is there diversion / misuse of funds – and what the corporate Management is proposing to do , to come out of its stress. It must seek answers to such tough questions from its Debtor. It would be good for the Bank; it would be good for the Management as well - as it is getting an independent assessment of its work and can look at it with fresh thinking.

Sometimes a whole sector is under stress. For example, the Air line sector is under presently. Textiles sector is under stress periodically. Cement sector some times. Sugar sector periodically, Jems and Jewellery sector some times. Iron and steel sector (almost unnecessarily), Building Sector (Management incompetence & Greed); Road building (Govt Policies); electricity Generation (Govt incompetence) and so on. These are my perceptions  and readers may have their own differing / additional perceptions. But, banker has to confront every such reason and confront the managements and also the Government with its views. It should be a learning and reforming process for all. With NPAs, a stitch in time saves a hundred.

2.       NEWS : HONDA and SUZUKI are planning to go RURAL AND CHALLENGE THE Indian Biggies, Hero and Bajaj : 

VIEWS : This was to be expected. In my view, Bajaj exiting scooters market was a BAD BUSINESS DECISION. From current assessment, Honda has become the second Biggest Indian 2 wheeler Manufacturer, sheerly on its Scooter market strength. Scooter/Moped market is just as big as the Motor Cycle market in India. Have you seen a woman riding a Motor cycle? Have you seen an elderly man preferring Motor cycle? And, together, they constitute the majority of 2 wheeler riders today. Abandoning this huge Market in its heyday was not the best business decision that Bajaj could make. 

It is fine that Bajaj is shining in Motor Cycles Market. But, if Honda can dominate Scooters Market so successfully and then, decide to give a chase to Bajaj and Hero in Motor Cycles Market too – What should the Indian Biggies be doing? Just Decide to LEAD IN ALL 2 WHEELER MARKETS – urban, rural, Motor cycles and scooters. 

This seems to be the most sensible decision, Hero and Bajaj must take. They must dominate with Technology – not just with speed and kms/litre. Hero and Bajaj must start thinking like Ford in inventing new Technologies relevant to India and the world. 

Tell us how you are better than Honda and Suzuki. If you can’t tell us today, prepare to tell us at least this time next year.  

Either Invent or Perish. This is the inevitable Fate of any manufacturer.

We have seen this happening already in TV, washing machines and many other Markets in India.

Hero and Bajaj must also ask themselves – If Honda and Suzuki can sell so well in India, what prevents us from selling better in their home land, Japan. At this point of time, both Hero and Bajaj really lack the type of world ambition that Ratan TATA exhibited in respect of TATA MOTORS and TATA steel. But, that is what can see them through in times to come. Hero and Bajaj must create the needed technology and the much needed  aura around their products for this.

3.       DIDIGIRI VS DADAGIRI : If there was a question whether didigiri is worse or dadagiri – there was a doubt till 2 days ago and it was difficult to answer. Now, the doubt stands removed, at least for the present. As of now, the feeling is - Didigiri is much worse than dadagiri – which is of course, not a Praise for dadagiri. If India fails to condemn this level of verbal violence – it should be prepared for worse things to come.

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