The Essential Dos and Don'ts in Money Making :
This blog strives to provide CRITICAL INSIGHTS and knowledge on wealth creation.
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Sunday, May 20, 2012
NEWS & VIEWS TODAY : BANKERS THINK NPAS AT LAST - INVENT OR PERISH, HERO& BAJAJ; THE HONDAS AND SUZUKIS ARE COMING = DIDIGIRI VS DADAGIRI, WHICH IS WORSE?
NEWS & VIEWS TODAY
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
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.
HONDA and SUZUKI are planning to go RURAL AND CHALLENGE THE Indian Biggies,
Hero and Bajaj :
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
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.
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.