Thursday, August 23, 2007

Been busy over the past week. Was not in town. Will update frequently starting today. Check this space!!

Friday, August 17, 2007

Real Estate Speculation

The real estate market is on fire, and speculators have made money in the market. Over the past few years, speculators have made money by blocking apartments and then transferring the titles. This market now I think has peaked out. With rising interest rates, the possibility of appereciation in flats/apartments is now low.

Right now, speculators have started to look southwards in tamil nadu. The government of TN is now interested in developing Southern Tamil Nadu. The land prices there are right now rock bottom, largely fuelled by high level of urbanisation happening in TN right now. Anyone with good information can make money by speculating on land in TN now.

The information I refer to is on which specific areas of TN the government plans to develop, and this information is necessary before announcements are made. Secondly, the reliability of the information plays utmost information. This poses a huge risk for potential investors. Those willing to undertake such a huge risk are likely to reap huge rewards from this sector. Some likely areas in TN are Madurai-Trichy belt, Kovai region, and my biggest bet is on Yelagiri. 4 hours from both Chennai and Bangalore, with the evolution of the weekend get away culture, land values here are bound to increase. With the growth of the economy, logistics will become more important, and I expect land value in the Thoothukodi and Namakkal to appreciate. The former is Tamil Nadu's second port, while the latter is the hub of trucking business in TN.

Wednesday, August 15, 2007

Morning Brief - 16/August/2007

Markets

Over the past two days, the global indices crashed, this morning the Nikkei reached its 8 month low, the Dow lost over a 1%, the KOPSI (South Korea) lost almost 4%. Expect the Sensex to touch the 14400 levels.

So what exactly is the issue? In the short term lending market, where financial institutions lend money to each other for periods ranging from a day to a few months, the players simply do not trust each others credit record. Those with surplus funds are not sure if those who require the cash are exposed to the US Subprime lending market. The lenders have no way of ascertaining whether the borrowers have exposure to the market or now. This makes lenders reluctant to lend money. Causing a credit crunch. This fear was further accentuated because a leading subprime lender in the US is likely to go bust. Global markets crashed on the back of a worry that there will be an impending credit crunch.

Meanwhile, Indian bankers do not expect a replay of the Sub-prime housing market worries here.

Corporate Watch

M&M is starting operations in Brazil and Egypt. While Tata Motors wants to gain a foothold in Europe, M&M cleverly has decided to focus on markets similar to the Indian market. Its range of rugged UVs (which will run on everything from kerosene to diesel, what ever the quality) will be ideally suited for such markets.

TRAI Vs Mobile Service Operators. Over what else? Price fixing. TRAI should launch an investigation to see if the operators have formed a cartel, rather than trying to hold prices firm.

In TN, all parties have now opposed the Tata project, never before has any industrial project faced such opposition. While Tata insists the project is on track, the Amma of Poes garden, aided by desperate for the limelight Ramdoss is opposing the project.

AI ground staff have once again gone on a flash strike, over payment arrears. Looks the carrier needs more than just handholding.

Chinese manufacturing quality is under cloud, after Nokia recalled batteries, Mattel recalled toys.

Struggling Indian financial institution IFCI is looking for a strategic partner to pick up 26% stake. Hope this ends IFCI’s woes.

Reliance plans to open 500 hypermarts and 1000 fresh stores. And some are planned in the communist bastion of West Bengal.

Economy

Fin Min is desperate for money, they just haven’t resorted to begging yet, soon they will get there I guess.

The plans for regional airlines has hit a roadblock, while more discussions are on regarding the new policy.

Bengal wants STPI extended. Being a latecomer, it needs STPI to attract further investments.

Tourism Ministry is using Youtube to promote India.

Ministry allows Cements without BIS nod. Looks like my earlier post on poor quality housing might come true

FM has mooted a gradual approach to rupee convertibility.


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Monday, August 13, 2007

Google: When it Fails

I’m not a big fan of Google, though I immensely benefit from its services. This blog is run on a Google Service, my email is driven by Google, and the feeds of this blog are delivered by a Google owned service (Feedburner).

Google’s entire revenue is generated from one source, namely online ads. Google maintains its predominant position in the online advertising market based on the promise of the wide range of platforms and reach these platforms have. It promises to deliver ads in people’s inbox, social networking site, third party sites apart from search engines. The key to dominating this market is scale and size. But this also has significant risks, as the entire business model of Google is built on this one source of revenue.

In an attempt to de-risk its business, Google launched Google Video, an online video rental store. Recently, Google decided to close down this business. Wilson Ng writes on Google’s recent failure:

When your company becomes successful, ( or even before), there will always be a pressure to diversify - introduce new models, products, and services. No matter how good you are, you will succeed or fail.

How you respond, and work when the product is not as good, which also hits your other brands, will be as crucial to your company’s continued success.(Link)

And over at the Fool:

Google's once-ambitious plan to sell and rent videos through Google Video, a cornerstone of the monetization plan when it launched Google Video last year, is coming to an end.

In a letter sent to previous Google Video shoppers, the world's leading search engine announced that it would stop supporting its platform that gave indie and major studios a digital outlet to sell movies, documentaries, short films, and television shows. (link)


Google should look to de-risk its business and diversify its income if it is to remain successful. It primarily remains a search driven company, unlike Yahoo which is content driven (Yahoo business, News etc) apart from being search driven. Google's inability to diversify raises the question is it just a online advertising firm?


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Evening Wrap - 13/August/2007

Markets

Sensex crossed the crucial 15,000 mark today, lead by a rally HUL, auto and steel stocks. Asian Markets too are on an upswing after central banks pumped in money. But it still looks like a choppy week ahead for the markets as the fundamental worries about subprime lending still remain. Two Goldman Sachs funds underperformed today, and are on life support. And despite the Fed's hand holding, the Dow did fall today.

Motilal Oswal IPO is to open on August 20th. If markets don’t recover, the IPO price might be revised. This though looks more attractive than Puravankara

Corporate Watch

Reliance Money is eying the rural segment. The rural market though presents a huge market, assessing the credit worthiness of borrowers will remain an uphill task as most borrowers might not have stable incomes or derive their income from the unorganised sector.

Acquisition costs have pushed Novelis to report a loss this quarter. This is the problem with leveraged buy outs, if the company bought out cannot pay for the acquisition cost, it poses a serious financial burden on the acquiring firm too.

In a bid to reassure the Americans over the H1B usage, IT firms have increased their overseas hiring. This could also be due to a lack of talent like Infy is facing.

Reliance Mart, the hypermarket arm of Reliance is lapping up real estate space. In this industry being an early mover is an advantage, or else scale is important.

Economy

Shinde says the power sector needs 10.31 lakh crore in the 11th plan. If I might ask, where is the money going to come from? And the sector still being regulated, private investment is still considered risky.

The four southern states have formed a tourism grid to promote tourism in the state. All the three southern states are trying to piggy back on Kerala’s success.

DoT and Defence ministry have locked horns over spectrum fee. If government bodies themselves cannot agree, its unlikely a clear policy will arise in the short term. 3g services will have to wait in India, despite having 3g compatible handsets in the market.


Sensex crossed the crucial 15,000 mark today, lead by a rally HUL, auto and steel stocks. Asian Markets too are on an upswing after central banks pumped in money. But it still looks like a choppy week ahead for the markets as the fundamental worries about subprime lending still remain.

Motilal Oswal IPO is to open on August 20th. If markets don’t recover, the IPO price might be revised. This though looks more attractive than Puravankara

Corporate Watch

Reliance Money is eyeing the rural segment. The rural market though presents a huge market, assessing the credit worthiness of borrowers will remain an uphill task as most borrowers might not have stable incomes or derive their income from the unorganised sector.

Acquisition costs have pushed Novelis to report a loss this quarter. This is the problem with leveraged buy outs, if the company bought out cannot pay for the acquisition cost, it poses a serious financial burden on the acquiring firm too.

In a bid to reassure the Americans over the H1B usage, IT firms have increased their overseas hiring. This could also be due to a lack of talent like Infy is facing.

Reliance Mart, the hypermarket arm of Reliance is lapping up real estate space. In this industry being an early mover is an advantage, or else scale is important.

Economy

Shinde says the power sector needs 10.31 lakh crore in the 11th plan. If I might ask, where is the money going to come from? And the sector still being regulated, private investment is still considered risky.

The four southern states have formed a tourism grid to promote tourism in the state. All the three southern states are trying to piggy back on Kerala’s success.

DoT and Defence ministry have locked horns over spectrum fee. If government bodies themselves cannot agree, its unlikely a clear policy will arise in the short term. 3g services will have to wait in India, despite having 3g compatible handsets in the market.


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Sub-Prime Worries and Sensex

Today two Goldman Sachs funds underperformed due to the global liquidity crunch. For those wondering what this huge fuss is about which is also affecting our beloved Sensex and shattering the Indian investor’s belief that we are insulated from global trends here is a brief explanation.

Over the past few years since the Dotcom bust, interest rates have been low. This means that globally loans have been easy to obtain, and the return on bonds have been low. In search of higher returns to meet their operating expenses, funds have invested in traditionally higher risk investments. These investments were rated as being secure because of the low interest rates. At low interest rates, it was assumed that the borrower could repay the loan.

Due to the low interest rates, banks and mortgage firms lent money to those who had shaky credit records. This debt was then passed onto funds who took them on as collateralised debt obligations (CSOs). Essentially the banks and mortgage firms passed on the risk of default to funds. When the borrowers defaulted, which is expected because they have a bad credit record, there were no buyers for this debt on the market. Due to a lack of buyers, the funds were faced with a liquidity crises, and therefore went bust. This was further augmented by the lack of faith from banks and other financial institutions in lending money to each other. Over the past week the LIBOR rate rose sharply. Leading to a lack of liquidity and central banks having to pump money into the system.

Since the funds in the US went bust, and they had liquidity issues, they liquidated their assets in other markets like Asia. This has lead to the fall of the Sensex over the past week. Over the last one week FIIs have withdrawn close to Rs 6000 crs from the Indian markets. Now central banks are trying to pump in money into the global system to assuage the liquidity crises, hopefully it will be successful, otherwise it might lead to a global recession.

Retail Investors worried by the volatile Sensex should stay put. The movements in the value of their portfolio does not matter, what matters is the value of the portfolio when it needs to be liquidated. If there are no pressing liquidity pressures, then investors should stay put because in the long term, the market will move only northward.

Further Reading: Financial Times, Business Week Economist TOI and Econbrowser (a more academic and technical piece)


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Sunday, August 12, 2007

Tata's 1 Lakh Gamble

A recent survey mentioned that the 1-lakh car could capture up to 25% of the two wheeler market. Tata clearly is hoping to replicate the success of the Ace. Though the prospects look good, I am sceptical on the success of the 1-lakh car.

The 1-lakh car will be sent to dealers as completely knocked down pieces and assembled by the dealers. To cut costs, the car will not have a metal body but one made of composite material like the Ace. Two engine variants will be on offer, 660cc two cylinder petrol and a 700cc diesel engine. In tests, the petrol version has offered 26kmpl, while the company aims for 30kmpl, which means on road the petrol will offer roughly 24kmpl. This is similar to the fuel efficiency of autos, but significantly better than the Maruti 800. The on road price of the car will be between 1.10 lakh to 1.25 lakh. This significantly lower than the base version of the Maruti 800 which costs Rs 200,000 on road.

The most important issue is will Indians take a liking to the design and lap up the car in large numbers? The likely target audience for this car will be in tier 2 cities especially those buying the commuter class bikes. For them fuel efficiency is of utmost importance for this segment. Apart from that, this segment will also like the car to have a sturdy feel, while also offering the prestige of owning a car.

The composite body of the 1-lakh car will not give the car a sturdy feel. Indians have an inherent liking for metal bodies, even if the vehicle is slower on this count. While the Ace has been tremendously successful, its biggest drawback is its composite driver’s cabin. On Indian driving conditions, even small accidents can lead to the material cracking, and therefore it has to be replaced. If the driver’s cabin had a metal body, then it would only have dents which need not be repaired. This is largely why the large three wheelers from Piaggio, Force and Bajaj are still selling, despite their drawbacks. The car will have a low height clearance, and being a composite body, large potholes on Indian roads can damage the body. The engine is likely to have an output between 20-30 Bhp. This on a 4 seater is miniscule power, and the car is unlikely to be faster than 3-wheelers. The car can seat 2 adults comfortably in the front and two small built adults/children in the rear seats. This design might make the car look like an auto with 4 wheels, which could be a significant drawback for the car.

Buying a car in tier-2 cities is often a status symbol. The 1-lakh car might not exactly fit the bill, as it is might be perceived as a auto with 4 wheels rather than a full fledged car. With Maruti launching its used car dealership, it can give the 1 lakh car a run for its money. An 800 with Maruti warranty might be a better option than an auto on 4 wheels. A used 800 would cost between 80,000-1.25 lakh depending on the car, so it as expensive as the Tata car, but with the Maruti warranty and being a proper car, it might just beat the 1 lakh car.

I thought predict the one lakh car will have limited success in India, but I might be wrong as Tata might be able to make changes to the car and then it can have wider acceptance, similar to the Indica. But I don’t expect it to eat into the commuter class bike market.

Morning Brief- 13/August/2007

Market News

The global markets continued their downward tumble. Both the European and American market are facing a liquidity crunch. The European Central Bank has pumped in a little over USD 200 billion over the last week to assuage the liquidity crises. Despite this European Stocks fell on Friday. The Dow also fell on Friday, despite the Fed pumping in money to reduce the liquidity crunch.

Meanwhile, the Japanese growth is slower than expected, which means rates will either remain unchanged or be reduced.

Liquidity pressures back home has lead to the Sensex losing almost 2% in the past week.

How does this affect the SENSEX? More liquidity in the global system leads to a higher risk appetite and with a positive growth story from India; it means that the FIIs will invest more in Indian equities. They certainly seem to be having a high risk appetite, with massive investments in the realty stocks, despite concerns over their valuations.

The global liquidity crises seem to have raised concerns about some leveraged buy-outs. This might increase the cost of funds for numerous Indian acquisitions, like the TATA-Corus deal, or the Aban-Sinvest buy out.

The current mortgage market crises, has lead to some grim outlook for global growth by economists. India might be affected, but if its domestic consumers might be able to limit the damage to just export-oriented sectors.

Corporate Watch

Bajaj Auto is now focussing its energy on the premium motorcycle segment, the 150cc or higher capacity and expects higher margins from this segment. Hero Honda, the undisputed leader in the commuter class bikes is facing a pressure on margins due to higher interest rates.

ICICI bank has decided to raise USD 1.5 billion via External commercial borrowings.

WIPRO has decided to launch operations in China to tap into east Asian markets of Japan, South Korea and Hong Kong.

Financial Service provider, Motilal Oswal fixes IPO price band at Rs 725-825 per share, whose face value is Rs 5. the promoters are expected to reap in Rs 800 crs via the IPO.

Infosys seems to have taken a long to medium term outlook on the rupee appreciation. The srupee is likely to further appreciate against the dollar and hedging against an appreciating rupee in the medium to long term is the right strategy.

General Motors is selling a form of maintenance insurance for its Chevrolet brand of cars. Customers can now buy maintenance packages for their cars for a period of three years. This is a first of its kind for cars, but is not new to the Indian consumer, who have experienced this through the Annual Maintenance Package offered by various companies in India.

Economy

The cabinet has approved converting the existing 4 lane highways to 6 lanes.

Industrial growth for Q1 stands at 11%

The IRDA is now checking the mis-selling of ULIPs. Often agents sell ULIPs as mutual fund-cum-insurance products, with customers unaware of the details.

India has just 31.5 million or 3.15 crore tax payers, that’s optimistically 3.15% of the total population, and the government has decided to squeeze them further to fund its socialist policies.

Friday, August 10, 2007

Fallout of Realestate Boom

A few days ago I wrote this post on homeowners in the USA being unhappy with quality of their homes. I also added that this is not an isolated incident and should be widespread in India. The following video is of an UNITECH construction in India.


Thursday, August 9, 2007

Morning Brief: 10/August/2007

I’ve been busy over the past few days, therefore have not been posting my usual round up of news.

One more subprime lender has gone bust, this time its BNP Paribas which has thrown in the towel. Now, Goldman Sachs has also joined BNP Paribas, while AIG is now predicting doom. Damodaran believes that linking the Indian stockmarkets volatility to subprime woes is an oversimplification. I wish he was right, then it would me more interesting for investors. But this statistic from Businessworld, does not support Damodaran’s views. Everyone knows Damodaran is just trying to assuage the sentiments of the market, it seems no one is willing to admit the emperor is naked!!!

Meanwhile, its still unclear if ICICI is exposed to the US subprime housing mortgage market. Apart from this FIPB now wants to look into ICICI’s holding pattern, while the Government is set to raise FBI Cap on banks

SEBI, meanwhile is considering reducing the number of independent directors. Looks like India does not have enough Independent directors

IT and ITES firms whining to the government about the rising rupee seems to have spurred the government into action.

While Novartis has magnamiously decided not to challenge the Madras High Court verdict, it has gone to its big brother (the Swiss Government) which is now trying to forge closer cooperation with the Indian Govt on IP protection. This no doubt is to swing a deal in Novartis’s favour.

The government has lifted the freeze on SEZ applications, granted the Maha Mumbai SEZ another year, while also cleared 6 more projects.

India and Israel have agreed to form closer economic cooperation. This is a step in the right direction as India needs to look beyond traditional markets of US and EU.

FinMin is desperate for money, especially to fund populist policy largesse, and is now pushing for revised pricing of 2G spectrum pricing.

14 days, that’s the time given to a GoM lead by Pranab Mukarjee to fix the KG basin gas price.

Reliance Communication has sold a stake in its telecom tower business. This follows Barathi’s outsourcing deal of its infrastructure. Operators are now moving towards leasing the infrastructure rather than buying it outright.

Only in AI: they buy stimulators, but cant find the space to house them.

ADB has once said that income inequality is on the rise and it is a worrying trend. Is anyone even listening to them? Sigh, they attach too much importance to themselves.

Tata Sky targets 8 million users by 2010, if they follow a scheme of renting the equipment, they can meet this target much faster.

Telecom operators are now working to establish a Do Not Call registry. Does this include intrusive SMS from one’s own operator? I get one such spam SMS every day.

Essar and GSPC have decided to bid for an oil block in Syria.

Puravankara IPO gets oversubscribed a paltry 1.91 times. At an issue price of Rs 400, its overvalued is my guess. Retail investors would have stayed away and Institutional investors would have mopped up the shares.

Government launches a new airline license called regional airline, interesting times ahead for the aviation industry, especially in the low cost carrier segment.

Tuesday, August 7, 2007

Sports Marketing in India: Set for a Sea Change?

While many question the rationality of hosting the Commonwealth Games in Delhi, considering the enormous expenditure involved, sports marketing is set to benefit from the games. Up until recently, the only sport which has any selling power was cricketers, and likewise cricketers were in demand. Almost every brand worth its salt signed up cricketers. With the exception of few like Paes, Bhupati and V. Anand, cricketers have dominated the sports marketing business in India.

After India lost the cricket world cup, companies have realised that signing cricketers is a risky gamble, as their appeal is directly linked to their performance on field and the visibility they have among the others playing. This has lead to companies looking at other sports to diversify their risk. This has lead to the growth in the popularity of people like Pankaj Advani, the slew of chess players, Narain Kartikeyan and others. Along with this television channels have also started actively promoting various other spots like football, tennis and formula 1.

The future definitely look as the hold cricket has over the Indian sports fan is set to decrease as more options are available to him. Companies will look to have a diversified portfolio of sportspersons as ambassadors rather than hinging their fortunes on one sport or the film industry alone.

On Innovation and Leadership

In this week’s Businessworld, Sangeeth Vargheese writes on the importance of India moving to a knowledge economy from merely being a low cost production destination.

"For now, everything seems to be hunky-dory. Yet, one point being missed is that most of India’s present growth is a result of our lower cost services when compared to other countries. But cost competency is never a sustainable proposition. In the long term, it holds no competitive advantage, since it can be easily replicated. Today it is India; tomorrow it could be any other country. If Pakistan or Ethiopia offer the same services at lesser cost, all these multinational companies that are currently swearing by India will pack their bags and move there. The solution is to differentiate India in ways other than just cost competency, before we can hope to consolidate India’s leadership.

However, our present systems — be it education or culture — focus on creating a bunch who are more doers (managers, engineers and analysts) than dreamers (change architects, innovators and entrepreneurs). This further reinforces our excessive reliance on cost competency. We are adept at replicating ideas and reverse engineering but are yet to be taken seriously as innovators.” (Link)

Vargheese has an important point, growth lead merely by low cost is replicable and not sustainable in the long run. With the appreciating Rupee, exporters are already lining up at the government’s doorstep asking them to offset the rupee appreciation.

India, henceforth needs to focus on innovation and leadership. Low cost can only grow the economy to a certain extent, for it to leapfrog into the next level, innovation is required. Indian companies have to consistently invest in research and development to innovate for them to survive.

Structurally Deficient Homes?


Puravankara has just launched its IPO, DFL has done so. The real estate sector is on fire, prices are skyrocketing. Just like in India, there is a housing boom in the USA. Currently, the market is experiencing a slow down.

Angry homeowners in the US who bought homes, and found them to be structurally problematic have taken to the internet.

The Internet has rapidly become an outlet for frustrated homeowners to chronicle their bad experiences with new homes they have found to be structurally defective. Homeowners can now post complaints, discuss legal options, and warn future buyers on at least a dozen builder-directed "gripe sites," with names such as www.crapconstruction.com and www.khovsucks.com. (Link)


This is the expected fall out of a boom in the housing market, more so if customers are not patient and demand quick delivery of homes. In the construction business, the level of technology determines the shortest time span required to build a house/flat. In a market where the buyers are impatient, there will be some sellers who will be willing to deliver houses quicker than the minimum time as determined by the level of technology, therefore they will have to cut costs.

Secondly, if there is a boom in the housing market, the cost of raw materials will increase. If the seller does not have adequate clauses to pass this onto the buyer, then the seller will cut corners to reduce his losses from increasing prices.

I reckon that either of these two factors led to faulty constructions in the USA. If this is the case in the US, where builders give some form of guarantee for the houses, I wonder what is the case in India. after a few years, the number of dissatisfied home owners might increase. This will become evident once the real estate boom slows down and the value of their property drops.

Monday, August 6, 2007

Morning Brief

Tata, Bajaj and Renault might have made a winning bet by backing the $3000 car, as small cars are set to grab 25% of the two-wheeler market. I am still sceptical on the success of this car.

With falling revenues from domestic flights, Jet has now started operations to New York. I wonder how long before fares in this sector to start falling with Kingfisher also set t start operations.

The mineral rich states are now throwing a tantrum over the national mining policy. Hmmm, I wonder is Navin Patnaik is upset at being sidelined over POSCO.

In a surprising ranking, HAL or Hindustan Aeronautics Limited is among the top 100 defence firms globally. Its ranked 34.

WIPRO has made the largest acquisition by an Indian IT firm through its acquisition of Infoprocessing Inc for USD 600 million.

M&M has started operations of its its pick up business in Chile. Wise move concentrating on such developing countries where the market has future growth potential and does not have strong players.

Yesterday it was the textile exporters, today it’s the IT and ITES sector which is asking for government subsidy to offset the rupee appreciation.

While mobile operators in the US are engaged in a dispute with Google over revenue sharing, Airtel has signed an agreement with Google to carry Googles services on its network.

With increasing number of loan defaults, Dena bank has joined with Crisil and Care implement credit rating for its potential borrowers.

Growth of Cable Television?

Over two years ago chennai was the first city in India to have the conditional access system. Then came the second wave to organise the unorganised cable television business in India, the Direct to Home (DTH) format. And the most recent attempt is by BSNL, through its IPTV venture.

BSNL has decided to launch IPTV services in Karnataka from the 15th of august.


“About 150 television channels, movies, education from kindergarten, primary and high school students of higher levels, and much more will be available on internet protocol television. Digital quality is another benefit. Service charges are Rs 150 per month plus usage charges, thus giving cable operators a run for their money. A one-time investment includes a set-top box worth Rs 3,950 and installation charges of Rs 889.” (Link)


The catch with all these services is the upfront capital investment. A CAS set top box costs Rs 3000 (Chennai Prices), while DTH costs Rs 3000 + activation charges, and the IPTV has an upfront payment of roughly Rs 4500. Right now these systems are purchased by those who donot want to haggle with their monthly cable operator, and can have sufficient liquidity to pay the upfront capital cost.

For most people the biggest hurdle as of now would be the upfront payments required for these systems. For greater market penetration, all these players would have to offer the equipment on monthly rentals. This has two distinct advantages. first, more people would adopt the system. For instance, a Rs 100 monthly rental + Rs 500 deposit is affordable for a greater percentage of the population than Rs 3000 capital cost. Second, a rental scheme will generate more revenue for the company than an outright sale in the long run. An outright sale means that from each household the company gets Rs 3000, while a rental scheme will generate the same revenue over 25 months, and after that the amount is profit. This is of course assuming that households are on this system for more than two years.

Without a rental scheme, the DTH or CAS or IPTV system will not take off in India. Interesting times up ahead no doubt with BSNL launching IPTV, but the market leader will be the daring player who offers the capital equipment at nominal cost or who offers rental scheme.

Evening Wrap


The biggest news today, nope, it is not the markets dropping below the 15k mark, rather it is Novartis losing its case in the Madras High Court. Significance of this ruling and the surrounding implications, here.

And yeah, the markets did drop below the 15,000 mark. This is largely expected due to the pressure on the sub-prime housing market in the USA.

In some positive news, manufacturing growth does not seem to be slowing down.

Committee of Seceteries have submitted their proposal in the gas pricing dispute involving the Krishna-Godavari region. This should come as some reprieve to fertiliser companies.

Despite Nandigram, SEZ's investment is happening in some states.

The appreciating rupee has lead to textile exporters seeking more support from the government, meanwhile TCS has decided to focus on clients outside the USA. The company also expects 15-18 deals in the USD50-USD200 million range in the coming months.

Walmart, despite all the opposition has made a grand backdoor entry.

In other news, Maharastra has decided to invest in an LNG terminal in Dhabol.

And it seems like Ratan Tata will have some fierce competition for the 1 lakh.

Finally, the GSM and CDMA players have resolved their disputes over spectrum allocation.

POSCO seems to have had enough of Orissa.

Sunday, August 5, 2007

M&M, Tata in the Race for Jaguar and Landrover?

In a surprise move, Tata and Mahindra have evinced interest in buying Landrover and Jaguar. For M&M, Landrover will fit into their idea of transforming themselves into a global SUV player, and can also gain access to Landrovers advanced body-on-chassis technology. This could catapult M&M into the league global SUV makers. The key question is whether M&M has the finances to revive Landrover and secondly, does it have the capacity to take on other SUV players like Humvee, Mitsubishi and GM, who much bigger.

Tata showing interest in these two brands seems weird largely because both brands are luxury brands. While Tata has been interested in increasing its presence in Europe, it is unlikely that this can be fuelled by either Jaguar or Landrover. Both these marques are niche lifestyle marques and lack products like the VW Polo/Golf, which can clock volumes. This acquisition though will give Tata access to technology for its SUV business. But the important question is whether this is the best way to gain access to technology? With Tata’s manufacturing capabilities and cost advantages, it might be prudent to look at other avenues, which might be cheaper.

Web 2.0 And Entrepreneruship

With the advent of web 2.0 companies like Youtube, Google and others, the common belief is that entrepreneurship is easy. It’s a cake walk. It is true in the case of these companies and numerous others like them, but not so for a majority of such companies.

Glen Kelman has written a guest post in Guy Kawasaki’s blog, (via) quoting the flip side of entrepreneurship.

“Lately I've been thinking how hard, not how easy, it is to build a new company. Hard has gone out of fashion. Like college students bragging about how they barely studied, start-ups today take care to project a sense of ease. Wherever I’ve worked, we’ve secretly felt just the opposite. We’re assailed by doubts, mortified by our own shortcomings, surrounded by freaks, testy over silly details. Trying to be like James or Markus has only been counterproductive.

And now, having been through a few startups, I’m not even sure I’d want it to be that easy. Working two hours a day on my own wasn’t my goal when I came to Silicon Valley. Does anybody remember the old video of Steve Jobs launching the Mac? He had tears in his eyes. And even though Jobs is Jobs and I am nobody, I knew how he felt. I'd had the same reaction--absurdly--to portal software and more recently to a Redfin, a fledgling real estate website.”


Glen is on the mark when he says he start ups are a hard work. Entrepreneurs are usually eccentrics who are driven by their foolhardy dreams. When Jamshed Tata wanted to build Jamshedpur, he was ridiculed largely because the mere idea of building a city on marshland seemed ridiculous. To start any firm, apart from Web 2.0 companies, it requires hard work as Glen points out. Entrepreneurs are also driven by the romanticism of the entire process of building their company, and the strong belief that better days are just ahead. This has lead to the culture of serial entrepreneurs, who move from one start up to another.

Google, Youtube, and other such Web 2.0 start ups are just a flash in the pan. There are unlikely to be many other successful firms which can be built like them.