Friday, December 07, 2012

RELIANCE RETAIL: RATIONALISATION

Reliance needs to engage with a global partner for its back end

“Reliance Fresh failed because it was too aggressive with its strategies and wanted to capture the entire market without leaving any space for the middlemen and local retailers,” points out a Mumbai-based retail specialist. Reliance had planned to establish its C&C business (which has attracted international big wigs like Walmart, Tesco, Carrefour, Metro AG, et al) in Tier-II cities. However, tough economic conditions demanded conservation of cash reserves, so that business was scrapped.

Winston Churchill had once said, “If you are going through hell, then keep going.” Indeed, Reliance must keep going, but wthout repeating the mistakes of its past. Quite logically, Reliance will have to cut the flab that it developed in such a short amount of time. The company is also mulling over international tie-ups for back-end support. That is a prudent strategy, which has served players like Bharti & Tata well. Outsourcing supply chain management is more cost effective and feasible, especially for a geographically scattered country like India.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

For More IIPM Info, Visit below mentioned IIPM articles.


 
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Thursday, December 06, 2012

Wyzer or Pfyeth? (Whatever...)

Pfizer’s bid for Wyeth makes sense; but it suffers from the fundamental problem with M&As – high risk!

Abuyout offer? Nothing new about it... Recession? Again, not a new occurence... Now, combine the two and there you have your eyes opened, and wide! And here’s Pfizer proving why both can coexist, through its $68 billion bid for Wyeth. In the name of cost synergies, Pfizer hopes to save $4 billion annually in operational costs via streamlining of activities. But as researches over time have proven, most big-ticket M&As have failed to generate any synergy! So here’s the question – is the deal logical?

Pfizer faces a major challenge of new drug development as its patent for Lipitor (that contributed to $6 billion in FY2008) will expire in November 2011. And that gives a ‘real’ reason for the merger – revenue generation! Wyeth’s core competence is in R&D. About 350 scientists in its labs are solely working on the much-awaited drug formulae for treating Alzheimer’s disease that can become the next drug wonder for Pfizer (generating revenues up to $20 billion annually). Currently, every major drug company is working on a drug to treat Alzheimer’s, and Wyeth having already invested more than $1 billion in the same, naturally gives Pfizer an automatic lead. Then there are other drugs that would fall into Pfizer’s basket through the deal, like Enbrel (an arthritis drug) that earned $3.8 billion in revenues for Wyeth during 2008, Prevnar (pediatric vaccine) that generated $3 billion in 2008, Xyntha (a hemophilia treating drug) that could help garner $1 billion in 2009. Naturally, it is revenues that entices Pfizer more! Commenting on the deal, David Lugg, Credit Analyst, S&P, quotes, “The company will reap the benefits of scale and be able to reduce costs. But revenues look more appealing a reason...” Credit Suisse also upgraded Pfizer’s stock status from “Neutral” to “Outperform” based on the merits of the deal. (In fact, Credit Suisse had long recommended a deal between the two.)


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

For More IIPM Info, Visit below mentioned IIPM articles.

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Tuesday, December 04, 2012

Where do you think you are going honey?!

As if the problems with global fuel prices weren’t enough, Kingfisher has gone ahead and undertaken strategies that only seem a do ‘and’ die effort. How is Mallya even sustaining the unbelievable losses quarter after quarter? B&E’s Shashank Tripathi and Angshuman Paul meet Vijay Mallya and other top Kingfisher executives and investigate...

We know why you stopped by this page [Surely, not because of your killing enthusiasm to understand complicated structural factors affecting the Indian aviation industry, huh!]. We call it the 3G of aviation. Glamour, girls and gizmos! Mallya was counting on the same three factors to ensure that passengers ‘stop by’ his airline. Well, passengers, like yours truly, did stop by in the thousands, but unfortunately, rather than striking the metaphoric gold, all that Mallya struck were three pathetic more Gs! Global fuel prices, government regulations and gadzillion godforsaken losses! Check the figures out! While the global aviation industry is expected to cross the $6.2 billion mark this year, the Indian aviation industry is expected to cross a loss of Rs.9,000 crore at the minimum, more than 33% of global losses. Forget forecasts, for the last financial year (FY07-08), the Centre for Asia Pacific Aviation (CAPA) has estimated the Kingfisher Airlines losses to be at a killing $500 million, or Rs.2,100 crore! If you add Air Deccan’s FY07-08 losses of Rs.834 crore to that, the combined loss comes to close to Rs.3,000 crore! That’s more than 33% of the Indian aviation industry’s losses!

When we met Vijay Mallya just a handful of months back, and had asked him the logic of such a business, Mallya had confidently parried, “I think other business leaders think of many strategies before investing into certain businesses; but for me, it’s just passion that drives me.” But really, can just passion make any group withstand such humongous and gut wrenching losses? Kingfisher’s Executive Vice President, Hitesh Patel, confesses to us, “We are just looking for survival first, and everything rest would follow.” It’s a serious question we ask now – Can Kingfisher Airlines really be sustained? Can it, in short, survive?

It’s not that such a situation suddenly crept up on Mallya. Various reports estimate that Kingfisher posted Rs.240 crore of losses in FY05-06, Rs.577 crore losses in FY06-07; and Air Deccan – India’s largest publicly listed loss making company – was never a profitable company in the near past!


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

For More IIPM Info, Visit below mentioned IIPM articles.

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Monday, December 03, 2012

In Defence of Capitalism

 Many of you might think I have gone bonkers for defending Capitalism at a time when financial cataclysm is creating mayhem across the world. After all, America symbolised Capitalism and it does appear as if Uncle Sam is being destroyed by Capitalism. You could say that it is de facto 'nationalisation' – the ultimate symbol of socialism – that is saving America from financial destruction and ruin. There is no doubt that without the Federal Reserve and the Treasury Department – both arms of the US government – the American economy would have collapsed by now. The titans of Capitalism – General Motors, Ford, AIG, Citi... – have gone to the American government with a begging bowl, pleading to be saved from the very beasts of Capitalism that they used to flaunt so proudly till recently. For all practical purposes, America has turned decisively socialist. Similar things are happening in Europe, Japan and other so called citadels of Capitalism. With all this as the factual backdrop, how can I claim that Capitalism is still the best option for economic growth, poverty reduction and overall prosperity? How can I make such a seemingly foolhardy statement when even drum beaters of Capitalism like Alan Greenspan are suffering from a spasmodic bout of Mea Culpa?

The answer is simple. In the rush to denounce 'Capitalism' and its wild excesses that have created this crisis, there is fundamental confusion over all important terms like Capitalism, Market, State and Regulation. What we have seen in America over the last two decades or so is not Capitalism in the classical sense; you could call it Crony Capitalism or 'Financialism'. American capitalism was triumphant when General Motors, General Electric, General Mills, to name just a few, were the standard bearers. America manufactured the best products, provided the best services and hence ruled the world economy. But then, it turned into 'financialism' where Wall Street rocket scientists kept creating bubbles and hoodwinking the world.

They were joined in the farce by credit rating agencies. And they deliberately fostered a lie that ''markets'' are always perfect and that the State and Regulation are relics of an old era. The problem was that vast swathes of the world bought this hideous lie. Regulation in America had become a joke over the last two decades, with the State and regulators brazenly siding with the fat cats. If regulation is absent or biased, then Capitalism loses its core essence. Imagine a game of cricket between India and Australia where Andrew Symonds is the Umpire. Something similar happened in America. And we are all paying the price. But please, do not denounce Capitalism and the market as the twin evils. They are far from perfect; but they still deliver the best results and will continue to deliver the best results as long as the players in the game of Capitalism are supervised by an unbiased referee who blows the whistle when there is a foul.


Source : IIPM Editorial, 2012.An Initiative of IIPM, Malay Chaudhuri

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Saturday, December 01, 2012

MARGARET ALVA: RESIGNATION

Alva's statement and resignation may start series of apprehensions

Following her charges, veteran Congressman and President of the party’s Scheduled Castes Cell, Yogendra Makwana said that the party should not sit idle over the issue and should look into the matter.

What was first looked at as an 'emotional outburst' has, after the remarks, from Makwana taken a different turn altogether. It shows clearly that there is apprehension within the Congress circle and if the leaders don't take the matter seriously, then it may set off a series of chain reactions. At this point of time, Congress is not ready for any such problem as the crucial Assembly Elections are nearby.

Many Congressmen may be saying that Alva's statements and her consequent resignation will not make any difference to the party, but it is worth noting that it has been a long time since a senior Congress leader has come against the party and taken some stand.


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.

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