Sunday, March 24, 2013


Wealth management has become very popular in the Indian economy right from 2006 onwards when Indian capital markets were the hot spot of investments. New types of financial products were introduced to reap the part of savings into complex investment models. Complex investments since where the funds were invested were never told to the investors. Later on it was found that products failed to meet the minimum commitment of capital protection. Even at the time of redemption it was found the fund value stood at 50% of the original investments.

Well the biggest flaw was not in the products of Portfolio management was that every one took these models of investments as capital appreciation model with no risk of erosion of investment capital. Well historically its has been found that whenever a new financial product comes into an booming capital market particularly a market like India flaws into the capital market will be there in the initial days. Thanks to the SEBI since it has worked and protected the mango people of the society from the scavengers of the financial market.

Wealth management is altogether a different concept. It is not a PMS but it drives more into the depth of individual portfolio management. I will better term it as IPM rather than mixing it up with any other product name.

Traditionally wealth management focused at the back of HNI clients but now the entire business model has changed where the focus is being driven towards every segment of the market. Rising cost of operation with decline in market performance has created a ripple effect on the client segment which has resulted to a significant drop in the revenues of the wealth management company.

Now they are converting themselves into a one stop setup for all financial planning solutions followed with extending their products to every inch of the society. Technology and social networking sites has also contributed to a huge significant level of transformation in business models. We now companies like Policy, Apna and many more companies have extended their products through technology advances. Thanks, to Smartphone since investments and notifications have become easier.

Since technology has created higher margins for the business from the phase of negligible margin level of the business while serving clients without technology. But still I find that the perception about wealth management and IPM is still far from exploration. Poor level of governance followed with various financial scams and miss selling of products have forced the investors mind to peep into wealth management segment. The trust and faith of in monetary matters has dried up. Even Banks that are being respected as the best of trustable friends have also joined the bandwagon of miss selling.

Another factor which is acting as a barrier for the segment to grow is that earlier wealth management companies or IPM use to share key information with HNI and Ultra HNI clients. That information was only available to the top notch segment of society. Exploration of technology has erased off that cream data exchange business model. Information is now available freely. At the same time growing educated population of the economy followed with Smart Phone gap of information has narrowed down to an considerable point.

I find now investors asking for critical data analysis and interpretation of complex economic outcomes. This has increased more after the debacle of 2008 and now it is compounding with the global uncertainty. That’s has created the competition in business as well as eliminated the craps from the capital market.

New young generation of employees followed with a matured class of investors who are now categorized under the affluent and young affluent retrospectively. IPM focuses on young goals and matured goals during the process of wealth management. But the intense competition of the market with stringent regularatory business model has lead to backdrop for the industry. Well it is not back drop but it is lack of euphoric zeal which is missing in the market since after 2004 the Indian capital market created rag to riches which has created a ripple effect for the segment. Fast money printing business days are over. It is now the period of patience to build business models and financial products.

Saturday, March 23, 2013

Delayed Indian Infrastructure

Indian Infrastructure segment has been struggling over the last 5 years. I would be wrong to say that it is struggling over the last 5 years; in fact it was struggling once the private sector was appointed to come for investments. I a country like India any infrastructure project takes up around decade to complete as compared to the half of the project period. PPP mode was established to expedite the projects as public sector was lagging the culture of private project execution style.

But all hopes remained only within the grave yard of expectations. Private sector came and now they are running away from infrastructure related investments. Whenever there is a project related to roads, bridges, dams etc we find that project over runs its estimated project cost.

Political parties are very much active player within every infrastructure based projects to fill up their pockets. Below is the list of couple of projects where cost has overrun along with period.

The prime difference between Indian projects and overseas projects the escalation cost where it is being found the overseas projects often get completed before the estimated project period and cost overrun is an new concept for the promoters of the project. Overseas projects implement various strategies and techniques to cut down on cost from the estimated cost of production so that they add premium value to their projects. In India we just abide the opposite of the overseas style of execution of projects. Involvement of too many authorities, 100 dozens of paper works and donation to political parties for clean chit of working creates Indian corporate to find foul practices for meeting the targets of their profits. Most of the largest sources of corruption in India are entitlement programs and social spending schemes enacted by the Indian government. Examples include Mahatma Gandhi National Rural Employment Guarantee Act and National Rural Health Mission. Other daily sources of corruption include India's trucking industry which is forced to pay billions in bribes annually to numerous regulatory and police stops on its interstate highways.

Too much political intervention has lead to an extreme level of variation between over run of cost as well as time. In my research I have drilled high to find out the relative variation in mathematical module where it is being found that:

From 1992 to 2009 delays in various projects across the Industries and also the Time Over run.

Source: Calculations based on MOSPI data.

It is being found from the mathematical model that there has been huge range of SD followed with respect to the magnitude of time and cost overruns.

We find that rising cost of delayed project execution has turned private investments to negate from the infrastructure segment. Rising cost due to delayed project execution and extensive political intervention has increased the ROI of the private sector which further affects the cash flow of the projects in the long term. In many cases it is being found the ROI is being projected at 30-35% due to overrun of time and cost.

Well my dear cost accountants might think that they might find some strategy to reduce the gap but unfortunately in a country like India where political parties intricately coiled within the system no strategy would work.

Sixteen major highway projects worth Rs.15,000 crore in four states have been stalled. These include the Chennai Port-Maduravoyal road in Tamil Nadu, Bahrampore-Farakka and Krishnanagar-Bahrampore projects in West Bengal, Cherthalai -Ochira and Thiruvanthapuram (Kerala)/Tamil Nadu border projects in Kerala and Goa/Karnataka border-Panaji in Goa. The road projects are awaiting environmental clearances from the Ministry of Environment and Forests (MoEF).

After coming to power the UPA government had said that it would build 35,000 km of roads in five years, which means building 20 km of roads in a day. The reality is something else though. In 2011-12, on an average only 10.39 km of road was constructed in a single day.

Currently, out of the 226 projects which are under implementation by the National Highways Authority of India (NHAI), 58 projects have been delayed due to multiple reasons including land acquisition. In Mumbai, many infrastructure projects, including monorail and metro rail projects are facing delays

It seems that we have now become habitual to the system of delayed and overrun project cost regime. The government and the system both are blind to an great extent. The consortium is yet to sign a concession agreement with Jawaharlal Nehru authority as it is refusing to pay the required stamp duty of Rs.50 crore. The project cost has increased to Rs.8,000 crore due to the delay. What a delay sirji?

I think Indian economy needs to have an award as well should write books on how to delay projects and increase the cost so that the international economy comes to know. This might help countries like Europe and US to make more sovereign reserves and strive out the recessionary phase of their economy.  The only difference that is required to be adopted that in case of India the delayed cost is being pocketed by the political parties where as in case of Euro-zone and US the delayed cost needs to link with the bank account of the central banks treasuries.

Today Indian economy is struggling to find its GDP growth due to high frequency level of corruption which has forced the private investments to drive down Its the corruption which has placed brakes on the Indian economic growth.

Sunday, March 17, 2013


When an Industry finds stupendous growth in the short term then Indian government places Brakes on such growth story in the long term of the Industry. Online business has made tremendous business revolution for every segment of the industry across the countries. India is now the emerging economy in terms of online business opportunity.

We prefer every purchase over the online business portal. We visit less in the bank for any monetary transactions. We book our travelling tickets online. Companies maintain their outlook database in server or cloud computing. Every data base is maintained online. Smartphone has changed our perception of using mobile phone from being used only for calling to a virtual business platform and entertainment platform. Storage of virtual data has lead to huge download of data which consist of music, movies, data etc.

Our society has also got converted and linked with online business and data connectivity. A click of a mouse leads to collection of huge data as well as access. In 2000 when buying a computer was a dream in every home and laptop was an imagination, today in 2013 every household has more than one laptop.

Smartphone followed with tablets and the latest phablet has made a turnaround of the Indian society. All these technologies have changed the society in every term which brings prosperity for the society.

I find in my research that in the coming decade Indian economy has a long way to make another revolution in the technology segment. Around 250000 villages Panchayat system are going to be connected in India out of the 650000 village’s panchayat. Hence a huge data connectivity revolution is about to explode in the society. The ancillary industry is also poised for a stupendous demand in the coming days. Optical fibers, storage facility of data, server space and cloud computing has tremendous opportunities in coming days.

Already we are having core banking facilities across the country. Now with the implementation of Adhar card facility there is a huge opportunity for the online data segment. The Indian IT industry is currently under the phase of change where from BPO and KPO segment the industry finds it’s another matured phase of growth from online data storage and cloud computing.

But the industry cannot grow alone. The government made a prudent decision during the IT industry revolution by giving SEZ units to the society. Employment opportunities got a huge revolution through the implementation of SEZ for the IT industry. The next revolution came from 2G segment where data transfer got the first identity. But the 3G segment failed to find the growth like 2G. Still 75% of the population of India uses 2G facility in every segment. Hence we all know that 3G failed to enter into every household.

We are now waiting for the entry of 4G segment in the society. We now find that the government has pegged a high price for the 4G segment. The repetition of the same mistake is being worked by the government. In my first line I made the thought clear about this mistake.

The failure of the 3G was not due to companies which failed to implement the same but it was due to the high exorbitant valuation derived by the government and auctioned to the companies. High auction prices lead to high prices for the 3G segment followed with high cost for the consumer.

Finally we end up with low penetration of 3G segment. If the prices of the 3G were low then it would have created huge penetration which would have created more employment, more individual taxes and more government revenues from other ancillary industry from the revolution of 3G.

More taxes and revenues only goes at the back of corruption and less benefits p[asses on to the society and economy. The Fiscal deficit of India will be met from high auction prices from the 4G segment. Well again the revenue will put brakes on the economic growth of India.

Women Banks

8th March 2013 is being a special day which is not marked as a red letter day in the calendar but celebrated across the world as International Women's Day. Those who don’t know the background for international women’s day for them this small intro will make them understand better.

The first national Women's Day was observed on 28 February 1909 in the United States following a declaration by the Socialist Party of America Well being Indian I am ashamed to celebrate the International women’s day as in past couple of months the number of rape case per day in India has migrated from 2 case per day to 4 case per day totaling to 180 above rape cases in India. Many of my readers might acclaim that India is not the alone country on the earth to go for chasing the highest total rapes, there are many countries leading in the crime.  All I can say to them is that eye for eye is not the solution. Well I am shifting out from the main part of the topic which is related to the Union Budget of 2013-14. The Indian government invited every member of the parliament for the inaurgation of the 1st Women Bank. Well this was not a gift for the International Women’s Day but it has some rock solid economic factors to support.
Women lending has made a phenomenal growth over the last couple of years. The data from RBI makes the decision of women bank to be very strong.

Women Lending (Cr)
Lending Amount


This reveals that women business opportunities are growing that entrepreneurship growth is equivalently growing. In my research I found that state wise contribution of Small Scale entrepreneurship by women are on the rise.
State-wise distribution of small scale industrial units owned by women entrepreneurs
 State/Union Territory  
 No. of SSI Units  
 Percentage to Total  
 Tamil Nadu  
 Andhra Pradesh  
 Uttar Pradesh  
 West Bengal  
 Madhya Pradesh  
 Jammu and Kashmir  
 Himachal Pradesh  
 Daman, Diu , Dadra and Nagarhaveli  
 Arunachal Pradesh  
 Andaman and Nicobar Island  

In 2001 RBI changed the law and created the revolution for the women of India. RBI made mandatory 5% of the net of PSB lending would be directed towards women. The revolution created its impact by surpassing the limit on 2011-12 to 7.3%. Recently RBI has extended that women are entitled to get Rs.50000 for each borrower. In 2011-12   15 million women got benefit from the lending programme of RBI.
Among the various banks the lending figure is very much impressive enough for the PSB. (Cr.)
3.2million Accounts
Canara Bank
1.3million Accounts
Indian Overseas Bank
1.25 million Accounts
Indian Bank
1 million Accounts
750300 Accounts
7 lac Accounts
 According to the recent study by the World Bank there are just 26% women account holders as compared to 46% men’s in India. This is an opportunity which has lead the government to go for exclusive women Bank. Since women park their monetary segment either with Cooperative societies, Credit Unions, Post Office and micro finance organizations. Well more than 6, 50,000 villages in India don’t have banks hence this is an immense opportunity for the banking space to grow. But a question comes to mind that why these numbers and values were not identified earlier. Since, we still value women as pound of flesh and as food stuff for the cannibal part of the society. Happy International Women’s Day.

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