Statesman vs politicians

Today’s politicians, like cockroaches, have antennas. They send out feelers to gauge the public opinion and often apologetically take a U-turn to go with the wind and maximize their presence. They are so much worried about getting re-elected that they refuse to take a stance. The question like “What is best for my country?” never crosses their mind as, like rodents, they are busy filling their bellies. What every country needs are leaders who have principals. They need to have a vision, a philosophy and a dream of utopia. They might change the details of their policies over the course of time but have a strong moral compass and sense of direction.

Politics has been reduced from a personal calling to a profession. With the scions being made the head of parties without any formal democratic process, some claim it is more like a dynasty or a family business. Everybody is so much concerned about lining their own pockets and getting re-elected that nothing good gets done. The job of opposition is not to oppose, but to keep those in power in check. Parliament is not a place where the loudest voice gets heard.

In short a politician is a weasel who works for his/her own person gain & glory. They are more governed by the short term popularity ratings & punch lines than the betterment of the people they represent. A statesman is a leader who is so much dedicated to achieve their vision that they don’t mind the long & painful path that is needed to achieve the same. Their popularity & respect cuts across party lines and they are remembered long after they are gone.

The founders of India were not politicians but statesmen. They had a vision and were not scared of a few thorns that came along in the way. No wonder some of the intuitions in the country were founded post-independence are have provided strong bedrock. Our fundamental rights, the notion of India itself, integration/assimilation of different cultures and democracy are few of them. Somewhere along the lines we stopped electing leaders and chose to vote along religion/communal lines. Populist schemes and hand-outs win more votes than development.

Looking at how the Congress government was completely washed away in the last parliamentary elections, I don’t have an iota of doubt that the roots and foundations of democracy are very strong in India. It is impossible to rig the polls. Then why is it that India does not have a leader worth following? Euripides had once said, people get the government they deserve. “Andho meigh kana raja” (one eyed man will lead the army of blind)

Unfortunately I don’t see the political environment improving anytime soon. The opposition has made it impossible to get any legislative work done. BJP was a nuisance when Congress was in power and now Congress is paying back in the same coin. The only loser is India :(

Approval process for US acquisitions

In 2011 AVIC Chinese SOE (State owned entity) that manufacturers fighter aircrafts for Chinese government bought Cirrus, which manufactures aircraft components for US Defense forces. However in 2013, Polaris Financial Technology Ltd. an Indian IT was asked to reverse its acquisition of 85.3 percent stake in IdenTrust. The approvals might look arbitrary but often it is not always so.
This case-study uses a 3 prong approach to demystifying the approvals. Firstly we have consulted five reputed consultants. Secondly we researched precedents and thirdly we reviewed the entire public information document available on the topic.
US are under increasing pressure to protect its technology leadership and acquisitions expose them to the threat of espionage and proliferation of cutting edge technology and products. Acquisitions in Financial sector, Telecom and IT are scrutinized for their potential threat to data privacy and exposure to sensitive databases. Investments in Ports and mining need to be vetted for customs and border security risks.
Organizations prefer to integrate the two companies swiftly in order to maximize the synergy and cross-pollination of best practices and technology. This is often not aligned with US interests to protect and manage its risk. Several structures have been proposed as mitigation measures.
A successful Acquisition is one that manages its stake-holders well. Many acquisitions are shrouded under confidentiality and under-estimate the importance of a well-defined clear communication strategy. There is too much emphasis on the other share-holders that the promoters often tend to ignore the reaction of Public, Senate, various federal and state agencies.

To read more download this old whitepaper that I had written.
CIFUS demystified for Indian IT companies

Sovereign Gold Bond| Should you invest?

Let me put it this way:
1. The RBI has fixed the gold price to be 2,668.4/- per gm. while MCX gold price currently is 2,567/- per gram. That is a 3.7% premium (or loss to the investors) Essentially you lose 1.5 years of interest on a 8 year instrument (without taking tax into account) This is taking into account the price rise of gold due to Paris bombing. Otherwise the premium that one had to pay was even more.
2. Tax treatment is misleading
a. They say that TDS will not be deducted but that does not mean that this instrument is tax free.
b. Interest & any capital gains that you make at the end of 8 years will be taxed.
c. I am highlighting this because the SBI’s gold deposit scheme takes care of all your taxes (both capital & interest income)
3. 5 year lock in and 8 years maturity
a. Gold & bank accounts are considered as liquid money that can help one in emergencies. Unfortunately entering into a 5 year lock-in will take the liquidity away. However some of this drawback will be mitigated by the facility of loans (75%) and its listing in the index.
4. Convenience of digital format is an odd reason.
a. One of the reasons why people invest in gold is because it has a high value to weight ratio. (1CR or 10million INR has a weight of 12kgs while 1cr of gold weighs less than 4kgs). If you take the density of gold vs paper into account, the amount of locker space it occupies for storage is miniscule. So unless u have like a ton of gold, converting into demat form will not help you much in saving weight. But then remember the limit of investment is 500gm.
5. If you don’t want the tax authorities to know your net worth (for legitimate or privacy) then this is a wrong instrument.
6. If you are a minority and believe that RSS & Modi is going to incite a series of communal violence to ensure mass exodus then you are better off with something that you can touch/feel/carry. Remember all you get is a certificate (digital/paper) which might not be of much value if you become an asylum seeker.

Gold has been a cherished investment instrument for many in India. Reasons:
1. Black Money: Unlike cash, it occupies less space, is not inflammable, not prone to termites and appreciates in value.
2. Indian rupee is a joke and will continue to depreciate further. So you are better off with something tangible. In fact all the appreciation that one has seen in Gold is primarily because of weakness of Indian rupee and not because of purchasing power of gold going up.
3. Gold prices is dictated by the war/recession/terrorism and uncertainty in general. Hence as IS is gaining momentum & China going into recession gold will become dearer.
4. It is still probably the only form of wealth that is liquid and yet hard to trace by authorities.

All being said 2.75% on something that otherwise not earn anything is not a bad deal. Even after adjusting for tax & loss at the time of purchase, you should be better off with bonds rather than physical paper.

Diwali Vs. Singles Day

Is India relevant in today’s world economy?
Yesterday 11/11 Chinese Singles Day (a make-name shopping festival invented by Alibaba) coincided with Diwali. Both countries had a huge retail sales & domestic consumption. Yet the Western media had articles after articles on Chinese Singles Day. Diwali festival was barely mentioned anywhere.

Isn’t it strange the only time the name India is mentioned in any international publications it is linked to
1. Religious Intolerance or RSS or Modi
2. Poverty or corruption or Congress
3. Draconian policies of bureaucrats or how investor un-friendly India is

It is time India should hire some good PR scientist to steer the conversation to modernization or better still advance so much that everyone has no choice to notice us.

Cinema Capital Venture Fund: Rejoinder to SEBI Complaint

Based on the responses received from the Fund managersCCVF Response, I have composed the SEBi Rejoinder. The reason for me marking this on my personal blog is to reach out to the fellow investors who have seen their investments getting eroded from INR 10L to INR70k over the period of seven years.
Please help me reach out to other investors of this fund.

SEBI & CCVF Response

CCVF on behalf of SEBI finally responded to my 22nd Oct 2015 complaint against the fund managers Samir Gupta, Sanjay Bhattacharji, Mohit Mehra & Soumo Ganguly. The only thing meaningful that I could gather from this three page letter was that the Auditor PWC & the valuation experts of E&Y are working hand in glove with the three fund managers to deceive the investors. Otherwise there is no reason why after a wait of an additional two years the investors can only realize 10-30% of the reported NAV.
I am pretty depressed by the toothless tigers in SEBI who allow paper valuations of funds and allow the scrupulous fund managers to rob the investors.

Supporting documents:
1. SEBI Response
2. My original compliant
3. My previous posts 1 and 2

Japanese Loan for India’s bullet train

In Economic Times of 24th Oct 2015, I saw a news item that Japan has offered a soft loan at 1% interest to finance India’s first bullet train proposed between Mumbai- Ahmedabad (505 km ) at an estimated cost of US$15b, roughly one lakh crore. It seems that Ministry of railways is ready to jump at this offer, but I feel that it will be a disaster for Indian Railways or Govt of India (depending upon who foots the final bill) because

1% interest may look attractive, but with a long history of appreciation of Yen and devaluation of Rupee, as between 2007 to 2012 yen appreciated from 35p to 70p, the effective interest rate would be much higher.

Japanese Loan, like most of the bilateral loans, usually comes tied up with lot of conditions, like vetting of tender conditions to suit the interests of Japanese industry, and with major spending in yen (may be 70 %age or more), the actual cost may even exceed estimation of 200 crores per km.

With such high import content the gain to Indian industry and R&D will be negligible.

Unlike Metro, High Speed Railway (HSR) projects do not add value to land or real estate, rather they lower it because of NIMBY (as everybody wants HSR but ‘Not In My BackYard)

High Speed Railways in most of the rich countries is losing its shine, in France TGV traffic and profit margins are much below its peak (Ref Economist- 15 Jan 2015)

Even with a typical HSR train fare of Euro11/ 100 km in Europe, the latest HSR- Sud Europe Atlantique between Tours and Bordeaux (302 km long) is coming under PPP with 51% viability gap funding by public on a budget of 7.5 b Euros which means less Rs 180 crores per km.. (Ref Rly Gazette international- March 2015)

Since India’s proposed bullet train will be more expensive to build, and India cannot keep comparable fares (say Rs 3960 for chair car for Mumbai- Ahmedabad bullet train) and can’t have matching traffic, the ultimate subsidy to be borne by Indian public can be anybody’s guess. Moreover, the beneficiary will be a miniscule of Indian population. But surprisingly, both- the Indian media which is generally against subsidies (specially in food and all other meant for poor), and the Govt of India which had gone for major cut on subsidies in healthcare and education in this budget, seem delighted with the prospect of bullet train in India.

I think that if in India we really want to go for HSR, the complete economics of the project must be brought forward for public debate. Even a rich country like USA, after two decades of discussions, has recently started construction of Californian HSR, but many are dubbing it as a ‘Monster’. Probably we must try with indigenous efforts, first for speeds between 200-250 kmph and then go to 250-300 kmph.