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PEDOPHILIA SCANDALPROF. WILLIAM W. GEORGE HARVARD BUSINESS SCHOOL

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I NDIA S MOST INFLUENTIAL BUSINESS & ECONOMY MAGAZINE

BUSINESS ECONOMYIndias No. 1 Business & Economy MagazineA PLANMAN MEDIA - IIPM THINK TANK PUBLICATION

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S SEPTEMBER 2012

10 WAYS TO SAVE THE INDIAN ECONOMY

EDITORIAL

S U TA N U G U R U : F R O M T H E M A N A G I N G E D I T O R ' S D E S K

HOW DR. MANMOHAN SINGH BEATS V.P. SINGH HANDS DOWN...t was really a no contest till recently. The late V.P. Singh was the undisputed winner of this trophy. He also remains the classic example of a middle class hero who became a middle class villain. Till he became the Prime Minister, V.P. Singh was the anti-corruption crusader and messiah who rode on the infamy of the Bofors scam. Of course, Indians soon realised that pious crusaders do not always become good leaders. Mercifully, his tenure did not last long enough for V.P. Singh to inflict irreparable damage to India. I used the words till recently because there was some lingering, forlorn hope that the current Prime Minister would at least do something that would enable V.P. Singh to retain the crown. But then, forlorn hopes always remain hopeless. I realised this when I read newspaper stories about how a Supreme Court Bench has yet again criticised the PMO. This time, the rap on the knuckles is because the Prime Minister has failed to convene a meeting of the Cauvery River Authority despite reminders. Allow me to use the words of the Bench: What do you mean by this? It is shocking that you require the consent of all the states even for a date of a meeting? Is the PM to see his convenience or the convenience of the members? It is surprising that the PMO is asking the convenience of everybody before fixing the meeting. Just imagine. The Prime Minister is the head of the Cauvery River Authority set up to tackle the often ugly dispute between Tamil Nadu and Karnataka over the sharing of Cauvery waters. What conclusion can you draw from the fact that he is not able to set up a meeting with some chief ministers? Either he is truly helpless and powerless, or he is indifferent and callous. Either ways, it bodes ill for India. This incident and the rap on the knuckles by the Supreme Court is not front page news. Nor will it lead our television anchors to froth at the mouth. Yet, in a small but very significant way, it reflects the disappointment and disaster that Dr. Manmohan Singh has been. In 2009, he was a true blue middle class hero because the Congress won virtually all urban seats in the Lok Sabha elections, including seven out of seven in Delhi. Today, that halo has been torn to shreds. Of course, the middle class Indian is very fickle and unreliable. And later historians might have more charitable things to say about the tenure of Manmohan Singh. The

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more charitable may say that Indians expected too much from him and hence the disappointment and anger. But for me, there are some crucial reasons why Dr. Manmohan Singh has become the worst Prime Minister India has ever had. The most important reason is that he has presided over an insidious process that has transformed India into a total banana republic. Nothing has been left untouched in this era of loot and plunder; nothing is sacrosanct. Just a few examples will suffice, though the tales of crony capitalism written in his tenure would fill up entire books. BSNL and Air India have been systematically run to the ground and destroyed through incomprehensible policies and decisions. I am not saying that the Prime Minister personally took the conspiracy call to do this. That is childish. But the fact is that private sector players have immensely benefited from the troubles of these two public sector giants. And I wont be surprised if as the cacophony over Air India gathers momentum the two are eventually privatised at throwaway prices, their assets and value eroded deliberately. It is in this era of Dr. Manmohan Singh that India has thrown up more dollar billionaires than even China. It is during his tenure that crony capitalism has become de facto policy. Let me quote a few lines from the book Breakout Nations written by Ruchir Sharma to illustrate what has happened under Dr Singh: Crony capitalism is a cancer that undermines competition and

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Business & Economy

slows economic growth. That is why the United States confronted the problem and moved to take down the robber barons... The Dow index of the top thirty US industrial companies is in constant flux and, on average, replaces half its members every fifteen years. Indias market used to generate heavy turnover too, but in late 2011, twenty seven 90 percent of the top thirty companies tracked by the benchmark Sensex index were holdovers 2006. Back in 2006, the comparable figure was just 68 percent... Nine out of the top ten Indian billionaires on the Forbes 2010 are holdovers from the 2006 list, while the 2006 list had only five holdovers. As of today, many of Indias super rich still inspire national pride, not resentment, and they can travel the country with no fear for their safety; but this genial state of affairs can change quickly. In effect, India has become a true banana republic where the ruling religion is crony capitalism and the ruling chant is scam. This is astonishing because the UPA regime never fails to remind all of us that its heart beats genuinely and passionately for the aam aadmi. Just one more example to conclude this observation. You might recall how the then Governor of Andhra Pradesh and veteran Congress leader N.D. Tiwari was seen frolicking with nubile nymphets. Do you know how this scandalous footage found its way into the media? The brothel owner who allegedly supplied the girls to Tiwari wanted revenge. Why? Because N.D. Tiwari had not kept his promise of getting a few mining licenses for her! Mera Bharat Mahan! The second reason why Dr. Singh has been such a monumental failure is his inability or unwillingness or both to move even an inch ahead on administrative reforms. Back in 2004 when he was appointed Prime Minister, Dr. Singh had singled out administrative reforms as his most important priority. And why not? Governance in India is in an appalling state because the entire administrative framework

In 2009, Indias Prime Minister Dr. Manmohan Singh was a true blue middle class hero. Today, that halo has been torn to shreds

(L) Dr. Manmohan Singh: The 13th (and current) Prime Minister of India; (R) (Late) Vishwanath Pratap Singh: Seventh (former) Prime Minister of India

has virtually collapsed. There is simply no accountability and both the tehsildar and the secretary level IAS officer treat the citizens as subjects to be lorded over. Our sister publication The Sunday Indian has done a story on how the IAS lobby has stolen the country. One would have thought that Dr. Singh would be well acquainted with the perils of Indian bureaucracy since he was himself a bureaucrat for most of his adult and working life. But in the last eight years, he has not lifted a finger to make even small, cosmetic changes to Indias rotting steel frame. The consequence has been brutal and devastating: the quality of governance is at an all time low and Indias record in delivering health, education and sanitation is actually worse than ever before. He has been unable or unwilling to even prevent bureaucrats holding sensitive posts to retire and take plum private sector assignments in a brazen defiance of norms and law. The third and most devastating failure in fact, the key reason behind all other failures has been his inability or unwillingness or both, to display some spine. So pathetic has been his track record in this regard that his personal reputation as a man of integrity has become a joke. The charitable would say that our current regime of coalition politics does not allow a Prime Minister all the power that he should have because allies dictate terms. True. In the NDA regime, Suresh Prabhu was widely acknowledged as a brilliant Power Minister. Yet, Prime Minister Atal Bihari Vajpayee was helpless when Shiv Sena decided that Suresh Prabhu must be sacked. Despite such compulsions, Vajpayee had a clear run this far and no further approach. And even troublesome allies knew that and respected his authority. Can anyone say that about Dr. Singh? The other charitable thing we say about him is that real power resides with Sonia Gandhi and Dr. Singh is actually doing the best he can of a difficult job. That is bunkum. Sonia Gandhi is a very intelligent and astute politician. There is no way she would have asked for the head of Dr. Singh if he had put his foot down on at least some crucial issues. It is not Sonia Gandhi who has made Dr. Singh a puppet; it is Dr. Singh who has become a puppet and eventually and inevitably the lamest of lame ducks. Lets all anxiously wait for 2014 for this agony to be over. It is Indias misfortune that 2014 still looks very, very far away.

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September 2012

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CONTENTS

September 2012

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INDIAS MOST INFLUENTIAL BUSINESS AND ECONOMY MAGAZINE

Volume 7 Issue XII, SEPTEMBER 2012

EDITORIAL & RESEARCH EDITOR-IN-CHIEF: Arindam Chaudhuri GROUP EDITORIAL DIRECTOR: A. Sandeep MANAGING EDITOR: Sutanu Guru JOINT EDITORS: Virat Bahri, Steven Philip Warner CHIEF EXECUTIVE OFFICER: Deepak Kaistha EDITOR ECONOMIC AFFAIRS: Prasoon Majumdar FEATURES EDITOR: Prashanto Banerji ASSOCIATE EDITOR (Copy): Sanjay Kumar SENIOR EDITORS: Deepak Ranjan Patra, Manish K. Pandey ASSISTANT EDITORS: Indira Parthasarathy BUREAU CHIEF (Mumbai): Mona Mehta SPECIAL CORRESPONDENTS: Amir Moin, Parimal Peeyush PRINCIPAL CORRESPONDENTS: Spriha Srivastava, Sray Agarwal, Akram Hoque, Onkar Pandey, Deepti Singh EDITORIAL COORDINATOR: Angshuman Paul CHIEF CONSULTING EDITOR: Malay Chaudhuri CORRESPONDENTS: Niharika Patra, Anirudh Raheja, Ravi Inder Singh, Haroon Reshi (Srinagar), Sayan Ghosh, RESEARCH TEAM: Deepanshu Taumar, Ashish Kumar, Latika Sharma DESIGN GROUP DESIGN DIRECTOR: Satyajit Datta SR. ART DIRECTOR: Siddharth Kapil DEPUTY ART DIRECTOR: Priyankar Bhargava SENIOR DESIGNER: Hitesh Mehta SENIOR INFOGRAPHIST: Kuldeep Singh SENIOR ILLUSTRATOR: Shantanu Mitra ILLUSTRATOR: S. K. Panduranga IMAGE EDITOR: Vinay Kamboj PHOTOGRAPHY GROUP PHOTO EDITOR: Ranjan Basu CHIEF PHOTOGRAPHER: Sujan Singh PHOTOGRAPHER: Sanjay Solanki, Mukunda De, Vikram Kumar, Rangnath Tiwari, Subhash Chopra, Naveen Sharma CHIEF PHOTO COORDINATOR: Varun Pal Singh SENIOR PHOTO RESEARCHER: Sanjay Kumar, Ashutosh Vig PRODUCTION PRODUCTION MANAGER: Gurudas Mallik Thakur PRODUCTION SUPERVISOR: Digember Singh, Satbir Chauhan, Soumyajeet Gupta, Dipak Basak, Mukesh Jha, N. Ekantha Lingam, Deep Narain MARKETING Pushkar Nanda, Rajat Sogani, Ravi Babu, Sumit Raina, Guljar Singh, Rishi Kapoor, Sunil Kumar, Bhaskar Mojumdar CIRCULATION REGIONAL HEADS: Swaroop Saha, Bhupinder Bisht, Kunj Bihari Joshi, Venkat Narasimman, Joydeep Ganguly, Gopal Singh SALES MANAGER: Manoj, Rizvi, Parameshwara, Shihabuddin B&E ONLINE CHIEF WEB DESIGNER: Neel Verma WEB DEVELOPER: Raj SaikiaPrinted and Published by Ashok Bose on behalf of Planman Media Pvt. Ltd. Published from: 9, First Floor, SCO-34, Sector-11, Panchkula-134 112 (Haryana) Printed at: M. P. Printers, B-220, Phase-II, NOIDA-201 305, Joint Editors: Virat Bahri, Steven Philip Warner For advertisement, feedback and other queries write to [email protected] For subscription contact at: 0120-4170111, 4170192 email: [email protected], [email protected] For editorial queries: [email protected] Editorial Ofce: Planman Media Pvt. Ltd., 48, Community Centre, Naraina Vihar Industrial Area, Phase-1, New Delhi-110028 Visit us at: www.businessandeconomy.org The Joint Editors Virat Bahri, Steven Philip Warner are GID & CULT responsible for the selection of news under PRB Act. Entire SUPPLEMENTS content copyright ARE BEING 2007 by Planman Media Pvt. Ltd.. All rights reserved DISTRIBUTED FREE throughout the world. Reproduction or translation in any OF COST WITH language in whole or in part without permission is prohibited. THIS ISSUE OF THE The publisher assumes no responsibility for the return of the MAGAZINE unsolicited material or for material lost or damaged in transit. IN SELECTED All disputes are subject to exclusive jurisdiction of competent CITIES courts and forums in Delhi or New Delhi.

FROM THE MANAGING EDITORs DESK HOW DR. MANMOHAN SINGH BEATS VP SINGH HANDS DOWN LETTERS TO THE EDITOR B&E THIS MONTH B&E INDICATORS B&E INFOGRAPHICS SCRUTINY STRATAGEM Signs of a long impending transition FINANCE RIP: Fannie Mae, Freddie Mac, 2012 B-SCHOOL COLUMN Prof. William W. George, Harvard Business School B-SCHOOL COLUMN Prof. Luigi Zingales, Booth School of Business B&E FEATURE ICICI Bank: When silence says it all NATIONAL FOCUS Why fuel guzzlers are turning friends CORPORATE FOCUS Can Samsung keep its edge in smartphones? HIPSHOT Manoj Bhargava, Richest Indian Billionaire in US REVISITING HISTORY India after Bihar famine POLICY SPECIAL STORY UPA government: Caught in CAGmire PROJECT SYNDICATE Ma Jian, Author, Beijing Coma

COVER STORY

BUSINESS ECONOMY

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10 WAYS TO SAVE THE INDIAN ECONOMY

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50B&E CORPORATION Why everybody at SpiceJet loves Neil Raymond?

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68SPECIAL FEATURE TRAI: A woeful downslide?

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92POLICY LEAD A weak power sector: Whats the cure?

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92POLICY VIEWPOINT Will price control make medicines accessible?Cover Design: Satyajit Datta

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LETTERS TO THE EDITOR

New genre magazineALSO FEATURINGMEASUREING CHANCE OF F. FAMA, FACULTYPROF. EUGEN GO RSITY OF CHICA FINANCE, UNIVE BUSINESS BOOTH SCHOOL OF TE, PROGRAM PROF. DAVE DUAR EGY, L BUSINESS STRAT DIRECTOR - SOCIA TOWN GSB UNIVERSITY OF CAPE

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Indias No. 1 y Business & Econom Magazine

STUDY NK TANK-B&E JOINT A CORNELL-IIPM THI

ARTHUR C. WHEATON , RelationsFaculty of Industrial School Cornell University ILR

CHINA UNPLUGGED

NOMY HEADED? ndings WHgERE IS THE DRAGON ECO ndings from ICMR d primary research Alon with on-groun

ARINDAM CHAUDHURIHony. Director, IIPM Think Tank

Every issue of Business & Economy magazine is a great compilation of thoughtful and analytical stories. Pick up any of the issues in the recent past, and one can clearly nd out that the magazine is informative and helps the readers in forming a rened perspective about various sectors. Fortunately, I got a chance to go through the latest issue on China Unplugged as well. In terms of quality, a gamut of issues were covered with an interesting presentation style. The magazine seems to be strongly focussed on quick supply of knowledge and an ease in understanding complex business situations. I have gone through various issues in the past and would say that its a new genre magazine growing by the hour. It nicely encapsulates current issues and brings out the true essence of the story. I wish that your journey touches new heights with every issue. Best of luck!

Vijay Jindal Chairman & MD, SVP Group

Knowledge pool Once you start ipping through the magazine, one may nd that its a pool of knowledge. My favourite is the policy section where its a trend to critically analyse the situation spanning across different sectors in India. Stories on slum development, MGNREGS, illegal mining and Draft Water Policy 2012 are just a few that I would like to name from the lot that make you think out of the box. I also like the Scrutiny section as it also follows a somewhat

similar trend. The magazine is captivating with some books reviews and columns from international leaders making it an even more interesting read. The sector story on ports also deserves a mention in this letter for the insider on the situation of Indian ports. I habitually go through many magazines, but Business & Economy is a class apart. Well done team.Sanjay Ghoshal Director, Avenir Business Solutions

On a constant rise There has been a constant rise in the efforts of the journalists at Planman Media. The quality of analysis and information about contemporary issues

makes B&E stand apart from the crowd. I am always left amazed by the variety of topics that you choose to discuss and the intensity with which they are highlighted . While supplements like BFM have some great cover stories too, GID has also been doing a commendable job in turning up with some outstanding work, deserving a genuine applause. Keep it up. Ankur Gupta,Joint Managing Director, Ashiana Housing Ltd.

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Its a powerful magazine Business & Economy is a perfect magazine in terms of world class stories. Be it international or national issues, both are covered with felicity. While the Stratagem section has a crystal clear view of what the companies are actually facing and their plans for the future with detailed analyses, B&E this month provides information in a nutshell. The range of articles is such that it gives both micro and macroeconomic outlooks to the reader and this spans the entire package for each and every story. In fact, the cover stories are gradually becoming phenomenal and denitely adding value to regular readers. The stories like the one on recent union problems at the Maruti plant, the sector story on ports and also the policy story on illegal mining clearly depict that its a powerful magazine, and in a way, an opinion builder as well. But you have been clearly missing out on movements in the retail, media and education sectors and I would like to see a quick response to my point. Overall, the magazine is a treat to read.Love Khosla Managing Director, Elvy Lifestyle

issue, the magazine becomes more interactive and its analytical style of supporting gures and charts turns it more reader friendly. Its the right mix of regulatory analysis and knowledge updation. The corporation and sector stories are a continuous source of gathering information. The edit team ensures that its efforts for the stories make them interesting for the readers. The Scrutiny section always offers new perspectives for both national and international issues. Also, the editorials are always enlightening and present a different POV. I always prefer to have the magazine in a hardcopy, but since I am a frequent traveller, it would be nice if the website of B&E is updated on a regular basis. Advit SahdevCEO & Founder, ODigMa

Something special Right from the cover to the last page, there is something special about B&E. Recent cover stories were really full of intellect and I really loved going through them. The content of the magazine provides a great deal of knowledge about the latest trends and issues about the business arena. All the stories are equally exciting and keep me glued to the magazine. Various interviews that are published are also a great treat to read. I wish you all the luck in your future endeavours. Vivek Khosla Gurgaon +9198999626XX Holistic coverage Your magazine Business & Economy has been able to deliver lively business stories issue after issue and I have eventually become a fan of this endeavour. I am reading this magazine for quite a long time now and am impressed by the simplicity with which it conveys the exciting happenings of business world. I especially liked the Volkswagen story, on how it is targeting the Indian market for expansion. The special coverage in the last issue on China was truly holistic. Anuj Nayyar Navi Mumbai +9194053177XX Convincing perspective Im an MBA student and for someone like me, the magazine is a real source of knowledge. This magazine tells me how to put theories into practice. I especially like the interviews of industry experts and marketing gurus, which are really proving to be a great learning for me. Being a prudent reader myself, I appreciate the analysis done by you as none of the facts that you write are baseless and thus the articles become convincing. Shikha Joshi Ludhiana +91981593247XX

Reader friendly presentation Business & Economy is an exceptional magazine. It is certainly an eye opener in terms of analysing the strategies of the companies. It nicely manages to discuss contemporary and critical issues alike. It enhances ones ability do a comparative analysis of competition in a particular sector. The magazine has been streamlined with relevant information in each story. With each

Articulate & accurate The magazine offers true justice to the sectors covered and also to the insiders stories since they are really insightful. While the use of rich language sets it apart on the stands, the covers, too, are eye catching among the clutter of magazines available on stands. The magazine is articulate, accurate and has spectacular interviews of the industry professionals with analytical inputs of analysts from various agencies. The team depicts a great spirit of journalism and does a laudable job by presenting stories that not only enlighten the readers but also encourage them to know more about what is happening around them. It would be great if you give your viewpoint on analysing the slowdown that the world is facing and how India will be impacted by the same. Good job team & way to go! Sunil RainaChief Marketing Officer LAVA International Ltd.

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Lucid & yet effective I nd Business & Economy to be a reliable and genuine source of information. Though one needs to wait longer than it was earlier, but the way in which the design and analysis of the business stories is donemakes it worthwhile. It not only provides a bird-eye view on an array of latest business and economic events but also broadens the horizon of knowledge and learning. Its simple, lucid and yet effective writing style makes it easy to understand. The precise and perspective-oriented content helps one to imbibe complex topics effortlessly. Though I dont see much of telecom and FMCG sectors in the magazine, I take this opportunity to congratulate the entire B&E team for their sincere efforts and wish them good luck.Nimish Kumar Senior Business Manager MediaCom

set by itself in analysing various aspects of the business environment. It is an engrossing magazine, with some ne sections like Revisiting history and Scrutiny. Special mention for the Revisiting history stories on Rajiv Gandhi and Saddam Hussein as they were eye openers and had a very detailed analysis. The magazine is impressive. Keep it up! Joy Deb AdhikariManging Director DASYS Pvt. Ltd

Comprehensive The consistent efforts of Business & Economy magazine in laying an emphasis on international issues, despite being an India-centric magazine, deserve appreciation. The magazine is comprehensive and rarely deviates from the high standards that have been

Credible The rst impression that the magazine sends out with its cover is just brilliant. The content is impeccable and the standards have been on the rise for a very long time now. It is always loaded with interesting stories like Naresh Goyals turnaround plans for Jet Airways and Volkswagen leveraging Indias plans to be a global leader. The effort of coordinating columns from the professors of top B-schools around the world deserves appreciation. Your cover stories like joint studies with international professors, Indias most protable companies, and the leadership issue with none other than Mr. Narayana Murthy were a delight to read. The magazine holds great credibility with the readers. Best of luck for the future. Ekta SaraswatSenior Analyst Copal Patners

Analytical bend Once you start going through Business & Economy magazine, you will become habitual to it in no time. The initiative that Prof. Arindam Chaudhuri has taken in enlightening the world is truly showing its mark with its analytical bend and resourceful interpretation of contemporary business world activities. I have been following the magazine for a long time now, and could say that sectors like auto and IT are being covered generously in the package every month. Though viewing the oil sector and heavy industries from your viewpoint would be a boon for avid readers like me; for now I would like to say, keep up the spirit. Harman Chadha Noida +9192504576XX Marvellous covers Wow! This was my rst reaction when I just nished the cover story China Unplugged and it compelled me to scribble down this appreciation then and there only. I went through the Tuck Business School joint study as well and would say that both of them were a class apart in their own terms. Every month B&E turns up with a marvellous corporation story loaded with facts & gures. In all, this monthly affair is worth a read. Ankita Mathur Panipat +9193556476XX Well conceptualized I would like to say thanks to the edit team of B&E magazine. The cover stories in every issue are just awesome and sector stories on ports and auto are exemplary. The issue is very well conceptualized every month with the supplements like GID & BFM supporting it in every sense. A superb effort in terms of quality and quantity. Ritesh Aggarwal Delhi +9195826042XX

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THIS MONTH

Tim Cook CEO, Apple, can now focus further on innovation as he can stay assured about innovations not being copied

A P P L E V S S A M S U N G : PAT E N T I N F R I N G E M E N T

Apple draws blood, Samsung gets a lickingt was one of Steve Jobs pet peeves. He often complained that Samsung had blatantly copied Apples iPhone design in its Galaxy range, and Android too was a rip-off of its iOS platform. Jobs outrage at rivals lack of respect for Apples intellectual property often boiled over. I am ready to wage a thermonuclear war against Google, he is believed to have said. Eventually, the end to the vexatious problem of Apples patent infringements by rivals seems to be in sight. On August 24 Apple finally scored a major legal win over Samsung in a patents lawsuit filed in a US court of law. A U.S. district court jury in San Jose, which was presided over by a South Korean American judge Lucy Koh, decided that Samsung was guilty of copying key features of the Apples iPhone and iPad devices. The court awarded Apple $1.051 billion in damages (Apple had demanded $2.5 billion in damages). Buoyed by the verdict, Apple is moving

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rapidly to press for a ban on eight models of Samsung, which are still in the market. The verdict has broader ramifications: it will help strengthen Apples share of the exploding mobile computing market. For many the Apple-Samsung lawsuit was widely seen as a proxy fight between Apple and Googles Android platform, since Samsung is the largest Android handset maker. Samsung is expected to appeal the jurys verdict, but its not clear how strong a case Samsung will be able to mount, given the overwhelming legal victory for Apple. Apple saw its shares climb 2% to a record high of $675 in post-verdict early trade. Samsung shares tumbled 7.5% wiping off $12 billion in value. Interestingly, Nokia saw a 10% jump in its stocks, and others like RIM and Microsoft too gained. These players own and run their own operating systems, which are different from both the iOS and Android.


News & Analysis

HP: TURNAROUND EFFORTS

RUSSIA: WTO ENTRY

Can cost cutting help HPs comeback?ollowing a third quarterly loss of $8.9 billion for the 2012 fiscal, Hewlett-Packard, the Palo Alto, California-based computer giant is desperately looking to effect a turnaround. CEO Meg Whitman has set in motion the restructuring process, which includes cutting 27,000 employees or 8% of its global workforce by 2014. The move comes in the wake of a challenging business scenario which saw HP face up to a failed tablet launch apart from chronic reverses suffered by its PC unit. Whitman, who succeeded the ineffectual Leo Apotheker as president and CEO last September, has vowed to turn HP around but has consistently warned that the process could take years. The downsizing at HP Meg Whitman is expected to generate anCEO, HP nualized savings of $3-3.5 billion for the company. As for its financial performance, the company has showed a profit of $1 per share, slightly better than expected, while revenues were below the forecast at $29.7 billion, a year-to-year drop of 5%. During the quarter, the company has taken important steps to focus on strategic priorities, manage costs, drive organizational change, and improve the balance sheet.

Russian market opens up for business & tradeith Russia joining the World Trade Organisation, many countries are looking to tap this new opportunity to expand their business in the country. Russia was the last major economy outside the trade group, and joining the WTO is expected to be a boon for Russian consumers and businesses. Exporting companies in Europe, Asia Dmitry Medvedev and the United States have Prime Minister, Russia been eagerly awaiting access to a population of 142 million people with growing incomes and an expanding middle class. The World Bank estimates that the WTO membership will add 3 percentage points to Russias GDP once new tariffs are put in place. Across all sectors of the economy, Russia will lower import tariffs to 7%, from about 15% currently, for the 155 countries in the WTO. However, American companies may even face higher Russian tariffs because the USA does not have normal trade relation status with Russia. That status is important since the WTO requires that any country that seeks to benefit from it must apply the same trade rules to all member countries. Major American exporters to Russia are worried about the impact on their business due to Congressional inaction on this issue.

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HPs share priceAt an all time low over the past yearHP share In $

Russias foreign tradeNatural resources help the country strike a positive trade balance3 30 2 28 2 26 2 24 2 22 2 20 1 18 1 16 40 3 30 2 20 1 10 0 2006Source: Central bank of Russia Trade Balance Exports Imports In $

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National

C O A L B L O C K S : U N FA I R A L L O C AT I O N

Coalgate ruckus in Parliament

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Manmohan Singh Prime Minister, India

day after the Samajwadi Party supremo Mulayam Singh Yadav met leaders of CPI, CPM and TDP seeking an investigation in the coal allocation issue under the supervision of an apex court judge, the parties collectively protested in Parliament over the allocation of coal blocks. Leaders of all these parties are outraged by Prime Minister Manmohan Singhs comments over the issue and are seeking action against the companies that were allegedly given favoured deals in the allocation of captive coal blocks. Manmohan Singh had earlier rejected the CAGs observations calling them misleading and flawed. The coalgate issue came into light

when a recent CAG report stated that between 2005 and 2009, nearly 150 coal fields were allocated to private and state-run firms without any transparency and objectivity in their auction bidding process. The BJP as the main opposition party has been demanding the PMs resignation over the issue. While facing harsh criticism from the opposition, Singh has urged the BJP to discuss the issue in Parliament without disrupting its proceedings. The CAG has pegged the loss over coal allocations to a whopping Rs.1.86 trillion, which the BJP says has been incurred due to the backhand and arbitrary deals undertaken by the UPA government.

R B I : B A N K S R E C A P I TA L I S AT I O N

Roadmap to Basel-III normsuantifying the cost of implementing the Basel-III norms for banks, the Reserve Bank of India has estimated the recapitalization requirements of the banking system at Rs.1,750 billion. The central bank, while releasing its annual report for the fiscal year 2012, said that though implementation of the Basel-III norms would be challenging, it is manageable. At present, at the system level, banks in India are adequately capitalised, and so the transition to Basel III is expected to be smooth, though careful capital planning would be required by banks in view of substantially higher equity requirement in capital. Basel III is the new international regulatory framework designed to correct the deficiencies in regulation that led to the global financial crisis of 2008. It seeks higher capi-

Q

tal adequacy ratio to meet any financial exigency. According to the RBI, public sector banks which control nearly 70% of the banking operations in the country would collectively require equity upto Rs.1,500 billion while the private sector banks would need Rs.250 billion in common equity capital. In terms of non-equity capital, Rs.2,650-2,750 billion will be required by the state-run banks, while the private lenders need Rs.500-600 billion. The aforesaid amount is based on assumptions like a 20% jump in every banks risk weighted average every year and normal internal accruals. Aimed at reducing the risks of financial destabilization, RBI issued the guidelines for the implementa-

D. Subbarao Governer, RBI

tion of the Basel-III norms in May 2012. Starting March 2013, banks will begin implementing the guidelines, which will be completed by March 2018. The RBI has also asked banks to keep capital 1% above what has been prescribed by the Basel committee. As per the report, irrespective of their ownership patterns, RBI is committed towards developing a level playing regime for all banks.


B&E THIS MONTH

National

RANBAXY: F DA D E C R E E

B H A R T I WA L M A R T : F D I V I O L A T I O N

Drugs off the shelf

Wholesaler in breach of FDI rules?merican retail giant Wal-Mart and its Indian joint venture partner Bharti Enterprises have been accused of alleged violation of multi-brand trade norms in a public interest litigation filed before the Delhi High Court. Currently, FDI is not allowed in multi-brand retail. The issue has been tak- Raj Jain CEO, Bharti-Walmart en up by a bench of acting Chief Justice A.K. Sikri and Justice Anil Kumar who have issued notices to the Centre and the firms on a PIL filed by scientist and environmental activist Vandana Shiva. The court has posted the matter for hearing on September 26. The PIL blames Bharti Walmart for illegally carrying out multi-brand retail trade inspite of being permitted only to carry out wholesale cash and carry trade in the country. Cash and carry is a form of trade in which goods are sold from a wholesale warehouse to retailers and customers settle the invoice on the spot and carry the goods away themselves. Currently, Bharti-Walmart runs 17 cash-andcarry stores in India, where 100% FDI is permitted. Bharti Retail, a wholly-owned subsidiary of Bharti Enterprises, operates 187 neighbourhood stores under the Easyday brand.

A

Arun Sawhney CEO, Ranbaxy

I

n an attempt to optimize its product portfolio, Ranbaxy Laboratories has withdrawn 27 generic drugs from the U.S. market. The company claims that these drugs were of negligible commercial value and withdrawal of these drugs will help the company to focus resources on other applications that are of greater importance and value to the US business and healthcare system. However, as per the information available on the website of the U.S. Government Printing Office, these drugs have been withdrawn under a consent decree of permanent injunction filed on January 26, 2012. It means that Ranbaxy can never again submit another application to the FDA for these withdrawn drug products and must never transfer these ANDAs to a third party. The decree was filed by Ranbaxy as part of its settlement with the American authorities regarding a ban on certain manufacturing plants operated by the company in India.

DLF: FINANCIAL RESTRUCTURING

Keen on selling non-core assetsn a bid to restore its capital structure, DLF has decided to reduce its net debt by Rs.50 billion by the end of FY13. The company currently has a debt of over Rs.250 billion, which is putting a huge interest burden on its balance sheet. To reduce debt, DLF is shedding off its non-core business and getting back on the path of financial consolidation. The company recently sold an 18-acre prime land parcel in Mumbais Lower Parel to Lodha Developers for Rs.27 billion. Another important property, Aman Resorts, is awaiting an appropriate Kushal Pal Singh buyer. The company had to adopt this massive change Chairman, DLF in its overall strategy after the 2008 credit crisis. At that point in time, DLF had big plans to become the countrys largest hospitality chain in collaboration with the Hilton Group. The companys debt then was under Rs.100 billion. While the company has denied that it is selling its assets at a lower valuation in a hurry to get its books in order, at least the current deal values are indicating the same. The debate between whether to expand or to hold the ground is an eternal one but in the case of DLF it seems that the company has failed to act on its strategic priorities. That is why when everyone had doubts about going for breakneck expansion DLF chose the path of rapid growth through external borrowings. And now when the time is not right for selling off precious assets, it is trying to reverse its earlier strategy.

I


INDICATORS

1.9%Bombay stock exchange: Risk averse investors have stayed away from the market in tough times.

Is the total retail participation in the Indian stock market. This is in total contrast with more than 30% participation witnessed in the U.S, and about 12% in China.Institutional investments300 200(Rs. billion)

Slow down in foreign funds On account of poor fundamentals, FIIs sold shares worth 9.8 billion rupees, while DIIs sold shares worth Rs.6.4 billion during the first quarter of the current fiscal. However, situation improved a bit in Q2. Till July 23, 2012, FIIs had reinvested Rs.78 billion in the stock market. Exchange value of the Indian rupee also stablised against dollar. Nevertheless, markets remain volatile due to the existing uncertainty about the future course of economy. Is another rate cut round the corner? Since Q1, FY13, RBI has eased its monetary policy. Simultaneous open market operations by the governing body have improved the liquidity scenario. As a result, the call money rates are on decline. In addition, liquidity infusion to the banking system through Liquidity Adjustment Facility has also gone down. Under the present demand-supply situation, India Inc. may soon expect another cut in interest rates. Market sentiments adding volatility to G-sec yields Expectations of an interest rate cut and concerns of weakening industrial and export growth brought G-sec yields down in the first half of the first quarter. However, S&Ps revision of Indias long term rating outlook to negative pushed yields upwards. Declining crude prices, general risk aversion and purchase of securities through OMO also affected yields in the second half of the quarter. If the environment of uncertainty does not get cleared soon, yields may go further up soon. Markets struggling with volume Volumes in the foreign exchange as well as stock markets have been on a continuous down slide since March 2012. A huge fall in the exchange rate of domestic currency against all major global currencies, especially dollar, and poor returns at the stock market kept traders and investors in check. However, speculators did not let the market to go dry as short selling, both in currencies and stocks could be seen full swing.

FII Investment

Mutual Fund Investment t

Average BSE Sensex

17,933 16,949

100 0Apr-10 Apr-11 Apr-12 Jun-10 Jun-11 Aug-10 Aug-11 Jun-12CD WAEIR

Oct-10

Dec-10

Feb-11

Oct-11

Movements in the money market rates13% 12% 11% 10% 9% 8% 7% 6% Jan11 an11 11Repo rate MSF rate Call money rate CP WADR

M 11 May11

Dec-11

Feb-12

-100

Jun12 J 12

Movements in G-sec yields9.00 8.80Yield in %

30 Mar12

30 Apr12

29 Jun 12

27 jul12

CD WAEIR

8.60 8.40 8.20 8.00 7.80 0 2 4 6Term in years

8 10 12 14 16 18 20 22 24 26 28

Financial market Average daily volumeCOM. PAPER (RS. BN) MAR-12 APR-12 MAY-12 JUN-12 JUL-12(P) 911.9 1310.0 1498.0 1258.1 BOND MARKET CORP G-SEC BOND (RS. (RS. BN) BN) 98.6 26.1 141.1 20.0 151.8 17.5 257.6 29.5 28.8 FOREX INTERBANK ($ MN) 20.6 23.1 20.9 8.4 STOCK MARKET (RS. BN) 151.9 120.1 117.3 117.1 112.8


Source: RBI

GSIC

B&E INDICATORS

Indias foreign exchange reservesForeign exchange reserves and constituent components ($ million)Item As on August 17, 2012 Week* March 2012* December 2011*

Quarterly movement of NYSENew York Stock Exchange8,200 8,000 7,800 7,600 7,400 7,200 7,000 6,800

Total reserves a. Foreign currency assets b. Gold c. SDRs** d. Reserve position in the IMF

288,919.4 256,656.8 25,714.7 4,356.6 2,191.3

(250.5) (263.0 *) 8.3 4.2

(5,478.1)(3,411.9) (1,308.4) (112.7) (645.1)

(7,769.3) (6,276.50) (905.60) (72.40) (514.8)

7,292.23Jun 1, 2012

7966.24August 30, 2012

Source: RBI Weekly Statistical Supplement; * Displays only the absolute variation over the period; **Special Drawing Rights

FII transactions in Indian marketsBuying and selling in Indian equity and debt markets by FIIs ($ million)Reporting Date Total for August Total for 2012 Grand Total till August 31, 2012 Equity Debt Equity Debt Equity Debt Gross purchases 481.36 118.14 4,201.4 1,375.07 52,747.84 8,799.18 Gross sales 373.32 115.49 3,570.7 1,129.9 47,673.25 7,346.67 Net investment 108.04 2.65 630.7 245.17 5,074.59 1,452.51

Quarterly movement of NikkeiTokyo Stock Exchange9,400 9,200 9,000 8,800 8,600 8,400 8,200 8,000 7,800

8 440 25 8,440.25Jun 1, 2012

8983 78 8983.78August 30, 2012

Source: SEBI; All gures till July 31, 2012; No. of Registered FIIs: 1,757; Sub-accounts: 6,343

Quarterly movement of goldDaily future prices (London, $ per ounce)1,800 1,750 1,700 1,650

Quarterly movement of silverDaily future prices (London, $ per ounce)40 38 36 34 32

Quarterly movement of DJIADow Jones Industrial Average13,400 13,200 13,000 12,800 12,600

1,660.00

30.66

1,600 1,550 1,500 1,450

30 28

1606.00Jun 1, 2012 August 30, 2012

26 24

28.38Jun 1, 2012 August 30, 2012

12,400 12,200 12,000 11,800

12,118.57 12 118 57Jun 1, 2012

13 000 71 13,000.71August 30, 2012

Quarterly movement of currenciesComparative rupee exchange rate100

Quarterly movement of crude oilInternational Future NYMEX ($ )120

90

GBP 86.03 71.29 YEN EURO EURO USD USD

87.95

95.8110 100

Quarterly movement of BSE SensexBombay Stock Exchange18,500 18,000

80

17490.81

71.0490

70

69.1360

69.6580

17,500 Graphics: Kuldeep Singh 17,000 16,500

50

55.91

55.72

70

16,000

84.3140 60

15,500

15,965.16Jun 1, 2012 August 30, 2012

Jun 1, 2012

August 30, 2012

Jun 1, 2012

August 30, 2012

15,000

September 2012 21

B&E INFOGRAPHICS

GSIC

GLOBAL ECONOMIC SLOWDOWN: US-EUROPE

Can US stay insulated?IT WAS AMERICA WHICH BROUGHT A GREAT RECESSION BACK IN 2008. THIS TIME, IT IS EUROPEAN SLOWDOWN WHICH IS HURTING AMERICA BADLY. HOWEVER HARD AMERICA TRIES TO DE-COUPLE ITS ECONOMY FROM THE AILING EUROZONE, THE ILL EFFECTS OF THE SLOWDOWN IN THE EUROPE WILL BE TRANSMITTED TO AMERICA VIA TRADE, BANKING AND MULTINATIONAL OPERATIONS. HOWEVER, IT DEFINITELY HAS A FEW LESSONS TO LEARN.BY ASHISH KUMAR

GDP growth rates: US & Eurozone (% change y-o-y )US economy closely follows the trend with Eurozone GDP growth since late 20084.0 3.0 2.0 1.0 0.0 -1.0 -2.0 -3.0 -4.0 -5.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 U.S. Euro Zone

Will European crisis hit US? Eurozone economy is on a down slide since 2010. In Q1 FY13, real growth in the region fell by 0.1% y-o-y. Greece, Italy, Spain, and Portugal were the worst affected EU members. Rise in the benchmark interest rates in Europe further fuelled the problems in Q2. Since then the US and Eurozone economies have shown as high as 89% correlation. Thus it was expected that the US economy is bound to bear the heat of economic meltdown in Eurozone. However, so far in the US GDP has registered approximately 1.7% yearly growth in Q2 as compared to the prior estimates of 1.5%. The increase in GDP was driven mostly by exports. But, fall in investments by businesses in the US is a concern for the economy and this may slowdown the recovery rate.

Source: Organization for Economic Cooperation and Development

US exports to Europe (% change y-o-y )Much above the lows of 2009 but winds have again turned southwards in 2012.40 30 20 10 00 -10 -20 -30 1998 998 2002 2006 2010

US exports take a hit in Europe Slowdown in consumer as well as industrial demand in the Europe is hurting US exports to the region. About 25% of the total US exports are to Europe. Hence, any negative news on the economic front from Europe is certain to hit US exports in a real bad manner. Between February and April this year, US exports to Europe contracted 18.4%. As new orders from Europe dried, manufacturing in the US fell drastically during the above mentioned period. To deal with the situation US now needs to try out everything to reduce their dependence on the Eurozone. Meanwhile, exporters from US seem to be working on the same as trade decit with non-European countries narrowed to $42.9 billion in June from $48 billion a month earlier.

Source: U.S. Department of Commerce


US economy

Eurozone investment in the US ($ bn, 12 month moving totals)European assets in the US have been falling steadily between 2010 and 2012100 50 0 -50 0 -100 0 -150 -200 0 2002 2004 2006 2008 2010 2012

Pull out of euro investors Non-availability of credit from domestic banks has forced many European companies to sell off their assets in the US. As a result, the European investments in the US are at their lowest since the beginning of nancial crisis in 2008. Moreover, as European companies liquidate their assets in the US to take care of their funding needs back home, US loses a major chunk of foreign capital inow. This is not only affecting quick recovery of the US economy, but also is dragging asset prices down for lack of demand, that used get corporate support funded by overseas investors. Hence, US federal is not left with many choices but to introduce multiple rounds of quantitive easing to add some impetus to the economic recovery. Overseas profits shrink In Q1, FY,13 prots of US corporations declined by $6.8 billion as compared to the preceeding quarter. While prots from domestic businesses increased by $41.7 billion, prots from overseas operations squeezed by $48.1 billion. Without a doubt, it is euro-effect thats trpubling USA Inc. This may prompt US based companies to try their hand at cost cutting. Any such attempt may help companies to increase their margins, but this may also result in companies handing over more pink slips to their employees. That for sure will not be a good situation for US, which is already facing a serious challenge in terms of high unemployment. However, cost cutting has become inevitable, thus the situation needs to be managed carefully US Inc. saving for the rainy day Considering the present economic conditions and the risk oozing from the European mrket, US Inc. has become too very conservative at this moment. The non-nancial corporation cash holdings in the US are on its all time high a clear indication that businesses are not very keen on investing as they remain uncertain about the future returns. Similarly, cash holdings by US commercial banks have risen by $129.9 billion or about 8% up since the beginning of 2012. Cash as a share of total assets of these commercial banks has grown by 59 basis points to 13.4% during the period. Reason, fear of upcoming recession. As analysts feel, such speculations may bring a recession, well before its due time.

Source: U.S. Department of Treasury

US corporate prots (QoQ change, in $ billion)For the rst time in the last 13 quarters, prots are in negative250 200 150 100 50 0 -50 2009Source: Bureau of Economic Analysis

2010

2011

2012

Non-nancial corp. cash holdingCompanies are prefering higher cash position14% % 12% % 10% % 8% % 6% % 4% % 2% 0% 1998Source: Federal reserve board

Commercial bank cash holdingBanks cash holding is on rise16% 14% % 12% % 10% % 8% % 6% % 4% % 2% %

2012

0% 2007

2012

September 2012 23

Graphics: Kuldeep Singh

SCRUTINYFA C E B O O K : A R A D I C A L I N V E S T M E N T S T R AT E G Y F O R M A R K

IIPM THINK TANK

Zuck, buy-back your shares!Facebook shares are trading at less than 50% of their IPO value, and the street seems to have just about given up on the IPO. While Zuckerberg made some money by selling his stock initially, he can make a bigger killing by buying back Facebooks shares from the market at the current dismally low pricesMark Zukerberg, the Founder and CEO of Facebook, is facing the ak from the street as his IPO has proved to be a damp squib and there is a big question mark on Facebooks sustainability

F

IN THIS SECTIONZUCK, BUY-BACK YOUR SHARES!

24NO MORE THE GOOD GUY

25WHOLL PROTECT THEM?

26MIND YOUR LANGUAGE

27

acebook is still a success story, but the gross underperformance of its shares post the much hyped IPO has certainly raised some eyebrows. Investor concerns seem to override their enthusiasm for the worlds most popular social network. Facebook, which was initially valued at $100 billion commands a far humbler m-cap of $41.03 billion as on August 27. The share stood at $19.15 on this day compared to the launch price of $41. Investors are worried about the sustainability of social networking companies. The revenue tap is still not in the best of health with brands unsure about how to leverage these sites. A recent research by O&M and Ipsos covering 153 executives across A-PAC highlights that 66% of executives polled considered social networking sites to be great for buzz building (just 20% in India). However, only 2.6% considered them great for brand building. Facebook, which reported a loss of $743 million for Q2, 2012, has to really look for ways to change perceptions on that front. Co-founder Dustin Moskovitz sold 450,000 Class A shares in three days.

Three top executives Director of Platform Partnerships Ethan Beard, Director of Platform Marketing, Katie Mitic and Mobile Platform Marketing Manager Jonathan Matus have announced their resignations; indicating a major crisis of confidence across the board. Although, Mark has made a lot of money with the IPO (he sold 30.2 million shares at $37.58 per share in May 2012), his wealth has shrunk drastically. Considering he owns around 503.6 million shares as per estimates (including stock options), his net worth as on September 4, 2012 stands at just $9.64 billion. But he also has a great chance to make more money by buying back shares at the current prices, especially if he is certain of the company returning to its promised aura. This will also enable him to retain his vice-like grip over Facebook. To top it all, by betting on Facebook again, he could lead from the front and demonstrate his confidence in the company he founded. And if he really buys-back, you know which magazine he reads...

Akram Hoque


International

E . C O L I : H U M A N T H R E AT

No more the good guyE. coli is now declared a human hazard as scientists are observing a discomting link to bowel & colon cancer. The world must act.eware! E. coli is a dire human threat now. Research done by medical scientists in Britain has revealed that the primary cause of one of the most common cancers is the E. coli virus. As a matter of fact, Escherichia coli (commonly known as E. coli) happens to be the most studied organism in the world. It is a very complex group of gut bacteria thats found in all warm-blooded animals including humans. The general theory and empirical evidence till date postulated that the bacterium was mostly harmless. This bacterium has even been deemed in some past studies as being essential for the survival of human beings and cattle as it helps to digest food. But recently, medical tests have revealed that E. coli might be the main cause of bowel/colorectal cancer (a disease which claims 600,000 plus lives a year, as per WHOs International Agency for Research on Cancer). Tests have indicated that E. coli bacteria are more prevalent among bowel cancer patients than E. Colis carcinootherwise. A germ genic effects are being the root cause being studied by scientists of cancer may seem uncommon. However, it is not totally out-of-place, as it has been proved beyond doubt that there are living viruses that cause cervical cancer and bacteria that lead to stomach cancer. E. coli reportedly has genes that are poisonous and lead to DNA damage that is common in cancer. However, it is not a sureshot cause of food poisoning and can remain dormant in the bowels with no ill effects. But the recurrence is high in patients. This is reflected in a study published in Journal Science. A sample size of 21 taken

B

from bowel cancer patients revealed that two thirds of them were carriers of this bug; whereas among healthy individuals, that rate is just one-fifth. Experiments on these lines are carried out extensively on mice. They also show that bowel cancers are much more frequent when the bacteria with a particularly DNA damaging pks gene is present in the body. It is also suspected by researchers that E. coli is a carrier of colon cancer,

and its involvement is deeper than previously thought. Professor Jonathan Rhodes of Liverpool University is studying this with keen interest, and opines from his own analysis, The bottomline message is that there seems to be a strong association between a type of E. coli and the development of colon cancer. And given that this type of E. coli is specifically able to damage DNA and inflict the sort of damage you get in a cancer, it is very likely that it has a causative role, at least in some patients.

The mystery, however, persists with respect to the exact causes of an E. coli infection in human beings. Researchers at the Liverpool University are in a joint mission with the University of North Carolina to decipher this puzzle. However there doesnt seem to be any clear cut trend line; not only on the causes of the infection but also on why certain E. coli bacteria are carcinogenic while the others arent. Presumably, even its harmless strain that affects the gut can cause cancer if it is inflamed. Professor Christian Jobin of the University of North Carolina intoned his views Theyre not exactly your flagship disease-causing bacteria. They wear a different mask. They wear the badguy mask now. This is because people with swollen bowels are at much greater risk to develop cancer as compared to people having healthy stomachs. It was previously believed that molecules produced by immune cells in the gut cause damage to the DNA, but now scientists are quite convinced that the bacteria is the real cause. And since the ill effects of this bacteria and are still under study, a vaccine doesnt exist for it yet. However, according to Professor Rhodes, the discovery is possible sooner than we think. It is next in line to the HPV vaccines that have been recently developed to combat the cervical cancer causing virus. Though it has not yet announced as an epidemic. its high time the medical community responds to the wake up call. Without the slightest iota of doubt, E. coli is a human threat! There have already been some tragic casualties exemplar being the deaths of 18 people in Walkerton. Another E. coli strain has had negative effects on the health front for thousands in Germany, and it has claimed 16 lives already. Developed nations like US, UK, France and Germany have taken it up on priority, but the rest are still on the sidelines. Before many lives are lost, the UN should at least take the initiative to declare it as a threat and incite a call to action. Sayan GhoshSeptenber 2012 25

IIPM THINK TANK

Scrutiny

D I S C R I M I N AT I O N : R E L I G I O U S M I N O R I T I E S

Wholl protect them?Minorities, irrespective of nation, region and society, are discriminated against globally. And this attitude is the ultimate enemy of peace

An angry group of protesters agitating over preserving their rights and urging for help

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inorities (be they ethnic, religious or racial) are defined by anthropologists like Charles Wagley and Marvin Harris as having five inherent characteristics. The most important is arguably the powerlessness of these minority groups. In spite of demonstrations by the minorities being so widely prevalent across the world, they are known to be engineered by the system (or state) in most countries to be discriminated economically, socially and culturally. The pitiable situation of Hindus in Pakistan, who face constant threats, forced conversions and marriages of women, has been the subject of much controversy recently as some families travelled to India to seek safety. Alarmingly, a report by the Sustainable Development Policy Institute of Islamabad reveals, Four primary themes that emerge most strongly as constituting the bulk of the curricula and textbooks are that Pakistan is for Muslims alone; Islamiat is to be

forcibly taught to all the students, whatever their faith, including compulsory reading of Quran; the ideology of Pakistan (sic) is to be internalised as faith, and hate be created against Hindus and India; and students are to be urged to take the path of Jehad and Shahadat. Though India has far better textbook credentials, Muslims here have also been unable to benefit from Indias economic success. They are largely associated with poverty, unemployment and illiteracy. In the 2001 census, against the backdrop of a national average literacy level of 65.1%, Muslims were confined to 59.1%, compared to 80.5% for Hindus. Their share in salaried jobs is as low as 13% compared to 25% for Hindus. This is compounded by poor representation of Muslims in police and paramilitary forces, which is less than 3%, even though they constitute 13% of Indias population. The Sachar Commission Report further states

that Muslims have to face lack of basic infrastructures like sanitation, roads and schools. In US, large scale suppression of African Americans and Hispanics has contributed to their frustration and a stalemate on racism issues. Around 21% of Whites have a bachelors degree compared to 13.6% Blacks and 9.4% Hispanics, while 8.4% of Whites secured a Masters degree with Blacks and Hispanics lagging with 4.9% and 2.9% respectively. In professional degrees too, 3.1% of Whites hold them compared to 1.3% of Blacks and 1.0% of Hispanics (2008 figures). Unemployment among Blacks is much worse than Whites during the current recession. China is no exception. The separatist Uighurs (Muslims) have been voicing their concerns on economic discrimination and cultural suppression for a long time against Chinese authorities. The Chinese have retained an agenda to neutralize the Uighurs (they blame Uighurs of resorting to terror tactics) with an iron fist. Amnesty International has also chided the Chinese for years of neglect in the region where money was spread too thinly compared to eastern China. In Britain foreign trash signifies Blacks & Asians. Coloured people are 26 times more probable to be stopped & searched by the police. Blacks are twice as unlikely to be educated and employed as Whites. The colored are multiple times likelier to go to jail than Whites for the same crime and are more likely to serve a longer term. Although most civilized countries have a framework in place to fight the issue the inherent xenophobia on the ground prevents it as a government is a representation of its people. In democracies, they are often paid lip service in elections and face disappointment later. Clearly, if progressive societies have to guard themselves against future unrest and social tensions, they must collectively work towards upliftment of minorities and truly treat them as equal stakeholders in progress. Sayan Ghosh


National

INTERNET CENSORSHIP: FOR GOOD

Mind your languageIndias recent move to ban some Twitter and Facebook accounts to stop hate agenda might be a bark up the wrong tree, but still uses a valid ruleany would see the Indian governments recent decision to ban (and later unban) almost 309 URLs of Facebook, YouTube, Twitter et al in the wake of the unfortunate Assam riots as a blatant violation of the freedom of speech ideology. Undoubtedly, the move by the Indian government which now stands more or less revoked was nothing but a knee-jerk and shortsighted reaction to contain a rapidly snowballing situation; almost akin to a doctor telling a cancer patient that the best way to cure the disease is to not talk about it to anybody else. Yes, clearly, the Indian government wound itself up trying to first identify which pages were encouraging hate speech, then trying to force foreign based social media sites to block these identified pages, then trying to justify the move to critical commentators and media. Criticise the government as one may for not understanding the real reason for riots but what is quite clear in the midst of all this brouhaha

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is that the government was legally right in moving against various hate promoting sites. These steps by the government have invited huge criticism from every section of society; but the very intention of the government seems quite clear and unquestionable. India has never witnessed a situation where social media is being misused in such a condemnable manner. Regular hate speech can have a long term effect on sections of the society that are on the web and create negativity in their subconscious mind. Undoubtedly, the government has taken these steps a bit late in the day, but it has the legal authority and duty to censor content, which might be detrimental to communal harmony. Not only India; the governments of many nations like United States of America, Australia and England have tak- Sachin Pilot and Kapil Sibal may have en similar actions erred on the side of but its a sign in the past to con- caution;things to come of good that US-based social trol violent and media sites will bend hate oriented to Indian orders

speech on the web. In US, the House of Representatives recently introduced the Rogue Websites Bill that has been supported by many in the house, even though it would force the Service Providers to create a list of banned websites and prevent users of those websites from accessing them. This bill is a version of the Theft of Intellectual Property Act or Protect IP Act introduced in the US Senate earlier. Minister of State for Communications and IT Sachin Pilot recently said, India has been pushing for global internet governance at the level of the UN so that control of social media would rest in the hands of UN and its member nations. But currently, only China supports India on this. In fact, the UN Human Rights Council in Geneva passed its first resolution on Internet freedom with a message for all nations to support individual and human rights online in July. Undoubtedly, freedom of expression is critical, but as is the case with the hate messages spread after the Assam riots, a line has to be drawn somewhere. Cyber security has remained an area of huge concern for India. Mobiles have penetrated wide and deep in the Indian market, and the rapid rise of smartphones in particular indicates how spreading the right or wrong message has become so much easier. A mobile analytics research firm Flurry has concluded that smartphone adoption today is ten times faster as compared to the PC era in the 1980s. India saw a 171% growth in the number of active smartphone devices for the year ending July 2012 according to the Flurry report. As per eMarketer, social media globally is expected to reach 1.5 billion users in 2012 (1.2 billion in 2011). India is expected to see the fastest growth of 51.7% yoy. This underscores the need for these sites to control their content and the government to crack the whip when necessary. The argument obviously gets turned on its head if the government misuses its rights to clamp down legitimate criticism of its own policies/agenda at any time. Ganesh Kumar RoySeptenber 2012 27

STRATAGEM

Global SpotlightMicrosoft CEO Steve Ballmer delivers a speech at the Seoul Digital Forum in Seoul on May 22, 2012. Microsoft is seeking to revamp its position in the mobile-led industry market with its new PC and tabletcompatible OS, Windows 8

IN THIS SECTIONSIGNS OF A LONG IMPENDING TRANSITION

30RIP: FANNIE MAE, FREDDIE MAC, 2012

33WHY EVERYBODY AT SPICEJET LOVES RAYMOND

50TRAI: A WOEFUL DOWNSLIDE

68WHEN SILENCE SAYS IT ALL...

74

or a lot of companies that ruled computing over the past several decades, the launch of the iPhone, by the Mountain View based computing mammoth Apple in 2007, marks a tipping point. For instance, lets ponder over Hewlett Packard (HP) and Dell two companies which will go down in history as iconic cases of vision mismanagement. Since June 2007, HP has lost 60% of its value bringing down its market capitalisation to $35 billion. During the same time, the company spent a monumental $40 billion on acquisitions that have neither created value for shareholders nor have set up the company for the future. The companys revenue has been declining continuously for the last four quarters compared to the same period last year. In fact, last month, the PC major posted a quarterly loss of $8.9 billion

F

SIGNS OF A LONG IMPENDING TRANSITIONMicrosoft is still far from projecting itself as the innovation mean machine that it once was. But after years, it looks as if Steve Ballmer has nally got it right. Microsofts focus on cloud computing along with its formidable position in the gaming industry has set up Redmond for a favourable future.AMIR MOIN


Microsoft the most significant $492 million for the fourth Microsofts m-cap vis--vis competitors quarterly setback in its quarter of the fiscal ending Like Microsoft once was, Apple is now the worlds most valuable company 700 73-year-old history. The June 30, 2012. A compariother company which was son with the same quarter 600 Microsoft Apple once referred to as the last year reveals that the 500 Cisco 1,000 pound gorilla of the company had posted a Google 400 PC heydays, but doesnt profit of $5.87 billion (69 quite ring a bell today is cents per share). Despite 300 Dell. In this case too, the this, the companys reve200 iPhone phenomenon has nues increased to $18 bilIBM 100 pushed down Dells value lion (a 4% growth). The perSumsung 0 by 60% to a mere $20 bilformance would have been 1990 92 94 96 98 200 02 04 06 08 10 12 lion. Interestingly, Apple better had Microsoft not Source: Thomson Reuters; in $ billion made more money selling taken into account $540 the iPhone over the last million in deferred revenue agement over the last 10 years set a nine months ($63 billion) than the on the Windows business a result of combined market value of HP and Dell. doubtful precedent for Ballmers regiving discounts to those who buy a The declining performance of these cord with respect to strategy. In 2007, Windows loaded system before the PC manufacturers is a matter of conBallmer decided to pay an 85% premi- launch of its Windows 8 OS on Octocern for not just their respective um ($6.3 billion) for acquiring aQuanber 26, 2012. If we were to factor in shareholders but for Redmond-based tive (an online advertising company). the accounting adjustment of $540 software major Microsoft as well. The While criticising Microsofts $8.5 bilmillion and exclude the write-down on Steve Ballmer led companys bread lion takeover of Skype last year (IrreaQuantive, then the result comes and butter is a direct function of manpressible we are, Irrepressible we will down to 67 cents a share. Therefore, ufacturers like HP and Dell selling be!; B&E, June 2011), we had pointed instead of people selling off the stock, more PCs every year, and their inabiliout that the companys experiment Microsoft gained 2.5% in trading at ty to convince the market that comput- with aQuantive which was absorbed the bourses. ers are still indispensable is most disinto Microsofts online services diviThe fact of the matter is that after a turbing for Microsoft. The fact that resion was a mess generating an opervery long time, Microsoft finally search firm IDC has cut down growth ating loss of $2.6 billion by 2011-end. seems to be in a position to reestabforecasts for PC sales to 0.9% from 5% Come July 2012 and Microsoft reportlish itself as the technology leader in June doesnt make the situation any ed its first ever quarterly loss. Raison that it once was. Recently, the compabetter. The data reveals that a total of dtre: It was forced to take a $6 bilny unveiled its new logo. Since then, 367 million PCs will be shipped global- lion write-down on aQuantive! there has been a furious debate over But thats not important at all. What design aesthetics, but what people ly this year. Further, indicating a sechowever is important is to look at ond year of continuous contraction, US seem to be missing out on is the fact what happened after Microsoft anshipments are forecasted to fall by that the logo represents a new stratenounced the write-down. Despite a 3.7%. Emerging markets wont be of gy focus. The entire efforts of the stagnant market for PCs, Microsoft much help either as growth stagnates company have been condensed into from last years already minuscule 2%. exceeded Wall Street expectations (if the Windows OS (both for PCs and moIt is precisely because of this comthe $6 billion write-down is excluded). bile), the office suite of utility tools petitive shift in the marketplace that Heres the bigger picture Microsoft and the gaming division Xbox. In orfor most of the last decade, Microsoft reported a loss of 6 cents per share or der to explore Microsofts prospects has appeared to be a company which as it progresses, we need to look at its is clueless and has lost its taste for inoperations in totality rather than looknovation. Call it a matter of fate if you ing at them one at a time. Although will, but the fact remains that Ballmer this may not be the best approach, in took over the reins from Bill Gates at a case of a company in transition it time when personal computing was yields a far better picture. undergoing a seismic shift a shift The company is on solid financial that the late Steve Jobs hopped on to, ground as far as its balance sheet is making Apple the worlds most valuconcerned. Sitting on a cash pile of able company today; a title that once $63 billion, Microsoft will continue to belonged to Microsoft! To make matgenerate $20 billion every year. This ters worse, initiatives taken by manis not just sufficient to off set the bur-

Initiatives taken by the management over the last 10 years set a doubtful precedent for Ballmers record with respect to strategy

September 2012 31

STRATAGEM

Global Spotlight

Microsoft: Direct competitor comparisonMicrosoft is sitting on a cash pile of $63 billionMSFT Market Cap Employees Quarterly rev growth (y-o-y) Revenue (ttm) Gross Margin (ttm) EBITDA (ttm) Operating Margin (ttm) Net Income (ttm) EPS (ttm) P/E (ttm) PEG (5 year expected) P/S (ttm)Source: Company reports

AAPL 615.00B 60,400 0.23 148.81B 0.44 55.82B 0.36 40.13B 42.55 15.42 0.68 4.13

GOOG 218.95B 54,604 0.35 43.16B 0.63 15.45B 0.31 11.11B 33.73 19.85 1.01 5.07

ORCL 155.02B 115,000 0.01 37.12B 0.79 16.05B 0.38 9.98B 1.96 16.2 1.04 4.18

Industry 213.55M 437 0.25 97.80M 0.71 6.46M 0 N/A N/A 25.57 1.34 2.83

258.21B 94,000 0.04 73.72B 0.76 30.71B 0.38 16.98B 2 15.4 1.14 3.5

den arising out of debt, but also leaves significant cash on the table to be further invested. Microsofts main problems arise out of the Web 2.0 phenomenon. The cloud has become a single touch point for almost all connected devices. This results in the commodification of the companys cash cows Windows and Office. The server business and application software products are therefore key strategic undertakings that will guide the company into the future. In part, Windows 8 is Microsofts attempt to make its OS engineered around web based dynamic applications. While the company will need to refine the OS continuously, it is well set to leverage the Office business in the cloud. The Office 365 suite works on a unique combination of software and services. For instance, you might soon see MS Word available through a subscription based model hosted in the cloud. What makes this proposition a viable one is the assumption that current customers would not want to disrupt their existing workflow. If it finally comes down to transitioning to a cloud based environment, then it would make absolute sense to do it with a long term partner like Microsoft instead of collaborating with a service provider which works on a different platform altogether. Having

said that, Microsoft will succeed in insulating its existing customer base but will have to struggle to acquire new clients. Another reason why cloud computing will become one of Microsofts totem poles is its presence in the development business. In order to develop and deploy applications in the cloud network, developers need a dedicated platform. Microsoft has this in the form of Azure. Not only does the platform accommodate different languages and developer tools, it also allows its users to merge their public cloud applications into their internal IT setup. Switching to different platforms is extremely costly and Microsoft has a great opportunity to shift its existing .NET customers to the Azure platform because the switching costs are almost non existent in this case. Andrew Lange, Associate Analyst at Morningstar

I expect Microsoft to build an economic moat around Azure and generate high returns on invested capital from this business

agrees. He believes that cloud platforms are very sticky due to high switching costs, enabling vendors to reap significant economic profits. Competitive dynamics should favour early entrants like Microsoft, and we do not expect the playing field to get very crowded; the combination of first-mover advantages, breadth and depth of technological expertise required to develop a robust offering, and large up-front capital investments pose formidable barriers to entry. As a result, I expect Microsoft to build an economic moat around Azure and generate high returns says Lange. Apart from these, Microsoft has Xbox as a source of significant competitive advantage. For the companys last fiscal year that ended June 30, the Business division generated $15.7 billion in operating income (almost half). Out of this, the entertainment and devices business (which falls under the Business division), made up for 40% of revenues. In June alone, Microsoft sold 257,000 units of the Xbox 360 in the US, giving it a market share of 47%. While some might argue that the console business is just a small part of Redmond, the fact that a seven-year-old device is delivering stellar performance quarter after quarter makes it a star performer. Skepticism aside, Microsoft has entered one of the most favourable phases in decades. The Samsung vs. Apple verdict plays out well for Microsoft which now has a better chance of pushing its Windows Phone 8 OS to manufacturers. Moreover, by announcing the Surface tablet, not only has Ballmer challenged Microsofts OEMs to come up with better tablets but has demonstrated that it has the capability of developing mobile devices which will deliver compelling performance to enterprise users something that the iPad has failed to do. If this was a well planned strategy, then Ballmer will go down in history as a worthy successor to Gates; and even if its not, shareholders wont be complaining if things go right.


Fannie and Freddie

Timothy Mayopoulos, CEO, Fannie Mae (L), and Donald Layton, CEO, Freddie Mac (R): While the two mortgage giants need to focus on stabilisation in the short term, longerterm structural reform is needed soon

RIP: Fannie Mae, Freddie Mac, 2012The recent changes in bailout agreements indicate that the Federal Government is now gearing up the process to end the era of mortgage giants Fannie Mae and Freddie Mac. But is it the right time? Is the US housing market ready to accept this and move on with the reform process to a new system? An analysis of why this is essential. DEEPAK RANJAN PATRA

T

he United States government couldnt have been clearer on this. The latest changes to the US Treasury bailout agreements with governmentsponsored enterprises (GSEs) Fannie Mae and Freddie Mac clearly indicate that its just a matter of days when the official words will be out to wind them up; the process has started though. As per the changes made to the agreements, the mortgage finance giants have been asked to turn

over all profits to the government and wind down their large investment portfolios at 15% per year rather than 10% as stated earlier. Result: The US government would soon take over all business controlled by the two GSEs for which it has been acting as the primary guarantor since both the institutions announced bankruptcy in 2008. The fact is that when the US government decided to continue the two agencies after bankruptcy, everyone knew that sooner or later they will be asked to

shut their shops. They only existed because the government wanted them for reviving the distressed US housing market. Now, when the government looks decisive, the question remains, has the US housing market stabilised enough to say goodbye to Fannie and Freddie? Its a point worth exploring besides understanding how the two mortgage giants have contributed to the overall US housing scenario. The story of Fannie Mae is certainly interesting in this regard for theSeptember 2012 33

STRATAGEM

International Finance

Quarterly Treasury draw requestNo help has been requested so far in 201235 30 25 20 15 10 5 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 0Fannie Mae Freddie Mac (Amount in $ billion)

Source: Fannie Mae, Freddie Mac

GSEs Quarterly draw from TreasuryBoth are now less dependent on the govt.35 30 25 20 15 10 5 0 2008 008 2009 2010 2011Fannie Mee Freddie Mac (Amount in $ billion)


GSEs payback in a decadeThe Federal estimate seems really stretched250Total Treasury Draw (No addition)

200 0Total Treasury Draw (Govt Projection)

150 0 100 0Total Dividend Payments

50 0(Amount in $ billion) -7

0 2008 08

-9 20 21

10

12

14

16

18


Cumulative net incomeBoth the rms are expected to be in black in 1210 0 -10 -20 -30 -40 -50 -60 -70 -80

(Amount in $ billion)

Source: Moodys Analytics

fact that it was commissioned in 1938 after the Great Depression provide the necessary impetus to the US housing market as a part of the New Deal (a series of economic programmes enacted in US between 1933 and 1936). Interestingly, it was this mortgage giant that ended up initiating the second biggest financial crisis ever. In fact, by the time Global Financial Crisis started (in the second quarter of 2008) Fannie Mae and Freddie Mac (the younger counter art of Fannie Mae was commissioned in 1970 to give competition to the former) had been exposed to subprime/ Alt-A loans worth a mind-boggling $388 billion and $392 billion respectively. Certainly, considering that the annual Private-label Mortgagebacked Securities issuances remained at over $800 billion per year in 2005 and 2006, one cannot say that these GSEs caused the crisis, but they for sure were the biggest contributors. Perhaps this was what prompted Senator John McCain to say that the catalyst for this housing crisis was Fannie Mae and Freddie Mac. In one of the debates during the Presidential campaign in 2008, he had claimed that these two GSEs caused the subprime lending situation that now caused the housing market in America to collapse. However, with the taxpayers owing close to 80% of the two GSEs post bankruptcy, the onus was on the government to use them to reorganise the US housing market. And as it can be seen, the job is done, at least to some extent. After long, the US housing market seems gaining legs. What is more interesting is the fact that now its in a situation where people have started looking forward to it as a growth driver. Agrees Celia Chen, West Chester based Senior Director at Moodys Analytics, as she tells B&E, Housing, once the Achilles heel of the US economy, is starting to look like a source of strength in a recovery that has lost its vigor and faces significant roadblocks. That housing is now a bright spot speaks more about the weakness of the recovery than absolute strength in housing.

Housing is starting to look like a source of strength in a recovery that has lost its vigor and faces many roadblocksThis comes as a relief at a time when the other drivers of growth are faltering. Housing is about to turn from being a drag on the broader economy to being a driver. Going by the available data, excess supply of housing in US has fallen to 750,000 units, its lowest since 2006. At its peak during 2008-09, excess supply was at 1,750,000 units. In addition, the share of distressed home sales is declining at a sound rate. As per Moodys Analytics, the share of distress sales has declined from 34.2% to 33.8% year-on-year in the second quarter of 2012. On the other hand, with the supply side stabilising slowly and steadily, home prices have started taking a U-turn suggesting that the prices already reached the bottom. The CoreLogic repeat purchase house price index suggests that housing prices have surged 2.2% year-on-year in Q2, 2012. The biggest concern, however. is the wide pool of bank-owned properties which are either in late-stage delinquency or in the process of foreclosure. The pool is as big as about 3.5 million homes. Another critical aspect of the reviving housing market that might keep it far from recovery is the visi-


95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Fannie and Freddie

Headquarters of Fannie Mae (Wisconsin Ave, N.W., Washington, D.C.) and Freddie Mac (McLean, Virginia). Both the rms have managed to put up a good show since bailout in 2008.

ble uneven growth. For instance, in July 2012 new home sales increased 3.6% as compared to 2.4% in June 2012. But this growth was more due to a bumper 76.5% growth in the Northeast, which witnessed a 55.3% fall in the previous month. The real housing growth in US, excluding Northeast, remained almost flat. Meanwhile, sale of existing houses rose as much as 2.4% in June 2012. Further, what remains the biggest problem in housing growth is mortgage credit availability. With banks and other mortgage financing companies still struggling to recover from the pile of delinquencies, new credit has become scarce with stricter application of terms and conditions for credit disbursement. Nevertheless, the sentiments are changing, though at a snails pace, and analysts are expecting that after six years (since 2006), 2012 may finally see the housing sector contributing to the countrys real GDP growth in a positive manner. Estimates suggest that while homebuilding will add as much as 30 basis points to real GDP growth, stability in house prices will add 20 basis points. It is also expected that 2013 onwards housing recovery will be in full swing. Such estimation could have fuelled the governments thought process to wind up Fannie Mae and Freddie Mac faster than what was originally thought when Obama called for a slow death of these two companies

last year. Moreover, its also time when the Federal Government is determined to get going with its mortgage finance reform plans. Early last year US Treasury Secretary Timothy Geithner had commented, We are going to start the process of reform now. But we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market. And the current move to accelerate Fannie Mae and Freddie Macs wind up process is nothing but a step in the same direction. Considering the amount of housing lending the government is handling at present (through Fannie Mae, Freddie Mac, Federal Housing Association and Veterans Administration) effectively all new loans it wont be wrong if the federal government is called the nations mortgage lender. But that certainly is not a sustainable model and they must exit this system at the earliest. This need, along with the reform plan that suggests nationalisation and privatisation of the housing finance sector, has ensured that the government sets both the GSEs free from duty at the earliest. However, what adds a little debate to the story is the way both the GSEs have performed over the past few years. Most importantly, they are back in black. This allows the federal government to gain handsome returns on $148.5 billion that it had infused into these companies to bail them out (both companies have returned $41.1 billion so far as against a withdrawal of $189.5 billion from the US Treasury). The argument gains some ground from the fact that drawing from treasury by the two companies have now gone down to almost zero and they have started repaying. Also losses from lending have drastically gone down since the day Fed took charge of these companies. Thus, the question remains: Is the government killing the goose that has just started laying golden eggs? As per federal government estimates, Fannie and Freddie, combined together, would receive as much as $221 billion from the Trea-

Gross loss on mortgage loans*Newer loans outperform despite weak recovery15 12 9 6 3 0 1Months since origination 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1

61

Source: Equifax; *% of original dollar balance written off

Share of mortgage debt (%)Fannie and Freddie still rule the sector55 50 45 40 35 30 25 20 15 10 5 0 1996

Fannie & Freddie - Housing Private lable RMBS - bubble

2009

2010

2010

Source: Moodys Analytics

sury. On the contrary, if the two companies start earning the way they did in their hay days, between 2000 and 2005, they can manage

0809-B&E-Sept

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