FinXpress - January 11, 2015

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Term of Week In Focus

Opinion

Personality Tech World

Capital

Budgeting | 6

Phaz Music : P2

Headphones |12 Pranav Mistry |11

Crude oil decline to

$50 a barrel: Will it

stay? | 4

JANUARY 11, 2015 | A FINNICHE INITIATIVE

The Demise Of

Mahinda Rajapaksa | 2

Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.

2015 has brought in sports fever at IMT. With IPL in mind, Cricket, Football and

Badminton tournaments are planned for the subsequent weeks. The owners have bought

their teams and the auctions for cricket and football players has been completed. The

tournament is set to kick start in the upcoming week and all teams are busy planning

strategies and practicing hard to emerge as winners.

Club FinNiche releases its weekly magazine FinXpress, with the In Focus talking about

the ‘The Demise of Mahindra Rajapaksha’. The Opinion gives an overview of ‘Crude oil

decline to $50 a barrel: Will it stay?’.

The term of the week describes ‘Capital Budgeting’, a process to decide which long term

investment to make. Do have a look at the market section, Tech world which brings to

you about P2 Headphones and Personality of the week, Pranav Mistry.

Club FinNiche welcomes any comments, suggestions or criticism regarding the

magazine. Please do write to us and share your ideas.

Happy Reading!

Regards

The Editorial Team

Club FinNiche

January, 11 | 2015 | Volume 29

The Demise of Mahinda

Rajapaksa

Crude oil decline to $50 a

barrel: Will it stay?

Capital Budgeting

Pranav Mistry

P2 headphones

- By J. Sindhuja

Mahinda Rajapaksa, the longest serving

president of South Asia has been

outmanoeuvred and outwitted by his

opposition team headed by Maithripala

Sirisena by winning a whopping 52.1% vote

share in the recently concluded Sri Lankan

general elections. This comes in as a surprise

particularly when the country has been

recording the highest GDP growth rate (>7%)

as compared to its South Asian peers for the

past five years and also boasts an comfortable

public finances.

Let us throw some light over all those factors

which have led to his ouster from the

presidential office.

The first factor and an important one is the

nepotism and favouritism which has been

extended by Rajapaksa to his family members.

For the record, the ministries of economic

development and defence along with other

key posts like speaker of parliament and

presidential advisor were all allotted to the

relatives of the then president. It is startling to

know that 70% of the state’s budget is being

allocated amongst those ministries which are

held by the brothers of Rajapaksa. This clearly

signifies the concentration of power with only

one family which was bound to meet with

acute resentment from the public, particularly

when it is a democracy.

Rajapaksa’s government has also been

accused of supporting fringe extremism by

using Sinhala Buddhist groups who were

primarily targeting the Muslim minority

population. The ruling party has actually

adopted a reverse polarization strategy by

fuelling deadly riots in the country, which

was expected to make the majority Sinhala

community to rally behind the government

and thereby overpowering the increasing

dissent amongst the minorities. However, as it

was clearly evident that this step has

backfired as a significant percentage of

Sinhalese votes have been polled against the

incumbent government owing to multitude of

various other factors.

The word ‘Development’ is the major plank of

the Rajapaksa's government, which included

massive overhaul of the country’s

infrastructural facilities and an urbanization

drive to provide basic amenities to the needy.

However there has been a case of serious

misgivings under this agenda, which includes

the likes of depriving its citizens the right to

criticise and to express their dissent. Things

went nearly out of control when Chief Justice

of Sri Lanka has been sacked only for

questioning the government over the

constitutional discrepancies on a financial bill.

To sum up free society and an independent

judiciary has gone for a toss under his regime

which hadn’t bode well with voters as they

weren’t really ready to pay such a heavy price

for sake of development. Another important

factor was the government’s miscalculation in

setting up its priorities like patriotism

prevailing over the quality of life. An average

Sri Lankan citizen has been facing

unprecedented increase in the food and

essential prices, while his salaries had more or

less remained the same which made it very

difficult to make his both ends meet. However

the government instead of tackling these

issues have chose to patriotism chest

thumping which didn’t go down well with

the common man for whom his own well

being comes above all the other factors.

The incumbent government has also been

criticized for its flip flop foreign policy

measures with its neighbours and the west.

During the war time, Rajapaksa has

maintained close relations with India which

has long been the country’s best ally over the

years. However there has been a complete U-

turn in this policy as he countervailed India

by engaging with its adversaries China and

Pakistan for various fronts. Its relationship

with China has particularly irked India as

country is important for its geological

maritime security, after a Chinese nuclear

submarine has been allowed to station in one

of the Sri Lankan ports. The other grave

policy blunder committed by the ruling party

was its absolute denial to carry out an

independent investigation over the war time

crimes by an outside entity as demanded by

the western powers, which has isolated the

island nation on various developmental

factors.

Lastly the opposition has been successful by

uniting the whole of minority population viz;

Muslims, Christians and Tamils for voting

against the incumbent government. This was

possible with a ‘Maithri’ approach which

implied that coming together and staying

together and moving ahead to achieve a better

society. The country’s stock market has also

cheered the result by galloping to a four year

highs. However the road ahead for the new

government isn’t expected to easy as there a

far too many challenges and very little hope in

the offering.

- By Gayatri Pandit

Last time the crude prices collapsed was in

2008-09, that was because of the financial

collapse. However, this time the reason for

the slump in crude oil prices is different. The

reason being the over supply, economic and

political changes in various parts of the

world. However, there are four reasons which

can say that the price will not be sustainable

at $50 per barrel.

The main reason behind the drastic decline in

oil prices is the increased production not only

in United States, but also in Canada, Iraq and

a handful of other countries. The decrease in

price is because oversupply from the United

States. As per OPEC, to maintain the market

share, none among the UAE, Saudi Arabia

and the United States are willing to cut down

their production because there is a fear that

other competitor may gobble up their market

share if the demand increases. Thus, it can be

seen that the decline in oil prices is because of

increase in US shale production and decrease

in the demand by China, which is the largest

imported of crude oil. According to

International Energy Agency, the demand

and supply imbalance in third and fourth

quarter i.e. roughly 500,000 barrels a day is

same as that of last year. The fluctuation is

observed in the first two quarters because of

the economic and political changes taking

place in various economies. 500,000 barrels of

overproduction(0.5% of the total) is equal to

OPEC overproduction versus its own quota,

and yet there is plunge in last two quarters

with no parallel when the world was similarly

oversupplied in past (2012). So, the question

arises here: Saudi Arabia is also contributing

to this supply, so even if they withdrew will

the prices stabilize or will it lead to inflation.

Another reason to the weakening demand of

oil and petroleum products in Europe and

developing countries as these economies are

trying to reduce their dependence on oil

products by using efficient vehicles and

enhanced technologies.

Also, the current prices are expected to be

below the costs. At $60 a barrel, many of US

shale projects do not even meet the threshold

of production cost which causes US

companies to cut down their drill contracts.

Many US oil drillers have cut down drilling

rigs for the 4th week. For example, Helmerich

& Payne Inc. (HP), the biggest rig operator in

the U.S., received a termination notice for four

contracts. Terminating rig drilling contracts is

cheaper than drilling $10million wells over

and over again.

In addition, the cash-strapped oil-producing

countries will become more unstable to

declining oil prices. The reason being fear of

supply disruption. For example, Russia is

largely dependent on oil and gas production

as the revenue from oil contributes to 45% of

government budget and if oil prices stay at

$60 a barrel, Russian economy may shrink 4.5

% next year.

Demand Supply mismatch

Economies relying more on

non crude products

US oil drillers cut rigs

Default by cash-strapped oil-

producing countries because of

large dependence on crude oil

export

Also, one of the major producers to oil

Venezuela is also badly affected by declining

oil prices. Because of rampant inflation and

declining oil prices, the Venezuelan economy

may shrink to 3% this year, resulting the

economy may default.

Implications on Stock market

The S&P 500-stock index declined 1.83%,

Tokyo’s Nikkei decreased by 2.5%. The Vix, a

measure of market volatility that is known as

Wall Street’s fear gauge, leaped about 12

percent. Because of these the investors are

turning their investments into mare reliable

return giving instruments such as government

bonds, treasury bills.

It can be seen from the graph as the market

price of crude is declining, investors are losing

their confidence in this sector thus switching

towards more reliable investments.

Other reasons for stock market decline:

With the election in Greece in due in the

coming year, it is difficult to predict whether

Greece will stay in Euro zone or not. Because

of this uncertainty, the dollar is continuously

up surging against the euro.

Consumer benefit

Consumers can benefit by decline in oil prices.

As the decline in oil prices does not lower the

household and vehicle spending on crude

products, hence the disposable income

increases. They also get additional benefit

because of the drop in heating oil and diesel

prices.

However, it is difficult to say that the decline

will stop in the coming months. It will take at

least 2015 winters to come to expect stability

in oil prices. This is because of the competition

for capturing the market share along with

that increase in the no. of refineries in Saudi

Arabia and the United Arab Emirates which

will increase the export of oil and gasoline

products to 500,000 barrels a day in coming

months. In addition, various countries are

planning to function their pipelines which

may add 350,000 barrels a day onto it.

Greece ability to stay in Euro

zone

Market competition for greater

market share

Oversupply is persistent till end

of 2015

Source: Reuters

Source: The Bond Buyer

Availability of funds

Structure of capital

Taxation Policy

Government Policy

Lending Policies of

Financial Institutions

Immediate need of the

Project

Earnings

Capital Return

Economic Value of the

Project

Working Capital

Accounting Practice

Trend of Earning

Size of Business

Risk of the business

Forecast of the market

Political unrest

Capital Budgeting is the process by which the

firm decides which long-term investments to

make. Capital budgeting, or investment

appraisal, is the planning procedure used to

figure out if an association's long term

investment, for example, new hardware,

substitution machinery, new plants, new

items, and exploration advancement ventures

are justified regardless of the financing of

money through the company's promotion

structure (obligation, value or held profit). It

is the procedure of distributing assets for

significant capital, or venture, expenditures.

One of the essential objectives of capital

planning speculations is to build the

estimation of the firm to the shareholders.

Numerous formal systems are utilized as a

part of capital planning, including the

strategies, for example,

Accounting rate of return

Payback period

Net present value

Profitability index

Internal rate of return

Modified internal rate of return

Equivalent annuity

Real options valuation

Ideally, organizations ought to seek after all

undertakings and opportunities that improve

shareholder esteem. Be that as it may, in light

of the fact that the measure of capital

accessible at any given time for new tasks is

restricted, administration needs to utilize

capital planning systems to figure out which

activities will yield the most return over an

appropriate time of time.

Management must apportion the

association's constrained assets between

contending open doors (ventures), which is

one of the principle centers of capital

planning. Capital budgeting is likewise

concerned with the setting of criteria about

which ventures ought to get speculation

financing to build the estimation of the firm,

and whether to fund that venture with value

or obligation capital. Investment ought to be

made on the premise of value-added to the

future of the corporation.

Capital budgeting activities may incorporate

a wide assortment of diverse sorts of

investments, including however not

constrained to, expansion policies, or mergers

and acquisitions. At the point when no such

esteem can be included through the capital

budgeting methodology and overabundance

money surplus exists and is not required, then

administration is relied upon to pay out some

or those surplus income as cash dividends or

to repurchase the organization's stock

through an share buyback program.

- By Shikha Sharma

Healthcare stocks and

Defensive Consumer stocks

gain this week

Vibrant India – Modi’s

superlative act likely to

influence investors

INDIAN MARKETS

Gold prices rose as dollar and other equities failed to reach the forecast. Gold also re-

bounds because of good seasonal demand. The volumes traded in the week were not

high. The Benchmark BSE index ended lower at 1.54 percent and NSE index ended at

1.32 percent lower, hitting the expectations of the investors. Indian shares are expected

to trade range bound in the week ahead.

BSE SENSEX

CNX NIFTY

Open High Low Close

SENSEX 27404.19 27507.67 27119.63 27458.38

NIFTY 8285.45 8303.30 8190.80 8284.50

COMMODITIES

EXCHANGE RATES

INTERNATIONAL MARKETS

Commodity Unit Rs / Unit % Change

Gold 10 grams 26800.00 0.26

Silver 1 kg 36833.00 1.65

Crude Oil 1 bbl 2983.00 -12.00

INR/ 1 USD 62.3953

INR /1 EURO 73.6140

INR/ 100 JAPAN YEN 52.23

INR / 1 POUND STERLING 94.1670

Open High Low Close

NYSE Comp 10811.82 10811.82 10680.53 10711.41

NASDAQ 4744.47 4744.71 4681.24 4704.07

S&P 500 2063.45 2064.43 2038.33 2044.81

FTSE 100 6569.96 6570.24 6471.38 6501.14

CAC 4249.26 4272.83 4149.14 4179.07

DAX 9813.99 9860.18 9601.75 9648.50

NIKKEI 225 17318.74 17342.65 17129.53 17197.73

SSE 50 2554.29 2692.61 2540.34 2569.02

Hang Seng 24049.70 24169.06 23859.49 23919.95

Diageo India merger with USL gets shareholder nod

Minority shareholders of United Spirits Ltd (USL) have voted in favour of a special

company resolution that will see the transfer of business of Diageo India to USL, a strategic

move which only 45 days ago was rejected by the same set of shareholders. The special

resolution encompasses three key business contracts between USL and its present owner

Diageo Plc, which controls 54.78% stake in the Indian spirits company. These contracts

include: import of finished goods for distribution in India; import of bulk scotch to be

bottled and distributed in India; and the licensing of global brands that would be

manufactured and distributed in India.

The latest move will add Rs 700 crore to USL's revenue and Rs 70 crore to the EBITDA. In

the last fiscal, USL's revenue stood at Rs 8,665 crore. Since the resolution was a related-party

transaction, Diageo by law had to abstain from voting. A little over 76% of minority

shareholders cast their vote in favour of the resolution as against 70.20% shareholders who

voted in favour last time, which saw the resolution getting defeated. To be passed, the

resolution required at least 75% to vote for it.

Directorate of Revenue Intelligence issues notice to Vodafone

The Directorate of Revenue Intelligence (DRI) has issued a show-cause cum demand notice

to telecom major Vodafone and its two subsidiaries for allegedly evading anti-dumping

duty of Rs.330 crore. “We have issued the notice to Vodafone,” confirmed a senior DRI

official. Vodafone imported Synchronisation Digital Hierarchy based transmission

equipment from China by declaring it as non-SDH equipment, for allegedly evading the

duty, according the DRI.

The Directorate General of Anti-Dumping has initiated the action after a local Indian

manufacturer Tejas Networks filed a complaint against cheap imports from China and other

countries. Officials said that Vodafone, during the proceedings, opposed the levy of anti-

dumping duty, saying that SDH was critical for the telecom sector. “We have investigated

and found out the modus operandi of the duty evasion,” said the official. Vodafone

spokesperson could not be contacted for a comment.

Vistara to run cost-effective model to stay afloat in market

The newest full service carrier Vistara, which took to the Indian skies on Friday, will run a

very cost-effective model to remain competitive in the aviation market where it faces

challenges from competition like Air India and Jet Airways. The key factor for us will be to

keep our costs low, Vistara’s chief executive officer Phee Teik Yeoh told FE on Friday.

Vistara, which currently has 400 staff in its rolls, including about 140 cabin crew staff, plans

to follow a lean hiring model.

Prime Minister Narendra Modi

will inaugurate the 7th edition

of Vibrant Gujarat Summit, a

flagship programme of Gujarat

government, in Gandhinagar

on Sunday, which will see

participation of UN Secretary

General Ban Ki-Moon and US

Secretary of State John Kerry

The present was amid the

announcement on Friday that

that Infosys will provide 100

percent variable bonus pay-out

to its employees for the

December quarter

Govt approves 12 FDI proposals worth Rs 1827.24 crore

The Government has approved 12 foreign direct investment (FDI) proposals worth Rs

1827.24 crore, including one by Ratnakar Bank Limited, Mumbai for an initial public offer

(IPO) of its equity shares to residents and non-residents including Foreign Portfolio

Investors (FPIs), Foreign Institutional Investors (FII), Foreign Venture capital Investors

(FVCIs).

The approvals were given on the basis of the recommendations of the Foreign Investment

Promotion Board (FIPB) at its meeting held on December 19.

Oil strikes new low, gold gains

Oil prices tumbled this week, hampered by oversupplies and weak global demand despite a

pick-up for the US economy, traders said. Brent North Sea crude dropped to $48.90 a barrel

Friday and the New York price hit $46.85 on Wednesday — the lowest levels since late April

2009. A decision last month by the Organisation of Petroleum Exporting Countries, which

supplies about a third of the world’s oil, to leave output unchanged despite the price plunge

has rattled the market in recent weeks. By Friday on London’s Intercontinental Exchange,

Brent North Sea crude for delivery in February tumbled to $49.67 a barrel from $57.02 the

previous week. On the New York Mercantile Exchange, West Texas Intermediate or light

sweet crude for February slumped to $47.96 a barrel from $53.49.

Gold won support from its status as an economic haven amid concerns for the eurozone.

Falling industrial output and exports suggest Germany’s current economic weakness is not

over yet, while concerns persist regarding Greece’s future role in the single currency bloc.

By Friday on the London Bullion Market, the price of gold rose to $1,217.75 an ounce from

$1,172 a week earlier. Silver climbed to $16.24 an ounce from $15.71. On the London

Platinum and Palladium Market, platinum grew to $1,225 an ounce from $1,193. Palladium

edged up to $795 an ounce from $791.

Government to invest Rs 3 lakh crore for building power infrastructure, says Piyush

Goyal

An amount of Rs 3 lakh crore would be invested in building infrastructure for transmission

and distribution of power in the country, Union Power Minister Piyush Goyal today said.

This would facilitate a 24x7 power supply, the minister said, adding the revenue to be

generated from the auction of coal blocks would be spent on the development of coal-

bearing areas. Focusing on the NDA government's commitment to provide 24x7 power

supply to people, Minister of State for Power (Independent Charge) Goyal said the eastern

states would get lakhs of crores of rupees through auction of coal blocks.

He is from Palanpur, North Gujarat. He has

completed his Bachelor's Degree in Computer

Science and Engineering from the Nirma

Institute of Technology in Ahmedabad,

Gujarat. Pranav holds a Master's degree in

Media Arts and Sciences from MIT and

Master of Design from Industrial Design

Center, IIT Bombay. Prior to that, he also

dropped out of Architectural college prior to

his Bachelor's degree. Later he was a research

assistant and a PhD candidate at MIT Media

Lab. A man who loves designing and wants

to see technology from design perspective,

He is proud 'Designeer'.

Career

He joined Samsung as the Director of

Research in 2012, and now serves as the Vice

President of Global Operations of the Korean

Company. He introduced Samsung Galaxy

Gear smart watch in September 2013. In the

past, he has worked with Microsoft, Google,

CMU, NASA, UNESCO, Japan Science &

Technology to name a few. Before joining

MIT, Pranav worked as a UX Researcher with

Microsoft.

Mistry is best known for his work on

SixthSense. Among some of his other work,

Pranav has invented Mouseless – an invisible

computer mouse; SPARSH – a novel way to

copy-paste data between digital devices;

Quickies – intelligent sticky notes that can be

searched, located and can send reminders

and messages; Blinkbot - a gaze and blink

controlled robot; a pen that can draw in 3D;

and a public map that can act as Google of

physical world. Mistry is one of the top

Inventor Under-35 and people know for His

Sixsense and Samsung galaxy Gear Smart

watch.

In News

As part of restructuring process and to arrest

the slide of profits margins of company's cash

cow Mobile division, Samsung Electronics

has crowned 33-year-old Pranav Mistry, as

vice president (Global operation) in

December 2014. Prior to this promotion,

Mistry was Vice President of Research &

Development and the head of Think Tank

Team based in Silicon Valley, USA.

He also came in news last year when he said

that he wants to work with Mr. Narendra

Modi and is willing to leave his present job to

do so. He said “I am waiting for him to pop

the question... and ready to say bye to my

lab”.

14th May, 1981

B. Tech. - Nirma Institute of

Technology

M. Des. - IIT, Bombay

PhD - MIT Media Lab

Young Global Leader 2013 by

World Economic Forum

50 Most Creative People of

2010 by Creativity 50

TR35 by Technology Review in

2009

Phāz Music, an audio company that launched

Tuesday, has introduced its first product: The

Model P2 headphones.

The P2s are coolly designed, with carbon fiber

frame and bright-orange ear cups, but the

appearance doesn’t make it unique. The P2s

are the first headphones that double as a

portable battery pack for your smartphone

with a battery power of 1200mAh.

While this may sound as an complex gadget,

the tech used is actually pretty simple: it just

has a pair of headphones and a portable

battery pack strapped inside the headphone.

That’s basically what the P2s are, just sleeker.

The P2s have a USB port under one of the ear

cups which is used for charging. If you want

to listen to music and charge your phone at

the same time, you’ll need two cables (an

audio cable and a USB cable).

The P2s also have a built-in amplifier that can

power the phone’s 40mm drivers for better

sound quality and also a 15dB bass booster.

The amp and bass booster could use up

approximately 10 percent of the headphone’s

built-in battery, which would mean you can

get about 10 hours of amplified, bass-boosted

playback along with charging your

phone. The phone would work passively even

without the amplifier or the bass booster

(unlike some noise-cancelling headphones),

so when the battery runs out there is still

plenty of playtime left.

Another neat feature on the P2s is the sharing

port. The audio-out port under one of the ear

cups lets you plug in a second pair of

headphones and “share” your music with a

friend.

The P2s are fashionable, with the battery

pack, amp, bass booster, and sharing port, but

they’re also pretty lightweight (comfortable to

wear for long duration). The headphones

though is not on par with gadgets of the same

price range.

- By Mohammed Zakir Ahmed

Phaz P2 headphones were

launched at the CES 2015 held

in Las Vegas from Jan 6th to

9th 2015.

The P2’s are available for pre-

order now at $249.99 and will

start shipping in April 2015.