Asian Voice - Saturday 30th January 2010
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Alpesh Patel Consultant Editor Financial Voice
13
UK benefited from Indian investments in 2009 4,000 jobs created in Britain, says Prince Michael of Kent
Dear Dear Financial Financial Voice Voice Reader, Reader, I write to you from Dubai where we are launching new Sterlingmarkets.com services. Here, as from elsewhere, the popularity of Financial TV has never been greater. Each fortnight I co-host a slot on CNBC in London for an hour. Sometimes I come across CEOs. Every Wednesday on Bloomberg TV I would crossexamine the CEO of a company who had their results that day. You may think CEOs speak English. It may sound like the language you use to communicate. But it is not. It is ‘CEOese’. Here are some translations. CEO: Profits are up Translation: Profit is opinion, but cash is fact. Our profits are up even though we have less cash in the bank because: we sold some of our ‘crown jewel’ assets as a one off. So the profit rise is a one-off exceptional item not the start of a trend. And those assets we sold, we’ll need those in the future. Actually, when we said we sold those assets, it wasn’t for cash. It was a barter arrangement and ummm… so our cash balance isn’t improved…but hey, we can still call it profit because we put a ‘notional value’ in the accounts. CEO: Prospects are good Translation: We are not telling you about the contingent liabilities; the lawsuits and the pension provisions. We can lean on the accountant to say it is not too bad and so our figures don’t look too bad, until the proverbial hits the fan that is. But hey, I’ll have left by then. CEO: I have every confidence in the company Translation: That damn headhunter still hasn’t agreed my golden handshake at the next job. CEO: We have increased profits from increased revenue growth. Translation: You might think sales are growing and this is adding to profits, especially with wider profits margins. That would get your vote. But I am afraid I am tricking you. We are counting money that is expected but not in hand. That allows us to show greater revenues and profits. Guess what? Sometimes we think there is little chance of getting that money. Bristol-Myers Squibb overstated $2.5 billion in revenues and $900 million in earnings between 1999 and 2001 by giving incentives to move product before the end of its quarters. CEO: We have increased market share Translation: Sounds good doesn’t it. Actually this is achieved from a lower profit margin and that means price-cutting to increase volume. That can be fine in the short-term, but longer term I do not rate those earnings as necessarily high quality. CEO: Our cost-cutting programme means our profits are up Translation: Cost cutting can be a short-term benefit before longer term profitability is hit. Imagine for instance companies cutting on research and development. This years earnings go up, but in five years you pay the real price for potentially under-investing. CEO: People selling our stock are midguided Translation: Actually they’re &*&S! In April 2000, Enron CEO called hedge fund manager Richard Grubman an a--hole during a conference call with analysts and investors. Less than eight months later, the company was filing for bankruptcy, costing investors billions. CEO: Don’t worry about the footnotes Translation: Heck that’s where I have hidden everything. CEO: If you ignore the one-offs it looks very healthy Translation: Yeah, these one-off expenses come in every year, they’re not so one off. Cendant, Kodak,
Even as the global economies were under the impact of the severe meltdown, Britian gained substantially from Indian investments and the bilateral trade between the two countries witnessed a double digit growth in 2009, Prince Michael of Kent said in Mumbai, the commercial capital of India last week. He also pledged
a donation of $100,000 for rebuilding Nariman House that was badly damaged in the 26/11 attack. Indian investments were instrumental to create 4,000 jobs in UK the previous, as the India – UK trade crossed £12 billion. He emphasised that the two countries need to work together as there is a potential for further business
growth. Prince Michael was on a three day visit to India to visit the Global Economic Summit in Mumbai. He said India and UK should co-operate in facilitating more small businesses in the both the countries through venture capital, appropriate financing vehicles as also reducing the red tape. Limited long term finances, con-
straints on external commercial borrowings and a limited bond markets were the impediments, he added. A strong SME sector is very important for emerging economies like India. Financing from innovative sources such as mutual, pension and infrastructure funds should also be explored, Prince Michael further added.
ONGC, Hindujas in dispute over Iranian gas share quantum British business group wants half of the jv share, ONGC to give only a quarter The joint venture between India’s state owned firm ONGC and Hinduja Group, the business group owned by British business barons of Indian origin is in a dispute over the quantum of share that they have got from Iran after they succeeded in finding huge gas reserves at the giant Sourt Pars gas field in the gulf country. According to sources in the knowledge of the
matter, Oil and Natural Gas Corporation (ONGC) feels that the joint venture was offered a stake by Iran was primarily due to ONGC’s expertise in the business. Hence, it wants seventy five percent of the jv’s share in the LNG that Iran has offered, while the Hindujas say their subsidiary (Ashok Leyland Projects Services (ALPS) should get fifty per cent of the LNG. ONGC is of the
view that as ALPS has no experience in the oil and gas exploration and production, they should get only twenty five per cent. Iran signed agreements just last month after years of tough negotiations. As per the agreements, the ONGC led joint venture would get 40 per cent of the gas in SP – 12. There is also another three way joint venture between ONGC, ALPS and
Petronet LNG that is a partner in Iran LNG. This company is setting up a plant to convert gas from SP – 12 field into LNG for exports. Iran LNG pact provides that the Indian jv will buy 20 per cent stake. Here, the Hinduja group wants half of the stake for itself, leaving half to be shared between ONGC and Petronet LNG. There are differences on this partnership too.
Star Alliance is still far away for AI Maharaja yet to complete systems integration Flying into the Star Alliance seems still a long journey for Air India, as one of the basic requirements – of systems integration is yet to complete for the Maharaja. This was the assessment of Wolfgang Mayrhuber, chairman and chief executive of Lufthansa the German car-
rier and one of the founding members of the Star Alliance after a meeting he had with Air India chairman and managing director Arvind Jadhav. Lufthansa CEO also said Air India still has some other issues that needed to be sorted out apart from upgradation of
Edison International, HCA, Weyerhauser. Each of these companies took a special charge/gain in each of the 20 quarters between 1998 and 2002. CEO: We’re sorry to lose him as a director, but he’ll still be a consultant Translation: Yes, a very lucrative consulting contract indeed and I hope to get one when I leave…we’re trying to make it a tradition in the board room. CEO: The director did well and so we feel the perks are sound practice Translation: Damn you’re good, no one hardly ever notices the non-cash perks such as flights on the corporate jet. Of course that doesn’t mean we run the company like a personal bank account…much. CEO: Yes, we have increased the amount in nonaudit fees with pay the accounting firm Translation: Damn again, you really know your stuff. Okay Enron also paid a lot more to their auditors, who just happened to look the other way, but we’re not playing that game. Honest.
the IT technology. The process of Air India joining the Star Alliance started way back in 2006, when it got the invitation to get on board with a group of 25 airlines globally. The alliance has a network that operates more than 19,500 flights daily from 1,071 airports in 171 countries. Being a member of the alliance brings in benefits of improved product offering, better service standards, access to new markets and premium customers as well as partnership with leading global
airlines. Sharing of airport lounges and synchronisation of flight schedules are also benefits that provide seamless travel to passengers on a single ticket even though they may have to fly with more than one carrier in a single journey. Air India already has made Frankfurt its hub for Europe and the USA, which is the hub for Lufthansa. The two also have a code sharing pact. The German airline sees tremendous growth potential in India.
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