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Is there any limit to Job Hopping & Salary Negotiations for Gen X ?

Sector Review - FMCG

By Varwo Arqra, LBSIM Delhi

By Nitio Jiodal , TAPMI Maoiral

What is the marketiog strategy qf IDEA Cellvlar ? By Sayak Barai, IIM Lvckoqw

The Fourth World Celebrating EPISODE An Intra TAPMI college fest

An object of fascination

By Siddharuh Jaiswal, IMT Hyderabad

E-commerce - Will the bubble burst ? By Arpab Gvha Malik, IIM Kqzhikqde

A Student’s Initiative Pratibimb | July 2012 | 1

Volume II, Issue XII

July 2012

A Monthly e-Magazine

T. A. Pai Management Institute Manipal, Karnataka

About TAPMI T. A. Pai Management Institute (TAPMI) is a premier management institute situated in Manipal and is well known for its academic rigor & faculty-student interaction. The Institute has been recently ranked amongst top 1 per cent of B-schools in India & 4th in the South Zone by The Week Magazine. Founded by the visionary, Late Shri. T. A. Pai, TAPMI’s mission is to provide much needed impetus to the task of building professional management capability in the country. In the process, it has also played a role in strengthening the existing educational and health infrastructure of Manipal.

Our Mission We are committed to excellence in post graduate management education, research and practice by nurturing and developing global wealth creators and leaders. We shall continually benchmark ourselves against the best-in-class institutions. We shall foster continuous learning and reflection, achievement-orientation, creative interdependence, and respect for diversity with a holistic concern for ethics, environment and society.

Recent Updates Prof. Gururaj H Kidiyoor, is alumnus of the month (August 2012). He is an alumnus of 1990 batch from TAPMI, is presently an academician with over 13 years of teaching experience plus 10 years of industry experience. He is a Ph.D (Management) from Manipal University. Prior to joining TAPMI as a professor, he has worked in Digital Equipment ( India ) Limited, Bangalore as a Channel Operations Manager (India). He has also worked in Wipro Infotech Limited as Channel Development Manager for South India and in TVS Electronics Limited as Area Sales Executive. Pratibimb | July 2012 | 2



JULY, 2012

TAPMI’s e-Magazine - is the conglomeration of the various specializations in MBA (Marketing, Finance, HR, Systems and Operations). It is primarily intended to provide insights into the plethora of knowledge that relate to the various departments of Management and to give an opportunity to the students of TAPMI and the best brains across country to exhibit their creative cells. The magazine also strives to bring expert inputs from industries, thereby bringing the academia and industry together. Pratibimb the e-Magazine of TAPMI had its first issue in December 2010. The issue comprised of an interview of denoted writer Ms. Rashmi Bansal along with a series of articles by students and industry experts like MadhuSudan Rao (AVP-Delivery, Mahindra Satyam) & Ed Cohen who is a global leader and chief learning officer who led Booz Allen Hamilton & Satyam Computer Services to the first rank globally for learning & development . It also included a hugely successful and engrossing game for finance geeks called “Beat the Market” to bring out the application based knowledge of students by providing them the platform where they were expected to predict the stock prices of two selected stocks on a future date. The magazine is primarily intended for the development of all around management knowledge by providing unbiased critical insights into the modern developments. TAPMI believes that learning is a continuous process and is not limited to the four walls of the classroom. This viewpoint is further enhanced through Pratibimb wherein students manage and contribute to create a refreshing learning environment outside the classrooms which eventually leads to a holistic development process. The magazine provides a competitive platform and opportunity to the students where they can compete with the best brains of the country. The magazine also provides a platform for prominent industry stalwarts to communicate their views and learning about and from the recent developments from their respective fields of business which in turn helps to create a collaborative learning base for its readers. Pratibimb is committed in continuing this initiative by bringing in continuous improvement in the magazine by including quality articles related to various management issues and eventually creating a more engaging relationship with its readers by providing them a platform to showcase their talent. We invite all the best brains across country to be part of this initiative and help us take this to the next level.

Pratibimb | July 2012 | 3



It is always a pleasure to witness that certain efforts of the students are sustained and carried forward; Pratibimb is one such. The oft-beaten track, “We are here to learn,” ends up as a mere platitude when there are no visible actions and documentation. Whereas there is no dearth of actions at TAPMI, documentation is not something that many—other than scholars—choose to engage in; it is normally viewed as uninteresting, drab and a drudgery. TAPMIans have proved that they are equally capable of actions and of documentation without losing the intellectual flavour of it. Scholarship is too important a phenomenon to be left to scholars alone, especially in the field of management. As future practicing managers who will be engaged in rigorous action in different fields of business, TAPMIans have manifested both the penchant to produce research works and also get their counterparts in other leading business schools to contribute their thoughts to this endeavour. In this regard, TAPMIans have truly demonstrated the evidence for creative interdependence, an important aspect of TAPMI’s mission. I sincerely appreciate the students and the faculty of TAPMI who have made Pratibimb a possibility through their scholarly works, co-ordination efforts and support. I wish the team the very best. Dr. R. C. Natarajan Pratibimb | July 2012 | 4

Editor’s corner


Dear Readers,

Manish Mishra

We would like to thank all the participants and readers for their valuable contribution. By making this magazine


monthly, we aim to provide a platform that will give you more opportunities to share knowledge and showcase your talent by competing with the best minds in the country.

Abhishek Dubey Namrata Mahapatra

Our presence has also augmented due to the popularity of social media. There has been a steady rise in our total audience, including both readers and contributors, and more


number of posts have gone viral. The plethora of topics published include learning from management gurus such as Peter








innovation that helped leading brands define themselves better. In fact we encourage our contributors to write about any new upcoming events related to management. For all


these amazing contributions, apart from students of TAPMI and other premier b-schools in the country.


The articles have been selected by the Editorial Team. We

Prof. Chowdari Prasad

wish to thank all those who helped us in improving Pratibimb

Dean (Branding and Promotions)

through their feedback. We would like to take this

TAPMI , Manipal

opportunity to extend our gratitude to all faculty and students at TAPMI for their continual support, guidance, motivation and inspiration that has helped us to take Pratibimb to the next echelon. To stay updated about the magazine, please like our page on Facebook. Also, send in your valuable suggestions/feedbacks to

Enjoy Reading!

Pratibimb | July 2012 | 5

Contents TAPMI Bites

- Wackathqo

Jqb Hqrriog aod Salary Negqtiatiqos: Hqw mvch is eoqvgh?

7 9

Varwo Arqra, LBSIM Dellhi

BANDHAN- A Ray qf hqre fqr the rqqr


Svgata Rqy | Abhirwra Biswas, IISWBM Kqlkata

The Fqvruh Wqrld - Is it ao qbject qf Fascioatiqo?


Siddharuh Jaiswal, IMT Hyderabad

E-cqmmerce - Will the bvbble bvrst qr is it jvst a hyse?


Arpab Gvha Malik, IIM Kqzhikqde

Is Iodia lqsiog qvt qf its charn qf beiog ao Ioxestneot Hvb?


Preetqsh Kvmar Srixastaxa, IIM Iodqre

BASEL III : Where Dqes Iodia Staod?


Jvbeeo Mqharatra | Shikha Sharna, DqMS IIT Rqqrkee

Aoalysis qf the marketiog strategy qf IDEA Cellvlar


Sayak Barai, IIM Lvckoqw

Sectqr Rexiew – FMCG Nitio Jiodal, TAPMI Maoiral Pratibimb | July 2012 | 6




JULY, 2012

We at Pratibimb get restless sometimes and then need something wacky to get our creative juices flowing. So we thought of a million ideas... something wacky that would involve the best brains of the college. This led us to organize a social-media driven branding competition right here on the TAPMI campus. True to our nature and the kind of outcome we expected... we named it Wackathon 2012, done under the umbrella of EPISODE, and intra TAPMI fest beckoning in the new batch of juniors. The purpose was to give all the B-school-busy bees on campus a real life understanding of branding via the social media and hence allowing them to prove their mettle on a podium they spent hours on every day. Another purpose was internal branding for the college as well as letting juniors feel the grit of viral marketing and what stunts actually make it click (read looking-cool-in-front-of-peers) . We had to come up with products that were not just engaging but also tricky to brand, at least endorse online. Somebody suggested the various eating joints on campus and that was it. 3 eateries with different clienteles and varying target segments to be promoted within a short time span of 1 week allowing 6 eager teams to compete and feel the heat. Pratibimb | July 2012 | 7



JULY, 2012

The day we officially opened the contest, somebody came up with a QR code for one of those joints! Then someone built an android app while somebody conducted an on-the-spot feedback. Interviews, theme songs, videos, post its, and a highway on my plate-like food review episode…… The Facebook pages were made and some teams paired it with tweeting tweets, some teams suggested selling merchandise online, while others designed logos and slogans for the joints, the list of innovative ideas being carried out was just endless. Lots of likes, shares and reposts later, the teams trooped in for the final presentations. One of our eminent marketing Professor (Professor K.J. Jaims) was there to judge their presentations. Well versed with the links of the Facebook pages and a financial times article proclaiming ―Likes don’t mean profits― he showed each team where they actually made a mark or missed out on one. The session was grilling and it implored each one of the presenters to connect social media more with the bare-knuckles marketing than with the razzmatazz of it. In the end, the writing on the wall was loud and clear. A good social media campaign can only be based on a good enough product. Like an advertisement, social media cannot be used to woo in naive customers with fake impressions. Finally it‘s coverage of customer engagement which gets reflected on your balance sheet not the likes or shares. This was also the first time that Pratibimb`s new Sub-Editors (juniors who had been newly recruited into the committee) were given a glimpse of what lies ahead for them and they too were mesmerized by the show of intellectual prowess on Pratibimb`s Wackathon.

All in all, it was an indicator of things to come. Just another milestone in the journey of a magazine becoming much more than what it has been prototyped as. Watch this space for more. ~Team PRATIBIMB

Pratibimb | July 2012 | 8

Job Hopping and Salary Negotiations: How much is enough? by Varun Arora, LBSIM Gen X is known for impatience and ambition. It wants more growth, both professional and monetary, in shorter span of time compared to the previous generations. The demand for more will continue to increase with Gen Y or Millennials. Out of several reasons, the major reasons why job hopping is prevalent in the industry are prospects of higher salary and better roles. The new employees today adjust more quickly in the workplace. So they do not have cultural issues while changing companies. Job Hopping: It was a general belief amongst the HR professionals looking for prospective candidates that hiring a job hopper is risky. Chances are that with even slight push by the competitor would make the new higher switch job before even being productive. Hence, the costs involved with hiring an employee and providing training to make the employee productive goes waste in such a case. Such candidates often miss out on long term opportunities that a company might give them. Looking at one such example, CEO and MD of Tata Consultancy Services ($ 10 billion Company), Mr N Chandra joined the company in 1987 after being offered on campus. He was given several opportunities from outside, but he stayed with TCS. He kept looking for better roles and was doing more every day than the previous. Staying with one company and looking for Pratibimb | July 2012 | 9

opportunities in long term he became the CEO at the age of 45 years. Still the number of job hoppers is now increasing and the mindset towards them is changing. With job hopping, one gets diverse work experience than one might get in single company. Apart from the work experience, even the salary increases. This makes some people hop jobs as quick as 6 months. Question arises, how much is enough? What is the ideal period one should spend in a company before hopping job? Though some experts perceive an ideal time to hop job is every 2 -3 years, but the perception changes with each person and industry. Job hopping also depends on demand and supply of talent. For example, ideal job hopping period for manufacturing would be higher than IT looking at dynamics of both industries. Salary Negotiations: It is very common to put ―Negotiable‖ in expected salary column. But is everyone a good negotiator when it comes to salary? The most important things are of course being prepared with information like what is the industry standard pay for the position being applied for, how high or low does the company being applied to pays according to the industry standard and how much does the applicant deserve. But what strategies may lead to good salary negotiation?

Candidates may negotiate as per their behavioural inclination. The negotiation style may be one of the following: 

Competitive (Candidate wins with higher salary)

Collaborative (Both parties negotiate to an optimum and agreeable salary)

Accommodating (Candidate may not press hard on salary to look for better prospects in the company later)

Compromising (Candidate compromises on one aspect for the other, say role over salary)

Avoiding (Candidate avoids negotiation and either rejects the offer immediately or accept and later leaves for better offer)

Salary negotiation is perceived to be like arm wrestling match. Both parties try to push the other down. Candidates want higher salary, while the HR is trying to get the best candidate at lower salary. However, the best strategy for both HR and the candidate is to be collaborative and negotiate to the optimum salary figure which is justified to both parties. In long term, there may be issues with both a high salary offer and a low salary offer. High Salary Offer: In most of the companies, though there may be salary deviations as per salary negotiation, long term payout depends on performance of the employee. So a person may get a higher salary in the initial offer, chances are he may not be able to meet the employer expectation of performance. This may stall or reduce the salary during performance appraisal. Low Salary Offer: If a person did not negotiate well and joined at a lower salary, chances are that he would soon leave the job for another offer where without negotiation Pratibimb | July 2012 | 10

he is getting higher pay. This causes infant attrition (people leaving the company within short span of time after joining). Sometimes, the candidate may not even accept the offer for salary while he never communicated the salary expectation to the HR. Aggressive Salary Negotiation: There are some positions at senior levels which do not have fixed salary structure in the industry. Often for these positions, the salary negotiations are very aggressive. Again the question arises, how much is enough? There are times when people negotiate on their current salary. Say they demand ―X‖ % hike over and above the salary they draw. There are times when people negotiate for ―X‖ % hike on another company‘s offer of ―Y‖ %. Taking an example, a person ―A‖ is earning INR 1 million per annum. Scenario 1: A demands 40% hike on his current salary. So the demand is of INR 1.4 million. Scenario 2: A gets an offer of Rs. 1.2 million and demands another company for 40% above INR 1.2 million which is INR 1.68 million. Some people even keep revising the demand and often depending on the requirement the offering companies also keep revising the offer. This either stops when salary goes very high and candidate accepts the offer or the company completely revokes the offer with a feeling that candidate is deliberately manipulating the expected salary. Conclusion: Gen Y is justified at looking forward to diverse and challenging roles with competitive salaries. They use the strategies of frequent job hopping and competitive salary negotiations. But looking at the perspective of the companies they work for, they need to strike the right balance. They need to determine before switching job if they have spent enough time in the same company and if they are

sure the current company does not have better future prospects to offer. Same goes for salary negotiation. Candidates need to be sure that they negotiate to justify the salary which is as per industry demand, their personal expectation and justifiable for the company to pay.

―Job hopping? Watch out!‖, The Times of India (http://

―Job hopping rate highest in India: Survey‖, The Economic Times (http:// -10-13/news/27585022_1_indian-employees -india-scores-findings-of-factual-job)

―Chandra‘s Marathon at TCS‖, Business Line, (http:// life/article2737892.ece?ref=wl_features_art)

References: 

Michelle Marks & Crystal Harold, ―Who asks and who receives in salary negotiations‖, Journal of Organizational Behaviour, 32, 371–394 (2011) Christopher O. L. H. Porter , ―The dynamics of salary negotiations: Effects on applicants' justice perceptions and recruitment decisions‖, The International Journal of Conflict Management, Vol. 15, No.3, pp. 273-303

Pratibimb | July 2012 | 11

BANDHAN- A RAY OF HOPE FOR THE POOR “Modern Hr practices: a Harbinger for Growth" by Sugata Roy & Abhirupa Biswas, IISWBM A smile lingers around Shanti Hembram’s face as she walks down the road for she has earned the respect of her fellow villagers.

All thanks to BANDHAN, the fourth largest microfinance organization in India which has touched the lives of 30 lakh women across 18 states. Working towards women empowerment and poverty alleviation, BANDHAN beautifully exemplifies the People Participatory Policy by recruiting HR Credit Officers and Branch Managers from among the villagers. They have adopted a cost effective, decentralized business strategy inspired by the ASA, Bangladesh wherein they have introduced a Residential Model across 1553 branches wherein all the basic necessities are provided by the company. They have emphasized on People Development Strategy with special focus on value diversity by which they aim to achieve organizational as well as inclusive growth, for which they were awarded the Best HR Policies by Genius Consultancy in April 2011. Their recruitment policy focuses on human qualities by providing functional, behavioral and attitudinal training to villagers with graduation degrees, comprising 85% of their HR population. BANDHAN maintains a total transparency principle which instills a sense of security and mutual cooperation, emphasized by their 1:1 performance appraisal method which is open to debate. With women as their principal borrowers, BANDHAN accentuates on women sustainability through economic viability by creation of livelihood assets. Pratibimb | July 2012 | 12

ORGANIZATIONAL BACKGROUND: BANDHAN is a very familial term in the Hindi vocabulary; it signifies togetherness and fostering special bonds. This became the inspiration behind creating a world class micro-finance institution that works at the grass root level. BANDHAN was born in 2001 under the leadership of Mr. Chandra Shekhar Ghosh, a Senior Ashoka Fellow. BANDHAN commenced microfinance operations in West Bengal in July 2002. All microfinance activities are carried under BANDHAN Financial Services Private Limited (BFSPL), incorporated under the Companies Act, 1956 and also registered as a Non Banking Financial Company (NBFC) with the Reserve Bank of India (RBI). The microfinance operations started in July 2002 from Bagnan, a small village 60 km away from the city of Kolkata. In 9 years, BANDHAN has travelled a wide geography of 18 States and Union Territories with special focus on underdeveloped states of Eastern India. BFSPL is engaged in the business of lending to individual women borrowers under “Group based individual lending” model to extend loans to individuals undertaking various income generating activities and operates in rural and urban areas throughout India. The main thrust of the company is to work with women who are in socially and economically disadvantageous positions; for their social upliftment and economic emancipation. The company generally tries to form a group of about

20 people. The members of the group are eligible for a loan after 2 weeks from formation and or joining of that group. While these loans are given without collateral & mutual guarantee, the coborrower/ member pressure acts as risk mitigant. The loans are repaid on a weekly basis, with individual loan repayment in normally 52 weeks in the form of 44 equated weekly installments (EWI). It has successfully accessed funding from more than 30 banks/financial institutions.

BANDHAN offers development activities in crucial fields of education, health, unemployment, livelihood through its not-for profit entity. Besides, BANDHAN also has a program exclusively for the hard core poor. “Why does BANDHAN primarily target women?” BANDHAN was set up to address the dual objective of poverty alleviation and women empowerment. The sole solution to it lay in focusing on increasing the family income through women which in turn gradually helps to increase the status of the woman in the family as well as in the society. Her confidence and decision making power also gets enhanced, her conjugal life improves. There is no second thought on the fact that women are better money managers. INNOVATIVE HR POLICIES:

BFSPL is, currently, operating in 174 districts spanning across 17states of India including West Bengal, Assam, Tripura, Bihar, Jharkhand, and Uttar Pradesh etc. However, it is mostly concentrated in West Bengal which accounts for about 70% of the company‘s loan outstanding as on September 30, 2010. Operations of BFSPL are managed through its network of around 1,553 branches and have 27.77 lakh active borrowers with total outstanding portfolio of Rs 1983.7 crores as on September 30, 2010. BANDHAN‘s commitment towards triple bottomline values is strongly asserted by its intervention in development activities. It believes that microfinance is not the last word for development of the poor. Aspiring to holistic development of the poor, Pratibimb | July 2012 | 13

First: PEOPLE PARTICIPATORY POLICY: Working towards women empowerment and poverty alleviation, BANDHAN beautifully exemplifies the People Participatory Policy by recruiting HR Credit Officers and Branch Managers from among the villagers. It comprises nearly 85% of HR population in the organization. The minimum qualification required for the people to be recruited as Credit Officer is mainly to be a graduate, and the target population belongs to an age group of 20-30 years. The reason behind recruiting HR Credit Officers from among the villagers is because as they belong from among them, they can clearly understand the needs and the type of financial support the villagers require for effective functioning in rural areas. At the same time it reduces the cost of hiring which is one of the important philosophies of BANDHAN; and uniquely distinguishes BANDHAN from other MFIs.

Second: ADAPTING THE HR POLICIES BASED ON DEMOGRAPHY BANDHAN uniquely adapted themselves according to the needs of the various regions by introducing the concept of Residential & Nonresidential Model. The Residential model is mainly followed in West Bengal, besides taking care of their basic wages; the employees are provided free cost-effective lodgings along with a mess system. Apart from it, on Saturdays they have work only till 10 o‘clock. This helps in motivating the Credit Officers and instills a sense of financial stability in them. The primary focus behind the implementation of the Residential Model is Value Diversity. They treasure the uniqueness of the people associated with them. But keeping in mind the cultural values and sentiments of people living in states like Maharashtra who prefer working from their own homes, they adapted their HR policies wherein the Residential Model was changed into a Non-residential Model. Third: RECRUITMENT PROCEDURE BANDHAN has got a very swift recruitment procedure. Recruitment is done through newspaper notifications and from staff references. The received applications are scanned, sorted and eligible candidates are called for the interview. The entire recruitment process takes place on a single day. Before leaving for the day, the selected candidates are handed over their appointment letters. The incumbents are then sent for a 3 day In Service Orientation (ISO) course. Upon successful completion of the ISO, they are posted at their respective branches. Centralized recruitment is done at the Head Office. Pratibimb | July 2012 | 14

Apart from employing the field Credit Officers (CO), even the Branch Managers in states like Delhi, Bihar and Uttar Pradesh are recruited from among the local people. This is best exemplified in Assam wherein on recruiting local people, communication with the other villagers has become easy and this helps in proper comprehension and solution to the problems. There exists no language barrier. Other MFIs were not able to comprehend the existing language barrier and could not adapt to this situation. Remuneration and Incentives: A clear grade salary has been set along with other allowances provided to the employees. The incentive structure is not defined in terms of collection and number of new borrowers. The attrition rate was around 12% in FY10 with gradual reduction in the past three years.

Fourth: TRAINING AND DEVELOPMENTAL POLICY After the initial recruitment procedure, integrated trainings are provided to enhance the skills required by the Credit Officers on-field. The training program implemented by BANDHAN is a four-phase process. The company has a separate training division at its

Head Office in Rajpur with more than 30 trainers in the department. The training division operates throughout the year and provides simultaneous training to fresh recruits and existing employees. New recruits undergo field training as well as 3day Post Service Orientation (PSO) which includes classroom training at the Head Office. Apart from these, 1 hour meetings on Awareness Creation and Hygiene Awareness are held for all employees. Capacity Building of Existing Employees: Since the inception of BANDHAN, training on a regular basis has been considered an important strategy to build the capacity of the staff. For this they have in place the People Development Strategy. The training imparted is participatory, learnercentric, problem-focused, need-oriented, promoting individual involvement and interactive. These courses are continuously upgraded to meet the emerging needs of the various programs of the organization. Often external resource people with extensive experience are invited to take courses. The senior operations personnel, Deputy General Managers, Divisional Managers also play the role of a trainer. Group leadership trainings are also imparted to the group leaders at regular intervals. Fifth: PERFORMANCE REVIEW AND PERFORMANCE APPRAISAL At BANDHAN the performance review is done twice a year within the period of June-December. The parameters on which the employees are judged are the functional qualities and the human qualities. Within the purview of the functional qualities, field-level assessments are done. Under the human qualities, employees are reviewed for their soft skills, convincing powers and behavioral skills, which highlight their people understanding and adaptability. BANDHAN has in place a proper appraisal system. Appraisal is done by the field Credit Pratibimb | July 2012 | 15

Officer to check the member eligibility. This ensures proper checks and balance because of the localized information available to the Credit Officer. To avoid bias during appraisal, CO‘s are never recruited from the same region for a particular branch. Loan appraisal process is fairly decentralized with branch manager having final authority for appraisal. Appraisal Process: The PAS (Performance Appraisal System) is executed twice a year in the interim of JuneDecember. Within the PAS, one-to-one appraisal and appraise interview is conducted. The review is mainly done on a 10 scale scoring system and the score is generally disclosed to the appraisee, highlighting the reasons for the scores received. This is an open to debate process wherein the appraisee can clear their doubts. This instills a sense of transparency within the organization and facilitates in smooth functioning due to increased communication between the different levels of management. Sixth: PROMOTION POLICY The promotion from Credit Officer to Branch Manager is based on cumulative scores obtained from field assessments as well as the viva voce, with more emphasis on the viva voce to critically analyze if the person is capable of getting promoted. Feedback is provided to the respective employees. Seventh: MANAGEMENT INFORMATION SYTEM BANDHAN has a systematic accounting and MIS system which has evolved along with the growth in operations. BANDHAN maintains its accounts and loan portfolio information at Branch, Regional Office and at Head Office level. BANDHAN is currently shifting their management information system from excel based manual systems to MFSOL developed by in-house IT department and currently information is being maintained parallel

in excel and the MIS. Currently, software testing is being done at Head Office level with past records being entered into the system. Eighth: DECENTRALIZATION OF ORGANIZATIONAL STRUCTURE At the branch level, Branch Manager is supported by Credit Officers (COs) to carry the field level operations. Management Committee Review Meetings are held at the head office on a monthly basis with participation of MD and Second line of management. The Branch Level Meetings are conducted on a weekly basis with participation of Branch Manager, Credit Officers with random participation of Regional Manager. At the intermediate level, Branch Managers, Regional Managers and Divisional Managers participate in the Divisional Level Meetings (quarterly)

respectively. BFSPL has created reporting structure for effective monitoring of operations. Even the branch operations of appraisal, disimbursement and collection have been decentralized. Ninth: MAINTAINING ACCOUNTABILITY AND TRANSPARENCY BANDHAN is very transparent and accountable to its various stakeholders with every work being documented. Over the years, different rating agencies (M-CRIL, CRISIL, and CARE etc) of Fig: Tumpa Makal at Ultadanga fish market

Strolling down the bustling marketplace of Ultadanga, an animated voice piercing the tranquility of the morning air is sure to enter your ears! Tumpa Makal proudly displays her array of fishes arranged in a tempting manner. As buyers throng around her stall and rummage through the pile of glistening fishes, she keeps on boasting the best quality. "What gives her so much confidence?" Tumpa recalls how wretched things were, when the sole-earning member of her family was her husband. "I was just another nondescript woman with no income, no identity and no decision-making power. Sending my two daughters to school was my dream. It was my neighbor’s prosperity which motivated me tremendously and I took a Suchana loan of Rs 5,000 for starting a business of selling fishes. And all my financial worries were put to rest right from the first day" says a radiant Tumpa. Thereafter BANDHAN gave her loans of Rs. 8,000, 12,000 and 15,000 in three subsequent terms. With soaring profits she is also running a meat-shop. On completion of the last cycle, a loan of Rs 20,000 was advanced to her. This need-based credit supply has helped her to do prolific business. From days spent in oblivion, she is now at the centre of attention, each morning. Not that she complains, "This is just the beginning, there's more to come.‖ With her impressive record, BANDHAN would be more than happy to assist her—not just for now, but in the long run too. Like Tumpa, millions of women are indebted to BANDHAN has a long way to go to fulfill the dream of becoming a world-class financial institution by 2015 transforming the lives of 6.5 million people across the globe. Pratibimb | July 2012 | 16

high repute have assessed BANDHAN on various grounds. For handling growth, BFSPL has created separate departments including administration, training, internal audit and operations with clearly demarcated roles and responsibilities. The ingenuity of BANDHAN lies in its effective implementation of grass root level HR policies with field level assessments based on functional competencies, which ensures a loan repayment rate of 99.97%; which is not seen in other MFIs. Their sole weakness is the lack of an expansion plan and singular focus on HR development. BANDHAN visualizes itself as a world-class financial institution by 2015 transforming the lives of 6.5 million people across the globe. Like Shanti, millions of women are indebted to BANDHAN but their work is only half done as they still have miles to go, touching the lives of millions.

Pratibimb | July 2012 | 17


 

 

Grading Report 2009-2010; Bandhan Financial Services Pvt Ltd Grading Report- 2010; Micro-Credit Ratings International Limited (M-CRIL), Gurgaon, India Performance Report; August 2011; Bandhan Financial Services Pvt Ltd Social Assessment: Enhanced Comprehensiveness Report; Micro-Credit Ratings International Limited (MCRIL),Gurgaon, India World Bank 2006; (23/05/2012; 22:45 hrs) Bandhan Financial Services Pvt Ltd; (16/05/2012-25/05/2012; 10:45 -15:56hrs)

The Fourth World - Is it an object of Fascination? by Siddharth Jaiswal , IMT Hyderabad We along with many analysts and economists seem to think this convergence force of globalization is real and universal, and that all the emerging markets will continue to grow rapidly, catching up with income levels in the west. A closer look shows that globalization did not, in fact, resonate equally in all developing nations. There is a broad array of countries that are not fully connected to global flows of trade and money. These nations comprise a chaotic Fourth World of ―frontier markets‖ in which political leaders have yet to buy fully into the global market consensus, and the economic expansion is still more erratic than the norm. The frontier nations occupy a world where insider trading can run rampant because it‘s officially tolerated, where financial data is unreliable as authorities do not really demand clarity from businesses, research here is often less about number crunching than about pressing one‘s ear to the walls for the latest rumors. The state of semi-lawlessness makes them volatile, with economic growth from a high of 20 percent in Ghana to a low of 2 percent in Serbia compared to big emerging markets like China and South Africa with 9 and 3 percent respectively. The ―macro mania‖ that seized observers of emerging markets over the last decade, as they rose and fell in unison, this phenomena did not extend to the fourth world where every market tends to follow its own peculiar rhythms often at the whim of local leaders. Cambodia opened its stock exchange in July 2011 and there were no companies ready to list, making it the only stock exchange in the Pratibimb | July 2012 | 18

world with zero trading and another instance is that of Ukraine‘s ―forced listing‖ in 2008 when the government forced big companies and banks to sell stock to the public which resulted in companies selling a tiny portion to comply with the rule which triggered lesser free float leading to less commitment a company has to the basic values of a public enterprise i.e return to stakeholders, not surprising outsiders see the Ukraine market as something of a joke. Frontier markets of the fourth world often fail the basic task of the market, which in theory is to match buyers and sellers in an open forum that allows them to agree upon a fair price. When rumors pass as information and rules make no sense, neither do prices. There is no doubt about the huge potential these nations hold, but they need to capitalize on this potential by opening up to the outside world and work towards proper governance. They are home to more than one sixth of the world population, but account for just 5 percent of global GDP and attract only 0.5 percent of global investment. An at most universal assumption holds that this gap will close over time and the fourth world is the place where the world will witness most explosive growth in the coming decades. Disconnected in Middle: The most isolated region from the global market and its trend is the Middle East, Iran and Iraq. The key frontier markets in the Middle East are the petro-monarchies of the gulf region, and the largest among these by far is Saudi Arabia which

is the only country which is open for investors, but only from within the gulf. This resulted in a spectacular stock market bubble in 2005, with Saudi Arabia‘s stock market becoming the biggest among the developing world, larger than that of China and India, solely based on oil-rich locals and neighbors. The quantum of this bubble was a good deal crazier than the dotcom insanity that gripped the United States at the turn of the millennium, and it pooped soon enough. But when a bubble pops in the gulf it does not make any sound as no one pays much attention as foreigners are not allowed in. Hence, it would be good idea for the Middle East to open the gates to its economy and gear up for a diversified growth model.

western province that produced strong growth in service industry. The north and east province that account for 30 percent of land and 15 percent population was mostly war zone. With the nation whole again, achieving 7 to 8 percent of growth in the next decade could be well within reach. With government keen on growth and the aim to raise the country from 102nd position to 30th in the World Bank‘s rankings by business climate by 2014. But the path does not

Promising Road: Few among the Fourth world nations have already started showing ability to grow and grow quick. They are in line to be called the next emerging markets of the world. Few of such economies are Sri Lanka, Vietnam etc which could prove to be the next growth miracle. Sri Lanka’s Peace Dividend:

In the 1960‘s Sri Lanka was billed as the next Asian growth miracle, only to be stymied by tryst with socialism that played a direct role in igniting the civil war which derailed Sri Lanka‘s development for 30 years. Today after the civil war, it seems that Sri Lanka‘s time has finally come. Though the growth dipped sharply during the war, the economy continued to grow at an average pace of 5 percent. The only reason for this was the young educated population situated in the Pratibimb | July 2012 | 19

promise to be easy as the socialist experiment of 1970 had lead to high taxes and government debt which still equals to 80 percent of GDP. However, it is bringing the vast swaths of formerly rebelheld territory back into play and exploits the country‘s long-standing strength of highly literate population and its geographical location between the two key shipping routes of India and China. Markets are especially bad at foreseeing the financial implications of war; the most famous example is World War 1, which took the investors by complete surprise, leaving with huge losses. Conversely, markets are also quite week at recognizing the financial benefits from peace, well studied by agencies such as World Bank and UN, the peace dividend is real and Sri Lanka is poised to be a big beneficiary. Vietnam’s Port to Nowhere: Vietnam offers a classic case of a small country that had greatness thrust upon it. By middle of the last decade investors were not only hyping Vietnam as the next China but, also throwing more money at it than it could absorb. In 2007 the investment produced a net inflow of $17 billion in

a $80 billion economy, a ratio four times than China ever achieved. The leadership simply lost control of the economy and in 2008 the bubble went bust. Vietnam always followed the footsteps of China, but it lacked the volume and scale which China held as its biggest strength. Additionally the operating cost in China was much lesser than in Vietnam, it is very difficult to connect with international shipping ports as most of its 54 ports were built for river routes which increased the logistics cost. It has to get back to the basics of economics by building roads, communications and infrastructure to connect business. The leadership is investing into education at a high pace than China and focus on high skill labor development. It‘s a good time for the government to deep dive into fundamental issues and concerns of the economy and plan a path ahead, hence a huge potential to regain its charm as the next China.

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References: 

  

Lunn, Smith (2006). A political and economic introduction to China. House of Commons Library, Paper no:06/36. Bergsten F.C. , Gill B (2007). The balance sheet of 2007 and beyond. Center for Strategic and International Studies. Nicholas R. Lardy (2011). Rebalancng Economic Growth. Richar Sharma (2012). The Breakout nations ―Journal of world economy and foreign trade‖ , published by Emerald EarlyCite, ISSN:1754-4408, May 2012. Statistics China. (2012). Economic Growth 2012. Retrieved from mp.asp?mp=5

E-commerce - Will the bubble burst or is it just a hype? by Arnab Guha Malik , IIM Kozhikode Ecommerce or rather E-tailing is still at a nascent stage in India. The noticeable trend is that established categories like books, mobile, electronics etc. are experiencing growth. In India penetration of online shopping using Credit card is low. The customers haven‘t matured enough. Cash on delivery is thus the direct byproduct of this, something that is unheard in the west. What drives ecommerce is the want for convenience buying in this age where consumerism and hedonism rule. The Indian e-commerce has developed a lot in the last few years. Consumers across urban India, according to published reports, are going for deals worth Rs. 20,000-25,000 today. Earlier, they stayed in the Rs. 2,000-5,000 range. According to a Vizisense study in 2011, adoption of ecommerce product sites is higher at 57% in urban India beyond the top eight metros‘ 43%. Today, between Letsbuy, Flipkart, Infibeam and Naaptol, $100 million worth of TV sets are being sold annually. And this number is growing very quickly.

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So why are there talks of another bubble building up? The fall of VC-backed Taggle in December set tongues wagging; however the failure of a single startup is too small a sample size to argue that the whole segment was in serious danger. The problem is: with most e-commerce providers not being profitable yet, what‘s pushing the valuation sky high? With the mushrooming of so many e-com websites, it has to be seen whether the Indian market can absorb all of them, if all of them can stay in the target group consideration set. And more importantly, are they financially stable. Flipkart raised close to Rs. 750 crore at a valuation of $ 1 billion. The company raised funds to build capabilities in logistics, technology, customer support etc. to scale up the business and others are following has raised $40 million at a valuation of $100 million (Rs 530 crore) in July. Other players like Fashion and You and Myntra have also raised huge amounts of money at significantly high valuations.

The extremely high price to sales ratio and PE ratio defies all logic. Mahesh Murthy, co-founder of Seedfund, a VC firm finds appalling mismatch between toplines, sales, margins and valuations. " ow can a company with toplines of Rs 50 crore H raise money at a valuation of $1 billion? The valuations have a ratio of 1:100 vis-Ă -vis sales to market cap. The company is yet to break even. The valuations, then, to my mind, are insane," According to Deepak Shenoy, founder MarketVision, and financial writer, to justify a $1 billion valuation, the company needs Rs 1,000 crore in toplines at a minimum 5 per cent margin. However this is far from being achieved. Hence there are apprehensions of a bubble. There is a price war out there; an intense competition among the players to get more and more buyers to register on their website. Every player claims to have huge customer base and with varying amount of money spent on marketing and visibility, their online traffic increases. Consider the case of, with an aggressive promotion, it has risen to 47 in the Alexa traffic rankings for India leaving behind established players like Myntra, Infibeam etc. But the interesting part is that the calculation of revenue per user has gone for a complete toss. Loyalty is out of the window and means nothing for a customer. Every website claims great value and affordable prices. In the greed to sell more

every retailer takes up more orders than they can actually deliver, more orders than stock resulting in order cancellations, irritated customers, and bad customer reviews. The Net Result is often One-night stands or short term sour relationships. Customer acquisition is being done at the cost of selling below cost price and this price increases many folds the moment you have new customers who are not loyal and dissatisfied as it means that they will not shop again. They are Lost Customers. The logistics partners are also to blame here who have no accountability and usually misplace the order or deliver the products late. In some case they do not report to the company after the delivery is made. In an environment like India where cash on delivery rules, websites lose money on account of dropped orders and customers refusing to accept the packages So when they are barely eking out a living with neither much customer loyalty, no revenues, only losses to show and a price war and insane competition to deal with, is the valuation sane? One might argue that the Indian internet market with almost 100 million users internet users out of which only 7 million are online buyers provide a huge opportunity for future growth along with the consumers maturing and having more confidence on ecommerce websites . The IAMAI report

Source: Indian Ecommerce Report, IAMAI

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highlights that the overall potential for ecommerce will increase from 146 million households in 2009-10, to 229 million households in 2024-25. It further says that the core potential for consumer e-commerce in India will increase from 71.4 million, to 141.8 million households. Core potential includes all households in the highincome category, and those in the medium-income category which have attained graduate or secondary level of education, and at the same time, engaged in more productive occupations. However, looking in a cynical way, the number of shoppers online won‘t grow at a staggering pace in the near future and neither the growth opportunities unless the websites reinvent themselves and keep on differentiating themselves in terms of building a unique customer value

proposition, rather than becoming a ―me too‖ player. Already the deals market is highly saturated and the presence of big players like snapdeal and mydala means high entry barriers for others. Moreover the customers after a few days get tired of deals. In fact how long can you expect them to be excited about deals on spa, facials, food and what not? Taggle was the first casualty in this sub segment. But saying that the ecommerce bubble will burst is Pratibimb | July 2012 | 23

being a bit too harsh to portals who have a longterm plan, have been investing in the right places like beefing up their supply chain and having a single minded focus on customer satisfaction. But it is an undeniable fact that the bubble will burst for many and invariably each failure will send valuations downward; but it‘s going to take a fundamental weakness for one to come to the conclusion that valuations are at a bubble level. There are opportunities but only if they realize: focusing on how many orders one can fulfill ensuring customer satisfaction in at least 85-90% cases rather than how many orders can one ship in a day. This realization will only make them wiser to invest in their supply chain and make it more efficient. The IAMAI report states that the reasons for this

mismatch between potential and actual ecommerce consumers are lack of trust, fulfillment issues, and shopping experience. Till now there has been inadequate infrastructure and only a few have started to invest in backend. In fact they should work hand in hand with the logistics partner and jointly invest in the distribution system. Only when the logistics partner is on board sharing the same vision of providing good service to customers, will the decline rates come down. It is 4% for some portals and may be as high as 30-40% for some.

The websites must realize the power of multiple warehouse and shorter lead times which can actually make whole cycle run faster and bring multiple benefits to all. If they can‘t address the issue of distribution and creation of multiple warehouses, SOR (Sales or Returns) is another procedure that they must follow. Keeping least amount of inventory with them should be a prerogative to cut costs The focus should be on developing innovative delivery models and setting-up high standards of safety and quality of services. Only when they fix issues like reducing the Order Processing Time, reducing the Shipping Time and un-complicating the Return policies/mechanism, will customers become loyal. Better customer loyalty increases the brand value which in turn will increase their chances to sustain and remain stable.

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References:  features/will-e-commerce-bubble-burst-2012 -_643132.html  SectorsInfotech/E-commerce-or-e-bubble/ Article1-803841.aspx   news/is-online-retailnext-bubble-waiting-topop/461511/  Indian E-Commerce report, IAMAI

Is India losing out of its charm of being an Investment Hub? by Preetosh Kumar Srivastava, IIM Indore Indian economy has been in news due to its economical bad performance for last 1.5 years. Huge Current Account Deficit, Depreciating Rupee, Policy Paralysis, Spiraling Inflation, and almost zero industrial production growth have been core reasons of India‘s falling credibility in terms of biggest emerging countries. Recent warning from Standard and Poor‘s of degrading India‘s rating to below Investment grade has added to already surmounting worries. But I have an optimistic view for our nation‘s economy. In order to present my point, I would like to go back to reasons why India gained unparalleled attention of world in the past, what compelled Mr. Jim O‘Neil, chairman of Goldman Sachs Asset Management to coin BRIC and add India to it. After this I would come back to assessment of current situation and its reasons. Good set of reasons of rising Indian on global economic front includes growth in all segments of GDP accounting sense - capital, labour and productivity growth. One of key advantage for India has been the demographic dividend with youngest populations, being trained much better than past. (Median age of Indian Population is around 28 years). Second, Increase in Savings rates and Investments rates has gone up by almost 35 per cent, particularly since the time Indian economy was liberalized. Third, India is home to the biggest English speaking population adding huge scope and potential to service sector. Fourth, rising consumption in India due to its new life style drove Indian economy. Fifth huge Pratibimb | July 2012 | 25

Infrastructure potential and large capital inflows in form of FDI and FII has helped manufacturing sector to grow. Now let us look at current issues and explore its reasons: 1. Current Account Deficit: Higher global oil prices leads to an increase in the current account deficit which invariably drives up interest rates and slows down the economic growth. To put this in a clear perspective, an increase of 10 US dollars in oil prices lead to a one and half per cent reduction in the GDP of any developing countries which are importing oil. Moreover due to slow down in Europe, Indian exports has gone down significantly. United States President Barack Obama‘s conservative policy further increased export issues. However with oil prices going down globally in first half of the year and slow but steady improvement in Euro Zone will strengthen our trade balance this year. 2. Depreciating Rupee: Rising trade deficit is one of reasons of rupee depreciation. With imports bill going down it will soon get stabilized. However we cannot blame rupee only for its depreciation, US Dollar has strengthened itself against almost every currency in the world. Moreover with rupee being depreciated, returns for overseas investors go down significantly. This circular loop hamper the sentiments all round. Moreover, high prices of gold has created fear among investors and hence with possibility of gold bubble, investor has shifted back to one of safest currency, that is, US Dollar, which has

further created an additional demand for dollar and hence depreciating rupee in Indian market. Inflation further decreases the purchasing power in India against other currencies leading to depreciation of the currency. However with trade balance being in control due to oil prices going down, base Inflation topping out, confidence of investors getting back to Indian Stock market due to further expected rate cut by RBI in second half of year, Rupee is likely to come back by at least 10% from its current level. 3. Policy Paralysis: The lack of enthusiasm about Indian market is now clearly more a result of the governance of our country which has recently come under severe doubts about its potential. Everyone around the globe is talking about this hurting policy paralysis and lack of ability to take decisions which has stalled our economy at a crucial stage when India could have benefited most in the world because of its so many positives. So far India‘s elite class has been reserved in their expression of condemnation of controlling agent. However it is clearly a sign of depression and dejection that they have recently aired their disapproval of the government so firmly. Mr.Azim Premji, Mr. Narayan Murthy and Mr. Deepak Parekh had recently shown their expression of worry. First time in history of independent India, Prime Minister has been addressed of being a rubber stamp. Despite being one of the most honest and educated prime minister not only of India but also of the world, Mr. Manmohan Singh has been accused of witnessing so many scandals and doing nothing about it. Anna Hazare‘s movement against corruption took the attention of the media, which affected investor sentiments globally. But this campaign will surely help India in long term if it achieved its objectives. Indian market has suffered a lot. Clearly at a time when China has recalibrated development, became much slower and moved towards consumption Pratibimb | July 2012 | 26

service linked growth and leading towards ease of commodity prices, it was policy paralysis in addition to huge deficit that let India not getting advantage of all these. Moreover, now we can sense a clear sense of urgency in government now post budget session and with elections coming up in two years. Hence we might see some of reforms and policy being framed in short period of time and help Indian growth story. 4. Spiraling Inflation: Recent increase in commodity prices despite increase in keep policy rates and ratios by our central bank has been terrible experience for each of us. There is an agreement amongst economists and other knowledgeable people that economic inflation could either be caused by either an increase in supply of money or a decrease in the quantity of goods being produced. India has certainly suffered from both. By tightening money supply we expected the first reason to nullify but could not achieve due to change in consumption pattern. I firmly believe pushing it down could hamper our own growth as it would play a key role if India has to grow faster. But no improvement in production side has caused inflation to sustain at a level which has been cause of worry. I expect that some of the reforms may incentivize the industry to play a dominant role and government acting in tandem could tap the opportunity to curb the inflation. 5. External Factors: Ongoing issues in Europe has dampened worldwide markets and badly impacted our economic growth. I hope that leaders of European nations would take resolute action to resolve the economic troubles facing them. Greece exiting out of Euro Zone could add another set of worry for whole world and India would be no exception. In order to solve this and to guarantee worldwide policy synchronization to sustain macroeconomic stability contributing to fast and sustained recovery of the world economy.

Now, I would come back to recent warning of S&P of degrading India. I assume this warning is certainly a wakeup call for government to put things in place as fast as possible. But in my view if we look at a time frame of 2-4 years, these issues will be handled and Indian growth story would be seen back to 8-9% if not in two digit growth. Keep in mind that fundamentals for India has not changed with an exception of government, sick of policy paralysis, and which is expected to

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take U-turn from the way it has proceeded so far if they want to remain in the parliament. Hence, with government taking adequate steps and external factor easing out, in the time frame of 2-4 years, we would certainly be one of top performing BRICS member. Hence India may not be first preference for worldwide investors in short term but would certainly become most lucrative investment hub for any other time frame.

BASEL III : Where Does India Stand? by Jubeen Mohapatra & Shikha Sharma, DoMS IIT Roorkee Introduction: Before embarking on the depiction Basel III norms and their futuristic impact on the Indian Banks and Economy at large, let's start off with a simple question: What is a Venture? It simply means an undertaking which has inherent Risks and Returns .When some capital is invested in a venture; it is expected to yield some returns or benefits out of it. But the buck does not stop here, as along with returns come the rabble-rousers; the different kinds of risks that plague an investment. Risks entail all potential losses which have detrimental effects on the expected output or the Returns. The risks can be quantified and analysed under many heads namely Market risk, financial risk, Operational risk, Credit risk etc. It is intrinsic to all the ventures from FMCG companies to Automobile giants to Non- banking financial companies to the most reputed of banks. The 3 Basel Accords: Raison D’être: Basel Accords were created under the aegis of Basel Committee on Banking Supervision to provide various avenues of safety against the various credit, operational, market and liquidity risks vis-a-vis the liquidation of banks. The first round of deliberations was conducted in 1988 in response to the insolvency fiasco of Herstatt Bank of Cologne; which was attended and ratified by the Central Banks of G10 nations. It gave rise to the de rigueur guidelines known as Basel I which elucidated the capital requirements to avert credit risks. The number of nations adopting it has since burgeoned to 100 worldwide.

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In June 2004 followed the Basel II regulations; which broadened the horizon of Basel I to include banking laws and regulations pertaining to capital adequacy , arbitrage regulation , risk quantification , risk classification and risk sensitive capital allocation. The final version of this dictum entailed three ―Pillars‖ or Concepts namely: Minimum Capital Requirements, Supervisory Review and Market Discipline, catering to the different risks and their repercussions. It also included a framework of tools called Risk Management System to detect and deal with prima facie evidences of risks and fend off residual concerns like systemic, concentration, reputation and legal threats to avoid a financial tailspin. However, Basel II has been sporadically criticized by a section of economists for having magnified the effects of the credit bubble. Basel II made it imperative for the banks to obtain credit worthiness ratings and loan risk evaluations from unfettered credit rating agencies. However these agencies in lieu of awarding honest ratings, swindled the credits awarded to weak Mortgage based Derivatives on beefy payments from the client bank leading to disastrous consequences. Since then Basel II has been appended and updated many times on the back of numerous financial turmoil and the sequence of reforms eventually culminated in formulation of Basel III regulations. The accord brought into existence during the year 2010-11 aims to plug the deficiencies which led to the late 2000 banking crises.

Basel III: An Overview: Apart from bank‘s capital adequacy, stress tolerance and market risk pruning, the third Basel accord also sketches out well defined contours of bank leverage, capital and liquidity requirements. It tries to reconcile the banking regulations with economic robustness to safeguard against the financial frailties. Some salient features of the latest accord are as follows – The accord has five broad implications: The first dictum tries to better the quality, eminence, consistency, and transparency of the capital base, by segregating the capital of a bank into 3 heads – a.

Tier I or Core capital( common shares , retainable earnings, disclosed reserves and equity ) , b. Tier II or Supplementary capital (Instruments in need of harmonization , Revalued and Undisclosed reserves ) and c. Tier III capital (needs to be eliminated). Second change strengthens the risk coverage

of the capital framework by trying to marginalize the credit risk. Third pillar offers a leverage ratio based system to entrench the Basel II risk frameworks. Fourth point requires building up capital buffers during good times, on which the banks and clients can fall back on; during stress and instability. Fifth one involves creation of a novel global liquidity standard; involving calculation of de facto liquidity coverage ratio, called Net Stable Funding ratio. It also limits the bad loans.

Indian Banking Sector, Basel III and Growth Scenario: After Reserve Bank of India pronounced final guidelines for Basel III commencing January 1st, 2013, and to be implemented by March 31st, 2018; speculations have been rife about its potential effects on the Indian GDP growth and whether or not the Indian Banks will be able to meet the cumbersome capital requirements. The

Graph showing spiralling Indian GDP , and Basel III might further accentuate the degrowth. Source : , Indian Central Statistical Organisation Pratibimb | July 2012 | 29

potential trade off between preventive safeguards and languishing economic growth has been making rounds in the economic debate mills of the country. And the cascaded effects of still to be tamed inflation, oil price hike, a free-falling Rupee and sluggish industrial expansion have only escalated the concerns. So is the Indian Banking Fraternity ready for implementation of Basel III? Will it invigorate the economic and banking standards or will it worsen the already plummeting growth rate as well? Prima facie it seems like a conundrum, but an in-depth analysis reveals that the long term benefits outweigh the imminent shortcomings. Just like every leap of faith, this step also has both pros and cons. The downside begins with requirement of a massive capital raising by Indian banks, in the tune of Rs 1.67 trillion over the next five years to cater to their growth necessities and boost up their held capital. This figure is churned out from the new Basel III norms requiring a minimum 5.5 per cent in common equity stock by

March 31, 2015 against 3.6 per cent now. Moreover creating a capital buffer by March 31, 2018 entails dilution of equity up to 2.5 percent. It has also hiked the minimum overall capital adequacy to 11.5 per cent as opposed to the current level of 9 percent. For now the private sector banks like ICICI, YES, Kotak Mahindra etc seem to be in a comfortable position to meet the guidelines as compared to the public sector peers like SBI who need large chunks of funding to mop up the required capital for compliance with Basel III. Because of such a massive capital structure overhaul the Indian banks will have to go for stringent loan disbursements which won‘t be helpful for the Indian industrial sector which is in dire need of banking support to fortify its position. Moreover under the new norms, for every 1% increase in Non-Performing assets the Banks need to gather 25000 crore worth of back up capital. So the banks are expected to go harsh on loan defaulters and tidy up the sectors of economy

A graph showing Bank Credit Requirements Vis- a -Vis held deposits Source : , Article3405002.ece Pratibimb | July 2012 | 30

where NPAs are proliferating rapidly like the critical Power sector and MSME sector; among others. Henceforth, any rate cuts expected from the chests of RBI will aid in boosting up the capital buffers of banks rather than accelerating the economic progress. All these factors might end up in a medium term reduction in growth rates of around .05 to .15 percent as per OECD studies and will most certainly have an adverse impact on the presently effervescent Indian economy. With that being said, let‘s take a look at the vibrant side of things, the bigger picture. As far as CAPITAL ADEQUACY is concerned, Indian banks are better placed than most of the foreign foils, to make a transition to the stricter capital regime. The seemingly draconian regulations set by RBI even after liberalization of monetary policies, will actually work in favor of the Indian banks. The existing RBI norms are more stringent than the international Basel III standards, which mean that the equity capital ratio and capital adequacy ratio of rated Indian banks are pegged well above the required margins of 9% and 14% respectively. Moreover recently the international credit rating agency Moody‘s and its Indian subsidiary ICRA have gone on records stating that the conservative return on equity and higher cost of capital on loans adopted by Indian banks will actually be seen in a positive light after the implementation of Basel III and it will be CREDIT POSITIVE for the developing economy of the subcontinent. Further the LEVERAGE RATIO under Basel III needs to be 3% to check derivative counterfeits and takes up cudgels against off the balance sheet trading .But the same ratio for Indian banks lies between 4.3 to 4.5% thus providing a hefty cushion and making it further easier and rudimentary to implement Basel III. Moving on to the LIQUIDITY COVERAGE Pratibimb | July 2012 | 31

Name of the Bank The Ratnakar Bank Nainital Bank Ltd. The Caholic Syrian Bank Ltb. The Lakshmi Vilas Bank Ltd. The Dhanlaxmi Bank Ltd. City Union Bank Ltd. Tamilnad Merchantile Bank Ltd. The Karur Vysa Bank Ltd. The Karnataka Bank Ltd. The South Indian Bank Ltd.

Assets as on 31.3.2011 3230 3292 9829 13301 14268 14592 16117 28225 31693 32820

Smaller Banks like the afore mentioned , with limited assets will find it difficult to conform to Basel III norms , resulting in dearth of loan disbursal to the smaller industries. RATIO required to provide cash flow for stress period of up to 30 days , here also Indian banks are much well endowed as compared to the foreign banks given the traditional saving mentality and conformist practices. The liquidity requirements of Basel III can be comfortably offset from two major sources namely; Cash Reserve Ratio-CRR (4.75%) and Statutory Liquidity Ratio – SLR (24%). The biggest yet intangible benefit will come in form of HEDGING against cyclic fluctuation in business market. Economic activities progress in form of cycles and banking system which operates in sync with the economy, is universally pro-cyclic . When the economy is zesty and rollicking, carried away by the booms, banks throw caution to the winds and disburse large amounts of loans , thus accumulating unbridled defaulting risks. During a downturn as seen in case of housing bubble of US , these contraventions impede the very fabric of the banking system hurtling it into a spiral of abyss. The creation of additional capital buffers under Basel III would put some shackles on the unfettered bank-lending as sufficient amount of capital has to be preserved now. This restrain will smoothen the large swings when the business cycles go berserk, thus acting as a shield. India has

already witnessed a few moderate tremors in the wake of Eurozone and US slowdown. Hence, for countercyclical measures to be proficient and effective, our banking system has to improve its ability to envisage the business cycles at sectoral , industrial and systemic levels. Conclusion: There is a famous quote: ―Whatever was on the left-hand side (liabilities) was not right and whatever was on the right-hand side (assets) was not left.‖ This comment came in the context of Lehman Brothers, who foundered so shoddily that their assets were not even worth a fraction of their book value and their entire capital base was worn out. It simply exposed the decay that had crept into the financial machinery, as a result of loose lending, subprime mortgages, shadow financial institutions, speculations, large NPAs and insufficient liquidity buffers, which planted the seeds of the great downturn. In this light, Basel III can prove to be an earnest and triumphant attempt to avoid crises like the late 2000s. Basel III tries to ensconce the balance sheets of banks by enhancing common stocks of equity, creating capital buffers to absorb shocks, increasing liquidity of assets, marginalizing the leverages, improving transparency as well as the market discipline.

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The famous adage ―make hay when the sun shines‖ is paramount in the case of Indian Banking fraternity. Given their secure position in contrast with the tumultuous west, coupled with rising diplomatic and economic clout of India in world map, Indian banks are ever so ready to perk up their banking regulations by embracing Basel III. Yes, in the initial phases it will decelerate the growth fractionally but then again all good things come with a price tag .In the long run it will prove to be a prudent and constructive step as the strong balance sheets will make our banks resilient enough to withstand the financial quakes. Coup de- Grace! References:  Apr 09, 2012 : Implications of Basel III for Capital, Liquidity and Profitability of Banks. (  Moody‘s Analytics 

Analysis of the marketing strategy of IDEA Cellular by Sayak Barai, IIM Lucknow

COMPANY PROFILE: Idea is the 3rd largest mobile services operator in India, in revenue terms, and recorded a subscriber base of over 100 million or 17.28%(Approx.) of the total mobile connections in India as of 31st January 2012. As on 31st January 2012, the company is leading the MNP (Mobile Number Portability) race, with a net gain of close to 11 million subscribers. The company also leads all other competitors in having the most active subscriber base, scoring highly on the VLR statistics. Idea's Revenue for the year 2011 stands Pratibimb | July 2012 | 33

at $3.43 Billion. Currently Idea is the 6th largest mobile operator by subscriber base. Idea cellular acquired 3G licenses in 11 telecom circles for Rs. 5768.59 Cr during the spectrum auction in May 2010.3G services have already been launched in 7 circles out of the 11 circles that Idea has acquired licenses. Idea Cellular is planning to be a world-class internet service provider (ISP) in India. It is working to establish state of the art infrastructure.


SWOT Analysis:

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Strong brand recognition Internet sales Growing reputation in global market

Expanding business operations Value added services Utilize 3G spectrum in 11 of 22 circles in India by providing services like WiMAX and LTE Expand rural reach

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Complexity of operations Absence in rural southern areas due to presence of existing competitors like Aircel

Fluctuations in foreign currency Government policies (on going tiff with DoT over acquisition of Spice telecom in 2008 may lead to cancellation of licenses for Idea in multiple circles)

CURRENT CUSTOMER SEGMENTATION Idea Cellular currently segments its customer profile into 2 basic groups: 1) Prepaid Customers and 2) Postpaid Customers Prepaid Customers are generally the personal use customer group i.e. non institutional. This segment accounted for around 80% of the customer base (2008 figures) and the remaining 20% was accounted for by the postpaid customer base. The customer base is also segmented into groups according to the monthly revenue generated: The segmentation here is done as: 1)VIP customers: These are the customers who form the VIP group as the name suggests and comprises of MPs, MLAs, industrialists and other high profile customers. These are given high attention in services as they are key to implementation of services across their regions. 2)Corporate Customers: These are the customers having more than five connections to their name and generate revenues in excess of Rs. 10000 a month. These are usually institutionally driven connections and are post-paid customers. Service quality in terms of Value Added Services provided including preferential customer service treatment is provided to retain these high value accounts. 3) Platinum Customers: These are the customers whose current monthly expenditure on Customer Segmentation Products Services Channels Complementors Unique competencies

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Idea Cellular Services is in excess of Rs.1500 per month. The revenue generated from these accounts includes Voice, Data and VAS services. Around 60% of these are from the post-paid group while the remaining 40% are from the prepaid group. Institutional Customers account for around 70% of the post-paid base while the remaining are the personal usage customers. 4) Gold Customers: These are the customers providing revenues to the company between Rs.1000 and Rs.1400 a month. The pre-paid base is again smaller in this segment accounting for nearly 35% of the customers. A healthy split is found between personal and institutional usage customers. 5) Silver Customers: This customer group provides revenues in the range of Rs.750 to Rs.999 to Idea Cellular each month. Pre-paid user group is in the range of around 55% while institutional sales account for around 80% of the post-paid group. 6) Medium Volume users: These are the customers generating between Rs.220 to Rs.750 each month. Prepaid customers form around 65% of the group while this group accounts for approximately 30% of the whole customer base of Idea Cellular. 7) Low Volume customers are the customers generating revenues less than Rs.250 per month Tier 1 Metropolitan Circle:

Description Pre-paid and post-paid mobile services GPRS, voice and SMS based entertainment services, callforwarding, call conferencing, regional, on-net, national and international roaming, GSM gateways, vehicle tracking and automatic meter reading Direct outlets Ericson, Nokia and Siemens 6 SIGMA, net setter data cards & Blackberry solution, largest customer base, NLD license, market leader in Maharashtra, strong distribution channels

Tier 2 Urban Circle: Customer Segmentation




Pre-paid and post-paid mobile services GPRS enabled information services like internet browsing, data cards and mobile email, call-forwarding, ring back tones, background music, voice and sms chat, ringtones, horoscopes, expert advice and subscription services. Direct and indirect


Ericson, Nokia and Siemens

Unique competencies

6 SIGMA, high quality network structure, centralization of several applications


Tier 3 Urban Circle: Customer Segmentation Products Services Channels Complementors

Description Pre-paid and post-paid mobile services Krishi voucher, NOKIA life tools, providing health care services Indirect outlets Ericson, Nokia and Siemens

Unique competencies

Usage of solar power as Base Transceiver Station (BTS), frequency optimization techniques

Target Market: The Target Market is the high revenue generating segment of the Platinum and Gold Customers. It is strategic for the company to increase user base in these two segments as they generate a steady income source and most being post-paid, the company is usually assured of ease of collection of bills. Major Benefits for these customers:  These are even given treatment in Customer care.  These are generally high data usage group and hence given dedicated Time Slots when their data usage is detected to maximize usage and revenue generation as a result.  The Metropolitan and Urban circles have mobile density of 134% as compared to 29% in rural areas. Hence, more focus should be on expanding in rural segments.  With the advent of 3G services and increasing number of smart phones, operators should focus on advanced value Pratibimb | July 2012 | 36

added services like live streams, mobile money etc. Strategy makers should think on the pricing policy of postpaid plans of corporates and affordability of the consumers to beat the competition. Company should come with new ideas & innovations to increase the sales & market shares. Company should focus more and more on advertising to promote services in corporate world.

References:       Interconnexion.pdf  

Sector Review – FMCG by Nitin Jindal, TAPMI Manipal Sector Overview  India‘s FMCG sector is the 3rd fastest growing sector. It has grown almost 18% in the Q3FY12. Its revenue is almost 2.4% of the Indian GDP. 

Indian FMCG Sector envelops large sectors of personal care, health care, home care and food and beverage. Therefore money circulated in this sector is huge.

FMCG companies and consumer facing sectors like consumer durables and consumer finance are suggesting continued growth in the tier II and tier III cities and rural markets.

Introduction of GST this budget can systemize taxation if implemented uniformly. It will help in avoiding multiple taxes like octrai, CST , VAT etc. Hence, would result in lowering of the prices and would boost demand.

Although, FDI is much debated and kept round the edges, it can fall back anytime. Since , this government would be making moves to save its neck, one can expect FDI to open

Nevertheless though the NREGA allocation has reduced, the wage per day are now being increased. This in turn would have a psychological impact on the income levels in rural markets.

Product innovation which was not much taken care of by Indian FMCG companies has taken centre stage now.

Awareness for nourishment amongst the rural population particularly for the younger generation is increasing. Baby and health food companies like Nestle India and GSK

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consumer are strong long term players and would outperform their home and personal care peers. The rise of Marico‘s super premium refined oil, Saffola in the rural markets also cannot be ruled out in the long term. 

A consistent rise in urbanisation would be a supportive factor for the health food companies.

With the increase in better housing structures in rural India called as ‗Pucca‘ houses would benefit paint companies, especially players like Asian Paints with the widest distribution and most comprehensive portfolio.

Affordability has substantially improved during the last few years indicating the potential for growth in branded products. Example in Bihar a rural household typically comprises of about 8-10 people per household.\ Assuming a daily wage income of INR100 per person, an individual household would have an income of about INR20,000 per month, which we believe is a decent income to afford branded consumer staples.

FMCG companies like HUL, Marico, Parle etc. are targeting BOP. BOP consists of 900 to 950 million people. This segment poses large scope of growth as this market is still untapped. Contribution of rural market going to rise from 34% to 44-50% in year 2020.

Figure 1 New Road Connectivity making key difference to FMCG demand

Source: Bloomberg

Figure 2: Rising urbanization led by infra development aiding literacy rate and hence awareness of branded products Urbanization has grown 31.2 % in FY12 Source: Bloomberg

Figure 3: Improvement in literacy has led increase in income level and increase in awareness about the branded products, hence resulted in affordability and growth

Literacy has increased almost 9% in FY12 Source: Bloomberg

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Figure 4: Average pay per day has increased to 100 according to MG NREGA . Hence increasing the disposable income Average pay per day has increased by 11.11% in FY11 Figure 5

Figure 6: FMCG companies are focusing on the direct reach to the rural market Companies like HUL, ITC which have widest distribution would be key beneficiary

Figure 7: Companies like HUL tying up with telecom service providers like Tata Teleservices to get better footfall and mindshare

Conclusion: 

Third fastest growing sector in India

Large money is circulated in FMCG

Uniform implementation of GST can lower prices and boost demand

Product innovation, the new mantra in FMCG sector

Consistent rise in urbanization

BOP poses large scope of growth

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Introduction `Does the stock market overreact?' De Bondt and Thaler in 1985 gave start to a new wave of thinking known as behavioural finance. Weak form inefficiency of the stock market was discovered by them after analysing how people are systematically overreacting to unexpected and dramatic news events which were surprising and profound. The Efficient Market Hypothesis as proposed by Fama (1970) asserts that the stock prices reflect the relevant information. The asset prices follow a random walk path i.e. they are merely random numbers. The study conducted by Caginalp G. and H. Laurent (1998) by the predictive power of price patterns finds patterns and confirms that they are statistically significant even in out-ofsample testing and report. The pattern of the stock index might help in predicting some of the effects of the various events. The calendar anomalies tends to exist which goes against the efficient market hypothesis. The researchers have used Gregorian calendar to investigate the calendar anomalies. There are various countries and societies which follow their own calendar on the basis of their religion. For example, the Hebrew calendar is followed by the Jewish society, which is strictly based on luni-solar, the Christian society follows the Gregorian, which is based on solar, and similarly Hindu and Chinese follow their own. The Hindu calendar is called ―Panchanga” and it is based on both movements of the sun and the moon. The festival of ―Diwali‖ is typically occurs at the end of October and beginning of November. The special ritual called ―Mahurat Trading‖ can be observed on major stock exchanges like NSE, BSE, NCDEX to name a few lasts for about an hour. It is performed as a symbolic ritual since many years. It marks a link with the rich past and brokers look at it on a positive note. It marks an auspicious beginning to the Hindu New Year. The investors place token orders and buy stocks for their children, which are sometimes never sold and intraday profits are booked, however small they may be. Thus, it is widely believed that trading on this day will bring wealth and prosperity throughout the year. It is interesting to observe the behaviour of trading activities during the period preceding and succeeding Mahurat Trading. The purpose of this study is to know the effect of the festival prior and post diwali on the the returns.

Econometric methodology

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I have measured stock return as the continuously compounded daily percentage change in the share price /

index (S&P CNX NIFTY) as shown below:

Visit: Rt = (lnPt – lnPt-1) x 100 …………………… (1) Team Where, Rt = return at time t



Pt, Pt-1 = closing value of the stock price index at time t, t-1.

Bag No. 9 in its portfolio. Further, the National I have used S&P CNX Nifty as it has gotPost the most liquid stocks Stock Pratibimb Exchange | July 2012 is largest | 40 in terms of Market capitalisation and Volume. I have used the data of the Manipal—576104

Pratibimb July 2012