Vol. 1, Sept.

2010
 IBS Hyderabad

From The Editor’s Desk

- Kriti Pant

Inside the Issue: Hey there,

With all of us gearing towards the end term exams, we
bring to you our last issues for this semester.
1.Maharaja to Pauper As this entire issue has been compiled by our junior
team, please do provide us with your valuable feedback
Cynthia Ann Robin
that can help our team meet and exceed your expecta-
tions.
2.Are You Worth Your Credit?
I now give it over to Priyanka, my editorial team mem-
Neha Sharma ber who deserves all the credit for compiling this one
for you all.
3.CREDIT DEFAULT SWAPS:
Lets take a chance!
Regards,
Kriti Pant Kriti Pant

4.A voice against atrocity Hey pals,

Priyanka Pathak
Welcome to yet another issue of FOCUS, for the
month of September`2010.We again bring to you,
5.Competition says Check?
a plethora of knowledge. I hope this is manifested
Maggi’s Next Move by our columns, which are an amalgamation of
content with quality.
Adwita Pant
The articles have nothing in common except the
6.SPORTS and CRISIS fact that our readers will be seized by each.
FOCUS typically includes fair bit of opinion.
Antariksh V
As all our other issues, this one too has articles on
7.Launching of IPO by Microfi- diverse topics. Hope you all enjoy reading this
nance Institutions one and also find it as interesting and informative
as the previous ones. Looking forward to more
Shaivya Srivastava ideas and suggestions.

8.’REAL INDIA’ – QUOTE UN- Happy reading and learning!

QUOTE
Regards,
Neha Singh Madhukar Priyanka Pathak
2

September Vol 1, 2010. Ecobizz Newsletter August Vol 2 , 2010. Ecobizz Newsletter
IBS Hyderabad

MAHARAJA TO PAUPER

- Cynthia Ann Robin

203 flights cancelled over a 50 day period,

to India. Right now with the holiday season just
about to end, cancellation of 203 flights means
sounds unbelieving but this is actually happen-
almost 50000 Indians not reaching their destina-
ing. The last nail on the coffin has been laid.
tions on time, which leads, to them being
What is happening to Air India? From the time stranded and maybe even affecting their jobs as
that Air India merged with Indian Airlines, it has they cannot report back at the appointed time
been riddled with controversies. Crashes, de- and date..The NRI association in Saudi Arabia
layed flights, cancelled flights you name it. has written to the Indian government about how
they are unfairly treated by this airline which
Air India started by JRD Tata was known for its reschedules or cancels its flight without the least
efficiency. It was among the best in the world in provocation.
the seventies and eighties. In
fact JRD Tata himself said that On December 2009 a Dubai bound
other airlines watch the de- Air India Express flight was can-
parture timings of Air India to celled due to ―technical snag‖.
match their own flight depar- “Air India express must
The Air India flight crash in Manga-
tures. such was its accuracy, pull up its socks soon or
lore left 158 people dead. The en-
but all of that has changed
now. The pride of India, the risk being wiped out quiry that had followed revealed it
was due to pilot`s error.
embodiment of Indian pride from public memory.”
and culture and once the air- Let me here quote a last personal
line of the patriotic Indian has example. On my way back to Hy-
lost its credibility. Air India is derabad from Kochi on 29th august
running into losses like never before to about at the Kochi airport, while I was waiting for my
Rupees 300 crores a month. And who is account- Indigo flight, I noticed a commotion nearby.
able for all of this? Well. Apparently nobody be- When my brother went to enquire, this is what
cause it is a government owned airline and in he found out. A man who was not a crew mem-
case of anything government owned, there is no ber came in the middle of the room and an-
sharing of responsibility So Air India Express nounced that passengers waiting for the Indian
flights continue to crash, delay and get cancelled. Airlines flight should go back as their flight had
Even though passengers do get reimbursed for been cancelled. When asked by the crowd there,
the cancellation of flights due to latest DGCA what authority he had to make such a statement
rulings still the inconvenience caused to them is he replied that he himself was a passenger and
far greater. 203 flights getting cancelled is no when he had gone to enquire about the delay he
joke. The reason they give is cabin crew shortage was told about the cancellation and the surpris-
and the forthcoming lean period. ing reason given was that the pilot was refused
lunch or something and so he had decided to go
Air India Express being a budget airline lots of
on a strike. Half an hour later the cancellation of
NRI‘s especially from the Middle East travel in it
the Indian Airlines flight was announced, the

August Vol 2, 2010. Ecobizz Newsletter September Vol 1, 2010. Ecobizz Newsletter
 IBS Hyderabad

reason being ―operational reasons.‖ To add salt to their miseries, on going through
passenger comments, I came across quite a num-
Seeing these absurdities it actually makes one ber of passengers narrating their ordeals with Air
wonder, is Air India even serious about its fu- India. There are complaints about confusion at
ture? One delay, one cancellation, one silly mis- the check in counters, misplaced luggage, and
hap is still accepted. But this has been happening rude behavior by the staff. A certain passenger
from the time of the merger close to 3 years ago. had to say that ―Air India simply does not know
How can we still accept its lapses as mere how to treat its customers, their staff are people
―technical snags‖? Now there have been a few who will never loose their jobs because of several
conspiracy theories related to Air India doing the of their unions- no matter how worse they are‖
rounds of the internet for some time now. And he goes on to say that even after making a com-
with this series of absurdities continuing one ac- plaint to Air India by e mail he did not receive a
tually wonders whether these delays, cancella- reply.
tions, reschedules are
being done intention- A lady on asking Air
ally. India Express for a
wheel chair was asked
To think of it, this is a to wait till all the pas-
government owned sengers had alighted.
airline and Air India If she would have
Express being a done that she would
budget airline with have missed her con-
cheap flights which necting flight, so she
mainly caters to the simply dropped the
Middle East area. Be- option.
ing government
owned it does not This is just a glimpse
even make profit the of the state of affairs at
type private airlines Air India as of now.
make. Include in it an The latest cancellation
increasing shortage of of 203 flights was the
pilots. last straw. Already
people have started to
Can this be a scheme? think twice before
A knowing sabotage booking their tickets
by the bureaucracy to on Air India even
declare Air India un- overlooking the fact
feasible so that they that Air India Express
will be forced to stop their operations making is a budget airline. The government needs to take
way for some new private airline with a profit heed of this wake up call now and start clearing
objective. the mess it has created. Air India was our first
commercial airline and even after so many years
Also the announcements by the government a
when the skies have been taken over by private
few days ago that of no disinvestment of Air In-
airlines, it is still synonymous with our culture
dia, no sacking of employees considering that Air
and it will be disheartening to see it die such a
India already has around 210 employees per air-
sad death.
craft double the global standard and aircraft pro-
curement to continue which is already driving
Air India to an unsustainable wall of debt has
already raised more than a few eyebrows.

September Vol 1, 2010. Ecobizz Newsletter

IBS Hyderabad

Are
M You Worth
OVEMENTS Your
IN S&P 500Credit?
V/S NIFTY

- Lakshay
-Neha Sharma
Mehta

A Credit Rating is basically an estimate of credit free availability of information about credit
worthiness. It can be related to individuals, com- scores, there is an ample amount of opportunity
panies and countries. Generally it‘s used by In- to invest in different alternatives which go along
vestors or Lenders in order to ascertain whether to improve the market efficiency. There are 3
they would want to give out a loan or a line of kinds of users for the ratings. They are enlisted
credit to an individual. On a macro level pertain- below:
ing to Companies and Countries, it‘s an estimate
of financial soundness. Typically, the ratings can Bond Issuers
also be used for functions such as adjusting in-
surance premiums, establishing the amount for a Government Regulators
lease based deposit and also to determine em-
ployee eligibility in certain cases. Now, what in- Structured Finance
fluences these ratings? Well,
In India, the credit ratings for
there are a multitude of fac-
Bonds are majorly handled by
tors some of which are con-
CRISIL. Apart from CRISIL,
trollable and some which
can‘t be controlled. In order to “So, You think that You the other major players are
ICRA, Fitch India and CARE.
list it down, some of the ap- make Smart Investments?
All the three work in collabo-
parent controllable factors are Of myriad Speculations and
ration with S&P, Moody‘s and
Payments, Amount of Debit/
Credit, any kind of Major Fi- Estimations, ever wondered
Fitch along with IDBI and Ca-
nara Bank. In order to stay
nancial Events and Employ- what’s your Credit Worth?”
ahead of the competition the
ment. On the basis of these
agencies need to keep updat-
parameters a credit score is
ing their models to obtain a
arrived upon which indicates
realistic picture of the cash
the ability of an individual to repay the debt.
flows in these dubious times and communicate
Apart from these, the interest rates and spending
the same to investors to lower the general risk as
patterns also play a major role.
well as counter party risk. A notable develop-
Now that we know what a credit rating is and ment in recent times is the move by the govern-
what are its ramifications, let‘s see who decides ment to exempt infrastructure bonds from credit
these ratings and what goes on behind it. Basi- ratings. This has been done in the purview of the
cally credit ratings are arrived upon by credit success of the bonds and to encourage invest-
rating agencies. The primary role of these agen- ment flow along with tax benefits. The planning
cies is to assign credit ratings to issuers for debt commission has put forward an investment out-
instruments and also the servicers working on lay for a trillion dollars for the 5 year plan start-
the debt given out already. The credit ratings ing in 2012.
given out by these agencies are used by Inves-
Credit ratings have a magnanimous effect on the
tors, I-banks, brokers and Lenders. Due to the
investment environment of a country. Therefore
5

September Vol 1, 2010. Ecobizz Newsletter

 IBS Hyderabad

it‘s imperative that a credit rating agency does its Recently credit ratings had a major role
homework right when it comes to ratings. Since to play in the sovereign debt crises. Sovereign
they deal with financial regulations there is a credit rating is given to sovereign entities such as
need for the agencies to be accountable, disclose a national government. It is an indicator of the
the rating methodology, build on the information level of risk involved with investing in a country.
symmetry, ensure consistency of accounting data The risk can be of two types, i.e. political risk and
and avoid any kind of conflicts of interest be- economic risk. These risk factors help in deter-
tween the parties. mining the investor‘s ability to meet financial
obligations. The more stable an environment, the
There are some notable instances in the past lesser the risk. Regarding the sovereign debt cri-
where the credit ratings offered by the agencies ses, the country in question was Greece where
have adversely affected the international markets the countries External Commercial Borrowings
to the extent of triggering and worsening finan- were being used as the collateral against bonds.
cial crises. The first is the East Asian Debt Crises. This was done without considering the credit
In this case, it‘s believed worthiness of those
that Credit Rating Agencies bonds which were even-
further aggravated the on- tually labeled as ‗Junk‘.
going slump in the mar- What was took the entire
kets. This happened be- world by surprise was
cause the agencies became the rapid downgrading
extremely conservative and of the credit rating by
downgraded the economies Moody‘s.
to a level lower than what
they were worth. Due to So where do we move
this cynical move, the ahead when we know
economies were unable to that we may very well be
source any funds through riding on a debt ridden
borrowings. The cost of economy and cannot
borrowing went up, large really buy the ratings
firms were unwilling to these ‗Creditworthy‘
invest and there was virtu- firms have to offer? I
ally no international capital believe that the Agencies
to help them steer out of the downturn. Not only have been given a lot of power and importance
can downgrading hurt the investor sentiments, in when it comes to the crucial economic and finan-
certain cases a small error can also lead to false cial sector. Rather than letting financial services
interpretations. This was the case when SEC was firms reap benefits out of these agencies by mak-
up in arms with Moody‘s in their credit rating ing it a mere business for short term profits with
mishap. As per the SEC, the agencies need to cracks in the financial structure, we need to en-
take care of certain protocols and procedures for sure complete transparency. As there is practi-
determining the ratings and should ensure the cally no ceilings and lack of information given
accuracy of accounting information and state- out on how ratings are determined, the govern-
ments used for the same. However in early 2007, ment can also setup an independent agency
it was uncovered that there was a technical glitch which can monitor the economic environment
in the systems Moody‘s was using which led to and help provide a lateral and unbiased opinion
an upward trend in the ratings. This led to a with correct ratings. At least, this would ensure
wrongful estimation of securities to invest in. that we are proactively working towards know-
Though they had this problem fixed, they waited ing the worth of our credit!
until January ‘08 to correct the ratings by when
the damage was done.

September Vol 1, 2010. Ecobizz Newsletter

IBS Hyderabad

CREDIT
M DEFAULT
OVEMENTS SWAPS:
IN S&P 500 V/S NIFTY

Lets take a chance!

- Lakshay
-Kriti
Mehta
Pant

Of late, the idea of allowing Credit Default It is for the third time after 2003 and 2007 that
Swaps (CDS) as insurance for Corporate Bonds introduction of CDS derivatives have been pro-
in India is quite talked about. According to Ms. posed in India. The proposal to introduce these
Shyamala Goipnath, Deputy Governor RBI instruments could not materialize as a high expo-
―introduction of CDS will provide market par- sure to CDS and such other derivative instru-
ticipants with an instrument to manage Credit ments led to the demise of high profile banks
Risk and contribute in promoting liquidity for (such as Lehman Brothers) and financial institu-
Corporate Bond Market‖. tions in US which eventually engulfed the entire
world economy. Therefore, realizing the mam-
CDS, a derivative instrument which helps the moth which these instruments are capable of cre-
holder hedge against the risk of default by the ating always kept the regulators in India decide
counterparty. Just as in a regu- against their circulation in the Indian derivative
lar sale agreement, so in a CDS market.
there exist two entities a buyer
and a seller. The buyer pur- The primary reason for de-
chases protection against the “Despite their not so good lay CDS
in the introduction of
in the derivative mar-
default in coupon payment by
the issuer of bonds and the
past, introduction of Credit ket is due to the issues asso-
seller sells the guarantee for Default Swaps can help ciated with the complexity
and transparency of the
payment of coupon in case of protect the credit risk and instrument. Also, the fear of
default by the issuer of underly-
ing instrument. A CDS buyer promote the required over indulgence into naked
pays a regular premium (at liquidity in the bond market” CDS by aggressive inves-
specified intervals) to the seller. tors operating in the finan-
In return the seller gives a cial markets too is keeping
promise (commitment) of repay- the decision makers in
ment in case of default by the make a move in its favour.
issuer of debt instrument. In case of default (by In order to overcome these challenges RBI is at-
the underlying bond issuer), the payment of pre- tempting to come up with a full proof mecha-
miums for protection stops. The seller of CDS is nism which enables the trade of CDS without
obligated to discharge the current cash value of any disturbances (controversies).
the underlying bond or the actual bond to the
Considering the issue related to the transparency
CDS buyer. At the same time the ownership of
of markets, setting up of a RBI regulated body
the protected (defaulted asset) instrument is
has been proposed. The proposed regulatory
transferred to the seller of CDS.
body will be responsible for maintaining a re-
In cases where there is no default the buyer of pository and clearing all the CDS transacted in
the CDS obtains a guarantee for protection and the market place. For the initial period as the
the seller earns the premium amount as profit. volume of transaction would be relatively less,
Clearing Corporation of India Ltd. (CCIL) can

September Vol 1, 2010. Ecobizz Newsletter

 IBS Hyderabad

help supplement the repository function. How- and will be permitted to make investment into
ever, with the rise in the volume of transaction naked CDS. However, Users can only invest in
the requirement of a separate independent entity the derivative instrument with the aim of miti-
will be essential. gating the risks associated with their underlying
exposures.
Also, the seller of the CDS will have to disclose

their exposure (guarantee given for default of In the light of the proposed solutions, despite the
underlying instrument) to the credit risk into numerous challenges, the idea of introducing
their accounts. However, the buyer of the CDS CDS in the Indian Derivative market appears to
may not treat it as an exposure to credit risk. This be worth executing. Although it is always said
will aid in maintaining greater level of transpar- that ―the history repeats itself‖. However, in the
ency in the system. case of CDS, god forbid the history to repeat!

Second is the concern of trading in naked CDS

with the intention of making speculative gains.
RBI proposes that the market participants will be
divided into two categories Market Makers and
Users. Market Makers are institutional investors

September Vol 1, 2010. Ecobizz Newsletter

IBS Hyderabad

A OVEMENTS
M voice against atrocity
IN S&P 500 V/S NIFTY

-Priyanka
- LakshayPathak
Mehta

The economic and political setup of a nation search by various social scientists and scholars as
takes a backseat when we talk of genocide. It has to why do people practice genocide and what are
been identified as a part of human history since the conditions which lead to it. Genocide as a
very early times and has subsumed the acts of crime can`t be deterred only by legal punish-
barbarism , massacres and mass murder. The ment. It holds a wide research as to understand
attempts made by international community and the various kinds of behavior such as murder,
implementation laws against this crime, has all infant killing, mental damage and preventing
resulted in vain. births. Genocide issues have cropped up in vari-
ous regions in the past few years, including Bos-
Genocide has been considered as the biggest nia, Rwanda and Darfur.
blow to humanity till date, the worst crime one
can commit on an international A naturally arising question which generally
level, ―destruction of the su- would spark up is, why does
preme being‖. genocide occur?

What leads Homo sapiens to

Genocide was indicted as ―WAR “What a shock and
CRIMES‖ in Nuremberg Tribu- actually reach such extreme lev-
shame that few countries els of inhumanity, violence and
nal in 1945-46 when its legal
application occurred in context still suffer disgrace due murder. Man is said to be a so-
of the Nazi war criminals. It in- to acts like genocidal cial animal and civilization is a
necessity for the human race to
cluded extermination of racial
and other regional and national
carnage, executed by prevail and it is a human inven-
groups against civilian popula- monstrous human tion.
tion so as to destroy the particu- animals” So does genocide indicate that
lar race and class of people so as
we are living in Darwin`s times
to occupy territories. The Jews,
and the law of nature is simply,
poles and gypsies were the specifi-
―survival of the most powerful‖?
cally targeted groups.
Well, getting past human empathy and behavior
Still, much has changed since Raphael Lemkin is not the rule of life. Humanity has to conclude
launched a one-man effort to fix a problem that that such horrendous acts are unacceptable and
no one had even named yet. we must find out ways to discourage this prac-
tice and eliminate them. A prerequisite for this
After World War II Lemkin`s advocacy led to proactive stance is an understanding of the delib-
the United Nations‘ 1948 Convention on the Pre- erately planned nature of these events. The sud-
vention and Punishment of the Crime of Geno- denness of the carnage in Rwanda is belied by
cide. It was a startling achievement, far behind the months of systematic preparations that pre-
anyone`s imagination of naming such an atrocity. ceded it, as well as the historical evidence of eth-
Yet its promise still lies dormant through many nic violence in that region. Academics and hu-
decades now. Genocide has been a subject of re- manitarian workers have told us repeatedly that

September Vol 1, 2010. Ecobizz Newsletter

 IBS Hyderabad

such mass atrocities do not exist in a vacuum and NEWS WORLDWIDE:

that the signposts ―were clearly visible years in
advance, but…largely dismissed, even denied by
the international community until the killing was
well underway.‖ China Industrial Output Tops Fore-
cast as `Robust' Demand Aids
People need to be awakened , all over the conti-
World Growth.
nent ,to act against this sinister scenario. Geno-

AT&T, Sprint, Verizon Said to Plan

Samsung Tablet to Rival IPad .

Nokia Hires Microsoft's Elop as

CEO to Reverse Losses to Apple.

BCE to Buy Canadian Broadcaster

CTV for $3.1 Billion.

Economic forecast gloomy, says

IMF.

Deutsche set to raise 9bn Euros to

shore up its finances.

Japan Bonds Fall for Third Week on

Producer Prices.

85 prisoners escape jail on Mexico-

U.S. border.

Greek protesters to confront gov-

cide occurs because man's desire for power and ernment on economy.
their need to feel safe or normal. Genocide can
occur for several different reasons; paranoia, re- Google`s ANDROID to be world
venge, or just plain insanity. It is time to restruc- no.2 in 2010.
ture our strategic thought and institutional proc-
esses to incorporate a proactive stance that enter-
tains many options, beyond military interven-
tion, for interrupting the progression of a society
toward mass atrocity. As rightly said,‖ An ounce Source:
of prevention is worth a pound of cure!‖
www.bloomberg.com

in.reuters.com

www.cnbc.com

10

September Vol 1, 2010. Ecobizz Newsletter

IBS Hyderabad

Competition
MOVEMENTS INsays
S&P Check?
500 V/S NIFTY
Maggi’s Next
- Lakshay
-Adwita
Mehta
Pant

It all started over two decades ago. India was ance Fresh etc. Besides them, imported brands
such as Wan Thai Foods In-dustry Co., Ltd.‘s
introduced to the concept of two-minute noodles. Yum-Yum instant noodles, Ko-Lee instant noo-
The bright yellow pack, with hues of red and the dles etc. also share retail space in the category
picture of delicious looking noodles twirled up in now.
a fork is still enough to get your mouths watered.
But the biggest threat to the Instant Noodles‘ Gi-
Maggi instant noodles, food major Nestle‘s flag-
ant is the introduction of GlaxoSmithKline‘s Hor-
ship brand in India, has reaped the advantages of
licks Foodles and Hindustan Unilever‘s Knorr
being the first mover in the category. From its
Soupy Noodles. According to the
introduction in the 1980‘s till
data by market research firm Niel-
date, the brand has been syn-
sen, Maggi‘s share of instant
onymous to the word instant
noodles, on an all-India basis,
noodles. But is the story “Nestle's flagship brand
across urban markets, has
changing track now?
faces competition in the slipped consistently in the pe-
Through the years, a number instant noodles category. riod between December ‘09 to
of players have tried to make a
mark in this category, by inno-
Maggie must change its July ‘10. The market share of
vating and offering more strategy and retain the Maggi instant noodles, which
choice. Until 1988, the Indian market leadership that it was 90.7% in December ‘09,
instant noodles category was dropped to 86.5% in July ‘10,
clearly monopolized by Maggi, has enjoyed for almost throughout India. Another as-
in the absence of any local three decades” pect that has impacted the in-
competition. Soon the Japanese
stant noodles market is the entry
noodle giant – Nissin Food
Products Co. Ltd – entered the do- of cup instant noodles. Accord-
mestic mar-ket through an In- ing to Euromonitor In-
dian subsidiary, Indo Nissin Foods Ltd, with Top ternational‘s statistics in the report ‗Noodles in
Ramen. Later in 2005, CG Foods India Pvt Ltd, a India‘ published in September 2008, the market
member of the Nepal-based Chaudhary Group of
size of instant noodles was around Rs 11346.3
Companies, launched its instant noodles brand
nationally. Further populating and adding excite- million in 2008, of which Rs 11171.7 million was
ment to the category was Capital Foods, the lead- the share led by pouch instant noodles and re-
ing processed food and private label manufac- maining Rs 174.6 million was held by instant cup
turer, which forayed into the segment in as re- noodles.
cently as 2008. A host of pri-vate labels too were
in competition including food and grocery retail- In spite of the new competition and the fact that
ers such as More, Spencer‘s, Food Bazaar, Reli- the new entrants will have an impact on Maggi‘s

11

September Vol 1, 2010. Ecobizz Newsletter

 IBS Hyderabad

market share, Nestle has the potential to expand area that Maggi should focus on is the product
the Rs. 1300 crore instant noodles category, range and the value proposition. Horlicks Food-
which is growing at a rapid 15% annually. To les have positioned their noodles as ―healthy‖
retain the position as the market leader, Maggi snacking option targeting kids and mothers.
has to think smart and act wisely. They are in short trying to give instant-noodles
that are healthy unlike the noodles that contain
The biggest advantage that Maggi has over the
Maida, which is unhealthy on regular basis and
others is the huge brand equity it enjoys among
usually avoided by mothers for their children.
consumers. Maggi noodles have become a house-
Maida is one of the ingredients in Maggi instant
hold name over the years. Even though Maggi‘s
noodles. However, to put an end to the critics
advertisements over the years have focused only
that say Maggi is unhealthy, Nestle came up with
on school kids coming home hungry and enjoy-
two products, ―Vegetable Atta Noodles‖ and
ing the noodles in two-minutes, it has an emo-
―Vegetable Dal Noodles‖. Both these new prod-

tional connect with various segments from chil-

ucts were positioned as healthy instant noodles.
dren to teenagers to college-goers to bachelors to
adults. It‘s on that basis the company is now aim- Also, to tap the growing market of the instant
ing at strengthening its ties with the consumers. cup noodles, where Indo Nissin‘s Cup Noodles
This is very apparent from the ―Me aur Meri had already entered, Maggi launched its own
Maggi‖ campaign that was started by Maggi last variety christened ―Maggi Cuppa Mania‖. In the
year. The campaign revolved around consumers near future, with focus on convenience and time,
sharing their Maggi experiences, and a select few Maggi can think of innovating by introducing
were published on the product packaging. The other options like Microwave instant noodles.
advertisement itself evoked nostalgia by focusing The target for the pouch maggi was the house-
on the emotional connect that Maggi has with wife mother; here it can be a working mother
each and every age group by showing different who through a microwave oven saves time.
versions of happy ―Maggi memories‖.
Focus on the flavors too is of vital importance,
Apart from the consumer-brand equity, another considering the consumers now have access to a

12

September Vol 1, 2010. Ecobizz Newsletter

IBS Hyderabad

lot of information and may expect a variety of NEWS @ HOME:

flavors. The basic ones that Maggi has are Masala
and Chicken. In the cup noodles, Maggi has the
flavors Maggi Yo and Chilli Chow Yo. More new
flavors can be introduced as per the consumers‘ Vodafone to pay India $2.6bn tax.
preference as flavor can be a major distinguish-
Indian troops on alert as border dis-
ing factor when it comes to instant noodles.
pute with China heats up.
Price is yet another factor that plays a very im-
portant role here as Indian consumers are sup-
ONGC to finalise BP Vietnam asset
posed to be highly sensitive to price. And hence, valuation in few weeks.
there may be a possibility that they purchase a
India slips in WEF rankings, Switzer-
substitute which is available for lesser price.
land tops.
Also, price can help increase consumer base in
rural.semi-urban market. Nestle, to reach out to India to vet Vedanta's Oil-
tier 2-3 towns and rural areas, launched Maggi 2- Exploration Ability Before Allowing
minute noodles at the Rs 5 price point. The Cairn Deal.
smaller value packs will help Maggi gain further
penetration and hence, sustain market share. India, Japan to ink eco cooperation
agreement
Under instant-foods category, the brand Maggi is
the fastest growing brand. But due to the entry of IIM-A to admit highest number of
competition, it'll have to work aggressively to foreign students
make sure it retains its leadership. There have
been new products and variants launched, but India, Russia to build military trans-
the awareness generation has not been much. port planes
Nestle initially spent a lot on sampling a product.
There were a lot of school programs where the
Natco Pharma open to settle cancer
product was freely sampled, in metros as well as drug patent case
small towns. There was a lot of money spent on
Cabinet nod for first caste census in
advertising, but it was the sampling which
80 years
helped them set a category and be the leader. It
seems that some of the lessons learnt (like free India ranks 77 in best countries for
sampling) have been unlearnt and time has come business
to re-learn those very lessons. What happens
next, time will tell, but considering Nestle‘s po-
tential, let‘s hope they are ready to bounce back
and retain the two-minute magic!

Source:
www.ndtvprofit.com

www.indianetzone.com

starnews.indya.com

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SPORTS and CRISIS

- Antariksh V

South Africans are already feeling the heat of 2010.

hosting the World Cup tournament. When the
initial estimate of World Cup stadium costs was
The EU has estimates that when soccer World
made by South Africa, it was set at some 2-3 bil-
Cup tournament is played on another continent,
lion Rand. Based on current visitor estimates,
the loss to economic output is £.8.1 billion -either
there seems no way for the SA Government to
through people watching at a late/early hour
recoup that investment; to top it up, over the last
and then calling in sick, or just calling sick for the
few months officials have been predicting the
whole two weeks to see the finals
final bill will come in around 13
in person. Last week, Britain's new
billion Rand. It is a staggering in-
coalition government announced
crease, but also a typical example
$38 million in Olympic budget cuts
of the insane enthusiasm that
as part of efforts to slash the na-
every country gets when asked to “Are hosting Sporting
tion's budget deficit.
stage anything to do with big-
money sport. These mega events Events actually
are organized with the hope of socially beneficial?
generating vast revenues and gain Even the current Greece crisis has
more businesses and tourists. Or- OR do they create a got its heritage linked back to the
ganizing countries highlight the crisis situation for the Olympic Games. While many fac-
advertising revenues and interna- tors are behind the crippling debt
tional exposure (social benefit) as host countries?” crisis, the 2004 Summer Olympics
the benefits that follow. in Athens has drawn particular
attention. If not the sole reason for
the nation's financial mess, it
The 1990 World Cup cost Italy scores some point to the games as
£550 million. The economic benefit has been vari- an illustration of what's gone wrong in Greece.
ously described since then as neutral to negative. Greece had been overspending. Governments in
In 2002 the host country Japan made a whopping the Greek were not able to balance a budget in
loss: ticket sales were £1.4 billion, and FIFA gave nearly 40 years, and the country narrowly
the country £100 million - but the all up cost was averted bankruptcy in May before panicky Euro-
£4.7 billion. Even the Germans made only a mea- pean partners grudgingly put up massive rescue
sly £56.4 million on their staging of the World loans. As a result recently the Greece's Finance
Cup in 2006: and if Germany can't make money Minister George Papakonstantinou had to out-
out of something, then it just isn't possible. line harsh spending cuts and tax increases to free
(Versus the cost of staging the thing, this repre- up billions of Euros in a joint International Mone-
sented a net profit margin of 0.4%). When the UK tary Fund and Eurozone rescue. Greece will re-
won the 'right' to stage the Olympics in 2005, the ceive about $135 billion in bailout loans through
nation went crazy. The total expenditure which 2012 from IMF and EU governments worried
started at £4.8 billion has crept up to £8 billion by about the Greek crisis. This crisis could also dam-

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age the Euro. months before the games, construction crews

worked around the clock, using floodlights to
There are more than a dozen Olympic venues - keep the work going at night. In addition, the tab
the start of Greece's irresponsible spending binge for security alone was more than $1.2 billion. Six
- now vacant, fenced off and patrolled by private years later, more than half of Athens' Olympic
security guards. Money loaned on short term, sites are barely used or empty.
was spent on long term assets. The 2004 Athens
Olympics cost nearly $11 billion by current ex- So finally the question that prevails for us Indi-
change rates, double the initial budget, which ans is; are we heading for the same fate with the
does not include major infrastructure projects CWG? With the current media publicity of the in-
rushed to completion at inflated costs. In the appropriations in CWG purchases and more than
`30,000 crore expenditure, do we still expect the

XIX Commonwealth Games`2010,New Delhi:-

Music maestro AR Rahman launches Delhi 2010's theme song

1500 dope control tests to be performed during Delhi 2010

Organizing Committee launches merchandise for Delhi 2010

Tata Motors joins Delhi 2010 as transport sponsor

Souce:
www.commonwealthgame2010.com

www.cwgvisit.com

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Contributions from the Guests

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September Vol 1, 2010. Ecobizz Newsletter

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Launching of IPO by
Micro-finance Institutions
- Shaivya Srivastava

Poor need access to credit more than subsidies. tion that provides microfinance services, like the
Access to credit allows poor people to take ad- supply of loans, savings, and other basic finan-
cial services to the poor (In India, they have not
vantage of economic opportunities. The poor
rarely access financial services through the for- got the license to operate savings account). Their
main objective is to eradicate poverty, to em-
mal financial sector. They address their needs
through a variety of financial relationships, power clients, to uplift them, to educate them
about business, to create employment by creat-
mostly informal. Credit is available from infor-
mal commercial and non-commercial money- ing small business, to engage them into activities
lenders, usually at a very high interest rate. for earning and for uplifting their social status as
Financial services could enable well as income levels Microfinance Institutions
the poor to leverage their ini- while doing so were con-
tiative, accelerating the process strained by the lack of capital,
of building incomes, assets and the lack of capacity, and the
economic security. “Microfinance institutions, high cost of doing microfi-
However, commercial lending a solution for India`s poor nance. To overcome the first
issue i.e. of capital, they
institutions have their own segment, unable to meet the
prudential lending norms viz. requirements of commercial moved to a ―for-profit‖ model,
and one of them launched an
borrowers to have a stable lending institutes” IPO in FY11
source of income out of which
Launching of the first IPO by a
principal and interest can be
paid back according to the Microfinance Institution, has
sparked a debate on whether it
agreed terms. Also very often, opening a branch
was a very costly affair and hence most villages is right or not for a non-profit organisation to
didn‘t have one. earn profits. There are always two sides to a coin
Microfinance institutions came into existence to and debates are never ending. The question is
meet the need of such individuals from poor seg- can an organisation function solely on ethics and
ments of rural India who could not meet the re- not care about making money? Hence it is for us
quirements of commercial lending institutes. to evaluate whether an institution solely born
with a social mission should be a profit-making
When microfinance offered a loan that was cheap
as compared to the informal sources of credit and or not?
SKS Microfinance‘s public offer of Rs 1,300 crore
also had a much relaxed lending norm, it found
ready takers. on 28th July this year which had overwhelming
response has opened gates for other such institu-
A Microfinance Institution (MFI) is an organiza-

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tions to launch their IPOs. SKS Microfinance has goes on to increase Microfinance is slated to join
attracted a lot of FII‘s like Abu Dhabi Investment the ranks of Flintstones, the crossbow, gas lamps,
Authority, British Columbia Investment Manage- the pigeon post and the floppy disk — all excel-
lent in their own time but rendered obsolete by
ment, JP Morgan Indian Investment Trust, etc,
the march of technology. There is this question
who believe that India presents ample opportu- whether the traditional money lender, or the
nity of growth for micro financing companies "sahukar" (the local money lender), are being
and SKS being one of the largest MFI in India institutionalized by the microfinance institutions
will be able to sustain its profits through its well- – the rate of interest being much higher?
One school of thought advocates Micro-saving
established business model.
instead of Micro-credit as it ultimately results in
On the large, Microfinance Institutions have
debt for poor people, the rate of interest being
found large number of supporters who feel that
quite high. This also creates a great impact on the
non-profit organi-
social value of poor
sations should be
people. Micro sav-
able to earn profits,
ings are necessary
as in the long run
for the security of
proceeds from the
the poor people. So
IPOs can help the
micro credit is not
company to meet
the ultimate solution
its future capital
to improving the
requirements for
well-being of poor
uplifting the poor,
people.
at the same time
While the debate
help its sharehold-
rages on, I am of the
ers grow. MFI‘s feel
opinion that it is a
that it is necessary
good step that these
for them to earn a
institutions have
little profit so as to
taken of augmenting
upgrade their infra-
their capital and it is
structure and IT
important to be able
systems and especially when their traditional
to stand on own feet before one can reach out to
sources (which are banks and philanthropists)
help others. A steady and growing net worth
are drying up. This IPO will also dramatically
would help the MFIs sustain the bad times in an
increase their visibility in the market and bring in
economic down cycle.
greater trust for the entire industry.
The great challenge before us is to address the
constraints that exclude people from full partici-
On the contrary there are people who do not ap- pation in the financial sector. Together, we can
preciate MFI‘s making profit and feel that they and must build inclusive financial sectors that
are deviating from their main mission which is to help people improve their lives."
help the poor. In fact they are of the view that
they are taking the wrong path and it might lead
to subprime all over again. Its critics also believe
that with profit making coming into play the in-
stitutions may become greedy and would not
care about the microloans as they do not make
high profits. In fact they feel that as the greed
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IBS Hyderabad

‘REAL INDIA’ – QUOTE UN-

QUOTE
- Neha Singh Madhukar

Many a times, I have heard people say to a per- real India is understandable. They have stereo-
son who has come to visit India from abroad, ‖If typed India, due to a kind of Image they have
you want to see the real India, you need to go to that has stayed for long, because it hasn‘t
the villages ‖ So are the people living in cities changed over long periods. But an Indian talk-
foreigners? ing like this is Ironic, it is like nodding in affirma-
tive to the notions of others, that we are yet still ,
What, then, can we expect others to perceive of the same Third World Country, that is so not the
our country? For them India would just be a land case now.
of snake charmers, myths, superstitions and a
poverty galore. Maybe this has got to do with Agreed, we have piles of problems, but it is not
our belief that has passed on to what is thought something which only we are facing, even devel-
by us-Real India resides in rural areas only. oped nations have had grave problems, and
most of them they have been able to overcome is
Indeed it is real as we say, be- partly because their plan-
cause more than 65% of our ning of domestic living was
population lives there. systematic, and partly be-
“If we wish to change the cause their citizens were
But it is quite tragic if we associ- perception of India. We aware, responsible and firm
ate ourselves with what India must channelize our exper- about progressing… ‗Its all
has come to mean – lacunae in in the mind‘ they say- once
necessities, infrastructure, water, tise towards searching and the mind is firm, we can be
power, transport, primary edu- providing basic education ready to take on any obstacle
cation and healthcare. Sure, with composure.
for all”
working towards it and hence
called a ‘Developing‘ economy. Once this happens in India,
But this is not what should come we are sure to get even bet-
to represent of us. ter .

Rural India is much more than that- a place Political elite can mismanage India, till we allow
where culture and tradition are practiced , cus- it to do that. We must not forget that we are liv-
toms are more alive and visible. ing in a democracy. I agree with you if you are
saying that it is difficult to remove problems of
However, Urban India, also is the real India, it our system, but I think it‘s wrong to say that this
is developing, evolving , and setting example for problem is beyond our hands. Yes it‘s damn dif-
other small villages and towns. And with rapid ficult, it can't be done overnight, but we cant live
Urbanisation , this line of difference between with as well. It requires a combined, relentless
them is sure to get thinner. effort over a period of time. If we are determined
we can definitely overcome the challenges to a
Foreigners wanting to go to the villages to see
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September Vol 1, 2010. Ecobizz Newsletter

 IBS Hyderabad

large extent . hazard way of regulation and needs to be imple-

mented and practiced strictly by the citizens.
Rather than gossiping about What Real India is, Brand India has to be positioned accurately and
we must channelize our expertise towards correctly. The best people to know and judge us
searching and providing basic education in rural should be us. And trust me, we are good judges,
areas also, so that they too would come in the and we do not want to get bogged down by what
race of development of our nation. others think of us.
India is a developing nation and has been ex- The point of interest is not actually the democ-
panding and diversifying in every field. Espe- racy model, but our arriving at an inclusive
cially since Independence, education has seen a model of growth..With rapid urbanization this
major change and growth, the legacy of which should start to show in the happenings. With
needs to be carried out at higher pace and we hope that we ourselves with time erase ‗divides‘-
need to accelerate even more. Talking about liter- rural/urban, super rich /below poverty line.
acy rate, it has been increasing from 3% in 1980s

Hopefully the real India would be everywhere

to more than 65% in 2001. All levels of education
rather than what is said about it now- in six lakh
in India, from primary to higher education, de-
villages.
pict a challenge. We have well-esteemed institu-
tions, namely IITs, IIMs, NITs, AIMs, ISI, JU, Once we (cities/villages) ourselves realize what
BITs etc. The intellect cultured from good knowl- is good for us in collective sense, it would surely
edge providers can be harnessed for the use of lead to corrections and betterments. The realiza-
our nation‘s progress instead of its citizens going tion is not far away.
abroad, leaving us with nothing but the term
‗brain drain‘to mouth. It is the citizens who need Most importantly, a sense of optimism prevails
to take an initiative and stand through it, if we in each reaction- this is why the topic is talked
wish to see the difference. about. Hope the optimism can be seen unfolding
and become a reality starting from grassroot
I am against the attitude ‗Chalta hai‘. If anyone level to the pinnacle.
wants to see implementation of real develop-
ment, it better be ‗organised‘ rather than a hap-

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