Jan
7
Satyam reveals Fraud after Fiasco
Filed Under Indian Stock Market, IT BPO KPO Services, Indian Companies, Indian Government, India Business | 1 Comment
Today is a bad day for investors of the Indian capital markets.
Till now the belief was that Satyam’s Board did a fiasco (which is paradonable if the intent was genuine) by doing things without the right process.
But today, Satyam’s chairman has revealed fraud in financial statements over the last few years, which results in over Rs5000 cr of non-existing assests. Now its a crime, not a mistake.
Read this fax letter from: Satyam_Computer_Services_Ltd_070109.pdf
Exactly a week back, we had written of two basic issues in the Satyam fiasco. Lessons From Satyam Investor Issues
The second point was this:
2. The effectiveness of Satyam’s corporate governance
What has come out very clearly from today’s news is that corporate governance was really bad at Satyam — and this is was top 5 Indian IT services companies — so you can well imagine what kind of controls may or maynot be there in smaller companies.
So this is going to put all IT companies under a very tight spot — with unplanned extra expenses in all kinds of auditing reviews. Everyone has to learn from Infosys - the leading IT services stock — about how to be fully tranparent with investors. SEBI should use Infosys reporting as a guideline.
Investors are likely to now reduce the P/E valuaiton for mid-cap and small-cap companies, because this corporate governance risk just can’t be calculated for smaller companies when a large company like Satyam can do it wrong, despite an army of auditors and market analysts.
Every investor needs to reassess his portfolio companies and check if the parts are adding to the total. This weak global economy will expose more such examples where things were hidden under rosy valuations and positive market conditions.
Following were the comments of Narayana Murthy (NRN) of Infosys about an hour back:
I am shocked and painfully dismayed at what has happened at an important software company in India. It is a total failure of governance. I only hope that relevant authorities get to the bottom of this and take appropriate action.
It is important to remember that one Satyam does not make the entire Indian software industry. I believe it is an isolated case. I want foreign investors to realise that there are many honest managements and good companies in this country. While what has happened at Satyam is totally regrettable, I believe that it does not represent India. It just represents one individual and one company.
In the short term, investors will start looking deeper into all companies they want to invest in, and rightly so. Once they realise that things are not all that bad and that most companies are decent and managements honest, they will regain their faith.
This too will pass. Investors will consider this as an extreme case. Right now, all of us must conduct ourselves in the most legal and ethical manner. It is a good warning signal for all managements.
Dec
31
RCom Rolls Out GSM Service in 11000 Towns
Filed Under Indian Companies, India Business, Mobile Telecom, India Investment Opportunities, Tier-2 Cities | Leave a Comment
In one of the fastest network roll outs to cover one billion people, Reliance Communications (RCom) on has unveiled its nationwide GSM mobile service across 11,000 towns.
The rollout with an investment of Rs 10,000 crore, makes RCom the only national player to offer both CDMA and GSM services to customers.
- RCom plans to execute both CDMA and GSM through an integrated operation.
- RCom’s CDMA network spans more than 20,000 towns and 450,000 villages, with around 60 million subscribers.
- The plan is to double RCom’s GSM coverage from 11,000 towns and three lakh villages to 24,000 towns and six lakh villages over the next few months, involving an incremental capex of a few thousand crore rupees.
Anil Ambani of Reliance ADAG and RCom said:
“In 2003, Reliance changed the landscape of telecom in India. Year 2009 will be no different. The company is targeting 100 million subscribers to use its network. We have done in 15 months what the industry has been trying to do in 15 years. Through the GSM launch, RCom plans to rewrite the rules of the industry in terms of pricing, proposition, value added services.”
- RCom plans to procure seven million handsets for Rs 3,850 crore. For the first year of GSM operations, RCom has set a target to sell 15-20 million handsets.
- RCom will use the existing 2,500 retail stores to push its new strategy.
Quick Facts On Indian Mobile Telecom Industry:
- The Indian mobile handset market is expected to cross 100 million units this year against last years estimated size of 70-75 million units.
- The GSM market serves 75% of the about 300 million mobile customers in India, and adds approximately nine million users every month.
Dec
31
ONGC To Acquire Imperial Energy - Shareholders Approve The Deal
Filed Under Indian Companies, Energy, India Business | Leave a Comment
Indian Energy Giant — Oil and Natural Gas Corp (ONGC) — has made a timely European acquisition: Imperial Energy.
Imperial Energy is based in Leeds, UK and owns oil producing blocks in Tomsk region of western Siberia in Russia and Kastanai in north-central Kazakhstan.
The ONGC has taken control of Imperial Energy Plc for GBP 1.3 billion (USD 1.9 billion) after an overwhelming 96.8% shareholders of London-listed Imperial Energy accepted the ONGC takeover offer.
The deadline for the state-owned firm’s 12.50 pounds per share offer closed yesterday and 99,241,110 or 96.8 per cent of the shares were tendered, ONGC Videsh Ltd (OVL) informed the London Stock Exchange.
OVL needed 90% shareholders to approve the deal, and got 96.8% approval. Imperial Energy will be delisted from from the London Stock Exchange pays in cash to the remaining 3.2% shareholders who were not in favour. The entire acquisition and subsequent delisting of Imperial Energy may take two to three weeks — which is quite fast by most standards.
ONGC Chairman R S Sharma said:
“ONGC ows the acquisition to government support, which has seen OVL in the past seven years increase its number of projects to 39 in 17 countries, from just a single project in Vietnam. This is the biggest overseas ever acquisition by OVL.”
OVL will fund the transaction through a combination of loans from the parent company (ONGC), wherein ONGC would lend USD 1 billion to fund the transaction at 5.96 % interest rate.
In 2003, OVL paid USD 1.7 billion to buy 20% stake in Exxon Mobil Corp’s Sakhalin-I field in Russia and USD 785 million for a stake in the Greater Nile project in Sudan.
Analysis & Projection: The weak UK pound and the better market capitalization of Asian companies could see more such takeovers in Energy and other sectors too.
Dec
30
Lessons From Satyam Investor Issues
Filed Under IT BPO KPO Services, Indian Stock Market, Indian Companies, India Business, Metros, India Investment Opportunities, India Real Estate | 1 Comment
The Satyam event has been on the centre stage on Indian business for the last two weeks. This year 2008 has shown us so many events in the financial space that we are primed for every kind of possibility.
The Satyam event has no precedence in the Indian business environment where most Board members unanimously vote for the agenda proposed by the Executive Chairman (who may have only a minority share holding).
Satyam stock lost almost 40% market value (falling from Rs 225 to Rs 135) over the last two week, though it has now recovered about 20% (Rs 160).
The events of the past two weeks have raised many questions, but all of them can be summarized into two basic issues:
1. The viability of Satyam’s strategy to diversify into unrelated business like Real Estate
While the debate remains hot, we did not see any projections or scenarios of how the Maytas deal would have given a better EPS for Satyam shareholders. As a Satyam shareholder, I was fine with diversification if the company leaders believe they can execute it.
Maytas has Rs12,000 crore of orders, so the order book is good, and profits can be made there. And the Indian real estate market has potential for many more players at the top-end level, who can do metro rails, airports, highways etc.
If Mukesh Ambani or Anil Ambani of Reliance starts a diversified business, the shareholders are happy that a new revenue stream will start. Its because Reliance has been diversifying into every possible industry. There is no reason to believe Satyam will fail, if the business plan is good. Raju understands the real estate business well, and Maytas looks like a healthy business.
Now whether the valuation being offered for Maytas by Satyam was fair-value is a different question, and that brings us to the second learning.
2. The effectiveness of Satyam’s corporate governance
Its likely that investors felt the valuation of $1.6 billion for Maytas for much higher, and there is no way to solve such a question expect by taking different views into account. You can’t push a valuation without the support of majority investors.
Since only 8.5% equity of Satyam was with Raju/promoters, and 61% with FIs, Satyam board should have done two things:
(a) passed the entire business plan and projections through the FIs, and got them on board, and their agreement.
(b) It would have been even better, if Satyam asked each of the three FIs to give their valuation for Maytas, and finalized an average of it as the proposed valuation.
If the above two steps we were done, its possible Satyam’s investors could have supported the deal.
————————–
Related Stories:
- Satyam reveals Fraud after Fiasco (latest post: 7 Jan 2009
) Customers trust Satyam: Ramalinga Raju tells employees Satyam shares in demand on possible change of guard Ex-cabinet secretary Prasad to continue on Satyam board Now, Satyam board can not decide on buyback
Sep
27
RBI Guidelines For Foreign Company Set-up in India & Repatriation of Income
Filed Under Indian Companies, Indian Government, India Business | Leave a Comment
Foreign companies may set up business in India in any one of the following manners while retaining its status as a foreign company:
1. Liaison Offices - A foreign company can open a liaison office in India to look after its Indian operations, to promote its business interests, to spread awareness of the company’s products and to explore further opportunities. Liaison offices are not allowed to carry on any business or earn any income in India and all expenses are to be borne by remittances from abroad.
2. Project Offices - The project office is the ideal method for companies to establish a business presence in India, if the object is to have a presence for a limited period of time. It is essentially a branch office set up with the limited purpose for executing a specific project. Foreign companies engaged in turnkey construction or installation normally set up a project office for their operations in India.
3. Branch Offices - Foreign companies engaged in manufacturing and trading activities outside India may open branch offices for the purpose of:
• Representing the parent company or other foreign companies in various matters in India, like acting as buying and selling agents.
• Conducting research, in which the parent company is engaged, provided the results of this research are made available to Indian companies
• Undertaking export and import trading activities.
• Promoting technical and financial collaborations between Indian and foreign companies.
4. Trading companies - Foreign companies may invest in trading companies engaged primarily in exports. Such trading companies are treated at par with domestic trading companies in accordance with the trade policy.
The RBI accords automatic approval for foreign equity up to 51 per cent for setting up trading companies engaged primarily in exports. All other proposals, which do not meet the criteria for automatic approval, can be addressed to the Foreign Investment Promotion Board, i.e. “FIPB”.
5. Wholly owned subsidiaries - Foreign companies may set up a wholly owned subsidiary, which is an Indian Company with an independent legal status, distinct from the parent foreign company.
Under the current foreign investment policy, a wholly owned subsidiary can be established either under the automatic route, if the conditions specified therein are complied with (specific high priority industries) or obtain an approval from the FIPB.
6. Joint venture companies - Foreign companies may set up a joint venture company i.e. in financial collaboration with an Indian business house/company in India, which is an Indian Company with an independent legal status, distinct from the parent foreign company.
Under the current foreign investment policy, a joint venture can be established either under the automatic route, if the conditions specified therein are complied with or obtain an approval from the FIPB.
Foreign companies intending to set up any kind of office mentioned above activities on behalf of the parent company or foreign trading companies in India for promotion of exports from India have to obtain a prior approval of the Reserve Bank by submitting an application in the prescribed form to the Central Office of Reserve Bank. On approval of such cases, permission is granted initially for a period of 3 years, subject to the condition that expenses of such office will be met exclusively out of inward remittances; such offices are not permitted to generate any income in India.
Industrial Policy:
Industrial Policy determines items/areas reserved under automatic route of approval by the RBI for Foreign Company to do business in India. Automatic approval is available through the RBI in all items/activities with the exception of a few items which are set out in Press Notes issued by the Government of India.
Besides reserved items/areas reserved by Reserve Bank of India are also notified a “List A” which specifies activities that are not covered by its Automatic Route.
To carry on business in items/areas reserved in List A, proposals are required to be approved by Foreign Investment Promotion Board, Government of India for which an application is required to be made to Secretariat for Industrial Assistance, Ministry of Commerce and Industry, Government of India, New Delhi.
Industrial licensing is mandatory in respect certain industries i.e.
- Distillation and brewing of alcoholic drinks;
- Cigars and cigarettes of tobacco and manufactured tobacco substitutes;
- Electronic Aerospace and defense equipment of all types;
- Industrial explosives including detonating fuses, safety fuses, gun powder, nitro cellulose and matches; Hazardous chemicals;
- Drugs & Pharmaceuticals (according to modified drug policy issued in September ‘94).
The compulsory licensing provisions do not apply to the small-scale units manufacturing any of the above items reserved for exclusive manufacture in small scale sector.
Specific Industries are exclusively reserved for the public sector i.e. Arms and ammunition and allied items of defense equipment; defence aircraft and warships; Atomic energy; Railway transport.
Foreign Collaboration:
Indian Companies can also enter into Technical Collaboration Agreements with Foreign Collaborators under two routes:
” The automatic route of Reserve Bank ” Under approval of Secretariat for Industrial Assistance (SIA), Ministry of Industry, Government of India, New Delhi.
Application for foreign technical collaboration which do not conform to the parameters given in automatic route are required to be made to SIA, Ministry of Industry, Government of India, New Delhi. The extension of Foreign Technical Collaboration Agreements (including those approved by the Reserve Bank) is also required to be approved by SIA.
Nuts and Bolts-1: Registration & Incorporation
The procedure for registration of an industrial undertaking varies; it entirely depends upon whether the item proposed to be manufactured falls within the licensed, de-licensed, or small-scale sector. An application seeking an industrial license must be filed with the Ministry of Industry together with the application seeking NRI investment approval. An application in Form FC/IL - SIA must be submitted to the Ministry of Industry for grant of an industrial license.
Form FC/IL - SIA should comprise information related to the promoter and collaborator, proposed activities, items of manufacture, capital structure, borrowings, investment, foreign exchange inflow, technology transfer, if any.
There is no definite time frame as when the approval will be granted, it depends on a case-to-case basis. However, if the information supplied in Form FC / IL - SIA is precise and calls for no clarification from the Government, approval is normally obtained in 4-6 weeks.
In case of an item reserved for manufacture in the small-scale sector unit must get itself registered with the Directorate of Industries/District Industries Centre of the State Government concerned.
Capital investment made in India can be repatriated fully repatriated along-with the profits after completing certain formalities. Also, returns on the investment can be repatriated in two forms i.e.: (1) “Dividend - dividend on shares held by foreign investors is fully repatriable subject to certain formalities, and (2) “Interest - interest earned on bonds or debentures can be repatriated after paying appropriate tax.
The profit, earned by the branch doing permitted activities can be remitted after payment of the necessary taxes in India, the branch office should submit an application for remittance to the authorized person along with necessary documents/certificates etc., as prescribed.
Direct Tax Issues Tax liability in India is basically determined on two criteria viz. Scope of total income and Residential status of the taxpayer. Company that is registered outside India is treated as a Foreign Company.
Taxable income of foreign enterprises determined as per the various provisions contained in the Indian Income-tax Act, wherever a foreign enterprise belongs to a country with which India as entered into an agreement for Avoidance of Double Taxation (AADT), the tax liability determines as per the provision of the relevant AADT.
Author: Rakesh Saxena, Advocate
| The Reserve Bank of India guidelines for setting up FDI bussiness in India. Article Source: http://EzineArticles.com/?expert=Rakesh_J_Saxena |
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Jul
27
Indian Trademark Law - Statues, Requirements & Process
Filed Under Research & Development, Indian Companies, India Business, India vs China, Intellectual Property | Leave a Comment
Indian Trademark Law has been codified in conformity with the International Trademark Law and is about to undergo an amendment to be at par International Trademark Law.
Recently India has signed Madrid Protocol that will allow Foreign Applicants to file an International Application designating India like many countries around the globe e.g China.
Though unlike China and many other countries Multi class filing is allowed in India.
Statues:
The various statues dealing with Intellectual property laws in India are as follows:
1. Trademarks Act, 1999
2. Copyright Act, 1957
3. Patents Act, 1970 as amended by Patents (Amendments) Act, 2005
4. Designs Act, 2005
5. Code of Civil Procedures, 1908
6. Indian Penal Code, 1860
7. Geographical Indication of Goods (Registration & Protection) Act, 1999
8. Semiconductor, Integrated Circuit Layout Design Act, 2000
9. Plants Varieties Protection and Farmers’ Rights Act, 2001
10. Information Technology Act, 2000
Requirement:
A ‘Trademark’ means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others. A ‘Mark’ includes a device, brand, heading, label, ticket, name (including abbreviations), signature, word, letter, numerals, shape of goods, packaging or combination of colors and any combination thereof.
The two main requirements of a trademark are that it must be distinctive (adapted to distinguish the goods/services of the applicant from that of others) and not deceptive. Therefore while selecting a trademark, words that are directly descriptive of the goods, common surnames or geographical names should be avoided as these confer weaker protection to the proprietor even if registered. Now the concept of “well known mark” has been introduced after the last amendment and Section 2 (zg) defines a well known mark as:
“Well-known trademark, in relation to any goods or services, means a mark which has become so to the substantial segment of the public which uses such goods or receives such services that the use of such mark in relation to other goods or services would likely to be taken as indicating a connection in the course of trade or rendering of services between those goods or services and a person using the mark in relation to the first mentioned goods or services.” While determining whether the mark is well-known mark, the registrar will take in to consideration while determining that the mark is a well known mark.
(a) the knowledge or recognition of the alleged well known mark in the relevant section of the public including knowledge obtained as a result of promotion of the trademark.
(b) the duration, extent and geographical area of any use for that trademark.
(c) The duration, extent and geographical area for any promotion of the trademark including advertising or publicity and presentation at fairs or exhibition of the goods or services
in which the trademark appears.
(d) The duration and geographical area of any registration of any publication for registration of that trademark under this Act to the extent that they reflect the use or recognition of that
trademark.
(e) The record of successful enforcements of the rights in that trademark, in particular the extent to which the trademark has been recognized as a well known trademark by any Court or Registrar under that record.
Whereas a trademark has been determined to be well known in at least one relevant section of the public in India by any court or Registrar, the Registrar shall consider that trademark as a well known trademark for registration under this Act.
“Relevant section of Public” may be actual or potential consumers of, persons involved in channels of distribution of or business circles dealing with the type of goods or services to which the mark is applied.
The Registrar is not required to consider the following facts while determining a well known trademark.
a) The Trademark has been used in India
b) The Trademark has been registered
c) The application for registration of the Trademark has been filed in India.
d) The trademark is well known in or has been registered in, or in respect of which an application for registration has been filed in any jurisdiction other than India or
e) The trademark is well known to the public at large in India.
Priority:
For claiming a priority from an application filed in United States a corresponding application should be filed in India within 6 months of date of filing of original application.
Various Grounds for refusal:
Absolute grounds:
Section 9 of the Trademarks Act, 1999 sets out the absolute grounds for refusal of trademarks, which can be grouped under following heads:
a) Trademark is devoid of distinctive character;
b) Trademarks that are descriptive;
c) Trademarks likely to deceive of cause confusion;
d) Trademarks or signs that are customary in current language and in the bonafide and established and customary practice of the trade;
e) Trademarks comprising scandalous or obscene matter or likely to hurt religious susceptibilities in India;
f) Trademarks consisting of shape which are purely functional or are necessary to obtain a technical result or give substantial value to the goods; or
g) Trademarks whose use is prohibited under Emblems and Names (Prevention of Improper Use) Act, 1950.
Prohibition:
Section 13 of the Trademarks Act, 1999 prohibits registration of any word as trademark which is:
a) Commonly used and accepted name of any chemical element or any chemical compound (as distinguished from mixtures) in respect of a chemical substance or preparation; or
b) Declared by the World Health Organization and notified as such by the Registrar, as an International non-proprietary names.
Relative grounds of refusal:
Section 11 of the Trademarks Act, 1999 sets out the relative grounds for refusal of trademarks, which can be grouped under following heads:
a) identical or similar to a previous mark with and/or without similar or identical goods;
b) Prohibition of use of the trademark under passing off or law of copyright;
Statutory defense available under the Act:
For registration:
a) Honest concurrent use;
b) Acquiescence; or
c) Prior user
Against Injunction suit or criminal matters
a) Use in accordance with honest practices in Industrial or commercial matters;
b) Parallel Imports;
c) Fair use in description of the goods or services; or
d) Generic ness.
Special Considerations in case of well known mark:
As per Section 11 of the Trademarks Act, while considering an application for registration of a trademark and opposition filed in respect thereof the Registrar shall
a) protect a well known trademark against the identical or similar trademark.
b) take into consideration the bad faith involved either of the applicant or the opponent affecting the rights relating to the trade mark.
However this provision shall not effect the trademark if it trademark has been registered in good faith disclosing the material information to the Registrar or where right to a
trademark has been acquired through use in good faith before the commencement of this Act.
Enforcement of Trademarks Rights:
Opposition (before the Registrar) and Cancellation (before the Registrar as well as Appellate Board)
Opposition can only be done after publication of the trademark and within 3 months of date of availability of Journal. One month extension is available if sought before the expiry of 3
months time.
Cancellation on the ground of non-use for a period of 5 years and 3 months and proof of intention on part of the registered proprietor not to use the trademark at the filing date and nonuse till the cancellation petition.
Before the Courts: Ex-parte Injunction, Permanent Injunction, Anton Pillar Order, and /or Arrest and Seizure of goods (irrespective of registration).
Assignment/ license:
Trademarks are now recognized as a “movable property” under the Indian law and can be therefore assigned/ licensed. A trademark can be assigned with or without the goodwill
attached to it.
Renewal:
The trademarks can be renewed perpetually, are renewable for a period of 10 years on payment of prescribed fees.
Express processing:
Under Indian trademark law now it is possible to expedite the various proceeding e.g. search, examination etc. by filing a request with prescribed fees. Indian Trademarks law are at par with the International laws and has stringent procedures for safeguarding and protecting interest of the proprietor of mark.
The author, Sudhir Aswal, is an Advocate and Registered Patent And Trademark Attorney with Aswal Associates and handles IPR division of the firm and is having the vast experience of having being associated with various premier IPR firms of India in the past. The author is also a member of APAA. Article Source: http://EzineArticles.com/?expert=Sudhir_Aswal
Mar
25
Indian Mobile Customer Base Set To Grow Ahead US Behind China
Filed Under Indian Companies, Emerging Sectors, India Business, Mobile Telecom | Leave a Comment
The Telecom Regulatory Authority of India (TRAI) has released a report on growth numbers in February in Telecom Space yesterday- March 24th.
This change can be accounted due to decrease in wire line subscribers over the month. Total wireless addition increases the wireless subscriber base in the country to just over 250 million (250.93 million is forecasted).
The overall tele-density in the country has now crossed over the quarter mark (25.31%).
As per projections by different regulatory bodies, US is adding 2-3 million wireless subscribers per month while India is adding above 8 million per month.
Currently the US has approximately 10 million more subscribers then India. So if we project the rates in future, then India will take over US by April and become second biggest mobile network in world. China will still be much ahead with more than 550 million subscribers.
Amongst other highlights in the reported numbers, is the fact that the growth rate of subscriber addition for Indian operators is continuing at a very high and stable rate.
Even on absolute level, India is adding more customers than China and with the tele-density still at comparatively lower levels, it would be reasonable to expect such good numbers for another 12 to 18 months.
On the operator side, Bharti is still leading the pack in adding new subscribers ahead of Reliance. Bharti added just over 2.2 million in February while Reliance Infocom added approx 1.6 million.
So another major milestone approaches for the mobile industry in India when it will become world’s second biggest network ahead of US. Indian companies have benefited to a great extent due to their lack of legacy and helpful government policies to transform the sector but their next challenge is to profitably monetize the value added services.
Nov
28
Indian Real Estate - Time for bigger Investments & Change
Filed Under Indian Government, Tier-3 Cities, Indian Companies, Emerging Sectors, India Business, Tier-2 Cities, Metros, India Investment Opportunities, India Real Estate | Leave a Comment
The Times of India reports of a conference in Chennai hosted by Dun & Bradstreet about ‘Dynamics of the Real Estate Market: The Investment Perspective’. As per the conference, the Indian Real Estate Market is pegged at around $14 billion. Although the article presents a summary on the major discussions, 2 major points of discussion emerge.
1. Foreign Investment into Real Estate
This aspect has been well explained in previous posts on this website. The article on FDI in India puts Real Estate as one of the top 3 attractions for Investment.
And the article on Indian Commercial Real Estate also discusses the potential there is in Real Estate. But just to add an interesting fact here – Financial Institutions are among the biggest investors in Real Estate Projects in India.
Merrill Lynch is paying about $377m for a 49 per cent share in a portfolio of residential projects managed by DLF- Indian’s largest listed developer, in one of the biggest deals of its type in India. The transaction, Merrill Lynch’s sixth in Indian real estate, brings its investment in the sector to about $550m.
Late last year, JPMorgan announced its first investment on its own balance sheet in Indian property, paying $60m for a stake in a residential project being developed by Mumbai group, Lodha Builders.
2. Innovative products by Financial Institutions
The Times of India article quotes S. Sridhar, Chairperson and Managing Director, National Housing Bank:
“the real estate community needs to think out of the box and offer wide range of products, which suits the pockets of even people in the low-income group.”
Perhaps new financial products are needed various rate increases by the Reserve Bank of India (RBI) had serious impact for the retail loan segment.
Borrowers have declined in number and default has increased as the interest rates became unbearable and the burden of a rising EMI became too much for the average borrower. The resulting slump has made it difficult for the banks to match previous year’s record breaking credit growth.
Banks have tried to counter the retail loan growth decline by offering discounts on home loan and other retail loan interest rates and associated processing fees during this festival season. This led to a small increase in retail loan off-take, but the results didn’t match the expectations. Home loans have been worst hit - with the segment not taking off as expected, even after festival-season discounts.
About the Author: Ishan Sethi is a Sales & Marketing professional with keen interest in emerging sectors and India business opportunities. He is an alumnus of Indraprastha University and IIM Lucknow. He can be reached via the Contact page.
Nov
28
Mobile Carriers in India- What next? part2
Filed Under India Business, Emerging Sectors, Tier-3 Cities, Indian Companies, Internet in India, New Media, Metros, India Investment Opportunities, Mobile Telecom, Tier-2 Cities | Leave a Comment
Let’s continue the discussion from the previous post. The continued rapid growth of the mobile subscriber base in India presents a variety of management challenges, and as an observer, it is sometimes visible which company’s management is performing better.
So far, Airtel and Vodafone have been engaged in a battle of Call Rates, Lifetime validity schemes, Recharge Coupons, everything to do with a financial benefit to the consumer. Here are a few interesting facts, from the International Data Corp(IDC) survey conducted on the ‘Mobile Service Usage and Satisfaction’:
- The average waiting time to speak to a customer support agent is a little below three minutes.
- When probed on billing, nearly one in every six (18 per cent) mobile users was dissatisfied with the billing system of his/her service provider. This is way off the TRAI guideline that billing errors should be less than 0.1 per cent.
- More than half the users with a billing related problem perceive ‘wrong amount being charged by the operator’ as the prime reason for dissatisfaction.
All these refer to Customer Service problems.
Let’s draw an analogy here: Mobil Oil was in a price war for long at its US Refueling Stations. Mobil’s management always considered price as the single most important criterion for a customer to walk into a station. In a market survey conducted in the 90’s they realized that 80% of its customers had customer service as top priority, and only 20% wanted price to be a factor. Mobil then went into a major program to reorganize a Refueling Station into a more customer-friendly place.
They contacted a Formula 1 team for speed in refueling, and to understand how the team in a Pit Stop worked so well together. They visited Ritz Carlton Hotels to get more know how on how to treat a customer better, and lastly visited Home Depot- a specialty US retailer, to understand how to build long term relations with customers.
On the face of it, an oil company has nothing to do with any of the 3 companies just mentioned, but within a year of making changes, customer satisfaction rating went above 95%. Just imagine!
Now even the Indian mobile carriers want the same high levels of customer loyalty – but don’t seem to be taking specific steps to make it happen. If some action is already being taken, then it’s weak and not visible. After all, given the pending number portability policy that will be implemented it seems logical for the companies to make every effort to hold on to existing customers.
And for these reasons, the biggest opportunity for any Mobile Wireless Carrier in India today is in building a better Customer Service Infrastructure. As surveys worldwide have shown, it’s 5 to 10 times more expensive to get a new customer than to keep an existing one - Business Management 101!
About the Author: Ishan Sethi is a Sales & Marketing professional with keen interest in emerging sectors and India business opportunities. He is an alumnus of Indraprastha University and IIM Lucknow. He can be reached via the Contact page.
Nov
28
Mobile Carriers in India- What next? part1
Filed Under Emerging Sectors, Tier-3 Cities, Indian Companies, India Business, Internet in India, Metros, India Investment Opportunities, Mobile Telecom, Tier-2 Cities | Leave a Comment
5.5 million new customers are subscribing to a mobile connection each month in India. At the end of December 2006, the number had reached 150 million subscribers. According to a research agency iSuppli Corp, the subscriber base will triple by 2010 and reach close to 480 million, thanks to rural penetration of the mobile carriers.
With such a huge market to capture, the pie seems big enough for all wireless carriers. This leaves little incentive for any mobile carrier to try and distinguish themselves from the others, since with increasing consumer base; the revenues are bound to come.
But from a marketers’ perspective, here’s the big challenge: “Should we allow the market to grow in their natural course? Or should we do something to develop the market and pull ahead from the rest of the pack?”
In the International Data Corp(IDC) survey conducted on the ‘Mobile Service Usage and Satisfaction’ only 3 among the 11 mobile service providers emerged as the most preferred operators – Airtel, Vodafone and BPL Cellular. While Airtel and Vodafone are two national brands, their marketing strategies are quite different.
While Vodafone (or Hutch) has maintained a classy positioning, beginning with the “Hi! We’re Hutch” ad campaign, to the cute puppy following you around, Airtel has forever been the Indian brand appealing to the masses, with bollywood icons like SRK and AR Rahman.
But today, it doesn’t matter. As per the survey results as many as 28 per cent of users shift services, even if they were satisfied with their present provider — lured by an even better service or (more likely) by special offers! So this is looks like one example of where all the brand positioning effort is not helping out.
About the Author: Ishan Sethi is a Sales & Marketing professional with keen interest in emerging sectors and India business opportunities. He is an alumnus of Indraprastha University and IIM Lucknow. He can be reached via the Contact page.
