Pratibimb July 2012

Pratibimb | July 2012 | 1

FINANCE | GENERAL MANAGEMENT | HUMAN RESOURCE | MARKETING | HEALTHCARE | OPERATIONS | SYSTEMS

The Reflection of Management

A Student’s Initiative

Volume II, Issue XII July 2012 A Monthly e-Magazine

PRATIBIMB

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

By Varwo Arqra, LBSIM Delhi

The Fourth World

An object of fascination

By Siddharuh Jaiswal, IMT Hyderabad

What is the marketiog strategy qf IDEA Cellvlar ?

By Sayak Barai, IIM Lvckoqw

E-commerce - Will the bubble burst ?

By Arpab Gvha Malik, IIM Kqzhikqde

Celebrating EPISODE

An Intra TAPMI college fest

Sector Review - FMCG

By Nitio Jiodal , TAPMI Maoiral


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.

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.

T. A. Pai Management Institute

Manipal, Karnataka

About TAPMI

Our Mission

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.


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 TAPMI’S MONTHLY e-MAGAZINE VOLUME 2, ISSUE XII JULY, 2012


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

DIR

EC

TO

R’S

ME

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AG

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Editor’s corner

Dear Readers,

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.

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 Drucker and Michael Porter, or management

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

wish to thank all those who helped us in improving Pratibimb

through their feedback. We would like to take this

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 [email protected].

Enjoy Reading!

EDITOR IN CHIEF

Sushmit Sinha

BRANDING &

ADVERTISING

Manish Mishra

DESIGN & CREATIVES

Abhishek Dubey

Namrata Mahapatra

COMMUNICATIONS

Divyanshu

PUBLISHING

Vandna Soni

FACULTY ADVISOR

Prof. Chowdari Prasad

Dean (Branding and Promotions)

TAPMI , Manipal

http://www.facebook.com/pratibimb.reflecting.management

http://www.facebook.com/pratibimb.reflecting.management

mailto:[email protected]


Contents TAPMI Bites - Wackathqo 7

Jqb Hqrriog aod Salary Negqtiatiqos: Hqw mvch is eoqvgh? 9 Varwo Arqra, LBSIM Dellhi

BANDHAN- A Ray qf hqre fqr the rqqr 12

Svgata Rqy | Abhirwra Biswas, IISWBM Kqlkata

The Fqvruh Wqrld - Is it ao qbject qf Fascioatiqo? 18

Siddharuh Jaiswal, IMT Hyderabad

E-cqmmerce - Will the bvbble bvrst qr is it jvst a hyse? 21

Arpab Gvha Malik, IIM Kqzhikqde

Is Iodia lqsiog qvt qf its charn qf beiog ao Ioxestneot Hvb? 25

Preetqsh Kvmar Srixastaxa, IIM Iodqre

BASEL III : Where Dqes Iodia Staod? 28

Jvbeeo Mqharatra | Shikha Sharna, DqMS IIT Rqqrkee

Aoalysis qf the marketiog strategy qf IDEA Cellvlar 33

Sayak Barai, IIM Lvckoqw

Sectqr Rexiew – FMCG 37

Nitio Jiodal, TAPMI Maoiral


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.

TAPMI BITES TAPMI’S EPISODE WACKATHON BY PRATIBIMB 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

TAPMI BITES TAPMI’S EPISODE WACKATHON BY PRATIBIMB JULY, 2012


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

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

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.

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

―Job hopping? Watch out!‖, The Times of

India (http://

articles.timesofindia.indiatimes.com/2011-

11-13/work/29765101_1_job-hop-job-offer-

job-satisfaction)

―Job hopping rate highest in India: Survey‖,

The Economic Times (http://

articles.economictimes.indiatimes.com/2010

-10-13/news/27585022_1_indian-employees

-india-scores-findings-of-factual-job)

―Chandra‘s Marathon at TCS‖, Business

Line, (http://

www.thehindubusinessline.com/features/

life/article2737892.ece?ref=wl_features_art)


BANDHAN- A RAY OF HOPE FOR THE POOR

“Modern Hr practices: a Harbinger for Growth"

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.

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

by Sugata Roy & Abhirupa Biswas, IISWBM


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 co-

borrower/ 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.

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 bottom-

line values is strongly asserted by its intervention

in development activities. It believes that micro-

finance is not the last word for development of the

poor. Aspiring to holistic development of the poor,

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:

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 & Non-

residential 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.

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 3-

day 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, learner-

centric, 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

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 June-

December. 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, dis-

imbursement 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

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 hus-

band. "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 ad-

vanced 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.

Fig: Tumpa Makal at

Ultadanga fish

market


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.

REFERENCES:

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 (M-

CRIL),Gurgaon, India

World Bank 2006; www.worldbank.org

(23/05/2012; 22:45 hrs)

Bandhan Financial Services Pvt Ltd;

www.bandhanmf.com/publications.html

(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

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.

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

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

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 rebel-

held 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.

References:

Lunn, Smith et.al (2006). A political and

economic introduction to China. House of

Commons Library, Paper no:06/36.

Bergsten F.C. , Gill B et.al (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 http://eng.stat.gov.tw/

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 e-

commerce 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.

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 suit.Snapdeal.com 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.

"How can a company with toplines of Rs 50 crore

raise money at a valuation of $1 billion? The

valuations have a ratio of 1:100 vis-à-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 Jabong.com, 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


highlights that the overall potential for e-

commerce 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 high-

income 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

being a bit too harsh to portals who have a long-

term 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 e-

commerce 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.

References:

http://www.moneycontrol.com/news/

features/will-e-commerce-bubble-burst-2012

-_643132.html

http://www.hindustantimes.com/News-Feed/

SectorsInfotech/E-commerce-or-e-bubble/

Article1-803841.aspx

http://www.pluggd.in/stop-blowing-our-

ecommerce-bubbles-297/

http://www.business-standard.com/india/

news/is-online-retailnext-bubble-waiting-to-

pop/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

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

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

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.

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 : www.tradingeconomics.com , Indian Central Statistical Organisation


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 : http://www.thehindubusinessline.com , Article3405002.ece


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

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

Name of the Bank Assets as on 31.3.2011

The Ratnakar Bank 3230

Nainital Bank Ltd. 3292

The Caholic Syrian Bank Ltb. 9829

The Lakshmi Vilas Bank Ltd. 13301

The Dhanlaxmi Bank Ltd. 14268

City Union Bank Ltd. 14592

Tamilnad Merchantile Bank Ltd. 16117

The Karur Vysa Bank Ltd. 28225

The Karnataka Bank Ltd. 31693

The South Indian Bank Ltd. 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 dis-

bursal to the smaller industries.


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.

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.

(www.rbi.org.in)

Moody‘s Analytics

Economictimes.indiatimes.com

http://www.rbi.org.in


Analysis of the

marketing strategy

of IDEA Cellular

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

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.

by Sayak Barai, IIM Lucknow


CURRENT SITUATION ANALYSIS:

Porter’s five forces:

SWOT Analysis:

Strong brand recognition

Internet sales

Growing reputation in global

market

Complexity of operations

Absence in rural southern areas

due to presence of existing

competitors like Aircel

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

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

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 pre-

paid 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:

Customer Segmentation Description

Products Pre-paid and post-paid mobile services

Services

GPRS, voice and SMS based entertainment services, call-

forwarding, call conferencing, regional, on-net, national and inter-

national roaming, GSM gateways, vehicle tracking and automatic

meter reading

Channels Direct outlets

Complementors Ericson, Nokia and Siemens

Unique competencies

6 SIGMA, net setter data cards & Blackberry solution, largest cus-

tomer base, NLD license, market leader in Maharashtra, strong dis-

tribution channels


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

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:

http://en.wikipedia.org/wiki/Idea_Cellular

http://www.mashpedia.com/Idea_Cellular

http://3ginternetdatacard.in/index.html

http://www.3gidea.in/

https://www.uwtmobile.com/

http://www.itu.int/ITU-D/treg/projects/itu-

ec/Ghana/modules/FinalDocuments/

Interconnexion.pdf

http://www.onesimcard.com/

www.ideacellular.com



Services

GPRS enabled information services like internet browsing, data

cards and mobile email, call-forwarding, ring back tones, back-

ground music, voice and sms chat, ringtones, horoscopes, expert

advice and subscription services.

Channels Direct and indirect


Unique competencies 6 SIGMA, high quality network structure, centralization of several

applications



Services Krishi voucher, NOKIA life tools, providing health care services

Channels Indirect outlets


Unique competencies Usage of solar power as Base Transceiver Station (BTS), frequency

optimization techniques

Tier 2 Urban Circle:

Tier 3 Urban Circle:


Sector Review

– FMCG by Nitin Jindal, TAPMI Manipal

Sector Overview

India‘s FMCG sector is the 3rd fastest grow-

ing 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 circu-

lated in this sector is huge.

FMCG companies and consumer facing sec-

tors like consumer durables and consumer

finance are suggesting continued growth in

the tier II and tier III cities and rural mar-

kets.

Introduction of GST this budget can system-

ize taxation if implemented uniformly. It

will help in avoiding multiple taxes like oc-

trai, CST , VAT etc. Hence, would result in

lowering of the prices and would boost de-

mand.

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 psycho-

logical impact on the income levels in rural

markets.

Product innovation which was not much tak-

en care of by Indian FMCG companies has

taken centre stage now.

Awareness for nourishment amongst the ru-

ral population particularly for the younger

generation is increasing. Baby and health

food companies like Nestle India and GSK

consumer are strong long term players and

would outperform their home and personal

care peers. The rise of Marico‘s super pre-

mium refined oil, Saffola in the rural mar-

kets also cannot be ruled out in the long

term.

A consistent rise in urbanisation would be a

supportive factor for the health food compa-

nies.

With the increase in better housing struc-

tures in rural India called as ‗Pucca‘ houses

would benefit paint companies, especially

players like Asian Paints with the widest

distribution and most comprehensive portfo-

lio.

Affordability has substantially improved

during the last few years indicating the po-

tential for growth in branded products. Ex-

ample in Bihar a rural household typically

comprises of about 8-10 people per house-

hold.\ 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 in-

come 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 go-

ing 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


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 7:

Companies like HUL tying up

with telecom service providers

like Tata Teleservices to get

better footfall and mindshare

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 5

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


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-of-

sample 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

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

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

Rt = (lnPt – lnPt-1) x 100 …………………… (1)

Where, Rt = return at time t

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

I have used S&P CNX Nifty as it has got the most liquid stocks in its portfolio. Further, the National

Stock Exchange is largest in terms of Market capitalisation and Volume. I have used the data of the

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