The restrictive law on cigarette shops

27 09 2017

Most of us are familiar and often use the small shops in the corner, who sell many things including cigarettes and tobacco. They usually stock items of urgent consumption and also are open long hours. They will also give you the item on credit when you do not carry a wallet on you, because he/she knows where you live.

The health ministry wants to control the sale of tobacco to children. Hence they want to restrict, the sale of other items in cigarette shops. They want to licence exclusive cigarette and tobacco shops.

I have the following issues with this proposal

– If local govt like municipalities will issue licence for these cigarette shops, this will breed corruption much like the liquor licences
– Already there is law restricting sale of cigarettes and tobacco products around 100 yards of any educational institution. If this is not being enforced properly then what makes them believe that small shops will not violate this new law too
– If ITC as a conglomerate can have a diversified portfolio including candies, biscuits along with cigarettes why restrict the small shop owner to stick to cigarettes only.


Volatility and SIPs

26 09 2017

Financial advisors advice retail investors to enter stock markets through Systematic Investment Plans , SIPs in short. There are two major advantages of SIPs over lumpsum investment, namely, disciplined regular saving ( Franklin advertises it as a good EMI¬†ūüôā) and Rupee Cost Averaging.

Rupee Cost Averaging, means you take advantage of the ups and downs of the stock market by buying more units when the markets are low and fewer number of units when the markets are high, thus keeping the average costs,a tad lower, than if you bought the same number of units every month.

SIPs work better than lumpsum when volatility is high. In a rising market, lumpsum investment of the same amount will give higher returns.

In 2017, volatilty has been relatively very low. The number of days when the markets have moved 1 % down is a lot lesser than previous years.


Would SIPs of all the Indian retail investors, be the reason why the volatility is low ? As per the AMFI web-site, SIPs are growing rapidly, in August 2017 the SIPs accounted for Rs 5206 crore as opposed to Rs 3497 crore in August last year. So there is  steady continuous buying by Indian institutional investors.

Individually, each investor wanted to benefit from the volatility through SIPs, but collectively, SIPs of all the investors have brought the volatility down. The very reason for entering into an SIP now is questionable !

GST council is musically challenged

11 09 2017

What absurd taxation policy this GST Council has come up with ?

The Indian instruments attract No GST and the western instruments attract the highest rate of 28 %

Apparently, damru is Indian and drums are western, sitar is Indian and guitar is western, pungi is Indian and saxophone is western.Can you imagine “Pukarta chal hoon main” ¬†without the guitar or “O Haseena zulfon wali” ¬†without the drums. The sound of “been” in the Nagin song may be Indian, but it was created by Kalyanji on a ‘western’ instrument called clavioline.¬†Are they not Indian music ?

The best of Hindi film music of the ¬†’50s and ’60s had a lot of so called ‘western’ instruments. Then why this absurd classification. There are so many musical instruments, who in the GST Council knows which is Indian and which is Western.

How far back would they go to justify an instrument as Indian. Sitar is not Indian, it came from Persia in the 18th century. Guitar came to India in the 19th century via British. Just because guitar came later, is it less Indian than sitar.

A flat low rate for all instruments can be administered better.

Is ITC justified in paying Yogi Deveshwar Rs 1 Cr per month ?

7 09 2017

ITC has filed a defamation case for Rs 1000 crore in Kolkata High court against the proxy advisory firm IIAS. IIAS had written strongly opposing the ITC board resolution of paying Rs 1 crore pm to Yogi Deveshwar.

Yogi Deveshwar ceases to be CMD since April 2017 and is designated Non-Exec Chairman. Sanjiv Puri is the CEO and MD.

Despite his Non-Exec Chairman status Yogi Deveshwar’s package is way higher than the CEO’s. CEO’s package is Rs 1.65 cr p.a plus commissions max of 300 % of salary. Say Rs 6.5 crore p.a.

Deveshwar’s package is Rs 13.5 cr p.a plus perks. So it is over double the salary of his CEO. A Non- Exec Chairman gets a salary double that of his CEO, who has the full responsibility and accountability of running a large conglomerate I.e ITC.

In Corporates, it is often said that the one who gets paid the highest, his opinion counts finally. There is even a fancy acronym for it- HiPPO. ( Highest Paid Person’s Opinion ).

Does Yogi fear that if he gets paid less than the CEO, he would not be able to assert himself as a Chairman and his opinion will no longer count ? Or it is just the board rewarding their Chairman a cosy retirement package for years of leading the company ? Or it is Yogi’s greed at work, rewarding himself a tidy amount knowing fully well there are no owners with management control in ITC and the institutional investors are passive ?

I think IIAS is perfectly justified in opposing this. Hope institutions take their advice. But who are the institutions , LIC, GIC and SUUTI i.e Govt of India owned FIs own 30 % of ITC. These institutions are either passive or wait for the call from Finance Ministry. If Deveshwar makes a call to Jaitley, problem is solved. All opposition gone.

Whatsapp Help Groups for credit

7 09 2017

Consumption is growing a lot faster than household incomes. Net result personal indebtedness is growing rapidly among Indians. People are buying more and more items on EMI. Besides the usual cars and two wheelers,even mobiles and holidays are on EMI. Companies like Bajaj Finance and Capital First are making hay. Credit card cos have actually increased the interest rates, when overall interest rates are declining. No need for it, I guess, there is so much demand.

On the one hand the senior citizens are struggling with declining deposit rates, most banks give only 6.5 – 7 %. Credit card companies continue to charge 38 %. Wish peer- to-peer lending grows among Indian families, so that these card companies can be disintermediated.

The networks are already there, the Whatsapp family groups. Along with Good mornings, recycled jokes and fake news, young members who are paying huge interest on their cards can borrow from retired elders who are seeking higher rates. They would be happy with even 10 % p.a.

The digital wallets and UPI based digital payment systems make money transfers quite frictionless.The family structure creates enough peer pressure , not to default. In some practical families, it may be happening already. The Whatsapp help groups is an idea whose time has come.

Godmen- Who is duping whom ?

7 09 2017

Many of my friends are feeling angry at Godman Ram Rahim Singh, that he has duped poor people.

According to me, there is an unwritten contract between the 1 % ( rich & powerful) , the ¬†Godman and the 99 % ( disenfranchised masses)..Godman plays the ‘beech ka bandar’ ( monkey in the middle ) beautifully, as long as it lasts, that is.

To the 1% ,overtly, Godman  offers peace , health and even road to God. But covertly, he offers the route to 99 % namely, markets and votes.

To the 99 %, he offers overtly identity, dignity, community and even livelihood. Covertly, the Godman is like Robinhood who steals from 1 % to feed the 99 %.

1 % is happy getting exploited economically by the Godman if the returns are good. 99 % adjusts to physical incl sexual exploitation as long as their other needs are met. Each is trying to dupe the other two.

Occasionally the equilibrium is disturbed and Godmen like Ram Rahim goes to jail.

As long as inequality exists in Indian society Godmen will exist.

Why Indian companies are so tied to their promoters ?

7 09 2017

Narayana Murthy says Infosys is his middle child, because it came into being in between the birth of his daughter and son.

He mentions this obviously to bring out the emotional attachment he has with Infosys, much like a parent with a child.

Not just a parent, an Indian parent. An Indian parent is in control of his child’s life, at least he/she wishes to, a lot longer than a western parent. Children are also comfortable depending on their parents a lot longer than a western child does.

Is that the reason why the western concept of promoters leaving the management control to a board is still not getting firmly established in the Indian corporate sector.?

Perhaps. Just like an Indian parent and his child’s bond is longer and deeper than a western one, the bond between founder and his company may be deeper, leading to such situations as seen in Infy and Tatas.

Promoters like Indian parents are unable to let go and the company just like Indian children are comfortable depending on their promoters. They accept them with all their faults.

Even where promoters are no longer alive or have no second generation to take management position Indian cos are looking at leaders who are more like father figures. Cases in point, AM Naik in L&T and Yogi Deveshwar in ITC.

Western concepts like fixed tenures for Chairman, retirement age are treated by most companies as just rituals. Asking a promoter Chairman when he would retire is as sacrilegious as asking a parent when he/she would die.

With rising life expectancy, even retirement ages get shifted higher and higher. When it reaches unreasonable levels say 75, then there is a brilliant idea increasingly adopted by many , Chairman Emeritus.

It is often said that the role of a parent is to give the child roots and wings. Indian parents often fail in giving wings to their children. Similarly, if the Indian companies want to be tied to the coat tails of their promoters, it is hard to expect them to develop wings and be global in size or make some world beating breakthroughs. They would be limited by the vision and capabilities of the promoter.

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