COVER STORYCOVERSTORY Shailesh J. Mehta School of ManagementShaileshJ.MehtaSchoolofManagement Indian Institute of Technology, BombayIndianInstituteofTechnology,Bombay July 2010 The Dawn ofTheDawnof BehaviouralBehavioural OperationsOperations How much Insurance How much Insurance should one have?shouldonehave?
Horse Power Horse Power or or Horsepower Horsepower How much Insurance How much Insurance should one have? should one have? The Dawn of The Dawn of Behavioural Behavioural Operations Operations Shailesh J. Mehta School of Management Shailesh J. Mehta School of Management Indian Institute of Technology, Bombay Indian Institute of Technology, Bombay Indian Infra Companies :On a Indian Infra Companies :On a Fund Raising Spree Fund Raising Spree COVER STORY COVER STORY July 2010
Transcript
Horse PowerHorse Power
oror
HorsepowerHorsepower
How much Insurance How much Insurance
should one have?should one have?
The Dawn of The Dawn of
BehaviouralBehavioural
OperationsOperations
Shailesh J. Mehta School of ManagementShailesh J. Mehta School of Management
Indian Institute of Technology, BombayIndian Institute of Technology, Bombay
Indian Infra Companies :On a Indian Infra Companies :On a
A lot has happened in the past few months; from rate hikes by RBI to introduction of the
new Rupee symbol, from ever increasing food price inflation and escalating expenditures on
the Commonwealth Games infrastructure to ever worsening profitability of Air India. One
of the hot topics of discussion recently has been the rise of Private Equity in India, after the
recent global meltdown. This edition contains a number of articles with discerning insights
into this issue and analysis whether this will be a sustainable strategy for venture capitalists. The cover story is especially focussed on the fund raising spree of Indian Infra companies,
which are expected to grow very fast, with the industry already in an accelerated growth
trajectory.
Carbon has become a trade commodity in high demand as of late. The Institute of Chartered
Accountants in India (ICAI) is working out accounting policies for Carbon Trade. An article
is dedicated to this new mechanism of trade and different forms of its implementation.
Another of our regular columnists has written about the competitive positioning of India in Clean Developmental Projects by analysing past growth trends.
From the marketing domain, we have discussed some emerging trends and strategies in
advertising, popularized by innovation and creativity. This edition features interviews with
Mr. Prabhat Pani, CEO Ginger Hotels and Mr. Sukumar Narasimhan, V.P., Supply Chain,
of Reliance Industries.
Keeping al!ve the entrepreneurial spirit, we have an exclusive start-up story of United Prosperity.
From this issue onwards we have started a regular column on the Insurance Sector by Mr.
Deepak Yohannan, the CEO of MyInsuranceClub.com and distinguished alum of IIM
Calcutta. In this edition he has discussed about the optimal amount of insurance cover one is
supposed to have.
In this rapidly changing economic and cultural geography, evolution and survival of the
fittest are the rules of the game. Be it a firm, a small start-up or the world’s largest economy,
constant improvement by innovation is the way to move forward. We hope you enjoy
reading this issue of L!VE as this magazine continues to evolve for the better.
Happy Reading!
Team L!VE
4 L!VE July, 2010
| C O N T E N T S |
COVER STORY
06 | Indian Infra Com-panies: On a Fund Raising Spree The Infrastructure companies are expected to witness a sub-stantial increase in their order
books by around 30-40% in FY11. Companies are competitively bidding for tenders and their
order books indicate that the number of projects undertaken is increasing steadily.
FACE TO FACE
19 | Prabhat Pani 21 | Sukumar Narasimhan
EXPERTS SPEAK
23 | How much Insurance one should have? 27 | Carbon: A new com-modity to trade and ac-count
BIZ WITS
38 | Quetzal 43 | Answers
CREATIVE BEND
44 | Horse Power or Horsepower 46 | The Green Mile
SOM-thing Special
48 | CONTINUUM
STUDENTS SPEAK
29 | Is PE the next In-Thing for India inc?
32 | Creative Advertising 36 | The dawn of behav-
ioural Operations
06
Issue # 3 / 2010
RESEARCH LABS
12 | Competitive position of India in CDM pro-jects
15 | Will Private Equity continue to be suc-cessful in India?
START-UP-STORY
40 | United Prosperity
15
32
L!VE July, 2010 5
6 L!VE July, 2010
| C O V E R S T O R Y | INFRASTRUCTURE |
T he government has continued its focus on modernization, ex-
pansion and development of infrastructure (roads, ports, airports, railways and power) to maintain a steady pace of economic growth at 8-9%. The increased budget alloca-tions resulted in an increase in the infrastructure projects/orders allotted to private and public infrastructure compa-nies resulting to an increased need for funding the under-
taken projects.
Infrastructure allocations & investments surge With the positive news flowing in to the Infrastructure sector in the form of budget allocations and supportive measures an-nounced by the government, Infrastructure companies have received boost. Financial Budget (2010-11) brought cheer to the Infrastructure sec-tor companies as the budget allocated 47% (Rs.1,786,820
mi l l ion – i nc l Powe r/US$400bn) of the total budget to Infrastructure development. Road transport accounted for a major portion (11%) of the total Infrastructure development budget followed by Railways (9%). The recent announcement of the 12th infrastructure invest-ment plan confirmed the upside in the sector as the investments are expected to double from the existing 11th plan infrastruc-ture investments* (Rs.22,500 b i l l i on / US$500bn ) to
INDIAN INFRA COMPANIES: ON INDIAN INFRA COMPANIES: ON
A FUND RAISING SPREEA FUND RAISING SPREE
The Infrastructure companies are expected to witness a substantial increase in their order books by around 30-40% in FY11. Companies are competitively bid-ding for tenders and their order books indicate that the number of projects under-
taken is increasing steadily.
- JASLENE BAWA FINANCIAL RESEARCH ANALYST
VALUE NOTES
* The government invested around ~US$350 billion in the infrastructure sector in the 11 th plan (2006-2010). And the private sector, invested worth ~US$150 billion (- 30% of the total 11th planned infrastructure investments worth US$500 billion). The infrastructure investment target of the 11th plan was achieved with investments in telecom, airports, oil and gas pipelines sector exceeding the targeted figures. Looking at the buoyancy in the past it is expected that the same level or a higher level of investments will continue to flow in the infrast ructure sector in the 12th plan.
L!VE July, 2010 7
| C O V E R S T O R Y | INFRASTRUCTURE |
Rs.44,500 billion (US$1,000 bn) reinforcing the infrastructure growth story. Of the total in-vestment figure around 40-50% of the 12th Infrastructure invest-ment plan (US$1,000 billion) will be financed by the govern-ment and the remainder by the private sector.
Order Book: On the rise
The Infrastructure companies are expected to witness a sub-stantial increase in their order books by around ~30-40% in FY11. Companies are competi-tively bidding for tenders and their order books indicate that the number of projects under-taken is increasing steadily. L&T, HCC, Gayatri Projects, Nagar-juna Construction, GMR Infra, IRB Infra, NMDC, NTPC, etc expect their order books to rise substantially to Rs.2,500 billion (US$55 bn) given the continued buoyancy in the Power, Oil &
Gas and Infrastructure sector. The table indicates the current (FY2010) and expected (FY2011) order book figures indicating an upward surge in the infrastructure projects. The Infrastructure sector is capi-tal intensive in nature and is
often faced with shortage of funds for project completion. Though the government pro-vided stimulus (working capital needs) to the companies; this was inadequate without private sector participation. This gave rise to a widening gap between the budget infrastructure alloca-tions (resulting to increased or-ders) and funds for the capital expenditure (working capital needs of these companies). To reduce the funding deficit, in-frastructure companies adopted a number of fund raising routes (Debt financing- primarily debt raised via Bank Credit, External Commercial Borrowings ECBs, Non-Banking Finance Compa-nies, etc. and Equity financing via PE – private equity, Quali-fied Institutional placements, IPOs – Initial Public Offering/
Particulars INR million % of Total
Road 198400 11%
Rail 167520 9%
Ports 19360 1%
Airports 95880 5%
Power 51300 3%
Other Infra (Telecom) 1253820 70%
Total 1786820 100%
Infrastructure spend break up (Source: Budget FY2010-2011 )
Company name OB FY10 (INR million)
OB FY11 (INR million)
HCC 188000 250000
L&T 695000 938250
IRB Infra 89590 134925
IVRCL 234000 320000
GMR Infra* 32000 64000
Gayatri Proj 62500 81250
Nagarjuna Const. 153700 199810
IL&FS Trans & Networks 120000 150000
Reliance Infra* 192600 250500
Sadbhav Engg 72000 108000
Current and Expected order book figures *GMR Infra - EPC (Engineering, Procurement & Construction)
order book, Reliance Infra -EPC order book
8 L!VE July, 2010
| C O V E R S T O R Y | INFRASTRUCTURE |
FPOs – Follow on Public Offers, FDI – Foreign Direct Investment, etc.) to ensure smooth comple-tion of their projects.
Finance raising initiatives
In order to fund projects, com-panies primarily approach banks and NBFCs. However, owing to the global financial crisis, the supply of credit to the sector was marred with most of the projects put on hold or de-layed substantially. However, during 2009 funds started trickling in the sector with companies‟ increasingly
borrowing debt from domestic banks. Borrowing slowly spread to loans availed from foreign markets as overseas debt could be raised at cheaper rates (loans at 9%-10%) compared to Indian banks. However, the re-cent European crisis triggered a second round of credit crunch causing an increased depend-ency on Indian bank and NBFC debts. Debt-laden Infrastructure com-panies: Infrastructure Compa-nies financials are highly debt laden with mounting borrowing costs. A Major part of the debt (short term in nature) used to
fund working capital require-ments (in contrast to other in-dustries where debt is used to finance capital expenditure) is also used to finance BOT (build, operate and transfer) projects that typically have a debt/equity ratio of 2:1. This increases their level of the working capital re-quirements on a regular basis. Additionally, government con-tracts form a major portion of company order books resulting to delayed realisation of pro-jects. Intensive working capital needs coupled with high gesta-tion periods tend to lengthen the overall capital cycle. This
Government plans to invest 11% of its Infra-structure Budget on development of roads.
L!VE July, 2010 9
| C O V E R S T O R Y | INFRASTRUCTURE |
leads to an increased need for working capital resulting to ex-tension of existing loans with no incremental returns.
Debt route With reference to the 12th Infra-structure investment plan Infra-structure companies are ex-pected to raise approximately 50% of the total US$1,000 bil-lion via the debt route. Tradi-tionally, Infrastructure compa-nies raise approximately more than 60%-70% of their funding needs via debt. This has been steadily increasing over the past years with an increased project pipeline. A few examples of debt raised
during the recent period are listed below: Hindustan Construction
Company (HCC) raised Rs.1,000 million (US$22m) from J&K Bank (The Jammu & Kashmir Bank) for its hill city project – Lavasa.
IRB Infra has raised debt worth Rs.25,990 million (US$578m) with a consor-tium of financial institutions (IDFC, Canara Bank, Bank of Baroda and Union Bank of India) to fund four pro-jects (Pathankot-Amritsar BOT project, Jaipur-Deoli project, Talegaon-Amravati
BOT project and Panaji-Goa BOT Project).
The companies are highly debt laden and are expected to con-tinue on the same path. Adding to existing woes, companies face constraints while obtaining domestic debt re-financing through ECBs (As Indian laws do not permit ECB debt re-financing) further narrowing down their borrowing options. Continuously mounting debt needs (to finance new projects and re-finance existing debt) and the tight situation of global credit availability urged compa-nies to look at options other than debt. As a move in this direction,
companies extended their fi-nance raising options to equity financing via primary and sec-ondary stock markets, PE and QIP routes.
Buoyant domestic stock markets since early 2010, assisted infra-structure companies to raise a substantial amount via the eq-uity financing route.
Equity route Funds raised by corporates dur-ing Jan – Jun 2010 in the In-dian primary markets via IPO and FPO route increased mani-fold compared to the same pe-riod last year. Till date, in Jan – Jun 2010 two Infrastructure FPOs raised a total Rs.100 billion (US$2.0 bn). Overall, Infrastructure IPOs helped raise ~Rs.62 billion (US$1,400 million) during the period Jan – Jun 2010 and
through the PE and QIP route the companies raised approxi-mately Rs.1 billion (US$23 m). The tables shows an indicative list of the IPOs, PE and QIP
FPO Name Amount raised Amount raised
REC 8.83 192
NTPC 84.8 1850
Total ~ 100.0 2
FPO raised in Jan-Jun 2010
(Source: BSE, NSE, Media Releases)
The companies have been able to raise a fair amount of finance via the equity route and are increasingly doing so. The supportive budget announcement to provide a boost to the infrastructure sector has pegged the fund raising momentum in the market.
10 L!VE July, 2010
| C O V E R S T O R Y | INFRASTRUCTURE |
deals during the period. The companies have been able to raise a fair amount of fi-nance via the equity route and are increasingly doing so. The supportive budget announce-ment to provide a boost to the infrastructure sector has pegged the fund raising momentum in the market. The companies that raised money through the equity route have received an overwhelming response (from the market with majority of the issues ending with oversubscriptions) laying ground for their peers to follow suit.
Riding the positive wave Riding the positive wave in the market, the infrastructure sector
is abuzz with forthcoming IPOs, PE funding, QIP deals such as HCC plans to raise around
Rs.20 billion (US$444m) through an IPO for its unit Lavasa in FY11
IRB plans to raise around Rs.12 billion (US$267m) through a proposed QIP issue. This is in line with its step to support its balance sheet to win big orders from NHAI & State highway pro-jects.
GMR Infrastructure stated that PE firm IDFC Private Equity Fund III, and four other investors agreed to invest Rs.4,650 million (US$ 99.63 m) in its unit, GMR Energy.
GMR Infrastructure, the in-
frastructure and power sub-sidiary of diversified GMR Group, plans to raise Rs.50 billion ($1,111 m) via eq-uity route
ICICI Venture, the PE arm of lender ICICI Bank, plans to launch a Rs.22,500 mil-lion (US$500 m) fund by Jul 2010 to invest in infra-structure projects.
Larsen & Toubro Ltd (L&T) plans to launch a PE fund to invest in Indian power and road projects. The fund size is expected to be in the range of Rs.13,500 million (US$300 m).
SEW Infrastructure, an engi-neering, procurement and construction (EPC) com-pany in Hyderabad, plans
Company Name Amount raised (INR million)
Amount Raised (US$ million)
Subscription (No. of times)
REC (Rural Electrification Corp) 8825 192 3.1
MBL Infra 1020 23 1.3
Hathway Cable & Datacom 7350 160.4 1.3
IL&FS Transportation Networks 7000 152 33.4
Aqua Logistics 1500 32 1.9
MAN Infraconstruction 1410 31 62.3
ARSS Infrastructure 1200 26 47
SJVN 10790 240 6.6
Jaypee Infratech 22500 500 1.2
Total ~61,600 ~1,400
List of IPOs/FPOs during Jan 2010 – Jun 2010
(Source: BSE, NSE, Media releases)
L!VE July, 2010 11
| C O V E R S T O R Y | INFRASTRUCTURE |
to raise Rs.1,520 million (US$33.7 m) from Jacob Ballas PE.
Overall, the deals above are expected to raise Rs.124 billion (US$3 bn) in the near term indi-cating that Infra-structure companies are actively moving out of the traditional realms of debt and venturing towards new financing op-tions. Going forward, this will activity gather steam offering PE firms, domestic and global asset man-agement companies a tremendous upside to participate in the infrastructure growth
story. Source: Annual report of Infrastructure compa-nies Economic Times Business Standard Budget speech 2011 11th & 12th India Infrastructure Invest-
ment plan BSE, NSE VC Circle website Media Releases
Deal Particulars Type Amount (US$ million)
Temasek Holdings invested in GMR Energy (GEL) PE 200
GMR Energy (GEL) raised capital from investors led by the IDFC Group for its energy expansion plans PE 103
Allcargo Global Logistics (AGL) raised Rs.1,000 million through QIP QIP 23
Helion, Foundation Capital and IFC invested in Azure Power PE 10
International Finance Corporation (IFC) invested in Husk Power Systems PE 1.3
Saudi BinLaden Group (SBG) acquired 20% stake in May-tas Infra for Rs.3 billion PE 67
List of PE (Private Equity) and QIP deals during Jan 2010 – Jun 2010
(Source: Media Releases - These are a few selected deals during Jan-Jun 2010)
Jaypee Infratech have raised US$ 500 million
through IPOs/FPOs during Jan 2010 - Jun2010
12 L!VE July, 2010
| R E S E A R C H L A B S | CDM |
Introduction
In the previous issue of „Live
magazine‟, I discussed about the
implications of climate change
on the financial sector. Though
climate change will pose a risk to
some future businesses too, it will
open windows of opportunities
for some new businesses also.
CDM (clean development
mechanism) consultancies and
carbon funds are a few of those.
Implementation of CDM projects
brings capital, new technologies
and sustainable development
benefits to developing countries.
In this article, I have analysed
India‟s competitive position as a
supplier of CDM projects.
Methodology
I started analysing it from the
data published by United Nations
Framework Convention on Cli-
mate Control (UNFCCC).
UNFCCC categorises the projects
as per the stage of application,
the project is going through. I
considered only those projects
that were accepted by the execu-
tive board at UNFCCC.
Comparison amongst Countries
China hosted 863 projects and
India 508, by the time this article
was written. Brazil and Mexico
are not far behind, implementing
173 and 121 projects respec-
tively. The top contributing na-
tions are shown in the following
chart (qualifier: number of ac-
cepted projects being more than
40).
These many countries con-
tribute to more than 80% of the
total supply of 2234 projects,
implemented globally. As ex-
pected, countries like India,
China, Mexico and Brazil have
been in the leading positions in
supplying CDM projects. The
trend of number of projects in the
last three years in these countries
is as shown in the graph below.
China started hosting CDM projects lately and hence this industry is still in
growth phase there. On the other hand, India, it seems, is already in the matur-
ity phase, at least the data suggests the same. Mexico and Brazil have shown a
similar trend like India.
Competitive Competitive
position of India in position of India in
CDM projectsCDM projects
-Anirban Naskar SJMSOM, IIT Bombay
L!VE July, 2010 13
| R E S E A R C H L A B S | CDM |
Technology Comparison
To understand the sectorial drivers of these projects, I classified the projects as per the technology used
to abate green house gases.
Type of Project as per
technology used
Industries those adopt
this technology
China India Grand Total
Hydro Power Power generating entities 419 60 479
Wind Power Power generating entities 220 99 319
Biomass Waste management firms, new
businesses were formed for this
purpose only
21 131 152
Waste Heat Recovery Several small and heavy engineer-
ing industries
57 64 121
Methane Utilisation Coal mines, captive power plants,
municipal bodies
34 11 45
Natural Gas Fuelled Power Captive power plants at various
small and heavy industries
20 16 36
Solid Waste Management Municipal bodies 27 8 35
N2O Abatement Fertiliser productionFertiliser production 26 4 30
kiosks and Wi-Fi services are all examples of adopt-
ing technology to offer superior brand experience
and service to the customers. Ginger Hotels has
now introduced mobile payment gateway where
travelers can book rooms in any of the Ginger Ho-
tels from their cell phones.
Over the years we have seen that the contribution of
B-school graduates in the Hospitality industry is
quite subdued. So, what is your advice to MBA stu-
dents, who want to pursue their career in the Hotel
industry?
Hospitality is always a front-facing job – one has to
interact with customers and guests at all levels.
Therefore, other than being trained and knowing
the technicalities of the job, one needs to be able to
strike the right cord with the customer. Good con-
versational skills and the ability to „listen‟ when
speaking with guests is always a plus. And of
course, a pleasant and forthcoming disposition is
expected. Though there are lot of MBA‟s who are
actually involved in corporate roles across various
verticals including Sales, Marketing, Finance & HR.
| F A C E T O F A C E | PRABHAT PANI |
As told to - Deepak Gupta, SJMSOM, Batch of 2010
L!VE July, 2010 21
| F A C E T O F A C E | SUKUMAR NARASIMHAN |
Currently Sr. Vice President, Supply Chain with Reli-ance Industries Limited, Mr. Sukumar Narasimhan has close to three decades of experience handling different segments of the Supply Chain both at the Operational & Strategic level. Below are the excerpts from the con-versation we had with him: What according to you is the pathway of India's jour-ney towards green supply chain management (SCM)? India has a lot to do towards 'greening' itself. Programs in National Geographic and similar other channels are replete with stories about how we have been continu-ally polluting the Ganges and other rivers. Our prac-tices in the industry are also not too much to write home about. For quite a while, technologies banned elsewhere were allowed into India (eg: Leather Tan-ning), but I believe it is high time our attitude towards environment changed. The only thing green about India is that many nations are envious about our industrial progress. But as a vibrant nation, we need to embrace greenness in eve-rything we do! What is our current situation? Deplorable would be the pessimistic one word, but on a brighter note, there is so much we can do in so little time! Beginning with waste management at homes, to wastes in industry, I guess there is much we can do! As with everything else, within the Indian ethos, we need someone with visionary leadership to get this program started.
What is your vision for 2025 in green SCM? Energy from waste, people content with a reasonably good standard of living without too much ostentation, extended forms of family comprising people with simi-lar needs being networked into a composite whole, and finally a realistic approach to beating the numbers on the stock exchange. These are what I believe we need to cultivate as an attitude to keep 2025 yet a peaceful earth for all to live in! As far as Green SCM is concerned, as I mentioned at the Continuum 2010, we need to adopt a lean, mean approach towards the processes and paper in opera-tions. Unless the supply chain fraternity begins collabo-ration on a wider scale where companies evolve a common network between themselves, as a nation, we will continue to expend more in every dimension than we can really work with. What kinds of risks are associated with going green? What are the initial hindrances? There can be no real risks to going green. The current hindrances and risks are because of the coloured per-ception we have towards such initiatives - how profit-able they can be! The more materialistic we get in our assessments, the less we will be driven towards truly green and sustainable improvements. What are the existing government policies, rules and regulations which are creating hindrances and what changes would you like to see for a better transition to
“India has a lot to do towards “India has a lot to do towards
'greening' itself...Our 'greening' itself...Our
practices in the industry are practices in the industry are
also not too much to write also not too much to write
green SCM? We, as a nation, are still in infancy towards true eco-nomic development. When affluence begins to bite at our toes, when there is so much conspicuous consump-tion, it is then we will begin to assess what we have lost to gain what we got! I sincerely hope like I said before, we learn sooner than other nations that there is virtue in moderate ostentation! What are the prospects of collaboration in supply chain e.g. things like clubbing warehouses and transportation as can be seen in the Telecom industry where sharing of towers has become an industry norm? Asset sharing as a concept in SCM has also existed, like leasing idle plant capacities, but that's where it has stopped. We have outsourcing only in Manufacturing in India, pretty little elsewhere in supply chain. Can more be done? The answer is a definite yes; much, much more can be done. Companies across different industry segments can get together to evolve a com-bined network of operations that provides synergy to all participants. The tragedy is when we always want to benefit at expense of someone else! What are the global practices that RIL follows? This is a tough question for me as an individual to an-swer but CSR themes have been fully adopted by RIL, and there are many initiatives we have undertaken to improve the order of things. In the public domain, there are a lot of socially responsible initiatives RIL has launched which makes me proud to be working for the firm! 3PL hasn't been embraced by Indian companies. What could be the reasons and what would enable it in the coming future? A primary reason for 3PL not taking off is because as managers, we dictate the way 3PL needs to work for us. I believe we need to focus on what needs to get accom-plished and leave the 'how' of it to the 3PLs. Without exaggeration, I keep repeating that the 3PL story is very similar to the 'mother-in-law/daughter-in-law' syndrome that's by now so famously known! I believe 3PL evolution will run hand in hand with the growth of organized retail in India. It is then, a seamless supply chain will become a sine qua non for the opera-tors and then, the 3PL can perform on a level playing field. Unfortunately, as with everything else, even 3PL maturation will need to be forced than embraced will-
ingly by us! Have you experienced anything in supply chain which industries take for granted, but it is among the key fac-tors of supply chain efficiency? Oh! This is a stupendous question! There is nothing we need to take for granted, beginning with the simple work protocol we establish as Standard Operating Pro-cedures! But unfortunately, we have all become victims of habit, thanks to the Taylorian theory of Division of Labor! Somehow, this needs to change ground up for us to begin the process of supply chain renewal! What is your daily schedule? Apart from reading what are your other hobbies? What do you do for recreation? When you're pushing 50, you have a distinct flavor to life - need to stabilize and slow down! Some faculties begin to creek and that's when the reality of imperma-nence begins to sink in. It is then, you begin to philoso-phize. And that's why you can pick that thread in all my thoughts! My hobbies are to read occasionally and write as well (am planning to write a book or two on SCM!). I love travel, but when work takes precedence, this will have to wait for a little later! Your message to young budding supply chain managers. See money in everything you do. Adopt an inquisitive
attitude than having to take things as they are. Continu-
ally challenge the limits of performance you set for your-
self, and cultivate basic discipline. A combination of all
these should land any youngster in good stead!
As told to - Nandini Muralidharan
L!VE July, 2010 23
| E X P E R T S S P E A K | DEEPAK YOHANNAN |
What is Life Insurance? In today‟s world most of us are aware of what Life In-surance means. Life Insurance in a nutshell means a policy that people buy from Insurance Company, which can be the basis of protection and financial sta-bility of the family in case of any unfortunate eventual-ity (death, disablement). Simply put, Life Insurance is a Protection Tool for the earning member of a family whereby if anything happens to this particular person and his earning stops, then the family should not suffer from financial crisis. Life Insurance is an Insurance of a person‟s life. So, if he were to die, his family would receive an amount of money called the Sum Assured, which would help the family to take care of the financial crisis which would arise from the sudden inflow in income. To get this benefit, he would have to pay a certain amount of money called Life Insurance Premium to the Insurance Company every year as per the contract. Who needs Life Insurance? Buying life insurance doesn't make sense for everyone. If you have no dependents and enough assets to cover your debts and the cost of dying (funeral, lawyer's fees, etc.), then insurance is an unnecessary cost for you. Also, if you do have dependents and you have enough assets to provide for them after your death by invest-ments, property, etc., then you may not need life insur-ance. However if you fall under any of the following category, then you definitely need insurance:
If you have people financially dependent on you
or if you are the sole earning member for your family, then you need Life Insurance If you have any loan or debt that outweighs your assets, then you need Life Insurance. If you are staying at home and providing your family with such services as child care, cooking, and cleaning, you need Life Insurance If both you and your spouse are earning and you would like to protect a surviving spouse against the possibility of the couple's retirement savings being de-pleted by unexpected medical expenses then you need Life Insurance If you are a parent and you need to protect your child‟s future against any unforeseen events for your child‟s security, then you need Life Insurance If you have a lot of wealth and assets and you would not like the same to run down by the effects of estate taxes or if you wish to transfer wealth to your future generations, then you need Life Insurance
How much Life Insurance cover should one have? Most of us are not aware of “how much” insurance one needs to purchase to protect one‟s family or for his future requirements. Let us understand the factors which influence the amount of insurance cover one should purchase to have a good night‟s sleep. Income Replacement - One of the biggest factors for life insurance is for income replacement, which is a major determinant of the size of your Life Insurance policy. The simplest way to understand it is if you are earning a certain amount every year for your family, then you need a policy which provides for an interest
- DEEPAK YOHANNAN, CEO MyInsuranceClub.com
How Much Insurance How Much Insurance How Much Insurance
Should One Have?Should One Have?Should One Have?
- Deepak Yohannan CEO, MyInsuranceClub.com
24 L!VE July, 2010
| E X P E R T S S P E A K | DEEPAK YOHANNAN |
earning of an equivalent amount. Currently, a large portion of the income goes to taxes and to maintain your own lifestyle. Hence the income, net of taxes, need to be determined for calculation of Life Insurance Requirement as Insurance Benefits are usually Income Tax free. For example, your Income, net of taxes, is Rs 5 lakhs in a year, then you need „A‟ amount of Sum Assured which if invested as a Fixed Deposit in a bank at 8% interest per annum will fetch an interest of Rs 5 lakhs in a year‟s time.
8% x A = Rs 5 lakhs Or, A = Rs 5 lakhs / 8%= Rs 62.5 lakhs
Thus Sum Assured requirement is a minimum of Rs 62.5 lakhs which doesn‟t include inflation so as to ensure that income of the earning member of the fam-ily can be replaced by interest earning on the Sum Assured without depleting the actual principal amount.
Income replacement for nonworking spouses is also an important and often overlooked insurance need. Cov-erage should provide for your costs for day care, housekeeping, or nursing care. Any net earnings from part-time employment also need to be added to this. However as simple as it may sound, calculating it is not very easy, since there are other factors that need to be added. Amount of Debt or Loan - is another very important factor while calculating Insurance requirement to en-sure that the liability to repay the same does not fall on your dependents. All your debts must be paid-off in full, including car loans, home loans, credit cards, personal loans, etc. If you have a home loan of Rs 10 lakhs and a car loan of Rs 4 lakhs, then you need at least Rs 14 lakhs in your policy to cover you debts
(and possibly a little more to take care of the interest as well). Hence in addition to Rs 62.5 lakhs (from the above example), Rs 14 lakhs + interest= Rs 77 lakhs (assuming Rs 50,000 as interest) need to be added as a loan component for repayment. Child Education Requirement - With the constant in-crease in the cost of education, it becomes an impor-tant factor for calculation of Insurance Requirement. The basic school education needs to be considered initially. Fee per month x 12 months in a year x Number of years remaining for child to complete education is the amount that needs to be added to Insurance Require-ment. For example: If the fee is Rs.2000 per month and the child is in 2nd class – Rs 2000 x 12 months x 10 years remaining for the child to complete class 12 = Rs.2.4 lakhs, which needs to be added to Insurance Require-ment. Higher Education needs to be factored in sepa-rately depending on what you would want your child to study and where and how much you are willing to
“...calculating the insurance requirement amount has always been a much debated topic as it is very difficult to estimate the amount of financial loss that the family would face in one’s absence.”
With the constant increase in the cost of education, it becomes an important factor for calculation of insur-ance requirement.
L!VE July, 2010 25
| E X P E R T S S P E A K | DEEPAK YOHANNAN |
spend on his or her education. Thus, in continuation with the previ-ous example, Rs 2.4 lakhs need to be added to the Insurance Require-ment of Rs 77 lakhs, which equals Rs 79.4 lakhs, plus maybe an amount of Rs 10 lakhs for the child‟s higher education, totalling to Rs 90 lakhs approximately. Dreams and Goals - All dreams and goals need to be considered separately as it is not a necessity but only a wish of the Life Insured. New house, car, foreign trips, child‟s wedding, etc. would fall under this category. The amount that you wish to spend on such occasion need to be added to the Insurance Requirement, after incorporating inflation For example if you wish to spend Rs 10 lakhs for your daughter‟s wedding 15 years later and the expected rate of Inflation is 6%, then you actually need to add
Rs 23.966 lakhs to the Insurance Requirement instead of Rs 10 lakhs. Insuring Others - Obviously there are other people in your life who are important to you and you may won-der if you should insure them. As a rule, you should only insure people whose death would mean a finan-cial loss to you. The death of a child, while emotion-ally devastating, does not constitute a financial loss because children do not contribute to the household income. The death of spouse, whether earning or not, does create a situation with both emotional and finan-
Between the Age Group Multiple of Annual Income
20 years – 29 years 20 times Annual Income
30 years – 39 years 15 times Annual Income
40 years – 55 years 10 times Annual Income
More than 55 years 5 times Annual Income
Multiple of annual income with different Age Group
Dreams and Goals like New Houses, Cars,
Foreign Trips etc need to be added to Insur-
ance Requirement after incorporating inflation.
26 L!VE July, 2010
cial losses and hence needs to be insured. Is Life Insurance an Investment? Many people see life insurance as an investment, but when compared to other investment tools, insurance cannot be really looked at as an investment tool. Cer-tain types of life insurance are referred to as tools for saving or investing money for retirement, etc. These are insurance policies in which you build up a pool of capital that gains interest. This interest accrues be-cause the insurance company is investing that money for their own benefit and is paying you a percentage for the use of your money, much like how banks oper-ate. However, if you were to take the money from the forced savings program and invest it in an index fund, you would likely see much better returns. For people who lack the discipline to invest regularly, a cash-value insurance policy may be beneficial. A disciplined inves-tor, on the other hand, has no such need since he can manage the same himself. Alternatives to Life Insurance Once the total amount has been calculated for Insur-ance Requirement, the other areas of investment also need to be considered. Property, bank deposits, other savings, bonds, mutual funds, stocks, gold, etc. form asset accumulation, which needs to be subtracted from Insurance Requirement to arrive at the correct amount. Term Insurance, a pure protection tool, suffices most of the requirement in your absence. However an indi-vidual‟s situation needs to be considered as only death benefit would not be the answer to all requirements. A mixture of Endowment and Term plan along with other forms of assets would form an ideal portfolio for an individual after considering risk appetite of the individ-ual. Easy Calculation of Insurance Requirement There is a quick calculation without getting into such nitty- grittiest. Multiples of annual income is considered as according to the different age groups. This is a simple and quick reference to calculate the Life Insurance Requirement. Although it would not ap-ply to everyone uniformly, it gives an approximate value for the same.
Conclusion The topic of calculating the Insurance Requirement amount has always been a much debated topic as it is very difficult to calculate the EXACT amount of finan-cial loss that the family would face in one‟s absence. Hence there has been many ways and means to come to a figure that is somewhat close to the actual re-quirement. The factors mentioned above, if consid-ered and calculated appropriately, also would yield a result somewhat close to the actual Insurance Require-ment. Calculating the actual figure for Insurance Require-ment is not possible. Do you really think it is possible to quantify exactly “how much” financial loss a family would face in a person‟s absence? Only when the per-son is actually absent, the family gets to feel the differ-ence. Till such time, a lot of small aspects of life are taken for granted and are not really valued. Therefore to arrive at a conclusive figure of exact amount of Insurance Requirement depends a lot on assumptions and expected loss. The rate of expected inflation, the future value of money and other factors considered are all on assumptions. Being adequately covered would also ensure a good night‟s sleep without having to worry for the family‟s security. Or, are we putting our families in the slightest of trouble if something unfortunate were to happen? Thus, the above factors and calculation would now help a lot of us to re-value ourselves and find out if we are adequately covered or not.
Other areas of investment like property, bank deposits,
bonds etc also need to be considered
| E X P E R T S S P E A K | DEEPAK YOHANNAN |
L!VE July, 2010 27
| E X P E R T S S P E A K | PRIYANKA OTSWAL |
A lthough India can be termed as a hub for Car-bon Credit market, still India needs to work on many issues. In spite of being preferred by
most companies in the UK, Germany, Japan and Den-mark, India is still not counted among the top three carbon credit nations because of its project rejection rate, which is as high as 50%. Such high rejection rate is due to a shortfall in project performances, changes/clarifications in the methodology. Despite all these concerns, outlook of carbon credit market remains strong owing to active participation of European Un-ion, rising fuel/energy prices, increase in the number of developed countries ratifying Kyoto Protocol etc. As far as the accounting of carbon credit is concerned, The Institute of Chartered Accountants of India (ICAI) is still working to design proper accounting policies for the same. “Whether the carbon credit issued through CDM projects should be shown as an asset or they should be termed as goods? Carbon credits should be termed as revenue or they should be termed as other income? Is segment reporting possible for CERs? How to value carbon credits?” are some of the issues, still waiting for ICAI new guidelines. The views of taxation authorities would be another interesting dimension.
How to Account for Carbon Credit? Indian companies are generating a good amount of revenues from carbon credit sale. This huge amount becomes material enough to account. But till now there are no guidelines under Indian GAAP. So the Indian companies are following lots of practices to account for the same. Under International Financial Reporting Standards (IFRS), most of the companies are treating income from carbon credit as government grants. And thus this
becomes a part of income statement on one side, and as a corresponding debit on the other side, it is treated as an Asset (Intangible Asset). But there are a lot of controversies over this accounting treatment. For a critical evaluation let‟s check out these issues:
Is Carbon Credit an Asset? The definition of an Asset given by Accounting Stan-dard 26 (AS-26) is: An asset is a resource: (a) Controlled by an enterprise as a result of past events; and (b) from which future economic benefits are expected to flow to the enterprise. An intangible asset is an identifiable non-monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. Carbon Emission Reductions (CERs) fulfill all the crite-rion of an intangible asset except that it is not held for use in the production or supply of goods or services. This indicates that CERs cannot be termed as Fixed Asset, and it is out of the scope of AS-26 (Intangible assets).
Is Carbon Credit an Inventory? Second method to account these CERs can be to show them as inventory (AS-2) AS-2 defines Inventories as: Inventories are assets: (a) held for sale in the ordinary course of business; (b) in the process of production for such sale; or (c) in the form of materials or supplies to be consumed in the production process or in the rendering of ser-
Carbon: A New Commodity to Carbon: A New Commodity to Carbon: A New Commodity to
Trade and AccountTrade and AccountTrade and Account
- Priyanka Ostwal, MBA (Finance), M. Phil. Faculty, Amity Business School
28 L!VE July, 2010
| E X P E R T S S P E A K | PRIYANKA OTSWAL |
vices. Inventories need not be in tangible form, it can be in-tangible also. CERs fulfill all the above requirements and thus can be termed as inventories. Thus, If CERs are held in the business for sale in the ordinary course of business, they can be termed as inventory (IAS2), if not they should be considered as identifiable non-monetary intangible assets.
How to Value CERs? So far, we have concluded that CERs may be termed as Intangible inventories. So the valuation criteria will again be according to AS-2, which says to value in-ventories at cost or net realization value, whichever is lower. The only cost which brings CERs into existence is the certification cost of CERs. All the other costs are either not relevant or they have incurred before CERs came into existence. That means in the books of ac-counts, CERs should be shown at their certification cost, but in that case there will be a significant mis-match between cost and revenue of these inventories. This is because entities would need to expense most of their costs as soon as incurred but will recognize reve-nue arising from CERs only when these are actually sold. So, the valuation criterion of carbon credit is again a problem.
Is Carbon Credit a Contingent Asset? From the above discussion, we can say that Carbon Credits are a part of assets of a business. But again the problem is, CERs are a kind of contingent assets (defined in Accounting Standard-29) as that “arises from the past events and the existence of which will be confirmed only when the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprises” (when pro-ject gets approved by the authority). Because of this reason, CERs (a contingent asset) can not be shown as assets until and unless communication for credit of CERs from United Nations Framework for Climate Change (UNFCCC) is received and provided it is probable that future benefits associated with CERs will flow to the entity and costs to generate CERs can be measured reliably. Thus, CERs can be termed as “Contingent Asset”.
Carbon Credit should be termed as Sales or Other income? Section 43A(11) of the Companies Act, 1956, defines „Turnover‟ as “the aggregate value of the realisation made from the sale, supply or distribution of goods or on account of services rendered, or both”. Again part II of Schedule VI to the Companies Act, 1956, requires a separate disclosure of “profits or losses in respect of transactions of a kind, not usually undertaken by the company or undertaken in circumstances of an excep-tional or non-recurring nature, if material in amount”. Sale of carbon credit is on non-recurring basis (though some exceptions are there). Thus, it can not be termed as „Revenue‟. Again, CDM projects are not cost cen-ters in themselves and thus making it impossible to work out separate profit or loss of any CDM project with accuracy. The combined study of Section 43A (11) and Schedule VI of companies act shows that in-come received from sale of carbon credit should be a part of other income not Sales. If amount received from sale of CERs is significant, they can be shown as a separate line item under the head “Other Income”.
Is Segment Reporting possible in case of CERs (AS-17)? According to some experts, CDM project (duly ap-proved by UNFCCC) should be looked as a separate segment for segment reporting as per AS-17. And the Capital Investment, Sales and Profit earned by these projects should be shown separately. This is not practi-cal as CDM projects are not either a profit center or a cost center in itself. It‟s a multi segment entity and can be identified with its parent entity only. References: http://unfccc.int/2860.php http://www.cdmindia.nic.in http://www.thehindubusinessline.com/2009/10/01/stories/2009100150370900.htm http://www.nlsenlaw.org/copy_of_news/accounting-debates-on-carbon-credits http://www.icai.org/ The Accounting Debates on Carbon Credits: D Murali, Busi-ness Line, October 16, 2008 “Carbon Credits: How Big is your Foot-print?”: Pradeep Kumar Gouda, N Rajashekhar, L!VE Magazine, SJMSOM, IIT Bombay
L!VE July, 2010 29
| S T U D E N T S S P E A K | PE |
I t is evident across geog-raphies that private equi-ties create positive impact
on the companies they fund and on the overall economy of the country they operate in. Increase in sales and profitability of the parent company and growth in employ-ment are some of the tangible benefits that the PE funded compa-nies tend to gain.
India Inc. weathered the cur-rent financial crisis steadily to reg-ister a 7% growth in GDP even in the troubled times. PE is increas-ingly being recognized as the vital asset class in India which can fuel infrastructural development in In-dia to support this robust growth that the India economy is going to witness in the recent future.
The 2010 fiscal is witnessing an increase in PE funding, follow-ing a decrease in PE deals in 2008 and 2009. India has a robust VC/PE industry with USD 32.5 billion
invested across more than 1500 VC/PE deals from January 2006 till date.
A study conducted in 2009 by Venture Intelligence found that PE boosts the Indian economy by cre-ating value for corporate India. This is through higher growth in sales and profitability of PE funded
companies; higher R&D spends which fuels greater innovation, and higher wage payment as com-pared to non PE funded compa-nies. The key findings from the study are presented below.
The economists world over have estimated that India needs about USD 1.3 trillion dollars of
Is PE the
next In-
Thing for
India Inc.?
- Swapnadeep Bhattacharyya
SJMSOM, IIT Bombay
30 L!VE July, 2010
investment over the next three years to sustain a GDP growth of over 7%. This implies that there is a requirement of USD 60-100 billion of VC/PE investments over the next three years. Approximately, PE investments can be in the range of USD 9-10 billion in the year ending December 31, 2010. The graphs show that PE backed com-panies perform better than Sensex companies owing to better opera-tional and fiscal discipline.
What is to be understood is that PE is essentially a financial transaction. Often, PE is chosen because long-term risk capital is not available elsewhere, due to underdeveloped equity markets. Sometimes, PE may be taken as a substitute for long-term debt be-cause public and private borrow-ing channels may be underdevel-oped or unavailable.
In India, the sources of long-term debt capital from public mar-kets are limited due to the rela-tively nascent stage of Indian debt capital markets. On the other hand, Indian equity capital markets, which are well-developed, are pri-marily accessible for more mature companies than those that need PE.
In developing countries like India, the impact of PE funding may well be even more significant. There are several reasons. Firstly PE fund is the much needed capital for private companies. Secondly, PE can help Indian companies by providing expertise in creating or-ganizations that are both well posi-tioned for global growth through specialization in the supply-chain,
and adapted to local management talent, ownership structures and needs.
Now, we will try to analyze the
impact of PE funding on some In-dian companies in particular and some industries in general.
Impact of PE on Air Deccan: The PE investment in Air Deccan brought both operational and fis-cal discipline. PE firms helped setup a proper organization struc-ture and created a formal business plan. The financing enabled Air Deccan to pursue its aggressive
business model of running a budget airline. Impact of PE on the Aviation In-dustry: Air Deccan had a big im-pact on the industry. Its no-frills flights, focus on second-tier cities, and aggressive pricing led to ag-gressive growth and spurred the entry of comparable budget air-lines. Its practices were imitated by established competitors and be-came part of industry practice. The result was a fall in the average cost of air travel in India. To a signifi-cant extent, these new business approaches were enabled by the
Often, PE is chosen because long-term risk capital is not available elsewhere, due to
underdeveloped equity markets. Sometimes, PE may be taken as a substitute for long -term
debt because public and private borrowing channels may be underdeveloped or unavailable .
| S T U D E N T S S P E A K | PE |
L!VE July, 2010 31
| S T U D E N T S S P E A K | PE |
initial round of funding and the models that were introduced by PE financiers seeking to imitate the success of budget airlines in other countries. Impact of PE on Café Coffee Day: The primary impact of the PE in-vestment was operational. Firstly, the PE funding enabled the com-pany to hold on to market leader-ship through expansion and provi-sion of value-added services such as Wi-Fi. Secondly, the PE inves-tors played a role in improving corporate governance and helping to recruit the CEO. Thirdly, they helped the management think through alternative revenue streams to complement the core business model of selling coffee. Impact of PE on Meru: India Value Fund‟s (IVF) investment in Meru was unusual for PE because of the relatively early stage at which funds were committed. The taking of a majority holding was also not typical of India, though more akin to the western model. The differ-ence with the western model was that the management of Meru was retained and strengthened. The impact on Meru is evident. The Meru brand has become synony-mous with air-conditioned radio taxis. Without PE investment, the company‟s professionalism and development trajectory would have undoubtedly been slower; techno-logical sophistication would likely have been lower, as well. The combination of these two factors is that Meru is not just the largest taxicab operator in India, but its most technologically sophisticated too. Impact of PE on the Education Sector: Higher education, a recent
growth leader in India, is a difficult field for PE investment owing to the legal requirement that providers of degree-granting institutions are not permitted to earn profit. It is esti-mated that, despite the industry‟s growth rate in technical fields of over 40 percent per annum be-tween 2005 and 2009, PE invest-ments are less than USD 300 mil-lion. PE has, therefore, looked to fund ancillary services that lever-age brand names. Given the new-ness of the private higher educa-tion sector, Manipal Universal Learning‟s success in using PE funds to finance for-profit services established a paradigm shift. Impact of PE on Naukri: ICICI Ventures invested in Naukri at a time when the Internet bubble was at its peak. This PE firm provided strategic support covering a range of functions from corporate gov-ernance to financial discipline, and to business focus. The Manage-ment ascribes its phenomenal growth (from INR 0.25 million to INR 2,700 million in 11 years) to PE funding. As a result, Naukri
continues to dominate the market and is a profitable company. The PE investment enabled Naukri to set the standard for digital service in job search.
In conclusion, one may state
that PE capital is „smart money‟ and that PE firms contribute to-wards the growth and success of their investee companies. The port-folio companies are typically SMEs. New management helps bring in new business ideas and models. High standards of corporate gov-ernance have typically not been an area of focus by such companies until the PE investment.
In response, several PE firms are adopting the western model and are now building separate operating teams to support their portfolio companies. This should bring increasing benefits to the portfolio companies and help fur-ther demonstrate to the Indian business community that PE capital, although expensive, is indeed ‟smart money‟.
32 L!VE July, 2010
| S T U D E N T S S P E A K | ADVERTISING |
A 200 words ad in a leading national news-paper…Cos t- Rs
10,000. A 10 second video com-mercial in any channel… Cost- more than Rs 1,00,000. Sponsor-ing a big scale event…Cost- more than Rs 10,00,000. As the scale of advertising increases, so does the number of zeroes in the cost.
Why do people spend so much on advertising? A rather silly question with a rather obvious an-swer.
What can be the alternative way of advertising? People are so much in love with the conventional ways of advertising that they fail to experiment. They are threatened by the fear of failure. This human phenomenon leads to stagnation and lack of innovation.
If you look around with open eyes, there can be a whole lot of new methodologies to advertise. Apart from the traditional ways, there are other cost effective ways of making the customer aware of the product – like advertising on poly bags. Poly bags are used by almost all retail outlets. But both the sides of the poly bag carry an advertisement of the shop that it belongs to. Product manufacturers can try and capture one side of the Poly bag to advertise their product. For example, a Big Bazaar poly bag can carry the latest offer or ads of Woodland shoes on the other side, not only making it more attractive but economical as well. We will revisit this idea in detail in the same article later on.
We learn different concepts in marketing like market segmenta-tion and targeting the right cus-tomer base. But we forget to use the science of basic human psy-chology while trying to advertise. Why would a person buy XYZ product? How can we make a cus-tomer happy as well as allure him to our product?
Can a TV commercial do that? Or that black and white text in a newspaper? Or is it the sponsor-ship of a cricket match that can help achieve that? The truth is that NONE of them can. They can only make a customer aware of the product.
Advertising is not just making a customer aware, but also influ-encing him and attracting him to your product. We should try and
- Palak Kumar & Arun Kumar K G
SJMSOM, IIT Bombay
L!VE July, 2010 33
find ways of advertising by means of which we can provide some value add to the customer. A free gift can make a person happy.
For instance, a Complan logo can be printed on an eraser or a pencil and distributed free on the billing counter of every modern retail store. Children are the ones who will be using these freebies and in turn demand the product advertised-Complan. A Nike ad can be superimposed on a key-chain and given free with every shopping bag. Similarly a Dell Inspiron etched pen can be given free with every bill above a certain limit.
The benefits of this type of advertising are unlimited- modern retailers like Big Bazaar, Reliance Mart would be more than happy to distribute these freebies as it will increase their customer retention. The advertisers will be happy to have their product advertised by spending less on such small gifts that could be purchased in bulk at dirt cheap cost. And finally, the customer will be happy and satis-fied for having received the free-bies. There is a value addition for everyone. Mostly the customer, who would be more impressed by the advertisers for having received a free gift, rather than just watch-ing a commercial!!
These are just some of the non-traditional advertising methods, which are becoming popular day by day. The basic idea behind such campaigns is to connect with the target audience at a much deeper level by giving them an
experience that they can‟t forget easily. This concept was taken to another level by companies such as Sony, and T-Mobile. The three minute guerrilla style advert enti-tled „Dance‟ is part of T-Mobile‟s „Life‟s for Sharing‟ campaign. This commercial manages to uplift with this ad with what seems like an entire train station of London com-muters spontaneously dancing together (400 people were in on the commercial gig). They really drive it home with the tagline "Life's for sharing". According to Lysa Hardy, Head of Brand and Com-munication, this campaign allowed them to let people learn a bit more about T-Mobile as a company on a more emotional level.
Another innovative ad which caught our attention recently was a Mr. Clean advertisement. It is an-other classic example of guerilla marketing, which tries to capture your attention when you are least expecting it. This kind of advertis-ing uses a surprise effect to tanta-lize the viewer when they are in a situation where they would not typically find media.
Most of the advances in ad-vertising in recent times have been made in the online media. How many of us are present in Orkut, Facebook or Twitter? The answer is pretty obvious. Social networking sites are the most powerful online advertising media today. You can target a wider market at a much lower cost. The flexibility and the scope for innovation is higher in online advertising. Flash mobs show the power of social and other
telecommunications media in reaching across to a varied and dispersed audience and bringing them together to perform a well coordinated act. By definition, a flash mob is a large group of peo-ple who assemble suddenly in a public place, perform an unusual and pointless act for a brief period of time and then quickly disperse. The term flash mob is generally applied to gatherings organized through telecommunications, so-cial media and viral mails. It is not applied to events organized by PR firms or publicity stunts. Just to add, these developments do not occur all of a sudden. They often have continuous growth or development over long periods.
So what are the advertising trends in 2010?
If you look at the advertising trends of 2009, you would see that many companies are investing on green marketing. In addition, we can see the same trend growing in a bigger way in 2010. Especially if you look at car branding, many companies are coming up with environment friendly cars that run on alternative fuels. Many experi-enced marketers think that Going Green is not just a fancy trend any more. People have already started believing in this concept and the immediate need of taking some action. Today it is not enough that you advertise the Go Green con-cept. You must add a comprehen-sive story and show that your busi-ness or organization is actually supporting the cause. IBM‟s smarter planet campaign is an
Most of the advances in advertising in recent times have been made in the
online media...Social networking sites are the most powerful online advertising media today.
You can target a wider market at a much lower cost.
| S T U D E N T S S P E A K | ADVERTISING |
34 L!VE July, 2010
excellent example of branding itself as a socially responsible corporate as well as an excellent employer.
The overall advertising envi-ronment in 2009 was fairly gloomy with slashed budgets and revised strategies to address the new real-ity. However, that didn‟t stop the industry from evolving, and the lessons learnt are likely to pay-off in the year ahead. For example, advertisers started looking at the need for accountability metrics and campaign-specific performance. They also started to embrace bur-geoning social networks and con-sumer generated media to bring consumers closer to a product or brand. The Nielsen study has come out with the top 5 advertis-ing trends for 2010.
Top Advertising Trends for 2010
1.Optimizing media convergence is a top priority. A better under-standing of media convergence will manifest in order to deliver a better return on investment. The ability to accurately measure activ-ity and link online ads to offline purchasing behavior will be critical.
2.New models emerge to take advantage of smartphones. Accu-rate mobile measurement will be required to stay ahead of the snowballing growth of the media platform.
3.More cross-media ad cam-paigns surface. The massive growth of online video games played and shared online leads the
way for more successful interactive and cross-media advertising cam-paigns to appear. Growth in the adoption of this innovative adver-tising across screens and activities will increase.
4.Commercialization of social net-working hubs increase. Social me-dia will provide a new sales chan-nel for establishing product aware-ness and commercializing brands to better support traditional adver-tising or text-based ads.
5.More interesting and interactive online ads appear. Increased use of more creative advertising and content models online such as video, attention-seeking page takeover ads and mechanisms for
| S T U D E N T S S P E A K | ADVERTISING |
Mr. Clean advertisement is another classic example of Guerilla marketing.
L!VE July, 2010 35
greater interactivity will drive the next era of Web development.
Given such global trends, we
have to analyze the way ahead. Is jumping onto the global band-wagon the only way forward? Think again.
ITC is a company which has undertaken a lot of effort to re-image itself as a socially responsi-ble company. They use the space in the notebooks produced by them to convey social messages such as global warming and also they advertise their own social campaigns. Why can‟t we take such ideas to an entirely different level?
Earlier we talked about adver-tising through poly bags. Stores used to use this medium to brand their store names. But, both the
stores and the product companies can benefit by collaborating in advertising on the bags. If the companies invest a small portion on such advertisements the cost of
poly bags can be covered easily. This will not only increase the visi-bility of such products, but also increase the sales in such stores. This mutually beneficial plan can be extended to a socially beneficial
one by introducing bio-degradable polybags. As such biodegradable poly bags cost more, thus prevent-ing the large scale use. If compa-nies and stores take this medium of advertising seriously then we can eliminate poly bags to a large extent. This could be the one ad campaign which the world was waiting for.
Just give a thought to the scale with which we can affect our soci-ety and environment through such innovative ideas. It just requires some exercise of our brain and more importantly, the will or capa-bility to break the traditions and think beyond the obvious.
Marketing constraints during
the time of this recession can pro-
vide the much required stimulus to
force us to innovate and innovate!
ITC is a company which
has undertaken a lot of effort
to reimage itself as a socially
responsible company. They
use the space in the note-
books produced by them to
convey social messages such
as global warming.
| S T U D E N T S S P E A K | ADVERTISING |
A better understanding of media convergence will mani-fest in order to deliver a better return on investment.
36 L!VE July, 2010
The Dawn of The Dawn of
Behavioural Behavioural
OperationsOperations
T he terms Behavioural Finance or Behavioural Economics are perhaps more common terms than Behavioural Operations. However, it
has the same implications in this field where human beings are critical to the functioning of the systems and processes. The inherent nature of the human beings prevent them from being rational and thus induce inconsistencies in the systems, from what is predicted by theoretical studies and research. Thus incorporation of this critical aspect of human behav-iour is essential in the modelling of systems in opera-tions as well. The performance of a system is defi-nitely based on inputs, processes and efficiency of those processes, but the skills, discipline and respon-siveness of the people involved in those processes do play a pivotal role in giving superior system per-formance and output. As in any other primitive theoretical base, core Op-erations Management principles assume that people involved in the systems have consistent responses, consideration for all possible alternatives and unbi-
ased evaluation. The decisions and actions in a con-strained environment, aiming to improve productivity and/or quality of any system comprise what we call as Operations Management. Due to the constantly changing nature of the macro environment, policies and forces of supply-demand, it is almost impossible to put in place a fully automatic management system, seamlessly integrated to incorporate such nuances and which will keep optimizing the output. If it was in place, it would eliminate the need of an Opera-tions Manager. However, major tactical and strate-gic decisions in this regard still lie with human be-ings and are often found out to be much more eco-nomically feasible. Since such a system is far from perfect, improving a system involves, responding to intricate problems, managing uncertainty and risks and often, experimentation, empirical analysis and live case studies. Given its receptivity to such human inputs, it is apparently surprising that behavioural theories have not been incorporated in this field of study for biases, which arise from cognitive limita-
| S T U D E N T S S P E A K | OPERATIONS |
- Somak Chakraborty
SJMSOM, IIT Bombay
L!VE July, 2010 37
tions of the human mind. Estimating the nature and magnitude of such biases can give us a clearer pic-ture and more holistic assessment of Operations in any field and make Operations Management mod-els more practical. The whole rationale behind incor-poration of "human" factors in Operations Manage-ment is a better understanding of contemporary problems and finding out more practically relevant solutions for the same. The initial works by Frederick Taylor in the field of industrial management did involve some behavioural connotations as in providing monetary incentives as a means of improving labour productivity. Though the study is outdated, it provided some valuable in-sights in affecting systems output by modulating be-haviour with the help of incentives. The study can be extended to incorporate the nature of incentives, since later studies have shown fairness, respect, rec-ognition etc. to be very powerful incentives as well. Inventory Theory is a popular subject of mathemati-cal research and quite a bit of advanced research has been done in this area which has resulted into very complicated models. However, very few (or none) models take into account risk avoidance ver-sus risk taking behaviour of the manager in charge of inventory management; the inter departmental confidence in the organization like that of between Sales & Marketing and Supply Chain which greatly affects forecasts and subsequently inventory. More-over, forecasting is often affected by recent events than past ones and phenomenon like overconfi-dence, bias etc., which distort the results of the mod-els from practicality. MPS and MRP models are often subject to reschedul-ing. This is highly a function of risk avoidance na-ture of customers. If we can quantify or predict these changes with reasonable certainty, lesser reschedul-ing will take place, which will in turn lead to cost savings and optimum capacity utilization. Product Development and Project Management are areas which require decision making in uncertainty and constant updation of prediction and forecasts, based on past data and/or competitor’s data for similar products and projects. Since predictions do
depend on anchors (initial estimated values), the bias in the subsequent forecasts is a direct function of the anchors. This largely affects the timeliness and cost projections of the product or project. The ‚Bullwhip effect‛ in supply chain has been ex-plained by many mathematical and causal models. It can also be explained by considering human cog-nitive limitations and lack of a proper integrated channel of communication in the supply chain, which distorts available information at each up-stream stage. Issues such as organizational structure and communi-cation of the firm in context do affect management of operations in that firm to a certain extent too. Problem in implementing innovation in supply chain or manufacturing, at the onset is again a behav-ioural factor that relates to resistance to change or shifting to a new learning curve. Even technology implementation has to face difficulties due to cogni-tive biases. TQM implementation is another instance where be-havioural factors play a decisive role. Attribution and evaluation of sub optimal components has a major human component involved in it and is prone to attribution bias. Setting quality benchmark and evaluation of improvement in quality is often subjec-tive and judgemental in nature, more than being a function of quantitative structural factors. The behav-ioural aspect in implementing research in manage-ment practice is, in itself, an empirical proof of ex-pectancy mismatch between the OM researchers and OM practitioners.In a nutshell, multi-pronged approach is required to effectively understand real life issues in Operations Management today. This must ensure that we incorporate psychological, so-cial, environmental and systemic factors when we go for modelling. A probable start will be to under-stand behavioural factors that can be effectively in-corporated in the feedback loops that influence sys-tem performance. Subsequently, multiple factors can be included to further develop the models.
Reference: “Toward a Theory of Behavioral Opera-tions" by Francesca Gino & Gary Pisano, 2007
| S T U D E N T S S P E A K | OPERATIONS |
38 L!VE July, 2010
| B I Z W I T S | QUIZ |
1. Connect:
2. This word had its origins in the death and destruction of WW2. It was RAF slang for a particular kind of bomb but is used in a totally different sense in the movie industry nowadays. What is this word?
3. This Brazilian player, Manuel Francisco dos Santos was born with severe physical disabilities but grew up to become a part of one of the finest Brazilian teams to ever play football. He was known by his nickname____ which means wren, a little bird. Due to his immense popularity in Brazil, he was also called Alegria do Povo(Joy of the People) and Anjo de Pernas Tortas (Angel with Bent Legs).Can you identify the player by his most popular nickname?
4. Movies: W, a fine actor was desired to play a role in X, but was offered Y the same year and he ended up taking the latter role. He eventually lost the Best Actor‟s Oscar that year to Z who played the role of X in X. Name W, X, Y and Z. (Hint: There is an India connection to one of these films.)
5. At the 1966 FIFA World Cup, Antonio Carbajal, the Mexican goal keeper created the record of playing in 5 different World Cups from 1950-1966.His record of playing in 5 World Cups was equaled in 1998 by another player who played from 1982-1998. Who is this famous player who even won the WC during this stint.
6. The advertising campaign of this company has often been controversial. Some of the ads included de-pictions of a variety of 'shocking' subjects such as a deathbed scene of a man (AIDS activist David Kirby) dying from AIDS; a bloodied, unwashed newborn baby with umbilical cord still attached; two horses mating; a collage consisting of genitals of persons of various races; a priest and nun about to engage in a romantic kiss, pictures of inmates on death row, and picture of bloodied, shot up pants and t-shirt of a soldier killed in Bosnian War. The company's logo served as the only text accompanying the im-ages in most of these advertisements. Identify the company.
7. In India, Where would you be posting a letter if the PIN Code started with a 9?
8. The Kármán line, named after Theodore von Kármán, is the internationally designated boundary of what?
QuetzalQuetzalQuetzal (Contributed by Ujjayan Sen Gupta, SJMSOM, IIT Bombay)(Contributed by Ujjayan Sen Gupta, SJMSOM, IIT Bombay)(Contributed by Ujjayan Sen Gupta, SJMSOM, IIT Bombay)
L!VE July, 2010 39
| B I Z W I T S | QUIZ |
9. Andres Escobar Saldarriaga, a Columbian defender became headline news during the FIFA World Cup 1994. Can you say why?
10.This term, used in the management parlance, originated from the process of chiseled horizontal marks that surveyors made into which an angle - iron could be placed to bracket a leveling rod, thus ensuring that the leveling rod can be accurately repositioned in the same place in the future. These marks were usually highlighted with a chiseled arrow below the horizontal line. Which term?
11.”YAMU PANCHAYAT” is a shop in New Delhi which is unique in its own way. Why is it unique?
12. The yubiwa pipe, a finger ring that would allow the wearer to smoke a cigarette down to its nub, was the first successful product of a well-known company. The profits from the yubiwa pipe were used to develop an electro-mechanical gadget that has made this company famous. Name the company.
13. The gentleman holding the FIFA World Cup trophy aloft once described it using these words: "The lines spring out from the base, rising in spirals, stretching out to receive the world. From the remarkable dy-namic tensions of the compact body of the sculpture rise the figures of two ath-letes at the stirring moment of victory". Identify the person.
14. The Oxford English Dictionary dates the first publication of the word to 1825. The origins of the word are unknown, but researchers believe the word stems from a Latin word which means “utmost deliciousness.” Food writer Harold McGee claims it to be “from the Creole for a mixture of sugar and molasses”. Identify.
15. An invention in the late nineteenth century when looked from the side had a resemblance to two coins, one leading the other. It got its name from these two coins. What invention are we talking about?
16. Each bottle of which alcoholic brand bears a stamp of its originating country to ensure that each bottle is “truly ________in spirit & authenticity”?
17. Which scheme came into picture when two Indian banks failed in 60‟s, while at that time India was the only second country to introduce that scheme, first was the United States. Which scheme am I talking about?
18. Incorporated on December 24, 2003, it operates the first-of-its-kind cate-gory of „Smart Basics‟ which was launched in June 2004, the Smart Basics concept created a revolu-tion in the world of Indian hospitality. The first of the Smart Basics hotel was launched in Bangalore and was called IndiOne. How it is known today?
19. He was a retired flight operations manager at Indian Airlines named Mr. Harpal Singh. He got some-thing first from the Iron lady of India. What am I talking about?
20. To advertise its company‟s product, the owner encouraged his franchisee to take to the air waves with their own campaign. Following its directive, two franchisees decided to target kids by sponsoring a local children‟s show, Bozo‟s Circus. When the station cancelled the show after 4 years, the franchi-sees hired a television announcer to create a new clown persona for local ads. It marked the birth of which legendry icon?
Answers are on page 43
40 L!VE July, 2010
Introduction:
UnitedProsperity.org (UP) is an
internet-based non-profit organi-
zation that was established to
help lift poor and near-poor peo-
ple around the world out of pov-
erty using micro-
financing initiatives.
UP was launched in
June 2009 by Bhal-
chander Vishwanath
when it partnered
with a large bank in
India, and Ajiwika,
an MFI that worked
with the poor in one
of the poorest states
of India.
UP‟s mission is to
empower individu-
als to provide a
compassionate and
impactful microloan
guarantee that mul-
tiplies into a bigger
loan to poor clients.
These microloans
are made to low-
income entrepreneurs, mostly
women, who would not otherwise
have access to banking and fi-
nancial services, to help them
start or grow their own small
businesses. The idea of individu-
als all over the world becoming
„social guarantors‟ for the pur-
pose of making loan guarantees
is an innovative approach to
tackle extreme poverty.
To date, UP has raised around
USD 70,000 in loan guarantees
from individuals in more than 20
countries. As a result, more than
650 entrepreneurs have received
around USD 130,000 in loans.
This scheme makes an immedi-
ate impact by increasing the in-
come of the families who take
part in it. Moreover, since Ajiwika
got access to capital from the
bank through UP‟s guarantees,
other banks have begun lending
to this MFI.
Motivation & Opportunity:
The poorest people in the world
have to live on just USD 2 a day.
They struggle each day to fulfill
the most basic needs of food,
shelter, and clothing for them
and their families. By giving this
group access to these microloans,
they are being given an opportu-
nity to develop small businesses
that will ostensibly support the
borrower and potentially benefit
the borrower‟s entire village or
community. The provision of
small loans (microloans) to poor
borrowers, through specialist
microfinance institutions is known
as microcredit. In the last couple
of years, this has become a
worldwide movement.
Despite its power
to transform lives
m i c r o c r e d i t
reaches only a
small fraction of
the people who
need it; many of
the poorest in the
most economi-
cally backward
areas with the
greatest need are
often outside the
reach of micro-
credit. Microfi-
nance Institutions
serve only 100
million of the 1.5
billion working
poor in need of
m i c r o f i n a n c e
(Gonzalez and
Rosenberg, The
State of Microfinance, 2006).
Current funding of MFIs is esti-
mated at USD 40 billion, but an
estimated funding of USD 250-
300 billion will be required to
meet the potential demand
(Jennifer Meehan, Tapping Fi-
nancial Markets for Microfinance,
Grameen Foundation, 2004).
Although there are nearly
10,000 microfinance institutions
in the world, most of the funding
goes to a few institutions. While
Tier 1 MFIs and some Tier 2 MFIs
are relatively well-funded, the
smaller Tier 3 and Tier 4 MFIs
find it very difficult to raise funds.
Thus there is a large number of
Tier 2, Tier 3 and Tier 4 MFIs
| S T A R T U P S T O R Y | UNITED PROSPERITY |
L!VE July, 2010 41
who could benefit from addi-
tional funding through United
Prosperity (see Figure 1).
Process of Working:
U n i t e d P r o s p e r i t y . o r g
(www.unitedprosperity.org) is an
Internet- based non-profit social
enterprise that enables private
individuals to become social
guarantors and contribute to-
wards the eradication of extreme
global poverty. The UP website is
a platform where poor entrepre-
neurs, MFIs, and social guaran-
tors can come together through
the following steps:
Step 1: UP‟s MFI partners screen
the entrepreneurs and upload
their profiles on the website. In
most cases, the MFI partner is-
sues the loan from their working
capital, to encourage the entre-
preneur to start work on their
business.
Step 2: Individuals can see the
entrepreneurs‟ profiles on the UP
website, choose which ones they
would like to support, and guar-
antee a loan through PayPal.
Step 3: UP consolidates the guar-
antees on multiple loans on be-
half of the MFI partner and then
issues a guarantee to the bank.
The funds are deposited as col-
lateral with the bank.
Step 4: Based on UP‟s guarantee,
the bank issues a loan that is
greater than the total guarantee
amount. If the loan to the entre-
preneur is already disbursed
from the MFI‟s working capital,
then the microfinance institution
is able to replenish its working
capital. Otherwise the loan is
disbursed to the entrepreneur.
Step 5: The entrepreneurs use the
loans to grow or start their busi-
nesses. After an agreed period,
they start repaying their loans.
Repayment statistics and progress
updates are available to the
guarantor through postings on
the entrepreneur‟s profile on the
UP website made by the MFI staff.
Step 6: Upon repayment of the
MFI‟s loan, UP‟s guarantee to the
bank is released. The guarantor‟s
funds will then be returned. The
Basic Model of United Prosperity
| S T A R T U P S T O R Y | UNITED PROSPERITY |
42 L!VE July, 2010
guarantor may elect to support
other entrepreneurs or withdraw
the funds.
The beauty of UP‟s guarantee is
that it reduces the risk taken by
the banks, thereby motivating
them to lend to smaller MFIs.
Once banks lend to the smaller
MFIs thanks to UP‟s guarantee,
the MFI starts to build a relation-
ship and credit history with the
bank. This gives the banks
greater confidence to provide
capital to smaller MFIs with man-
ageable levels of risk. As an in-
strument of social and financial
change,
UP‟s loan guarantees are much
more powerful than outright do-
nations or direct loans for a
number of important reasons
because they:
Offer higher social return on in-
vestment – A loan from an indi-
vidual to an MFI results in a loan
of equal size to the poor entre-
preneur. As the guarantee pro-
vided by the UP model is only
partial, the impact for the social
guarantor is greater. For exam-
ple, if the poor entrepreneur
needs to borrow USD 1,000,
then the social guarantor needs
to guarantee the loan only to the
extent of USD 500. This USD 500
will be leveraged to provide a
USD 1,000 loan to the entrepre-
neur giving a leverage ratio of 2
(USD 1 000/USD 500).
Create local self-sufficiency –
UP‟s guarantee for the loan helps
to establish partnerships between
MFIs and local banks, thereby
building institutions and capacity
at the local level for greater long-
term benefits. In contrast, direct
international lending to MFIs
from international donors could
foster dependency on foreign
donors rather than strengthen
local institutions and institutional
linkages.
Mitigate currency risk – UP‟s loan
guarantee model has the effect
of mitigating the currency risk to
the MFI because the MFI borrows
money from a local bank in the
local currency. Moreover, social
guarantors are not exposed to
any currency risk, unlike some
other online lending sites which
pass on some of the currency risk
to their individual lenders.
The impact
Since starting operations, UP has
provided more than USD 130,
000 in microloans to over 650
entrepreneurs and their families.
The majority of microfinance bor-
rowers are women. After meeting
the basic needs of their family,
women are more likely to invest
their profits in improving their
family‟s quality of life and oppor-
tunities in education, healthcare
and nutritious food. As a result, it
is more likely that those future
generations will break free from
the cycle of poverty. Other entre-
preneurs have taken out microfi-
nance loans to buy cows or buf-
falos, or more stock for their
shops. As a result, many of them
have increased their income and
their standard of living, enabling
them to improve their homes and
many of them have even started
saving for the future.
More details are available at
http://www. unitedprosper-
ity.org/us/progress_reports.
The guarantee provided by
United Prosperity impacts several
areas:
1. Entrepreneurs receive mi-
croloans, increase their income
and eventually comes out of pov-
erty.
2. The MFI builds credit history
with the bank which lends to the
MFI based on the guarantee.
Once the credit history has been
established, over a period of time,
the bank will lend to the MFI
even without a guarantee thereby
lifting even more entrepreneurs
out of poverty.
3. Other banks start lending to
the MFI, thereby increasing the
pool of capital available to poor
entrepreneurs.
Final Verdict:
unitedProsperity.org‟s guarantee-
loan- impact model has immense
potential to make capital avail-
able to the poorest families in the
world. It is an excellent way for
the general public to make a
sustainable and meaningful dif-
ference to the lives of low income
clients and their families. As poor
entrepreneurs become wage
earners and start managing their
own loans and savings, their
status in the family and the com-
munity improves, and they are
able to plan for the future.
Contributed by: Nitin Jain (Nitin Jain graduated from IIT Bom-bay in 2004 and has been associ-ated with United Prosperity for past one year)
| S T A R T U P S T O R Y | UNITED PROSPERITY |
L!VE July, 2010 43
1. Nestlé‟s soup brand, Maggi, was promoted by McCann Erickson in Romania with an advertis-ing campaign, “If Only Women Spent Less Time Cooking”. Three print advertisements suggest what might have happened if people were able to make use of ready-made soups: The God-mother, four USA presidents on Mt Rushmore and Tarzan rescued by Jane.
2. Blockbuster
3. Garrincha. FIFA considers him the best Brazilian player ever after Pelé. He is also widely re-garded as the best dribbler in football history.
4. W - Dustin Hoffman; X - Gandhi; Y - Tootsie; Z - Ben Kingsley
5. Lothar Matthaeus
6. Benetton
7. Army Post office(APO) and Field Post office(FPO)
8. The Kármán line lies at an altitude of 100 km (just over 60 miles) above the sea level, and is commonly used to define the boundary between the Earth's atmosphere and outer space. This definition is accepted by the Fédération Aéro-nautique Internationale (FAI), which is an inter-national standard setting and record-keeping body for aeronautics and astronautics. The line was named after Theodore von Kármán, (1881–1963) a Hungarian-American engineer and physicist who was active primarily in the fields of aeronautics and astronautics. He first calcu-lated that around this altitude the Earth's atmos-phere becomes too thin for aeronautical pur-poses (because any vehicle at this altitude would have to travel faster than orbital veloc-ity in order to derive sufficient aerodynamic lift from the atmosphere to support itself). Also, there is an abrupt increase in atmospheric tem-perature and interaction with solar radiation.
9. During the 1994 World Cup, Colombia‟s Adres Escobar Saldarriaga (13 March 1967 – 2 July 1994) netted an own-goal that helped USA ad-vance and sent his own team packing. This own
goal occurred on June 22, 1994, in the second match of Group A, which resulted in a 2-1 vic-tory for the Americans and an exit for the Co-lombians. On July 2, 1994, Escobar was shot and killed in Medellin outside “El Indio” bar, located in a Medellin suburb. It‟s believed by many that he was killed due to his own-goal in the „94 World Cup, which resulted in gambling losses to several powerful drug lords. It has also been reported that after Escobar was shot, the killer yelled “Goal!” after each of the 12 bullets fired, just like an announcer would dur-ing a soccer match.
10. Benchmarking.
11. It is India‟s first ISO CERTIFIED paan parlor, they even have a website: http://yamupanchayat.in/home.htm
12. Casio
13. Silvio Gazzaniga, who designed the current ver-sion of the FIFA World Cup Trophy.
14. Toffee
15. Penny – Farthing or the ordinary Bicycle.
16. Havana Club Rum, truly CUBAN in spirit & au-thenticity
17. Deposit insurance, as we know it today, was introduced in India in 1962. India was the sec-ond country in the world to introduce such a scheme - the first being the United States in 1933. It was in 1960 that the failure of Laxmi Bank and the subsequent failure of the Palai Central Bank catalyzed the introduction of de-posit insurance in India. The Deposit Insurance Corporation (DIC) Bill was introduced in the Parliament on August 21, 1961 and received the assent of the President on December 7, 1961. The Deposit Insurance Corporation com-menced functioning on January 1, 1962.
For all of you who admire the Car and the comforts it gives and the luxury factor it encom-passes, here are a few statistics for you:
Car emissions kills 30,000 people each year in the U.S. (2, 1998)
More than half of the people in the U.S. live in areas that failed to meet federal air quality standards for several days a year (7, 1990), and around 80 million Americans live in areas that continually fail to meet these standards (6, 1998).
Most ozone pollution is caused by motor vehicles, which account for 72% of nitrogen ox-ides and 52% of reactive hydro-carbons (principal components of smog). (7, 1990)
Emissions from cars dwarf that from power plants. In May 2000, Austin Energy planned to reduce nitrogen oxide (NOx) emissions by 40% at its Decker and Holly power plants, from 1700 tons per year to less than 1000 tons per year by 2003. By comparison, NOx emissions in Travis County from motor vehicles totaled approximately 30,000 tons in 1996 ( the last year for which complete data was avail-able). (1, 2000)
SUV's put out 43% more global-warming pollutants (28 pounds of carbon dioxide per gallon of gas consumed) and 47% more air pollution than the average car. (4, cited in 2002)
( S o u r c e : h t t p : / /bicycleuniverse.info/transpo/almanac.html )
These are old statistics and the number would have in-
creased by now to some unimag-inable proportions. To put things in perspective, around 15,245 people died in US of HIV/AIDs, almost half the number of deaths caused by Car emissions (NIAID, 2000). After seeing these statis-tics, you might be left to wonder about continuing with cars as a means of travel.
Why Cars?
Some of us would be left to think why such a harmful thing was invented and how it became popular at all, in the first place. Let us look at why this need came.
At the turn of the twenti-eth century, there were no cars; there were some 200,000 horses which worked in the New York City or 1 horse for every 17 peo-ple. Horse-drawn wagons were there all around the city and when a horse broke down, it was
Horsepower?Horsepower? Horse Power Horse Power
OROR
-Thiagu Ranganathanan, Research Scholar SJMSOM, IIT Bombay
L!VE July, 2010 45
often put to death on the spot. Many stable-owners held life-insurance policies, that, to guard against fraud, stipulated the animal be euthanized by a third party. (And you thought Car Insurance is a pain!). There was also consider-able noise pollution that was caused by iron wagon wheels and horseshoes. In 1900, horse acci-dents took away the lives of 200 New Yorkers, or 1 death every 17,000 residents. By comparision,in 2007, 274 New Yorkers died in auto accidents, or 1 death every 30,000 residents! Oh Sh**! Horses also need to eat. According to one estimate each urban horse probably consumed on the order of 1.4 tons of oats and 2.4 tons of hay per year. One contemporary British farmer calculated that each horse consumed the product of five acres of land, a footprint which could have produced enough to feed six to eight people. Probably fifteen million acres were needed to feed the urban horse population at its zenith, an area about the size of West Virginia. Directly or indi-rectly, feeding the horse meant placing new land under cultivation, clearing it of its natural animal life and vegetation, and sometimes diverting water to irrigate it, with
considerable negative effects on the natural ecosystem. Worst of all was the problem caused by horse dung. The aver-age horse produced about 24 pounds of manure a day, which totalled to 5 millions pounds of horse manure a day. In 1894, the Times of London estimated that by 1950 every street in the city would
be buried nine feet deep in horse manure. One New York prognosti-cator of the 1890s concluded that by 1930 the horse droppings would rise to Manhattan’s third-story windows. Also, the manure emits methane gas, a powerful greenhouse gas. The 1898 International Urban con-ference, the first of its kind had an agenda dominated by horse ma-nure. Stumped by the crisis, the conference declared its work fruit-less and broke up in three days instead of the scheduled ten. The world had seemingly reached a
point where its largest cities could not survive without the horse but couldn’t survive with it either. Then came the Car! So, no wonder that when car was invented it was proclaimed as an ‚environmental savior‛. Even you would agree with them if you were living in New York City 100-110 years ago.
The problem was vanished when the technological inno-vation of dung-less animal called car was done. But now the world is fastly reaching a stage where living without automobiles is difficult and liv-ing with it is unsus-tainable. The horse situation showed that when
a solution to a given problem does-n’t lay before our eyes, it is easy to assume that no solutions exist. But history has shown again and again that such assumptions are wrong. So, maybe it is time we might come up with a newer innovation that could stop the perils of cars. Sources/References: Super Freakonomics, Steven D. Levitt, Stephen J. Dubner, 2009 From Horse Power to Horsepower, Eric Morris, Access, Magazine of University of California Transporta-tion Centre, Spring, 2007 h t tp://bicyc leunive rse . in fo/transpo/almanac.html
| C R E A T I V E B E N D | 180 DEGREES |
46 L!VE July, 2010
Folks! This stuff has got nothing to do with Stephen King or Tom Hanks! It’s merely an austere at-tempt to recall a trip down the countryside during the Christmas vacations. Normally I woke up that Sunday morning ‘round 10, as if a weekend really matters once vacations are on... Never-theless, Dad asked me if I would accompany him for a drive down the ‚Bakshi Ka Talab‛ – a small village on the outskirts of Lucknow City! ‚Hmmm, It’s been a while since I’ve seen a thing green. I quit green vegetables long back :P‛, I chuckled... ‚Why not... Let’s Move n set things roll-ing!‛ It took about an hour for us to reach the ‘Talab’... alighted me from the Tavera with my Ko-dak... n I seriously felt that God finally heard me moaning – ‚Gimme some Sunshine‛! The jacket was thrown away, for Mr. Apollo was dazzling with full might! There was something pleasantly peculiar about the smell of the breeze, which was kinda tangy... and there lay a vast stretch of limitless land, which was green n yellow n wavy... outlined by a hazy strip of woods... which blended with
the horizon in perfect harmony! The green life was expressing its delight by means of those yellow little bunches of florets... which drove me closer to them n whoa! I see myself in the middle of some Neverland... and you automati-cally let loose your limbs... n take a 360 degree view... n feel like jumping in the thin air when sud-denly you feel something just trip over your feet! I knew it... It were Chip n Dale, jeering me for my act... as if scorning – ‚Look at this poor chap, deriving pleasure outta the simplest of things!‛ Who can explain those dinky squirrels, that it’s the simple
things which are rare in the hu-man world... n they marvel us more than the convoluted! I could’ve stayed in that patch for eternity, but for another piece of simplicity which caught my atten-tion. There was this little space that appeared to have been natu-rally carved out for a purpose... What surfaced to be Di-hydrogen Monoxide... with the tiniest of green leaves covering them... similar to a few from the Sum-mer/Spring collection of Victo-ria’s Secret adorning those zero skinned females which just about qualify to be termed as appar-els! ;) Adjoining which was a
man-made road... which proba-bly lead to another one of those la-la lands! Something asked me to follow that trail... and I aim-lessly moved about to find an-other little space... n there stood this huge dignified gentleman... quite similar to the Na'vi Home-tree of Pandora (Avatar Fame)... the only difference being that there were no Na’vi warriors aiming poison arrows at me... and there was no Neytiri (SIGH) (SIGH) to... ahem ahem! Of course... surrounding the
Home-tree, there was this huge chaff bundle... which would probably find its way through the intestines of the village cattle sometime soon! That spring in me made me jump at that chaff-bundle like I’d crash at ma bed post the last terminal examination of the semester!! Trust me, lying down on that... despite running the risk of bird-drops... was a heavenly experience in itself! ‚ T u m s e h i d i n h o t a hai..surmayee, sham aati hai...‛, Don’t get me wrong there... i aint
getting romantic... it was ma bloody cellphone which played the spoilsport, yet again (SOB) (SOB)!! ‚Beta, am done with ma work, where art thou... get back to the car!‛ Finally, it was time to go... and I was cursing Airtel... for it was ‚Expressing Itself‛ at the wrong time! I did manage a few clicks here n there... n a few of those impressions remain in the gray film of the Cerebellum!
Shailesh . J . Mehta School of ManagementShailesh . J . Mehta School of ManagementShailesh . J . Mehta School of Management Indian Institute of Technology BombayIndian Institute of Technology BombayIndian Institute of Technology Bombay
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