TAPMI Pratibimb January 2012

Pratibimb | January 2012 | 1

A Students’ Initiative

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

The Reflection of Management

A Student’s Initiative

Volume II, Issue VII January 2012 A Monthly e-Magazine


Mission

T.A. Pai Management Institute (TAPMI) is a premier management institute situated in

Manipal and is well known for its academic rigor & faculty-student interaction. The

Institute has been recently ranked amongst top 1 per cent of B-schools in India & 4th

in the South Zone by The Week Magazine.

Founded by the visionary, Late Shri. T. A. Pai, TAPMI’s mission is to provide much

needed impetus to the task of building professional management capability in the

country. In the process, it has also played a role in strengthening the existing

educational and health infrastructure of Manipal.

We are committed to excellence in post-graduate management education, research,

and practice by nurturing and developing global wealth creators and leaders. We

shall continually benchmark ourselves against the best in class institutions. We shall

foster continuous learning and reflection, achievement-orientation, creative

interdependence and respect for diversity with a holistic concern for ethics,

environment, and society.

About TAPMI

Dr. Ramdas M Pai, Chairman, Manipal Education and Manipal Group, has been

awarded the Golden Peacock Lifetime Achievement Award for 2011 in recognition of

his contribution in the field of education and healthcare.

Recent Update

T. A. Pai Management Institute Manipal, Karnataka


About Pratibimb

Pratibimb a reflection of management, is an amalgamation of pioneering thoughts, put forth by some

of the best brains of the crem de la crem of Indian B-Schools and corporates. It brings out a collection

of Ideas concerning the various disciplines of management sciences and provides opportunities to

ponder over various management issues and scenarios, to B-Schoolers across the country. Insights of

Industry stalwarts and revered academicians also find their place in the magazine.

Pratibimb the e-Magazine of TAPMI had its first issue in December 2010. The issue comprised of an

interview of denoted writer Ms. Rashmi Bansal along with a series of articles by students and industry

experts like MadhuSudan Rao (AVP-Delivery, Mahindra Satyam) & Ed Cohen who is a global leader

and chief learning officer who led Booz Allen Hamilton & Satyam Computer Services to the first rank

globally for learning & development. It also introduced a hugely successful and engrossing game for

finance geeks called “Beat the Market” to bring out the application based knowledge of students by

providing them the platform where they were expected to predict the stock prices of two selected

stocks on a future date. The magazine is primarily intended for the development of all round

management knowledge by providing unbiased critical insights into the modern developments.

In sync with TAPMI`s belief of learning not being restricted to classrooms and textbooks, Pratibimb

provides an atmosphere of knowledge sharing and skill enhancement to students and also a

competitive platform which allows B-Schoolers to brainstorm and critically analyse real life

management situations.

Within a short span of time, Pratibimb has been able to create a buzz on most B-school campuses in

the country and currently enjoys the confidence and admiration , reflected in the articles sent for

publication, of various reputed Management Institutions. Pratibimb has featured interviews of eminent

personalities from public and private sector like Ms. Rashmi Bansal (Author of "Stay Hungry Stay

Foolish", Editor - JAM Magazine and IIM A alumnus), Dr. Jagdish Seth (Global Marketing Guru,

Emory University, USA), Mr. Dhanendra Kumar (Chairman, Competition Commission of India), Mr.

Vinit Monga (Head of Finance and Control, Nokia Siemens Network, Bangalore) and Mr. Benny

Augustine (Director - Human Resources, Unisys India). Pratibimb became a monthly e-magazine from

October, 2011.

Views and opinions of long time Veterans of Industry provide a peek into the real churnings of the

Corporate world and rare insights into challenges and concerns of industry, bridging the gap between

Campus and Corporate.

Its commitment to excellence and innovation is growing by leaps and bounds with every new issue,

fuelled by the interest shown by avid readers, subscribers and contributors. A host of new innovations,

features and additions are in the offing as this dynamic offering from students of TAPMI is in the

process of constant reinvention. With better things on the horizon, Pratibimb is poised to be a better

reflection of the management world, and a lot more.

We invite you to become a part of Pratibimb and help us take this to next level by contributing articles

or participating in national level B-School events – “Beat The Market” and “Route To Market”.


I am pleased to state that the team members of PRATIBIMB have continued their sincere efforts to bring out this ninth issue in January 2012. The previous eight issues had a number of management articles written by students of various B-Schools and also from students and faculty of TAPMI. This student magazine is also accessed and appreciated by our alumni and industry and business readers. The magazine provides a platform for our students to use their creativity, imagination and language skills to reflect upon various management areas i.e. operations, marketing, system, HR, finance and entrepreneurship as well as in areas of their interest. It also fosters research culture among students. Research orientation and sharpening analytical mind are crucial for their academic orientation. Generally literary work, research article writing and publication should become part of students’ learning goals while they are in the campus. This would perhaps sow seeds for pursuit for academic career by a few management students after their initial experience in industry and business. It has been observed that on comparison with fast developing country i.e., China in Asia, the focus on research and publishing from Indian students and faculty in management journals and pursuit of Ph.D. programme in leading universities has been moderate in recent past. This situation needs to be improved. To this extent our students and faculty can best express themselves about their creative thoughts, opinions, knowledge and interests by contributing to PRATIBIMB. Let PRATIBIMB grow in content and variety with thoughtful articles in months to come. I congratulate the persistence and continued efforts put in by the team members of PRATIBIMB for timely publishing this volume. I wish them higher performance, joy and success in their endeavor.

Dr. A. S. Vasudev Rao

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editor’s corner Rohit Kumar, Chief-Editor

Ramanuj Vidyanta, Editor-Branding

Sarvesh Joshi, Editor-Creative

Designer

SUB-EDITORS

Abhishek Anupam

Abhishek Dubey

Manish Mishra

Pranaynehru T

Sushmit Sinha

Vandana Soni

Faculty Advisors

Prof. Chowdari Prasad, Dean

(Planning & Development), TAPMI

Dr. Jaba M. Gupta, Associate

Professor and Chairperson—eGPX,

TAPMI

Special Thanks

Mr. Mitesh Thacker,

Head Research & Trading Analyst , www.miteshthacker.com and

TAPMI Alumnus (PGDM 1997-99)

Prof. Vinod Madhavan, TAPMI

Prof. Kushankur Dey, TAPMI

Alumni Affairs Committee, TAPMI

Dear Readers,

We are pleased to release January, 2012 edition of

Pratibimb.

We are thankful to all the students from various

colleges who put in great efforts in writing articles

on various issues/topics and worked hard to send

entries for “Beat The Market” and “Route To

Market”. The articles have been selected by the

Editorial Team whereas “Beat The Market” has

been judged by Mr. Mitesh Thacker, Head

Research & Trading Analyst,

www.miteshthacker.com and TAPMI Alumnus

(PGDM 1997-1999) and “Route To Market” has

been judged by Prof. Vinod Madhavan, TAPMI.

We thank judges for their precious time.

We also thank all those who helped us in

improving Pratibimb through their feedbacks. We

would like to take this opportunity to extend our

gratitude to all faculties and students at TAPMI for

their continued support, guidance, motivation and

inspiration to take Pratibimb to the next level.

Please continue to send in your valuable

suggestions / feedbacks at

[email protected] so that we can make

improvements in the coming issues.

Happy Reading!!

Rohit Kumar

mailto:[email protected]


contents

A Synoptic View of Indian Commodity Futures Market 7

Prof. Kushankur Dey, Assistant Professor (Finance), TAPMI

Social Search- A Major Driver in Future Business Innovations 11

Nikhil Gulhane, IIM Indore

Euro Game 14

Harishma Mittal, IMI New Delhi

Financing Indian Infrastructure Sector 17

Ashley Rose Thomas, FMS Delhi

A Tryst with Dr. Soans at Moodibidri 22

Prof. Kushankur Dey, Assistant Professor (Finance), TAPMI

IPRS—is the name of the game 25

Vikash Kumar, IMI New Delhi

Re-Defined HR Function 29

Tuneer Chatterjee, STEP-HBTI

Fit of Social Media with Existing Marketing Strategies 31

Sangeetha Kesav | Amit Sikdar, IIM Bangalore


A Synoptic View of Indian Commodity Futures Market

Locking in Commodity Futures Market

Indian commodity futures market has had a

chequered history but has been taking off in a

significant way in recent times. Commodity

futures markets have been attracting a lot of

attention because these markets have been

providing avenues to different participants

towards provision of information enabling

resource allocation, risk minimization as well as

the provision for information on transaction costs

and their minimization by means of special forms

of futures contracts, participants, and market

institutions. In response to the role of the futures

market, researchers opined that the futures market

provides a partial insurance mechanism to the

growers’ produce as this market is deemed to

mitigate the price risk of output only rather than

value of total produce. Since producers are not

homogenous in nature, their expectations are

largely varied with respect to the nature of

produce, futures contract specifications, delivery

month, margin money, and over and above all,

efficiency of the market.

It is believed that derivatives in the form of

forward trading existed in India in ancient times,

but in the absence of appropriate record keeping,

nothing is known in this sphere till about a century

ago. While commodity derivatives in some form,

albeit crude, were prevalent in India since the late

19th century, it is only after the turn of the year

2000 that these have been introduced in a

significant and systematic manner. On several

occasions, committees had been constituted to

monitor, control, and regulate this market at the

behest of the government of India, namely, A.D.

Shroff Committee (1950), M.L. Dantwala

Committee (1966), A.M. Khusro Committee

(1979), K.N. Kabra Committee (1993), Shankarlal

Guru Committee (2001), Habibullah Committee

(2003), and lastly Sen Committee (2008).

It is worth noting that today India has 23

commodity exchanges of which 17 are regional

and 6 are national level exchanges. The following

table provides a neat understanding of regional

and national level commodity exchanges and

traded commodities on these exchanges:

by Prof Kushankur Dey, TAPMI


TABLE 1: Year wise inception of Indian

Commodity Exchanges and Traded Commodity

Year Name of the Exchange Commodity Traded Remark

1875 Bombay Cotton Trade Association Cotton 1st Regional exchange in India

1893 Bombay Cotton Exchange Limited Cotton Regional

1900 Gujarati Byapari Mandali Groundnut, Castor seed and Cotton

Regional

1913 Chamber of Commerce, Hapur Wheat Regional

1919 Calcutta Hessian Exchange Limited Raw Jute and Jute Goods Regional

1920 Gold and Silver Exchange, Mumbai Gold and Silver Regional

1921 East India Cotton Association Cotton Regional

1927 East Indian Jute Association Raw Jute Regional

1945 East India Jute and Hessian Limited Raw Jute and Jute Goods Regional

1951 Rajkot Seeds Oil and Bullion Merchant’s Association Limited

Oil and Bullion Regional

1956 Bombay Commodity Exchange Castor seed, castor oil (1998), RBD Palmolin (2000)

Regional

1956 Ahmedabad Commodity Exchange Castor seed, Cotton seed, Cotton oil cake

Regional

1956 The Spices and Oilseeds Exchange Ltd. Turmeric Regional

1957 Indian Pepper and Spices Trade Associa-tion

Spices Regional

1970 Vijay Beopar Chamber Limited, Muzaf-farnagar

Gur Regional

1973 Bhatinda Om Oil and Oilseeds Exchange Ltd.

Gur Regional

1982 The Rajdhani Oils and Oilseeds Exchange Gur Regional

1984 The Meerut Agro Commodities Exchange Co. Ltd.

Gur Regional

1997 Coffee Futures Exchange Ltd. Coffee Regional

1999 National Board of Trade Soyabean oil, Mustard seed oil and oil cake

Regional

2000 The Kanpur Commodity Exchange Ltd. Mustard oil and oil cake Regional

2002 National Multi-Commodity Exchange of India Ltd.

Edible oils, Rubber, Coffee, Jute Sacks, and Metals

National

2003 Multi Commodity Exchange of India Ltd. Energy and Metals National and International (largest ex-change in In-dia)


Among these 27 exchanges, a few are operational.

Multi Commodity Exchange is the largest

commodity exchange in India and 6th largest

exchange in the World. Table 2 enumerates the

traded volume and value of commodity futures

trading in India.

TABLE 2: Volume (in million tones) and Value

(Rs. in lakh crores) of futures trading in India

Source: Economic Survey of India (2006-07 to

2010-11), Government of India

Mechanics of Commodity Futures

Mechanics of commodity futures trading has

largely been adopted by almost all national level

exchanges. These are at par with the best practices

reflected on the Chicago Board of Trade (1848)

and many global commodity exchanges.

Mechanism of trading is put in place for better

price discovery and price risk management.

Trading, settlement, and delivery-three integral

processes essentially make any futures contract

complete. Margin money, quantity, quality or

grade specifications, daily and final settlement

mechanism and delivery schedule are a few

parameters underlying the principles of the futures

contract design. The design provides a sketch of

standardized contract of the notified commodity to

all participants who are willing to participate

through regulated structures. Performance

guarantee is ensured by the exchange and its

adjunct clearing house for both the buyer and the

seller. The logic behind these stringent

surveillance mechanisms is to ensure liquidity,

leverage, and transparency of the market.

Margin Money and its Cost

Margin money is an important pre-requisite

providing a gate pass to enter the market. Margin

is of two types; initial and maintenance, though,

nomenclature of margin varies from one exchange

to another. Precisely, margin imposed by any

exchange is based on type of commodity being

traded, positions taken by the client under the

member, and volatility or price fluctuations of that

commodity in the market for some period of time.

2003 Multi Commodity Exchange of India Ltd. Energy and Metals National and International (largest ex-change in India)

2003 National Commodity and Derivative Ex-change of India Ltd.

Agricultural commodities: pulses, oilseeds and oil complex, cereals, planta-tion, and spices, metals and energy products

National

2009 Indian Commodity Exchange Metals, Agricultural com-modities

National

2010 ACE Commodity and Derivative Ex-change

Agricultural commodities, metals and energy prod-ucts

National

2011 Universal Commodity Exchange Metals National

Commodity 2006-07 2007-08 2008-09 2009-10 2010-11

Vol. Val. Vol. Val. Vol. Val. Vol. Val. Val.

Total 612.9 36.77 557.3 40.66 686.3 52.49 764.9 77.26 119.49


Initial margin constitutes about 4% to 5% of total

value of the contract traded on the exchange

platform. Some additional or special or/and

incremental or variation margins are also charged

by the exchange based on trading frequency,

contract size, magnitude of the variation in spread,

volatility in the market, etc. Arbitraging or short

selling strategy can be an alternative, though it is

opposite to the normal trading strategy. From

financial angle, if margin money raised through

collateral then it has a direct impact on number of

contracts being purchased. On contrary, if it raised

via debt or loan then is inversely proportional to

purchased contracts.

Commodity Futures: Myths and Realities?

No doubt, however, price formation and its

transmission are some of the most discussed issues

nowadays. While commodity futures markets are

expected to play the two important roles of risk

management and price discovery, their utilities in

provisioning of these two services have come

under criticism from various corners. It is further

argued that availability and effective

dissemination of information from the futures

market helps to stabilize and decrease spot price

volatility. However, all these present testable

hypotheses. While ambivalence on the utility of

futures markets still exists at the policy levels,

probably the endeavour will help in expanding the

literature base by furthering the debate on

producers’ ground.

Beat the Market

As Jim Cramer, a former hedge fund manager, and a best-selling author put it, “As long as you

enjoy investing, you'll be willing to do the homework and stay in the game… I mean I'm not

smarter than the market, but I can recognize a good tape and a bad tape. I recognize when it's

right and when it's wrong and that's what my strength is.”

Stock markets have never been predictable, you may apply the best of logic and reasoning, but there could be a

possibility that you may falter if the emotions of the investors take control.

The entries or this contest have been judged by Mr. Mitesh Thacker, Head Research & Trading Analyst,

www.miteshthacker.com and TAPMI Alumnus (PGDM 1997-1999).

The winning entry of ‘Beat the Market’, December2011 edition is Udaipur bulls from IIM, Udaipur !!

Congratulations!! We thank all the participants for their effort.

Beat the Market is a game designed to prove your mettle in stock market analysis. This time onwards, we will

provide you the name of one listed company from NSE. You need to analyze stock movements of this company till

24th Feb, 2012. On the basis of fundamental and technical analysis you need to give us your share price estimate of

this stock as on 9th March, 2012. Fundamental & Technical analysis will carry 70% weight while 30 % weight will be

given to Accuracy of the estimated prices in the final score.

The winning entry will receive a letter of appreciation and prize money of Rs. 1000 /-

Rules:

Company to be analyzed is Housing Development and Infrastructure Limited (NSE - HDIL)

You may analyze in a team of not more than 2 members

The file should not be more than 7 pages long including cover page, the cover page should contain the team

name, team members name, Institute name, contact number

File name should be BTM_<TEAM_NAME>_<INSTITUTE_NAME>

Upload entries at http://www.tapmi.edu.in/student-life/pratibimb/participants-submission by 11:59 am, 24th

Feb, 2012

http://www.tapmi.edu.in/student-life/pratibimb/participants-submission






Social Search - A Major Driver in Future Business Innovations

A New Perspective on Marketing and Business Innovations

Many companies are advertising on social net-

working sites and paying hefty amounts for spon-

sored search results. However the question is – if

is this the best possible way of utilization of the

technology to attract more customers and generate

more value? Is there a better alternative? The an-

swer might lie in new emerging technology called

social search.

What is social search?

Social search is stream of research that explores

methods of organizing users’ past interactions

with an information system (also known as explicit

and implicit feedback), in order to provide better

access to information to future users of system.

Social search is a set of techniques focusing on-

Collecting, processing, and organizing trac-

es of user’s past interaction

Applying this community wisdom in order

to improve access to information and there-

by visibility to the firm’s offerings

Social search involves application of community

wisdom of user’s peer group (colleagues, friends

and relatives) to display the relevant search results

to the user. For example, if I search some list of

movies on internet, the search engine will also

show movies recommended by my friends apart

from regular results.

How Social Search can be useful to businesses?

A) Generating word of mouth through trusted

referrals

As per the survey conducted by the American Ex-

press OPEN team in March 2011 on random sam-

ple of 400 startup US business firms, following

statistics were obtained.

Social search can help businesses to generate the

word of mouth through a mechanism called trust-

ed referrals. It has been observed that when we

buy a new product, advices from friends and rela-

tives has major role in affecting our decision to

buy. Following findings of a research will rein-

force the importance of trusted referrals.

by Nikhil Gulhane, IIM Indore

How does new customer find you?

Word of Mouth 82%

Search Engine / Internet 66%

Advertising 37%

Yellow Pages 23%

Newspapers/Magazines 23%

Store Front 17%

Other 21%


Social Search is not equivalent to advertising

on social networking site:

The idea behind the social search is to generate

maximum trusted referrals from peers which may

not be achieved just through just spending money

on advertising on social networking site. Follow-

ing graph will indicate the change in performance

of advertising after the implementation of “page

like” sponsored stories on Facebook. “Page like”

by friends created trusted referrals and therefore

Fig.1 Consumer Spending Behavior when referred by friend vs. when purchased alone

(Ref Source: American Marketing Association. (March 2009). AMA report on Influence of friends on consumer spending)

Fig 2. Change in performance of Facebook advertisements of two clients after implementation of

“Page like” sponsored stories by friends which resulted in higher social referrals & higher ac-

ceptance

(Ref Source: TBG Digital (March 2011). Global facebook marketing report. Retrieved from http://

www.tbgdigital.com/wp-content/themes/tbgdigital-multilanguage/pressreleases/tbg-digital-global-

facebook-marketing-report-q3-2011.pdf)

CTR- Click through rates increased after social referrals

CPC – Cost per click rates decreased

CPA- Cost per acquisition decreased


increased visibility in social search for the prod-

uct.

B) Empowering enterprises beyond business

intelligence:

Business Intelligence is set of technologies that

gather, store, analyze and make accessible data to

help managers make informed decisions. However

if executives expect to discover new trends, gaps

in organizational research and customer insights

into where they should be building new products,

they may be disappointed. Social search exploits

linking all types of content from diverse source.

As per CIO insight in 2007, following critical

business needs were highlighted:

Developing new products including patent dis-

covery and improving operations

Improving our ability to capture, analyze and

provide real-time information

Gaining insight into customer facing activities.

Social search provides a huge opportunity toward

meeting this business needs. There are business

avenues like social media consulting, social

search intelligence which are being currently ex-

plored. Google’s +1 and similar other initiatives

are targeted to capture this opportunities. How it is

done in future is remained to be seen.

References:

American Marketing Association. (March

2009). AMA report on Influence of friends

on consumer spending

Gilbane Group. (2007). Social Search be-

comes Strategic Technology. Retrieved from

http://gilbane.com/whitepapers/Vivisimo/

Vivisimo-WP-final.pdf

Raghuram Iyengar, Sangam Han & Sunil

Gupta (May 2009). Do friends influence

purchase in a social network. Harvard Busi-

ness School. Retrieved from http://

www.hbs.edu/research/pdf/09-123.pdf

TBG Digital (March 2011). Global facebook

marketing report. Retrieved from http://

www.tbgdigital.com/wp-content/themes/

tbgdigital-multilanguage/pressreleases/tbg-

digital-global-facebook-marketing-report-q3

-2011.pdf


Euro Game

Economies are like the snakes and ladders, a good

economic decision can take you up through the

ladder of success while poor ones pull you down.

Poland is on a crossroad where their decision to

adopt euro can boost the economy and take them

up the ladder in the game, however if the decision

turns out to be a bane for the country, it would re-

sult in the economy becoming a victim of the big,

venomous snake called recession. The theme of

this article revolves around the same snakes and

ladders game; I renamed it as “Euro game”

Since 2004, when they became a part of the Euro-

pean Union, the debate on this question has been

going on. There have been two groups, first the

modern and forward looking one which favours

the adoption of euro as it believes that would re-

sult in the growth and development of the econo-

my and the standard of living, the second, the or-

thodox and reserved ones believe that it would

take away their rights and control on their econo-

my and would turn out to be a disaster. These

groups have mainly been formed on political

grounds. One of the two parties of the polish polit-

ical system, Kaczyński brothers’ the Law and Jus-

tice (PIS) party, the previously ruling party, was

sceptical about rushing into joining and still be-

lieves in taking it slow ,weighing the pros and

cons, and wants to go through a referendum on

this issue . Whereas, the party currently ruling the

nation, Prime Minister Donald Tusk’s Civic Plat-

form (PO), has been intent on adopting it sooner

rather than later. A similar conflict is there be-

tween the people. The support for the euro has

been higher in larger cities while its lower in the

relatively rural areas.

The Governor of the National Bank believes that

haste could be harmful to the country’s economy

but still suggests that Poland should join in. And

so is the belief of Saryusz-Wolski, who in line

with German Chancellor Angela Merkel's aims

affirmed the necessity to change the EU treaty re-

garding the size of loans that member states can

take among themselves, so that “no one goes into

debt at the expense of somebody else.”

Poland will have to postpone this convergence

which they were hoping would happen in 2012,

owing to the recession which has hit the economy

resulting in failure in meeting the conditions set by

the European Monetary Union. To join the game

of Euro, Poland will have to qualify first. The first

of two main barriers (conditions) are the require-

ments of the Maastricht Treaty and secondly they

have to take part in the European exchange rate

mechanism (ERM II) under the European Mone-

tary System (EMS) for a period of two consecu-

tive years, which means that exchange rate of Po-

land cannot fluctuate more than 15% against the

euro during that time. After swimming through

these oceans, other small canals have the criteria

to include an inflation rate of no more than 1.5 %

points above that of the 3 members of the Europe-

an Union showing lowest inflation. The deficit to

GDP ratio ( i.e. Ratio of the annual government

deficit to gross domestic product ) must not ex-

ceed 3 per cent (or at least be at a level close to

3%) at the end of the fiscal year before joining,

which currently is 7.9% for the country. Govern-

ment debt ratio to GDP should be less than 60% at

by Harishma Mittal, IMI Delhi


the end of the fiscal year before joining, or should

be approaching this figure at a ‘satisfactory rate’;

this condition is being satisfied by achieving a

51% ratio. Finally, nominal long-term interest

rates should be less than two percentage points

above the 3 members of the European Union

showing lowest inflation.

These targets are very difficult to achieve especial-

ly in the prevailing economic conditions, few

countries which already are members of the Euro

zone are also finding it difficult to achieve them.

European Central Bank, even though requested by

IMF to relax its regulations, does not want to do so

as after the euro crisis all the member countries

have become very sensitive about the countries

being added since they do not want to pay the

loans of any other non-performing country. Every

financial decision has two sides to it, the country

has to weigh both the sides and decide whether the

prospect’s advantages surpass its disadvantages .

Adopting euro comes with its fair share of pros

and cons ; both having long and short-term effects.

First, let’s have a look at the bigger picture. The

long term positives and negatives. Proponents for

the adoption of euro would have the potential ben-

efits that a common currency will bring, especially

the increase forecasted in country’s trade and

growth, resultant of monetary integration with the

rest of Europe. Different costs related to zloty /

euro exchange rate connections would be eliminat-

ed along with the exchange rate risk in the trade

with countries of Euro zone. The exchange rate

risk elimination is expected to not only have a pos-

itive and direct effect on business, but is also been

anticipated to remove this type of risk for Poles

who normally borrow in foreign currencies to fund

big ticket items such as infrastructure needs like

houses and apartments. Ever since the Euro zone

crisis began, the Polish zloty experienced a decline

while losing approximately 1/3rd of its value in

relation to Europe’s more stable currencies and

the dollar. This had a particularly adverse affect on

many Poles who took out mortgage loans in cur-

rencies like Swiss francs to buy homes and who,

as a result ended up paying many thousands zloty

more for their new purchases in real terms.

The main drawback of the adoption of euro in Po-

land is that it would be required to give up its con-

trol on its monetary policy to the ECB (European

Central Bank) which monitors and controls the

situation of all of the countries in the euro zone. At

a point of time the economic cycles for different

countries can be different, thus requiring different

policies, which is not possible with the single

monetary policy enforced by ECB for all. For ex-

ample, Poland is still expected to growth in the

near future as predicted by many economists.

Therefore, they would do better with a stringent

monetary policy with higher interest rates if they

want to have lower levels of inflation. Whereas, in

countries with high unemployment rates, it is ad-

vised to have a loose monetary policy with lower

interest rates. It is difficult to strike a balance be-

tween the two, and the common monetary policy

would often not be the best for the economy of the

country.

From the above graph we can clearly see that there

is a significant difference in the GDP growth rate

of Poland and that of the euro zone. Thus, the poli-

cies in the euro zone would be chartered by taking

Membership criteria

Government Finances ERM II mem-bership

Long-term interest rate

Inflation rate

annu-al government deficit to GDP

gross government debt to GDP

Min. Values required to become a member of the Euro Zone

max 1.5%

max 3% max 60% min 2 years max 6.0%

Poland 4.8% 7.9% 51% Not a member

4.5%


into consideration all the countries and would not

prove beneficial for Poland which is growing at a

higher rate than the members of the zone.

Once you become a part of the zone you can’t ap-

preciate or depreciate your currency because it’s a

common currency which is not under your control.

This is one of the major reasons for the devasta-

tion of many countries in the zone today such as

Greece. Once you’re a part of it, leaving the zone

is not an option for the countries like Poland as

that can result in currency depreciation to the ex-

tent that households and businesses would go

bankrupt and the banks will become insolvent, in

short, a total breakdown of the economy of the

nation.

Another front where joining the euro zone would

be a concern would be increased prices of small

ticket items purchased on a mass scale, named as

the “cappuccino effect”.

Even after the disasters faced by some countries in

the euro zone, most experts are in favour of join-

ing the euro zone, arguing that the resultant

growth of GDP (especially in the long run) would

far outweigh the criticisms noted above.

There is a lot of excitement amongst the public

regarding the euro. The decision for its adoption is

yet to be taken and it has already started affecting

the interest rates and currency at which households

take loans, and corporate and the government is-

sues bonds. The lowering of interest rates to meet

the set conditions has already resulted in an in-

crease in investments. But this comes with its own

set of risks.

This lowering of interests would have taken the

country to the interest levels desired by the euro

zone had the economic boom continued. But the

reverse happened resulting in higher interest rates

and a drying-up of foreign financing. This antici-

pation behaviour of euro adoption is leading to

one more problem. people have started taking

loans in other currencies and not their own. This

would lead to domestic monetary policy gradually

losing its ability to influence the economy. Also,

borrowing in foreign currencies exposes them to

the risk of annex change rate depreciation. Euro

adoption would eliminate such currency mis-

matches and thus relieve both borrowers and in-

vestors from the risk that the exchange rate will

move against them. It is thus a win-win situation

for both sides.

Portugal’s experience suggests that the

“structural” fiscal deficit—the deficit corrected for

the economic cycle—should be well below the 3

per cent Maastricht limit, especially for countries

like Poland where the level of public debt is still

high. This would allow the government to deal

with economic shocks—such as the loss of com-

petitiveness experienced by Italy’s and Portugal’s

textile industry—without ending up in the EU’s

excessive deficit procedure and experiencing a rise

in public debt.

Becoming a part of the world’s second largest

economy does bring large economic payoffs, but

this does not mean that they will be able to reduce

their fiscal deficit to 3% while joining the ex-

change rate mechanism, the two Maastricht crite-

ria that are not met currently. Giving up monetary

policy requires sharpening the remaining tools at

the policy maker’s disposal--a fiscal policy char-

acterized by small deficits, low debt and flexible

spending, as well as creating a nimble, business-

friendly environment. Now it’s for Poland to de-

cide whether they see Euro as a ladder which

would take them further or a snake waiting to bite

them. And only time can unfold the secrets of the

game, I call it “Euro game”.


Introduction

The Indian economy is booming, with rates of

Gross Domestic Product (GDP) growth exceeding

8% every year since 2003-04. This on-going

growth is due to rapidly developing services and

manufacturing sectors, increasing consumer de-

mand (largely driven by increased spending by

India’s middle class) and government commit-

ments to rejuvenate the agricultural sector and im-

prove the economic conditions of India’s rural

population.

Substantial investment in infrastructure continues

to be required in order to sustain India’s economic

progress. The country’s capacity to absorb and

benefit from new technology and industries de-

pends on the availability, quality and efficiency of

more basic forms of infrastructure including ener-

gy, water and land transportation. There is a need

for large and continuing amounts of investment in

almost all areas of infrastructure in India. This in-

cludes transportation (roads, ports, railways, and

airports), energy (generation and transmission),

communications (cable, television, fibre, mobile

and satellite) and agriculture (irrigation, pro-

cessing and warehousing).

The key issue pertaining is with respect to the fi-

nancing of these projects. In the past, government

took the whole responsibility of financing these

projects. As per the Eleventh Five Year Plan the

amount of investments required for infrastructure

is almost Rs. 20 lakh crores. Government led in-

frastructure financing and execution cannot meet

these needs in an optimal manner and there is a

need to engage more private investors for meeting

these needs. Even though the Indian financial sys-

tem has adequate liquidity, the risk aversion of

Indian retail investors, the relatively small capitali-

sation of various financial intermediaries requires

adoption of innovative financial structures and re-

visiting some of the regulations governing the In-

dian financial system. In addition to above, vari-

ous regulatory initiatives and market reforms are

required to enable the commercial banking system

to participate more vigorously in providing infra-

structure financing. Let’s analyse each of these

aspects in more detail.

Five Year Plan & Infrastructure

Infrastructure development has been lagging as

historically we have a poor record of meeting tar-

gets. First two years of the Eleventh Five Year

plan have already seen a deficit in the planned and

awarded projects. According to government data,

close to 60% projects are already affected by time

and cost issues. According to Mckinsey, a global

consultancy firm, if the current trend continues

over the Eleventh and Twelfth Plan periods (2008

– 2017), India could suffer a GDP loss of USD

200 billion (around 10% of its GDP) in fiscal year

2017. The biggest challenge faced by the infra-

structure development in India is the lack of avail-

able financing. The core infrastructure sectors

would face a shortfall of USD 150 billion – 190

billion in financing during the eleventh plan peri-

od. This is equal to 35% of planned investment in

core sectors over this period.

Financing Indian

Infrastructure Sector by Ashley Jose Thomas, FMS Delhi


Infrastructure – Deficit and Eleventh Plan

Physical Targets

Table 1: Infrastructure- Deficit and Eleventh

Plan Targets

Characteristics of Infrastructure Finance

1. Longer Maturity: Infrastructure finance

tends to have maturities between 5 years to

40 years. This reflects both the length of the

construction period and the life of the under-

lying asset that is created.

2. Larger Amounts: While there could be sev-

eral exceptions to this rule, a meaningful

sized infrastructure project could cost a great

deal of money. For example a road or power

project around USD 200.0 per project.

3. Higher Risk: Since large amounts are typi-

cally invested for long periods of time it is

not surprising that the underlying risks are

also quite high. The risks arise from a varie-

ty of factors including demand uncertainty,

environmental surprises, technological obso-

lescence, political and policy related uncer-

tainties.

4. Fixed and Low (but positive) Real Re-

turns: Given the importance of these invest-

ments and the cascading effect higher pric-

ing here could have on the rest of the econo-

my, annual returns here are often near zero

in real terms.

Challenges in Infrastructure Financing

1. Non-Channelized savings: India’s saving

rate is very high but most of this is in physi-

cal assets. These savings are not channelized

towards infrastructure because of lack of

long term savings in the form of insurance

and pension.

2. Asset- Liability mismatch: Most of the

banks are hesitant to finance the infrastruc-

ture projects because of the long term nature

Sector Deficit Eleventh Plan Targets

Roads/

Highways

65,590km of NH comprise only 2% of network;

carry 40% of traffic; 12% 4-laned; 50% 2-laned;

and 38% single-laned

6-lane 6500km in GQ; 4-lane 6736km NS-

EW; 4-lane 20,000km; 1000km Expressway

Ports Inadequate berths and rail/road connectivity New capacity; 485m MT in major ports; 345m

MT in minor ports

Airports Inadequate runways, aircraft handling capacity,

parking space and terminal buildings Modernize 4 metro and 35 non-metro air-

ports; 3 Greenfield in NER; 7 other Greenfield

airports

Railways Old technology; saturated routes; slow speeds

(freight: 22 kmph; passengers: 50 kmph); low

payload to tare ratio(2.5)

8132km new rail; 7148 km gauge conversion;

modernize 22 stations; dedicated freight cor-

ridors

Power 13.8% peaking deficit; 9.6% energy shortage;

40% transmission and distribution losses; ab-

sence of competition

Add 78577 MW; access to all rural households

Telecom/IT Only 18% of market accessed; obsolete hard-

ware; acute human resources shortages Reach 600m subscribers – 200m in rural

areas; 20 m broadband; 40 m Internet

Figure 1: Banks' loan share towards infrastructure


of these loans on one hand and short term

deposits on the other.

3. Debt markets are not fully developed:

Debt market in India mainly comprises Gov-

ernment securities, short term and long term

bank papers and corporate bonds1. Still there

are a few challenges before the policymakers

in terms of development of the debt markets-

Effective market mechanism

Robust trading platform

Simple listing norms of corporate bonds

Development of market for debt securiti-

sation

4. Regulated Earnings - Earnings from pro-

jects like power and toll (annuity) may be

regulated leading to limited lucrative options

for private sector and difficulty for lenders.

Also any increase in input cost over the op-

erational life is very difficult to pass on to

customers due to political pressures.

5. Limited Budgetary Resources - With wid-

ening fiscal deficit and passing of FRBM

act, government has limited resources left to

meet the gap in infrastructure financing. Rest

of funds have to be met by equity / debt fi-

nancing from private parties and PSUs.

6. Regulatory Constraints - There are lot of

exposure norms on pension funds, insurance

funds and PF funds while investing in infra-

structure sector in form of debt or equity.

Their traditional preference is to invest in

public sector of government securities.

New mechanism for infrastructure financing –

PPP

The ambitious target of Rs. 20,56,150 crores in-

vestment in infrastructure in the Eleventh Five

Year Plan is constrained by the limitations of

budgetary allocations. As a result, the role of pri-

vate investment through public-private-

partnerships (PPPs) in infrastructure projects as-

sumes greater significance in delivering the Elev-

enth Plan targets. Recently, legal and regulatory

changes have been made to enable PPPs in the in-

frastructure sector, across power, transport, and

urban infrastructure. For example, the Electricity

Act allowed for private sector participation in the

Distribution of electricity in specified area(s) of

the distribution licensees under the role of a

“franchisee”. The recognition of the franchisee

role is a significant step towards fostering PPP in

the distribution of electricity.

India Infrastructure Finance Company Limited

(IIFCL)

India Infrastructure Finance Company Limited

(IIFCL) has been set up as a nonbanking company

for providing long-term loans for financing infra-

structure projects that typically involve long gesta-

tion periods. IIFCL provides financial assistance

of up to 20 per cent of the project costs, both

through direct lending to project companies and by

refinancing banks and financial institutions.

Solutions and Alternatives

Some of the options before us which can be ex-

plored to overcome the mentioned challenges are –

1. Priority Sector Status to Infrastructure –

Currently banks have to lend 40% of their

total loans to priority sector which includes

small scale industries, education, agriculture

etc. Infrastructure is not a part of the priority

sector currently. Assigning of priority sector

status to Infrastructure would witness more

inflows of funds.

2. CDS, developing debt markets – Currently

Credit Default Swaps (CDS) are not availa-

ble for corporate bonds and unrated infra-

structure bonds and RBI is in the process of

introducing them. Foreign Institutional In-

1 Due to tax breaks and declining interest rates, infrastructure bonds have been emerging as a key source (contributing to around 16.0% of infrastructure

financing in 2003) - Infrastructure finance report of ICICI Securities - September 2003.


vestors (FIIs) also invest large amounts in

debt instruments but these are mainly gov-

ernment securities. India has a well-

developed equity market but the same is not

true for debt market. Debt markets in India

have to be revamped so that the infrastruc-

ture can also attract a significant portion of

these funds2.

3. Using Foreign Exchange reserves – India’s

foreign exchange reserves currently stand at

USD 320 billion. According to Guidotti-

Greenspan model, a country’s Forex re-

serves should be equal to its short term debt.

Going by this definition India’s short term

debt is roughly USD 65 billion which means

India’s four-fifths of foreign exchange can

be utilised for other purposes. The Deepak

Parekh committee is also in favour of utilis-

ing a portion of this forex for infrastructure.

Countries like Singapore have done this pre-

viously.

4. Increasing the CAP on institutional inves-

tors – Currently insurance companies face a

cap of 10% of funds invested in infrastruc-

ture sector. An increase in this cap would

bring in more investments from institutional

investors like pension funds, PF funds and

insurance companies.

5. Tax free infra bonds by banks – Currently

only NBFCs can float tax free infrastructure

bonds. If banks are also allowed to float the-

se bonds, they can raise long-term resources

for infrastructure projects, thus reducing the

asset liability mismatch.

6. Rationalising the tax treatment on unlist-

ed equity shares – Unlisted equity shares

attract larger capital gains tax than listed

ones. Currently capital gains on unlisted eq-

uity shares are taxed at 20% instead of 10%

for listed equity shares. Most private players

in the infrastructure sector are not able to

raise capital through public issues. Therefore

for these players unlisted equity will be their

dominant source of equity capital. Therefore

they are adversely affected because of the

tax treatment meted out to unlisted equity

shares. Hence special consideration should

be given to private players in the infrastruc-

ture sector to encourage investments.

7. Securitization of loans - The loans given to

infrastructure project consortiums by banks

are not secured & fall under the unsecured

loans asset class for banks. Currently RBI

mandates that provisioning of such unse-

cured loans is kept at 15% (additional 10%

for substandard unsecured loans). Therefore

total amount of loans to infrastructure pro-

jects are constrained because of the sub-

standard unsecured nature of these loans.

The primary source of repayment of these

loans is the future cash flows accrued from

the project once they are completed and

ready for public use. These cash flows can

act as a security under certain conditions and

debt covenants. For instance in case of road/

highway development projects, RBI passed

an order that a) annuities under Build-

operate-transfer (BOT) model and b) toll

collection rights where there are provisions

to compensate the project sponsor if a cer-

tain level of traffic is not achieved, be treat-

ed as tangible securities.

8. Transforming IIFCL – The government

should transform IIFCL into a specialised

body that can refinance infrastructure loans

from banks and NBFCs or would purchase

infrastructure loans, re-package them as

2 This was also commented upon by RBI in its annual report for year 2002-03 - “The experience since the late 1990s suggests that a key prerequisite for the evolution of institutional arrangements for infrastructure financing is the development of the capital market. The central issue is not the

adequacy of funds but the convergence of investment horizons of ultimate savers and borrowers in the economy. This, in turn, warrants intensifying

reforms in insurance and pension funds which provide a natural hedge for the risks inherent in the financing of infrastructure.”


credit-enhanced securities and sell them to

other investors’ mainly insurance companies

and pension funds.

References

McKinsey&Company (2007); “Building In-

dia: Transforming the nation’s logistics infra-

structure”; Infrastructure Practice Report,

2007

PricewaterhouseCoopers (2008);

“Infrastructure in India: A vast land of con-

struction opportunity”; India Infrastructure

Report, 2008

Malhotra, Sandeep and Kamal Nigam (2003);

“Infrastructure Finance in India”, ICICIre-

searchcentre.org and CAFS Working Paper,

July 2003

Mohan, Rakesh (2003); “Infrastructure De-

velopment in India: Emerging Challenges”,

Working Paper presented at the World Bank

Annual Conference on Development Eco-

nomics, Bangalore, May 2003

Morris, Sebastian (2003); “Efficacy of Gov-

ernment Expenditures”, India Infrastructure

Report, 2003

Nachiket Mor and Sanjeev Sehrawat

(October 2006); “Sources of Infrastructure

Finance”, Institute for Financial Management

and Research Report, 2006

The Secretariat for the Committee on Infra-

structure (2009), Planning Commission, Gov-

ernment of India; “Financing Infrastructure

Projects through the India Infrastructure Fi-

nance Company Limited (IIFCL)”, May 2009

Infrastructure Development Finance Compa-

ny (2010); “Infrastructure Development in a

Low Carbon Economy”; India Infrastructure

Report 2010


It was December 5, 2011. A group of ICICI Bank

officers, training consultant, Mr. Sunil, Prof. K. J.

Jaims, and Prof. Sanal accompanied the journey to

reach a far-flung area, about 50 km away from

TAPMI campus. Farm is popularly known as

“Soans” farm. Though the objective of journey

was to train officers under the beauty and bounty

of nature, I took this as an opportunity to interact

with Dr. L. C. Soans in between. Following the

welcome drink served by one of the farm’s

employees, Dr Soans greeted everyone saying that

everyone should roam around the farm. Moreover,

his delighted face signified that so called

“management” education can meet its learning

goals through “experiential” learning without a

territorial boundary. “Adequacy of learning needs

to be attained by an appropriate learning

environment”, he added at the onset of Sunil’s

“creativity” session.

Let us familiarize with the farm for a while. Soans

farm, an hundred acres of lush green areas in

lateritic soil, is located about 40 km away from

Mangalore on the national highway 13 (NH-13). It

has developed over years as a centre for

innovative agriculture. Traditional agriculture in

this area was restricted to the valleys with

perennial water supply for crops like areca nut,

coconut, banana and rice. Way back in 1926, an

attempt was made to bring into useful cultivation

in hilly areas and in non forested grasslands which

are dependent only on the seasonal monsoon as

source of water. Rainfed agriculture has been

predominant in these areas throughout years.

The interview session with Dr Soans took almost

an hour. The following transpired in the course of

discussion:

Kushankur: “Sir, can you brief the history of

Soans farm?”

Dr. Soans: “Well. I should narrate the long story

in short. Basel Mission, a Swiss-German

missionary organization ventured into a pilot

agricultural project under the leadership of Rev.

Fischer, a missionary based in Karkala. Alfred

Soans, a young agriculture graduate was employed

in 1928 to pursue the project by his heart and

hand. Because of the shallow soil over the laterite

beds and the lack of irrigation, the initial coconut

plantation did not appear”.

Kushankur: “Can you recall some of innovations

that those your father and you brought in?”

Dr. Soans: “This kind of inquiry always makes

me nostalgic. My father brought in many

innovations like intercropping with several new

crops like pineapple which saved the situation.

The low price of agricultural produce and the start

of the Second World War were a great setback.

The Germans who became enemies of the then

A Tryst with Dr. Soans at Moodibidri

Written by Prof. Kushankur Dey, Assistant Professor (Finance), T A Pai

Management Institute, some portions of the article adapted from Dr L. C.

Soans’ archival databases what Dr. Soans handed over to me during the

conversation. Prof. Dey can be reached at [email protected]


British rulers had to leave. The local church,

which became the custodian of the farm could not

support it and planned to sell the land. My father,

who had put a lot of effort, prevailed on the church

to save the farm. Eventually, he was given charge

of the farm on a lease.

Post-1947, the agricultural situation improved.

Further innovations like farm mechanization and

improved irrigation practices made possible the

expansion of the farm from 46 acres to nearly an

hundred acres. Agriculture was further diversified

and more new crops suited to the land, climate and

the market were introduced. While pineapple

continued to be a major crop, corps like mango,

sapota, pepper, cinnamon, nutmeg, cocoa, cashew

nut, coconut and vanilla made possible round the

year utilization of the land and further

employment opportunities for the local population.

At present the farm is managed by me and my

younger brother, Mr. I.V. Soans, a fruit

technologist by training. Horticultural

development is further strengthened by a nursery

section and a fruit processing plant. The cropping

pattern has evolved into a multistoried mixed

cropping, ecologically sustainable model, for

visiting farmers from across the country. It has

also become a popular destination for foreign

tourists to see the variety of spices and medicinal

plants”.

Kushankur: “Fantastic description. I am

interested to hear about tourists since your farm

seems to be a centre of Eco-tourism”.

Dr Soans: “Yes. Prof Dey, you are correct. Cruise

ships docked at the Mangalore port and groups of

tourists took a day-trip to Karkala to visit the 42

foot monolithic statue of Bahubali, a Jain saint and

the 15th century thousand pillared temple at

Moodibidri. Meanwhile, they stopped at Soans

farm as a restive spot where rest room facilities are

provided. They had their feast under the fringes of

mango trees and got a chance to take a tour of the

farm and captured the photographs of different

tropical fruits and spices which they often use in

their diet but do not get the chance to see the

actual plants prior to visiting the farm.

Soans farm has also diversified into Eco-tourism

with guest houses in the farm for those interested

in nature, bird watching and study of the tropical

rainforest nearby”.

Kushankur: “What are the products commercially

available in your farm?”

Dr Soans: “Our objective is to sustain the farming

which is why marketing the products is essential.

Prima facie, commercially available product in the

farm are pineapple, coconut, pepper, mango,

guava, nutmeg, cinnamon, cardamom, mace,

vanilla, banana, rambutan, mangosteen, durian,

barbados cherry, surinam cherry, passion fruit,

cocoa, bamboo, jack fruit, Rangoon cherry, star

apple, star fruit, rose apple, custard apple, egg

fruit, mulberry, allspice, clove, cashew nut,

breadfruit, butter fruit, gooseberry, yam, areca nut,

coffee and different varieties of ornamental and

fruit plants. Processed pure juice and RTS are also

available”.

Kushankur: “I come to know about your farm

practicing energy healing. Can you elaborate on

this?”

Dr Soans: “I appreciate your inquiry to this

practice. You may be aware that health and

sickness have been part of human existence over

the ages. Throughout the centuries many methods

of healing have been developed. Herbs provided

the main sources of medicine for various ailments.

Many animal and mineral products have also been

used. The contribution of a proper diet has also

been recognized in such system as Naturopathy.

The modern Allopathic system of medicine has

witnessed the development of a large array of

drugs in pure form obtained from chemical and

biological sources. The Ayurvedic and other

ancient systems have largely retained a drug

combination obtained from herbal and other

sources without purification of the active

principles involved in healing. In my farm you

will find a range of healing types, namely,

Pyramid energy, Pranic healing and Reiki,

Medicine wheel, the Labyrinth adapted from

various countries in different time period”.

Kushankur: “What are your next agendas or tasks

enlisted for 2012? In my view, your

entrepreneurial ability will encourage others to

grow with nature organically. May I request you to

allow me to write a case on Soans farm?”


Dr Soans: “Health Tourism. I mean it. Oh! You

want to showcase my farm through writing. I will

tell your professors to support our farm providing

human resources, advices or technical know-how

on natural resource management which is need of

the hour”.

After an hour-long discussion, it appeared me that

classroom teaching is not effective unless practical

exposure accentuates the learners to do things

practically. It is neither science nor art. It is

practice which shapes the individual to become an

entrepreneur.

I am not using any buzzword like “social” or

“venture capitalist”. Today, these are fad.

Entrepreneur is one who knows, understands, and

preaches to sustain his /her venture in the soil with

“grey” and “sweat” equity. This is not ending. It is

beginning of the entrepreneurship edition.

Readers, you can expect that in next issue

something more is awaiting.

Ms. Mohini Gupta (PGDM 1996-1998)

Alumnus of the Month – January 2012

The Alumni Affairs Committee (AAC) is pleased to announce Ms. Mohini

Gupta (PGDM 1996-1998) as the Alumnus of the Month (AoM) for January

2012.

After completing MBA from T.A. Pai Management Institute in 1998, Ms. Mohini started her career with

Wipro Technologies, when she joined the HR team at the Hyderabad Development centre. She then

moved to Bangalore as the HR Manager for Manufacturing & erstwhile Corporate verticals. From 2001-

2006 she took a break in her professional career, as she spent time in the US and UK with her family.

On her return to India, she joined Wipro Consumer Care & Lighting (WCCLG) where she lead the

Business HR function for the Consumer care and Trade lighting business between October 2006 to

December 2010. In WCCLG, she played a pivotal role in driving initiatives like EPS and HR

Automation. She also drove their campus recruitment across B-Schools and was responsible for the

Management Trainee program.

Ms. Mohini moved from Wipro Consumer Care and Lighting to Wipro Technologies in December

2010. In her current role, she has been leading the International HR Strategic enablement initiatives

which include Engagement, Branding, Communication & Analytics for International locations. Among

her early assignments in this role, Ms. Mohini spearheaded and submitted Wipro Technologies entry for

the Association of Diversity Council awards, which was placed at second position after US Navy. Ms.

Mohini is also a part of Mergers and Acquisitions team. She was the HR SPOC for integration, for the

recent SAIC acquisition by Wipro Technologies, in the ENU vertical.

Apart from leading all central initiatives in HR across geographies outside of India, she is also a

member of the Prevention of Sexual Harassment Committee at Wipro.

Ms. Mohini has done her Bachelor’s degree in Psychology. She lives in Bangalore with her husband,

Ashish and two children, Dhruv and Diya. She loves to travel and enjoys adventure sports.

- by Alumni Affairs Committee


The time when the top most B-School of country,

the Indian Institute of Management (IIM), Ahmed-

abad published its 2009-11 batch’s placement re-

port adopting its Placement Reporting Standards in

June, they did not know its consequences. The re-

port was externally audited, as per the standards,

for which the institute had consulted the credit rat-

ing agency Crisil. They issued a detailed 31 pages

report which had every hidden aspect of their

placements and compensation offered by the com-

panies. Later this year, big names joined the band-

wagon, hoping to bring transparency in their

placements reports and to achieve a standard

across the all B-Schools.

But before start bowling anything against or for

IPRS one should know the pitch and the play-

ground well, i.e. what is the current scenario of

management education in India. MBA education

in India - was started around 50 years ago reached

its peak last decade. Today an MBA degree is a

passport to a good career - a career which ex-

tremely rewarding and highly challenging. Post

liberalization, the economy of India has seen a rise

in the demand for MBA graduates. Firms from a

variety of sectors - ranging from IT, Financial Ser-

vices, Manufacturing, Telecommunication,

FMCG, Banking, Retail and Consultancies - start-

ed hiring MBA graduates from Indian b-schools.

The conditions have been improved in last 4-5

years as the salaries offered at premier B-Schools

of the country have been grown and in quite a few

cases have more than doubled. There is an in-

crease in the international placements as well es-

pecially in financial consulting sector. It is a mat-

ter of pride to get placements in the "Big 4" con-

sulting firms and in some of the top investment

banking companies in the world. The salaries of

such placements can go anywhere between US$

60,000 per annum and US$ 1, 50,000 per annum.

These Ivy League b-schools also take pride in fin-

ishing their placements within first few days of

their placement weeks. It is common for students

of such b-schools to have more than one offer at

hand. Every such school then been ranked on the

basis of the “average starting salary” along with

other parameters. Each and every college is

fighting to lure more applicants on the basis of last

year’s average salary by posting their placement

reports on their websites, journals and other me-

dia. When everybody was enjoying this game IIM-

A has decided to change the rules by introducing

IPRS.

Now in this current scenario, the Indian placement

reporting standards (IPRS) — which aim at adapt-

ing the American MBA CSC Standards to an Indi-

IPRS—Is the Name of the Game

by Vikash Kumar, IMI New Delhi


an background and dictate corporate firms recruit-

ing from B-Schools to clear the hidden sides of

compensations they offer. The MBA

Career Services Council (U.S.) is the provider of

education, information and expertise for the sup-

port and development of individuals in the MBA

career management and employment professions

in U.S. and abroad. They provide education, pro-

fessional development, networking opportunities

and support for their membership and the MBA

career services and recruiting industries as a

whole. Abiding to the basic architecture of MBA

CSC, IIM-A were able to develop such standards

for Indian context which is first of its kind. In first

year of IPRS, standards were agreed by firms that

hired around 210 students of the total 312 place-

ments at IIM-A (according to placement reports).

But nobody denied the fact that there were few

companies which appreciated the initiative taken

but also emphasized that the change would be a

slow but sure process which would depend on oth-

er big names adapting the IPRS thereby forcing

more firms to be transparent. Authorities at IIM-A

also said that they have a plan to report this year’s

placement statistics for both groups separately.

The institute opened the discussion at a confer-

ence (Saturday, June 18), which was attended by

33 Indian business schools. IIM-Shillong, IIM-B,

SP Jain, JBIMS, NITIE, IIFT, IMT-G were among

few who attended the conference. The rest of the b

-schools like other IIMs, ISB Hyderabad and

XLRI Jamshedpur were conspicuously absent.

Four recruiters (McKinsey & Co, Booz & Co and

HUL) were also present there but it seemed that

they have already incorporated the standards and

so left the conference in midway. Others big

names included media houses Business Standard,

Mint, The Economic Times, Business Today, and

Business world and rating agencies also attended

Here are some of the figures from the survey conducted by iimjobs.com – These numbers were collated based on salary

data administered between May 16 to 31, 2010 with over 5600 MBA graduates sharing their salary data anonymously.

Average Salaries for Sales & Marketing Sector Average Salaries for Systems (I.T) Sector

Average Salaries for Finance Sector Average Salaries for Consulting Sector

Source*: http://trak.in/tags/business/2010/06/14/top-mba-business-b-school-salary/

http://trak.in/tags/business/2010/06/14/top-mba-business-b-school-salary/


the meeting. The long conference reached a con-

sensus on making several big and small changes to

the first draft of the standards. Mainly among the

changes was elaborate the CTC (Cost to Compa-

ny) salary communicated in placement reports to

Maximum Earning Potential (MEP), which the

conference felt was more appropriate and more

representative of compensation that included per-

formance-linked variable pay. It was also decided

to detail the information about summer placements

and attributes related to that like how many were

arranged by B-Schools and how many were self

arranged by students. Also the stipend structure

whether paid or non-paid. It was also agreed that b

-schools can release an unaudited report initially to

the public and the media. But they have to issue

the standardized placement report (the real thing)

after three months.

So what were the objectives cited by IIM-A in its

first IPRS proposal? IIM-A issued its draft pro-

posal this year and school has mentioned the key

aims of the standard in revision 2.0 of the report.

The key aims of the standard are:

1) To cater to the placement related information

requirements of all the stakeholders involved; the

key stakeholders being the candidates, recruiters,

the B-school, media, ranking agencies and pro-

spective students.

2) To enable the candidates to do a fair compari-

son not only across various professions, but also

across individual firms, and across different roles

offered and their specific parameters.

3) To give access to in-depth information about

placements to the media. This would enable the

media to have better insights into the placement

process, and would also reduce chances of misin-

terpretation, especially while comparing infor-

mation from two or more B-schools.

4) To ensure MBA employment reports are used

in fair and accurate manner to attract students and

employers.

5) To help B-school aspirants in making a well

informed choice, thereby resulting in more realis-

tic expectations on their part when they join a B-

school.

6) To provide prospective students and employers

with a reliable way of comparing placement statis-

tics of one B-school to another.

7) To enable ranking agencies to obtain placement

related statistics across B-schools in a standard-

ized format.

*Source: www.iimahd.ernet.in

This gives a vague idea behind the formulation of

such standards. The IPRS is first step towards

standardizing the placement processes at B-School

and making it transparent for both the parties

(Recruiter and MBA aspirants/applicants). It was

proposed that there should be no concept of lateral

placement because it was often wrongly used as an

excuse to permit the most-preferred recruiters ear-

ly access to students (including fresher). But the

standards as such, therefore, will be quiet on the

subject of how laterals (graduates with prior expe-

rience) fared in the placements. Yet, the need of

experienced MBA aspirants to learn about their

chances of employment post-MBA is a real deal

and it would be interesting to see how this section

will respond to the standardized placement reports.

We can only speculate but the best way would be

to include laterals information under the

‘additional information’ section and not alienate

applicants with work experience.

After all the hoopla about IPRS, the question

which still remains is how will IPRS become the

sector standards? We are talking about the diversi-

fied sector where we have few Ivy League B-

schools with “AAA” rating which represents only

top 10% of the sector. The democracy driven

country also have B-schools which is being rated

“B” and goes down further, and mind you, rest 70-

80% MBA graduates come out from these colleges

where most of the executive level recruitments

have been done. Here we are talking about push-

ing a recruiter to have a compensation policy both


Inviting Articles

“Best Article” of this edition: Ashley Jose Thomas, FMS Delhi

Congratulations!! The winner will receive a cash prize of Rs. 1000 & a letter of appreciation.

We are inviting articles from all the B-schools of India. The articles can be on any field of business

from Marketing, Finance, Operations, HR to Systems.

You can send us articles on:

Recent developments or trends in any of these fields

Articles covering latest trends, innovative practices, strategies, etc. in the global perspective

We also invite articles on management thinker similar to the current section

Apart from above, creative works in relation to any of the fields will be equally appreciated

The best entry will receive a letter of appreciation and a cash prize of Rs 1000/-. The format of the file

should be MS Word doc/docx. Articles should not be more than 2500 words.

The last date of receiving all entries is 24th February, 2012. Please upload entries at http://

www.tapmi.edu.in/student-life/pratibimb/participants-submission with file name as BAC_<ARTICLE

NAME>_<INSTITUTE> by 24th February, 2012.

transparent and lucrative for these 2nd and 3rd tier

b-schools. The other aspect is the recruiters who

come to second and third tier b-schools are those

which have not been able to fill up their require-

ments at the IIMs. It makes clear that only top-

rung b-schools will be more optimistic about the

IPRSs. But to make IPRS as sector standard the

need is to add a huge number of new resources

and processes to the placement procedures in order

to document the detailed salary components and

placement figures continually. As a result none of

the others would be committed to adhering to

them fully right away, but we could still expect

few of them joining the bandwagon and might

start adhering to parts of it in the coming years.

And rest may wait and watch a real example first.

After singing all the pros and cons we can say that

IIM-A has done a tremendous job of taking this

initiative for being transparent about both its own

experience with adopting the standards and raising

its voice and building consensus with stakehold-

ers. The IPRS is a well-intentioned and bold move

by IIM Ahmedabad and if triumphant, will help in

making the picture more transparent inside the sin-

gle information parameter that (for worse or bet-

ter) lies in the nucleus of Indian b-school boom –

“the average starting salary”.








HR as in human resource is a department in any

organization or firm is responsible for taking care

of well being of the employees. It provides a

number of factors that can be measured to show

how HR contributes to the business. HR is now a

key role in developing and implementing corpo-

rate strategy as well as becoming a high-valued-

added part of organization. HR Metrics provides a

platform for measuring the analytic and data based

decision-making capability to influence business

strategy in an attempt to make business better de-

cision and transform HR into strategic partners.

Over the last few years, HR technology, specifi-

cally HRMS (human resource management sys-

tems), has been widely promoted to increase the

efficiency and effectiveness of HR departments.

However, despite the availability of a “container”

capable of holding meaningful measurements and

metrics, the actual development and utilization of

measurement and reporting practices appears to be

lagging. The most discussed topic in the HR in-

dustry today is metrics and measurement. From

professional organizations like the Society for Hu-

man Resource Management (SHRM) and the Hu-

man Capital Institute (HCI) to HR gurus and white

papers from management consulting firms like

Deloitte Consulting, the topic of metrics is cov-

ered extensively. It can be quoted here that “HR

Metrics is a much-touted and underutilized initi-

ative”.

The major HR-metrics are stated below:

Efficiency of the HR functions:

It explains how efficient the HR is in doing their

administrative work. (Boudreau; Lawler & Leven-

son, 2004) The data can be gathered in database

and the multi-company database allows companies

to compare the performance of their own HR de-

partment with HR departments in other compa-

nies.

The following are some of the parameters of effi-

ciency of the HR functions: (Kavanagh & Thite,

2009)

Cost per hire: It is the cost associated with

a new hire. It is not only important to know

how much it cost in hiring, but it is also im-

portant to see if the money spent is used to

hire right people. (Boudreau; Lawler & Le-

venson, 2004)

Time to fill up the open position: It is the

total days to fill up a job opening per job.

The shorter the time, more efficient of the

HR department in finding the replacement

for the job.

HR expense factor: It is the ratio between

total company expense and HR expense. It

shows if the expenses on HR practices are

too much in terms of the whole company

expense.

Effectiveness of HR-Functions: It shows whether

the HR practices have a positive effect on the em-

ployees or the applicant pool. This is very im-

portant for HR because they are regarded as the

leader for acquiring, developing and helping to

Re-Defined HR Function by Tuneer Chatterjee, STEP-HBTI

“When we learn something from each other, we're formed by the experience.... we are authors of

each other”

- Doc Searls


deploy talent. (Boudreau; Lawler & Levenson,

2004)

The following are some of the examples on effec-

tiveness of the HR functions: (Kavanagh & Thite,

2009)

Training ROI (Return on Investment): It

is the total financial gain an organization has

from a particular training. It shows the effec-

tiveness of the training program and how

much it can benefit to the company after the

training. It can be directly be showed by the

employees being trained. Training metrics—

they are used but not to the level that they

need to be to ensure readiness and productiv-

ity.

Absent rate: It determines that the company

is having an absence problem from the em-

ployees. It also reflects the effectiveness of

the HR policies as well as the company’s

own policies. It always goes along with em-

ployee satisfaction.

Developing company’s core competency:

It helps to demonstrate the connection between

HR practices and the tangible effects on organiza-

tion’s abilities to gain and sustain their competi-

tive advantages. This approach often treats em-

ployees as their human capital instead of the ex-

pense. (Boudreau; Lawler & Levenson, 2004).

The following are some of the examples on effec-

tiveness of the HR functions: (Kavanagh & Thite,

2009)

Revenue factor: It indicates the effective-

ness of company operation with the use of

the employees as their human capital.

Defect rate: It indicates the number of de-

fects products in the operation. The lower

the defect rate, the more effective the HR

practices in developing company’s core

competency in terms of reducing cost.

On the contrary it can be said that:-

“Everything that counts can’t be measured

and everything that can be measured does not

count.”

HR is increasingly being expected to provide

quantitative, as well as qualitative, information

about the organization’s human capital. Where the

shift is from expense control to increasing ROI, it

becomes important for HR metrics to be redefined.

“We have a tendency to focus on reporting

measures as opposed to true analytics that answer

the ‘so what’ questions related to strategy.”

It is believed that HR needs to focus on

metrics outside the purview of HR to make the

biggest impact on the corporation. HR (as a

whole) needs to better understand each department

and the organization as a whole before making

strategic HR decisions. HR will need to find crea-

tive ways to track the virtual workforce. It’s com-

monplace to support telecommuting and more

metrics need to be in place when tracking those

with flexible work schedules.

The predicted trend in HR practice these days is to

build upon what departmental managers are inter-

ested in to incorporate what interests top manage-

ment—how human capital impacts the execution

of strategy.

The initial question focused on which human capi-

tal metrics to use; now the question is how metrics

can help plan strategy. Frear wrote about it as a

movement toward “transformative HR” wherein

recognizable stages emerge, and the first stage in

this transition is for the HR professionals to under-

stand the business realities that the organization

faces.


Social Media Marketing is becoming one of the

most effective means of marketing. Range of com-

panies and products leverage Social Media, espe-

cially small and medium businesses to enable

them to compete at equal footing with the sector

majors. Usually B2C companies use social media

marketing. Consumers use social media to get the

information, feedback and opinion of different

people before buying a product.

360BuzzAds Pvt. Ltd. claims to be the first inte-

grated Social Media Marketing engine which

helps businesses monetize Social Media by grow-

ing their online user engagement. Mr. Subramanya

R Jois, CEO of 360BuzzAds Pvt. Ltd. says that

the number of people visiting the forum mall in

Bangalore has increased from 40,000 to 60, 000

on an average during the weekdays after the usage

of social media marketing.

Benefits to companies using social media:

Used to build Viral communities across So-

cial Networks, reducing cost and time to

Market.

Availability of Face book on mobiles has

enabled companies to reach customers more

easily.

Companies can receive qualitative feedback

from users easily.

They can also leverage it to promote their

products and convey any offer/discount.

Cons of using social media:

There are chances of customers of another

product giving some negative comments or

opinion about the product. That would have

a very bad impact. So the companies should

keep track of the negative feedback and

should take action.

Resources should be allocated to keep track

of the post and reply to the users queries.

Social Media: the game changer:

Social media has provided, both existing and pro-

spective customers a channel to voice their opin-

ion in much more powerful way than ever. Any

company trying to ignore it would risk losing mar-

ket share and reputation in long run. Earlier, rela-

tion between a company and its customers were

either:

One to Many: With companies having the

higher ‘preaching’ ground and unidirectional

communication through various advertising

mediums

Fit of Social Media with Existing Marketing Strategies

By Sangeetha Kesav | Amit Sikdar, IIM Bangalore


One to One: Mainly while addressing cus-

tomers’ complaints, occasionally during pro-

motional events

However, now with advent of social media

bandwagon companies

need to realize and treat

social media channels as

an important complimen-

tary channel to their exist-

ing marketing channels,

which unlike others ena-

ble two way communica-

tions and hence, often

perceived as a threat by

many marketers who now

need to be answerable

and more responsible in

terms of their strategies as

the communication has

now turned to become

Many to Many.

Many to Many: In fact,

as the following figure shows that since the

world wide web has equipped customers’

with the tools and abilities to interact with

each other, irrespective of geographical

boundaries, companies have been forced to

use the same channels to engage with the

customers in a bi-directional communica-

tion, initially only to minimize the damage

but now to maximize their value proposition

delivery.

Reasons for using Social Media Marketing:

Mary J. Culnan et al, (2010) have discussed on

how firms should use social media to interact with

customers and how their use varies by industry.

They also stated that in order to gain benefit from

social media, firms need to develop implementa-

tion strategies based on three elements: mindful

adoption, community building, and ab-

sorptive capacity.

The reasons for using Facebook by com-

panies of various sectors identified by

360BuzzAds are for Branding/awareness,

Engagement, Transaction, Loyalty and

Recruitment purpose.

Branding/ Awareness

FMCG companies extensively leverage

digital marketing for brand awareness.

They have different pages for the differ-

ent products they offer. Information on

promotions, gifts and greetings are updat-

ed frequently. Videos, pictures and Store

Source : 360Buzz Ads.com


locator facility of the product are shared in their

page. Loyal users of the brand create communities

which help in viral marketing.

Engagement

Few brand pages look beyond brand awareness.

They engage with the customers by conducting

surveys, quizzes and polls to find the expectations

from the customers. Some of them also reward the

users for these events. They appoint a person to

answer all the queries of the user which can hap-

pen through text or video chat. For example in

Apollo hospital Facebook page people used to

query the availability of the doctors. This brings

an attachment and satisfaction of the customer to-

wards the product/service.

Social Commerce/Transaction

Companies also use Facebook for the transaction

purpose. Customers can buy the goods directly

from the link provided in Facebook. The transac-

tion will take them to the payment gateway where

they can pay for the product. This is very mostly

used by the retail companies. Sometimes exclusive

discounts are offered for Facebook customers.

There are few products that cannot be sold online

via Facebook like baby foods and supplements,

medicines and liquor due to the regulatory norms.

So the companies selling these products can only

use Facebook for awareness and not for transac-

tion.

Loyalty

Companies were found to encourage loyalty

amongst their existing customers or signalling

benefits amongst potential customers by giving

special discount, some meant for Facebook users

only, on the basis of number of purchase and for

inviting their friends to join the page. To further

reward loyal behaviour and continuous

“following”, some companies maintain leader

boards, with leaders determined through their con-

tribution to discussions and participation in con-

tests, etc.

Recruitment

Now companies have started uploading the job

notifications on the Facebook page. People also

use this medium to enquire about the job require-

ments and vacancy. Summer interns and new

joinees query about their joining date and posting

location.

Tools used by companies to analyse the inputs

from Social Media:

Twitter Sentiments

Tools like Twitter Sentiment are used to find the

positive and negative sentiment of people com-

menting on a particular topic in Twitter. This will

Twitter Sentiment for Apollo


help companies to track the negative sentiments

and work on it to resolve it.

Social Mention

Social Mention is another website that provides

statistics related to use of a keyword on various

social media platforms, similar to ‘Google Alerts’

but more focused. A snapshot of the website is

shown below with the search term ‘Apollo’ and

associated statistics on various social media plat-

forms:

Social Mention for search on Apollo

Conclusion:

On one hand Social media (specifically Facebook)

provides great opportunity for Small and Medium

businesses primarily to increase their reach, on the

other hand it could be perilous too if not properly

managed. Establishing presence on Social media

and announcing its products would not only suf-

fice for a company but it would also have to con-

tinuously monitor the on-going dialogue between

its existing and potential customers. This could

also improve companies’ perception in terms of

customer service, garnering positive mentions and

corresponding network effects through the social

networks of a customer.

To conclude, a check-list of Do’s and Don’ts, es-

pecially useful for budding companies trying to

gain foothold but equally valid for established

ones:

Do’s:

Define your target customer segment and

develop a communication strategy with a

proper tone

Develop a style of interaction matching the

brand personality one wants to project

Define level of moderation

Use all the possible & relevant applications

available as each can enhance or affect one

of the five parameters discussed earlier

Try to create apps/games specific to your

brand/product, increasing their attractiveness

Focus on loyalty building measures, a part

often neglected by many

Keep the sales pitch subtle with more em-

phasis on ‘Engagement’ to influence cus-

tomers purchasing decisions

Don’ts:

Use Social media for corporate communica-

tion purposes – it is not the right platform to

find and address relevant audience, and it

will alienate the end customers who usually

doesn’t have an interest in this

Forget to regularly update the content and


come up with ideas to keep customers en-

gaged with your brand/product

Try to thwart a dissenting customer by en-

gaging in a duel of words or trying to dis-

credit/malign his or her image as this could

disenchant other users from actively partici-

pating due to fear of similar actions

Use same page to communicate about differ-

ent product segments with possibly different

customer segments; create separate product

pages in such cases rather than one single

brand page

Varying the aim of communication with dif-

ferent Social media channels which is per-

ceived differently and cause a scattered

brand image projection.

Route to Market

Winning Entry of December Edition: Team “THE LAST SAMURAI” from

IMI, New Delhi led by Mr. Vikash Kumar.

Congratulations !! We thank all the participants for their effort. The entries for this

contest have been judged by Prof. Vinod Madhavan, TAPMI.

The market has always been unpredictable for the companies. This holds more

significance in the case of international brands trying to enter new emerging markets.

Every brand wants to be recognized globally so that they can tap the new markets

easily. The role of marketing managers in this age of globalization becomes more

important in providing the companies with correct strategy to enter new market. We

give our readers a platform to experience this challenge through “Route To Market”.

The primary objective that the participant is expected to fulfill is to provide a “Market

entry strategy” for an international brand/product into the Indian market. The overall

strategy would be divided into three stages:

Rules:

Brand for which entry strategy needs to be crafted is “merci Finest Selection

(Chocolates) ”

Document size should not exceed 4 pages & a maximum of 2 members are

allowed in a team

The participant is expected to justify his stand – point in each deliverable

Each stage should be clearly mentioned under sub – heading

Upload entries with file name as “RTM_<TEAM NAME>_<INSTITUTE

NAME>” at http://www.tapmi.edu.in/student-life/pratibimb/participants-

submission by 11:59 pm, 24th Feb, 2012

The winner will receive a cash prize of Rs.1000 /-








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TAPMI

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T- +91 7204494284

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