Thursday, December 26, 2013

Book Review: Bhava (Kannada novel) by U R Ananthmurthy

This short novel (which can be read in one sitting) explores the psychological depths of people (central characters of the novel) who did not or could not remain committed to their partners but got indulged into illicit relationships and live life with dual mindset.

The story begins with Vishwanath Shastry meeting a stranger (Dinakar) in a train and he realizes that he could be his last son who was believed to be dead in the womb along with his mother. But he is not sure of whether he is the biological father as he suspects a Pundit who was close to his wife would be his father. That relationship of Shastry's wife outside the marriage had makes him angry and he attempts to end her life when she get pregnant. He thinks she is dead in that attempt but becomes aware later that she is not dead but disappeared from the house along with fine gold and jewellery. Meeting this person Dinakar who is on his way to find Seetamma, a person who was well known to him and his wife brings back the old memories and his duality over whether Dinakar is his son or not grows further.

Dinakar too has his version of story. He has faint memories of his mother who was dead when he was five and does not know who is his father. His successful stint as a TV journalist does not help him in finding the purpose of life and his inability to remain loyal to any woman he comes across as mates adds to his confusion. He is on the way to Kerala in the form of a devotee of Lord Ayyappa but wants to meet Seetamma whom he considers his second mother. During the visit, he becomes aware from Sitamma's son Narayana (who was his friend also) that he has a grown up son from a relationship he had when he was young. And this son of Dinakar, named Prasada is also in the suffering of knowing who is his real father and is on the way to become a Sannyasi, a renouncing stage of life.

This plot exposes the intricacies of human mind and behavior through main characters of Shastry and Dinakar. While Seetamma and his son Narayana shows the positive aspects of a broader thinking, the lack of it in the central characters shows the how individuals form different opinions, how they are influenced by different circumstances of life and take an entirely different path despite living in the same society.

Sunday, December 22, 2013

Book Review: Ithaca by David Davidar

This is the story about a person behind the story tellers, a publisher. The protagonist of this story, a person of Indian origin, working for an international publishing firm, climbs up the career ladder for being with a right person (a star author of Angel’s series of books) at the right time, which helps him earn name and money for his firm. But all is not well in his personal life and his relationship with his wife, who is also part of publishing industry, has turned soar. 

To find peace with himself, he tries a vacation in an uncommon place, Thimphu in Bhutan. As heads back to his office in London, he finds that his star author, who was in his old age and facing personal trauma, is no more alive. In the absence of a new book in the Angel’s series, his firm has nothing significant to offer, so the financials of the firm take a hit. And the company becomes an acquisition target. To defend the position of his firm, he has to do whatever it takes. As per advice of CEO of the firm, he heads to meet the translator of his star author, and to his surprise he finds there was a last piece of unpublished work. His company pays a hefty amount to acquire the rights and plans a series of events to promote and distribute the rights of the book to other languages and media, and the promotional event in Frankfurt fair gets the attention he expected and on the other note, reconciliation efforts with his wife seems to be paying off. 

Despite pulling off a new book which has all the potential to improve financials, his firm gets acquired by a bigger firm which is run by a ruthless and ambitious person. And the unexpected developments, that the book was not an original piece of work by the start author but a desperate attempt of his translator putting together pieces from an already published work by another author. This attracts criticism by the media and the protagonist of the story gets fired. He returns to India, his village in a hilly station and gets consoled by an unusual person, a postman of the village. He accepts that no one can escape fate but looks forward optimistically to find a new direction in life.

Thursday, November 28, 2013

Viewpoint: Diesel price, Inflation and Deficits: Turning points of economic spiral


Diesel prices are on the rise so inflation is at higher levels. Will there be further increase in diesel prices and inflation? Probably not. Here is the reasoning.


Diesel prices are on the rise. Almost Rs. 15 per litre (approx. 30%) increase in the last 3 years is observed. This increase makes the transportation costlier, input costs rise and the burden is passed to consumer so we witnessed persisting inflation at 11% in 2013 (average CPI).

Why diesel prices went up?

If we take a look at Brent Crude chart, it has remained in a narrow range in the same time frame. Then what is causing Diesel price rise?

USD/INR chart reveals the secret. It is not the international crude prices but the fall in Rupee made the import costlier by around 20% or so. And rest of the rise has come from increase in diesel prices by 0.5 rupee a month with Government’s initiative to reduce the burden on Oil Marketing Companies (OMC). This would continue and further accelerated to reduce the subsidy burden and bleeding of OMC's.

Why diesel prices will top out in a year or two from now?

Even if crude prices remains flat, diesel prices can go up if Rupee weakens further and fuel subsidy withdrawal speeds up. But the Rupee’s weakness has roots in Trade deficit (a gap between exports and imports) and Current Account Deficit (CAD, a gap between outflow and inflow of foreign exchange).
Diesel prices contribute to both deficits. Oil being the second biggest import of the nation, increases the import bill. And fuel subsidy is one of the biggest Government spend that increases Fiscal Deficit (a difference between Government's spend and earnings). But reducing the subsidy and bringing the diesel prices to market levels helps in reducing Fiscal Deficit, reduces Government's borrowings and strengthens rupee. Stronger rupee reduces the import bill and makes the crude import possible at lower prices reducing the trade deficit and further strengthening the Rupee further in the process.

Diesel would cost another Rs. 12 more a litre (approx.) if subsidies are withdrawn. But this would have reduced the current account deficit to the tune of Rs. 100,000 crores a year or approx. 30% of CAD. This will help Rupee appreciate, reduce the import bills and narrow the trade deficit. And the benefits of importing crude at lower prices can be passed back to consumers offsetting the price rise caused by subsidy withdrawal.


In a narrower time frame, diesel prices can go up but not consistently as the benefits of deficit reduction start paying back. Moreover, oil supplies are on the rise all over the world so there are good chances that international crude prices may see softening with time. And oil discoveries within India are on the rise, any increase in domestic production will only help to reduce the import bill and strengthening of Rupee. So we may actually see Diesel prices coming down in a couple of years. But what about inflation? It too may soften. If it does not, there could be other reasons driving it and Diesel would not be the one behind it.


2. Brent Crude and USD/INR:

Tuesday, November 19, 2013

Perspective: Wind-Hydro hybrid power plants to overcome the demerits of stand-alone wind farms


Wind and Hydro, both renewable forms of energy, both economical and best alternatives to thermal (coal based) energy and avoid harm to nature. But they too come with their baggage of demerits. Wind does not blow when there is a peak demand for energy (i.e. during afternoons) but is at full action in the night generating electricity when we need the least. There are no viable ways to store energy in the scale of mega-watt’s either. On the other hand, hydro, the cheapest source of electrical energy production, has geographical limitations such as elevations which are not significant enough or the insufficient water flow rate to set-up a hydro power plant.

There are significant water bodies across India acting as reservoirs used for irrigation purposes, but no power generation is done as the elevations are not enough. Often, if not always, wind turbines are co-located around water reservoirs like the one shown in this picture.

So there lies an opportunity to utilize the energy generated from wind-turbines which cannot be stored to pump up the water from reservoir to a tank in upper hill to provide the required elevation needed to set-up a hydro power plant. While this method of storing energy is many centuries old but the benefits of adopting are huge now as Wind turbines these days generate power in the scale of mega-watts and are capable of pumping up great amount of water. The energy that can be recovered could be as high as 80%. Such a hybrid system can turn out to be a cost effective power plant due to higher utilization factor enabling power supply according to the varying demands across the clock.

Financial viability
For such system to be financially viable, capital costs required to set-up a hydro power plant have to be recovered from energy produced from it and there has to be a subsequent increase in the bottom line (profits) of the hybrid power plants. Let us work out a scenario with approximate costs to see if it makes sense or not.

We may consider a pool of wind turbines with a combined capacity of 100 MW, operating 12 hours a day, so generating 1200 MW hours of energy a day. Since there is always a case of production-demand mismatch and with absence of an energy storage system, we may consider an under utilization of capacity, assumed at 30% or 360 MW hours a day. If we consider 80% of energy recovery from a hydro power plant which is being set up which can produce 288 MW hours of energy on daily basis. If thus produced energy is sold at a rate of Rs. 4 per unit, it can create a revenue stream of Rs. 11.5 lakh a day. If we expect that this plant is operational 300 days in a year, it can contribute Rs. 34 crores of additional revenue every year and around Rs. 690 crores in its expected life span of 20 years. If the capital costs for setting up of this hydro power plant with a peak load capacity of 30 MW are around Rs. 100 crores, it would generate 7x returns in its life time or around 30% simple rate of return a year.

Maintenance costs are not considered here as they are minimal and an electrical distribution grid is considered to be already present with wind-power plant is being operational. All these financial figures are for illustration purposes only and the actual figures vary from project to project.

Policy and Regulations
Since the Governments promote production of renewable energy with many incentives, combination of Wind-Hydro power plant would not find any resistance from regulatory bodies even though additional approvals may be needed. Since the water being drawn from the reservoir is being returned to it, it may not invoke any objections from stakeholders of the reservoirs, the farmers.

Adoption and Scalability
While water bodies may not always be present in the vicinity of wind farms, other alternatives such as compressed air or thermal energy storage can be explored (on case to case basis) even though they may not offer the similar benefits of wind-hydro combination.

But if one takes a look at the geographical chart of India, each state on an average has at least 10 locations where wind farms and water bodies are co-located. There lies an opportunity to harness the infrastructure deployed to provide energy for growing India.

This system can be scaled and extended for projects such as linking of water reservoirs to bring a balance in the water availability across geography instead of wasting the enormous power generated by wind turbines when there is no load.


1.     Wind Generates Electricity When We Need It Least  (Institute for Energy and Research)

2.      Calculating the amount of available hydro power
P is power in watts; η is the dimensionless efficiency of the turbine; ρ is the density of water in kilograms per cubic metre; Q is the flow in cubic metres per second; g is the acceleration due to gravity; h is the height difference between inlet and outlet (Source: Wikipedia)

3.      Picture shown is taken at Vanivilas Sagar in Karnataka

4.      Scientific American magazine, March 2012, page 50, reports energy recovery from pumped up hydro power plants can be 80%

Thursday, November 14, 2013

Book Review: Young Tagore

This book is about Tagore in the making. It is a careful reconstruction of days of Tagore during his childhood and youth. It has liberal references to Tagore’s memoirs ‘My Reminiscences’ and ‘My Boyhood Days’ and his other works to create a psycho biography of young Tagore, the inner world within him shaping the genius.

Rabindranath’s creativity and literary interests were evident when he translated Shakespeare’s works when he was 13. His ability to write poems brought him praise from his school teachers but won him no friends instead he was bullied by schoolmates for being feminine. He lost his mother when he was 14. While making efforts to overcome the feeling of abandonment, he became emotionally closure to his sister in law, Kadambari (his elder brother’s wife) who nurtured the creative abilities of Tagore. And a travel to England for a year, when he was 17, expanded the universe of Tagore making him more expressive and liberal in thoughts. On his coming back, his literary works flowed uninterrupted and brought him name and fame. But his marriage against his liking proved an emotional drain and the suicide of Kadambari puts Tagore into depression which was expressed in his works produced during that time, more evidently in Ghare Baire (The Home and the World).

While the world knows of Tagore as a poet, novelist, story writer, painter, and philosopher (and so on), this book shows he was a private person and a series of untimely deaths in his family made him more sensual and gave him an ability to create stories from his own life.


After reading this book, I thought of checking with Sudhir on the question I had and he replied. Here is the e-mail conversation.

Dear Sudhir,

Reading your ‘Young Tagore’ helped me understand the sensual young Tagore but a question raised in myself, that, if Rabindra was not born in a rich family, or if he was forced to earn for his daily bread, was his sensual creativity still remained high?

I thought many are born with creative abilities but that does not see nurturing or the person cannot spend much time in creative expressions in the form of writing, painting, theater etc. as their daily chores of life forces them to earn from some other routine jobs to feed themselves and their family. For young Rabindra, there were no such financial worries or denying access to resources he wanted. Did this help him to spend time in what he was good at and what he liked to do and flourish?



Dear Anand,

You are right that creative ability need facilitating circumstances, social and financial, to express itself.

Sudhir Kakar

Monday, November 4, 2013

Book Review: Ecstasy

This is the story of a village boy Gopal (symbolic representation of Ramakrishna Paramahamsa), coming in contact with sadhus residing in the rest house of his village, developing an interest in mysticism and reaching spiritual heights, quite unconventionally and rapidly. Another story of Vivek (representation of Swami Vivekananda) runs parallel who becomes disciple of spiritually enlightened Gopal, known as Ram Das Baba. While Gopal takes up his destined path of becoming a Yogi with a little resistance from his mother, Vivek had no idea of taking up spiritual path until his father’s death even though his horoscopes suggested that is his destiny.

This would have been a fictional biography of Ramakrishna Paramahamsa, but author had made changes by setting up the story in a different time, so the protagonist characters become symbolic representations of the spiritual legends.

Saturday, November 2, 2013

Book Review: Mandra (Kannada)

Art is divine but need not be the artists. This contradiction is the plot of this novel. It is the story of a classical singer Mohan Lal and his women. On his way to mastery of the Hindustani music, he scores over many females. Two failed marriages and other relationships does not deter him from his path to popularity and fame, rather they fuel it. Like all things come to an end, his musical career too tops out coinciding with his failure in indulging in bodily pleasures resulting in calling off of his relationships. He attempts to review some of the facts from his past, the responsibilities he ran away from, but with no great success. His break-down in the musical performance prepares the ground for the rise of a new artist, one of his pupils and a past associate.

Music is more than producing sounds for expression of an emotion. It could be the life spirit. The author shows how the subject of an art gets finer with knowledge and skills being passed on from the master to his pupils, but the art within the master dies when the life spirit gets destructed. A complex web of musical world is reveled in precise details.

Sunday, October 27, 2013

Book Review: Argumentative Indian

This book brings together sixteen essays under a single title. Here Amratya Sen reasons how India found its identity during different times. He takes multiple references of Bhagavdgita and the influence ancient writings such as Vedas and Upanishads had on the culture and lives of the people. He argues how the Mauryan king Ashoka and the Moghul ruler Akbar had similar outlooks and were tolerant of different religions. He narrates how Gandhi and Tagore disagreed on many aspects. He explores how much of the grand vision of Nehru as delivered in his speech ‘Tryst with Destiny’ is realized.

This books has no bounds as it travels across different time horizons and subjects. If you are an Argumentative Indian, you should have this book on your study table.

Book Review: Ascetic of Desire

This is fictional biography of Vatsayana. The story unfolds the details of Vatsayana from his birth. His upbringing in a brothel from where he picks up the drivers of the sensuality and lust, and grows up to write the most popular work he is known for.

The story is told through a young scholar, accepted by Vatsayana as his pupil, who puts the pieces together from Vatsayana’ s life. In the course of events, this young scholar ends up having an affair with his wife. After Vatsayana discovers this, he disappears, never to be seen again.

This story set in fourth century AD, reveals the finer details of the lifestyle and mindset of the people lived in those times. But it is the author, Sudhir Kakar, who represents the characters of the story with a psychological depth makes this book a powerful narrative.

Friday, October 11, 2013

Book Review: The Crimson Throne

This book on Shah Jahan’s reign as seen through the eyes of two firangi’s (European travellers Niccolao Manucci and Francois Bernier) gives many insights into the personal lives of Shah Jahan, his family and close aides. It documents the incident which made Shah Jahan develop a disliking towards his son Aurangzeb even before he was born and made him groom his eldest son Dara Shikoh for the throne. It describes how Shah Jahan through his misdeeds of seducing wives of his nobleman for his humanly pleasures created enemies out of his loyalists and that lead to treachery in the decisive battle against Aurangzeb. Personality and behavioral traits of Dara Shikoh are well observed in this book, it shows why he was an able administrator but a poor warrior. Dara’s inability to identify his enemies became an advantage for Aurangzeb which he exploited well to win the war. Aurangzeb gets Dara executed publicly and brutally and that incident creates fear among the crowds and revolt in his commanders. But Aurangzeb learned from that and employed other methods while ending lives of his other brothers and a sister, either first moving them to prisons away from public eye or making use of poison.

I would suggest new readers to begin with ‘Empire of the Moghul’ series where the flow is across generations. Then take up this book which is more lucid, insightful and gives the facts and rationalizes the twists in the tale. Both books offer complimentary perspectives but yet different style of presentation on fifth emperor of The Moghul kingdom.

Now my interest is turned away from The Moghuls and I want to explore other works of Sudhir Kakar, author of this book.

Sunday, October 6, 2013

Book Review: Empire of the Moghul : The Serpent's Tooth

Fifth in the Empire of the Moghul series, this book with Shah Jahan as the protagonist brings history alive. Narration is so powerful, characters and situations unfold in front you like in a movie or a drama.  If you have read the earlier book of this series, you would know Shah Jahan, as prince Khurram, had a splendid up bringing with a great attention from his grand-father Akbar. This book rather deals with his tragic ending.

Unable to overcome grief with the loss of his wife Mumtaz, his priorities in life become different and he fails to notice his young children (without the support of their mother) growing up to be rivals. His complete trust in his elder son Dara to manage the developments, but underestimating ambitions of his third son Aurangzeb makes him fail utterly in his last of years of life. The creator of Taj Mahal,  the Emperor of the World (literal translation of Shah Jahan) becomes confined to four walls and spends his last days overlooking the great monument he built.

His times prove again that enemies for The great Moghul kingdom were more internal than external. The saying in the family 'throne or coffin' continues to haunt Shah Jahan's sons as well. While Shah Jahan himself had to get rid off of his half brothers to ensure no threats survived on his way to become an emperor, he thinks his sons being full brothers will not to go through the similar situation. But Aurangzeb proves him wrong by getting his brothers killed and claiming the peacock throne.

Friday, September 27, 2013

Book Review: We are like that only

If you are a retailer or a marketer or interested to know about the consumption patterns in India, this book would be a good start. Thanks to Rama Bijapurakar. She explains why Indian consumers are different than their global peers with supporting data. She will reinforce some of your perceptions and change many.

India is diverse. So are consumers in India. They are modern but yet traditional. They have spending power but go bargain hunting. It is common to see a middle-class housewife buy expensive goods in a mall, but yet bargain with vegetable vendors. Brands appeal to them but good old common sense prevails before any buying decision is made. Demography is very diverse. Life is getting better but some problems remain the same. We drive better cars but on the same roads with pot holes. While we crave for better things, we continue to tolerate all kinds of nuisances. Why? Because “We are like that only”. Yes, that is the title of the book. Get a copy to have better insights before getting out to do business in India.

Book Review: Animal Farm

It is a timeless classic. It is a portrayal of Russian historical personalities in the form of animals in a farm. It is about how the revolutions happen but the purpose is short lived as the hunger for power kicks in.

Animals in a farm coming together and rebelling against the dominant farm owner with a purpose to lead an idealistic life of treating all animals equally is the story theme. While they find success in their rebellion, aftermath life of the animals living in peace and harmony is short lived. The purpose is soon lost as one of the leaders of the rebellion, a pig named Napoleon, becomes power hungry and takes control of the farm by force and tactics. He manipulates the commandments all animals agreed to follow to suit his best interests. New order emerges and inequality comes back.

What makes this story interesting is the narration of animal characters resembling human like personalities and how the platform for a rebellion was prepared and purpose is lost. George Orwell has simplified the historical events in Russia to create this story and characters of Animal Farm. But even if we keep this Russia background aside, this book makes a quick and entertaining read. The impact can last for many days, probably a reason for this book to be in print for the last 100 years.

Sunday, September 22, 2013

Opinion: Reading habit in children: Is it reducing?

Pose this question to any parents, they immediately agree without giving it a thought. And would add on how the new generation kids & young adults are glued to TV and gaming. Is it really so? But the formal studies and data suggests otherwise. Of course, research does not rule out that preferences of young have changed and electronics media is getting a prominence. But it shows that there is significant improvement in readership, both in absolute terms and percentage (%) terms. How so? Who and what is right?

The numbers of readers is going up because literacy figures are improving in India. Social awareness and many of the Govt. programs have ensured that all (well, almost) get primary education. Thanks to child labor laws. School dropouts have seen an impressive reduction over years. With that background, these students putting hands on a comic book will add to readership figures of the research study. So, the macro picture says, more are receiving education, so there are more young readers on average and absolute terms as well. There is a significant improvement at the bottom of pyramid and they understand the importance of education. But as we move up the layers, experiences begin to differ.

Any well to do family (who are well above poverty line and have sufficient spending power) will provide a different perspective to it. The grandparents in these families observe that, their grandchildren spend less time in reading (non-text books) in comparison to how much they or their children were spending when they were of their age. This observation is consistent across all geographies of India irrespective of language or religion.
So what changed? I think it is just the choices or alternatives available to reading brought this change. If Television was made available in every house some fifty years ago, it would have brought the similar impact then as well. Multimedia always scores above reading in conveying the content. Reading needs effort and attention but you can watch a video even when you are tired and you can say it is relaxing. See, now we know it is not the issue of younger generation. It is the instinct of a human being, preferring to be a social animal. A human naturally prefers to listen and watch others and appreciates other human beings in action, so a movie becomes a mass media having a wider reach than books. Human beings express emotions many a times without saying a single word, through body-language/gestures. And when talking variation in tone & pitch convey lot more than what the person says verbally. These can be captured in multimedia formats, but in books it would take many pages to describe them in detail. Tolstoy did a fine job of writing what was going on Anna’s mind in his novel Anna Karenia. It would take readers many days to months of reading to read the entire novel, but movies made based on the novel reached more people than same novel, even though it is hard to give complete justice to the masterpiece novel. Even in the times when movies were luxury, there were drama/plays doing that job.

Let us come back to main theme. Is readership getting reduced in the younger generation? No, it would only get better. But the quality of reading or number of hours spent in reading per child reducing? Probably, yes. But not for bad reasons. The new generation reads less because they have alternatives. Chota Bheem on TV appeals more to them than reading Amar Chitra Katha or a Phantom comic. It is fine. But is this engaging in effortless activities diminishes imagination or creative skills in the young? May be yes, but let us not conclude without looking into facts and figures. Let us discuss it sometime later.

Saturday, September 14, 2013

Opinion: Consumption story in India: A dark cloud or a silver lining?

Retail space in India observed a meteoric growth in the last decade. It created new billionaires in the likes of Kishore Biyani and made many multinationals open stores here. Spending long hours in the malls during weekends became part of life. Feeling depressed? Go shopping. So wrote newspapers. Shopping became favorite time pass for housewives more than ever. Everyone opened their purses and spent. From buying clothes to having pizza’s for lunch and traveling to faraway destinations during holidays. Consumption looked like an unstoppable for train, almost.

 Consumption growth was lot higher than income growth for a longer period. But we are noticing signs of it slowing down now. Car makers reported sales dropping Year on Year basis from January to July in 2013. Mall operators are complaining that incoming crowd is increasing but it is not tuning into sales. New companies entering into retail space are reducing in the middle of intensifying competition. Few retail chains are up for outright sale. So what changed so quickly, is it a temporary phenomenon? When do we see uptick again?

Well, before looking into what changed, let us look into what were the growth drivers behind consumption during the last decade. India’s per capita income rose by 6.7% during 2004-2012 (Source: The Financial Express; Link: But the retail stores were clocking a much higher revenue growth rates during the same period. Some of them doubled their revenue in 3-4 years period. How consumption growth was higher than income growth? Following factors would have helped.

  1.   Pent-up demand: The rich class in India had spending power but had very few options in acquiring finer things in life. If we take example of Sports Utility vehicles, there existed an unmet demand.  But there were no wide range of SUV available here in India ten years ago. Import duties for an SUV like Hummer were prohibitive. As the products in this segment started coming in, like Mahindra’s Scorpio, they saw unprecedented success.                                                                      
  2. Easy access of credit and EMI: The middle-class India always had desires to acquire goods which will better their lifestyle but had a limitation in their upfront spending. This opportunity was unlocked by spot distribution of loans at the shops and easy payments through EMI, the term which was not well known before. When the consumers walked into retail shop and found that the latest refrigerator they wanted to own is available on easy installments, they went ahead in acquiring it many months ahead of what they had planned earlier. So they not only spent their savings on hand but borrowed from their future earnings as well.                                                   
  3. Reaching the semi-urban & rural market: Majority of India’s population lives in rural area. Even though demand for luxury goods was non-existent there, but the necessary goods were not in easy reach for middle class consumer. Traveling to towns to buy them would mean additional costs and efforts. In the last decade this gap was widely filled. You can find a Hero motors showroom in a town having less than 50,000 populations these days. But it was not the case a decade ago. Maruti gets significant sales from towns which are not part of top 20 towns of India. As they expanded, their sales also grew linearly and for market leaders, it was exponential growth.                                                                                                                                
  4. Rise of high income jobs & trickle-down effect: Thanks to boom in IT & Pharma sector which became new employment generators for booming India. Top 5 IT companies employ more than 10 lakh engineers in India whose starting pay is higher than what their parents earned during their retirement time. One high paying job in this sector, almost created 3 jobs in the service sector in the form of services provided by banks, hotels, transportation, housing, education, healthcare etc. These globe-trotting engineers were also messiah of globalization. The set new trends in consumption, creating a new segment of consumer class.

So, the run in consumption too, like all good things in life had come to a pause. Higher interest rates, stubborn inflation, global economic slowdown, local Govt.’s inaction had an impact on India’s economy. GDP growth rates have reduced, so is consumption. But all is not bad to bring things to a halt. This too shall pass. But the drivers of consumption would be different. First movers had an advantage in serving the pent-up demand during the last decade. But that does not work again as consumers are aware of the choices they have now. Here is what I think will be the drivers of next wave of consumption.

A.  Affordability: A basic digital camera is now available for Rs. 5,000 while the same was costing at least Rs. 10,000 few years ago. This kind of driving down in the prices with innovations in technology, supply chain optimization and passing the benefit to end customers will make products affordable to larger consumer base. This would break the relationship between income growths of consumers to the kind of goods or services they consume.

B.  E-commerce: Flipkart is here. The biggest market place of the world, Amazon, has also arrived. e-Bay is seeing consistent growth in user base. E-commerce is set to make it big, at least in the urban India. I wonder when I see the books I ordered reaching me 1-2 days in Bangalore even though their inventory base is Delhi, Mumbai or Kolkata. My wife buys the designer sarees from sellers based in Surat without having to stepping out of the comforts of the home. Of course, touch and feel experience is missing but consumer has more options than ever. The inventory these e-commerce platforms offer are unmatched by local malls. So whatever you want, you can buy it without going around the world, like in the past years. Consumer is king, as always. E-commerce is another enabler for that.

C.  Younger generation joining the workforce: Unlike Europe or Japan which have a major share of citizens enjoying their pension than paying income tax, India has a majority of population who are in their twenties and getting ready to join the workforce. They would take up the per capita income growth to double digits in the years ahead. They would create a virgin market, both in electronic goods and fashion & lifestyle market, rejecting all the influences of former generations.

D.  More people moving out of poverty: The trickle-down effect of economy will continue, may be at a higher pace, as witnessed in the history of developing economies as they turned developed nations. That would put more people who are living on the edge of poverty line into middle class that would fuel the consumption.

Caveat to this expectation is a recession for prolonged times leading to job losses, and causing destruction in quality of life. But as an optimist, I see the next wave of consumption beginning in a year’s time.

Monday, September 9, 2013

A trading opportunity in Wipro as it gets back to Nifty index

NSE has announced that Software services exporter Wipro Ltd will replace Reliance Infrastructure Ltd in the National Stock Exchange's 50-stock index, or Nifty effective September 27. (Source: Economic Times, Link:

This would lead to similar adjustment in many mutual funds and ETF’s which are bench marked to Nifty index. So there lies an opportunity to go long in Wipro. But at what levels to enter and how long to hold?

  1. Let us look at the timing. Effective date is Sep 27. September series expires on Sep 26. While there is a possibility that funds will begin making changes in September series itself, there is a little chance they may carry it to next series as well. So traders building positions in futures can better opt for October series futures. Traders using option route can build position in September series now but move the positions to October series before a day or two of September expiry.
  2.  Levels: Let us take a look at option chain of Wipro. Since we are looking for a support level to enter, we need to look into the Open Interest (OI) build-up in puts. We can observe that significant OI is at 460 strike price. This would be a stronger support level for this series. Any dip below 460 is expected to give a bounce back unless OI reduction is observed. Similarly, to estimate the level of profit booking, we need to look into OI in calls and we can observe significant OI build-up at 500. This would be the level where stock can find good resistance, so an exit point.

Source: NSE Website data as on Sep 06, 2013 

This data can change quickly. And any other macro-economic events impacting the broader market may also affect the expectations. Future traders can buy at-the money put to limit the damage in such an event.

Sunday, August 25, 2013

Company Valuation: How do you value Flipkart?

Flipkart's valuation: Will it increase if there is no IPO?

Since Flipkart is a marketplace, it does not own inventory of goods sold on its site. So inventory cannot become part of the book value of Flipkart. That leaves the Brand Value and investments in Technology as its part of valuation.

The customer base and their loyalty would be a pretty impressive figure for Flipkart. But the question is, will it keep growing or find saturation any time soon or see a negative growth with changes in the way of doing business.

For growth to remain to intact, following factors should remain same or get better.

1. Benefits to customers (Discounts, Delivery costs, Minimum purchase price) without impacting operational costs of the firm
2. Sufficient operational profits or new investment to fund growth and the the capital structure shall offer acceptable returns to the investors.

Let us look into those factors in detail.

1. Discounts, Delivery costs and Minimum Purchase Price

If we take a look at their revenue segmentation, books form a major category. Flipkart was almost unchallenged in selling books through online mode with its vast span of books listing and superior service quality. But the arrival of Amazon brings in a tough competitor. For now, free delivery irrespective of purchase amount would become a positive factor for Amazon (when prices match for the product on both websites). But if we assume that Amazon too will have to charge for delivery sooner than later, who will consumers will prefer, Flipkart, Amazon or the neighborhood bookstore? If the book is available off the shelf in a nearby bookstore, is priced less than Rs 500, then why buy them on portal, and wait for couple of days and cough up additional Rs. 50 for delivery? This is when discounts in brick and mortar stores match with the online portals. But the inflation will not let the delivery charges for online stores remain same. What will be the effect if the minimum purchase amount is raised or the delivery charges go up? Will they be able to maintain the sales figures?

India is a price sensitive market, so the customer loyalty can quickly change whenever there are changes in pricing. Whoever prices aggressively will have an upper hand. Let us see how one portal can price it lower than the other portal when the product is sourced from the same supplier? In case of books, a new book will have just one publisher, so the same source of supply. If we assume that online firms (vendors on Flipkart or Amazon or any other site) gets the same purchase price from publisher, then operational excellence will decide who can sell it at a lower price. Operational excellence would mean keeping the costs low by reducing wastes, overheads, optimizing the routes and keeping the firm lean. How lean one firm can get? What are the risks of operating with thin margins? Will investors be happy with those returns? It leads question of capital structure of those firms. Who has funds available at lower cost? The firm having a larger equity base would have an advantage over the firm which has to service the debt or offer higher returns to PE investors.

2. Operational Profit, Capital Structure and RoI

Due to intensity of competition, Flipkart will have to match selling prices with competition; else its revenue growth will slow down. With that acting as a ceiling, margins will be under pressure. It not only has to make profits per transaction but has to offer positive returns on investments. Currently Flipkart is funded by Private Equity (PE) investors. Since the successes of PE funds are measured with their exits, mostly with 5-7 years time span, it will apply to Flipkart also. Unless PE investors have a longer time investment plans for Flipkart, IPO would be the only exit route for current investors. For IPO to be successful, equity markets need to be in good mood. Are the stock markets conducive for IPO? If time is not right, then it will have to go for one more round of funding from PE or generate sufficient operational profits in order to survive. Increasing profits would mean lesser discounts or higher delivery charges to customer which will hit sales figures. Dropping sales would impact the valuation which is done now at higher sales figures and growth rates. 

However no one knows what the future holds, but we can think of three possible scenarios.

Best Scenario:

IPO happens at higher valuation, Flipkart gets good equity base. Amazon reduces its aggression, both Flipkart and Amazon will grow.

Worst case scenario:

IPO gets delayed, and there is no further funding available. Amazon steps up competition making use of its deep pockets. Flipkart will be forced to invest less in growth and start making profits to survive. Valuation drops from current level.

Likely scenario: 

Both Flipkart and Amazon reduce predatory pricing and look at having a balance with profits. They may work out exclusive contracts with suppliers to avoid selling the same product, wherever possible. Brick and mortar stores may find a relief with new operational models and peacefully co-exist. Flipkart's growth rates may reduce and valuation will also find it difficult to go up from here.

Saturday, August 24, 2013

Book Review: It happened in India

It happened in India

Kishore Biyani is not a trained economist but his understanding of consumption patterns, origins of demand and supply and the preferences of middle class population in India is no less. Here is a summary of his definition on consumption classes and entrepreneurship in the book “It happened in India’.

India can be divided into three sets. First one is consuming class (around 14% of population) with substantial disposable income. Second one is serving class who make life easier for the consuming class. They are approx. 3 times of consuming class in number (around 55% of population). Third one is struggling class, with a hand-to-mouth existence, who will continue to remain on the periphery of consumption cycle.

There are three kinds of entrepreneurs – creators, preservers and destroyers.

Such insights are all over the book, as Kishore goes through the journey of creating a retail empire. But book has interviews/opinions of Kishore’s family members, relatives, colleagues, industry associates which interrupt the flow. While some of them provide additional information, more numbers of them seem unnecessary.

Overall, it is a good read and readers can finish in one go. And this book was written during economical rise of India, if the current economic slowdown stays for longer duration, will his businesses remain successful need to be seen. That can be a sequel to this book.

It Happened in India

Wednesday, August 21, 2013

Amar Chitra Katha!

Amar Chitra Katha!

Truly unfading memories! No doubt, my love for books, as a kid, started with Amar Chitra Katha stories. I think they were more than entertaining comics, and more than just pictures and text. There was a takeaway in every book, and each story enriched imaginations of young readers. How else do you expect the kids to visualize Tennali Ramakrishna and his acts? When television was a luxury couple of decades ago, Amar Chitra Katha (ACK) did the fine job of storytelling and helped the young learn effortlessly.

Times have changed, ACK’s founder Anant Pai is no more. Even the organization is also managed by different promoters now, but brand of Amar Chitra Katha has evolved and remained immortal.

If you have kids at home, why don’t you sit with them and play ACK videos for them on your TV or YouTube? Even better, if you switch off TV and handover the hard copies, helping them learn the traditional way. When they grow up, they may write about it on their blog and remain thankful to you.

Opinion: Discount wars between Flipkart and Amazaon

If you buy books regularly from web, you would have noticed that 66% off on popular books (Independence Day offer) on Amazon got over last weekend. During the offer period, the books available on discount were also changing on almost daily basis. And I think Amazon was quite successful in attracting traffic and acquiring the new customers.

Flipkart responded to this offer by giving similar discounts on same titles but I could see that it was limited to very few titles. As Amazon ended the offer, Flipkart too was very quick to roll back. I suppose they use a software engine to match the prices. Amazing thing these algorithms do.

My order on Amazon got delivered in a card board box, books were safely arranged, some of the books were shrink wrapped and some were not. Delivery guy sported a Samsung smartphone for taking digital signature which helps in closing the transaction when customer signs on it. The only drawback was, delivery guy could accept only cash as he did not have the device to use my debit card. I just had to tender exact change.

While it is anybody’s guess that Amazon’s offer was a promotional effort, it showed that price wars can go any extent benefiting the customer at the expense of these portals. Now Indian consumers have a choice with Amazon whose breadth of inventory and service levels match with Flipkart. My friends & colleagues confirmed that they too are checking the prices on both sites before placing an order.

This is just the beginning. Let us wait and see where the intensity of completion between these two firms will lead to. Until then, book lovers can romance more books.

Monday, August 5, 2013

Book Review: A biography of an anonymous person!

This fictional biography of a soldier set in Tipu Sultan's times makes a wonderful read as it combines history, folklore and poetry in varying proportions and keeps the reader engaged till end. This book is not the story of just this soldier but could be of any soldier in his times. And it provides a different perspective than conventional history books.

Author (Krishnamurthy Hanur, a retired professor) has put to use his multi talents of a researcher and of a historian. His knowledge of interactions of society, culture and kingdom’s of their times influencing each other and shaping the lives of the people is commendable. I guess this work would get translated soon into other languages while I wait for a new book from this author.

Friday, July 19, 2013

Book Review: A Fistful of Rice

Even though things are a lot different at SKS Microfinance now, knowing its past would not hurt. In fact, reading this book would bring motivation to do some thing of your own and touch the strings of making a difference in the society.

The book begins with a woman (who was denied a small loan) asking 'Am I not poor too?' to Vikram Akula, then a volunteer in a NGO. It makes him think of possibilities of extending help in a scale which are beyond the reaches of small social not-for-profit organizations. It brings determination in him to build SKS.

Like any entrepreneur who builds an organization from scratch, Vikram also goes through hardships, leaving the comforts of living in US along with his parents. He rather chooses to bring a difference in villager's life in India, starting from his home state of Andhra Pradesh. His decision to not to live in US costs him his marriage too. But the determined Vikram moves on with his purpose in life.

SKS scales up, gets noticed by everyone including the likes of Warren Buffet and Bill Gates. The capital which was hard to come by in the initial days comes in leaps and bounds. And the book ends with a woman who has borrowed from SKS, asking 'Am I not doing well?'

A Fistful of Rice: My Unexpected Quest to End Poverty Through Profitability

Wednesday, June 26, 2013

Decoding fineprint

Business world is not entirely fair. Not surprising, isn't it? But in what all ways corporate can twist the information in their favor and commit frauds?

Auditors job is to assure that the financial statements they audit are true and there are no accounting frauds. But they are paid by the corporate who are supposed to be investigated. You know the outcome. Remember Satyam’s case?

Hospitals depending on their scale (50, 100 beds or so) along with the facilities they offer have to earn their depreciation. They need minimum of number of patients to keep their business going. If there are not enough new patients coming in, existing patients will have to extend their stay or have to go through series of tests, check-ups one more time. In maternity hospitals, deliveries which are supposed to be normal can turn into cesarean section deliveries depending on the utilization % of the hospital at that time or return on investment promoter is expecting. Death of humanism? Yes, it is a chapter’s name in this book ‘Bullshit Quotient’ by Ranjeev Dubey.

In Casino, house always  wins (almost). How else they can operate if there are equal of chances of winning for both the participant and the house? Stock market is also run by market makers who set the odds and lets you play. If you are lucky to pick the same side of operators, you will make money but not for long as the game changes. How many small traders find success in the market? What does it reveal?

Pick the book to clear out some of the myths which corporate world wants us to believe.

Bullshit Quotient: Decoding India's Corporate, Social and Legal Fineprint

Sunday, June 23, 2013

Bookless in Baghdad

How many books do you read in a year? 10, 50, 100 or more?

Shashi Tharoor during his growing up years gave it a try and he could count 365 well before the year ended! He started reading at the age of 3! (I guess they were comics). Being an introvert during his childhood made him make friends with books than in neighborhood.

This book ‘Bookless in Baghdad’ is a selection of the columns author has written for newspapers in the past few years. So this book does not put forward a single theme, but part memoir and part literary criticisms. This controversial author shares his love for Woodhouse, praise for Rushdie, goes on expressing his opinions on the authors and their works with his probing mindset and analytical thinking.

Bookless in Baghdad

A non-fiction on fiction

This one is not a fiction but a non-fiction about world famous novels of all times and understanding what makes them great. Orhan Pamuk, author of ‘The Naive and the Sentimental Novelist’ looks into the intimate connection shared between the writer and the reader, makes the book thoughtful, and deeply personal.

The book begins with a chapter named ‘What our minds do when we read novels’ and progresses with review of the works of world’s all-time best authors from Tolstoy to Naipaul. You will get a favorite list of books of the author and also of the authors he reviews in this book.

If you are a book lover (your spouse would hate this passion of yours), this book is a must on your reading list.

The Naive and the Sentimental Novelist

Identify risks for trading opportunities

At the high level, risks can be classified into financial and non-financial risks.

i.                 Financial risks include Market Risk, Credit Risk, Liquidity Risk
ii.                Non-financial risks include Operational, Legal, Political etc. risks

Identifying and understanding these risks in detail gives us plenty of opportunities to trade. It is illustrated here with an example.

Market Risk is associated with interest rates, currency exchange rates, commodity prices etc. Every business firm is exposed to such risks. Coal India is the biggest consumer of crude oil and the variation in crude prices will impact the margin structure of Coal India, so the stock price has a negative co-relation to oil prices. But neither Coal India’s stock price nor Brent crude pricing can go in one direction for long. They reverse, find equilibrium but not for long. Disturbance in market forces set them apart but again there will be a reversal at some point of time. This information gives the trader an edge to create trading positions in both and use technical parameters like convergence, divergence to book profits and wait for another opportunity to initiate trade.

Remember there are other risks playing out during the same time, which can alter the identified relationship, so the trader need to be cautious and have watchful eye to identify what is driving the individual stock or commodity price.