It was perhaps just as well that Sunday’s match where the UK knocked out India’s hopes of qualifying for the Beijing Olympics hockey event was played in Chile at a time well past midnight IST, when the fans back home were fast asleep. The sad spectacle of the UK brushing aside India’s past pretensions of being a hockey superpower would have been too much to take! It was evident from the earlier group game where the UK beat India 3-2 that our midfield trapping of the ball left much to be desired compared with our opponents. And so, for the first time in 80 years, India has failed to qualify for the Olympic hockey event. The blame game was on in full swing when one tuned in to the TV news-channels on Monday, with the most logical culprit being Indian Hockey Federation (IHF) president K P S Gill, during whose tenure the men’s national team’s performance has touched new lows. Two years ago, the Indian hockey team failed for the first time to reach the semi – finals of the Asian Games, being knocked out by China! The FIH (International Hockey Federation) had even appointed the renowned coach Ric Charlesworth as a technical adviser to the Indian team but there were reports that the IHF cold -shouldered him to an extent that he was not even given a air- ticketto Chile. Some former Indian hockey players argue that too much attehtion is being given to cricket. The fact, however, is Indian cricket has evolved in the absence of the kind of state support which sports in China enjoy across the board. India’s sports minister is quoted as saying that less than 6.5 % of the country’s 77 crore youth has access to organised sports and that the priority should be on developing a sports culture even while the Indian Olympic Assodation chief accuses him of sabotaging Delhi’s bid to host the 2014 Asian Games! The blame game continues!
Archive for March 11th, 2008
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SECURITISATION OF INSURANCE RISKS
March 11th, 2008 
krishna Securitised risks have slid into a crisis of confidence and they have taken the financial market with them. There is a great deal of uncertainty around because players have invested in securities linked to US subprime mortgages without properly checking out the risks involved. Wire money online to India with Xoom.com for as low as $4.99. Packaging risks, syndicating them and offering them on capital markets is still the right way forward. Capital has to be put to work and earn us both prosperity and economic growth. What we are seeing in the current market is “teething problems”. Investors paid too little attention to a correct pricing of credit risks. Financial institutions assumed that the risk would not remain on the books for long and were over-reliant on rating agencies. Today’s developments are taking place against the backdrop of a relatively solid real economy as has been the case in the financial industry in recent years. Wherever there is excessive growth, misconduct arises. But as during the dotcom boom and bust in 2000, also opportunities arise. The investment instrument involving securitisation of risks is far from being dead, and neither can such assets be classified across the board as being” at risk”. One example of an increasingly important’ tool for the insurance industry is the cat bond. Irrespective of the risks underlying the product and the circumstances defined for triggering a cat bond, it is important to take a professional approach to the structuring and trading of products of this nature. Securitisation of major risks arising from natural catastrophes is able to provide both insurers and investors who understand the risks with interesting opportunities in future. How does a cat bond work? Allianz announced the successful offering of an innovative catastrophe bond of an amount of $150 million in April 2007. This cat bond provides Allianz with protection against high severity losses incurred from earthquakes in the United States or Canada, not including California, and river floods in Great Britain. The a bonds issued offer a return to investors of 3.15% s over LIBOR and have a Standard & Poor’s BB+ rating. The insurance risk is modeled to be 0.54% per annum. This means that investors must reckon with an annual loss of 0.54 % of their invested capital. They are compensated for this risk with a return that is 5.8 times higher. What looks like a small risk though, [...]
SANITY RETURNING TO MARKETS
March 11th, 2008 krishna February has been a nightmare for the Indian primary market. From IPOs getting pulled out, issues not getting subscribed despite lowered price bands, deferred IPOs and disastrous listings, we have seen it all. Under such terrible conditions, it’s refreshing to see a well priced IPO come through, with a reasonable chance of getting fairly oversubscribed. Interestingly; Rural Electrification Corporation (REC) comes from the government stable and with the exception of Isec, does not have the privilege of being stewarded by any of the top five “blue blooded” investment banks. Wire money online to India with Xoom.com for as low as $4.99. REC, like it’s primary market predecessor, PFC is a power sector financier. It has a reasonable track record and a healthy Return on Equity (RoE) of 20%. There are question marks over how it will access low cost funds to grow in the future as avenues such as 54EC bonds and ECBs may no longer be available. REC will have to find a way around these funding constraints. It is perhaps in recognition of these risks that the company has left enough on the table for investors. On FY09 numbers, REC – at the higher end of its price band of 105, comes at a Price to book (P/BV) of around 1.3 and a PE multiple of 7 times. That’s a good deal. If, because of market conditions, they choose to do it around the lower end of the band, i.e., 90 rupees, even better? Sure, it may not be the best stock in this sector but at least it is not ridiculously priced like many of its peers. Retail and HNI participation so far, has been expectedly lukewarm, but my guess is it’s tough to lose money from this price point. Any post listing fall below issue price would have to be a temporary aberration. We need more RECs to revive the sagging primary market. Well priced IPOs with a considerable margin of safety for new investors. At the start of 2008, several billion dollars of IPOs were slated to hit the market in the first quarter. Now, things are a bit different. I doubt’ if even half of that will see the light of day and the ones that do will have to rework their price bands significantly southward. That is, if they don’t want egg on their faces. All this is good in a way. First [...]
BIG STRIDES BY RELIANCE AND AIRTEL
March 11th, 2008 krishna Reliance Communications, a Reliance Anil Dhirubhai Ambani group company, has consolidated its global telecom business under a new entity, Reliance Globalcom. This entity will bring under a single umbrella services such as its global voice business (including international voice calls), managing net-works for companies, Internet services and undersea cable systems that it single face owns under the FLAG brand. Further, Reliance Globalcom’s operations will be headquartered in London and will be headed by Punit Garg along with 1,000 employees. Reliance Globalcom expects revenues of Rs. 5,279 crore in 2007-08 and FLAG will be rebranded as Reliance FLAG. This is anticipated as a possible inference with the consolidation. It has plans to plans of coming out with an IPO in the near future, according to Garg. This consolidation is primarily due to the company’s need to bring together Reliance Communications different entities like its recent acquisition of Yipes Enterprise Services, FLAG and Reliance Communications’ international business under a single company. “We would like to approach the global market as an end-to-end telecom service provider and offer a single face to clients,” said Garg. With this consolidation, Reliance Globalcom wants to push its network management services, which involves managing of companies’ IT networks from its data centres located in Mumbai, Long Island and New York. ast month, Reliance Communications announced capital expenditure for this year at Rs 24,000 crore. These investments would be made in emerging areas like the enterprise communications business, FLAG, and direct-to-home and Internet protocol television. At that time chairman Anil Ambani added that decisions on various options for the future of the communications business would be evaluated. Mobile phone tariffs, which are already the lowest in the world, are set to fall down further. Bharti Airtel, which slashed local call rates to one rupee per minute across all its plans in the first week of January, is open to slashing local call tariffs further. The existing market is so competitive that tariffs are bound to fall further. All other telecom operators had quickly matched Airtel’s revised rate of one rupee per minute cross all the tariff plans. However, earlier this month, Sunil Mittal, the Chairman and Managing Director of Bharti Group, had discounted tariff cuts, saying customers were more inclined to seek innovative offerings and better services. The new telecom entrants may not be able to match the existing players, but the entry of CDMA players like Reliance [...]
