Weak IPO market forces issue managers to look for alternatives

The dry-up in the IPo market is not only forcing merchant bankers to downsize their teams but look at other revenue generation options such as buybacks, CDRs, PEs and mergers & acquisitions (M&A).

Recently Deutsche Bank cut 1900 jobs after its second quarter profit fell 46%. The job cuts will come from the investment banking division. Morgan Stanley, Goldman sachs and JP Morgan have globally announced plans to cut jobs or, trim compensation to minimize expenses

  source THE HINDU BUSINESS LINE Aug4,’12

CHANGING HUES OF FINANCIAL MARKETS

       The period between 2006 and 2012 can broadly be classified into the following rapid-fire economic cycles

   with corresponding features of financial markets:

    1.       Boom: during the boom period 2006-12, risk capital or equity funding was in demand. Funds were raised

     thro’ Initial Public Offers  (IPOs), follow on public offers (FPOs), Qualified Institutional Placements (QIPs)

     and Private Equity (PE). The enterprise values (EV) were very high

     2.       Recession: post Lehman crisis, the equity markets- both primary and secondary- have lost their euphoria

     from 2009 onwards. As raising funds at high EVs became difficult, debt-funding became more common.

     Concerned over high inflation, RBI raised key interest rates ( 13 times since March 10), putting the

     borrowers into difficulty, leading to Corporate debt restructuring (CDR) in many cases. CDR exercises

     involve reducing the debt burdens of the company by methods such as reduction in interest rates, longer

     repayments, conversion of debt into equity etyc. Creditors are to be convinced about the viability of the

     company with such reduced debt burden

     3.       Stimulus driven : Concessions etc. can improve the viability; turn-arounds can happen with adequate

     concessions, stimuli etc.

     4.       Stagflation

    

    source THE HINDU BUSINESS LINE Aug4,’12

RURAL INDIA- AN EMERGING POWERHOUSE

1.       Introduction
         It is said that there are two Indias –Bharat ( existing in the villages) & India ( thriving in the urban areas). If the country has to make progress & make its mark on the global stage, these two India’s have to converged.

        Millions of people in the rural India live below the poverty line. There are a number of issues relating to health, education & sanitation which need urgent attention. All stakeholders – government, NGOs, civil society & corporate- have a role in enabling a collaborative model of development

2.       Progress in Rural India

         Two out of there Indians live in her villages.  Major transformation has taken place in the last 60 years mainly thanks to the Green Revolution.  As much as 40% of India’s consumption is accounted for by rural India.

         The key drivers for transformation is India’s consumption-led growth, significant improvement in infrastructure & communication, and increased government spending on programs for rural development. Rural incomes, which were dependent mostly on farm income, are now boosted by trading, agro-processing & ancillary industries.  Therein lies the opportunity for unleashing a much higher level of aspiration among 800 million people living in rural India.  This is India’s biggest opportunity

3.       The Challenges of Transforming Rural India
The biggest challenges are in
        a.       Agriculture: agriculture productivity levels among the lowest in the world; the reasons are small land holdings with limited mechanisation & the limited access to capital
        b.      Rural Employment & Employability: The share of agriculture in GDP has fallen from 30% in 1990-91 to 14.5% in 2011-12, while the number of people employed in agriculture has not come down, thanks to inadequate opportunities for employment beyond agriculture & lack of employability.
        c.       Human Development: The Human Development Index is lower than that of many developing countries
        d.      The Opportunity: The population of rural India is about 12% of the world population, which   makes it bigger than the size of Europe. The growth in rural economy can have a significant cascading impact on the national economy that can transform the growth rate of the country
        e.      Sustainable Growth: Growth in our villages can put pressure on natural resources ( like water & energy). The challenge is to decouple growth from environmental footprint. We should ensure sustainable growth with a positive social impact in a manner that is economically & environmentally  sustainable
4.       Enablers of Rural Transformation
          If rural India is to achieve consistent & sustainable growth, we need to harness the power of agriculture. We need to break various bottlenecks that stifle growth. Market based approaches are needed. We also have to go beyond agriculture for leveraging the power of people to realize the full potential of rural India. For making rural India more self reliant , we need to look into what the villages lack , viz. Infrastructure, information, capital at reasonable rates of interest and education & skills.           
          Enablers which can build an ecosystem that can harness the power of rural India:
                                          a.       Access to Urban India
                                          b.      Technology Adoption
                                          c.       Financial Inclusion
                                          d.      Education & Health
                                          e.      Skill Buildin
5.       HUL’s Association with Rural India
HUL has a strong association with rural India with 40% of its products consumed in the rural markets; its distribution network reaches 1.3 lac villages. The company is bringing alive the spirit of Sustainable Living Plan to holistically contribute to the social, economic & environmental agenda with a significant impact on rural India
            o   Sustainable Sourcing
            o   Enhancing Livelihoods
            o   Health & Well-Being
6.       Conclusion
HUL is excited with opportunity to continue to serve 800 million consumers in rural India 7 be a part of a great journey

source :  THE HINDU BUSINESS LINE July24,’12 (Extracts from the speech by Harish Manwani, Chairman, HUL in the company’s AGM on the 23^rd July)