Viewpoint: A Panel Discussion on Budget 2013

The Indian Institute of Management’s finance and investments club – Beta organized Viewpoint – a panel discussion on this year’s union budget on Tuesday the 5^th of March, 2013 at the institute’s campus.  The discussion saw distinguished faculty, from the areas of economics and finance get together to air their views and opinions on the subject. The faculty trio that chaired this event were Prof Errol D’Souza, Prof Ravindra Dholakia and Prof Jayanth Verma.

Prof Errol D’Souza was fairly happy with the budget presented by the FM considering that India is suffering from a high fiscal and current account deficits coupled with economic inequalities and rampant corruption. He went on to say that using expenditure by way of cash transfers which are less corruption prone shows that it wants to move towards a more transparent system. Prof D’Souza also believes that government can contribute to the reining in of inflation by reducing the fiscal deficit and by reducing subsidies on public utilities and petroleum. The government’s revenues can be shored up by measures that are growth promoting such as increasing the climate for investment.

The next speaker on the panel was Prof Dholakia, in his opinion the FM had identified the right symptoms but the diagnosis was flawed. The FM addressed slowdown in savings as a key concern – but erroneously thinks that the slowdown is in household savings instead of public sector savings and corporate savings. Also the FM was of the opinion that the problem of slow growth rate can be effectively tackled by investments, Prof Dholakia believes that this will not solve the problem, instead the actual issue is capacity underutilization, which can be solved by sanctioning of projects in the pipeline. He was also of the view that the fiscal deficit might have been understated due to underestimation of the expenditure involved in the Food Security Bill and overestimation of non-tax revenue.

The final speaker on the panel was Prof Jayanth Verma who spoke extensively on the problem of capital flight. According to Prof Verma households expecting double-digit inflation are investing in non-financial inflation hedged assets and commodities such as gold. Many business groups are investing more money outside India than in India. Also FIIs have become a major source for funding the current account deficit but are subject to abnormal taxation laws, the FM has in his budget not addressed the issue of improper taxation of both FDI and FIIs.

The discussion held the audience enthralled and was concluded with a lively Q&A session. The third edition of the series well received by an enthusiastic audience comprised of not only students of the flagship PGP programme but also the PGP-Agri-Business Management, Fellow Programme in Management and the Armed Forces and PGP Executive programmes.

Viewpoint: Dissecting Budget 2012

A day after the Union Budget was released, BETA, the Finance and Investments club of IIMA, organized a panel discussion on campus to analyze the budget and its impact on the economy. Professors G. Raghuram, Jayanth Varma, Satish Deodhar, Sebastian Morris and T. T. Ram Mohan presented several insights and opinions in front of a jam packed audience comprising the IIMA community, students from local colleges and media representatives.

Though there was a general consensus that the budget has hit the right note overall, reservations about the  government’s ability to follow up prescription with implementation were voiced. Further, high interest rates were identified as the major impediment to the India growth story, and as such stress was laid on the importance of the central bank’s willingness to mould monetary policy to complement fiscal measures. It was established that a renewed focus on growth was key to achieving fiscal discipline in the long run.

In light of the global financial crisis and the resultant decline in capital available to India Inc. abroad, the need for developing efficient and mature capital markets in India was recognized, and initiatives like The Rajiv Gandhi Equity Savings Scheme were hailed as steps in the right direction. The panel also applauded the efforts of the Railway Minister in taking unpopular but effective policy measures such as rate hikes and setting up commissions for railway safety.

The discussion was followed by an involved Q&A session that witnessed enthusiastic participation from a well-informed audience.

Beta – IIMA’s Finance Club organizes Finomena – 2011

First years who enter IIM A are traditionally confused about the sectors they would like to be a part of at the time of internships. In traditional IIM A style, the second years band together to put as much information as possible at the first years’ disposal, to help them make their decision. True to this, BETA (The Finance & Investments Club of IIM-A) conducted a 4 day intra-IIMA finance summit from 14^th July 2011(Thursday) to 17^th July 2011(Sunday) to introduce first years to the world of finance, outside their textbooks.  Conducted on an annual basis, Finomena this year comprised:-

1.      Careers in Finance talk:- This widely acclaimed talk by the BETA 2^nd year members covered finance careers in both width and depth. It dealt with a range of topics from career paths to interviews to on-the-job experiences in finance, often treading on issues that few people openly dare to discuss.

2.      Tryst with Industry stalwarts:- Mr. Ramaswamy Govindan and Mr. Vijay Kuppa(IIMA 2009 passout) of L&T Finance’s famed treasury function, shared their ‘on the ground’ experience.

3.      FinQuest:- The finance quiz did not fail to disappoint, with 7 select teams competing for the 2 prizes on offer.

4.      BullsEye(the trading game):- Replicating the open-outcry system, it gave an insight into on the skills/temperament needed to be successful traders and investors. Teams of investors and traders competed within their peer group for top honors.

These events allowed the first years to engage with Finance at a more practical level – letting them learn for themselves, the kind of finance knowledge they would need during their internships.

This year, IIM-A also tied up with Bloomberg to conduct their financial aptitude test ‘Bloomberg Aptitude Test’ on campus, absolutely free for IIM-A students. This 3 hour test saw more than 250 test takers from both the first and the second year. While the results will not be publicly aggregated/searchable on an institute basis, we are confident that the results will bolster IIM-A’s standing as the nation’s top B-School, and among the best worldwide.

We thank the guest speakers, students, Bloomberg personnel, administrative staff and others who helped make this a grand success.

Beta, the Finance and Investments Club, presents EXCHEQUER 2010

Salary packages, research papers, student intake, foreign exposure – these are some of the metrics used to award rankings that define the typical Indian B-School. Many believe these parameters are incomplete, or worse still, unfair. But somehow, these methods have lingered on for lack of a better alternative.

BETA, IIM Ahmedabad’s Finance and Investments club, is all set to change that very soon through EXCHEQUER 2010 – a national level financial services competition organized in association with UBS, a  global financial services firm with presence in 50 countries and employing more than 64,000 people. Through EXCHEQUER, BETA aims to open up a platform, in which teams comprising the best students from India’s best B-Schools compete to gain a title of “The Best B-School in Finance in India”.

EXCHEQUER shall test its participants through competitions that shall simulate real-world conditions as closely as possible across all major financial disciplines. The seven IIMs, ISB, MDI, FMS & XLRI are a few of the 25 institutes expected to participate in the event.

The event shall be held over the period of Aug-Sept over two rounds. The first stage shall be an online elimination round from which the top 8 teams shall graduate to the second round to be held at the IIMA campus in September. The preliminary round shall begin on the 17^th of August and go on in phases till the 11^th of September with the results for the first round being declared in the third week of that month.

Each stage shall test the teams on their real-world skills in reading, understanding and taking positions in the four sectors namely, capital markets, investment banking, private equity & venture capital and financial strategy.

The four sub-events for each of these sectors, Arbitrage (Capital Markets), Deal Maker (Investment Banking), Leverage (PE/VC) and White Knight (Financial Strategy) will present problems tempered with real world constraints to the competing teams such that their knowledge and skills are tested to the extreme. The details of the four sub-events are as follows:

The Investment Banking event, DealMaker, is designed to put the participants in the banker’s shoes and execute the process of deal making from origination till pitching to potential investors.

Arbitrage (Capital Markets) aims to give participants the opportunity to compete against each other in a simulated market, testing their capital markets fundamentals

The Private Equity event, Leverage, will give participants an opportunity to play the role of a private equity firm using a simulated deal execution from term sheet to funding

White Knight, the Strategic Finance event, will require the participants to formulate a financial plan for the future strategic initiatives for a retail bank/microfinance institution.

The Grand Finale shall take place at the IIMA campus on the 25^th and 26^th of September. This first of its kind event is sure to change forever how Indian B-Schools perceive each other.

Visit http://beta-iima.com/events/exchequer/ for more details on the event.

Post By: Sitaram Agarwal

The Money Manager from IIMA’s Finance Club

Beta, The Finance Club of IIMA, in association with the Finance clubs of IIMB and IIMC, publishes the “Money Manager”, a pan-IIM finance magazine. The seventh edition of the magazine has been brought out by Beta, with support from Brics Securities and GACL, in January 2010. It was launched at the IIM Ahmedabad Finance Conclave 2010. 

The theme of this edition is “Risk Management: Enhancing Value in Uncertain Times” and attempts to peer into the future of this discipline, its relation with the recent crisis and how it can be used by firms to create sustainable competitive advantage.

Special features include:
a) Lessons in Risk Management – Prof. Shrikant Datar, Harvard Business School

b) Markets 2.0 – the Changing Face of Finance – Mr. Ranodeb Roy, Head of Morgan Stanley Asia’s Fixed Income Division

c) Regulating the New Normal – Prof. Charles Jones, Columbia Business School

d) Winning student entries

To enable the Money Manager to reach a wider audience, it will be available for download online.  To download, please visit:

http://stdwww.iimahd.ernet.in/beta/nuke/html/modules.php?name=Content&pa=showpage&pid=9

Beta Career series talk: Carbon Finance

Mr. Guruprasad Mohapatra (IAS, 1986), the Managing Director of Gujarat Alkalies and Chemicals(GACL) and Gujarat Narmada Valley Fertilizer(GNFC) Co. spoke to the students of IIM Ahmedabad on the 14^th of August. An M.A., M.Phil. in international relations from JNU and MBA from the University of Ljubljana, Slovenia he has a substantial experience in development and administration. He has had several appointments as collector in various districts of Gujarat and has been the Municipal Commissioner in Surat Municipal Corporation. His active association with power sector reforms during his stint with the State Electricity Utility is especially noteworthy. Under his able leadership GACL has gone from strength to strength and is currently the only PSU in the country, which has earned CERs and offers consultancy to other PSUs on CDR mechanism.

Outlining the Carbon Trading Market

Mr. Mohapatra started by outlining the origin of the carbon trading market. It has its roots in the Kyoto Protocol which came into force in 2005 and envisages a reduction in the emission of 6 polluting gases by industrialised nations in the period 2008-2012 by at least 5.2% as compared to the 1990 levels and is monitored by the UNFCCC. However, given the high level of industrial activity in such nations, it is difficult to achieve these standards and hence they have been given an option to purchase CERs (Certified Emission Reduction) from developing nations, giving rise to the Carbon trading market. The buying and selling of these CERs enables the industrialized nations to continue running their industries at similar levels of output while providing the developing nations the necessary capital and technology to use more eco-friendly sources of power.

Procedure to earn CERs

Mr. Mohapatra also enumerated the procedure to be followed by an organisation to apply to the UNFCCC for registering the carbon credits and the conditions that a project must satisfy in order to be eligible for getting CERs. He also talked about the various kinds of projects that fall under the Clean Development Mechanism (CDM) of emission reduction, the major industries that could benefit under this scheme and the major buyers of such credits. In this context, Mr. Mohapatra described the kind of projects that have been initiated by GACL, of which 2 have already been registered by the UNFCCC, and the kind of cash flows that were associated with the projects.

Growth Prospects in India

He also said that while the recession had adversely affected the CDM market both in terms of volumes and value, it was on a recovery path. Comparing India and China, the two biggest players in this market, Mr. Mohapatra mentioned that while China had a larger share in the number of registered CDM projects as compared to India, the quality of Indian projects was considered as superior to the ones from China and this is something Indians could aim to capitalise upon.

After doing a SWOT Analysis of the CDM projects, he concluded that their future hinges on whether the Kyoto Protocol is extended beyond 2012. He concluded that if it did the opportunity for Indian organisations to benefit from would be immense.

This session on Carbon Trading Mechanism was extremely interactive and provided an enthusiastic assemblage of students with keen insights into the CER industry along with instilling in them a desire to continue learning about this nascent but important field.

—

Anuj aka popat

Media Cell

(Inputs: Beta, the Finance Club @ IIMA)

Beta career Series Talk: Ashish Gupta

About the speaker ‘Mr. Ashish Gupta’

Ashish is currently managing the G3 Interest Rate derivatives trading and Interest Rate Risk management for Reliance Industries Limited. Before he moved to Reliance, he was Vice President with the Structuring desk at Citigroup for 3 years. Additionally, he was instrumental for growth of the structured options business. Prior to Citigroup, he spent 3 years with ICICI Bank Limited at their International Banking Group and was heading the treasury at Offshore Banking Unit with responsibilities to head G3 Interest Rate Derivatives trading, G3 Asset & Liability Management and Fixed Income Bond Investments and Trading.

He started his career in treasury at EXIM Bank of India, Mumbai and was in charge of Asset & Liability Management and rates trading in INR rates. After spending 2 years with EXIM Bank of India, he went on to pursue MSc (Financial Engineering).

Ashish, is also a visiting faculty on Fixed Income, Derivatives and Structured Options. By education, he is B.Com (Honors), MSc (Financial Engineering), Chartered Accountant (FCA), Chartered Financial Analyst (CFA Institute, USA), Financial Risk Manager (GARP, USA), and Certified Treasury Manager (ACTM, USA).

Session 1: Careers & Opportunities in Fixed Income: Structuring & Trading

The first talk targeted the 1^st year students interested in financial markets careers. Mr. Ashish Gupta, the speaker kept the session informative and interactive. He shared his experiences in both structuring and trading. He gave examples of how trades for a big corporation might be structured. He described the way the trade would go from a sales person who would initiate discussions, to structure who would create and price the product, to a trader who would trade it on the market. He narrated anecdotes that highlighted divergence in theory and practice, and brought into focus the transaction costs and other things which theory ignores but which make a difference in practice. He responded to a question on work-life balance by saying that he goes to office, problem solves for most of his day and comes back home. The problem solving might be for a client or for a proprietary desk or the sales team.

Ashish Gupta in Session 1 with First Years

The session focused on the skills needed to enter and be successful in the industry, like a feel for the markets, quick decision making and being aware of the major goings on in the world. Ashish advised on various financial indicators that students can track to follow the financial situation like the LIBOR, the US-Euro, USD-INR rates and debt issuance by governments. Students really enjoyed the session and learned about a career in trading and structuring.

Session 2: Fixed Income Hedging & Trading

The second talk was a session on advanced fixed income ideas. The speaker himself being a senior trader discussed trading and hedging strategies relevant to the current markets. The audience were 2nd year students doing a course on derivatives and risk management as part of their chosen electives. The speaker explained the pit-falls of employing a few trading strategies which might seem very profitable in the current market conditions but in reality might play against you in the long-term. He gave real life examples of trades in interest rates that look very profitable at first sight but will require significant changes in the interest rates prevailing to break even given the spreads and transaction costs.

The next session with second years

The session was assisted by Bloomberg captures of market data and an explanation of what one might expect to do in rates trading. All-in-all it was a very interesting and interactive session with focus on practical aspects of the job as well as an informative session about the anomalies caused by perceptions and risk-aversion.

PE/VC Firms – Creating value and Managing Growth

Mr. Alok Mittal (Canaan Partners)

The Leverage session by Mr. Alok Mittal in progress

On July 23^rd, Mr. Alok Mittal, General Partner with Canaan Partners , visited IIM Ahmedabad campus to deliver a lecture on “Creating Value and Managing Growth” organized by Leverage. Canaan Partners is a Private Equity/Venture Capital firm. They have been in India for about 4 years now, funding and providing guidance to several technology based companies like Bharat Matrimony, Cellcast, iYogi Holdings Pvt. Ltd and UnitedLex.

Mr. Alok Mittal started the talk with an explanation of the different challenges that a firm faces at different maturity levels. Typically, for a firm in its nascent stages what is important is the Business model, Management team and the product that it is planning to build/sell. As the firm matures, issues like profitability, competition from other players, financing concerns come in. And then eventually, when a firm is stable and profitable, it has to think of governance, scale expansion and execution. Similarly the entity financing the firm will also keep changing from incubators/angel investors to Venture capital to Bank loans/Private Equity to eventually an IPO/Trade Sale.

The first concern that a Venture Capital firm has about any company is its Business Model. The least expectation is a right estimation of the market size of the product. But, what would set any firm apart would be the extra dimension that they can add to their model, especially for firms getting into businesses that already exist. As Mr. Alok Mittal said, “New is better than old, but you got to be different.”

Another important aspect is the network effects in the business. Any business with strong network effects would mean that the initial cost of the business would be much higher than the eventual costs, hence ensuring better returns at later stages. Competition is another deterrent. As Mr. Alok Mittal put it, “VCs always like to get into business with “all” or “none” characteristics”.

Also, a particular business may generate interest among investors a number of years after its initiation depending on industry developments. As an example, he talked about the case of Online Ticketing Industry, which started early, but generated interest in investors only in 2006. Through a fishbone diagram of the developments in the industry, he showed how introduction of cash cards and start of low cost carriers encouraged more participation from customers and hence made the investors realize that it was a good arena to invest in.

After business model, the next concern is the management of the new firm. Here what is checked is if the team has the right skill set required for the business (the skill fit would obviously vary for say, a social networking company and an e-ticketing company). What is also gauged is passion among the people to succeed. Also, the execution capability of the team is very important. Especially in Indian markets, where innovation is at a low and most concepts are remodeled from foreign markets, the margin for error in execution is very low as there is constant danger of other competitors coming in.

Soon the session turned into an interactive one where students enquired on what support a VC firm provides to an entrepreneur apart from the capital. Mr. Alok Mittal answered that the interference by the VC would depend on how much each company needs it. The VC would get involved in board level decisions like budget allocation, business acquisitions, strategy planning etc. They would also get their hands into the recruiting process and their wide network would help in forming business links with other companies.

As for jobs with PE/VC firms, there are two types of roles that a PE/VC firm offers. The first is an Investment Support Role which would typically require an experience between 0 to 6/7 years. The second role is that of a Principal which requires about 10 years of experience, either as an entrepreneur or a very strong operating/marketing background. In fact, the principal is the one who makes the decisions and takes the bets.

Considering the small numbers that PE/VC firms hire, Mr. Alok Mittal’s concluding words for a job in PE/VC were “Shoot for it, but don’t bet on it”.

Budget at IIMA

The presentation of annual budget in India is always an engaging event for economists, academicians, industrialists and common man. This year, the build up for budget was all the more exciting as the expectations from Finance Minister were very high. The atmosphere at Indian Institute of Management – Ahmedabad was no different, with students and professors engrossed in numerous discussions about India’s possible economic reforms and policies.

The Economic Club of IIM – Ahmedabad collated different challenges and expectations from the upcoming Budget. This article communicated the gist of problems that finance Minister should focus on.

Challenges for the Budget 2009-10 by the Economics Club of IIMA

Subsequent to the presentation of the Budget, Beta (the Finance Club of IIM – Ahmedabad) analyzed the different aspects and nuances of the Budget with their impact on corresponding sectors. The club also reviewed the highlights of the budget with media agencies like the Telegraph and Zee Television.

Budget 2009-10 salient features by Beta, the Finance Club of IIMA