Anuradha Gupta Blog

Popular SAAS Matrix

2023-07-07T11:01:00.000-07:00

The following SaaS (Software-as-a-Service) metrics were commonly used to assess the performance and growth of SaaS companies

Monthly Recurring Revenue (MRR): MRR is the predictable and recurring revenue generated by a SaaS company on a monthly basis. It provides insight into the financial stability and growth potential of the business.

Annual Recurring Revenue (ARR): ARR is the total contracted annual revenue of a SaaS company. It is calculated by multiplying the MRR by 12. ARR is useful for tracking long-term revenue growth and predicting future performance.

Churn Rate: Churn rate represents the percentage of customers or revenue lost over a given period. A low churn rate indicates higher customer retention, which is crucial for the success of a SaaS business.

Customer Acquisition Cost (CAC): CAC measures the cost incurred to acquire a new customer. It includes expenses related to marketing, sales, and other customer acquisition activities. Lower CAC values are generally desirable.

Customer Lifetime Value (CLTV or LTV): CLTV is the estimated total revenue that a customer will generate throughout their relationship with the company. It helps evaluate the profitability of acquiring and retaining customers.

Gross Margin: Gross margin is the difference between revenue and the direct costs associated with delivering the product or service. It indicates the profitability of a SaaS company before considering other operating expenses.

Burn Rate: Burn rate is the rate at which a company is spending its available cash. For SaaS startups, it is important to carefully manage the burn rate to ensure sustainable growth and avoid running out of funds.

Net Promoter Score (NPS): NPS measures customer satisfaction and loyalty by asking customers to rate their likelihood of recommending the product or service to others. It helps assess the overall customer experience and identify areas for improvement.

Active Users: Active user metrics track the number of users who are actively engaging with the SaaS product or service within a specific time frame. It provides insights into user adoption, engagement, and product stickiness.

Average Revenue Per User (ARPU): ARPU represents the average revenue generated per user or customer. It is calculated by dividing the total revenue by the number of users. Increasing ARPU can drive revenue growth.

Education Industry (Market Overview)

2013-01-13T08:25:00.001-08:00

Education Industry (Market Overview)

India is the place of world’s largest population with different age group, income level, and priorities. It has world's largest population under the age bracket of 5 to 24 of about 450 million and around 500 million populations are under 25-50 age groups. It has around 35% of total population are under the age group between 0 – 15 and by 2016 around 63% of total population will be under the age bracket of 15 to 59. This phenomenon leads us to the judgment that in coming future India can be the best destination of man power outsourcing and there will be a huge demand for education (primary, secondary, vocational, subject expert). In addition, this leads to higher demand of educational institute and other forward and backward supporting institutions. Quality and applied education not only helps in personal and professional growth but for meeting industry demand which is highly competitive and selective. The industry drivers for education industry can be willingness to pay by guardians, opportunity cost, age distribution, industry demand, government participation etc. As per census data 2011, India’s current literacy rate stands at 74% and female literacy rate is 65% while male literacy rate stands at 82% in India. This literacy level has shown an increase of 9.21% from 64.83% in 2001 to 74% in 2011 but for a country where the world’s highest population lives this pace of growth is very low and it is also well below the world’s average literacy rate of 84%. It is also a truth that India has the largest illiterate population compare to any other nation in the world. With the emergence of India as knowledge based economy human capital has become its major strength. This has put a spotlight on severe inadequacies of India’s infrastructure for delivery of education.

Segment Analysis:

Indian education can be classified under the four heads namely, schooling higher education, vocational training and ancillary.

Schooling segment covers pre schooling, elementary education, secondary education, adult education, teacher training, K-12 etc whereas higher education consist of graduation (Generation and Professional education), post graduation (Generation and Professional education) and technical education; language training, diploma, certification courses comes under vocational education purview, other ancillary segment include test preparation centers, online companies providing assessment solutions and technology provider.

In terms segment wise market size, schooling segment is the largest segment valued approximately at $40 bn and is expected to reach by $144 bn. Around 400 million of population is needing for primary and secondary education by 2016 since these students will be seeking higher education over the next decades demand of higher education cannot be ignored. Vocation training institute (English speaking classes, computer training, and subject expert diploma) also has importance but limited to the urban and semi urban area and driven by industry demand. Test preparation centers panorama depends on proprietary knowledge, corporate demand, competition, and willingness of parents to pay for education.

Exhibit 1

Age	% of Total Population (2011)	% of Total Population (2016)
Below 5	10.1	9.7
Between 0-15	28.48	27.73
Between >15 - 59 years	63.38	63.33
+ 60 years	8.14	8.94

Source: http://populationcommission.nic.in/npp_app3.htm

Segment Analysis (SWOT).

With the emergence of India as knowledge based economy, human capital has become its major strength that brought out several inadequacies of Indian education system in delivering quality education. It is currently facing problems of infrastructure, demand and supply gap, huge student and teacher ratio, lack of trained teacher, dropout rate, capacity constrain, regulatory hurdles, multi grade class rooms etc. making situation tough and challenging. To reap the benefit of human power, revolution in education is a necessity not an option that Indian policy makers has already aware and they are working towards its development. The segment wise SWOT analysis of educational policy is specified in exhibit 2.

Schooling

Out of total population India currently has largest portion under the age group of 0-14 which will be seeking for elementary, primary and secondary education. Schooling segment covers Preschool, primary school, K-12, including other ancillary sector such as private tuitions, stationary industry, publishing centers, teacher training institute, etc.

Analysis in Schooling:

High Opportunistic Segment-

The schooling segment covers the largest population estimated at $40 billion in 2011 and is expected to reach $140 bn by the year 2020.

Government Initiative and Support:

The 11^th five year plan (2007-2012) was termed as ‘Indian Education Plan’ placed at higher priority in the line with inclusive growth and development which showed an increase of 24% of budget outlay in education segment. The budget 2011 also gave main focus on Right to Education (RTE) which includes Sarva Shiksha Abhiyan (SSA) and Rashtriya Madhyamik Shiksha Abhiyan (RMSA). Budget FY12 also witnessed an 18% hike with a plan outlay of INR 61,427 crore for allocation in education in which school segment received 75% (INR 45969 crore) while INR 5458 crore has been earmarked for higher education. For 2012-2013, government allocation of RTE both SSA and RMSA showed an increase of 21.7% and 29% respectively. The government also proposed to set up 6,000 schools at block level as model schools in the 12th Five Year Plan. School and higher education was also exempted from services tax. Introduction of credit guarantee fund, proposal of $140 mn for Rajiv Gandhi Scheme for Empowerment of Adolescent Girls, a 58% increased outlay for National Programme of Mid-Day Meals and $3 bn allocation in Integrated Child Development Services are some of the initiatives taken by government in FY12.

Prospects of Public and Private Partnership-

Government is planning to set up 6,000 model schools out of these 2,500 will be set up under public private partnership providing exposure to private sector also. The private participation in education sector is quite low due to regulatory hurdles and not-for-profit motive. School operates as not-for-profit model under Section 25 Company or trust in which surplus should be plough back for institution development criteria is also making the sector unattractive for private players but the government participation and willingness to get a pie in largest demography remains be a profitable sector for private players. Companies like Educomp and Core Education are continuously growing leaps and bound. Perception of parents towards private institution is very optimistic and positive in comparison with government institution; they prefer to enroll their child in private institution rather than sending them in government school.

Lack of trained teacher-

Quality education is key driver for economic development. The objective of a knowledge based economy can be achieved through trained teacher and quality teaching which can help us in injecting practical education and building bright future of the students. Most of the educational institutions get failed because of not meeting minimum criteria under which lack of trained teachers is very common. It is not just the lack of trained teacher but also high student and teacher ratio and multi grade classes are some of the problem faced by us. As per Technopak estimates, India will require 6 mn teachers by 2020 to attain world average student teacher ratio. Thus in order to improve quality of education it is imperative to address the shortage of teacher and quality of teacher as well as narrowing the gap between demand and supplying.

Education Infrastructure:

The existing education infrastructure is not adequate to serve 40% of total population (seeking both primary and higher education) forcing Indian middle class to withdraw their children from Government College and enroll them in the private college at higher cost but in rural area private collage option is very low or negligible that forces them to compromise with additional classrooms, science / computer lab, library, toilets, drinking water facilities and hostel buildings for children especially for girls for both primary and secondary education. In terms of government spending in

IBM & Tealeaf, a move towards success

2012-05-13T10:04:00.003-07:00

International Business Machines Corporation (NYSE: IBM), the world's largest computer-services provider, announces another acquisition of Tealeaf Technology, Inc., a leading provider of customer experience analytics software, taking one more step of achieving the objective of $20 billion in revenue growth by 2015. Since the beginning of 2000, they have acquired 130 companies in strategic areas including analytics, cloud, security and smarter commerce and it expect to spend $20 billion in acquisitions over the 2015 road map period to support growth initiatives.

Tealeaf is the third acquisition IBM has made to expand what it calls smarter commerce in the past year. It has made six purchases in that area since 2010. The key divisions of IBM’s for high-growth spaces that should drive approximately $20 billion in revenue growth by 2015 are, growth markets, business analytics, cloud and smarter planet. The Smarter Planet offerings generated close to 50 percent growth year to year, with Smarter Commerce demonstrating strong market momentum. With the acquisition, IBM extends its Smarter Commerce initiative by adding qualitative analytics capabilities that provide chief marketing officers (CMOs), e-commerce and customer service professionals with real-time and automated insights into online customer buying experiences across online and mobile devices. As a result, organizations can gain actionable insight that allows them to improve customer support, transform site usability, tailor marketing campaigns and increase online conversion rates.

IBM has acquired 28 companies to build targeted analytics and information expertise since 2005. It has generated hundreds of patents a year in analytics, and invented breakthrough technologies like IBM Watson, a learning system that answers questions in natural language, and InfoSphere Streams, software that can correlate and analyze thousands of real-time data sources. Software revenue increased 8.7 percent (9 percent adjusted for currency) driven by strong growth in the focus areas of Smarter Commerce, business analytics and storage solutions.

The acquisition will help IBM in various areas:

Expansion of Smarter Commerce Business:In 2011, software revenue of IBM increased 8.7 percent (9 percent adjusted for currency) driven by strong growth in the focus areas of Smarter Commerce, business analytics and storage solutions. The total market size for online commerce expected to hit $1 trillion by 2014 and mobile commerce $200 billion by 2015, with Tealeaf, it can awarded with new revenue streams.

Acquisition of Existing Customer Base:Tealeaf has over 450 customers worldwide including 30 of the Fortune 100 companies. These customers are predominantly in financial services, travel, and retail and communications services. Current clients include: Dell, Wells Fargo, Air Canada, GEICO, Orbitz, Crate & Barrel, Neiman Marcus, Expedia, Zappos, ING Direct, Best Buy, DirecTV, McKesson and StubHub. The existing customer base will be shifted to IBM that can create upward synergy. Tealeaf will extend IBM's leadership in Smarter Commerce by giving companies qualitative web and digital analytics capabilities, allowing them to capture and replay a customer's web and mobile interactions to provide a more granular and richer view of a customer's experience.

Tealeaf acquisition also drives a positive move for IBM and the stock price has rocketed up to 0.11%. As per the Q1, 2012 earning update growth markets revenue up 9%, business analytics revenue up 14 and smarter planet revenue up more than 25 percent. To sum up, the move will drive the stock price to upward direction.

The acquisition of Tealeaf aims to accelerate IBM’s growth in the smarter buildings market by adding advanced intelligence. Tealeaf will help boost IBM’s middleware software sale which usually is the core platform in all of IBM’s Smarter Planet offerings. Middleware Software constitutes 46.1% of the Trefis price estimate for IBM's stock. IBM makes money primarily through the sale of middleware software and technology services such as outsourcing and integration.
On February 1, 2012, it completed the acquisition of Emptoris Inc., a privately held company based in Burlington, Massachusetts. Emptoris is a leading provider of cloud and on-premise analytics software that brings more intelligence to procurement and supply chain operations with spend supplier and contract management for Smarter Commerce. It has also acquired Emptoris, Worklight, and DemandTec. Tealeaf acquisition also drives a positive move for IBM and the stock price has rocketed up to 0.11%. As per the Q1, 2012 earning update growth markets revenue up 9%, business analytics revenue up 14 and smarter planet revenue up more than 25 percent. To sum up, the move will drive the stock price to upward direction.

Source:http://www.trefis.com/stock/ibm/articles/33161/ibms-smarter-planet-iniatives-lay-groundwork-for-growth/2011-01-10 http://economictimes.indiatimes.com/news/international-business/ibm-to-buy-tealeaf-technology/articleshow/12969225.cms http://www.nasdaq.com/article/ibm-to-acquire-tealeaf-technology-inc-to-help-marketers-deliver-exceptional-digital-experience-for-smarter-commerce-20120502-01239 http://www.ibm.com/us/en/

LinkedIn and Slideshare What to expect Next

2012-05-12T09:31:00.002-07:00

LinkedIn (NYSE:LNKD), the world’s largest professional network on the Internet with 161 million members worldwide, agreed to acquire Slideshare, a leading professional content sharing community. The transaction is valued at approximately $118.75 million, subject to adjustment, in a combination of approximately 45 percent cash and approximately 55 percent stock. Over the past few years, Slideshare and LinkedIn have been working closely together to help professionals be more effective and productive through the content they create and share on LinkedIn.

The acquisition of Slideshare is well fit with the LinkedIn’s business synergy as Slideshare had nearly 29 million unique visitors, ranking it among the most heavily trafficked sites for professional content. Slideshare helps professionals discover people through content, and content through people. These presentations also enable professionals to discover new connections and gain the insights they need to become more productive and successful in their careers, aligning perfectly with LinkedIn’s mission and helping us deliver even more value for LinkedIn user. The company is publicly held and has a diversified business model with revenues coming from hiring solutions, marketing solutions and premium subscriptions.

About LinkedIn

Founded in 2003, LinkedIn connects the world’s professionals to make them more productive and successful. With 161 million members worldwide, including executives from every Fortune 500 company, LinkedIn is the world’s largest professional network on the Internet. The company has a diversified business model with revenues coming from member subscriptions, marketing solutions and hiring solutions. Headquartered in Silicon Valley, LinkedIn has offices across the globe.

A brief about Revenue Model for LinkedIn

The company reported the solid performance for the first quarter ended March 31, 2012, Revenue for the first quarter was $188.5 million, an increase of 101% compared to $93.9 million in the first quarter of 2011. The company has its expected revenue range to $880 million to $900 million. It has basically three area of exposure i.e. Hiring Solutions, Marketing Solutions and Premium Subscriptions.

Hiring Solutions	54%	Revenue from Hiring Solutions products totaled $102.6 million, an increase of 121% compared to the first quarter of 2011. Hiring Solutions revenue represented 54% of total revenue in the first quarter of 2012, compared to 49% in the first quarter of 2011.
Marketing Solutions	26%	Revenue from Marketing Solutions products totaled $48.0 million, an increase of 73% compared to the first quarter of 2011. Marketing Solutions revenue represented 26% of total revenue in the first quarter of 2012, compared to 30% in the first quarter of 2011.
Premium Subscriptions	20%	Revenue from Premium Subscriptions products totaled $37.9 million, an increase of 91% compared to the first quarter of 2011. Premium Subscriptions represented 20% of total revenue in the first quarter of 2012, compared to 21% of revenue in the first quarter of 2011.

About Slideshare

Founded in 2006, Slideshare is a leading professional content sharing community. Professionals can upload content for free, discover people through content, and content through people. Slideshare brings presentations, documents and videos to life on the web for professionals to discover and share. Premium social content marketing subscriptions enable professionals and brands to gain social media engagement and generate sales leads. The company is based in San Francisco, Calif., and is backed by investors including Jonathan Abrams, Mark Cuban, Dave McClure, and Venrock. It has also partnership with Twitter, Google Hangouts and FreeConference.com.

Its revenue model includes premium subscription with Slideshare PRO option, advertising and marketing, through branding and lead generation (The services are called AdShare and LeadShare. Using LeadShare, companies can get upload their various marketing material, and Slideshare will get somewhere between $1 to $22 for each lead generated. Using AdShare, a user can promote their presentations throughout the site.) Slideshare's biggest competitors include Scribd.com, Issuu and Docstoc.

Value Creation for LinkedIn and its Users

· New way to explore connection (discover people through content, and content through people) and user interactivity (LinkedIn)

· Through the integration with Slideshare, the user can put some more stuff such as Project Reports, Presentations, books etc. It can also add the value of the profile of the user. (LinkedIn Users)

· Increase the number of monthly unique visitors which can impact directly to the advertising and marketing revenue. (LinkedIn)

· In addition to ad sales, LinkedIn can also explore the opportunity in lead generation business model of Slideshare. (LinkedIn)

Key Facts:

	LinkedIn	Slideshare
Members	161 Million	60 Million
Monthly Unique Visitors	107 Million	29 Million

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. This is my independent article.

Source:

http://www.pcworld.com/businesscenter/article/230860/Slideshare_deepens_ties_with_linkedin.html

http://www.siliconbeat.com/2009/10/06/the-rise-of-Slideshare-and-how-corporate-presentations-became-entertainment/

http://press.linkedin.com/node/1191

http://press.linkedin.com/node/1192

2012-05-03T02:26:00.001-07:00

SWOT Analysis OF SABMiller Plc.

SWOT Analysis – Identify and summarize (in your own words) at least 2 points each of the Strengths, Weaknesses, Opportunities and Threats of SABMiller plc from its annual report attached herewith:

Company Overview

SABMiller Plc (formerly known as The South African Breweries Ltd.) is a beverages manufacturing company. It is engaged in manufacturing and marketing of beers, soft drinks and alcohols under the international brand name such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft and Grolsch, as well as some local brands name such as Águila, Águila Light, Atlas, Balboa, Barena, Club, Club Colombia, Cristal, Cusqueña, Golden Light, Imperial, Pilsen, lsen Callao, Pilsen Trujillo, Pilsener, Poker, Salva Vida, Pony Malta etc. It also offers bottles soft drink for Coca-Cola products. SABMiller Plc operates over 75 countries on six continents namely; Latin America, Europe, North America, Africa, Asia and South Africa. The company was incorporated in 1985 and is based in London, England.

Financial Highlights (All numbers in US $m)

	2011	2010	2009	2008	2007
Revenue	19,408	18,020	18,703	21,410	18,620
Operating profit	3,127	2,619	3,148	3,448	3,027
Profit for the year attributable to equity shareholders	2,408	1,910	1,881	2,023	1,649
Basic earnings per share	152.8	122.6	125.2	134.9	110.2
Diluted earnings per share	151.8	122.1	124.6	134.2	109.5
Return on equity (%)	13.7	12.6	13.4	12.2	12.5
EBITA margin (%)	17.8	16.6	16.3	17.4	17.4
Free cash flow (US$m)	2,488	2,028	106	594	1,153

Industry Review

According to the estimation by Canadean; specializes in beverage industry research; due to emerging and developing markets, economic and societal developments and transformative improvements, beer market has gone through a process of rapid change. In the 2011 calendar year, global beer market volume growth is forecast to be 2.5%, led by continuing strong performances in Asia, Africa and Latin America. China and Africa are expected to grow by almost 5% and Latin America by almost 3%. Looking ahead to 2015, it is likely that growth will continue to be led by emerging markets. The 25 fastest-growing markets are forecast to deliver over 5% CAGR in beer volumes. China is expected to account for almost 40% of this growth with Vietnam, Brazil, Ukraine, Nigeria, India and Peru contributing significantly.

Strengths, Weaknesses, Opportunities and Threats of SABMiller Plc.

Strengths

· Strong Branding Strategy- The concept of local and international brands shows its capability to understand the taste and preference of buyer in the local market.

· Broader Geographical Presence- As the company is operating in six continents with over 200 brands and positive financial performance of each continents as well as exposure to emerging markets gives a positive impact on the company. Further, the company has taken step to make beer affordable by reducing the price and through its smaller-sized packaging, it can cover larger market.

· The USP of SABMiller is local value creation.

· Cost Control- The capital expenditure was lower than in the prior year at US$1,315 million from US$1,528, it shows the company’s capacity of cost control and cost management.

Weaknesses

· Investment activity of the company has come down from US$ 501 million to US$ 198 million.

Opportunities

· Growing and Emerging Markets- The company can also serves to untapped and small market by making its products affordable.

· Diversification in other category- The current growth rate of the beverages and alcohol became very stagnant, the company can also diversify into other demography, for example, in fruit bears and cold drinks, and other flavored drink. It can also move itself in making teenager products.

· Other- Emerging and developing economy and increasing earning capacity of consumer can boost the demand of its existing product.

Threats

· Lower Growth Rate- The beverages industry became a mature industry that limits the growth prospects for hostile and inorganic growth.

· Consumer Preferences- The Consumer tastes and behaviors are constantly evolving and competition is increasing and becoming more sophisticated.

· Regulatory Challenges- With increasing government concern, the alcohol industry is facing several objections and pressure. Further, the growing tax rate is resulting lower profit after tax income and reducing EPS.

· Growing Hyperinflation and Economic Stagnation- The growing inflation rate and economic stagnation are continuously increasing the product manufacturing cost that is creating volatility in the price of raw materials. Increasing fuel cost is also a concern for the company.

· Other- Currency Fluctuations, regional political problems etc.

Source and References

-Company Website and Annual Report

http://www.sabmiller.com/files/companysnapshot/SABMiller_company_snapshot.pdf

http://www.sabmiller.com/files/reports/ar2011/2011_annual_report.pdf

Legal and Regulatory Aspects in M&A

2011-02-16T09:36:00.000-08:00

The Letter of Intent

When one company decides to acquire another company, a series of negotiations will take place between the two companies. The acquiring company will have a well-developed negotiating strategy and plan in place. If the Target Company believes a merger is possible, the two companies will enter into a "Letter of Intent."

The Letter of Intent outlines the terms for future negotiations and commits the Target Company to giving serious consideration to the merger. A Letter of Intent also gives the acquiring company the green light to move into Phase II Due Diligence. The Letter of Intent attempts to answer several issues concerning the proposed merger:

How will the acquisition price be determined?

What exactly are we acquiring? Is it physical assets, is it a controlling interest in the target, is it intellectual capital, etc.?

How will the merger transaction be designed? Will it be an outright purchase of assets? Will it be an exchange of stock?

What is the form of payment? Will the acquiring company issue stock, pay cash, issue notes, or use a combination of stock, cash, and/or notes?

Will the acquiring company setup an escrow account and deposit part of the purchase price? Will the escrow account cover unrecorded liabilities discovered from due diligence?

What is the estimated time frame for the merger? What law firms will be responsible for creating the M & A Agreement?

What is the scope of due diligence? What records will be made available for completing due diligence?

How much time will the Target Company allow for negotiations? The Letter of Intent will usually prohibit the Target Company from "shopping itself" during negotiations.

How much compensation (referred to as bust up fees) will the acquiring company be entitled to in the event that the target is acquired by another company? Once news of the proposed merger leaks out, the Target Company is "in play" and other companies may make a bid to acquire the Target Company.

Will there be any operating restrictions imposed on either company during negotiations? For example, the two companies may want to postpone hiring new personnel, investing in new facilities, issuing new stock, etc. until the merger has been finalized.
If the two companies are governed by two states or countries, which one will govern the merger transaction?

Will there be any adjustment to the final purchase price due to anticipated losses or events prior to the closing of the merger?

M&A Agreement

As the negotiations continue, both companies will conduct extensive Phase II Due Diligence in an effort to identify issues that must be resolved for a successful merger. If significant issues can be resolved and both companies are convinced that a merger will be beneficial, then a formal merger and acquisition agreement will be formulated.

The basic outline for the M & A Agreement is rooted in the Letter of Intent. However, Phase II Due Diligence will uncover several additional issues not covered in the Letter of Intent. Consequently, the M & A Agreement can be very lengthy based on the issues exposed through Phase II Due Diligence.

Additionally, both companies need to agree on the integration process. For example, a Transition Service Agreement is executed to cover certain types of services, such as payroll. The Target Company continues to handle payroll up through a certain date and once the integration process is complete, the acquiring company takes over payroll responsibilities. The Transition Service Agreement will specify the types of services, timeframes, and fees associated with the integration process.

Representations
One very important element within the M & A Agreement is representation by both companies. Both sides must provide some warranty that what has been conveyed is complete and accurate. From the buyers (acquiring firm) viewpoint, full and complete disclosure is critical if the buyer is to understand what is being acquired. Discovery of new issues that have been misrepresented by the seller can relieve the buyer from proceeding with the merger.

From the seller's point of view, full disclosure requires extensive time and effort. Additionally, it is difficult to cover every possible representation as "full and accurate." Therefore, the seller prefers to limit the number of representations within the M & A Agreement. One way of striking the right balance is to establish materiality limits on certain representations. The M & A Agreement will also include language, such as "to the best of the sellers knowledge," in order to alleviate some

Indemnification

Another important element within the M & A Agreement is indemnification.

The M & A Agreement will specify the nature and extent to which each company can recover damages should a misrepresentation or breach of contract occur. A "basket" provision will stipulate that damages are not due until the indemnification amount has reached a certain threshold. If the basket amount is exceeded, the indemnification amount becomes payable at either the basket amount or an amount more than the basket amount. The seller (Target Company) will insist on having a ceiling for basket amounts within the M & A Agreement.

Since both sides may not agree on indemnification, it is a good idea to include a provision on how disputes will be resolved (such as binding arbitration). Finally, indemnification provisions may include a "right of sell off" for the buyer since the buyer has deposited part of the purchase price into an escrow account. The Right to Sell Off allows the buyer (acquiring company) to offset any indemnification claims against amounts deferred within the purchase price of the merger. If the purchase price has been paid, then legal action may be necessary to resolve the indemnification.

Confidentiality
It is very important for both sides to keep things confidential before announcing the merger. If customers, suppliers, employees, shareholders, or other parties should find out about the merger before it is announced, the target company could lose a lot of value: Key personnel resign, productivity drops, customers switch to competing companies, suppliers decide not to renew contracts, etc.

In an effort to prevent leaks, the two companies will enter into a Confidentiality Agreement whereby the acquiring firm agrees to keep information learned about the Target Company as confidential.

Specifically, the Confidentiality Agreement will require the acquiring firm to:

Not contact customers, suppliers, owners, employees, and other parties associated with the Target Company.
Not divulge any information about the target's operating and financial plans or its current conditions.
Not reproduce and distribute information to outside parties.
Not use the information for anything outside the scope of evaluating the proposed merger.

M&A Closing

Once all issues have been included and addressed to the satisfaction of both companies, the merger and acquisition is executed by signing the M & A Agreement. The buyer and the seller along with their respective legal teams meet and exchange documents. This represents the closing date for the merger and acquisition. The transaction takes place through the exchange of stock, cash, and/or notes. Once the agreement has been finalized, a formal announcement is made concerning the merger between the two companies.

It should be noted that due diligence extends well beyond the closing date. Therefore, actual payment may be deferred until legal opinions can be issued, financial statements audited, and the full scope of Phase II Due Diligence can be completed. It is not uncommon for many conditions to remain open and thus, the M & A Agreement may require amendments to cover the results of future due diligence.

The Regulatory Environment

So far, we have discussed the overall process for mergers and acquisitions as well as some important legal documents. We now need to understand some of the regulations that can affect the merger and acquisition. In the United States, regulations can be divided into three categories: State Laws, Federal Anti-Trust Laws, and Federal Security Laws.

Since discussion of state law is beyond the scope of this course, we will focus on federal related laws. The Federal Trade Commission (FTC) and the U.S. Justice Department (USJD) administer federal anti-trust laws. The Securities and Exchange Commission (SEC) administers federal security laws for companies registered with the SEC.

Anti-Trust Laws

One of the most important federal laws is Section 7 of the Clayton Act which stipulates that a merger cannot substantially lessen competition or result in a monopoly. In determining if a merger is anti-competitive, federal agencies will look at the markets served and the type of commerce involved. Several factors are considered, such as size of market, number of competing companies, financial condition of companies, etc.

The size of the newly merged company in relation to the market is very important. The USJD uses an acid test known as the Herfindahl-Hirshman Index (HHI) to determine if action should be taken to challenge the merger. The HHI measures the impact the merger will have on increased concentration within the total marketplace. HHI is calculated by summing the squares of individual market shares for all companies and categorizing market concentration into one of three categories. The three categories are:

Less than 1000: Unconcentrated market, merger is unlikely to result in anti-trust action.
1000 - 1800: Moderate concentration. If the change in the HHI exceeds 100 points, there could be concentration in the marketplace.
Above 1800: Highly concentrated market. If the change in the HHI exceeds 50 points, there are significant anti-trust concerns.

Accounting Principles

One last item that we should discuss is the application of accounting principles to mergers and acquisitions. Currently, there are two methods that are used to account for mergers and acquisitions (M & A):

Purchase: The M & A is viewed prospectively (restate everything and look forward) by treating the transaction as a purchase. Assets of the Target Company are restated to fair market value and the difference between the price paid and the fair market values are posted to the Balance Sheet as goodwill.

Pooling of Interest: The M & A is viewed historically (refer back to existing values) by combining the book values of both companies. There is no recognition of goodwill. It should be noted that Pooling of Interest applies to M & A's that involve stock only.

In the good old days when physical assets were important; the Purchase Method was the leading method for M & A accounting. However, as the importance of intellectual capital and other intangibles has grown, the Pooling of Interest Method is now the dominant method for M & A accounting. However, therein lies the problem. Because intangibles have become so important to businesses, the failure to recognize these assets from an M & A can seriously distort the financial statements. As a result, the Financial Accounting Standards Board has proposed the elimination of the Pooling of Interest Method. If Pooling is phased out, then it will become much more important to properly arrive at fair market values for the target's assets.

NOTE: Most Advanced Accounting textbooks will provide comprehensive information about accounting for mergers and acquisitions. A full treatment of this topic is beyond the scope of this program. Participants are advised to refer to an Advanced Accounting textbook for more information about M & A Accounting.

M-Governance or E-Governance

2011-02-09T10:50:00.000-08:00

India is the second largest user of mobile phone across the world, the integration of voice call, SMS, broadband, and other mobile based application is removing the gap between computers and mobile phones. Now days, mobiles is the necessity than luxury.

Pleasing everybody when policy making is never easy, but the new telecom policy shows benefit for the ordinary living hood in India. Telecom is a means to create "One Village" where interstate border become irrelevant. As also in insistence that spectrum-linked revenue maximization became secondary to the goal of building pan India connectivity.

The new policies for telecom sector is much likely linked to social utility than a revenue recognition for government-as the policy to remove roaming charges, to raise broadband connectivity and availability to the common people, and to add some more valuable mobile based apps for users. The policy maker have left the idea of making money out of bidding process for spectrum and turn it to put optimum utilization of the scarce resource.

It would be a good move if the technology, telecom, internet, broadcast, electronics come together to facilitate maximize data transmission at cheapest rate. It will help the users to use mobile in multiple ways such as e-commerce, bill payments, entertainment and leisure facilities etc. But the rising use and demand of mobile can cause the concern of safety and security. Here, the policy maker should understand the need of proper monitoring system for telecom operator and users and to replace e-governance with m-governance.

Private Equity Firms and Private Equity Funds and Process of Private Equity Deal

2010-09-19T02:17:00.000-07:00

Private Equity Firms-

A private equity firm is an investment manager that makes investments in the private equity of operating companies through a variety of loosely affiliated investment strategies including leveraged buyout, venture capital, and growth capital. With the collaboration of GP and LP they create a fund called PE Fund.

PE Fund-

Private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity. A private equity fund is raised and managed by investment professionals of a specific private equity firm.

For Example-

ICICI Venture Ltd.http://www.iciciventure.com/ operates as private equity and venture capital firm. It engages in private equity, venture capital and mezzanine investments which include buyouts, growth capital, turnaround, recapitalization, secondary transactions and ownership consolidations.

The Company has created several funds given below

1. ICICI Emerging Sectors Fund-
2. ICICI Mezzanine Fund I
3. ICICI Real Estate Fund
4. India Advantage Fund Series I
5. India Advantage Fund Series II
6. India Advantage Fund Series III

These funds has different interest areas, accordingly they invest.

Steps of PE Fund Investment-

The Private Equity Process in 7 Steps:

1. Deal Origination (Deal Sourcing)
2. Due Diligence
3. Deal Negotiation
4. Deal Closing (Acquisition)
5. Post Acquisition Monitoring
6. Exit (IPO, Trade Sale or Buy back)
7. Repeat.

Deal Origination

Deal Origination or as some call it ‘Deal Sourcing’ is how we get our deals, a potential deal can either come through a company owner approaching us or from an intermediary who will try to bring both parties (Company and Deal Maker) to close the deal. In some cases, we may just approach companies who are expanding fast and wish to grow further. In a year, we come across hundreds of potential deals - but only a few are selected.

Due Diligence

Due Diligence is what you could call ‘doing your homework’. Before starting detailed negotiations, we try to make sure everything is fair and square. Although Auditors and Consultants are appointed to conduct the Financial, Tax, Legal and Technical Due Diligence - we also work side by side to understand the target company and its industry better. All the information collected at this time, is then used during negotiation.

Deal Negotiation

At the Deal Negotiation phase, we set out the terms and conditions (covenants, representations and warranties) and other deal terms that define (or make the deal). Contracts such as Investment Agreement, Share Purchase Agreement, Management Agreement, Advisory Agreement etc are drafted to include all items that put the deal together.

Deal Closing

Deal Closing is probably the easiest part but also contains an element of risk. It’s the conclusion of the deal, the signing of all Agreements and transferring funds* from the buyer to seller, conducting other administrative functions (usually done by a separate entity) like updating any articles of association etc.
* So where do those funds come from? Well, there are two routes - the Fund route or the Private Placement route. And this is where the element of risk can step in. Most private equity firms have a Fund, that calls upon its HNWI to bring up money as committed earlier to fund these acquisitions. However some firms choose to place (sell) a stake in the ownership of the acquired company to certain individuals who might wish to participate only in a specific sector - what we commonly call the private placement. We do through this Special Purpose Vehicles (SPVs) that are nothing but legal entities to hold our stake in the company.

Post Acquisition Monitoring

Post Acquisition Monitoring requires the Deal Team (those who have worked on putting the deal together) to closely monitor the company, both from an operational and financial point of view against the expansion plan and budgets that were setup earlier by the company. Improvements to business, from Corporate Governance, Financial Reporting, Information Flow to Strategy are made at each level through either the company’s management or its board (where we have a seat).

Exit

As the company matures (usually after 2 - 4 years) with the presence of the Deal Team, we prepare it for an Exit - either an IPO or a Trade Sale (sale to a larger party, multi-national or conglomerate) or in rare cases a Buy Back by the owners. By this time, the company will have grown quite a bit with still plenty of room to grow further. (There’s a saying, in a deal - always leave something extra for the person buying - it makes everyone happy.)

Repeat

And once we’ve exited the company, we return our investors money with the profit we gained for them after taking our fees for all the effort put in the above process. Then… we just repeat the process, albeit with a greater appetite for investments.
Although this may seem like a linear process - it isn’t exactly so, primarily because we deal with a number of companies and each one is at a different stage in the private equity process.

Private Equity

2010-09-19T00:32:00.000-07:00

What is Private Equity-?
Technically refers to any type of equity investment in an asset in which the equity is not freely tradable on a public market. It often involves either an investment of capital into an operating company or the acquisition of an operating company.

Kind of Private Equity Investment -
1. Angle
2. Venture Capital
3. Growth capital
4. LBO
5. Mezzanine Debt
6. Distressed Investing
7. Hedge Fund

Type of Private Equity Investment strategies

1. Corporate Finance
a. Leveraged Buyout (LBO)
b. Growth Capital
c. Turnaround

2. Venture Capital
a. Early Stage
b. Late Stage
c. Growth capital

3. Private Debt
a. Mezzanine
b. Distressed Debt
c. Infrastructure

LBO-

•The private equity firm buys majority control of an existing or mature firm. To do this we hire a financial sponsor.
•The financial sponsor will raise acquisition debt which ultimately looks to the cash flows of the acquisition target to make interest and principal payments. The acquisition debt is a non recourse debt(secured debt).

Venture capital-

•Equity investments made, typically in less mature companies.
•Venture investment is most often found in the application of new technology, new marketing concepts and new products that have yet to be proven

• Sub-divided by the stage of development of the company
 Start-up companies- Companies that are in the process of developing business plans, products / services have been developed and are marketed to a limited number of customers.
 Late Stage companies- High growth companies, nearing profitability.

Growth Capital-

•Minority investments, in relatively mature companies, and often used to fund expansion of existing business that are generating revenue but may not yet be profitable or generating cash flow to fund future growth.
•These companies are looking for capital to expand or restructure operations, enter new markets or finance a major acquisition without a change of control of the business.
•These companies are likely to be more mature than venture capital funded companies, able to generate revenue and operating profits but unable to generate sufficient cash to fund major expansions, acquisitions or other investments
•By selling part of the company to private equity, the owner can take out some value and share the risk of growth with partners.
•The company can be both public company or private company.

Turnaround-

•Acquisitions of underperforming businesses or businesses in out-of-favor industries in need of either financial or operational restructuring
•Also called special situation where an investor will provide debt and equity investments, often "rescue financing" to companies undergoing operational or financial challenges.

Private Debt-

a.Mezzanine Capital is the subordinate debt and preferred equity.
It is more costly than normal or senior debt, because of the high cost of capital associated with it.

Note- subordinated debt is debt which ranks after other debts should a company fall into receivership or be closed. And it has a lower priority than other bonds of the issuer in case of liquidation during bankruptcy, below the liquidator, government tax authorities and senior debt holders in the hierarchy of creditors. Because subordinated debt is repayable after other debts have been paid, they are more risky for the lender of the money. It is unsecured and has lesser priority than that of an additional debt claim on the same asset.
•Preferred stock is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument. And it is subordinate to bond. It usually carries no voting right but may carry a dividend and may have priority over common stock in the payment of dividends and upon liquidation.

Distressed Debt-

Investments in public and private debt securities that are trading at discounts to par value due to financial stress on the underlying company. In this case the company has either filed for bankruptcy or appear likely to do so in the near future.

Infrastructure

Investments used to finance the construction or enhancement of distribution networks for electricity, water and gas, and certain transportation assets such as toll roads, bridges and tunnels.

Secondary’s

Secondary investments refer to investments made in existing private equity assets. These transactions can involve the sale of private equity fund interests or portfolios of direct investments in privately held companies through the purchase of these investments from existing institutional investors.

ABOUT FACEBOOK

2010-08-28T08:41:00.001-07:00

About Facebook-

Facebook is a social networking website where user can create free profile, share information and connect globally. They can also add their photos; share their interest, personal information, contents, videos and links. Apart from the regular feature, users can also join their desired community and send virtual gifts to their love one.

History-

Facebook was founded in 2004 by Harvard undergraduates, Mark Zukerberg, his roommate and a fellow of computer science. Facebook as began Harvard only site with the intention to distribute college notes that expanded to include all universities and ultimately the public.

Value proposition -

Facebook applications include profile development, photo uploading, photo tagging, news feed, instant messaging, virtual gift, interactive games, events and many more applications. Users can also use privacy setting on their profile to protect their profile from unwanted application and fellow.

Business model -

Facebook is a Web 2.0 company that has primarily adopted Business to Consumer model as community provider through mobile and peer to peer technology. Today they use their application and third party application that has provide a potential to act as portal, community provider and content provider.

Revenue model-

Facebook gives away almost their service free of charge and most of revenue comes from marketing service and solution. Its marketing service includes Facebook social ads, advance targeting, content integration, and banner ads etc.

Competition-

Facebook has major threat with MySpace, Friendster, Bebo and Google & to a lesser extant competition is with Linkedin, Evite, Meetup and TheSquare.

Future Prospects-

Facebook is currently trying to become the world’s largest social utility, expanding their social graph globally with the implementation of their new translation applications. It has no plan to go public. It also trying to gain major technological competence ensures privacy, total quality management & other strategic deals with mobile companies.

Important Ratio concepts

2010-06-23T11:34:00.000-07:00

MEANING
Ratio Analysis is very important concept to judge a company's fundamentals,
it can be said that it is a tool used to conduct a quantitative analysis of information in a company's financial statements like Profit and Loss account, Balance sheets and cash flow statement . With the help of past data u can judge the companies current financial performance.

IMPORTANT RATIOS

1)Debt Equity Ratio
2)Current ratio
3)ROCE- return on capital employed
4)RONW- Return on net worth
5)PBITD margine\
6)PAT margine
7)Cash Profit Margin

This seven ratio is important to judge the company's financial health.

Debt to Equity:

The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. It is used to determine whether a government agency, business, household, or other entity can safely borrow over long periods of time.

Assets are important because your lender may be unwilling to loan you any more money if your debt-to-equity ratio exceeds a certain figure. If sales and assets grow at the same rate, your debt-to-equity ratio should remain within the lender's limit, allowing you to borrow to finance growth forever.

A ratio greater than one means assets are mainly financed with debt, less than one means equity provides a majority of the financing.

If the ratio is high (financed more with debt) then the company is in a risky position - especially if interest rates are on the rise.For further clarification you can read the leverage concept:

Formula:

Debt/Shareholders Equity

Current Ratio:

The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. An indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is.

Acceptable current ratios vary from industry to industry, but a current ratio between 1 and 1.5 is considered standard. If a company's current assets are in this range, then it is generally considered to have good short-term financial strength. If current liabilities exceed current assets (the current ratio is below 1), then the company may have problems meeting its short-term obligations. If the current ratio is too high, then the company may not be efficiently utilizing its current assets.
In general, a quick ratio of 1 or more is accepted by most creditors, in which u consider the most liquid Current assets.

Formula:

Current Assets/Current Liabilities

ROCE:

The prime objective of making investments in any business is to obtain satisfactory return on capital invested. Hence, the return on capital employed is used as a measure of success of a business in realizing this objective. It is the best measure of profitability in order to assess the overall performance of the business. It indicates how well the management has used the investment made by owners and creditors into the business.

ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings.

ROCE tells us how much profit we earn from the investments the shareholders have made in their company.

A negative ROCE would mean that the firm had made a loss.

ROCEs are typically between 5% and 15%. This will depend on the sector in which the firm operates.

Formula:

EBIT/Capital Employed

RONW:

This ratio gives you an idea of the returns generated by investing in the company. While ROCE is an effective measure to get a general overview of the profitability of the company's business operations, RONW lets you gauge the returns you can earn on your investment. This ratio indicates the return on stockholder's total equity.

RONW/ROE is the single most important financial ratio applying to stockholders and the best measure of performance by a firm's management.

A high return on equity indicates that the company is spending wisely and is likely profitable; a low return on equity indicates the opposite. As a result, high returns on equity lead to higher stock prices.

A negative RONW would mean that the firm had negative earning.

Formula:

PAT/Net Worth

PBITDM:

PBITDM margin measures the extent to which cash operating expenses use up revenue. PBITDM margin is often more useful than operating margin for the same reasons that EBITDA is more useful than operating profit (EBIT) - it excludes non-cash items such as depreciation.

Generally, a higher value is appreciated for this ratio as that would indicate that the company is able to keep its earnings at a good level via efficient processes that have kept certain expenses low.

However, when comparing company's EBITDA margin, make sure that the companies are in related industries as different size companies in different industries are bound to have different cost structures, which could make comparisons irrelevant.

Negative EBITDA margin means that company is running in operating loss.

Formula:

EBITDA/Gross Sales

PATM:

A company's after-tax profit margin is important because it tells investors the percentage of money a company actually earns on sales. This ratio is interpreted in the same way.

For example, a company's sales could increase, but if costs also rise, that leads to a lower profit margin than what the company had when it had lower profits. This is an indication that the company needs to better control its costs.

Thus, it helps to measure of how well a company controls its costs after taxes.

A high after-tax profit margin is generally seen as better if it is at all feasible.

A low after-tax profit margin is not necessarily a negative sign. Some companies and industries are expensive to run and have low margins by their nature.

Formula:

PAT/Gross Sales

CPM:

cash profit margin ratio is used to measure operating performance.

Formula:

(Pat+Dep)/Gross Sales

so these are the very important concept for fundamental analysis

FINANCIAL INCLUSION IN INDIA- IMPACT & CHALLENGES

2010-04-11T20:51:00.000-07:00

Financial inclusion in India – The way forward

ANURADHA GUPTA
Student of BLS institute of management

ABSTRACT:
The government of India & RBI has out with a major initiative towards ensuring the inclusive growth through financial inclusion so that the access of financial service will reach to the mass population.
The main theme of this paper is to highlight the requirement of financial inclusion and to estimate the social benefit from these initiatives.
As Reserve Bank of India data shows that as many as 139 districts suffer from massive financial exclusion, with the adult population per branch in these districts being above 20,000 and only 3 percent with borrowings from banks. On the assumption that each adult has only one bank account (which does not hold good in practice, so that actual coverage is likely to be worse) on an all India basis, 59 percent of the adult population in the country has bank accounts. 41 percent of the population is, therefore, unbanked. In rural areas the coverage is 39 percent against 60 percent in urban areas. The unbanked population is higher in the poorer regions of the country, and is the worst in the North-Eastern and Eastern regions.

This paper seeks to provide evidence on impact of financial inclusion in India, the various issues of financial exclusion, and present status of financial services of India. This paper studied secondary data to draw the conclusion.
The study found that with this initiative the poorer section of the society will get benefit for their development and growth.

Objective of the Paper

• Highlight the issue of financial exclusion
• Impact on Indian economy of financial inclusion
• RBI initiatives & guideline
• Scope & challenges of financial inclusion in India
• Further suggestion

Meaning of Financial Inclusion

“The process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair and transparent manner by mainstream Institutional players.”

Financial Inclusion should include access to financial products and services like-

 No frill Bank accounts – check in account
 Micro Credit
 Savings products
 Remittances & Payment services
 Insurance - Healthcare
 Mortgage
 Financial advisory services
 Entrepreneurial credit
 Pension for old age
 Business correspondence & self help group
 Branchless banking
 Micro finance & micro credit facility
 Investment plan for child's education

General equation

NFA + BC = FI Where, BC = Banks + OFIs + MFI + IT

NFA = No Frills Saving Bank Account
BC = Banks + Other Financial Institutions + Micro Finance Institutions + Information Technology
OFI = Insurance Companies, Mutual Funds, Pension Companies

Pre-requisites For The Success of Financial Inclusion

 Appropriate Technology
 Appropriate and Efficient Delivery model
 Mainstream banks’ determination and involvement
 Strong Collaboration among Banks, Technical Service Provider, BC Services
 Especially the state administration at grass-root level
 Liberalization of BC model

Financial Exclusion

Financial exclusion could be looked at in two ways:
Lack of access to financial services which could be due to several reasons such as:

 Lack of sources of financial services in our rural areas, which are popular for the ubiquitous money lenders but do not have (safe) saving deposit and insurance services.
 High information barriers and low awareness especially for women and in rural areas .
 Inadequate access to formal financial institutions that exist to the extent that the banks couldn't extend their outreach to the poor due to various reasons like high cost of operations, less volume and more number of clients, etc. among many others.
 Poor functioning and financial history of some beleaguered financial institutions such as financial cooperatives in many states which limit the effectiveness of their outreach figures.

Some Attributes of Informal Financial Services, Due to which there is Exclusion, are

 High risks to saving: loss of savings is an easily discernible phenomenon in low income neighborhoods in urban areas.
 High cost of credit and exploitative terms: credit against collateral such as gold is even more expensive than the effective interest rates, similarly, rates paid by hawkers and vendors who repay on daily basis are very high.
 High cost and leakages in money transfers: the delays in sending money home through all informal channels add to these.
 Near absence of insurance and pension services : life, asset, and health insurance needs

Scope of financial Inclusion can put into effort

Recent developments in technology have transformed banking from the traditional brick-and-mortar infrastructure to a system supplemented by other channels like automated teller machines (ATM), credit/debit cards, internet banking, online money transfers, etc.

The Reserve Bank of India (RBI) has enabled branchless banking by facilitating the business correspondent/facilitator model, enabling non-government organizations, micro-finance bodies, co-operative societies, grocery shops, PCOs and individuals to collect small deposits, disburse and recover certain loans, and also sell other financial products, like insurance, pension and mutual funds, and to handle small remittances and payments. But is it also true that while a large number of no-frills accounts have been opened; those that are operational have yet to reach a meaningful level? On its part, the government has also unveiled a number of initiatives to mainstream the marginalized, like making small borrowers eligible for another loan, issuing them credit cards without security, asking banks to adopt one district for 100 per cent financial inclusion, and establishment of the financial inclusion fund and the financial inclusion technology fund. This apart, there are over 83 million Kisan Credit Cards . Similarly, there are over 5 million self-help groups (SHG) having savings of almost Rs 40 billion.
The Reserve Bank of India (RBI) today said that financial inclusion is not restricted merely to opening of bank accounts and should imply provision of all financial services like credit, remittance and overdraft facilities for the rural poor

Regulatory challenges

The RBI circular on Business Correspondent Model allows, NGOs/ MFIs set up under Societies/ Trust Acts, Societies registered under Mutually Aided Cooperative Societies Acts or the Cooperative Societies Acts of States, section 25 companies, and Post Offices to act as Business Correspondents. Most organizations incorporated in these forms have social mandates, with less emphasis on business model. The present guidelines exclude NBFCMFIs from the ambit of being a Business Correspondent. The current experience of MFI outreach in India shows high growth and outreach to the poor, and at the same time, limitations on the types of financial services that can be offered by them. The BC framework allows for this to be corrected. However, currently, the legal form that allows MFIs to grow in size and scale and access greater resources is not permissible as a Business Correspondent. Most MFIs incorporated under other legal forms, permissible under the BC framework; aim to reregister as NBFCs to attract capital for expansion and scale of business. Non Banking Finance Companies (NBFCs) should be brought under the ambit of Business Correspondent framework, as they not only serve the need of scale through their high outreach, but also have access to resources for professional management of an enhanced responsibility through the BC model.

Associated challenges

From the perspective of the banks, providing suchservices would have various risk associated with it. The major risks to the banks are legal, reputation and operational risks. These risks are to be managed with tight and regular monitoring, developing systems and procedures and by developing effective risk mitigating tools and matrix. The banks can consider evaluating these institutions through various bench mark indicators and procedures like
 Capital Adequacy
 Governance
 Liquidity of the institution and placing minimum
 liquidity at banks concerned in the form of deposit
 Systems and procedures
 Regular inspection of the BC either through in house or external auditors
NBFC-MFIs, registered with the RBI could be monitored with appropriate and tight controls, systems, procedure and risk mitigating tools and other bench mark norms like CAR and liquidity, including penalty and withdrawal as business correspondents.

Advantage of Financial Inclusion

1- Economic Growth

The growth trend of the Indian economy over the last few years appears to indicate
the beginning of a new phase of higher growth. From an average growth rate of around 6.0 per cent for a quarter of a century, the growth rate has accelerated to 8.1 per cent over the last few years. Along with declining population growth, this suggests high growth in per capita income in excess of 6 per cent in recent years, and perhaps approaching 7 per cent, which would lead to doubling of per capita income every ten years. Most importantly, the current growth process is not a flash in the pan so through the financial inclusion the we will achieve the inclusive growth And access of credit facility will lead to increase the entrepreneurial skill of people and short out the problem of credit crunch among the less developed people.

2- Financial deepening

There is a general consensus among economists that financial development spurs Economic growth. Theoretically, financial development creates enabling conditions for growth through either a supply-leading (financial development spurs growth) or a demand following (growth generates demand for financial products) channel. And that will lead to the growth of different financial product in India

Financial Institution & their recent contribution towards financial inclusion

TINERI

Punjab National Bank made a model way of financial inclusion that is not only to open the bank accounts but also free them from the clutches of the money lenders. The local Pradhan has helped villagers with the procedure of opening the bank account. Now they have started saving whatever little they can

BRANCHLESS BANKING - CORPORATION BANK

Corporation Bank developed a business model for each of the beneficiary, whereby these villagers don’t commute to the bank for any kind of transaction. Corporation Bank appointing one of the villagers as a business correspondent, so that there is more comfort level and there is more empathy. So, they are dealing with their own people. This is how this business model and operative model of the central piece of this financial inclusion called Branchless Banking.

Way Forward

Notwithstanding the regulatory, operational and other aspects in focus, financial inclusion is a complex issue which cannot be solved alone by any actors in the system. Formal financial institutions such as, banks, insurance companies, mutual funds, pension companies will have to join hands with small NGO-MFIs, larger NBFC- MFIs, and technology providers to enable inclusion. The strengths of these institutions will have to be put together through sound collaborations for financial inclusion. Local and national presence organizations have to ensure that these partnerships look at both commercial and social aspects to help achieve scale, sustainability, and impact. This collaborative model will have to tackle exclusion in two main ways:

 By ensuring that there is a supply of appropriate and affordable services available to those that need them
 By stimulating demand for appropriate financial products, services and advice with appropriate delivery mechanism
These different sets of institutions have to appreciate the power of this model and collaborate to deliver to and reach the large number of masses by providing comprehensive financial services and financial advice. Such collaborations will also ensure that financial inclusion is not looked upon as a social obligation, but viable business models over time.

sub prime crises

2010-04-08T03:33:00.001-07:00

Sub prime Loan
• A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans. Quite often, sub prime borrowers are often turned away from traditional lenders because of their low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment.
• Means the chance of default is more then the normal borrower
• And in this case the lending organization charge higher interest rate those whose credit wordiness is not good in the past
• Example can be- below 600 is come under defaulter

Subprime mortgage

A subprime mortgage is a type of loan granted to individuals with poor credit histories (often below 600), who, as a result of their deficient credit ratings, would not be able to qualify for conventional mortgages. Because subprime borrowers present a higher risk for lenders, subprime mortgages charge interest rates above the prime lending rate
There are several different kinds of subprime mortgage structures available. The most common is the adjustable rate mortgage (ARM), which initially charges a fixed interest rate, and then convert to a floating rate based on an index such as LIBOR.

Key consideration during loan distribution

Mainly three main factor is considered
1. income of borrower
2. assets
3. credit wordiness

Above three are very linked to each other like if you are defaulter then it means you don’t have good income and without income you can not build the assets ans so on u can ur self coordinate all three
Note – the traditional loan can be viewed as prime loan against prime mortgage and the sub prime is below the avg credit rating

History of sublending

The Community Reinvestment Act of 1977 and later liberalization of regulations gave lenders strong incentive to loan money to low-income borrowers.
The Deregulation and Monetary Control Act of 1980 enabled lenders to charge higher interest rates to borrowers with low credit scores

Alternative Mortgage Transaction Parity Act, passed in 1982, enabled the use of variable-rate loans and balloon payments.

Tax Reform Act of 1986 eliminated the interest deduction for consumer loans, but kept the mortgage interest deduction.

Over time, businesses adapted to this changing environment, and subprime lending expansion began in earnest. While subprime loans are available for a variety of purchases, mortgages are the big-ticket items for most consumers, so an increase in subprime lending naturally gravitated toward the mortgage market. According to statistics released by the Federal Reserve Board in 2004, from 1994 to 2003, subprime lending increased at a rate of 25% per year, making it the fastest growing segment of the U.S. mortgage industry. Furthermore, the Federal Reserve Board cites the growth as a "nearly ten-fold increase in just nine years."

A evaluation of subprime lending
The Good

Subprime loans have increased the opportunities for homeownership, adding nine million households to the ranks of homeowners in less than a decade and catapulting the United States into the top tier of developed countries on homeownership rates, on par with the United Kingdom and slightly behind Spain, Finland, Ireland and Australia, according to the Federal Reserve. More than half of those added to the ranks of new homeowners are minorities. Because home equity is the primary savings vehicle for a significant percentage of the population, home ownership is a good way to build wealth.

The Bad

Subprime loans are expensive. They have higher interest rates and are often accompanied by prepayment and other penalties. Adjustable-rate loans are of particular concern, as the payments can jump dramatically when interest rates rise.) All too often, subprime loans are made to people who have no other way to access funds and little understanding of the mechanics of the loan.

On the lending side, the rush to bring in new business can lead to sloppy business practices, such as giving out loans without requiring borrowers to provide documented proof of income and without regard to what will happen if interest rates rise. And the recession is the result of sub prime lending.

The Ugly

Because subprime borrowers generally aren't favorable candidates for more traditional loans, subprime loans tend to have significantly higher default rates than prime-rate loans. When interest rates rise rapidly and housing values stagnate or fall, the ripple effects are felt across the entire industry. ( when the interest raise then the property rate fall because the investor will find the costly rate that down the demand for loans when the don’t have fund to invest they will not buy property)

The borrowers' inability to meet their payments or to refinance (due to prepayment penalties) causes borrowers to default. As foreclosure rates rise, lenders fail. Ultimately, the investors that purchased mortgage-backed securities based on subprime loans also get hurt when the underlying loans default,

Buyer Beware

When used responsibly by lenders, subprime loans can provide purchasing power to individuals who might not otherwise have access to funds. While negative attention is often focused on the mortgage industry, particularly on subprime lenders, the borrowers themselves share some responsibility for the problems subprimes have caused in the market. In other words, borrowers should never sign papers for a loan they do not understand or have the ability to repay. Despite the fact that a significant segment of subprime borrowers default on their loans, the loans themselves are neither good nor evil. They are simply an economic tool.

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Global Pharmaceutical Customer Relationship Management Practices

2010-04-08T03:16:00.001-07:00

Global Pharmaceutical Customer Relationship management practices

Introduction

As PETER DURCKER rightly said that “The purpose of business to create customer” The success lies in the hand of customers, and because of high competition it has became very tough to retain the loyalty of customer. The key success factor of any organization is to provide the better services to the existing customer so that it would not get time to switch. Customer relationship management can be the single strongest weapon that shows your customer become loyal towards you.

Customer relationship management- Overview

CRM- is a comprehensive strategic approach for creating, maintaining and expanding customer relationship.
It is a methodology that assists businesses in determining customer satisfaction, customer behaviors, the value of each customer and finding additional needs of their customers
The idea behind CRM Management is to be able to focus on specific customers, anticipate their needs and meet or exceed them. Thereby allowing businesses to increase customer loyalty and retention efficiently and effectively.
Marketing is here to spend to get more revenue and Service is here to attract and to retain the customers. Product marketing today is fully influenced by the dynamics of web and customer relationship management methodologies, as the interactive technologies become driven more and more by the web technologies.

Global pharmaceutical market- an overview

 The global Pharmaceuticals Market has demonstrated consistent strong growth patterns.
 Much of the growth in the Global Pharmaceutical industry can be attributed to the change in the disease profile of the global population.
 Increase incidence of life style related diseases that lead the demand for drugs
 Pharmaceutical market across the world is witnessing increased opportunities in the area of Bio Pharmaceuticals, Pharmacogenomics and Biologics market.

Challenges for global pharmaceutical market

 Competition among the big players like Pfizer, Johnson and Johnson, Wayeth etc.
 Poor business models
 Lack of direct interaction between buyer and seller
 Lack of proper awareness specially in developing economy
 Web technologies access

Key success factor for pharma industry

 Global access
 Product differentiation
 Intensive research about market & economy
 Information Technology
 CRM or PRM (Patient Relationship Management)

Global Pharmaceutical Customer Relationship management practices

On the average, Pharmaceutical product development reaching consumers after Phase III is a billion dollar investment, takes 13 years and the product uniqueness patent expires in 15 years. That is, it is difficult to create a product, takes lot of money, takes more time to take the product to consumers, and ownership of the product expires sooner than any product created for its uniqueness.
Global Pharmaceutical CRM Markets presents an all-encompassing research of Pharmaceutical CRM markets for three regions: North America, Europe and Japan. The research focuses on various segments such as Sales force automation, marketing automation, customer analytics, customer service, closed loop marketing and key opinion leader management. The challenges to mange customer relationship efficiently have dictated the need for cutting edge CRM tools and technologies

CRM or PRM (Patient Relationship Management) thus helps to get the most revenue from these 15 years of shelf life by reaching more new patients (consumers), keeping them loyal by increasing their well being and if PRM is well done, the PRM has the potential to innovate new products and services, there by providing competitive advantage to continue to thrive in the market and grow.
Also PRM/CRM can be used in patient intelligence for further product innovation. Whether anybody recognizes or not, the on going strong years of patient care intelligence will have so much of knowledge (may be responsibly called – patient voluntary trials that complements Phase IV clinical trials) about the product, its efficacy, side effects, co-effects, life-style, and pharmaco-demographic effects, that it can lead to product innovation.

The end results of CRM is the same among different industries that include pharmaceutical industry also, namely to
 Provide best possible products and services to the customers,
 Be competitive
 Be innovative in creating new products and services to suit the dynamics of demographics and market conditions with assured availability of continuity of products and services
 Sell and service more with utmost details to the customer input and customer relevance

Conclusion

CRM is a strategic tool to achieve a competitive edge over other. Today we need to have a database, associated analytics to provide right message to the right person, at the right time, and possibly creating documents and FAQ documents that are useful for the patients for 7x 24 availability in the web. Also build web based relationship or interaction or knowledge management to reduce cost and increase competitiveness

CSR- A Need of Today: “Outlook of Indian Companies”

2010-04-08T03:15:00.000-07:00

Abstract:-The role of business society has undergone a sea change. From the exhortation that there are no social obligations for business to the understanding that being socially responsible is critical, corporate social responsibility has come a long way .The present article attempts to explore the benefits of a socially responsible corporate and also the damage which can be done out of ignorance or irresponsibility to the environment, community, customers and share holders. It has been observed that many organistions shouldering their social responsibility effectively like ACC , Balarpur, Infosys, Reliance and many more . It is also seen that ignorance of social responsibilities by the corporate world can lead to and has already in the past led to irreparable damage to the society and environment in which they exists such as Union Carbide, Coca Cola and satyam ..

INTRODUCTION
Traditional ways of thinking about management pay little detailed attention to either organizational or natural environments---for good reasons. When most of the management theorists were alive, the external environment of the organizations was primarily stable and unchanging. There was little concerned about the natural environment: citizens of the world simply assumed that the earth resources were inexhaustible. Today the world is very different
A worldwide concern about the natural environment has emerged spurred by environmental disasters, the discovery of a hole in the Ozone layer, & an increase in pollution and other forms environmental degradation .A new environmentalism has swept the globe.
The origin of the CSR constructs has been traced back to the works of Bowen, particularly his book Social Responsibilities of Business men published in 1953 (Valor 2005). Dubbed as the modern “father of corporate social responsibilities” he included issues like stewardship, social audit, corporate citizenship and even issues related to stakeholders (Windsor 2001). However, he did not provide any definition of CSR .The term, as literature indicates, could be interpreted in various ways:
According to Adolph Berle “ Social responsibility is the manager responsiveness to public consensus”. This means that there cannot be the same set of social responsibilities applicable to all countries in all times. These would be determined in each case by the customs, religions, traditions, level of industrializations and a host of others norms and standards about which there is a public consensus at any given time in a given society.
According to Keith Davis “he term SOCIAL RESPONSIBILITIES refers to two types of the business obligations (1) the socio-economic obligations and (2) socio-human obligations. The socio-economic obligations of every business are to see that the economic consequences of its actions don’t adversely affect public welfare. This includes obligations to promote employment opportunity, to maintain competition, to curb inflation etc.The socio human obligation of every business is to nurture and develop human values (such as moral, co-operation, motivation & self realization in work).
Corporate social responsibility focuses on what an organization does that affects the society in which it exists. It is also the study of people’s right and duties, the morals rules that people apply in making decisions, the nature of relationships among people.
AREA OF APPLICATION
• Towards the consumer and the community
• Towards employees and workers
• Towards shareholder and other businesses
• Towards the State
The key drivers for CSR are :
( 1 ) Enlightened self-interest - creating a synergy of ethics, a cohesive society and a sustainable global economy where markets, labor and communities are able to function well together.
( 2 )Social investment - contributing to physical infrastructure and social capital is
Increasingly seen as a necessary part of doing business.
( 3 )Transparency and trust - business has low ratings of trust in public perception. There is increasing expectation that companies will be more open, more accountable and be prepared to report publicly on their performance in social and environmental arenas
( 4 )Increased public expectations of business - globally companies are expected to do more than merely provide jobs and contribute to the economy through taxes and employment.”
Many of the large corporations in South-Asian Perspective are private, and many do not have the same public pressures on corporate behavior that public companies in Europe and North America have for progress on corporate social responsibility, although this is changing. Yet many of the larger companies in South-Asia have strong localized philanthropic programmes including India.

Some sector specific best Corporate Social Responsibilities practices

ACC Ltd is among the first companies in India to include commitment to environment protection as a corporate objective. ACC plants, mines and townships visibly demonstrate successful endeavors in quarry rehabilitation, water management techniques and greening activities such as afforestation, horticulture and vegetable cultivation. Better and cleaner mining techniques have also helped safeguard and conserve mineral resources. An important contribution that ACC is now making is in promoting new effective solutions for dealing with hazardous and non hazardous wastes from different industrial processes

BILT’s CSR policy states “while the company is responsible to continuously enhance shareholders wealth, it is also committed to its other stakeholders to conduct its business in a responsible manner that creates a sustained positive impact on society.” At BILT, Corporate Social Responsibility is an integral part of the business processes of the company. BILT in its farm forestry project has developed a programme where nursery extension workers provide seeds to the farmers at subsidized rates and also provide support and management for plantation of the trees. The company then buys back its plants at competitive rates thus eliminating middlemen. BILT has undertaken many community initiatives around its plants for the poorest. One of these is the formation of Joint Liability Groups (JLG) of poor and marginal farmers to take up pulpwood plantation on their degraded land. The aim of forming JLGs was to help the farmers in getting credit from banks with the group acting as collateral

HDFC has a clearly defined CSR philosophy and uses its core competence in the housing sector for projects in micro-finance and low-income housing. (The Kottapuram Integrated Development Society, Kerala, the Gandhi Smarak Grama Seva Kendra, Kerala, and the Grameen Koota, Karnataka, are some of the organizations associated with HDFC.) The company has supported various low-income housing projects through “The Shelter Assistance Reserve”, an internal fund. It has undertaken diverse social and development initiatives, in partnership with over 160 organizations to implement projects in community development, education, environment, child welfare, etc.
Larsen & Turbo (L & T) Limited construction industry is the second largest employer in India after agriculture, employing about 32 million-strong workforce, L&T set out to regulate and promote Construction Vocational Training (CVT) in India by establishing a Construction Skills Training Institute (CSTI) on a 5.5 acre land, close to its Construction Division Headquarters at Manapakkam, Chennai. CSTI imparts, totally free of cost, basic training in formwork, carpentry, masonry, bar-bending, plumbing and sanitary, scaffold and electrical wireman trades to a wide spectrum of the rural poor. About 2,000 skilled workmen in various trades has been produced , with about sixty percent of them being deployed to L&T’s jobsites spread across the country. The success of this training-initiative demonstrates that adoption of systematic training techniques are bound to yield efficient and skilled personnel in the shortest possible time, and in the power to convert the potential of the Rural Youth in Construction and upgrading Rural Economy in a small way.
Hindustan Construction Company (HCC) : HCC plays an active role in CSR initiatives in the fields of Health, Education, Disaster Management, and Environment. Disaster Resource Network DRN is a worldwide initiative, promoted by the World Economic Forum (WEF).Trained volunteers and equipment resources from Engineering Construction & Logistics companies will complement the existing efforts of Government, NGO's and International Organizations in disaster management. It was during the WEF annual meet that the massive earthquake struck Gujarat in January 2001. The need for a trained and effective participation from industry was first felt there. The members of Engineering and Logistics segment of WEF came together to establish this network. The idea was further strengthened during the 9/11 incident where again the industry participated in the relief operations. DRN Worldwide was formally launched in New York in January 2002. And shortly thereafter, DRN - India Initiative was launched.

ITC Limited: ITC partnered the Indian farmer for close to a century. ITC is elevating the partnership to a new paradigm by leveraging information technology through its trailblazing 'e-Choupal' initiative; creating livelihoods by helping poor tribals make their wastelands productive; investing in rainwater harvesting to bring much-needed irrigation to parched drylands; empowering rural women by helping them evolve into entrepreneurs; and providing infrastructural support to make schools exciting for village children. Through these rural partnerships, ITC touches the lives of nearly 3 million villagers across India
Reliance Industries: Reliance Industries Ltd. launched a countrywide initiative known as “Project Drishti”, to restore the eye-sights of visually challenged Indians from the economically weaker sections of the society. This project, started by one of India’s corporate giants has brightened up the lives of over 5000 people so far.
SAP India : SAP India in partnership with Hope Foundation, an NGO that works for the betterment of the poor and the needy throughout India, It has been working on short and long-term rebuilding initiatives for the tsunami victims. Together, they also started The SAP Labs Center of HOPE in Bangalore, a home for street children, where they provide food, clothing, shelter, medical care and education.

Irresponsible corporate behavior can result in harm to individuals, to communities and to the environment. Society tries to protect itself from harm by setting rules for behaviour that everyone agrees to abide by as part of living in a society. The price of peaceful co-existence is partial relinquishing of individual freedom.
Rules of behavior can be formal and written, or informal and unwritten. Historically, where there is a potential for harm, society has formalized rules of behaviour into legislation and regulation. Amongst other things, corporate law institutionalizes rules that seek to prevent corporate irresponsibility, to prevent corporations from doing harm.
In extreme cases, irresponsible corporate behaviour has resulted in horrific deaths and injuries, extensive environmental damage, or major economic failures that ruin livelihoods and wreck whole communities.

Some sector specific Corporate Irresponsibility

No.

SECTOR Corporate Irresponsibility Company that is undertaking this
1. Pesticide 200,000 injured when poisonous gas escaped

Union Carbide factory in Bhopal,

2. Beverages Depletion of ground water level
Coca-cola

In 1984, in the world’s worst corporate disaster, 2,000 people were killed and over 200,000 injured when poisonous gas escaped from a Union Carbide factory in Bhopal, India. Legal proceedings involving the case continued until 1991, when a settlement for US$470 million was reached between Union Carbide and the Indian Government.
The high degree of public protests against the Coca Cola plant in Plachimada, Kerala, India got international attention and also led to government intervention for closure of the plant. The plant at Plachimada was alleged to have exploited the ground water resources leading to drying up of wells and other natural water resources in the area. The entire region, which was a thriving agricultural land, had to rely on water supplied by tankers. Coca Cola was drawing 1.5 million liters/day from the common groundwater resource.
The causes of corporate irresponsibility are difficult to determine precisely. Irresponsible behavior can be intentional or unintentional, the result of an act of commission or an act of omission, and taken by the corporation as a whole or by an individual manager. Preventing irresponsible corporate behavior is therefore not straightforward
Benefits of CSR: -
1. Positive public image
2. Retaining staff, enhancing employee morale
3. Higher productivity, reduction in costs and increase in profitability
4. Positive engagement with the government.

CONCLUSION: -

Now a day, there is a growing awareness about CSR activities among the organizations as well as stakeholders (employees, shareholder, community, environment, consumers) in order to have a mutually beneficial relationship over a long period of time. It is important in this context to understand that the sustainable business growth is associated with care for the community and markets the corporations operating in.
To encourage CSR, a step forward has been taken since 1999 The Federation of Indian Chambers of Commerce and Industry (FICCI) and Business World (BW) are given an award jointly.

Enterprise Value

2010-01-14T09:32:00.000-08:00

What Does Enterprise Value - EV Mean?
A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents.
Think of enterprise value as the theoretical takeover price. In the event of a buyout, an acquirer would have to take on the company's debt, but would pocket its cash. EV differs significantly from simple market capitalization in several ways, and many consider it to be a more accurate representation of a firm's value. The value of a firm's debt, for example, would need to be paid by the buyer when taking over a company, thus EV provides a much more accurate takeover valuation because it includes debt in its value calculation.