Sunday, August 13, 2017

Promising the Skyscrapers: Jaypee's Corporate Debt Burden

There was a showdown yesterday in our neighborhood yesterday. About 4000 homebuyers staged a protest against the Jaypee Group for its failure to deliver their apartments on time.

The anger and rustration of homebuyers is undertandable. Having been promising a "Wish Town" with sprawling lawns, gold courses, playgrounds and various other amenities , and having invested  their life savings to buy a home of their own, they are now being left in the lurch. Apartments that were to be handed over in 2011 are still undelivered. Across the expressway, a vast array of unfinished apartment complexes can be seen on the horizon -- empty shells of brick, cement and concrete, with no sign of life, or work-in-progress.

A number of protests have been taking place from time to time. The last one led to a blokage on the expressway, and this one was aparently triggered by a decision in the High Court. The Allahabad bench of the National Compaly Law Tribunal (NCLT) admitted IDBI bank's insolvency plea pertaining to Jaaypee Infratech. The company had failed to repay a loan of INR 8500 Crores (USD 1.3 billion).

Behind the anger and frustration of the homebuyers is the larger picture of Corporate Debt in India. Thanks to poor internal controls, bad debts in Indian banks has shot up to INR 7,00,000 Crores (USD 109 billion) over the last two years. In order to defaults companies have been on fire sale of assets: Reliance Communications (RCom), which had debts of over Rs 47,000 crore sold its tower business to escape default default, the Ruias have sold their oil refining business to Rosneft, GMR and GVK parts of their airports and power businesses, and Vijay Mallya parts of his liquor businesses that were mortgaged to fund Kingfisher Airlines.

Jaypee group’s debt is over Rs 75,000 crore (USD 11b). So, according a report in the Hindu:
"... the group has agreed to sell its 20mtpa of cement assets to Kumar Birla-led Ultratech for Rs 15,900 crore. This will leave its listed entities with about 6mtpa of cement capacity, three thermal power plants, one hydropower plant, an expressway project and land parcels. It is looking to sell most of these assets at the right price, but buyers are not easy to come by. Aside from selling stake in its land parcels and the Yamuna Express Highway, the group is looking to sell its remaining cement plants for Rs 4,000 crore and its Bina thermal power plant for Rs 3,500 crore. In the last year, the group has defaulted on payment obligations worth $350 million. Analysts say its capacity to service its debt has not improved."

No wonder there are few takers when the Jaypee Group boss, Manoj Gaur, tries to tell the homebuyers that their "investment is safe".


* (2017) -

Jaggi on the slowdown (30may17)

(2017, May) Financial Express -
- They now constitute 11 per cent of of the gross advances of Public Sector Unit (PSU) banks. In all, the total NPAs including both the public and private sector banks were Rs 697,409cr in December 2016. These figures were compiled by Care Ratings.

 - 31 May - Reliance Defaults -
Andy / Bloomberg -

The Hindu-

Wednesday, August 09, 2017

USB Vulnerability

Ever so often, whenever I pick up a USB memory stick, a certain train of thought crosses my mind.
"Here is a miracle device", I remind myself, "which one of the 6 billion+ across the world, one that has made data-transfer and battery charging so amazingly simple, and yet, contains within it the power to destroy nuclear plants, water and power supply grids and to unleash starvation, misery and death across the world!"

A few years ago, the Economist highlighted positive features of the 'thumb-drive' in an article very aptly titled. "In Praise of the Humble USB". While reading this piece, I was delighted to know that a computer architect of Indian origin,  Ajay Bhatt, had a key role to play in creating this amazing interface, which his parent company, Intel, decided to make 'the cheap USB plug and socket an open standard, available to manufacturers everywhere free of all royalty charges and licensing fees'. This one move destroyed the Firewire standard that had been patronised by Apple, and made USB a de facto standard across the world.

The ease with which the USB drive could be used also made it a handy tool in the hands of spies, spooks and saboteurs. The most famous example of this is the Stuxnet virus which CIA and Mossad used to destroy a thousand centrifuges in Iran. Ever since I heard of this cyber-attack, I have been awed by the sheer scale of destruction that can be unleashed through the USB drives. It also led me to the mistaken belief that the Iranian nuclear program had been irreparably damaged because of Stuxnet.

A recent documentary by Alex Gibney - "Zero Days" - suggests that in the real world, things are not what they seem. In their eagerness and impatience to destroy the Iranian nuclear centrifuges, Mossad apparently changed the codes created by their CIA/NSA collaborators, and released a version that was a lot less subtle, and left behind an electronic trail that was being used against the USA. It seems Iran has now built up one of the largest cyber-armies in the world, one that was behind two major warning attacks: one on the largest oil company in the world, SaudiAramco, destroyed every line of code on 30,000 computers, and then a surge attack on banks in the USA that crippled commercial operations.

As a friend recently pointed out, our biggest vulnerability is that new technology is being built on old systems that were not intended to be on a network. So, by default, we have gaping holes in just about all the things that now run our lives - utility supplies, banking & finance.

Even the ubiquitous USB works on FAT-32 system which has since evolved into exFAT and NTFS. However, the base continues to be FAT32, and as long as this is the case, our systems will continue to be inefficient - and utterly vulnerable.


Stuxnet - Alex Gibney's Zero Days -
* FAT32, exFAT and NTFS

Saturday, July 08, 2017

SpeedPost Courier Racket

India Post works like magic these days. If you pack a handloom saree and send it by SpeedPost it magically transforms enroute, into a cheap rexine handbag!

This is exactly what happened to us last week. My wife had been eagerly waiting for her first "Dubakka" cotton handloom saree sent from Maanini Vastra Samskriti India PL (MVSI), Bangalore. Photos had been exchanged on WhatsApp, a design had been carefully chosen and confirmed. When the packet arrived by Speedpost (no. CK 02481962 5 IN) yesterday, it looked like a saree packet, it weighed like one, but when we opened it, the packet contained a tacky, cheap rexine handbag.

SpeedPost packet no. CK 02481962 5 IN

Puzzled, we called up MVSI immediately. Had they, by any chance, sent us a handbag that was meant for another customer? The answer was an emphatic "No!". The company did not deal in anything other than handlooms. In fact it had carefully built a reputation as a reliable partner to a larger initiative by a group of handloom enthusiasts from "Kaithari", a social network that had been working tirelessly for the revival of handlooms across South India.

At a time when artisans in remote villages in Karnataka and Andhra Pradesh were losing their livelihoods to a change in fashion trends, groups like Kaithari and MVSI had come together with a revival initiative, linking weavers in small towns like Udupi and Dubakka (AP) to markets in urban India. Over 1200 sarees of the "Udupi weave" had been sold by MVSI, and the "Dubakka weave" (aka Chitkula Sarees), was just beginning to notch up sales.

Convinced that this was not a mistake at MVSI we examined that Speedpost packet a little more carefully. The packed had indeed been tampered while in transit. The brown tape had been carefully sliced open with a blade, the contents switched, and the packed re-sealed with transparent cello-tape.

While a formal complaint is being registered with India Post / SpeedPost, the question is - Is this a one-off incident or does it represent a larger problem plaguing India's booming e-commerce industry?

Two years back in 2014-15, the postal department’s revenues from e-commerce majors had more than doubled to over Rs 1,000 crore, up from Rs 500 crore the previous year, and just Rs 100 crore in 2013-14. While the e-commerce majors get all the attention, fact remains that SpeedPost, with its unmatched national network, remains the first choice for entrepreneurs in remote corners of the country.

Many rural communities depend on Speedpost for their livelihoods. Unless strict action is taken against such pilferage "Make in India" and the fledgeling "Digital Economy"is bound to suffer. This is one magic-show that India Post customers can do without.



Dubakka Sarees aka Chituka Sarees -

Monday, June 26, 2017

Compromise Managers

"Angamaly Diaries" is a fabulous movie.

A 2017 crime-drama film in Malayalam, directed by Lijo Jose Pellissery, it tells the story of internecine conflicts, and gang-wars in a small town in Kerala. What makes the movie outstanding is the way it brings out the color and celebration of life - eating, drinking, singing, dancing - with the darkest of out instincts, of murder, vendetta, and strikes a fine balance between the two.

It is the last part that really caught my attention here - especially the role of individuals who are designated as "compromise managers" by the warring factions.  These are people who are allowed to step in when the cycle of murder and retribution reaches a stalemate where there can be no winners, or when it is clear that if the fight were to continue into a war of attrition, the winner would be an "outsider".

The one person designated as the Compromise Manager is an insider, a person who, despite being identified with one gang, has over a period of time, won the trust and confidence of the rival gangs as well. From this precarious position, he tries to make the key decision-makers, often the most violent individuals, recognize their own long-term selfish interest in agreeing to a compromise formula.

Thanks to this arrangement, the role of the state law-enforcement agencies and its ponderous legal system gets sidelined in favor of solutions that are more local. Money and business opportunities stay within the community, and the focus shifts from settling scores in the neighborhood, to putting up a joint front for challenges that come from outside.

Needless to say, CMs can be effective only when the costs (including bribes, jail-terms) of using the official legal system are much more than the benefits. In this case the town does have an active police officer, but the CM understands that in increasing crime-graph reflects poorly on the career of government officers. Similarly, the lawyers find it more lucrative to extract fees for striking a compromise rather than legal charges.

If the small town or village represents a microcosm, the UN perhaps represents the defunct legal system that is simply not in a position to resolve conflicts. This movie makes you wonder - who would be best positioned to be a compromise manager in conflict between nations-states?


* Movie - Angamaly Dairies (2017)

* Director - Lijo Jose Pellissery -

Friday, June 23, 2017

An Award Ignored

Strange are the ways of the Indian media.

A few days ago, an Indian scientist-entrepreneur based in Japan won the country's top environment award for 2017, and it was barely mentioned here. Bits of the news appeared on the web-editions of India Today and DNA, both apparently sourced from a newsfeed site called UNIIndia.

Dr. Shrihari Chandraghatgi, CEO of EcoCycle Corporation, was awarded the Environment Award for 2017 in Japan for "developing cutting edge technologies to address burning environmental problems". This award is the highest honour given every year jointly by the Ministry of Environment, Japan, National Institute for Environmental Studies (NIES), Japan and The Nikkan Kogyo Shinbun (a media group). What is more,  Chandraghatgi is the first foreigner to win this award.

What exactly is the cutting edge technology developed by Chandraghatgi to address 'burning environmental problems"? According to information available at his company website, EcoCycle has developed a unique technology for environmental remediation and recycling of organic solvents in semiconductor industries. It uses microorganisims to clean the soil and groundwater contaminated with chlorinated solvents and hexavalent chromium. The company has also developed unique on-site emission analytical techniques for semiconductor industries.

India does not have a significant semiconductor industry. Much of its requirements are imported. While this may have been a reason for the rather tepid response here, it fails to see the larger picture. In one of the interviews, Chandraghatgi gives an open offer aimed at India - "Now it is my turn to work in India where large scale health problems are reported because of consuming toxic groundwater. If any organization, government or NGO, wants to take up such cause with concern of public health, I am ready to provide my technology and vast experience free!"

Will this offer be taken up in right earnest? Or will we continue to wear our blinkers and look-up towards the West - USA, Europe - technological breakthroughs that are relevant to India?


* (20Jun17) -UNI - "Agri. Microbiologist Dr Shrihari Chandraghatgi gets Japan Award"
- Dr Shrihari is currently helping Ministry of Industry, Thailand in forming environmental regulations and educate with remedial technologies.
- In 2017 he established a NGO, Kibono Hikari literally means Ray of Hope to help under privileged children in India with educational and medical support.

* (21Jun17) - IndiaToday - "Indian Agri-Microbiologist given Environment Award in Japan" -

* (21Jun17) - DNA -

* (2015) - Son's donation for Scoriosis treatment -

* EcoCycle Corporation, Japan

Friday, June 09, 2017

"Tatkal" Railway Bookings

It is amazing how the Indian railway reservation system has evolved over the last two decades.

Today I tried my hand, for the first time, at a system called "Tatkal". It is a system for last-minute bookings, for travelers who have not planned their journey in advance. The computerized system turned out to be a lot easier than expected.

I needed to make a quick trip to Mumbai, which is about 1400 km from New Delhi. There are about 20 trains connecting the two cities, giving you a wide range of options. You could start your journey at midnight, or take the last train after 11:00PM. You could cover the distance in 15.15 hrs in the fastest train, the Rajdhani Express (no. 12952), in 1st class AC comfort, for INR 4755, or reach there at a more leisurely pace in the Amritsar Express (no. 11058), which takes no less double the time - 31.15 hrs. A journey on the latter, on a 'sleeper' ticket would cost you just INR 600 (USD 9.30!).

You also realize that in the egalitarian world of Indian Railways, even the slowest train is called an "Express" :)

My travel priorities were quite straightforward:I did not want to start my journey at unearthly hours, and I waned to travel cheap. This brought down my choices to five trains, all of which were fully booked. So I opted to go for "Tatkal" which is a option that sits discreetly as a narrow banner, alongside the others: General / Ladies / Handicapped.

The first option was Paschim Express (22 hrs) and it showed 17 seats available when I logged in at 11:00AM. However, by the time I reached the payments page, the IRCTC website went into its 'daily maintenance' mode. When I returned an hour later, all the seats were gone!  The next best option seemed to be the 12284 'Nzm Ers Duronto' (20 hrs), and this too was running on a waiting list.

Now, a surprising thing happened when I opted to take a wait-listed ticket. The IRCTC servers now gave me a pop-up "Vikalp" option - in case this ticket was not confirmed, I had three other trains to choose from, all of which were the next available trains to Mumbai. This saved me the trouble of going back, retracing all the steps to make an alternate booking. Cool.

The ease with which the whole process was completed reminded me of the late 1990s when the only option was to line up at the railway reservation counters. You had to reach the station two months in advance, stand in a long line, and wait for your turn at the counter. There had been times when the bookings closed by the time I reached the window, or was shortchanged by the ticketing officers. Either way, you lost at least half a day for rail bookings.

Now, thanks to IRCTC, the online booking system has become amazingly simple. So much so that it is easy to forget that it represents just a small fraction of the effort put in by a government agency, CRIS (Centre for Railway Info Systems), to help railways carry 6 billion passengers, and 6 million tons of freight, every year!

Scope for Improvement:

* Acronyms are confusing - it would be useful to have the full-form appear on a mouse-over. Eg. Train no. 12172 s described as "HW LTT AC SF", which is no better than Morse-code. Turns out that this is "Haridwar Lokmanya Tilak Terminus Air-Conditioned Super Fast Express"!


* VIKALP Scheme -

* Raghuram (2007): Turnaround of the Indian Railways -

* Tatkal Booking Guide -

Thursday, June 08, 2017

GST Explained by the Revenue Secretary

In less than a months' time, the tax system in India will take a radical shift to a comprehensive Goods and Services Tax (GST) model. In most countries, GST is understood as a single indirect, comprehensive, broad-based consumption tax. In Singapore the GST rate is a flat 7% while in Australia, it is 10%. Other countries have a graded VAT system with different tax slabs.

The Indian model GST is going to be unique - and seems rather confusing. From 1 July 2017, we are going to have a GST with five different slabs, ranging from 0% to 28%. The norms for reporting and compliance too seems quite formidable. This impression is getting reinforced by 'expert analysis' on YouTube and the social media.

This was the background and context to a recent meeting organised by the Indian Express, to bring Dr. H. Ardhia, the Revenue Secretary himself, to interact with the pubic. It was a decidedly anxious audience  of about 400 people who assembled at IIC on 6 June, 2017.

It was a packed hall, ringed with people who could not find vacant seats. The two empty chairs on the stage were taken up Vishwanathan from IE, and Dr. Ardhia, who was described as a PhD in Yoga!

First came the big picture: The long legacy of Indirect Taxes (Customs, Excise Duty, Service Tax, VAT, Stamp Duty, Entertainment Tax, etc.,), how the division of responsibilities between the central and state governments had resulted in various inefficiencies, and how steps were taken to gradually move from VAT to a nation-wide, common GST system.

The total tax collection for FY 2015-16 was INR 14600 billion (Rs 14.60 lakh crore), of which indirect tax revenues was Rs 7.11 lakh crore and direct tax collection came in at Rs 7.48 lakh crore. In India, the ratio of direct vs. indirect taxes was 35:65 - just the opposite of what it ought to be, and the sheer absurdity of the fact that in a country of 1.2 billion people there are only 2.4 million people who earned an annual income of over INR 1 million!

A substantial part of the session was set aside for answering questions from the audience. Surprisingly there were hardly any long-winded queries - most of them were short and sharp, with matching responses from Dr. Ardhia, with a dose of good humor. At the same time, it was a bit disconcerting to note from the responses, that the Revenue-Secretary too was not entirely clear on how the government would cope with various interpretations of the GST Act 2017.

Starting from 1 June 2017, we are sure too see many months - and perhaps years - of GST-related turbulence and turmoil.


* Taxes to be subsumed in GST -

* (2017) - Dept of Revenue - collection during current year -
- 2011-12 Corporate tax 3.2 LCr -- Income Tax 1.7 LCr = Total 4.9 Lcr
- Customs 1.44 LCr -- Central Excise 1.4 LCr -- Service Tax 0.97 LCr = Total 3.9 LCr

* E&Y on GST Compliance -

* Global VAT / GST Rates -

* (2016) - Tax collection in 2015-16 exceeds target by Rs 5,000 crore -

* State Tax Revenues -
- Total for all states, 30,331 billion (30L cr)
- Top five - WBengal (4518b), AP+Telengana, UP, TN, Karnataka
- Kerala is at no.9 at INR 1382b

* (2017) Budget Explained --

* Revenue Secretary -
- Dr. Hasmukh Adhia