Thursday 2 February 2012

Bold move in challenging market conditions

I have always associated the name "Dabur" or "Burmans" with the FMCG / consumer goods sector and specifically with products such a Meswak, Dabur Lal, Hajmola, Dabur Vatika, Dabur Chyawanprash and the like. While reading an article in Outlook Business magazine, it was really  interesting to know that the Burman family - the promoters of Dabur also have significant interests in the finance sector, especially the insurance sector.

Just to provide a brief overview: The Burmans first ventured into the insurance sector through their joint venture with ABN Amro Bank in 2001 to market the bank's life insurance products, then they also partnered with Fidelity International (Fidelity eventually acquired the Burman family's stake) & Aviva Life Insurance (holds a significant 74% stake) and introduced them to the Indian markets. And moreover, the Burman family's investments in the insurance sector is close to INR 2,000 crore - a fascinating figure considering Dabur India Ltd.'s revenue of over INR 4,000 crore today.

What surprised me the most was not that they have a presence in the finance/insurance sector........but the Burman family's decision to buy a 25% stake in Espirito Santo Securities, the Indian unit of the Portuguese Banco Espirito Santo with a view to enter the "highly" competitive and difficult equity broking business. Well you would ask me - "What's so surprising then? Its just another investment for a big group!" Yes, it is.

But the surprising thing is not the investment,
  • What's surprising is: the timing of the investment (equity broking business in India is currently in deep trouble given the current market scenario; incumbent players are looking at other revenue streams to survive, low trading volumes and increasing costs are forcing broking houses to shut operations or downsize or looking to sell, historically foreign brokerages have chosen to leave India during times of turmoil) - rationale behind the investment seems to be buying/entering into a beaten down segment, taking a contrarian view and coming up trumps when the tide turns.
  • What's surprising is: neither the Burman's nor their JV partner have extensive experience of equity broking in a difficult market as India.
Although Dabur claims that financial services is their second largest focus area after consumer goods; and their JV partner states that by entering into a partnership at this difficult juncture in the equity market when consolidation is the norm of the day, the Burman-Espirito Santo JV shall have the advantage of building market share before the industry consolidates & the good old days return to the Indian equity markets;

Only time will tell whether the Burman's will succeed in this extremely risky endeavour or shall history prevail and the Burman's will exit this financial services venture too as in the past!

Wednesday 1 February 2012

Indian government's double standards


Today morning's newspaper article came as a big surprise to me. Most of you would be asking "WHY?"....It was surprising to read an article titled "Ajmal Kasab not given a fair trial". Fair trial, what is this advocate appointed by the apex court to defend Kasab talking about? This ruthless terrorist came into India with the objective of waging a war against Hindustan and his aim was "to kill" irrespective of who the people were - the children, the oldies, the innocent common man, the police and anyone & everyone those came in his way. And today even after 3 long years of wait, these victims  of Kasab and his accomplices have not got justice against such a heinous crime and we are still trying to defend Kasab by stating that he was not given a fair trial.

Later as I was traveling, I read another article which is currently making the news: "the Antrix-Devas deal controversy". For those who are unaware, let me provide you with a brief background on this controversy. The controversy pertains to the Antrix-Devas agreement of January 2005. Antrix is the commercial arm of the state-run ISRO (Indian Space Research Organization), whose primary objective is to develop space technology for its application to various national tasks. Devas is an Indian company in the arena of satellite communications and technologies to establish a next-generation national satellite system that provides vital services to the masses and government agencies across India. The former ISRO chief along with three other scientists have been accused of violating rules while awarding the contract. The government which is currently grappling against numerous graft charges, after six long years has suddenly awakened and decided to scrap the deal given the accusation and wrongdoings in the deal. I am not against scrapping of the deal given the huge losses caused to the exchequer (approx. Rs. 2 lakh crore) as mentioned by the Comptroller & Auditor General (CAG). However, the government has banned the accused 4 scientists from further government jobs without giving them an opportunity to a "Fair Trial" and putting up a defence seems uncalled for. The entire scientist fraternity including the Prime Minister's chief scientific advisor has condemned this ban.

"Natural justice demands that people should be punished after they are found guilty. In this case, the punishment has come before the accused have had a chance to hear the charges and put up a defence. - Excerpt from a financial newspaper" 

Given  that the advocate appointed by the apex court is seeking a "Fair Trial" for Kasab who committed the most heinous crime of waging a war against India, I believe these 4 valuable intellectuals (scientists) of India should atleast be allowed a "Fair Trial". In fact, one of these 4 scientists was also awarded a "Padma Vibhushan" in 2009. The Padma Vibhushan is the second highest civilian award in the Republic of India. It consists of a medal and a citation and is awarded by the President of India.

Hope the government takes necessary steps of withdrawing the ban, investigating the wrongdoings in the deal and trying the suspects in a court of law.