Nifty may correct only if it closes below 6,200
In Tuesday’s closing report we had mentioned Sensex and Nifty may be volatile and directionless for a day or two. Ignoring the weak data from the US, the Indian market opened Wednesday higher and managed to move further throughout the session before closing at the highest level since 24 January 2014. The bourses witnessed high volatility today on account of the February 2014 F&O contract expiry.
The BSE 30-share Sensex opened at 20,870 and hit a low at 20,860 while the NSE Nifty opened at 6,202. After hitting a low almost at same level, both Sensex and Nifty moved higher to hit a high at 21,005 and 6,246, respectively. The Sensex closed at 20,987 (up 135 points or 0.65%) while the Nifty closed at 6,239 (up 39 points or 0.62%). The NSE recorded a volume of 63.26 crore shares. The stock market remains closed Thursday on account of Mahashivratri. The government will unveil data on gross domestic product (GDP) for Q3 December 2013 on Friday.
The Securities and Exchange Board of India (SEBI) on Tuesday proposed in a discussion paper that appointment of an agency to monitor the utilization of funds raised through an initial public offering (IPO) should be made mandatory. Currently, such an appointment is compulsory only if the public issue size exceeds Rs500 crore. SEBI said the move is aimed at strengthening the monitoring of utilisation of all the equity capital raised by selling shares to the public. Among other points, SEBI proposed to make it mandatory for the monitoring agency to assign grades to the issuer so as to curb misuse of money raised through a public issue. SEBI has sought public comments on the proposals till 25 March 2014.
On the political front, eleven regional parties formed an alliance on Tuesday to contest general elections, presenting themselves as an alternative to the ruling Congress party and the opposition Bharatiya Janata Party. Prakash Karat, a leader of the Communist Party of India (Marxist), which is part of the new coalition, said the partnership was forged in an effort to keep the country's two major national parties out of power. A report by Moody's analytical arm says that though downside risks to the economy have receded in recent months, it is likely that the growth engine will continue to sputter until 2015 even if "business-friendly" Narendra Modi becomes prime minister.
US indices closed marginally lower on Tuesday. US home prices ticked down 0.1% in December, declining for a second month, with 11 of 20 tracked cities posting drops, according to S&P/Case-Shiller's composite index. After seasonal adjustments, home prices in December rose 0.8%, down a bit from 0.9% in November. The consumer confidence index fell to 78.1 in February from 79.4 in January, the Conference Board said Tuesday. Federal Reserve Chair Janet Yellen will testify for the US Senate on monetary policy on Thursday.
Among the Asian indices, five closed in the green while four closed in the red. Hang Seng (0.54%) was the top gainer while Jakarta Composite (0.97%) was the top loser. European indices were trading lower while US Futures were trading marginally higher.
Archana Bhargava, became the chairperson of UBI despite a patchy record but why did she suddenly leave UBI? Was she keen to report exaggerated bad loans and sanction dubious ones that alerted the RBI to act?
The sudden exit of Archana Bhargava, Chairman & Managing Director of United Bank of India (UBI) with her voluntary retirement application being accepted in 24 hours, has set the banking industry buzzing. One view was that she had been made a scapegoat for daring to bring out the rot in the UBI. That UBI had seen such a precipitous decline was significant, because this is the bank, which, along with United Commercial Bank had its net worth completely eroded in the 1990s before being revived with big capital infusion from the exchequer at the taxpayers’ cost.
Another view is that Ms Bhargava’s powerful political connections, which got her the top job at UBI, despite a patchy track record, also ensured that the got a swift exit, when Reserve Bank governor, Raghuram Rajan asked for her to be sacked and the board superseded. Moneylife examines some of the charges and counter charges.
While UBI’s bad loans trebled to Rs8,546 crore at the end of December 2013 from Rs2,964 crore last March, things really came to a head when Mrs Bhargava wrote to the RBI to say that neither the external auditor of the bank nor the RBI inspection has brought out the real mess in the bank and the non-performing assets that were not detected. This letter prompted RBI to appoint Deloitte as the forensic auditor, while RBI itself initiated a fresh credit audit, which also covered the loans sanctioned by her. The latter probably happened because, as The Economic Times has reported, that 10 UBI general managers wrote to the RBI that she had chosen to override the board and sanction Rs100 crore loan to a realty developer.
In fact, the RBI curtailed her loan sanctioning powers to under Rs10 crore to a single entity while the audits were on. But that was not all. Ms Bhargava, blamed the Infosys software Finacle for failing to detect NPA below Rs10 lakhs. However, it turns out that this did not mean that NPAs remained undetected, but were monitored using regular credit monitoring systems that pre-date core banking. In fact, UBI sources insist that the bank’s NPAs below Rs10 lakh loan portfolio were exaggerated by the former chairperson for reasons known to her. In several other areas, the bank has made provisions that are even higher than those of State Bank of India. It is believed that a sober look at the bad loan books will allow the bank to write back some of these provisions in the coming months.
Why did Dr Raghuram Rajan seek the removal of Mrs Bhargava along with superseding the UBI board? A universal view is that poor people management and friction with the board of directors as well as top executives of the bank.
Sources say that Mrs Bhargava has been at loggerheads with the board and several government appointees from the very beginning. What is however curious is her “rush” to declare massive NPAs in order to “show the bank in bad light”. The other version, that she was trying to prevent government nominees on the board from lobbying for politically motivated loans or brokering deals for big business seem much less plausible, now that the finance ministry has given her a smooth exit from the bank. Also, Mrs Bhargava herself is supposed to be extremely well connected with the leaders of the Congress party.
The question is, if Mrs Bhargava has such poor people skills, how did she bag a coveted bank chairmanship? Was it based on an impeccable service record? On the contrary, bankers confirm that she has had run-ins with corporate houses and faced charges of strange deals in all her previous assignments. However, most of these charges, including a serious allegation by a company called Rajesh Exports, have not been substantiated following an RBI investigation. Such charges would have affected the careers of many bankers and prevented them from bagging a coveted chairmanship at a nationalised bank. In Ms Bhargava’s case, her contemporaries insist that powerful political support from the ruling Congress government and the ability to have people of influence on her side all through her career, especially at Punjab National Bank.
So how bad are UBI’s finances? Was UBI, whose networth was fully eroded in the 1990s, hiding another precipitous slide through dubious and reckless lending? Or, was it, as UBI’s senior bankers allege (on condition of anonymity), CMD Bhargava was in a tearing hurry to show the bank in bad shape by declaring ever escalating NPAs ever quarter. This was apparently the biggest source of acrimony on the bank’s board and led to severely strained relationships with senior management at UBI. Ms Bhargava may have had a point about the work culture at the bank — this is a complaint that one has heard from everybody posted in West Bengal or specifically in Kolkata.
Interestingly, having given Ms Bhargava a quiet exit through voluntary retirement, it is not clear why the finance ministry is delaying the decision to supersede the board of directors and to appoint a new chairperson. Mr Rajiv Takru, Secretary financial services told the Financial Express that the ministry is waiting for an inquiry report. Since Governor Raghuram Rajan has only written to the government after a forensic audit by Deloitte and another audit, including multiple inquiries into complaints against the former chairman from companies such as Rajesh Export, it is not clear what the government is waiting for.
It is also unclear how the government can permit a VRS when there are serious charges about loans of Rs800 crore being disbursed with a Rs300 crore collateral or that she overruled the board to extend a loan of Rs100 crore to a developer. This only underscores the view that crony capitalism and political string-pulling is the reason for the massive rise in bad loans in the past few years despite a powerful SARFESI Act having been enacted, a decade ago that strongly armed bankers with powers to recover loans.
Namrata Kothari and Meghna Mittal, both founders of online fashion and shopping portal—www.InOnIt.in, say that entrepreneurship leads to innovation, which eventually results in growth provided you stay persistent and focused
Namrata Kothari and Meghna Mittal are Mumbaikars who met at the Wharton School of Business, spent some time in investment banking before deciding to turn entrepreneurs. After business school, Namrata worked at Goldman Sachs while Meghna worked at Bear Stearns for several years. But soon both were bitten by the entrepreneurship bug and chucked up their jobs to return to India.
www.InOnIt.in, an online fashion and shopping portal, that they cofounded in April 2011 started as a simple experiment in e-commerce. This has now an annual turnover of more than Rs1 crore. They receive 1.5 lakh visitors on their website every month and have managed to get 1.03 lakh followers on Facebook. A free online newsletter that they bring out also boasts 40,000 subscribers.
Read the excerpts of an interview of Namrata Kothari with Konica Bhatt of Moneylife:
Konica Bhatt (ML): Tell us something about your business.
Namrata Kothari (NK): The main aim of InOnIt is to create a platform where women can come and read about fashion trends, as well as buy products that suit their style. They can follow the fashion trends of their favorite celebrities and shop accordingly. It is an online fashion blog as well as a one-stop shop for all women’s clothing.
ML: What inspired you to set up this particular business?
NK: We wanted to start a technology-related business, as well as one that would fill a niche in the online fashion industry. There were not enough online content websites back then, where we could browse products in one place as well as get information about latest trends. This was the main idea behind www.InOnIt.in
ML: What roles do you play in the business? What is the staff strength of the company?
NK: Meghna (Mittal) takes care of the marketing and finance, while I take care of the content and merchandising. We started with a staff of eight women. As the business expanded, we hired more people for the tech team. Currently, our staff consists of 13 people.
ML: What is the main source of revenues?
NK: Our online sales definitely play a prominent part in generating revenue. Our dresses and jackets are the most sold products, and we have as many as 40 sales per day. We also work with a lot of brands and expertspeak who act as our sponsors.
ML: How do you deal with the many glitches that come up with being an entrepreneur?
NK: Glitches are of different kinds -- like in picking the right vendors to managing your business. We try to be as resourceful as possible, without wasting money. Managing time and work is also a tough task. Also, being an e-commerce industry, website malfunctioning is one of the biggest glitches; we have to make sure the tech team stays on it all the time to fix it as soon as possible.
ML: What drives you to work everyday?
NK: Mainly the excitement to build a product that will change or enhance the way customers learn, discover and ultimately make purchase decisions. Its fun to create something that will enhance the shopping experience for people and it is challenging to try to get someone to actually spend money. That challenge is what fascinates us to go to work everyday. There was an incident where someone purchased 35-37 items online for Rs50, 000. She was a second-time customer and the purchase left us flabbergasted. It is still the largest one time sale we have made till date. Such exhilarating experiences motivate us to follow our goals.
ML: What are the future plans for both of you and for InOnIt?
NK: As of now, we are planning to revamp the website. We hope to bring more connection between content and e-commerce and enhancing the experience of the visitors. We are also planning to do a fashion event this year.
ML: Who are your main competitors?
NK: We have a different set of competitors from both sides of our website. For the forum side, other websites that do similar content, numbers of independent bloggers who talk about fashion and follow celebrities are the main competitors. Some of the big fashion websites like Jabong, Myntra have a great collection of items on sale. They are the biggest competitors in the ecommerce side.
ML: What were the biggest challenges you faced as women entrepreneurs?
NK: We never really faced any challenge, if fact it is more of an advantage. As there are not many women entrepreneurs, people look up to you for being a woman entrepreneur. So people generally treat you positively. Balancing personal and professional life can be a personal challenge for women.
ML: What business apps, tools or mottos help you run your business efficiently?
NK: We use a variety of apps for the business. The main ones are Mailchimp for emails, Asana for organisation to create projects, tasks, Hootsuite for social media, Wonderlist to create a to-do list and Evernote for quick office making notes, interviews. We also use the ever popular Google Docs as well.
ML: What are the major opportunities for women to start their businesses?
NK: The type of business you want to open depends on your educational background. It only makes sense to enter in a field which you know about, and also are passionate enough to follow. Though the public relations sector, fashion industry, education sector have some major opportunities for women, there are no stereotypes anymore.
ML: Any tips for women entrepreneurs trying to make it in a competitive world?
NK: It is very important to have conviction. Also, once you enter the competition, stay persistent and focused. There are times when the pressure builds up, or you have a number of distractions. At such times it is extremely important to maintain the focus and not get side-tracked. Remember to always aim high in life in order to succeed.
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(In the run up to International Women’s Day on 8th March, Moneylife is running a series of Women Entrepreneurs who have made a mark. If you know women who ought to be featured in this series, do write to us with details at [email protected]. And if you are a women entrepreneur wanting to expand your business and grow, do keep in touch with our not-for-profit entity at foundation.moneylife.in - we may have some news in store for you!)