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US presidential polls: Mitt Romney’s bet

Mitt Romney’s bet now is that the economy will be so bad that the American people will forgive him for anything to get a new start

Is Mitt Romney too rich to be elected the president of America? Is his enormous wealth a liability rather than an asset particularly when America is going through hard times? Is his money too in your face to Americans? This is a question worth pondering because if Mitt Romney becomes president he will be the richest man to be elected president of the United States. His wealth is estimated to be around $250 million. According to People magazine though he did not work in the last year he was making $50,000 a day. If you take the wealth of the last eight presidents from Richard Nixon to Barrack Obama and double their wealth then it adds up to something near Mitt Romney’s wealth.

Nelson Rockefeller from the storied Rockefeller family ran for president thrice seeking the Republican presidential nomination in 1960,1964 and 1968. He was the governor of New York between 1959 and 1973. He was selected by Gerald Ford to be his vice-president after he became president on Richard Nixon’s resignation. He never won the Republican nomination and never became the president of the United States .Was his wealth a barrier? Similarly Ross Perot a billionaire ran for presidency as an independent candidate in 1992 and 1996 but did not make much headway. He too failed.

Per se money should not be a problem to get elected. However it is what money seems to do to people and particularly what it seems to have done to Governor Mitt Romney which is the issue here. Mitt Romney seems to lack the common touch .He seems to be insensitive to people and doesn’t seem to understand that may have feelings, too. His comments about Jewish culture being superior recently riled the Palestinians. It is impossible to think of any president including Dubya (George Bush) saying something similar. On Governor Romney’s first trip abroad after he became the Republican candidate for president, Romney’s insensitivity was famously on display in London.

He took pot-shots at the organisers for mis-steps in organising the Olympic Games and bragged about his superior organising abilities when he helped to organise the Winter Olympic Games at Salt Lake City in Utah. David Cameron the British prime minister had to point out that organising Olympics in the middle of nowhere was different from organising the Olympics in one of the busiest cities in the world. The prime minister would have also done well to point out that Summer Olympics are slightly larger with probably twice as many events as the Winter Olympics. There was a famous gaffe of Mitt Romney where he said that if he became president the relations between Great Britain and the United States would improve because they were both Anglo Saxons. This was around about way of pointing out that President Obama was black. This also highlighted Romney’s insensitivity and being out of touch.

Then there is the famous Romney horse in the Olympics which is participating in an event called Dressage which is some sort of “Horse Ballet” but is a sport for the richest of the rich and it draws attention to Mitt Romney’s wealth. There is also the vexed question of the non-release of Mitt Romney’s tax returns beyond the year. His father famously released his tax returns for 12 years when he was running for president. Governor Romney is not releasing his tax returns beyond a year on the ground that the Democrats will distort them. Is is specious at best and is going to hurt Romney sooner or later. He might also be the first presidential candidate who had a Swiss bank account and funds in the Cayman Islands. Ordinary Americans I am quite sure do not understand all this. They probably regard all these things as petty alien.

Butt Mitt Romney was the head of Bain capital, a venture capital company, and venture capitalists by their very nature are betting men and Mitt Romney was obviously a pro. Mitt Romney’s bet now is that the economy will be so bad that the American people will forgive him for anything to get a new start, to get a second chance. For that very reason he discusses only the economy and does not dwell on other issues for too long. Judging by his recent speech on foreign policy he might not be too interested in other issues and his bet is that in the present circumstances neither are the Americans.

Mitt Romney bet big-time at Bain and won big-time but presidency may turn out to be a different cup of tea.

(Harsh Desai has done his BA in Political Science from St Xavier's College & Elphinstone College, Bombay and has done his Master's in Law from Columbia University in the city of New York. He is a practicing advocate at the Bombay High Court.)


SpiceJet’s profits spiced up?

The Kalanidhi Maran owned SpiceJet has broken the jinx of five consecutive quarters of losses and a posted profit of Rs56.15 crore in the June quarter. However, the auditors have voiced their concerns in their review report

The Kalanithi Maran-controlled SpiceJet has reported profits, a rarity for an airline. Its net profit for the quarter ended June 2012 grew to Rs56.15 crore when compared to a massive loss of Rs71.96 crore recorded in the corresponding quarter of the previous fiscal. It sales for the latest quarter improved by 51%, year-on-year, to Rs1,406.74 crore. According to the company, its market share has increased to 18.6% as of 30 June 2012, from 17.1%. Ace speculator Rakesh Jhunjhunwala’s Rare Enterprises bought 25 lakh shares of the scrip at a price of Rs30.77.

Do all the numbers look good as they make out to be? On closer examination, auditor SR Batliboi & Associates, reveals that it has used accounting methods to boost net profit. The auditor note said, “No provision has been made for interest of Rs747.1 lakh up to 30 June 2012, relating to earlier years on the outstanding inter-corporate deposits taken by the company. Had the same been accounted for, the net profit (after tax) for the quarter ended 30 June 2012, would have been lower by Rs597.60 lakh and accumulated losses as at date would have been higher by the same amount.” Even an exceptional income to the tune of Rs12.86 crore boosted its net profit. The income in question was the warranty claim set against some of the exceptional costs it incurred on engine repair last year.

No doubt there has been genuine improvement in revenues and profit but this seems to because of the ongoing troubles of Kingfisher Airlines. For instance, the airline witnessed a 26.1% increase in number of passengers. This helped SpiceJet return to profitability after five quarters, despite rising oil prices. The average revenue per passenger in the quarter increased by 24% from Rs3,283 to Rs4,068 and this helped its topline grow as people shift from Kingfisher Airlines to SpiceJet as well as other airlines. Even the plane load factor increased from 78.9% to 80.3%, year-on-year, for the quarter ended 30 June 2012.

Despite recording profits, Neil Mills, its chief executive office voiced concern and said in the press statement, “While we expand our footprint in domestic as well as international sectors, the excessive taxation on ATF (aviation turbine fuel) in India and the weakening of rupee against the dollar are matters of serious concern. The sharp increase in airport charges and other pass-through levies in various forms increase the cost of air travel to our passengers, without bringing any additional revenue to the airline. The need of the hour is for the Government of India to intervene proactively and launch initiatives urgently to improve the health of Indian civil aviation.”

The bigger issue for SpiceJet investors would simply be what happens when a restructured Kingfisher comes back and dramatically improves the supply side. Returns of SpiceJet shareholders including Mr Jhunjhunwala’s would be based more on what Vijay Mallya is not able to do rather than what Mr Maran is able to do.



nagesh kini

5 years ago

Long before the auditors of SpiceJet, the auditor of another airline - Kingfisher has rightly qualified his report by explicitly stating that with the net worth of the company having eroded it has ceased to be a going concern."
Only wish more such auditors had been so upright so as to qualify their reports in calling a spade a spade and not a shovel - more and more of them have set loose a new trend of stating as a part of their report - "Without meaning to qualify, read with Note.." This conveys nothing and the Management chooses not to respond in the Directors' Report!

ICRA places 14 suppliers of Maruti under watch over Manesar mayhem

The ratings agency said several auto ancillaries that have a high revenue dependence on Maruti's Manesar plant, may experience lower cash accruals and in some cases possible stress on their liquidity position during the lockout

Mumbai: As a fall out of the lockout at Maruti Suzuki's Manesar plant following violence and arson, rating agency ICRA on Tuesday placed 14 auto component manufactures on 'rating watch with developing implications', reports PTI 
Several ICRA-rated auto ancillaries, that have a high revenue dependence on Maruti's Manesar plant, may experience lower cash accruals and in some cases possible stress on their liquidity position during the lockout, prompting the agency to place their ratings under "watch with developing implications".
"Given the present uncertainties, it is difficult as of now to quantify the extent of supply disruption and its eventual impact on individual companies' financial risk profile," ICRA said in a release.
The firms under the rating watch list are ALP Nishikawa, Global Autotech, Jay Bharat Maruti, Juken Uniproducts, Kalyani Thermal Systems, Krishna Maruti, Lumax Industries, Machino Polymers, Neel Metal Industries, SKH Metals, Sona Somic Lemforder Components, Subros, Technico Industries and Uniproducts.
ICRA said it is monitoring the situation and would conclude its rating action as and when greater clarity emerges.
Production of four popular models - Swift, Swift DZire, A-Star and SX4 - has been halted since 18th July as India's top carmaker declared a lockout at the plant in Haryana following large-scale violence which led to the death of a top HR executive of the company.
According to ICRA, these four models together account for around 30-35% of Maruti's volumes. For suppliers, the overall average realisation of components related to these four models is higher than those of components that go in models produced at Maruti's Gurgaon facility.
Accordingly, it is estimated that those vendors that supply to all models of Maruti derive around 35-40% of their revenues from supplies to models produced at the Manesar plant, the rating agency noted.
Being the largest passenger vehicle original equipment manufacturer (OEM) in India with domestic market share of 38.4% in 2011-12, any demand or supply shock on Maruti's output, tends to have a relatively greater adverse impact across its supply chain, ICRA maintained.
Even during 2011-12, when production had remained intermittently disrupted at both Manesar and Gurgaon units in the wake of a prolong strike, some auto component makers, particularly those deriving a large majority of their revenues and profits from sales to Maruti, had experienced lower profits and cash accruals during that period, it said.
Given the prevailing situation, a quick resolution and subsequent process of normal production resumption may get protracted, the agency added.


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