With the third plant production capacity of India Yamaha Motor will be increased in stages to a level of 18 lakh units annually by 2018 with an initial annual capacity of 4 lakh units achieved in 2014
New Delhi: Japanese two-wheeler giant Yamaha on Monday said it would set up third facility in India, entailing an investment of Rs1,500 crore over the next five years, reports PTI.
The company's wholly-owned subsidiary - India Yamaha Motor (IYM) - will start the production of this new plant near Chennai by 2014 with an initial annual capacity of 4 lakh units, which will be expanded to 18 lakh units by 2018.
"India Yamaha Motor signed a memorandum of understanding with the government of Tamil Nadu today approving the construction and operation of a new two-wheeler factory in the state," the company said in a statement.
The facility will be located at the industrial park in Vallam Vadagal on outskirts of Chennai and the construction is scheduled to begin in September 2012, it added.
"The forecast for the total investment in the new factory and facilities is approximately Rs 1,500 crore over the next five years," IYM said.
The company had earlier said it was scouting for land in South India, preferably with port facility, to make the country an independent export unit for selling in overseas markets, including Latin America and Africa.
As per plans, the new plant will initially employ 1,800 people and have an annual production capacity of 4 lakh units.
"Production capacity will then be increased in stages to a level of 18 lakh units annually by 2018, at which time employment is expected to reach 6,500 people," it said.
IYM has two manufacturing units at Surajpur in Uttar Pradesh and Faridabad in Haryana. While the Surajpur plant produces motorcycles for both domestic and export markets, the Faridabad unit makes two-wheeler parts.
"To keep pace with the growth in demand, plans have been implemented to boost the existing factory's annual production capacity of 6 lakh units to 10 lakh units on an investment of approximately Rs 750 crore in 2012," IYM said.
By 2018, the company will have a combined production capacity of 28 lakh units.
"We are very pleased with this development as this is in line with YMC's medium-term management plans of enhancing local production levels to meet the demand growth in emerging markets such as India and their export markets," IYM Chief Executive Officer and MD Hiroyuki Suzuki said.
The Indian two-wheeler market has witnessed robust growth in the last few years and IYM expects it to attain 2 crore units level by 2016, when the company is targeting to sell 20 lakh units and achieve 10 market share, he added.
The S&P futures derivative product launched by the NSE is finally paying for its inherent limitations. Volumes have collapsed as investors and brokers shun a product which can only be traded when the US market is closed, creating uncontrollable risk
The volumes of the Standard & Poor 500 index derivative, traded on National Stock Exchange (NSE) have plummeted. The volumes traded on the contract this fiscal was meagre, with only an average of 234 contracts per day changing hands, since the beginning of this fiscal. On the other hand, the average volume of the contract from its launch in up to 31 March 2012 was 1,549 contracts per day. Since 31 March 2012, the number of contracts traded has not crossed 1000 per day except once.
What is most pertinent is that the volumes have plummeted despite transaction charges being waived off. Earlier, the exchange announced, at time of product launch, that the transaction charge would be waived off till 29 February 2012. However, the charges continue to be waived off, presumably to keep volumes healthy. However, volumes have clearly indicated that investors aren’t interested in a half-baked product.
One reason for this collapse in volumes is that the product design of S&P 500 futures is flawed. The Indian futures prices are derived from the US-based S&P 500. But these two are in two different time zones and two different trading timings. The futures traded in India don’t move as per live prices because the underlying market is closed when the futures are traded in India. The futures prices are determined by the market players on the National Stock Exchange, who based their prices either on previous day’s closing which is dated or pre-opening prices of the US market prices which are highly unreliable because they are a product of poor volumes. This makes a nonsense of this futures product. If trading is done on the basis of only closing prices, both buyers and sellers would feel trapped and would not like to take a chance.
The whole idea of this product was to participate in the American market using rupees. According to NSE’s press release at time of the launch, managing director and chief executive officer, Ravi Narain had said that, “derivative contracts on these global indices will provide Indian investors easy access to US markets in Indian market hours, without taking any currency risk.”
The reality is that, for this product to work, the timings have to be similar if not identical.
NSE, in order to induce healthy volumes, even encouraged brokers and investors to participate by introducing a “rewards scheme” known as Liquidity Enhancement Scheme (LES), wherein market participants fulfilling all the required terms and conditions would be rewarded from a common pool. According to a circular issued by NSE, it said that the existing cash incentive payable for maintaining open interest is Rs25 lakh per month, from which the top 10 market participants will be paid on a proportionate basis. Further, it said that all trading members with average daily volume of at least Rs5 crore across clients in a month (excluding proprietary trading) and average daily participation from at least 15 clients in a month will be eligible for additional incentives. Thus, it is encouraging brokers and dealers to encourage a product which is fundamentally flawed.
For a brief of the product, please see here: NSE to launch S&P 500, Dow Jones futures from Monday
According to an analysis by Barron's, a US financial magazine, only by digging into the footnotes of reports, and checking other regulatory filings, can one estimate that their earning tables leave out 90% of Herbalife's distributors and almost 95% of Nu Skin's. More importantly, it documents how MLMs are getting their money from micro-credit institutions—an issue that is of serious relevance to India, where tens of thousands MLMs are luring the poorest people
US-based Barron's financial magazine, which provides in-depth analysis and commentary on the markets and companies, has said that a careful analysis of Herbalife and Nu Skin numbers suggests that over 90% of their US distributors make no money.
"International markets offer fresh prospects for the companies, but even so, Herbalife's filings show it has to replace more than half of its distributor ranks every year. The world is large, but it is finite and increasingly well-informed. Herbalife's chief executive Michael O Johnson has said that his company is the "intersection of health and wealth," but the numbers show that distributors are capable of figuring out that it's a dangerous intersection," Barron's said in a report (Where Beauty Is Skin Deep ).
The report said, Nu Skin's and Herbalife's annual reports disclose the commissions earned by their US distributors. But the disclosures by both firms tabulate commissions for only a top fraction of their networks-giving a distorted picture of what a distributor could expect to earn. Only by digging into the footnotes of those reports, and checking other filings at the Securities and Exchange Commission (SEC), can you estimate that the tables leave out 90% of Herbalife's distributors and almost 95% of Nu Skin's. Even in the small slice shown by Nu Skin, most are in a segment that averages under $600 in commissions per year. Only 451, or about 0.2% of US distributors, are in the sliver that averaged more than $15,000 in commissions last year, according to Nu Skin's compensation summary. The numbers are better at Herbalife, but still daunting: About 1,200 made it into the 0.2% sliver that got more than $100,000 in commissions, it added.
Herbalife's SEC filings do a good job of documenting the churn within its ranks. Last year, it lost 51% of its 'active' distributors worldwide-an improvement from the 60% churn in 2009. Nu Skin, for its part, refused Barron's request to quantify its turnover rate, which SEC filings simply describe as 'high'. "It is easy to start a Nu Skin business," says the company. "It [is] easy for them to drop out."
Importantly, the Barron's report highlights the use of credit (mostly obtained through microfinance companies) for subscribing to MLM schemes. Quoting present and former employees of Grameen America (the brainchild of Nobel Peace Prize winner Muhammad Yunus, is present in the US as well), the report says that in Omaha and New York, many who took Grameen microloans, joined Herbalife and other such multi-level sales organisations as self-employed distributors.
The earnest manager of Omaha's Grameen America branch, Habib Chowdhury, told Barron's that he now discourages women from borrowing to join Herbalife.
For Herbalife and its health-products rival Nu Skin, however, business has never been better, says the report. Over the past five years, Los Angeles-based Herbalife more than doubled its earnings to $3.30 a share and saw its stock quadruple. Nu Skin tripled profits, to $2.38 a share, over the same stretch; the Provo, Utah outfit's stock likewise tripled. Both NYSE-listed companies have shared their swelling cash flows with stockholders, through dividends and huge share repurchases. Herbalife chief executive Michael O Johnson was the highest paid boss of a public company last year, earning $89 million.
Robert Fitzpatrick, president of Pyramid Scheme Alert and author of "False Profits" and also a crusader against multi-level marketing (MLM) companies says, this is the first time that "a prominent business magazine is questioning the validity of two of the nation's largest MLM companies-Herbalife and Nu Skin".
"The most significant issue of this article, however, is that Herbalife and other MLMs are reportedly now getting revenue from 'micro-credit' loans granted by non-profit banks to help the poorest of the poor. MLMs are now disguising themselves as anti-poverty programs!" says Mr Fitzpatrick. This is of extreme importance to India.
At Moneylife, which is arguably the only publication that has been single-handedly campaigning against MLMs and pyramid schemes, we believe that Indian regulators and state governments need to watch this development carefully, especially when the discredited microfinance sector is looking for ways to revive its fortunes.
As Mr Fitzpatrick says, "Verified data show that 'success' in MLM schemes is less than 1% per year for consumer investors. The micro-loan repayments would be based on the ability of poor borrowers to recruit other poor people into the MLM business, rather than from sustainable, profitable sales to retail customers. In that system, each unit of the 'business', on its own loses money. Profit comes only from the investments from other poor investors, nearly all of whom are destined to lose. If this is the case, and it is occurring on a significant scale, it means that MLM may be corrupting the micro-credit lending field, which is operating in many of the world's poorest countries.
Micro-credit lending was originally aimed at creating self-sufficiency and building community infrastructure. It is the exact opposite of a predatory investment scheme".