Manthan 2017: Day 2: Guest Lecture 2: “How to analyse an investment idea- A true life example”- Mr.Ravi Sundaram, Senior Development Manager, iNautix Technoogies India Pvt Ltd.

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Mr. Ravi S. started the discussion by quoting “Don’t invest for the sake of making money, but to gain an understanding of the market.” By taking the example of the pharmaceutical sector he is closely associated to, he explained concentrated vs. diversified portfolio. According to him, all guidelines need to be strictly followed while considering each of them.

He went on to explain the process related details while making investments. He mentioned that the duration depends on the nature of the investments. The holding period depends on the nature of stocks you are holding in the firm. Right issue needs to be carefully considered while going through with the decision. He further elaborated the investment decisions by citing an example of the life cycle of the drug which goes through various stages namely pre-clinical, clinical, NDA Review, Post marketing, launch, generic.

He went on to explain the road ahead for the pharmaceutical sector, through which he explained the important considerations like “Am I paying too much?.” Here, we mentioned that more than numbers, judgment and expertise matter while making investments.

While considering investments in a start-up, sustenance with consistency is a takeaway. He also explained few standpoints including government’s involvement in policy making. He said that the government looks at it holistically, not based on individual investor’s interest.

He also explained certain concerns while making investment decisions, few of which include life cycle phase wherein it possibly still be in early investment phase involving high R&D cost. Management’s strategy of in-organic growth, low tax%- take has its subsidiaries in countries where they book R&D expenses and outspoken management i.e. the number of media interactions include some of the other concerns. He ended the discussion by quoting wise quoting as an requisite to good investment decisions.

Manthan 2017: Day 2: Guest Lecture 3: “Credit Rating Perspective”- Mr. Shaik Mohammed Haneef, Deputy Manager Business Development, ICRA.

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Mr. Shaik Mohammed Haneef from ICRA enlightened the students about the various types of credit ratings and how it is evaluated from the point of view of ICRA in his session on ‘Credit Rating Perspective’. He stated that ICRA majorly evaluates and provides credit ratings and non-credit ratings which are used by clients for understanding a corporate’s credit state.

He elaborated and explained on various credit ratings such as SME Rating, bank loans, infrastructure projects, and commercial papers. He also put some light on non-credit ratings such as real estate grading, solar grading, ESCO (Energy Services Company) grading which is used to understand energy efficiency, and vendor rating.

Mr. Haneef further elaborated on the four different sources of risk such as industry risk, business risk, financial risk, and management risk. He later gave a practical understanding of the risks to the students through the ICRA website followed by answering some intuitive questions by the students on the same.

Manthan 2017: Day 2: Guest Lecture 1: “Operational risk” – Mr. Lalit Taneja, Regional Director, Global Association of Risk Professionals.

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The topic being discussed in the guest lecture was operational risk. Mr. Taneja explained to the students the concept of operational risk using Basel Committee’s existing definition. It is basically the loss that is incurred due to failed internal processes, people, and systems or from external events. He also explained that individual banks can adopt their own definitions of operational risk if the minimum elements in the Committee’s definition are included. A key takeaway from the discussion was that operational risk is inevitable and cannot be zero.

Mr. Taneja briefly spoke about internal & external fraud, employee & workplace safety, clients, products and business practices, and process management. He emphasized the importance of operational risk indicators. These indicators are vital in identifying potential losses and tend to be specific to organizations.  They refer to lagging/ex-post measures and information on events that have already taken place (examples include failed trades, settlement errors). It is up to the risk managers to transform lagging into leading indicators. This process can be carried out by changing the focus of the indicators or even by adding new information. Thus, the focus of these indicators could be changed to highlight issues that are still outstanding or remain open after a specified period of time. The transformation of these processes is difficult to implement in reality. He went on to explain three types of risks namely:

  1. Legal risk – It is included in operational risk. It refers to the risk of disruption to operations due to unenforceable contracts, lawsuits, adverse judgments and legal proceedings.
  2. Reputation risk – Although this type of risk isn’t usually considered, reputation risk is very critical to a business. It refers to negative public opinion. A fall in a company’s reputation can result in liquidity difficulties and falling share prices.
  3. Business or strategy risk – It arises from an adverse shift in the assumptions, goals and other features that underpin a strategy.

The next part of the lecture was about the latest trends and approaches. Mr. Taneja spoke of the relevance of frameworks, advanced analytics, strategic planning, stakeholder feedback, advanced management approach and the need to forecast “black swan” events. Post the discussion, Mr. Taneja answered questions which were along the lines of operational risk, risk management, and its applicability. He was able to explain the concept exceedingly well because he was able to relate it to real life examples in corporate organizations and financial institutions.

Manthan 2017, ECHO, Day 2- “The secret of generating Alpha”

On Day 2, Manthan 2017, The panelists engaged the audience in an insightful discussion on the secret of generating alpha, with Mr. Yash Verma as the moderator.

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Mr. Mahesh A Chabria- Vice President (New Projects) with SBI Fund Management Pvt Ltd

Mr. Mahesh Chhabria started the discussion by saying that those who know the secret will not reveal it and those who reveal the secret will not know it. Talking about the secret of generating Alpha, Mr. Chhabria said that it’s important to understand the benchmark and how much more can a portfolio generate over the benchmark. Mr. Chhabria advised the audience to overweight the stocks on which one is bullish and underweight the portfolio on which one is bearish. Mr. Chhabria also talked about the correlation between alpha and beta and advised that to generate alpha one should look beyond the index. Mr. Chhabria continued to say that investors should focus more on mid-cap and small-cap companies instead of large-cap as it is already saturated. When asked about the role of luck in the generation of alpha, Mr. Chhabria said that the luck might be a combination of hard work and research and good active funds beat the expense ratio and give profits.

Mr. Swapnilsagar Vithalani- AVP Investment Banking, JRL Group

Mr. Swapnilsagar started the discussion by comparing the mimic index of today to that of 1993. He said that it is difficult to outperform benchmarks. According to him, to generate an alpha, a company must have a competitive advantage, have intangibles, under-priced, and brand recall. One must focus more on the sustainability of Alpha more than generating it. The period of sustainability depends on the risk profile of the portfolio.

Going on further in the discussion he mentioned that compounding is the 8th wonder of the world. The longer one holds onto a company, the better return one will receive. With the evolution of technology, alpha can be generated using machines and algorithms. But Mr. Swapnilsagar said that a human touch to these machines will add value. Humans are capable of understanding the psyche of promoters by researching on small and mid-cap stocks.

Mr. Manoj Jethva, Senior Adviser PE, VC & Debt Advisory

The introduction started with the discussion of PE funds. PE funds are very specialized & not as mature a market as compared to the US or UK. For a fund to be registered as a PE, there are several criteria to be met. Firstly, its operational cash flow has to be positive. Second, the visibility of the company is important. Third, how the management of the company & the strategies are adopted. Further, on the discussion of humans versus machines, he explained that it is always the prerogative of the managers/humans to generate returns or alpha, not that of the machines. It is the humans who are the decision makers. It is they who are responsible for making superior returns.

Further in the discussion, he shared his views on the topic, whether, in India, the generation of alpha is a result of market inefficiency or the Mutual Fund manager’s skill & whether there was any correlation between the two, he explained that as far as generating return is concerned, the skill of the manager matters more. This is primary. This would be reflected in the decisions made as to when to enter or exit the market. Luck would be secondary. He also gave his opinion on the probable inefficient markets in the world by giving an example.

MANTHAN 2017: DAY 1: Inaugural Ceremony

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The inauguration ceremony of Manthan 2017, the annual budget conclave of T. A. Pai Management Institute, Manipal was held today. The theme for this year’s event is “Evaluate Empower Exceed”. It started off with an insightful address to students by the Director-in-chief, Prof. Gururaj Kidiyoor and was followed by an informative speech by Prof. Madhu Veeraraghavan. He spoke about the TAPMI Finance Lab and the intent behind establishing it. It was started in the year 2013 and was established with a vision to position TAPMI as a leader in Banking and Finance education in the country. This goal is continuously pursued by training students in real time trading and investments in one of the finest finance labs in India today.

TAPMI has always strived hard to make its finance courses industry relevant and SMIC is one such course. Students today are neither interested in learning only theories, nor they want to limit themselves to writing papers and journals. They want real world experiences and this is explicitly the reason why SMIC was introduced as a course. SMIC is a course specially designed for students to train them in the art of investment. Students learn the fundamentals of trading and are provided real money for investing. This differentiates TAPMI from other colleges where trading happens only through simulations and lack real-time experience. With the vision to bridge the gap between theory and practice, SMIC provides hands-on experience to the students for growing and developing to become successful investors.

The ceremony was followed by the SMIC presentations. It was indeed an extremely proud day for TAPMI to celebrate and demonstrate excellence through the 11 teams who worked really hard for days and presented their portfolios before the industry experts.  The teams comprised of both PGDM and BKFS students. The students got an opportunity to act as real-world investors and present their investment ideas before industry experts. The judges reviewed each team’s work and provided suggestions after finding out weak areas in each plan. The feedback from the judges was a great value addition for the teams and helped them identify areas of improvement.

Dharitri Valedictory

1. Stree Shakti Yojana: This project was aimed at enabling self-sufficiency among women. The approach in terms of benchmarking, primary analysis & Human-centric design was discussed. Interesting suggestions were recommended.
2. Technical vocational & Employment training (TVET): This project was undertaken with an objective to determine & bridge the gap between the demand & supply of skills in employability and centralizing the process of locating skilled labour. The analysis & observations in settlement data, methodologies implemented/suggested to achieve the objective & tasks completed were discussed.

3. Women & Child Nutrition and BMI Programme Review (By SEG): This project was undertaken to understand the effect of nutrition for children & pregnant women in Anganwadis. The Key findings in terms of stakeholder interviews, feasibility studies & programme specific gaps were determined. Finally, recommendations in terms of an IT supported monitoring solution was suggested among other things.
The BMI Project was undertaken to understand the perception of all stakeholders of the BMI Programme & identify the value add by the program. The findings were conducted in 3 Talukas, namely, Udupi, Karkala & Kundapura. Insights were obtained from pregnant women, ASHA workers & Medical Officers. Main recommendations suggested were community service, supporting facilities to ASHA workers, etc among other things.

4. Coconut Value Chain: The objective was to identify the value chain in local regions and suggest changes to increase the profitability of farmers. The methodologies in terms of primary and secondary research were discussed, detailed analysis of value chain was conducted, issues faced by farmers, marketing & product side related were explained and was concluded by suggestion of recommendations.
5. Solid Waste Management (By SEG): The objective was to implement a sustainable model for waste segregation at source and minimize the impact on the environment. The work done was systematically segregated into the initial, intermediary, present stage and future steps to be taken.
6. Plastic Waste Management (By SEG): The objective was to find different ways in which plastic waste can be disposed off. For this, the groundwork was discussed in terms of Secondary research & awareness campaigns. Recommendations in terms of setting up of a plant under Rudra Environment Solutions was suggested.
7. National Rural Livelihood Mission (NRLM): The objective was to come up with project ideas that can be implemented under this scheme and recommend ways to implement them. The NRLM scheme was discussed in detail, projects undertaken were presented.
8. Rajiv Gandhi Chaitanya Yojana: The objective was to find the factors hampering the acceptance of this Yojana among rural youth and the ways and means of finding solutions to this. The present stage and the findings from the primary research were suggested. It was concluded with recommendations & the way ahead were discussed.
9. Tech Readiness in Udupi: The objective was to define tech readiness in terms of Udupi district, identify suitable parameters & develop an action plan. The Key output was a proposal for Udupi- Technological & Infrastructure Interventions was presented.
10. Gram Panchayat Management: The primary objective was to improve the perception of the public regarding the Gram Panchayat. Primary research was conducted & the output was presented. The process and phase 1 results were presented in elaborate detail along with the recommendations.
11. Medical Tourism & Healthcare Value Chain: The objective was to map the healthcare value chain in Udupi & to suggest ways to improve the services. Primary, secondary & GAP analysis was conducted. In terms of Medical Tourism, the objective was to study the industry in detail. Post this, the research was conducted and Thailand’s medical tourism model was taken as a benchmark to study and to be used as one to improve medical tourism.

The Union Budget 2017-18: A Brief Overview

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The Union Budget 2017-18 was unique and historic in many ways. For starters, it was presented on a much earlier date of 1st February as opposed to the usual date of 1st March. Also, the Railway Budget was incorporated into the General Budget. On the backdrop of various Macroeconomic and Geo-Political events such as demonetization, US Presidential Elections etc. the Q3 YoY GDP took a hit. CRISIL has lowered the country’s GDP growth forecast to 6.9% for 2017.

Therefore, the Union Budget 2017-18 had a huge role to play in normalizing and revival of the growth of the Indian economy.

Following are the major points that have been covered in the budget:

  • In the last 2.5 years, the administration has moved from discretionary and favoritism based to systematic and transparency based
  • Infrastructure sector got a big boost with a total fund allocation of Rs.3.96 lakh Cr with a strong focus on the Railways (Rs.1.31 lakh Cr) and Road network development
  • The Budget proposed to scrap Foreign Investment Promotion Board(FIPB) in 2017-18 and further liberalize the FDI policy
  • Rural economy gets a boost. Allocation for MNREGA hiked to Rs.48,000 crore; 100% rural electrification by May, 2018; Rs.40,000 crores allocated to irrigation funds
  • Tax rates slashed to 5% for those within the income bracket of 2.5 to 5 lakh rupees. 10% additional surcharge levied on those individuals whose income lies between Rs.50 lakh to Rs1 crore. Minimum alternative tax reduced to 25% for companies with sub 50 crore revenue
  • In a move to curb black money, maximum cash transaction will be capped at Rs.3 lakh. Funding to political parties in terms of cash has been capped at Rs.2000. Any donations above this would have to be done via digital or cheque modes
  • Proposed to create a Payments Regulatory Board in the Reserve Bank of India by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems
  • FRBM Committee has recommended 3% fiscal deficit for the next three years, keeping in mind the sustainable debt target and need for public investment and Govt. is committed to achieve that
  • In order to make MSME companies more viable, income tax for companies with annual turnover less than Rs.50 crore is reduced to 25%
  • Utilize the Head Post Offices as front offices for rendering passport services