The Hindu Business Line : Growing Indian wealth

With this quote of the Union Finance Minister, Mr P. Chidambaram, opens chapter 1 titled ‘India as No. 1’ in ‘India’s Global Wealth Club’ by Geoff Hiscock ( www.wiley.com ).

It hardly seems worth thinking about…” the author writes, driving through Mumbai roads on a rainy night.

“The notion of India as No. 1 in Asia sounds preposterous in a country where a third of the population of 1.2 billion people live below the poverty line… Even 40 or 50 years from now, will India really have solved its problems to the extent where it can draw level with or surpass the economic, political, and scientific power of China, the US, Western Europe, and Japan?” The answer is a resounding ‘yes’ from a growing number of influential Indians, observes Hiscock.

“In the 1980s, India’s slogan was ‘remove poverty.’ Now the time has come to think about creating wealth,” reads a quote of Mukesh Ambani, the richest resident Indian.

“Education offers the possibility of lifting our entire country from its mire of poverty and inequity,” hopes Azim Premji. And Anand Mahindra declares that the real strength of Indian businesses is that every company here ‘has been through hard times’.

According to the author, there are seven secrets of India’s remarkable resurgence, viz. India’s size, science, diaspora, cultural history, English literacy, strategic weight, and switch to a globalisation mindset.

India may indeed have hundreds of millions of people at the bottom of the pyramid, but there are also about a lakh HNIs (high networth individuals) with financial assets of at least $1 million (excluding real estate), notes Hiscock, citing a recent ‘wealth report’ from Capgemini.

“About 8,000 of these are ‘ultra HNIs’ with more than $30 million in assets, and a hundred or more are in the billionaire class.”

To Rahul Bajaj, however, it is not important whether India became a ‘so-called superpower’ over the next two decades.

“My dream for India, 20 years from today, is a country where poverty has been banished. Where parental income is not a barrier to good health and education, where talent is encouraged, achievement celebrated and the weak can also live with dignity,” reads a snatch of Bajaj-speak in the book. He dreams on of “a country retaining its age-old humanism, tolerant of differences and with a world view that is a cross between that of a yogi and an entrepreneur. A country that retains its soft power in offering an alternative, attractive way of life, that celebrates life, to the world…”

Wealth of insights!

Ratios for monitoring

In our drive to exploit the fullest possible data-processing capability of computers, an old adage is often forgotten: ‘management of a complex system needs only a little information and even fewer tools of decision-making and control’. Thus rues Hrishikes Bhattacharya in ‘Total Management by Ratios’, second edition ( www.sagepublications.com ). A carefully chosen ratio or a set of ratios can also be highly effective in monitoring, he adds.

The book has useful chapters on ratios for financial control with regard to different functions such as manufacturing and marketing, as also for working capital management, debt servicing, and managerial efficiency. The author elaborately discusses the role of ratios as predictors of business failure. The final chapter, on ‘valuation and stock market ratios’, begins with this nugget of wisdom from Oscar Wilde: “A pessimist is somebody who complains about the noise when opportunity knocks.”

Recommended for a detailed study.

Inside ‘insider’

Insider trading laws in the US and the UK are based on theory that insider trading is ‘as good as fraud,’ says ‘Prohibition of Insider Trading Law & Procedure’ from the Institute of Company Secretaries of India (www.icsi.edu).

“The first attempt to curb insider trading in India was in the shape of a disclosure requirement by company directors of their shareholdings and provisions were incorporated in Sections 307 and 308 of the Companies Act, 1956,” the publication recounts. “The experience of the UK shows that the task of SEBI (the Securities and Exchange Board of India) is not easy.”

For the professionals’ shelf.

Rules of thumb
There is no right answer for the value of an unquoted company, whether it is privately owned or a subsidiary of a group, says Barrie Pearson in ‘Exit Right’ ( www.vivagroupindia.com). “It can even be argued that the only meaningful valuation is the highest amount which one of several known serious buyers is willing to pay.” Yet, it is possible in most cases to calculate the likely price range, he adds.
One of the fundamentals of business valuation is that the price any purchaser is prepared to pay is likely to be determined by ‘the profit and cash flow produced from owning the business, and to a lesser degree by the balance sheet worth of the assets.’
Then, there are the rules of thumb in the market sector. “Hotel valuations worldwide are often linked to a price per bedroom. In the UK, public houses are valued in terms of a price per barrel of beer and lager, applied to the annual volume of barrels sold. Software business valuations may be linked to turnover.”
Suggested buy to help you add sheen to ‘a golden goodbye’.

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