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Ingenuity and enterprise are the mindful insights that provide a
vision for the future. As the years have passed, NITIE has stood the
tests of time by scaling new heights and reaching pinnacles against
all odds. It has maintained the tradition of featuring in the top
league of Business Schools across the country with our students
achieving accolades in every sphere. With the alumni occupying
coveted positions in the industry, with the areas of excellence being
Operations, SCM, Marketing, Finance and Information Technology,
NITIE has built a reputation for itself over the years.
It gives me immense pleasure to introduce you to the first issue of
our quarterly Finance magazine. In-Fin-NITIE is an initiative by
$treet, the Finance Forum at NITIE. $treet, the Finance Interest
Group seeks to assist the budding managers in assimilating
classroom as well as practical learning in the field of Finance,
thereby nurturing them to evolve as better managers. The initiative
is truly a showcase of the talent of the students in the area of
Finance with contributions towards the field in the form of
multifarious articles. These articles are well complimented by
quizzes and other compilations to grab the interest and attention of
the reader. The knowledge of Finance as a domain is essential to the
understanding of business administration and management. All the
fields of business be it Production, Marketing, Manpower
Development or Research Development revolve around Finance.
This initiative by $treet is a step that will help students gain a better
knowledge of the domain and also innovate to offer solutions to the
challenges that continue to confront the industry and society.
I applaud the zealous efforts of the meticulous students and Prof. M.Venketaswarlu under whose competent auspices the initiative has
been undertaken. I congratulate them for their endeavour in
helping NITIE continue to be the preferred destination for leading
business establishments seeking the finest and most innovative
managers.
Message from the Director
Dr. Subhash D. Awale
was the Joint Educationa
Advisor (Tech)
Government of India
before he took up the
Directorship of NITIE
He was Vice-Chancellor o
Dr. Babasaheb Ambedka
Technological University
Lonere from 2000-2005
He holds a B.E (Civil)
M.E. (Structures) Degree
and Ph.D. from IIT Delhi
During 1998-99, he
functioned as Member
Secretary of All India
Council for Technica
Education (AICTE) in
addition to his duties in
the Ministry. Over the pas
30 years, he has been
actively involved in the
field of Technica
Education as a Researcher
Teacher, Planner and
Administrator and ha
handled all aspects o
Technical Education
including Engineering
Technology, Architecture
Management, Pharmacy
etc.
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It was money that drove human civilization from the barter system
to more complex forms of business and trade. Whatever may have
been the form of money during the progress of civilization, be itanimals, metals, coins, paper notes or e-money, there is no denying
the fact that businesses and economies have and always will revolve
around money. Money is as money does is one statement that is
often cited to explain the function of money.
Finance is the science of money management. In the past, as
economies grew larger and transactions grew more complex, finance
assumed a bigger role in the functioning of the economy. Banks were
setup to act as custodians of money and Central Banks evolved to
regulate the functioning of banks. Before mankind could introspect,
we had a complex financial system in place.
The above assumes more importance in the wake of the economic
downturn that recently engulfed the planet. It started off with the
sub-prime crisis which arose out of poor lending standards and
within the blink of an eye, the global economy was in shambles. Some
referred to it as the biggest economic recession to hit the globe post
1929, whereas others called it the death of capitalism. Whatever
may have been the reaction to the same, the bottom line is there for
all to see. The new global economy needs a new world financial
system, one that is poverty-alleviating, stable, economically viable,
ecologically sustainable and mutually acceptable.
At NITIE, we believe Finance is more than just a field of
management. It is much more than the analytics, the exciting
intricacies and the high paying careers. It is a social science that has
played a stellar role in the evolution of mankind and will always be
closely linked to the holistic development of economies and societies.
We believe finance is about expression and innovation. And it is thisvery spirit that we have attempted to capture and portray through
In-Fin-NITIE.
In-Fin-NITIE gives you a glimpse of finance at NITIE, underscoring
the reverence that NITIEians have towards finance and the
importance it commands in their scope of thinking and innovation.
We would like to hear from you regarding the magazine. Letters to
the editor can be sent tostreet.nitie@gmail.com.
Bon voyagefor the journey through In-Fin-NITIE!
Team $treet
From the Editors Desk
Patron:Dr. Subhash D.
Awale
Convener:Prof. M.
Venkateswarlu
Editorial Board:Aakash Chawla
Gaurav BajajGaurav MalhotraRitika Arora
Design Team:Rajneesh
Umesh Karthy LRJ
Special Thanks:Team IMPACT
Abhishek KumarAmitabh Vatsya
Rohit Kumar
Disclaimer:The opinionexpressed in thmagazine are those ofthe respectivauthors. In-Fin-NITIE
or Team $treet doenot necessarilyendorse them andcannot be heldresponsible for thsame.
Team $treet, 2010
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Perils & Prospects of Private Equityin India - Amitabh Vatsya, NITIE
Home Equity Insurance:Redistributing Risk - Shailabh
Kothari and Rishabh Bhandari,
NMIMS
Dollar Docked (Cover Story) - RohitKumar, NITIE
Innovative Monetary Policy Tools-Ajay Jain, IIM Bangalore
Qualified Institutional PlacementsInnovation or Convenience - Abhinav
Saini, NITIE Events @ NITIE Fin - Quizzitive : The Finance Quiz
Contents
Page 4Page 7
Page 8Page 9
Page 10Page 14
Page 15Page 18
Page 19Page 21
Page 22
Page 24
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OVERVIEW
The chart above depicts very succinctly, the successstory of the Indian Private Equity (PE) sector. It boasts of
a glorious Compound Annual Growth Rate (CAGR) of
43.67%. But these figures belong to a different era, one
before the collapse of the Lehman Brothers. A world
where raising capital was not the ordeal it is today. Back
in May 2009, I had posted a query on Nicube (a
professional networking website popular in Europe)
about careers in Private Equity. I got an instant response
from Donnie Brasco, an Investment banker with
Barclays: PE is dead, virtually dead and it seems that it
will remain so for several years to come. There seems to
be some activity in terms of PE funds buying debt from
distress sellers (i.e. other PE funds, hedge funds, etc.),
but other than that, why do you want to go there? I
don't see how money could become as cheap as in
2003-2007 again. This was indicative of the general
sentiment towards PE in the western world. Chart 1
suggests that the concerns of Mr. Brasco about the
global market were not unfounded. Indian PrivateEquity, a relatively nascent market compared to its
global counterparts was left at cross roads in the post-
Lehman era. This article will mostly address the issue
raised by Mr. Brasco about the fate of PE in the Indian
context. The discussion will move from the challengesahead of Private Equity in India to the current status of
Perils and Prospects of Private Equity in India
- Amitabh Vatsya, NITIE
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the same. The last section will bring forth the growth
opportunities for PE firms.
Recent reforms regarding LPs and GPs
In an environment where access to capital will decide
the future of private equity, institutional investors
(Limited Partners), sitting on huge pools of capital are
setting their own terms to turn things in their favour.About 10 European and Asian development financial
institutions including CDC, who invest in emerging
market private equities including India, have endorsed
the Institutional Limited Partners Association (ILPA)
Private Equity Principle. ILPA, a not-for-profit
association, represents the interests of institutional
private equity investors.
These principles recommended that the general partner
community should charge moderate management fees
and stick to the funds investment purpose. Also,
changes in tax laws that impact general partners should
not be passed on to the investors. According to a recent
report by London-based research agency Preqin, there
are about 78 firms from India, out on the roads to raise
private equity money. Adoption of such principles by
these Limited Partners (LPs), who commit to emerging
markets, will only add to the woes of PE fund managers,
who are already finding it difficult to raise cash in an
extremely challenging environment.
Decreasing Confidence of Venture
Capitalists
Venture capitalists often talk about downturns being
the right time to invest in start-ups. Yet the data does
not reflect this belief. An interesting study was
conducted by University of San Francisco Associate
Professor of entrepreneurship, Mark Cannice. He asked
local venture capitalists how confident they were about
the high growth industry for the next 6 to 18
months. The Confidence Index above shows an upturn
and downturn by quarter.
Disappointment of Asian LP with
performance of their PE portfolioAccording to the recent Coller Capital Global Equity
barometer, many LPs report that poor performance of
PEs during the downturn has damaged the perception of
the asset class within their organization. This has
resulted in a change in their risk appetite and
investment criteria. A good percentage of investors
have deepened their Due Diligence prior to committing
to funds. Many have demanded improved reporting
from their GPs.
Complexity regarding Transfer Pricing
In recent years, Transfer Pricing (TP) has attracted a lot
of attention from taxing authorities around the world. A
robust TP policy should be a critical component of any
global private equity managers overall tax risk
management strategy. A recent judicial pronouncement
in India underscores the importance of a robust TP, as
an Indian court held that where a foreign
enterprise has a dependent agent in India
(and thus an agency PE), then nothing
further is taxable in India in the hands of
the foreign enterprise if the correct arms
length price is applied and paid. As private
equity houses expand their globa
management company footprint and
deploy more senior executives to local sub
advisory offices, fund managers should
revisit their TP models.1
Treaty-based structures
Most private equity houses employ treaty
based structures to mitigate exposure to source country
taxation by investing through treaty-protected specia
purpose holding companies. The use of Special Purpose
Vehicles (SPVs) to obtain treaty protection and other tax
benefits is subject to ever-increasing scrutiny by taxing
authorities across the world.
In India, the tax authorities have been scrutinizing PEinvestments and have been aggressively investigating
deals involving the transfer of interests in companies
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with underlying Indian investments. In the high-profile
Vodafone case, the Indian tax authorities attempted to
tax a non-resident on the profit from the transfer of
shares in a Mauritius company on the basis that the
profit arose from the underlying shares in an Indian
company. The matter is currently pending before the
Bombay High Court, and the Indian revenue authorities
have proceeded to issue notices to several other
multinational companies in similar situations. In light of
the prevailing uncertainties, fund managers face
challenges while structuring in India. This may prove to
be detrimental for the growth of Private Equity in India.
2009: A year of moderate activities for
PEOn 05 Dec 2009 VCCircles, a VC / PE research firm
reported: PE / VC deals show signs of comeback with
29 transactions in November.
Private Equity (PE) and Venture Capital (VC) firms cut,
on an average, one transaction a day in November 2009,
indicating clear signs of a pickup in deal activity.
Although the absence of large PE transactions meant
that the total deal value was lower in November this
year compared to same month last year, the number of
deals rose to 29 against 22 in November 2008. 2
This was led by strong growth in VC and seed funding
which accounted for more than half of all PE / VC deals
last month. In the VC space, those striking multiple deals
included Intel Capital, Mumbai Angels and Gujarat
Venture Finance Ltds SME Technology Venture Fund.
According to the latest Asian Private Equity Barometer
report, produced by AVCG in association with KPMG
India, 3Q09 at US$932 million from 36 deals, exhibited a
small shift in value or numbers from 2Q09s US$1.3
billion from 35 investments, and signs are that the
Indian market will remain consistent over the next few
quarters. CPP IB, a prominent Australian investor
participated once again in India in 3Q09, in partnership
with Kohlberg Kravis Roberts & Co., taking a 15% stake
in Aricent Technologies for US$255 million. IDFC Private
Equity, along with Oman Investment Fund and SREI
Infrastructure Finance, delivered another TMT deal, an
infrastructure one, with a US$224.4 million investment
into Quippo Telecom Infrastructure, and also bought out
BP Energy Indias wind power interests for $95 million.3
Laws of Attraction
The total no of foreign Venture Capital firms registered
with SEBI is 135. Out of the 135, 20 firms were
registered in 2009. So what is the reason for the sudden
entry of foreign PE firms in India? The reason lies in the
underlying structure of the Indian Industry. Medium-size
companies in India need to access capital markets
because of the traditional shortage of private capital,
whereas in other parts of the world, similar size
companies are often privately or bank-funded and can
get away with being less transparent. Another factor
which favours the attractiveness of
India is that post the opening up of
the economy in 1991, the country
has seen huge improvements in
both capital markets regulation
and in corporate governance. In
fact, even some medium-sizecompanies in India compare
favourably with similar companies in industrialized
countries. The capital markets impose higher standards
of governance on these companies listed in India
Furthermore, Indian capital markets regulation today is
of a high standard. However, enforcement has the
potential to improve further.
The Road AheadIndias newly-elected government came to power with a
strong mandate for change: Infrastructure spend is
expected to increase along with various initiatives to
help the rural poor, including expansion of the
( l l l
Company Investor Value ($ Mn)
Dish TV Apollo Management 100
IPL Theatrical Rights Dar Capital 71
Gateway Rail Freight Blackstone 64
Manthan Software Services ePlanet, IDG Ventures,
Fidelity Ventures
15
Ansal Properties &
Infrastructure
IPRO Growth Fund 14
In light of the prevailing uncertainties
regarding tax structure, fund managers
face challenges while structuring in
India.
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Guarantee Act), which will put more spending power in
the hands of Indias rural consumers. Expansion of road-
building plans, from the current 2 km to 20 km a day by
2012, should help ease congestion and make the
countrys supply chains operate more efficiently.
At the same time, the creation of ready-to-run projects
in the power sector will make it significantly more likely
that the government will hit its target of building the
ultra-mega power projects (generating more than 4,000
MW each) via the public-private-partnership (PPP)
model. Regulations governing the flow of foreign capital
into the country are also expected to be relaxed
although the taxation treaties which streamline that
flow are being reviewed at present.
The Demand for Owner Mentality
On the human value addition front, more private equityfirms will hire operating partners who become deeply
involved in the management of buy-out investments
and other portfolio companies. In many cases, private
equity firms retain the incumbent management,
preferring not to rock the boat when buying out a
company. As seasoned managers with an in-depth
industry or functional expertise, operating partners act
as sage counsellors and critical advisors on operating,
financial and strategic issues for the portfolio
companies management teams. With a clear mandateto add value to an investment within a fixed time-frame,
they can adopt a less sentimental approach and focus
unflinchingly on results to make fast decisions and act
rapidly where necessary. It has been shown that running
the business as an owner inevitably helps unlock value.
The benefit of this joint management ownership
program is that it instantly puts in place, highly
motivated owner executives to run the company from
day one.
The Rise of Entrepreneur-In-
ResidenceThis concept is a popular practice among
Silicon-Valley start-ups and can be copied
successfully in the Indian terrain as it is
abundant with tech start-ups and start-ups
coming out of B-School campuses. Basically
this system allows a venture capital firm to support a
senior executive, who has had a significant experience in
executing programs in a certain segment or has been an
entrepreneur and can build a team around a technology
or a vertical. This model is gaining significance by
application by some VC firms such as Cannan Partners
and venture incubation organizations such as CIIE.
Are you listening, Mr. Brasco?
PE is certainly not dead in India. Indian market is
currently the favourite destination of PE investors and it
will remain so in the foreseeable future. The relatively
nascent Indian financial sector has a large number of
practices to learn from veteran markets. The influx of an
entrepreneurial culture is due, but it is just a matter of
time before the same happens. Indian financial markets
need to structure the taxation system to entice more
investments from abroad. Indian domestic PE firms such
as IDFC PE and ICICI Ventures are getting matured and
will hopefully be able to develop a perfect value
addition model. Success stories like the Bharti -Warburg
Pincus deal will be the order of the day. The woundedIndian PE will strike back and its resurgence is actually
occurring in front of our eyes.
References:
1. PriceWaterhouse Coopers Global private Equity
Report 2008
2. www.vccircles.com
3. Asian Venture Capital Journal Private Equity
barometer Q3 2009.
The author is a first year management student at NITIEand can be reached at amitabhhelios@gmail.com
Another factor which favours the attractiveness of
India is that post the opening up of the economy in
1991, the country has seen huge improvements in
both capital markets regulation and corporate
governance.
The influx of an entrepreneurial cultureis due, but it is just a matter of time
before the same happens.
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In-FIN-NITIE| VOL 1| ISSUE 1| FEB 2010 Page 8
A lot has been written about the sub-prime crisis of 2008
and its causes, but little has been probed into the ways of
avoiding or mitigating the aftershocks of such a
tumultuous meltdown that brought the world economy to
a grinding halt. The sub-prime crisis was certainly an
effect of information cascade that caused the people to
believe that the growth in real estate prices would
continue indefinitely. Statistics show that the real home
Source: The Businessweek dated June 21, 2007
prices for the US as a whole increased by 85% between
1997 and 2006 when they hit peak though there were no
fundamental changes in construction costs, population or
long term interest rates during the boom; a result of
speculation spelt by social contagion.
What is Home Equity Insurance?This article is an attempt to apprise the readers of a
financial innovation through which risks of owning houses
can be redistributed among the institutional insurance
companies while ensuring that the individual
homeowners dont have to bear the brunt of falling
prices.
Why an equity insurance? Why not simply insurance, the
kind we have against fire, burglary, etc? The reason is
simple. Both the securities markets and the insurance
industry help people manage risks but their payment
schedules and structures are grossly different. The
insurance industry pays only when an unexpected event
has occurred whereas in securities contracts ones
position is valued almost every second resulting in a
change in value of ones contracts. Since the value of rea
estate keeps changing, traditiona
insurance contracts cannot be of much
help. This issue can be resolved by
hedging through financial markets
However, hedging through conventiona
futures markets can also be problematic
as most of these contracts require posting
margins, margin calls, etc. Such
obligations can be burdensome fo
ordinary households.
An option contract is one where one can
have benefits of both the insurance
industry by having a premium for entering
into the contract and the futures markets that allow for
frequent change in the value of the asset. By paying a
premium, the homeowners can buy a PUT option that
gives them the right to sell the house if the prices fal
below the strike price, thereby minimizing the losses
[Premium + Price at which the house was bought
Current price (Strike Price Current Price)]. The option
writers in this case will be usually the real estate
developers or insurance companies.
An attractive strategy for the insurance companies would
be to build insurance products based on the futures
markets on real estate indices and pass it on to the home
owners. Such insurance products will completely
eliminate the downside risk for the home owners, while
Home Equity Insurance: Redistributing Risk
- Shailabh Kothari and Rishabh Bhandari, NMIM
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In-FIN-NITIE| VOL 1| ISSUE 1| FEB 2010 Page 9
also limiting the upside potential. Having pass-through
options would allow them to realize the benefits of
appreciation of their home prices while minimizing
downside risk.
The traditional insurance contract can also be replicated
through home equity insurance by having European put
option contracts with exercise date contingent on Life
Event. The premium charged by the Insurance companies
will be low since such life events are rare. This makes it
profitable for Insurance companies and an effective
means for homeowners to hedge risks through financial
markets.
Example:
Consider a house bought at Rs. 25 lakhs. A put option is
bought at a premium of Rs. 1 lakh with a strike price Rs.
20 lakhs. The graph shows the profit/loss with and
without home equity insurance.
As can be seen from the graph, the downside risk is
minimized to a large extent while the upside potential has
not been affected much.
What can be the roadblocks in implementing
Home Equity Insurance?
Eliminating real estate risks by hedging through financial
markets seems very inviting. However, the fundamental
issue is that Real estate is very illiquid, unlike most of the
assets. The result is inefficiency in real estate market and
indices.
The options cant be priced through the conventional
Black-Scholes model as it prices options based only on the
current price of the underlying asset, but real estate
prices depend on the trend in prices. The Black-Scholes
model also assumes that costless continuous arbitrage is
possible between the option market and the market for
underlying asset. This assumption is flawed in real estate
markets where transaction costs are enormous. Prof
Robert Shiller of Yale University has come up with a new
option pricing model which eliminates the drawbacks ofBlack-Scholes, though its viability remains to be tested.
The entire home equity insurance is based on an index
instead of a case by case basis which may cause the
homeowners to sell their homes at less than what they
deserve and not be adequately reimbursed.
The individual homeowners may not be well versed with
the derivatives markets which may cause them to stay
away from it. Any product that is being designed must be
done by keeping in mind such homeowners who lack the
skills and knowledge possessed by financial analysts. Also
it must be marketed in a way they find attractive and easy
to understand.
Concluding notes
It is imperative for the policy makers to constantly update
the mandatory risk management practices by way of
implementing innovations in the financial domain to avoid
events leading to crises similar to those that have
occurred in the past. At the same time, these innovationsmust also be thoroughly tested before implementing on a
wider scale to ensure that they are not a threat to the
existing financial system. Home Equity Insurance can
definitely play a vital role in protecting the interests of
individual homeowners - the underside being that it may
cause losses to insurance companies during Life Events.
References
1) The Sub Prime Solution:
http://www.vedpuriswar.org/book_review/The%20Sub%20Prime%20Solution.doc.
2) Home Equity Insurance by Robert J. Shiller and Allan N.
Weiss: http://cowles.econ.yale.edu/P/cp/p10a/p1007.pdf
3)http://kth.divaportal.org/smash/record.jsf?searchId=1&
pid=diva2:248800
The authors are management students at NMIMS and can
be reached atshailabh.kothari@gmail.com and
rishabh.bhandari@ymail.com
Payoff
-30
-25
-20
-15
-10
-5
0
5
10
1 5 9 13 17 21 25 29
Current price of house
Profit/Loss
Profit/loss
with put
option
Profit/loss
without put
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In-FIN-NITIE| VOL 1| ISSUE 1| FEB 2010 Page 10
The numerous factors which play in favour of the dollar as
the appropriate choice include its size,
quality and stability of the dollar asset
markets, particularly the short term
government securities market where
the central banks tend to be the mostactive. The high liquidity of these
financial markets makes the dollar an
excellent medium for exchange.
The history of the US Dollar as the
choice of the reserve currency dates
back to the year 1944 near the end of
the World War II.
There was a vacuum
created in the
World financial
system due to
weakness of pound
sterling. With the
world economy and the international
economic and financial systems in near
shambles, delegates from all 44 allied
nations gathered in Bretton Woods,
New York with an aim of setting up asystem of rules, procedures and
institutions to regulate the
international monetary system. There
the US Dollar took over the role that
pound sterling / gold had played in the
previous international financial system.
In 1971, the Bretton Woods System was revoked by USA
At that point in time the amount of gold backing the dolla
had depreciated to record low
levels. No other currency
emerged as an alternate reserve
currency. Japan was riding on a
huge current account balance
Although the German Mark had a
reputation as one of the world's
most stable currencies, its
contribution in the world
economic affairs was not
overwhelming. French Franc was
also not strong enough to play
the role of a reserve currency at
that point of time. The Swiss
Franc was based on full gold
convertibility until 2000. So after
a brief marriage with the
Smithsonian agreement, the
world moved on to a free float economy and dollar
remained the dominant currency in the world market.
The demand of dollar was artificially inflated after the
collapse of the Bretton Woods system. USA made good
use of its relations with Saudi Arabia, one of the largest oi
producers. It supported the power of the House of Saud in
exchange for accepting only U.S. dollars for its oil in 1972
73, just after the collapse of the Bretton Woods
arrangement. Saudi Arabia received military cover and
recognition of the legitimacy of the monarchy in
exchange. The rest of OPEC soon followed suit. As
Dollar Docked
- Rohit Kumar, NITIE
As the
demand
of oil was
increasin
g at an
ever
increasin
g rate, thedemand
of dollar
could only
increase.
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In-FIN-NITIE| VOL 1| ISSUE 1| FEB 2010 Page 11
everybody in the
world needed oil,
they had to hold
dollars. As the
demand of oil was
increasing at an ever
increasing rate, the
demand of dollar
could only increase.
Thus oil became one
of the most important
strategies in the USA
policy. Until recently
oil could only be
bought and sold in
dollars, (except from
2008 at Kish, Iran)
thus inflating the demand of the dollar. So the earlier
system of exchanging dollar to gold (Bretton Woods
System) was now changed to dollar exchange for oil. As a
matter of fact, USA has never taken any challenge to its oil
policy lightly.
Mr. Saddam Hussein is said to have planned to sell oil in
non-dollar currencies during 2002. Suddenly biological
weapons were claimed to be present
in Iraq and war was imposed on her.
It is another fact that these
biological weapons and Weapons of
Mass Destruction (WMD) were
never unearthed. Iran planned a
new oil bourse which would trade in
any currency way back in 2005. It
finally opened in February 2008
after a lot of hiccups which were
said to be externally influenced. Iran
was also on the verge of war
because it was said to be in process
of manufacturing nuclear bombs.
In the not-too-distant future, all that
may be history. The Independent
reported confirmed talks between Gulf Arab and Chinese
representatives in Hong Kong of oil trade in non-dollar
denomination. Brazil has shown interest in collaborating
in non-dollar oil payments, along with India.
The recent downturn has shown that we cant have only
one reserve currency. The size of the US economy has
become relatively smaller to the amount of global balance
it is expected to serve. Its trade deficit is continuouslyincreasing. The US dollar peaked in value in 2000-2001
and has been in a significant decline ever since. There was
a relatively brief period in 2008 when the dollar
rebounded quite sharply due to the worldwide financia
crisis. But since then, the dollar has resumed its long-term
downtrend. There were voices which argue that it was
excessive dependence on dollar which led to world being
dragged into the mess created by the US financial sector
They said that another reserve currency was required tode-risk the world economy from another downturn.
While making a decision about the choice of a reserve
currency there are four factors which are largely
considered share of world output and trade
macroeconomic stability, degree of financial market
development and network externalities. There had been
Figure 1 - Variation of dollar against currencies
The US
dollar
peaked in
value in
2000-2001
and has
been in asignificant
decline ever
since.
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multifarious reserve currencies
over the previous centuries and
the dollar has fluctuated widely in
the past 65 years as well.
The shop till you drop attitude of
Americans is showing signs of
change with personal savings rate
rising to about 7% from less than
1% a year before. With increase in
savings, spending is less. As
consumer spending accounts for
70% of USA spending, the
economy is going to contract in
short term due to increased saving
rate. Leading economists call it
the paradox of saving.
The Commission of Experts of the
UN General Assembly on Reforms
of the International Monetary and
Financial System, led by Joseph E.
Stiglitz, has suggested a gradual
move from the US dollar to the
Special Drawing Rights (SDRs). It
wants to increase the share of
SDRs in total international
reserves in a gradual manner
starting from an issue of $ 250
billion.
Hong Kong is issuing bonds
denominated in Chinese Renminb
(Yuan). Countries are starting to
use their currencies in mutua
trade instead of the dollar (Chinaand Brazil). Thus the US would
have a tougher time financing its
trade deficit. Would China be the
next superpower? Only time would
have a definite answer.
China was the first economy to
pitch for the dollars replacement as the worlds reserve
currency. The stability of the international financia
system cant hinge on the currency of one single country,
even though it is the largest economy in the world said
Hua Ercheng, Chief Economist at the China Construction
Bank in Beijing. However, the bigger question remains
which currency will be able to replace the mighty dollar as
the currency reserve? China has been criticized roundly
for the handling of its own currency Renminbi. Talks about
the replacement of the dollar as the reserve currency had
proliferated at the G-20 summit held in London in early
April. Thereby nations such as Russia, France and Brazihad suggested that the US Dollar should be supplemented
by the other major currencies as a shared reserve
currency. President Dmitry Medvedev of Russia had also
questioned the future of the US Dollar as a global reserve
currency and had said that using a mix of regiona
currencies would enable in making the world economy
more stable.
This is similar to Special Drawing Rights (SDRs) created by
the International Monetary Fund in 1969 in an effort to
stabilize the international foreign exchange system. The
basic definition of SDRs given by the IMF is as follows
The SDR is an international reserve asset, created by the
IMF in 1969 to supplement its member countries officia
reserves. Its value is based on a basket of four key
international currencies US Dollar, Euro, Yen and British
The stabilityof the
international
financial
system cant
hinge on the
currency of
one single
country,
even thoughit is the
largest
economy in
the world -
Hua
Ercheng,
Chief
Economist
China
Construction
Bank
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Pound. The US Dollar itself makes up almost half of the
value of the SDR. The exact amounts of currency making
up SDRs are determined by the IMF Executive Board in
accordance with the relative importance in international
trade and finance every five years.
The IMFs so-called Special Drawing Rights could be usedas the basis for
a new currency.
Its first Deputy
Managing
Director John
Lipsky famously
said There are
many, many
attractions inthe long run to
such an
outcome.
Arguments against making SDR
the world's reserve currency
include the fact that the US
dollar, the Euro and the Pound
which make up the large majority
of SDRs have all lost value sincelate 2007 when the recession
began. Why replace a falling
dollar by an index which so
heavily includes the dollar? Also,
SDRs do not contain the Chinese
Renminbi, Indian Rupee,
Australian Dollar or Canadian
Dollar, all of which are important
benchmark or secondary globalreserve currencies. However,
even if the dollar is replaced by
the SDR, the IMF does not have
the financial prowess to
safeguard the exchange risk.
SDRs would have to be delinked
from other currencies and issued by an internationa
organization with equivalent authority to a central bank in
order to become liquid enough to be used as a reserve
Russia has proposed several regional reserve currencies
including the ruble as a part of the response to the globa
financial crisis. Dominique Strauss Kahn, MD of IMF said
that the Remnimbi can be added in the future to the
basket of currencies of SDRs, So, this is not a quick, short
or easy decision, said Mr. Lipsky, adding that it would be
quite revolutionary.
The status of the dollar as the reserve currency may also
be challenged by the Euro, the other global currency. It
has equivalent advantages and fewer risks offered against
the dollar. The Euro area does not have a large current
account deficit as a whole (although Germany has a large
surplus and Spain, Greece have a large deficit). The Euro
area intra trade is very high. However Euro, in spite of its
huge success in Europe remains a regional currency. Euro
has not overcome its self-imposed limits on usage and
adoption moving beyond the boundaries, due to the
maintenance of the ERM-II Exchange Rate Stability
requirements and the Maastricht deficit, inflation and
interest rate criteria. The share of dollars in globa
reserves stands almost thrice of the euro.
The power of "incumbency" is conferred by the "network
externalities" that accrue to the currency that is
dominant. Together these factors make it unlikely there
SDRs would
have to be
delinked from
other
currencies
and issued by
an
international
organization
with
equivalent
authority to a
central bankin order to
become liquid
enough to be
used as a
reserve.
http://search.bloomberg.com/search?q=John+Lipsky&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=John+Lipsky&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=John+Lipsky&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=John+Lipsky&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d17/31/2019 in-fin-nitie_q1_Mar 2010
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will be a large or abrupt change in the dollar's reserve
currency status. The sheer magnitude of dollar assets in
the official reserves of foreign central banks and the
realistic prospect of continued, and perhaps disorderly,
depreciation of the dollar
against most currencies, place
central banks at considerable
risk of incurring large capital
losses on their dollar asset
holding. With more than
enough dollar reserves to
meet liquidity needs, prudent
asset management would
seem to dictate some
diversification away from the dollar and towards the euro.
The only reason why the Dollar hasnt collapsed
completely is because economies largely continue to
recycle their surplus wealth and
trade surpluses back into dollar-
denominated assets. One
columnist connects the dots with
regard to the forex implications,
Less Chinese intervention to
prevent renminbi strength would mean China, slowly over
time, would build up fewer dollar reserves. In other
words, economies no longer concerned with pegging their
currencies, would have very little reason to build up large
pools of reserves.
We all are entitled to our opinions, but not to our facts. So
lets get the facts right before we fell into the folly of
stumbling to forecasting. As much as 70 percent of the
worlds currency reserves are held in dollars, according to
the IMF, leading to calls for nations to diversify their cashpiles to avoid excessive exposure to the U.S. economy as
it quadruples its budget deficit in a bid to counter the
worst recession since the Great Depression. To quote the
Economist It is hard to think of a parallel in history. A
country heavily in debt to foreigners, with a government
deficit it is making little effort to control, is creating vast
amounts of additional currency. Yet it is allowed to get
away with very low interest
rates. Eventually such an
arrangement must surely
break down and a new
currency system will come
into being, just as Bretton
Woods emerged into the
1940s. Cost of an abrupt
switch over from dollar to
other reserve currency is
prohibitively high. Its replacement as the reserve currency
of central banks would be slow and painful process. As
IMF chief Mr. Kahn said about a new global currency
based on SDR it is not going to happen tomorrow, but it
may happen in 10 years. The
replacement seems
imminent. When and which
currency is a question which
only time would tell.
References1. http://windowtowallstreet.com/oildollarvalues.aspx2. http://whatmatters.mckinseydigital.com/currencies/c
hina-s-exchange-rate-policy-and-what-it-means-for-
the-dollar
3. http://en.wikipedia.org/wiki/Special_Drawing_RightsThe author is a first year management student at NITIE
and can be reached at ask4rohit@gmail.com
My greatest challenge has been to
change the mindset of people. Mindsets
play strange tricks on us. We see
things the way our minds have
instructed our eyes to see. Prophet
Muhammad
History is a nightmare from
which I am trying to awake -
James Joyce
http://online.wsj.com/article/SB125374798483235707.htmlhttp://online.wsj.com/article/SB125374798483235707.htmlhttp://online.wsj.com/article/SB125374798483235707.html7/31/2019 in-fin-nitie_q1_Mar 2010
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The financial meltdown, which brought the world down to
its knees, caused a major havoc in the money markets in
the US in 2007-08.
The Federal Reserve controls liquidity in the system
through its network of Primary Dealers (PD). When the
interbank markets are functional and smooth, these PDs
distribute liquidity to banks and thus throughout the
system facilitating transactions in the broader economy.
Banks lend to each other based on their evaluation of
creditworthiness of counterparties.
During the crisis period however, a sudden loss of trust
amongst the banks resulted in a reduction in the
willingness or ability of banks to distribute reserves
through interbank transactions, thereby severely
disrupting the funding markets. Banks scaled back their
term lending to other banks as they grew uncertain of the
creditworthiness of their counterparties as well as their
own ability to raise future funds. This severely strained
liquidity conditions in the market in late 2007, resulting in
Innovative Monetary Policy Tools
- Ajay Jain, IIM Bangalore
EXECUTIVE SUMMARY
The financial meltdown, which brought the world
down to its knees, caused a major havoc in the
money markets in the US in 2007-08. The Federal
Reserve controls liquidity in the system through its
network of Primary Dealers (PD). When the
interbank markets are functional and smooth, these
PDs distribute liquidity to banks and thus throughout
the system facilitating transactions in the broader
economy. Banks lend to each other based on their
evaluation of creditworthiness of counterparties.
During the crisis period however, a sudden loss of
trust amongst the banks resulted in reduction in the
willingness or ability of banks to distribute reserves
through interbank transactions, thereby severely
disrupting the funding markets. Banks scaled back
their term lending to other banks as they grew
uncertain of the creditworthiness of their
counterparties as well as their own ability to raise
future funds. This severely strained the liquidity
conditions in the market in the late 2007.
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massive widening of spreads between the overnight inter
- bank lending rates such as the Overnight Index Swap
(OIS) and term London Inter-Bank Offer Rates (LIBOR),
which is considered to be a measure of interbank funding
pressure.
Failure of conventional tools
In a bid to address the rapidly deteriorating financial
conditions, the Fed initially resorted to the conventional
monetary policy tools of cutting the fed funds rate and
the discount rate. Unfortunately, these tools failed to
break the halt in the interbank market forcing the Fed to
design innovative tools to inject liquidity into the market.
The Fed tried to flush the market with liquidity through its
Open Market Operations but owing to a heightened
reluctance of banks to lend to each other in the inter-bank
money market, the banks ended up hoarding the money
the liquidity seizure continued. The hoarding of money
was also clearly visible from the falling money multiplier in
the US economy.
As an alternate measure, the Fed also cut down the
discount rate to encourage the depository institutions to
borrow from the discount window. In response to the
soaring strains in the money market
the Federal Reserve brought down
the discount rate premium, from 100
basis points to 25 basis points. The
Fed also made the terms of loans
more flexible. However, their efforts
failed to bring the desired results, due
to the so-called stigma problem
during a financial crisis, the banks may
be reluctant to borrow from the
discount window, worrying that such
actions would be interpreted by the
market as a sign of their financial weakness.
As it became evident that the conventional monetary
policy tools were not fetching the desired results, the
Federal Reserve innovated to introduce new facilities to
provide liquidity to those banks which needed it the most.
The Monetary Policy Tools innovation -
Term Auction Facility (TAF)
As the liquidity conditions deteriorated, the Fed
introduced a new tool called TAF to make funds directly
available to the banks.
TAF provided term funding on a collateralized basis, at
interest rates set by auction. The Fed auctioned fixed
amount of short-term loans to depository institutions that
were judged to be sound by their local reserve banks. The
minimum bid was set at an overnight indexed swap rate
relating to the maturity of the loans. This credit facility
allowed depository institutions to borrow from the Fed
for 28 or 84 days against a wide variety of collateral and at
rates below the discount rate. The facility improved
liquidity by making it easier for financial institutions to
borrow when the markets are strained and not operating
efficiently.
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TAF reflects some features of both open market
operations (OMO) and discount window lending. It
distributes the lending to the participants through
auctions of set amounts of funds in a fashion similar to
OMOs. At the same time, using the discount window and
its collateral management operations, it lends on a
collateralized basis. What sets the TAF apart from the
discount window, however, is the competitive auction
format and use of a market-determined interest rate
instead of a fix policy rate. Also, TAF offers an anonymous
source of term funds without the stigma attached to
discount window borrowing.
The TAF represents an improvement with respect to
repurchase agreements in their capacity to provide
liquidity. First, the range of collateral it accepts is widened
from General Collateral to discount window collateral.
Second, by providing funds for a longer term, it eliminates
the need to roll over the loans every day or every week.
And third, unlike discount window loans, the money goes
to the institutions that value it most as the interest rate is
determined in the marketplace.
Asset-Backed Commercial Paper Money
Market Fund Liquidity Facility (AMLF)
The Asset-Backed Commercial Paper (ABCP) Money
Market Mutual Fund (MMMF) Liquidity Facility was
intended to foster liquidity in the ABCP market in
particular and money markets in general.
This lending facility provided funding to depository
institutions and banks to finance their purchases of high-
quality ABCP from money market mutual funds who were
finding it difficult to meet heavy redemption demands by
investors. This facility was created to counter the large
number of redemptions at money market funds which
had left these funds in a quandary.
The funds that had redemptions in excess of their cash
and Treasury positions were facing a situation where they
could meet their redemption needs only by selling other
assets. But these other assets, high-grade short-term
paper, had become unusually illiquid given the
uncertainty in the market about the creditworthiness of
the issuers. So sales could occur only at a substantia
discount. Without AMLF, money market funds would havebeen forced to make the unpleasant choice between
either suspending redemptions, or liquidating paper at a
deep discount.
This facility allowed highly rated ABCP to be pledged by
eligible borrowers (banks, bank holding companies, o
brokers) to secure advances. The Federal Reserve charged
the primary credit rate/Discount Rate for the loan.
With announcement of the AMLF, redemptions from
prime funds slowed appreciably.
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Term Securities Lending Facility (TSLF)
TSLF as a lending facility allowed primary dealers to
borrow Treasury securities on a 28- day term by pledging
eligible collateral. The range of securities which can be
used as collateral was wider than for the TAF. TSLF is a
bond-for-bond form of lending and it affects only the
composition of the Feds assets without increasing total
reserves. The eligible securities under the facility included
investment grade rated mortgage-backed securities (MBS)
not under review for downgrade, and all securities eligible
for repo agreements. In exchange, the primary dealers
received a basket of Treasury general collateral, which
includes T-bills, T-notes, government bonds and inflation-
indexed securities form the Fed's system open market
account. So, operationally, the TSLF is an auction process
where PDs bid for Treasury securities.
While the TAF was aimed at easing interbank lending, the
TSLF was directed toward the spreads on MBS that had
widened as financial market participants started to shun
them. The idea was that if primary dealers can exchange
MBS for Treasuries through this lending program, then
asset managers, traders and other market players would
be willing to hold them again.
Primary Dealer Credit Facility - PDCF
The PDCF is an overnight loan facility that provides
funding for up to 120 days to primary dealers in
exchange for collateral at the same interest rate as the
discount window does. This facility was initiated to
provide an equivalent of discount window (available
only to depository institutions) to the primary dealers
(usually investment banks). This facility allowed primary
dealers to borrow against a relatively broad set of
collateral, pretty much similar to the discount loans
made to commercial banks. However, the PDCF was
immediately popular unlike the traditional discount
window, which commercial banks continue to shun
Borrowing averaged slightly over $30 billion per day for
the first 10 days since its introduction.
There were two objectives behind the launch of PDCF. The
first was to ensure the liquidity of the investment banks
With this facility, they now had direct access to
borrowing. Secondly, the PDCF was designed with the
idea of helping to reduce spreads on the securities
included in eligible collateral. Since primary dealers could
now take a relatively broad set of bonds to the Fed and
obtain immediate cash, the idea was that these securities
should now be more readily acceptable as collateral in
private borrowing arrangements as well. This facility thus
allowed the Fed to extend liquidity assistance directly to
major investment banks that were previously ineligible.
ReferencesOlivier Armantier, Sandra Krieger, & James McAndrews,The Federal Reserves Term Auction Facility
www.newyorkfed.org
www.dallasfed.org
www.bloomberg.com
The author is a second year management student at IIM
Bangalore and can be reached at
ajay.jain08@iimb.ernet.in
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Companies listed on the stock exchange are eligible toraise funds in the domestic
market by placing securities
with Qualified Institutional
Buyers (QIBs). These
securities can be equity
shares or any securities
other than warrants, which
are convertible into or
exchangeable with equity
shares.
The major benefit of
Qualified Institutional
Placements (QIPs) is that it
involves lesser disclosures
and does not require a pre-issue filing with SEBI which
gradually has made it a preferred instrument for entities
to raise funds. This raises the important question - Is QIP
an innovation churned out by SEBI or is it just a more
convenient way of raising capital, introduced toencourage companies to raise more from domestic
markets?
In the first year of its introduction, 16 QIPs were
introduced, which grew to 29 QIPs in the year 2007
through which about $5 billion (about Rs. 20,011 crore)
was raised. The year 2008 saw a bear run grip the market
and even QIPs could not provide enough fuel as only 4
deals were made while on the other hand, deals struckduring the Bull Run turned into losses for most of the
institutions. It was thus concluded that a secondary
market revival was necessary for the QIPs to revive.
However in the year 2009, QIPs made a comeback backed
by some of the bigger deals, like those by Unitech (Rs
2,789.33 crores) and Axis Bank (Rs 3,007 crores). A total of
31,102.25 crores was raised through 42 deals. This is seen
as a recovery on the back of a strong market run. The
surge in preference is viewed as result of a few
advantages QIPs offer, firstly it being a hassle free method
and secondly it being less time
consuming.
SEBI defined a pricing norm for QIPs
which stated, The average of the
weekly high and low of the closing
prices of the related shares quoted on
the stock exchange during the six
months or two weeks whichever is
higher preceding the relevant date.
One of the major changes made by
SEBI in the year 2008 to boost
investments was the pricing norms of
Qualified Institutional PlacementsInnovation or Convenien
- Abhinav Saini, NITI
SEBI, at the time of introducing
Qualified Institutions Placements
(QIPs) in May 2006, defined it as
an additional mode for listed
companies to raise funds from
the domestic market. This,
according to SEBI, was
introduced to make the market
more competitive and efficient.
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QIPs, allowing it to be based on the two-week average
share price, so that companies could price the issue closer
to the market value of the shares. In 2009 again, the
investment bankers had requested for a change in pricingnorm to allow current market price as the issue price to
bring down the difference, a request which was rejected
by SEBI.
QIP and the Domestic Fund Instruments
QIP is majorly seen as competitor to other domestic fund
raising options and an alternative way of meeting the
same capital requirement, though an easier and less
costly route.
When we analyze the preference of each as a money
raising tool by companies, we observe a paradigm shift
towards QIPs in the year 2009. This can be majorly
contributed to lower confidence that companies
had in IPO successes in that particular year and
the positive outlook of QIBs, a lower inclination
towards rights issues and derailed interest in the
execution of FPOs.
In the year 2009, a whopping 60% of the total
domestic capital raised was through the QIProute. Unaffected by the lower prices in the
previous years and the losses incurred by the
institutions, QIPs managed to steal the limelight in
the fund raising process of Indian corporations.
This share of investment through QIPs, in terms of
percentage and amount stand highest ever since
2007, a year in which close to 25% was raised through
QIPs.
When we study the distribution of domestic
funds raised over the last three years, a period
which has experienced both bull and bear
show, we observe that QIPs have managed to
grab the share of funds earlier raised by rights
issues. It must be taken into consideration that
for the companies which do not mind dilution
of stakes, QIPs offer a much better and more
convenient source of fund as compared to
rights issue. Rights offers are made at a
discount to the market price, and hence are not
preferred by existing shareholders' especially
when the secondary market is doing well and
this turns companies the QIP way.
QIP and Overseas debt funds
Qualified Institutions Placements, at its introduction was
launched as an instrument to attract the Indian
companies which were increasingly attracted towards
international funding through depository receipts
something that was conceived as undesirable export of
Indian equity.
When we consider the capital source fund channels used
by companies in the last 3 years, it is observed that QIPshave come strongly in comparison to the overseas funds
options. In the year 2007, the overseas funds had started
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2007 2008 2009Domesticfunds(incrores)
Domestic Fund distribution in 2007-2009
Rights Issue
FPO
IPO
QIP
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2007 2008 2009
(inRs.
Crore)
Funds raised through QIP and Depository Receipts (DR)
QIP
DR
(ADR & GDR)
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feeling the recession heat, which burnt them in the year
2008, which saw only $100 million (Rs 467 Crores) being
raised by India Inc. through this channel. This was majorly
seen as drying up of credit, volatility of the dollar and
easing of pricing norms of QIPs.
Even though funds raised through the ADR and GDR
routes made a strong comeback to jump back to $3.44
billion (Rs 16000 crores) in 2009, they still stood small in
comparison to the QIPs. Also it must be taken into
consideration that only 13 issues of DRs were issued in
the year and the major portion of fund raised was the
$1.5 billion raised by Sterlite Industries. When we
compare this to 42 issues of QIPs, it is safe to say that QIP
had been the flavour of the year and has managed to
notch up some of the desired space from the global debt
instruments.
The Future Ahead
When we peek into the year 2010, it looks promising with
around 54 companies waiting in line with valid
shareholder approvals in hand to raise an aggregate
capital of about Rs. 42,942 Crores, a projected growth of
approximately 36%. If all these QIPs are successfully
executed, it would result in establishment of a QIP fund
raising structure at par with other instruments.
As observed from previous years, the success of QIP in2010 will depend majorly on the performance of the
secondary market. Estimating the future of QIP and its
standing in the domestic fund market, based on
conclusion drawn from the last year data would not be
sufficient, given the volatile nature of the market and the
regular changes in government policies in these years. The
performance of QIPs is yet to be gauged over longer
period of time and it still requires restructuring as the
market adapts to the new offering.
It is yet to be seen how the performance of QIPs will
change, once the western economies recover from the
recessionary setbacks and the government pulls the rates
back. It would be interesting to see whether companies
would still prefer domestic funds or they would look to
raise capital through foreign debt instruments.
One of the major hurdles seen in the path of QIP growth is
the pricing norm which has affected the valuations gained
by companies. The minimum price set by SEBI, to uphold
minority shareholder interest, leaves the issuer with no
room to negotiate on price, as the pricing formula is rigid
So, even though there are many deals in hand, the
regulatory floor price might prove to be a dampener.
When we quantify the impact of QIP on the stability of
share price of a company, it proves to be a weakening
instrument as it allows control of share prices in hands of
few institutions, which may exit, leading to a sharpdecrease in the share price.
Taking a holistic view of the domestic and overseas fund
raising market situation since the introduction of QIP, it is
appropriate to tag QIP as a bit of both Innovation and
Convenience. Innovation which has managed to create its
own space in the domestic corporate capital finance
market. Convenience because of what it offered
especially to the cash starved companies in the credit
crunch period. At times when retail investments were not
looking up, QIPs managed to shine distinctively in the
funds sky. It is still early days hence future amendments
by SEBI and market conditions will play a major hand in
the further development of Qualified Institution
Placements.
The author is a first year management student at NITIE
and can be reached at nuevo.abhi@gmail.com
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Dun & Bradstreet is the leading provider of business-to-
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A day long Executive Development program on
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August 2009. The workshop covered areas like Introduction to Derivatives, Indian Equity F&O
Derivatives Market, Futures, Options, Options Pricing Overview, Basic Trading Strategies using
Option, etc. Around 125 students attended the workshop with students themselves evaluating
different exotic and vanilla options and deciding where best they can be applied.
The best brains from Indias premier business
schools were in Mumbai from the 5th to the 7th of
November, as NITIE played host to Prerana 2009
the annual management festival of the institute
The 3 day extravaganza which aimed at promoting
business excellence, was a grand success.
With , NITIE continuedits tradition of providing the students with a
platform to meet and interact with luminaries from
the Indian corporate sector. This highly awaited elite business conclave was a resounding success,
with the stalwarts like Ms. Meera Sanyal, Country Executive, Royal Bank of Scotland India and Mr
Narayan Ramachandran, Country Head, Morgan Stanley India.
Events @NITIE
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The other big chain of events was the Summer Project Contest where students benchmarked their
summer projects against the best in the country. This year, the Summer Project Contest received over
500 entries across 5 verticals of management namely Marketing, Finance, IT, HR and SCM.
Beat-the-$treet was a legacy event conducted by $treet that asked participants to explore fund
raising options for a company in the midst of a secondary market slowdown.
NITIE was part of a pan India B-School Stock Picking
and Derivatives Trading Competition from November
16 through 27, 2009.
The online competition was played across India's top
16 B-Schools and over 500 teams competed for the titleof Stockezy Stock Market Pundits 2009. The first
round was a stock picking game where the picks were
evaluated according to their returns. Three teams
from every b-school qualified for the final round which was on Futures and Options Strategies
NITIE had the second largest participation from the pool of colleges selected.
This is an ongoing training program for MBA students wanting to build their career in Investment
Banking and Equity Advisory. The program is run by 4
professionals from the industry. The focus of the program is to
give an in-depth knowledge about the ground realities of
Equity Research, Project Finance, Corporate Finance and
Investment Banking.
Samiksha a series of panel discussions on contemporary business themes, born out of a need for
greater interaction between the industry and the academic community, has been successfully
bringing together students and experts from the industry since its inception.
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After the demise of some of the biggest banking and
financial companies worldwide, Samiksha tried to
find out how the RBI regulated Indian Banking
sector has been evolving in conjunction with the
Indian economy. The honchos from the Indian
Banking industry were invited to discuss the topic
Indian BankingAn Evolving Landscape on the 5th
of February 2010.
The distinguished panelists included Mr. Pramod Kasat, Director - Credit Suisse, Mr. Abhijit Biswas,
Director - Equirus Capital, Mr. Sanjay Agarwal, DGM - Globa
Risk Management - ICICI Bank and Mr. Aspy Engineer, Senior
VP - Retail Banking - Axis Bank
B Gyan, an industry interaction session at NITIE was
organized on the 16th of February 2010. The topic for the session
was Venture Capital Funding and Mr. Vipul Mankad
President SIDBI Ventures, delivered an enlightening lecture on the same. Budding entrepreneurs
also presented their business plans to Mr. Mankad, who obliged by offering his views on the same.
1. Establish the connect for the following
FIN- QUIZZITIVE
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2. Connect the 2 pictures
3. Mathematicians in Poland
have pointed out a new
problem with these items.
Because they are struck
asymmetrically, using differentdies that depict national
symbols on one side and a standard map and denomination on the other, they may produce
faulty results when spun by gamblers. The reality is, when students in Poland spun them for
250 times, King Albert of Belgium appeared 140 times, instead of a fair 125. What are we
speaking about?
4. The American public worry that they were becoming too materialistic resulted in
something which focused on intangibles that make life worth living. It was the
brainchild of McCann-Erickson. What are we talking about?
5. Connect the following
6. Establish the connect
Mail in your answers to
street.nitie@gmail.com with
the subject
before the 15th of March 2010.
Winner to get a cash prize of
Rs. 1000/-
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The Team that is $treet
is a student run Finance Interest Group at NITIE that assists
budding managers in assimilating class-room as well as practical
learning; thus nurturing them to evolve as better managers. Having
completed 5 years of existence, $treet has grown from being an informal, in-house discussion forum to
a truly national b-school society. In the year 2009-10, $treet organized a wide variety of activities
ranging from workshops to lecture series to inter b-school competitions. Come 2010, the financial sector
and the broader markets are trying to come to terms with an economy evolving out of slowdown.
$treet aims to play an active role in helping the students comprehend the effects, challenges and
opportunities that are thrown by the current economic situation. We also aim to strengthen the Brand
$treet by fostering partnerships with the alumni, academia and the corporate world.
The Team:Aakash Chawla aks.onweb@gmail.comGaurav Bajaj gauravbajaj85@gmail.comGaurav Malhotra gmalhotra85@gmail.comRitika Arora ritikaarora19@gmail.comRajneesh mail.rajneesh@gmail.com
About Us
About NITIE
The , Mumbai is
a centre of excellence recognized by the Government of India. It was
setup in 1963, in collaboration with the International Labour
Organization (ILO). Since its inception, NITIE has been providing
solutions to complex problems of the industry and business. NITIE
today is constantly ranked among the top 10 business schools in the
country and its Post-Graduate Programmes are among the best in the
country. Throughout the years, NITIE and its alumni have carved aniche or themselves in the industr .
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