If you dissect the quarterly/yearly results of Hero Honda; which were published last week; one this is very clear, it seems recession has not impacted Hero Honda and there is a growth reported by them. More importantly, they have achieved this through growth in rural India.
Less affected by recession, the rural economy is spending much of the higher income derived from a good winter crop of grains and pulses, high minimum support price from Government and the relief from the government waiver of farm loans.
The general election (business standard has predicted that 2009 General election would contribute 0.3% to GDP), summer holiday season, marriages and even the effect of sixth pay commission hikes; all are aiding a massive jump in sales.
The strength of rural economy is getting reflected in Fast moving consumer goods (FMCG), cement and telecom; in addition to two wheelers and tractors.
All of a sudden; rural consumer is of great importance for India Inc now. The marketing teams are busy in defining the strategy to attract rural attention. Interesting enough; rural market is untapped in many areas and there is lot of room for the business for all. Due to media network, even rural market is aware of the new trends and products. And unlike his urban counterpart; rural consumer is ready to spend and he need not to bother about his job loss and EMI to pay every month.
Unfortunately, our business (IT and ITES) doesn’t have an exposure to rural India!
Sunday, April 26, 2009
Sunday, April 19, 2009
‘Marriage made in Heaven’- Merger of Satyam and TechMahindra
This week saw a major deal is Indian IT industry where TechMahindra took over management control of Satyam. It will be a good relief for Satyam employees; they are in to more stable hands now; there was good amount of instability over last 3 months.
Also, appreciable point is how new board of Satyam and the Indian Government acted quickly to safeguard the Satyam employees, customers and shareholders. We saw a real quick decision making in this entire process; which is really commendable.
However, this deal is more strategic for TechMahindra; let’s see how;
Geography Expansion: TechMahindra is very strong in Europe and Satyam is strong in APAC and US. This merger will help TechMahindra to easily expand in to US and APAC, that too with strong customer base including GE, Cisco. This also helps to go beyond British Telecom in terms of new business and try cross selling in other existing customers. This is huge advantage. You can’t imagine the pain in building US operations from the scratch.
Business Expansion: TechMahindra is known for its telecom domain. Satyam is strong in SAP [About 45% of business] and Engineering Services business and BIFS. Thus TechMahindra will get built up practices of SAP and Engineering services. This is much required diversification.
Employee Base: Satyam has pretty strong sales force and outstanding techies, it is said, and some of the key business managers have already left though.
Thus, this deal seems to be a great fit and appears to be more strategic for TechMahindra. It leaped ahead as 4th largest IT company in India. Off course any deal comes with the challenge of managing the merger and management has to work towards aligning both the companies. Also, we should not forget the risk of liabilities Satyam might carry, no body knows about these liabilities as of now.
However, on paper it looks like; as what TechMahindra CEO put it ‘Marriage made in Heaven’.
Also, appreciable point is how new board of Satyam and the Indian Government acted quickly to safeguard the Satyam employees, customers and shareholders. We saw a real quick decision making in this entire process; which is really commendable.
However, this deal is more strategic for TechMahindra; let’s see how;
Geography Expansion: TechMahindra is very strong in Europe and Satyam is strong in APAC and US. This merger will help TechMahindra to easily expand in to US and APAC, that too with strong customer base including GE, Cisco. This also helps to go beyond British Telecom in terms of new business and try cross selling in other existing customers. This is huge advantage. You can’t imagine the pain in building US operations from the scratch.
Business Expansion: TechMahindra is known for its telecom domain. Satyam is strong in SAP [About 45% of business] and Engineering Services business and BIFS. Thus TechMahindra will get built up practices of SAP and Engineering services. This is much required diversification.
Employee Base: Satyam has pretty strong sales force and outstanding techies, it is said, and some of the key business managers have already left though.
Thus, this deal seems to be a great fit and appears to be more strategic for TechMahindra. It leaped ahead as 4th largest IT company in India. Off course any deal comes with the challenge of managing the merger and management has to work towards aligning both the companies. Also, we should not forget the risk of liabilities Satyam might carry, no body knows about these liabilities as of now.
However, on paper it looks like; as what TechMahindra CEO put it ‘Marriage made in Heaven’.
Sunday, April 12, 2009
Tata Son’s US ambassador
Until I read this interview on India Knowledge @ Wharton; I didn’t even know that Indian business houses can think about such a strategic move.
To me it seems like a fantastic idea as I believe in building the relationships is the way to build business in any country. This is a fantastic move by Tatas having ‘an ambassador’ in US; from where they are having bigger business coming from.
The role definition is “I represent the views of the Tatas -- the objectives and goals of the Tatas in the United States. I interact with government officials, with regulators, with legislators [and] with people from the Executive Branch on some issues of concern and interest to the Tatas. I also report back to Tata headquarters -- to Bombay -- about what I hear in Washington, what the trends are, what people are thinking about India, what people are thinking about Indian business. I try to be a interlocutor, if you will, between the Tatas in India and the United States government in particular, but also with the population [or] America at large -- meaning with academia, with American business, with American think-tanks -- to sort of explain one to the other”
Link to the full interview is below; but I am pretty much impressed by this investment by Tatas.
Link to complete interview
True example of how visionaries always think differently!
To me it seems like a fantastic idea as I believe in building the relationships is the way to build business in any country. This is a fantastic move by Tatas having ‘an ambassador’ in US; from where they are having bigger business coming from.
The role definition is “I represent the views of the Tatas -- the objectives and goals of the Tatas in the United States. I interact with government officials, with regulators, with legislators [and] with people from the Executive Branch on some issues of concern and interest to the Tatas. I also report back to Tata headquarters -- to Bombay -- about what I hear in Washington, what the trends are, what people are thinking about India, what people are thinking about Indian business. I try to be a interlocutor, if you will, between the Tatas in India and the United States government in particular, but also with the population [or] America at large -- meaning with academia, with American business, with American think-tanks -- to sort of explain one to the other”
Link to the full interview is below; but I am pretty much impressed by this investment by Tatas.
Link to complete interview
True example of how visionaries always think differently!
Sunday, April 05, 2009
One Last Chance for Detroit
It used to be said that “what is good for General Motors is good for the USA”. That is not true any more. The company now accounts less than a fifth of all car sales in the US, while other companies produce and sell better, smaller, fuel-efficient cars that market might likes. And the word “bankruptcy” might have finally been uttered in GM context by president Obama; though he wants it to be “managed bankruptcy”; which means a safety net for employees and retires but not to the management.
Full bankruptcy of GM will pretty much destroys what remains of the company; and be a political bomb in terms of its psychological impact on the entire nation. So, there is one more chance given to the management; after CEO is been fired; in the hope that the union and bond-holders will make financial sacrifices needed to make company viable.
Now, new management at GM has to produce a plan for restructuring itself with-in next 60 days. But given the past failures of such plans; including the ones which was rejected last weekend by White House auto task force; it would be risky to assume that all will go well with-in next 60 days. This would be a huge task at hand; especially you are trying to revive a huge company like GM and that too in 60 days of stipulated period of time.
I think, this whole government’s protection net might act as an interim solution to a longer problem. It can’t solve the long term problems for sure. The issue with US auto industry is; over the years they produced over-priced gas guzzlers that have a declining market. Or as a management consultant would have put it; the companies are out of sync with the market.
In GM this was no secret, yet the company did little to address the issue and continue to focus on big gas-guzzlers because they were more profitable at that time and they thought this might continue. They didn’t notice decline in the profit margins and the sales.
It appears that; this would be one final chance for GM; if not the choice would be either sudden or slow death. If that happens, these 60 days would give us enough time to adjust ourselves to an idea of possible closure; merger or breakup.
Full bankruptcy of GM will pretty much destroys what remains of the company; and be a political bomb in terms of its psychological impact on the entire nation. So, there is one more chance given to the management; after CEO is been fired; in the hope that the union and bond-holders will make financial sacrifices needed to make company viable.
Now, new management at GM has to produce a plan for restructuring itself with-in next 60 days. But given the past failures of such plans; including the ones which was rejected last weekend by White House auto task force; it would be risky to assume that all will go well with-in next 60 days. This would be a huge task at hand; especially you are trying to revive a huge company like GM and that too in 60 days of stipulated period of time.
I think, this whole government’s protection net might act as an interim solution to a longer problem. It can’t solve the long term problems for sure. The issue with US auto industry is; over the years they produced over-priced gas guzzlers that have a declining market. Or as a management consultant would have put it; the companies are out of sync with the market.
In GM this was no secret, yet the company did little to address the issue and continue to focus on big gas-guzzlers because they were more profitable at that time and they thought this might continue. They didn’t notice decline in the profit margins and the sales.
It appears that; this would be one final chance for GM; if not the choice would be either sudden or slow death. If that happens, these 60 days would give us enough time to adjust ourselves to an idea of possible closure; merger or breakup.
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