National Investment Fund and civilised behaviour

"Savages consume everything in their sight, while civilised people save for future generations",
an quote i read long ago but one that has been tatooed in my heart. I think the actions we take as a society for the benefit of future generations, is what that sets one group of people apart from the others.
But what does the Nation Investment Fund (NIF) have to do with civilised behaviour??
Quite a lot, in my view.

First, i think the NIF, ( a fund that will house the sale proceeds from govt. owned companies and the earning used for social purposes) will go down in history as a great piece of financial innovation - One that can change the course of th country's economic history. The fund has ensured the backlash against any divestment will be sobered down and the earning will be put it use for a noble cause.

Second, it has the ability to make India a debt-free country or atleast the assets with the NIF can be equal to the debt of the country. The PSU Index has a market cap of Rs 5,00,000 crore or over $100 billion , thats close to external debt of $112 billion.

It is be fooloish to think the fund can be ramped up overnight but Rs 50,000 crore each year is certainly achievable. so, $50 billion can be reached by the end of the term of Dr Manmohan Singh government and Indian Railways Corporation ADR can be listed on the NYSE!
If it does, it will alter everything - our debt rating, currency rating.

The NIF, can be what the Nowegian Oil Fund (which has $165 billion of oil export surplus) is to Norway.

Most importantly, it will be a strong demonstation that our politicans can act with the interest of future generations in mind and not just petty votebanks.

NIF on the net:
http://pib.nic.in/release/release.asp?relid=6769

IDBI Bank - Innovation unlimited

I hope you havent got too bored by now and switched windows to browse some picture of Salman Khan or Ash, as your preference may be. But if you are still here then read on- as to how IDBI Bank changed my views on innovation in the financial sector.

I had till recently held the errounous view, that innovation in this sector could not provide a sustained competitive advantage. New financial provides could be easily copied. If it requires complex IT solns, then it would take about a month for a competing institution to introduce the product in the marketplace. So, the advantage of an innovative new product could at best be Fleeting.

But what if a financial institution has developed a culture of sustained innovation? Can this provide a "Sustainable competitive advantage"? Can there be a 3M of the financial world?
I believe now tha answer is an emphatic YES, and i was lucky enough to see a glimse of it in IDBI Bank.

From simple ideas like provide portfolio value of demat accounts through mail, instant account opening packs , 100 % housing loans and ATM based on open source s/ware, it was innovation unlimited. Gunit Chadha and his team had done an unparalled job at the bank.

DSPML + Hemendra Kothari + Ethics

I remember Hemendra Bhai mentioning once mentioning that "old world ethics" were nolonger present in the investment banking world. I thought he was taking a pot shot at Uday Kotak, of Kotak bank, who had conered a substantial part of the business.
I wonder if Mr Kothari has turned a new leaf while his firm acted as an advisor to both sides in IDBI - IDBI Bank merger!
These days, i have more respect for prostitutes who sell their bodies for money, than investment bankers in pin striped suits who sell their souls for lucre.

A rigged merger ratio

Manipulation has always been an essential ingredient of the financial world. However, it has not very often been practiced with such brazenness and little outcry. The merger ratio, so carefully crafted to ensure the govt. holds 51% in the combined entity as required by law, leaves little doubt about the process. One wonders about the moral depravity that permeates the top management of the two institutions and advisors to merger. Is there not a Man (or woman!) in these institutions, who can cry foul and provide details to outside world??

IDBI Bank, which will finish this year with an EPS of at least Rs 8 and expected EPS for next year is Rs 12-13, has been brought at 6 times next years earning in a wider market where stock average a PE of 15. It is unbelievable such deceit is not known to those in power – like the top brass of the Ministry of Finance and The Reserve bank of India. They have chosen to remain mute spectators or collude with their friend M Damodaran to push through the merger.

IDBI merges with IDBI Bank

The merger came as no surprise and the ratio was exactly as expected - just enough to allow the govt. to have a majority stake in the combined entity.

Although the events leading to the merger went on rather predictable lines, the outcome had an effect rather difficult to explain. The final nail on the coffin to what could have been one of the finest domestic banks and lead contentender for a global India financial powerhouse was indeed very painful.

and one of the many things it did was to spur my latent desire to blog - thanks to a friend who suggested the idea, and express my views on some issues, which few unlucky surfers may stumble upon.