Thursday, June 26, 2008

The American Dream…

There are many, many different types of people living in the United States, but most of them have heard of or believe in the “American Dream”. The promise of living in the United States has always been work hard, earn money, and build a better future for you and your families. Will the American Dream survive the next 50 years? Given the uncertain economic conditions today, will people continue to believe in it?

Here is the link to an interesting article I read, that got me thinking and talking about this interesting topic:

Sheena Malik
Stedfast Financial, New York

Wednesday, June 18, 2008

Should Ranbaxy promoters have sold out?

Ranbaxy has been an example of the rise of an Indian MNC.

After many years of acquiring some big companies globally, it was a role reversal to see the promoters of Ranbaxy deciding to sell their controlling stake of 34.8% for Rs10,000 crores at Rs 737 per share ( 31.4% premium over the company’s closing share price on the same day).

If the Daiichi Sankyo’s acquisition of Ranbaxy leads to a stronger company in this globalised era, and can also retain its name and country of origin then it may give a fillip to the rise of Indian MNC. However, if it becomes Daiichi India, with no trace of Ranbaxy then it may become one less Indian MNC.

The company reported an operating income of more than Rs 4000 crores and a net worth of more than Rs 2000 crores for FY 2008. The company also commanded respect in our stock market enjoying a P/E ratio of 34. It has a total debt-equity ratio of 1.4 and long term debt-equity ratio of 0.9. This gave it scope to raise resources both from the equity market as well as the bond market.

The promoters may have very good reasons for selling their controlling stake, but overall I feel a little sad that Ranbaxy promoters sold the controlling stake.

Prof J N Mukhpopadhyaya

(Globsyn Business School)

Emerging Financial Management

The old practice of compliance Accounting and management thereof has undergone remarkable metamorphosis in recent times in view of severe competition, globalization, price -wars and tough Govt. regulations across the world.

However, managerial focus to stay viable and profitable on a continuous basis defying all hurdles has become so forceful in present times that the entire world of finance and the people who manage finance are devising new ways and means to map continuity , profitability and value addition in business whilst countering risks and uncertainties.

The financial management of to-day is to ensure the company takes right decisions in various crucial matters which are cost effective, most reasonable and entails minimum risk .This, in other words, is accounting for managerial decisions and evaluation thereof. The other requirements being investors' / shareholders' value addition , evaluating the value chain of the business, business continuity mapping, business risk mapping and finding ways and means for their mitigation.

Since most companies are becoming global now, the need for effectively managing international transactions is also an emerging area. This entails currency swaps, interest rate optimization and hedging of currency fluctuations .These in turn needs advance planning, adequate market judgment and financial market analysis. Adequate knowledge of international trade and financing thereof is, thus, called for on the part of a CFO.

As more and more companies are going for mergers & acquisitions, company valuation has emerged as a significant responsibility of a CFO. This entails organizing due diligence, understanding future potentials and assessing intrinsic worth thereof .CFOs in the past were seldom involved in these functions. Further, many mergers/ acquisitions are across the countries, hence, determing the valuation and the evaluation process has to have some kind of uniformity with regard to treatment as well as disclosures of items of income & expenditure and assets & liabilities. This calls for adequate knowledge on the part of CFO, apart from Indian GAAP and the Indian Accounting Standards, of US GAAP or any other GAAP and Accounting Standards thereof, as may be required, for necessary conversion. Moreover, as the concept of fair value accounting is gaining ground, the transition towards IFRS seems inevitable. Thus preparation of Accounts and making the disclosures thereof under IFRS is also an emerging area for a present day CFO. With the formulation of trade guidelines under WTO, the whole gamut of Accounting Policies / Standards will undergo change across the nations, thus, calling for additional responsibilities on the part of a CFO to manage finance and business under a new dimension.

With the emergence of big corporations with huge investments involving many shareholders, managing investors’ expectation and the need for their protection also has become an important function of the CFO in recent times. This entails proper disclosure of financial information as per plethora of Govt. Rules / Regulations to cater to investors right to information.

Finally, as the business has to continue with an expected return on capital invested, the management of the future functionalities and its financial implications has to be articulated as correctly as possible. This entails establishing probabilities and expected values on the key functions of the business and projects the most likely scenario and manages the same with vigor and stamina. This is also an emerging area for the present day CFO.

Contributed By:
Pratap Chakravarty
(Head Finance & Company Secretary)
Jost India Auto Component (P) Limited

Monday, June 2, 2008

Should Human Assets Be Included in the Balance Sheet of a Company ?

Though your Balance Sheet is a model of
What balances should be,
Typed and ruled with great precision,
In a type that can see ;
Though the grouping of the assets
Is commendable and clear,
And the details which are given more
Than usually appear,
Though investments have been valued
At the sale price of the day,
And the Auditors Certificate shows
Everything O.K.
One asset is omitted and its worth
I want to know,
The asset is the value of the Men
Who run the show.

Author: Sir Mathew Webster Jenkinson

Contributed By:
Prof. Jayanta Mitra
(Globsyn Business School)