The rise and fall of a castle in the air

NOT WELL-GROUNDED: The NOT WELL-GROUNDED: The sign at a closed Kingfisher Airlines 

booking counter at Mumbai airport tells a bigger story

Source : The Hindu :K Giriprakash :13 Nov 2011

How an airline obsession put a liquor baron on the rocks

Never has the flamboyant Vijay Mallya been in such a tight corner before.

He took over the UB Group even before he turned 30 after his father, Vittal Mallya, passed away suddenly in 1983. Since then, he has consolidated the group holdings, shed those companies, including a car battery making venture, which didn't make sense to his business, won a corporate battle — and a war of words — with the pugnacious Manu Chabbria, wresting from him Shaw Wallace, once among the top companies in the liquor industry. Today, his beer business controls half the domestic market while the liquor business controls three-fourths of the market.

But as the saying goes, the quickest way to become a millionaire is for a billionaire to invest in the airline sector.

Kingfisher Airlines was set up in 2003 but hasn't seen a single year of profit since it got listed in 2006. Today, accumulated losses stand at about Rs 8,200 crore and the money to pay for fuel, salaries and airport fees is running out, prompting Mallya to approach the government for a bailout.

The company blames the government for its predicament — the high cost of aviation fuel, the requirement to service non-profitable routes — with a top UB Group official telling The Hindu that the politicians running the country should decide whether they want the transport sector to be robust or are happy enough with “continuing the bullock cart age.”

But market analysts believe flaws in Mallya's business plans and style of functioning lie at the root of Kingfisher airlines' woes.

In a controversial report on the airline, Veritas Investment Research analysts point out that Mallya should have never got into the airline business. “We believe that the ill-conceived foray into the airline business has already cost UB shareholders dearly, and that their ownership of India's premier liquor and beer assets has been sacrificed at the altar of egoistic ambitions,” two analysts with the research company said in a report in September this year. The report was hotly contested by the UB Group management which felt there was nothing wrong with the airline.

The problem, of course, lay in acquisitive excess. For Mallya, there was no ducking the temptation of getting into the airline sector. For one, there was the glamour, something he couldn't get enough of despite the yachts and islands. In time, the airline became a stepping stone for the pursuit of other adventures.

He acquired Whyte & Mackay, a Scottish bulk liquor maker amidst drama and glamour, holding a press conference in London to announce the deal. He bought newspapers (Asian Age was one such), fashion and movie magazines, bought and sold a TV company and added football teams to his ever expanding empire. He even added a cricket team to his list of acquisitions and called it Royal Challengers. Someone who was known for his distaste for politicians, he actually funded a party and became a Rajya Sabha MP as well.

The acquisitions wouldn't just stop there. He went on to own a racing team (Force India) which regularly competes in Formula One racing events, launched a calendar named after his brand, Kingfisher, in which the best of the models fell over each other to feature. He held New Year parties at his famed Goan palatial bungalow.

Of course, the biggest venture of them all was Kingfisher Airlines and because he was the big daddy of the glamour world, he promised flyers a class of service not usually seen among the domestic airlines. Jet Airways was good and on time, but was for busy executives; Air Deccan was for the aam aadmi, a sort of shuttle service, while the others either didn't matter or were too small.

Mallya didn't disappoint. He brought glamour into the business of running airlines. Each seat in his aircraft had a TV screen just like the international air carriers offered welcoming guests by appearing on the screen and asking them to write to him personally if they were unhappy with any service. He handpicked air hostesses, gave away goody bags to each passenger and the welcome at the airport counters had to be seen to be believed. He made you feel special. The corporate sector wanted all top executives to fly Kingfisher and they came back admiring the service.

Three key mistakes

It was when the good times seemed to last forever that Mallya made his first strategic mistake. Deccan Aviation's Capt G.R. Gopinath, who was desperately looking for a buyer for his airline, Air Deccan, had all but tied up with the Anil Ambani for a sell-out. Some last-minute delays eventually led to the collapse of the deal. That's when Mallya, who kept denying that he couldn't even think of buying an airline whose business model was different than his own, suddenly put in his bid, apparently offering more money than the previous one to clinch the deal.

It seemed a good deal in the beginning. Mallya got Air Deccan's huge market share and several aircraft as well, plus an immediate listing. Thrown in was another goody: the licence to fly on international routes as Air Deccan had been in the business for five years — a requirement by the regulator for any airline to fly overseas. But he also acquired the losses incurred by the airline.

Through a reverse merger, Kingfisher Airlines became Air Deccan and once the entire acquisition was completed with necessary approvals from the regulator SEBI in place, Mallya quickly changed the airline's name back to Kingfisher Airlines in 2008.

He spun off Air Deccan's fleet into a subsidiary called Kingfisher Red. So, Kingfisher Airlines had an economy as well as business class and flew on trunk routes including the metros, while Red did the rounds of tier-II cities' as well as some of the bigger cities. It was picture perfect.

It wasn't, actually. Mallya was not just into one business but several and each as different as the other. Normally, for such diverse businesses, one would appoint a CEO each to run it with a hands-on approach who would, in turn, report to the group chairman.

While the liquor and the beer businesses had an experienced set of officials running the show, the others needed the undivided attention of Mallya himself. More so for the airline venture. This was where his second mistake came in. The airline had everything going for itself: great brand visibility, loyal customers and a wide network. But as a former business partner of Mallya pointed out recently, he was more like an absentee landlord.

Mallya was seen everywhere and apparently took more than necessary interest in running the airline but it wasn't just good enough. The business model was coming apart and losses kept mounting. There was cannabalisation from the mother brand. “If two brands look alike, then obviously, passengers will opt for the cheaper priced,” the former partner, who did not want to be identified, said.

Industry analysts say the third mistake was that the airline should have first consolidated its domestic operations and then introduced international routes because on the foreign routes, the competition only gets bigger and with those who have deeper pockets.

Looking for a soft landing

The airline is today saddled with total debts of over Rs. 6,000 crore. Mallya was forced to take loans from banks which now have a total exposure of about Rs. 7,000 crore to Kingfisher Airlines, of which over Rs 1,300 crore had been converted into equity during the last fiscal as part of a debt restructuring exercise. Of the banks' total exposure, over Rs. 4,000 crore are in the form of term loans. The consortium, led by banking behemoth State Bank of India, also includes a number of other public and private banks.

But early this year, after the airline missed one of the milestones to raise Rs. 1,000 crore through global depository receipts because of the crisis in the Arab world, the lenders converted part of their loans to equity at a premium to market price. As a consequence, these banks now hold 23 per cent stake in the airline.

These loans for Kingfisher have also come at an enormous cost for the UB group. More than nine out of 10 shares of its crown jewel, United Spirits have been pledged as collateral to the banks.

Awash in liabilities, Kingfisher Airlines is today asking the banks for another debt recast and perhaps some easier terms to pay interest costs. What remains to be seen is whether the banks will agree this time because they are under extreme pressure not to do so. The government's view on the matter is, of course, the most important factor.

But in a recent interview to Business Line, UB Group chief financial officer Ravi Nedungadi pointed out that when the first debt recast happened, the price of crude was about $80 per barrel, which has now gone up to $100 per barrel while the rupee has eased past Rs. 50 per dollar from about Rs. 40 earlier. “It is obvious that the working capital requirements too has gone up,” says Nedungadi.

In its bid to reduce costs, the airline has started cancelling flights and has recently closed down its low-cost carrier Kingfisher Red which, according to one analyst, might prove to be another costly mistake. “Indian passengers are extremely price conscious and this measure may just lead the airline into a deeper mess,” he said.

The ‘king of good times' may just have to abdicate his throne some time soon if he wants to stay in business. It isn't always that you can pull off every business venture in your life time. Scotch on the rocks works. Kingfisher on the rocks doesn't.

The unpleasant side of Steve Jobs.

Source :BL:D Murali :13 Nov 2011

Walter Isaacson reveals the emotional, and sometimes unpleasant side of Steve Jobs.

November 13, 2011:  

Ever wondered why on-off switches are an anathema to Apple devices? Because of the iconic co-founder's belief in afterlife, as captured in ‘Steve Jobs' by Walter Isaacson. To Jobs – who was about fifty-fifty on believing in God, because he felt there was more to our existence than meets the eye – the on-off switch perhaps symbolised death, as if, ‘Click! And you're gone.'

He liked to think that something survives after you die, because “It's strange to think that you accumulate all this experience, and maybe a little wisdom, and it just goes away. So I really want to believe that something survives, that maybe your consciousness endures…

 Maybe that's why I never liked to put on-off switches on Apple devices.”

HARSH HONESTY

Many have wondered how, behind a company that makes products that mean so much to most people, there was someone as mean as Jobs. Even his family members wondered whether he simply lacked the filter that restrains people from venting their wounding thoughts or wilfully bypassed it, narrates Isaacson. “This is who I am, and you can't expect me to be someone I'm not,” was the explanation that Jobs would offer.

In the author's view, Jobs could actually have controlled himself, if he had wanted. “When he hurt people, it was not because he was lacking in emotional awareness. Quite the contrary: He could size people up, understand their inner thoughts, and know how to relate to them, cajole them, or hurt them at will.”

A snatch of Jobs-speak informs that he did not think he run roughshod over people. “But if something sucks, I tell people to their face. It's my job to be honest,” defends Jobs.

Advising one to be able to be super honest, Jobs notes, “Maybe there's a better way, a gentlemen's club where we all wear ties and speak in this Brahmin language and velvet code-words, but I don't know that way, because I am middle class from California.”

DESIGNER DAD

Growing up with Paul and Clara Jobs – a high school dropout with a passion for mechanics and his salt-of-the-earth wife who was working as a bookkeeper – the couple who had adopted him soon after birth, the child Steve learnt many profound lessons. 

Not only that he was ‘chosen' and ‘special,' rather than just ‘abandoned,' but also that craftsmanship is important. “Steve, this is your workbench now,” Paul had told him when marking off a section of the table in the garage. “I thought my dad's sense of design was pretty good, because he knew how to build anything.

If we needed a cabinet, he would build it. When he built our fence, he gave me a hammer so I could work with him,” Jobs would reminisce.

Fifty years later the fence still surrounds the back and side yards of the house in Mountain View, informs Isaacson. “As Jobs showed it off to me, he caressed the stockade panels and recalled a lesson that his father implanted deeply in him.

 It was important, his father said, to craft the backs of cabinets and fences properly, even though they were hidden. ‘He loved doing things right. He even cared about the look of the parts you couldn't see.'”

An interesting sidelight in the book is about how Paul's craftsmanship helped fulfil the signed pledge the couple had made when Steve was adopted – that a savings account would be funded to pay for the boy's college education.

 “My college fund came from my dad paying $50 for a Ford Falcon or some other beat-up car that didn't run, working on it for a few weeks, and selling it for $250 – and not telling the IRS.”

BUILDING INSPIRATIONS

The ‘original vision for Apple' was the house where the family lived, built by real estate developer Joseph Eichler, whose company spawned more than 11,000 homes in various California subdivisions between 1950 and 1974, one learns. Inspired by Frank Lloyd Wright's vision of simple modern homes for the American ‘everyman', Eichler built inexpensive houses that featured floor-to-ceiling glass walls, open floor plans, exposed post-and-beam construction, concrete slab floors, and lots of sliding glass doors, describes Isaacson. “Eichler did a great thing. His houses were smart and cheap and good. They brought clean design and simple taste to lower-income people. They had awesome little features like radiant heating in the floors,” Jobs would admire, during one of his walks with the author around the neighbourhood.

Isaacson reports that the appreciation for Eichler homes instilled in Jobs a passion for making nicely designed products for the mass market.

 “I love it when you can bring really great design and simple capability to something that doesn't cost much,” he said as he pointed out the clean elegance of the houses. 

“It was the original vision for Apple. That's what we tried to do with the first Mac. That's what we did with the iPod.”

FIRST PRINCIPLES

You can find many nuggets of design gyan in the chapter titled ‘Design principles', which opens with a section on Jony Ive, the head of the company's design team. From almost quitting Apple, Ive stayed back after listening to Steve announce that the company's goal is not just to make money but to make great products.

Ive and Jobs would soon forge a bond that would lead to the greatest industrial design collaboration of their era, writes Isaacson. “Ive was a fan of the German industrial designer Dieter Rams, who worked for the electronics firm Braun. Rams preached the gospel of ‘Less but better' - Weniger aber besser - and likewise Jobs and Ive wrestled with each new design to see how much they could simplify it.”

Simplicity, explains Ive, is not just a visual style; it is not just minimalism or the absence of clutter. “It involves digging through the depth of the complexity. To be truly simple, you have to go really deep… You have to deeply understand the essence of a product in order to be able to get rid of the parts that are not essential.”

MANAGEMENT LESSON

For company bosses, a key takeaway is an insight of Jobs about why decline happens in companies like IBM or Microsoft. “The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important,” he traces. “The company starts valuing the great salesmen, because they're the ones who can move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company.”

Examples that Jobs mentions are of John Akers at IBM, who was “a smart, eloquent, fantastic salesperson, but he didn't know anything about product” and Ballmer in Microsoft, so much so that Jobs did not think anything would change at Microsoft as long as Ballmer is running it.

“I hate it when people call themselves ‘entrepreneurs' when what they're really trying to do is launch a startup and then sell or go public, so they can cash in and move on,” frets Jobs. “They're unwilling to do the work it takes to build a real company, which is the hardest work in business. That's how you really make a contribution and add to the legacy of those who went before.”

Right fit as an iLearn product, even for those who proclaim iKnow.

Tailpiece

“If only we could clone by copying playlists, and…”

“Hiring the other man's Siri, too?”

RBI cancelled the banking licence of Gujarat Industrial Co-operative Bank.

Source :Express News Service: Ahmedabad:Sun Nov 13 2011, 03:15 hrs


The Reserve Bank of India (RBI) has cancelled the banking licence of Gujarat Industrial Co-operative Bank. 


The bank’s fate became uncertain after RBI clamped restriction on it due to insolvency.

The only saving grace is that 96 per cent of its depositors hold less than Rs 1 lakh in it and thus their deposits are covered by insurance.

B R Divanji, chief executive officer, has said the bank has been under an administrator since September 2008 when RBI had imposed restrictions on it under section 35A of Banking Regulation Act. In Surat alone, where it had nine out of 20 branches, had withdrawn over Rs 31 lakh in a single day. Depositors holding more than Rs 1 lakh in this bank are 8,100 and they constitute four per cent of total Rs 2.05 lakh depositors as of now. They hold Rs 190 crore collectively.

The bank has 20 branches in the state. It has been facing crisis for long and which has become the cause of its closure. Divanji said that the total deposits as on date stood at Rs 507 crore while its non-performing assets (NPAs) had crossed Rs 350 crore. In March 2008, the NPA level were Rs 201 core and instead of going down it rose to Rs 198 crore by October 2010.

Meanwhile, RBI has also penalized four Urban Co-operative Bank (UCB) in Gujarat for the violation of instructions on know your customer norms and on unsecured advances. The penalised banks are - are The Municipal Co-operative Bank Ltd., Ahmedabad (Rs 1 lakh), Ahmedabad Mercantile Co-operative Bank Limited, Ahmedabad (Rs 1 lakh) for floating of trust for general public and enrolling cooperative societies as members, Surat People’s Cooperative Bank Ltd (Rs 1 lakh) for admitting societies as members and crossing ceiling for unsecured loans.

It also imposed a monetary penalty of Rs 5 lakh for violation of KYC norms/Anti Money Laundering guidelines. 


These banks were issued notices and after considering their written replies, and personal hearings, RBI came to the conclusion that the violation was substantiated and warranted imposition of the penalty.

Wikipedia focusing on India this year

Source :PTI:The Hindu:Doha:Nov 7,2011

One of the world's most popular websites Wikipedia has turned its focus on India this year, and is working to reach out to people in the country as part of its expansion plans.

Wikipedia founder Jimmy Wales said that the free internet encyclopedia has its staff working in India conducting studies and outreach exercises.

“This year our focus has been India. We have a few people on the ground in India; they're there helping in solving technical questions, with outreach to universities, and PR, letting the public know that Wikipedia exists in all those Indian languages,” he said here.

Wales, the brain behind world's fifth most popular Website, was in Qatar to attend the World Innovation Summit for Education.

He said his organisation was carrying out pilot studies in India and that it intends to use the learning experience gathered from the other regions of the country as well.

PILOT PROJECTS

“So those are just some pilot projects in India that, as we learn from those, we'll know what we're going to do in other geographies,” Mr. Wales said on the sidelines of the summit.

“And in our five-year strategic plan, we did identify the Middle East and North Africa as key areas that we wanted to move forward in,” he said.

Asked about the role played by social media in the Arab Spring, Mr. Wales said he believed that it did make a lot of contribution to the uprisings that began early this year and have already toppled three entrenched regimes.

Validity of cheques to be three months

Source :The Hindu :C. GOURIDASAN NAIR: Nov 7,2011

The Reserve Bank of India (RBI) has decided to reduce the validity of cheques from the 

present six months to three months from April 1, 2012.

Through a circular (No. DBOD.AML BC No. 47/14.1.001/2011-12) issued on November 4, the RBI has asked chairmen and chief executive officers of all scheduled commercial banks (excluding regional rural banks) and local area banks not to make payments against cheques/drafts/pay orders/banker's cheques bearing dates beyond three months of the date of presentation of such instruments. 

The banks have also been asked to notify their customers about the change in the validity of these banking instruments by printing or stamping on cheque leaves, drafts, pay orders, and banker's cheques issued on or after April 1, 2012, suitable instructions ensuring compliance with the decision to reduce their validity.

At present, cheques and other instruments issued on a particular date can be held back for up to six months and need be presented only before expiry of the six-month period.

However, the Government of India has notified the RBI that some sections of the bank customers were using the cheques and other instruments as equivalent to cash during this six-month period.

“The Reserve Bank of India is satisfied that in public interest and in the interest of banking policy, it is necessary to reduce the time within which cheques/drafts/pay orders/banker's cheques are presented for payment from six months to three months from the date of such instrument. 

Accordingly, in exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, the Reserve Bank hereby directs that with effect from April 1, 2012, banks should not make payment of cheques/drafts/pay orders/banker's cheques bearing that date or any subsequent date, if they are presented beyond the period of three months from the date of such instrument,” the RBI circular said.

Banks to open branches in under-banked districts by 2012

Source :PTI:The Hindu:Nov 7,2011

The Finance Ministry has asked all banks, including private sector lenders, to open branches in locations with population of more than 5,000 in the under-banked districts by September 2012.

RBI has identified 296 districts, which are under-banked, spread across 18 states and union territories.

“Such branches could initially have lesser staff, say 2 persons, with ATM facilities,” Finance Ministry said in its recent guideline on financial inclusion.

The staff strength could be increased as the business grows, it said.

The new bank branch opened would also provide banking services in the adjoining areas.

“While planning for branch expansion, it may be seen that in the unbanked areas the branches are available within a radial distance of 5 km,” it said.

As per the branch authorisation policy of RBI, prior approval of the central bank is not required to open branches in Tier-III to Tier-VI areas.

In fact, opening bank branches in the under banked districts of the under banked states would entitle the banks to seek branches in Tier-I towns under their annual branch authorisation plan.

Such a branch would be assigned a service area by the State Level Bankers Committee covering one or more Gram Panchayats, it said.

In other districts, it said, the banks must try to open as many brick and mortar branches, in their service areas, in habitations having population of 10,000 and above by September 2012.

It is to be noted that only about 5 per cent of the nearly six lakh villages in the country have bank branches.

With the Financial Inclusion Plan under implementation, around 73,000 villages, having population of 2000 and above, would be provided facilities for banking services by March 2012.

As of June 2011, banks have opened banking outlets in 1.07 lakh villages up from just 54,258 as on March 2010. Out of these, 22,870 villages have been covered through brick and mortar branches, 84,274 through business correspondents outlets and 460 through other modes like mobile vans, etc.

Bill to cleanse politics of criminals in winter session

Source :TNN: Dhananjay Mahapatra :Nov 4,2011








NEW DELHI: The government is proposing radical reforms to ensure decriminalization of politics and intends to table a bill in the winter session of Parliament proposing to debar candidates facing trial in serious and heinous offences. 


At present, under the Representation of People Act, only persons convicted by a trial court and sentenced to more than two years imprisonment are debarred from elect ions for a period of six years, which commences from the date of completion of the prison term. 


This allows persons facing multiple murder charges to contest elections. Moreover, even if a sitting MP or an MLA is convicted of an offence and sentenced to more than two years jail midway through his term, he continues to be a people's representative and can attend Parliament or assembly if he files an appeal in the higher court and gets a stay on the conviction. 


The proposed legislation, first reported by TOI on June 17, is going to be strict on such exigencies and says those who are chargesheeted by police, CBI or other investigating agencies for murder, acts of terrorism, rape, dacoity and similar serious and heinous offences would be debarred from contesting elections till the tri al court acquits them.


 The legislation is part of the larger bouquet of anti-corruption measures government has embarked upon to blunt the attacks it has faced from Team Anna as well as political opponents over the issue of corruption. Government plans to pass three legislations: Lokpal Bill, Judicial Standards and Accountability Bill and Whistleblowers Protection Bill in the winter session. Besides, it has also planned to introduce Grievance Redressal Bill which, while ensuring smooth delivery of services, will also tackle corruption in providing the same. 


Conceived as an alternative to Team Anna's insistence that the proposed Lokpal should be tasked with tackling corruption among lower bureaucracy as well, the Grievance Redressal Bill is being projected as a better way of fighting "cutting edge graft". Government sources point out that under the Lokpal bill, failure to deliver a service is proposed to be treated as an act of corruption. They say this could only delay the delivery of government services since establishing a criminal charge could take time. 


As against this, the Grievances Redressal Bill provides to separate corruption from failure to deliver a public service/good and, thus ensuring that the grievance for the failure of delivery of service is redressed within a fortnight. 


During the discussion on stricter measures to decriminalize politics last week in the Cabinet Committee on Political Affairs, law minister Salman Khurshid argued strongly for the bill. These proposals on electoral reforms were firmed up during the tenure of Khurshid's predecessor M Veerappa Moily, who had constituted a Committee on Electoral Reforms to recommend to the government concrete ways in which the electoral system could be strengthened through legislative means. Khurshid also laid stress on amending the existing provisions of RP Act to make filing of false affidavits by candidates along with nomination papers to declare their assets and criminal antecedents a serious offence which could attract a permanent ban on contesting elections.


 By this way, disclosure of criminal background would be made non-negotiable.


It means, if a candidate deliberately conceals his criminal antecedents and is found guilty, then he will be forced to abandon a career in electoral politics. The proposed amendments, discussed in the CCPA, also include withdrawing immunity to sitting MPs and MLAs from continuing with their tenure after being held guilty and sentenced to more than two years imprisonment even if they get the conviction stayed by a higher court on appeal.


 By this, the government intends to force an elected representative to resign from his membership from Parliament or assembly the moment a trial court finds him guilty of an offence and sentences him to more than two years imprisonment.


dhananjay.mahapatra@timesgroup.com