Tuesday, 28 April 2009

More instruments in financial markets?

The current crisis in the world is caused, as they say, by the new instruments created by bankers to make more profits. The new and innovative instruments like sub-prime lending, Collateralized Debt Obligations (CDO) and likes were introduced to encourage more and more lending. And this led us to this point.

Now every experts see the problem in these instruments and blame regulators of the time for not having checked on them when these were introduced in the market.

Why not regulators make it a point that they keep a close eye on the market and see if any new types of instruments are being introduced by market players like banks, PE players, hedge players and investment bankers. When this happens the regulators should not clamp down upon them immediately instead get some of the experts together and discuss pros and cons of them threadbare. This can help unearth any shortcoming if they have and accordingly regulations can be introduced so that we do not come to this point. I know it's easy on my part to say in the hindsight.

Monday, 27 April 2009

Foreign Coaches: and their payback

I never knew that a foreign coach can add so much value to a team's performance and lift it up at least by a place. That too a coach who has been very successful in his last assignment as a coach of a successful sledging team, incidentally this team was also very successful in two formats of a gentlemen's game. Having a foreign coach, and entire an entourage of assistances and what-nots, all forrign born with white skin, to help(?) the team in every department possible. After this coach was hired, the team has been doing wonders and the coach is making sure that the team is at least not on the last spot in the ladder.
A lot of new innovations were done by this coach, like making every team member, except the one who captained team in last season, captain of the team. This way everyone has incentive to do his /(her?) best. Another innovation of packing back team members who are not fitting in the team's scheme of things (saving a huge amount of money specially during recession when money is honey). And another innovation is recruiting coach's sons in various newly created positions within team. And another innovation .......will come later. Not all today.
So out obsession with everything phoren is really paying dividend. Next time think this team's owner should also be foreign and so be all the players. That way team would be wining more games.
Our national team also had a foreign coach who is compatriot of the above coach. During this national coach out team also did wonders.
I just wonder should we not have our PM, president, everything phorener so that they take us up and up and up and we enjoy the fruits sitting on the ground.

Friday, 17 April 2009

Keeping promise: At the cost of other’s life!

Infosys has been telling (or boasting) all along that it will honour all its promises of job offers made out to the campus recruits (close to some 16000). Infosys has also got a huge bench of over 25000 staffs. So if Infosys is to be believed they will have 41000 free people to be employed in this financial year on various project (this figure may be little less if attrition is to be factored in). This tells that the company must have so much work coming its way (pipeline in industry jargon) in near future which can absorb all new and existing bench employees. There is also news that more staff would come off project this year.
But in contrast, Infosys itself has been telling that there will be almost no growth (projected 1.5% in rupee terms) in current financial year. Now we hear that company has asked its employees who are on the bench to work for its BPO arm. I understand that if company do not have enough work then it should ask employees to work for associate companies. This way jobs are saved, employees get to learn new skills and associate companies get resources when required without recruiting from outside. But what’s point in sending your existing employees to associate companies against their wishes and recruiting new (which Infy is doing by honouring its campus promises). If company does not have enough work why should it hire more which impacts job securities of its existing employee, severely impacts company financial affecting shareholders.
There is a famous saying in Ramayan “Jaan Jaaye par wachan na jaaye” (Keep your promise even at cost of your own life). Infosys seems to be following this saying, but with a little twist. Twist is that if life has to go it will not be its own but that of its employees. How unethical!

Thursday, 16 April 2009

Infy Guidance: Impact on years to come.

The result by Infosys yesterday were not that bad, they were almost on expected lines but what guidance Infy gave for the year ahead was really SHOCKING. Infy gave guidance of just around 1.5% of growth in rupee terms (a negative growth in dollar terms, worst still). This was the most shocking news of yesterday and I would say of this year so far.
Implication of this piece of news is:
1. Infosys is considered the bellwether of the overall Indian IT services industry and any trend set by it is considered to be replicated by the overall industry. So we can safely assume that the overall IT industry would also grow at the same rate. That is almost a 0% growth.
2. As there would be hardly any growth in IT service industry so there would not be need for new recruitment and certainly IT industry would like to rationalize their existing bench (generally Indian IT companies maintain up to 30% bench strength). This means there would be lay-off of resources that are currently on bench in companies.
3. Real estate in India is almost singularly dependent upon the uptake from IT industry be it for commercial or residential sector. So as a result I would say it’s safe to say that there would be no takers for real-estate that means the property prices are going to CRASH badly and LOUDLY in a years’ time.
4. Indian IT industry employs a huge no. of youth. As there would be hardly any growth this year so there is going to be significant problem of unemployment this financial year.
5. As lot of industries, home loan, financial industry to some extent and many more industries depend directly or indirectly for their growth on the growth of IT industry, so these industries would not be growing and that would impact employment too. So ultimately India would see huge unemployment problem among the educated youth (thankfully for political parties the election would be over by that time).
6. Infosys is saying that there would be hardly any new requirement for IT services in their target markets (western world), that clearly says that there would be no growth in those economies for this financial year. So a badly needed pickup in economic activities are still at least a year down the line. This means if we reasonably assume that economies in the west would start picking up only after this financial year (if nothing goes wrong now of which there is no surety). It would take at least a year for western economies to take off and then they will generate the requirement for IT offshoring so Indian IT companies should wait at least 2 year for their services to be required.
7. When in 2000 dotcom went bust, IT industry in India was impacted in 2001 and it took another 3 years for requirement to pick up. It’s only from 2003 end that serious recruitment started by IT companies. Which means a small problem like dotcom took two years off from the job market growth in India. Assume how long it will take this time as the problem is far far serious this time.