Profits from thin air!

A slew of hi profile and popular Indian companies have interesting financials.
Their profits fo up and up and their operating cash flows (CFO) go down and down and in several cases go from red to deep red.
Classic accounting scandals, when they werre uncovered and dissected showed this - the cash flow from operations were telling the investors all they need to know.If only they were willing to look at the right places, ie, the cash flow statements along with PNL and the balance sheet.

Free Lunch?

The finance minister remarked sometime last year that there cannot be good economics without good politics. Fair point. Especially in a democratic setup like India with all sorts of motley parties joining hands to form the government. However, there sure can be bad economics,even with good politics.
The Govt. has shown a strong unwillingness to confront truth, with its adhoc policies on the market prices of petrol/kerosene/LPG. In the last couple of years, even as crude moved from $40 pb to around $75+ pb, wishful thinking still dominates.All we have seen so far is arbitrary redistribution of the losses faced by the oil marketing companies.Redistribution between upstream,downstream,the Govt. and the consumers. It is another matter that at the end of the day, it is the tax payer who is footing all the bill one way or other. But it is important to ensure that the USER foots the bulk of the cost and not all taxpayers in general. Govt. intervention and hence distortion of market prices should be removed as early as possible. Otherwise, the consumers have every incentive to overconsume hydrocarbon fuels as long as they are not made to pay market prices.It is another matter that Indian citizens are as such paying a subsidised price of anywhere around $4.00-$4.5 per gallon of gas - a price that makes even the consumers in developed economies howl.But then that is another story

The Inflation Game - What's the real "real growth" rate of the Indian Economy

The inflation numbers reported by the Govt. all read 4.5%-4.75% over the past few weeks. Is this for real or is PC(finance minister) selling dreams ?. Is India an economy with a stable 4%-5% kind of inflation?.
Well , if you are a house renting,petrol consuming,food consuming citizen, the answer is a big no. The published inflation numbers are just a bunch of badly calculated irrelevant numbers. All the while, even the savers are getting shafted with bank deposit rates lower than the actual inflation rate faced by the citizens. This is before the interest income is taxed. The post tax rates are worse. Of course, you can always deploy your savings in tax free schemes (up to a certain amount), but then you don't have liquidity anymore.
While the nominal GDP growth rates can be assumed to be reasonable ( or even conservative given that there is a fairly large black economy), the GDP deflator number used by the Govt. is likely to be as meaningless as CPI and WPI rates.
If we adjust for all this, the real "real GDP" growth rate is not 8% , but more likely around 6%.

The Great Indian gold rush and the Great Wealth Transfer

The latest issue of Business World talks about the great private equity deluge in India. The last time anything remotely similar happened was in 2000. Interestingly, the PE/VC funds are investing in all kinds of companies these days - Hi-tech, low-tech,no-tech, stock broking companies with world class research (ha ha , which world are these guys from), hotels, and what have you.
Good time to be a promoter really. With too much money sloshing around and people hungry to do deals, the entreprenuers have never had it so good.
Looks like the whole of India is one big opportunity and everyone is confident about 30% IRR for the foreseeable future. Even more interesting are the PE investments in infrastructure companies. India needs tons of money to upgrade her infrastrucutre and it is really lucky that we got all these PE/VC friends throwing money around. The U.S got built with investments from England/Scotland and to a lesser extent Europe and these investments turned out to be one way wealth transfers with the investors getting nothing in return. Another wealth transfer from American Banks helped to upgrade the infrastructure in Latin America. Now it is India's turn. Are we lucky or wot?
Technorati Profile