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prakashkumar

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Missed opportunities

 We live in a world devoid of standard practices. The few standard practice which does prevail offers standard returns (results). Fixed deposits will always be safe but the returns will be mediocre as well. Make no mistake, the financial intermediaries, which take deposit of your money at 6-8% return are looking to make 15+% return of the money deposited at the minimum to earn their living. Business runs on this simple logic. Any Institution paying a salary “x” to an employee is getting around 3-5x at the minimum to sustain its growth trajectory. It is all a story of risk-return-reward (3R).

 

Indian companies though much glorified then their historic days, are still a step behind their global peers in terms of taking risk and thus going for the big leap. Days of diversification and organic growths are numbered and debt after all is not a bad word. Best form of diversification can happen inorganically, in sectors you are either not present or weak. Critics will argue that it can also happen if you are already good in that particular sector – you can just explode if you take another major player within your scheme of things.

 

I see few opportunities which were globally missed – Lehmann Brothers is one of them. Problem was the asset it was holding which led to its bankruptcy – their was not much of an issue with the fundamentals of business. Lehmann was the fallen child in which every body else got bailouts to ease out while being the first one to report leveraged subprime exposure – Lehmann lost it out as it was the envious kid. Makes me belive everyone wanted it to fail. The opportunity, was there for Tata or Ambanis or similar to bail it out and then grow it from there. It was not a compulsion to buy – it never will be. However, these are signature moments of demostrationg rise from mediocricity. Lehmann, after all was no push over organization. It was the poster boy of global financial market. A bailout of this powerhouse by a developing/third world Country, would have been a befitting signal to the global market to look beyond US, Japan and Co. Many, Indian giants had cash at their disposal to claim this prized possession available for pennies. However, they all choosed to “err” on the safer side of risk. Any investment is a combination of risk and reward. How less we were willing to take the former resulted in this missed opportunity which would have otherwise catapulted the house taking over Lehmann and India at large on a different orbit.

 

Satyam, fiasco was other such clandestine misadventure. Federal interventions are bad – esp. if it challenges the basic foundation of corporate locus standi. Satyam, was a case in which the father disowned his son. Some 7000 crores INR, never existed but was previously claimed. The problem here was was that nobody believed 7000 crore and nobody was sure what the extent of actual damage was- the opportunity was lost as India started its pathetic slow investigation into the scam and setting up the book right and restating the accounts. The process was so slow, that even at dawn of ’11 we are still not sure and that has resulted in an employee/customer exodus out of Satyam and market giving it a surreal valuation on the downside. The extent of damage which this slow investigation has done is far greater than the extent of actual damage. For a flagship, IT company like Satyam of the hay days – it was easy to get the 7000 Crore back in a few quarters, but we allowed it to decay and lose even more. Everybody wanted to buy Satyam cheap- Mahindra, eventually got it not because it deserved it but because no body was otherwise interested.The opportunity was lost, when some aggressive house failed to remember the goods of Satyam, and not stepped to fill in its moment of despair- a house of repute taking over Satyam at face value and taking circumstances head on would not have recovered the 7000 crore back, but atleast would have limited the loss to 7000 only. Today, Satyam is still looking at an uncertain future and no body knows what swap ratio will eventually decide the fate of Satyam shareholders once it eventually merges with Mahindra. Overall, handling of Satyam by authorities also casted a shadow on India.inc, who is very eager to be counted amongst G5 – These telling incidents were the opportunity lost by Country, at large.

 

No one knows how soon another opportunity will knock and whether their would be any takers.

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