Month: February 2017

 “When the last tree has been cut down, the last fish caught, the last river poisoned, only then will we realize that one cannot eat money.” – Native American saying

Camping & trekking is my way to connect with the nature. I am not a survivalist but I would like to teach the kids how to improvise & appreciate the simple things in life.
Rule no 1:
Check the local temperature, and plan accordingly. Dress up in layers and always carry extra pair of under-shirt, boxers & socks. Weigh your back-pack and evaluate the utility of everything you pack. Trek might be a great exercise for you to realize how much clutter you have surrounded yourself with.
Rule 2:
Unless you are going through extreme treks like Himalayas or deserts go for reliable, lightweight items. Do not buy anything expensive or bulky no matter how bad is the temptation. Even if you have a mule with you, it will be better to limit your payload. Try to carry things that are simple, multi-purpose so that you are able to survive with limited weight. Trekking equipment should be cheap, sturdy, waterproof and divisible. In most cases basic items suffice and more the amount of electronics & complex parts are there in the gear, the higher are your chances of a field failure.
Rule 3:
Most people are obsessed with food & water but they under-estimate the exposure to weather & elements. Leaches, mosquito, & reptiles are often more dangerous than wild animals. Use sun block and mosquito repellent liberally and frequently.
Rule 4:
Camping is not essential for a trek. I would prefer a thatched room in a village to camping alone in the wilderness. Also interacting with the locals if often a more fruitful experience than being alone in the wilderness.
Rule 5:
If you are traveling in a group try to distribute the items among everyone. You do not want one person with all the water, one with all the food and the third with only clothes. So that even if we are temporarily separated every person in the camp is self-sufficient to survive until help comes over.
Rule 6:
You camp for the experiences and the chance to spend time together away from distractions. So do not over plan and prepare for every emergency or situation. Just be yourself and enjoy the nature. The nature has its own music, so try to leave your electronics behind.
Rule 7:
Leave the world a better place. Try to bring back all the non-bio-degradable waste rather than littering it over; it will be great if you can bury some of the waste that others have left carelessly behind. Do not leave your camp-fire unattended or carelessly throw your cigarette butts. Try to spend the weekend without any cigarettes, alcohol, drugs or intoxicants.

Human beings have a fascination towards numbers. Factories in 80s used to create a small healthy competition between shifts by publishing the production stats on a simple dashboard. Today TCS is creating a similar competition to prevent food wastage.
 

I guess we all want to be part of a success story. Numbers help us visualize and quantify our contribution.

If market rumors are believed, this is a wonderful proposal in the otherwise boring telecom space:

1. Synergy through consolidation of marketing cost, operations & office space.
2. Unlocking value through sale of excess of excess spectrum. Giving the new company cash to fight Jio aggressive promotions
3. Idea is the 3^rd largest player and might soon turn 4^th before fading away as irrelevant. This deal will give the promoters a chance to exchange their equity for a stake in the largest telecom player.
4. Reverse listing for Vodafone is attractive. It allows them to unlock the value through listing and share the losses with Indian shareholders till the market is back into viability.

Being contrarian by nature, here is why I think it might not happen:

1. The deal requires either Birla’s to cut their existing holding 42% of Idea to less than 20% of the new company or infuse cash or exit completely.
   • Option A is risky, thanks to Indian promoters love of micro management. If Infosys, & Tata board squabble throws any light Birla’s might not be OK with back-seat.
   • Option B: requires purchase of additional equity in cash to gain back equal voting rights in the board. This is also unlikely as stock price is almost 70-80% higher than what it was before the news making it more pricey for Birla for additional stake. Secondly as a 3^rd If the deal was happening, then they would not have allowed Vodafone to spoil the party.
   • If Vodafone had any interest in buying out Birla, then they would have not shared their intentions and allowed the stock price to zoom up.
2. Jio could offer 90-180 days of free data because it had zero subscribers to begin with. Also they really limited the number of new connections & portability request last year to limit the cash burn rate. The New entity will have a whopping 40%+ market share with wafer thin margins. So no price reduction that they do will be economically viable & Jio can always match is as their subscriber base is still small (so limited cash impact from the scheme)
3. By same logic, the war-chest from Birla’s cash infusion & spectrum sale to counter Jio’s promotion may not be useful. Idea could gain more new connections at lesser cost as the 3^rd largest player rather than the largest player. Therefore, if Birla’s had to infuse cash, they would have purchased additional equity through rights at pre-news levels and not at present levels.
4. Unlocking value through sale of excess spectrum is also doubtful. The sale will happen at below market price & will only strengthen the spectrum availability for the competition. No businessman likes to idea of selling precious & limited asset at loss to its competition.
5. Vodafone’s history with Indian government’s regulatory approval cannot be ignored. They badmouth Indian Income tax department on its tinkering with the fine print to bring the Essar-Vodafone transaction into tax ambit. Now this has two repercussions, firstly Vodafone will be once bitten twice shy and extremely cautious of going back to seek approval for deals. Secondly some babu in Indian government might be holding a grudge and really make them hoops. In any case, the deal will add one more layer of bureaucracy from SEBI which unlisted company like Vodafone India is free from adhering to.
6. Not only Vodafone is bigger entity but it also in the core business of telecom. So effectively, Birla’s would always fear the risk of relinquishing the mgmt. control to Vodafone even after cash infusion to get equal stakes. Remember a listed company means that either player can make an open market purchase and gain the control.

However, one should not ignore that Idea is a sinking ship. As long as Jio is not able to capture enough market share, they will ensure that the tariffs are subdued and the established players bleed. In addition, Idea risks being the fourth player, a position from which it could never recover. Therefore, it is likely that the mgmt. will trade its current equity position to a minority stake in the larger combined entity.
Disclosure: I have a shorted the Idea shares in the F&O market.

On the loan interest income that is charged to a borrower, bank eats up 35%, income tax department 22%, inflation 42% and you get a measly 1.7% share (or 0.15% on the capital invested) Do Indian banks think that people give them money on charity?

Even mutual funds and venture capital funds do not charge a 20X ratio of mgmt. fee to investor returns ratio. Furthermore, the list of bank charges is are practically endless which further eats into your returns.
Premature withdrawal loss is almost a racket. The loss due to penalties, penal interest rate etc. would lead to returns, which are sometimes lower than the savings interest rate.

Banks are saddled by 6 lakh crore of NPA (as of June 2016). Your low returns on deposits are to recoup these losses and fund the bank’s expansion. I don’t deny that banks provide services, have branches, and handle cash which costs them dearly. Still the NIM (net interest margin) that the banks in India enjoy are highest in the world.
Already many people buy corporate/PSU bonds instead of FD for long term planning. The lower taxation & indexation benefits has led to a rise in FMP (fixed maturity plans) options available. Even for very short-term deposits, the returns provided by liquid funds outstrip those by banks.
In short, banks are flexible, convenient & simple way for saving, but the question is am I ready to pay this steep a price for it?

Reward points like any loyalty program are part of the corporate’s gamification strategy. The goal being to keep you away from the competition, make you spend more and shift your consumption pattern to high margin goods and services without adding much cost to the company. Hence, do not be surprised if you spend more time in comparison between various offers, schemes, fine print, coupons & options by various websites than selection of your best travel destination. The loyalty programs by design to make the price comparisons difficult.
Here are some common sense rules:

1. Perceived vs actual values: If you cannot use a coupon code/voucher because of the point redemption then the points are coupons in disguise. (eg: dominos)
2. Action modification: If the points are valid only on certain category of items and not valid on low margin items (eg: big bazaar on sugar, oil, aata etc.) then you know how much your points are worth. Similarly a lot of stores use loyalty programs to shift your consumption to their private labels which are priced much higher than the unbranded good that you would find elsewhere.
3. If you need to pay a redemption charge when you want to consume the points, then discount them from the value. (most airlines & sbi credit card) Remember this forces you to accumulate the reward points, which is the money that the company can keep interest free and risks some/all the point’s lapse at expiry.
4. Refunding restrictions: Paytm cashback is like pure money. You can spend it on a zillion things or even wire it back to your account. On the other hand gocash (goibibo) has so much restrictions that you will end up spending 50-100k just to utilize the 3000 odd gocash balance. Naturally, one should value the points based on how useful it is for you.
5. Tier based rewards: One of the biggest trap and hardest to let go. MakeMyTrip requires you to book 4 times before unlocking the rewards. BigBasket & American express have benefits linked to relationship value. The trap here being that one ends up overspending. Also if you are 80% there, then there is a tendency to frivolously spend to reach the mark.
6. Expiry: One should be mindful of the expiry date. As a personal rule, I consider anything expiring in the next 90 days as coupons, which if not exercised immediately will turn worthless.
7. Clubbing: I was wowed by MakeMyTrip’s recent experience where I was able to redeem my icici bankcard reward points (payback) and my Citibank reward points in the same booking. It really allowed me to afford a luxury for Valentine’s Day, which was beyond my budget. Similarly the cashback of the wallets have very few usage restrictions.
8. Tax invoice value: Often the reward points don’t show up in the final bill, allowing the customers to claim higher reimbursements (income tax or employer) than what they truly borne. The reward points can now be used for personal expenses. Although not unethical, this practice is used by many to unlock the high tier rewards/upgrades that would otherwise be unaffordable.
9. Time: often ignored, but the most important concept. It is not possible to manage a zillion store programs. One does not buy a car because of the attractive free gift the sales person offer, it is a good product and the gift is icing on the cake. Treat your loyalty programs with the same detachment.
10. Social cost: If the reward needs you to spend a zillion second clicking/liking various company promotions, send invites/emails to everyone in the contact list, then probably it will only end up wasting your time and ostracizing you as a spammer. Similarly
11. Enrollment fee: the benefits are elusive and sometime in the future, but this expense hits you on day one and is probably charged annually. So one needs to intelligently to a cost benefit analysis.

Gone are the days when a simple price comparison between two websites could dictate which is the most economical. The goal today is to spend the least time deal hunting and yet not overpay.