26.03.2009

Politics & the Nation

• In defence of Nano
• Today's ET editorial makes a strong plea against the argument that Nano roll out will be clogging the already congested roads.  Worth a read.  Read it here.

Finance & Economics

• Ever heard of terms like "junior subordinated debt" or "senior subordinated debt"?
  
• Take a look at this news extract, if you haven't:
  
• "Bethesda, MD -- American Capital Strategies, Ltd. today announced that it has agreed to invest $10 million in the form of senior subordinated debt with detachable warrants in A.H. Harris & Sons, Inc., the largest distributor and rental center of concrete-related construction supplies in New England. At closing, $5 million of the commitment will be drawn down. A.H. Harris intends to use the proceeds of American Capital's investment to finance future acquisitions in order to further expand its leadership in its core markets and enter new markets."
  
• So, what is "senior subordinated debt" here?
  
• It's debt - borrowed money that is being lent to them. It has a liquidation preference (if the company fails and the assets are sold, the money gets distributed to creditors and shareholders in order of liquidation preference, with shareholders last) that is senior to other subordinated debt, but junior (gets paid after) most other creditors. The "detachable warrants" represent the opportunity to buy common stock for some period in the future at a fixed price - basically a play on the company if things go well and added to the debt as a "sweetener". That they are detachable means they can be sold away from the debt, which may occur in the event they do become valuable but the debtholder doesn't want to exercise them.
  
• Basically, American Capital is lending Harris $10 million on the belief that they will do well given that it is to be used for expansion. AC will only make money (and not lose money) if Harris is successful.
  
• NACAS recommends suspension of AS 11 norms for a 2 year period.
• The National Advisory Committee on Accounting Standards (Nacas), which is the final word on accounting policies followed by the Indian industry, has favoured suspending for two years a key rule that requires firms to mark-to-market foreign exchange assets and liabilities.  This decision comes as a victory for corporate India, as it sits down to draw yearly financial results.
  
• The demand to suspend this rule, known in accounting circles as AS-11, was made by the Confederation of Indian Industry (CII) on grounds that it could severely distort the earnings of many companies. It was contended that this accounting standard, designed to address normal conditions, should be suspended for the time being, as the present market conditions were not normal. 
  
• Nacas chairman is YH Malegam.
  
• But ICAI has objected to this proposed step
  
• The country's accounting regulator, the Institute of Chartered Accountants of India (ICAI), said it continued to maintain its opposition to suspend implementing AS-11. “We believe that an accounting standard should not be changed because of any change in circumstances. We are not interested in going for any changes in the regulation because we want consistency and prudence,” said ICAI president Uttam Prakash Agarwal.  ICAI further said that with India’s accounting norms set to converge with the International Financial Reporting Standards (IFRS) by April 2011, the decision to suspend AS-11 will not be a prudent step.
  
• Is there another accounting scandal brewing?  This time in state government bond deals?
• If you read this report, this is what you will surely be left to wonder.  Too detailed to make any short notes of it.  Good one.  Lets us understand the intricacies of market manipulation.
• Do read it here.
• GAIL split into two companies
  
• GAIL India, the country’s flagship natural gas company, will spin off its marketing business into a separate firm from April 1 to comply with the policy guidelines outlined by the petroleum regulator. 
  
• Gail India will remain a gas transmission company and will construct cross-country pipelines to transport gas, while Gail Gas (GGL) will carry out marketing business. GGL will be listed on the domestic bourses soon. 
  
• Ever experienced the difference between seeing the brighter side of things and being pessimistic?
  
• Avid readers of the Economist might admit that they are influenced by its pessimistic outlook on the current state of the global economy.
  
• But look at TK Arun's take on the present economic situation in the country!  An excerpt:
  
• Fresh telephone connections numbered 15 million in January and 13 million in February. Non-oil, non-gold imports are positive, even when overall imports show a decline. Within this lot, project imports are growing strong. In the latest numbers for the index of industrial production, capital goods showed a growth of 15%, even as the overall index showed a marginal decline. Cement and steel prices are firming up. Inventories are down in a number of sectors including auto, calling for stepped up production. Consumer durable makers like LG and Samsung report robust — 29% and 30% — increase in sales in January and February. Rural demand is strong and fast moving consumer goods companies see no slackening of demand. 
  
• The forthcoming elections will pump in several thousand crore rupees worth of demand for assorted goods and services, ranging from cars and jeeps and planes and helicopter rides to advertising, printing, audio equipment, catering and liquor. Once the elections are over and an elected government assumes office, it will revive the fiscal stimulus work that the outgoing government left off. 
  
• That's some real optimism; ain't it?
  

Time Pass??  Not really

• World's costliest ad ever!!
• Even as I am writing today's post, I received this video clipping from a friend of mine.
  
  
• Reportedly this is the world's costliest ad ever made and was the winner of this year's best Ad of the world.  It took 606 takes and re-takes to make this commercial and the total cost was $ 6.2 million for this 90 second commercial.
• Need I say that one could probably make a movie for that kind of money?
  
• Everything is real with no graphics used and still achieved the precision it highlights. The team that made this commercial won many awards.
  
• Let us all thank my friend Mr. Venkat Kambala for bringing this to our notice.