FINALOGUE

T h e

F i n a n c e

C a t a l o g u e

3 r d

J u l y ,

2 0 1 4

Welcome To XLRI
Whats
Inside?

We would like to extend our heartiest congratulations to the batch of 2014-16 for making it
to one of the most prestigious and the oldest B-School in the country. We hope that with
your addition comes a multitude of new experiences, perspectives, and vibrancy to this
hallowed campus. Heres wishing that you savour the much celebrated XL Culture
throughout your stay here.

It is with great pride and joy that we present the first edition of Finalogue for the current
academic year. Your feedback would help us give you the best of Finance every time.

Whos
Who?

Do provide us with your valuable comments at finax@xlri.ac.in

Best wishes, always
Team FINAX [www.facebook.com/finaxxlri]

Marriage
of Flipkart
and
Myntra

Virtual
Currency

NPA: Indian
Bankings
Achilles Hill

SIP Gyan

Finax Committee Selection

We will be taking the selections of the Junior Committee very seriously and will be keeping it very
transparent and objective. Knowledge of Finance is absolutely no criteria for getting through to
FINAX. The parameters would be broadly Communication skills, Creativity and Confidence. The
process comprises two round of interviews and an activity which will test you on all the
aforementioned three Cs. Feel free to get in touch with us even if there is an iota of doubt.

Lets Hit the Floor with our First Event!

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Facebook and Whatspp - Is it worth the moolah ?

FinTrivia

Zuckerberg has to his credit the social-networking revolution, he definitely has some hang of things
when it comes to online communication. So, lets just delve deeper into this deal and try and find out
what is in it for Facebook.

1.Singapore
has
the
world's highest percentage of millionaires with 1
out of 10 households
having at least USD one
million
in
disposable
wealth

The most important aspect of this deal would be that Facebook now has gained access to a large repository of phone numbers, which was the only part of information missing from its databases. With
additional 1 million users being added on a daily basis the repository is just bound to get bigger and
bigger. Also,
entering into mobile communication world would enable Facebook to fulfil the crucial part of social
communications core mission of connecting the world.

2. In 1990, the Soviets

gave Pepsi "Stolinchnaya
Vodka" and a ship fleet
consisting of 10 commercial ships, 17 submarines,
a cruiser, a frigate and a
destroyer In exchange for
Pepsi products!
3. Apples cash and investments are now equal to
the GDP of Hungary, and
more than that of
Vietnam and Iraq
4. The total Assets under
supervision for JP Morgan
is $2.2 trillion which is
more than the GDP of
India
5. If you had invested
$100 in Microsoft in 1986
instead of buying a
version of Windows 1.0, it
would be worth $46,400
today
6. The biggest merger to
date in U.S. history was
that of Internet service
provider America Online
and media giant Time
Warner. The merger was
worth a reported $162
billion in January, 2001

F I N AL O G U

WhatsApp is highly engaging with 70% of its users being active on a daily basis while on the other
hand Facebook seems to be losing its sheen. Another thing going in favour of WhatsApp is the geographical
presence it has. WhatsApp predominantly has users in the areas of Europe, India and Latin America.
It is not surprising that these are the regions which Facebook is also targeting to sustain its growth.
Facebook would end up competing against many mobile apps to gain customers mobile minutes in
the near future and WhatsApp would come in as a handy weapon at that time.
With absolutely no precedence for such a deal it is tough to say whether Zuckerberg has pulled off
another stunner or has he miserably failed.

The marriage of Myntra and Flipkart

Closer home the e-commerce industry is set for a period of consolidation and restructuring. May this
year saw the merger of two giants - Flipkart and Myntra. Flipkart is Indias largest e-commerce firm
whereas Myntra is Indias largest online apparel retailer.
Both these companies have now reached reasonable scale of operations and have been able to
set-up an ecosystem for e-commerce in India. The next step for them is to compete against players
like Amazon and Wal-Mart which are set to take the Indian e-commerce industry by storm. These
multinational firms have strong financial muscle and therefore it is imperative for players like Flipkart
and Myntra to combine their operations.
Integration of back-end operations is expected to generate cost synergies. The customer acquisition
cost will also reduce as there would be chances of cross-selling.

Another laudable point is that Myntra is operating with an independent website and under the
control of the original management which in a way would not create any personnel related issues.
So, as of now this deal- rumoured to be around INR 2,000 crore - makes a lot of strategic sense but
lets see how well it actually turns out to be.

This being our first edition for the session 2014-15, we bring to you the
Firsts in Finance
First Currency: Paper bills in China during Tang Dynasty (AD 618-907)
First Stock Exchange: Amsterdam Stock Exchange (1602)
First PSU to be privatized in India: Modern Food Industries in January 2000
First Asset Bubble: Tulip Mania, 1637
First Central Bank: Swedish Riksbank, 1668
First Power Co. in India with Soviet Collaboration: Neyveli Lignite Corporation

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Currency going Modern!

Virtual Currency: Impacting the unaffected

Fikipedia
Cockroach theory
The theory that states
when a company reports
bad news to the public,
there is usually a lot more
bad news behind the
scenes that may come out
later.

Macaroni Defence
An approach taken by a
company that does not
want to be taken over. The
company issues a large
number of bonds with the
condition they must be
redeemed at a high price if
the company is taken over.

Dead cat bounce

A small rally after a sharp
decline on Wall Street. It
could refer to a stock with a
nose-diving share price.

Puke point
The "puke point" is the
point at which the investor
can no longer stomach the
losses, and decides to sell
the asset, regardless of its
steeply falling price.

People think of money as being factual, existent thing. But thats view is fading fast. Today only 8% of the
world's currency exists as physical cash. Currency note is nothing but a piece of paper but then what gives
it its magical properties is, in words of Professor Castronova, a social process that enshrines a good as a
unique artefact called money; once enshrined, that artefact serves money's three functions, well or
poorly.
As the monetary consolidation continued, however, strange new kinds of currencies were popping up
because of the problems with the physical currencies and coins ranging from bulkiness to counterfeiting.
The new kinds of currencies started with Supermarket trading stamps. Others include air miles, iTunes gift
vouchers, discount coupons, two-for-one deals, and the numerous tokens used by online computer gaming
users, Second Lifers and the like. Many of these "currencies" had money like properties, but we did not
think of them as money.
And then arrived Bitcoins and suddenly everyone got very excited or indignant or perhaps both! What
exactly is a Bitcoin? To answer that, we can say that if hard currency is like a record, then a bitcoin is like an
MP3.
Bitcoins fall in the category called Cryptocurrency. Cryptocurrency is a digital or virtual currency that uses
cryptography for security. Notable thing about a cryptocurrency is it is difficult to counterfeit because of
this security feature. A defining feature of a cryptocurrency is that it is not issued by any central authority,
rendering it theoretically immune to government interference or manipulation. Cryptocurrencies make it
easier to transfer funds between two parties in transactions; these fund transfers are done with minimal
processing fees, enabling users to avoid the steep fees charged by most banks and financial institutions for
wire transfers. Bitcoin, hence, is called a decentralized virtual currency.
New bitcoins enter the market by a process called "mining." Available bitcoins are hidden amid a complex
encrypted computer program. Users' computers are working round the clock to solve a complicated
mathematical problem in order to release new coins. The easiest-mined bitcoins have already been
discovered. Finding new coins requires huge amounts of computing power. That has led some hackers to
take over unsuspecting users' computers to harness their power to mine for more bitcoins. The system is
designed to require more work to get coins as time goes by, that makes the currency's growth rate, also
known as inflation, steady and predictable.

There have been lots of cryptocurrencies before bitcoins, and there are innumerable more in the pipeline
for two reasons: strangely, there appears to be no legal framework that prevents the creation of private
currencies, and the digital technology to generate them is now abundantly available to all. Some of the
other Cryptocurrencies are: Litecoin, Peercoin, Freicoin, Ripple and Linden Dollar.
Most current discussion of the downsides of virtual currencies focuses on one aspect of them that they
are basically just tools for money-laundering. But that link hasnt been established so just wait and watch
to experience the effects of Bitcoins in near future.

FinApps

Paper Wallet
A paper wallet is an offline
mechanism for storing
Bitcoins. The process involves printing the private
keys and Bitcoin addresses
onto paper.

F I N AL O G UE

Mint:
Freely available on iOS, Android
Frequently cited as one of the best financial software
apps by sites such as Wired, CNET and Digital
Trends, Mint lets you look at all of your bank account
balances in real time, sends an alert when you're
about to surpass your budget and lets you manage
your expenses.

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NPA: Indian Bankings Achilles Heel

Market
Watch
Bank Rate
9.0%

Repo Rate
8.0%
Reverse Repo Rate
7.0%
MSF Rate
9.0%
CRR
4.0%
SLR
22.5%
Nifty
7725.15
Sensex
25841.21
DowJones
16970.01
$/Rs
59.58
Gold
28040
As on 2nd July

F I N AL O G UE

What is the one factor you look out for when Indian banks release their financial results? Most of us
would agree that it is PAT, NIMs, ROA or increase in loans & advances. But if you have tracked the
results and reaction of the stock market after the results, you would notice that Non Performing
Asset (NPA) figure is one most important factor driving the banking stocks over the past 2-3 years.
So, what exactly is NPA? Once the borrower has failed to make interest or principle payments for 90
days the loan is considered to be a NPA. As a thumb rule, high GDP growth does result in higher NPA
because of banks granting rapid loans. But non recovery of those loans cripples the very system of
banking. The decline in asset quality of bank assets have resulted in introduction of stringent BASEL III
norms around the world to counter this problem and India is no exception to the case.
The biggest ailment in Indian banking industry over the past few years has been the rise in NPA which
is incapacitating the system specially the PSU banks. The gross NPA of public sector banks rose to Rs
2.03 lakh crore at the end of September 2013, from Rs 1.55 lakh crore on Mar, 2013. PSU banks are
major worries in this regard with premier SBI recording Gross NPA close to 5% consistently over past
2 years. This definitely is an alarming situation. Sales of non-performing loans to ARCs jumped to Rs
27,000 crore in 2013-14 from Rs 8,000 crore in FY13, and are likely to double further in FY15.
Bad loans could climb to 7% of total advances by March 2015, the RBI warned in a report in
December. This is nearly equal to the size of the budget of Uttar Pradesh. The biggest chunk of the
soured debts is with PSU banks, which account for two-third of loans but 80 per cent of NPAs.

The big ticket defaults of Kingfisher Airlines and Deccan Chronicles are just the tip of
the iceberg. Priority sector lending makes it imperative for banks to grant loans to
various sectors that make it tough to recover loans. The real issue lies in the
pressure from government to compel banks to aid infrastructural projects, power
sector projects which have been the real cause of ballooning NPAs. Moreover, the
decision to waiver loans and politically motivated steps to waiver electricity bills in
certain states have exacerbated the situation.
The big ticket defaults of Kingfisher Airlines and Deccan Chronicles are just the tip of the iceberg.
Priority sector lending makes it imperative for banks to grant loans to various sectors that make it
tough to recover loans. The real issue lies in the pressure from government to compel banks to aid
infrastructural projects, power sector projects which have been the real cause of ballooning NPAs.
Moreover, the decision to waiver loans and politically motivated steps to waiver electricity bills in
certain states have exacerbated the situation.

It is not that RBI is not doing its part with respect to high NPA situation. The stringent regulation and
instructions are released from time to time. RBI has instructed banks to conduct special drives for
recovery of loss assets, to put in place early warning system, to replace system of post-dated cheques
with Electronic Clearance System and to constitute a Board level Committee for monitoring of
recovery. In past 6 months, despite the uncertain economic environment, banks have been able to
improve their credit quality, primarily due to lower slippages, better recovery and higher sale of
non-performing loans to ARCs and a strong recovery in the last three months of 2013-14.
The RBI plans to take up with the government concrete suggestions on reining in NPAs. These include
creation of additional debt recovery tribunals, creating special cadre of officers and a separate bench
for speedy disposal of NPA-related cases. Recommendations may also be made to the government to
expedite setting up of special benches in every high court for corporate cases. Also the full
implementation of BASEL III norms by 2018 will drive towards strengthened asset quality. However, it
seems we are stuck with high NPAs in next few years to come.

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Whos Who?
Elon Musk - South African-American entrepreneur (The Real Life Iron Man)
Elon Musk - South African-American entrepreneur I think thats the
single best piece of advice: constantly think about how you could be
doing things better and questioning yourself. Considered to be the
poster boy of the thrillionaires (a term coined by New York Times to
describe a class of former high-tech entrepreneurs who are using their
newfound wealth to help turn science-fiction dreams into reality), Elon
Musk is the epitome of a self-made man. The founder of three highly
successful start-ups-PayPal, SpaceX and Tesla Motors-Musk has
mastered the technique of turning shortcomings into profits and not
resting on his laurels. One of his ultimate dreams is to build an oasis
settlement on Mars which could accommodate upto 80,000 pioneers as
he believes that a multi-planetary life will serve as a hedge against threats to the survival of the human species. Born (1971)
and raised in South Africa, Musk taught himself how to program when he was 10 years old and sold his first commercial
software (a space game) when he was only 12.
An avid philanthropic, Musk habitually invests 100 hours per week running his companies and believes that there is no short
-cut to hard-work. Seen by many as someone who has reshaped peoples spending habits (PayPals association with eBay),
Musk dreams of making trips to human colonies on Mars a reality. A huge Star Wars fan, Musk has a cameo-appearance in
the high profile superhero film Iron Man II apart from being the inspiration behind the billionaire Tony Starks character in
the movie franchise.

Whos Who?
Arundhati Bhattacharya Chairperson, State Bank of India
Indian government on Oct 7, 2013 has officially announced the appointment of Arundhati
Bhattacharya as the next chairperson of SBI for three years. The 66th largest bank in the world
and the countrys largest lender, the State Bank of India gets its first woman boss in its 207 year
old history. Prior to this post, she has been the (first woman) Managing Director and Chief Executive of SBI Capital Markets, the merchant banking arm of SBI
Known to be objective and quick in decision making, Bhattacharya is highly appreciated for
successfully steering the SBI Capital Markets at a time when the financial markets were in a
dismal shape. Under her guidance and leadership she has majorly contributed to the setting up
of several new company initiatives of the Bank, including SBI General Insurance, SBI Macquarie
Infrastructure Fund, SBI SG Securities Ltd, etc., as well as the launch of new IT platforms such as
mobile banking and financial planning targeted towards the young customer age bracket.
Bhattacharya is a true asset to SBI as she has also played a pivotal role in setting up three of the latest subsidiaries of the
Bank which are the General Insurance Subsidiary, the Custodial Subsidiary and the SBI Macquarie Infrastructure Fund. She
was interviewed for the post along with three other top Managing Directors of SBI by a powerful selection panel that included RBI governor Raghuram Rajan and financial services secretary Rajiv Takru.. Arundhati, a strong believer in women empowerment is confident enough of heading Indias largest bank with experience of over three decades, and a good level of
exposure thus enabling her to deal with any business situation. Apart from work, she loves to cook and read management
books especially while travelling and she is also associated with helping the physically challenged, aiming to integrate them
with the society.

F I N AL O G UE

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Investment Gyan
(Laughing) Tryst
with Terms
Bank: A place that will
lend you money if you can
prove that you don't need
it
Credit: The
preferred
method
of
acquiring
money for people who are
too timid to steal and too
proud to beg

Accountant: A person who

works with numbers but
lacks the personality to be
an economist
Value investing: The art of
buying low and selling
lower
Economist: An expert who
will know tomorrow why
the things he predicted
yesterday didn't happen
today

Market correction: The

event that occurs the day
after you buy stocks
Tax refund: A tactic devised by politicians to give
you back some of your own
money in such a way that
you are supposed to think
it's a gift.
Broker: What my broker
has made me
Institutional Investor: Past
year investor who is now
locked up in a mental
institute
Stock Analyst: Idiot who
just downgraded your
stock

Alpha: A modern portfolio theory measure of risk-adjusted return.

Bargain hunters: Investors who search for securities that they believe are
under-priced.
Beta: A measure of a stock's or a portfolio's price movement relative to the
market. A high-beta asset (beta coefficient great than 1.00) will tend to move
with greater amplitude than the market while a low-beta asset (beta coefficient
of less than 1.00) will tend to experience more moderate ups and downs than
the market.
Cats & Dogs: Investments that don't appear to be very promising
Convertible: A security, such as a bond, that can be converted into another type
of security, such as a stock
Derivative: An investment vehicle whose value is dependent on another
vehicle. Examples are puts, calls and swaps
Efficient market hypothesis: A theory that the value of a market or an
individual asset reflects all the information known about it and everything that
is anticipated for the future
January theory: The theory that the market will rise in January because
investors tend to sell assets in which they have losses late in the year
Liquid market: A market with a ready amount of securities available to buy
and sell
Option: A contract that allows the owner to buy or sell an asset at a
pre-specified price. "Puts" and "calls" are options.
Penny Ante: A return almost too insignificant to matter. An organization or a
unit that generates a very small return
REIT: A real estate investment trust. An equity security whose value is based on
real estate holdings.
Spin-off: To create a separate entity of a unit of an organization, or the unit
that is being separated from the main organization
A Note to Remember:

One of the funny things about the stock market is that every time one
person buys, another sells, and both think they are astute.
F I N AL O G UE

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Fun with Finance

Un-jumble the words given below. All are related to the world of Finance. Take the circled alphabets and arrange them
to fill in the description of the cartoon:
THE _ _ _ _ _ _ _ _ _ / _ _ _ _ / _ _ _ _ _ _
Hints for Jumbled Words Questions
a. Unsecured debt instrument, slightly different from bonds
b. Rate at which general prices rise
c. Measure of volatility with respect to market as a whole
d. Financial asset whose value is based on the underlying
e. Mitigation of risk
f. Nationally recognised, well-established and financially sound
company
g. Happens in a floating exchange rate system
h. Significant decline in economic activity
i. Related to chapters 7,9, 11, 12 and 13,15 under Title 11 of
United States Code
j. Extension of credit when an account reaches 0

For answers, refer to the bottom of the page

On a Lighter Note!

Answers: Sovereign Debt Crisis

Blue Chip, Depreciation, Recession, Bankruptcy, Overdraft, Debenture, Inflation, Beta, Derivatives, Hedging

F I N AL O G UE