15th Oct 2008

Volume 2, Issue 14

Wealth Incorporation Christ University Institute of Management Finance Club Initiative Presents...

CHAANAKYA
Issue Attractions
National Headlines International Headline Corporate Interview Students Article
Investors Check/Quiz

..Tracking the Economy

Failure is simply the opportunity to begin again, this time more

intelligently. - Henry Ford
1 1 2 3 4
5 6 7-8

National Headlines
SEBI removes the restrictions on issue of participatory notes by FIIs, and also

Company Review/Buzz Words

Crossword Placement Special/Commesnts
Inflation11.8 %

permits their issuance with derivatives as underlying assets. Tata motors moves out of singur. Selects Gujrat as its new home. CRISIL says that share market investors in India lost Rs.2.3 trillion of their wealth in September as a fallout of ongoing crisis in the U.S. financial markets. TCS to buy Citigroup BPO for $505 mn; also to get $2.5 bn contract from Citigroup Interbank borrowing rate has crossed 20% due to liquidity tightness.
India's forex reserves fell by $153 mn to $291.82 bn. Union Cabinet approves an interest subvention of Rs 4311 cr to banks for giving

Repo Rate-9%, Reverse Repo-6% CRR 7.5%

15 days Movements
13200 12800 12400 12000 11600 11200 10800 10400 10000 30 1 3 6 8 10 13 14
Sensex

Sensex

short-term crop loans to farmers. BSNL in talks with Apple, Blackberry to launch 3G services in India and Bharati launched its new DTH service. Indias Industrial production plummeted to a decade low of 1.3% in August 2008, driven by a dramatic fall in manufacturing.

International Headlines
ONGC Videsh may bid for 8 Iraqi oil, gas blocks. The rupee erased most gains against dollar as banks bought the greenback to
Rs/$

Rs/$
46 46.4 46.8 47.2 47.6 48 48.4 48.8 49.2 49.6 50

meet demand from oil companies and other importers.

Asian markets retreat after rally. UK banks receive 37 bn bail-out.

10

Gold(per gram)
1350 1325 1300 1275 1250 1225 1200 1175 1150 30 1 3 6 9 10 11 14
Gold(per gram)

Hong Kong guarantees deposits, sets up fund for banks. US-listed Indian stocks rebound, gain $11 billion. Paul Krugman wins Nobel Prize for economics. EU countries commit $1.5 tn to bank bailouts.

Oil(per bbl)
4550 4400 4250 4100 3950 3800 3650 3500 30 1 3 6 9 10 11 14

GM talks merger with Chrysler as bankruptcy looms.

Oil(per bbl)

India, US seal nuclear deal. Forex reserves dip by $7.8 bn.

Whenever you see a successful business, someone once made a courageous decision -Peter F. Drucker

Page 2

Interview with Manu Punnose

Position Held : Managing Director (Subhkam Capital Ventures Ltd.)
Q1. Will recession in US effect our growth, if yes then in what multitude for the upcoming ventures ? Ans. It would be nave to assume that we would be completely insulated from what happens in the US, as the US economy is a vital component of the global economy.Thus a recession in the US will have an impact on the Indian economy insofar as exports to that country are concerned. However, we believe that we are less dependent on the US than in the past, since our economy is now more diversified in terms of market composition. At the turn of the century, the Indian economy was growing largely on the back of the service sector, which was predominantly export oriented. In the last few years, however, Indian industry has built a solid domestic base for the products and services, which provides a certain amount of cushion. While domestic demand may also see a slowdown due to the crisis all around, the effect is not expected to be crippling. Q2. Why should shareholders of Indian companies not panic in a world crisis situation ? Ans. As mentioned above, a significant contributor to the Indian growth is the sizeable domestic market. Indian companies should therefore be able to weather the storm raging all over. The economy may witness slower growth, but a recession is very unlikely. Q3. In such a situation which companies (sectors) will you like to extend your support as a venture capitalists ? Ans. Those sectors that cater to the domestic market to a large extent are expected to be better placed than those that depend on export markets. Also, sectors that are dependent on non-discretionary spending should fare well. Examples of these are healthcare and education. Our focus would also be on infrastructure, particularly those that are already under implementation; such projects may face temporary problems, which if appropriately addressed, can create immense value when the cycle turns. Q4. What changes have come up during the last 5 years regarding financing from venture capitalists ? There has been a maturing of the industry. The number of players and the funds under management have grown multi-fold. The investment strategies have also changed with there being clear demarcations in terms of stages of funding today, we have funds focused on start up early stage, growth stage and buyouts. In terms of industry focus, there is a much wider array of sectors attracting private equity. Among the most visible changes is the evolution of real estate as a focus sector for PE firms. Q5. What parameters are considered before investing into any new ventures ? The criteria on which an opportunity is judged are: scalability of the business (market opportunity), companys business plan (strategy, competitive advantage), management (vision, ability) and exit flexibility.

In the business world, the rear-view mirror is always clearer than the windshield.- Warren Buffett

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DOWNFALL OF LEHMAN BROTHERS

BY:

Sridevi C.S

Did you Know?

T h e

Lehman Brothers was founded in 1850 by two cotton brokers in Montgomery, Ala. The firm moved to New York City after the Civil War and grew into one of Wall Street's investment giants, despite period brushes with death. On Sept. 14, 2008 the investment bank announced that it would file for liquidation after huge losses in the mortgage market and a loss of investor confidence crippled it and it was unable to find a buyer. Lehman's slow collapse began as the mortgage market crisis unfolded in the summer of 2007, when its stock began a steady fall from a peak of $82 a share. The fears were based on the fact that the firm was a major player in the market for subprime and prime mortgages, and that as the smallest of the major Wall Street firms, it faced a larger risk that large losses could be fatal. As the crisis deepened in 2007 Lehman closed its sub prime lender, BNC Mortgage, eliminating 1,200 positions in 23 locations, and took a $25-million after-tax charge and a $27-million reduction in goodwill. The firm said that poor market conditions in the mortgage space "necessitated a substantial reduction in its resources and capacity in the sub prime space" and in early 2008, the storied investment bank defied expectations more than once Lehman managed to avoid the fate of Bear Stearns, the other of Wall Street's small fry, which was bought by JP Morgan Chase at a bargain basement price under the threat of bankruptcy. Lehman and Bear Stearns had a number of similarities. Both had relatively small balance sheets, they were heavily dependent on the mortgage market, and they relied heavily on the repo or repurchase market, most often used as a short-term financing tool. But by the summer of 2008 the rollercoaster ride started to have more downs than ups. A series of write offs was accompanied by new offerings to seek capital to bolster its finances.Lehman also fought a running battle with short sellers. The company accused them of spreading rumors to drive down the stock's price. On June 9, 2008, Lehman announced a second-quarter loss of $2.8 billion, far higher than analysts had expected. The company said it would seek to raise $6 billion in fresh capital from investors. But those efforts faltered, and the situation grew direr after the government on Sept. 8 announced a takeover of Fannie Mae and Freddie Mac. Lehman's stock plunged as the markets wondered whether the move to save those mortgage giants made it less likely that Lehman might be bailed out. Investor confidence continued to erode as Lehman's stock lost roughly half its value and pushed the S&P 500 down 3.4% on September 9, 2008. The Dow Jones lost nearly 300 points the same day on investors' concerns about the security of the bank.[7] The U.S. government did not announce any plans to assist with any possible financial crisis that emerged at Lehman
On Sept. 10, the investment bank said that it would spin off the majority of its remaining commercial real estate holdings into a new public company. And it confirmed plans to sell a majority of its investment management division in a move that it expects to generate $3 billion. It also announced its latest round of bad news -- an expected loss of $3.9 billion, or $5.92 a share, in the third quarter after $5.6 billion in write-downs. By the weekend of September 13-14, the Treasury had made clear that no bailout would be forthcoming. Treasury Secretary Henry M. Paulson Jr. and Federal Reserve officials did encourage other financial institutions to buy Lehman, but by the end of the weekend the two main suitors, Barclay's and Bank of America, had both said no. Lehman had reached the end of the line. The bankruptcy of Lehman Brothers is the largest bankruptcy filing in U.S. history with Lehman holding over $600 billion in assets. Morgan Stanley has lost a third of its prime brokerage assets since Lehmans collapse, amid concerns about its ability to weather the stormy markets.

h i g h e s t denomination ever printed by the United States is the $100,000 Gold Certificate. They were used only for transactions between the Federal Reserve and the Treasury Department. The motto IN GOD WE TRUST was declared the national motto of the United States by the 84th U. S. Congress and was first used on paper money in 1957, when it appeared on the One Dollar Silver Certificates. One of the smallest banknotes in the world is the Ivory Coasts 0.10 Franc note, issued in 1920. This 32mm x 46mm note is actually a postage stamp pasted on cardboard. Queen Elizabeth II is the second longest reigning head of state after King Rama IX of Thailand. She has been Queen since 1952. Her pictures appear on the banknotes of 34 countries.
Stock Ratnas
INFOSYS TECHNOLOGIES BSE 500209 SE-INFOSYSTECH CMP-Rs.1318.55 TARGET PRICE: Rs. 1713 AVENTIS PHARMA
BSE- 500674 SE AVENTIS CMP- Rs 754.05 TARGET PRICE: Rs.1000

SINTEX INDUSTRIES
BSE-502742 SE SINTEX CMP-218.85 TARGET PRICE 418
(CMP CUURENT MARKET PRICE)

The success combination in business is: Do what you do better... and: do more of what you do... -David Joseph Schwartz

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INVESTORS CHECK
The Three Factors of Investing

By: Sebin Emmanuel

The three factors that ultimately determine the return on any investment are time, interest rate and the amount invested. If one could increase any single factor, which would it be and which would be the second and third? Consider the following options of investment: Rs.100/month @ 6% for 30 years, or Rs. 1000/month @ 6% for 10 years If we choose the first option we make a mistake of earning Rs.63,427 less. Now let us take a look at the following graph that compares Time, Interest Rate and Amount Invested.

Each of the three factors is represented by their separate colors and the Doubling Element, 1X2X4X, etc. , represents doubling of one factor independent of the other two factors. For example, above 1X the interest rate is 1%, the monthly amount invested is 100 and the time is 1 year. Similarly in 2X interest rate is 2%, amount invested is 200 and the time is 2 years. Remember, only one factor is doubled for each bar, while the others remain constant. As we move from left to right, we see a trend in the growth of each bar. Which factor should we choose if we have extra cash? At 16X the blue bar represents 16 years, compounded at 1% at a monthly investment of Rs.100. As is visible, time is by far the most dominating factor and it has an exponential growth. The graph shows that one can have a significant impact on the factor of time, by investing now, versus later. But time is not a factor easily doubled. So, what about interest rate, the least effective factor on the chart? One can have some control over his interest rate but as a general rule, the higher the interest rate the riskier the investment. Thus, interest rates are somewhat of a moving target, unless it is fixed, but no high return investment is fixed. We have seen now how Time as a factor is the most dominating, but cannot be easily doubled and that Interest Rate is a moving target. This leads us to the last factor of investment, the amount of money which we can afford to invest. The amount of money which one can invest is the only factor that can be significantly changed, without taking on uncontrolled risks. For example, if a family spends Rs. 2000/ month servicing their existing liabilities, or debts, it would take a lot of time for them to become debt free unless they do prudent investment. .continued on page 6

Quiz:
Q1.Which growth model inspired the use of capital-output ratio for developmental planning? Q2. In business, what is the term used for the friendly acquisition of a target firm in a hostile takeover attempt by another firm? Q3. Where were the multiple exchange rates first employed? Q4. Identify the country where the branch banking system was first developed.
Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion..JACK WELCH

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Company Review: Tata Consultancy Services

Tata Consultancy Services Limited (TCS) is the world-leading information technology consulting, services, and business process outsourcing organization that envisioned and pioneered the adoption of the flexible global business practices that today enable companies to operate more efficiently and produce more value. They commenced operations in 1968, when the IT services industry didnt exist as it does today. Now, with a presence in 34 countries across 6 continents & a comprehensive range of services across diverse industries, we are one of the world's leading Information Technology companies. Six of the Fortune top 10 companies are among our valued customers. The company recorded revenues of $17,996 million during the fiscal year (FY) ended May 2007, an increase of 25.1% over 2006. The operating profit of the company was $5,974 million during FY2007, an increase of 26.1% over 2006. The net profit was $4,274 million in FY2007, an increase of 26.4% over 2006. The growth in revenue was on account of growing demand for its products in most of its business lines and expanding product portfolio through its acquisitions. Work Culture: TCS has an energetic and open workplace environment, and a collaborative culture that's based on te a mw o rk. Pul l ing to ge the r is a c e ntra l te ne t o f the ir w o rk e thic . Energetic and full of enthusiasm, they enjoy day (and night) at work. Life at TCS is a stimulating and exciting experience. Not only do our offices have the best infrastructure and technology, the colleagues have a knack of working hard and partying harder. Careers at TCS. Extraordinary opportunities for growth: they offer positions that allow you to challenge conventions and collaborate across continents and technology areas. New horizons: A wealth of diversity in culture, training, knowledge, and experience gives employees incredible opportunities to learn and expand their horizons. Knowledge acquisition: Youll learn on the job by working alongside some of the worlds besttrained IT consultants delivering cutting-edge technology to FORTUNE 500 clients. Learning and development programs: They provide on-the-job training, mentorship, professional development, and continuing education support to enhance your career and ensure you continue to learn and grow. Cutting-edge innovation: Innovation isnt just a buzz word at TCS; its one of the pillars on which our entire business operates.

Buzz Word
Badwill-The negative effect felt by a company when

Book Quotes:
Individual commitment to a group effort - that is what makes a team work, a company work, a society work, a civilization work.Vince Lombardi fear, but the triumph over it. The brave man is not he who does not feel afraid, but he who conquers that fear.- Nelson Mandela

shareholders & the investment community find out that it has done something that is not in accordance with good I learned that courage was not the absence of business practices.

Bag Holder-An informal investment term used to

describe an investor who holds the position in a stock Everyone experiences tough times, it is a which decreases in value until it is worthless.

Bid whacker-A term used for an investor who sells

shares at or below the bid price.

measure of your determination and dedication how you deal with them and how you can come through them.Lakshmi Mittal

A business has to be involving, it has to be fun, and it has to exercise your creative instincts.Richard Branson

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Continued from page 4

But how much money can one invest? If an average person were to stretch his finances, he can afford to invest 1/10th of what he pays each month towards debt elimination. Now consider Rs.2000 in debt payments each month @ 15% for next 30 years. Then, you cant even hope to outpace this kind of leverage with a Rs.150-200 investment at 6%, 8% or even 12%. But here is a striking example about how to do that, if you have understood the three factors of investments described above. Let us assume the family spends Rs.2000/ month towards servicing of debt and invests Rs.200/month currently. Now, follow along the graph and keep this in mind as our starting point: Rs200/month @ 6% for 30 years is Rs.2,00,000. Not a bad return. But, what if you first eliminated your debt in 15 years and invested the full Rs.2200 for the remaining 15 years? Thats over Rs. 640,000 which is a difference of 440,000! Now. what if you eliminated your debt in 10 years and invested Rs.2200 for the remaining 20 years? Thats over one million rupees and a difference of Rs. 800,000! Thus, one can leverage his position by understanding the factors that affect returns on investment. Quiz Answers
1. Harrod Domar model 2. The White Knight 3. Germany 4. U.K

Did you Know?

The term "buck" for

CROSSWORD:
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EclipseCrossword.com

Across
2. 4. 5. 8. 11. 12. 13. 15. The movement of cash in and out of a business from day-to-day direct trading and other non-trading or indirect effects, such as capital expenditure, tax and dividend payments The financial guarantees and performance guarantees issued by banks on behalf of their clients. A person who expects share prices in general to decline and who is likely to indulge in SHORT SALES. U.S. took over control of insurance giant __________ in an $85 billion bailout An expense that cannot be attributed to any one single part of the company's activities. Acronym for comprehensive measure of the economic activity that takes place in a country during a certain period. _______ represents an absolute ownership on any asset. The _____ ratio is an important indicator as to how the investing market views the health, performance, prospects and investment risk of a public company listed on a stock exchange
A fixed interest rate-bearing bond of an organization backed by some amount of credit.

Down
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U.S. dollar originated from the Old West when buckskin was a common medium of exchange with Indians. Later as currency replaced the barter system, people still refer to a dollar as a buck. Paul Galvin came up with the name Motorola for his company when his company started manufacturing radios for cars. The popular radio company at the time was called Victrola. Shanghai Stock Exchange was founded in 1891 as Shanghai Sharebrokers' A s s oc i a t i o n 1 90 4, renamed as Shanghai Stock Exchange in 1990 and re-established after being suspended in 1949. The world's highest denomination note is the Hungarian 100 Million B-Pengo, issued in 1946. That's 100,000,000,000,000,00 0,000 Pengo. It was worth about U.S. $0.20 in 1946.

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A contractual arrangement by which a firm or person acquires the right to use an ASSET for a definite period, in return for rent payable at regular intervals. 6. _____ test is a stern measure of a company's ability to pay its short term debts, in that stock is excluded from asset value 7. The various financial assets and securities held by an individual or institution are referred to collectively as ? 9. Any surplus money paid to acquire a company that exceeds its net tangible assets value 10. The accumulated and retained difference between profits and losses year on year since the company's formation. 14. An ______ shows how a specified portfolio of share prices are moving in order to give an indication of market

PLACEMENTS SPECIAL: CONGRATULATIONS FOR PLACEMENT IN HDFC ! ! !

MANISH SINHA

SHARAN RAJANI

NEETHI JAYAKRISHNAN

PALLAV SARASWAT

GANESH KRISHNAN

NIKHILA OTURKAR

DHARANI D.P

NIKHIL PUROHIT

NIKET JAIN
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ANSHU CHABRA
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COMMENTS

The issue covers a holistic view of the happenings in the financial scenario or gamut of the business in terms of financial markets.
- Prof. L.Ganesh

Talent which the students are showing is tremendous Talent Prof. Anirban Ghatak

I think the first year students are carrying the work left by us very well, I wish very best of luck for making it even better than that of us & pass it on further to their juniors as even higher benchmark. - Rahul Singh (Student II year ,Finance)

Contributions made by 2nd year:

Editing/Compiling News Company Review Stock Ratnas, Investors Check Interview Students Article Coordination Arihant Patawari Chetan P. Shriya Mohammad Nimakwala Lavanya Sebin Jerry Sridevi C.S Fouzia Tarannum B.

Contributions made by 1st year:

Editing/Compiling Did you know, Quiz Quotes, Book Quotes Graphs, Buzzwords Indices Crosswords Communication Gyanesh Shroff Megha Garg Maria Fernandes Paloma Lobo Paulomi Hitesh Archana

Please mail your valuable feedbacks, reviews at chaanakya.ccim@gmail.com