The Thread

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Where recycling is better business

Recycling waste into something useful is good in itself, but what if margins in doing so are better than using non-waste raw material? That seems to be the case with Ganesha Ecosphere which uses discarded PET bottles to produce polyester staple fibre (PSE).

So, the next time you have a soft drink and throw away the empty bottle you need not necessarily feel guilty about adding to non-bio-degradable waste. That is provided, you are near an urban centre where roving ragpickers collecting all kinds of processable waste are a routine sight.

The used plastic or PET bottles they collect go through an elaborate process of aggregation, up a supply chain of bigger and bigger traders and eventually land up quite possibly at the doorsteps of one of the 25 collection centres of Ganesha Ecosphere to be converted into PSF used in the manufacture of textile fabrics and a lot else.

Ganesha Ecosphere, which clocked a turnover of Rs 385 crore in 2012 and a bottom line of Rs 20.6 crore, has been around for nearly two decades, and next year will add over a third to its capacity to reach 78,600 tonnes of annual PSF capacity. They will, thereby, maintain their leading position in this niche reprocessing industry, accounting for over a quarter of its total installed capacity, according to Gopal Agarwal, chief financial officer.

The business was promoted by chairman and managing director S S Sharma in 1995 who initially began with the Birlas and then in 1989 went into yarn processing.

It is also examining processing other kinds of plastic waste like the ubiquitous plastic bags whose use is being sought to be curtailed. This can lead to setting up a plant to use discarded bags and the caps of PET bottles to produce polypropylene, which is widely used as a packaging material. So, as long as the economy grows, the use of plastics increases, as also the demand to recycle waste, Ganesha Ecosphere plans to grow profitably.

Its biggest challenge is collecting and processing of raw material. While an informal raw material supply chain is in place all over the country, cleaning and sorting out the material, which can be used is onerous. The ragpicker gets Rs 20-22 per kilo of material that he hands in to the trader. After sorting, cleaning and compressing, the material is shipped to one of Ganesha’s two plants at Kanpur and Rudrapur, where at the factory gate the cost comes to Rs 35 per kilo. To meet any raw material shortage, Ganesha also has a licence to import (as this is a waste its import is regulated).

Raw material transportation is costly but setting up plants at collection centres is limited by the fact that the technology makes for viability at an annual capacity of at least 18,000 tonnes.

Ramesh Chauhan of Bisleri fame, whose work is Mumbai based, is in the same business of helping aggregate plastic waste, which is eventually passed on to Reliance Industries. But Agarwal sees him driven in part by an agenda of corporate social responsibility whereas “for us waste recycling is a wholly commercial exercise.”

Not only is this recycling of one kind of waste profitable, the margins in this operation are better than those earned by PSF manufacturers who use PTA and MEG as raw materials. (Reliance is of course way ahead in margins as it strides the entire value chain right from the cracking of hydrocarbon onwards.

The conversion process that Ganesha uses has from early this year qualified for earning carbon credit, but that has not yet been sought as such credits are currently slated for sunset at the end of the year with the end of the enabling Kyoto protocol. As and when it is renewed and there is a market again for carbon credit which commands a decent price, Ganesha’s margins will improve further.

Ganesha treats the water it discharges and sells the waste that it generates like bottle caps. So its manufacturing process does not add its bit of industrial pollution. The manufacturing plants run on electricity and considering the power situation in Uttar Pradesh and Uttarakhand, there is a backup of diesel generators.

http://www.business-standard.com/india/news/where-recycling-is-better-business/482383/

 

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Why Are the Suits Crying?

Like the mamas of some businessmen, research is a tax-saving device in India; and social work a way of keeping wife and daughter-in-law employed. Corporate India invests very little in science or strategic philanthropythe visionary pursuits that materially and culturally enriched Western society, especially the United States. Instead, big Indian business spends far more money on persuading politicians. Indian corporations are not only complicit in the state of the nation, but also, as the chief sponsors and beneficiaries of political corruption, largely responsible for it. That is why, in this season of bleak economic projections and Manmohan Singh bashing, it is a bit comical to see the serious men of corporate India, one after the other, appearing on a pedestal and condemning the Government for all that is wrong with the nation today.

They talk of the lack of political leadership and policy paralysis (which, anyway, began as a response to one of the biggest corporate scandals in modern India). NR Narayana Murthy even said, I feel sad about [the] Indian economy. He clearly does not believe he is part of the problem, which is odd.

A few months ago, after the Chief Economic Advisor to the Government, Kaushik Basu, suggested that bribe-giving be made legal, Murthy said, It is a great idea. Basus logic, which was correctly understood by Murthy, was that if bribe-giving were legalised, it would empower the giver to later rat on the taker. This reasoning tries to convey that luring a person for commercial gain or providing an incentive to a government official to break the law is morally, and so legally, excusable. It also tries to convey that the business community is a helpless victim of a corrupt system. It is a laughable claim.

There is a huge supply of corruption because there is an even larger demand for it. Indian companies have traditionally leaned more on purchasing policy or turf than on competitive innovation. In fact, if there is policy paralysis in the Government today, corporate India has for long had innovation paralysis (apologies for not providing a sweet alliteration). When the going was good for large corporates in the boom years after the economic reforms that began in 1991, when they were vastly enriched as the new owners of national resources and businesses previously owned by the Government, what exactly did they do? Nothing much. There was outsourcing, of course. And copies of patented drugs, and one overrated cheap car that has largely failed. There was much chest-thumping in the media over Indian companies buying overpriced foreign brands. Also, a phoney celebration of the Indian entrepreneurs alleged ability to improvise in the face of oddsthe bullshit of jugaad. Isnt it true that anyone anywhere in the world will know how to break the rules to survive? Is this the greatest virtue Indian enterprise can find in itself? An underworld system of foreign exchange or a tractor assembled from other automobile parts are not things to be proud of. The fact is that a Jaguar is the real jugaad.

British and American companies, in their formative boom years, invested heavily in universities and research, and even in culture. They consistently showed that they had a stake in the progress of man and well-being of society. Later, Japanese companies graduated from being manufacturers of cheap low-brow goods to become technological leaders until they were beaten again by American and European companies. The battle is far from over. Chinese firms, though with the support of a government that has the luxury of knowing what it is doing, are slowly making that shift today.

Indian software companies were great beneficiaries of progressive government policies and were even protected from political corruption, at least when compared to other industries. In the years when they made their billions, they kept saying, India will soon move up the value chain. Any reporter who was covering the software industry would have heard this thousands of times. Yet, India has not moved up the chain. In fact, Indian outsourcing itself is beginning to lose some ground to other Asian nations. It has no ideas to elevate itself. And it has not invested enough in improving the educational and intellectual standards of the average Indian. As a consequence, it appears to have lost its way.

It is true that India is just emerging from being one of the poorest regions in the world, prosperity is among its newest experiences, and Indian companies will need more than just two decades of freedom from socialist central planning, to make their giant leaps. But there is no evidence today that they are planning their future on the strength of ideas or crucial investments in society. (It is important to note though that Ratan Tata is one of the major funders of the American scientist Daniel Nocera's project 'The Artificial Leaf', which is a device that mimics the science of photosynthesis that plants use to extract energy from sunlight and water. If the Leaf works as Nocera hopes it would, it will fundamentally alter the way the world looks at energy sources.)

The Government has good reasons to be myopic. It has to sell itself to its customers every five years. It will sacrifice prudent long-term goals for expensive and immediate social security. Indian business, too, is as myopic, though it does not have good reasons to be so. A more innovative, feisty and philanthropic corporate India will not only enrich the nation but also steal away the Governments core customers as it did with the middle-class. And Narayana Murthy will have no reason ever to be sad again.

http://www.openthemagazine.com/article/voices/why-are-the-suits-crying

 

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Investors Protection: Legally dishonest

The government wants to restore investors’ confidence in the stock markets. How can I have confidence when the government breaks the rules to give undue advantage to the powerful? In the past, the government forced promoters to steal by restricting directors’ salary to ridiculous amounts like Rs3,000 a month. Now, they have legalised robbery by giving promoters the shelter of legal enactments, to rob a company in many ways.

The Companies Act, in its wisdom, had originally provided that when a public limited company wished to issue new shares, it was mandatory to offer it first to the existing shareholders. The original Act was drafted with a view to ensuring that promoters did not cheat the other shareholders. This stopped promoters from issuing shares to themselves when the prices were low or issue shares to others. This section (original Section 81-1) virtually embodied the spirit of true joint stock companies and the principle that every shareholder is an owner and should be treated equally.

Alas, honesty had to give way. The government, at the behest of the industrialists, amended the law to give freedom to the promoters to issue shares to whoever they chose, without bothering about the other shareholders. All it needed was a ‘special resolution’. A three-fourths majority is required, but when promoters own a large chunk, this becomes a formality. It would have been ideal if the law said that it needed the approval of three-fourths of the shareholders who are not promoters.

This one amendment to Section 81 has ensured enormous amount of wrongdoing. Fairness demands that the first offer be made to the existing shareholders and then be passed to the others if they say no. Here, the promoter cuts off the other shareholders without offering even normal courtesies, forget what is fair. The irony can be seen from the sequencing of the legislation itself. Section 81 (1) says that you have to be fair. Section 81(1A) says that you can rob the rest of the world. It is possible to argue that most placements under Section 81(1A) happen at prices above the market price.
Maybe, but that is no excuse to not offer it to the existing shareholders. All it needs is a simple rights issue that is open for 15 to 30 days and then, at the end, offer the unaccepted shares to the intended person. And if you want to offer it to a ‘strategic’ investor, then put it to vote and surely no rational shareholder will have any reason to stall it.

The other vexing area where shareholders get the short-shrift is when the promoter increases his shareholding. First, he does it through preferential issue of ‘warrants’ to himself. This is totally unfair. It is like buying shares on credit! I am sure every other shareholder would also like to have the same privilege of paying 25% today and the rest after a year. If the promoter wants to up his holdings, he is free to buy from the secondary markets. Why should he get anything preferentially? As it is, he takes a few crores in salaries irrespective of the returns to the shareholders. And uses company property as his personal. This is another legally sponsored abuse of the minority shareholder.

The ultimate abuse is when the owner ‘decides’ to do a ‘buy-back’ of the shares. Here, the promoter is cleverly using company money to reduce non-promoter shareholding and thereby increase his own shareholding. I see companies sitting on mountains of debt resorting to this route. What the promoters do is to sell part of their shares when prices rise and then resort to one of these legally permitted abusive routes to restore their shareholdings.

The government and the regulators are paying lip service to the so-called ‘minority’ shareholders. Instead of indulging in foolish legislation to encourage ‘corporate social responsibility’ (abdicating its own responsibility and robbing a shareholder without his permission), if they focused on setting right the wrongs that have been sponsored by them, investors may come back.

Then there is the other vexing issue of disclosure. While everyone talks of transparency, company balance sheets are hiding more than they ever used to, legally. The changes in accounting (sub)standards with the active connivance of the Institute of Chartered Accountants of India (ICAI) has been the single most damaging factor, when it comes to corporate governance. In the name of ‘green’ movement, companies are getting away with murder. This ‘green’ movement is really a red movement. As a shareholder, you get an email saying that the company will ‘presume’ that you do not require a physical copy of the annual report. I can barely read the full page of a digital report on my screen. I need magnifying glasses. I cannot refer to two different pages at the same time as I could do when I held a physical annual report. As it is, the annual report has been ‘abridged’ and subsidiary companies’ accounts are not available either in print or on the company’s website. The Securities and Exchange Board of India and the ministry of company affairs (MCA) have been willing accomplices in this. They should have ensured that digital reports should have been an option instead of a default practice. Surely, the cost of sending out so many annual reports is far less than the amount of perquisites promoters and the top management enjoy. In the name of saving the environment, companies are skimping on giving out information to their owners.

The playing field is tilted against minority shareholders in another way. It has become a common practice of companies to have ‘analyst meets’ with brokers with whom they share more information than with their own shareholders. They give ‘guidance’ on the profits to brokers, but not to the shareholders. How come analysts have more information than a shareholder can ever hope to have? If a company cannot even disclose to its shareholders what it sells and how much of each product to its shareholders, how is it that the analysts are able to provide all of that information in their ‘research’ report? We have imported this from Wall Street; SEBI and MCA should stop this.
SEBI has also actively contributed to hiding information. They had started a system called ‘EDIFAR’, modelled along the lines of EDGAR system of the US, which provides all corporate information in the public domain, in a standard format. In a criminal waste of money and complete abdication of responsibility, successive SEBI chairmen have allowed this to become defunct. The mutual fun(d) industry, instead of providing oversight, is washing its hands off by trying to make a trade body like the Association of Mutual Funds of India into a self-regulatory organisation (SRO). Which SRO, that is a trade body, will ever care for the small investor?

So, the investor is not only being taken for a ride by companies and market intermediaries all the time; they are damned by the regulators and the lawmakers too. But investors have learnt all this the hard way. This is precisely why they stay out of the market and all the efforts of the various government agencies to promote financial literacy and education will come to naught. People just don’t trust the system. In fact, the more financially literate they become, the less they will engage with risk products.

Unless you are so savvy that you can understand corporate India, do not venture into investing in stocks. They are not for the common man.

http://moneylife.in/article/investors-protection-legally-dishonest/27776.html

 

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Ramadan fasting dilemma when sun never sets

Practising Muslims across the world are observing Ramadan. For one month, they are fasting between sunrise and sunset. But what do Muslims do in a town where the sun never really goes down?

The town of Rovaniemi in Finland lies in a land of extremes.

At 66 degrees north it straddles the Arctic Circle in Finnish Lapland. During midwinter it is cloaked in total darkness. But in the summer it is bathed in daylight.

The long days pose a particular problem for fasting Muslims like Shah Jalal Miah Masud.

The 28-year-old moved to Rovaniemi - 830km (515 mile) north of the capital, Helsinki - from Bangladesh five years ago to study IT. He has not had any food or water for 21 hours. And he laughs.

"It doesn't get dark. It always looks like the same, the sun is always on the horizon and it's quite difficult to get what the time is actually right now," he says.

It is 11 o'clock in the evening and the sun has only just dipped below the horizon. The sky has turned a beautiful deep, rich blue. This is as dark as it will get, then the sun will rise again in five hours.

Masud says it is difficult to fast according to Finnish time and admits he is tired. But despite the hunger and fatigue, he says it is a pleasure to observe Ramadan during the long Finnish days.

There is another option which reduces the number of fasting hours - mark its duration by the rising and setting of the sun in countries far to the south of Finland. Dr Abdul Mannan - a local Imam and president of the Islam Society of Northern Finland - says there are two schools of thought.

"The Egyptian scholars say that if the days are long - more than 18 hours - then you can follow the Mecca time or Medina time, or the nearest Muslim country time," says Dr Mannan.

"The other (point of view) from the Saudi scholars says whatever the day is - long or short - you have to follow the local time."

Dr Mannan says the majority of Muslims in northern Finland observe either Mecca's fasting hours or Turkish time because it is the nearest Muslim country to Finland.

For Nafisa Yeasmin, a researcher at the University of Lapland, choosing when to fast has not been an easy decision. She moved from Dhaka in Bangladesh six years ago with her husband and two children.

Her spacious Scandinavian-style kitchen - full of white cupboards and wooden work surfaces - smells of frying onions, turmeric, chilli and cumin.

As she prepares her traditional iftar meal, she recalls her first Ramadan in Rovaniemi when she decided to fast according to Finnish daylight hours, going without food for up to 20 hours a day.

"It was very difficult to follow because in Bangladesh we are used to 12 hours' daytime and 12 hours' night-time," she says.

"Then I thought, not any more. I have to follow Mecca's timetable. But I'm a little bit worried whether Allah will accept it or not."

Many Muslims come to Finland as refugees from all over the world, particularly Somalia, Iraq and Afghanistan. Since 2001, Finland has accepted 750 refugees a year. New arrivals are often sent to live in towns like Rovaniemi in the far north in a government resettlement programmes.

In Rovaniemi the long days are not the only obstacle that fasting Muslims face.

No shop in this town of 60,000 sells halal food, which is prepared according to Islamic law. The nearest town, Oulu, that does is 300km away. Another option is Lulea, across the border in Sweden.

Yeasmin opts for Lulea, which is a six-hour round trip journey by car, with a shopping list full of items, including black chickpeas, dates, rice crackers and lots of halal meat.

Understandably, she has stocked up for the whole month of Ramadan. To make her point, she opens her huge white fridge - covered in her children's school photos - to reveal all seven trays crammed full of frozen halal meat.

http://www.bbc.co.uk/news/magazine-19199411

 

[yusi]

Equally challenging dilemma's for the future, such as when orbiting the earth:

http://www.wired.com/science/space/news/2007/09/mecca_in_orbit

 

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Eid Mubarak

 

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What the coal scam is all about

The report of the Comptroller and Auditor General of India (CAG) on coal block allotment to private parties amounts to a very damaging accusation of financial irregularity.

Unlike some other scams — such as the much-publicised securities scam, fodder scam or even the latest 2G scam — where a section of the business and politics class stood to gain, ‘coalgate’ can unsettle the high and mighty across the board. Hence, there are strong doubts about whether the beneficiaries of this staggering scam will ever be taken to task. The indications were clear in the rejoinder issued by the Union Coal Minister Sriprakash Jaiswal last week, elaborating the roadblocks in introducing competitive bidding for block allotment.
HOW IT HAPPENED

States such as Rajasthan, Chhatisgarh and West Bengal have opposed a bidding process, Jaiswal said. This has left the state dispensation route — a major source of corruption — open. Examining the parties in power in these States since 2004, it is obvious that political groupings across the ideological spectrum — Left, Right and Centre — are allegedly involved in the scam.

Similarly, the industry players who secured coal blocks were from varied backgrounds — including those with no track record in power generation or even manufacturing. Yet, they managed to secure coal blocks against proposed projects.

The route was simple: take the state leadership into ‘confidence’ and they would, in turn, recommend the name for block allocation. A little known Kolkata-based company, for example, promised huge capacities in Chhatisgarh.

What the Central Minister did not say is that till date the political class, cutting across ideology, is yet to come to terms with the decision to auction blocks. And, it has sufficient reasons to be ill at ease with the idea.

It is with political connections that certain corporates managed to acquire access to natural resources. The list of consortium members in blocks makes it clear that there are many who do not have any ‘business’ to be there.

The real beneficiaries were big players. A rough assessment shows that a couple of industrial houses, as mentioned by the CAG, bagged a lion’s share of blocks. The Centre cannot deny responsibility, as attempted by Jaiswal, for awarding blocks free of cost for merchant power generation, thereby helping private players earn a windfall profit. And, we are not talking about coal blocks allotted to firms with power purchase agreements and captive generation plans.
GOVERNMENT’S ARGUMENT

In its defence, the Government now refers to the urgent need to step up coal production and fuel economic growth.

And, since Coal India (CIL) was not in a position to cater to the projected demand, policymakers were forced to draw an ‘emergency plan’ to ramp up production. Assets which were yet to figure in the CIL’s development agenda were dished out to captive users.

Between 2004 and 2009, a committee headed by the Union Coal Secretary, distributed nearly 150 blocks, more than two-thirds of the total of 215 blocks allotted since 1993.

The beneficiaries were selected by a screening committee based on project planning. A share of assets went to nominees identified by the State Governments. Under the current legal dispensation, where CIL is the owner of all coal resources, it was argued that charging the beneficiaries a price for being allotted the coal blocks was not possible.

Natural resources were given free of cost.

The Centre may use this argument, of coal being a nationalised resource, to counter the allegation that it deprived the nation of substantial revenues that could have been generated through auction. “There could not have been a better policy than this,” the Coal Minister has been quoted as saying.

The underlying argument is: to auction the blocks the government needed to amend Mines and Minerals (Regulation and Development) Act. And, given the track record of the coalition politics, any such amendment could have been inordinately delayed.

Even if we accept this argument, Jaiswal’s contention that the process of allotting blocks has been transparent rings hollow. It is true that the process adopted post-2004 was better than the practices followed during 1993 and 2004, when 60 blocks were doled out without any non-performance clause or earnest money. The broad-basing of the screening committee also helped to reduce the element of ad hoc selection.

But, why did the government not restrict such allotment only for commercial power generation, ensuring that such electricity be available to the nation either at a regulated price or through PPA with designated distribution utilities? This simple measure could have ensured ‘power for all’ at an affordable price.

On the contrary, captive blocks were granted to steel, cement, merchant power and even downstream industries such as ferroalloys. They pocketed the benefit of getting coal free of cost. Some fly-by-night operators even monetised the benefit by selling their project plans to serious players.
DELIBERATE OMISSION?

And, going by the chain of events, the murmur of opposition voices — even within the screening committee — against such largesse, one may argue that some omissions were deliberate.

What’s worse, only one of the 57 blocks allotted to private sector is developed and is in operation (the figures are just a shade better for the public sector).

The bottom line: the nation was not merely deprived of revenues against allotment but also of the required coal production (which was the cornerstone of the argument in favour of such ad hoc distribution of assets free of cost) — and is now paying for imports.

http://www.thehindubusinessline.com/opinion/article3799589.ece

 

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Price rise

 

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Zero loss and governance

 

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Stock screener

Came across a very good stock screener with many additional features including a stock watchlist which will give alerts on new corporate developments. Avery good one indeed.

http://www.screener.in/