Top Ten Ways To Eliminate Corruption in India

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© Nitesh Kotecha

India's Junk - Is Anyone Looking? (Part 1)

Guys, Let us look at a junk stock - Resurgere Mines and Minerals.  This shares of this company are promoted heavily by one of India’s top brokers only because they have to distribute this stock to the general public of India.

Below is an extract of the Management discussion and analysis (MDA) from the audited balance sheet. The MDA is supposed to be the director’s discussion with shareholders.

The company has written the MDA by telling you how the world and India is doing in terms of growth.

The company has not offered a single explanation of its financial condition to the shareholders.  Nor has it discussed any aspect of its operations

I am pasting the text below in small font so as to conserve space.  If you wish to read it, copy it and paste it to a word processor and then enlarge the font size.  

This is one more example of the kind of nonsense that exists in India.  We have SEBI pulling up the Sahara Group as the group is visible and a political target.  SEBI  turns a blind eye to hundreds of companies like Resurgere which take investors for a ride.

Can we expect SEBI to be strict with companies like these just like it was firm with the Sahara Group? I don’t know. Can you expect donkeys to fly?

Note the question mark.

© Nitesh Kotecha

Resurgere Mines and Minerals -Management Discussion and Analysis

World Economic Environment

IMF, in its April 2012 update, has projected a World output growth of 3.5% for 2012 against a growth of 3.9% during 2011.

However, projected growth of 3.9% for 2013 indicates a mild recovery. Slight recovery in the major advanced economies, coupled with the solid growth in most emerging and developing economies presents a positive outlook for the Global economy on the whole.

While US economy appears to be on recovery path with a growth of 1.7% in 2011 and projected growth rates of 2% and 2.3% for 2012 and 2013 respectively, the Euro Zone continues to be an area of concern. Its projected growth for 2012 is -0.3% against a growth of 1.5% during 2011. The projection for 2013 is also for a flat growth at 0.7%. In the Euro Zone, Greece which had contracted by 6.9% in 2011, is projected to contract by another 4.7% in 2012, before starting recovery in 2013 along with Portugal and Spain.

Growth in the advanced economies will be slow, projected at 1.4% for 2012 and 1.9% for 2013, primarily because of the ongoing problems in Europe.

As per IMF, the emerging and developing economies would also experience a lower growth of 5.6% into 2012 against a growth of 6.2% in 2011. In developing Asia, China which had grown at 9.2% in 2011 is expected to slow down to 8% in 2012 before recovering to 8.5% in 2013.

Given the overall dampening in economic activity, the trade growth is expected to slow down for both developed as well as developing world. Risk in 2012 is in the form of continued hardening of oil prices. China and India, which together account for around 80% of the incremental oil demand, would continue to push the demand given the pace of their economic expansion. Further, any geo-political uncertainty could trigger a sharp increase in oil prices.

Indian Economic Scenario

 The GDP growth of the Indian economy was estimated at 6.5% for the Fiscal 2011-12. Reduction in gross fixed capital formation and slow down in industrial production have been the cause of concern. No change in the growth rate is expected in the coming fiscal, with RBI projecting a growth of 6.5% for 2012-13. The Union Budget has announced a number of measures to boost the investment climate, with special focus on infrastructure and manufacturing sectors. For the Steel Industry, the key measures are in the form of increasing custom duty on flat carbon steel products from the level of 5% to 7.5%. This along with measures to bring back industrial growth should allow for accommodation of additional supply on capacities likely to be commissioned in 2012-13.

The announcements with regard to reduction in customs duty on machinery imports for mining and mineral sector, specially for iron ore beneficiation and pelletisation, will lead to reduction of overall capital cost.

Forward-looking Statement:

This report contains “forward-looking statements” – that is, statements related to future, not past, events and may be interpreted as ‘forward looking statements’ within the meaning of applicable laws and regulations. In this context, forwardlooking statements often address our expected future business and financial performance, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “should” or “will.”

Forward–looking statements by their nature address matters that are, to different degrees, uncertain. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the company’s operations include a downtrend in the iron ore, bauxite, steel, pig iron, soapstone, & met coke industry – global or domestic or both, significant changes in political, economic, business, competitive or regulatory environment in India or key  markets abroad and from numerous other matters of national, regional & global scale including but not limited to natural calamity, tax

laws, litigations, Government policies & regulations, fluctuations in interest and/or exchange rates of Indian Rupee, etc.

Any forward-looking information in this report has been prepared on the basis of a number of assumptions, which may prove to be incorrect.

This report should not be relied upon as a recommendation or forecast by Resurgere Mines & Minerals India Limited. The views expressed herein may contain information derived from publicly available sources that have not been independently verified; no representation or warranty is made as to the accuracy, completeness or reliability of this information. We do not undertake to update our forward-looking statements.

Global iron ore industry:

Iron, the fourth most abundant rock and constituting about 5% of the earth’s crust, is the world’s most commonly used metal. Global iron ore deposits are estimated at 800 billion tonnes, containing more than 230 billion tons of iron. Iron ore is mined in more than 50 countries and the world’s largest iron ore producing nations are Russia, Brazil, China, Australia, India and the US.

World Steel Scenario

The Global Steel Industry is going through a rough phase with demand declining and the major steel economies like USA and Europe running into oversupply. The World crude steel production in 2011 stood at 1518 million tonnes, growing at 6.2% over 2010, with China contributing as high as 52% to the incremental production. The growth rate however, was considerably lower as compared to 16% in 2010.

The Global steel demand during 2012 is expected to grow by 3.6% to 1422 Million Tonnes, moderating slightly as compared to a 5.6% growth in 2011. It is expected to grow further by 4.5% to around 1486 million tonnes in 2013, as per WSA forecasts. Demand in major steel producing nations, viz. Japan and Europe is projected to increase in 2012 as compared to the demand in 2011. In the US, demand is forecast to grow by 5.7% in 2012 and 5.6% in 2013. China’s growth in steel demand

in 2012 and 2013 is expected to moderate to 4.0% following 6.2% growth in 2011. The continuing slowdown of Chinese steel demand is mainly driven by the Chinese Government’s efforts to restructure the economy. However, part of China’s projected slower growth is offset by improvement in other emerging markets and the recovery in US.

India is expected to resume its high growth trend after a sluggish performance in 2011. In 2012, India’s steel use is forecast to grow by 6.9% to reach 72.5 MT and is projected to grow further by 9.4% in 2013, driven by increased infrastructure investment and higher pace of urbanisation.

WSA forecast suggests that in 2013, the emerging and developing economy will account for 73% of World steel demand.

Indian Steel Scenario

India maintained its ranking as the 4th largest steel producer in the World with a production of 71.3 million tonnes in 2011, registering a growth rate of 4.4% over 2010, as per WSA. According to JPC estimates, domestic finished steel consumption posted a growth of 6.8% during 2011-12 to 70.92 Million Tonnes. The World Steel Association has projected a growth of 6.9% for steel consumption for India during 2012, which is higher than the growth in steel consumption projected for China (4%). In 2013, the growth rate is forecast to accelerate to 9.4%.

Financial performance – operational performance

With the Indian Economy reeling under the collateral impact of a sovereign debt crisis in Europe and frequent increases in domestic interest rates to rein in inflation this Fiscal, the growth rate of real consumption of domestic steel in the currentFiscal also witnessed a slow down as compared to last year.

The summary of financial performance of the Company is presented below:

(Rs. in Lacs)

Particulars FY 2011-12 FY 2010-11

Total Income 7,670.57 65,171.68

Profit / (Loss) before Depreciation & Amortization (1,531.34) 3,331.38

Less: Depreciation 2,274.08 1,928.25

Less: Amortization (Including Goodwill) 3,912.49 2,682.58

Profit / (Loss) before tax (7,717.91) (1,279.45)

Less: Provision for taxation 3.31 317.94

Profit / (Loss) after tax (7,721.21) (1,597.40)

During the year under review, the company’s total income is decrease by 88.23% compared to the total income from the last year and company has incurred a loss of Rs. 7721.21 lakh during the year under review.

Mining overview:

India’s GDP growth was catalysed by the mining industry; every rupee invested in the mining industry generated Rs. 2.4 of output (directly or indirectly) in the country’s economy. Mining contributed about 2 per cent to the country’s GDP (source: Central Statistical Organisation).

The Prevention Of Politics As A Career Act

I dream of a world where every country has its own act that briefly conforms to the above utopian law.

Why does a person want to be at the service of others?  I have always believed that there are personal motivations involved ESPECIALLY when a person wants to work for others!

Let us look at all the social service organizations that have brand names that span across countries.  The people involved in the committees fight bitter battles and speak with a fisherwoman’s tongue.  The other activities include over-invoicing costs and pocketing the difference in cash, hosting dinners and personal grandiosity as displayed in photographs of local and regional newspapers.

Let us look at this a bit more honestly and a little less cynically.  Let us assume that President Obama had announced in 2008 that he would be President for four years only and that he would not contest elections in 2012.  What are the odds that President Obama would have done a much better job than what he has done?  I believe that he would have excelled.  The thought of contesting elections in 2012 would have never entered his mind and he would have been more concerned about leaving a legacy.

The Indian politicians are a powerful lot.  Many Indians pride themselves when they know a politician to be a friend.  Many Indians want to be that – a politician and supposedly spend a life worrying about the people of the country.  What rubbish!

To have a majority of the people wanting to be politicians is an insult to a country and its politics.

A politician must spend no more than 10 years of his life in politics.  He/ She must then retire and try to earn a living like the rest of the country does.  I think a decade of self less service is good enough.  Why would one give more time to this?

Countries stink because the same politicians have been stinking the country for too long.

© Nitesh Kotecha