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

To Wonder

To crush and to ridicule one, people may try

But it does not make sense to wonder

All the what which where when and why?

Some scheme and connive, some may even lie

But it does not make sense to wonder

Why lesser mortals don’t change till they die?

To improve or to destroy? Even God gives a sigh

But it does not make sense to wonder

In which manner did God cut the pie?

'm scribbling these lines to you my children

Just keep smiling and don’t you ever cry

In this world it is no wonder

We go forward only if we try try and try

© Nitesh Kotecha

No One Killed the Indian Mutual Fund Industry

The Indian Mutual Fund Industry is in bad shape.  Is it really in trouble?  I would like to disagree.  This is one opportunistic industry which has always benefited from outsmarting investors by selling dreams instead of genuine products.  Here are some facts

The Association of the Indian Mutual Fund Industry has released data last week that the top 250+ distributors of this Industry have earned a total Rs 18600 million in the financial year 2011-2012 up from Rs 1770 million in the previous year.  The increase in profit has come despite the fund houses increasing their pay out commissions by 5%.

This is not an industry which is in trouble.  However, the MF industry is a cry baby and has Godfathers in the Government who have a vested interest in this industry.  Most Politicians route their illegal holdings through Mauritius and this money enters the MF Industry via the Foreign Institutional Investors route.

Readers of this blog are advised to look at expense ratios of each fund they opt for.  The MF industry has just received a go ahead from its regulator to increase its charges by 0.25%.  This is a net increase of 11%.

Stick to funds that charge minimum amounts as expense ratio.  Stay away from brokers who try to sell you the funds.  Be careful of every IPO that the fund house brings in.  A new IPO is allowed an expense of 6% as its initial costs.  These are nothing but the salary hikes that they need to pay their fund managers.   As an existing fund cannot charge in excess of 2.25% as expenses, the fund houses come out with IPOs to pay this money to their expensive fund managers.  The period between 2003 and 2007 saw this string of IPOs that were just rubbish.

Remember, any fund charging anything in excess of 1% as expenses, is expensive and you need no pay that kind of money for a mutual fund.  Stay away. Stick to funds with lower expense ratio.  If your broker is selling you this kind of junk, don’t buy and close your account with him.  You don’t need an expensive fund and neither do you need a greedy broker.

Happy Investing!

© Nitesh Kotecha

On Death And Dying

Death is inevitable, something that will touch every one of us at some time – no matter how hard we try to avoid the thought or pretend it’s not there.  It is something that people don’t wish to talk or think about and yet it is as certain as our birth.

The greatest fear in human beings is the fear of the unknown.  What happens to me at death?  The cause of this fear and confusion stems in not knowing who or what “I” am.  We feel “I” am dying thinking “I” to be the body.

When I realize “I” am not this body, then I free myself from death altogether.  I am immortal, eternal and I leave this body when the part I have been playing is over.  Remember, the senses (smell, touch, taste etc) are the instruments of consciousness, but not consciousness itself.  Whatever we can experience from sense objects will not give experience of immortality.

We experience sorrow when something is taken away from us and yet we know that everything in the world is perishable.  It is not that we should not enjoy the things and the people around us.  We are actors on a stage.  The world is a drama and we souls are acting through our bodies, playing our part with other actors, using the props, and choosing scenes of our choice.

We must learn to live in the present enjoying each moment realizing the overall plan of this drama.  We wonder at the intricacy and precision at which each action brings an equal and opposite reaction.  This theory of cause and effect, action and reaction, is the basic law of life, both on physical and metaphysical planes.

This understanding also helps us to face the loss of a loved one.  We must realize that we were playing a part together with someone and now, that scene is over.  It is the possessiveness of things and people that causes sorrow.  This is also called “Maya” or illusion of life.  It is because of Maya that we experience grief, sorrow, emptiness and loneliness.

When somebody’s part is over, we fell that we have lost that person’s love and comfort.  But, it was never yours.  You are fortunate to experience that person’s love or comfort just as you are fortunate to experience the warmth of the sun’s rays or the coolness of the water.  We cannot control the coming and the going of a person more that the rising and the setting of the sun.

Neither money nor power nor prayer can stop the eternal flow of Life and so we must learn to flow with it.

© Nitesh Kotecha

Don’t Let Yourself Be Hurt This Time

The gazelle slowly walked 

As her mother patiently talked

"We are the lion's meat

Everyday is not so neat

Calm your senses as you eat

For the bell will ring

And loud will be the chime

Don’t let yourself be hurt this time"

Don’t let yourself be hurt this time

Don’t let yourself be hurt this time

The boy quickly shook

As his father gave a last look

"I know I have been rude

'm sick 'n can’t have any food

Gimme a hug 'n make me feel good

For the bell will ring

And loud will be the chime

Don’t let yourself be hurt this time"

Don’t let yourself be hurt this time

Don’t let yourself be hurt this time

© Nitesh Kotecha