Download - FinXpress July 19 2015
-
The finance club at IMT Ghaziabad is engaged in a constant endeavor to provide you with a practical exposure to the world of finance and the latest emerging trends in the related fields of Risk Management, Banking, Investments and non-finance topics.
Do write to us at: [email protected]
Term of Week
In Focus
Opinion
Personality Tech World
ESOP | 6
iFusion |12 Ravi Venkatesan |11
Grexit Worries | 4
JULY 19, 2015 | A FINNICHE INITIATIVE
Irans Nuclear
Deal | 2
-
Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.
IMT Ghaziabad will be hosting the launch of Indias most important biggest B school
case study event on 19th July. Club FinNiche would like to take the opportunity to
welcome all the juniors to the clubs and committees in IMT Ghaziabad. It is exciting to
see the flare with which the juniors are taking the new leadership roles and carrying
forward the IMT legacy.
FinNiche launches yet another edition of FinXpress with the In Focus section putting
light on Irans Nuclear Deal. The Opinion gives an overview of Grexit Worries.
The term of the week describes ESOP", a decision by the board of the directors to
increase the number of outstanding shares by dividing the shares, keeping the total value
of shares same. Do have a look at the revamped market section which has included
international markets and Tech world which brings to you iFusion.
Hope everyone likes the revamped version of magazine. Club FinNiche welcomes any
comments, suggestions or criticism regarding the magazine. Please do write to us and
share your ideas.
Happy Reading!
Regards
The Editorial Team
Club FinNiche
July 19, 2015 | Volume 40
Irans Nuclear Deal
Grexit Worries
ESOP
Ravi Venkatesan
iFusion
-
Deal has the potential to
change the political landscape
of Western Asia.
Israel has condemned the
deal.
- By Shashwat Shekhar
Iran reached an historic deal with six major
world powers on Tuesday. The nuclear deal
ends a decade of tough negotiations. This
deal has a potential to transform West Asia.
The agreement was reached in Vienna, on the
18th day of diplomatic talks. According to the
deal, the sanctions imposed on Iran by U.S,
European Union and the United Nations will
be lifted and in return Iran will curb its
nuclear programme. The west has always had
its suspicion that Irans nuclear programme
is aimed at making a nuclear bomb. After the
deal, the President of the U.S, Barack Obama
said that the deal effectively blocks every path
to a nuclear weapon that Iran can take. The
foreign minister of Iran, Mohammad Javar
Zarif, called deal a win- win. The deal can
be seen as a major victory for both U.S
President Barack Obama and his Iranian
counterpart Hassan Rouhani. The latter was
elected two years ago on a promise that he
would reduce the diplomatic isolation of
Iran.\The Prime Minister of Israel, Benajmin
Netanyahu, termed the deal a mistake of
historic proportions while the deputy foreign
minister of Isreal, Tzipi Hotovely, called the
deal historic surrender.
The U.S congress has 60 days to review the
deal and if the congress chooses to reject the
deal, the US President, Barack Obama can
exercise his veto power. It would take two
third majority of the lawmakers to override
the veto. This means that for the bill to die,
some fellow members of Obama from the
democratic party will have to vote against the
bill. On the other hand, it is not likely that
Iran will be able to receive benefits of the deal
before next year as it needs to be ratified. It is
also required to verify the implementation.
Irans National Security Council will also
review the deal and if it thinks that the deal is
against national interest then Iran will not go
ahead with the bill.
The deal also has a snapback mechanism.
Under this clause, some sanctions can be
re-imposed in 65 days if Iran violates the deal.
The ban on Iran for procurement of missile
technology will remain for next eight years.
Similarly, embargo on weapons is to remain
for next five years. On the sidelines of the
deal, the International Atomic Energy Agency
(IAEA) also reached an agreement with Iran
on ways to resolve outstanding issues
between the two by the end if thus year. The
deal with the world powers hinges on the
condition that IAEA will be able to inspect the
nuclear sites in Iran. Iran is also expected to
answer questions of IAEA regarding military
aims of past research.
The fact that the deal can benefit Iran has not
gone down well with allies of U.S in West
Asia. Iran does not officially recognize Israel
and supports enemies of Israel. Some people
believe that the reason behind the US
improving its relationship with Iran is the
emergence of a common enemy in Islamic
-
State which has gained ground in Syria and
Iraq.
Lifting off sanctions can bring a rapid
economic boon in Iran. The restrictions had
reduced countys oil exports and the economy
shrunk by approximately 20%. The global oil
prices fell at the prospect of Iranian oil
returning to the market. U.S and European
Union will allow Iran to export oil to any
country and reduce restrictions on trading
other products such as chemicals, natural
gas and refined products. Only Russia holds
more gas reserves than Iran.
Once the sanctions are removed , it will be
easier for India to pay in rupees for the crude
oil it imports from Iran. The plan of a gas pipe
line from Iran to India through Pakistan can
also be revived. Iran is also expected to open
its substantial hydrocarbon reserves to Indian
companies.
The prospect of oil production in Iran will put
downward pressure on crude oil prices. It is
estimated that crude oil prices will remain
below $70 per barrel in both long and
medium term. This will continue to have a
profound effect on Indias import bill.
Indias energy consumption is 4.4% of total
global consumption of energy. It comes
behind only U.S, China and Russia in terms
of energy consumption. Consumption of
petroleum products in India grew by 3.14% in
the fiscal year 2014-15. IMF has pointed out in
its report titled Implications of lower oil
prices that countries like India will be able to
reap modest benefits of lower oil prices as the
government does not fully pass on the
benefits to the final consumers. The fall in
crude oil prices is expected to boost the global
economy by one percentage point in 2015
and 2016. In the same period Indias GDP is
expected to grow by 0.4 and 0.6 percentage
points respectively. This is done mainly by
the government the budget deficit and correct
the subsidiary burden. Fall in international
prices of crude oil has helped the NDA
government to keep the retail inflation below
5%.
Low crude oil prices has also given countries
like India an opportunity to re-negotiate the
conditions of imports. India has requested for
a correction in terms and price with
Organization of the Petroleum Exporting
Countries and has asked for abolition of
something called Asian premium.
Abolition of this premium will also help
Japan, China and Korea along with India.
OPEC accounts for 94% and 85% of Indias
gas and crude oil imports respectively.
If the agreement manages to survive it will
be one of the greatest foreign policy successes
for the President of U.S. Obama had
personally started the initiative two years ago
with a call to the Iranian President Hassan
Rouhani. In 1980, the U.S had cut diplomatic
ties with Iran after a group of revolutionaries
attacked the U.S embassy in Tehran and kept
hostages for more than year.
Oil prices are likely to drop in
anticipation of excess supply.
Iran has the second highest
gas reserves in the world.
-
- By Gayatri Pandit
In European Union, most political decisions
related to money and migrants rests with 28
national governments. The tension of
adjusting the economy according to other
factors like currency, tax laws has become
acute since 1999 on introduction of the euro,
which now binds 19 nations into single
currency which is watched by European
Central Bank. However, it leaves budget
decisions and tax policies in the hands of each
country. With the beginning of Greece crisis
in 2010, many international banks and foreign
investors sold their Greek bonds and holdings
to avoid the repercussions of Greece debt
crisis.
Bailouts to Greece
After Wall Street imploded in 2008, Greece
announced that it had been understating its
deficit figures for years, which left investors
and creditors questioning about the
soundness of Greek finances. By 2010, Greece
curtailed the borrowings in the financial
markets which further threatened to set
financial crisis. To control this situation, the
troika the International Monetary Fund,
the European Central Bank and the European
Commission issued two international bailouts
for Greece, which would eventually total
more than 240 billion euros. In 2010, a 110
billion bailout loan to rescue Greece from
sovereign default was launched and cover its
financial needs throughout May 2010 until
June 2013, however with delayed
implementation by Greece calls for another
bailout package of 130 billion. These
packages comes with conditions on
implementation of austerity measures,
structural reforms, and privatization of
government assets. It requires deep budget
cuts and tax increase.
The bailout money was given to let the Greek
economy stabilize its finances and quell the
fears that the EU could break. Though it had
helped to reduce problems twinned
unemployment raised above 25 percent. The
bailout money mainly goes toward paying off
Greeces international loans, rather than
making out a way for economy to recover.
The Greek government still has debt load
which could not be paid unless the recovery
takes hold.
Very nearly 66% of Greece's obligation,
around 200 billion euros, is owed to the
Eurozone bailout fund or other Eurozone
nations. Greece does not need to make any
payments on that obligation until 2023. So
while Greece's aggregate obligation is huge as
much as twofold the nation's annual
economic outputit may not make any
difference much if the legislature did not have
to make payments for quite a long time to
come. When the money came due, the Greek
economy could have sufficiently developed
that the entirety no more appeared to be
daunting. In the short term, however, Greece
has an issue making payments due on
Grexit, an abbreviation for
"Greek exit," refers to Greece's
potential withdrawal
from the Eurozone, after which
it would most likely revert to
using the drachma, its currency
until 2001
-
credits from the International Monetary Fund
and on securities held by the European
Central Bank. Those commitments add up to
more than 24 billion euros through the middle
of 2018, and it is impossible that either
institutions would agree to delay the
repayments.
As said by Paul Krugman, Greek economy can
recover from the crisis by exiting from EU and
launching a new currency. The Greece can
further devaluate its currency to boost its
exports and the debts can be paid with
cheaper currency. However, it may have
consequences such as the dogma that the EU
membership would no longer be perceived as
irrevocable, which also led to impact on the
austerity measures set by IMF which has
contributed to Greek depression. In addition,
looking at the current scenario with a very
high debt (177% of its GDP) the solution of
third bailout is a temporary fix as Greece is
likely to find it increasingly difficult to meet
the revenue and budget deficit targets.
Currently, the Greek parliament has agreed to
European demand of tough new austerity
measures and structural reforms for defusing
the countrys sovereign crisis. Now here the
question raises whether the Europe is able to
deliver the broad-based economic reforms to
stressed countries like Greece. The answer to
this question is obvious, in the global
economic crisis the outcome of euro zone is
disappointing which is due to the weak
performance of Eurozone as a whole and
asymmetric outcomes within the Eurozone
countries.
-
A credit default swap is a type
of contract that offers a
guarantee against the
non-payment of a loan. In this
agreement, the seller of the
swap will pay the buyer in the
case of a credit event (default)
by a third-party. If no default
occurs, the seller of the swap
will have collected a premium
from the buyer.
Employee Stock Ownership Plan or ESOPs is
a type of employee benefit plan which tends
to encourage employees to acquire stock or
ownership in the company. Certain stocks are
given to the employees at no or negligible
costs under these plans and they remain in
the ESOP trust fund till the time the employee
retires or leaves the company and the
employee can exercise the rights on such
shares.
These plans aim to motivate the employees
and ensure dedication towards the company
for improvement in work performance and
also to increase the value of the company by
offering shares to the employees of the
company. It is an incentive which is given to
the employees to create a sense of
commitment towards the company and is
proven to be effective as an appeal to the
employees. It generally appeals all kind of
employees and the HR need not be in a fix as
to what kind of incentives needs to be offered
to the employees: monetary or non-monetary.
ESOPs are often used as a corporate finance
strategy and to align the interest of the
employees with that of the interest of the
organization. ESOPs are considered to be
qualified in the sense that it provides various
tax benefits to the company which is
sponsoring ESOPs, the employee and also to
the selling shareholder.
It can be used to keep plan participants
focused on company performance and also
the appreciation of share prices. It acts as an
interest builder to the employee as he will be
interested in the performance and stock
prices of the company and will be
encouraging participants to do what is best
for the shareholders as the employees
themselves are shareholders.
Uses of ESOPs :
To create an additional employee benefit:
It can be used in conjunction with
employee saving plans
To borrow money at a lower after-tax
cost: The ESOP borrows cash which it
uses to buy company shares enabling
company to make interest and principal
deductions
To buy the shares of a departing owner:
Owners of privately held companies can
use ESOPs to create a ready market for
their shares.
- By Yojana Ranasaria
-
INDIAN MARKETS BSE index ended up 0.06 percent, while the NSE index closed 0.02 percent higher,
marking their highest close since April 16.For the week, the BSE 30-share index gained
2.9 percent and the broader NSE index rose 2.98 percent. Inflation data, Greek develop-
ments and companies' quarterly earnings decided the course for the stock markets this
week. Besides, progress of monsoon, investment trend by foreign investors and the
movement of rupee against the dollar also influenced sentiment. Indian markets start
its upward journey on its own merits.
BSE SENSEX
CNX NIFTY
Open High Low Close
SENSEX 28,480.92 28,576.32 28,417.46 28,446.12
NIFTY 8,623.65 8,642.95 8,593.15 8,608.05
-
COMMODITIES
EXCHANGE RATES
INTERNATIONAL MARKETS
Commodity Unit Rs / Unit % Change
Gold 10 grams 25498.00 -1.06
Silver 1 kg 34200.00 -0.88
Crude Oil 1 bbl 3208.00 -1.44
INR/ 1 USD 63.49
INR /1 EURO 69.14
INR/ 100 JAPAN YEN 51.20
INR / 1 POUND STERLING 99.42
Open High Low Close
NYSE Comp 11,010.84 11,010.84 10,965.67 11,024.87
NASDAQ 5,196.11 5,210.16 5,183.23 5,210.14
S&P 500 2,121.50 2,123.00 2,120.75 2,121.25
FTSE 100 6,796.45 6,799.78 6,764.80 6,775.08
CAC 5,138.98 5,138.98 5,110.48 5,124.39
DAX 11,747.47 11,753.18 11,649.94 11,673.42
NIKKEI 225 20,646.63 20,658.95 20,611.22 20,650.92
SSE 50 2756.87 2834.18 2723.74 2742.85
Hang Seng 25,246.64 25,517.45 25,183.86 25,415.27
-
Data centres in India Oracle
With the increase in adoption of cloud based applications and solutions as well as increase
in demand from the government segment, Oracle an enterprise software company is now
mulling data centres in India. This will help the software company to host the applications
and some other cloud based solutions within the country. Oracle presently does not have
any data centre India and the potential growth as well as demand are certainly making the
company to think over having some data centres in India. India is the second largest
employee base for Oracle globally. Recently, Microsoft announced to set up three data
centres in India. Considering data centre in India, Oracle will have 19 cloud data centres in
India. Also the government will be benefitted through the applications and solutions in the
Digital India campaign. Other than public sector, the demand for such solutions is
increasing in the banking, financial services, insurance, telecom and manufacturing sector.
Declining steel prices are affecting makers of raw materials
The declining steel prices are affecting the makers of pellets, sponge, pig iron units etc. Even
in the last four months, several sponge iron units across the country have shut down , pellet
plants have been unable to sell and the pig iron industry experienced reduction in capacity
utilised. The industry has an annual capacity of 50 million tonnes but currently it is
producing only 17-20 million tonnes, and that is how they are also failing to make money.
Karnataka has experienced significant number of shut downs, 36 out of 66 units have shut
down, 2 are sold and rest are running at the half the capacity.
WPI remains in negative zone for eighth month
Annual wholesale prices continued to decline for the eighth consecutive month. WPI
declined at a faster rate of 2.4% in June year-on-year compared with 2.36% in May. The WPI
inflation in June 2014 was 5.66%. WPI food inflation also came down from 3.80% in the
previous month to 2.88%. However, CPI inflation rose to a nine month high of 5.4% in June.
Considering the difference in the WPI and CPI, economists said that higher margins at retail
levels also led to the divergence between the two inflation numbers especially on food front.
From merchandised dolls and
board games to reality shows,
amusement park sides and
digital properties, Disney has
mastered the art of making
movies live forever. The Indian
arm of Disney is even doing the
same.
-
Monsoon session could derail GST deadline
Earlier this year, Finance Minister Arun Jaitley made an impassioned plea in the Lok Sabha
to pass the GST bill. If the House did not pass it, he warned the Constitutional Amendment
Bill would not clear the April 2016 deadline when it must be rolled out. And this fear may
come true. Other competitive political power in Bihar, where an election is yet to happen is
likely to dominate the monsoon session and less amount of business may happen, especially
in the Rajya Sabha. Whereas, other political leaders are also trying to extend the deadline.
The All India Anna Dravida Munnetra Kazhagam (AIADMK) is not in favour of the bill in
terms of its existing principle. On the other side, Congress which has 12 state governments
out of 29, already showed its disagreement with the existing norms. So even after monsoon,
it seems difficult to get the bill cleared having maximum votes in favour.
RBI reverses farm loan norms because of weak rains
Government showed its concern over a week monsoons impact on the agricultural sector as
well as RBI adopted the policy of direct agricultural lending target for banks. In April this
year, The RBI had announced revised norms for priority sector lending in which the
distinction between direct and indirect lending was abolished. These norms became
effective immediately. But RBI issued a circular to banks asking lenders to beef up credit
directly to the farmers so that they do not resort only to corporate farm loans to meet
targets. However, it is the banks duty to ensure that their direct lending to non corporate
farmers does not fall below the system wide average of the last three years. These norms
not only abolished distinction between direct and indirect agricultural norms but also set
targets for loans to marginal farmers and a variety of corporate loans.
Mindtree announced two acquisitions
Mid-sized information technology services company Mindtree announced two acquisitions
worth Rs. 425 crore. The reasons can be digital is getting more and more popularity and
other big players are taking similar kind of steps and also the company will definitely
experience certain increase in the cline base. These acquisitions are expected to expand the
companys offerings in the digital field and also overall revenue. Mindtree will acquire
British technology consultancy Bluefin Solutions and US-based analytics firm Relational
Solutions.
-
Ravi Venkatesan is the former chairman of
Microsoft India, now is the founder chairman
of Social Venture Partners India. Through
Social Venture Partners Ravi Venkatesan
formed a network of engaged philanthropists
who are into addressing social problems
through venture philanthropy. He is also
serves as a venture partner at impact investor
Unitus Seed Fund. He also serves as a board
member of Rockefeller foundation, Infosys
Ltd, and Strand Lifesciences. He is the author
of the book which is published in Harvard
Business Review, which is Conquering the
Chaos: Win in India, Win Everywhere.
At Microsoft
Ravi Venkatesan served as Chairman of
Microsoft India from 2004 to 2011. during this
tenure Ravi helped to build India into
Microsofts second largest presence in the
world and one of its fastest growing markets.
He is also the creator of Microsoft Indias
Project Shiksha, which is a computer literacy
program. It trained almost 40 million school
children in India.
At Cummins Inc.
Ravi spent sixteen years with Cummins Inc.
As a chairman of Cummins India he led its
transformation into Indias leading provider
of engines and power solutions. He is one of
the key members in establishing Cummins
College of Engineering. It is Indias first
engineering college for women in Pune.
Education
Ravi Venkatesan has obtained his bachelors
degree in mechanical engineering from
Indian institute of Technology, Bombay. He
did his masters in engineering from Prude
University and has a Master of Business
Administration from Harvard Business
School.
He received Indian Institute of technology
Bombays Distinguished Alumnus Award.
He was also voted as one of Indias best
management thinkers by Thinkers50. He was
voted the most influential MNC CEO for 2011
by the Economic Times daily. He was in the
news recently when he was shortlisted by the
government for the post of chairman in PSBs.
IIT Bombay
Purdue University
Harvard Business School
2003
Distinguished Alumnus Award,
IIT Bombay
2011
Distinguished Engineering
Alumnus, Purdue University
2011
Most Influential MNC CEO,
Economic Times
2013
Indias Best Management
Thinkers, Thinkers 50
-
The iFusion device is a device that allow you
to bring together the traditional features of
the phone with the features of the iPhone,
thus bringing a completely new device that
enables the user to enjoy the benefits of both
the worlds.
Its ideal for the use as it allows for hands
free talking especially in a home or office
setting.
With the prevalence of home offices,
especially in a start up, it becomes really
ideal for them
Its very easy to coordinate a video call in a
skype or facebook app.
Docks are integrated for helping it to get
charged faster and easier.
Streaming music is also easier from your
iPhone.
Compatibility is not an issue , as iFusion is
highly compatible with iPhone PBX apps,
Cisco Mobile 8.1, Avaya one-X Mobile, and
MaxMobile for Microsoft Lync.
Key Features
The Bluetooth technology is the latest to
allow for rich audio and video quality to
allow for rich quality.
The speaker are dual full duplex for
amazing audio quality in conversation or
in audio quality.
Highly efficient design, ergonomic, and
very easy on the palm as well as in the
hand.
The embedded ports are integrated to
provide the facility of charging.
The data facilitation is easy as USB port
allows data and other synchronization
with a Mac or PC.
It also comes with an audio enhancer, for
external use.
The USP of the device is that it allows all the
platform of IOS to work , doing away with
the compatibility issues, and the networking
issues.
- By Shubhra Sasmit
Bluetooth 2.1 + EDR
Apple 30-pin Connector
3.5mm stereo port for external
speakers
Power Supply Input - 100-240V
auto sensing 50/60Hz 0.3A
DC to phone - 12V 1A
USD 29.95