To get the most from massive investments, India must adopt a coordinated approach that aligns the development of each transport mode with the country’s needs.
SEPTEMBER 2010 • Rajat Gupta, Hemang Mehta, and Thomas Netzer
Source: Travel Infrastructure Logistics Practice
Continue @:
http://www.mckinseyquarterly.com/Transforming_Indias_logistics_infrastructure_2670
Friday, November 19, 2010
Friday, July 9, 2010
SKS Microfinance Plans IPO
This news appeared in the Indian Edition of WSJ.
IPO Pits Profit vs. Altruism
Indian Microlender Sees Scale in Capitalism; Industry Pioneer Has His
By ERIC BELLMAN
Hyderabad, India
SKS Microfinance Ltd. moved a step closer to bringing Wall Street to the slums of India. But that also will bring more criticism from microfinance experts who say profits and initial public offerings have no place in the industry.
SKS won approval from the Securities Exchange Board of India to proceed with an IPO, according to people familiar with the situation. The company and its early investors expect to raise more than $250 million from the deal, which is likely to happen within 30 days and would make SKS the first microlender in India to go public.
Only a handful of microlenders around the world have made it to the global stock markets, so the SKS deal could encourage other companies in the sector to follow. SKS is the largest microlender in India, with a portfolio of about $1 billion. About $5 billion in microloans were made in the country last year, and the IPO would help SKS borrow money to fuel expansion.
"The only place you can get the amount of money that is needed to help the poor is in the capital markets," Vikram Akula, founder and chairman of SKS, said in an interview. "That's why we are doing this IPO."
But as SKS's executives and investment bankers went on a roadshow to stir up interest in the shares, they stressed how little profit the company makes. The strange sales pitch reflects sensitivity to accusations that SKS is gouging borrowers even as its makes millions of tiny loans to poor families.
Pioneer of Microlending
Mr. Akula has a decades-long relationship with Nobel Prize winner Muhammad Yunus, the founder of Bangladesh's Grameen Bank, who is credited with sparking the microfinance revolution. The two men now stand on opposite sides of the question of whether altruism and capitalism can coexist.
"Microcredit should not be presented as a money-making opportunity. It is an opportunity to make an impact on poor people's lives," Mr. Yunus said in an interview. "An IPO gives a wrong message."
Mr. Akula, a 41-year-old U.S. citizen and Yale University graduate, launched SKS in 1998 after working in nonprofit organizations in India that tried to help the poor. Even the best-run groups lacked the capital or the organization to meet the needs of the world's poor, so he decided to build a new kind of microlender that wouldn't have to depend on government money, grants and charity.
Before launching the company that would become SKS, Mr. Akula went through the training program at Grameen Bank, telling Mr. Yunus that he wanted to tweak his model to reach more people. "If I remember correctly, he just smiled," Mr. Akula said.
Mr. Akula started on his own with a small team that went from village to village in the southern state of Andhra Pradesh. He used the Grameen model, which sets up groups of poor women and lends them as little as $50 to help with small businesses like growing vegetables or running a tea stand.
He also took cues from McDonald's Corp. and Starbucks Corp., standardizing training and lending procedures to cut costs and accelerate growth. Employees were paid a decent wage so that Mr. Akula wouldn't have to rely on volunteers and regional managers from top, rural business schools. And he built in enough profit to make the business appealing to institutional investors.
The debate about profit's place in the microlending market exploded in 2007 when Mexican microlender Banco Compartamos SA listed its shares. Its original investors and founders took home millions, sparking accusations that they were profiteering from the poor by sometimes charging more than 80% annual interest.
Mr. Yunus contends that any microlender charging borrowers more than 15 percentage points above its cost of capital needs to cut costs or profits—and pass the savings on to the poor. SKS charges around 18 percentage points above its cost of capital.
"Vikram is a very capable young man," Mr. Yunus said. "But he took a wrong turn when he decided to use microcredit for making money."
Mr. Akula said he needs to build in around five percentage points of profit to expand, adding that Mr. Yunus's expectations are too high because his experience is in markets likes Bangladesh, where he didn't have to deal with the high costs of reaching remote villages.
A Subprime Crisis?
Some analysts and investors are worried that the growth being fueled by healthy profits could result in a subprime crisis as competing microlenders give too many loans to poor borrowers who can't repay them.
SKS has seven million borrowers, up from 200,000 five years ago. In the same period, the company's profit growth has averaged more than 200% a year.
MFIs Attract Executives From Other Sectors. Access thousands of business sources not available on the free web. Learn More .Mr. Akula said SKS could charge interest rates of more than 40%, instead of its current average of 28%, but doesn't the company needs only enough profit to attract investments and lending for its rapid rollout.
Even after the IPO, a majority of SKS's investors will be committed to sticking with the lower-profit model, he said.
Earlier this year, Mr. Akula sold part of his SKS stake for more than $10 million. He said he isn't ashamed of the money, adding that rewarding microfinance employees with benefits closer to those in the conventional finance world is part of his business strategy.
—Arlene Chang contributed to this article.
IPO Pits Profit vs. Altruism
Indian Microlender Sees Scale in Capitalism; Industry Pioneer Has His
By ERIC BELLMAN
Hyderabad, India
SKS Microfinance Ltd. moved a step closer to bringing Wall Street to the slums of India. But that also will bring more criticism from microfinance experts who say profits and initial public offerings have no place in the industry.
SKS won approval from the Securities Exchange Board of India to proceed with an IPO, according to people familiar with the situation. The company and its early investors expect to raise more than $250 million from the deal, which is likely to happen within 30 days and would make SKS the first microlender in India to go public.
Only a handful of microlenders around the world have made it to the global stock markets, so the SKS deal could encourage other companies in the sector to follow. SKS is the largest microlender in India, with a portfolio of about $1 billion. About $5 billion in microloans were made in the country last year, and the IPO would help SKS borrow money to fuel expansion.
"The only place you can get the amount of money that is needed to help the poor is in the capital markets," Vikram Akula, founder and chairman of SKS, said in an interview. "That's why we are doing this IPO."
But as SKS's executives and investment bankers went on a roadshow to stir up interest in the shares, they stressed how little profit the company makes. The strange sales pitch reflects sensitivity to accusations that SKS is gouging borrowers even as its makes millions of tiny loans to poor families.
Pioneer of Microlending
Mr. Akula has a decades-long relationship with Nobel Prize winner Muhammad Yunus, the founder of Bangladesh's Grameen Bank, who is credited with sparking the microfinance revolution. The two men now stand on opposite sides of the question of whether altruism and capitalism can coexist.
"Microcredit should not be presented as a money-making opportunity. It is an opportunity to make an impact on poor people's lives," Mr. Yunus said in an interview. "An IPO gives a wrong message."
Mr. Akula, a 41-year-old U.S. citizen and Yale University graduate, launched SKS in 1998 after working in nonprofit organizations in India that tried to help the poor. Even the best-run groups lacked the capital or the organization to meet the needs of the world's poor, so he decided to build a new kind of microlender that wouldn't have to depend on government money, grants and charity.
Before launching the company that would become SKS, Mr. Akula went through the training program at Grameen Bank, telling Mr. Yunus that he wanted to tweak his model to reach more people. "If I remember correctly, he just smiled," Mr. Akula said.
Mr. Akula started on his own with a small team that went from village to village in the southern state of Andhra Pradesh. He used the Grameen model, which sets up groups of poor women and lends them as little as $50 to help with small businesses like growing vegetables or running a tea stand.
He also took cues from McDonald's Corp. and Starbucks Corp., standardizing training and lending procedures to cut costs and accelerate growth. Employees were paid a decent wage so that Mr. Akula wouldn't have to rely on volunteers and regional managers from top, rural business schools. And he built in enough profit to make the business appealing to institutional investors.
The debate about profit's place in the microlending market exploded in 2007 when Mexican microlender Banco Compartamos SA listed its shares. Its original investors and founders took home millions, sparking accusations that they were profiteering from the poor by sometimes charging more than 80% annual interest.
Mr. Yunus contends that any microlender charging borrowers more than 15 percentage points above its cost of capital needs to cut costs or profits—and pass the savings on to the poor. SKS charges around 18 percentage points above its cost of capital.
"Vikram is a very capable young man," Mr. Yunus said. "But he took a wrong turn when he decided to use microcredit for making money."
Mr. Akula said he needs to build in around five percentage points of profit to expand, adding that Mr. Yunus's expectations are too high because his experience is in markets likes Bangladesh, where he didn't have to deal with the high costs of reaching remote villages.
A Subprime Crisis?
Some analysts and investors are worried that the growth being fueled by healthy profits could result in a subprime crisis as competing microlenders give too many loans to poor borrowers who can't repay them.
SKS has seven million borrowers, up from 200,000 five years ago. In the same period, the company's profit growth has averaged more than 200% a year.
MFIs Attract Executives From Other Sectors. Access thousands of business sources not available on the free web. Learn More .Mr. Akula said SKS could charge interest rates of more than 40%, instead of its current average of 28%, but doesn't the company needs only enough profit to attract investments and lending for its rapid rollout.
Even after the IPO, a majority of SKS's investors will be committed to sticking with the lower-profit model, he said.
Earlier this year, Mr. Akula sold part of his SKS stake for more than $10 million. He said he isn't ashamed of the money, adding that rewarding microfinance employees with benefits closer to those in the conventional finance world is part of his business strategy.
—Arlene Chang contributed to this article.
Tuesday, April 27, 2010
Stress-Free Blog and Follow up
We're done writing our papers, which takes a lot of stress away, hence the title for this: the stress free blog. India was a stranger before I met it, and now that we've met, it's definitely a place I would like to get to know better. I was ready to leave when we did, and I felt so at home for the next two weeks following the trip, and then a sudden homesickness dawned on me and I realized how much I missed the country. Its culture was so rich that there were so many more things to explore, and I barely got to make some friends who were locals. The only e-mails I exchanged were with my eyebrow threading artist and my sari fitting expert. Therefore, I'm still curious about what I'm missing out on and I'm hoping to go back, potentially teach abroad there for a year or two. Maybe I will be able to see it from a completely different perspective since if I do go on that program, I'll be more independent and be able to experience things somewhat similar to what a local would experience.
Train to India from a Different Angle
Many people have focused on how corruption played a major role in our train ride. Unfortunately, and fortunately, I did not get to witness the scene. Just a couple of cars down, I witnessed something completely different. Because the train was packed, there weren't any available seats, so we ended up standing for a bit. What amazed me were the following actions. First, the conductor felt bad and he personally tried to create a seat for us in the aisle by putting some newspapers on top of a crate. Then, a mother got up and offered her seat so that we could at least eat. Suddenly, it was as if the second world of India was in this car as compared to the one where our tour guide was being harrassed. Many men and women either tried to make space or offered their seats to us and this amazed me since it's a rare event in the states. After some polite declines since it was, after all, their seats, a man said to me "We're men, and it doesn't look good if a woman is standing while we're sitting, so please sit." I finally sat, and rested my head for the last half of the trip. During this time, I was still very sick and had a terrible sore throat so I didn't get a chance to talk much, but I know my classmates had a wonderful experience meeting and getting to know their friendly train neighbors. It's just interesting that the concept of two Indias can fall into so many different contexts, and one such example was our train experience.
Reflection
It is quiet at my desk. The India trip is last month's news, our research papers are handed in, and the class is just waiting to see the fruits of our research and field work manifest into that 'A'.
Before this trip, I was really not sure of what to expect from an MBA level course with a travel component. I knew that the course was designed to meet the elective requirements of a few different concentration areas at Rutgers Business School: Marketing, Supply Chain, and Global Business -- but unlike other courses there weren't traditional metrics to help me judge how I was doing and if I was learning what I needed to be learning.
But a few things helped to eleviate this predicament. There was reading to be done, news to catch up with, and we had to also research the companies we were going to see. During the course of the trip, being in a small, close knit group helped because we were able to bounce ideas off of each other and learn from other people's questions. Pictures, videos and diligent note taking also helped to keep us in check and to remind us of what we saw as we traveled. (Note: for anyone traveling through school, I highly recommend investing in a recorder, or an app on the iPhone. It is worth it when you are trying to remember details from the various meetings and encounters and also much easier to take voice notes than to write out your thoughts.)
When we got back from India, our class reflected on what we saw and how we viewed India. At a few points during our presentations, it was hard to believe we were all on the same trip: everyone had something new to add to the discussion and had viewed India in a completely different light. This was definitely the benefit of a travel based course such as this. We were not bound to text-book learning and could focus our learning on what interested us. I was happy to be able to apply concepts from other classes to what I saw in India. Other students choose to focus on ideas related to their profession.
My suggestion for anyone taking this course, or one similar to this, is to make sure to spend a lot of time reading and preparing for what you will see. But when you are there, just look out the window and take it all in. Try to have a few ideas in mind before you go, as to what lens you may want to see the country in. I knew before the trip that I wanted to look into innovation, science, and entrepreneurship. While I may not have seen all of what I expected to see, having an small idea helped to focus my thoughts during the trip.
Before this trip, I was really not sure of what to expect from an MBA level course with a travel component. I knew that the course was designed to meet the elective requirements of a few different concentration areas at Rutgers Business School: Marketing, Supply Chain, and Global Business -- but unlike other courses there weren't traditional metrics to help me judge how I was doing and if I was learning what I needed to be learning.
But a few things helped to eleviate this predicament. There was reading to be done, news to catch up with, and we had to also research the companies we were going to see. During the course of the trip, being in a small, close knit group helped because we were able to bounce ideas off of each other and learn from other people's questions. Pictures, videos and diligent note taking also helped to keep us in check and to remind us of what we saw as we traveled. (Note: for anyone traveling through school, I highly recommend investing in a recorder, or an app on the iPhone. It is worth it when you are trying to remember details from the various meetings and encounters and also much easier to take voice notes than to write out your thoughts.)
When we got back from India, our class reflected on what we saw and how we viewed India. At a few points during our presentations, it was hard to believe we were all on the same trip: everyone had something new to add to the discussion and had viewed India in a completely different light. This was definitely the benefit of a travel based course such as this. We were not bound to text-book learning and could focus our learning on what interested us. I was happy to be able to apply concepts from other classes to what I saw in India. Other students choose to focus on ideas related to their profession.
My suggestion for anyone taking this course, or one similar to this, is to make sure to spend a lot of time reading and preparing for what you will see. But when you are there, just look out the window and take it all in. Try to have a few ideas in mind before you go, as to what lens you may want to see the country in. I knew before the trip that I wanted to look into innovation, science, and entrepreneurship. While I may not have seen all of what I expected to see, having an small idea helped to focus my thoughts during the trip.
Monday, April 19, 2010
India's Infrastructure Drive Must Steer Around Potholes- WSJ
Upgrading infrastructure has fueled rapid economic growth in the world's most populous country, China. Hope is springing once again that the second-most-populous one, India, might follow the same path. To avoid disenchantment, India will need to work extra hard to get support from investors at home and abroad, and to deliver on past promises.
China, with its sprawling networks of new highways, airports and budding high-speed rail connections, makes for a daunting comparison. India has weaker government finances and an unruly democratic government that lacks China's authoritarian discipline. Clearing land for roads or power plants in China is a cinch; not so in India, where land rights are often hugely contentious. Government-backed companies have led China's infrastructure build-out. India's push will depend heavily on the private sector. And India, with its history of murky and investor-unfriendly rules on infrastructure investment, has a record of disappointment.
Monday, April 5, 2010
Geithner Has His Work Cut Out for Him in India
NEW DELHI, INDIA — Timothy F. Geithner, the U.S. Treasury secretary, lands in New Delhi on Tuesday for a two-day trip to inaugurate a new economic and financial partnership between the world’s largest and oldest democracies. It is a return of sorts for Mr. Geithner, who lived for five years in New Delhi as a child.
Mr. Geithner has his work cut out for him, economists and policy analysts in both India and the United States say. Hammering out economic agreements between the two countries has traditionally been an arduous task.
“On principle, they both agree on everything,” said Jahangir Aziz, chief India economist at J.P.Morgan in Mumbai. “It always comes down to the nitty-gritty and that’s where things get stuck. Part of the problem is neither of them wants to give the other side an inch.”
It took nearly 20 years for the United States to lift a ban on imports of Indian mangoes, for example, and a deal to allow energy-strapped India access to U.S. nuclear technology, agreed in principal four years ago, still has not cleared all the legal hurdles that would let American companies sign contracts to do business here. (French and Russian companies, by contrast, have signed contracts and are expected to begin work soon.)
Continue reading @ http://www.nytimes.com/2010/04/06/business/global/06geithner.html?pagewanted=1&ref=world
Mr. Geithner has his work cut out for him, economists and policy analysts in both India and the United States say. Hammering out economic agreements between the two countries has traditionally been an arduous task.
“On principle, they both agree on everything,” said Jahangir Aziz, chief India economist at J.P.Morgan in Mumbai. “It always comes down to the nitty-gritty and that’s where things get stuck. Part of the problem is neither of them wants to give the other side an inch.”
It took nearly 20 years for the United States to lift a ban on imports of Indian mangoes, for example, and a deal to allow energy-strapped India access to U.S. nuclear technology, agreed in principal four years ago, still has not cleared all the legal hurdles that would let American companies sign contracts to do business here. (French and Russian companies, by contrast, have signed contracts and are expected to begin work soon.)
Continue reading @ http://www.nytimes.com/2010/04/06/business/global/06geithner.html?pagewanted=1&ref=world
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