BALKIND - Balkrishna Industries (India)

[seshnath]

...that does not mean Oligarchs are in control

Long, I think your argument is flawed. By your account, even USA is run by oligarchs ! India is making slow steps in unraveling the issue of black money and Swiss Bank accounts - I believe we will get there eventually albeit at a slow pace.

Name the steps taken! Why "eventually albeit at a slow place"? I would stop all else and go after 28 years of budgetary outlays....won't happen because the Oligarchs are in control. Please keep the discussion focused on Indian Oligarchy to stay on topic.

THe FT article has it right, it is the Oligarchs spreading this pseudo-patriotic protectionism, keeping the capital flowing in freely. With multinationals, atleast some future taxes will flow into the state's coffers versus the Swiss banks. It is reported that entire sectors of the economy has paid no taxes ever.

 

Here's one - http://in.finance.yahoo.com/news/Black-money-India-Switzerland-ians-3312104591.html

 

 

 

For my Indian CPE, I sat through an otherwise boring India budget discussion recently.  In the current budget proposal, there is a provision specifically to tackle tax-friendly but secretive jurisdictions.  The proposal is to notify certain jurisdictions (NJA) as unfriendly and put the onus of withholding/tax incidence on the person making the payment to anyone within such NJAs.  The details are awaited. 

 

Another interesting thing I heard from an insider is a no-questions-asked repatriation of existing Swiss/other funds by Indians into an infrastructure fund.  It kills two birds with one stone.  This is just under consideration - wouldn't move soon due to political reasons - election year and such.

[seshnath]

...that does not mean Oligarchs are in control

Long, I think your argument is flawed. By your account, even USA is run by oligarchs ! India is making slow steps in unraveling the issue of black money and Swiss Bank accounts - I believe we will get there eventually albeit at a slow pace.

Name the steps taken! Why "eventually albeit at a slow place"? I would stop all else and go after 28 years of budgetary outlays....won't happen because the Oligarchs are in control. Please keep the discussion focused on Indian Oligarchy to stay on topic.

THe FT article has it right, it is the Oligarchs spreading this pseudo-patriotic protectionism, keeping the capital flowing in freely. With multinationals, atleast some future taxes will flow into the state's coffers versus the Swiss banks. It is reported that entire sectors of the economy has paid no taxes ever.

 

I should also a comment I heard recently at another meeting from a high-level official of RBI - somebody asked him the question about cash economy and its link to corruption.  He said something that sounded very cryptic to me at the end of his answer - "what are you going to do with cash, if it is of no use to you?"  He was essentially talking about bringing everything within banking system - taking away cash as a mode of payment other than for petty stuff.  Think about it.

[seshnath]

 

3. You don't have to list to borrow dollars - I used to work for a private company which was an exporter - it used to borrow in USD all the time.  There are legal ways to do it.  I have come across companies which borrow in USD to invest locally - but rarely to just sit on a bank deposit of some kind.  Entrepreneurial mindset of the people prevents them from such carry trades, IMHO.

 

 

Sesnath - what was the longest maturity on this debt that this private company was able to borrow at? I'm guessing it really depends on your relationship with your bank but still curious to know how much $ denominated debt can be raised by a private indian co.

 

There are norms based on networth and such.  It would have changed since I worked.  I am really out of touch on this particular subject when it comes to details - I have been outside India for about 10 years now.

[seshnath]

What is the best way to play this carry trade( take US money and invest in India's bond) for an american citizen?

 

If you are american citizen and dont earn in India, you can't do it.

 

 

Indian citizens living abroad as well as persons of indian origin (at least one grand parent born in India, I think) have it easy.

 

You don't have to earn in India - you can be a tourist and still open a rupee account.  Once you have a rupee account and get a tax id (PAN), investments should be easy.  Besides, NRO accounts (mentioned in the link below) can also be regular term deposits in rupees.  Here is a link for the terms for tourist to open an account:-

http://www.rbi.org.in/scripts/FAQView.aspx?Id=30

 

Institutions just have to register with SEBI (equivalent of SEC) before investing in anything.  I am told it costs around $5K.

 

And starting this year, foreign nationals can invest in mutual funds as well.

 

I am not aware of a way where a foreigner can invest without visiting India, other than the MF route above.

[savant]

 

3. You don't have to list to borrow dollars - I used to work for a private company which was an exporter - it used to borrow in USD all the time.  There are legal ways to do it.  I have come across companies which borrow in USD to invest locally - but rarely to just sit on a bank deposit of some kind.  Entrepreneurial mindset of the people prevents them from such carry trades, IMHO.

 

 

Sesnath - what was the longest maturity on this debt that this private company was able to borrow at? I'm guessing it really depends on your relationship with your bank but still curious to know how much $ denominated debt can be raised by a private indian co.

 

There are norms based on networth and such.  It would have changed since I worked.  I am really out of touch on this particular subject when it comes to details - I have been outside India for about 10 years now.

 

Thanks very much

[seshnath]

>Oligarchy by definition means power with small number of people.  It just isn't practical in India - especially with decentralized government with allocated budgets to the grass-root level.

 

In India's case, I think it is the industrial + political lobby that constitutes oligarchy. There may be exceptions to this rule in some places which dont have many industries.

 

When one company (Reliance) controls 3% of the GDP of the country, it can have a lot of power. In the absence of antitrust rules, lax taxation and no competition (blocked by the license raj), no inheritance tax, this can go on for a long time.

 

Anti-trust rules - There used to be an MRTP act - which was draconian and repealed.  It still exists in a new form.

Lax taxation - I don't know on what basis you say that - India is one of the highly taxed countries - individuals and corporate.  I find US Tax code simpler than Indian - in enforcement and in legal issues.  The push now is to move away from income-based taxation towards consumption based indirect taxes.  Every budget adds a new list of services to service tax arena.  It is much easier, compliance-wise and achieves the goal of promoting savings and capital formation.

License raj - old story.  It is more or less dead.

Inheritance tax - sure.  There still is a wealth tax - so we don't necessarily wait for death.  It is an annual tax on assets above a certain threshold.

 

Reliance controls 3% of GDP - but it is no oligarchy.  If you know the history of the company well, it grew making its founders as well as lot of shareholders rich.  I don't know if you know this, founder of Reliance, Dhirubhai Ambani, was a gas station attendant in Aden, Yemen.  He is more of a rags to riches story deserving Horatio Alger award than being an oligarch.  Once you have earned money, it is your business what you do with it - give it to your sons/give it to charity/build a palatial house etc. 

 

http://www.iloveindia.com/indian-heroes/dhirubhai-ambani.html

 

If lobbying is your criteria for oligarchy, then US is already one.  Look at the trouble they have after the crisis in getting some necessary legislation passed.  In India things can be done - besides, social equality is in-built in the constitution.

 

Personally, I think what India and Indians need are just opportunities, not do-good charities.  The drive to boot-strap oneself out of poverty is inherent in most of the people of this generation I have come across.  Once you take care of the basics, it is a force waiting to get unleashed.

[shalab]

The capability of the indian people is unquestioned ( as is the capability of the russian people ) - they have contributed to many different fields in significant ways.

 

The question is only about the system as one has to consider the system before making investments. I saw this article where the former law minister made claims about half the indian chief justices being corrupt.

 

http://news.oneindia.in/2010/09/16/half-chief-justices-are-corrupt-law-minister.html

http://www.srai.org/eight-former-cjis-corrupt-says-ex-law-minister-shanti-bhushan/

 

Then, in the link you sent; there are notable good examples but also crooks who are in jail for corruption noted as a hero.

 

http://www.iloveindia.com/indian-heroes/ramalinga-raju.html

 

[QLEAP]

Stealing Churchill's words - India is a puzzle wrapped in a riddle wrapped in a enigma :)

 

Now can we move onto individual stocks ?

 

 

[QLEAP]

A good interview with Amitabh Singhi - http://www.gurufocus.com/news/136192/interview-with-amitabh-singhi-managing-director-at-surefin-investments

 

[QLEAP]

"The Economist" has  fantastic coverage on India, its policies and public/private sector businesses this week for those interested. Its very exciting to be here amidst all this positive outlook on growth potential and business transformation compared to the depressing environment in Europe/USA.  Hopefully the growth materializes in a big way - all we need is one visionary, corrupt free govt that can bring in reforms and aid the private sector rather than the bureaucratic red tape..

 

and ...

 

BKT is performing very well with 20% growth in earnings YoY. The stock is up 40% this year and is still trading at ~7 times FY12E earnings. I have come to realize that markets are more inefficient in Indian mid-cap space, its very puzzling to see 20-30% growers at 5-7 times earnings.

 

Happy Diwali to everyone, let the year ahead be a prosperous and peaceful one for all of you !

 

cheers

qleap

[savant]

all we need is one visionary, corrupt free govt that can bring in reforms and aid the private sector rather than the bureaucratic red tape..

 

And a govt that can stop stupid schemes like NREGA which cause unnecessary inflation, fiscal deficit and are essentially a money transfer to corrupt politicians - all simply to win the popularity vote

 

And yes - the inefficiency in the mid-cap and small-cap space in India is mind-boggling

[QLEAP]

For those following this one -

 

Another good quarter from BKT - revenues increased 50% Y-o-Y and profits have nearly doubled.

 

http://www.moneycontrol.com/livefeed_pdf/Feb2012/Balkrishna_Industries_Ltd_130212_Rst.pdf.

 

Stock has doubled since Jan 2011 but still trading at 10 times current earnings..

 

 

 

 

 

[dumpurp]

Anyone still looking at this one?

 

Thanks

[QLEAP]

 

The Indian markets are on a tear and I feel that the market has priced in their future growth. They have a tailwind due to lower rubber prices and the new plant coming up. Any hiccups can cause a correction.

 

 

Disclosure: I sold my position earlier this month.