Financial Wisdom – By Kalidas

Radical Solution for Credit Crisis from Kalidas

Helping Indian Industrialists, Mr. Prime Minister

with 20 comments

08-015t-tata-birla

Ref: 0811-015

It is well known that India’s best breed of industrialists Tata (of TISCO and Tata Motors) and Birla (Hindalco) for over 5 decades are in serious trouble while taking up expansion overseas. Yes, they made serious errors and in normal course, they may not have deserved the help for their follies.

0811-015-tata

0811-015-birla

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

However, the circumstances are entirely different now. We are in middle of severest form of credit crisis. Although Tata and Birla are well known in India, they are not as much known overseas. Since almost all western banks are in trouble, they are unable to raise necessary finance their overseas acquisition – Corus (for Tata Steel), Jaguar (for Tata Motors) and Novelis (for Hindalco). They are now at the mercy of the foreign vultures.


Should India and Indians abandon these worthy Industrialists who created millions of jobs, made India independent in basic industries without foreign help, donated thousands of crores in charities in building temples (Birla Temple in Shahad, Kalyan (Maharashtra)  is one of them), educational institutions like BIT (Birla Institute of Technology), Tata Institute of Social Science (TISC at Chembur, Mumbai) Tata Institute of Fundamental Research (TIFR), hospitals, schools, nurseries, Tata Consultancy Service (TCS) and what not for the benefit of Indian society regardless of cast, creed or color, and also paid thousands of crores of Income Tax, Excise duty, Sales Taxes, Professional taxes to the national and state exchequer for over 60 years?

 

0811-015-man-mohan-singhIt is now pay back time, Mr. Prime Minister and Finance Minster. India and Indians are not those ungrateful bastards. Those who helped this nation deserve all type of help when they are in distress.

 

It is causing sleepless nights to both Ratan Tata (in his early seventy) and Kumar Mangalam Birla (who is relatively younger). They deserve better retirement days. We have to make their lives better towards the fag end of their life in recognition of their contribution to the massive development of India and Indians as whole. These two industrialists never bothered about India’s deep divide religious fabrics while creating industries for themselves and millions of Indian back home. Without them, India would not have been 60% of what it is today.

 

Ratan Tata is going pillar to post for lousy $12 billions whereas Mr. Birla for paltry $5 to 6 billions to finance their overseas acquisitions. When the world is denying them these paltry sum, for its own reasons of bankruptcy, why not India with over $300 billions of Forex reserve which is earning lousy 1 or 2% interest and invested in bankrupt country like USA, help our own businessmen whose acumen is beyond doubt.

 

0811-015-chidambaram

 

Charity begins at home. India as nation must help these two outstanding businessmen. They may not long for Bharat Ratna, Padma Vibhushan, Padma Bhushan or similar khitabs. They need material help at the time of their acute distress. If Indian Forex Reserve does not come to the help of India’s best industrialists, what is the use? Should we allow our Forex reserve for the use of Americans who has been simply wasting all resources and using them to create toxic waste.

 

Indian FOREX Reserve belongs to the Indians and must be used for Indians first and others later.

 

And I do not suggest that you give them free money. Give them the amount required as under after due scrutiny.

 

 

  1. Assess their requirements and be wetted by top financial institution.
  2. Work out how much amount they need
  3. Give them @ 5% in foreign currency non subordinated Convertible Bonds secured by the floating pari pasu charge on their respective enterprise.
    1. Such bonds may carry conversion rights at last 6 months average prices of their respective shares, exercisable only after 5 years.
    2. It may have buy back clause at 8% premium per year for the life of 15 years. This will help these guys to buy back the bonds when they are comfortable without diluting their equity stakes when the things improve.
    3. If the Government wishes, it may sell these bonds in the market with huge profit (because current stock prices are very low), after giving respective companies to buy back the bonds.
  4. When the things improve, they can raise the capital from the market to buy back these bonds.
  5. Give them loans repayable in 15 years due to depression prevailing all over the world.
  6. Ask them to pay special tax @ 3% after initial 5 years so as to relieve the interest burden during early phase of management. National exchequer may also be benefited for help rendered.
  7. Ask them to give India at least 5 hospitals and 5 Technical Institutes with full management rights vested with the respective group companies on purely voluntary basis. (we can trust them)
  8. Ask them to adopt at least 5 villages to make them into model town in next 15 years on voluntary basis. (again, we can trust them)
  9. Indian tax payers are not affected with this help. Their advance is fully secured and given to the industrialists they trust most.

 

This is the only way of really honouring our beloved industrialists. It is not going to set the precedents, if you are worrying about them. Even if it is setting precedent, it is a good one. It is one of the principles enshrined in the Constitution of India under Directive Principles of State Policy from Article 36 to 51. One of the article is quoted below:

 

Directive Principles of State Policy as enshrined in Constitution of India

38.

State to secure a social order for the promotion of welfare of the people.—’[(l)j The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life.

2[(2)

The State shall, in particular, strive to minimize the inequalities in income, and endeavour to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations.]

39.

Certain principles of policy to be followed by the State.—The State shall, in particular, direct its policy towards securing—

(a) That the citizens, men and women equally, have the right to an adequate means of livelihood;

(b) That the ownership and control of the material resources of the community are so distributed as best to subserve the common good:

 

By following above policy, the state will be preserving the jobs of the millions of workers in India

 

Mr. Prime Minister and Mr. Finance Minister, the time is critical. Do not even flinch while extending help. If you do not, their enterprises could slip into foreign hands, could cause huge job losses back home that may have devastating social consequences. The material resources of this country are in danger of losing to foreign hands, if our own people are not helped.

 

This is the appeal not only from this Kalidas (Anil Selarka) but also millions of investors in India. Read the following sample poll from learned investors from India and let them help you in forming your final decision. God Bless India.

 

Kalidas, Hong Kong

16-Nov-2008

Ref: 0811-015- Helping Indian Industrialists


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20 Responses

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  1. Dear Sir,

    I honestly believe this idea is path breaking. On the other hand, don’t you think this opens up a can of worms, as a lot of other companies too are sailing in the same boat.
    Also in my humble opinion, I think that our PM and FM do not have the foresight or the will power to implement this revolutionary step!!
    Your comments and gut feeling would be highly appreciated.

    Kiran Patel

    November 17, 2008 at 8:59 pm

  2. Sorry forgot to mention my city and country.

    Kiran Patel, Mumbai. India

    November 17, 2008 at 9:04 pm

  3. Dear Sir,

    What a heart touching letter it is? I don’t have any words to express my feelings on the elegancy and delicacy of this letter. Truly path breaking idea for the Indian Capitalism.
    Sir, I wish you send this letter to PMO/FMO . Tata truly needs it. But I doubt he would approach Government in first place. I wish Indian government sees it though your eyes and comes up with policy to help all foreign buyouts by Indian companies. Please suggest policy . Otherwise some industrialists with political clout would ask for Govt help though they might not need it ;-)) I Wish Government keeps 25Billion of its foreign exchange money for this. Sir please add IISc Bangalore which is first among the equals in Indian higher education started by TATA

    Shiva
    Bangalore India

    Shiva

    November 17, 2008 at 10:12 pm

  4. Sir, The idea is good. I have some reservations/doubts. First, any such help cannot be restricted to only these two groups. Secondly, when you (as an individual) could assess and mention the pitfall of overseas acquisition by TATAs even when it was proposed by them, the TATAs could not, despite (a) years of existence, (b) years of conservatism in their blood and (c) battery of chartered accountants was at their call for assessment of not only the new venture but also the emerging financial scenario across the world, let them atleast NOW say that they – ‘Yes, they made serious errors and in normal course, they may not have deserved the help for their follies’-; otherwise, without their specific request, Govt. of India cannot act.

    sekar

    November 17, 2008 at 10:25 pm

  5. Sorry, I am sekar from New Delhi, India.

    sekar

    November 17, 2008 at 10:25 pm

  6. Respected sir,

    As usual, a very good path breaking article. Simple, clear and elegant one.

    Please answer my following question:

    Why can’t you publish these articles in INDIA in daily financial newspapers, Magazines and on some good financial web sites?
    I wish most of the Indians should get a chance to read these types of articles and bring some revolution of to the Indian financial systems ( PM/FM/RBI/SEBI).

    Raj( Wipro), London, UK, 17/11/2008

    0811-073 Kalidas Replies to Raj (Wipro) (Monday, November 17, 2008)
    I tried number of times in publications like Economic Times, Times of India, Business Standard with no result. In Hindu (Business Line) it was published on 3 occasions. The business editors of all these so called business publications are duds, populist, non abrasive and would not permit writing having fresh style or thoughts. They are pedestrians and would like to publish what agrees with their mind set or ideology.

    I therefore gave up. I do not want to break head with those retarded news editors.

    Raj ( Wipro)

    November 17, 2008 at 11:24 pm

  7. kalidas,
    totally agree with you. these companies working towards building a stroner india deserve help from all the indians and the GOI. I wish good sense prevails over dirty politics and PM/FM help them. I have great respects for TATA who strived all their lives to do what is good for india. They never operated in unlawful manner, seeking favours from the Govt. A fine example would e IISc campus in bangalore. A great vision from these guys. The land they contributed for this institute is worh 1000s of crores.

    We need to thank these companies! Else, there is every possibility that East India Company will start ruling india all over again.

    thanks,
    vijay hegde

    vijay hegde, bangalore

    November 18, 2008 at 1:28 am

  8. Dear Sir,

    Its a very nice article and the feeling are very subtle. But its a big doubt our Indian politicians are coming forward to save these good Industralist. They spend their time only thinking about how to make money for themselves only.

    Rajmohan babu, Pointe-Noire, Congo

    Rajmohan babu

    November 18, 2008 at 2:33 am

  9. Sir,

    I agree with you that during difficult times, GOI should come and help honest Industrialists. Both the above come under the said category.

    However, I wonder why the same yardstick is not applied when an PSU turnsout bad due to external reasons and all economists cry for its blood leaving thousands unemployed forced to take VRS. I am afraid histroy is repeating itself. Gone are the days of privitisation and nationalisation will start again.

    Regards,

    Vanjeeswaran
    Mumbai
    India
    18/11/2008

    Vanjeeswaran

    November 18, 2008 at 12:54 pm

  10. Dear Kalidas sir, Great letter. Every indian should send this copy of the report to PM and FM by post and through telegram.
    Thanks and regards
    Ravi, Chennai, India

    Ravi

    November 18, 2008 at 1:44 pm

  11. Dear Kalidas Sir,

    Brilliant one.

    I agree with you that all mass newspapers and even websites are useless. They do not have the same type of intelligence that you have. No need to waste time running after fools from Times of India and CNBC because they do not believe in free ideas.

    Also a great thinker like you should not approach them – if they have sense they will approach if not leave them.

    This blog is going to be found by those who are meant to find it.

    Keep spreading these great ideas.

    Amit, Mumbai

    Amit

    November 18, 2008 at 2:14 pm

  12. Dear Sir,

    Its still green in my memory, when the Corus deal was signed the whole of country was jubilated. It was the pride moment for the NRIs. It was the Corus deal that reverse the opinion of the foreigners and as a NRI I am feeling the difference. I fully agree with your view and this is critical time to support the troubled industrialists. I salute your great wisdom.

    Thanks and regards
    Saravanakanth

    0811-075 Kalidas Replies to Saravanakanth (Tuesday, November 18, 2008)
    It was misplaced jubilation. you were celebrating the event of utter stupidity of Ratan Tata buying the Corus, a company no body wanted to buy for years. Complimenting someone on his stupidity is a crime.

    I wrote as early as in Dec 2007 and Jan 2008 of the folly of Ratan Tata, and almost every boarder out of patriotic flavour bounced on me for writing a target of Rs 300 for TISCO when the stock was well over Rs 800.

    Nationalism and Patriotism is one thing, but never make a person larger than life. It was not victory event in a war or cricket match.

    Tata bought Corus, when the Sterling was near all time high, the stock markets were all time high, steel prices were all time high, Corus was 5 times the size of TISCO and he undertook “hidden pension fund liabilities of the Corus” without doing due diligence.

    Tata wanted to outdistance Laxmi Mittal who was creating waves at that time. Ratan Tata thought – this yesterdaay’s bachha Mitttal has run ahead of me in few years whereas I am stuck with the ancestral heritage of TISCO without any major improvement. Let me show Mittal that I am as good as or even better than you.

    Saravanakanth,Salalah, Oman

    November 18, 2008 at 6:19 pm

  13. Dear kalidasji,

    From TOI web site:

    =============== Start of Article ==================

    Govt to consider Tata’s proposal in helping domestic companies
    18 Nov 2008, 1759 hrs IST, PTI

    NEW DELHI: Minister of State for Industry Ashwani Kumar said the government will consider Tata Group Chairman Ratan Tata’s proposal of setting up a
    special fund in select banks to help domestic companies repay foreign loans.

    “The proposal has come and it will definitely be considered,” the minister said while addressing the India Economic Summit here today.

    He said the government has received the suggestion of the Tata Group chairman for creating a separate fund in a few banks to enable companies to meet global exigencies.

    Tata, in a letter to the Prime Minister, has proposed the creation of a fund in select banks to help creditworthy corporations with funds in meeting exigencies.

    Besides difficulty in rolling over the existing debt and fresh funds drying up, the depreciation of the rupee against the US dollar has further impacted the domestic companies with the increased cost for servicing overseas loans.

    Kumar further said that a few sectors of the economy are in greater need for funds. “In fulfilling their needs, whatever help the government can, it will provide,” he said.

    The Minister has convened a meeting of industry associations tomorrow to assess their requirements.

    “The government at the highest level will work pro-actively with industry so that we can come out (of the financial challenges) as soon as possible,” he added.

    ================= End of Article ==================

    Hope some respite for the TATA’s.

    Girish, Pune, INDIA

    0811-076 Kalidas Replies to Girish, (Wednesday, November 19, 2008)
    Good to know that they are already thinking on that line. I hope that the process is faster and not bogged down to impractical regulations and committees. Yes, basic safety of the Government funds has to be ensured.

    Girish

    November 18, 2008 at 9:08 pm

  14. Dear Sir,
    Simple, elegant and touchy letter. Conveys what it has to convey effectively. We should not forget the past Industrialists like Mr Ratan Tata, Mr Birla etc… who had layed a strong foundation in the past which still lasts and generates many more great people from their institutions and the inspirations provided by them. I have received one forwarded article written by Ms Narayan Murthy, whose career got a transformation by just writing a simple letter to Mr Ratan Tata. It was a very good article. In the modern economy which is very complex, any knowledgeable person can make big mistakes. It is very difficult to identify the risks involved while making those decisions. We are all on the same boat in one way or the other depending on the exposure we have taken. We are lucky to have you with us, devoting your valuable time to guide us. GOI should come to the rescue of these great Industrialists who are facing temporary difficulty due to the existing global environment. Each one of us who has read this article can campaign by sending it to as many people in our contact lists. Hope, these great people get necessary help in times of need!!

    Shubguru
    Singapore

    shubguru(MMB)

    November 19, 2008 at 8:24 pm

  15. Hi Kalidas,

    I agree with your views that some urgent relief from Indian Govt. be given to Tata’s and Birla Groups.

    But i doubt whether that would be enough and done in time. Some urgency is required from Govt of India. What are the possibilities of mutual fund companies raising these funds…?

    I am not sure on this, but how about floating a kind of NFO from mutual fund companies like LIC itself or others, offering investment options into these troubled companies which are in serious trouble while taking up expansion overseas.

    The NFO as usual will have lock-in period of few years and later pay back the investor with gains. But on maturity, the investor gains be converted in to equity shares at reasonably discounted price to what ever market price at that time instead of cash or units of NFO. This would be like retail investor buying NCD’s of companies through Mutual fund companies.

    If feasible this should bring some business for mutual fund companies which are facing redemptions presently.

    Tata’s along with reliance have already initiated efforts or worked raising funds from LIC in form of NCD’s. so is there a way retail investor could benefit from these efforts.

    Let me know your suggestions on these thoughts if they sound feasible.

    Regards,
    Ajay, Mumbai.

    Ajay

    November 20, 2008 at 10:56 am

  16. Respected Sir,
    Are you coming to Amravati in the 3rd week of this month ?.I am very eager to meet you. I have not received any mail from you till the date.Hope you will reply .

    Pankaj Belsare
    Nagpur-08,Maharashtra,India

    Pankaj

    November 20, 2008 at 1:32 pm

  17. Sir, This is in reply to Shubhguru(MMB) message posted on 19 Nov.08. The letter written by Ms. Narayana Murthy was not addressed to Mr. Ratan Tata (present head of Tata Group).

    sekar, Dehi, India

    November 20, 2008 at 10:10 pm

  18. Sekar, Thanks for highlighting it. It was addressed to late Mr JRD Tata(Jehangir Ratanji Dadabhoy Tata) and not Mr Ratan Tata.

    shubguru(MMB)

    November 22, 2008 at 1:32 am

  19. Hi Kalidas,

    It’s reported a bailout package for Indian companies as demanded by Tata Group is likely to be considered by Indian Govt.

    But in case of many businesses, there is problem where many foreign companies dump their unsold and mass produced products in to Indian markets for sale and affecting the businesses of local Indians.

    Eg. Steel, soft toys, electronic items from Chinese companies and European nations coming into Indian Markets. Due to free trade or open global market there are perhaps very less restrictions on these kind of practices happening.

    I certainly feel this scenario needs to be corrected. Instead of bailout packages, these kind of problems should be addressed in first place to safe guard businesses of local industries.

    Also, I would like your views on current volatility in Indian stock Markets. what are your thoughts on likely trend further from here in view events in US like appointment of Timothy Geithner as his likely new Treasury secretary in US president elect Obama’s team and possible bailout package for US auto industry been worked out.

    Lastly, I had requested your analysis and views on ICICI Bank. Could you please provide similar anaysis as provided for RPL.

    Regards,
    Ajay – Mumbai.

    Ajay

    November 23, 2008 at 12:13 pm

  20. Hats of to you sir. Your words were retold in WSJ. Please see the link below.
    http://online.wsj.com/article/SB122752113555852755.html?mod=googlenews_wsj

    -Prasad

    Prasad

    November 24, 2008 at 6:59 pm


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