Book Review - Animal Farm by George Orwell

A satire story written in 1945 to symbolise communist party rule and how personality cult takes shape leading to autocratic rule.

A synopsis - Mr.Jones runs a farm with many animals where he treats them badly.  One day the animals rebel, chase Mr.Jones out and take over the farm and live a happy life working all for themselves.  The pigs being intelligent of the lot take over leadership of the farm and more particularly over a period of time by Napoleon (one of the pigs) who turns autocratic and is protected by his fierce dog force spreading fear among other animals.   As days pass to years Napoleon take full control and all animals are worked as slaves and Napoleon becomes more ferocious than man in his cruelty to animals. 

Even though it is now 75 years since publication of this book many points in the book is quite relevant even today.  Some takeaways for today's corporate world from this book

Work Smart use your intellect - Working Hard without thinking is no good

A great character in the book is Boxer the horse who is a very strong animal and has an appetite for work.  He works extra hours in the morning & also in the evening, at times all alone.  When two times the wind mill gets destroyed he takes upon himself to re-build it.  Though being a strong horse he fails to understand certain things.  One he cannot be healthy always and run with the same energy all the time, second he always blindly believes his autocratic leader Napoleon and refuses to question his action and always says "Napoleon is always right".  He continues to work hard and does not use his intellect leading to his health getting deteriorated and finally being sent to the slaughter house by the leader whom he believed so much.  

What you hear and see is not the truth always - Use your judgement & act only when fully convinced

Squealer the pig is the number two after Napoleon and is the "Propaganda minister" of the farm.  He is the communicator between the autocratic leader Napoleon (who seldom appears in public) and other animals in the farm.  He is such a master communicator that he passes on all lies as true almost always ending the story with "you do not want Mr.Jones to be back don't you?".  This scares the animals and they take word of Squealer to be true.  Squealer also amends the seven commandments written on the wall time to time to suit the pigs cause in a clever manner knowing pretty well that rest of the animals have little memory power and do not know to read.  Believing Squealer all animals in the farm over a period of time become slaves working with little food & rest.  If the animals have checked the stories of Squealer right from the beginning the autocratic leader Napoleon would not have become very strong and lived up to the original commandment which read "all animals are equal" rather than the amended commandment which read "all animal are equal, but some animals are more equal than others"

Team work is a winner always

During two battles in the farm - "battle of the cowshed" and the "battle of the windmill" - it was the team work of animals charging together against the men with guns in their hands made victory possible for them.  True there were some casualties among the animals in the battle but teamwork ultimately turned tide in their favour and animal's turned victorious in both the battles.  Whatever may be the situation it is better to face it as a team which will bring more desired result than an individual action

When you have to Action - Action 

Benjamin the donkey is a old & wise animal in the farm almost equal to the pigs in intellect.  He is well aware of the actions of the pigs and dogs and also aware of the change in commandments done by Squealer.  He is always skeptical about all events happening in the farm but not take any action or warn any animal.   He is also a cynical animal taking care of himself and least bothered about group welfare.  Though being aware of all events in the farm he never takes any action or induces anyone to take action, he remains a mute spectator (with some grumbling) and allows the pigs and dogs to take absolute control of the farm thereby making other animals including himself as a slave.  Had he taken action, situation would have been different at the farm which he failed to do.

Overall a very good book to read by people of all ages.  I enjoyed reading this book and was able to correlate very easily to day to day life.  Must read book.  I am planning to watch the Animal farm movie also soon

Book Review - Mossad by Michael Bar Zohar, Nissim Mishal

Mossad the Israeli secret service is undoubtedly one of the best of its kind renowned for its secret operations against its targets across the world.  This book provides an inside view of key operations undertaken by Mossad and the way they went about executing these operations which ended many times in success or at sometimes failure.  A very racy book which makes it quite difficult to drop once you have started.  It provides an excellent narration of the events which at times are pulse raising and makes you awe at the meticulous  planning carried out by Mossad agents.  There are about 20 (though I did not count exactly) incidents / operations narrated in the book of which I would pick up the below operations for some corporate learning.  

Very detailed Planning, Multiple Rehearsals, Trained team members, Back up plans - key to success of a project  

In 1960, capture of Adolf Eichmann a ex-Nazi officer who absconds to Argentina after defeat of Germany in world war II.  Adolf Eichmann was held responsible for killing of Jews during the war.  Once Mossad gets information of Eichmann hiding in Argentina they put in a detailed plan of abduction knowing well that Argentina would not accept for repatriation of Eichmann.  The planning for this abduction was carried out to the last detail, rehearsals held, agents posted with false identities, multiple options discussed, back up plans laid out to the last detail which made the abduction plan so fool proof that probability of it failing was very minimal.  With these traits the abduction was carried out and there was no flaw and Eichmann was brought to trial in Israel.

Protect your team - sincerely help them get out of difficult situations - a message to current team members and future team members that the organisation cares for you - Motivation

For this I would quote two incidents.  First in 1951, escape of Israeli Mordechai Ben Porat from Iraq which was masterminded by Israeli agencies when his cover was exposed in Iraq.  He was taken to secret places hidden and then made to board a plane while the plane was taxing by dangling a rope from the aircraft - the escape was a filmy styled dramatic one.  This was a great planning by Israel to support & save its agents at any cost instilling confidence in agents that their country will come out in their support.  Second was in 1997 the failed assassination attempt in Jordan of Khaled Meshaal in which 6 Israeli agents were stuck in Jordan and were facing serious charges.  Finally Israel prime Minister Benjamin Netanyahu had to intervene and after series of negotiations and exchange of prisoners the 6 Israeli agents were released.

Concern for peers - Helps in harmonising team to achieve greater goals 

This was demonstrated by Israeli agents when they brought Jews from Ethiopia to Israel.  Their concern for their social peers was genuine and highly regarded.  

This books is written in a story format and feels like reading a spy novel.  Nevertheless it provides a very good read if you want to have a brief idea on working of spies.  

Book Review - Elon Musk by Ashlee Vance

I wanted to have an understanding of the history of Tesla and SpaceX ventures and hence chose this book to read.  This books gives an intrinsic view of the same.  This is a well researched book, giving full details and well written to keep the readers attention.   A must read book for all as it encompasses within it many facets which will enthrall all type of audience.  Some take away's from the book which I would like to share.

Think BIG - don't stop - GO FOR IT

Tesla was a company not started by Musk, he invested in it and then made it really big.  There was the idea by the promoters in 2003 but it was Musk who not only dreamed big also went for it.  Space X & Tesla are both examples of organisations whose ambitions were too big and highly futuristic without any precedence, it was the sheer persistence of Musk to make it big against all odds (including near bankruptcy in 2008, launch failures, missing deadlines) which ensured Musk succeeded in his ventures.  Musk believed in his ideas and worked towards it persistently and ensured that he succeeded in them.

Take away : Do not only dream, action the dream to realise the dream.

Time to action - Immediate

Call it impatience or setting challenging targets.  Musk's feature is he sets targets which are very very challenging and never likes to be challenged for these decisions.  SpaceX was started in 2002 and he wanted to set up a first launch in 15 months!!  He was not afraid of failure.  Between 2005 and 2008 there were 3 unsuccessful launches and finally succeeding in the 4th launch in September 2008.   But for his tough target setting this launch within a short period of time would not have been possible  

Take away : Action should be immediate no procrastination, set challenging targets 

Take Control 

Musk likes to be in control.  This is vindicated by the fact that he did not have multiple suppliers for his components as was the case with his competitors who had multiple vendors across the globe and did not have direct control over them and had to to depend on them for various components.  Musk wanted to have control over his components and their supply chain and hence he believed in in-house production and vertical integration.  Musk ensured that many components required for his end products are manufactured at his plant at the least time and cost possible at the same time high quality products 

Take Away -  Wherever possible be in control of our related activities

Surround your self with excellent team members 

Musk believes in hiring the best team members.  He recruits personally top rank holders from universities and assign them with challenging tasks.  He always believes that it is best to hire one excellent engineer than having 3 mediocre ones.  

Take Away - Surround yourself with the best or ensure that your training makes your peer group the best in class 

 

Challenging himself and his team

Musk has a grueling work schedule working for very long hours and also expect his employees to do the same. When there was problem in some components for Roadster project Musk immediately flew to England in his jet picked up the component and delivered it to the factory in France to be on the deadline.  Another instance when one of his engineers wanted to order an component (Actuator) for $120,000 Musk challenged the engineer and gave him a budget of $5,000 to develop this product in house which the engineer did.  When challenging is at high levels it becomes a personal challenge for team members and it improves productivity and with it the results.

Take Away - Challenge and bring out the best (rough sea makes a good sailor) 

Knowledge of what you do (Subject knowledge)

A must to have for Musk.  He important traits are two fold one to read and acquire knowledge about the process to manufacture his products and to discuss with his engineers in detail about all aspects and acquire as much knowledge as possible on all aspects of his product.  This helps him in developing his product and also to challenge his team members.  In this way Musk became an aerospace expert and also a electric car expert.  This trait helped him guide his companies to success

Take Away - Acquire in-depth knowledge in whatever you do

   

Vini Vidi Vici : Dream - Create - Market

I came, I saw, I conquered said Caesar.  Musk is only slightly different.  He had a dream (electric car, rockets), he created them with precision.  What is the use of dream and creation if you cannot sell your idea or product and make it commercially successful.  Musk used his extrovert approach to good use, he kept the media fed with interesting news at times he boasted too.  He was constantly in the news giving regular updates about his products and kept his marketing ante upwards.  This ensured that his products were well noticed and well received (ofcourse quality of his products were also of high standard).  His after sales also was great and any complaint from customer is attended to immediately.

Take Away - For a successful entrepreneur 360 degree skills are essential 

Overall a very good book especially for youngsters who are setting out on their career.   A must read.

NBFC Regulations dated 22.10.2021 - A good move by RBI

Check the below facts of some 2021 successful IPO's

Paras Defense and Space Technologies Limited - Issue Size 170.78 crores

IPO was oversubscribed overall by 304 times.  Category wise over subscription - Qualified Institutional Buyer (QIB) 170 times, High Networth individuals (HNI) 928 times, Retail investors (RI) 113 times

IPO Price - Rs.175; Listing day price Rs.498.75

MTR Technologies Limited - Issue Size 596.41 crores

IPO was oversubscribed overall by 201 times.  Category wise over subscription - Qualified Institutional Buyer (QIB) 165 times, High Networth individuals (HNI) 651 times, Retail investors (RI) 28 times

IPO Price - Rs.575; Listing day price Rs.1082.25

Tatva Chintan Pharma Chem Ltd - Issue Size 500 crores

IPO was oversubscribed overall by 180 times.  Category wise over subscription - Qualified Institutional Buyer (QIB) 185 times, High Networth individuals (HNI) 512 times, Retail investors (RI) 35 times

IPO Price - Rs.903; Listing day price Rs.2,310.25

Devyani International Limited - Issue Size 1,838 crores

IPO was oversubscribed overall by 117 times.  Category wise over subscription - Qualified Institutional Buyer (QIB) 95 times, High Networth individuals (HNI) 213 times, Retail investors (RI) 39 times

IPO Price - Rs.90; Listing day price Rs.123.25

The common thread running in these IPO's are 

1. the HNI segment is oversubscribed many times higher than other categories especially retail investors.  
2. listing of shares on first day was with a huge premium and HNI investors had a huge opportunity to offload shares at a huge profit

What makes the above 2 common threads interesting?

IPO financing by NBFC's is a very lucrative business for them.  NBFC lend to HNI short term loans with interest rate ranging between 6% to 10% (interest rate depends on demand for a particular IPO).  Another interesting point to note here is the leverage for these loans are as high as 70 to 80 times, which means that an individual can place bids for Rs.70 to Rs.80 crores by just having Rs.1 to Rs.2 crores in their account.  This practice leads to build up of high demand for IPO's and leads to high levels of over subscription which is also one of the reason for high listing price on date of listing.  HNI's who exit on the listing date at times make huge profits without actually having any money (minimum money) in their account.  Though there is a big risk in this (if listing day price falls below issue price).  

With big ticket IPO's still lined up like Paytm, PaisaBazaar etc HNI activity is expected to be high.

This is the reason why RBI has acted now. In a notification number DOR.CRE REC.No.60/03.10.001/2021-22 dated 22.10.2021 RBI has directed as below the NBFC's (effective date 1st April 2022)

Ceiling on IPO Funding – There shall be a ceiling of ₹1 crore per borrower for financing subscription to Initial Public Offer (IPO). NBFCs can fix more conservative limits. 

This will regulate huge demand from HNI's by leveraging funds of NBFC's and also will stop artificial inflation of subscriptions.  With this action of RBI there will reduction in speculation in IPO market.

A good move by RBI.                

Higher GST collection in October 2021 - A show of economic recovery?

Second highest ever revenue GST collection of Rs.1.3 lakh crores was clocked in October 2021, promoting our finance minister to comment  “This is very much in line with the trend in economic recovery”.    Is this correct assessment?

Consider the below facts

• Fuel prices increased by 23% in 2021 (global oil prices increased by 65% during the same period)
• LPG prices increased by 30% in 2021
• Steel - Hot rolled coil was selling at Rs.54,500 per ton in January 2021 now it is Rs.72,500 per ton - 33% increase
• Palm oil prices increased from $ 1,020 in June to $ 1,125 now
• In March 2021 Hindustan Unilever increased prices across its portfolio by 6% to 14%.  Again in September 2021 there was an increase ranging between 3% to 8%.  For July to September quarter HUL reported 11% year on year sales growth but it volume growth was 4% indicating a 7% price-led growth in this quarter.
• Maruti Suzuki India Limited has cited rising input costs, including escalating prices of raw material such as steel and precious metals, as the key reason behind the soaring prices. Maruti Suzuki increased its price 4 times during this year
• Asian Paints has informed that so far during this financial year they have increased selling prices by 7% as against a 21% increase in input costs

The above facts are only a tip of the iceberg.   Across industrial sectors inflation is soaring prompting almost all companies to increase their selling prices to protect margins.  With increase in prices, volumes are shrinking which means there is recession in the economy.  People are cutting down consumption to offset increase in prices.  

This unprecedented price increase is increasing GST collection in the country and not growth of economy.  This is not a sustainable tax growth.  

There needs to be strategies in place to smoother input cost increases, else there will be larger dip in GST collections. 

My Economics goes for a toss

I studied economics in university though I am not an expert but can reasonably understand economics and markets.  

"Swish" and there is a fire when Harry Potter swirls his wand in a Harry Potter movie - that is magic, Crypto currency market is now something similar to it now "Swish" a tweet and crypto currency moves up or down defining all laws of economics (though wondering where is economics in Crypto currency after all!)

Elon Musk the founder of Tesla is using his magic wand popularly known as Twitter to move up and down the price of Crypto currency.

There had been series of tweets from Elon Mush since 2020 which influenced prices of Crypto currencies & more so in 2021.  In February 2021 Musk tweeted that Tesla has $1.5 Billion worth of Crypto currency and the company would soon accept Bitcoins as payment for Tesla cars this sent Crypto currencies values soaring more than 10%.   

Then came the twist in the tweet in May 2021 Elon Musk tweeted that Tesla will not accept Bit coins for payment towards Tesla citing environmental impact due to mining of Crypto currencies.  This sent Bitcoins prices head down from $ 55,000 to $ 48,000 within 24 hours and went to lows of $ 34,000.

Soon after this tweet another couple of tweets came out from Musk "Tesla has not sold any Bitcoin" another acknowledging Bitcoin miners plan to switch to renewable energy for mining Bitcoins - these tweets again picked up Bitcoin prices to around $ 43,000.  

Currently Bitcoin is trading around $ 38,000 

Cryto currencies are here to stay in the financial system, they do not fall within any economic definition and will continue to be influenced by multiple factors especially social factors.  Unless until Governments of the world sit down and bring in a set of regulations Cryto currency will behave similar to this and create headlines whenever there a sensational news  

Tax collection shows India in recovery path

Surprisingly there were all time high record GST collections in April 2021 @ Rs.141,348 crores despite lockdown in some states and quick spread of Covid 19 virus.  

In its press note, releasing April 2021 GST statistics, finance ministry has stated "Despite the second wave of Covid-19 pandemic affecting several parts of the country, Indian business have once again shown remarkable resilience by not only complying with the return filing requirements but also paying their GST dues in a timely manner during the month".  

This statement of the Government attracts some credit due to the fact of high GST collections consistently above Rs.1 crore mark for 7 months since October 2020.  However with lockdown coming down in full force in May there are expectations of much lower GST collections in May 2021 

Moving to direct taxes - Government announces that collection for Q1 2021-22 of direct tax is Rs.1.86 lakh crores which is more than double the last year collection amount of Rs.92,762 crores.  

Good Direct tax & GST collections shows good growth in Q4 of 2020-21 & Q1 of 2021-22 (maybe even in double digits).

Nice numbers on taxes on which we should be quite happy.  With economy moving up Government should step up infrastructure spending, rationalize taxes on oil, control inflation and move the economy into growth path.

Oil Price & Inflation in India

2021 has seen a big recovery in international oil prices by as high as 47% from $ 48.86 on 1.1.21 per barrel to $ 71.81 per barrel on 15.6.21.   This levels of $ 70+ were seen last only in late 2018.  Oil is at a 2.5 year high currently.  

This meteoric rise in oil prices is attributed to global economic recovery which fuels higher oil demand.  This economic recovery is attributed to high levels of vaccination in many developed countries.  With this price increase OPEC countries will be happy and there is scope for increase in production which may slightly reduce increases, but short term outlook for oil is bullish and it may go up further.   

Challenge for India will be already high oil prices due to high levels of taxes on oil will further push oil prices to new highs and trigger further inflation which is already high at levels of 6.3% in May 2021.  Government should now look to taper the price of oil by reducing taxes on oil and prevent a run away inflation due to oil.

CPI Inflation

As per data released by Ministry of Statistics and Programme Implementation (MoSPI) on 14.6.21 Indian inflation is currently at a 6 month's high of 6.3% mainly triggered by higher food inflation which is at a 6 month high of 5.01%.

Food inflation which is at a 6 month month high of 5.01% is triggered by higher food and energy prices with energy prices soaring to 11.58% during the month as against 7.91% in the previous month.  

There is also a big jump in Wholesale Price Index (WPI) mainly triggered by increase in crude oil prices.  WPI is increasing consistently for the pat 5 months 

As per Government the high rate of inflation in May 2021 is primarily due to low base effect and rise in prices of crude petroleum, mineral oils viz. petrol, diesel, naphtha, furnace oil etc. and manufactured products as compared to the corresponding month of the previous year

What is the stand of Reserve Bank of India

In its monetary policy report released on 7.4.21 RBI the following is the projection by RBI "CPI inflation is projected to average 5.0 per cent in Q4:2020-21, 5.2 per cent in Q1:2021-22 and Q2, 4.4 per cent in Q3, and 5.1 per cent in Q4,"

Now with 6.3% CPI inflation is above the target set by RBI.

RBI earlier this month in its announcement kept the policy rates unchanged to bring about a boost to growth and keep a lid on inflation.  

RBI is committed to keep inflation lower to the extent possible to trigger economy into the growth path.

This is a wise approach.

Empowering team members - A winning model

I was reading the autobiography of Elon Musk, one of the key factor to his success as an entrepreneur is people.  He went about recruiting the best talent available however paradox is that their pay was not the best in the industry but they had more challenges to handle more innovations to create, make the impossible possible, in short they were empowered at every stage of their career to create something new and great.  Though some of key persons stint with Musk's enterprises were short their contribution was quite significant as they were pushed to their limits by Musk's management style which I can term as one form of empowerment.  If you read the history of India especially that of Moguls the generals are empowered to fight the war with a promise that on victory the winning generals usually gets huge rewards (both legal means and looting) of which a large portion they keep for themselves and balance share with their team, here empowerment comes from the incentive on successfully completing a task.  I was reading Bangalore ex-don Agni Sridhar's book "My days in the underworld", the common thread which runs in the book is for underworld gangsters to make it big in the underworld is to make a big target threat or killing this propels one's stature in underworld, here empowerment is big time action or an one off big task successfully executed which awes your friends and enemies alike.  If you read history of communist revolution in Cuba and specifically the traits of Fidel Castro & Che Guevara their empowerment stems from their resentment of America.

Empowerment is achieved in different forms and ways for different teams / team members.  There is no one fit rule on empowerment for everyone.  Empowerment is a subjective theme and should be administered in small doses through out the career of a team member to ensure that they perform to their potential and bring in laurels to the task and institution they work for.    

Empowerment of team members can be achieved by the following

• Training - An employee once she is clear what she has to do, how she has to do, for what she has to do & when she has to do a particular job she will be elated and feel empowered to carry out the task.  A point to note here is that training should not be momentary and commence only when a task needs to be carried out on the contrary training should be ongoing, meaning training should be carried out in anticipation of future tasks this will help the employee quickly to adopt to a task and carry on with it with high level of efficiency.  For example to execute a new task high level of team work may be required.  If the organisation has ongoing training's on team work the entire team is aware of the concepts of team work and feel empowered to carry out the task assigned.  
• Informed Team Members - how much training is important equally important is information to team members.  Any organisation is dynamic and there are multiple changes within the organisation or outside the organisation affecting the organisation's way of working.  Team members should be empowered and be made aware of all these dynamism to ensure that team members carry out their tasks effectively.  For example a change in product packaging should be communicated well in advance to all relevant team members so that they are empowered and the information is passed on to customers well in time and their concurrence taken, else there will be a backlash from the customer to the team member and the team member will get demotivated due to lack of information.  in short information / data is king which if provided well on time to team members they will be empowered and happy to note that they are updated and can answer any question confidently       
• Split into small teams - In many situations a task has to be coordinated and executed by a big team, in the team there will be a Manager and under him multiple team members will be assigned to carry out the task.  The team members will always look to instruction or guidance or push from managers to carry on tasks which puts an enormous pressure on the manager as he has the entire team to talk to and ensure they complete the task.  If the manager splits the team into multiple modules or platoons and for each module / platoon make one person a platoon leader he / she gets empowered to lead the small team, plus the manager needs only to interact with the platoon leader and so gets time for strategic decision making and actions.  This model can be successful for a 100 member team or a small 10 member team also.    
• Allow the module / Platoon leader to take decision  - It is always good for a manager to define the task clearly to the module / Platoon leader and also give them clear Standard Operating Procedures (SOPs), limits & guidelines within which they can take a decision for a task.  For example if a module / platoon leader is in-charge for making payments to non-standard vendors like hotel bills, entertainment expenses, car expenses.  These expenses are sensitive subjects and if there is no SOP or guideline or limit the module / platoon leader every time has to refer to the manager for a decision and so acts only as a messenger.  But if the manager gives a clear SOP / guideline / limit as to the grade of employee, the level of expenses etc the module / platoon leader can finalise decision himself / herself and instruct the team appropriately there by being empowered to take decision and also completing the task well on time and thereby saving a lot of manager's time who can use it for other productive purposes 
• Lead from the front - Che Guevara was a doctor by profession but his attraction towards communism and hatred towards America pushed him to join hands with Fidel Castro and fight the Government which was considered a puppet of America in Cuba.  In his first assignment to lead a team of revolutionaries there was quite a lot of hesitancy and doubts in the minds of the revolutionaries as how a medical professional with very little experience in battle fields can lead them, but when they saw Che Guevara fighting from the front lines and simultaneously issuing instructions to the team and at times attending to injured colleagues the team became empowered by their leader and pushed their limits and won the battle which was a first major victory for the revolutionaries.  In very critical tasks it is important that the leader is available upfront for the team to see and feel that they are not alone and their leader is around with them to support them and take care of them.  This will empower the team members to have self belief and confidence to move ahead with the task in hand
• Bottom up Decision making - I am not here to debate top down vs bottom up methods of decision making.  From an empowerment perspective Bottom up decision making works well as the team member / employee feels she / he is one of the decision making authority and that their decision should not go wrong or fail so employee gets empowered to put in additional efforts to ensure that the task is completed.  In this bottom up approach the team member can also share quite a number of ideas and information to his manager which can help expedite completion of a task.  Also a manger finds it easier to implement a decision which originated from a bottom up approach rather than a decision which originated from a top down approach
• Manager's Pat -  A manager's positive words or message on a team members performance goes a long way in empowering an employee and motivates them to carry out their tasks more efficiently and in majority of the cases it has a multiplier effect on their performance.  There may be times when the team members decision or action could have turned out to be bad, if the manager steps in and counsels the team member and corrects them will empower the team member to ensure that they do not repeat the same error and also to carry out the task with more vigor and enthusiasm.  
• Manager should step in -  Manager's delegate task to team members and team members carry on with the task.  If there are any hurdles or any obstacle from any other team member or teams, managers should voluntarily step in and support the team member, which makes the team member feel that there is support for them to carry out the task and hence feel empowered.  This means the managers should practice controlled delegation which ensures that they are aware of the actions of team members and step in whenever a situation to that effect occurs.
• Incentivise on core areas - In an organisation usually for most team members compensation and incentives are tied with organisational goals 100% which in effect means that an employee's individual contribution is not incentivised.  To empower an employee, compensation & incentive should have a small portion (atleast 20%) linked to employee's individual or team's performance.  For example for a logistics team member one criteria for compensation & incentive can be organisation sales achievement say 80%, the balance 20% should be awarded for say "Nil difference between book and physical stock", this will empower the employee to carry on his responsibility of inventory management with full vigor and dedication 
• Finally challenge the team member - This may not work for all team members but will work for team members who are open for challenges.  A manager can challenge an employee to carry out certain task within certain resources and the employee takes this as a challenge and gets empowered to carry on with this challenging task.  For example a difficult customer can be assigned to a sales team or team member with a challenge from the manager, this will empower & motivate the team to push for victory against the difficult customer

Conclusion

Empowerment comes in different models and ways, it can be big or small.   One type of empowerment which works for one team member will not work even for this team member's next seat colleague.  Manager's challenge is to identify the team members caliber and assign them with appropriate empowerment mechanism.

 

Stock market on a high

Record closing of Sensex (52,232 points) & Nifty today despite a RBI warning of bubble in their annual report is surprising.  It is astonishing to see the market participants are taking a bullish view despite high valuations and drop in industrial activities due to Covid.  Maybe the market is factoring in the future - demand pick up after covid.  Which may also be a factor.  The good news due to market boom is that corporates will have more money in their pockets to spend on investments, improve their capacities, invest in R&D.  There are slew of new IPOs planned for next 6 months to 1 year notably among them are Zomato (around Rs.8,250 crores), Paytm (around Rs.22,000 crores), Lava (around Rs.1,400 crores), Delhivery (around Rs.5,000 crores), Bajaj Energy (around Rs.5,450 crores).  Success of these IPOs also rest on a booming stock market which will help build confidence of investors especially retail investors.  More paradox of this stock market rally is that in parallel commodity prices are also increasing especially gold which is at 5 month highs & oil which is almost at 2 year highs.  There seems to be a buoyancy in the system which is difficult to mystify.  

To me this buoyancy of the stock market is propelled by three main reasons.  Firstly interest of retail investors who find stock market returns attractive and tax efficient compared to traditional investment avenues.   Secondly there is a good inflow of FPI money into the markets  which moves the market upwards.  Thirdly pension funds are coming of age in India and there is significant flow of funds into pension funds (Asset under management of NPS crossed Rs.6 lakh crores) and moving up very fast.   

Of the above three reasons first two are a bit fragile and can stop anytime and there can be severe backlash also  This is where the RBI bubble caution comes into play.  

My piece of advise, retail investors do not follow the herd be sensible in investing go for a mix of equity and debt and do not leverage too much on equity as the same is over valued and already at high levels.

Conflict Resolution key to success

In Corporate world conflict resolution is key to success.  Conflicts can be between employees, with stakeholders, with customer, with vendor, with regulating agencies, with financial institutions etc.  Successfully navigating such conflicts is an art (with some application of science though).  In this article we are restricting our discussion to conflict within the organisation between employees and how quick solutions to them help in achieving better results.

Conflict amongst Peers is the most common form of conflict when employees within the division or from different divisions have differing view points on the same subject leading to a conflict and hence a stalemate on actions and processing of activities / work.  How quickly these conflicts are resolved depends on how the conflict is addressed by the team members or manager or an arbitrator.  

Conflicts are solved by the team members (within the peer group) if as a team they address the issue rationally discussing its pros and cons for each team member and then coming to a solution which is acceptable to all team members.  In this situation usually one team member takes the lead to bring about this resolution.  In this conflict resolution mechanism there is a good bonding among team members as they themselves have solved the conflict and nothing is forced upon them.  This model works only when

1. Team members are empowered by management to take decisions in their respective areas of operations
2. Management have adequately trained its team members on the task and all team members are clear (to a large extent) as to their roles and responsibilities in the organisation.  
3. There is controlled delegation of activities to the team and the managers have good overview of the tasks carried out by the team.  This ensures that the team members are insulated from any trouble during any task or solution for a conflict - this happens because the managers are aware of all actions and watching the same from a short distance and step in whenever there are chances of any trouble brewing
4. There is acceptance within the team of one time leader amongst them who help solve the conflict.  This leader can be a different person in different situations - acceptance is the key.   This can be achieved only if the team is well trained and good clarity of roles and responsibilities are fixed by the management 

I would recommend this model of conflict resolution to be the best as it brings in bonding among team members and team members feel empowered to know that they are part of the solution rather than the problem, this leads to high level of productivity.  There will also be a high level of ownership in this model as the solution is derived by the group rather than by someone else and pushed into the group, this ensures that the team works to its potential to ensure success as it is their solution and they do not wait it to fail.

Conflict are solved by managers when they step into a conflict situation for which the team or teams does not find a solution and there is a stalemate among the team members.  Though this is not a desirable situation most of the time this happens due to multiple pushes and pulls by each team member or teams since there is no consensus among the team members / teams.  As an effective manager the manager should carry out the below steps to bring about a successful conflict resolution model

1. Hear out the issues of all team members or opposing teams / team members in detail in presence of all the team members or relevant team members so that there is no exaggeration or simplification of the issue by any team member or team
2. Brain storm as to the nature of the issue, how it originated and what are the reasons it remains a conflict which is not solved till then.
3. Encourage team members to prepare and present their solution to the conflict either individually or as one team or multiple teams.  Managers should then study the efficacy of these solutions based on their knowledge and expertise and if found viable support in implementation of this solution.  
4. Manager should be rational and not take sides or should not engage in favoritism, this will ensure that there is respect for the manager within the team and there is good scope the solution (if any) suggested by the manager will be implemented smoothly.
5. Encourage team members to be a part of the solution and as much as possible push the team members to engage in the solution creation process directly and create a mirage that the problem is solved by the team members themselves and managers have just an outside role (pseudo role) in the process.  This process will empower the team members and ensure that they take ownership for the solution and implement the same with full enthusiasm and ensure its success. 
6. Managers should set a time frame within which a solution to be found and implemented for the conflict.  This will create a pressure on team members to expedite a solution or accept a solution proposed.   This process will ensure that the conflict is solved in a time bound manner.  If not a long drawn process will create more problems and with it there will be quite a number new challenges over a period of time to the conflict
7. If the team members or the team is not capable or not willing to come out with a solution the manager should propose a solution and also ways of implementing this solution in a detailed manner so that each time member understands and same and implements it.  The flip side of this action is that manager should be vigilant and keep track of the progress of the solution as there is little ownership of the solution within the team members
8. Document the conflict resolution process and the solution in a "Standard Operating procedure" or SOP or any other mode for easy reference to all team members and also to serve as a guide in future for carrying out the task or assignment 

Conflict are solved by arbitrators when team members nor their managers are able to come out with a solution for the conflict.  Usually arbitrators are not appointed but they are usually senior managers who are two to three levels above the manager in the organisation and hence have more powers to bring out a solution to the conflict.  These arbitrators step in when someone requests them to step in or if they identify a long drawn conflict not solved for quite sometime and it affects the performance of a task or an assignment.  Being senior managers in the organisation obviously arbitrators have more power and control over the team / team members and their managers hence an effective arbitrator should carry out the below steps to bring about a successful conflict resolution model apart from the above 8 steps discussed in the manager dispute resolution model

1. Usually when a conflict gets to the level of an arbitrator it is sure (to a large extent) that a solution is not possible by the team members and solution has to flow down from the top.  
2. Being senior managers arbitrators have more experience and knowledge of the subject matter, using this expertise they should push for a quick solution to the team.  The arbitrator should ensure that the team internalizes it and delegate the solution to the manager for implementation.  A constant followup is also necessary to check the progress of the solution proposed
3. Arbitrators should take it upon themselves to train and empower the manager/s and the team members so that over a period of time they are capable of finding a solution for any conflict which may arise in the future.  In this way arbitrators can avoid future conflicts to be escalated to their level thereby avoid eating away their valuable time and resources.
4. If there are any erring team member who needs to be reprimanded or any action taken arbitrator should in a proper or subtle manner take appropriate action so that the erring team member does not repeat the same problem and creating a conflict again or stalling a solution to the conflict. 

Conclusion

Conflicts are inevitable in an organisation quick resolution in the key, best way to resolve is with consensus among team members as it will bring in high level of ownership.  If the resolution gets escalated to manager or an arbitrator then solution should be implemented and in parallel training should be imparted to team members so that in future they are capable of finding their own solutions for conflict or avoiding conflicts altogether 

Stock Market Concerns - RBI Annual Report

Some statistics of stock market for 2020-21 financial year 

1. Sensex surged 77% in 2020-21.   It was 28,265 on 1st of April 2020 & ended at 50,136 on 31st March 2021
2. Peak was reached on 15th February 2021 @ 52,154 
3. 25 Initial Public Offers (IPO's) were issued by corporate's during 2020-21 of which 21 had generated positive returns for investors  
4. Equity market recorded a net inward Foreign Portfolio Investment (FPI) of Rs.2.8 lakh crores during 2020-21 (compared to a net outflow in FPI of Rs.6,024 crores in Previous year)
5. Direct participation of retail investors was the hallmark for the year 2020-21 with 1.43 crore new Demat accounts opened during the year (compared to 50 lakhs in previous year).  Retail holding in NSE listed companies increased to Rs.13.6 lakh crores from Rs.7.2 lakh crores in the previous year 
6. Asset under management of pension funds soared past Rs.5 lakh crores

Desipte covid concerns what are the major cases attributed to this sharp surge in stock market in India. 

The market factored in the following factors for the sharp recovery.   Easing of Covid and consequent expectation of recovery in economy, better performance by corporate's especially during Q3 & Q4 of 2020-21 triggering record GST collections, Rs.1.5 lakh crore Performance Linked Incentives (PLI) for key manufacturing sectors, record high FPI inflows during 2020-21, lower interest rate regime triggered by lowering of repo rates by RBI and global economic recovery to name some of the key factors.

Now for the concern of RBI for this sharp upward swing of stock markets.  The following are the major factors RBI lists in its report under the title "Is the Bubble in Stock Market rational"

1. This order of asset price inflation (77% in 2020-21) in the context of the estimated 8 per cent contraction in GDP in 2020-21 poses the risk of a bubble. 
2. Results suggest that the stock price index is mainly driven by money supply and FPI investments. Economic prospects also contribute to movement in the stock market, but the impact is relatively less compared to money supply and FPI. This assessment shows that liquidity injected to support economic recovery can lead to unintended consequences in the form of inflationary asset prices and providing a reason that liquidity support cannot be expected to be unrestrained and indefinite

To conclude, meteoric rise in Indian stock market is a cause of concern considering the fact that there is no strong fundamental reason but short term temporary reasons which can reverse any time causing the bubble to burst.  Investors especially retail investors should exercise caution when treading into the market and it is advisable to use a mix of equity and debt to achieve their financial goals

Milestone - PFRDA - NPS

The Pension Fund Regulatory Development Authority (PFRDA) tweeted on May 26th 2021, that they reached a milestone of Rs.6 lakh crores of Asset under Management.  The best part is the last Rs.1 lakh crore happened in just 7 months (Press Release)

                            Source : PFRDA Tweet 27.5.2021

With asset under management crossing Rs.6 lakh crores and subscribers touching 4.28 crores, PFRDA is on a roll.  

What triggered this upward movement?

• Fairly good returns on equity investments.  Equity schemes have given around 13% to 15% returns for the past 5 years, some scheme names have been given for quick reference  

• Fairly good returns on debt (Government bonds) investments.  Debt schemes have given around 9% to 11% returns for the past 5 years, some scheme names have been given for quick reference  

• Fairly good returns on Corporate bons investments.  Corporate bond schemes have given around 9% returns for the past 5 years, some scheme names have been given for quick reference 

• On an average a conservative investor can earn a 11% returns which can never be imagined under EPF or PPF

• Another advantage of NPS is its low cost structure.  Annual cost fees in NPS is currently capped @ 0.1% which is far lower than mutual fund schemes

• The most attractive part of NPS  is tax benefits under 80CCD(1) - 10% of salary subject to a maximum of Rs.150,000, 80CCD(2) - 10% of salary with no monetary limit  & 80CCD (1B) - Rs.50,000

Major drawbacks of NPS

• Liquidity - investments are locked till the investor attains age of 60.  Yes there is a partial withdrawal option of 25% of own contribution but this will be a small portion

• At time of withdrawal if corpus is more than Rs.5 lakhs then 60% of the corpus can be withdrawn and balance 40% should be compulsorily invested in an annuity.  Income from this annuity is taxable

Conclusion

NPS is a good investment vehicle for the long term which gives superior returns and tax savings.  Cost of maintaining NPS being low also brings in more attractiveness to this scheme.  Though there are draw backs on liquidity and tax on annuity, NPS is a superior scheme for investment which I recommend.

Sensex - Reducing fear of Covid?

Sensex closed today @ 51,017 points which is just 2.2% short of the all time high of 52,154 reached on 15th February, 2021.   

2021-22 has clocked till now 2% increase in sensex or 988 points.  Today market posted strong gains due to gains mainly in financial & IT stocks.  Nifty financial services index increased by 0.52% & Nifty IT index increased by 1.76% during the day to move up the index. 

Stocks are projected to be uptick in the short term due to reduction in Covid infections in India, expected better performance of Indian corporate's and rising trend in US & Europe stocks   

Black Gold Inching towards 100 - Roll it back

Per litre petrol Cost today 25.5.2021

Mumbai : Rs.99.71
Chennai : Rs.95.06

Kolkata : Rs.93.49

Delhi : Rs.93.44

Let us take Chennai for further analysis.  

Price of WTI crude on 1.1.2020 - $ 61.13 per barrel

Price of WTI crude on 25.5.2021 - $ 65.65 per barrel

Increase % = 7.4%

Price of 1 litre petrol in Chennai on 1.1.2020 - Rs.78.20

Price of 1 litre petrol in Chennai on 25.5.2021 - Rs.95.06

Increase % = 21.6%

What caused this disparity? Why so high increase in domestic petrol prices?

Is it Currency?  No only marginally

USD vs INR on 1.1.2020 = 71.36

USD vs INR on 25.5.2021 = 72.79

Increase % = 2%

Is it Taxes in India?  Yes significantly

Twice in 2020 taxes were increased on petrol (March & May) - totally Rs.13 per litre or 65% increase in tax from Rs.19.98 to Rs.32,98 per litre in 2020

Overall impact on petrol price per litre = 17%

Indirect tax collections in 2020-21

Provisional figures released by Government on 13.4.2021

Shortfall of Rs.0.5 lakh crores in GST collection was more than offset by an increase of Rs.1.46 crores in central excise collections which mainly constituted tax on petrol & diesel.  The increase of 12% in indirect tax collection is mainly because of higher tax on petrol & diesel.

What the Government should do now

With the economy projected to get back into normal mode in Q3 2021-22 there should be a push for industrial development consequently improve collections under GST.   In parallel there should be a reduction in excise duty on petrol & diesel to pre 2020 levels and reduce inflationary impact on the economy.  It would do a world of good if Petrol & diesel are brought under GST ambit rather than erstwhile excise & VAT regime

Will the Government Act on this or push for more taxes on fuel and thereby fueling inflation which is the last thing the economy wants at this moment 

Crpto Currency - Waiting for a reason

Crypto currencies had dream run with its main constituent Bitcoin in 2021 up until  April rising over 97% from $29,111 in 1st of January 2021 to $53,260 in 30th April 2021.   Then the drop started in May by 34% and now trading at $ 37,707 which still is a good growth of 30% for 2021.  

The market capitalisation of crypto currencies stood at $1.58 trillion on 24.5.21 which was $2.2 trillion on 1.5.21, in 25 days time a whooping $ 620 Billion has vanished in investors wealth.  

  

What triggered this slide in May?  Two factors are cited, one Elon Musk (Tesla).  Tesla stopped accepting Bitcoins as payment for their cars, there was also talk of Tesla selling off some of their Bitcoin holdings.  Tesla cited environmental concerns caused by crypto currency mining as its main reason for not favouring Crypto currencies this is an U-turn by Tesla from its earlier statement.  

Second reason is China announcing that it will crackdown on crypto currency mining as a part of an effort to control financial risks and also to control high electricity consumption which are gulped down by Crypto currency miners who are majorly concentrated in China 

Question : Are the above the major factors to wipe away value from crypto currencies and will these factors continue to determine value of crypto currencies in future?  To my knowledge No.  Crypto currencies were moving up mad @ 97% in the first 4 months of 2021 and it was looking for some reason to wind down when it conveniently found reason in Tesla & China and dropped 34% in one month.  Now that crypto currencies are down from their high levels they will look to consolidate in the days to come and again look for excuses to move down or move up.  Volatility is a hallmark of crypto currencies and it will always play a major part as there is no regulation from Governments and it will find some reason for moving up or down dramatically making headline news everytime.

Just a spoke in the Growth Wheel - All is well still - Will be back in track in Q2 & Q3 of 2021-22

All was going on well till mid of February when Covid made a big comeback into India and now has started to slightly taper down albeit slowly.   This surge will stunt economic growth as demand drops and people start to become cautious again and start to increase their savings rather than spending.  Jobs are once again in the spotlight with hospitality and entertainment sector ensuring many of them vanish leaving earnings to drop significantly.   Good news is that there is no full lockdown similar to last year.  Lockdowns now are only regional ones now, those too ensuring economic activities are not stunted to a large extent leading some scope for earnings to happen.  A bold step by the Government is implementing vaccination for all adults of 18+ from 1st May, this is the only way to contain the virus added with following Covid protocols by all citizens of India.  Industry which saw smart recoveries in Q3 & Q4 of 2020-21, will take a hit in Q1 of 2021-22 and look for revival in Q2 once the pandemic is contained.  Reserve Bank of India (RBI) Industrial outlook survey of the Manufacturing Sector for Q4 2020-21 was released on 7th April 2021, which was projecting quite an optimistic picture for the industry for Q1 of 2021-22.  Will that be realised?

                   Source : RBI

Q1 of 2021-22 will show a subdued growth in contrast to RBI projections due to unprecedented covid surge.  Indian corporates proved their resilience in Q3 & Q4 of 2020-21 but it will be a difficult task in Q1 & Q2 of 2021-22, recovery should start from Q3 of 2021-22.

Stock Markets

Recovery of business and hence stock market was quite upbeat in Q3 & Q4 clocking an upward swing of 20%, in contrast the months of April & May 2021 till now has seen a see-saw swing and expectations are bears will rule the market.     

                                                         Stock Market Movement 

Corporate results for Q1 2021-22 is expected to be subdued and markets will factor in the same in Q1.   Should expect a flat or depressed market for 2021-22 albeit some short term volatile movement and rallies 

Rupee Movement 

Q3 & Q4 saw Rupee strengthening or holding ground due to better corporate and stock market performance.  

Q1 2021-22 (April) saw a sudden depreciation of the Rupee due to Covid surge and domestic stock market weakness.  However uptick in stock market movement & general US Dollar weakness (Dollar Index) helped Indian Rupee to move towards appreciation mode.  My prediction is Indian Rupee will be under depreciation mode till business sentiment moves up and Covid fears subside in Q3 2021-22.  When Rupee depreciates it will be time for RBI to intervene in the markets and ease out the Rupee a bit and to ensure cost of inputs especially oil do not spiral out of control consequently sending inflation into a tail spin, which is the last thing the country wants which is already reeling under pandemic stress.  

Oil Prices

With economies opening up crude oil is back in focus.  In Q1 2021-22 there is a 2% appreciation in Crude WTI from $ 61.45 to a barrel to $ 62.78 per barrel

Projection is crude will continue to marginally raise over the next two quarters in line with economic activity pick up

Conclusion

There will be a economic slowdown in Q1 2021-22 & part of Q2 also.  Q3 & Q4 of 2021-22 will bring in recovery and all will be well soon

Marching on in April

Stock Markets

Sensex surged 4% in the last week of April with 4 days of continuous increase despite turbulent times with Covid cases increasing significantly in India.  Surge is mainly due to better Q4 results of corporate (compared to 2020 Q4)

• IT & ITES stocks - Revenue growth of TCS 4.2%, Infosys 13.08%, Wipro 3.14%, Mindtree 5.2%  
• Bank stocks - Revenue growth of HDFC 13%, ICICI 17%, Axis Bank 10.98%  
• Automobile - Revenue growth of Maruti Suzuki 32%, TVS Motor 52.87%
• FMCG - Revenue growth of Britannia 9.68%, HUL 35%, Hatsun 23.89%  
• Manufacturing - Revenue growth of ACC 22.57%, Bajaj consumer 39.25%, Tata Steel 53.4%, ABB 7.02%, Biocon 16.3%, Carborandum 27.38%, Ambuja Cements 23.44%  

Overall corporate's are delivering better than expected results for Q4 2020-21 which keeps investors interested.   

Another major reason for the surge in sensex is that business sentiment is upbeat as can be seen by RBI survey  

        Source : RBI

Reserve Bank of India (RBI) Industrial outlook survey of the Manufacturing Sector for Q4 2020-21 was released on 7th April 2021, this shows a positive sentiment for Q4 2020-21 and Q1 2021-22.  Markets are factoring in this positive sentiment and gives a big thumbs up and consequently jump in sensex.    

As for Covid markets have already factored the same in 2020 and so more cases will not impact it unless it takes on monstrous proportion which I believe will never happen.  Though cases are on record levels good news is that till now 15 crore vaccination have been administered in India and there is a conscious push for faster vaccination in the days to come.  Government has realised vaccination is the only route out of this pandemic and stepping up all efforts which is appreciated.   

Rupee

Rupee in the last 4 days had an appreciating effect and appreciated 1.28% moving from 75.02 on 23.4.21 to 74.06 on 29.4.21, this primarily is due to a positive stock market which grew by 4% during the same time period.  Also the announcement that US Fed Reserve keeps its policy rates and assets purchases unchanged is pulling the dollar index down and it is at its one month low and currently at 90.63, this helps the Rupee to appreciate. 

US Dollar Index (DXY)

Goo

OIL

Good news is that petrol / diesel prices in India are unchanged since 15th April, which is a long record considering price movements in the last 1 year.  Primary reason for this is a slight drop in demand due to Covid & oil companies are in pause mode to see the trends in global oil market.  In the meantime there has been a sharp movement of oil and Crude WTI is trading at $64.98 per barrel