Tag Archives: Business Standard

Kingfisher Taking its Last Breath!

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Chairman of Kingfisher Airlines, Vijay Mallya has been an example of one should not run a business. With few services left with the company and shareholders barking at him, however, Mallya still is not in a position to give in.

It seems that Mallya entered into the business for the glamour it brought, rather from having real understanding of the industry. In the U. S., the last 30 years have witnessed nothing less than 50 airline bankruptcies. With high fuel prices and related costs, success in aviation industry in India is not an easy achievement as well. In the country there have been at least 10 failures since the opening of aviation to the private sector in the 1990s.

Mallya might not have done research on it before diversifying his business into an unrelated sector. He might have taken up the challenge thinking of repeating his success, which he enjoyed in his liquor business. Mallya did create the best airline brand in Kingfisher. Passengers were opting for Kingfisher than Air India or Jet, as Mallya had introduced a no-expenses-spared approach to Kingfisher First Class. But, then he bought Air Deccan at a huge premium, which stood contradictory to the cut-rate carriers of the company.

And at the worst, he staked entire of his liquor business to save his sinking airline. Today, he is having talks with Diageo to sell a stake in United Spirits, since he had pledged too much of his liquor business and his personal assets to keep Kingfisher flying. He told his shareholders that he is in talks with foreign airlines to sell a stake. However, the point to notice here is why any foreign airline would want to buy a stake in such a sinking company.

Attacks on the KFA

Many shareholders were critical of how the company’s debt had spiraled out of control and the fact that the management had not taken active steps to prevent it. Some of them called the management ineffective and asked for a managerial change. They also added that if it is not fulfilled, the government’s move to allow foreign direct investment into the civil aviation sector wouldn’t be of much help to the company.

According to the report came in Business Standard, some of the shareholders of the company opined that the dismal stature of the company has affected the UB Group. And yet others were sad that the employees of the airlines were not paid their salaries since the last few months.

It is reported that Kingfisher Airlines continues to default on its service tax outstandings, amounting of over 60 crore, and the government’s move to allow FDI in civil aviation sector only offers a ray of hope for the company to recover the dues, as the department has frozen most of the accounts of the ailing airlines. The company has failed depositing the service tax collected from the passengers with the department since November 2011 on a regular basis.

Presently the Airlines is having 7,000 crore in accumulated debt in 17 banks and around an equal amount of losses. It has lost about four slots in the Mumbai airport. Kingfisher currently operates only around 80 services a day with just 15 operational aircrafts, which used to operate 360 flights a day, Business Standard reports.

Mallya assures the Shareholders

As the shares have started showing a better status in the market, Mallya is setting forth to counter the shareholder attacks. “I am a businessman and I will sell businesses at the right price,” he said to Business Standard.
At Kingfishers Airlines’ annual general meeting (AGM), the Chairman assured the angry shareholders that he would get the company back in shape. Mallya told the shareholders while the situation was tough, all efforts to recapitalize the company had been made. He also criticized media being negative about his shares.

Deccan Herald reports that, in his initial remarks at the AGM meet, Mallya said that KFA has a fleet of 12 aircraft that fly 40 destinations. He added that during the past eight months of this fiscal year, the promoters of the company have infused 1,154 crore into it, proving that the management is committed to the welfare of the company. And in his concluding words he said we need God’s blessing and luck to save this company.

 

 

 

Indian Railways, Now Tracked by Satellites

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The Railways are soon shifting to a satellite-based tracking system to get the exact time information regarding the movement of train. The pilot project implemented on Chennai section is soon to be completed. It will be in production from next year.

P Bala Bhaskar Rao, VP (Operations) of Hyderabad-based Avantel Limited, “We will commence installation of the Mobile Satellite Service (MSS) system from the next week covering 107 locomotives that run on the Chennai section. The installation of the technology will be completed by February of next year,”as quoted by Business Standard.

Indian Railways, Now Tracked by Satellites

India’s first certified indigenous MSS system for defense and aerospace applications has been developed by Avantel and the first 12 unit of system including four spare systems is to be delivered to Boeing Company under a contract worth about $ 2.2 million. Supplied by the American aircraft company to Indian defense forces, these MSS systems would be fitted on 8 P-8I Maritime Reconnaissance Aircraft.

The Boeing Aerospace in compliance with Directorate General of Aeronautical Quality Assurance (DGAQA) standards produced the MSS system for the P-8I. According to the company, it has been qualified by the Center for Military Airworthiness & Certification (Cemilac).

Rao said that the system involving the technology is same for the aircraft and Indian Railways. The MSS-based tracking system is planned to be implemented in the Railways across the country once its pilots demonstrate its efficiency.

The first phase of the Real Train Information System, based on the satellite imaging for rail navigation has been opened by the Railway. It has been mutually developed by the Research Design and Standards Organization and IIT-Kanpur. Despite the fact that the locomotives are fitted with GPS equipment, the system runs on Global System for Mobile (GSM) communication technology that is used in mobile phones.

After the implementation of new system the movement and location of each train will be tracked on a realtime basis. Rao said, “Once the system is in place several value-added services like providing passengers with accurate information on train arrival time among others will be developed around it,”
Avantel has also come up with ultra high frequency (UHF) communication systems and products, and it will be delivered to Antrix Corporation, the commercial arm of the Indian Space Research Organisation (Isro) under a contract for 25-crore in the next six months.

The Indian army extensively uses the MSS system mainly on the Navy warships and Cost Guard vessels. The MSS system for defence applications are developed from various platforms like submarines, torpedoes, ground-based vehicles, ships, and aircraft.

Founded in 1995, Aventel had started developing Type-C terminals for one-way messaging following a technology transfer agreement with Isro in 2000. A turnover of Rs 24.5 crore was recorded for the BSE-listed company in 2001 and revenue of 26 crore is expected for the present year. Its share closed up at 58.25 whereas its 52-month price stood at 69.5 and 41 respectively.

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10 Cos Benefitting From Rupee Downfall

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The steady fall in the value of rupee is not a good sign for India but there are organizations that are benefitting from this. Exports and global acquisitions of Indian companies are on the rise, despite the economic slowdown in India. Financial Analysts say that exports will experience only a short-term gain and might not work well in the long-run. However, there are a few organizations which are benefitting from the depreciation of rupee, which are as follows:

1) ADF Foods

ADF Foods in an ethnic Indian food company, which specializes in chutneys, pickles, spices, canned food and frozen food. It is an export-oriented organization and it also has its own, special brands. According to Business Standard, ADF Foods witnessed net sales of 52.25 crores in the second quarter of 2011, which is higher than that of last year. Net sales have increased by 42 percent as compared to last year. Experts say that having a strong brand presence is very important to transcend fluctuations in money value. Since, ADF Foods has a good brand name in the market because of its own brands, like – Ashoka, Camel, Aeroplane, Truly Indian, Khansaama and ADF Soul, ADF is doing quite well in the market.

2) Bombay Rayon Fashion

Bombay Rayon Fashion (BRF) export their products mostly to US and Europe. According to Business Line, the exports of BRF have gone up and a steady rise is seen in its stock value but this growth might get stunted because of increased costs of raw materials, depreciation of rupee and high interest rates. There was a 20 percent growth in the revenues in the quarter ended, June 2011. Still, the company is facing troubles due to the increasing cost of input materials. According to S.P. Tulsian, most textile companies, like BRF, Raymond and Bombay Dying, will experience only marginal increase in revenue due to depreciating value of rupee.

3) Gokaldas Exports

Gokaldas Exports is a leading organization in readymade garments, based in Bangalore. It has reported net sales of 271.75 crores in the quarter ended September, 2011, thus, indicating an increase of only 2 percent when compared to last year. It, however, reported a loss of 30.12 in the same quarter. This may be because of the fact that the US and European markets are not doing that well. Also, an increase in wages due to the revision in minimum wages, is making the company face losses. Like BRF, this too faces the increased cost of inputs.

 4) Lupin

Lupin is a leading pharmaceuticals company of India and has businesses in mostly the U.S. There was an increase of 24 percent in both its net sales and net profit in the second quarter of 2011. This growth was attributed to good brand name and entering a licensing agreement with Medicis Pharmaceutical Corporation. Lupin also showed a growth of 14 percent in the net sales in Japan (Kyowa Pharmaceuticals) and 61 percent growth in South Africa (Pharma Dynamics), both in the second quarter.

5) Plethico Pharmaceuticals

Plethico Pharmaceuticals is among the leading global healthcare companies, based in India. Plethico has registered a steady decline in its profits over the last few months. It has reported a net loss of 22.91 crores in the quarter ended September, 2011. It, however, had registered a net gain of 7.62 crores in the quarter ended June, 2011, which is better than last years. The fluctuations in Plethico might be due to managerial changes as President, Rajiv Bedi, and Chief Operating Officer, Hemant Modi, resigned this year. Unlike Lupin, Plethico is not able to derive full benefit of the sliding rupee.

6) Piramal Glass

Piramal Glass is a leading pharmaceutical and perfume manufacturing company, catering mostly to the U.S. and Sri Lanka. India still provides for more than half of its sales. Piramal Glass registered sales of 197.46 crores and a net profit of 22.23 crores in the quarter ended September, 2011. Managing Director of Piramal Glass, Vijay Shah, said that the U.S. acquisition helped them gain both, better technology and a bigger customer base in the premium segment (Estee Lauder, L’Oreal, Revlon and Elizabeth Arden).

7) Tata Global Beverages

Tata Global Beverages (TGB) is a wing of the Tata Group and its operations are spread all over the world. TGB has registered a whopping increase of 93.9 percent in its consolidated profit in the year 2011. According to sources, this tremendous increase can be attributed to better sales and lower costs of operations. This growth was mostly due to sales from outside India and hence was not affected much by the depreciating value of rupee.

8) United Phosphorous

United Phosphorous (UPL) is a Mumbai based crop-protection, seeds and chemical company. The agricultural sector is said to gain prominence in the coming months and hence better growth is expected in this sector. According to Unicon Investment, UPL is expected to register a net profit of 51 percent at 173.2 crores by the end of 2011. However, according to Livemint.com, after acquiring the US-based company, RiceCo, there has been a decline in sales in the month of December, 2011. Still, the market value of UPL is strong right now.

9) Mirza International

Mirza International in one of the leading leather-based product companies in India. It caters to customers from all over the world. It registered sales of 155.46 crores and a net profit of 11.27 crores in September, 2011. It is also planning to divest in a sister company, Mirza (UK). The Europe crisis does not seem to have much effect on Mirza International but the rupee down-slide might catch up to it.

10) Gitanjali Gems

The reputed Gitanjali Gems mostly caters to the US in foreign markets. It has various companies under its wing, namely – Gili, Asmi, Nakshatra, Sangini and the like, apart from jewelleries, Gitanjali Gems also manufactures watches. It was also involved in a number of acquisitions of foreign companies in the last few years. It registered net sales of 3167.6 crores, for the quarter ended September, 2011, indicating a 26.2 percent growth over the last year. It also registered a net gain of 132.2 crores in the same quarter. This growth has been contributed to better consumer reaction from Tier II and Tier III cities in India. Brand name is also a strong point of Gitanjali Gems and, hence, the growth.

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