Indian Economy - News & Discussion 27 May 2012

pentaiah · Post by **pentaiah** » 08 Sep 2012 13:49

Boss your firm must have attorney on retainer.

1) First thing first all documents negotiated through bank for material

2) There must be earnest money in deposit with a neutral arbitrator

3) you should make a public sector bank (like King Fisher and Deccan chargers did) a party to this

4) even now go to public sector bank and discount the outstanding bills of the company in default so that your NPA becomes People of India's NPA, the Indian public is abundantly rich they dont care such small change when billions of cores are being looted.

you have to pay some bribes

next time Strictly COD for material 2 Months on Invoice for services...

You have to deal this via attorney and dump your losses on public exchequer

if you are in Mumbai Bal might help, If in TN Blues brother Karuna and Stalin have standard rates on chart for this kind of service

Vriksh · Post by **Vriksh** » 09 Sep 2012 14:08

Pentaiah Saar!

How does one go about signing WO using Banks as intermediaries?
Who are these neutral arbitrators we should approach?
How do you discount bills legally as you suggest?

We are mostly technical people with no connections to such founts of power as Kingfisher have? Can we give off unhonored bills to third parties or government to extract through legal means since we have to pay tax on these Invoices but since party has not paid can we ask government to attach client properties to pay us and take tax after this?

Who is Bal? Herr SS Kapitan is it, the one who wants to lead the army for a month one hears?

Agnimitra · Post by **Agnimitra** » 10 Sep 2012 10:29

R.I.P.
Verghese Kurien, the man who made Amul a $2.5 bn entity, passes away

member_20317 · Post by **member_20317** » 10 Sep 2012 14:28

Dear Mods : While off topic in letter, request you to let my post remain here, as some of the issues being discussed are actually the background info of our economy.

Vriksh ji, yours is a consulting set up. Costs can be reasonably tied up with time/roll out. All seasoned people try to manage their risk with new clients by keeping a small 5%-10% advance and getting all the payments tied up against the progresses. You do not go in for the next stage until the earlier payments are made. This has 2 benefits. Your margin is afforded some security by the 5-10% advance OTOH the client has an inherent deterrent as a half complete project is as good/bad as a job not done.

Seems like you have compromised your negotiating position bad. Having started on a wrong foot now your aim should be to get to this desired position as surely as you can even if slowly. Aim to cut losses not to make profit if you think things are really bad. Chances are your legal is as good (even if non-existent) as it can get in the set up size you are mentioning. The problem seems like a trade matter and a proper accountant is what you could be missing. Since you are a tech guy, you need to keep in mind that the first job of an accountant is to establish accountability not to mesmerize you with his legal competency or his managerial skills. Also have a proper working relationship with your CA for matters like Service Tax, Composition schemes, VAT, IT and your number do ke cash issues

. Small set ups usually do mess up on maintaining proper paper work which is very important for larger clients. Missing MRNs, log sheets, progress calculations, over/under supplies. You see even in larger firms the people are merely doing naukri. They cannot stick their neck out for you. Even Indian companies are getting professionalized (in a western sense) with a lot of Internal audit etc. BTW even private sector guys take bribes (everything done tactfully off course and not in one make or break deal).

I have personally observed people who do not aim high but keep these matters under control having their business expand often times with the same one or two good clients. Then these guys force the new clients to work on their terms. This way everybody benefits.

MCA21 site has only the data the Companies want to release. Fines/Penalties upon not filing or late filing are treated as a simple commercial decision and not as matter of corporate governance. Seasoned businessmen rely more on their own negotiating acumen and business networking instead. MCA21 has use only when you are in a position to grill the company on corporate matters ie. you are a lender/investor and only relevant during the due diligence phase. No substitute exists for good old business networking. IT returns carry the same issue as the MCA21. I have given IT returns of my company only to MNCs that are caught up in some obscure EU law and for due diligences to lenders. Nobody is going to take this requirement seriously. However ‘Real time Balance Sheet information’ carries some value (MCA information will be dated). But then you need to correlate BS info against the real world. Completion estimates, Valuations, Bring to use dates are all open to interpretations even in big companies with well established procedures. Procedures get well established because the Lala wants to control by exception. He will allow creative accounting in only a few big ticket items. Ergo the rest of the small ticket items have to fall in line.

If you are thinking of Lawyers then try to establish the chain of evidence before you decide to hire one. Was the whole agreement done in a procedurally relevant manner. Lawyer will either be a dishonest guy or an honest professional who does not know of your business execution part good enough. Lawyers are as good as the inputs you provide and his own basic nature. Not a way of getting out of the mess if its purely business execution issue. Legal recourse is a whole new ball game. You need to evaluate your chances against expected benefits and keep evaluating them.

Escrows are created where inflows and outflows are traceable and accountable. Never heard of escrow mechanism in the business tick size you are mentioning. Escrows carry costs too, same goes for BGs, Insurances. Bills discounting etc as suggested are reasonable for new clients where you would be willing to bear costs for establishing faith.

Present action chosen by you ie. new contracts on consultancy/design basis only, materials to be bought by client, is a good one but risk averse. Try also to partner people who have done better in the areas you are weaker. Treat collections as a proper business vertical. Source out the collections to your partner. Have a clear entry and exit in these agreements. Banks are also will be willing to hand hold you for a cost when you are dealing with new clients. Keep evaluating these costs against benefits you expect. Indians are honest at business (as understood in Indian terms). For most Indians Law is an imposition that they like beating. Do not treat business as Brahman/Kshatriya/Shudra Dharm. Meeting people is important, it is all a give and take only.

In every industry there are about 25% goonda elements, 50% mediocre and 25% good industrious people.

Do you remember why Som Mittal (Digital) took over after the merger instead of the Compaq wala guy.

vina · Post by **vina** » 12 Sep 2012 07:47

Our company may have landed ourselves in (hopefully temporary) soup due to our naivete and may be difficult to extricate

Always work through a bank.Bake the Bank cost overheads into your prices and pass it on to the customer. Never extend credit.

NEVER extend credit. Especially if you are a small player going against big guys. The big guys have all the leverage, can extend payment ad infinitum and you will have serious difficulty collecting and anyways, they have 90 days credit terms usually.

For eg, Petrochem Godzilla is notorious for exactly all the kinds of business practices you listed. You can make any sale and hit any target you want with them, but try collecting.. haa haa.. you will literally bleed to the bone in the process. And no, they don't do it with just small guys, even their giant vendors in everything from telecom to equipment , especially in their large orders.

The Chinese are going to learn the hard way in the Power Equipment business with Always Dependable Almighty God and Dependable Infrastructure with their trains and other junk.

vina · Post by **vina** » 12 Sep 2012 07:48

ravi_g wrote:Do you remember why Som Mittal (Digital) took over after the merger instead of the Compaq wala guy.

No. What is the story behind that ?

pentaiah · Post by **pentaiah** » 13 Sep 2012 00:52

Cyber criminals shave off India’s wealth by $8b

http://www.thehindu.com/business/Econom ... 889621.ece

Yagnasri · Post by **Yagnasri** » 13 Sep 2012 09:57

Vriksh wrote:This may be off topic (mods may move/x-post it to relevant forums) but I need advice on handling the market conditions for our firm, which may be broadly applicable to many on this forum who work as independent consultants/ proprietorships/entrepreneurs.

Background:

Our firm is a boutique firm (turnover ~ 3Cr/Yr) specializing in design/consultancy/turnkey execution industrial/domestic waste water using an innovative technology that allows water reuse without expensive membrane technology (which is mostly imported). Towards this we have assembled a very strong technical/execution team of Skilled workers, M.Tech, PhDs and Professors from the best institutes in India and abroad. In the last 3 years we have set up 40-50 small scale plants all over India running very successfully with strong consumer satisfaction. However our contracts/legal department is understaffed/non existent (probably an understatement)

Issues:

Of late in our quest (or you may say greed) for expansion we took on larger projects (Rs 1 Cr - Rs 2 Cr per Work Order/WO) from various clients in the private and government sector. Based on the strength of our order book a cash credit/CC facility (Rs 30L) extended by a Bank.

In one of our pvt sector projects in the interest of fast project completion we used the CC and internal resources and moved made to order materials and installation labor to project site worth nearly (Rs 1 Crore). When we raised bills for materials supply the pvt ltd company started raising all sorts of questions to dispute the validity of bills to avoid/delay paying and threatens to cancel contract. They interpreted the WO to suggest payments could only be paid at their discretion/pleasure after commissioning (since WO says payment after commissioning) of plants which in this case would take atleast 3-4 years since waste water is not likely to be generated any time soon. The aforesaid company is apparently using the following modus operandi (using their financial size arbitrage) with many other small/large vendors by 1) giving what seems to be lucrative contracts on paper similar to ours, 2) waiting for materials supply, 3) and using site security to prevent our personnel from removing materials from site for non payment 4) Threatening legal and extra legal action using hired goons 5) From reading the fine print it appears that all arbitration is via their mediators.

In other private sector work also many companies expect us to deliver materials and then release payment. When we raise bills typically there are disputes on various items on technicalities and deductions from the WO at the end of the project (ultimately making project financially un-viable). Payments are routinely delayed 4-6 months on this basis. This has lead to extremely difficult cash flow conditions leading to much heartburn. Essentially it appears that all power is in the hands of the client and no amount of effort from our side is capable of satisfying them.

Based on this we have now run into a cash crunch making it impossible to honor our contracts with other companies.

Advise wanted
1) How can we find out track record/ financial record of clients (publically listed firms/non publically listed firms) before Work Order/MoU signing
2) What is legal recourse in case of disputes as listed above
3) Can we ask for 3 years IT returns and other financial documents
4) How can we ensure we get paid on time
5) Is there an escrow service available on contracts
6) Is it possible to insure materials (for non-payment from client side)
7) is it possible to get Third party Bank Guarantees.
8.) Is there open source information on Private Ltd Firms, Proprietorships, Listed and unlisted firms to help take important financial decisions etc

Present action chosen
1) We have started booking new contracts on consultancy/design basis only, materials to be bought by client instead of us

Can gurus comment on all of the items above. Our company may have landed ourselves in (hopefully temporary) soup due to our naivete and may be difficult to extricate. However I would like to use BR to devise methods/procedures/collate open source so that such issues routinely faced by small scale industries/firms (which form the bedrock of Indian economy) can be fairly addressed/ resolved.

This is a typical problem of organisation which are found and managed by tech people who normally not well versed in " worldly matters". There are many processes under which the money of this kind of firms can be secured with little effort.

Please mail me at [email protected] and I will help you.

Pratyush · Post by **Pratyush** » 13 Sep 2012 13:48

^^^

With the poor, IIP, numbers that have been released yesterday. Can it be said officially that India has entered a period of recession?

Aditya_V · Post by **Aditya_V** » 13 Sep 2012 14:48

Vriksh-> Suggest you have a proper In house Accounts team who also takes care some the legal aspects. Also, listen to thier concerns which sometimes might get in the way of doing Business immediately. Credit rating can be done in many ways, Current Performance, Dun & Bradstreet reports , enquires etc. Being a Small firm always ask an advance upfront- 5-10% and request progress payments based on completion. Try and request for BG's for contracts.

For legal cases try and get an Undated cheque. Enter date and deposit. If the guys cheque bounces, it is one of strongest legal basis against which you can pursue against a debtor, rest will take years and documentation should be good with high legal costs.

Prem · Post by **Prem** » 14 Sep 2012 00:19

India August Exports Fall 9.7% From a Year Earlier, Pujari Says
http://www.businessweek.com/news/2012-0 ... ujari-says

Indian exports shrank 9.7 percent in August from a year earlier, Director General of Foreign Trade Anup Pujari said, as faltering global growth hurt demand. Merchandise shipments declined to $22.3 billion last month, Pujari said at a briefing in New Delhi today as he released provisional trade data. Imports slid 5.08 percent to $38 billion, leaving a trade deficit of $15.7 billion, he said.
The debt crisis in Europe and elevated U.S. unemployment have hampered overseas sales by emerging markets from India to China. The South Asian nation has taken steps such as increasing taxes on gold imports to try and narrow the trade shortfall, which has pressured the rupee. The U.S. market is showing signs of stabilization, Commerce Secretary S.R. Rao said at today’s briefing. The rupee, which has plunged 14 percent against the dollar in the past year, weakened after the report and closed down 0.3 percent at 55.415 per dollar.

vera_k · Post by **vera_k** » 14 Sep 2012 07:45

Fuel prices to save the economy

"By November, a dollar would have cost Rs 100! And an unprecedented exodus of foreign investment would have taken place. Can you kill your own currency?

kmkraoind · Post by **kmkraoind** » 14 Sep 2012 10:52

Centre mulls Metro in cities with over 2 million population

It seems, all of the Bombardier and BHEL metro coach plants will not be ideal or the workforce will be ideal once big city metro projects are completed.

Aditya_V · Post by **Aditya_V** » 14 Sep 2012 12:35

vera_k wrote:Fuel prices to save the economy

"By November, a dollar would have cost Rs 100! And an unprecedented exodus of foreign investment would have taken place. Can you kill your own currency?

I agree the Government has no choice to increase prices since the Budget deficits are no longer manageable.

But why is this so, it is because 8 years of continous gross mismanagement and wholesale looting of the Tresury, not enough invetsment where money needs to go.

Aditya_V · Post by **Aditya_V** » 14 Sep 2012 12:45

kmkraoind wrote:NREGA funding may be stopped if no redressal: Jairam Ramesh - Economic Times

If it done, problems of labor shortage, inflation and lower level neta-babu money siphoning will come be addressed. It seems UPA has realized these money spinners are not generating any votes for them.

This move is even worse, they want to selectively stop funds to states to show local Govts are not implementing RajMata and clown prince schemes. Leopard is not changing its pots

cdbatra · Post by **cdbatra** » 14 Sep 2012 17:56

http://www.ndtv.com/article/india/gover ... ail-267499

1990s ARE BACK PEOPLE . BUCKLE UP FOR RIDE !!

kmkraoind · Post by **kmkraoind** » 14 Sep 2012 19:49

Mamata gives govt 72 hours, PM prefers to ‘go down fighting’

While she maybe busy swallowing the FDI punch to her political bible and busy framing her new hate speech for the UPA, Manmohan Singh has done what some would say is the unthinkable. The man who the country yearns to hear, apparently told his Cabinet colleagues that, “If we have to go down, we have to go down fighting.”

Is it a big bluff, or will be an ultimate showdown, just like UPA-1. At least no weekends for media people.

vina · Post by **vina** » 14 Sep 2012 21:00

Finally, the govt seems to have grown a pair.

Kudos to Manmohan Singh. He had finally gotten the ball moving, despite absolute pig headedness from Didi and of course the opportunistic BJP.

This is the same man who bet his govt on the Nuke Deal. He had my deep admiration when he did that and showed that he has the will to do the things that need to be done and he has done it again. I dare say that any Indian Prime Minister in his place would have taken a similar decision , except Pranab Mukherjee of course. That is probably why Pranab Mukherjee can NEVER become the Prime Minister.

The really disastrous decisions were appointing Soniaji's retainers in key positions. . Shivraj Patil in Home and Pranab Mukherjee in Finance. That guy had absoultey the ossified instincts of command and control and mai-baap days and his budgets were based on flights of fancy rather than any reasonable expectations. I had called it "All the ducks line up for it to work" budget back then. Well, the ducks lined up once for him, and then did not line up at all after that and with no ability to cater to any shocks/contiengcies (well, the UPA under RajMata had "already" spent the future "growth dividend" in their ill concived dole outs) and now we have a massive fiscal problem as a result.. (oh.. Sooper Comprehensive had argued against that here !).

Pranab Mukherjee was a class act. He managed to sink a promising economy TWICE (first time under Indira Gandhi) and now again. I thank our lucky stars that he has been kicked upstairs to an inconsequential and ceremonial position where he can't do any more damage and he can never come back to a position in government , more so, the finance ministry.

pentaiah · Post by **pentaiah** » 14 Sep 2012 21:04

One should not forget the stellar services of PC both as FM and HM of course his vision of catering to Royal ruling family (RRF) miserly needs as well

krisna · Post by **krisna** » 14 Sep 2012 21:07

Finally, the govt seems to have grown a pair.

only when pushed to the brink.

corrected.
what the brink is-- can be debated endlessly.

Theo_Fidel · Post by **Theo_Fidel** » 14 Sep 2012 21:32

So is FDI in retail open as well? Its all a little confusing. Anyone have a list of sectors.

nakul · Post by **nakul** » 14 Sep 2012 21:46

Retail FDI is left to individual states to implement.

Singha · Post by **Singha** » 14 Sep 2012 21:50

I hope KA implements it. I want BLR to look like bangkok in terms of "MBK" and "siam paragon" mall

and that old fetish of mine - sports authority + ikea

maybe decathlon had got wind of some movement, they are busy building another site in whitefield, when their sarjapur road site is ok to serve the retailers.

nakul · Post by **nakul** » 14 Sep 2012 21:55

BJP is a bania party. They will be looking out for the interests of retailers. GD is voting for congrez

Singha · Post by **Singha** » 14 Sep 2012 22:16

I support domestic manufacturing, not trading in crap from "wuxi" in china and restamping it with a markup of 500%...which is what a lot of domestic traders are doing.

nakul · Post by **nakul** » 14 Sep 2012 22:20

I think single retail (Ikea) was not a problem politically. It the multi brand (Walmart) that was giving people headache. The central govt has passed the headache to the state govt. So whether the state govt likes it or not, single brand retail would become more commonplace.

For multibrand retail, I don't mind Chinese goods as long as keep the food shelves Indian.

Theo_Fidel · Post by **Theo_Fidel** » 14 Sep 2012 22:23

Thanx nakul,

Hmm! So which state is going to take up that particular gauntlet. Nice hurt retire by GOI....

If Wal-mart comes in, it is going to be crap from wuxi 24/7. The only good thing is that Indian discretionary income is low, so hopefully damage is limited.

nakul · Post by **nakul** » 14 Sep 2012 22:32

FWIW Modi was saying FDI in retail would not hurt retailers since they act as middlemen. It will be manufacturers facing the heat. We can expect more Chinese goods flooding India via FDI route.

Moreover multi brand retail is only for cities with 1 million & more population. I don't want to move to a place less than 1 million to get my daily glass of pure desi gaay doodh & saatvik greens

nakul · Post by **nakul** » 14 Sep 2012 23:11

Andhra, Assam, Haryana, Delhi, Uttarakhand, Rajastha, Manipur, J&K asked for FDI in multibrand FDI.

putnanja · Post by **putnanja** » 14 Sep 2012 23:22

nakul wrote:Andhra, Assam, Haryana, Delhi, Uttarakhand, Rajastha, Manipur, J&K asked for FDI in multibrand FDI.

I believe Punjab & Gujarat too will go in for multibrand FDI

nakul · Post by **nakul** » 14 Sep 2012 23:28

putnanja wrote:
nakul wrote:Andhra, Assam, Haryana, Delhi, Uttarakhand, Rajastha, Manipur, J&K asked for FDI in multibrand FDI.
I believe Punjab & Gujarat too will go in for multibrand FDI

Anyone know why these states going for FDI???

kshatriya · Post by **kshatriya** » 15 Sep 2012 03:35

^^ Ruled by Congress ?

On a side what happens if the faithfools go on a rampage against American Companies in India for some cartoon/movie? They did that to Kfc in lebanon yesterday

Singha · Post by **Singha** » 15 Sep 2012 07:16

they can do it anytime even now - Kfc, pizza hut, dominos, mcdonalds, chilis, papa ginos, nike, tommy hilfiger, ralph lauren dot the landscape.

nelson · Post by **nelson** » 15 Sep 2012 07:38

They chose the consulate as of now.

http://www.thehindu.com/news/cities/che ... epage=true

vina · Post by **vina** » 15 Sep 2012 08:03

they can do it anytime even now - Kfc, pizza hut, dominos, mcdonalds, chilis, papa ginos, nike, tommy hilfiger, ralph lauren dot the landscape.

They are all franchised stores, not company owned. Any attacks on those will set off the owners of those stores (of all communities) against the rioters. So generally in India, any stuff of this kind ususally avoids private properties and hence public property (buses esp) become targets.

Singha · Post by **Singha** » 15 Sep 2012 10:10

well the faithfool could always target company owned properties in the IT, finance and manufacturing space like GE or GM. but that will generally bring down the police danda hard on their backsides...its so much easier to loot and burn a defenceless shop or two and then disappear into a maze of alleys where police will usually not follow for fear of bricks from the roofs and being trapped and counterattacked.

muraliravi · Post by **muraliravi** » 15 Sep 2012 16:24

Singha wrote:I support domestic manufacturing, not trading in crap from "wuxi" in china and restamping it with a markup of 500%...which is what a lot of domestic traders are doing.

But they have also removed the clause that mandates 30% domestic sourcing, what about that?

shyamd · Post by **shyamd** » 15 Sep 2012 17:07

NDTV says that PM made the following statement in Cabinet: " this is the time for big bang reforms. If we have to go down, lets go down fighting "

Basically they have no choice but to make the reforms.

kmkraoind · Post by **kmkraoind** » 15 Sep 2012 17:33

Initially they have clauses of sourcing of 30% from small and medium sector, but it is nonviable because once they start manufacturing within a year or two, they will become big. Stating this reason, cleverly they removed 30% clause, which means flooding super markets entirely by cheap Chinese goods. Instead they would have made 50% or 70% made-in-India clause, irrespective of size of company, small or medium or big. With this new draft, there is no mandatory made in India clauses, indeed very uncanny move by Congress.

nakul · Post by **nakul** » 15 Sep 2012 17:42

I thought one of the main reasons WalMArt was refusing to enter was the 70% Indian sourced clause. They were lobbying hard to get it removes. And they have succeded. Prepare for the China flood!