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The Grim Side Of Foreign M&As

wealthymattersYes, there is the successful take-over of JLR by Tata Motors, but most of India Inc’s big-ticket overseas acquisitions in the past five to seven years have,eroded wealth. The reasons for this range from high leverage taken to acquire a company , adverse changes in business cycle, or simply , failure to turn around a loss-making unit.

Tata Steel-Corus

Tata Steel acquired Corus, four times its size, for $12.04 billion in 2006. The valuation was more than one and-a half times its initial offer and was paid mainly through debt. Eight years down the line, Corus hasn’t contributed much to Tata Steel’s earnings. The European business was loss-making till FY13 and has not yet shown strong signs of a turn around.

Hindalco­- Novelis

Hindalco acquired Canadian company Novelis for $6 billion in 2007, making the combined entity the world’s largest rolled-aluminium producer. However, the high leverage, resulting from the acquisition and the slowdown in aluminium demand, post acquisition, have led to the company’s stock stagnating at the same level, adding nothing to its value. Read more of this post

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Loans Against Insurance Policies

wealthymattersThe news that Life Insurance Corporation (LIC) of India has recently surpassed banks as the largest personal loan lender in India has turned the focus on insurance policies as collateral. Apart from LIC, other life insurers like ICICI Prudential Life and Edelweiss Tokio Life, and several banks, including the State Bank of India (SBI), ICICI Bank and HDFC Bank, offer loans against life insurance policies.

Loans are granted only against traditional policies that have life cover along with a savings element in them. Term insurance covers and unit-linked insurance plans cannot be pledged to secure loans against them.Policies must acquire surrender value -the amount you would get if you terminate the policy after a certain years -to qualify for loans. You must assign the policy in favour of the insurer to get a loan. Typically, insurance companies offer loans up to 85-90% of the surrender value. LIC charges an interest rate of 10%, to be paid every six months. Read more of this post

So What Has Shemaroo Got ?

wealthymattersI love how the web has democratized the media and entertainment industry. So when I heard of the Shemaroo IPO and how an old hand in the industry has decided to leverage new technology, I was immediately interested. Here is a list of the rights they own:

Shemaroo has the rights to 2,918 films. Of this, Shemaroo owns the perpetual rights of 759 films:355 films in Hindi,364 in languages other than South Indian and 40 are children’s and devotional movies. Besides this, Shemaroo owns aggregate rights (limited period ownership) of 2,159 films, of which 1,289 are in Hindi, 728 in regional languages and 142 special interest content.


Read The Writing On The Wall

wealthymattersDon’t waste time trying to fight the obvious and get others to change their priorities. Gauge their interest and cut back on the time, attention, effort and resources you have and redirect them to better prospects.

How To Get A Million Dollar Idea

wealthymatters“My preferred terms for the process of ideation are synthesis and reduction.  In synthesis, a large number of ideas are created based on the problem at hand – without consideration for practicality, costs, risks, timeline, and other factors.  In reduction, some ideas are slowly and progressively eliminated.  Ideas which are impossible, impractical, or undesirable are discarded first.  The ideas worth pursuing are prioritized and pursued.  Next, those which aren’t working are also discarded.  Through this process of reduction, the ideas that are truly valuable eventually float to the top.  Google Labs is a good example of this process of synthesis and reduction.  Of thousands of ideas which are discussed, only a few hundred are pursued.  Of those, maybe a few dozen are marketable.  Only 3 or 4 find a profitable business model.  However, if you had not discussed thousands of ideas in the first place, you could not have found the 3 or 4 that are truly valuable.

Go meta.  Whenever you are working on a new idea, task, or product, always be ready to generalize and look at the bigger picture.  For example, if you are tweaking your shopping cart, briefly consider if customers would be better served by a total redesign of the shopping cart – or if you even need a shopping cart, eg. Amazon One-Click. Read more of this post


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