Retailers/Brands see surge in buying with plastic money

Is India heading towards a cashless economy? With a rising number of consumers preferring to use their debit/credit cards instead of money to buy even daily necessities, plastic money seems to be overtaking cash in India’s modern retail stores. While, it means good news for the Reserve Bank of India to keep a check and control over fake currency and black money, rising debt levels among consumers’ could be reason to worry. However, country’s leading retail chains are happy with the new trend, since they are witnessing a spurt in shopping with an increasing number of customers opting to pay by card. E-commerce boom too had led to a rise in credit/debit card shopping though preference is given to cash on delivery option. Retailers ride on the credit tideMost of the country’s retail chains and brands including Future Group, Shoppers Stop, Spencer’s Retail, Wills Lifestyle, John Players, Woodland among others, have seen credit and debit card payments consistently exceed cash this year, reflecting a change in urban consumer’s behaviour. For instance, Shoppers Stop department store chain and Future Retail’s Central and Brand Factory fashion outlets claim sales by card now account for almost 55 percent of the total, whereas shoe and apparel retailer Woodland has seen payments through plastic money account for almost 52 percent of the total transactions. Experts have attributed the adoption of plastic money to a rise in young shoppers, an increasing share of working women, easier and large credit availability as well as rise in impulse shopping. RBI data showed that the country’s debit card user base was 331 million at the end of the last fiscal year; the credit card base was 19.5 million people. Card use has been growing at around 30 percent per year. It is obvious that consumers tend to spend more when buying through credit and debit cards. A recent Assocham study showed, in Chennai, 30 percent shoppers buy daily products online, and this could rise to 40-45 percent this year, in Kolkata nearly 15-20 percent shoppers buy daily products online, and this could rise to 25-30 percent this year, in Bangalore its 20-25 percent and this could rise to 40-45 percent this year. Non-metros like Lucknow ranks high in online shopping, followed by Jaipur, Dehradun, Nashik and Trichy and top reasons for buying online, include safety, time, convenience, variety, discounts and comparisons. Rising debt and shopping in slow economyThough the economy is sluggish and consumer sentiment is low amid high inflation, electronic cards — debit, credit and pre-paid cards are posting robust growth. Credit card spends (in value terms) have more than doubled to Rs 1.23 lakh crores despite a dip in the number of credit cards between 2007-08 and 2012-13, debit card spends (in value) have risen six times to Rs 74,400 crores during the period. On a positive side, experts point out that the successful adoption of plastic money in modern retail is surely encouraging small, stores to install card swipe machines. With smart money, is organized retail heading for a smart future ahead… only time will tell. Source: Article

Read More........ → January 02, 2014

ILFS Sued- The road to regional airports

The government can cry itself hoarse over how it wants to develop its regional airport policy and even make announcements on how well the projects are doing, but it is clear that things are far from what they seem. Reality bites. Finally somebody had the gall to take legal action against an ineffective, inefficient, staid system. Pushed to take legal recourse due to lack of response from jv partner and sister companies, promoters of regional airport-holdings international limited (rahi), a joint-venture between rahi aviation holdings pvt. Ltd. (rah) and il&fs transportation networks ltd announced that a series of legal actions had been initiated against il&fs, itnl, il&fs engineering (ieccl, earlier known as maytas) and others, “in the wake of the gulbarga and shimoga airport projects languishing for want of appropriate responses from il&fs.” Rahi came in with dreams of building 99 airports and i can attest to the passion having met the founder many times. Its first two projects at gulbarga and shimoga would have paved the way for a network of such regional airports. “unfortunately, both these pioneering projects have languished for over a year now, in the face of a deadlock created by the brazen display of corporate ego and associated institutional might of ilfs and its group companies,” said umesh kumar baveja, chairman, rahi. Speak of a way to kill initiative! Congratulations india- we’ve done it once again! This is what part of what rahis press release reads- For over a year now, rahi has endeavoured to keep the projects alive in the face of serious impediments brought to it by itnl (these, and many more breaches, are the subject matter of complaints filed, and underway, against itnl, their affiliates and functionaries). Itnl has refused to participate in board meetings since february 2012, thereby blocking all attempts for rahi to raise much needed capital to complete the projects. Itnl has used its institutional relationships with banks to even have the final sanction of debt for the shimoga project withdrawn. It further created an environment where bankers to the gulbarga project suspended further disbursement of debt. But the most brazen act of all was itnl’s collusion with their sister company ieccl to the serious detriment of rahi. As a result of the aforesaid, gulbarga debt has now turned into a non-performing asset (npa) and its credit rating downgraded to default grade (‘d’). Itnl even sought to use the bankers to usurp management control of gulbarga, thereby, seeking to profit from their own wrongs. Similarly, itnl attempted to profit from its investment in rah, and through rahi in gulbarga and shimoga; itnl thrust an exorbitant loan at an interest rate of 17%, far higher than its own, stated cost of debt of 11.75%. Baseless, unsubstantiated allegations against rahi and its owners to third parties such as banks and the government of karnataka were made with the sole aim of defaming them and eroding their business credibility. Source: Article

Read More........ → December 12, 2013

Warren Buffett lays down logic against dividends

In his latest annual letter to shareholders, Buffett explains why paying dividends doesn't make sense. The annual letter that Warren Buffett writes to his shareholders is something of an event in the business world. What is normally mundane business communication from other CEOs, has become an art form in Buffett's case. This year's letter has excited media people more than most because it has a long discussion about the media business. Over the last few years, Buffett has bought a string of newspapers even though the newspaper is widely understood to be in severe decline in the US. However, the most interesting part of the letter is Buffett's response to the constant clamour for dividends that he hears, given his holding company Berkshire Hathway's $50 billion cash chest. He lays down four uses to which a company can put its cash, in decreasing priority. First, it should reinvest the money in growing its core business. If that cannot be done productively, then it should use the cash to acquire or expand into other businesses. If that too is not feasible, then it should repurchase its own shares if they are available cheaply enough. He lays down 120% of book value as the standard for cheap enough that Berkshire follows. He terms share buybacks at this level as 'buying a dollar for 80 cents'. Only if this too is not possible should a company consider paying dividends. It's an interesting view, and one which is hard to fault. The logic of prioritising share buybacks over dividends is sound, even though it won't sound so to Indian ears. But what about investors who want a cash income from shares? Buffett's recipe is interesting - sell some stock to realise the amount you want. He says that this always leads to a better outcome for the business and the shareholder, including in tax-efficiency. The letter is a great read, but don't take my word for it - download it and read it for yourself. Source: Hindustan Times

Read More........ → March 07, 2013