L&T Finance IPO - After SKS & Muthoot, Another Overpriced NBFC IPO?

The Initial Public Offering (IPO) of L&T Finance Holdings Ltd, the non-banking finance company (NBFC) promoted by India’s engineering major Larsen & Toubro Ltd (BSE: 500510, NSE: LT), is all set to open on 27th July with a price band of Rs. 51-59.

The offer price appears deceptively cheap, as it is just around 6 times the face-value of Rs. 10. But going deeply into what is being offered at this cheap rate, an altogether different picture unravels.

The offered share’s FY’11 EPS is just Rs. 2.83, making this offer’s price-earnings multiple above-average at almost 21 times at the upper end of the price band. In sharp contrast, listed NBFCs that are performing  fundamentally and in the secondary market, is available between 12 to 16 times. Shriram Transport Finance (BSE: 511218, NSE: SRTRANSFIN) is available for 12 times P/E, while Mahindra & Mahindra Financial Services (BSE: 532720, NSE: M&MFIN) is available at a P/E of 16.

On the other hand, the core financial performance of the company, as measured by return to its investors, is not higher than the industry average, to command such a high valuation. In fact, the situation is just the reverse with L&T Finance Holding’s FY’11 Return on Equity (RoE) being 13.58% as against Shriram Transport’s  superior returns of 24.87% and M&M Financial’s 19.36% for the same period.

Coming to Net Asset Value (NAV) per share also, L&T Finance Holding is not shining, with a Book Value of just Rs. 20.40, that translates to a high price-to-book-value of almost 3 times for this IPO. By this metric also, there are enough comparable peers in the listed space, which are trading much cheaper. For example, both Bajaj Finance (BSE: 500034, NSE: BAJFINANCE) and Sundaram Finance (BSE: 590071, NSE: SUNDARMFIN) are available at a P/BV of 2 times.

A query sent by Seasonal Magazine to L&T Finance Holdings to ascertain the rationale for such high-valuations remained unanswered at the time of publishing this story.

L&T, the promoter of the company seems to have gone for these kinds of hefty valuations, keeping in mind only their brand value and their own long history in the listed sphere as a blue-chip. stock It remains to be seen whether that brand value in the engineering & construction sector would play out to their advantage in the financial space, which has its own set of deeply entrenched players like the houses of HDFC, ICICI, Kotak, Shriram, Bajaj etc.

Looking at L&T Finance Holdings’ and its subsidiaries’ portfolios, though they are present in most segments, these L&T firms are not strong in high-momentum NBFC sectors like home loans and auto finance. This is definitely a dampener, for investors focused on the financial space.

In contrast, L&T Finance Holdings has a lot of exposure in infrastructure financing. But with that sector’s longer gestation projects, the short-term earnings growth is likely to be under pressure always. The only visible advantage over here is the possible synergies in driving up this business with parent firm, Larsen & Toubro.

The company also has a sizeable exposure in the microfinance segment. With stocks in that sector like SKS Microfinance (BSE: 533228, NSE: SKSMICRO) causing huge losses for investors, L&T Finance Holdings will have a tough time assuring investors regarding the ongoing safety of their microfinance exposure.

Considering the timing of this IPO now, which finally happens after a long wait, but is still  undeniably a tough time for the financial sector, especially NBFCs, due to the rate-tightening and regulatory pressures. This raises doubts whether the company was under any kind of pressure to raise funds in an emergency. A query sent by Seasonal Magazine to L&T Finance Holdings on this regard remained unanswered.

If one looks at the highly successful listed NBFCs, almost all of them are niche-plays, like home loans, auto loans, gold loans etc, as against L&T Finance Holding’s model where it has fingers in all pies. Such an NBFC model is yet to deliver outstanding success in the listed space.

The only real advantage enjoyed by the company is a possible banking licence in the future. But this is nowhere near, and is fraught with uncertainties. For example, RBI is already averse to offer banking licence to groups with exposure to real estate development. Nobody is sure whether such an aversion won’t be extended to the related field of infrastructure development.

Retail investors who are considering this issue at all would be better off by waiting for better prices post IPO and listing, much like how SKS Microfinance and Muthoot Finance (BSE: 533398, NSE: MUTHOOTFIN) became available for much cheaper rates in the secondary market after their IPOs.

Choithram International School is Demystifying & Economising IB Education

Promoted by Indore-based Choithram Trusts, led by philanthropist Satish P Motiani, and executed by educationalist Dilip Vasu, the Choithram International School of Indore is today not only one among the only four IB World Schools in the country, but leading the out-of-the-box thinking by breaking some unquestioned paradigms in education, aided by a generous use of technology, but still fulfilling parents’ desire for affordable international education.

The International Baccalaureate Program is one of the toughest to master in India not only by students and teachers, but by parents. Many international schools have used this to their advantage in creating an aura around IB programs, and of course, for charging exorbitant fees.

But in reality, the UN-sponsored and Geneva-headquartered IB program is the easiest to understand, and the one that makes real sense. In fact it is thought of as complex, only because it is so simple, says, Dilip Vasu, the young Principal of Choithram International. “Which is the easiest alphabet to draw for a kid,” asks Dilip. Most probably C or U, we reply. “Then why do all schools start with teaching A, one of the most difficult for a kid,” asks this Principal.

IB education, in fact, gives that kind of flexibility to start teaching from an appropriate alphabet that makes sense for a kid. “Teaching D is so easy after C, isn’t it,” asks this born-to-teach teacher who has had a few stints in other leading international schools, including IB schools, before joining Indore-based Choithram, around six years back.

Madhya Pradesh & Chhatisgarh constituting Central India was never a stronghold for international schooling. To correct this, it called for an international organization, preferably with local roots. That paved the entry of Choithram Group, which was established by Seth Thakurdasji Choithram Pagarani, which has its business in UAE, UK, Hong Kong, Thailand, Japan, African countries and different parts of world including India. Choithram is perhaps the largest NRI Group hailing from MP, with 65 years of track–record and operating in 26 countries. Under family scion Satish P Motiani’s leadership the T. Choithram Foundation started Choithram International School in 2004 at Indore, Central India’s economic capital and their hometown.

The first IB affiliated international school in Central India, Choithram International draws on the expertise of the Group as well as the Foundation’s long experience in public schooling. Choithram International has produced world toppers and national-level subject toppers, many a time. Though sparing no expense to come up with a state-of-the-art campus, complete with its own indoor stadium, Choithram International is also noted for affordable international schooling, with fee coming up to only one–fourth of comparable international schools. It is a legacy imbibed from Group Founder Late Thakurdasji Choithram Pagarani who was not only a globe–trotting entrepreneur but a philanthropist who started institutions that still provides healthcare and education to the poor.

“But Choithram is quite different from most IB schools in two ways. First of all, you wouldn’t find a more conforming school than Choithram to the stringent IB standards.” This is indeed true, with it being one among the only four fully IB World Schools in India, with not only full implementation of IB’s Primary Years, Middle Years, & Diploma Program, but exclusive implementation of IB which means that Choithram International doesn’t accommodate any other curricula unlike many namesake IB Schools.

Dilip Vasu continues, “That is about conforming to IB standards. But we are also the most flexible when it comes to utilizing the measured freehand that IB accords it schools.” Coming to his favourite topic of innovation in education, he informs us that he has done away with cursive writing from Choithram, once and forever. “If you and me, and millions of our generation are now not following the cursive writing we practiced for weeks and weeks together, let us not burden this new generation with this wasteful exercise that is there only because no teacher has had the guts to question it.” That of course, is one beauty of IB. Anything that restricts a child’s creativity can be shown the door, even if it is cursive writing. IB encourages each school to have its own pedagogy, its distinctness.

Dilip takes out his Parker and waves it at us. “This is going to be obsolete within the next 3 to 5 years. So it anyway doesn’t matter whether you have done cursive writing or not”. And that brings him to talk about one of the core philosophies that differentiate IB from all other curricula. IB, it seems, is more interested in teaching children not the hot subjects of today, but how to learn to learn that hot subject of tomorrow. “Do you know the buzzing subject, five years from now,” asks Dilip. “Neither do I, nor the teacher, nor the student.” So what IB really does is teach the student to learn any unknown subject that may emerge 5 or 10 or 15 years down the lane.

That is why IB curricula has such formidable subjects like Theory of Knowledge. Dilip Vasu is in a prophetic mood when he adds, “We can’t expect our children to carry on with a career that they might chose today. Unlike mine and your generation, these kids will elect to change careers at least 3 to 5 times within their lifetime.” Globalization and the technologies that are emerging everyday would make sure of that, says this Principal.

Speaking about technologies, Choithram is one school that is modern than many comparable peers. With support from Satish P Motiani, the technologies that Dilip has implemented for their students are impressive. Forget the Apple iPads to all students. Also forget, if you want, the Grade 1-12 study materials from Stanford University that comes pre-loaded in the iPads. But even the most ardent critic would applaud the vision to include a six-lakh book online library. “Gone are the days when a school library’s books were counted in thousands, and even the most popular book had only a couple of copies. Our students can access any of these six-lakh books anytime they want by just logging on to the network.”

When we met him, it was barely days since Dilip Vasu had returned from New York, after leading an IB delegation of eight students from Choithram who attended the UN General Assembly for around five days. “We represented Tajikistan,” informs Dilip and continues, “What is the point in a nation’s students representing that nation itself? If there is a shuffle, we get to learn another nation in a vast sense. That is how the radical IB thinking goes.”

Are all these innovations delivering, we ask Dilip. “IB is for moulding leaders. For grooming a typical engineer or doctor, this may be overkill. This is for creating world-changing leaders.“ He gives a quick example. Earlier in his career, Dilip had been guide to a student’s IB Diploma thesis, and this student later went on to establish a multi-million dollar business empire based on the business idea in that thesis. And that too, without attending college after his IB Diploma.

But even with all these achievements Dilip Vasu is most eloquent when he speaks about the affordability of Choithram International. “Parents are shocked to know that we charge around Rs. 75,000 only for IB, in a world where CBSE schools posing as international schools are charging up to Rs. 2 lakh.” This is no magic, however, according to this Principal. “This institution is indebted to the philanthropic nature of our Managing Trustee, Satish P Motiani. He is a legend in Indore, if not Madhya Pradesh, for his various social works through the Choithram Trusts. He has never looked upon education as a business.”

Indus International School Plans Engagement with Civil Society

Bangalore’s Indus International School, promoted by a group of industrialists, technopreneurs, and academicians, and led by the much decorated former soldier and scholar, Lt. Gen. Arjun Ray, VSM, PVSM, and noted academician Mrs. Sarojini Rao, is nowadays exploring ways and means in which students can engage and contribute to the civil society around them.

For those who have known Bangalore’s Indus International School up-close, it is unnecessary to hear that this is a school which is different, created by leaders from various walks of life, for grooming leaders of tomorrow. This essence of the school has been best captured by the pivotal role, Lt. Gen. Arjun Ray, has taken on in the school ever since its start in 2003.

However, this Param Vishisht Seva Medal holder had some sobering advice to tomorrow’s leaders recently. Addressing students from four Bangalore schools, including Indus, the much decorated General reminded, “One needs to serve first, then lead.”

Though an often repeated theme long back, during the Gandhi era, the timing and the target couldn’t have been more challenging. The retired General was not addressing an average cross-section of Indian students, but students hailing from relatively affluent families across the globe, who have been fortunate to study at posh international schools, like Indus, in India’s Silicon Valley.

The General’s logic? “Students in India are disengaged from the civil society,” thunders this mostly suave army man who has attended the prestigious Staff College, UK.

The timing couldn’t have been better. Civil society has been in the limelight than ever before during the last three months. Civil society leaders like Anna Hazare, Aruna Roy, Arvind Kejriwal, and many others had emerged as new beacons of hope for a country ravaged by corruption.

But student engagement with civil society has been a largely neglected area. But then General Ray and the Indus Trust and its schools that he heads, is known to walk their talk. Just visit Indus International Community School, a group school located at Billapura Cross, Sarjapur, Bangalore. Or just have a look at their website. This is the world’s first ever international school created for poverty-stricken students by, believe it or not, the students of Indus International School.

The Indus CEO had delivered these words during the Charter signing of another novel venture. The school collaborated with three other premium schools in Bangalore to come up with Inter Student Council League, an arrangement that will facilitate welfare of schools through sharing knowledge with each other.

Displaying zero-egos and a non-protectionist attitude, these schools are setting an example for other schools to follow in sharing. Indeed, the League is already inviting other noted schools to join, subject to the adherence of some guiding principles.

Though the sharing will include academics, sports, and arts, core thrust areas will be community outreach and environmental betterment. To get the ball rolling, the League has already tied up with the noted NGO, Child Rights & You (CRY) to organize various events that would lend power to addressing crucial child rights issues.

The Indus campus is nowadays in a drowsy mood. The academic session had come to a close on June 10th, and summer holidays are on. The over 1100 students from over 32 countries that make up Indus Bangalore would now return to this campus on July 25th (for Grades 10 & 12), and August 8th (for all others) for the new academic year.

When the year reopens, it would be another eventful one for the students of Indus. For years now, the noteworthy events that leaders like Lt. Gen. Ray and Principal Mrs. Sarojini Rao have facilitated for the students, teachers, and parents, have come to define much of the unique experience of being in the Indus family.

The Science Exhibition, participation in Destination Imagination, visit by France’s Victor Hugo School, Harvard Model United Nations, trips to Germany & France, and Indus Dance Fest, were only a few among the numerous events hosted by Indus during the last year.

Coming to the aspect of what makes academics at Indus truly outstanding, Indus Principal, Mrs. Sarojini Rao, recently opined, “Apart from the curricula, we provide our students orientation on emerging knowledge domains like ecology, entrepreneurship, bio-diversity, internet technologies, bio-technology etc.”

Mrs. Rao, stood first in her University in Economics and is a double postgraduate in Education and Economics. She is trained in all the three IB programs (PYP, MYP and DP), and is also a graduate from the Principal’s Training Center for International School Leadership, USA.

The 40-acre Indus Campus in Bangalore is not only an awe-inspiring one in its looks, but a carefully thought out campus. The spacious classrooms are more than ample for the limit of 25 students, and are equipped with play areas for pre-school, projection systems, computer facilities and lockers. The integrated sports complex comprises an indoor-stadium and an outdoor track and field stadium. The well-equipped amphitheatre has a seating capacity of over 800.

Indus admits both residential students and day scholars. There are separate boys and girls hostels based on the 'house' concept. Each hostel is closely supervised by an experienced houseparent.

After the success of their flagship Bangalore school, the Indus Trust has established two more similar schools, Indus International School, Pune and Indus International School, Hyderabad. The Indus Trust is promoted by highflying industrialists, technopreneurs, and academicians like Sushil Mantri, Kumar Malavalli, HB Jairaj, and Professor Shivaram Malavalli.

Speaking to Seasonal Magazine, Gen. Ray opined on what really differentiates the Indus experience for students. “We are very particular that the environment here promotes order, fearlessness, independence, a love for learning, a connection to the world, and a sense of social responsibility.” These values are much in sync with the International Baccalaureate Curriculum the schools follows.

Acharya Can Move Up By Attracting Talent and Updating Infrastructure

Bangalore based Acharya Institutes is today one of the largest integrated campuses in the city for professional education in various streams. The 120-acre 15-lakh sqft campus is home to 5650 students now. But there is still much distance to be covered by Acharya, for it to be ranked within, say, the Top-5 engineering colleges of Karnataka by CET ranking. Chairman B Premnath Reddy realises this formidable challenge, more than anyone else, but believes that a dual strategy of attracting talent and updating infrastructure will one day take Acharya to better academic heights. 

But he is not really taking aim at RV College, PES Institute, MS Ramiah Institute, BMS College, or Bangalore Institute of Technology. Instead, he is trying to build up Acharya to national stature. A college is only as good as the talent of its teachers and the modernity of its facilities, says this Founder. For attracting and retaining teaching talents, Acharya became the first college in Karnataka to implement the Sixth Pay Commission reccomendations, even ahead of Government-run colleges. The best recent example of Reddy’s focus on infrastructure is the International Academy for Competency Enhancement (IACE), a finishing school that industry takes seriously. 

But are Reddy’s strategies working out? The top-most CET ranks entering Acharya is steadily improving. Acharya has also had some success on the placements front with companies like Google, Ford, Infosys, Wipro, Accenture, and many others visiting the campus and taking Acharya graduates. Seasonal Magazine tries to find out what the future holds for Acharya by interviewing Chairman, B Premnath Reddy; Director - Admissions, Shalini Reddy; and Director , Dr. C. Vijaykumar:

Seasonal Magazine: Acharya Group has grown on all fronts during the past 5 years. How far has professionalizing the teaching and non-teaching staff, advanced growth at Acharya? 

Premnath Reddy: I will give you just a brief overview of this, and let Dr. C. Vijaykumar handle the specifics. What you say is correct, around five years back we took a conscious decision to thoroughly professionalize the entire organization, and one of the most visible changes came in the top rung with the induction of Dr. Vijaykumar himself. And yes, professionalizing the entire organization has definitely helped us attract higher growth and stature, by way of better students and better faculty. Over to Dr. Vijay now.
Dr. C Vijaykumar: Since Chairman did the overview, let me get into the specifics, the examples. The first thing that should be mentioned is that for our engineering college faculty, we recruit lecturers with a minimum qualification of MTech, with preference for higher qualifications like PhD. That also means there are no guest lecturers or faculty with just BTech or any  such arrangement. We have also set up an R&D Division to ensure that even those faculty with Masters qualifications are registered for PhD, so that within  the next five years we would like to have more faculty with PhD qualification. Coming to the non- teaching staff, all of them have basic or advanced qualifications, but more than that, we provide them with an excellent in-house training programs to equip them fully. And both teaching and non- teaching staff are taken outside regularly on professional trips, where we get outside trainers to impart various professional skills. Last but not least, let me highlight an important step our Chairman has undertaken to attract the best staff. Acharya was the first college in Karnataka to implement the Sixth Pay Commission recommendations.

Seasonal Magazine: That is quite surprising. You mean Acharya was the very first college to do this?
 

Dr. C Vijaykumar: Yes, absolutely. In fact our Chairman implemented this even before it was offered in Government colleges. He did it in last October.

Seasonal Magazine: Acharya Institutes have come a long way during the past 3-4 years, with companies like Infosys, Wipro, IBM, Ford, Google etc taking your students through campus placements. But if you look at the companies, it is more skewed towards IT, Auto, & Engineering sectors. How has been the progress in placements in the other sectors, as Acharya has a wide portfolio of arts and science programs? 

Premnath Reddy: No, this is not true now. It is already changing, and Vijay will update you on this.
Dr.C Vijaykumar: Well, the pattern you mention regarding IT & Auto was there, and that was due to two things - one, our engineering college is the largest one, and secondly, this was Bangalore, where IT held the sway. But as Chairman said, this is already changing. Financial sector has been active on the placement front. Since the last couple of years, we have been successfully placing our Pharmacy, BBM, & BCA students, and even many of our arts & science students. But in this latter section, yes, there is room for improvement. One
reason is that we are not very keen on encouraging BPO recruitments. It is a policy thing, about which Our Chairman Mr. Prem is very particular, and he will update you on this.
Premnath Reddy: Yes, we are not too keen on some typical BPOs, and that is the main reason why placement is not up to our desired level in some streams. I feel that students are really losing out when they join many BPOs. The pay might be good, but the avenues for moving up are very limited, and more than that, they wouldn't go for that life-changing professional or higher degree. I strongly believe that they are better off joining either conventional careers like banking or insurance, or going for meaningful higher studies.

Seasonal Magazine: Engineering education remains your key thrust area at Acharya. How do you see the Karnataka Government's recent ordinance on engineering admissions that force the consensual route?
 

Dr. C Vijaykumar: It is a non-issue really as far as Acharya is concerned, but let me ask Ms. Shalini who is the real expert over here to fill in the specifics.
Shalini Reddy: You see, in Karnataka, we have a proliferation of engineering colleges. The seats are basically divided between 45% based on CET, and 25%  based on COMED-K and 25%  is college's own admissions. Many of the newer colleges have trouble in attracting students, and  they  surrender those seats to the government quota. Acharya is unaffected with this development because our own quota, COMED-K as well as CET quota are full.

Seasonal Magazine: At 120 acres and 15 lakh sq ft, Acharya Institutes has become one of the largest integrated academic facilities in the country catering to students from Plus-2 to Research. But with a good percentage of your over 5500 students hailing from neighbouring states, why have you decided to stick on with Bangalore? 

Dr. C Vijaykumar: Well, long back maybe Our Chairman had this idea to spread out, but now the statistics have changed. Acharya is no longer catering to just the neighbouring states. We have sizeable number of students from almost every state and centrally administered areas. So, the fact is that Acharya @ Bangalore has clicked big time. In one way, you can say that Acharya's growth has been perfectly synchronous with Bangalore's growth as an educational and career destination. Now, when students from across India want to come to Bangalore to study, it doesn't make much sense to branch out.

Seasonal Magazine: Overseas students have always been a niche strength of yours. How do you feel about India's policies towards foreign students? Where all can things be improved to attract more foreign students?  

Premnath Reddy: In fact, I wanted to discuss the aspect of overseas students in the last question itself. Overseas students are also one of the reasons why we have concentrated on Bangalore. This city has tremendous mindshare among not only NRIs, but parents and students of foreign origin. Over to Dr. Vijay for the details.
Dr. C Vijaykumar: I think we at Acharya are very much qualified to speak about this aspect you raised. Because, Acharya is now home to over 450 students from nearly 30 countries. Two improvements that are possible by the Government come readily to my mind. Number one, the student visa process has much room for simplification, and speeding up. Secondly, there is absolutely no quality criteria now regarding the institutes admitting overseas students. This should change immediately because, if it doesn't, sooner or later, it is going to backfire on “Brand India” as an Educational destination. We are not calling for any complex quality standards that only a few institutions will pass. There should be at least some criteria regarding an institution's track-record, quality of infrastructure, experience of faculty etc.
Shalini Reddy: Maybe Dr. Vijay should also speak about his personal qualification, or should I say, personal experience in this line, of servicing foreign students.
Dr. C Vijaykumar: Well, if it helps the discussion, definitely. I was earlier with EdCIL India Ltd., which as you might know, is a public sector undertaking under MHRD providing educational consultancy services. Working there, I had pioneered India's first educational exhibition abroad, in which I took a group of 30 select institutions to participate in road shows across 5 countries. We started off with Middle East, targeting NRIs, but later took the show to Africa. I repeated the exercise two more times in the years that followed, taking a larger contingent of Indian colleges, across Africa, South Asia, South East Asia  etc. I was inspired by the way UK was promoting their educational institutions in India and across the world, through such road-shows. Today, private organizers are conducting too many road-shows of Indian institutions abroad, but unfortunately, there is absolutely no quality criteria being followed in selecting the institutes.

Seasonal Magazine: You had started a polytechnic at Tanzania a few years back. How has been the performance, and do you intend to take the Acharya brand to more countries?
 

Premnath Reddy: Yes, definitely, at least two more countries in South and South East Asia are in our immediate horizon. But your question is interesting in more ways than one. Will you fill it up for me, Vijay?
Dr. C Vijaykumar: Well, it is quite interesting for me too, on a personal level. I was instrumental in acquainting Acharya with the African market, especially Tanzania. Later, over here, I worked closely with our Chairman in fulfilling his ambition to start a high-quality institution in Tanzania. It is a very successful polytechnic and we have an intake of around 150 students across three engineering streams there. It is doing quite well, and the opportunity over there is huge, as Indian education is highly regarded there. The reason why our Chairman is now bullish to spread our wings to more countries is something more. We are already predicting that post WTO/GATT, India is going to open her doors fully to international universities and you are going to see a flooding of foreign institutions here. To be competitive in this regime, we too have to spread our wings to more countries and make the best use of the opportunities that will emerge due to this new international trade treaty. Our first stop will be in a South or South East Asian country where we may go in for a large-scale tie-up.

Seasonal Magazine: How do you view the recent row over Minister Jairam Ramesh's statement that IIT/IIM's brilliance is more due to meritorious students than meritorious faculty? Do you think private institutions like Acharya can one day equal the quality offered by IIT/IIMs?
 

Dr. C Vijaykumar: Well, what I am going to say is not Acharya's official say on this. Take this as my personal opinion. Shall I proceed,?
Premnath Reddy: By all means, say what you feel like.
Dr. C Vijaykumar: I think there is much truth in what Mr. Jairam Ramesh has said. Once upon a time the strength of the faculty was everything, I admit. It facilitated better infrastructure and reputation. But nowadays, what drives IITs/IIMs really is the collective brilliance of its students. They are the cream of cream and they discuss and collaborate on a continuous basis. If you take the average faculty over there, they are more interested in extracurricular things, consultancies, research, private pursuits and what not. It is a far cry from what an average faculty at say our university, the VTU, has to undergo. Here the competition is intense and a teacher has to prove his brilliance, he has to assure quality in the graduates, in order to come up. That is why we have voluntarily and unilaterally implemented a unique quality assurance framework, where a three-member team of quality advisors oversee each and every step of the teaching-learning process. Coming back to your question, we are improving by leaps and bounds, year after year, in the average entrance rank of our students.

Seasonal Magazine: Can you give a broad outline of the industry-academicia interactions at Acharya? How far have these initiatives been helping in grooming up more employable graduates and post graduates?
 

Dr. C Vijaykumar: Since the last 2 years, we have made tremendous progress on this front. We have an IBM Excellence Centre over here. A Teacher Improvement program is under taken by Infosys. Novell is doing another program here. And the most interesting project is our  the International Academy for Competency Enhancement (IACE). This is the brain-child of our Chairman, and I request him to fill up the details here.
Premnath Reddy: Well, the objective of IACE was how to enhance employability of our graduates. We decided that we won't leave any stone unturned to achieve that objective. No amount of investment would deter us. The project has to be novel and groundbreaking in its effectiveness. We finally set it up successfully. The real innovation over here is not the beautiful infrastructure, not even the guest lectures by industry stalwarts, but the fact that the employability training starts as early as the 3rd Semester or Second Year itself. We start grooming our students for employability early itself, and we make sure that we continue with that process throughout the course, in a concurrent fashion, and the results have been quite telling.

Seasonal Magazine: What all constitute your main CSR activities? Can you briefly touch upon the contributions of management, staff, & students in CSR?
 

Premnath Reddy: Shalini here would be the best person to answer that. It is her passion which is driving much of our CSR.
Shalini Reddy: Let me say about both our core CSR activities, and the related field of how ecologically holistic our approaches are. Our main CSR work is about adopting neighbouring villages, and our nursing college has been instrumental in providing healthcare for needy women in our surrounding villages. Prem has got another ambitious CSR project in his mind, which we will be implementing shortly, and that has got to do with our Fashion Technology students teaching needy women about modern dressmaking aspects and we are creating an NGO to organize the whole thing and maybe even to market the apparels to create a sustainable livelihood for them. Our students are also involved in educating villagers about the need to vote and thus mark their voice in the democratic process. Coming to our eco-friendly features, we do water-recycling, we do organic farming for our own mess needs etc.

Seasonal Magazine: Three of you appear to be a great team in guiding Acharya to great success. Can each of you comment on others' strengths?
 

Premnath Reddy: Well, it is not just we three. We have a very broad and effective line of professional leaders. But coming to Dr. Vijay over here, he has a unique experience behind him. He did his post-graduation in applied psychology,  did his doctoral thesis on entrepreneurship with a CSIR scholarship, and has worked as a senior scientist in a national level Textile Research Association and later with EdCIL India Ltd., before joining with us. Together with all that he has the initiative to try new things, which is how we came to know each other for the first time.
Dr. C Vijaykumar: I think the Acharya Family is blessed with a visionary Founder & Chairman. While taking the difficult decision of leaving a cosy PSU job and opting for the private sector, this inspired and reassured me a lot. Unlike many other entrepreneurs in this sector, education is not just another business for him. He does only education, and it is his life. Our Chairman is not from a business family, and soon after his college, he had made up his mind to focus on education. His dream was to build a leading institution, and his dream keeps on expanding, and now it is to build a world-class group of institutions. He is also a great leader when it comes to staff welfare or remuneration, and staff is kind of assured that their Chairman is forever building a bigger and bigger opportunity for all of them. Coming to Ms. Shalini, I would say Mr Prem and Ms. Shalini  are the perfect couple. She understands Prem's dream more than anyone else, and would support him to any extend. This is remarkable on her part. I would say Ms. Shalini's dedicated hard work and attention to detail are the secret weapons in Acharya's arsenal.

Coal India Set to Overtake Reliance, Just 14% Behind in Market Cap

Will Coal India Ltd (BSE: 533278, NSE: COALINDIA) soon edge out Reliance Industries Ltd (BSE: 500325, NSE: RELIANCE) to become India’s most valuable company? If that happens that would be something to cheer for the whole nation, as here is a PSU, and a very equitable one at that - it is the largest employer - edging out the biggest of private enterprises.

Coal India is all set to be included in the prestigious BSE Sensex index from August 8th onwards, a move that will help not only help Coal India scrip in this flight to top, but the Sensex EPS itself. 

The decent Q4 & FY’11 results, as well as recent intentions to boost production growth rate from 6% to 9%, has made even the most respected international brokerages call for a re-rating of the scrip. The demand environment also continues to be strong, with NTPC alone placing a 10 MT order, and 18 of the who-is-who of world coal like Rio Tinto, Peabody, Massey, Xstrata, Sinarmas lining up to serve Coal India with whatever coal it can’t produce on its own in time.

And to move Coal more efficiently, Coal India has even offered Indian Railways a deal to buy many new rakes.

For a recent entrant into India’s capital markets, Coal India has really gone places. The first flight was, of course, unknown to many. It was during an almost decade-long run-up to its IPO, when Coal India Ltd and its wholly owned subsidiaries effected a magical turnaround in business.

The second flight was the most famous, when CIL did what was the world’s third largest IPO in recent history, and witnessed huge oversubscription as well as handsome listing gains.

But soon came a period of lull, when the markets considered that the Coal India scrip was fully priced between Rs. 300 to Rs. 350. This period also witnessed fundamental challenges for the company from a few fronts including environment and transportation, as well as a scheduled leadership change at the top.

But by mid-March, CIL had sorted out most of these problems under the new Chairman, NC Jha, who was formerly Technical Director and, of course, a company veteran. And the third flight began for the company and the scrip, which saw this most-recent Maharatna achiever quickly surpass IT major TCS and petroleum major ONGC, to become India’s second most valuable company and most valuable PSU, by market capitalization.

Now, the only company remaining ahead, Reliance Industries, seems so near with not more than Rs. 35,000 crore separating their respective market caps. Percentage wise it looks very small at just 14%. The consensus target for Coal India by a few international brokerages has higher upside than this, percentage-wise. 

This looks all the more achievable as Reliance has been reeling recently at the bourses, due to multiple inquiries it is facing with India's regulators. But it remains to be seen whether Reliance will give up the most-valuable status without a fight. In any case it seems that Reliance also would have reason to smile as Reliance and/or Chairman Mukesh Ambani had invested the maximum possible in Coal India during its IPO.  

With the FY’11 results out, Coal India seems very much poised for the next and possibly final take-off to become India’s most valuable enterprise. Consolidated net profit for the fiscal is up by almost 13%, on a revenue growth of over 11%. Not a bad jump at all, considering the huge base on which it has come.

Coal India is also boldly addressing several challenges to its momentum posed by policy hurdles, railway logistics, and environment concerns. With the full backing of India's Coal Minister Sriprakash Jaiswal, Coal India seems to have surmounted the challenge posed by a Planning Commission directive that would have restricted the e-auction arrangement that is not only a boon to power projects with no explicit coal-linkages, but an 80% more profitable arrangement for Coal India, than the usual Fuel Supply Agreements (FSA) under which it sells at hugely subsidised prices.

CIL has also taken up the logistics issue head-on with Indian Railways, by working together as well as fighting for its rights when needed, with good results coming in.

By focusing on green initiatives as well as publicizing them, CIL has also largely addressed the environmental concerns.

But what will really make Coal India fly for the long haul this time is the sheer demand for their product, as well as the enormous room remaining to extract better prices vis-à-vis high international rates. Already, it is estimated that out of the 80,000 MW power generation target for 2017, barely 40,000 MW worth of projects have succeeded in obtaining coal-linkages.

This booming demand and scope for better prices have successfully neutralized a recent enormous jump in wage bill, and are expected to make Coal India a scrip of long-term investment potential.

Musli Power Founder Says, "We Have Got Justice From Court"

Kerala High Court has recently revoked the State Government imposed ban on the manufacture and sale of Musli Power X-Tra. We met a beaming Dr. KC Abraham to ascertain the nitty-gritty of the developments. Seasonal Magazine had some hard questions for Kunnath Pharmaceuticals Founder, who had recently upped his challenge to Rs. 10 crore for anyone proving tadalafil’s presence in their blockbuster ayurvedic drug, Musli Power Extra. Here, he shares his radical views on various aspects of his flagship product, as well as about the greater question of being an entrepreneur in the state of Kerala:

You had recently upped your open challenge from Rs. 5 crore to Rs. 10 crore, for anyone proving the presence of certain allopathic molecules in Musli Power X-Tra. Why? 

Well, it is because we want to convey to our customers that we remain doubly sure about our product. Which company would dare to do something like this? Nobody had come forward to even stake a claim to the earlier reward of Rs. 5 crore. But the rumour mill continues that somebody had found tadalafil in it. It is tough to kill a rumour, especially if it is being spread with malicious intent and in an organized manner. The reward is open to anyone proving that genuine capsules of Musli Power X-Tra contains tadalafil (Cialis), sildenafil (Viagra), or steroids, through gold standard tests like Mass Spectrometry or HPLC.

The court has just removed the Government ban on manufacture and sale of Musli Power X-Tra. Are there are conditions attached to it?

Earlier we had obtained a stay on the Government order. Now the court has revoked the Government ban. We welcome the court order, obviously. There are some conditions set, but most of them are for the Government to follow. They were directed to collect authentic samples from us and get it tested at a Ghaziabad test facility specifically created for testing herbal medicines. Government was also directed to allow us a hearing, if we request to have such a hearing before them on this issue. The only condition set before us is to cooperate in giving authentic samples, which we were always complying with. Since we had a stay for most part of this ban period, we continued to manufacture and sell the medicine all over India and abroad, including in Kerala.

But hasn’t the negative publicity affected the sales?

No, it is not the negative publicity that has affected, but the organized effort from some quarters to derail the product’s supply-chain and sales. But we are confident of surviving this crisis.

Are you saying that your product was being targeted despite the stay? Who is behind this, according to you?

It was being targeted by a section of the bureaucracy, despite the stay, for some weeks. At the behest of whom, I have often indicated in media interviews. But we have fought it out with the authorities, and now the situation is better. Somebody just can’t kill the demand for the product, however hard they may try.

Are you repeating the allegation that MNC Pharma is behind this? Or is there something more?

I would repeat that any day. But on a final analysis, that should be expected. They are our competitors. Our blockbuster ayurvedic product is affecting the sale of these allopathic medicines with side-effects. But at the end of the day, I am more disappointed with the corruption prevailing in a section of the bureaucracy in Kerala.

Can you tell a specific example?

Well, I don’t want to blame anyone through media. Whatever I had to say, I had said it in their face. There was this officer with whom I was pleading my case. I told him that I am not asking him to bend any rules, that Kunnath was paying huge excise duty, income tax, and VAT to the government, as well as other taxes , and that I was providing hundreds of jobs in this state. And you would be shocked at this officer’s reply. He simply asked, “But what is there for me in it?”  

But, again, that also should be expected by a business, isn’t it? Which state doesn’t have corruption?

No, you are totally wrong over there. Here, it is not a matter of just corruption but sadism. You won’t just believe it unless you are at the receiving end of it. Here in Kerala, lobbies with vested interests and officers will vow to finish a business off. I would call it a case of super-inflated egos and sadism. Business success is never appreciated in this land.

But you are continuing with your business in Kerala…

Yes, very much I will continue in Kerala. But that is because I don’t mind fighting it out, as long as I am on the right side of the law. A few friends and even political leaders are advising me that I would grow a hundred times faster if I go outside Kerala. But I think that would be a cowardly thing. Secondly, nobody understands the scope of this product. This is not going to stay as a local medicine or brand. We are already taking this product to many countries. I want Musli Power X-Tra to be the first internationally successful product from Kerala.

But that also means you are not de-risking your business model…

No, we will de-risk it systematically. Our current production unit is built according to US FDA standards, and duplicating such a setup in a neighbouring state is not a great deal for us. We can do that any day we decide to go for it. Our organic farming for our herbal ingredients is already outside the state, in Rajasthan, and it is being done in a massive way. But our greater focus now is strengthening our logistics, sales force, customer reach etc. across the country and abroad.

You have also been reluctant to make Kunnath Pharma a multi-product company. That also goes against the conventional wisdom of de-risking… 

You won’t believe how many times I have heard this same argument from consultants. But that is because, they just don’t understand the scope of this product that I mentioned earlier. I will elaborate. Musli Power X-Tra’s target base is the whole world population - men and women - between 18 to 80 years. We have not even scratched the surface of this market. But having said that, Kunnath is indeed pursuing the development of quite a few products like our anti-asthmatic, anti-diabetic, anti-high-cholesterol, and a few more drugs. Some of them are offered only through physician-channels and some are under clinical trials. We don’t want to enter any segment with a half-baked or undifferentiated product. The drug has to work absolutely. Like Musli Power Extra. Its efficacy is what made it a hit. Not the advertisements or even the controversies. In all segments possible, we want to replicate that success. Nothing less than that.

But none of your ingredients in Musli Power X-Tra is secret. Can’t it be replicated by someone else?

That is the mystery. Let me ask you a question in return. If it were possible, won’t it have been done already? In fact, many many pharma companies - local and foreign, ayurvedic and allopathic - have tried and failed here. Most of them want to make only a quick buck. None are willing to invest crores and crores of rupees and spend years and years of research to develop a drug as effective as ours. The secret lies in our unique ratios of high-concentration active principles, and it is a patented invention. Nobody is going to replicate that.

In which all countries are Musli Power planning to enter?

We started off with Kuwait and Bahrain, and later entered a few more GCC countries including UAE. In Singapore, we have obtained all the necessary permissions and we may enter any time now. Recently, we have surmounted major hurdles in getting even the US FDA approval. We hope to get the final approval soon. We will take this to each and every country gradually. It is not a big deal for a safe product that works.