All things Money Thread

Big Daddy

Super User
There are two kinds of truth: One based on facts and other based on repeating a lie. India's economic story is based on later strategy. Here is another story based on great Indian economic progress. The story says that Indian women are missing out by not working in growing Indian economy (as if jobs are available). I say, Indian women do not want to work. The want to marry and sit at home. The stat in the article prove this where % of women in workforce were 37% in 2005 and now it is down to 25% despite government creating quotas and give generous maternity leave benefits. These benefits may increase business cost and lower female employment, but not every woman is at reproductive age so that does not explain over 10% drop in employment if economy is growing at such a great pace as it is claimed to be. So I believe that it is combination of poor economy and high stress jobs that is leading to greater number of women staying out of workforce.

http://money.cnn.com/2017/05/30/news/economy/india-women-workforce-economy-growth/index.html?iid=hp-stack-dom

Women are missing out on India's economic boom
by Rishi Iyengar @Iyengarish May 30, 2017: 10:19 AM ET
This company helps women in India find custom-fit success
India's fast growing economy has a big problem: Not enough women are working.
"This has a very significant cost to growth," said Frederico Gil Sander, author of a new report by the World Bank.


India is growing at an enviable 7%, and the World Bank predicts that will increase to 7.5% by 2020.

But that could be much higher if it could increase the proportion of women in work.

Based on 2012 figures, the last year for which official data is available, only 27% of Indian women aged 15 or older were working or actively looking for a job.

That's down from 37% in 2005, despite a strengthening economy and growing middle class.

That means India ranks 120 out of 131 countries, below far smaller economies such as Bangladesh, Vietnam and Indonesia and on par with Pakistan, Egypt and Yemen.

The World Bank estimates that increasing the rate of female workforce participation by as little as six percentage points could push growth up to 7.9%. If India closes just half the gap with Indonesia and Bangladesh, its economy could grow at 8.5% a year.

"If India were able to increase the [female] labor force participation even more, the impact on potential GDP would be proportionally greater," Sander said.


Women are abandoning agricultural work as they move into India's booming cities. But they're finding it hard to get a job when they make the move, Sander explained.

"Many of the women want to work, but the fact is that not enough jobs are being created that women can take up," Sander said.


The Indian government has tried to make it easier for women to work, most recently by doubling the paid maternity leave firms must provide. But many say the generous policy is a double-edged sword that could deter companies from hiring women in the first place.

The World Bank says there is no substitute for creating more jobs and ensuring women can access them.

"Getting women into the labor force and into productive jobs will give the economy a boost, which is much needed," said Junaid Ahmad, the bank's country director for India.

"Focusing on inclusion... is the next agenda for India to achieve the double-digit growth that it can achieve."
 

Big Daddy

Super User
Government is planning of selling Air India to an Indian company. The problem is that Indian aviation companies are not really professionally managed. Indian idea of business is to keep cutting cost until you run out of business. That is not what competition really is. To stay competitive you have to learn dynamic seat pricing, impose ticket restrictions for different prices, get into fuel price future contracts, try overbooking by predicting no-shows and cancellations, diversify revenue streams like time sensitive freight carrying, impose baggage fees, etc. In short, a combination of several things will maximize revenue and keep you in business. Optimization of these aspects requires substantial computerization. Advanced computer, math and business skills are required to compete. This is one thing India does not have. For centuries India is stuck at a certain level of intelligence-- a ceiling so to speak. Until that ceiling is broken, Indian economy is not going to grow. Breaking that ceiling requires grit, educational achievement, professionalism and a general social desire to improve itself by critical analysis. More importantly a degree of self-confidence to try something different and a business environment that allows risk taking. Mind you that risk taking is different than foolhardiness like lowering cost to compete until you go bankrupt-- a strategy that is so common in Indian aviation industry today.

http://www.business-standard.com/article/companies/no-foreigners-please-air-india-might-be-sold-to-local-domestic-investors-117053100531_1.html
 

citymonk

Super User
Report clearly says no Indian Company has muscle to buy Air India with its debt.

TATA used to run it before it was nationalised.
One huge reason for so much debt is it's employees canteen. It is highly subsidized, I have myself relished lip smacking snacks @ dimes.
Pure KheerKheer bowl was hardly for 25paise in 1990's.

A full course meal Thali used to cost Rs. 1.25, including Sweet dish like kheer or Gulab Jamun. I still remember their Raita and other accomplishments.
Parasites type employees will not only dine in canteen during duty hours but will get parcels packed for home too. These parasites are entitled for family airtickets for vacations abroad. Plus home droping for all employees, irrespective of duty type is icing on cake.

Canteen alone is big puncture in boat and all those free tickets. These open tickets were anyway sold by employees for personal gains.


Any way following paragraph of report is worth noting, why banks do not want equity of such organization.

"An earlier attempt at restructuring Air India’s debt into equity was nixed by banks that did not want shares in an airline that would be difficult to encash."
 

citymonk

Super User
Report clearly says no Indian Company has muscle to buy Air India with its debt.

TATA used to run it before it was nationalised.
One huge reason for so much debt is it's employees canteen. It is highly subsidized, I have myself relished lip smacking snacks @ dimes.
Pure KheerKheer bowl was hardly for 25paise in 1990's.

A full course meal Thali used to cost Rs. 1.25, including Sweet dish like kheer or Gulab Jamun. I still remember their Raita and other accomplishments.
Parasites type employees will not only dine in canteen during duty hours but will get parcels packed for home too. These parasites are entitled for family airtickets for vacations abroad. Plus home droping for all employees, irrespective of duty type is icing on cake.

Canteen alone is big puncture in boat and all those free tickets. These open tickets were anyway sold by employees for personal gains.


Any way following paragraph of report is worth noting, why banks do not want equity of such organization.

"An earlier attempt at restructuring Air India’s debt into equity was nixed by banks that did not want shares in an airline that would be difficult to encash."
 

citymonk

Super User
Report clearly says no Indian Company has muscle to buy Air India with its debt.

TATA used to run it before it was nationalised.
One huge reason for so much debt is it's employees canteen. It is highly subsidized, I have myself relished lip smacking snacks @ dimes.
Pure KheerKheer bowl was hardly for 25paise in 1990's.

A full course meal Thali used to cost Rs. 1.25, including Sweet dish like kheer or Gulab Jamun. I still remember their Raita and other accomplishments.
Parasites type employees will not only dine in canteen during duty hours but will get parcels packed for home too. These parasites are entitled for family airtickets for vacations abroad. Plus home droping for all employees, irrespective of duty type is icing on cake.

Canteen alone is big puncture in boat and all those free tickets. These open tickets were anyway sold by employees for personal gains.


Any way following paragraph of report is worth noting, why banks do not want equity of such organization.

"An earlier attempt at restructuring Air India’s debt into equity was nixed by banks that did not want shares in an airline that would be difficult to encash."
 

Big Daddy

Super User
Part of the reason for poor financial performance may be that it flies Modi and these trips do not seem to end :mrgreen:. I had read earlier that AI employees get free annual rides to their vacation spots. And of course there are unprofitable flights that government promises like one from Sri Lanka to Varanasi. Anyway, entire Indian aviation industry appears to be unprofitable (Kingfisher, Jet and now this). Margaret Thacher said that in socialism you eventually run out of other people's money. So Indira Ghandi may have nationalized Indian banks to borrow and then spend but years of bad decision making has led to banks stacking up debt and now new money is hard to find. World bank is not going to be any generous to India either and newly formed BRICS bank is already committed to financing China's wasteful One Belt One Road project.

Centralized decision making almost always fails due to lack of oversight. If Banks remained private they would worry about stock prices and would not fund wasteful government projects and airlines.
 
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citymonk

Super User
I do not understand how debt is converted into equity, I mean what would be FPO price fixed. Will there be any premium charged per alloted share or should Such shares of AI be alloted at rate less then Par value of Rs. 10 or Rs One.

And if banks get equity at fair value much much below par then it should be better for them then writing off the debt altogether.
 
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Big Daddy

Super User
Let's face it no one is going to buy a stock that does not have any future. People are only going to buy stock that has future. So let's assume that you have a company that has growth potential but has debt. Say that debt is $25 million and people think that by restructuring and adding more money (say $5 million) into the company, company can give profits of $50 million next year. This means you want to issue stocks worth of at least $30 million. The original $25 million will wipe out the debt and additional $5 million is raised to grow the company. The reason people will buy stock is that the company has growth potential where stock price will grow. The initial offering price (IPO)/share will depend on valuation of the company. It must be more than $30 million but how much more depends of subjective estimates of growth potential of the company. If IPO value is low then stock price will jump in a day and if IPO value is high then it will drop. Ideally, you want to offer the stock at a price that is fair (meaning that it does not fall too much or go up too much).

The reason you have stock offering is to wipe out debt by moving ownership of the company (from government in this case) to shareholders, and also raise additional money to grow the company. When I say grow the company, it means growth in profits and not growth without profits as is happening in some eCommerce companies. A company that generates profits will have positive net present value (leading to positive stock value). A company that does not generate profits or is not likely to generate profit will have zero value and will not be able to offer an IPO because no one will buy such company.

Investors are extremely short sighted so company management is always on their toes to show profits.
 
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Akash Deep

Active Member
Here, it is a good read to find out why AI is in losses. Just an FYI, most of the airlines around the world see no profit and when it comes to Govt. ones than they are always in loss.

  1. Siphoning off tax payers money:

    Have you heard of Shardha Scam? It costed 40000 Crores to the nation. Air India(AI) is under a debt of similar amount i.e. 40000 Crores.

    Read further to know more :)
  2. Mandatory regulation for government officials to fly using AI: Officials working in govt sectors or PSUs have a compulsion to book their travel through AI. At any given time of the year, cost of an AI travel is much higher than private carriers operating on the same route. Yet due to govt regulations they have to book their ticket through AI. Later, govt refunds the amount to the traveller. In a nutshell, a govt enterprise ends up paying another govt enterprise a value more than what was actually required. Drawing your attention towards another consequence of this symbiotic relationship, I would like to state a similar situation wherein if there is no AI flight available at the precise time, date and the exact locations, travellers have to undertake longstop oversand they end up paying for accommodation. Now this accommodation charge(N) is again borne by the govt. So where the task could have been accomplished in X amount of money, it ends up consuming X + N.
  3. Low number of profitable flights: AI operates 250 Domestic and 120 International flights daily on an average and only 9 out of 370 are profitable. This accounts for a huge loss in aviation sector considering the amount of money required to sustain AI's on board and ground staff, maintenance and running charges and last but not the least, the air carrier fuel.
  4. Consistently worst OTP: AI has always been at the bottom of On-Time Performance (OTP) amongst all domestic carriers.

    P.C: Bangalore Aviation
  5. Low PLF: AI can boast itself of maintaining its position in bottom two when it comes to PLF(Passenger Load Factor). Taking into consideration its high fares and lucrative fares offered by competing airlines, it won't be an exaggeration to say that half of their load factor might be a contribution from govt officials stuck due to the compulsion mentioned in point 2. If it were not true, PLF of AI may never cross 30%. Even though, govt data states that slightly more than 5% seats of AI are filled by govt employees but a single travel in the airline might unreveal the truth underneath. FYI, AI is still unable to fill its 17000 seats out of 62000 every day.
  6. Inefficient planning and service:
    - "Snag Hit" Dreamliners acquired by AI can operate for 14 Hrs daily for generating maximum revenue instead of current 11.5 Hrs/daily.
    - There are many routes where only AI is operating even after generating not much revenue out of those routes. E.g. BLR- MYQ, DEL- IXD etc.
    -In a developing nation like India where low air fares are preferred over spacious leg area there is a huge margin where number of seats can be increased in an AI aircraft. For the same area used for economy class, Indigo has more seats than AI.
  7. Frequent technical failures: Aircrafts owned by AI experience frequent technical failures and the rate is much higher as compared to private carriers. Sources say that currently 22 AI Planes are in the workshop undergoing repair. It would have been rather profitable if AI had taken planes on lease like Indigo instead of buying.
  8. Excessive man power:
    AI should be a case study for Hidden EmploymentData shows that of the 3,400 cabin crew members, nearly 17-20 percent are in excess daily. There are at least 1,450 pilots in AI, who fly about 410 planes. As per the norm, a pilot must clock around 84 flying hours a month, but even in domestic sector, they are not able to cross 56 hours a month. Source. After much vicissitude of fortune posed by non profitable flights on low profitable routes, worst OTP, low PLF, snag- hits and technical failures the meagre revenue generated at the end is utilized to pay salaries to the excess man power in place.
  9. Non-competitive staff members: Aviation industry uses the most advanced form of revenue management principles. To understand this and be at par with other players in the market govt should hire young people from premier institutions. Alternatively, they can recruit civil servants either with a long tenure to serve or with a prior experience in aviation industry. These prerequisites might enable the recruited staff to understand the dynamic revenue system along with detailed route planning. Currently, govt hires civil servants who are about to complete their tenure and by the time they understand how airlines work they retire.
  10. Govt policies: At the end, I would like to put forward the unrivalled reason for AI's loss as per my view.
    "To succeed you need two things- Ignorance and Confidence"
    -Mark twainFor any company to succeed, it is required that it places faith and confidence in its employees. This confidence gives them a freedom to think and execute disruptive ideas. Currently, AI officials at the prospects of suspension or transfer are afraid to take any divergent step. If AI could build a niche where it shows confidence on its employees and assure them that the unlikely consequences will be ignored, it may save the dooming airline.
 

citymonk

Super User
What ever the reasons for AI failure, Government is trying to save it by providing more and more loans and hence the airline is struck in vicious debt trap cycle.
Their main current worry is to able to pay immediate interest on fresh emergency loans, they are expecting from banks to ease interest rates being charged on such new loans.

And lately they have been somehow successful in paying interest on loan as short term measure.

http://wap.business-standard.com/article/economy-policy/debt-trap-air-india-s-ride-out-of-turbulence-may-have-hit-a-dead-end-117051700292_1.html

I think Kind of Air hostesses they employ due to reservation policy is also one of main reason people avoid to buy their tickets.


 
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