Tuesday, August 17, 2010

SKS and the IPO

The SKS IPO has been controversial for many reasons. The core issue was if it was ethically right to privately profit from serving the poor. This debate has raged in the front pages of the pink papers and the international press and everything ranging from the methods used, the interest rates charged and the marital status of the promoters have been scrutinised and criticised.

The fact is that the issue was a huge success and heavily oversubscribed. It listed at a premium and closed the first day of trading at a premium of over 10% to issue price. After a long time an Indian IPO generated profits for flippers who borrow and subscribe to IPOs and sell on listing. Needless to say original investors and promoters who cashed out made huge profits. All in all the market has pronounced its verdict and it is indeed OK to profit from the poor.

The fact that the market now views this segment as investment worthy has huge implications. Every investment manager round the globe will now look to allocate a percentage of the portfolio and large capital flows will reduce cost of capital to this segment and the ensuing competition will eventually result in lowering the cost of borrowing to the poor. With over 300 million of our population not having any access to formal credit markets, for productive, consumptive or housing needs the importance of formal capital cannot be overemphasised. Over 1 trillion dollars of capital is required of which at least $250billion has to be in equity form.

So let us not waste our breath debating ethics but laud SKS for unlocking a new source of much needed capital.

Friday, August 13, 2010

the underbelly of delhi

12000crores being spent on the common wealth games? Did I hear right? In a country where between 30 to 40% earn less than $2 a day. And what do we get for it? I am told prestige.
Of course prestige is priceless, but only if we have something to be proud about.

If we spend 12000 crores and create ugly non functional monstrosities, and do not win a single medal, will that still be prestigious?And who is paying for this anyway? and who gets the so called prestige? the politicians? the sports officials? In any case the politicians are the sports officials , and get not only the prestige but also, as i understand, most of the money.

Then someone told me that Delhi in the process will get some world class infrastructure. Now, I have been in and out of Delhi for quite a few years now, and happen to believe that Delhi relatively speaking has the best infrastructure in the country..be it the broad roads, a swanky airport, a metro system that compares favourably with any that I have used anywhere in the world. So why take money from the rest of the country which is literally crying for some decent infrastructure spend and create more in Delhi? Just so that our worthy netas can feel proud? And get richer?

Any why are our regional Netas not crying hoarse at this daylight robbery to feed Delhis underbelly? Do they get to share in the prestige and the loot too?