Robin Chandra Roy had predicted the current slowdown in real estate two years ago. Currently, we shall see the end of companies which still price according to the customer’s desperation. Some new companies will come up, which will have their total project plan for construction disturbed if the cost of a screw goes up by 2p
The real estate industry around the world has developed in the same manner till now. Real estate agents have graduated into real estate developers who undertake to do the dirty of work of getting licenses and mutating the land from either agricultural to residential urban or into commercial urban. The expertise is more often than not in dealing with specific documents, which are either vetted of generated by the local agency or body of government with their particular rules and methods. For instance, selling land or an apartment in Dankuni in West Bengal, outskirts of Osaka in Japan or in Hillsborough in the United States entail having thorough knowledge of documents regarding land ownership and also land use.
So its all about documents or lack of them, isn’t it? If you don’t know how to process a document for real estate then you don’t know how to handle land dealings and you cannot graduate from just a guy who lives in a rented apartment to a guy who buys and sells them; or come to think of it who creates them from agricultural or fallow land.
However, in the last 10 years a few things have changed in the highly regulated regimes of Guang Zhou, Singapore and Thailand. Singapore with its lethal combination of Tamilian and Chinese can-do, will-execute rationalism; Thailand with its monarchy taking most of these decisions in a centralized manner and finally Guang Zhou with its one modular body taking all decisions regarding real estate restructuring and development.
The real estate development cycle moves in a particular manner around the world. It starts from specific need, moves onto fixed budget and then the scenario of funding comes into play and then it moves on to the diverse and branched situation of multi-expertise such as digging the ground for a foundation, getting the papers in order from the local authorities, sourcing cement and bricks, etc.
Only when this process has begun does the next stage of compartmentalization begin. How many rooms? In what structure? What sizes? What direction? For whom? How many storeys? For what purpose? Whether for an individual, family, organization or company?
Once these are solved then the question of embellishments arises. How many inches on the window? What kind of curtains? What colour of taps in the bathroom? What colour of paint? There are different vendors to address all these issues.
The real estate industry, as far as manpower and human resource skill goes draws strength from the realtor industry, which are labeled in common parlance as property dealers in India. This is changing and the real estate industry is changing too. The adjustment process is looking like a painful birth as it should. Earlier, the property dealer extended his expertise of hiking the price on the same product so that his two per cent commission gets inflated. So the buyer and the seller both paid a higher two per cent for the same house if it moved from one owner to another many times as the catalyst for this process ensured that the price moved up manifold.
The process was repeated when property dealers became real estate developers. They sold one batch of apartments for X and then sold another batch for 2X and the last batch for 8X if they could. They kept milking the consumer. Their expertise for glib talk convinced the customer so well that a matchbox sized apartment with paint peeling off its walls was fit to be bought for Rs 1.5 crore mortgaging the consumer’s grandmother and family heirlooms. The consumer like a meek lamb always believed that the price is going to skyrocket to the moon next week. It was conveniently forgotten that the very person who is selling them the matchbox is the same entity who will hike the price.
The new kid on the block is the professional who specializes in creating the product such as the architect, the materials manager or the structural engineer. Earlier, it was the salesman who had taken over the process, now it is the guy inside the factory or in front of the drawing board. These people have devised new ways of building, designing and constructing houses. Companies such as Asipac Projects in Bangalore headed by Amit Bagaria have tied up with Japanese companies to maximize space in small apartments. Rajnikant Gera of CREDAI has introduced Thai professionals such as Sunchorn who specialize in fabricating 15 storeyed buildings with pre-fabricated material.
These specializations are slowly spilling over to the selling and product planning area. People are no longer fixing a price looking at the size of the customer’s wallet but fixing a price after due diligence over logistics and cost of materials. This is giving rise to a new breed of companies who know what they are doing. This is a divorce from the past.
By Robin Chandra Roy
General Motors in India has tried different techniques too. One of them being launching many beautiful models. The other being a promise that the company will render free servicing for three years with the customer only paying for the parts.
This kind of innovation has had positive results where the Indian population has seen the rise of Chevrolet cars over the years. Unlike earlier years, nobody cranes a neck to see what brand of car it is if a Optra is suddenly parked in your local mall.
At the same time, today’s internal-combustion engine is far more advanced and efficient than its predecessors. Over the past 20 years, automakers including General Motors have significantly improved its power, its fuel efficiency, and its emissions, with more changes to come. Not that it will always outperform the alternatives; fuel cells—rapidly gaining market acceptance and slated to be in mass production for some premium markets by 2010—may become the leading technology of the late 21st century. However, given the current economics of the internal-combustion engine, we predict that it will still be installed in 90 percent of all new vehicles sold in developed economies in 2015 and remain dominant in new vehicles for at least another decade after that, both as a stand-alone technology and as an integral part of hybrids. Here we are wont to follow the progress of General Motors’ Captiva green car.
Until the late 1960s, business economics and perceived consumer values shaped the automotive industry’s power plant choices. Carmakers could choose from a range of technologies The value to the consumer of each of them was determined by its fuel and cost efficiency as well as its safety, durability, and ease of use. The convenience of the supporting infrastructure available for the internal-combustion engine was another very important consideration in the power plant choices of the automakers. In addition, increasingly strict emissions regulations have been influencing their priorities since about 1970.
A closer examination of these issues—technology, infrastructure, and emissions regulation—can help make it possible to forecast which technology will power cars in the coming decades. Other factors too may eventually be important. Fuel cells, for example, may have unique advantages for what auto engineers call packaging: since they don’t need an engine bay, they offer greater freedom in styling and structural safety and related issues.
Here we focus on only two technologies: fuel cells and gasoline- or diesel-powered internal-combustion engines. Hybrids—the third contender—are clean and fuel efficient and have a valuable role to play in the near term, but they sacrifice performance and raise costs, since two separate technologies must be integrated and controlled. Although hybrids are in compliance with today’s lower emissions targets, only the fuel cell can power the zero-emission vehicles (ZEVs) that regulation will require in ever-increasing numbers.
At the beginning of the 1980s, the average horsepower per litre of cars in the US market had been drifting for 25 years—since the introduction of the high-compression engine, in the mid-1950s. A complacent industry was making few efforts to improve the underlying technology. But in the early 1970s, pressure for improved efficiency and emissions performance rose sharply. The US Clean Air Act as amended throughout the 1970s embodied in law the environmentalists’ demand for stricter emissions rules. Furthermore, the Arab oil embargoes of the 1970s squeezed the fuel supply and drove the need for more efficient engines.
Here is the outgoing Satyam Chairman B Ramalinga Raju’s letter to the Board:
To the Board of Directors,
Satyam Computer Services Ltd. Dear Board Members, It is with deep regret, at tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice:
- The Balance Sheet carries as of September 30, 2008
- Inflated (non-existent) cash and bank balances of Rs.5,040 crore (as against Rs. 5361 crore reflected in the books)
- An accrued interest of Rs. 376 crore which is non-existent
- An understated liability of Rs. 1,230 crore on account of funds arranged by me
- An over stated debtors position of Rs. 490 crore (as against Rs. 2651 [cr.] reflected in the books)
- For the September quarter (02) we reported a revenue of Rs.2,700 crore and an operating margin of Rs. 649 crore (24% Of revenues) as against the actual revenues of Rs. 2,112 crore and an actual operating margin of Rs. 61 Crore ( 3% of revenues). This has resulted in artificial, cash and bank balances going up by Rs. 588 crore in Q2 alone.
The gap in the Balance Sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew significantly (annualized revenue run rate of Rs. 11,276 crore in the September quarter, 2008 and official reserves of Rs. 8,392 crore). The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations — thereby significantly increasing the costs.
Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was that poor performance would result in a take-over; thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten.
The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas’ investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam’s problem was solved, it was hoped that Maytas’ payments can be delayed. But that was not to be. What followed in the last several days is common knowledge.
I would like the Board to know:
1. That neither myself, nor the Managing Director (including our spouses) sold any shares in the last eight years — excepting for a small proportion declared and sold for philanthropic purposes.
2. That in the last two years a net amount of Rs. 1,230 crore was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoter shares and raising funds from known sources by giving all kinds of assurances (Statement enclosed, only to the members of the board). Significant dividend payments, acquisitions, capital expenditure to provide for growth did not help matters. Every attempt was made to keep the wheel moving and to ensure prompt payment of salaries to the associates. The last straw was the selling of most of the pledged share[s] by the lenders on account of margin triggers.
3. That neither me, nor the Managing Director took even one rupee/dollar from the company and have not benefited in financial terms on account of the inflated results.
4. None of the board members, past or present, had any knowledge of the situation in which the company is placed. Even business leaders and senior executives in the company, such as, Ram Mynampati, Subu D, T.R. Anand, Keshab Panda, Virender Agarwal, A.S. Murthy, Han T, SV Krishnan, Vijay Prasad, Manish Mehta, Murali V. Sriram Papani, Kavale, Joe Lagioia, Ravindra Penumetsa, Jayaraman and Prabhakar Gupta are unaware of the real situation as against the books of accounts. None of my or Managing Director’s immediate or extended family members has any idea about these issues.
Having put these facts before you, I leave it to the wisdom of the board to take the matters forward. However, I am also taking the liberty to recommend the following steps:
1. A Task Force has been formed in the last few days to address the situation arising but of the failed Maytas acquisition attempt. This consists of some of the most accomplished leaders of Satyam; Subu D, T.R. Anand, Keshab Panda and Virender Agarwal , representing business functions; and A.S. Murthy, Han T and Murali V representing support functions. I suggest that Ram Mynampàti be made the Chairman of this Task Force to immediately address some of the operational matters on hand. Ram can also act as an interim CEO reporting to the board.
2. Merrill Lynch can be entrusted with the task of quickly exploring some Merger opportunities.
3. You may have a testatement of accounts’ prepared by the auditors in light of the facts that.I have placed before you.
I have promoted and have been associated with Satyam for well over twenty years now I have seen it grow from few people to 53,000 people, with 185 Fortune 500 companies as customers and operations in 66 countries. Satyam has established an excellent leadership and competency base at all levels. I sincerely apologize to all Satyamites and stakeholders, who have made Satyam a special organization, for the current situation. I am confident they will stand by the company in this hour of crisis.
In light of the above, I fervently appeal to the board to hold together to take some important steps Mr T R Prasad is well placed to mobilize support from the government at this crucial time. With the hope that members of the Task Force arid the financial advisor, Merrill Lynch (now Bank of America) will stand by the company at this crucial hour, I am marking copies of this statement to them as well.
Under the circumstances, I am tendering my resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded. My continuance is just to ensure enhancement of the board over the next several days or as early as possible.
I am now prepared to subject myself to the laws of the land and face consequences thereof.
(B. Ramalinga Raju)
Copies marked to:
1. Chairman SEBI
2. Stock Exchanges
For the last few days, I had been thinking of experiencing a conducted tour to see various tourist places in Bangalore. I initiated the action by searching for a suitable tour operator. Over the net, I found that the information is limited. Anyway, I started by calling up Bangalore Metropolitan Transport Corporation (BMTC Tel no. 22952311/9844263157. ) which has a one day sight seeing tour that starts from Majestic Bus stop (Kempe Gowda Bus Stop) at 9 A.M. As I stay at some distance from the Majestic, and starting my tour from Majestic would be painful, I then called up Karnataka State Transport Development Corporation KSTDC (Reservation Enquiry Tel no.80-2275869/22212098) for details. They have a tour for half a day as well as for one day but the details of the tour are not available on the website. Finally, I started visiting few private tour operators near my place. I found Janathaa Travels and Manish Travels, both of which offer a one day trip. Manish Travels though offers a pick up from Marthavalli which is closer to my place. I went to their place at 8A.M to wake them up early after a long working night! Though they were not so happy with a customer so early in the morning, they issued me a ticket with seat no. 4. With my experience, I know that this allocated seat number has no real meaning if you did not book your ticket early enough. They will “adjust” you as one might say in Indian English. I was though hopeful for a better seat.
The bus came at 9 A.M, picked me and other five customers from Marathahalli and drove down to main city. After reaching there at around 9:45 A.M, they told all the travelers to board another bus (the reason for this was not clearly given, and I assume this was probably because they are short of passengers) which is from Shiv Shakti Travels. When I found I have been allocated the navigator’s seat I voiced a mild protest which went unheard.
Then, the journey began. Most of the passengers are from Bengal and Gujarat – the inhabitants of these two states of India are known to have the greatest propensity to travel.
Our first stop was at ISKCON temple, a very famous religious place (situated on Chord Road, temple timing: 4-15 A.M to 5-00 A.M, 7-15 A.M to 12-50 P.M, and 4-00 P.M to 8-20 P.M). You need to remove your footwear before entering. They don’t allow cameras inside although you may buy photographs of the temple for Rs.10 outside the temple premises at the stalls set up there. Fifteen minutes were allocated to the travelers to visit the temple.
The next location was the Bull Temple which is on the bull temple road approximately 5 km. from ISKCON. Here also you need to remove your footwear though you can take pictures. A stone carved bull (the “vahana” or transport of Shiva is worshipped here which is approximately 10ft in height and 20 ft. in length. Outside, you may buy a few nice woodcarvings offered by hawkers. Note that you need to bargain before purchasing.
Our guide informed us that the next stop would be Tipu Sultan’s Palace. (Timing: 8-30 A.M to 5-30P.M, Rs. 5 and Rs. 100 for Indian and Foreigners respectively)). Again, the time allocated is only 15 minutes, which is truly an unrealistic amount of time to fully appreciate the wonders of the palace and the museum inside and read the history of Tipu Sultan.
Lalbag, the botanical garden was the next halt. (Timing: 8-00 A.M to 6-00 P.M, Walker’s Time: 6-00 A.M to 8-00 A.M and 6-00 P.M to 7-00 P.M, Tickets: Rs.10) The guide was with us and he made sure we saw the beautiful garden in 30 minutes, walking along the pathway, twisting one’s head right and left, to grasp all the impressions formed and absorb the sights and smells quickly so that when you are back you can tell a lot about the garden. We ultimately saw only the glass house and the watch tower.
The next stop was all about the joys of shopping! They brought us to Mysore Resham Emporium run by Sandesh group not the Govt. owned emporiums (good marketing by the retail operators). The ladies went hurriedly inside. A newly married couple also went with them. When they came back I could see a big smile on the wife’s face and a gloomy look on the young gentleman (I guess whatever she bought must have been very expensive)
By the time we finished shopping it was almost 1.30 pm. Rats were running in my stomach. We went to a nearby vegetarian restaurant Usha. I ordered Puri-bhaji when I found Dosa is not available (this must be the only veg restaurant in Bangalore that does not offer the ubiquitous dosa!) and also asked for lassi. The waiter told me lassi is not available. I ordered coffee instead. Later, I found a menu card which was lying on the next table. I found that milkshake could be an alternative and tried to change the order. They informed me that once the order goes to the computer it can not be changed (which reminded me of “Lock Kiya jai” from Amitabh). The food was horrible. All the customers are the tourists brought by the tour operator (I suspect there could be a code sharing agreement existing here).
After the sumptuous lunch we went to enhance our knowledge in science and technology at the Visvesvaraya Museum (10-00 A.M to 6 P.M, Tickets: Rs.20). The time of twenty minutes allocated by the tour operator basically means one needs to cover four floors with 5 minutes to see and understand. Somehow I managed to see all floors but can tell the names of the hall only after 6 months of visit. It is fairly interesting place for students to visit, especially those beyond the 8th standard. A lot of everyday items are shown with the scientific principle behind it explained. A must see exhibit is that of the “Head on a Platter”.
Next stop as per the brochure was Vidhan Soudha and Attara Kacheri. The guide informed us you can see those looking out from your window. They cannot stop there due to traffic regulations. Hai Ram these two words came out from my mouth –I missed out on two of the most beautiful architectural displays in Bangalore. In between, the bus passed by Cubbon Park (a “window” visit), which incidentally, had been also listed in the brochure.
The Bannerghatta National park, a 30km journey from the city central, gave us an opportunity for a good nap to digest the food and all hurried visits to the earlier tourist spots. When we got up, some people said aa gayye, itna jaldi” while still yawning.
Zoo: 9 A.M to 5-30 P.M, Safari: 10 A.M to 4-30 P.M, Tuesday Closed) (Tickets-Zoo-Rs.30 on weekdays and Rs.35 on weekends, Zoo and Safari- Rs.65 on weekdays and Rs. 90 on weekends) we went for Safari at 4.30P.M., run by KSTDC transport. After a few moments, we found ourselves on a narrow hilly serpentine road with trees around. It was a nice journey. We entered through a huge gate (just like Jurassic park) into the safari park that is reserved primarily for lions and tigers. We could feel the experience of a real safari when we saw the tigers and the lions walking near by. The safari lasted only half an hour but was worth every penny. Clearly the Bannerghatta national park is a must-see place in Bangalore.
The hurried day-long tour ended at Bannerghatta, and we finally began our journey towards home. While coming back, I was thinking of those visitors who take the conducted tour expecting to visit places of interest but ultimately end up with what memories? The names or the glimpses of the places?
If you have 2 or more companions, my advice would be preferably take a rented taxi/car (Rs.450 for 4hrs up to 40 Km and thereafter @Rs. 12 per Km or Rs.850 for 80 km for 8hrs) and experience the different sights and sounds of Bangalore at leisure on your own time. If you are a visitor from outside Bangalore, the visit to Vidhan Soudha and Attara Kacheri can be made in the evening or early morning which may be a stone’s throw distance from your hotel. There are a few other places like Bangalore Palace, Ulsoor Lake, Sankey Tank Lake or St. Marks Cathedral, St. Mary’s Basillica, St. Andrew’s Kirk and Jumma Masjid which you can visit of your own but are not included in the standard tour operator packages.
I hope you have enjoyed this trip with me and it has given you a good sense of places you can enjoy visiting in Bangalore. Talk to you in the next trip at Bangalore.
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