COVER STORY

WHO OWNS THE GAS?
Reliance Industries Limited and Reliance
Natural Resources Ltd are fighting a
legal battle over the supply of gas from
the former‘s D6 block in the Krishna-
Godavari basin.
At the core of the dispute between the
Ambanis is a family pact between the
two brothers that has never been publicly
seen in its entirety and which explains
how the assets of the Reliance group are
to be carved up between them. It is on
the basis of this agreement that Anil Am-
bani‘s RNRL is laying claim to gas from
Mukesh Ambani‘s RIL.
Any decision by the Supreme Court
could set a basis for future regulations on
gas pricing in India.
DECISION OF THE COURT:-
The government is the owner of natural
gas and contractor RIL has no absolute
marketing freedom to sell the gas till its
delivery to the consumers without gov-
ernment‘s approval, said Justice Satha-
sivam reading out the operative part of Fuel prices have taken a hike recently. But have you ever wondered what makes oil prices as
the judgment.
Supreme Court on Friday ruled in favor
of Mukesh Ambani‘s Reliance Industries
in a gas-pricing dispute with Anil‘s Reli-
ance Natural Resources, making the
price fixed by the government as binding.
The case involves terms of a deal under
which Reliance Industries was to supply
Reliance Natural with 28 million stan-
dard cubic meters a day (mmscmd) of
Kirit Parikh panel for freeing petrol, diesel prices
Kirit Parikh, in his report on fuel pricing to Petroleum Minister Murli Deora advocated total
decontrol of oil prices, while recommending an immediate increase in prices of kerosene by Rs 6
per litre and LPG rates by Rs 100 a cylinder; pegging the losses of state-run oil marketing com-
panies at Rs 40,000 crore on account of having to sell transport fuels at below cost.
The fuel pricing policy will address government's fiscal problems. The panel suggested to free Kautilya, an initiative taken at IBS Mumbai to keep its students abreast with the economic environment and financial nuances
petrol prices at refinery and at retail level & diesel prices be market driven. PSU oil companies at engulfing and affecting us. Student driven in nature, it is aimed at creating interest amongst them to learn more about what
present lose Rs 3/litre of petrol. matters to everyone-Money.
Price of petrol may go up by Rs 4.70 a litre and diesel by Rs 2.30 a litre if the government gives
the pricing freedom to state-owned oil marketing companies – IOC, BPCL and HPCL. EURO: At the Edge
A price hike of petrol and diesel is imminent unless finance ministry pays full cash compensa-
tion to state-owned oil companies for kerosene and cooking gas, an oil ministry official said The Greece sovereign crisis has
requesting anonymity. The finance ministry has decided to pay a compensation of only Rs been in the making since the US
12,000 crore in 2009-10 to public sector oil cos for selling kerosene and cooking gas below triggered global downturn of
cost as against total estimated revenue loss of Rs 31,000 crore in the fiscal year.
2008. The EU economy shrank
Losses on petrol and diesel were to be compensated by state-owned upstream companies -
ONGC, Oil India and Gail India. The upstream companies have already paid about Rs 8,364 by four percent the year after;
crore to the three public sector oil companies for their losses on auto fuels in the first three factory output drop by 15%. 1
quarters of 09-10. in 10 people are without jobs
The finance minister, however, wants to reduce fuel subsidy burden. He is in favour of deregula- today. Increased govt spending to
tion , as mounting subsidy burden is a major concern for the public exchequer. The government support the economy had public
had to pay over Rs 71,000 crore in 08-09 as fuel subsidy though oil bonds. debt climbing by a fifth. And
now the European commission
03/02/2010 - Agencies
has warned govt debts of Cyprus,
KNOWLEDGE SHARING Denmark and Finland seem a
threat to the wider European
volatile as they are? economy. Already the euro has
lost 6% against the dollar since
January. A normal response to
such a crisis-the worst since the
creation of the eurozone in 1999
-would be devaluation. But that
is not an option given the euro is
a currency of 16 countries. One
suggestion is a two tier Euro,
One for the fast recovering coun-
The Economics & Finance Club July Issue
NEWS UPDATE Indian Touch to FIFA World Cup
2010: What is little known in both
RCOM merges tower biz with Infosys rings in 30th year, gifts Jehangirpuri and Johannesburg is
GTL Infra in $11bn deal: shar es to emp loyees: the World Cup football‘s Indian
Anil Ambani-controlled RCOM Infosys employees, on the co's connection. The bladder at the core
is all set to divest its tower busi- of the Jabulani—the Zulu word
payroll as of March 2010 and in
ness to Manoj Tirodkar- means ‗to celebrate‘—is made by
service during second week of
controlled GTL Infrastructure August, will receive five equity Enkay Rubber in a factory in Gur-
for an enterprise value of
shares of the co. gaon , usin g la tex so urc ed
$11billion in a cash-cum-stock
01/07/2010 –E.T. from Kerala.
deal. RCOM announced crea-
tion of world's largest telecom R-Power, RNRL merger ratio 04/07/2010-India Today
tower co with a value of Rs 50k fixed at 1:4: Anil Ambani‘s R DATA SNAPSHOT
crore. Power will merge sister firm
27/06/2010 –E.T. RNRL with itself by offering MARKET WATCH:
Noel likely to succeed Ratan one share for every four RNRL Sensex 17985 +48.7
Tata: Tatas may have finalised a shares
successor to Ratan Tata, by ap- 05/07/2010 –E.T. Nifty 5400.65 +17.65
pointing Noel Tata as non- India to grow at 9.5 per cent in
executive chairman of Tata In- NASDAQ 2242.03 +43.67
2010: IMF: The IMF raised
vestment Corp. India‘s growth forecast for 2010 S&P 500 1095.34 +16.59
27/06/2010—E.T.
to 9.5%, saying that robust cor-
Scrap US dollar as sole reserve porate profits and favourable Dow 10363 +146.75
c u r r e n c y : U N R e p o r t financing conditions are likely to
A new UN report released calls fuel investments. BULLION & COMMODITIES:
for abandoning the US dollar as
the main global reserve currency, 09/07/2010 –E.T. Gold Rs/10gm 18410

gas for 17 years at a rate below the gov- tries and other for the laggards. saying it has been unable to safe Growth in firms' advance tax
29056
ernment price. 11/07/2010 –Business Today guard value. posts 5-yr high: The government Silver Rs./1Kg
QUIZ is on course to mop up its budg- Crude Rs./bbl 3590
30/06/2010 –E.T.
―It has brought more clarity as far as China renews Google`s internet eted direct tax target of Rs 4.3
policy is concerned that the government 1. Which bank acquired RBS retail business in 6. Who is the new CEO of easy jet??? Tata Power to raise Rs 1,400 cr lakh crore for this fiscal, with the
licence
is the owner of the gas and has the power INDIA? 7. Who Coined The Term ―SENSEX‖ in by selling 15% in 2 coal SPVs: first quarter (April-June) collec- CURRENCIES:
The Chinese government has
to decide prices. This makes govern- 2. Which bank is coming up with world‘s largest 1990? renewed Google's licence to op- Tata Power will raise $300 mil- tions pegged at Rs 69,000 crore, Rs./Dollar ($) 46.9000
ment‘s role more predominant, but vota- IPO? 8. Name the person who introduced the erate in the world's largest inter- lion by selling a 15% stake in a growth of 15% over the same
ries of economic liberalization may con- 3. Who is the current finance secretary of India? 'Double Entry' book keeping concept? two SPVs, which own coal period last year. Rs./Euro (€) 59.0025
sider this as a step backward.‖ net market, appearing to accept a
4. What is the contribution (%) of U.S. in the 9. Who is the major Promoter of Spice compromise offered by Google mines, to fund acquisitions.
07/07/ 2010 –TOI Rs./Pound (£) 70.7075
world GDP for 2009? (Example: 15%-20 %) Jet? over internet censorship.
―For the moment the sad news is for 01/07/2010 –E.T. More Poor in 8 Indian states
RNRL. So far, by and large the market 5. How many countries have GDP of more than 10.Which is Asia‘s Oldest Stock Ex- 09/07/2010 –Financial Times Promoters get richer with record than 26 African Countries: ECONOMY:
was discounting the judgment would be $1trillion as on 2009? change ? dividend payout of Rs 36,768 6%
Multi-dimensional Poverty India Bank Rate
in favor of RNRL. And this ruling Waka Waka for South Africa cr: The Munjals of Hero Honda claims they account for 421 mn,
would be an EPS enhancer for RIL; their CRR 6%
The World Cup had brought and RIL chairman Mukesh Am-
EPS will go up by at least 6 to 8 rupees. t Is
sue: KIRAN STATIONERS & PRINTERS ―priceless‖ benefits to South bani led the group of promoters
11 mn more ―MPI poor‖ than in SLR 25%
ex 26 poorest African Countries.
The bigger set back is for the Anil Am- N S Shop No. 9, Blue Nile, Powai, Mumbai-76 Africa, as the 33 billion rand who got richer with the highest-
IFR nce Saving Bank Rate 3.5%
bani group as they were dependant on ge (4.2 billion USD) spent had led ever dividend payout of Rs 13/07/2010-E.T.
this ruling for other projects as well. ve r Phone: 25792624 / 9892222292 (Praful)
C on to lasting improvements in infra- 36,768 crore last year Tata Tele exits COAI: Tata
IIP 11.5%
–Pulkeshin Shah Email: ksp @in.com Inflation 10.16%
structure, communications and Teleservices resigned from Cellu-
Thanks to:
transport. The number of for- 08/07/2010 –E.T. lar Operators Association of
Prof. Y.K.Bhushan, [Senior Advisor & Campus Head ]; Dr. Sunanda As on 13/07/2010
Easwaran, [Dean]; Dr. K.M. Bhattacharya, [ Dean, Head of Centre for House to all varieties of Office Stationery & Computer eign travellers in South between IOC, RIL among 8 Indian cos in India alleging that COAI repre-
Advanced Banking & Finance Studies]; Prof. Swaha Shome and Prof. C o n s u ma b l e s , P h o t o c o p y i n g & P r i n t i n g June 1 & 24 was 744 520. Fortune 500 list: Besides IOC sented the interest of GSM play-
Davinder Suri; & Team Kautilya.
(Black&White/Colour), Lamination, Spiral/Regzine Acc. to Visa, spending by for- and RIL, the other Indian com- ers.
Send in your articles/suggestions at: Binding with Gold Embossing, Casio Scientific Calculator. eigners using its credit cards has panies in the list are Tata Steel, 13/07/2010-E.T.
kautilya.ibs@gmail.com topped $128m, up 54% com- Tata Motors, BPCL, HPCL and Piramal Health sells diagnostic
pared to last year. ONGC and SBI.
7. Deepak Mohoni; 8. Lucas Pacioli; 9. Kalanidhi Maran; 10. BSE
Previous Years‘ Question Papers, Xerox Notes, and other biz to Super Religare Labs
1. HSBC; 2. AgriBank of China ; 3. Ashok Chawla; 4. 24.5%; 5. 12; 6. Carolyn McCall; 03/07/2010 - Business World 13/07/2010-E.T.
Answers to Quiz: Reference Material/Text Books also available. 14/07/2010-CNBC-TV18

Introductory Issue presents SIP Experiences of Batch—2011
The Biggest Stipend-EXPERIENCE:
Project Title: Corporate Finance
Company: Hindustan Construction
Company (HCC)
Objective of the project: Is to make it
Objctv instead of Objective (yet gets the
meaning conveyed !) …In true Financial
sense it is reduction in the unnecessary
cost and expenditure yet delivering the
optimum results.
Methodology and Description: As the
name suggests, Corporate Finance is all
about raising money and managing
money not only through the cheapest
source but also with the minimal risk.
My Internship started with the learning
of concept and then gradually it moved
to making excel model for hedging and
risk management of funds. The tech-
niques used were the Interest Rate swap
and the Currency swap for minimizing
risk.
Next task was the Sensitivity Analysis
which compares your Income Statement
with worst/planned/best case scenarios.
Instead of changing numbers throughout
your financial model, with this unique
page, you can play ―what-if?‖ and thus
develop scenarios. I was also given train-
ing at Bloomberg, where I became famil-
iar with Bloomberg services – Basic level.
A study of Credit Monitoring Aggregate
(CMA) report was undertaken whereby
Ratios and the Financial aspects of the
company were studied, from both the
perspective of company and the banker
and the discrepancies in classification
were found and reconciled, it gave me
hands on experience to know how a sin-
gle entity is viewed differently by differ-
ent stakeholders.
Experiences that I learned, when I was
churned @ SIP:
Event: When the Banker says the Loan
will be sanctioned
Conclusion: Then it is sure that loan
approval will take at least a month‘s
time.
Tool: MS-Excel
Learning‘s: MS-Excel, an application
developed by Mr. Gates that is simple,
yet the most complicated and the most
powerful tool in the hands of mankind
Statement: Whenever somebody praises
you.
Conclusion: He genuinely wants you to
work harder.
Belief: When you feel the model you
made is flawless
Reality: You forget the assumptions that
made it so.
Term: Deadlines
Meaning: Deadlines are actually Dead-
Lines.
- Prateep Nigam
―Never put all apples in one basket‖
This fundamental principle of In-
vestment had always held a strong
position in investment theories,
which is indeed palpable in the in-
vestment instrument called Mutual
Fund. Mutual Funds being a lucra-
tive option for investment are in
vogue among all corporate. The
nature of providing higher return
with lesser risk makes it a viable
option for investment. The 14
weeks SIP has given us an opportu-
nity to mull over some areas of this
industry.
Title of the Project: Mutual Fund
Analysis and Investment Recom-
mendation Objective: To find top 5
performing schemes in each of the
six DEBT segment‘s category viz.
Liquid, Liquid Plus, GILT, Short
term, Short term floating rate and
Income funds.
Methodology: Based on the struc-
ture of CRISIL‘s ranking approach.
Weighted ranking was the basic tool
to find the ranks. Differentiating
factors, which were assigned weights
are Rolling Returns, Sharpe.
Ratio, Volatility, Average Maturity
and Asset quality.
Take away from SIP: Acquired
knowledge of working of mutual
funds and apart from the project
gained knowledge of calculation of
cost of capital and working of dif-
ferent kinds of debt instruments
used for fund raising. Use of Excel
at length. Improvement in inter per-
sonal skills and operational skills as
in how to do the job in a speedy
way.
Experience: It was a wonderful cor-
porate exposure in terms of practical
application of knowledge, time man-
agement, discipline, work load, rela-
tion building, and interaction with
people like Joint President. Birla
Group is a worth place to work as it
provides all the avenues for an indi-
vidual to learn and grow.
- Sandeep Surana & Akshay Doshi
Hidden Opportunity in distressed
assets : I did my internship from
D‘Essence Consulting. It is a man-
agement consulting firm based in
Andheri. I worked on several pro-
jects there. The one that I would
like to share with you all is –
―Distressed Businesses‖. I did a re-
search on the topic and wrote a
white paper on the same.
A business is called distressed at the
time of fall in market demand, fund-
ing & liquidity constraints, financial
-ormance incentives. One of my research
For Private Circulation Only
works on Steep Discount of Valuation of
reporting issues, lack of formal controls, restructuring, Major holding Companies listed on In-
liquidation, etc. A security belonging to such a company dian Stock Exchanges and Underlying
is called Distressed Asset. Valuing, negotiating and ac- Value of Investments of the same was
quiring distressed assets is a complicated, high-stakes widely appreciated. The Economic Times
initiative filled with layers of potential risk. found the analysis accurate and worthy of
In an ideal transaction, assets would be acquired with recognition…so much that it used my
minimal capital expenditure, blend perfectly with the analysis and quoted from it. What else
acquirer‘s business model, integrate seamlessly with op- can an intern ask for at this stage!!
erations, and extend scale and efficiency, generating above
- Mausam Jha
-average returns for decades. Opportunities of buying
distressed assets would include above average returns on
The First hang of Corporate Finance:
deeply discounted assets, growth in market share,
I was hired as an intern of Lakshya Con-
expansion of geographic or product footprint and genera-
sulting, which provides value-added advi-
tion of new revenue streams, access to superior technol-
sory and consulting services i.e. Business
ogy or other elements within the supply chain. valuations, Business plans preparation/
The acquiring company has to be very sure that it suffi-
vetting, Economic feasibility reports, Pro-
cient enough for the acquisition. To ensure the same, the ject financing, Fund raising, VC & PE
company should develop processes and governance. A
advisory, etc. My entire journey was full
senior management team that understands the goal and
of practical learnings and experience of
objective of the acquisition should be formed who are the field of corporate finance.
able to pin-point appropriate targets. Understanding the
components of value and moving forward with a due My project involved working on a live
diligence process and perfect intelligence is a must. Thor- project of Valuation of a company , rea-
son for Valuation was that company was
ough knowledge of tax implications, various acquisition
and integration strategies and legal structures that en- going to be merged internally among their
group of companies, so I had to recom-
hances distressed investing is required in order to gain the
mend the fair value. The company was
most out of the acquisition. If a company has confidence
in its processes for addressing the challenges, there can be valued by using discounted cash flow
method (DCF) it entails estimating free
great opportunity in distressed businesses. With prepara-
tion, information and nerve, such investments can yield cash flows (FCF) and discounting it to
present value at weighted average cost of
rich awards. - Arpita Kataruka
capital (WACC) it reflects the required
returns by both debt and equity investors.
9 to 7….. And then some more…..
First half of the project involved to insert
It‘s been a month now since my internship got over. My historic financial statements in excel sheet
internship was in finance specialization and my project
as per management accounting which is
revolved around fundamental and Technical Analysis of better for understanding in valuation, to
shares. analyze historic financial statements by
These are two most common methods of analyzing secu- financial ratios analysis and DuPont
analysis, to do common size income state-
rities. While fundamental analysts try to find the real long
ment analysis and prepare cash flow state-
term worth of securities and gives ideas as ‗What‘ to buy/
sell, Technical analysis looks at the past and present price ment. The second part of the project was
movements along with the volumes and tells us ‗When‘ to DCF valuation. I had forecasted P & L
A/c, Balance sheet and cash flow state-
buy/sell scrip.
ment for the next five years.
So coming back to my internship experience …what can I
say about the first day of work? It is only on this day that On the basis of this FCFF was prepared
I was made aware of my office address‖ The Bombay and discounted at WACC by estimating
Stock Exchange building!‖ A rare vintage monument. But cost of equity and cost of debt, which
that happiness was short lived. My company guide resulted into Enterprise Value. Equity
straight away handed me a list of some 2000 companies Value is then derived by deducting all non
and explained few parameters on the basis of which I had working capital debt and obligations.
to shortlist the same .It left me flabbergasted… So much Throughout this internship, I accom-
of information to process!! Nevertheless I started my plished many things - from advanced fi-
work. It took me whole day to finish my task against a nancial analytics, to investment feasibility
deadline of 2 hours! report (China vs. India), complicated beta
I also got the opportunity to be a participant at various calculations and business valuations using
seminars. In one such meeting I got a chance to meet Adi the DCF methodology.
Godrej the chairman of Godrej group!! It was moment of
Lakshya Consulting‘s strict quality stan-
great joy. Meeting the drivers of the Industry and hearing dards made me learn how things should
them share their views on the business‘ future is indeed an
For Private Circulation Only
be done in a consulting firm. I learnt to
inspiring moment. focus very strongly on standardization,
My internship made me disciplined. I had a laid back language, completion, essence, etc. when it
attitude, but now as my job was to monitor market comes to report writing.
closely; I had to be on my desk before 9:00 am and of I would like to thank CEO of Lakshya
course my boss famously quoted at the end of each day. Consulting, Mr. Pratik Singhi, for con-
―No late coming business‖. tinuous guidance.
So in the end all I want to say is that hard work does pay -Vikas Goplani
off. In my case it was in the form of cash reward as perf-
The Office Hangover: But Project Done; Presentations Done and back to the
The time we neared our Ist Sem Ex- same noisy classes, crowded canteen and 3 hour class-
ams, we were already thinking about room sessions I miss ―MY‖ office.
where we wanted to do our SIPs. I
tapped a few personal contacts to land -Abhishek Laddha
my internship interview at Motilal
Oswal Securities Ltd, Corporate Plan- I listen and I forget.
ning Department. I see and I remember.
I do and I understand.
My first interview was with the Asso-
ciate VP HR, 5 days before the IInd These words best describe my summer internship ex-
perience with India‘s largest commercial enterprise,
Sem. Exam – ―My first first inter-
view‖. Tense with apprehension and ranking 105th on the Fortune Global 500 list in 2009,
Indian Oil Corporation Ltd.
excited in anticipation, I walked in
through their doors, an hour before The project titled ―Eco Drive‖ was aimed towards
the interview schedule. Soon I had a branding of Autogas, IndianOil‘s auto LPG brand.
follow up interview with my line in-
The objective of the project was to develop and imple-
charge, the Sr. VP and Associate VP.
ment marketing communication tools like T.V / Ra-
The sudden change in environment dio commercials, leaflets/posters, banners and hoard-
from the noisy classroom to an office ings, in pump branding collaterals etc for the promo-
having pin drop silence, from a hap- tion of Autogas by understanding the market dynam-
hazard and crowded canteen to a sys- ics of auto LPG market. To achieve the objectives
tematic and orderly canteen and from study was conducted at ALDS (Auto LPG Dispensing
enforced 3 hour classroom sessions to Station) across 3 cities of Mumbai, Bangalore and
an office where I could get up and Chandigarh. In this study, customers, dealers as well as
have a coffee break at will. To top it mechanic interaction helped me to be aware of the
all, it was a 9 to 5.30 job and a mini- problems in the usage of Autogas and made me realise
mum travel time of an hour and a half; that how much consumer opinion matters to a com-
meant I was out from 7 to 7. I had to pany dealing with product like Oil and Gas.
change from being a night owl to an
Internship at IndianOil has proven to be an enriching
early bird to be able to meet the de-
learning ground. My mentors allowed me to expand
manding schedule and project. my horizons, understand my capabilities as well as
My vertical was a close knit group of empowered me to try new things. I got a chance to use
people in late 20‘s and 30‘s. The team my classroom knowledge and mix with it with some
made me comfortable at the office; unconventional ideas to get the results. This project
introduced me to the office culture has not only helped me to understand the nuances of
and style of functioning. They also brand communication but also helped me in my per-
took over as my co-mentors in absence sonal development. In my interaction with Grey
of my mentor. worldwide I understood the importance of different
mediums of branding and effective techniques to de-
My project entailed piles of data min-
ing and was tedious. My moment of velop strong brands.
glory came two months into the in- Summer Internship has proven to be a great learning
ternship; my mentor‘s boss asked me experience. It provided me with an opportunity to
learn by experimenting with my ideas in a real com-
to submit part of my data before I
could leave for the night, I stayed back petitive environment. I can say with certainty that I
till 8.30 that night. Only at lunch the have improved my knowledge of different areas and
concept of marketing specially branding, and have
next day did I realize that the data had
been presented and appreciated at the substantiated my learning from classroom teaching.
morning‘s meeting with the board Once again I would like to thank my mentors from
members, when my colleagues in- IBS Mumbai and IndianOil for giving me this won-
formed me of it. Nearing the end of derful experience, which I am sure, will be a strong
my Internship, I really missed college. base for my carrier henceforth.
-Goonpreet Singh
WORD TRIVIA
Automated Screen Trading (AST) Electronic trading in stocks through visual display units. It
makes possible a floorless exchange and brings transparency to deals.
Bigger Fool Theory: You may have been foolish enough to buy an overprice stock, but you be-
lieve that there is an even bigger fool who will buy it from you at a higher price.
Daily Margin An amount, to be decided by the stock exchange, to be deposited by a member, on
a daily basis, for the purchase or sale of securities. It is imposed to curb excessive speculation.
Stop Loss It is a tool of protecting one‘s profits, or reducing one‘s loss by giving some price
targets for the transaction to take place.
Support: The level is a price level where the price tends to find support as it is going down. This
means the price is more likely to "bounce" off this level rather than break through it
Resistance: It is where the price tends to find resistance as it is going up. This means the price is
more likely to "bounce" off this level rather than break through it.