Midlife Madness (ii) - Masters of their own destiny? VIEWS AND COMMENTS INVITED

Masters of their own destiny?

Anjuli Bhargava / New Delhi January 19, 2008

Running your own business is a constant learning process, a few corporate honchos-turned-entrepreneurs.

Rakesh Seth, 49, quit the corporate world after 16 years with Nestle and three years with Pepsi, when he was 40. In November 1998, the government started the Freephone service (instead of the caller paying, payment was made by the called). That gave him the idea of setting up Finedge India, a call centre and brand activation company, in February 1999. Seth says the move from the corporate world to the world of business allowed him to strike a better work-life balance. �You can do things on your own terms. I follow a system but I follow a system on my own terms.�

In contrast, in the company, you do many things because �it doesn�t look nice�. For instance, executives often stay till their boss leaves � even if they have no work � because it doesn�t look nice. �In a large MNC, it�s all about impressions and how you manage your bosses. In business, it�s all about reality. And success depends on how you manage your clients and employees,� he adds.

�If one needs to be at work at 7 am, one will � no matter what anyone thinks. And if you feel like an occasional round of golf before office, well you can.�

Rahul Chadha, who quit the corporate sector five years ago after putting in 11 years � his last job was with consulting firm A T Kearney � to start CRS Health, a chain of drugstores, says that �being your own boss� was a primary driver but not as important as the opportunity to �take a concept to the market quickly�. The going, however, hasn�t been a bed of roses. �People can be a challenge. People, as in the powers that be; people, as in the demanding Indian consumer; people like those one interacts with in civil dealings�even attracting the right people is a challenge,� he explains.

But, unlike what many believe � according to Chadha, there is no going back. �Once bitten by the entrepreneurial bug, it�s difficult to imagine getting back to a job,� he adds.

That�s a lesson that needs to be kept in mind � while it may appear easy to return to the corporate sector in the unlikely event that your business fails, especially in today�s high-growth scenario, it is easier said than done. Once you�ve tasted blood, few can deal with the placid environment the corporate sector offers.

In this transition from having a boss to being your own, the biggest pitfall, many feel, is the quality of your peers and colleagues.

As an entrepreneur, you are mostly giving �learning� and shape to the organisation whereas as a salaried manager you are moulded by the organisation and colleagues.

�Getting good people to join you is a challenge; unless you go the VC way and start big, you will not work with the kind of minds you were used to,� feels Seth.

He chose to bootstrap his operations with his own funds (his company did a turnover of Rs 28 crore last year) and not to go the VC way because then the �VC drives you like he owns you� and also because he feels that �tension and risk� depend on the pace at which you want to grow. (It�s interesting that all the three examples in our cover story on page 1 have no VC funding as yet � though 9.9 Mediaworx could be the first to go that way.)

Seth points out that in the initial stages, small things like the type of office, managing your own travel bookings and so on � stuff handled by big administration departments typically � can get to you, but one gets used to it.

For instance, Seth has an administration department of four, but the quality of people he has is not what he was accustomed to. The other issue is that the buck stops with you. �I was running a 1,700-agents call centre for Hutch. In spite of all the administrative staff, if the toilets were dirty there, I could get a call. In Nestle, I�d be doing the shouting,� he explains.

Forget the shouting, you may even find yourself eating humble pie. According to Rajat Goel, CEO and managing director of Eye-Q, which was set up last year, �You have to be prepared to swallow your pride and stand outside your erstwhile subordinates� room for two hours to get business.� And mind you, you may not even like the guy.

Running a business requires you to be a bit of a �reasonable master-of-all-trades�. �You need some skills in every area � legal, marketing, finance, administration...� says Seth, so it helps to have worked in the corporate sector for a while before taking the plunge. It also helps you empathise better with your client, and he with you.

�I found clients want to help you out because they can understand your language. They prefer dealing with you rather than a hard-core businessman,� he says. Since Seth also knows the inner workings of a large company, it helps him frame his proposals in a way that the boss and the boss�s boss will approve it.

One of the major benefits of being an entrepreneur is that while as a salaried manager you are �selling your skills and time� and the organisation is benefitting from your value addition, as an entrepreneur you pay the salaries but keep the value addition each employee creates.

In the process, you create an organisation which will work for you when you are unable to, or choose not to work! Call it the benefits of a calculated risk...

Midlife Madness (i) - Sailing in the same boat? Anybody ready to take the plunge !!!

Mid-life madness

Anjuli Bhargava / New Delhi January 19, 2008

Why are successful, powerful professionals opting out of high-potential careers in favour of entrepreneurial uncertainty?

What makes a 42-year-old, slightly balding, well-settled senior executive in a steady, cushy job in a multinational set-up, rock the boat?

Someone with two kids going to one of the best schools in the city, a wife who hosts great parties and a career trajectory aimed straight for the top echelons of the company, if not the very top. Ambition? Money? Boredom? Opportunity? An urge to prove you can make it on your own? A burning desire to tell your boss to go, take a walk? Or as many of Roy K Cherian�s friends first asked when they heard he�d taken the plunge: �Is it just his hair he�s losing or maybe a part of his brain too?�

Roy says his wife Rani was �slightly scared� (yet brave enough to be supportive) when he decided to quit his new job with the United Breweries group in Bangalore. Prior to that, Cherian � a product of IIM Ahmedabad � had spent close to 13 years with Nestle and Ulka Advertising. Why then did he take what his friends and family think is an �outrageous� step? Cherian (he says his hair loss is genetic) says none of the above alone, or all of the above together, motivated him to throw in the towel.

�I wanted a sense of independence. The thrill of building an organisation and seeing the tangible results of one�s hard work excited me.�

His point � left unsaid � is that, in the corporate sector, you don�t always work for results. Almost everyone Business Standard spoke to felt that those in the corporate sector often work not for results but for their bosses. That can prove frustrating, especially when you�re stopped from doing something you know is the right thing for the business. That�s when some bravehearts jump ship.

Cherian and his partner, 39-year-old Anunay Gupta, set up Marketelligent five months ago, an analytics company based out of Bangalore. At least two parties have already endorsed their faith in what many think is a bizarre move � IIM Bangalore, which is allowing the start-up to incubate out of its campus, and their first client Zelcom, a US-based consulting company. Gupta, the analytics whiz, says he �felt the urge to do something unique and build something of value from scratch�. It helped that he was able to find the right partners to start the venture and leverage his experience and expertise in the business analytics space, an opportunity that, in India, is heating up and is at a stage similar to the software industry 10-15 years back.

Marketelligent is not VC backed; several friends and acquaintances have invested small and large sums, which the duo is quite nervous spending. Nor are Cherian and Gupta alone.

The entrepreneurial bug seems to have caught a large number of people � almost surely each one of us can think of at least a couple of friends or acquaintances who�ve taken the mid-career plunge.

What�s interesting is that in many cases, those opting out of the corporate rat-race had no apparent reason to do so. They had whizzing careers, most were already earning salaries that could feed a small village for a month, had one � if not two � real-estate properties in their name, and were comfortable in the corporate set-up. In all cases, money didn�t appear to be the motivator but a by-product.

Still, throwing caution to the winds mid-career appears to be the flavour of the season.

In a move that surprised many, 43-year-old Pramath Sinha, former CEO of the ABP Group and ex-partner at McKinsey, on �the ninth day of the ninth month� last year, set up 9.9 Media-Worx, a diversified media business. Sinha had worked 14 years in the corporate sector, at the very top of the pyramid, and had �never imagined I�d be an entrepreneur�.

He grew up in a fairly conservative environment where his father always said that �business is not for us�. Members of the family who�d ventured into business had been �spectacular failures�.

Then why did Sinha go against the family grain? One of his reasons, he says, is that the timing was correct. �India is opportunity-rich at the moment. So, if you have a new idea or have some insights on how to take forward an old one, this is a good time to do it.�

Also, setting up a new company � unlike in the old days � is easy. �Getting a company started today is smooth and can be done like clockwork,� he explains, something that often deterred prospective entrepreneurs in the old era of licences and red tape.

But above all, Sinha�s experience with the Indian School of Business (he set it up and was its first dean) set the stage for where he finds himself today.

�Initially, after the ISB experience, I thanked god that I hadn�t become an entrepreneur � the sleepless nights [on account of] 9/11, students not getting jobs, not enough companies coming to campus, and the onus of this great dream that had been built�� he recalls.

�In consulting, in contrast, you are an advisor and the buck never really stops with you. When I got back to McKinsey, I realised that all the excitement had gone out of my life,� he says.

Instead of �playing the game and being on the field�, he felt like a �commentator�. �As ISB started to do well, Sinha began to get credit for what he�d been instrumental in creating. He realised that the urge to create � once it bites you � probably never leaves you, and 9.9 is living proof of it.

Rajat Goel, the 42-year-old founder, CEO and managing director of Eye-Q, a super-speciality chain of eye-care hospitals, quit his position as director (surgical business) of Bausch and Lomb after 16 years, in March 2007. After being identified as a �high potential� manager in 2006 in a leadership course at Oxford and Rochester, and having been nominated as the best regional head within his firm for three consecutive years, he began to wonder, �What next?�

For 16 years, Goel had been doing the same thing, he says, but the clincher was something else. At Bausch and Lomb, his colleagues and he had, for 10 years, been promising an eye-care revolution in India. A visit to Rewari showed him the hollowness of that claim.

�No instruments, pathetic care � I found you couldn�t offer even a chair to the patient, let alone high quality care. Ten years of talking and we hadn�t made even a slight impact 70 km outside Delhi.�

He says this really upset him. Rewari (he studied there for seven years and it is �where my roots are�) was where he set up his first state-of-the-art eye hospital. Contributions from seven of his IIM colleagues in terms of their domain expertise and resources helped him start with six hospitals in the first year, which will be taken to upto 100 across India in due course.

When he first mentioned his plan (of setting up three-four quality hospitals), his friend � a former CFO of Patni Computers � laughed aloud. He said with the kind of scale he had in mind, he wouldn�t get anywhere. It was then that Goel and his partner started to think big.

One thing Goel says he was ready for was a loss of status; he talked to everyone who mattered in his life before he went ahead. �It was a bit like an arranged marriage. All my relations � my sister�s husband, my wife�s brother, my father, my wife � met my partner before backing me,� he adds.

He even discussed the move with his kids. �Carrying your entire eco-system with you,� he argues, �can make or break what you do.�

Goel�s life has changed in more ways than one, some good and some bad. He used to take eight flights a week in his old job; over the last year he�s taken three. He used to work 12 hours; now he works 17.

�Life has been extremely tough � but good. Most of the assumptions we started with were turned on their heads. There have been many moments of crisis. It�s been a great journey and an experience � and everyone is looking at me with new respect,� he says. Now, people tell him he�s done what they want to do too but haven�t been able to.

That new, earned respect is perhaps what�s motivating Sinha, Gupta and Cherian to step into an entrepreneur�s risky, challenging and not-so-steady shoes. They will now be in control of their own destinies � and will have no one to blame or to credit whether they flounder or flourish. Source : http://business-standard.com/general/storypage.php?&autono=

Three Things You Did Not Learn In School

Three Things You Did Not Learn In School

Back in the summer of 2002 our son completed 9th grade and was on target to attend Woodinville High School. On our annual summer hike, as we conversed about the challenges and opportunities of the next year, I said: "By all means excel in your studies and in the subjects you like. Just know that school, with all its many good things, is not going to teach you the three most vital skills that are a struggle and preoccupation for adults. You have to learn to manage these skills in this life if you are to be independent and free, and to succeed and thrive."

Hiking the Pacific Northwest provided a great background for our conversation. The turns of the trail offered natural commas, periods and exclamation marks; the forest provided the cathedral of nature and the mountain lake we were heading toward made for a natural point of realization. We played the "Can you guess the three skills?" game and then zeroed in on them:


The three skills are:

First - Learn to manage your energy

Second - Learn to manage your relationships

Third - Learn to manage your money

I sought to be a good father preparing his son for the future and said: "School will not teach you these skills. You must discover for yourself how to best manage your energy; you have to find out how to build and hold relationships and you've got to learn to manage your money."

Let's see what areas of knowledge are included in each of these three skills:


First - To manage your energy you need to

1. …know yourself.
2. …understand your strengths and talents.
3. …recognize your vulnerabilities and weaknesses.
4. …use your body wisely.
5. …manage your emotions.
6. …discover what relaxes you and how to rest well.
7. …appreciate what energizes you and gets you going.
8. …identify what drains you and minimize its presence in your life.
9. …discover what you enjoy and what helps you grow.
10. …clarify your goals, aims and purpose.


Second - To manage your relationships you need to…

1. …learn to be a good listener.
2. …build the capacity to appreciate another person's viewpoint.
3. …practice clear and eloquent communication.
4. …seek to understand before you expect to be understood.
5. …develop inter-personal effectiveness.
6. …understand the anatomy of trust and how to build it.
7. …cultivate emotional and social intelligence.
8. …learn to say NO.
9. …develop genuine interest in other people's experience.
10. …be an effective leader, a wise follower and a great collaborator.


Third - To manage your money you need to…

1. …understand the nature of money and your relationships with it.
2. …appreciate the difference between "want" and "must" in all areas of life.
3. …recognize that what matters is not how much you earn but how much you spend.
4. …make a commitment to pay yourself first. Automatically save at least 10% of your income. If you can do more, do more.
5. …build an emergency cushion of cash - three to six months expenses.
6. …interview as many financial planners as you need in order to find a trusted advisor. Make sure you understand what they say.
7. …have a financial plan. Identify the best retirement account you can have and make the maximum contribution allowed.
8. …simplify your life: automate your bills. Accelerate paying your mortgage payments.
9. …be clear about the difference between good debt and bad debt. Don't do bad debt.
10. …understand the difference between working for money and money working for you. And remember the one you work for is waiting for you at home.


In an enlightened 21st century world youth would be coached in these three areas. Every 18-year-old needs to know how to handle and manage these three important currencies that will ultimately determine how much he or she can enjoy life:

1st - Energetic currency

2nd - Relational currency

3rd - Financial currency

Now it's your turn. Turn the key. Be your own leader.

IIM C overhauling curriculum - may be LD is also included...

IIM-C going in for curriculum overhaul

Pradipta Mukherjee / Kolkata July 09, 2007

To keep its students up-to-date with new management and business strategies, the Indian Institute of Management-Calcutta (IIM-C) is going in for a major curriculum overhaul after a gap of nearly eight years. The last time it did this exercise was in 1999.

A skeletal framework of the revised curriculum has been submitted to the board of governors and the faculty. A final call will be taken in another two months with the new curriculum scheduled to be introduced from the 2008 session.

“So far, we have been able to decide on the framework. We should be able to take a final call on what we should include and what all should be dropped from the current curriculum in another two months,” said Shekhar Chaudhuri, director, IIM-C.

“Although all teachers at IIM-C keep making changes to the syllabus from time to time, a major curriculum overhaul is done after every 10 years or so. This is important to ensure that IIM-C will teach what is latest and best in business and management. Also the course itself should be likeable to the students and at par with other overseas institutes so that there is ease during student exchange programmes and cross-cultural learning,” Chaudhuri explained.

The revised curriculum will be a mix of topics that would include subjects that have been the trademark of the institute and at the same time new subjects that reflect a trend in business management programmes across the globe.

So, while theory, finance and analysis will continue to be a part of the curriculum, courses in behavioural science, conflict management, psychology, human values, business communication and entrepreneurship development could also be included.

The new syllabus is also likely to be a mix of case studies, problem solving in real life and at the same time include the traditional method of theory and finance.

“We have looked into the syllabus of some of the best B-schools of the world, like Wharton-Kellog, Harvard, University of Chicago,” added Chaudhuri.

The new syllabus would also include feedback taken from the faculty, students and the alumni. Once the framework is approved, the faculty at IIM-C may need to go in for a short training on the new curriculum before it is finally rolled out in 2008.

Preview of the revised syllabus

Theory, finance and analysis to stay Behavioural science, conflict management, psychology, human values, business communication and entrepreneurship development could also be included Likely to be a mix of case studies and problem-solving in real life Cues taken from some of the best B-schools of the world -- Wharton-Kellog, Harvard and University of Chicago Will be finally rolled out in 2008

CEO Etiquettes - The missing link

Kindness Pays Dividends

It might sound like an oxymoron, but Steve Harrison is a business ethicist. He's worked at the outplacement firm Lee Hech Harrison for 25 years helping fired employees get back on their feet. In that time he's witnessed some pretty despicable behavior by companies.

With the bad comes the good, though. And it's the kind behavior that he discusses in his new book, The Manager's Book of Decencies: How Small Gestures Build Great Companies (McGraw-Hill, $24.95). Aside from just being a nice person, Harrison argues that small gestures such as learning employees' names goes a long way toward creating a loyal staff. His argument: A loyal staff equals a productive staff and a productive staff equals a successful business.

In Pictures: Big Impact From Small Gestures

Among his observations: CEOs who answer their own phone hear fewer complaints and the best day to fire someone is a Wednesday. Harrison recently explained that logic to Forbes.com.

You say that managers should fire employees on Wednesday. Why? What makes Wednesday better than say, Monday?

Harrison: It's all about preserving the dignity of the terminated individual. Being terminated means rejection. It's a personal setback. Avoid Friday because the person's support systems aren't there. The outsourcing service and human resources people who will help them aren't there to give advice on the weekend. If you get fired on Friday you have two days to stew and get really angry.

In the middle of the week the employee has a support system and several days to adjust before the weekend arrives.

Why should a company be concerned with making the employee feel better?

There's a talent shortage these days. Why make enemies? You never know if you're going to ask that employee to return to work for you. There's no such thing as a perfect downsizing. But people always know when you try to make a well-thought-out event.

We've got the day of the week down. Is there a "best" place and time to fire someone?

Yes, in the office of the individual being fired or at a nearby conference room. That way he or she doesn't have to walk through an office full of people who may know what's going on. Also, the employee can sit and get recomposed; make a call if necessary.

As for time of day--late in the morning or at noon when people are going out for lunch. Or, later in the afternoon as people are leaving and finishing up their day. The idea is to set up the prospect of the fewest possible people being there. The worst time to do it is 5:00 p.m. or 5:30 p.m. on Friday.

Never say, "It wasn't my idea. I'm just carrying out orders." That's not leader-like. It requires courage, sensitivity and decency. The little things count.

Firing someone with decency is also good for the remaining people. It shows that the company has compassion during a difficult time.

Why write this book?

We're an outplacing firm so we are observers of leadership performance. I became interested in this topic in particular after Enron, when federal sentencing guidelines for corporate malfeasance came out. One way companies can lessen their fine is if they tried to "promote an ethical culture." But the feds couldn't say exactly what that meant.

I decided to write a book proposing what an ethical culture means. They're small acts that are not part of the corporate conduct manual or a company's policy manuals. I studied companies that did the little things that don't cost anything that are tangible. After all, the boss of a company isn't just the boss. He or she is the mayor of a community.

Which companies are best at this practice?

Five CEOs really get it. Reuben Mark of Colgate-Palmolive (nyse: CL - news - people ). He's the poster child for decency and humility. His philosophy is, "I make sure nothing important or big-time creative is ever perceived as my idea." He'll walk onto the factory floor in Mexico City and tell a joke in Spanish. He's a mensch.

Ken Iverson, former CEO of the American steel company Nucor (nyse: NUE - news - people ). He answered his own phone, did not permit privileged parking spaces or luncheon spaces. He had everyone--including himself--on the same compensation plan. He was the laureate of egalitarianism.

Doug Conant, CEO of Campbell Soup Co. (nyse: CPB - news - people ). At the end of many workdays he sits with a few of his direct reports and asks about things people have done that have gone above and beyond. He listens to the stories and he writes "thank you" notes on cards in his own hand specific to what the employee did. In terms of a retention character, it's huge.

Herb Baum, former CEO of Dial. He did "hot dogs with Herb." He walked onto a factory floor or an office unannounced and served lunch and answered questions until the last person's question was answered.

Herb Kelleher, founder and CEO of Southwest Airlines (nyse: LUV - news - people ). His motto is "there's no such thing as little people." He identified people in unglamorous jobs and made heroes of them. Facility people were given the Top Wrench award and the maintenance crew was given the Top Cleaner award. He looks to put people into the spotlight people who weren't in the spotlight.

In Pictures: Big Impact From Small Gestures

source: Forbes.com

Pay zero tax on unlimited gains!

India has truly become a tax haven. If you are willing to take market-related risks, you can arrange your affairs in such a fashion that you don't have to pay even one single rupee as tax, irrespective of the extent of your gains.

And, it's all perfectly above board and legal! Here's how.

With a view to giving a boost to the Indian equity market, successive recent finance ministers have doled out many tax concessions to the income and gains from:

• Shares traded on a recognised stock exchange in India, and
• Equity-based mutual fund schemes (equity funds).

Now, all you have to do is to park all your funds available for investment in either of these two avenues -- and relax.

The dividends are tax-free, and so are all long-term capital gains. The only question that needs an answer is -- which of the two avenues should you choose?

Table 1 below presents a comparative gist of all the currently prevalent costs and taxes on shares and equity funds.

Table 1: Comparative Analysis between Shares & Equity Funds

Transactions		Equities	Equity-based MFs
Purchase	- Brokerage	Around 0.5%	Nil
	- STT	0.125%	Nil
	- Entry Load	Nil	Around 2%
Sale	- Brokerage	Around 0.5%	Nil
	- STT	0.125%	0.25%
Dividend	- Income Tax	Nil	Nil
	- Distribution Tax	16.995%	Nil
Capital Gains	- Short-term	10.3%	10.3%
	- Long-term	Nil	Nil
Exit Load		Nil	Load on Early Exits
Effect of Dividend on Price / NAV		Small	Full Reduction
Annual Management fees of AMC		Nil	Around 1%
Risk		High	Medium

Let us compare these two avenues, item by item. At the first glance it might appear that equity mutual funds are superior to direct investment in shares because:

1. You don't have to pay brokerage for equity funds whether at purchase or sale. This, however, is more than offset by the entry/exit loads and AMC (Asset Management Company) fees.

2. No STT (Securities Transaction Tax) for mutual funds at purchase. This is compensated by double the STT at sale by mutual funds. Good for long-term investors in mutual funds.

3. Mutual funds are exempt from Dividend Distribution Tax (DDT) of 16.995%. (The Finance Act 2006 extended this benefit to closed-end equity funds as well.) Don't get overly lured by this, however.

DDT is charged to mutual funds when they receive dividends from companies they have invested in. Charging DDT to you when you receive any dividend from a mutual fund would amount to double taxation.

Personally, I don't like either the dividend or the dividend reinvestment options of mutual funds. The quantum of dividends paid, whether by mutual funds or by companies, is, both, variable and uncertain, rendering the planning of day-to-day expenses difficult.

• All these incomes are tax-free for FY 2007-08
• Tax: Which ITR form should you use?
• Wrong PAN on Form 16? What to do

The growth option of mutual funds bypasses this difficulty. The growth option is better than the dividend option only for this one reason and not because it bypasses DDT by converting the dividend into growth. Purely from a taxation point of view, the two options are equivalent since in both cases there is no DDT, the dividend is tax-exempt, and so are the long-term capital gains.

The real edge equity funds have over shares for most investors

As we saw from the above comparison, there isn't much to choose between shares and equity mutual funds so far as their respective costs and taxes go. Yes, mutual funds charge loads to cover their expenses of market transactions and also a small fee for nursing and monitoring your investments. But it is worth paying the price because:

1. Mutual funds make personal monitoring unnecessary: Mutual funds undertake the rigours of the monitoring and keeping tabs on your portfolio. You receive the benefit of their expertise in handling and tracking the market.

2. Mutual funds are akin to savings bank accounts: When investing in an open-ended equity fund scheme, an investor can deposit money any time s/he has investible funds and, similarly, can redeem, partly or fully, any time s/he needs funds. The repayment is effected within 5 working days at most. Thus, such schemes have virtually become savings bank accounts -- and with tax-free returns, to boot.

3. Systematic withdrawal facility: A good strategy is to withdraw as much as you need at some fixed periodicity of your choice. For instance, you may withdraw on a monthly, quarterly, 6-monthly or annual basis to meet your expenses.

Tax-smart: Zero tax even on short-term capital gains

If you are forced to redeem your mutual fund units in the short-term horizon, namely within 12 months of their purchase, whether partially or in full, tax is payable @ 10.3% on any short-term gains thus made.

Can we avoid this? Let us see how:

Remember that you have parked all your investible funds in the growth option of an equity fund. Now, imagine that you had a capital of Rs 100 lakh (Rs 10 million) with which you bought 10 lakh (1 million) units of Rs 10 each. Suppose the NAV (Net Asset Value) has grown by 10% to Rs 11 per unit, and thus the value of your investment has become Rs 1.10 crore (Rs 11 million). Of this, you redeem 90,909 units worth Rs 10 lakh (Rs 1 million) before 12 months, which still leaves your original investment of Rs 100 lakh invested in the mutual fund intact.

Now comes the best part.

The short-term capital gain you have made is Re 1 per redeemed unit, i.e. Rs 90,910. You have no other income. The tax threshold, below which no tax is payable, is Rs 110,000. Ergo, you have Rs 10 lakh (Rs 1 million) for your household expenses from short-term capital gains - and, at zero tax!

Convinced now that India is truly an incredible tax haven for an informed investor? The only pre-condition you need to fulfill in order to benefit from this big-bang tax break is to familiarize yourself with the basics of investing in equity funds and grasp some simple strategies that can significantly reduce the market-related risk of equity investing.

• Guidelines to filing your income tax return
• How to design a tax-smart salary package

Excerpt from:

Taxpayer to Taxsaver (F.Y. 2007-08)

By A N Shanbhag

Publisher: Vision Books

source: Rediff.com

Banglore Tiger!!!

Documenting Wipro's Rise: 'It Challenges Other Companies to Strive for Excellence'

Published: June 14, 2007 in Knowledge@Wharton

The story of how Western India Vegetable Products morphed from a disorganized agriculture-based manufacturing and distribution company into Wipro, the third biggest global tech services provider (behind Tata Consultancy Services and Infosys), is fairly well known in India.

In the summer of 1966, when Azim Premji was 21 and about to graduate from Stanford University, he was called home to Bombay to take the reins of the family business after his father's sudden death. Premji first modernized the vegetable oil business he had never wanted to run. Then, as opportunities presented themselves, he expanded. When IBM left India in the late 1970s, he saw the opportunity to get into the computer business. When the Indian economy began to open up in the 1990s, he started to build up what would become a global Business Process Outsourcing (BPO) powerhouse.

Steve Hamm tells the story of Wipro in Bangalore Tiger: How Indian Tech Upstart Wipro Is Rewriting the Rules of Global Competition. A senior writer and the software editor at BusinessWeek, Hamm has been a business journalist for more than 20 years, has followed the tech industry for a little less than 20 years and has been chronicling the emerging tech services industry in India since 2001.

The intertwined stories here -- those of Wipro, Premji, India and the evolving worlds of commerce and technology -- are important and worth reading.

A Good Face for Brand India

Azim Premji, whom Knowledge@Wharton has interviewed, comes across particularly well: intelligent, creative, focused and flexible. His zeal for understanding, rationalizing and then constantly tuning and improving systems -- perhaps, in part, a product of his education as an engineer -- is clearly one of the cornerstones of Wipro's success. The fact that "India's Bill Gates" is a Muslim burnishes India's multicultural credentials.

One of Hamm's primary points is that Wipro gives us a view of where things are heading globally, and he phrases this in language with an evangelical caste to it. "Wipro is not just a company," he writes. "It's a quest. And, in a fiercely competitive and rapidly changing business environment, no company that is not also a quest can succeed for long. Bottom line: Wipro matters because it challenges other companies to strive for excellence."

Hamm documents the degree to which this quest has been built on egalitarian principles. Premji and his executives come across as having broader concerns than profit and expansion -- from their desire to set a clear moral example, to a commitment to educating their employees and themselves, to a deep and ongoing devotion to transforming India, both economically and culturally. All of those things, of course, redound to the success of the company. They also serve as examples of the benefits of long-term thinking.

Refusing to pay bribes may cost a company business, but a reputation for being incorruptible will likely bring more. It is expensive to educate employees -- particularly given the danger that you might be educating the competition when and if they leave -- but it is more expensive to lose employees. One can argue about the appropriate role of a company in the larger society -- Premji's foundation supports education, down to the elementary level -- but if India is not successful in broad terms, the chances for any Indian company, at home or in the global arena, are diminished.

One of the core aspects of the Wipro story, and of Hamm's persuasive view of the current and future global business environment, is the degree to which success often hinges on flexibility and planning. The successful entrepreneur or manager is one who, on putting a process or business deal in place -- the IT infrastructure of a hospital, for example -- understands and accepts that getting things right is always temporary.

You can't relax even if you feel that things are running "perfectly," because all that means is that things are running "perfectly" today. Tomorrow will inevitably be different. And waiting to see what happens before considering how to proceed is a recipe for following, not leading, trends. Wipro doesn't just look at tomorrow, Hamm tells us: The company always aims to be looking three years ahead and preparing for the future.

Starting with the vegetable oil business, Premji consistently brought a higher standard of assessment to his company along a variety of axes. He set a high ethical bar for all employees; he measured what they did and gave them incentives to do better; he focused endlessly on education -- both educating himself and educating his employees at all levels -- to give people the tools to advance.

"In those first difficult years," Hamm writes, "Premji established a management style and a corporate culture that formed a solid foundation for everything that would come later. While his father's top men had based their decisions on tradition and instincts, he brought numerical measurement and analysis into play. And way before it became de rigueur for Western businesses, he benchmarked each of his managers against the others."

What to Tell and How to Tell It

In 1981, Tracy Kidder wrote The Soul of a New Machine, which chronicled the development of Data General's Eclipse mini-computer, meant to compete with Digital Equipment's Vax. The book won a Pulitzer Prize and a National Book Award. It was an early "glimpse-inside-high-tech" at a time when computing was just beginning to penetrate the public consciousness in the U.S. as something other than "Back Office Big Iron" -- invisible mainframes that were abstractions to most people.

Kidder's book was largely focused "down in the trenches" with the project engineers. Their concerns and their view of both business and technical processes were functional and direct. Hamm spends more time talking to and quoting higher level managers and executives.

Their concerns often boil down to promoting the brand. That is not to say that what he relays often seems wrong or dishonest. Rather it feels largely beside the point and often repetitive. There is limited use in hearing people repeat that the company seeks to be efficient or honest or forward looking. More interesting and important is how these things are accomplished. More interesting still is hearing about how a company deals with setbacks. That's the situation in which stakeholders of all kinds show both their strengths and their weaknesses, and where readers often learn the most. The Wipro executives, understandably, don't tell us much about what hasn't worked.

As a journalist, Hamm is working in a venerable tradition. In business schools, students pore over case studies; they learn about business practices and strategies by dissecting concrete examples; they follow the data. Longer-form narratives like Bangalore Tiger serve a related but slightly different function. They come at the subject from another angle.

The numbers are the numbers. One can map Wipro's corporate structure (as Hamm more or less does), which provides a fascinating and useful overview. But that map only shows what the company has done. It doesn't tell how it was done. "How" is a matter of information but it is also a matter of story. In some ways, Hamm does a good job of telling the story of Wipro; in other ways he falls short.

The advantage that a journalist has in this situation is the benefit of a sustained and intimate inside view of a company. One of the disadvantages of this approach is that it often disinclines us from taking a more critical perspective.

Throughout the world and throughout history, there has been no shortage of companies that prospered by paying bribes, exploiting their workers and their customers, and selling inferior goods or services at over-inflated prices. It is the rare modern business seminar, however, in which these methods of operation are extolled as the sure road to success. To say that success is built on ethical conduct, respect for both workers and customers, and selling a high quality product at a competitive price -- variations of which Hamm repeats throughout the book and quotes any number of Wipro executives as saying -- borders on the trite. Google, with perhaps equal measures of humor and seriousness, boils business ethics down to a pithy three words: "Don't Be Evil."

The book also feels as if it has been assembled in large part from smaller freestanding pieces. There are places where the seams show, where set-piece bits of information are reused or where information is sequenced in a manner more confusing than helpful. In one section, for example, Hamm writes: "Rather than sell a British-based bank only software programming, [Wipro] can also sell the bank IT consulting, manage its desktop computers, and even run its consumer credit card accounts receivable department."

One wonders immediately how it is possible to outsource the management of desktop computers. Further down the page, Hamm notes that "It's primarily done by employees in India, but some of the work is performed in the client's offices," which mostly deepens the mystery. It isn't until some 17 pages later that we are told, "Wipro has created a portfolio of automated monitoring and maintenance software and process [sic] that allow it to perform 90% of the work from India and only 10% on-site."

Finally, there are places where it is hard not to at least question Hamm's interpretation of facts or history.

The reader and the writer need not always agree, and being forced to consider something from a different and unexpected point of view is one of the benefits, and pleasures, of seeing something through someone else's eyes. Authors make choices all the time, in the examples they include or discard, in what they focus on and what they make peripheral. Given Hamm's long immersion in the subject matter dealt with here, however, it is jarring when he hits off-notes, making assertions or assumptions that seem dubious and undermine his authority.

For example, very early on, in the book's introduction, Hamm points to Mark Andreessen's designing the first web browser in 1993 as one of the crucial pivot points that would eventually facilitate the explosion in remote computing on which the core of Wipro's business has been built. "Andreessen's browser, called Mosaic, democratized the Internet," Hamm writes. "It was an easy-to-use doorway to the Net that made it possible ultimately for anybody in the world with a computer and Internet access to connect with anyone else."

Fair enough; that's a good description of what happened on the consumer side. But business had been using remote computing of various sorts for decades by then. Businesses were not held back by the network interface. It would make more sense to point to bandwidth, which, from the 1980s on, became ever "fatter," cheaper and more ubiquitous as satellite access became more common, microwave links helped bridge areas where cables were impractical and fiber optic networks were built out to the point where there was a large surplus of bandwidth, which drove transmission costs steeply downward.

These criticisms aside, Hamm knows the landscape he is writing about. Wipro and Premji are an important and interesting story and the information provided here is valuable; it would have been well worth editing more carefully.

http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4202

Customer Service!!!

(can we expect such service in India...)

Counterfeit Colgate Toothpaste Found

Colgate-Palmolive Company today warned that counterfeit toothpaste falsely packaged as "Colgate" has been found in several dollar-type discount stores in four states: New York, New Jersey, Pennsylvania, and Maryland.

There are indications that this product does not contain fluoride and may contain Diethylene Glycol. The Company stated that it does not use, nor has ever used, Diethylene Glycol as an ingredient in Colgate toothpaste anywhere in the world.

The counterfeit toothpaste can be easily recognized because it is labelled as "Manufactured in South Africa." Colgate does not import toothpaste into the United States from South Africa. In addition, the counterfeit packages examined so far have several misspellings including: "isclinically" "SOUTH AFRLCA" "South African Dental Assoxiation."

Counterfeit toothpaste is not manufactured or distributed by Colgate and has no connection with the Company whatsoever. Colgate is working closely with the U.S. FDA to help to identify those responsible for the counterfeit product.

Consumers who suspect they may have purchased a counterfeit product can call Colgate's toll-free number at .


(am not sure in Col Pal has a toll free number in India....may be it has....someone can update on that...)

(source http://www.cnn.com/2007/US/06/14/dobbs.toothpaste/index.html)

RBI working on harmonised Consumer Price Index

MUMBAI: To make inflation figures more realistic, the Reserve Bank is planning a 'Harmonised Consumer Price Index' even as the rising clout of services in the consumption basket has made the Wholesale Price Index less representative.

"In parallel, we are doing technical work on computing a Harmonised Consumer Price Index, and we are in consultation with the government in this regard," RBI Governor said at the Banco Central de Chile.

There are occasions when divergence between WPI and CPI is larger than usual. In view of these considerations, we do monitor and disseminate all the CPI indicators, he said.

Reddy said the increasing importance of services in the consumption basket is making the Wholesale Price Index (WPI) - the main measure of inflation - less representative.

A single CPI index could be even less representative as there is differing consumption trends for the rich and the poor, the rural and the urban and also among regions across the country, he said.

"We do not have the concept of core inflation but for purposes of analysis as well as articulation, we identify the impact of fuel- and food-price shocks," he said.


These two items are often subject to shock both external and domestic. The two items also have a large weight in the basket, especially of consumption. It is also difficult, ex ante, to differentiate between the shock and the permanent components, he added.

Speaking about the inflation target, Reddy said the Reserve Bank, since three years, have nevertheless articulated, with significant impact, tolerance limit of inflation at around five per cent.

Reddy said that has since been embedded in inflation expectations as noticed in severe adverse reactions when WPI exceeded five per cent.
The goal is to anchor inflation expectation in India so as to align them with the global levels as soon as possible for ensuring smooth economic integration with the global economy, he said.

Making a comment on inflationary trend, Reddy said the inflation rate accelerated steadily from an annual average of 1.7 per cent during the 1950s to 6.4 per cent during the 1960s and further to 9.0 per cent in the 1970s before easing marginally to 8.0 per cent in the 1980s.

However, the inflation rate declined from an average of 11 per cent during to 5.3 per cent during the second half of the 1990s ) and further to 4.9 per cent during , he said.

More recently during , WPI based inflation rate increased from 4.1 per cent at the end of March 2006 to an intra-year peak of 6.7 per cent at end-January 2007 and remained firm in the range of 6.1-6.6 per cent in the succeeding weeks before moderating to 5.7 per cent by the end of the financial year, he said.
[http://economictimes.indiatimes.com/News/Economy/Finance/RBI_working_on_harmonised
_Consumer_Price_Index/articleshow/msid-2110020,curpg-1.cms]

Where the world has gone to....

A very interesting case study.....after all those that we had in our classes.....
This is one short and interactive.....so for the inquisitive....it is here

Harvard Case Study

I suggest we discuss this case online either by posting comments here or replying to our group email.

A healthy discussion will benefit us all as we learned during the course.
So hope to see your solution to the case either published on Harvard site or well discussed on our communication channels

-Chetan Shah

One Cage, Two Birds

One Cage, Two Birds

This is a fable about two birds, both caged with food and water.

One bird rebelled against his conditions, rejected the food and kept knocking his head against the caged door. He was sad and frustrated. “We are doomed to die living this miserable life in this prison,” it said with a hopeless sense of accepting his circumstances.

The other bird said, "Let’s us enjoy the food and water and fly into freedom at the first opportunity to escape.”

The chance to escape seemed negligible to non-existent, but the bird remained optimistic and alert to the chance to escape.

The unexpected opportunity came in the evening when the master came home in a changed mood. He decided to set the birds free.

But while the bird that remained optimistic and alert to the chance to escape fled the cage into a life of freedom in the skies, the negative bird kept wondering if he will get food out in the open and if he will be able to survive. “It may not be such a great idea to go out and search for food and water when the master is providing everything free,” the negative bird said. Even as it was wallowing in doubts, the master’s wife came and admonished the master and quickly shut the open door before the remaining bird inside could escape. Influenced by his wife’s thoughts, the master thought that he may have erred in his judgment. The master and his wife were happy that they were to keep at least one bird in the cage.

While the opportunistic bird grabbed the first available chance to a life of freedom, the negative bird paid the price for procrastination to live and die a life of continuing misery in the cage. After years of staying in the cage, life was not easy at the beginning in the outside world, but with passage of time, the free bird truly enjoyed the many joys that were beyond even his imagination inside the cage. The caged bird, on the other hand, led the same drab life and continued to wallow in misery till his very end.

Many of us, too, find ourselves trapped in a cage. Most of us are like the negative bird: Keep cursing our bosses, our companies, our colleagues and wonder if we ever will get to free ourselves from the hell we find ourselves in. But, like the procrastinating bird, when an opportunity does come our way, we are filled with self-doubts that prevent us from taking the flight to freedom to chart out a life that we dream about. We tend to fool ourselves by thinking that we are in a comfort zone when in reality we are enduring the pangs of survival in the discomfort zone.

4 Best Words of Investing Advice

The 4 Best Words of Investing Advice

There's some great investing advice out there, but plenty of bad advice as well. Like, oh, this pearl of wisdom: "It doesn't matter how high the price is -- buy all the Enron you can."

While you can spend all day listing smart and useful investment advice, I got to thinking about great advice that's no more than four words long. Here's what I came up with:

"Buy what you know"
This is probably the second-most-famous four-word piece of investing advice. This advice comes from, or is at least most popularly attributed to, Peter Lynch's One Up on Wall Street. In a timeless article published several years ago, Jeff Fischer wrote at great length about this phrase:

[I]t is most often read to mean buy the brands that you know, buy the companies that make products that you like, and buy the company names that you always hear in daily life.

When large-cap stocks are soaring, this strategy, simple as it is, appears brilliant. "If I just buy IBM, General Electric, and Hershey, I could double my money every three years!" Of course, when large caps go into long periods of rest or retraction, the strategy requires patience and offers less than blistering returns, especially if you "bought what you knew" as it was hitting a seven-year peak.

"Buy what you know" is one-dimensional advice for three reasons. First, what you know may not be worth investing in. Second, the practice of buying what you know is rarely interpreted to mean buy the business model, the cash flow statement, and the balance sheet that you know backwards and forward. It too often is seen as "buy your favorite brand." Period. If you happen to know and love Kmart, but you didn't learn about its financials, you [were] in a sorry situation because you were an uninformed investor. Third, I've never heard the term "buy what you know" coupled with anything regarding valuation. It seems to be "buy what you know -- at any price."

Thank you, Jeff. "Buy what you know" may help new investors get comfortable with the process, but it simply won't help you pick particularly good stocks if you don't get into the valuation side of the equation. Plenty of people bought Krispy Kreme (NYSE: KKD) because they knew it, and that was a disaster. Plenty of others have bought Harley-Davidson (NYSE: HOG) because they knew it, and that's worked out fantastically. Simply put, acting on "buy what you know" doesn't lead you down any path in particular.

"Buy low, sell high"
I'm pretty sure this is the most famous four-word piece of investing advice ever. As guidance, the phrase is inarguable -- yet largely useless. By definition, if you succeed in buying low and selling high, you've made a profit. Any purchase is made with the expectation -- or at least hope -- that in absolute dollar terms, you're going to be selling at a higher price than what you've bought for. But since the advice itself gives no guidance as to what is "low" and what is "high," it can't be used without a whole lot of addendums. Buy stocks with low P/Es, or at 52-week lows, or during bear markets, or any number of other interpretations of "buying low." Selling high might or might not be useful advice. After all, as Philip Fisher has famously written, and as adopted by Warren Buffett, the best time to sell a stock, if it's properly researched, may be almost never.

We can all tell plenty of stories about someone selling a stock at a quick profit that seemed high but turned out to be several hundred or thousand percent below what they could have made, had they only held on. Tom Gardner frequently mentions Whole Foods and Daktronics when confessing his own bad calls. Not to pick on Tom -- his results speak for themselves -- but these were mistakes that came out of the "buy low, sell high" mold.

"Buy an index fund"
This is the most actionable, most mathematically supported, short-form investment advice ever. If you look up The Motley Fool in the encyclopedia -- or at least on Wikipedia -- you'll find that we are "famous for [our] view that, for the majority of people who have little time to keep track of stocks, the best investment strategy can be summed up in four words: 'Buy an index fund.'"

And that remains true. If you've got little time to keep track of stocks, this really is the best investment advice around. It's not perfect -- after all, you might be asking, "Which index fund?" And then you'd want to specify certain characteristics, such as:

• No load
• Low annual cost
• Low turnover
• Broad index

That means a fund like Vanguard 500 Index (FUND: VFINX), which coincidentally may allow you to "buy what you know" because it holds a lot of what you know, including Intel (Nasdaq: INTC) Coca-Cola, Altria (NYSE: MO), and Wachovia (NYSE: WB), each of which is in the fund's top 25 holdings.

When cornered at cocktail parties for investment advice, this is the one piece I usually provide. After all, barely 25% of mutual funds over time beat the relevant market index. I don't think that you can really improve on this advice if you're stuck using four words or fewer.

But you can spend more than four words on investment advice, and like the other four-word mantras above, doing so usually yields even better advice. Like the classic index fund, a managed fund can have no load, low cost, low turnover, and well-diversified holdings. It can, on rare occasions, be managed by someone or some team that has the ability to properly allocate capital and value businesses, thereby adding value beyond what the market average provides on its own. When you combine all of these factors, you get the potential to find a mutual fund that improves on the index fund and becomes something that will help you make money.