FINXpress DECEMBER 21, 2014 | A FINNICHE INITIATIVE
Opinion
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The not-so-bright future of SpiceJet| 4
In Focus Russian Rouble
Term of Week
Crisis| 2
Deferred Revenue| 6
Tech World Personality Warren Edward Buffett |11
LG G Flex|12
December, 21 | 2014 | Volume 26
While seniors are busy with the preparation of their end term examination starting tomorrow, juniors are busy with their internal assessments and report submissions. We wish good luck to everyone for their exams. The common thing to everyone is bearing with the extreme cold of Delhi.
Russian Rouble Crisis
The not-so-bright future of SpiceJet
Deferred Revenue
Club FinNiche releases its weekly magazine FinXpress with the In Focus talking about the ‘Russian Rouble Crisis’. The Opinion gives an overview of ‘The not-so-bright future of SpiceJet’. The term of the week describes “Deferred Revenue", which means unearned revenue or income as product or service has not been reached to the customer but the payment has been received. Do have a look at the market section, Tech world which brings to you about LG G Flex and Personality of the week, Warren Edward Buffett.
Hope everyone likes the revamped version of magazine. Club FinNiche welcomes any comments, suggestions or criticism regarding the magazine. Please do write to us and share your ideas.
Happy Reading!
Warren Buffett
Regards The Editorial Team Club FinNiche
LG G Flex
Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.
- By Aditya Agrawal
Economic policies around the world are formed by the central banks, which more often than not work in a manner which can be
called slow-moving at best. Furthermore, the policy considerations usually are predictable US removed the restrictions placed on travel by Modi when he was elected PM
to a certain extent, and in coherence with the policy statements published in their policy review meeting. In this scenario, the 650 basis points rise in interest rate in the dead of the night spells out a crisis all over it. There are high indications that Russia is not headed towards a deep recession coupled with high
Agenda includes UNGA meet-
inflation. governed by these exports. The fall in price
ing, meeting with President
Obama, CEOs of US firms as
The background of this crisis in Russia starts
from the 2013 average of $108.66 to nearly $54
well as Indian Diaspora at the
off with its economy’s high dependency on oil
only shows the fragility of the economy. This
famed MSG
and gas firms. The Russian government has
though was not a one stop change, with their
high stakes in the energy firms present. This is
having been a strong consensus about the
further accentuated by the fact that more than
overall decline in
two third of the exports of the country is of
economy, throughout 2015.
the forecast for Russian
petroleum products and it constitutes almost 50% of the annual state budget. Oil prices
The second biggest concern for Russia is its
have been falling continuously over the past
foreign policy headache caused by its stand
few months, with prices having dipped by
on Ukraine. This resulted in various sanctions
almost 50% in the previous six months. This
being imposed on it by the America and the
decline of oil prices has reached a point
European Union. There has been substantial
wherein it has touched the $60 mark in the
financial sanctions, which has resulted in
past few days, a level which was seen for the
Russia struggling to borrow abroad. There is
last time in the midst of the previous financial
also an indication that this standoff may only
crisis. This has only resulted in the rouble
worsen, with America having agreed to
following the meltdown in its value.
supply weapons and equipment to troops in Ukraine. This action will only result in
Exports as a percentage of the GDP for Russia
escalation
is at 28%, with just oil exports in itself
situation though has escalated many folds
of
the
current
standoff.
The
contributing to as much as 39% of all exports,
from this generic scenario. If we see the
resulting in almost 11% of the GDP being
unfolding of events in the past week, we see
Article titled “A Renewed US-
that the price of Brent crude fell down by
consumed by the Russian people are
just 1%, but the value of rouble declined by
imported, and they have now doubled in
over 10%, the biggest drop since 1998. This
value, due to this crisis. This has initiated a
initiated the intervention of the Central
run on the bank deposits led by mass
Bank, with it using open market operations
hysteria. There are reports of long queues
and using $2 billion to buy rouble and also
outside banks and ATMs, as people try to
the mid night hike in interest rates by 6.5%.
take out whatever savings they have in the
But, even this did not help in the decline in
banks. This situation if it continues would
value of rouble, with it declining in value by
lead to a liquidity crisis in the country.
11% the next day.
There is also a sharp movement to buy hard
India Partnership for the 21st
goods, as they are now being viewed as the
Century�. Also releases a joint
This shock of failure of the Central bank has
only way out to preserve the value of
statement
key
sent the markets into hysteria, as they come
money. This though is leading to counter
aspects of strategic relation-
to the realization that the Central Bank does
situation wherein there is not enough
ship
not have infinite reserves of American
supply to cater to these demands.
focusing
on
Dollars, as was the conceived notion of Meets with 11 CEOs in a breakfast meeting and 6 CEOs face to face, the next day. Assures of stability in tax law
everyone. Furthermore, this shock in itself
Looking from the perspective of foreign
has the power to set off a chain of corporate
organizations, this situation is one which
failure.
they have not been able to cope up with. Even
though
demand
for
goods
has
The Russian rouble has been stabilized for
increased, but margins have declined on a
the time being at 60 to a dollar, but it has left
dollar basis. This can be quite clearly be seen
deep problems to be handled. The currency
from the case of Apple, which has stopped
in itself has lost almost half of its value in
selling its goods online in Russia, as it has
the last year, which has almost halved the
been unable to cope up with the loss in
Russian economy of $2.1 trillion to a mere
value of Rouble.
$1.1 trillion. This on a comparative basis, is just half of the GDP of California.
This situation is only slated to get worse,
with reports coming out that Vladmir Putin It has also resulted in the external debt of
had having met his advisers to find out
the various Russian banks and organizations
whether Russia could withstand a complete
ballooning to nearly 70% of the total output.
shutdown
This has resulted in a scenario wherein a
indications, he feels Russia can. If he does
downgrade of Russian bonds to the junk
continue with the current policies, Russia
category is only a matter of time.
may well be in for a crisis bigger than that of
from
the
West.
As
per
1998, and this would not just impact Russia, This crisis has not just restricted itself to the
but the global economy as a whole, as was
financial sphere, and has started affecting
quite clearly seen in the crisis of 2008, that a
the day to day life of its common people.
problem in one part of the world would
More
have its ripple effect worldwide.
than
half
the
consumer
goods
- By Yojana Ranasaria
In
December
when
SpiceJet, owned by Sun group of India is one
The aviation industry survives on debt and
of the low-cost airlines of India and was
maintains its working capital requirements by
recently in news as it announced its shutting
borrowing funds. The whole of aviation
down of operations due to shortage of funds
industry is debt stricken and exceptions are
and inability to pay debts.
only a few. In such a tight situation, the things
the
get worst for airline companies to face stiff
SpiceJet
competition from its peers. SpiceJet gave upto
had to cancel many planes on
50% discounts in festive season to match that
receipt
of a warning from
of its competitors and all this adds to the
Directorate General of Civil
burden of debt they are carrying. In December
Aviation (DGCA) of clearing its
when the situation got worst, SpiceJet had to
dues to the employees and
cancel many planes on receipt of a warning
crude oil companies
from Directorate General of Civil Aviation
situation got worst,
(DGCA) of clearing its dues to the employees and crude oil companies and as a penalty they were to fly on cash and carry mode which meant they can book an air slot only on immediate
payment
to
the
regulatory
authority. On December 17, it had to ground SpiceJet came into existence in May 2005 with
its fleet of planes because of inability to pay
its registered office in Chennai and corporate
dues.
office in Gurgaon. In a span of less than 10
operations the next day on extension of credit
years, it has been able to achieve the milestone
facility by Airport Authority of India till
of being the second largest airline by domestic
December, we are yet to see what lies ahead
passenger share. The roots of SpiceJet can be
for this company, is it going along the same
traced back to 1993, when industrialist S.K.
lines of Air India and with support from the
Modi found ModiLuft in association with
government and some blue-chip investors,
Lufthansa Airlines. The airlines shut its
has chances of survival or will face the same
operations in 1996 and the same was revived
fate as Kingfisher Airlines and be doomed in
by promoter Ajay Singh in 2004 with the
history.
Though
the
airlines
resumed
its
name SpiceJet.. Rise of global crude oil prices led to accumulated loss of 390 million in 2012
SpiceJet drama played out in times of distress
and has been making losses since except in
when the promoter Kalanithi Maran threw up
2013 when it returned to profits.
his hands in shortage of funds and the
Government pushing Ajay Singh, former
amount of current debt to the tune of
promoter to feed in money to revive the
around Rs. 3600 crores for which Singh and
airlines show political hue attached to it.
two other blue chips have joined to rescue the airlines by pooling money and pay off
The government has smoothened matters
its debt at the earliest.
and cleared the air by showing support to revive the airlines and urging Ajay Singh to
The cash-strapped airlines can also witness a
drive
steady
change in guard if private investors both
The cash-strapped airlines can
recovery. It has given suggestions like
domestic and foreign manage to pool in Rs
also witness a change in guard
extending ticket booking till March 31st,
1200 crores . If the investment comes
if
restoring credit lines which are offered by
through in this short span of time, the stake
domestic and foreign manage
Oil
and
will pass from media baron Kalanithi Maran
to pool in Rs 1200 crores. The
airport authorities and also asking bank for
to these potential investors. Through this
lending the distressed carrier.
fresh investment, the carrier with a market
private
investors
both
government has smoothened
the
airlines
towards
a
Marketing Companies (OMCs)
capitalization of Rs 600 crores will buy
matters and cleared the air by
equity to pay off its debt. The investment
showing support to revive the
will also help the carrier to save some cash
airlines and urging Ajay Singh
which can be utlised to maintain its future
to drive the airlines towards a
daily operations and the timing of such
steady recovery.
crisis is opportune in a way that crude oil prices has fallen down and the aviation industry is booming with many passengers preferring to fly. The decision to have a business class and shifting from all-economy model for its new aircrafts seems to be a bad business decision as it will only result in rising maintenance cost when the debts are already piling up according to sources and might be reverted. The support from Government and other investors is obvious in this situation as closure of the carrier will impact not only The no-frills carrier has a total debt of Rs.
investments in the aviation sector but will
1.236 crores out of which around 90 percent
dampen the overall investment climate of
is taken in the form of External Commercial
India. We are yet to see how things take turn
Borrowings (ECB). Also, it has a large
and what lies ahead for this carrier.
- By Shikha Sharma
Deferred revenue is important in accurate reporting of assets and
liabilities
on
a
Deferred revenue (also known as deferred
permit expenses and yearly support charges.
income, unearned income, or unearned wage)
Experts study inclines in conceded incomes of
is, in accrual accounting, money received for
such organizations for a superior sign of their
products or services which have not yet been
monetary execution.
conveyed.
per it
is
revenue as
Recording unmerited incomes on the wage
a liability until conveyance is made, at which
explanation, as opposed to as conceded
protects
time it is changed over into revenue
incomes
treating
principle,
the
company's balance sheet. It against
recognition
As
recorded
unearned income as an asset,
on
the
asset
report,
may
be
considered as forceful bookkeeping, as it
and guards against overvaluing
Progress instalments or unmerited income,
would have the impact of exaggerating
the company's net worth
recorded on the beneficiary's asset report as a
incomes.
risk, until the administrations have been
rendered or items have been conveyed.
Deferred
Deferred revenue is an obligation in light of
accumulated cost with the distinction that an
the fact that it alludes to income that has not
obligation to be secured later are products or
yet been earned, yet speaks to items or
administrations got from a partner, while
administrations that are owed to the client. As
money is to be paid out in a recent period,
the item or administration is conveyed after
when such cost is caused, the related cost
some time, it is perceived as income on the
thing is perceived, and the same sum is
wage explanation.
deducted from gathered costs.
For instance, an organization that gets a
The sentence above appears to clear up the
development
contrast
instalment
of
$100,000
for
revenue
between
offers
deferred
qualities
revenue
with
and
conveyance of an item would book it as
gathered cost, yet it is truly befuddling to
deferred revenue on its asset report. When it
clarify it along these lines. To clear up it in a
conveys
the
clearer manner, we may say: Deferred pay
organization would exchange the $100,000
offers qualities with gathered cost with the
from
distinction that conceded wage (the cash that
the
the
item
conceded
to
the
income
client, record
to
customary income on its wage proclamation.
an organization got ahead of time) shows the products
and
administrations to its clients,
the
Programming organizations by and large
organization owed
have sizable measures of deferred revenue on
collected cost demonstrates the cash an
while
their asset reports, commonly speaking to
organization owed to others.
INDIAN MARKETS
Oil closed up as much as 5
The BSE Sensex and Nifty rose for a second consecutive day on Friday. Gains also tracked Asian shares that enjoyed their best day in 15 months after Wall Street boasted its biggest two-day advance since late 2011 amid relief the Federal Reserve was in no rush to withdraw stimulus from the U.S. economy. Investors remained encouraged after the cabinet approved a constitutional amendment bill on Wednesday to rationalise state and central indirect taxes into a harmonised goods and services tax (GST). Still, for the week, the shares ended flat to slightly higher after two previous weeks of declines as a slump in the Russian rouble sparked fears of financial contagion earlier in the week.
percent on Friday, its biggest
Open
High
Low
Close
gain in over two years, as
SENSEX
27,136.28
27,472.59
26,502.63
27,371.84
some traders took profits on
NIFTY
8,160.75
8,259.10
7,969.40
8,225.20
short positions after prices this week hit their lowest since
BSE SENSEX
2009
Energy and materials sectors were leading the gains on Friday
and
throughout
week,
as
investors
the were
betting that the bottom in oil prices might be in sight Energy
sector
stocks
in
particular jumped nearly 10% over the past week, while materials gained 5%
CNX NIFTY
COMMODITIES Commodity
Unit
Rs / Unit
% Change
Gold
10 grams
26,965.00
+0.56
Silver
1 kg
36,700.00
+0.40
Crude Oil
1 bbl
3,578.00
+0.31
EXCHANGE RATES INR/ 1 USD
63.07
INR /1 EURO
77.46
INR/ 100 JAPAN YEN
52.80
INR / 1 POUND STERLING
98.73
INTERNATIONAL MARKETS Open
High
Low
Close
NYSE Comp
10,535.52
10,919.51
10,360.03
10,890.24
NASDAQ
4,679.76
4,793.24
4,653.60
4,653.60
S&P 500
2,005.03
2,077.85
1,972.56
2,070.65
FTSE 100
6,300.60
6,566.90
6,144.70
6,545.30
CAC
4,094.46
4,291.20
3,926.34
4,241.65
DAX
9,599.82
9,901.26
9,219.05
9,786.96
NIKKEI 225
17,099.40
17,621.40
16,672.94
17,621.40
SSE 50
2,680.16
2,937.65
2,680.16
2,937.65
Hang Seng
22,977.84
23,189.60
22,529.75
23,116.63
Govt hikes import tariff value on gold and silver The government on Tuesday (December 16) raised import tariff value on gold to USD 396 per 10 grams and on silver to USD 561 per kg in line with volatile global price trends. The tariff value on imported gold was at USD 388 per 10 grams and silver at USD 540 per kg in the first fortnight of the current month.
The company secured a repeat order
from
Sri
government,
Lankan
through
the
company's distributor in Sri Lanka,
David
Pieris
Motor
Company, for the supply of 1.25
lakh
Discover-125M,
units
of
which
the
company expects to execute in next 3-4 months
Globally, gold and silver prices have been volatile in the last few weeks. In London, gold prices rose on Tuesday 0.53 percent to USD 1,199.80 per ounce, while silver rates too increased to USD 16.22 per ounce. In the domestic market, gold prices however showed a decline. Gold was sold at Rs 27,200 per 10 grams and silver at Rs 37,050 per kg in the national capital on Tuesday. Govt tables mid-year review in Parliament, FY15 growth seen at 5.5% India's GDP is expected to rise to 5.5 percent in the current fiscal from 4.7 percent last year on back of improving macro-economic situation, says the Finance Ministry's Mid-Year economic review which also flagged fiscal challenges like subdued revenue collections. The review projected that 7-8 percent economic growth was "within reach" in the coming years and said inflation has fallen dramatically and that declining oil prices will help in containing CAD at around 2 percent of GDP.
Microsoft's CityNext service will empower citizens in Surat with
The 'Mid-Year Economic Analysis 2014-15' tabled in Parliament also assumed that the Reserve Bank would maintain status-quo in the interest rate till March 2015 and a stable outlook for rupee. Industry has been demanding cut in interest rate amid slowing industrial production.
open data and digital way of accessing
civic
services,
Government approves 8.75% interest rate on provident fund deposits for 2014-15
thereby making Surat a Smart City.
Over five crore subscribers of the EPFO will get 8.75 per cent interest this fiscal on their provident fund deposits - the same rate as the previous year. "Finance ministry has ratified the decision of the EPFO's central board of trustees (CBT) to retain 8.75 per cent rate of interest for the current fiscal," said a source. The rate was same in the previous year, 2013-14, when it was raised from 8.5 per cent in the 2012-13 fiscal. Tata's Vistara airline to fly from January 9 Tata's full service carrier in partnership with Singapore Airlines Vistara to fly from January 9 by operating daily flights to Mumbai and Ahmedabad from Delhi. Regulatory authority DGCA on Monday granted the air operator permit to Vistara to begin its commercial operations across the country.
Indiabulls Settles Case With Sebi with Rs 1 Crore Payment Indiabulls Securities has settled a case related to alleged non-compliance of stock broker norms after payment of Rs 1 crore to the market regulator Sebi as consent settlement charges. The Securities and Exchange Board of India (Sebi) had begun adjudications proceedings against Indiabulls Securities in relation to certain alleged irregularities by the stock broker.
The Finance Ministry today said there were as many as 213 cases of service tax evasion relating to BCCI/IPL, involving Rs 261.64 crore between 200910 and May 6, 2014
MTNL has raised Rs 3,768.97 crore in FY 2014-15 i.e. Rs 2,268.90 crore on November 28, 2014 and Rs 15,00.07 crore on November 19, 2014 by selling bonds
However, the regulator has now agreed to dispose off the pending adjudication proceedings after a consent settlement. The regulator's inspection of Indiabulls Securities' records during November 2006 had found certain irregularities in the broker's business operations such as failure to maintain proper records pertaining to investor complaints and appointment of unregistered sub brokers in the guise of "marketing associates". While adjudication proceedings were in progress, the broker made a proposal to settle the matter on payment of Rs 1 crore under Sebi's consent order mechanism. Subsequently, the proposed consent terms and settlement amount were approved by Sebi's High Powered Advisory Committee (HPAC) as well as by a panel of the regulator's whole time members, following which Indiabulls remitted the amount. Dr Reddy's acquires Habitrol brand City-based drugmaker Dr Reddy's Laboratories has acquired Habitrol brand, a nicotine replacement therapy transdermal patch, from Novartis Consumer Health Inc. According to a statement issued by the drug major, the acquisition of Habitrol brand (an over-the-counter nicotine replacement therapy transdermal patch) from Novartis Consumer Health Inc was done following issuance of the proposed consent order from the US Federal Trade Commission (FTC) on November 26.
FM Jaitley presents GST Bill in Lok Sabha, says interests of States taken care of The much-awaited Goods and Services Tax (GST) Bill, which provides for an overhaul of the taxation system, was introduced in the Lok Sabha on Friday with the government saying concerns of all the States have been taken care of and they would benefit from the win-win measure. Finance Minister Arun Jaitley said the Constitution (122nd Amendment) Bill will be taken up in the Budget Session of Parliament and that he will be open to all suggestions till the very last minute. Introducing the contentious GST Bill, which was cleared by the Cabinet on Wednesday (December 17), Jaitley said, "We have made sure that no State will lose a rupee of revenue. It will be a win-win situation."
Early Life Warren Buffett developed a knack of financial and business matters. At 11 years old, he started investment is stock markets.
30h August, 1931
University of Nabraska-Lincoln, Colombia Business School
-Ranked wealthiest person in
2008 with estimated net worth of US$62 billion and as third wealthiest in 2011 -In 2012, Times named Buffett one of the most influential person
Warren Buffett, known as the “Oracle of Omaha”, is an investment guru and is one of the most respected and influential businessman in the world. Buffett is the chairman, CEO and the largest shareholder of Berkshire Hathaway. Warren Buffett is known for this adherence to value investing and his personal frugality despite his immense wealth. He is also a well known philanthropist and in 2006, announced that he would give 99% of this fortune to a charity particularly through Gates Foundation. Warren Buffett was the lone insurance police for Pepsi’s Billion Dollar Sweepstakers.
Business Career After completing Bachelor of Science in business administration from university of Nabraska-Lincoln, he is enrolled to Colombia University to learn from two well known securities analyst David Dodd and Benjamin Graham. In 1990, Buffett became a billionaire by selling class A shares with market closing at US $7,175 a share. In 2014, the price of Berkshire Hathaway hit US$200,000 per share for first time, and thus the net capital of the company hit US$328billion. Being an investment powerhouse, warren Buffet suggested 6 things which should be done with money in 2015: 1. Index funds should be chosen for investment 2. Avoid Bitcons 3. Learn how to read financial statements 4. Avoid greed, focus on savings and not getting rich quickly 5. When stock prices drop—Buy and avoid selling 6. Stop pretending to be an expert As per Warren Buffet, it is hard to predict about equities in the next 17 years, but considering the recent market it is better to pick the securities with most probable return, from appreciation and dividends combined.
- By J. Sindhuja
LG Electronics
LG G
Android 4.2.2” Jelly bean
Qualcom snapdragon 800
LG is a champion of innovation with more than six decades of consumer electronics experience around the globe and has now leveraged that expertise, and changed the very shape of the smartphone category by creating the new G Flex, the world’s first curved and flexible smartphone. G Flex represents the latest in OLED (organic light-emitting diode) screen technology which was borrowed from LG’s growing expertise in curved OLED TVs. G Flex brings you a curved form factor that fits in the palm of your hand ,the shape of your face. It is powered by a unique, new, long-life type battery which flexes along with the phone. State-of-the-art materials are used inside and out in manufacturing the device, which enables it to perform feats no other smartphone can perform. Features G Flex’s 6.0” Curved OLED screen fills your field of vision for a more immersive, panoramic viewing experience. G Flex follows the curvature of your face, and provides an
outstanding voice and sound experience. It’s perfect for watching movies or playing games when held in landscape position. LG G Flex uses the Qualcomm Snapdragon 800 2.26 GHz Quad-Core Processor, an intensely fast CPU for smooth and seamless operations. It enables the operating of multiple apps open at once. The 13-megapixel camera captures all of life’s moments , including crisp night time photos and precise action shots. A simple knocking gesture is all it takes to wake G Flex’s display without picking it up or pressing the power key. It has the great feature of sensing the gesture and turns the display on or off automatically. QuickTheater is the other feature that gives you direct access to your photos, videos and youtube by just holding the Flex and use two thumbs to open the screen. The only limitation is that flexibility is limited and may be bent flat up to 180 degrees for a limited period of time only.