Monday, December 29, 2008

Amazing - Satyam Saga Post 2

Amazing stuff I've been reading. It seems the 8.6% stake that the Raju family owned in Satyam was already pledged to banks - They had borrowed cash against the same already and had used the proceeds to invest in Maytas Properties and Maytas Infrastructure. So the plan seems to have been to use all of Satyam's money to buy the shares they owned in Maytas and then return money to the banks to free up their shares. In effect, using money lying in a company they managed but owned very little of to exit their investments before the markets further deteriorated. Is it only me or does this whole confusing rigmarole seem almost criminal?

Poetic justice that their desperate actions caused the stock to plummet and meant their value did not cover the loans that banks had advanced to them earlier causing them to ask them for further collateral. They not being able to provide the same, banks went ahead and sold stock to recover as much as they could, further depressing the stock. It seems they could end up losing their entire shareholding in the company. Poetic justice indeed!!

Wednesday, December 17, 2008

What were these guys thinking?

So Satyam computers decides to spend 1.3bn USD of its cash and take on 300mn USD in debt to buy Maytas Infrastructure and Maytas properties - two companies owned by its founders. The founders btw own 9% of Satyam ONLY. The resolution is passed unanimously by the board and then communicated to the stock exchanges. Shareholders go ballistic and the stock tanks by 54% - The company has to call of the deal fearing god knows how many lawsuits.

What surprises me is the names on the Satyam board

The links point to their profiles. What were these people thinking? I am sure that they have decades of experience and know their respobsibilities. Or is sitting on a board just about making a quick buck and getting the company to pay for your stay in expensive hotels? Shameful to say the least. I wouldn't be surprised if shareholders decide to replace a significant number of board members and maybe the three executive directors too. They anyhow seem to be more interested in constructing bridges and apartments in India instead of spending their time and energy delivering software to customers in the U.S of A.

Saturday, December 13, 2008

The daily routine

Saturdays and Sundays are my relaxed days. For the past month, I've been on a tough schedule that I love. It's made me feel much better. Here is what it looks like:-

5:30a.m. - Alarm goes off. Try to wake up
5:55a.m. - Watch U.S. markets closing reports on CNBC, check google finance, email on blackberry, Paytronic sales and new merchant sign up reports.
6:10a.m. - Head to the gym
6:20-7:45a.m. - Gym - primarily the treadmill (preparing for the mumbai marathon) and some light weights
8:00-8:15a.m. - Do some laps in the pool
8:40a.m. - Back home
8:40-9:20a.m. - Breakfast, Read the papers (The Mint in detail, Glance through the ToI), Get ready for work
9:30a.m. - Get to office (benefits of living next to work)
7:45p.m. - 10:30p.m. - Social time - The general routine is to have dinner at home and spend some time with Hemisha and watch some TV though we regularly also go out for dinner or a movie (the PVRs at Oberoi mall or Juhu are our usual destinations.)
10:30p.m. - Bed time (unless I have conf. calls with the U.S. when this gets extended to about 11:30p.m.)

Saturdays and Sundays I have a much more relaxed schedule. I don't go to the gym or Pool and try and leave work a bit earlier (6:30ish). Try to use this time to catch up on reading, meet up with friends and other start-up people and also for other personal stuff. I like having a routine. Have had once since the beginning when I became an entrepreneur. I like it as it brings some predictability into my otherwise very unpredictable life.

Friday, December 12, 2008

The terrorism post

So I'm late. Virtually every blogger who had something to say has said it. I'm done with dinner and thought of writing a new blog post. Asked Hemisha for her suggestions on a topic to post on and she said "Aren't you going to write anything about the terror attacks? " For those who have not heard, on 26-11-2008 Mumbai, the city I live in, was attacked. You can read more about it here.

I'm gonna try and share a few of my views. I do have some perspective as I do feel I have seen terrorism at close quarters post 9-11.

Firstly a preface:- Our government needs to realize that warfare has changed. When I was a kid my parents used to subscribe to the India Today magazine which was posted to us overseas. I remember seeing images regularly which basically had two columns - India and Pakistan with the number of Fighter Jets, Tanks, Missiles, soldiers etc. that each one had stacked up graphically against the other. Warfare used to mean out bombing, out tanking or out numbering the other side in battle. The states realized this on 9-11-2001 and we should have taken a cue but seeing that we haven't we should take one now. Fighting terror requires very different people, processes and technology. It does not matter if we have a large highly trained millitary, lots of jets or the nuclear bomb. Winning this war will mean realizing that we are fighting a very different kind of enemy and so rejigging our entire millitary and defense to think along these lines. Here are a few of my pointers:-

1. We need to change our metrics for whether we have won or lost a battle. Our battle is not won if we kill the terrorists. Our battle is won if we are able to unearth their plans and capture them, thwart their plans. This is far less glamorous and will not be as appreciated by the masses but this is what we must consider as a win and this is what we must celebrate. The objective of the other side is not to come to Mumbai and conquer our territory, declare it as a part of Pakistan. It is to cause damage to property, innocent lives and to the social environment in our country. The terrorists seem to clearly understand their objectives and goals - Can we say the same about our government and millitary?

2. We need to realize that fighting terror is an expensive defensive battle. It is akin to protecting your farm from a flying pest. While for the pest it takes hardly any resources to come in and cause havoc, protecting the farm from such pests means making investments many orders of magnitude larger. We as a democracy will need to realize that significant money will need to be dedicated to protecting our security. Our government will have to keep defense spending as it is and create an equal (if not larger) budget dedicated to 'Homeland security'. To give you a quick comparison - The States has a homeland security budget of about 60bn and a defense budget of about 550bn. India's defense budget is about 25bn USD. We will have to set aside at least 3-4bn USD on a yearly basis towards homeland security.

3. Technology is a key weapon against terror. This is because fighting terror is about two primary areas - watching out for suspicious activity (surveillance and monitoring) and deep diving once you get a clue to be able to follow the trace (sort of being able to follow a trace even though it is very faint. We need our cities to be covered in surveillance cameras, all indians to be fingerprinted and given smart card and biometric IDs, all bank transactions to be tracked, voice calls on all telecom networks to be logged for 6-9 months and then speed analyzed, trace chemicals to be detected through traces in the air etc. We will need to invest in technology and people with a technological bent of mind to be able to implement these in the department of homeland security.

4. Problems we will face will be non-trivial. India is a country which generates large volumes of data. Imagine the complexity with trying to archive all voice calls for even a year. Then imagine the problem if you are trying to analyze these calls by having humans listen to them (physically impossible as they will be listening to real time conversations in real time. This requires software that can analyze calls much faster than real time = probably 40-50 times faster!!) . I suspect we will need to invest heavily in research into these problems and to finding solutions that can then quickly be implemented by the government. Government owning research will be highly inefficient. My suggestion would be to fund labs at some of the IITs and give 40-50mn USD to 2-3 funds whose charter would be to fund companies that they think are developing relevant technologies for the government.

5. It will be difficult to do everything ourselves. We will need to buy software and tools from overseas vendors who have working solutions to similar problems being faced by their governments. To do this, we need to have a procurement process that is reasonably open and transparent. We will also have to be mature and not cry foul everytime we see a company has been awarded a multi-million dollar contract.

and Lastly,
6. We need to prepare as a nation for Emergencies. All kids need to be taught how to swim, climb down from the 3rd floor balcony, how to administer first aid, how to put out fires, how to stay calm etc. If they don't clear the basic course in 'survival skills and emergency procedures' they should not be able to get past 6th grade. All buildings need to have fire drills, evacuation procedures and emergency exits. We need to have an ambulance system that is designed for the chaos that is India and our roads. Most importantly we need to train our people that in situations of war, they need to sit indoors, remain calm and not expect to be kept posted about everything. We should be content with listening to hourly government bulletins and to not having any other reporting in moments of war.

So having said this much, I must end here. It's been interesting writing this and I might be motivated in the future to write some more!!

If not debt, then equity?

Given that my last post discourages entrepreneurs from raising debt apart from a few specific cases namely:- 1. Very high ROCE low risk bus...