We would like to extend our heartiest congratulations to the batch of 2014-16 for making it

to one of the most prestigious and the oldest B-School in the country. We hope that with

your addition comes a multitude of new experiences, perspectives, and vibrancy to this

hallowed campus. Here’s wishing that you savour the much celebrated XL Culture

throughout your stay here.

It is with great pride and joy that we present the first edition of “Finalogue” for the current

academic year. Your feedback would help us give you the best of Finance every time.

Do provide us with your valuable comments at finax@xlri.ac.in

Best wishes, always

Team FINAX [www.facebook.com/finaxxlri]

We will be taking the selections of the Junior Committee very seriously and will be keeping it very

transparent and objective. Knowledge of Finance is absolutely no criteria for getting through to

FINAX. The parameters would be broadly Communication skills, Creativity and Confidence. The

process comprises two round of interviews and an activity which will test you on all the

aforementioned three C’s. Feel free to get in touch with us even if there is an iota of doubt.

Welcome To XLRI

Finax Committee Selection

FINALOGUE 3 r d J u l y , 2 0 1 4 T h e F i n a n c e C a t a l o g u e

What ’s

Inside?

Who’s

Who?

Marriage

of Flipkart

and

Myntra

Virtual

Currency

NPA: Indian

Banking’s

Achilles Hill

SIP Gyan

Let’s Hit the Floor with our First Event!

P a g e 2

Facebook and Whatspp - Is it worth the moolah ?

Zuckerberg has to his credit the social-networking revolution, he definitely has some hang of things when it comes to online communication. So, let’s just delve deeper into this deal and try and find out what is in it for Facebook. The most important aspect of this deal would be that Facebook now has gained access to a large re-pository of phone numbers, which was the only part of information missing from its databases. With additional 1 million users being added on a daily basis the repository is just bound to get bigger and bigger. Also, entering into mobile communication world would enable Facebook to fulfil the crucial part of social communication’s core mission of – connecting the world. WhatsApp is highly engaging with 70% of its users being active on a daily basis while on the other hand Facebook seems to be losing its sheen. Another thing going in favour of WhatsApp is the geo-graphical presence it has. WhatsApp predominantly has users in the areas of Europe, India and Latin America. It is not surprising that these are the regions which Facebook is also targeting to sustain its growth. Facebook would end up competing against many mobile apps to gain customers mobile minutes in the near future and WhatsApp would come in as a handy weapon at that time. With absolutely no precedence for such a deal it is tough to say whether Zuckerberg has pulled off another stunner or has he miserably failed.

F I N A L O G U

1.Singapore has the

world's highest percent-

age of millionaires with 1

out of 10 households

having at least USD one

million in disposable

wealth

2. In 1990, the Soviets

gave Pepsi "Stolinchnaya

Vodka" and a ship fleet

consisting of 10 commer-

cial ships, 17 submarines,

a cruiser, a frigate and a

destroyer In exchange for

Pepsi products!

3. Apple’s cash and invest-

ments are now equal to

the GDP of Hungary, and

more than that of

Vietnam and Iraq

4. The total Assets under

supervision for JP Morgan

is $2.2 trillion which is

more than the GDP of

India

5. If you had invested

$100 in Microsoft in 1986

instead of buying a

version of Windows 1.0, it

would be worth $46,400

today

6. The biggest merger to

date in U.S. history was

that of Internet service

provider America Online

and media giant Time

Warner. The merger was

worth a reported $162

billion in January, 2001

FinTrivia

The marriage of Myntra and Flipkart

Closer home the e-commerce industry is set for a period of consolidation and restructuring. May this

year saw the merger of two giants - Flipkart and Myntra. Flipkart is India’s largest e-commerce firm

whereas Myntra is India’s largest online apparel retailer.

Both these companies have now reached reasonable scale of operations and have been able to

set-up an ecosystem for e-commerce in India. The next step for them is to compete against players

like Amazon and Wal-Mart which are set to take the Indian e-commerce industry by storm. These

multinational firms have strong financial muscle and therefore it is imperative for players like Flipkart

and Myntra to combine their operations.

Integration of back-end operations is expected to generate cost synergies. The customer acquisition

cost will also reduce as there would be chances of cross-selling.

Another laudable point is that Myntra is operating with an independent website and under the

control of the original management which in a way would not create any personnel related issues.

So, as of now this deal- rumoured to be around INR 2,000 crore - makes a lot of strategic sense but

let’s see how well it actually turns out to be.

This being our first edition for the session 2014-15, we bring to you the

“Firsts” in Finance

First Currency: Paper bills in China during Tang Dynasty (AD 618-907)

First Stock Exchange: Amsterdam Stock Exchange (1602)

First PSU to be privatized in India: Modern Food Industries in January 2000

First Asset Bubble: Tulip Mania, 1637

First Central Bank: Swedish Riksbank, 1668

First Power Co. in India with Soviet Collaboration: Neyveli Lignite Corporation

P a g e 3 Currency going Modern!

Virtual Currency: Impacting the unaffected

People think of money as being factual, existent thing. But that’s view is fading fast. Today only 8% of the

world's currency exists as physical cash. Currency note is nothing but a piece of paper but then what gives

it its magical properties is, in words of Professor Castronova, “a social process that enshrines a good as a

unique artefact called money; once enshrined, that artefact serves money's three functions, well or

poorly”.

As the monetary consolidation continued, however, strange new kinds of currencies were popping up

because of the problems with the physical currencies and coins ranging from bulkiness to counterfeiting.

The new kinds of currencies started with Supermarket trading stamps. Others include air miles, iTunes gift

vouchers, discount coupons, two-for-one deals, and the numerous tokens used by online computer gaming

users, Second Lifers and the like. Many of these "currencies" had money like properties, but we did not

think of them as money.

And then arrived Bitcoins and suddenly everyone got very excited or indignant or perhaps both! What

exactly is a Bitcoin? To answer that, we can say that if hard currency is like a record, then a bitcoin is like an

MP3.

Bitcoins fall in the category called Cryptocurrency. Cryptocurrency is a digital or virtual currency that uses

cryptography for security. Notable thing about a cryptocurrency is it is difficult to counterfeit because of

this security feature. A defining feature of a cryptocurrency is that it is not issued by any central authority,

rendering it theoretically immune to government interference or manipulation. Cryptocurrencies make it

easier to transfer funds between two parties in transactions; these fund transfers are done with minimal

processing fees, enabling users to avoid the steep fees charged by most banks and financial institutions for

wire transfers. Bitcoin, hence, is called a decentralized virtual currency.

New bitcoins enter the market by a process called "mining." Available bitcoins are hidden amid a complex

encrypted computer program. Users' computers are working round the clock to solve a complicated

mathematical problem in order to release new coins. The easiest-mined bitcoins have already been

discovered. Finding new coins requires huge amounts of computing power. That has led some hackers to

take over unsuspecting users' computers to harness their power to mine for more bitcoins. The system is

designed to require more work to get coins as time goes by, that makes the currency's growth rate, also

known as inflation, steady and predictable.

There have been lots of cryptocurrencies before bitcoins, and there are innumerable more in the pipeline

for two reasons: strangely, there appears to be no legal framework that prevents the creation of private

currencies, and the digital technology to generate them is now abundantly available to all. Some of the

other Cryptocurrencies are: Litecoin, Peercoin, Freicoin, Ripple and Linden Dollar.

Most current discussion of the downsides of virtual currencies focuses on one aspect of them – that they

are basically just tools for money-laundering. But that link hasn’t been established so just wait and watch

to experience the effects of Bitcoins in near future.

Mint:

Freely available on iOS, Android

Frequently cited as one of the best financial software

apps by sites such as Wired, CNET and Digital

Trends, Mint lets you look at all of your bank account

balances in real time, sends an alert when you're

about to surpass your budget and lets you manage

your expenses.

F I N A L O G U E

Cockroach theory

The theory that states

when a company reports

bad news to the public,

there is usually a lot more

bad news behind the

scenes that may come out

later.

Macaroni Defence

An approach taken by a

company that does not

want to be taken over. The

company issues a large

number of bonds with the

condition they must be

redeemed at a high price if

the company is taken over.

Dead cat bounce

A small rally after a sharp

decline on Wall Street. It

could refer to a stock with a

nose-diving share price.

Puke point

The "puke point" is the

point at which the investor

can no longer stomach the

losses, and decides to sell

the asset, regardless of its

steeply falling price.

Paper Wallet

A paper wallet is an offline

mechanism for storing

Bitcoins. The process in-

volves printing the private

keys and Bitcoin addresses

onto paper.

Fikipedia

FinApps

P a g e 4

NPA: Indian Banking’s Achilles Heel

What is the one factor you look out for when Indian banks release their financial results? Most of us would agree that it is PAT, NIMs, ROA or increase in loans & advances. But if you have tracked the results and reaction of the stock market after the results, you would notice that Non Performing Asset (NPA) figure is one most important factor driving the banking stocks over the past 2-3 years. So, what exactly is NPA? Once the borrower has failed to make interest or principle payments for 90 days the loan is considered to be a NPA. As a thumb rule, high GDP growth does result in higher NPA because of banks granting rapid loans. But non recovery of those loans cripples the very system of banking. The decline in asset quality of bank assets have resulted in introduction of stringent BASEL III norms around the world to counter this problem and India is no exception to the case. The biggest ailment in Indian banking industry over the past few years has been the rise in NPA which is incapacitating the system specially the PSU banks. The gross NPA of public sector banks rose to Rs 2.03 lakh crore at the end of September 2013, from Rs 1.55 lakh crore on Mar, 2013. PSU banks are major worries in this regard with premier SBI recording Gross NPA close to 5% consistently over past 2 years. This definitely is an alarming situation. Sales of non-performing loans to ARCs jumped to Rs 27,000 crore in 2013-14 from Rs 8,000 crore in FY13, and are likely to double further in FY15. Bad loans could climb to 7% of total advances by March 2015, the RBI warned in a report in December. This is nearly equal to the size of the budget of Uttar Pradesh. The biggest chunk of the soured debts is with PSU banks, which account for two-third of loans but 80 per cent of NPAs.

The big ticket defaults of Kingfisher Airlines and Deccan Chronicles are just the tip of the iceberg. Priority sector lending makes it imperative for banks to grant loans to various sectors that make it tough to recover loans. The real issue lies in the pressure from government to compel banks to aid infrastructural projects, power sector projects which have been the real cause of ballooning NPAs. Moreover, the decision to waiver loans and politically motivated steps to waiver electricity bills in certain states have exacerbated the situation. It is not that RBI is not doing its part with respect to high NPA situation. The stringent regulation and instructions are released from time to time. RBI has instructed banks to conduct special drives for recovery of loss assets, to put in place early warning system, to replace system of post-dated cheques with Electronic Clearance System and to constitute a Board level Committee for monitoring of recovery. In past 6 months, despite the uncertain economic environment, banks have been able to improve their credit quality, primarily due to lower slippages, better recovery and higher sale of non-performing loans to ARCs and a strong recovery in the last three months of 2013-14. The RBI plans to take up with the government concrete suggestions on reining in NPAs. These include creation of additional debt recovery tribunals, creating special cadre of officers and a separate bench for speedy disposal of NPA-related cases. Recommendations may also be made to the government to expedite setting up of special benches in every high court for corporate cases. Also the full implementation of BASEL III norms by 2018 will drive towards strengthened asset quality. However, it seems we are stuck with high NPAs in next few years to come.

F I N A L O G U E

Bank Rate

9.0%

Repo Rate

8.0%

Reverse Repo Rate

7.0%

MSF Rate

9.0%

CRR

4.0%

SLR

22.5%

Nifty

7725.15

Sensex

25841.21

DowJones

16970.01

$/Rs

59.58

Gold

28040

As on 2nd July

Market

Watch

The big ticket defaults of Kingfisher Airlines and Deccan Chronicles are just the tip of

the iceberg. Priority sector lending makes it imperative for banks to grant loans to

various sectors that make it tough to recover loans. The real issue lies in the

pressure from government to compel banks to aid infrastructural projects, power

sector projects which have been the real cause of ballooning NPAs. Moreover, the

decision to waiver loans and politically motivated steps to waiver electricity bills in

certain states have exacerbated the situation.

P a g e 5

Who’s Who?

Elon Musk - South African-American entrepreneur (The Real Life Iron Man)

Elon Musk - South African-American entrepreneur “I think that’s the

single best piece of advice: constantly think about how you could be

doing things better and questioning yourself.” Considered to be the

poster boy of the ‘thrillionaires’ (a term coined by New York Times to

describe a class of former high-tech entrepreneurs who are using their

newfound wealth to help turn science-fiction dreams into reality), Elon

Musk is the epitome of a self-made man. The founder of three highly

successful start-ups-PayPal, SpaceX and Tesla Motors-Musk has

mastered the technique of turning shortcomings into profits and not

resting on his laurels. One of his ultimate dreams is to build an “oasis”

settlement on Mars which could accommodate upto 80,000 pioneers as

he believes that a multi-planetary life will serve as a hedge against threats to the survival of the human species. Born (1971)

and raised in South Africa, Musk taught himself how to program when he was 10 years old and sold his first commercial

software (a space game) when he was only 12.

An avid philanthropic, Musk habitually invests 100 hours per week running his companies and believes that there is no short

-cut to hard-work. Seen by many as someone who has reshaped people’s spending habits (PayPal’s association with eBay),

Musk dreams of making trips to human colonies on Mars a reality. A huge Star Wars fan, Musk has a cameo-appearance in

the high profile superhero film Iron Man II apart from being the inspiration behind the billionaire Tony Stark’s character in

the movie franchise.

F I N A L O G U E

Who’s Who?

Arundhati Bhattacharya – Chairperson, State Bank of India

Indian government on Oct 7, 2013 has officially announced the appointment of Arundhati Bhattacharya as the next chairperson of SBI for three years. The 66th largest bank in the world and the country’s largest lender, the State Bank of India gets its first woman boss in its 207 year old history. Prior to this post, she has been the (first woman) Managing Director and Chief Execu-tive of SBI Capital Markets, the merchant banking arm of SBI Known to be objective and quick in decision making, Bhattacharya is highly appreciated for successfully steering the SBI Capital Markets at a time when the financial markets were in a dismal shape. Under her guidance and leadership she has majorly contributed to the setting up of several new company initiatives of the Bank, including SBI General Insurance, SBI Macquarie Infrastructure Fund, SBI SG Securities Ltd, etc., as well as the launch of new IT platforms such as mobile banking and financial planning targeted towards the young customer age bracket. Bhattacharya is a true asset to SBI as she has also played a pivotal role in setting up three of the latest subsidiaries of the Bank which are the General Insurance Subsidiary, the Custodial Subsidiary and the SBI Macquarie Infrastructure Fund. She was interviewed for the post along with three other top Managing Directors of SBI by a powerful selection panel that includ-ed RBI governor Raghuram Rajan and financial services secretary Rajiv Takru.”. Arundhati, a strong believer in women em-powerment is confident enough of heading India’s largest bank with experience of over three decades, and a good level of exposure thus enabling her to deal with any business situation. Apart from work, she loves to cook and read management books especially while travelling and she is also associated with helping the physically challenged, aiming to integrate them with the society.

P a g e 6

Investment Gyan

Alpha: A modern portfolio theory measure of risk-adjusted return. Bargain hunters: Investors who search for securities that they believe are under-priced. Beta: A measure of a stock's or a portfolio's price movement relative to the market. A high-beta asset (beta coefficient great than 1.00) will tend to move with greater amplitude than the market while a low-beta asset (beta coefficient of less than 1.00) will tend to experience more moderate ups and downs than the market. Cats & Dogs: Investments that don't appear to be very promising Convertible: A security, such as a bond, that can be converted into another type of security, such as a stock Derivative: An investment vehicle whose value is dependent on another vehicle. Examples are puts, calls and swaps Efficient market hypothesis: A theory that the value of a market or an individual asset reflects all the information known about it and everything that is anticipated for the future January theory: The theory that the market will rise in January because investors tend to sell assets in which they have losses late in the year Liquid market: A market with a ready amount of securities available to buy and sell Option: A contract that allows the owner to buy or sell an asset at a pre-specified price. "Puts" and "calls" are options. Penny Ante: A return almost too insignificant to matter. An organization or a unit that generates a very small return REIT: A real estate investment trust. An equity security whose value is based on real estate holdings. Spin-off: To create a separate entity of a unit of an organization, or the unit that is being separated from the main organization

F I N A L O G U E

Bank: A place that will lend you money if you can prove that you don't need it Credit: The preferred method of acquiring money for people who are too timid to steal and too proud to beg Accountant: A person who works with numbers but lacks the personality to be an economist Value investing: The art of buying low and selling lower Economist: An expert who will know tomorrow why the things he predicted yesterday didn't happen today Market correction: The event that occurs the day after you buy stocks Tax refund: A tactic de-vised by politicians to give you back some of your own money in such a way that you are supposed to think it's a gift. Broker: What my broker has made me Institutional Investor: Past year investor who is now locked up in a mental institute Stock Analyst: Idiot who just downgraded your stock

(Laughing) Tryst

with Terms

A Note to Remember:

One of the funny things about the stock market is that every time one

person buys, another sells, and both think they are astute.

P a g e 7 Fun with Finance

Un-jumble the words given below. All are related to the world of Finance. Take the circled alphabets and arrange them

to fill in the description of the cartoon:

THE _ _ _ _ _ _ _ _ _ / _ _ _ _ / _ _ _ _ _ _

F I N A L O G U E Answers: Sovereign Debt Crisis

Blue Chip, Depreciation, Recession, Bankruptcy, Overdraft, Debenture, Inflation, Beta, Derivatives, Hedging

For answers, refer to the bottom of the page

On a Lighter Note!

Hints for Jumbled Words Questions

a. Unsecured debt instrument, slightly different from bonds

b. Rate at which general prices rise

c. Measure of volatility with respect to market as a whole

d. Financial asset whose value is based on the underlying

e. Mitigation of risk

f. Nationally recognised, well-established and financially sound

company

g. Happens in a floating exchange rate system

h. Significant decline in economic activity

i. Related to chapters 7,9, 11, 12 and 13,15 under Title 11 of

United States Code

j. Extension of credit when an account reaches 0