What are we?

What did we do against the Mumbai terrorists attacks:

1. We participated in online polls and declared that India badly needs to take more stringent action against terrorism
2. We participated in Email campaigns and added our names to the lengthy list of citizens seeking action from the government
3. We participated in peace marches
4. We supported tons of websites on the themes of India rocks, Proud to be Indian etc..
5. We lit candles to honour the victims of terrorism
6. We bought T-shirts with whacky slogans supporting the fight against terrorism
7. We watched and may be a few of us participated too in panel discussions
8. We observed a minute of silence in the honour of the terrorist victims
9. Sachin dedicated his century. Amitabh cancelled his dinner with Clinton. Sanjay Dutt lowered his fee. RGV visited the terror ravaged Taj. Bollywood registered 30 movie titles. Saif and Kareena condemned the most heinous terror act and government’s failure to protect the citizens. Aamir Khan wore a black dress on Eid to denounce the terror act.


We have recovered now. We have come back to organizing our lives around two of our most important goals - Watching our bank balances increase and liabilities decrease.

That brings me back to the main question. Are we fundamentally hypocratic or plain helpless?

Not Today

December 10, 2008

8.35 AM: I started from my home and sped towards Chanakyapuri (my office). The moment my car hit the main road I realized that I would have been much better-off had I started even 5 minutes earlier. But that never happens... I hastily laid that thought to rest and drowned myself in loud music to transport myself to a different world. My mood changed and I started appreciating Delhi - Its misty romantic look, clean and broad roads, greenery... Delhi is great. A couple of PYTs (Pretty Young Things) walk past.... My mood elevates even further..

8.50 AM: After some skillful driving, I manage to reach office on time. Those gleaming Volvo cars parked in the office, stole my vision. They always do. I console my mind saying that someday I will own them.

8.55 AM: Reached my desk. Was happy to see my desk as clean as it always used to be. I don't like a cluttered desk. It reflects a cluttered mind. Not sure if a clean desk reflects a clean mind... But I would like to think so.

Started my laptop. It slowly comes to life and after a few minutes of what seemed an herculean effort, it asked me for my password. Without a second thought I punch in those keys... And here comes the first jolt of the day

"Your account has been disabled. Pls contact the administrator"

Wild thoughts run in my head...

What was the last assignment I did? Did I really screw it up that they did not even bother to inform me before firing?

But how can they do it? The notice period serves both ways right?

I thought IFC is a relatively safer island amidst all this mayhem and I never expected this could happen here... And to me..

9.10 AM: Office is still almost empty and there is no one at office who could help... my emotional mind makes its temporary exit and in comes the rational mind..

I make a mental calling plan..If the news is confirmed..

Call your wife first.. assure her that you haven't married a dumbo and that i would be back on track in a short time

Parents next... my mind was racing ahead and thinking of simpler ways to explain the subprime story and the woes of mortgage backed securities.. One good news though, tell them you would be back in Chennai soon..

Make calls to previous bosses with whom i am still in good books..

Calculate the burn rate (cash used up per month) and the bank balance to see maximum period of self sustenance without external assistance

Meanwhile start thinking of those entrepreneurial plans you always had..

Be calm.. if it has happened, it has happened..

9.20 AM: "You were supposed to change your password on Friday and you did not change it. That's why your account has been disabled. Do it now" yelled the IT administrator..

Heaved a sigh of relief.. Not today..

Happy to work now

Scratch your own itch

Now that I caught your attention, let me share a very intersting article I read in Newleaders.com

Getting things right is very hard to do, but is even further complicated when you are trying to solve a problem for someone else. You have to be the customer and the creator at the same moment in order to create something that will truly solve a problem once and for all. When you try to solve problems that aren’t your own, your product ends up either being too complicated or simple, which isn’t the solution.

In a world where most medical records still exist on paper and we use paper voting ballots for the presidential elections, we don’t need another RSS blog syndication widget or another new way to embed music on your MySpace page. Instead, try investing your time into developing products that can help people save time, money, or increase awareness.

Start small, solve your own problems, and don’t quit your day job until you are absolutely certain that it will be a success.

FAIL

Came across an article which crisply summarized what can be expected in an emerging economy during a market turmoil such as the present one.

4 things essentially - FAIL

F: Fear and uncertainty
A: Asset prices (falling)
I: Interest rates (rising)
L: Liquidity crisis

The whole world seems to be crashing... but it is during times like these that great corporations and fortunes are made. If you want to take cues from Warren Buffet, he has been buying American stocks from his personal account in which he previously owned nothing but US government bonds. He says "Be fearful when others are greedy and be greedy when others are fearful"

What's in a place?

I stopped by the ISB campus last evening. Took a leisurely stroll around the campus. Went to the classrooms, library, sarovar, my old room at SV1,the rec centre... Everything I could squeeze in the little time I had.Memories rushed into my head like the first passage of light into a dark room which had never been opened before... Ha ha ha.. Ok it was not that dramatic, but it was great to relive my memories...precious moments of joy,long periods of pain, embarrassments, disappointments, moments of truth...

Its strange how things can change in a matter of six months. The campus is still as pretty as it ever was... But those familiar faces which greet you with 'what's up?' Wherever they saw you...Were missing. (Its a different matter that most people who greeted you thus, did not actually wait for a response). What's a place in itself? Its the people who truly make it what it is...

Got sometime to interact with some of the current batch too. Entrepreneurs, media reporters, traders.. What not. The batch has some great bunch of people. But, the tension in the campus is palpable. Its not easy to be in such a situation when you have kicked a good job, taken a huge liability in the form of a loan, watch your dream companies come crashing down in front of your eyes.. Tough times ahead.

My own little piece of advice to them..

1. While you hope for good placements, prepare for the worst.

2. Nobody is as interested in your career as you yourself are. Its pointless to outsource that responsibility to CAS or the school. Remember... The school never promised you a job.

3. The first level of defence is to establish or reestablish your old contacts. They are people who have at least seen you at work and were hopefully impressed. If they are not going to help you get a good job, nobody else will

4. The second level of defence is to use the network your batch mates have. They themselves may not be willing to go back to their previous employers for whatever reasons. But these companies could be your dream employers and these your batch mates may at least lead you to the right people.

5. The third level of defence is to use the alumni and their network

6. If you note, these levels of defences are arranged in the ascending order of information asymmetry.

7. If you have not already started, do it now and explore these levels of defence and if possible get at least in-principle offers or comforts from these people. It will remove enormous pressure of your shoulders during the placements. Handle it intelligently and diplomatically.

8. No substitute to preparation. Esp in these tough times. You don't want to miss an opportunity when it actually lands. Keep the machine well oiled and be ready to race ahead when needed.

9. Keep your cool. If you have come till here in your life, you will most likely reach where you want to go. There is a bigger force at work, whether you realize it or not, whether you like it or not.

Best wishes for your preparations and placements ahead

On top of the world

Thats Mount Everest. I clicked this photograph from the aircraft, on my recent visit to Nepal.

License to be unrealistic

I see a waitress standing at the door of the lobby where my training program is going on. She has been standing by the door for at least 5 hours now. Her job description is simple - Open and close the doors for guests, with a smile.....
.... And i thought my job description was not power packed..

The other day i was taking the late night flight from Mumbai to Delhi. It was close to midnight when the plane was about to touchdown Delhi. I sneaked a quick view towards the air hostess cabin and saw them wearing a make-up and getting ready to say "Thank u sir.. have a good night". Here is a quick peek into their day : Get up - Board - Smile - Serve - Sleep - Back to step 1....
.... And i thought my job was travel intensive..

When my plane did land at Delhi, i took a cab back home and started chatting with the driver on the way back. Meet Mr. Unknown, he drives from 6 AM to about 12 - 12.30 AM. Each day. Has been doing it for past 8 years. Saves enough per month to pay a two day visit to his wife and children who live about 100 KMs away from Delhi. They cant live with him. Its unaffordable. Mr. Unknown hopes that over the next 10 years, he would save enough to buy his own car....
.... And i thought my career was progressing a bit slow..

But they are different. They do not have a FT 20 B-School degree...
... Are they really different? Or to put it the other way, does a B-School degree really give the license to complain, be impatient and unrealistic in my dreams?

Power packed air travel

When you start matching the names and the faces of the security personnel at the airport, when you start wondering why Kancheepuram Idli is missing from today's menu of Kingfisher, when you start predicting which flight of Jet would have an in-flight entertainment system and which would not.... You know that you and travel have become as inseparable as Deccan and delays.

Every air traveler on an average spends at least 25-30 min after finishing all formalities (baggage screening, security check in etc) before his boarding call. Here is a list of services which if provided by the airport/ airline, can make air travel a lot more interesting and power packed and could make this time worth the wait..

Services at the airports:
1. Beauty salons - Can I have a quick facial/ a hair cut/ a shave/ a shampoo bath/ hair colouring before my boarding call? Can it make me more presentable before i land?

2. "Ladies and gentlemen... Air Deccan regrets to announce a further delay of 45 minutes. This delay is due to late arrival of flight from......." - On a usual day this announcement may have the ability to suck out the last ounce of energy which u had preciously saved. But what if you can spend the next hour or so usefully. Can someone give me a head massage (just the service I need right now.... Imagine an announcement which goes thus.... Air Deccan regrets... Blah blah blah.... Passengers who wish to avail a complementary head massage can do so by proceeding to gate no 1). Kingfisher can offer body massage services too, to take the Kingfisher experience to a completely new level ;-)

3. Book rentals: There is no dearth of book shops in the airports. But it is most likely that I don't actually buy the book in the airport store. The reason - I think it may be overpriced/ I am not sure how long my interest will last in the book/ I am not sure if there are better alternatives..
What if I don't need to buy the book but can just rent it for a small fraction of its original price and can return it to another branch of the same store in the airport in which I am going to land? If I really like it, may be I will buy it there...

4. In the same breath, can I hire MP3 players loaded with genres I like and return it in the landing airport? Can someone rent me a portable DVD player loaded with a movie which I always wanted to watch, but never got a chance...

5.I have a headache/ a running nose/ feeling feverish... I don't want to just pop an off-the-shelf pill, but i can't afford to be sick tomorrow. Can a doc have a quick look at me and prescribe something sensible?

6.How about secretarial services? I need to schedule a visit to my dentist, take my family out for a movie, have a dinner appointment with my friend. Can someone have all these appointments scheduled and give me the confirmations and the movie tickets, when I land?

7. Be it economy class in Air Deccan or business class in Kingfisher... All are equal when it comes to security check. Everyone has to wade through serpentine lines before ones turn comes through. Can someone else stand on my behalf and call me when just 4 or 5 people are ahead of me?

8. Here comes my next idea inspired by Harry Potter. If RFID tags are attached to each boarding pass, wherein passenger information is captured and if these are displayed as moving dots (with passenger details) on a live map in the airport area, I could spend hours staring at the screen and getting to know who is around. Mind you.. the airlines too dont need to make announcements like "This is the final call for Mr. X traveling by Kingfisher to ...." Mr. X's position can directly be spotted through the RFID tag..

Ok... Now let's move on to in-flight services

9. Networking platforms: Every flight has some interesting personalities traveling in it. However, at best I can know about my neighbor and no one else. Can there be a system wherein people can voluntarily say a few things about themselves and this in turn is available for others to see. Meeting requests can be communicated through a system and if the other person is interested in the meeting too, then the airline can facilitate the in-flight meeting, by rearranging their seating/ having a small meeting area arranged near one of the exit doors etc..

10. Independent Service Providers - Take a look at this... If i am a financial consultant and cannot do anything useful during the 2-3 hr flight journey, i may be happy to offer my services to others, of course for a fee. Unlike networking platforms described above, these are pure commercial service offerings. I can meet a consultant, a leading doctor, an analyst, a beautician, an event manager... whoever.. right in the flight. For the both the above services, the airline can take a cut too.. for facilitating the meeting.

Anyone out there listening? Come on do something.. or still better hire me..

Life goes on

Random thoughts
1. Recently read an article in Business Line/ ET which talks about what investor's strategy should be in these tough market conditions. The crux of the article is "If you have held on till now, hold on for some more time". While holding on for now may be a right choice, i find the logic provided for holding on, slightly wierd. By this logic, we should probably never quit the market and hope that our patience would prove good someday. Markets are dynamic and a static strategy such as this is dangerous. Evaluate opportunities and risks given the current market scenario and dont fear to book losses

2. If an IIT-an has a dream of doing an MBA and ultimately wanting to work in an financial institution, why study in IIT in the first place. Why not do an undergraduation in commerce/ economics and familiarize yourself with necessary evils like P&L, Balance Sheet and Cash Flows??

3. Hmmm now about my workplace - IFC is a very interesting workplace with some fundamental contradictions when compared to a usual financial institution. IFC is a financial institution with profits not being the only motive, manages to do great work without placing target pressure on its employees, does not believe in participating in a deal if it feels that it has no role to play apart from just providing money. In fact the day IFC goes out of business, is the day when it has truly achieved its goals. My exposure and experience has been great so far..

4. Reading the blogs of most of the current students at ISB. I am reminded about the movie Gladiator, where people watch the fights/ death match from the sidelines. I am glad that i have graduated to being a spectator and am no more a gladiator.

Dojos, Senseis and Reis....

The new language ringing in my ears. Yes.. i have enrolled myself for Karate classes. I have always been fascinated by martial arts and but never have even spent a minute to learn them. Life is short and i cannot afford not to chase my dreams..

The first thing which really impressed me about Karate is the discipline. You will have to bow and show your respect before you enter the training place. Plus you show your respect to your teacher, your teacher's teacher and the grand master at the beginning and end of each class. Additionally you bow down and wish every senior when you meet them. By the way seniority is defined by belt and not by age.

Some of the philosophies of Karate, as told by my teacher, which bowled me over were..

Karate is not for fighting with others. It is not even for self defense. You fight with yourself. You fight with your weaknesses and with those things which prevents you from emerging greater. Its a process of self evolution, where you will reach a stage when you no longer need to fight.

Another simple point which looked beautiful when he said... "Can a vehicle keep running throughout its life, if you simply keep filling petrol? The obvious answer is a No. A vehicle to be in good condition needs proper repair and maintenance. However, most of us do not seem to understand this simple truth in our lives. We keep eating and think that we shall live healthy always. 90% of us do not even do basic exercises in our life. Karate or for that matter any form of exercise is basically good maintenance".

I hope my enthusiasm continues and doesn't die a premature and a hasty death.

Tips - Optional?

I found this message in Oberoi Hotels in Mumbai - "Tips is optional. We do not levy any service charge for the same".

The day might not be far, when we may have to shell out a 10% service charge and a 12.5% VAT on the TIPS which we give to the bearers in the hotels..

Strange are our ways when we bargain with the auto walas and the vegetable vendors but do not mind letting out a nice sum as a tip in these hotels where the price of anything is already suffixed with a couple of additional zeros..

Its good to be back

Back in the ring after a gap of slightly more than a year. From the first impressions of the workplace it seems to be living up to its expectations. Hope it continues..

Delhi... Yet to explore the city. But i got to see and experience extreme heat, rain, a cold night and a mini sandstorm.... all in a single day. The house hunt ended positively in an extremely short span of time - Half a day.

Reading and enjoying the blogs of many of the present batch of students at ISB... A dry smile crosses my lips when I think that I no longer need to start a mind numbing assignment or start reading an epic-long case study on a Sunday morning nor will my bank account continue to bleed a slow death.

Its good to be back.

And so it ends..

Thus came the end of a great and an enlightening year. We had the graduation ceremony today and I am sure you will read all about it in the media.

I had a great time blogging. It has helped me organize my thoughts, speak to people whom i have never met (and some of whom i will never meet) and at many times, question my own reasoning.

I will continue blogging, as the journey progresses forward. But this is the last time i can wish you all luck as an ISB student..

Best of luck

Doing things differently

Today is the last day of classes for me at ISB. There are no mixed feelings, i am definitely happy. As the ISB journey comes towards the end, i wanted to write a post on what would i have done differently, if i were to repeat the entire experience at ISB.

For the records, i am clearly not looking forward to such an experience of doing it all over again, but may be the future batches might find something useful in this post. The views expressed here are purely my own and hence some (or many) might not subscribe to them. But after all this is my blog..

1. Study like crazy in core terms. Do not be swayed if someone tells you grades dont matter. The point is despite all your efforts you might not be in the Dean's list or may be not even somewhere close to it. That does not matter. At least you tried your best.

2. Term 2 is one of the most important terms. It separates the men from the boys. Make sure you work double hard during this term.

3. Be sure that the consulting bug is going to bite you. The hype in the campus, the build up given in the campus by alums and the repeated visits by consulting firms will for sure affect you at some level. From all the sweet talk that happens, every student believes internally (or is led to believe) that he is a right fit for consulting. But the hard reality strikes only towards the end.

Do explore this option seriously. Talk to alums, attend these sessions, make up your mind if you really like this option as a career, look at the history of recruits done by these firms and make a realistic estimation of your chance. But do these early enough and move on. You will save yourself so much time, effort and tension.

4. With respect to placements, make three choices:
a) Same industry target - A company from the same industry which you would like to go back to.
b)Realistic career switch target and
c) A dream career switch target.
The kind of efforts you need to put in is very different for each of these choices. Develop your strategy to tackle each of them. Ignoring any of these options might harm you severely towards the end.

5. ISB is all about "relativity". Your absolute strengths and weaknesses dont matter. These matter only in the context of what is it compared to your other batch mates. This applies in everything from grades to b-school competitions to your previous work experience to extra curriculars. So, keep working on your "differentiation" strategy. Remember these differentiations have to be both meaningful and credible.

6. Everyone is innocent until proven guilty. Be extremely cautious and intelligent in whatever you do at ISB. I am purposefully leaving this vague enough, but hopefully you would understand the meaning when you are here.

7. B. School competitions - There are a ton of them which happens. Most of them do not even count on as "spikes" in your resume. The filtering criteria for these competitions which i used are: Participate only if
a) Prize money is good
b) There is something interesting in the format/ outcome and
c) If it can work as a spike in your resume.
No point in writing mind numbing essays on "Challenges for Indian leadership in the "Nano" era" along with a million others.

8. ELP (Experiential Learning Programme) - A vast majority of them is pure bullshit. Do not feel compelled or pressurized to take this up. Do it if it is in your area of interest or if it will help you in someway in your placements. In most cases, people are better off taking an additional elective instead of ELP.

9. Develop your BATNAs (Best Alternative To a Negotiated Agreement) with respect to your placements, at least two months in advance. Prepare yourself for the worst possible outcome in placements. Even before the placements commence, try and make sure you find at least two companies which are ready to take you (on a "as is" basis). This will not only help ease the pressure but also increase your bargaining power at the table during placements.

10. Keep juggling with business ideas. You will get ample exposure to various business ideas during your stay at ISB. Keep your eyes and ears open. You never know whats in store for you.

11. Networking - One of the most important words you will hear at ISB. To me networking is not just knowing names and exchanging cards. It is "exchange of value". Do not miss your opportunity to reach out to others and at the least make few trusted friends.

The expert advice

Lao Tzu’s famous quote “Those who have knowledge don’t predict and those who predict don’t have knowledge” seems most appropriate in this situation. I was just browsing through the Sensex targets given by various experts before the crash began in early January. Am pasting some of these below… have a good laugh.


“We are overweight on India as it is the best bull market in Asia. Our India weightage is at 38%, which is the biggest in thematic portfolio. The long-term Sensex target remains at 40,000." – Chris Wood, CLSA, Global Strategist, October 2007

“We continue to be bullish on the Indian market and have set a BSE SENSEX Target of 23,950 to 25,000 for 2008” – Citigroup, Jan 08

“This puts the Sensex target at around 27,000 mark. The breakout could be as big as 2.618 times the largest leg, leading to a mind boggling figure of 39,000. Even if we keep aside this over-optimistic view, the target of 27,000 could be achieved and that too most probably in the first half of 2008. The daily chart shows one directional wave (A) followed by wave (B), which seems to be a diametric pattern. This pattern has seven legs and has a bow-tie shape” - Milind Karandikar, Leading Technical Analyst, in Business Standard, 7 Jan 2008

“Being an India bull there are reasons such as strong corporate earnings growth (though slower around 20%), and liquidity expected from FIIs & domestic institutions that could propel the Sensex to 24000 by the end of the year (Sensex PE at this level would be around 22.85 considering Sensex EPS of 1050)” - Amar Pandit, Moneycontrol - 2nd Jan 08

“After Sensex 20,000, the market expectations are for 30,000, but I don’t see the Sensex extending beyond 24,000 this year with the benchmark making a decade high this year” - Mukul Pal (Leading technical Analyst), in Business Standard, 7 Jan, 08

“So, in order to find the Sensex targets for ’08, we added these multiples to the highest monthly closing of the Sensex in ’07, i.e. 20286.99. So, the possible targets of the Sensex in the year ’08 at 0.382, 0.618, 1 and 1.618 Fibonacci ratios are 23094.27, 24828.61, 27635.89 and hold your breath, 32177.51, respectively” – Economic Times, 7 Jan 08

“76.4% of leading brokerage firms viewed that the markets are fairly valued while 11.8% each believes that it is overvalued and undervalued, respectively” - CNBC-TV 18 poll, 1 Jan 08

“The move past 15,400 proved beyond doubt that the long-term uptrend has resumed from the June-2006 trough of 8,800. But this move appears to be the final (fifth) part of the long-term move that commenced in May 2003. This final leg can take a few more months to complete during which the Sensex will move between 17,500 and 24,800. We place the outer target for the Sensex in 2008 at 27,145” – Business Line Research, 30 Dec, 07

“Indian stock market would continue its bull run next year with the benchmark index Sensex likely to touch the 24,000-mark by the end of 2008” - Macquire Bank, 30 Dec 07

The last term

Every student dreams about Term 8 in ISB. Its my turn now.

ISB is a totally different place now a days. Some of the activities which are taking place in campus now are..

1. Night Cricket - This is real fun. The intersection cricket matches starts around 7.30 PM under floodlights and goes on well in the night. There is music, liquids and lots of cheering

2. Monopoly Championships - The good old game is back in form, with more and more converts each day

3. The Multiplayer Age of Empires Championship – People are trying to load the game in LAN and organize multiplayer championships. This is still under process. Should be good fun when its up and running

4. Most students have taken a new resolution that they would watch at least 50% of the movies available in our library. So there is a perennial crowding in the DVD section, which had never seen so many visitors in all the seven terms put together

5. Gym and the swimming pool - Many students have started hitting the gym and the swimming pool with vengeance. Some to keep fit, some trying their best to relive their memories of how they once looked and a few others just for the fun of it.. especially given the fact that its our last one month in campus

6. Other games - Many other games including Basketball, Shuttle badminton, Table Tennis, Pool, Carom have regular patrons

7. City exploration - ISB has recently increased the capacity and the frequency of the City Shuttle which takes students from ISB to the city. It could not have come at a better time. All of us are trying to do justice to this beautiful city by giving it the attention it deserves..

8. Assignments/ Pre reads - They have at last taken a back seat at ISB. Assignments are not receiving a minute extra than what they are worth it. Most of us meet the night before to complete these "impediments" which are still on our way.

Interesting times at ISB...

Efficient Markets

I had a field day today. Watching the budget live is fun. And that too when you have have the stock markets sites and your internet trading accounts opened in your laptop it is absolutely thrilling...

I was watching the markets live after having read my dose of budget expectations. The market opened lower and stayed under till about 11 AM on weak global cues and may be because of the uncertainty that it faced in the form of budget.. But once the budget speech started, the market was responding almost on a minute to minute basis to the budget provisions.

The moment Mr. Chidambaram announced the increased thrust on education in the form of a 20% increased budget spend stocks like Educomp, Aptech, NIIT were up. Then came the announcements on healthcare and the 15% additional allocation.. up goes DRL, Sparc.. Emphasis on polio and HIV eradication reflected an increase in Panacea Biotech. Waivers of loans availed by small and marginal farmers.. the PSU bank stocks fall. Excise duty reduction.. auto stocks rise. And then comes the killer…the hike in the short term capital gains tax. Then there was no stopping and markets started falling badly.

All of us know about the efficient market hypothesis. But it is during events like these you get to watch it in action. Ok.. enough of the serious stuff. I am not sure how many of you caught the real fun moments in today's budget. I caught at least three instances:

1. When the finance minister was talking about the "One Time Settlement scheme" for the loans availed by the farmers, there was one MP who was opposing it heavily without even hearing what the FM was saying. At one point when the FM announced that he is increasing the loans that are going to be eligible under the scheme, this guy started opposing even more. The speaker then intervened and said to that opposing MP that "You should be happy when the loans to be waived are increased. Then why are you opposing?" Then MP then immediately sat down with a sheepish smile on his face. Thats the state of our beloved leaders..

2. During his speech the FM was at one point extolling LIC and he said "LIC is a jewel amongst the crowns.." I hope he did not mean this..

3. When the FM increased the IT exemption limit for senior citizen from 195 K to 225 K... he had a naughty look at his face and looked at the speaker and said..."I hope there would be no objection now"...

The Pre-IPO Grey markets

I had started a project some months ago at ISB which aimed at understanding the Pre-IPO grey markets and their ability/ effectiveness in forecasting the listing prices. The project is complete at last and am sharing some interesting pieces of information which i found..

For the uninitiated, Grey Markets are actually over the counter markets where dealers may execute orders for preferred customers as well as provide support for a new issue, before the stock actually gets listed. So, these markets operate in the period between the announcement of an IPO and the actual listing.

As the name suggests, this is an illegal market and has been banned by SEBI. However trades in this market are still rampant and thousands of crores exchange hands. The grey market premiums are even quoted in many of the financial dailies and are easily available in many public forums on the net.

I had studied the time series data of the grey market premiums for 38 IPOs which came out in 2007. Some of the interesting stuff on these..

1. The correlation between the last quoted grey market price and the actual listing price is 0.9768 (a near perfect correlation). This suggests that, grey market’s ability to predict actual prices is great.

2. Not surprisingly, there is a definitive positive association between the percentage premium (in grey markets) and the subscription rates. Higher the premium quoted in the grey markets, greater seems to be the subscription rates or vice-versa. The correlation here was about 0.8095.

I am not going to bore you to death, giving the other findings here. However, I have concluded my paper stating - Stay away from these markets and don’t ever get into executing actual trades. Thousands of investors have burnt their fingers dealing in these markets.

Nevertheless, as intelligent investors use these grey market prices as one more additional data point in your analysis while evaluating an IPO. Grey markets seem to be great indicators of dumb IPOs..

Destination

The wait is over. I am joining International Finance Corporation. It is part of the World Bank group and is the largest multilateral source of loan and equity financing for private sector projects in the developing countires.

Day 7

Received too many complaints yesterday that i haven't posted the Day 7 proceedings... Sorry about that. Remember, i told you all about the "interesting appointment" that i had, I had to go out of station for the same.

Day 7 was a lackluster day. I guess, there were just about a couple of companies which participated.

The last thing i heard was that more than 95% of the batch is placed in the first 6 days.. of course these are unofficial estimates..