Is Reserve Bank of India hoarding too much capital?


via Is Reserve Bank of India hoarding too much capital?

Did you know…


Did you know…

… that today is the birthday of Title 9? In 1972, the U.S. Congress passed the Higher Education Act of 1972. Title IX of this act barred sex discrimination in sports at colleges receiving federal aid. This act helped to create many more opportunities for women to participate in college sports.

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Today’s Inspirational Quote:

“Do not be dismayed by the brokenness of the world. All things break. And all things can be mended. Not with time, as they say, but with intention. So go. Love intentionally, extravagantly, unconditionally. The broken world waits in darkness for the light that is you.”

— L.R. Knost

WORD OF THE DAY


WORD OF THE DAY
Cabal
kə-BAL
Part of speech: noun
Origin: Latin, late 16th century
1

A secret political clique or faction.

2

A secret intrigue.

Examples of Cabal in a sentence

“My favorite movie is about a powerful cabal during the French Revolution.”

“Political coups around the world have been the result of a well-planned cabal.”

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skwɔːl
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Wisdom Quotes


The wise can gain more from a simple question than the simple can learn from a wise answer.
A wise man can learn more from a foolish question than a fool can learn from a wise answer. (Bruce Lee)
==========
Judge your day by the seeds you plant for tomorrow, not by the harvest you received from the seeds of yesterday.
Don’t judge each day by the harvest you reap but by the seeds that you plant. (Robert Louis Stevenson)

Two Lefts Don’t Give Us Rights: via PNUTs Newsletter


 

  • More than a million Rohingya Muslims fled to Bangladesh in 2017 to escape ethnic cleansing in the Myanmar state of Rahkine. Bangladesh’s government, with Myanmar’s cooperation, has tried to repatriate thousands of the refugees, who are living in squalid camps in Cox’s Bazar.
  • Over three thousand were approved for repatriation last August. But the refugees refused to go back to Myanmar voluntarily without some guarantees, including the right to citizenship. Bangladesh responded by further restricting their movement and communication, including imposing an internet blackout.
  • Activists like Mohammad Arfaat have been calling for more help for Rohingya to launch their own initiatives, for everything from education to arts, but complain of lack of support from UN agencies and international aid groups. “No one comes to research what’s happening. Whenever there’s violence, they’re not here,” Arfaat said. “You see them on social media, talking to the public, but they don’t come to talk to us.”
  • Activists have campaigned for years against a government ban on all but the most basic level of schooling, warning of a “lost generation.” They won a victory last month when Bangladesh announced a pilot program to teach children between 11 and 13 the Myanmar curriculum, although Rohingya teachers and activists had little knowledge of how the plan would work. (Guardian)

LogiSYM | The Importance of Sustainability in Innovation: the Impact of Quantitative Tool to Measure Sustainability Progress and Capabilities – LogiSYM January 2020


via LogiSYM | The Importance of Sustainability in Innovation: the Impact of Quantitative Tool to Measure Sustainability Progress and Capabilities – LogiSYM January 2020

Seasoned Nuts Quotable


SEASONED NUTS: QUOTABLE
“To stir the masses, to appeal to their higher, better selves, to set them thinking for themselves, and to hold ever before them the ideal of mutual kindness and good will, based upon mutual interests, is to render real service to the cause of humanity.” – Eugene Debs

IiAS: Dividend and buy-back study 2020


via IiAS: Dividend and buy-back study 2020

[10:00, 2/7/2020] DHANANJAYA PARKHE: Green Startups and Sustainable Development. One of my pet themes has been that Corporates have reached a point of total INTELLECTUAL BANKRUPTCIES and have run out of ideas to invest in Research and Development and also Vendor Development and New Startups to find new processes, new materials, new products. The above news item from TOI in a way proves my point. These companies not only hoard and deprive the dividend to the shareholders – they also do not invest to grow business and bring in more employment. NS/ Modi are aware but deliberately close their eyes. The total amount held by Top 100 listed companies is Rs 13,84 Lakh Crores. This money does not earn any interest. Government should create a threshold for this for e.g. 1% of turnover and TAX the balance @30% for keeping idle money and Intellectual bankruptcy
[10:00, 2/7/2020] DHANANJAYA PARKHE: Some of this money could be definitely used for Green Startups to protect environment or to promote R&D efforts thru ATAL Innovation Mentor program launched by NITI Ayog in Schools to promote Innovation among school chiledren.

IiAS: Dividend and buy-back study 2020

February 6, 2020

60 companies can incrementally return almost Rs. 886 billionto shareholders

Cash hoarding continues to plague the Indian corporate sector. In our fifth annual study on companies that can pay more, IiAS estimates, based on FY19 financials, that 60 of the S&P BSE 500 companies can, conservatively, return Rs.886 bn of surplus cash to their shareholders; which is just about one-third of their aggregate on-balance-sheet cash on 31 March 2019.

Over the years, IiAS has been rallying against cash hoarding in Indian companies and asking boards to critically reevaluate their capital allocation policy. Our consistent advocacy even led to SEBI asking the top 500[1] companies to publish a dividend distribution policy, in the hope that this will compel boards to think about the use of surplus cash[2]. While several boards have taken a hard look at the need for cash conservation, there is room for more to be done.

IiAS study, based on FY19 financials, concludes that 60 of the S&P BSE 500 companies can incrementally distribute Rs. 886 bn to their shareholders.  Key conclusions of the study are:

  • Of the 60 companies, just five companies aggregate over 50% of the total incremental distributable cash of Rs. 886 billion (Exhibit 1).

  • Of our list of 60 companies, almost one-third are MNCs.

  • The excess cash, if distributed by these 60 companies, translates to a median dividend yield to 3.8%, significantly higher than the current 1.1%. There are six companies where the excess cash translates into an additional dividend yield of more than 15%. These are listed in Exhibit 3.

  • The 60 companies can return a median of 52% of their total cash to shareholders. There are ten companies that can distribute over 75% of their 31 March 2019 on-balance-sheet cash (Exhibit 4).

 Exhibit 1: Five companies alone can distribute over Rs. 463 bn

Exhibit 2: MNC companies (Top 10) likely to pay higher dividends from FY21 onwards, due to abolition of DDT

  • The consolidated PAT for these 60 companies increased by 13.4% over FY18, while the profit after tax for the BSE 500 companies in aggregate increased by 0.3%. While the 60 companies have outperformed the index (based on profitability), almost half of these companies reported a decline in the FY19 return on equity (ROE), compared to the previous year: this should compel their boards to review capital allocation and return some of the excess cash to shareholders.

This year the number of companies with excess cash reduced from 75 to 60, while the absolute quantum of excess cash dropped from Rs.1,081 bn to Rs. 886 bn this year. Profitable companies with surplus cash reported lower free cash flows in FY19 – a result of slower operating cash flows coupled with increase in capital expenditure, especially by state-owned enterprises.

Exhibit 3: Companies where the excess cash translates into an additional dividend yield of more than 15%

Exhibit 4: Companies that can distribute over 75% of their 31 March 2019 on-balance-sheet cash

The Finance Bill 2020 proposes to remove the Dividend Distribution Tax (DDT) and dividends henceforth will be taxable in the hands of shareholders. While the proposed amendment may work out beneficial for certain retail shareholder in the lower tax brackets, the effective tax rate can be as high as 42.7% for individuals with income of over Rs. 5.0 cr. On the other hand, companies will bear buyback tax of 20% (effective rate of 23.3%), which was introduced in the Finance Act 2019, if they decide to return surplus cash through the buyback route.

Exhibit 5: The impact of IiAS 2019 study (which was based on FY18 financial statements)

IiAS believes companies strategy on whether to choose buyback or dividend as a route to return cash to shareholders will likely depend upon the ownership structure. The abolition of DDT augurs well for MNCs, as the foreign parent entity can claim credit for the corporate taxes paid in India on dividends in their home jurisdictions. On the other hand, family-owned companies may accelerate dividends before the next fiscal, to escape paying dividend taxes in personal capacities. Even so, IiAS believes companies’ dividend policy must not be driven by personal taxation requirements of controlling shareholders – instead, it must be driven by thoughtful capital allocation policies that result in predictability of corporate behavior.

While we recognize that companies need to maintain liquidity for organic and inorganic growth, the question is how much cash is reasonable to hold. Excess cash on the books has led some companies to make risky acquisitions. In another case, the excess cash was encumbered, which investors did not realize until the company defaulted on debt. Therefore, returning cash to shareholders is a testimony of the quality of a company’s earnings and will result in more efficient use of capital.

Footnotes:

[1]: SEBI regulations mandate the top 500 companies by market capitalization to articulate a dividend distribution policy

[2]: All references to cash and/or cash balances includes cash and bank balances, cash equivalents, and liquid investments.

[3]: There is a civil suit filed by ITC Limited against IiAS and two of its employees, in the Calcutta High Court, alleging defamation in relation to its 2017 AGM voting advisory and a report issued by IiAS on succession planning at ITC. ITC has claimed purported damages aggregating Rs. 10bn. The suit is being contested by IiAS and its two employees and is presently pending before the court.

For the full report and additional analysis, click here

Tags:

dividend

dividend policy

SEBI

buyback

‘Best Countries’ 2020: Which Nations Ranked Highest – and Why? – Knowledge@Wharton


via ‘Best Countries’ 2020: Which Nations Ranked Highest – and Why? – Knowledge@Wharton

MIC LISTEN TO THE PODCAST:

Wharton’s David Reibstein speaks with Wharton Business Daily on Sirius XM about the U.S. News 2020 Best Countries rankings.

With an enduring reputation for political neutrality, a peaceful civil life and prime luxury goods, Switzerland once again has topped a list ranking the best countries in the world.

The central European nation with a population of just 8.5 million is basking in its fourth year at the No. 1 spot in the U.S. News & World Report 2020 Best Countries rankings. Started five years ago, the rankings measure global perceptions of 73 nations chosen because they contribute most to the world’s GDP. More than 21,000 people around the world are asked to evaluate the countries based on 65 metrics ranging from stability to transparency to equality.

The United States, which ranked eighth last year, moved up to the No. 7 spot. The slight improvement was a surprise to Wharton marketing professor David Reibstein, who began the rankings in partnership with U.S. News & World Report and marketing consultancy BAV Group.

“Part of my surprise is that I live here in the United States,” Reibstein said during an interview on the Wharton Business Daily show on Sirius XM. “And one of the things that I’ve done with the data is … looked at how Americans feel about the U.S., and actually the internal perception is down.”

The top five in order are Switzerland, Canada, Japan, Germany and Australia. Lebanon is in last place behind Serbia, Oman, Belarus and Tunisia.

Reibstein said his research focus on branding led him to the idea of ranking countries.

“Part of a brand is often where it comes from. When we see wine that comes from France, we go, ‘Oh, it must be a great wine,’ or shoes that come from Italy — ‘Oh, that must be great,’” he explained. “I started thinking about, well, is there a brand for a country? And how does that contribute to the economy of that country?”

Switzerland

Although Switzerland was first overall, the country didn’t reach the top spot on any of the individual dimensions that were measured in the survey. Still, it ranked high for safety, gender equality, income equality, cleanliness, entrepreneurship and “open for business,” among other qualities. The World Economic Forum, held earlier this month in Davos, boosts the positive perception of the country.

“I started thinking about, well, is there a brand for a country? And how does that contribute to the economy of that country?”

“It contributes to that image of Switzerland,” Reibstein said. “It’s a great place to put your money — the banking industry that happens there. Their watches — hence our sense of precision. You know, their trains run right on time.”

According to Reibstein, the country’s policymakers should be credited for helping to foster favorable feelings toward Switzerland. “I think government plays a huge role in it –what the government policies are, but also what it is that they invest in and make sure exists within their country. Neutrality of Switzerland — that’s a government decision.”

Canada

America’s neighbor to the north nabbed the No. 2 spot this year. It’s a position held for almost all years of the ranking except last year, when it fell to No. 3 behind Japan.

However, Canada is No. 1 for quality of life.

“A good job market, affordable, economically stable, great family life, income equality — those are all some of the dimensions that contribute to quality of life, and people view Canada as extremely strong on those dimensions,” Reibstein said.

He noted that terrorism, corporate scandals, political upheavals and other strife can affect the rankings because such negative events lower the world’s perception of a country. But that’s not the reason why Japan slipped back to No. 3 behind Canada this year.

“I think the thing that happened is not much changed about the perception of Japan,” Reibstein said. “The perceptions of Canada went up across a number of dimensions, and they eked ahead of Japan.”

Canada also ranked second (behind Sweden) for citizenship, a category defined as leading the world by example.

“Countries that care about human rights, gender equality and religious freedom are the nations held up by academics, advocates and others as examples worth imitating,” the report states. “These global citizens inspire pride in their people, civil society leaders and lawmakers.”

“The perceptions of Canada went up across a number of dimensions, and they eked ahead of Japan.”

United States

In 2016, the U.S. ranked fourth. Then it fell precipitously to seventh the next year, following a divisive presidential campaign that moved the country toward a more isolationist agenda.

“I believe a great part of that was because of the contentiousness that we have, and we’re not keeping our dirt under the covers. It’s very, very visibly displayed for the world to see, and that has an impact on perceptions,” Reibstein said.

America’s image is “somewhat stabilized” now, and a strong economy with low unemployment is engendering positive attitudes, he noted.

“They see our economy and the vibrancy of what’s going on, and the unemployment and how it has dropped, and they think things have got to be pretty good here,” Reibstein said.

The magazine said the U.S. was bolstered by its image as the “world’s most powerful country,” but it was also damaged by the sharpest drop in global trust since the rankings began.

“The country enters 2020 with a presidential election coming in November that will draw heavy public attention around the world,” the report’s assistant managing editor, Kevin Drew, wrote. “The most pressing question is whether Donald Trump will win re-election. Both his policies and his rhetoric have raised questions around the world about the nation’s future course on the global stage.”

The Ones to Watch

The United Kingdom continues to slide down the list, falling to sixth place this year. Reibstein attributes the downward momentum to uncertainties over Brexit. By a narrow margin, the U.K. voted in a June 2016 referendum to withdraw from the European Union. But four years and three prime ministers later, the path remained unclear. Parliament members on Wednesday overwhelmingly approved Prime Minister Boris Johnson’s plan to exit the bloc by 11 p.m. on January 31.

“They [have continued] to have all this turmoil,” he said. “You ask the question, does government have an impact? Well, the whole Brexit vote and how the government [has been] in strife there is affecting [perceptions of] the U.K.”

“[In the U.S.,] we’re not keeping our dirt under the covers. It’s very, very visibly displayed for the world to see, and that has an impact on perceptions.”

Reibstein is also closely watching Australia, which jumped two spots from seventh to fifth this year. The report describes the nation as wealthy with a comparatively high GDP and per capita income. It has a high life expectancy, a high rate of participation in sports and a particular concern about the environment.

But the data for the 2020 list was compiled before the widespread bush fires that have burned about 25 million acres and killed 30 people and millions of animals, according to BBC News. Recent headlines have drawn a spotlight on efforts to save kangaroos, koalas and other species affected by the disaster.

“I want to point out that we collected this data in September, October. It was before all the fires and the hardships that they have right now,” Reibstein said. “While Australia has gotten a lot of publicity in their humanitarian treatment with all the animals that they can try and save, that hasn’t even been factored into this. I’m going to be really curious to see what happens to Australia next year.”

Another country he’s keeping an eye on is France, which slipped two spots to No. 12 this year. Reibstein thinks the global perceptions of France have been colored by recent civil unrest, street protests and terrorist attacks that have garnered widespread attention and dimmed tourism.

“You saw a dramatic drop in the perception of safety, and that ended up contributing to France falling down [the list],” he said. “The first year we did this, Germany was ranked No. 1. Then they took in 1 million refugees, and they had the Volkswagen scandal, and we saw Germany fall from No. 1 down to No. 4.”

Reibstein emphasized that the data does not establish a causal relationship because it measures general perceptions not tied to specific events. Still, the numbers tell an interesting story.

“We see these events, and we see the change in the perceptions that’s going on.”

Did you know…


… that today is Backward Day? Today is the day to do everything backwards! Try writing or reading backwards. Wear your shirt with the back in the front. Walk or talk backwards. Play a board game backwards, from the finish line to the start. Have fun with it!

~~~

Today’s Inspirational Quote:

“Things work out best for those who make the best of how things work out.”

— John Wooden

Random Acts of KIndness


  1. If you know someone who is having a hard time financially, pop $5, $10 or $20 in an envelope, disguise your writing or type the envelope, and mail it to them
  2. Drop off a toy or game at a hospital
  3. Slip paper hearts that say “Its random acts of kindness day! Have a great day! Pass it on!” under the windshield wipers of parked cars
  4. Wash a neighbor’s vehicle
  5. Obey your parents

Random Phrases of the day


  1. Back to Square OneMeaning: To go back to the beginning; back to the drawing board.
  2. Break The IceMeaning: Breaking down a social stiffness.
  3. Down To The WireMeaning: A tense situation where the outcome is decided only in the last few seconds.
  4. Cry Over Spilt MilkMeaning: It’s useless to worry about things that  already happened and cannot be changed.
  5. In the RedMeaning: Losing money. Being in debt.

Why clear definitions are key to intelligent discussions – Big Think


The best way to have an intelligent conversation with others is to ensure everyone understands the terms being used. They need to be clearly defined. If this isn’t done, people may get into false arguments over nonsense — they may be talking about very, very different things.
Dogmatism is often the enemy of knowledge because it often prevents us from opening ourselves up to the possibility that we may be wrong — it’s this humility that allows us to consider different people’s perspectives, some of which may be more accurate than our own.
Besides the ability to helpful discussions with others, being precise about our ideas and having well-defined terms allows us to also find out precisely where we are wrong. It’s a quick and incisive way to learn.

via Why clear definitions are key to intelligent discussions – Big Think