MBO in Jet Airways

I am closely tracking the strike by the Pilots of Jet Airways. Any frequent flier in Jet Airways will agree with me that its service quality has gone down after its tie-up with Kingfisher Airlines. Now you look at any two cities and find the best time to travel between the cities and you will find that Kingfisher offers the most convenient timings and Jet does not.
It was a different story before the tie up between the two airlines. I do not know what actually happened behind the scenes. But Kingfisher managed to get a better deal while having a tie-up with Jet.
I personally think Jet will benefit a lot if it breaks its tie-up with Kingfisher. And this is where I see the strike by the pilots as an opportunity. The pilots can do an LBO on Jet and take it private and release value by just breaking the tie-up with Kingfisher. The pilots union will not come in the way of shareholders' value creation as the ownership (at least majority ownership) will be with the pilots.
Any takers?

Back to School

The assignments for a Fulbright Scholar are not exactly defined. You can do whatever you want. Do research. Study books. Update yourself. Attend classes. Explore United States.

I am doing little bit of every thing. And today I attended the first class here at Stern. I last attended a class in 1994 at IIM Bangalore. Now I am back to school after almost 15 years.
I attended the Valuation class of Prof. Damodaran. He is simply great. A very simple person (I think all great teachers are simple :)), has a great sense of humor, loves the subject, is an expert in valuation. There are some 200-odd students who are attending his class.
It is sometimes good to view class room teaching from a student's perspective.

Nobody taught me valuation at IIMB. In fact, IIMB introduced Valuation as a course in 1995. I learnt it by studying different books. I wish I studied the subject here at Stern.

Problems with Cash-cum-Stock Offer

There are innumerable evidence about the negative returns to the bidder post-announcement of an acquisition. This makes any cash-cum-stock offer an interesting exercise.

Look at the Craft Foods' bid for Cadbury. Crafts' price fell by 5.9% yesterday (day 1 in event study parlance) after the announcement of the takeover bid. The bid is a 60% stock and 40% cash bid. Just assume that there is no synergy in the merger. Then the price of Craft will fall to reflect any takeover premium. But this simultaneously reduces the blended offer value for Cadbury.

The current stock prices of Craft and Cadbury present an interesting case study in risky merger arbitrage that the arbs used to do during the 1980s and early 1990s. Cadbury's price is above the blended offer price (computed after the price of Craft declined) and the I Bankers of Craft are confident that no White Knight is going to come to the rescue of Cadbury.

If this is correct, a risky arbitrage strategy would be to go long on Craft and short on Cadbury. But as I said, it is risky arbitrage. :)

Credit Rating of Faculties

While teaching estimation of cost of debt, I often discuss about rating of companies and how the same affects the cost of capital of companies. I have a few amusing experience of how our students (who are now managers of banks) rate the faculties.

a) HDFC Bank told me that I do not deserve a Gold card and that I am only eligible for a silver card:). I told them get lost...

b) Citibank sent me a letter saying that I am not eligible for a Gold card (though I already have a gold card from Citibank) after almost a year of my applying for another card. Surprisingly I received the Card the next day after receiving the the first letter. :) The left hand there probably does not know what the right hand does.

c) ICICI Bank similarly refused me to give a Gold card on the ground that I am not eligible for it.

Given that all those individuals who rejected my application were MBAs, I wonder what our students think of us :)




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BM Course Restructuring

Dear XLRI Alumni,

I am a member of the BM restructuring committee at XLRI. As part of the exercise, we require your feedback on the existing course curriculum at XLRI and how the same can be improved. Any honest feedback will be welcome. Kindly send the same to my id (pitabasm@xlri.ac.in) asap.

Please do not give any faculty specific feedback. Your feedback should be entirely on the way the core courses and the electives should be delivered (irrespective of who does it).

Thanks in advance



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My Ten Years with Academics

This May, I completed 10 years in academics. Looking back, I find that the first five years were the most productive ones, when I knew each student by name, where I used to spend hours setting up question papers and then correcting them, where I used to do research and publishing, where I was learning something everyday.

Not that I did not learn anything in the last five years. But they were more on the executive education front, nothing great really! I must have taught thousands of students in the last five years, do not remember more than 20 names, not a single paper (great paper that is!) to my credit. Do not know if I am really adding any value now.

Hopefully the next five years will be more productive, from an academic point of view.


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My Excel Blog Address

I got a few mails to know the URL of my Excel blog. Actually, it is available in yahoo 360. You must have a yahoo account to view that. Invite me as a friend and needless to say, it is available only to my students.


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Excel Tricks

Since I learnt a lot of Excel tricks from my students, I have decided to start a blog exclusively on Excel tricks and their applications in Finance and other fields in management. Here, I will share these tricks with screen shots so that one can do it directly.

Needless to say, these are available only to my students. You can find the link at my yahoo blog.





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ER Reports on Singapore Stocks

While designing the course content for the XLRI Singapore program, I happened to visit the website of Singapore Stock Exchange. I was pretty impressed with one feature of the Exchange, which I think other exchanges in the world can adopt.

They have started a research initiative (known as SGX-MAS initiative), where an investor can go through the equity research reports of stocks listed in the exchange. As of now 187 firms have signed up for the program and about 12 equity research firms track the stocks of these firms. The website says it is available only for two years. Hopefully, it will be extended for more number of years.

One just needs a login account to have access to the equity research reports (available in PDF format). It is free. Visit the website of the exchange to become a member.

Efficient Markets Hypothesis (semi-strong version) is based on the argument that when information is available to all, then prices will always reflect all publicly available information and hence no non-insider can earn excess returns consistently. This is a great initiative on the part of the exchange to make information available to all investors free of cost and will definitely help making SGX one of the best in the world.

The exchange should request (ask) the analysts to particularly track the mid-cap and small-cap stocks so that information will be available on a wide-variety of stocks. Even developed stock exchanges face the problem of lack of adequate information on small-cap stocks and that probably makes the market for small-cap stocks somewhat inefficient. The analysts do not track small-cap stocks because there is a lack of interest in such stocks. Such proactive behavior on the part of the exchanges can definitely help making the entire market efficient.








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