Who says companies are spending more on salaries?

Employee costs to sales is a metric which gives an idea of how much a company spends in terms of salaries when compared to the generated sales. For Indian companies, over the last ten years, employee costs have been quite range bound, and even as it seemed like payrolls had risen quite rapidly during the boom years of FY05 to FY08, as can be seen, sales of companies in general had risen even faster, thus keeping the ratio low even during those years!

* Represented by 274 of BSE-500 companies that have released their FY09 annual reports so far

Now do you realize, why do coffee vending machines keep on buzzing till late at night?

How does the INDIA story look [from a Debt-Equity angle]

The debt-equity ratio, is one of the key metrics which is used to get a snapshot of the riskiness of a business. The fixed charges in terms of servicing high debt obligations can be extremely burdensome, especially when business is down. History is full of examples of otherwise good businesses getting overwhelmed by the excessive weight.

The chart below shows that companies in India have made the smart move of taking advantage of the upturn in the business cycle to increase the amount of equity financing in their business, thus lowering their D/E ratios from a high of 1.4 at the end of FY03 to 0.8 at the end of FY09. Though FY09 has seen a slight increase when compared to FY08, the long term trend should thus indeed inspire confidence in FIIs.

ROE for Indian Stocks…

Return on Equity is considered as one of the key metrics for identifying a good or a bad stock. A constant and high ROE denotes high quality and a unstable or low ROE rings warning bells. One of the foremost reasons of stocks in India been given high valuation during the boom years of FY04 to FY07 was that Indian companies were earning the best RoE among their emerging market peers.

As of date the average ROE has fallen significantly (to 17.3% in FY09) from a peak of 24.1% in FY07. With profitability remaining under pressure for at least FY10, one should not expect the ROE to rise again. This should also keep under pressure, the valuation that investors assign to Indian stocks in general.

Real Estate on FIRE, yet again!

Real Estate sector was riding the market wave yet again, today. Just like the arrival of tiny birds called 'swallows' marks the beginning of summer, the arrival of a phenomenon in the Indian real estate market is also known to signal the beginning of a season. The season of a rise in property prices that is. And what is this phenomenon? Well, it's nothing but the tendency of brokers to start underwriting more and more properties so that a perception of scarcity can be created.

As per a leading daily, the nexus between the builder and the broker, which pushed property prices to record highs in 2006 and 2007 in the NCR (National Capital Region) is back in business and hence, buyers better watch out.

How has Reality stocks performed in the stock markets? After a quick analysis this is what I found…

The below chart shows the degree of speculation that has led to the rise of realty stocks since the broader rally began on 9th March 2009. While the realty index has surged by around 187% since then, the average P/E multiple of the index has risen by almost 423%[oops!!!], or a multiple of 5 times the P/E that these stock were trading at in March! Thus to conclude, it's entirely the case of P/E expansion that has caused the rise in realty stocks while corporate earnings have remained under pressure. The same conclusion, though to a lesser degree, also applies to metal, power, pharma, and small-cap stocks. Is this sheer speculation or the undervaluation correcting itself? More a case of the former than latter is what I think.

Park your vehicle with ease, because you are in INDIA

My yesterday’s analysis might have made you mood make a nose dive. But don’t worry as every new day brings a fresh story with itself. My office is in the heart of Bangalore city, i.e. on M.G Road. As per my last organization, we don’t own the full building here, which means that the parking space is also not free. Though the company pays for the senior management’s parking, the middle and the lower management has to shall out Rs.15/hr >> Rs.130 a day >> Rs.3,120 a month >> Rs.37,440 a year. On an average if an employee works for 5 years in the co. (I am taking 5 years because the company is in a manufacturing industry where attrition levels when compared to IT Industry is comparatively low) he/she pays Rs.1,87,200 (and this is after assuming, there will be no hike in the parking fees for the next 5 years, which I know, is quite impossible)!!!
So this made my dynamic mind think, about the parking rates around the world. As usual, I opened Mr. Internet Explorer and typed in the KING of KING’s url www.google.com! Some search and this is what I found:


So guys and girls, CHILL as parking rates are the lowest in India. Now, I hope that you will carry a S.M.I.L.E (for the whole day) after reading this POST!
After today’s finding, I can proudly say, yet once again, JAI HO!
This survey came in The Economist's July 18th'09 edition.

The story with 2 TITLES!

You might find it a bit weird, but this post has 2 Titles attached to it:

I was wondering as to why the WEST comes to EAST for all its IT needs? As obvious my DataCenter immediately threw the answer that OUTSOURCING is the only reason for it, as hourly pay when compared shows a titanic difference! That’s when the whole idea to write this story popped to me.

The other part of the story came to my mind when I saw a FIRANG [later, I came to know that she is from Israel  ] listening to her iPod while on the treadmill. This is the time I thought as why don’t I have the same and then my brain’s rate of recurrence again started fluctuating. Some more research and I got the connect for the 1st part of my story.

The story, here it is:

Why companies in the Western world will continue to look towards India
OR
Compare your salary to your counterparts in other nations

PART 1: These chart(s) are a clear indication of why companies in the Western world will continue to look towards India for cheaper outsourcing options. As the below chart shows, an employed employee in Mumbai earns gross wages of around US$ 1.3 an hour, just around 5% of an average guy working in New York. And if it assumed that New York won't be the right comparison considering that most employees out there work for high paying financial firms, let's compare Mumbai with Rio de Janeiro (Brazil) and Beijing (China). Wage levels there are still 4.3 times and 2.5 times respectively of what an employee in Mumbai earns per hour.

Surprised? Don’t be, as Part 2 is yet to come!

PART 2: To look at these data points in a more interesting way, see the chart below. While an employee in Beijing has to work 73 hours to earn enough to buy an iPod Nano, the amount of work for the same product to be put by an employee in Mumbai is 177 hours!

I am out of words now and all I can say is JAI HO!