Body Retention

It is now almost six months Selvi joined as maid. She is smart, literate and punctual-five-days-a-week. Just last week returned from her summer holidays. She went to her hometown along with her hubby and two school going children. Unlike earlier maids, she has got one good quality. Though she works at 2-3 houses, she never tells us anything about other employers’ inside stories. There is a common trait in most of the maids. Even if you don’t like listening, maids tell you all the rubbish and they expect you to listen too. If you don’t, that is treated as an insult. In turn, they spread all the bad things about you. To cut the story short, maids do spread/leak out stories of your personal life. One has to factor this before employing one. Even if you put a condition that he/she should not do this/that, that is difficult to enforce/monitor. Don’t be under the impression that if you pay more, they remain loyal to you. That’s generally not done. If you like them, keep them; if you don’t, fire them. There are no binding contractual obligations on either one. Even if there is one, it rarely works.

Recently I came across a news article in Financial Express, which informs that one IT major, while giving increment to their employees, put a condition that they should not join specific rival companies after they resign their present jobs for a specified period. Given the high attrition rates across the corporate sector in general and IT and ITES sectors in particular, employers make all possible efforts to keep the talented flock within their fold. If needed, they put caveats in the job agreements, known as ‘non-compete’ clauses. For the unwary and uninformed employees, this clause acts as a proverbial hanging sword.

The validity of non-compete clause has come up for judicial scrutiny in a number of cases. In almost all the cases, the verdict is against the employer. The judicial rationale is that any action, which restrains trade, is void. The agreement of restraint is unfair, as they impose an undue restriction on the personal freedom of a contracting party. The famous Coca-Cola Vs Pepsi case in 2000 is a one such case.

Demand for the skilled is growing at a rapid speed, whereas the supply is not picking up at commensurate levels. Latest data shows that at the top three IT firms TCS, Infy and WIPRO, the attrition rates are varying between 13-16. That speaks of the seriousness of the issue from the point of view of IT firms. In financial services sector too, the entry level salaries have been skyrocketing owing to the shortage of skilled and experienced professionals. The situation in other sectors is not so terrible, but it is putting HR guys under tremendous pressure.

There are no hard and fast rules as far as retaining the skilled is concerned. Every firm has to adopt a strategy which suits it. More viable option will be to come out with an employee-specific HR policy instead of generic policy. Given the high quantity of personnel employed in an organization, such a policy requires larger resources. But this is the price one has to pay to retain the skilled. Inclusion of non-compete clause in the employment agreement is of no use, unless HR policies are structured to retain the skilled within the fold.

ICICI Bank

I have got special attachment with ICICI since my days in college. We were participating in a general quiz competition; one of the questions, which in fact made us win, was about the abbreviation of ICICI. In early 90s it was neither a bank nor a popular brand. Incorporated as Industrial Credit and Investment Corporation of India way back in 1955, at the instance of World Bank, Government of India and Indian industry, to work as a developmental financial institution, is now a private banking behemoth, showing phenomenal growth in the financial sector, whether it is banking, insurance, mutual funds, securities brokerage, venture capital funding etc


Why suddenly Sekhar started singing ICICI number? Generally, I don't have the habit of sleeping full day on Sunday. But this Sunday I made an exception. Slept till 5 in the evening and got up to read weekend news papers. HT does not give a bit of financial news on Sundays and Mint is a six-day pink paper. So I am left with only Indian Express, which very kindly gives thumbnails on business world. What caught my attention is the quarterly results of ICICI Bank. Recently I was allotted shares in its follow-on public offer. So in the capacity of a shareholder, I began reading between the lines also. I put down below some of my thoughts on it.

Salient features of the quarterly results are as follows:

• operating profit increased 58% to Rs.1,524 to Rs.965


• profit after tax increased by 25 per cent to Rs.775 from Rs.620


• fee income up by 35% to Rs.1,428 from Rs.1,055


• Total advances increased by 35% to Rs.198,277($48.7 billion) to Rs.147,184($36.2 billion)


• Provisions gone up by 156% to Rs.552 from Rs.216, in line with the provisions made during FY07. This includes impact of the higher proportion of non-collateralized loans in the retail portfolio

The numbers are quite promising. In spite of growing in size, it is still able to maintain the sizzling growth momentum on quarter on quarter basis. When RBI hiked interest rates in the wake of high inflation, the general view was that banking sector would face tough time on credit front. Yes, it indeed slowed down the credit growth. The latest data shows that overall credit has shrunk by Rs.14,386 cores since April, against a rise of Rs.33,818 crores over the same period last year. However, ICICI Bank's overall advances showed no signs of weakness. A look at the results reveal that retail credit is up by 29%, whereas the overall advances increased by 35%. Given the consensus that RBI may not change the rates in its ensuing Credit Policy and the healthy credit growth rate, the Bank may be able to perform reasonably well in the near future. The worrying factor is the raising bad debts, on the retail front in particular. Adequate provisions are made, but then one has to pull up socks and control and contain before they blow out of proportion.

As far as valuation of the stock on the bourses is concerned, the closing price on Friday is at Rs.985.15, after touching intra-day high of Rs.1003. Its life time high is Rs.1009. This quarter, EPS is little above 8. Annualised EPS would be between 32-35. Price by Earning (PE) ratio then works out to be upwards 30. My view is that the share price is fairly valued. It will be unfair to expect 100 per cent returns, it delivered during last one year, in the short to medium term, unless additional information relating to growth in existing or emerging areas flows into markets, or markets go on frenzy in the wake of relentless inflow of foreign money into country's capital markets. Having said that, I would like to put a 'hold' on it with annual returns' expectation in the range of 20-30.