Niveshak June 2010 Issue

Monday, June 28, 2010 , Posted by Bhav at Monday, June 28, 2010

Dear Niveshaks

FIFA world cup fever has again gripped soccer fans across the globe as this most popular sporting event in the world made its maiden voyage to the continent of Africa in mid-June. We can see the fervour has risen in India too and it won’t be a surprise if football becomes the next big thing after IPL this summer. The impetus to this tournament can be gauged by the fact that it has generated revenue of USD 1.6 billion between 2007 and 2010 as opposed to USD 584 million between 1999 and 2002. Some of the credit behind this goes to the valuation of sponsorship by IEG valuation service whose assessment of the model of a small number of sponsors with a broader right package and competitive environment significantly helped FIFA in selling its packages very profitably. Looking at the euphoria and enthusiasm among football fans, we have brought an article on ‘’Finances and football” for your perusal in this issue.

I, on behalf of team Niveshak, would like to thank you all for liking and appreciating our endeavour of presenting a sector wise analysis of some major sectors in the May issue . We hope to bring more such analysis in future. The sector which witnessed some major happenings last month was Telecom. After 34 days and 183 rounds of intense bidding, 3G spectrum was auctioned for which the total bid price touched Rs 16,750.58 crore on the 34th day of bidding. It was the auction format and severe spectrum shortage, along with ensuing policy uncertainty, which drove the prices beyond reasonable levels of Rs 35000 crore which was calculated in the budget by our finance minister. These prices, although reasonably high for telecom operators, augur well for our economy as the revenue mop up will help the government cut its fiscal deficit to nearly 4.9 per cent from 5.5 per cent of GDP projected in the Budget. Few telecom operators like Reliance Communications are even planning to sell a strategic stake in order to fund its foray in 3G telephony. Thus, we see that the allocation of 3G spectrum to private telecom operators will lead to mass rollouts of 3G services in the country which is expected to bring a paradigm shift in the Indian telecom industry.

“Disclosure of conflicts of interest” has been a point of debate for so long as there is a very thin line between moral obligation and legal obligation of disclosing every possible conflict of interest. Someone alleged of a conflict of interest may simply deny that a conflict exists because he/she did not act improperly. In fact, a conflict of interest can exist even if there are no improper acts as a result of it. But whether this is religiously followed or not by most of the companies is a question that remains unanswered. Our cover story for this month takes up this issue and talks about Wall Street’s most powerful firm Goldman Sachs and Co which is accused by US government of selling mortgage investments without telling the buyers that the securities were crafted with input from a client who was betting on them to fail. The repercussions of this are in front of us. Investors lost heavily whereas the client of Goldman made fortune out of the subprime crisis.

Hope you all find this issue an interesting read. Your feedback and suggestions will be highly appreciated.

Stay Invested for the good times ahead.

Bhavit Sharma

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