Convocation or Commencement

This post has been a long overdue- but better late than never.

Our institute’s 23rd Convocation was on this Tuesday.



Coincidentally, on the same day, I read the following short story in The Hindu’s YoungWorld which I thought is worth sharing.

A martial artist, who had spent years mastering karate, was waiting to receive the Black Belt from his master, when he was told that he had to pass one more test. "What’s the significance of the Black Belt", asked the master. "If you can answer this question correctly, I shall give you the Black Belt." The student smiled confidently and replied, "It’s the reward for my hard work!" To his surprise, the master shook his head disapprovingly and said, "You are not ready for the Black Belt. You may return in one year."
A year later, the student went to his master. Once again the master asked him the true meaning of the Black Belt. The student was bewildered and answered, "It’s a symbol of distinction... the highest achievement in our art!" The master once again shook his head in disapproval and told the student to return the next year with the answer.
The following year, the student went to his master, looking very humble. "Have you understood the importance of the Black Belt?" the master asked him. "Yes, Master," relied the student. "I’ve realized that it is not the end but the beginning of a never-ending journey of discipline, work and the pursuit of excellence."
"Here’s your Black Belt," said the master, smiling happily. "You have finally understood its true significance."

Probably, that's why they refer the graduation day as "Commencement" in some universities.

All the best to the IIML class of 2009.

Car Lease

From many of my co-students here, I learnt that various software companies are following a unique incentive scheme - owning car through company lease. It works something like this. The company leases out to the employee the car of his choice. The car will be in the name of the company and the lease payments are cut from his salary. At the end of say 3 or 4 years, the employee has to pay the salvage value at that point of time and get the car transferred into his name.

As per the tax laws, the company provides conveyance to the employees which can be treated as expenses in the profit-loss account. Instead of charging it to expenses under wages & salaries, the company charges the expenses to the conveyance account. Or if someone wants to treat it differently, the car can be capitalized to fixed assets and can be depreciated every year over its useful life. Now, instead of the wages & salaries, the expenses are under depreciation.

This is just one part of the story. The other part of the story is that the income of the employee is reduced, because the lease payments are not made out of his pocket. So, the employee will be paying less income tax.

We shall come back to the company’s side now. Since the company is providing car with fuel, maintenance etc (that’s what the scenario as per the accounts), the company is liable to pay the FBT at the rate of 20% over 20% of the expenses which works out to be a net of 4% on the total expenses. If this option is not provided by the company, the company would not have needed to pay this 4%. So, logically this has to be passed on to the employee. Also, if this option is not provided, the employee has to take a loan for his car at the market rate or pay out of his pocket. Adding to that, he will not be able to save the income tax. So, naturally the lease rent payable will be greater than the market rate. That is because the company is under no obligation to provide this option. Since it has designed such an exotic option, it wants to have its pie too.

I have made a simple calculation taking car’s price to be INR 400,000 and recurring expenses of INR 2,500. If someone decides to use the car for a 4 year period, one can save around 18% of total expenses under the lease option. The company also earns a 10% in the present value terms. This calculation is based on some assumptions which are also clearly stated in the calculation.

Excel sheet is uploaded.

Money behind IPL

I stuck upon an interesting and informative article regarding IPL in the BusinessLine. It is quite old (published: May 2008), but worth reading.

The author talks in detail about the financial model of the IPL. Who owns what? Who owes whom what? etc. There is so much of money involved at different levels in the IPL: team franchise, broadcast rights, player contracts, official sponsorship, team and player sponsorships, stadium rents, tickets, to name a few. This is the direct money which is at play when the Kings, Challengers, Riders and the like are at play. Apart from this, IPL creates a lot of indirect money in the form of travel, promotion, advertisements etc.

Understanding IPL’s financial levers

In the previous of IPL (2008), only 2 teams saw profits. We shall see what happens this year and the years to come.

With the busy schedule of the international players participating in the IPL, the timing is the most critical factor. If IPL misses to hold the event due to some externalities, there are several parties waiting to get a hole burnt in their pockets. Let us hope for some good entertainment this season.

Jogging

I have been jogging / cycling regularly for a while now. This is not a new year resolution, in fact I started jogging 3 days ahead of the new year. No need to have some special day to start something new. It has been around 2 and half months now in which I missed to jog only on 2 days. I started with a small stretch initially with just over 1 km which has now improved to one full round on the ring road of the IIML campus (2.7 km). I have never believed I could run such a distance non-stop. The secret of jogging lies in controlling the breath. If you do not feel that you are making extraordinary efforts to breathe while jogging, you are well in control and can jog comfortably. One of the most important things I realised in this jogging exercise is that, if one believes he can. Remember KungFu Panda? It may sound like a cliched message, but truth sounds like that always.

One of the shots on the course of my track:




More Photos. All of these photos are taken inside the campus.

Intelligent Ad!

I received an ad from a cinema multiplex. The message is quite interesting!

Don't miss to read the conditions. Very Clever!




The offer is open for children till class 8 only, which means they will most probably be accompanied by parents and contribute to increased sales. Offer is valid only in the weekdays as the cinema house does not want to lose the premium seats on weekends. Offer closes on April 15th which is probably just the start of the vacation - again it does not want to offer free seats during vacation peak time.

Th overall objective is to attract the future potential movie goers, with the side benefit of increased sales on the slump weekdays. (or vice versa)

If you peruse carefully, you know who's ad is this.