Eco Topics for GD/PI Prep By prof_calculus

[vinit456]

Originally Posted by jhaji

that was a good example..
my doubts are cleared..
one more thing, that means the index which is calculated is calculated on the base year.
can they change the base year or it is fixed??

Like Tanveer sir said, The base yr. an be changed.

But then again one needs to have the mrkt cap data of cos. of that yr. and also understand the respective weightages that cos. which were not there in that base yr. and have been included later, like Reliance infocom and other IT cos.

Also comparitive reference for which indexes like the sensex and Dow jones (the older ones) would have to be slighlty adjusted in terms of the value gain/loss they would witness post the change.......

[crazyfootballer]

Originally Posted by arun agarwal

Merger:-
Merger is normally associated with consolidation of group companies. In this case no cash transaction is involved and only shares are swapped based on there pre merger value. In some case two separate companies can also merge if both management decide so, but this is rare occurrence.

Buyout and Acquisition:-
Basically in both cases you acquire a new company (like Tatas acquiring Corus). Only difference I can think of is, that in a buyout you fully purchase the stakes from concerned party and in acquisition you buy the stakes so that you are able to control the new entity.I will be happy to hear some more views on above.

Arun

Merger involves share swapping - agreed on this part.
Acquisition - can be done in 2 ways -: Firstly, in terms of cash transaction and secondly, through shares. So, when an acquisition is done thru shares, then how it is different from a merger (apart from the fact that merger is generally between group of companies) ?
When a small company acquires a company larger than its own size then cash is involved. E.g - TATA-Corus deal. But acquisition can take place in terms of share if larger company is buying the smaller company.

P.S - I may be wrong. Please elaborate on this. Question is open to all.

[vinit456]

Originally Posted by crazyfootballer

Merger involves share swapping - agreed on this part.
Acquisition - can be done in 2 ways -: Firstly, in terms of cash transaction and secondly, through shares. So, when an acquisition is done thru shares, then how it is different from a merger (apart from the fact that merger is generally between group of companies) ?
When a small company acquires a company larger than its own size then cash is involved. E.g - TATA-Corus deal. But acquisition can take place in terms of share if larger company is buying the smaller company.

P.S - I may be wrong. Please elaborate on this. Question is open to all.

Yes ur right, One an aquire thru shares. But put it this way,

Mittal and Arcelor were both listed cos. After Mittal aqcuired Arcleor the shares of both cos. will still be listed and traded as seperate cos. Only difference being that Mittal has management control over Arcelor.

But in a merger like centurion Bank and Bank of Punjab, the stock would be traded as centurion Bank of Punjab, which is the merged entity, the new co. AOL-time Warner is listed as a new co. post the merger. Nothing but 2 considerbaly large cos. forming a new one. Whereas Tata steel after having acquired Corus would not create a new co.

Both cos would still be seperate entities with new management control. But under a merged enity, there one new co.

[debashish31]

Guys who are intrested in nowing the nitty gritty of Steel Industry ForExample why did TATA acquired CORUS,what's NEXt on LNM MITTAL's Shoppoing List,How areSteel prices controlled.India V/S China in Steel sector P.M me mail I.D i will send the report

[iceblue]

hats off to every contributor of this thread.this thread is one of the best.
what is more important is that terms r presented in simple manner.which differentiate it from many site related with economic terms.thanks everyone to share ur wisdom with us

[writetotanveer]

Some notes on eco basics..BOP..etc..
Regards
Tanveer

[lranjitk]

Originally Posted by debashish31

Guys who are intrested in nowing the nitty gritty of Steel Industry ForExample why did TATA acquired CORUS,what's NEXt on LNM MITTAL's Shoppoing List,How areSteel prices controlled.India V/S China in Steel sector P.M me mail I.D i will send the report

Hey It would be great if you can upload the same in the thread as it will be helpful for all...

[gaggi_85]

HI
can u pls tell me the difference bertween FDI and FII and whether the presence of these affect our economy??? pls try to quote the answer by giving examples so dat i can understand it better..

[can...i??]

Hi seniors,

Just a little bit digression from the current points of discussion as I think people here could help me out.
Can anybody of you please enligten me as how finance is different/ related to the points being discussed here ?
Also , how it would help me.
Any links or puys ID's who could help me with my questions would be greatly helpful.

Thanks in Advance..

[Rincewind]

Originally Posted by gaggi_85

HI
can u pls tell me the difference bertween FDI and FII and whether the presence of these affect our economy??? pls try to quote the answer by giving examples so dat i can understand it better..

Disclaimer: This is from the highly suspect source of cerebrum@rincewind.com and hence needs to be taken with a pinch of VIniT-AMIN for nutrition and support

Now some definitions (not bookish so bear with my bull!):

FII - Foreign Institutional Investor/Investment. The entity (financial institutions, banks, mutual funds, hedge funds et al) which invest in the markets in a country not the country of their incorporation. (Kindly read up the funda of corporation... from corpus meaning body... Q: How to get a life? A: Get yourself incorporated )

FDI - Foreign Direct Investor/Investment. The entity (company, financial institutions, person) which invests in a company in a country other than its own with the aim of control i.e. 10% or more of the voting power. (Kindly read up about free-float market cap... me made a post in UDT thread about why FDI is not considered in the free-float factor for calculation on SENSEX... helps to connect the dots... as i said... its not knowledge we need ... what we need is to show our abilities to connect the dots and get a big picture and/or show off )

They are different... as can be seen by the definitions.

Now examples:

We have two companies (kompaanees as my eco prof in KGP said): Rincewind Hedge Funds- RW (i love jhaarees!!) and VitAmin Pharma Inc. - VA

Now both of us are from the country, PAGAL-LAND (PG). Now Dr. Gaggi's Labs (DGL) in SANITY-ISTAN (SI) is a rising star in generics and stuff, with good industry fundamentals but needs funds for its expansion plans and stuff.

Now RW invests in stocks of DGL as its portfolio needs to minimize risks as well as hedge on the volatility of SANITY-ISTAN's pharma sector. (Kindly go through hedging, risk management of portfolio's etc., my post in UDT is the lying-down-man's version for a start.)

And then VA being a big gun in the sector in PG looking for a foothold in SI. They buy about 15% stake in DGL. It's both a control, and also for a wait-n-watch for future acquisition and stuff.

So RW == FII
& VA == FDI.

Both affect the economy. How? That question is better answered by (a) ET columns (b) Economist columns (c) Rediff columns or especially (d) Hindu columns.

P.S. Our inputs are majorly for giving a start. Not any opinion. So people, better start scouring the cyber-vista for the pro-con things, more impartial. Opinion wise as per me, both have positive impact, both as inflow of funds as well as better know-how. FII/FDI are known to bring in knowledge sharing - they want their investment to bear fruit, so they even help/interfere rather than sit-back and relax.

P.P.S. FDI need not be of the kind in the example. Some help to start (green-field), some acquire/merge rather than wait-n-watch, and some are either up-stream or down-stream in their home country (refineries as FDI in oil fields). Motive in general is profit, in particular it may be for new markets, better methods or economy of scale/scope (check out the beer and bottle example in UDT about the saga of Fooshters, KaBal and Roman Bottles)