Arthanomics 2006: Finance Seminar at IIM Kozhikode

The Indian Institute of Management, Kozhikode, organized the 2006 edition of its annual finance seminar, Arthanomics, at its campus in Calicut, Kerala, on the 14^th and 15^th of January. The theme of the seminar was “Towards Mature Financial Markets -The Indian Transition.” The seminar was a big success, with wide participation from both students and corporates.

Mr ML Jain, AGM – Kerala Region, Bank of Baroda, was the chief guest, and inaugurated the seminar. In his inaugural address, he emphasized that there was a dire need for young managers if India‘s high-growth trajectory was to be maintained and taken further. For that, it was necessary to overcome fear and break status quo. He stressed that the country’s growth has to reach the grassroots level, so it was necessary to focus on social, not just economic growth.

The event commenced with a team from NCDEX conducting a three hour workshop on commodities and derivatives trading. The workshop imparted knowledge to the participants regarding the commodity markets in India, their evolution, product conceptualization, design & contract specifications, risk mitigants and settlement process. It was supported by a demo of an NCDEX trading terminal to view live action on the quotes placed by the market players. This workshop was especially apt as a Bull Run is widely expected in the commodities space.

Mr Manish Gupta, Head, Structured Trade, Citibank then addressed the participants. He mentioned the various ways in which financial corporations provide finance at every step of the supply chain in all industries, through the use of structured instruments. The ways in which these instruments are utilized were mentioned, such as factoring, forfaiting, insurance, and ECA (External Credit Agency) guarantees.

The next speaker to take the stage was Mr CJ George, MD, Geojit Securities, who gave a very candid view of how the primary markets in India really functioned. He first gave statistically backed information and many examples to show how the Indian secondary markets (Exchanges) were among the most efficient and transparent in the world. But he said there was a need to make the IPO market friendlier to the retail investor. To balance the lopsided Bull Run driven by FIIs, a counterweight of large number of retail investors, and domestic FIs (Financial Institutions) was essential, he stressed.

Mr Anil Jhala, CFO, Birla SunLife Insurance, gave the next talk on Key Drivers of Growth in the Insurance Industry. He started with a historical overview of the insurance market, from the first Indian insurance company in 1818 till the IRDA act of 2000, which opened the field for private players. He said that India represents only around 0.66% of the $ 3.2 trillion global insurance premium market, and has much potential for growth. On a humorous note while referring to pension schemes, he said that the risk now is not of dying early, but living longer. With interest rates at extreme lows, young people will have to invest astronomical amounts of money to be assured of a safe future, post-retirement. He stressed that Life Insurance was a measure of social security and one of the most important long-term sources of funds for the government, so its yields shouldn’t be compared to shorter-term instruments.

The second day’s proceedings started with Mr. Partho Mukherjee, Head – Treasury, UTI Bank talking about currency and interest rate derivatives. He outlined how policy, the yield curve, liquidity of the underlying markets, the players and volatility play an important role in shaping the framework for a sound derivatives market. The absence of potentially big players like the PSUs make the derivatives markets rather nascent. Yet derivatives remain the fastest growing market in the treasury space. He was confident of Mumbai becoming the next commercial hub in Asia, provided there is a fine tuning of regulations. He explained with an example how innovative products in banking evolved out of a need to provide customized solutions to demanding clients.

Mr. Hemant Tanna, VP Investment Banking, ING Vysya, concluded the seminar with a very interactive talk on tapping international debt markets. He noted that ECB (External Commercial Borrowings) guidelines were the single most important reason for India being relatively insulated from the South East Asian crisis. He concluded the talk with a brief overview of project financing and mentioned how it was not just about cash flow predictions but rather about allocating the various risks associated with the project to the parties best suited to address these.

The event also consists of a paper presentation on the topic “Financing the Infrastructure Growth in India over the Next Ten Years,” in which students from top B-Schools across the country are taking part. The Platinum Sponsor for Arthanomics 2006 was Bank of Baroda. The paper presentation was sponsored by Larsen & Toubro. Hindu Business Line was the Print Media Partner for the event, IndiaInfoline the Online Media Partner, and State Bank of Travancore the Associate Sponsor.