FINXpress

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Do write to us at: finniche.imt@gmail.com

Term of Week

In Focus

Opinion

Personality

Tech World

Deferred

Revenue| 6

LG G Flex|12

Warren Edward

Buffett |11

The not-so-bright

future of SpiceJet| 4

DECEMBER 21, 2014 | A FINNICHE INITIATIVE

Russian Rouble

Crisis| 2

Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.

While seniors are busy with the preparation of their end term examination starting

tomorrow, juniors are busy with their internal assessments and report submissions. We

wish good luck to everyone for their exams. The common thing to everyone is bearing

with the extreme cold of Delhi.

Club FinNiche releases its weekly magazine FinXpress with the In Focus talking about

the ‘Russian Rouble Crisis’. The Opinion gives an overview of ‘The not-so-bright future

of SpiceJet’.

The term of the week describes “Deferred Revenue", which means unearned revenue or

income as product or service has not been reached to the customer but the payment has

been received. Do have a look at the market section, Tech world which brings to you

about LG G Flex and Personality of the week, Warren Edward Buffett.

Hope everyone likes the revamped version of magazine. Club FinNiche welcomes any

comments, suggestions or criticism regarding the magazine. Please do write to us and

share your ideas.

Happy Reading!

Regards

The Editorial Team

Club FinNiche

December, 21 | 2014 | Volume 26

Russian Rouble Crisis

The not-so-bright future of

SpiceJet

Deferred Revenue

Warren Buffett

LG G Flex

US removed the restrictions

placed on travel by Modi when

he was elected PM

Agenda includes UNGA meet-

ing, meeting with President

Obama, CEOs of US firms as

well as Indian Diaspora at the

famed MSG

- By Aditya Agrawal

Economic policies around the world are

formed by the central banks, which more

often than not work in a manner which can be

called slow-moving at best. Furthermore, the

policy considerations usually are predictable

to a certain extent, and in coherence with the

policy statements published in their policy

review meeting. In this scenario, the 650 basis

points rise in interest rate in the dead of the

night spells out a crisis all over it. There are

high indications that Russia is not headed

towards a deep recession coupled with high

inflation.

The background of this crisis in Russia starts

off with its economy’s high dependency on oil

and gas firms. The Russian government has

high stakes in the energy firms present. This is

further accentuated by the fact that more than

two third of the exports of the country is of

petroleum products and it constitutes almost

50% of the annual state budget. Oil prices

have been falling continuously over the past

few months, with prices having dipped by

almost 50% in the previous six months. This

decline of oil prices has reached a point

wherein it has touched the $60 mark in the

past few days, a level which was seen for the

last time in the midst of the previous financial

crisis. This has only resulted in the rouble

following the meltdown in its value.

Exports as a percentage of the GDP for Russia

is at 28%, with just oil exports in itself

contributing to as much as 39% of all exports,

resulting in almost 11% of the GDP being

governed by these exports. The fall in price

from the 2013 average of $108.66 to nearly $54

only shows the fragility of the economy. This

though was not a one stop change, with their

having been a strong consensus about the

overall decline in the forecast for Russian

economy, throughout 2015.

The second biggest concern for Russia is its

foreign policy headache caused by its stand

on Ukraine. This resulted in various sanctions

being imposed on it by the America and the

European Union. There has been substantial

financial sanctions, which has resulted in

Russia struggling to borrow abroad. There is

also an indication that this standoff may only

worsen, with America having agreed to

supply weapons and equipment to troops in

Ukraine. This action will only result in

escalation of the current standoff. The

situation though has escalated many folds

from this generic scenario. If we see the

unfolding of events in the past week, we see

Article titled “A Renewed US-

India Partnership for the 21st

Century”. Also releases a joint

statement focusing on key

aspects of strategic relation-

ship

Meets with 11 CEOs in a

breakfast meeting and 6 CEOs

face to face, the next day.

Assures of stability in tax law

that the price of Brent crude fell down by

just 1%, but the value of rouble declined by

over 10%, the biggest drop since 1998. This

initiated the intervention of the Central

Bank, with it using open market operations

and using $2 billion to buy rouble and also

the mid night hike in interest rates by 6.5%.

But, even this did not help in the decline in

value of rouble, with it declining in value by

11% the next day.

This shock of failure of the Central bank has

sent the markets into hysteria, as they come

to the realization that the Central Bank does

not have infinite reserves of American

Dollars, as was the conceived notion of

everyone. Furthermore, this shock in itself

has the power to set off a chain of corporate

failure.

The Russian rouble has been stabilized for

the time being at 60 to a dollar, but it has left

deep problems to be handled. The currency

in itself has lost almost half of its value in

the last year, which has almost halved the

Russian economy of $2.1 trillion to a mere

$1.1 trillion. This on a comparative basis, is

just half of the GDP of California.

It has also resulted in the external debt of

the various Russian banks and organizations

ballooning to nearly 70% of the total output.

This has resulted in a scenario wherein a

downgrade of Russian bonds to the junk

category is only a matter of time.

This crisis has not just restricted itself to the

financial sphere, and has started affecting

the day to day life of its common people.

More than half the consumer goods

consumed by the Russian people are

imported, and they have now doubled in

value, due to this crisis. This has initiated a

run on the bank deposits led by mass

hysteria. There are reports of long queues

outside banks and ATMs, as people try to

take out whatever savings they have in the

banks. This situation if it continues would

lead to a liquidity crisis in the country.

There is also a sharp movement to buy hard

goods, as they are now being viewed as the

only way out to preserve the value of

money. This though is leading to counter

situation wherein there is not enough

supply to cater to these demands.

Looking from the perspective of foreign

organizations, this situation is one which

they have not been able to cope up with.

Even though demand for goods has

increased, but margins have declined on a

dollar basis. This can be quite clearly be seen

from the case of Apple, which has stopped

selling its goods online in Russia, as it has

been unable to cope up with the loss in

value of Rouble.

This situation is only slated to get worse,

with reports coming out that Vladmir Putin

had having met his advisers to find out

whether Russia could withstand a complete

shutdown from the West. As per

indications, he feels Russia can. If he does

continue with the current policies, Russia

may well be in for a crisis bigger than that of

1998, and this would not just impact Russia,

but the global economy as a whole, as was

quite clearly seen in the crisis of 2008, that a

problem in one part of the world would

have its ripple effect worldwide.

- By Yojana Ranasaria

SpiceJet, owned by Sun group of India is one

of the low-cost airlines of India and was

recently in news as it announced its shutting

down of operations due to shortage of funds

and inability to pay debts.

SpiceJet came into existence in May 2005 with

its registered office in Chennai and corporate

office in Gurgaon. In a span of less than 10

years, it has been able to achieve the milestone

of being the second largest airline by domestic

passenger share. The roots of SpiceJet can be

traced back to 1993, when industrialist S.K.

Modi found ModiLuft in association with

Lufthansa Airlines. The airlines shut its

operations in 1996 and the same was revived

by promoter Ajay Singh in 2004 with the

name SpiceJet.. Rise of global crude oil prices

led to accumulated loss of 390 million in 2012

and has been making losses since except in

2013 when it returned to profits.

The aviation industry survives on debt and

maintains its working capital requirements by

borrowing funds. The whole of aviation

industry is debt stricken and exceptions are

only a few. In such a tight situation, the things

get worst for airline companies to face stiff

competition from its peers. SpiceJet gave upto

50% discounts in festive season to match that

of its competitors and all this adds to the

burden of debt they are carrying. In December

when the situation got worst, SpiceJet had to

cancel many planes on receipt of a warning

from Directorate General of Civil Aviation

(DGCA) of clearing its dues to the employees

and crude oil companies and as a penalty they

were to fly on cash and carry mode which

meant they can book an air slot only on

immediate payment to the regulatory

authority. On December 17, it had to ground

its fleet of planes because of inability to pay

dues. Though the airlines resumed its

operations the next day on extension of credit

facility by Airport Authority of India till

December, we are yet to see what lies ahead

for this company, is it going along the same

lines of Air India and with support from the

government and some blue-chip investors,

has chances of survival or will face the same

fate as Kingfisher Airlines and be doomed in

history.

SpiceJet drama played out in times of distress

when the promoter Kalanithi Maran threw up

his hands in shortage of funds and the

In December when the

situation got worst, SpiceJet

had to cancel many planes on

receipt of a warning from

Directorate General of Civil

Aviation (DGCA) of clearing its

dues to the employees and

crude oil companies

The cash-strapped airlines can

also witness a change in guard

if private investors both

domestic and foreign manage

to pool in Rs 1200 crores. The

government has smoothened

matters and cleared the air by

showing support to revive the

airlines and urging Ajay Singh

to drive the airlines towards a

steady recovery.

Government pushing Ajay Singh, former

promoter to feed in money to revive the

airlines show political hue attached to it.

The government has smoothened matters

and cleared the air by showing support to

revive the airlines and urging Ajay Singh to

drive the airlines towards a steady

recovery. It has given suggestions like

extending ticket booking till March 31st,

restoring credit lines which are offered by

Oil Marketing Companies (OMCs) and

airport authorities and also asking bank for

lending the distressed carrier.

The no-frills carrier has a total debt of Rs.

1.236 crores out of which around 90 percent

is taken in the form of External Commercial

Borrowings (ECB). Also, it has a large

amount of current debt to the tune of

around Rs. 3600 crores for which Singh and

two other blue chips have joined to rescue

the airlines by pooling money and pay off

its debt at the earliest.

The cash-strapped airlines can also witness a

change in guard if private investors both

domestic and foreign manage to pool in Rs

1200 crores . If the investment comes

through in this short span of time, the stake

will pass from media baron Kalanithi Maran

to these potential investors. Through this

fresh investment, the carrier with a market

capitalization of Rs 600 crores will buy

equity to pay off its debt. The investment

will also help the carrier to save some cash

which can be utlised to maintain its future

daily operations and the timing of such

crisis is opportune in a way that crude oil

prices has fallen down and the aviation

industry is booming with many passengers

preferring to fly. The decision to have a

business class and shifting from all-economy

model for its new aircrafts seems to be a bad

business decision as it will only result in

rising maintenance cost when the debts are

already piling up according to sources and

might be reverted.

The support from Government and other

investors is obvious in this situation as

closure of the carrier will impact not only

investments in the aviation sector but will

dampen the overall investment climate of

India. We are yet to see how things take turn

and what lies ahead for this carrier.

Deferred revenue is important

in accurate reporting of assets

and liabilities on a

company's balance sheet. It

protects against treating

unearned income as an asset,

and guards against overvaluing

the company's net worth

Deferred revenue (also known as deferred

income, unearned income, or unearned wage)

is, in accrual accounting, money received for

products or services which have not yet been

conveyed. As per the revenue

recognition principle, it is recorded as

a liability until conveyance is made, at which

time it is changed over into revenue

Progress instalments or unmerited income,

recorded on the beneficiary's asset report as a

risk, until the administrations have been

rendered or items have been conveyed.

Deferred revenue is an obligation in light of

the fact that it alludes to income that has not

yet been earned, yet speaks to items or

administrations that are owed to the client. As

the item or administration is conveyed after

some time, it is perceived as income on the

wage explanation.

For instance, an organization that gets a

development instalment of $100,000 for

conveyance of an item would book it as

deferred revenue on its asset report. When it

conveys the item to the client, the

organization would exchange the $100,000

from the conceded income record to

customary income on its wage proclamation.

Programming organizations by and large

have sizable measures of deferred revenue on

their asset reports, commonly speaking to

permit expenses and yearly support charges.

Experts study inclines in conceded incomes of

such organizations for a superior sign of their

monetary execution.

Recording unmerited incomes on the wage

explanation, as opposed to as conceded

incomes on the asset report, may be

considered as forceful bookkeeping, as it

would have the impact of exaggerating

incomes.

Deferred revenue offers qualities with

accumulated cost with the distinction that an

obligation to be secured later are products or

administrations got from a partner, while

money is to be paid out in a recent period,

when such cost is caused, the related cost

thing is perceived, and the same sum is

deducted from gathered costs.

The sentence above appears to clear up the

contrast between deferred revenue and

gathered cost, yet it is truly befuddling to

clarify it along these lines. To clear up it in a

clearer manner, we may say: Deferred pay

offers qualities with gathered cost with the

distinction that conceded wage (the cash that

an organization got ahead of time) shows the

products and administrations the

organization owed to its clients, while

collected cost demonstrates the cash an

organization owed to others.

- By Shikha Sharma

Oil closed up as much as 5

percent on Friday, its biggest

gain in over two years, as

some traders took profits on

short positions after prices this

week hit their lowest since

2009

Energy and materials sectors

were leading the gains on

Friday and throughout the

week, as investors were

betting that the bottom in oil

prices might be in sight

Energy sector stocks in

particular jumped nearly 10%

over the past week, while

materials gained 5%

INDIAN MARKETS

The BSE Sensex and Nifty rose for a second consecutive day on Friday. Gains also

tracked Asian shares that enjoyed their best day in 15 months after Wall Street boasted

its biggest two-day advance since late 2011 amid relief the Federal Reserve was in no

rush to withdraw stimulus from the U.S. economy. Investors remained encouraged

after the cabinet approved a constitutional amendment bill on Wednesday to rationalise

state and central indirect taxes into a harmonised goods and services tax (GST). Still, for

the week, the shares ended flat to slightly higher after two previous weeks of declines

as a slump in the Russian rouble sparked fears of financial contagion earlier in the

week.

BSE SENSEX

CNX NIFTY

Open High Low Close

SENSEX 27,136.28 27,472.59 26,502.63 27,371.84

NIFTY 8,160.75 8,259.10 7,969.40 8,225.20

COMMODITIES

EXCHANGE RATES INTERNATIONAL MARKETS

Commodity Unit Rs / Unit % Change

Gold 10 grams 26,965.00 +0.56

Silver 1 kg 36,700.00 +0.40

Crude Oil 1 bbl 3,578.00 +0.31

INR/ 1 USD 63.07

INR /1 EURO 77.46

INR/ 100 JAPAN YEN 52.80

INR / 1 POUND STERLING 98.73

Open High Low Close

NYSE Comp 10,535.52 10,919.51 10,360.03 10,890.24

NASDAQ 4,679.76 4,793.24 4,653.60 4,653.60

S&P 500 2,005.03 2,077.85 1,972.56 2,070.65

FTSE 100 6,300.60 6,566.90 6,144.70 6,545.30

CAC 4,094.46 4,291.20 3,926.34 4,241.65

DAX 9,599.82 9,901.26 9,219.05 9,786.96

NIKKEI 225 17,099.40 17,621.40 16,672.94 17,621.40

SSE 50 2,680.16 2,937.65 2,680.16 2,937.65

Hang Seng 22,977.84 23,189.60 22,529.75 23,116.63

Govt hikes import tariff value on gold and silver

The government on Tuesday (December 16) raised import tariff value on gold to USD 396 per

10 grams and on silver to USD 561 per kg in line with volatile global price trends. The tariff

value on imported gold was at USD 388 per 10 grams and silver at USD 540 per kg in the first

fortnight of the current month.

Globally, gold and silver prices have been volatile in the last few weeks. In London, gold

prices rose on Tuesday 0.53 percent to USD 1,199.80 per ounce, while silver rates too

increased to USD 16.22 per ounce. In the domestic market, gold prices however showed a

decline. Gold was sold at Rs 27,200 per 10 grams and silver at Rs 37,050 per kg in the national

capital on Tuesday.

Govt tables mid-year review in Parliament, FY15 growth seen at 5.5%

India's GDP is expected to rise to 5.5 percent in the current fiscal from 4.7 percent last year on back of improving macro-economic situation, says the Finance Ministry's Mid-Year economic review which also flagged fiscal challenges like subdued revenue collections.

The review projected that 7-8 percent economic growth was "within reach" in the coming years and said inflation has fallen dramatically and that declining oil prices will help in containing CAD at around 2 percent of GDP.

The 'Mid-Year Economic Analysis 2014-15' tabled in Parliament also assumed that the

Reserve Bank would maintain status-quo in the interest rate till March 2015 and a stable

outlook for rupee. Industry has been demanding cut in interest rate amid slowing industrial

production.

Government approves 8.75% interest rate on provident fund deposits for 2014-15

Over five crore subscribers of the EPFO will get 8.75 per cent interest this fiscal on their

provident fund deposits - the same rate as the previous year. "Finance ministry has ratified

the decision of the EPFO's central board of trustees (CBT) to retain 8.75 per cent rate of

interest for the current fiscal," said a source. The rate was same in the previous year, 2013-14,

when it was raised from 8.5 per cent in the 2012-13 fiscal.

Tata's Vistara airline to fly from January 9

Tata's full service carrier in partnership with Singapore Airlines Vistara to fly from January 9

by operating daily flights to Mumbai and Ahmedabad from Delhi. Regulatory authority

DGCA on Monday granted the air operator permit to Vistara to begin its commercial

operations across the country.

The company secured a repeat

order from Sri Lankan

government, through the

company's distributor in Sri

Lanka, David Pieris Motor

Company, for the supply of

1.25 lakh units of

Discover-125M, which the

company expects to execute in

next 3-4 months

Microsoft's CityNext service will

empower citizens in Surat with

open data and digital way of

accessing civic services,

thereby making Surat a Smart

City.

Indiabulls Settles Case With Sebi with Rs 1 Crore Payment

Indiabulls Securities has settled a case related to alleged non-compliance of stock broker

norms after payment of Rs 1 crore to the market regulator Sebi as consent settlement charges.

The Securities and Exchange Board of India (Sebi) had begun adjudications proceedings

against Indiabulls Securities in relation to certain alleged irregularities by the stock broker.

However, the regulator has now agreed to dispose off the pending adjudication proceedings

after a consent settlement. The regulator's inspection of Indiabulls Securities' records during

November 2006 had found certain irregularities in the broker's business operations such as

failure to maintain proper records pertaining to investor complaints and appointment of

unregistered sub brokers in the guise of "marketing associates".

While adjudication proceedings were in progress, the broker made a proposal to settle the

matter on payment of Rs 1 crore under Sebi's consent order mechanism. Subsequently, the

proposed consent terms and settlement amount were approved by Sebi's High Powered

Advisory Committee (HPAC) as well as by a panel of the regulator's whole time members,

following which Indiabulls remitted the amount.

Dr Reddy's acquires Habitrol brand

City-based drugmaker Dr Reddy's Laboratories has acquired Habitrol brand, a nicotine

replacement therapy transdermal patch, from Novartis Consumer Health Inc. According to

a statement issued by the drug major, the acquisition of Habitrol brand (an over-the-counter

nicotine replacement therapy transdermal patch) from Novartis Consumer Health Inc was

done following issuance of the proposed consent order from the US Federal Trade

Commission (FTC) on November 26.

FM Jaitley presents GST Bill in Lok Sabha, says interests of States taken care of

The much-awaited Goods and Services Tax (GST) Bill, which provides for an overhaul of the

taxation system, was introduced in the Lok Sabha on Friday with the government saying

concerns of all the States have been taken care of and they would benefit from the win-win

measure.

Finance Minister Arun Jaitley said the Constitution (122nd Amendment) Bill will be taken up

in the Budget Session of Parliament and that he will be open to all suggestions till the very

last minute. Introducing the contentious GST Bill, which was cleared by the Cabinet on

Wednesday (December 17), Jaitley said, "We have made sure that no State will lose a rupee

of revenue. It will be a win-win situation."

The Finance Ministry today said

there were as many as 213

cases of service tax evasion

relating to BCCI/IPL, involving

Rs 261.64 crore between 2009-

10 and May 6, 2014

MTNL has raised Rs 3,768.97

crore in FY 2014-15 i.e. Rs

2,268.90 crore on November

28, 2014 and Rs 15,00.07 crore

on November 19, 2014 by

selling bonds

Warren Buffett, known as the “Oracle of

Omaha”, is an investment guru and is one of

the most respected and influential

businessman in the world. Buffett is the

chairman, CEO and the largest shareholder of

Berkshire Hathaway. Warren Buffett is

known for this adherence to value investing

and his personal frugality despite his

immense wealth. He is also a well known

philanthropist and in 2006, announced that

he would give 99% of this fortune to a charity

particularly through Gates Foundation.

Warren Buffett was the lone insurance police

for Pepsi’s Billion Dollar Sweepstakers.

Early Life

Warren Buffett developed a knack of

financial and business matters. At 11 years

old, he started investment is stock markets.

Business Career

After completing Bachelor of Science in

business administration from university of

Nabraska-Lincoln, he is enrolled to Colombia

University to learn from two well known

securities analyst David Dodd and Benjamin

Graham. In 1990, Buffett became a billionaire

by selling class A shares with market closing

at US $7,175 a share. In 2014, the price of

Berkshire Hathaway hit US$200,000 per share

for first time, and thus the net capital of the

company hit US$328billion.

Being an investment powerhouse, warren

Buffet suggested 6 things which should be

done with money in 2015:

1. Index funds should be chosen for

investment

2. Avoid Bitcons

3. Learn how to read financial statements

4. Avoid greed, focus on savings and not

getting rich quickly

5. When stock prices drop—Buy and avoid

selling

6. Stop pretending to be an expert

As per Warren Buffet, it is hard to predict

about equities in the next 17 years, but

considering the recent market it is better to

pick the securities with most probable return,

from appreciation and dividends combined.

30h August, 1931

University of Nabraska-Lincoln,

Colombia Business School

-Ranked wealthiest person in

2008 with estimated net worth

of US$62 billion and as third

wealthiest in 2011

-In 2012, Times named Buffett

one of the most influential

person

LG Electronics

LG G

Android 4.2.2” Jelly bean

Qualcom snapdragon 800

LG is a champion of innovation with more

than six decades of consumer electronics

experience around the globe and has now

leveraged that expertise, and changed the

very shape of the smartphone category by

creating the new G Flex, the world’s first

curved and flexible smartphone.

G Flex represents the latest in OLED

(organic light-emitting diode) screen

technology which was borrowed from LG’s

growing expertise in curved OLED TVs. G

Flex brings you a curved form factor that fits

in the palm of your hand ,the shape of your

face. It is powered by a unique, new, long-life

type battery which flexes along with the

phone. State-of-the-art materials are used

inside and out in manufacturing the device,

which enables it to perform feats no other

smartphone can perform.

Features

G Flex’s 6.0” Curved OLED screen fills your

field of vision for a more immersive,

panoramic viewing experience. G Flex follows

the curvature of your face, and provides an

outstanding voice and sound experience. It’s

perfect for watching movies or playing games

when held in landscape position.

LG G Flex uses the Qualcomm

Snapdragon 800 2.26 GHz Quad-Core

Processor, an intensely fast CPU for smooth

and seamless operations. It enables the

operating of multiple apps open at once.

The 13-megapixel camera captures all of life’s

moments , including crisp night time photos

and precise action shots. A simple knocking

gesture is all it takes to wake

G Flex’s display without picking it up or

pressing the power key. It has the great

feature of sensing the gesture and turns the

display on or off automatically.

QuickTheater is the other feature that gives

you direct access to your photos, videos and

youtube by just holding the Flex and use two

thumbs to open the screen. The only

limitation is that flexibility is limited and may

be bent flat up to 180 degrees for a limited

period of time only.

- By J. Sindhuja