Note corruption is nothing new for the Big 4 firms with another one PriceWaterhouseCoopers caught red handed in the massive billion dollar Satyam corruption scam.Two of the partners of PWC were sent to jail in the fraud which involved cooking the books for almost 8 years.Having a Big 4 auditor is a must for any well known big public company.However the reputation of these Big 4 continues to get besmirched with newer scandals.It does not take a rocket scientist to guess that bribes were involved as rules were circumvented and Corporation Bank top brass was also involved.Government Tenders are a massive hotspot of corruption as they are opaque and powers rest with a few.Lack of transparency results in massive embezzlement of taxpayer money.Corporation Bank.Note Relaince India’s biggest company is facing an investigation along with the oil and gas regulator DGH.Recently LIC Housing Finance one of India’s largest housing finance companies was involved in a scam as well alongwith top official form other PSU Banks for taking bribes.This resulted in a massive stock price fall for a number of these companies.Expect Corporation Bank stock to take a similar dive hurting the shareholders.Investing in the Indian stock market has become more dangerous than ever where a corruption scam hides under every stone.Government companies which are considered safer by investors too are being proved problematic with PSU CEOs now being jailed for scams.India’s largest aluminum company NALCO CEO has been jailed for accepting gold bricks in bribes

Green Self Service Kiosks are set to become ubiquitous in branches run by India’s largest bank State Bank of India.Finance has been greatly been benefited by the Information Technology solution reducing transactions costs and time greatly.Banks in India have been slow to roll out Technology Platforms .India due to the lack of penetration of technology has been far behind with large swathes of its population bereft of access to technology.SBI however has come up with an innovative idea Green Channel Counters (GCCs) which is a low cost solution to reduce costs and improve efficiency.These self service kiosks have a screen,keypad,passbook printers etc through which a customer of the bank can perform most of the functions.This would reduce the need for staffing and also lead to saving of paper.Normally it require a ton of forms to perform various functions like depositing,withdrawing money.However with these kiosks most of it can be done online which would greatly reduce paper usage saving trees as a result.

Proprietary Trading by Foreign Banks and Brokerages has been allowed by the Finance Ministry overruling India’s Central Bank RBI.There seems to be no logical reason given by the Ministry despite RBI objecting saying that it will affect the financial stability and lead to increased speculation in the Indian stock markets.Note Properietary Trading refers to trading in financial assets by investment banks using their money and has come under the regulatory glare in the US.Huge conflicts of interest arise due to this practise as brokerages can indulge in front running and other unethical and illegal acts.Already major investment banks like Goldman have been fined hundreds of millions of dollars over improper trading acts.Proprietary Trading encourages brokerages to mislead and defraud customers as they are generally on the other side of the trades and advising them as well.

India’s policymaker keep making dumb policies to promote agriculture in the country which leads to huge losses for taxpayers and leads to no gains for poor farmers.One such policy is to give a interest rate subsidy of 3% to farmers who have repaid their loans.This means that if you are getting a loan from the banks at 7.5% normally,you will now get it at 4% if you are a farmer who has repaid his loans.Note the condition “repaid his loan” is meant to sound as it he has great thing like saving someone from a burning building.Last time I though all loans were meant to be repaid.But evidently different rules apply to farmers who were in the election year in 2009 were given a loan waiver.The government effectively allowed the farmers to convert their loans to a grant.It was an indirect gifting of billions of dollars to farmers to get votes and it worked splendidly for the ruling Congress party.A winning idea is seldom abandoned even it leads to perverse economic outcomes.

Power Finance Corporation Green Energy has been floated as a subsidiary of one of India’s biggest power sector financier Power Finance Corporation.As the name implies the company’s mission is to provide loans to India’s Green Energy Industry.Note India requires around $10 billion dollars according to the government plans of building 17 GW of Alternative Energy Capacity in India between 2012-2017 which is low in my view.However even this low target will require a massive amount of debt financing to the tune of around $6-7 billion annually.Power Finance Corporation is one India’s largest infrastructure financing companies owned by the government.The company which has billions of dollars of loan assets to the Power sector in India has naturally entered the fast growing Green Energy area as well.

Power Finance Corporation (PFC) will raise ~$1 billion through a follow-on-public offer (FPO) which is the first divestment by the Government for FY12.Note the government of India has set a target to raise $9 billion through divestment of public sector (PSU) companies stocks.PTC India Financial Services another company operating in the same segment offering finance to power generation companies came out with an IPO.Despite advantages of growth,a good business model in India’s booming Energy Sector,the valuation of the company had been kept too high leading to 20-30% losses from the IPO price.However PFC does not have a high valuation trading for around 9-10x P/E which is comparable to the competitors like REC.However the valuation is not very low also keeping in mind the rising interest rate environment which is making life tough for the Indian Banks and financial intermediaries.Power Finance Corporation has substantial advantages of growth,a good business model in India’s booming Electricity Sector where the List of Power Companies are growing exponentially.The valuation of the company also has been kept at a reasonable level at a discount of around 5% from the prevailing stock market price.The growth of the company has been impressive but a rising interest rate environment,competition from other power finance government providers like IFCI,IDFC,REC makes the issue neutral.It is always possible to buy the stock later or buy competitors in the same space like REC.The stock is a good buy for the long term given the fundamentals,good business sector,however current short term macro problems does not make it a great buy currently.