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01 October 2010

Perils of Being an MBA - 2.

The biggest problem of being an MBA is that you become too cynical when it comes to advertisements and business news.

Today morning my wife saw this news item in the papers.

"Hindustan Motors to unveil new models of Cars".

The article quoted the CEO as saying that in the next 15-20 months, HM is planning to manufacture three new models of Cars under the 'Ambassador' brand. They are also planning to set up a component manufacturing unit which will Cater to the requirements of other car manufacturers.

"Isn't it great?" my wife exclaimed, "We used to have an Ambassador car when we were growing up. I still miss the rigid, upright unfolding seats in which you have to sit with your hips and back at 90 degree angles and the leg space was so short that you come out of the car with legs bend. Sitting in that car for a long time gave new meanings to the phrase 'Streching the limbs' ".

"And remember 'Contessa'?" I decided to add to the discussion, "that long and flat car that looked like a Chapatti or something. And remember the excitement that was followed after the release of Contessa? Man, people were crowding to buy that car. Man, that car looks so outdated in design and fuel efficiency, when compared to the current set of cars available".

"We should buy an Ambassador when it is released? It says it will be released in about 15 months."

Now my MBA Brain decided to kick in. Hindustan Motors shares are languishing at their bottom. The company has probably a few diehard Bengalis as share holders (and some stupid guys who purchased the share out of pure greed. And finally, the company has some land at Kolkatta and some outdated and obsolete machinery. And with these the company is planning to manufacture cars. And they are hoping that the cars will sell....

Probably some VIP has some shares of HM and he wants to sell it off now, with the market at 20000 and all. This is the time when gullible investors will eat any news and buy the shares which could drive the prices up so that these VIP guys can sell off at some profit (?). All these feel good stories are a way of talking the share price up.

How can HM manufacture cars? They are probably better off constructing a Mall or an apartment complex in the land available.

PS: If HM announces the construction of a Mall, I will buy the HM Share.

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