Economics board project

Objective:

•The reason I picked externalities as my topic is because it piqued my interest when

I learned it in class.

•The project gave me a good opportunity to learn and know more about this topic.

•To clear up any doubts or misunderstandings I had about the topic and arm me with information
for the exam.
Introduction
Asset management refers to the process of developing,operating,maintaining and selling assets in
a cost effective manner. Most commonly used in finance , the term is used in reference to
individuals or firms that manage assets on behalf of individuals or other entities . Asset managers
bundle a person’s savings and invest them as profitably as possible in the world economy.
Investment opportunities include government financing through sovereign bonds, private sector
financing through equity or bond purchases, and financing infrastructure needs, with the aim of
generating a return that is shared between the asset manager as remuneration and the investor as
their return.

Assets are especially essential parts of the business equation. Although the concept of an asset is
broad, it refers to anything that can be controlled and used to either store or produce more value.
These include the physical and intangible assets that your company owns.

Tangible assets are physical items such as machines, tools, real estate, vehicles, and more. In
addition, intangible assets include intellectual property (IP), databases, operational data, software
license agreements, and organizational capital. These assets have a finite value.
The idea of spending time and money on protecting assets that don't generate any revenue may
seem like an inefficient use of resources. But as soon as a business grows and scales, the
importance of asset management increases proportionally, and ignoring your company's assets
can turn into a financial nightmare.

When properly managed, assets can contribute to your company’s growth, financial success, and
encourage sustainability. However, poor management practices can hurt your bottom line and
potentially hinder or even destroy growth opportunities.

Asset management ensures that your company can continue to grow and expand with the correct
use of assets. It will help keep your business on track, manage risk, and more.

An asset manager monitors and maintains things of value within a business. If you adopt an asset
management plan, you can develop, operate, maintain, upgrade and dispose of your assets cost
effectively.
This means having your fingers in several pies – administration, finance, capital and operations –
and a good grasp of your company’s strategic and operational processes.
And if you don’t want to take on the extra work, there are external specialists you can bring in.
These consultants will look at the assets, cash flow and finances in your company and
recommend how you should reinvest to maximize profitability.
Asset management for manufacturing companies concerns the entire lifecycle of plant assets,
such as equipment, parts, production lines, and the plant buildings themselves. It includes
making decisions about asset use, asset investment and disinvestment policies, and managing the
asset portfolio.

While the definition of asset management may differ from one organization to another, they can
be vastly classified into three types: physical, financial, and contractual.
Physical asset management stands for the process of handling things like fixed asset
management, inventory management, infrastructure, and public asset management.
Financial asset management refers to the process of managing procurement, developing an
investment strategy, controlling budget and costs, handling cash, bonds, and stocks.
Contractual compliance streamlines processes like IT asset management, digital asset
management, contractual maintenance, and management of intangible assets.

We like to think of it in this simple way… picture a piece of equipment your business uses and
then factor in all the decisions you make about this item, from market research, initial purchase,
implementation into your business, servicing and upkeep all the way through to getting rid of the
asset when it has reached the end of its useful life.
Although asset management can be implemented through spreadsheets, nowadays, specialist
software that can collect and analyze data is generally used for asset management, allowing you
to make the right decisions for your business.

Types
The different methods of managing assets are as follows.
Financial Asset Management (FAM): It refers to the strategic allocation of funds into various
financial market instruments like investment funds, stocks, bonds, futures, and derivatives.
Fixed Asset Management: Companies require property, plant, machinery, equipment, and other
fixed assets for their functioning, the regulation of these assets falls under this category.
Infrastructure Asset Management: The facilities that ensure connectivity and accessibility act as
assets for a nation. These include roads, bridges, transportation, internet, electricity, and
telephones. For infrastructural assets, managers focus on the development, improvement, and
replacement of amenities.
Real Estate Asset Management: These Asset Management Companies direct financial resources
into buying or construction of commercial properties.
IT Asset Management (ITAM): Information technology is an inseparable component of the
corporate world, and this discipline handles software and hardware assets. This includes
computer systems, patents, licenses, applications, and networks.
Digital Asset Management (DAM): Digital assets like content, social media presence, websites,
media, and other intellectual properties are regulated through DAM.
Enterprise Asset Management (EAM): The EAM handles both tangible assets and intangible
assets of a firm. It looks after infrastructure, software, documentation, premises, and process.

Advantages And Disadvantages

ADVANTAGES:
1. Optimize resources

Does your organization have several desktop computers sitting in storage collecting dust? How
about a piece of machinery that’s getting too much use in the factory? With asset management,
you can optimize the use of each of your resources.

By optimizing resources, you won’t make redundant purchases and can properly use assets so
you don’t need to retire an asset before the expected due date. As a result, you can avoid making
unexpected repairs or purchases and stop losing money in investments that aren’t bringing value
to your business.

2. Forecast accurately
Like any strategic initiative, asset management can help you plan for the future. Asset
management isn’t only about overseeing a company’s current assets; it’s also about forecasting
the company’s future asset inventory.
For example, how many new computers and software licenses will you need to purchase as your
company grows, or when will you need to replace the equipment on the production line? Asset
management can accurately answer these questions and more.
3. Prevent theft and loss

Tracking assets and their every move within an organization is a major component of asset
management. Tracking minimizes potential theft and loss, particularly of smaller and portable
assets like retail products and computer hardware, but it can also apply to larger assets like
machinery or vehicles.

4. Prolong the life of each asset

Every asset — whether it’s a building, a computer, or a vehicle — requires proper maintenance
and care. Even software needs frequent updates for it to work properly. Asset management
focuses on maximizing value, which includes repairing, maintaining, and caring for each asset to
prolong its life for as long as possible.
DISADVANTAGES

1.Lack of Understanding
The purpose of asset management is to have a specialist look deeply into a company's operations
and solve money leakage problems. The advisor is brought on board to fix these problems.
However, the advisor may not understand why certain monthly expenses are important in order
to keep the company afloat

2.Poor Communication
Nothing is worse than hiring a stockbroker or financial advisor only to hear from him or her once
or twice a month. The same is true for an asset management team. If several different individuals
are working on a problem such as future spending patterns, all it takes is a lack of input from a
team member to distort the final figures

3.Too Much Management

The primary goal of an asset management team is to find ways to use available capital in sound
investment opportunities. However, a few fluctuations in the stock market and some question
marks on the company's balance sheet is not reason enough to avoid risk altogether

4.Fees And Incentives

Some third-party asset management advisors charge a flat-fee based on the amount of money
they will be handling for investment purposes. It is vitally important for you, the business owner,
to make sure that there are no hidden incentive fees that must be paid to the advisor should your
return on investment fall below the desired result.

Case study:HCL tech

Introduction:
Founded in 1976 as one of India's original IT garage start-ups, HCL is a pioneer of modern
computing with many firsts to its credit, including the introduction of the 8-bit microprocessor-
based computer in 1978 well before its global peers.

HCLTech implements its Corporate Social Responsibility agenda through its CSR arm, the HCL
Foundation. Various flagship programs and special initiatives of the Foundation endeavor to
contribute toward national and international development goals, bringing about lasting positive
impact on people and the planet through long-term sustainable programs with a thematic focus
on Education, Health and Sanitation, Skill Development and Livelihood, Environment and
Disaster Risk Reduction and Response. Child protective strategies, inclusion, and gender
transformative approaches remain central in all initiatives of the HCL Foundation, thus ensuring
equitable development and opportunities for all.

Vision
To be the source code for sustainable socio-economic & environmental development
Mission
Nurture clean, green, and healthy communities where everyone is empowered and equipped to
reach their full potential in full engagement with our employees and partners, showcasing and
establishing international standards of planning, implementation, monitoring, and evaluation in
community development.

Our Value Proposition

Invest in people, the planet, partnerships, and the prosperity and peace agenda to meet the
Sustainable Development Goals (SDGs)

● Work with urgency and passion to break the cycle of poverty in all its forms, be it social,
economic, or environmental.
● Leverage the Integrated Community Development Approach (ICDA) impacting every
stage of life.
● Blend the wisdom of communities with a scientific rigor to seed and propel
transformative change.
● Partner and co-create actively to establish true convergence of thought, commitment,
experience, and expertise.
● Hold ourselves accountable to exacting standards of governance leading to credibility.

The Government has decided the following disinvestment strategy for Hindustan Copper
Limited (HCL). In phase I, the Khetri unit of HCL alongwith Taloja Plant will be formed into a
separate company. The assets of these units will be valued and will form a 49 per cent
contribution from HCL in a new company in which 51 per cent equity will be injected by a
strategic partner. In phase II the remaining portion of HCL comprising the Indian Copper
Complex (ICC) and the Malanjkhand Copper Project (MCP) will be restructured by closure of
unviable mines in a phased manner with consequent separation of surplus manpower under
Voluntary Retirement Scheme. HCL will then look for one more strategic partner for 51 per cent
disinvestment in the remainder of HCL. The Phase-I process of disinvestment of HCL is at an
advanced stage and is likely to be completed within the current financial year.

Reasons for disinvestments:

Commenting on disinvestment of HCL, Chidambaram said there will be a fresh issue of equity to
the extent of 10 percent of the pre-issued paid up capital. "In conjunction with the issue of the
equity, government will also disinvest its 10 per cent pre-issued paid up capital of the company."
The government has targeted to raise Rs 40,000 crore from disinvestment this fiscal.
So far, divestment in Satluj Jal Vidyut Nigam fetched Rs 1,000 crore to the government.
The government is likely to sell its stake in 10 PSUs, including MMTC, SAIL and RINL this
fiscal. Last fiscal, it had raised Rs 25,000 crore through stake sale in Oil India, NMDC, REC and
NTPC.
The disinvestment in HCL, 0.41 per cent stake of which is already with the public, will see the
government holding coming down to 81.45 per cent from 99.59 per cent at present.
HCL's follow-on offer will see the firm issuing fresh shares aggregating up to 9.25 crore shares
of face value of Rs 5 each, with the government selling a similar quantity of shares. Shares of
HCL jumped 11.15 per cent to Rs 523 on BSE during mid-day trade.
Copper mining firm HCL turned profitable last fiscal and is looking to expand its operations, for
which it plans to fund its Rs 4,200-crore augmentation programme.
HCL plans to raise copper ore production from 3.15 million tonne per annum (mtpa) to 12 mtpa
and has plans to expand capacity of its mines and projects including the Khetri mines in
Rajasthan, Malanjkhand Copper Project in Madhya Pradesh and Surda mines in Jharkhand.
The divestment and fresh equity issue is likely to fetch Rs 4,000 crore, half of which will go to
the government, Mines Minister B K Handique had said last week.

Further details of disinvesting:

The government has disinvested 6.83% stake in Hindustan Copper Ltd (HCL), which would
fetch around Rs400 crore to the exchequer.
Through the two-day Offer for Sale (OFS) which ended on Thursday, it had planned to sell 4%
in HCL, with an option to retain an over subscription of up to 4%. “The Government of India has
disinvested 6.83% of paid up equity in Hindustan Copper Limited through Offer for Sale (OFS).
The government is likely to get approximately Rs400 crore from this disinvestment," a finance
ministry statement said.
The floor price for the share sale was fixed at Rs64.75 per share and retail investors were offered
a discount of 5% on the cut off price for the non-retail category. Institutional investors bid for
5.05 crore shares, which is 1.71 times the 2.96 crore shares on offer for them. “As a result, the
government revised the total offer size to 6.83% of the paid-up capital," the statement said.
Close on the heels of halting the disinvestment in oil PSUs, the sell-off process has suffered
another setback with the government deciding to defer ''indefinitely'' the closing of financial bids
for Shipping Corporation of India and Hindustan Copper Ltd.
The decision is believed to have been taken by the government in view of a host of court cases
challenging disinvestment of SCI and HCL.
According to sources, the adverse decision of the Supreme Court halting the disinvestment
process in the two nationalized oil PSUs, HPCL and BPCL, could have a bearing on other
privatization cases.
The financial bids for SCI were slated to close on October 20, while bids for HCL were to be
received before October 15.
As many as three bidders, Essar, Sterlite and Videocon, were in race for acquiring the
government''s 51 per cent stake in SCI. The disinvestment process for HCL, where the
government proposes to offload 98 per cent equity, attracted two bidders - Sterlite and Birla
Copper.

What will be done to the remaining assets:

Ahead of the first tranche of 9.59 per cent disinvestment of government ownership of 99.59 per
cent of Hindustan Copper Limited (HCL), India’s only vertically integrated producer of the red
metal, the company’s share traded in small lots at up to Rs 268. When the non-government
holding was that miniscule, there was no chance of the share price being reflective of company
fundamentals. This explained why the government, under pressure to mobilize Rs 30,000 crore
by way of disinvestment during 2012-13 as part of fiscal deficit management, offered a 41 per
cent discount for HCL shares over the ruling market price. Even then, the HCL share sale evoked
poor response from private institutions. As was anticipated, government institutions like LIC and
State Bank came to the rescue of the HCL issue, whose importance lay in kick-starting this
year’s disinvestment programme.
The first sale of government shares could happen only in November-end as New Delhi could not
risk a float earlier when the market was in tumult. But what is the lesson for the government
from the HCL disinvestment exercise? At HCL floor price of Rs 155 measuring the stock’s
enterprise value at 24.5 times the company’s earnings before interest, tax, depreciation and
amortization (Ebitda), compared with five to 10 times for Coal India Limited (CIL) and NMDC,
private investors found it wise to stay away. As disinvestment in companies like NMDC, Vizag
Steel and Nalco happens in the rest of 2012-13, the government should offer pricing in a way as
to ensure that post-listing shares do not sink below the floor. This happened with HCL shares.

Garnering funds by share sale will come to the government’s aid to restrict fiscal deficit to 5.3
per cent. Disinvestment, particularly in a company like HCL with almost total government
ownership, should ideally usher in significant improvement in corporate governance, reporting to
non-government shareholders and transparency. It is nobody’s case that HCL’s record in any of
these is found wanting. But the point remains, as has been the experience of CIL, reporting to
controlling ministries is one thing and to be answerable to a large body of shareholders,
including highly probing funds, is a different proposition altogether. A private sector company,
which made many unsuccessful bids to open a large bauxite mine in Odisha, continues to suffer
as much in the hands of foreign funds as domestic and offshore NGOs. They suspect that the
proposed bauxite mine will harm the environment and deny tribals their livelihood. So, HCL has
entered the wondrous world of shareholder scrutiny, which on occasions could be feral. Wasn’t
there an occasion for the UK’s Children’s Investment Fund Management to complain about
CIL’s ‘failure to perform their functions with care and skill?’

This point is mentioned for two reasons. First, as HCL remains in a chase to lift copper ore
production to 12.4 million tonnes (mt) by 2017-18 from last year’s production of 3.479 mt, it
will be expanding capacity of existing mines, selectively reopen mines closed earlier and also
open new ones. Almost in every case, irrespective of the mineral mines opening subject to forest
and environment clearances and satisfactory resolution of local issues like resettlement of
affected people, they suffer considerable time overrun. Second, in case HCL mines projects
suffer delays for the above reasons, as is the experience of SAIL with Rowghat iron ore mine
development in Chhattisgarh or of Nalco with Gudem and Kr Konda bauxite deposits in Andhra
Pradesh, then it will be difficult for the copper company to avoid cost overrun. Eight HCL
projects are budgeted for Rs 3,435 crore. What should, however, be reassuring for shareholders
is the company claiming that ‘mining projects are on course and successful bidders for six of
these have already been chosen’

The strategy of focussing on copper ore mining and raising production of ore and copper
concentrate that led to turnaround of HCL forms the basis of its ‘corporate plan 2020’. What
particularly came to the aid of the company, which a decade ago was in dire state till the
government stepped in with two rounds of capital restructuring, was the closing down of the
bigger of its two smelters and refining units at Khetri in Rajasthan. For the reasons - small size
and antiquated technology - that the Khetri smelter was closed down, the company at an
opportune time should decommission the punier smelter at Ghatsila in Jharkhand. When the
country boasts of 400,000-tonne and 500,000-tonne smelters, both in the private sector, and
using technology rivaling the world’s best, what hope is there for HCL’s Ghatsila unit?

India has limited known reserves of copper ore which lends itself to economic exploitation for
metal production. According to the Indian Bureau of Mines estimate of April 2010, the country

has copper ore reserves in terms of the metal at 4.8 mt and resources that are likely mineable but
incompletely explored or untapped at 12.3 mt. As the only company engaged in copper ore
mining, HCL has access to over two-thirds of Indian reserves with an average metal content of
1.05 per cent. In a drive to expand its ore bank, HCL is seeking clearances for reconnaissance,
prospecting and mining permits in ore bearing states. Such initiatives will underpin sustainable
profitability for the company.

Chances of further or full disinvestment of the company:

The government today approved disinvestment of 10% equity each in mining companies Coal
India Ltd (CIL) and Hindustan Copper Ltd (HCL), reports PTI.

The decision was taken at a meeting of the Cabinet Committee of Economic Affairs (CCEA)
earlier today.
"Disinvestment of Coal India Ltd would be through a book building process in the domestic
market. 1% of the equity will be offered to the employees of Coal India Ltd and its eight
subsidiaries," home minister P Chidambaram told reporters after the CCEA meeting.

The committee also decided to allow 5% price concession to retail investors and employees of
CIL. The paid up equity capital of CIL is Rs6,316.36 crore and the government owns 100% stake
in the coal major.

For the disinvestment of Hindustan Copper Ltd, there will be a fresh issue of equity to the extent
of 10% of the pre-issued paid up capital.

"In conjunction with the issue of the equity, the government will also disinvest its 10% pre-
issued paid up capital of the company (Hindustan Copper)," Mr Chidambaram said.

The disinvestment in HCL, 0.41% stake of which is already with the public, will see the
government holding coming down to 81.45% from 99.59% at present.

HCL's follow-on public offer (FPO) will see the firm issuing fresh shares aggregating up to 9.25
crore shares of face value of Rs5 each, with the government selling a similar quantity of shares.

Shares of HCL jumped 11.15% to Rs523 on BSE during mid-day trade.

Copper mining firm HCL turned profitable last fiscal and is looking to expand its operations, for
which it plans to fund its Rs4,200-crore augmentation programme.

HCL plans to raise copper ore production from 3.15 million tonne per annum (mtpa) to 12 mtpa
and has plans to expand capacity of its mines and projects including the Khetri mines in
Rajasthan, Malanjkhand Copper Project in Madhya Pradesh and Surda mines in Jharkhand.

The divestment and fresh equity issue is likely to fetch Rs4,000 crore, half of which will go to
the government, mines minister B K Handique had said last week.

Suggestions:
I agree with what the government has done as the disinvestment of the company HCL tech is
quite less and hence not leading to the normal consequences such as loss of jobs or fear of losing
the company to the foregin organizations.

Bibliography :
1:Google.com
2:Buisness-Standard.com
3:Dipam,gov.in
4:https://www.hcltech.com/
5:https://www.hcltech.com/blogs/impact-new-dol-rules-asset-and-wealth-management-industry
6.Mint.com