Here is a financial instrument that me and a Morgan Stanley - TopicsExpress



          

Here is a financial instrument that me and a Morgan Stanley colleague (Rushal Ajmera) came up with about a year ago. It is called the Ticket Default Swap (TDS). Here is how it works : 1) You buy a TDS from Naik-Ajmera Financial Services. It is essentially an insurance product. It is 70% of the value of the season ticket you usually pay for (for instance, if your monthly pass is 1000 Rs, you will have to pay us 700 Rs) 2) Instead of buying tickets and passes for train travel, you travel ticket-less. 3) Suppose a TC catches you. In that case, you pay the fine from your own pocket, and take the receipt. You carry that receipt to Naik-Ajmera, and we will pay you back the whole fine. 4) The protection is only valid till you have a valid TDS. It works exactly like the pass, it is only cheaper for you. @Rushal : I was finally able to figure out the economics of this, and a way to make sure that our company never makes a loss : 1) The average fine collection due to ticketless travel in 2013 was around 94 crores for central railway. [cr.indianrailways.gov.in/view_detail.jsp?lang=0&dcd=1576&id=0,4,268] 2) The total amount of ticket sales was 751 crores [wonderfulmumbai/latest-railway-ticket-fare-for-mumbai-local-and-outstation-trains/] 3) At 70%, our revenue is 525 Cr. Even if we assume a bump of of activity from CR, as was the case in November (read Link#1), the maximum potential fine is still not more than 130Cr. Even if we assume that they increase that to 4 times this, we still are with a 5 Cr profit. Obviously, with so much money we will build a cartel and bribe TCs and reduce our bottom line, but this is not even assuming that. After administrative and human resource costs, we will still be rich. *I have no work on weekends. I really need to get a hobby.
Posted on: Sun, 16 Nov 2014 03:28:12 +0000

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