Praxair (PX) - Stock Analysis

Introduction:

Praxair is among the largest industrial gas supplier companies in the world. As of early 2010, its market share stood at an impressive 15% as indicated by the following pie chart (taken from Praxair’s corporate presentation document):


Their products are classified as:
  • Atmospheric gases – extracted directly from air, and
  • Process gases – produced through other processes.
Markets served include segments as aerospace, chemicals, electronics, energy, food and beverage, health care, manufacturing, metals, and a variety of smaller markets. Below is a pie chart showing the diverse nature of the company’s revenue streams (also taken from Praxair’s corporate presentation document):



The company has a very mature patent program with over 3000 approved and active patents. As indicated by the following achievements, they are industry pioneers:
  • Pioneered the first commercial oxygen plant in the 1920s.
  • Pioneered non-cryogenic air separation in the early 1950s.
  • Introduced the patented CoJet technology in 1997, a revolutionary means of injecting oxygen and other gases into electric arc furnaces (EAF). The process has since become a standard for chemical energy input in EAFs.
  • Commercialized oxygen-based technologies for utility boilers and steel mills in the early 2000s
  • Pioneered Brazil’s first LNG plant
The screen-shot below indicates the healthy diversification of the company in terms of both distribution and sales by region:



The dark shadow plaguing the company is its history before 1992. Praxair was spun-off from Union Carbide, the company partially responsible for the 1984 Bhopal tragedy, considered the world’s worst industrial catastrophe.

Business Issues:
The company plans to achieve annual organic sales growth of 8-12% and generate 12-18% annual organic EPS growth. Of this, base business is expected to follow industrial production and achieve growth of 3-4%, applications and technology transfer to contribute 2-3%, and on-site project backlog at 3-5%. Among these, the on-site project backlog has the best visibility while the other two with their included dependencies imply associated risks. Overall, the 12-18% long-term EPS growth projection seems overly aggressive; given EPS growth was just achieved last year from cost-cutting measures.

Praxair has significant debt. Good cash flow well above what is needed to service their debt obligations is generated. The debt-to-equity ratio stands at 0.85, which is not excessively high compared to peers. Nevertheless, it entails trouble should business unexpectedly slack off for the company.

Praxair is a dominant player in Brazil and the hope is to achieve comparable levels of penetration in other emerging markets. This strategy is critical for maintaining growth, as mature markets are expected to grow modestly in the 2% range. As a commodity business, the company however runs the risk of push-back from emerging market governments as they encourage local competition – amply demonstrated by the whopping $1.3B fine Brazilian regulators slapped on White Martins, their Brazilian subsidiary. That said, the risk is indeed worth taking for growth potential is enormous and the opportunity long-term as demonstrated by the bar graph below:



Praxair is largely invulnerable to economic uncertainties as their on-site/pipeline business, accounting for a quarter of the overall revenue, has 15-year take-or-pay contracts. A limited level of immunity is available for the merchant liquid (29% of revenue) business as exclusive supply contracts are predominant. Also, Praxair is expected to benefit from certain global shifts with regards to emerging market developments, energy sourcing environmental protection:
  • Infrastructure development and domestic consumption increases in the emerging economies.
  • Shift to hydrogen as an energy source.
  • Enhanced oil recovery initiatives that use Praxair’s products as a raw material for injection technologies.
  • Coal gasification initiatives to derive chemicals out of coal require Praxair’s products.
  • Alternative bio-fuels are resource-intensive compared to the use of gases Praxair produces.
These initiatives are expected to act as growth drivers to support their annual sales growth target of 8-12%.

Finances:
Below is a table summarizing Praxair’s financial position:



Year200720082009
Revenue9.40B10.80B8.96B
Net Earnings1.18B1.21B1.25B
Shares Outstanding315.49M306.86M306.48M
Earnings per Share (Normalized – one-time items removed)3.623.804.01
YOY Earnings Growth20.67%4.97%5.53%
YOY Revenue Growth12.95%14.83%(17.04%)
Net Profit Margin12.55%11.20%13.95%


Last year business dipped substantially in the wake of the global recession - Revenue fell 17% yoy but amazingly the company coped to grow earnings as the net profit margin improved yoy by an outstanding 275 basis points – the impact of a one-time tax event buoyed the effort. Still, this is incredible execution by its executive management team.

Quantitative Rating:

Below is a spreadsheet showing our quantitative rating summary of Praxair (PX). (click for an understanding of the ratings on this spreadsheet):


PX scores 7.25/10 on its ability to beat inflation: Return on Equity, Net Profit Margin, Free Cash Flow are all almost perfect. PEG ratio, a measure of valuation is however very rich at 1.86.

Corporate Abuse rating is 0/10 as their executive compensation is egregious: The CEO makes around $8M, over 250 times the average worker.

Income generation and liquidity measure is almost perfect at 9/10: PX pays a decent 2% dividend. The stock is also Optionable and very liquid.

Volatility ranking is also almost perfect at 9.33/10: the company has sizable debt and that reduced this rating slightly.

Capacity to increase dividends scored 10: the company grew earnings steadily in the last 5 years and earnings showed consistent growth history as well. Praxair’s payout ratio is very good at 39 – company has room to increase dividends. The company has very good 5-year average dividend growth at an annualized rate of 17.31%. Earnings also showed a consistent growth rate of 12.75% in the last 5 years.

The overall quantitative rating or the ‘OFB Factor’ came in at 7.12/10, which is well above average.

Summary:

Praxair Inc. has an enterprise value of $33.69B and a forward PE of 17.38. Praxair’s revenue came down significantly in the last year as the company felt the impact of the recessionary environment worldwide. Praxair is expected to grow revenue in the high single-digit range for the next two years, hinging on economic rebound. Praxair’s sales projections incorporate achieving a CAGR of 14% in the emerging market while continuing modest growth in other markets thereby increasing sales in emerging markets from the current 35% range to 45% in the next 5 years. In many of these markets Praxair’s advantage is being the first-mover and with it the chance of succeeding is high although associated risks abound.

Praxair has a PEG ratio of 1.86, which indicates valuation is high. Our quantitative analysis showed the company as having a ‘Well Above Average’ rating. Although most of our other checks showed green lights, valuation is high and we recommend adding Praxair to the watch list and consider purchase when the share price gets cheaper.



R2I - Shipping Experience

We contacted the shipping company Universal Relocations two and a half months prior to our planned shipment date (5/10/2010). A reliable recommendation made shipping company selection simple. Timing was about right and we did not feel rushed during the entire process. The step-by-step log below captures the various details:

At the largely informal initial meeting, we were introduced to the various shipping options. After eyeballing our effects, the immediate verdict was that our possessions at that point would not fit a 20’ container. But, if we were to trim down, we might be on the borderline for a 20’ container with some wiggle space. We were also given a quick rundown of the costs involved, rough estimates, and insurance options (read more by clicking here). As for the Kawai K15 (48”) acoustic piano and the Yamaha P65 digital piano we wanted shipped, it was informed that they both would attract duty of around 35% of their cost in India with depreciation at 10% or per year for the years owned. Also, to minimize cost, it would be better if we were to check with our piano dealer for crating and loading.

Two weeks into the process, we signed the contract for shipping a 20’ container and provided them with copies of our passport. The estimated costs added up to ~$7400 (~$6K for shipping, origin, and destination service for door-to-door delivery, $350 for all-risk valued inventory insurance for $10K worth of listed items, and $1050 for estimated customs duty). The shipping company supplied the insurance coverage statement. For origin services, we opted to pack our belongings except for furniture, china and odds and ends of delicate nature.

We touched base with our piano dealers (DC Piano, Berkeley, CA) and it turned out crating and loading were routine for them – pricing would be around $175 for a used crate that Kawai uses to ship new pianos to their warehouse or roughly $350 for a new one. Our initial move date scheduled for Sunday 5/9/2010 had to be rescheduled to Monday 5/10/2010 as DC Piano provided this service only on weekdays. This is something to consider for people in the same situation.

Three weeks into signing the contract, Universal Relocations confirmed the availability of a container and issued a booking number as well. They also arranged for a 3-men crew to arrive between 8 AM and 9 AM on 5/10/2010 for packing. Container was scheduled to arrive later in the day (2PM or so). The ETA for wrapping up origin services was around 5 PM.On our part, we shook hands with DC Piano to arrive after 2PM for the instrument to be loaded into the container.

The shipping company sought contact information in India including phone number. As we had arranged for a cell number for use in India, we were able to oblige without scrambling. This is yet another factor to consider – a contact number in India is a must - if not your own, a close relative or friend’s should work.

Packing was in earnest by early April. Although we were living out of boxes, we had to repack carefully and that too with an inventory list – painstaking …

Some things to consider when doing your own packing:
  • Packed plastic cartons ship as such – the movers will pad it as needed.
  • Suitcases need to be left unlocked.
  • Garden tools and other odd shaped items will be shrink-wrapped by the movers.
  • New purchases are best left in their original packaging. The professional crew will add whatever extra buffering deemed necessary.
By shipment day, we were all set with our end of the bargain - all items were packed into numbered boxes, with contents noted – keeping a spreadsheet in addition to having a hard-copy and number slips for the boxes worked well.

The three-men crew came as promised by around 9 AM in a Penske moving truck. Numbering the boxes they packed and noting the contents were our responsibility. The piano movers came around 2:30 PM but they had to wait around for 15-20 minutes, as the container failed to arrive till around 3:15PM. A base for the piano was affixed while inside the house and the crating was done inside the container.

The container loading started around 3:30PM and finished by around 5:30PM. The movers were out of the house by 6PM – long day for sure, but flawless execution for the most part!

Three days after our possessions left the house, we received the invoice. The total came to $6321. The breakup was as follows:


Packing and Loading Services$1250
Ocean and Inland Freight from Alameda, CA to Chennai Port$2971
Customs Clearance and Door Delivery to Kochi$1500
Destination terminal handling charges, delivery order fees, and service charges$250
All Risk Insurance for Valued Inventory at $10,000$350
Total$6321

We landed in India by the 18th of May and were contacted a few times in June by the staff at Universal Relocations, Chennai. They reconfirmed that we wanted them as our agent to clear the shipment, had the Power of Attorney executed, and also had us sent our original passport and OCI card. They assured they will be working closely with customs to ensure customs duty is negotiated to be the agreed upon rate of $1050 – the breakdown was $800 for Kawai K15 acoustic piano (2 years old), $200 for Yamaha P65 digital piano (3 years old), and $50 miscellaneous.

Below are a couple of issues worth a mention:
  1. We first used Blue Dart to sent the passport & OCI cards to our shipper but they failed to deliver it. As Blue Dart and Speed Post (Indian Postal Service) were the only ones authorized to handle passports, we tried again via Speed Post and that worked. This caused a delay of about four days.
  2. The scheduled ETA of the container at Chennai port was the 15th of June but it was delayed by a week due to an engine problem with the ship in Colombo.
We received confirmation of the shipment’s customs clearance by the 29th of June. Our US issued visa card payment to the shipper toward customs payment ($1050) was repeatedly rejected for some reason and we ended up transferring money from our back account in India.

Universal Relocations confirmed July 1st Thursday as the date of delivery. The terminal services manager did inquire about issues with Kerala union people in our neighborhood – we frequently had seen union people around but apparently within our community, there had not been any issues - later, we came to know that the union folks generally stays clear of apartment & villa complexes due to some legal restrictions. The delivery truck arrived at our abode around 10:30 PM amidst soaking rain! They unloaded everything, reassembled the furniture, removed all packing materials and left the house in the afternoon the following day – impeccable service. One suggestion for improvement though is that movers could really benefit with better equipment – with the couple of small dollies they had between them, it was a struggle to get the piano in. But, to their credit, they still managed to do it flawlessly.

Our passport and OCI was delivered back on 7/3/2010. Customer services from Universal Relocations later called to inquire about their service. Our feedback was positive, for the process was well oiled but we did mention a minor damage to a piece of furniture. They offered to pay for its repair – by then the repair was already done and we declined the offer.

Realized a month later that we were missing a few items and on cross checking with our spreadsheet, realized they were all part of a box labeled ‘Men’s clothing’. Most probably, the government officers at the checkpoint in Kerala lifted the box during the checking process – the shipper’s had mentioned about bribing them to get past that checkpoint as well – the officers wanted to inspect the piano crate knowing full well that doing so would invalidate the insurance and also damage the item!


Related Posts:

  1. R2I - Deciding on What to Take.
  2. R2I Shipment - Choosing from Insurance Options and Our Experience.
  3. R2I Shipping Options.
  4. R2I Shipping FAQ.
  5. R2I Shipping Experience.

Get a Quote Now: Universal Relocations.



R2I Shipping FAQ

As our May 2010 move from Alameda (USA) to Kochi (India) was our first experience in transferring personal effects across continents, we were teeming with concerns and questions. Below are some of our inquiries and the responses we received:

1. What is Transfer of Residence (TR)? Can expatriates (US citizens) qualify for TR? 


TR is a concession offered to people transferring residence to India after staying abroad for at least two years and who has not availed this option in the previous three years. This consideration allows for the import of personal and household goods either free of duty or at a discounted duty.

Being an expatriate does not bar one from being eligible for TR. But as requirements vary, it is best to check with the shipping company. US citizens with valid PIO card or OCI are eligible for TR. Otherwise a residence permit is required.

2. Can you explain how customs duty works when shipping under TR?


When shipping under TR, most electronic items and appliances are dutiable at a concessional rate of 15.3% while others are dutiable at 35.7%. Six items exempted from duty are – VCR, washing machine, cooking range, PC, laptop, and refrigerators under 300 liters.

3. How early should the shipping company be contacted and are there timelines for shipping under TR?

It is best to give the shipping as much lead time as possible. Containers are handled by trucking companies with permits to enter port/terminal and during peak time there is shortage of containers. Upwards of two months should work for the most part. Shipping via TR cannot be done prior to 45 days from the departure date.

4. What are some ballpark estimates for FCL shipment and insurance?


40’ containers average $10K for all-inclusive charges (customs + applicable union charges) and 20’ containers hover around $6.5K. Click to know more about Shipping Options.

For total loss only option, insurance costs 2.5% of declared value compared to 3.5% of valued inventory for all-risk. Click to know more about Insurance Options.

5. Is the negotiated rate with the shipping company the sum total of all my shipping expenses? If not, what other charges will I be on the hook for?

Customs Duty and Terminal Handling Charges (Port Dues) are the major charges in addition to the quoted rate. The shipping company can usually provide a good estimate in this regard – around $300 or so is average. Alas! If your destination is to Kerala, notorious union charges lurk (Nokkukooli – remuneration for looking on while the shipment is unloaded - a shameful custom to say the least). Horror stories with charges upward of Rs 20K are common and usually there is no easy way out. The other unknown is demurrage/detention charges that can bite if you are tardy with providing documentation at the destination port – the shipping company is charged for container delays and they pass it on to the customer.

6. Identify the official documents involved in the transaction?
  • Signed Contract: states the shipping company’s offer along with all the inclusions, exclusions, and other terms and conditions.
  • Bill of Lading: the official terms of the contract between the shipping company and you.
  • Household Goods Descriptive Inventory: the official record of the items shipped. Anything not in this list is not officially shipped. The document is required for customs clearance as well as for insurance purposes.
  • Miscellaneous and Optional items: Passport is a requirement for customs clearance. Valued Inventory is required for all-risk insurance. An insurance certificate is provided as the official contract when you purchase insurance.
7. Will the container come to my house for my shipment?
 
The container does come to the customer’s residence in a flat bed truck for FCL shipments. Permits may be required depending on the location and local rules. Should there be insufficient space to park the container, loading from the customer’s place is done onto a regular moving truck and container loading happens at the shipping company’s warehouse. For LCL shipments, the packing and palletizing happens at the customer’s house, but container loading happens at the shipping company’s warehouse.

Containers are handled by trucking companies with permits to enter port/terminal. Container rental rates are by the hour and so shipping companies focus on reducing the time - the first two hours of waiting at the premise is usually offered “free” while the rest is charged at an average of $75 per hour. There may be some leeway here and it would depend on your negotiation skills. An alternative to avoid time pressure is to avail of the ‘drop and pick’ option whereby the container is dropped off and picked up at a later scheduled time, for an additional fee.

8. Is my closest destination port the best alternative for shipping and for customs clearance?


Proximity is absolutely not a factor in choosing destination ports. At times it might make more sense to ship to the port the shipping company recommends – they might have a healthy relationship with customs officials at certain ports – since the customer is already paying for door-to-door service, and if the shipping company’s officials are responsible for clearing customs, it is largely insignificant as to which destination port the shipment arrives.

Additionally, there are Inland Container Depots (ICDs) which allows for customs clearance. Shipping companies will transport the shipment from the port to such ICDs for certain destinations – New Delhi, Bangalore, etc. Depending on your location, it can work to your advantage.

9. How secure is my shipment once it leaves my house?


Shipping companies generally employ bolt seals, which are considered very secure and approved by Indian authorities. For FCL shipments, once the container leaves the customer’s residence, it is unopened until it arrives at the destination port. The vulnerability is from that point on - the best bet is for you to be physically present along-side your shipment from that point on. Unfortunately, in a lot of cases, this is not possible and so security is compromised.

10. Do I need to be present in person to clear the shipment through customs?


The customer’s physical presence is not mandatory to clear the shipment – an agent of the shipping company can be authorized using a power of attorney.

11. What items are restricted/not allowed in a shipment?

Pressurized items are not allowed. Left Hand Drive vehicles are not allowed. Only a single one-liter bottle of liquor/wine is permitted – anything more is dutiable at 222.4% - other miscellaneous charges also apply. Other obvious exclusions include narcotic drugs, obscene stuff, silencers for firearms, exotic wild life products, etc. Weapons and ammunition require a possession license.

12. Are we allowed the option of packing part of our belongings with the shipping company doing the rest? Is there a process for packing? Are there any size restrictions/recommendations?

The following options are at the disposal of the customer:
  • Let the shipping company professionally pack the entire lot (most expensive),
  • Self-pack everything (this severely limits insurance options as all-risk insurance does not allow for this), and
  • Do partial packing – pack all items except breakables and furniture. Professional packing and loading (origin services) for a full-load 20’ container average around $2K. Choosing this option reduces the charges by around one-third.
For self-packing, there are no restrictions w.r.t size. Some rules of thumb apply:
  • Maximum 50lb per box (for easier loading at the origin),
  • Smaller boxes for heavier items, 
  • Superior quality package cartons handle transportation stress better (quality wise Home Depot cartons are at the rear end of the scale, while those from moving supply shops fare way better),
  • Original packaging is unsurpassed and if purchasing new items for the kitchen/dining rooms, it is best to ship them as purchased, and
  • The shipping company may also be able to help with acquiring cartons for a nominal cost. Also, plastic cartons, check-in baggage, etc. are all permissible in place of cartons.
13. How are acoustic pianos handled? Does it make sense to ship a piano purchased in the US for use in India, considering humidity factors?

Some shipping companies have negotiated rates with piano movers, which can be competitive. Otherwise, it is best to arrange this part on your own – ie, let a piano moving company crate and load the piano on the container – the service can be pretty expensive running upwards of $300.

Regarding humidity factors and recommendation, the best bet is to verify with the dealer from whom the piano was purchased. On a personal note, for the Kawai K15 piano we shipped, the verdict was that it was designed to work in Asia as well. The dealer however did recommend and provide silica gel to be placed inside the piano.

Related Posts:
  1. R2I - Deciding on What to Take.
  2. R2I Shipment - Choosing from Insurance Options and Our Experience.
  3. R2I Shipping Options.
  4. R2I Shipping FAQ.
  5. R2I Shipping Experience.

R2I Shipping Options

In this era of choices and options there are different ways to ship your belongings. The size of the load, how quickly the effects should be available, and how economical the shipping should be all play a part in choosing the shipping option. Below are the popular choices:
  • Ground or air shipping of boxes via carriers such as UPS, Fed Ex, or USPS: Ground or air shipping by means of these carriers is a better option in lieu of carrying them as extra baggage. Extra baggage costs are usually higher compared to these options. The downside though is that customs payment is the customer’s responsibility with no room to negotiate.
  • Air Freight Shipment: The amazing advantage with airfreight shipment is that door-to-door service is under a week on the average including ground transportation and customs clearance. The shipment is priced either by volume or weight whichever is higher. Pricing is high compared to ground shipment options, but that is the price of quick turnaround!
  • Less than Container Load (LCL) Shipments: The option is practical for those with less than a full container load worth of possessions. The shipment will either be palletized or packaged in wooden crates depending on size. The normal size of a pallet is 3’x4’ and the boxes are stacked on them, shrink wrapped and secured using fasteners – the volume that can be packed on a single pallet varies between 60 and 90 cubic foot. Bigger volume items like furniture require lift vans (wooden crates with around 200 cubic foot of volume). Door-to-door service is still available, with service levels almost on par with FCL – it takes an additional 15-20 days and container loading is usually done at the shipping company’s warehouse rather than at the customer’s place. They do provide the customer the flexibility to self pack or allow professional movers to do the job. Palletizing adds 10-15% to the volume of the items while lift vans add 15-20%.
  • Full Container Load (FCL) Shipments: FCLs come in different sizes and the common container sizes are 20’, 40’ and 40’ Hi Cube. The container is loaded and bolt sealed at the customer’s place. The base pricing for the 40’ foot container freight alone is about 40% more than the 20’ foot container. With the origin and destination services added in, the premium can be over 50%.
As mentioned, we chose FCL to move our stuff. Shipping companies were contacted about two and a half months before our planned ship date. As we were literally living out of boxes at the time, it was easy for the shippers to estimate the container size required during their pre-move survey. The verdict was that we were on the borderline with a 20’ container. As we were aware furniture made of particle board was not covered, we had plans to dispose a bedroom set which gave us about 10% leeway for new purchases.

20’ containers have an aggregate volume of 1050 cubic foot, 40’ containers 2100 cubic foot and 40’ Hi Cube 2350 cubic foot. Shipping companies have ballpark numbers as to what will fit into a particular size container – 2BR apartment or house moderately furnished along with a small family’s personal stuff usually fits a 20’ container – anything more usually will require a 40’ container. As people tastes and attitude toward personal possessions vary, this is not exact science. To help estimate volume, the ballpark figures below can be used for common household items:


ItemVolume Requirement in Cubic Foot
3-person Sofa60
Side Table20
Office Desk40
King Size Bed65
Small Night Table10
King Size Mattress55
Side-by-Side Refrigerator75
Larger Picture Frames or Mirror (Professionally packed)10
One 8-person Dinner Set (Professionally packed)20
Dining Chair10-15

With door-to-door service option, convenience is the name of the game. However, there are a few weak links when the shipment can be less than perfectly secure, despite the company’s best efforts:
  • At the destination port, for door-to-door service, there is usually an unloading-loading cycle, unless the customer’s residence is in close proximity to the port. Unloading & loading cycle require the bolt seal to be released and so the load is no longer secure. There is a destination services manager responsible for the security of the shipment during this process but that is not the same as customer being present to monitor.
  • During ground transportation of the shipment from the destination port, checkpoints exist, especially when crossing states. State government authorities have the legal right to demand inspection of the cargo. Unfortunately, bribing the officers is the norm in many of these locations. This is the period when the shipment is most vulnerable as there is usually one manager on the truck and many “government officers” around.
As part of providing door-to-door service, the shipping companies negotiate with customs based on the valued inventory. Some even provide a rate upfront based on the valued inventory – it could be high compared to what the customer would pay if physically present at the port to clear the shipment, but that is the price of convenience! The upfront rate option is extremely convenient and we would recommend using it, if available and the quote is reasonable. Basically, what is required from your side is mailing them the  documents (passport, etc.) for customs clearance and signing a proxy authorizing an agent from the shipping company to clear customs on your behalf.

Related Posts:
  1. R2I - Deciding on What to Take.
  2. R2I Shipment - Choosing from Insurance Options and Our Experience.
  3. R2I Shipping Options.
  4. R2I Shipping FAQ.
  5. R2I Shipping Experience.

R2I Shipment - Choosing from Insurance Options and Our Experience

The major insurance options available for R2I shipments are:
  • Total Loss Insurance: This is the most economical insurance coverage option. It is applicable only if the entire shipment is lost due to a catastrophic incident. Exclusions at the discretion of the underwriter further limit the scope of the insurance. The coverage amount is derived from the value declared by the owner and the premium is typically a percentage of this declared value: 2.5% is the norm. An advantage offered by this option is that Packed by Owner (PBO) shipments are covered as opposed to only those packed by a professional moving company.
  • Full Replacement Value – Valued Inventory: Only items declared by name and value are covered in this category. Pricing hovers in the vicinity of 3.5% of the declared total replacement value of the items listed.
  • Full Replacement Value – Lump Sum: Under this comprehensive insurance choice, the entire shipment is covered. Pricing is structured along the lines of Full Replacement Value – Valued Inventory option in that it calls upon the customer to maintain a High Value List limited to items valued above $500. The requirement is to purchase coverage for the total amount listed in the High Value List plus coverage at $6 per pound minimum for the rest of the items. e.g. – if high-value items add up to $10K and the weight of the remaining items add up to 3000 pounds. The requirement will be to take coverage for $28K ($10K + 3000 * $6).

In addition, shipping carriers usually have carrier liability insurance, a nominal insurance that covers shipments by weight (the norm is $0.60 per pound) while in their possession. Although the coverage is all right for a freebie (as the average weight for household goods in a 20’ container is over 6000 pounds the average value of the coverage is around $3600), the major limitation is that it does not apply for the shipping carrier’s origin and destination services – only those durations when the shipment is actually in their possession is covered. One additional option that some shipping companies offer is insurance against named perils such as theft, burglary, and specific accidents.

Be mindful of the caveats below when deciding on the type of insurance to opt for:

1. Valued Inventory or High Value List: This list is mandatory for the Full Replacement Value insurance options. The drawback is that unless the customer diligently jots down replacement values for the items, he runs the risk of being under-insured, thereby reducing the actual coverage.
2. Co-Insurance (Underinsuring):  Whether the shipment is classified as under-insured and by how much determines the settlement compensation amount in case of a claim. A common scenario of a shipment being classified as under-insured is when adequate coverage is not opted as per the terms of the ‘Full Replacement Value- Lump Sum’ option. For e.g. -
  • If high-value items add up to $10K and the weight of the remaining items add up to 3000 pounds, the requirement will be to take coverage for $28K ($10K + 3000 * $6).
  • If the coverage opted is for only $20K, the shipment excluding the high value items will be classified under-insured by 44.44% based on (100 – $10K/$18K*100).
  • Filing a claim for $1000 will result in a payment of only $555.60 ($1000 * (100-44.44)), if the items are not from the high-value list.
3. Exclusions: Exclusions are items excluded from any insurance coverage. Obvious items include small but high-value items like jewelry, watches, gemstones, cash, collections, etc. One exclusion clause that can come back to bite at claim time is that insurance companies exclude furniture made of processed wood. For many R2Iers, that single clause eliminates the bulk of the furniture in the house. Here is a sample exclusion clause from the insurance company – “Damage to any furniture constructed of veneered chipboard, particle board, composite board, or similar. Any reduction in quality thereof arising as the result of dismantling or reassembling of any such items of furniture is also excluded”.
4. Deductible: A deductible usually applies for all claims. The norm for deductibles on Total Loss Coverage is $500 and for All Risk Insurance Coverage is $250.

On our part, we went with “Full Replacement Value – Valued Inventory” insurance. The piano and the wooden and leather furniture featured in our valued inventory list. The total value added up to around $10K and our insurance cost was $350. The move was almost flawless – minor damage to a couple of items and loss of at least one box of clothes – unfortunately; we realized the loss of clothes only after two months. Looking back, we probably would choose the same option if we have to go through another move. ‘Full Replacement Value – Lump Sum’ is a better coverage but in our opinion, cost-prohibitive – for in our case, the insurance cost would easily have crossed $1K.

Related Posts:
  1. R2I - Deciding on What to Take.
  2. R2I Shipment - Choosing from Insurance Options and Our Experience.
  3. R2I Shipping Options.
  4. R2I Shipping FAQ.
  5. R2I Shipping Experience.

R2I - Deciding on What to Take

The silver lining of relocation is the chance to de-clutter the home front and make it a sane place to chill. Nevertheless deciding between the keepers and the tossers from the plethora of possessions is only but one of the daunting tasks that lie within the dark clouds of moving. Expensive shipping costs add insult to to the cause, unless it is a corporate move.

For a living space above 800 square feet, it is fairly safe to presume the need for a full-container load (FCL). Transportation costs alone for FCL shipments using a basic 20’ container from a door in US to a port in India is upwards of $3K. Value added origin and destination services along with insurance, taxes and other charges add upwards of another $3K.

These price points along with the associated tasks can tempt one into starting anew in India. In many instances, this approach will not prove prudent for it makes financial sense only if shipping charges rake up more than what it would cost to liquidate all belongings and purchase new ones in India. Unless this move was in the horizon from the very onset and every purchase reflected allegiance to that decision, chances are the value of one’s possessions will easily amount to more than the shipment charges. Hence the real choice, in most cases would be whether the wish is to retain company with the existing bits and pieces or favor a new start for an additional cost.

On our part, the decision to ship most of our belongings was relatively easy, as we wanted an acoustic piano while in India. Replacing our Kawai K15 purchased for around $3K, would have been more expensive in India. Also, when we purchased our first home in 2003, we furnished with quality furniture. Ideally our intent was to keep what we had unless the costs proved prohibitive. To assess costs, we ran some numbers around replacement expenses assuming rough pricing in India and liquidation values of our things. That step proved the shipping costs were a necessary evil in our relocation saga.

A lesson learnt by running this list was that replacing better-quality pieces is extremely expensive – luxury taxes and the imported parts in most of the finer objects available in India made for such items to be twice or thrice as expensive to comparable counterparts in the USA. Examples include larger refrigerators (side-by-side and/or sub-zero designer ones) and larger LCD TV’s, which are both dearly priced in India. High-end furniture, crockeries, and other household goods also command a premium to purchase in India compared to US. Also, there are a few other considerations when making the decision to ship or liquidate:
  • Electrical appliances:  Liquidation values for such items are really low in the US but to function in India they require a voltage converter. Some appliances require bulky and expensive converters rated over 300W and designed for continuous use.
  • Electronic items: Except for amplifiers and sub-woofers that require high power, most electronic items only require 50W-100W converters – buying a 100W or 200W continuous rated compact converter with an extension cord might suffice to hook up 110V electronics for a particular room. LCD TV’s are special in that they require both a voltage converter and a signal converter. Even so, for the avid viewer, it can be more economical to ship the high-end LCD TV and use it with the converters in India.
  • Furniture made of particleboard: As these are more prone to damage than real wood furniture, insurance companies place particleboard in their exclusion list. Unfortunately, most furniture available in middle-class contemporary furniture stores in the US falls in this category. Liquidation value for such furniture is also very low. However, the good news is that such furniture is easily replaced in India – better quality furniture made of High Density Fiberboard (HDF) that compares well to the bulk of the Medium Density Fiberboard (MDF) furniture stocked in Ikea are available at competitive price points in India.

We started liquidating things six months before our May 2010 move. Below is a representative list of what we liquidated and the rough values realized:




Related Posts:
  1. R2I - Deciding on What to Take.
  2. R2I Shipment - Choosing from Insurance Options and Our Experience.
  3. R2I Shipping Options.
  4. R2I Shipping FAQ.
  5. R2I Shipping Experience.

GMAT Exam Prep Books and Resources - ISBNs and Best Prices

The Graduate Management Admission Test (GMAT) offered by the non-profit Graduate Management Admission Council (GMAC) is a standardized, generic test unrelated to any particular field of study. It aims to measure Math and English language skills deemed necessary to succeed in graduate business studies. It is a Computer Adaptive Test (CAT). Registration is steep with a base fee of $250. Fee waivers for economically disadvantaged test takers are available: up to ten fee waivers are offered to schools to be used at their discretion – so, the game plan would be to check with the schools under your consideration and see if one of the schools approve you for a fee waiver. A free GMAT test preparation software and certain other free resources are available at their website for registered users. The software mimics the technology used by the official GMAT computer based exam.

The format and timing details of the 3.5 hour test is as follows:




The quantitative and verbal sections of the test draw on a computer-adaptive format. From a large pool of potential questions ranging from low to high levels of difficulty each section starts with a question of moderate difficulty. Questions in these sections are dynamically selected based on the answer – a correct answer will result in the subsequent question being more difficult. The logic is to adjust the test to be in sync with the test takers ability level. This process continues until the number of questions required for the section is completed. The negatives are that the test taker has to answer all questions presented, and that random guessing can result in a low score because the software considers even the wrong answers when selecting the next question.

Below are ISBNs and best prices of study resources for the GMAT Test:


ResourceFormat/Media OptionsBest PriceDescription
GMAT Official Guide Bundle978-111910819$40.94Official Bundle from GMAC. 900 retired questions from the official exam. Separate guides for quantitative and verbal portions.
Cracking the GMAT Premium Edition with 6 Computer-Adaptive Practice Tests
  • Kindle Edition at $22.99
  • Paperback: 978-0804126014 at $24.03.
$22.99Proven techniques, drills, and questions. Online video tutorials along with extra online practice.
Kaplan GMAT 800: Advanced Prep for Advanced Students978-1618654069$12.99Focus on questions that most people get wrong. 300+ high-difficulty practice questions with detailed explanations. Online resources including 100+ challenging questions.
The Official Guide for GMAT Review with Online Question Bank and Exclusive Video by Graduate Management Admission Council
  • Kindle Edition at $23.99
  • Paperback: 978-1119042488 at $22.99.
$22.99Over 900 actual questions from the past GMAT tests with answer explanations. Create own practice tests online. There is also a 100-question diagnostic test, study tips, and test-taking strategies.
Complete GMAT Strategy Guide Set - Manhattan Prep GMAT Strategies Guides978-1941234105$100The best preparation set (10 guides) available to achieve a very high score.Six full-length practice exams. 200+ additional practice questions. Includes one year of access to Manhattan's online computer-adaptive GMAT practice exams and Question Banks.
Kaplan GMAT Premier with 6 Practice Tests: Book + Online + DVD + Mboile
  • Kindle Edition at $17.27
  • Paperback: 978-1625231352 at $27.80.
$17.27Sixfull-length practice tests with answer explanations. 1,200+ practice questions with explanations. 200 question online Quiz Bank, DVD with bite-sized video lessons, and targeted for test takers shooting to break 700. 




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Last Updated: 04/2017.

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