Business en Sat Jan 01 12:14:10 IST 2022 affluent-seniors-fuel-india-silver-economy <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Beena moved her parents from Pune to a house near hers in Bengaluru, to care for them. But it turned out that they needed more than that. Her parents, Sarojini, 86, and Moti Shahnani, 92, required catheter support besides daily care. And Covid was the last straw.</p> <p>&nbsp;</p> <p>“I was not able to take them to doctors,” said Beena, who turned in desperation to Portea, a health care startup that offers services ranging from basic nursing assistance to tailor-made packages based on patients’ requirements. Beena signed up for a package that included daily nursing care at home, medical monitoring, catheter change and emergency medical attention. “My parents stay in their own independent house, but I know that there is help at hand at any time of the day,” she said.</p> <p>&nbsp;</p> <p>On the other end of the spectrum is Ila Gupta, 66. The Gurugram-based homemaker joined Senior Dance Wellness, a programme curated exclusively for seniors by the dance wellness company You Can Dance, a while ago. “Dance was a passion for me, but I was busy with duties at home. But now that my children are settled, I can finally indulge in it,” she said.</p> <p>&nbsp;</p> <p>“We felt there was a huge gap in the market,” said You Can Dance’s co-founder Yatan Ahluwalia, who, along with co-founder &amp; creative director Pulkit Sharma, designs the session keeping in mind the health conditions of the seniors.</p> <p>&nbsp;</p> <p>These are just the tip of the opportunity iceberg that the silver economy is. The term refers to products and services aimed at the purchasing potential of the elderly. While this primarily brings to mind real estate projects billed ‘senior living’, of late it has moved on to cover a lot more in its ambit, ranging from financial solutions, transport, food, insurance, robotics, internet, sports and leisure. There is even a television channel aimed specifically at senior citizens!</p> <p>&nbsp;</p> <p>The government itself is pushing its silver economy agenda seriously. In December 2020, it came out with a draft National Policy for Senior Citizens, with appropriate regulations and standards, tax structures, policy support and subsidised financing. Ayushman Bharat has provision for an Asha worker to check on senior citizens, at least on paper. There are high expectations that the 2022 Union budget will have sops beyond the tax exemptions.</p> <p>&nbsp;</p> <p>But the most exciting government plan has been a business incubator project called SAGE, or Senior Ageing Growth Engine. It aims to “give a boost to private participation in the elderly care sector by selecting and promoting new startups with innovative ideas,” said R. Subrahmanyam, secretary in the ministry of social justice.</p> <p>&nbsp;</p> <p>SAGE will have a screening committee that will provide a funding of Rs1 crore as one-time equity to startups that suggest business ideas on elderly needs not just in health and housing, but also technology access to finances, wealth management to legal guidance.</p> <p>&nbsp;</p> <p>SAGE is joined in the acronym-craze of the Modiverse by SACRED, or Senior Able Citizens for Re-Employment in Dignity, which will work à la an ‘e-marketplace’ for senior citizens looking for a job, be it full-time or gig work or even pro bono options. Those retired from the armed forces as well as public sector companies and nationalised banks could be part of the first set of seniors to be thus employed.</p> <p>&nbsp;</p> <p>The reason for this heightened interest in the silver economy is not hard to figure out. A recent study in The Lancet noted that the life expectancy of an average Indian had risen by more than 10 years since 1990—from 59.6 years to 70.8 years. This means, and estimates by the UN as well as the Confederation of Indian Industry confirm, that about one in every four Indians will be a senior citizen by 2050. In sheer numbers, that will be equal to the population of the US.</p> <p>&nbsp;</p> <p>Looking after the welfare, including specific health requirements, of such a large number of people can be mind boggling. This is why Bibek Debroy, chairman of the Economic Advisory Council to the prime minister recently said, “India is often portrayed as a young society, with a consequent demographic dividend. But India also has a greying-cum-ageing problem.”</p> <p>&nbsp;</p> <p>However, there is a silver lining. While the challenge is to meet the requirements of this big group and to see how they can be made productive, it also throws up an opportunity. Thanks to the rising incomes and retirement benefits, and better investment opportunities, the elderly now play a significant role in driving the economy. In fact, studies put senior citizens, along with professionals in the 45 to 64 age group, as the ‘wealthiest age cohort’ in the world. And they would like to lead a full and productive life through the sunset years.</p> <p>&nbsp;</p> <p>“A large number of senior citizens today are independent, well-travelled, financially stable and socially connected,” said Prashant Thakur, director &amp; head (research) at the realty consultancy firm ANAROCK. “They have every right to decide how they want to live in their golden years.”</p> <p>&nbsp;</p> <p>And it is a market that is buzzing with a bevy of products and services—some old, some new and some borrowed from the west, where the silver economy is already a thriving segment.</p> <p>&nbsp;</p> <p>Ratan Tata, chairman emeritus of Tata Sons, is an investor in a startup—started by his protege Shantanu Naidu—called GoodFellows. It aims at providing companionship to the elderly in their day-to-day activities. The pilot is on and a launch is planned for early-2022.</p> <p>&nbsp;</p> <p>Naidu will face competition from the likes of Seniority, a shopping destination for seniors. Its members-only Evergreen Club is a web and app-based platform where anyone above 55 can socialise with others in the age group over shared interests, games, competitions and skill sessions.</p> <p>&nbsp;</p> <p>And, why limit those interactions to just socialising? Happy Seniors, a Pune-based dating community, does cupid proud as a dating service for elders. Many old-age homes and marriage service firms are offering ‘alliances’ for those in the older age brackets; some apparently even match seniors interested in a live-in option, considering how companionship is the biggest need for most seniors.</p> <p>&nbsp;</p> <p>And, the importance of retirement planning is also increasing. According to Prashant Tripathy, managing director &amp; CEO of Max Life Insurance, “There are no alternative retirement instruments available for senior citizens other than traditional ones like post office savings, bank fixed deposits, like different type of annuities.” Max Life Insurance recently did a retirement index study to gauge the financial capability of Indians to lead a healthy, peaceful and financially independent life once they retire.</p> <p>&nbsp;</p> <p>While the real estate projects aimed at ‘senior living’ initially came up at the turn of the century, it seems to have come of age now. A recent study showed that there were at least 55 specific senior living building projects in various stages of completion across India. This is an estimate from just 12 big realty firms. The Association for Senior Living India (ASLI), the umbrella body of developers which liaison with the government on policies, says it is adding three or four new members every month.</p> <p>&nbsp;</p> <p>That the potential requirement of senior living in the years to come is way more than what is available or under development explains the interest. Max India’s Antara, for instance, recently announced a Rs300 crore investment to build senior living projects across big cities.</p> <p>&nbsp;</p> <p>“Many seniors do not (want to) settle for traditional old-age homes as they prefer, and can afford, autonomy and the company of age peers in well-equipped retirement communities,” said Anuj Puri, chairman of ANAROCK. “A recurring theme of this pandemic has been seniors living alone, struggling for basics, managing without house help and anxious about medical issues. The need for homes in a setting where these factors are taken care of is now undeniable.”</p> <p>&nbsp;</p> <p>The pandemic clearly accentuated the need for senior-specific developments. “Residents of senior living communities were safer, better served and remained socially engaged during the pandemic. This was in direct contrast to the difficulties faced by seniors living on their own,” pointed out Mohit Nirula, CEO of Columbia Pacific Communities, one of the first multinational firms to venture into senior care in India.</p> <p>&nbsp;</p> <p>Senior living options have transformed from the days of being cooped up at old-age homes run by charitable or religious organisations. From retirement communities outside city limits to separate apartment complexes with scalable facilities (a bed with wheels or health monitors, for example), medical help on call and round-the-clock security, it has now evolved into even hybrid options.</p> <p>&nbsp;</p> <p>Realty major Puravankara’s Capella complex in Whitefield in Bengaluru, for instance, is now planning two towers exclusively for senior living. “The advantage is that you can have the child and the parents living in the same community in the same complex,” said Ashish R. Puravankara, managing director. Puravankara now plans to incorporate this model in all its large projects in the future.</p> <p>&nbsp;</p> <p>Hospital care at home is also picking up steam. “Many procedures can be effectively done at home, and insurance companies are also supporting them. This is starting to become mainstream,” said Meena Ganesh, MD, co-founder and chairperson of health care startup Portea Medical. “A health plan which tracks health condition and over a period of time intervenes as appropriate is what we have seen to be very popular.”</p> <p>&nbsp;</p> <p>According to Ankur Gupta, chairman of ASLI and joint-managing director of Ashiana, the first real estate company to launch senior living in India, the taboo has reduced considerably and the conversation has completely shifted. “It is such a delight to see seniors wanting to live a quality life and keep their kids independent,” he said. “It will help the sector at one level, and the country at another. We are making everyone capable of taking care of themselves at a greater level.”</p> Tue Jan 11 14:01:28 IST 2022 cooperative-sector-is-best-model-for-bharat-growth <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Few Indian brands enjoy the recognition and reputation that Amul does. The dairy giant is now expanding the milk products portfolio and getting into new products like vegetables and frozen fruits. In an exclusive interview, R.S. Sodhi, managing director of Amul, talks about its plans and the bigger role Amul has to play in the cooperative sector. Excerpts:</p> <p><b>Q/ What are Amul’s expansion plans?</b></p> <p>&nbsp;</p> <p>A/ Amul’s expansion plans are based on how much milk we will be getting. Generally, every year there is an expansion by Rs800 crore to Rs1,000 crore. We are getting 9 per cent more milk, which means 25 lakh litres. That means an investment of Rs1,000 crore. We are investing in Gujarat and outside in various product categories.</p> <p>&nbsp;</p> <p>We are expanding in fresh products (milk, curd and butter milk). A Rs500-crore dairy is coming up in Rajkot; land is being allocated by the state. Within two years, big dairy plants will also come up in Bagpat, near Delhi, Varanasi, Rohtak and Kolkata. The total investment would be between Rs300 crore and Rs500 crore.</p> <p>&nbsp;</p> <p>We are also eying Rs1,000 crore in exports. Amul exports to some 55 countries, though mainly to neighbouring countries.</p> <p>&nbsp;</p> <p><b>Q/ What are the new technologies Amul is introducing?</b></p> <p>&nbsp;</p> <p>A/ In milk production, we recently introduced two new technologies and these are doing really well. One is sorted sex semen, which leads to 95 per cent of calves born being female. The technology is subsidised (70% to 80%) for farmers. Second is embryo transplant, which helps to multiply the numbers (of high-yielding cows). Usually, a cow will deliver only one calf in a year. Using embryo transplant, 100 to 150 calves can (come from the same cow) every year, as the embryo can be transplanted into a non-productive cow as well. The calf will have the genes of a good bull.</p> <p>&nbsp;</p> <p>Milking machines are now being used more. Each machine costs Rs50,000. As not all farmers can afford it, we have mobile machines.</p> <p>&nbsp;</p> <p>For milk collection, we are working on solar-powered bulk milk coolers. Also, our tankers can measure fat and other parameters and feed it into the system even as the milk is pumped into the tanker. This ensures that nobody tampers with the quantity and quality of milk.</p> <p>&nbsp;</p> <p>We recently built Asia’s biggest milk powder plant. We are also working on a technology which can store perishable sweets like barfi and kalakand for up to 45 days.</p> <p>&nbsp;</p> <p><b>Q/ What are the new products in the pipeline?</b></p> <p>&nbsp;</p> <p>A/ New variants in butter and cheese, and we are investing a lot in Indian traditional fresh sweets. We want to make these products and fresh paneer in plants closer to consumption areas, and not centrally in Gujarat.</p> <p>&nbsp;</p> <p>We are working on high protein dairy products. We will be adding more markets for products like atta (flour) and honey. Bakery, frozen fruits and vegetables are other areas we are expanding to.</p> <p><b>Q/ There is buzz about organic and healthy food.</b></p> <p>&nbsp;</p> <p>A/ It is a growing category; at the moment, it is very niche, small and scattered. In dairy, we can definitely work. But in fruits and vegetables, we will have to get into the main category first and then organic. India’s organic market is Rs4,000 crore to Rs5,000 crore a year.</p> <p>&nbsp;</p> <p>In the fruits and vegetables category, we will add organic. The planning is on and it should happen in a year. We have forward distribution in the market, unlike others. We also have a pan-India frozen chain. No other company has this advantage.</p> <p>&nbsp;</p> <p><b>Q/ What are the key challenges before Amul?</b></p> <p>&nbsp;</p> <p>A/ As such, Amul and the dairy industry have the same challenge—how to increase productivity of animals to decrease the price of milk. The price of milk is increasing, but we have to ensure that milk and milk products are reasonably priced so that consumption increases. It is about meeting these two diagonally opposite demands by making the supply chain more efficient.</p> <p>&nbsp;</p> <p>Another challenge is dissuading the government from entering into free trade agreements for the import of dairy products, as this will harm the interest of dairy farmers. Till now, the government has responded favourably.</p> <p>&nbsp;</p> <p>Another challenge is the propaganda by vested interests against milk, which is a universally accepted super food and healthy product. PETA and other groups are unleashing false propaganda. In some countries, there are vested interests who do not want India to become a big force in the dairy industry.</p> <p>&nbsp;</p> <p>The whole world is surprised by how well India is doing. This is providing very good income for farmers in rural areas. There are 10 crore farmers (families) in animal husbandry in India and Amul has 3.6 crore farmers (families) under its fold.</p> <p>&nbsp;</p> <p>Another challenge is keeping Amul a contemporary, modern food brand for youngsters and villages. It is the only food brand that is accepted by all age groups, income brackets, geography, castes and religions. It is about keeping this image of the brand intact. The brand has to be modern, contemporary and innovative. It is not easy. Any decision you take, be it packaging, technology, pricing or policies, you have to see that in no way is it harming that image.</p> <p>&nbsp;</p> <p><b>Q/ How do you see the competition from private dairies?</b></p> <p>&nbsp;</p> <p>A/ Liberalisation happened in 1991. Many dairies have come up, many have survived and many have closed down. There is scope for everybody. In India, the dairy sector is worth Rs9 lakh crore and the organised sector is worth Rs3 lakh crore. In another decade, the organised sector can be worth Rs10 lakh crore.</p> <p>&nbsp;</p> <p>Competition will bring in more transparency, better prices for the farmers and better products. It will also help us to continue to work in supply chain innovation and expansion.</p> <p>&nbsp;</p> <p><b>Q/ Is Amul helping others set up cooperatives?</b></p> <p>&nbsp;</p> <p>A/ Cooperatives command 60 per cent market share in India. And all have come out of the knowledge and experience of Amul. This has been happening since Dr Verghese Kurien formed the National Dairy Development Board in 1965 to replicate the Amul model through it.</p> <p>&nbsp;</p> <p>In 2010, we decided to increase our milk procurement from outside Gujarat. So, we get milk from other states, including the northeast. We are helping cooperative sectors. For example, we are promoting the Jammu and Kashmir Milk Producers Union. It is now a Rs300 crore industry. We are also helping Andhra Pradesh to set up a cooperative.</p> <p>&nbsp;</p> <p><b>Q/ Union Cooperation Minister Amit Shah said he had a lot of expectations from Amul.</b></p> <p>&nbsp;</p> <p>A/ This is because, if India has to grow Bharat has to grow. Bharat means small workers and small farmers. For this, the cooperative sector is the best model in which they are not exploited by middlemen.</p> <p>&nbsp;</p> <p>Cooperative is the way of doing small business by small people, through small people. India is a country of small farmers, entrepreneurs, retailers and consumers. And only cooperatives can take care of these segments.</p> <p>&nbsp;</p> <p>Cooperatives are the only way to distribute wealth and remove income disparity. I think the government has realised this, and Amul is the time-tested, profitable, well-recognised model that the government would like to replicate.</p> Sun Jan 09 10:15:36 IST 2022 finfluencers-breaking-down-finance-for-the-masses <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Pune-based Rachana Ranade always wanted to be a teacher. She cleared her chartered accountancy exam in 2008 and declined high-profile job offers from multinational corporations to start teaching. As recently as 2019, she was teaching MBA and CA students. At one point, she was a visiting faculty in as many as seven colleges. Today, Ranade is a YouTube star, dishing out information on all things finance—from basics of the stock market to futures and options trading for beginners and analysis of initial public offerings.</p> <p>&nbsp;</p> <p>“Other than CA and MBA, the stock market was one area I loved,” she said. “I have been investing in stocks since 2006. My husband and brother also used to always talk about stocks. So, that is what got me interested and I slowly started learning. Once a group of CA students approached me to take a class on stock markets. While conducting a class for a small batch, I realised that the stock market was a subject that could be taught.”</p> <p>&nbsp;</p> <p>As more students got interested in her lectures on stock markets, people started demanding recorded lectures. The first lecture that Ranade uploaded on YouTube was a lengthy 90 minutes. It still got 25,000 views in three months. That proved to be a game changer, she said. The lecture has since received over 10 million views and Ranade has left teaching to become a full-time financial influencer.</p> <p>&nbsp;</p> <p>Hyderabad-based Prasad Lendwe’s interest in the stock market began when he was in college. While pursuing an engineering degree in Mumbai, he started following the stock market through a financial daily that his friend bought regularly. His interest piqued, he moved on to second-hand books and magazines. Initially, with his limited knowledge, he suffered huge losses in the market.</p> <p>&nbsp;</p> <p>Rather than calling it quits, he learnt more about stocks and started working part-time to raise seed money for investing. To share the learnings from his mistakes, he posted a video on the basics of the stock market in 2014. The YouTube video got 14,000 views in around two months and continued to attract more. This led to requests for more such content and Lendwe started uploading videos every few months. Now, he is also a full-time financial influencer (commonly known as a finfluencer).</p> <p>&nbsp;</p> <p><b>Locked down, investment up</b></p> <p>When the pandemic led to lockdowns across the world, people seemingly found more time to look at the markets. Equity investing definitely grew in a big way. On October 25, the unique registered investors on the National Stock Exchange (NSE) crossed 50 million. The growth from 30 million to 40 million had taken 15 months. But, the next 10 million were added in just seven months, according to the NSE.</p> <p>&nbsp;</p> <p>A record 14.2 million new demat accounts were opened in the year ended March 2021—over three times the 4.3 million accounts opened in the previous financial year. A large part of this growth was fuelled by discount brokerages like Zerodha, Upstox, Groww and 5Paisa. As more people have taken to direct stock market investing, their quest for information has also grown. This has led to skyrocketing views for finfluencer videos.</p> <p>&nbsp;</p> <p>Ranade’s YouTube channel now has over 3.2 million subscribers. Raipur-based Pranjal Kamra’s YouTube channel on finance has over 3.3 million subscribers. Mukul Malik’s personal finance channel has touched 2.8 million. Lendwe’s channel has crossed 1.6 million. The underlying thing that has clicked is that all these influencers try to explain difficult topics in simple language that common people can understand.</p> <p>&nbsp;</p> <p>“The amount of views that all good influencers are getting clearly shows that the younger generation, which has come into the market, wants to learn,” said Anant Ladha, the founder of Invest Aaj for Kal. “They are not just here to get so-called tips on what to buy and sell. During lockdown, people had time and wanted to learn something new. There has been a clear bifurcation between good and bad, and channels providing good educational content have exploded.”</p> <p>&nbsp;</p> <p>Ladha, a chartered financial analyst and a certified financial planner, was doing offline financial advisory sessions. But, by doing these sessions for small groups, he felt that he can only ever reach one lakh to two lakh people. So, Ladha decided to tap into social media platforms and began uploading videos on YouTube. His channel now has over six lakh subscribers. Initially, his videos used to get 2,000 to 5,000 views. They now fetch 60,000 to 80,000, some even hit one lakh.</p> <p>&nbsp;</p> <p>Chennai-based options trader P.R. Sundar, who also has a YouTube channel on stock markets, has seen similar growth. Sundar taught mathematics in Gujarat for around six years. Then, in 1994, he started teaching in Singapore. He returned in 2005 and, in 2007, started investing in stocks. His YouTube channel is under two years old. In April 2020, he had 20,000 subscribers. That has surged to around 7.8 lakh now—a growth of over 3,000 per cent in less than two years. His videos, on average, get around one lakh views.</p> <p>&nbsp;</p> <p><b>The influencer revenue model</b></p> <p>As the clicks on videos uploaded on YouTube increase, so does the platform’s revenue. YouTube then shares this revenue with the content creators, based on the number of views. The YouTubers can also enable channel memberships. Members-only benefits vary—YouTubers usually explain these while asking viewers to become members.</p> <p>&nbsp;</p> <p>Another revenue stream is sponsorships; videos by finfluencers is logical content for stock broking firms to sponsor. Several broking firms are reaching out to finfluencers. The partnership could be as simple as enabling links on a channel, which would direct a viewer to a demat account opening page on a broking firm’s website. Bhuvanesh R., a business analyst at discount broker Zerodha, said that the firm has an affiliate partner programme where partners get a share for bringing people to it. There could also be other benefits. For example, Sundar said that his YouTube videos had helped him attract more people to his workshops.</p> <p>&nbsp;</p> <p>Ranade enabled paid memberships last year and YouTube’s CEO Susan Wojcicki mentioned in her official blog that it accounted for the majority of Ranade’s YouTube revenue, with around $100,000 (about 076 lakh) in less than a year. “This is just membership revenue,” said Ranade. “Then there are advertisements, brand deals and there are courses.” But, she is quick to add that while there is money to be made, one needs to have perseverance and stick to one’s schedule of uploading videos without fail. Ranade’s husband, who is also a CA, has recently quit his job and joined her full time. Ranade publishes videos twice a week and plans her upcoming videos weeks in advance after discussions with her team.</p> <p>&nbsp;</p> <p>Sundar, who does market analysis daily, agreed there is a lot of hard work that goes into making a YouTube channel successful. He pointed out that even on vacations, he has had to make time and publish his videos through his phone.</p> <p>&nbsp;</p> <p><b>The untapped markets</b></p> <p>Until a few years ago, people from states like Maharashtra and Gujarat and the metros elsewhere formed a major chunk of stock market and mutual fund investors. But, that is changing fast. Data from the Association of Mutual Funds of India shows that assets from B30 (cities beyond the top 30) touched 06.16 trillion in September 2021, compared with 04.47 trillion in September 2020—a 38 per cent year-on-year increase.</p> <p>&nbsp;</p> <p>However, despite the surge in stock market investors and mutual fund flows hitting a record, the overall equity market penetration still remains in single digits. As smartphone penetration and media consumption in the small towns grow, this is a huge addressable market for influencers. “Earlier people had to rely on news magazines or business channels for content,” said Sundar. “Now, because of the phenomenal growth of platforms like YouTube, Facebook and Twitter, a lot of people have got opportunities to be content creators and content receivers.”</p> <p>&nbsp;</p> <p>Finfluencers like Lendwe, Kamra and Ladha largely have content in Hindi. But, there is huge potential in other regional languages, too. Sharique Samsudheen, who does YouTube videos on the stock market and personal finance in Malayalam, has over 8.9 lakh subscribers.</p> <p>&nbsp;</p> <p>Sundar plans to start a Tamil language channel in a few months; there have been many requests for the same, he said. Lendwe also expects traction for vernacular medium content in the next few years. He is currently setting up a team and plans to hire anchors to start YouTube channels in different languages, especially targeting people who do not understand Hindi.</p> <p>&nbsp;</p> <p>Ranade says there is a huge scope for generating financial education aimed at kids. “My third standard kid said that ‘When I keep money in banks, they are providing a service; so why shouldn’t we pay them to keep our money safe, rather than them paying us’,” said Ranade. “I realised that children do understand a lot. So, finance for kids is a dream project. This will be a long-term project, but I do feel that there is a need for such content targeting children, too.”</p> <p>&nbsp;</p> <p>While many finfluencers are providing great content, there is a flip side. “Some of the influencers are honest and are doing it for a purely educational purpose,” said Bhuvanesh. “But, the garbage is 100 times the decent content out there.”</p> <p>&nbsp;</p> <p>Also, many influencers are not licenced as financial advisers. Lendwe, for instance, clearly mentions that his videos are based on the knowledge he gathers. Furthermore, investment goals and horizons will depend on each individual. This is a big road block for YouTube influencers as many of them give generic information.</p> <p>&nbsp;</p> <p>K.S. Rao, head, investor education and distribution development, Aditya Birla Sun Life AMC, said that while finfluencers were helping improve the learning curve of investors, there should be regulation in the space. “If I have one lakh followers, a statement I make will have an impact the next morning,” he said. “If the statement is motivated, then it could be dangerous for people who are following me.” So, while finfluencers play a big role in investor awareness and education, financial planners or advisers will remain key.</p> Sun Jan 02 10:58:56 IST 2022 dividend-yield-and-portfolio <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>WHEN YOU CALCULATE</b> returns from equity investment, you must take into consideration two sources of returns. One, the return from an appreciation in price, and two, the revenue generated from dividend income. Simply put:</p> <p>&nbsp;</p> <p>Equity returns = capital appreciation + dividend</p> <p>&nbsp;</p> <p>Inarguably, the capital appreciates or price appreciates element holds maximum sway and has a large impact on your total returns from equity investments. However, the dividend element should not be ignored. A lot of well-established companies in India regularly pay dividends, and you can create a small source of dividend income for yourself by investing in these companies. If direct equity investing is not your cup of tea, then you can simply consider investing in a dividend yield fund.</p> <p>&nbsp;</p> <p><b>What is a dividend yield fund?</b></p> <p>A dividend yield fund is a type of equity fund that invests in stocks of companies that have a high dividend yield and have historically been regularly paying dividends. Generally, a dividend yield fund invests approximately 70-80 per cent of its corpus in stocks that have a high dividend yield (historical dividend yield should be higher than market dividend yield) and the balance they invest in other stocks. It is important to note that the criteria for selection are not high dividend but high dividend yield. Before we move on to understanding how a dividend yield fund can add value to your investment portfolio, let us first understand the difference between dividend and dividend yield.</p> <p>&nbsp;</p> <p>A dividend refers to a sum of money that a company pays to its shareholders from its profits. Two factors need to come together for a company to pay dividends. One, it should be making profits and should have surplus cash. And, two, it should choose to pay out the profits rather than reinvest it back in the business.</p> <p>&nbsp;</p> <p>Dividend yield is the dividend expressed as a percentage of the share price of the company. It is usually expressed annually and it tells you what percentage of a company’s share price is paid out in dividends.</p> <p>&nbsp;</p> <p><b>More than a bear market friend</b></p> <p>What dividend funds essentially do is that they reduce the volatility of your investment portfolio. Now, historically, companies that have consistently declared dividends are those that are profitable and well-established. They have weathered multiple market cycles and are now in a position to generate profits and redistribute them amongst shareholders. Exposure to such companies will add stability to your equity portfolio and enhance returns in the form of dividends. However, while talking about returns, it is also important to understand that since these companies are no longer in a high growth phase, they are unlikely to generate exponentially high returns. Another thing about dividend yield funds is that they invest in companies that have a high dividend yield, i.e., the dividend relative to the current share price is high. Inevitably, they end up becoming value funds since the stock price relative to the dividend is low. While value funds can underperform for extended periods, over an entire economic cycle, they can also generate potentially good returns. Thus, when you invest in a dividend yield fund, you must have a long-term investment horizon.</p> <p>&nbsp;</p> <p>More importantly, know why you want to invest in a dividend yield fund. If it is just for dividend income, exponential returns, or short-term gains then it might not be the right investment for you. On the other hand, if you have a long-term investment horizon and are looking for stability and the potential for consistent income and good returns over a longer period, then a dividend yield fund might just be the solution for you. To that extent, they can be a good addition to every kind of portfolio. An important thing to remember is that dividend yield funds are not mandated to pay out dividends. Thus, when you invest in a dividend yield mutual fund you must ensure that the fund has a decent sized corpus, low historical volatility, consistent dividend payout history, and low expense ratio. For example, ICICI Prudential and Templeton are some of the top-performing funds in this category.</p> <p>&nbsp;</p> <p>At the end of the day, all investments that you make must be well-aligned with your asset allocation strategy, adhere to your risk and investment time horizon constraints, and have the potential to generate the desired returns.</p> <p>&nbsp;</p> <p><b>The writer is co-founder, Money Tree Services.</b></p> Sat Jan 01 12:13:01 IST 2022 bengaluru-indias-tech-capital-is-also-its-rose-basket <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Rose Day (February 7) kicks off Valentine week, during which affections are revealed or strengthened with the exchange of roses. But, on the outskirts of Bengaluru, every day is Rose Day. Around four to five lakh roses are harvested daily in the city; the greenhouses together cover about 2,000 acres. Open field cultivation, too, produces a significant number of roses. The flowers are grown throughout the year in India’s tech capital, which has emerged as the nation’s rose basket.</p> <p>&nbsp;</p> <p>The many floriculturists who migrated to Bengaluru suburbs in the 1990s have reaped rewards. Shrikanth Bollapally, who hails from Andhra Pradesh, moved to Doddaballapur near Bengaluru around 20 years ago. He grows roses in greenhouses on his 35-acre farm. Bollapally, who is president of the Flower Council of India, is from an agricultural family. But, no one in his family is into floriculture; they grow sugarcane, paddy, soybeans and sunflowers in Andhra Pradesh.</p> <p>&nbsp;</p> <p>“I wanted to do something innovative in floriculture,” Bollapally told THE WEEK. “I took a bank loan and started greenhouse rose cultivation.” His business had grown and was doing well. But, Covid-19 posed a major challenge because of the postponement and cancellation of weddings and other events. “I am dependent on the Indian market,” he said. “Other big floriculturists in the area also export.” Things are slowly getting back on track for Bollapally and many others like him.</p> <p>&nbsp;</p> <p>Open field cultivation has been a tradition in and around the city for a long time, while greenhouse cultivation became popular only in the mid-1990s. People used to grow garden variety roses, but greenhouses focus on hybrid varieties of Dutch roses. The Indian government was quick to recognise the potential for export. “In the western hemisphere, one cannot grow roses for six months because of the cold and if roses have to be grown in lighthouses, the energy costs go up,” said Thilak Subbaiah, a Bengaluru-based horticulture consultant, who specialises in rose cultivation. He added that roses generally grow well in places where the average temperature is between 28 to 30 degrees Celsius during the day and between 20 to 25 degrees Celsius at night.</p> <p>&nbsp;</p> <p>“European countries were importing roses from Africa and Central America. So, in the mid-1990s, the government directed many banks and financial institutions to help floriculturists,” Subbaiah said. He added that this helped cover the high capital expenditure. “Initially, rose cultivation in and around Bengaluru used to depend on Israeli technology,” he said. “We imported a lot of material, but gradually home-grown innovations developed.”</p> <p>&nbsp;</p> <p>The result is that greenhouse cultivation, which experts point out is only 20 to 30 per cent of the overall rose cultivation area, has already exceeded open field cultivation in terms of production capacity. The quality, too, is superior. “Open field roses have short stems and are of inferior quality,” said Subbaiah. Bollapally said the cost of setting up greenhouses could be as high as Rs50 lakh per acre (one-time investment on infrastructure, including irrigation, and plants and maintenance costs). This is in stark contrast with open field cultivation where there are no major infrastructure costs.</p> <p>&nbsp;</p> <p>“Each rose bush lasts for five to six years, depending on the maintenance,” said Bollapally. “On average, an acre [in greenhouse cultivation] can grow 35,000 rose plants and one can get around 2,000 flowers per day per acre. That adds up to over seven lakh flowers per annum per acre.” He said there was huge demand from major cities across India, such as Delhi, Hyderabad, Pune and Kolkata. For domestic distribution, roses are packed in cartons and are transported by air or road. “Once the rose is plucked, it has five to six days of life—if it is maintained at the right temperature,” said Bollapally. “If it is not handled carefully, it will wilt the same day. For domestic dispatch, a temperature of 20 to 25 degrees Celsius has to be maintained. For exports, it needs to be around 3 to 6 degrees Celsius during storage and around 15 to 20 degrees Celsius in air cargo.”</p> <p>&nbsp;</p> <p>The Middle East, Malaysia, Singapore, Australia and Europe are now major export markets for Bengaluru roses. The city also boasts the International Flower Auction Bangalore (IFAB)—the only organised flower auction house in India that is running successfully. It has been functional for over two decades and runs 365 days. IFAB representatives collect the roses from the floriculturists. The auction prices are transparent and a message is sent to farmers when their flowers are sold. They receive payment on every eighth day.</p> <p>&nbsp;</p> <p>“There has been no default in payment for the last 20 years,” said M. Vishwanath, managing director, IFAB. He added that the auction house was registered under the Companies Act and worked in tandem with both growers’ and buyers’ associations. “On average, we get around 2.5 lakh to three lakh rose stems per day,” he said. “They are usually auctioned the same day. There has been a steady increase in growth, but it has been flat for the last two years because of Covid-19. We have more than 300 registered farmers/growers. Anyone can register with us.” He added that the pricing was based on demand and supply. “There is no lobbying during the auction,” he said. “The buyers are given tabs. The auction starts at 8:30am and goes on till around 2:30pm every day. During the festive season and close to Valentine’s Day, the auction can go on till 8pm.”</p> <p>&nbsp;</p> <p>Vishwanath said the elevation of Bengaluru—over 800m—was one of the major factors that made it suitable for rose cultivation. “We get good-sized buds because of the elevation and favourable climatic conditions,” he said. He added that even in a greenhouse, the temperature can only be manipulated by around 4 to 5 degrees Celsius, and therefore the local climatic conditions were vital. He said that the prices were currently good. “The average price is 04 to 04.50 per rose stem,” he said. “If the same price continues for the next three to four months, and if the Covid situation stabilises, we can expect an increase in rose production in the area in the future.” The K.R. Market (Krishna Rajendra Market) is already one of the largest rose markets in the country. Around two to three lakh roses are sold here in a day. The market has a mix of both open field produce and greenhouse roses. But, the majority of greenhouse roses go to the IFAB and open field roses are primarily sold at K.R. Market.</p> <p>&nbsp;</p> <p>Bollapally said that even the recent ban on garlands and bouquets by the Karnataka government has not had a major impact on rose cultivation. He added that the ban notwithstanding, the government has been supporting the business and has given subsidies to floriculturists. “Now, we are even seeing professionals such as doctors, engineers and lawyers getting into the rose cultivation business,” he said.</p> <p>&nbsp;</p> <p>But, not everything is rosy in the rose cultivation business. Labour and water shortage are major issues. It is believed that 60 to 70 per cent of the labourers at rose farms in and around Bengaluru are migrants from Bihar, Uttar Pradesh, Chhattisgarh and Jharkhand. Subbaiah said pests and diseases were also challenges. So, the new entrants will need to prepare for such problems. As the saying goes, there is no rose without thorns.</p> Sun Dec 19 17:03:51 IST 2021 balancing-act <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>BALANCED ADVANTAGE FUND</b> (BAF), also known as Dynamic Asset Allocation Fund, is a category of hybrid mutual fund schemes that invest in asset classes like equity and debt and keep modifying their asset allocation based on the market valuation. As a result, this category of funds has lower risk than pure equity funds but has the potential to give higher returns than debt funds. The highlight of the category is that the fund manager has the flexibility to move anywhere from 0 to 100 per cent allocation in a particular asset class based on market conditions.</p> <p>&nbsp;</p> <p>BAFs use various tools to gauge an asset class. Some rely on valuation tools such as price to earnings and price to book ratio, or a combination of these to ascertain the proportion of investment in equity and debt.</p> <p>&nbsp;</p> <p>A traditional hybrid fund would have a predefined ratio of 70:30 in favour of equity or debt, depending on whether you opt for an aggressive or a conservative fund. In effect, the leeway to shift the asset mix was predefined and limited. That is where BAFs have an edge.</p> <p>&nbsp;</p> <p>Several fund houses use a model-based approach to decide on the allocation mix. Such an approach is generally perceived to remove fund manager bias, if any, towards an asset class. These models indicate which asset class is attractive and the fund manager decides to invest in that particular asset class. Owing to this approach, the portfolio undergoes automatic reallocation so that the fund is invested into equities when the market is cheap and vice versa.</p> <p>&nbsp;</p> <p>BAFs over the past few years have been increasingly gaining popularity due to their inbuilt asset allocation practice. Almost all the major fund houses today have a BAF in their product offerings. However, the way in which it is managed varies. There are a few options where equity allocation is largely static at over 70 per cent. Such offerings will tend to deliver returns during a bull market. The same goes with equity allocation which is momentum based.</p> <p>&nbsp;</p> <p>On the other hand, there are some very conservative offerings where the equity allocation is less than 30 per cent. Most of the BAF universe, however, tends to be somewhere in the middle of the spectrum. These funds dynamically change their equity allocation to keep pace with the changing market conditions. HDFC Balanced Advantage Fund, the largest fund in the category, has an equity exposure of up to 75 per cent, while ICICI Balanced Advantage, the second-largest, has an equity exposure of 37.2 per cent. Most other funds in the category have an equity allocation between 30 and 55 per cent.</p> <p>&nbsp;</p> <p>One of the major challenges for an investor is to ensure that the wealth created by a bull market rally remains protected. In such a scenario, BAF emerges as a good option for lump-sum deployment. Here, one can park all the gains and can rest assured that the investment will not be subjected to undue risks. The caveat here is that one should have deployed money in a conservatively managed BAF.</p> <p>&nbsp;</p> <p>By being a part of a conservatively managed BAF, one can have an allocation towards equities while being sufficiently hedged. This means your investments will largely remain protected due to limited equity exposure even in case of a correction.</p> <p>&nbsp;</p> <p>A pioneer in the category, the ICICI Prudential BAF has a track record of more than a decade. The allocation calls in the fund are based on a tried and tested model. Even though the average equity allocation over the last decade was around 54.6 per cent, the returns generated by the fund were at par with Nifty 50. In effect, what an investor of this fund has achieved is that despite the reduced equity allocation, which means lower risk, the return profile has been that of a fully invested equity fund.</p> <p>&nbsp;</p> <p><b>The author is managing director, J2 Wealth &amp; Investments.</b></p> Sat Nov 20 16:47:19 IST 2021 residential-real-estate-market-on-the-rebound-headed-for-consolidation <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>IN MUMBAI,</b> the largest residential real estate market in India, 8,576 houses were sold in October, the highest for that month in a decade. November, it seems, is going to be as good—1,441 properties were registered in the first week of the month, according to the real estate consultancy Knight Frank India.</p> <p>&nbsp;</p> <p>The past six years had been rough for the residential real estate sector. Demonetisation, disruptions caused by the Real Estate Regulation and Development Act and the goods and services tax and a liquidity crisis had driven down demand for houses. The pandemic was the final blow. Inventories piled up and developers hit the brakes on new launches.</p> <p>&nbsp;</p> <p>The hard times, however, seem to be over now, with buyers returning to the market. As the prices are steady, it continues to be an excellent market for buyers. The biggest draw, however, is the all-time low interest rates. During the pandemic, central banks around the world slashed interest rates and pumped money into the system. The Reserve Bank of India cut the repo rate (the benchmark rate at which it lends to banks) to just 4 per cent. Banks, in turn, slashed their rates. Some banks offer home loans at 6.40 per cent interest now.</p> <p>&nbsp;</p> <p>“A healthy environment fostered by low home loan interest rates is set to continue as the RBI has kept key policy rates unchanged for the eighth consecutive time in early October,” said Shishir Baijal, chairman and managing director of Knight Frank India.</p> <p>&nbsp;</p> <p>Home sales in the July-September quarter in India’s eight largest cities surged 92 per cent year-on-year to 64,010 units. This was 104 per cent of the quarterly average in 2019, indicating that sales are now above the pre-pandemic levels. “The residential market has been witnessing pent up demand. The market will further be buoyant on festive tailwinds, supplemented by conducive market dynamics like low interest rate and deal sweeteners from developers,” said Niranjan Hiranandani, managing director of Hiranandani Group.</p> <p>&nbsp;</p> <p>The momentum can be seen across all major markets. Mumbai saw sales more than double year-on-year to 15,942 units in the September quarter, according to Knight Frank India. In Hyderabad, sales jumped more than three-fold to 5,987 units. In Bengaluru, sales surged 131 per cent from a year ago to 11,337 units. Sales rose 94 per cent in Pune, 75 per cent in Kolkata and 48 per cent in the National Capital Region. In Kolkata, 6,861 units were sold in the third quarter, 244 per cent more than the 2019 quarter average.</p> <p>&nbsp;</p> <p>“The way the market has bounced back is better than the pre-Covid times,” said Rajeev Ramaswamy, joint managing director, Sreevatsa Real Estates. “The lockdown last year made people realise that they need a larger space. So, people now have specific requirements. Young families with children, for instance, are looking for larger homes.”</p> <p>&nbsp;</p> <p>A few states in the last year announced measures that helped drive the demand. West Bengal, for instance, announced a 2 per cent rebate on stamp duty for property registrations done between July 9 and October 30, 2021. “We have been seeing green shoots of recovery across the state and broader eastern India,” said Harshavardhan Neotia, chairman of the Kolkata-based Ambuja Neotia Group. “Projects like condominiums or integrated townships are in huge demand because facilities like gym, recreation, parks, gardens and daily essential stores are all located within the society premises,” he said.</p> <p>&nbsp;</p> <p>The demand for larger homes is likely to continue. “We are incorporating a higher percentage of larger units/extra bedrooms in our product mix and configurations,” said Pavitra Shankar, executive director, Brigade Group.</p> <p>&nbsp;</p> <p>As sales have improved, developers have stepped up on project launches. Real estate consultant JLL says 32,863 units were launched in the July-September period, up 21 per cent from 27,057 in April-June. Just for comparison, 12,654 units were launched in the September 2020 quarter. However, these are still below the pre-Covid January-March 2020, when around 40,500 units were launched. The focus is on clearing the inventory and aligning launches with actual market demand.</p> <p>&nbsp;</p> <p>Hyderabad accounted for 31 per cent of new launches between January-September 2021, followed by Mumbai (18 per cent), Pune (17 per cent), Bengaluru (16 per cent) and Delhi NCR (10 per cent), showed data from JLL.</p> <p>&nbsp;</p> <p>The pandemic has changed not only buying preferences but also selling methods. Developers have invested heavily in technology, and customers can now view projects from the comfort of their homes in augmented and virtual reality. Developers have also streamlined online home buying platforms. JLL expects digital marketing to become the primary channel in the sector to generate leads.</p> <p>&nbsp;</p> <p>There are, however, plenty of challenges as well. Prices of key raw materials such as steel, cement, aluminium and copper have risen sharply this year, driving up construction costs. Developers have not been able to pass on these to customers, worried that it would dampen the demand. Shortage of skilled labour is also adding to the costs. “As demand for housing becomes imperative, developers are hopeful of sustainable post-pandemic demand. The sharp pressure of cost escalation will ultimately get passed on to the consumer,” said Hiranandani.</p> <p>&nbsp;</p> <p>The pandemic has resulted in customers shifting preferences to big brands and reputed developers. This is expected to bring in a wave of consolidation. “Owing to healthy balance sheets, access to capital, and weaker developers being shunted out of the market, the market share of large organised developers is set to grow further in the next two-three years,” said Adhidev Chattopadhyay of ICICI Securities.</p> <p>&nbsp;</p> <p>According to property consultant Anarock, the overall housing sales share of the top eight listed players rose to 22 per cent in 2020-21, from just 6 per cent in 2016-17. Non-listed big developers increased their share to 18 per cent from 11 per cent in the same period. “Organised and seasoned developers will get opportunities to take over languished projects through the joint venture/ joint development route,” said Neotia. “The sector will also witness acquisitions of a portfolio of projects of smaller companies by larger developers.”</p> <p>&nbsp;</p> <p>Unsurprisingly, realty stocks have been on a dream run. The NSE Nifty Realty index hit an all-time high this year and is up over 100 per cent in a year. With housing demand expected only to pick up the pace, this bull run could be just the beginning of many.</p> Sat Nov 20 13:06:17 IST 2021 shortages-and-price-rise-caused-by-the-supply-chain-breakdown-may-persist <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>BESIDES MULLING</b> over climate change and global corporate tax, and pow-wowing with the Pope, there was one last-minute addition to the agenda at the G20 Summit in Rome that Prime Minister Narendra Modi agreed to without batting an eyelid—a meeting hurriedly convened by US President Joe Biden. The agenda? Discuss supply chain challenges and other disruptions affecting global commerce.</p> <p>&nbsp;</p> <p>“Supply chains are something that most citizens never think twice about until something goes wrong,” said Biden at the meet. “Now that we have seen how vulnerable these lines of global commerce can be, we cannot go back to business as usual.”</p> <p>&nbsp;</p> <p>Chipped in Modi: “In the initial months of the pandemic, we all felt the shortage of raw materials to make essential medicines, health equipment and vaccines. Now that the world is gearing up for economic recovery, the supply problems of semiconductors and other commodities are coming in the way of healthy growth.”</p> <p>&nbsp;</p> <p>The supply chain is the non-glamorous stepsister of global business; she toils away in the kitchen and the backyard, and nobody talks about her as long as the work gets done. But when this sis stops working and throws a fit, the world and its boardrooms and showrooms sit up and take note.</p> <p>&nbsp;</p> <p>And, that is exactly what has happened now.</p> <p>&nbsp;</p> <p>“There is a huge mismatch between demand and supply,” said Rajeev Chaba, president and CEO of MG Motor India. “Most economies had scaled down their production after wave one and wave two (of the pandemic). With economies opening up, there is a huge demand for goods. And prices are going up like crazy because (shipping) containers are not there, there is a shortage of equipment, lifts and labour (at ports), steel prices are going up, and there is a huge chip shortage. There is chaos right now!”</p> <p>&nbsp;</p> <p>According to Ajay Nair, partner and leader (supply chain transformation), at the consultancy major PricewaterhouseCoopers (PwC), “Nobody anticipated the quick pick-up (in consumer demand), disruption on the supply side and volatility on the demand side. The impact on the global economy has been substantial.”</p> <p>&nbsp;</p> <p>A confluence of factors led to this crisis. Lockdowns and restrictions saw both production and consumption plummeting. As many factories work on the ‘Just In Time’principle of stocking enough inventory (raw materials needed for production)—as stocking more for a longer period means both spending more money and requiring more storage space—they cut down on this as they expected the economic scenario to remain muted for a long time. But the pent-up demand and the ‘worst-is-behind-us-so-let-us-splurge’mentality after the second wave meant that shoppers came back with a vengeance much before businesses expected them to.</p> <p>&nbsp;</p> <p>A big problem was that of container shortage. The global supply chain runs on the smooth movement of containers—primarily from Chinese ports—moving raw materials and finished goods back and forth. As Covid hit, these containers stopped moving, and when the demand suddenly recovered, there were not enough of them at the points where they were needed. This had a domino effect on the rest of the world.</p> <p>&nbsp;</p> <p>“A container from China to Mumbai earlier took 15 to 18 days; now it takes up to 50 days,”said Nitin Arora, managing director of MEO International Logistics. “While Indian ports are fast in turnaround, it is all part of a global chain and it doesn’t help that many containers are stuck in US ports due to delays in unloading because of lack of labour and equipment.”</p> <p>&nbsp;</p> <p>It also did not help Indian businesses that after the Ladakh clashes, authorities withheld imports from China at Indian ports, and relented only after realising that they were only hurting Indian businesses. “Indian industrial production is totally dependent on consignments from China,”said Arora. “Finding an alternative is not possible in a hurry.”</p> <p>&nbsp;</p> <p>The sudden spurt in demand also saw prices of commodities used in industrial production—steel, aluminium, copper and zinc—suddenly going up. Oil and gas prices have shot up 60 per cent in recent months to around $85 a barrel. Some analysts expect it to cross $100 next year. Retail prices of petrol and diesel have been hiked virtually on a daily basis in India, pushing up the price of almost everything.</p> <p>&nbsp;</p> <p>Add to that one-off events like a global shortage in semiconductors, an energy crisis in China and the blocking of the Suez Canal back in the summer. These led to the birth of a perfect storm that has battered the world’s supply chain network.</p> <p>&nbsp;</p> <p>While the situation in India is not as visible as in the US, where department store shelves go empty quite often these days, it is just as acute. A glitch in the coal supply chain saw India’s electricity supply flickering last month. Many states were forced to go in for power cuts. While officially the government maintains that all is well and coal supply has been buffered up, Union Power Minister R.K. Singh did admit that “it’s going to be touch-and-go”for the next few months.</p> <p>&nbsp;</p> <p>It may be hard to believe there is a demand-supply mismatch when you see festive merchandise spilling over from shops to pavements and exuberant shoppers thronging marketplaces. Dig a bit deeper, and you find the fault lines just simmering under the surface.</p> <p>&nbsp;</p> <p>Manufacturers are struggling with a shortage or delay in getting crucial raw materials. On the consumer side, people are struggling to cope with the rise in the prices of almost everything.</p> <p>&nbsp;</p> <p>The mobile handset market declined 5 per cent in the past three months, and the dip could be as much as 30 per cent for some models. “During the September quarter, we saw supply constraints that were even more severe than those experienced during the June quarter. The global semiconductor shortage finally also took a toll on the end consumers,”said Tarun Pathak, research director at the consultancy Counterpoint.</p> <p>&nbsp;</p> <p>The chip shortage saw carmaker Maruti Suzuki’s profits going down 65 per cent in the September quarter as it had to cut down production. The issue is the same for anything from cars to high-end watches to other premium products. “There has been a huge deluge of last-minute orders. It is an order cycle issue,” said Pushpa Bector, executive director, DLF Retail.</p> <p>&nbsp;</p> <p>It could just get worse before it gets better. “For consumers, availability of products dependent on chips is going to continue to be a challenge,”said Nair. “Net price implication is going to go up. And for companies, this will put pressure on profitability.”</p> <p>&nbsp;</p> <p>But, for India, it need not be as bad as other countries, if the government deftly manages electricity production and keeps the spiralling fuel costs under check. “These are unusual dynamics, but hopefully (by) next year, they should sort out,”said Chaba.</p> <p>&nbsp;</p> <p>In the long run, it also depends on how well we take the lessons from this post-pandemic crisis, ranging from digitising supply chains to diversifying and developing alternatives to China. For example, Uttar Pradesh-based commodity trader-turned-FMCG company BL Agro. “We faced a shortage of raw materials we were importing, so are now procuring from the domestic market,” said its managing director Ashish Khandelwal. But, while Atmanirbhar Bharat and production-linked incentive (PLI) schemes are a good start, they are long-term measures. “Volatility is here to stay,”said Nair. “Disruptions will keep on happening—it could be climate change or another pandemic next time. That is the nature of the world and we need to be prepared.”</p> <p>&nbsp;</p> <p><b>WHEN THE CHIPS ARE DOWN</b></p> <p>&nbsp;</p> <p><b>Covid is just one of the many reasons for the shortage of semiconductors that has crippled industries.</b></p> <p>&nbsp;</p> <p><b>WHY IS IT SO IMPORTANT?</b></p> <p>Semiconductors can variably conduct electricity as per requirement. This makes them mighty useful in the amplification of signals, switching and energy conversion. In other words, they are required for anything from computers and phones to cars and data servers to work properly.</p> <p>&nbsp;</p> <p><b>WHAT HAPPENED?</b></p> <p>As demand fell when Covid hit, production went down. Then as work-from-home spawned a huge pent-up demand for laptops, phones and gaming devices, chipmakers struggled to meet orders on time.</p> <p>&nbsp;</p> <p>A series of unfortunate events happened—a snowstorm caused blackouts that halted production at chip factories in Texas, while a fire swept through one in Japan.And a drought hit Taiwan, the world’s biggest hub for semiconductor manufacturing. In case you have not figured out where this is going by now, know this: chip making requires water; lots of it.</p> <p>&nbsp;</p> <p><b>THE NET RESULT</b></p> <p>The electronics and auto industries are the worst affected. Car factories across the world have been forced to cut production. Many mobile phone models have disappeared from shops and e-commerce sites.</p> <p>&nbsp;</p> <p><b>WHEN WILL THE SITUATION IMPROVE?</b></p> <p>Not before the second half of next year, according to experts. India is said to be negotiating with Taiwan to set up a semiconductor plant, but that is a long-term plan and will be no solution to the current crisis.</p> Tue Nov 16 21:30:33 IST 2021 the-nimble-indian-saas-startups-are-all-set-for-the-global-game <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>SOON AFTER MILIND</b> Borate cofounded Druva, a startup providing software as a service (SaaS), in 2008, he realised that his focus clients, those in the financial service sector, were reluctant to buy critical software from a small India-based company. Borate and his team quickly tweaked the company’s strategy and launched a product designed for general enterprise uses, especially remote offices and employees. The new product found many takers and its success paved the way for Druva’s first round of funding.</p> <p>&nbsp;</p> <p>Today, the Pune-based company is one of the largest cloud data protection platforms and has customers across industries such as health care, manufacturing, media and entertainment, financial services and education. “We were the first data protection company to be fully offered as a service,” said Borate.</p> <p>&nbsp;</p> <p>Druva is just one of the many Indian SaaS startups that are cashing in on the pandemic, which is forcing companies around the world to offer their services remotely. India currently has around 1,000 SaaS startups and ten of them are unicorns (those with $1billion valuation or more). Their combined annual revenue is around $3 billion, says a McKinsey report. This could go up to between $60 billion and $70 billion by 2030, accounting for 4 to 6 per cent of the global SaaS market.</p> <p>&nbsp;</p> <p>In 2020, Indian SaaS startups got about $1.5 billion in venture funding, including the $150 million that Postman, a unicorn, received. Chennai-based Freshworks, the first Indian SaaS unicorn, made its debut on Nasdaq on September 22, and is currently valued at around $13 billion. “It is time for the world to wake up to India’s product innovation,” said Girish Mathrubootham, chairman and CEO of Freshworks. “Indian SaaS companies will put India on the world map as a product nation.”</p> <p>&nbsp;</p> <p>In the SaaS model, the software is licensed on a subscription basis to clients and it is hosted on cloud. It is managed digitally and centrally, reducing the dependence on human resources. It saves enterprises capital investment and the need for an entire technology team.</p> <p>&nbsp;</p> <p>“There are so many different services that can be delivered through software. The large companies cannot possibly offer all of them or do all of the functions well,” said Krish Subramanian, co-founder and CEO of ChargeBee, a unicorn that provides billing services.</p> <p>&nbsp;</p> <p>Launched in 2011, ChargeBee currently has customers ranging from e-learning companies to storage and food services. It supports more than 100 currencies and two dozen popular payment gateways. “We solve the issues around subscription billing, allowing customers to change pricing, run promotional campaigns easily and automatically solve issues around declined payments,” said Subramanian.</p> <p>&nbsp;</p> <p>Many factors fuel the growth of the SaaS sector. “On the one hand, the SaaS business model helps move high capex (capital expenditure) to opex (operational expenses) from a business perspective. And on the other hand, it means a more predictable and recurring revenue business for software companies and their investors,” said Vaibhav Gupta, principal, practice head (private equity and principal investor), Zinnov management Consulting. “The flexibility it offers to businesses in functionality, scale, and remote productivity, in addition to the sticky revenue stream and capital efficiency, have made SaaS the first choice for both investors and entrepreneurs alike.”</p> <p>&nbsp;</p> <p>Gupta said Indian SaaS players had reached a noticeable mass. “The pandemic has expedited five to seven years of transformation in just two years and has now increased the reliance on technology. As businesses and enterprises become more open to consuming technological interventions, SaaS demand will continue to grow. We also see immense potential in the Indian SaaS companies giving global giants a run for their money. India as an ecosystem offers all the key ingredients for SaaS companies to be global leaders,” he said.</p> <p>&nbsp;</p> <p>Big IT players are focused on customer applications or system integration and work with platforms like Oracle, SAP or Microsoft Dynamics and provide a turnkey solution. This concept can work for large enterprises. But mid-size and small businesses usually do not have the budget to work with large IT players and would rather choose a SaaS provider. “SaaS from India has a significant advantage if they can provide a complete solution running on a cloud at affordable cost,” said Mohan Kumar, managing partner, Avataar Ventures, a venture capital firm.</p> <p>&nbsp;</p> <p>Venture funds have been increasingly taking interest in funding SaaS startups. “We evaluate a SaaS company on its product differentiator with regard to its competition,” said Kumar. “Other factors include team, growth trajectory and market size. We also look if the company’s product has accelerated adoption, which is a big positive sign that it is essential and a must have for a business.”</p> <p>&nbsp;</p> <p>Unicorn India Ventures, a Mumbai-based early-stage fund house, has a special focus on SaaS investments since its inception and has invested in SaaS startups such as Sequretek (cyber-security), Fedo (insurance), Gamerji (gaming), Probus (energy infrastructure) and OpenApp (access management).</p> <p>&nbsp;</p> <p>“It remains to be seen what disruption and potential innovation will emerge in this space in the next five to ten years. In general, smaller companies and startups can be nimbler in execution of new ideas, have less inertia in the face of changing market conditions and are more perceptive to the articulated and unarticulated needs of the niches they serve. So that can be seen as possibly another reason for the faster than benchmark growth,” said Bhaskar Majumdar, managing partner of Unicorn India Ventures.</p> <p>&nbsp;</p> <p>Venture funds also consider the fact that the SaaS model is globally scalable, non-capital intensive and has non-linear scalability. “There are no last mile execution challenges, unlike the conventional structure of businesses like consumer packaged goods and retail, making it the most sought-after area,” said Ankur Mittal, cofounder of Inflection Point Ventures, an angel investment platform. “SaaS products that come out of India are efficiently built, the business model is tested and sustainable, and can scale and generate revenue in global markets easily.”</p> <p>&nbsp;</p> <p>The specialised SaaS players are expected to grow exponentially on the back of the demand from global small and medium-size enterprises. “We estimate that the SaaS market valuations in India will surpass that of IT services before 2030,” said Gupta.</p> Thu Oct 28 15:42:13 IST 2021 a-one-stop-portfolio-diversifier <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>THE MOST COMMON</b> way of investment by retail investors is to invest in an asset class that has performed well recently. Equities are a preferred choice for investing based on the juicy returns of the past year.</p> <p>&nbsp;</p> <p>A typical investor strives to attain reasonable returns with a low probability of losing capital, rather than a sporadic jump in the net asset value for a brief period. So, although the current period offers umpteen reasons to invest in equities, one must remember that a single asset class has periods of outperformance and drawdowns. Therefore, a well-thought asset allocation is required to generate long-term returns. If an investor is aiming for long-term capital appreciation with superior risk-adjusted returns, multi-asset funds are an ideal choice of investment.</p> <p>&nbsp;</p> <p><b>Why allocate across asset classes</b></p> <p>Over the last decade, the asset returns have been quite divergent in nature. Different asset classes outperform in different cycles, therefore staying across asset classes is a quintessential way to achieve healthy and consistent returns. Several empirical studies have proved that 90 per cent of the portfolio returns are based on asset allocation, and less than 10 per cent of the return is generated by stock selection. Allocating funds solely to a single asset class is not prudent, and chasing last year’s top-performing asset class can be detrimental.</p> <p>&nbsp;</p> <p>For instance, gold posted the best return in 2020, with a return of 31 per cent, followed by 20 per cent by international equities, 16 per cent by local equity and 12 per cent by debt funds, while in 2019, the international equities delivered a return of 34 per cent versus gold, which posted a return of 21 per cent. So, changing the asset allocation by looking at last year’s returns could dent wealth creation. From 2007, if one invested in the asset class based on its previous year’s winner, it would have resulted in a return of around 8 per cent on an annual basis, while if invested in the asset class which was the worst performer in the previous year, it would have delivered a return of 11.8 per cent. The most optimal returns have come if the investor invested equally in the four different asset classes, with a return of 13 per cent. This shows that combining multiple assets not only offers superior returns in absolute levels but also carries low volatility.</p> <p>&nbsp;</p> <p><b>Why multi-asset funds</b></p> <p>Now that we know the importance of being invested in different asset classes, it is time to consider how this can be achieved in practical terms for a lay investor. The challenge here is multifold—to recognise which asset class to invest into, when to rebalance and how to minimise the tax incidence when re-balancing. So, in effect, it is not easy to execute a multi-asset strategy without sinking in some time and effort. To address these challenges, several fund houses over the past decade have been offering multi-asset funds.</p> <p>&nbsp;</p> <p>As per the SEBI scheme categorisation definition, a multi-asset fund is one that invests in at least three asset classes with a minimum allocation of at least 10 per cent each in all three asset classes. One stand out name here is the ICICI Prudential Multi-Asset Fund, which invests across equity, debt, gold and REITs/InvITs. Here, equity brings in capital appreciation, debt offers stable returns, gold provides a hedge against inflation and REITs/InvITs play a role in yield enhancement. Over the last decade, the 10-year daily rolling returns of the fund have been more than 12 per cent, nearly 81 per cent of the time. When considered over a five-year time frame, the fund has never delivered negative returns. Over the last year, the fund has outperformed its benchmark by 12.6 per cent, and when it comes to returns the figure stands at 42.7 per cent.</p> <p>&nbsp;</p> <p><b>The author is founder &amp; MD of Orange Rise Pvt Ltd.</b></p> Fri Oct 22 19:41:09 IST 2021 buyers-are-back-and-carmakers-are-trying-hard-to-meet-the-demand <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Mahindra and Mahindra opened the bookings for its new sports utility vehicle, the XUV700, on October 7, but was forced to stop in an hour owing to overwhelming response. The company received 25,000 bookings in an hour, which would take it six months to deliver. The next day, 25,000 more units were booked in two hours.</p> <p>&nbsp;</p> <p>A month earlier, Volkswagen received some 12,000 bookings for the Taigun SUV even before its launch.</p> <p>&nbsp;</p> <p>India’s largest carmaker, Maruti Suzuki, has racked up 2.2 lakh pending bookings, according to its executive director, Shashank Srivastava.</p> <p>&nbsp;</p> <p>As India is getting out of the Covid-19 pandemic, there has been an increased demand for personal mobility, and carmakers are struggling to keep pace. “Covid has made consumers evaluate their mobility preference and we have been seeing a considerable transition from shared to personal mobility in the last 18 months,” said Veejay Nakra, CEO of the automotive division of Mahindra and Mahindra.</p> <p>&nbsp;</p> <p>“From July, we have seen an increase in consumer demand,” said Vivek Srivatsa, head of marketing (passenger cars) at Tata Motors. “As the vaccination programme is progressing, the confidence of customers is coming back. Revenge shopping and revenge travel are on the cards and car purchase has moved much higher up in priority than what it was earlier.”</p> <p>&nbsp;</p> <p>SUVs have specifically been in high demand. In the July-September quarter, they outsold cars—3,67,457 SUVs against 3,43,939 cars. “There has been strong demand for UVs with the opening up of markets post the second wave of Covid, and we see this continuing as we get into the festive season,” said Nakra.</p> <p>&nbsp;</p> <p>Not surprisingly, companies are targeting this segment. In addition to the XUV700, Mahindra launched the Bolero Neo, and its off-roader, the Thar, continues to be in high demand. Skoda launched Kushaq, which shares the platform with the Taigun. French carmaker Citroen, which entered India with the C5 Aircross SUV earlier this year, recently unveiled the smaller C3 compact SUV, which will be launched next year. Morris Garage’s new launch, the Astor compact SUV, takes on the popular Hyundai Creta and the Kia Seltos.</p> <p>&nbsp;</p> <p>The hottest launch in the segment so far has been the sub-compact Tata Punch. Priced between 15.49 lakh and 19.09 lakh, it has been seeing strong bookings. “Punch is on the way to becoming our top-selling product in line with the Nexon or slightly above it,” said Srivatsa. The success of the Safari and the Nexon has helped Tata Motors regain the position of the third-largest carmaker in the country and the Punch could help it cement that.</p> <p>&nbsp;</p> <p>Srivatsa pointed out that first-time buyers were increasingly looking at products in higher segments. “Almost half of the customers of the compact SUV Nexon and premium hatch Altroz are first-time buyers,” he said.</p> <p>&nbsp;</p> <p>Unfortunately, though, what could have been a blockbuster festive season is turning out to be a disappointment for carmakers owing to an acute semiconductor shortage. A car has hundreds of chips—many more in the high-end models—be it the infotainment system, digital instrument panels or even the remote locking and keyless entry system. A surge in demand for consumer electronics—because of the rise in work and study from home—and the glitches in the supply chain owing to the pandemic have hit carmakers hard.</p> <p>&nbsp;</p> <p>Maruti Suzuki, for instance, could produce only 77,782 units in September, compared with 1,61,668 units in the same period a year ago. It is more or less a similar situation across the industry. “Owing to the semiconductor shortage, in September 2021 there was a drop in production of about 37.46 per cent for passenger vehicles and 17.15 per cent for two-wheelers,” said Rajesh Menon, director general of the Society of Indian Automobile Manufacturers (SIAM).</p> <p>&nbsp;</p> <p>Typically, before the festive season sets in, automakers increase wholesale to ensure there is enough stock with the dealers, and dealers build up a stock of around 40 days. This time, however, it is barely 15-20 days, or even less in some cases. “Today in the passenger vehicle segment, barring entry-level vehicles, it is supply rather than demand that has become a challenge, and dealers are losing business due to this. The semiconductor issue is so bad that the normal waiting period of 2-3 months has gone up to 12 months for certain models and variants,” said Vinkesh Gulati, president of Federation of Automobile Dealers Association.</p> <p>&nbsp;</p> <p>Worse, automakers do not expect this to be fixed soon. “Semiconductor is a worldwide issue. Demand is going up across all categories. So, we don’t see the issue getting solved anytime in the near future and will remain a challenge,” said Srivatsa.</p> <p>&nbsp;</p> <p>Companies are focusing on managing their product mix by optimising supply chains and maximising production with parts that are available. But semiconductors are not the only headache. Raw material prices have surged this year, forcing many companies to raise prices multiple times. Since January, prices have gone up 7-10 per cent.</p> <p>&nbsp;</p> <p>Another concern is the rising fuel prices. Across the country, petrol prices have topped Rs 100 a litre mark. Two-wheelers, especially those in the entry-level segments, have been hit hard as value-conscious buyers are worried about the cost of ownership. According to SIAM, only 15.28 lakh two-wheelers were sold in September 2021, compared with 18.49 lakh units in September last year. For the July-September period, two-wheeler sales stood at 41.14 lakh units, against 46.90 lakh units in the same period a year ago.</p> <p>&nbsp;</p> <p>But, there are signs of a turnaround. As the pace of vaccination has picked up, states are opening educational institutions and many companies have resumed work from the office. This augurs well for two-wheeler sales. Month on month, sales are already up 15 per cent. “Dealers expect double-digit growth in urban areas. Demand is expected to be subdued in rural areas as customer sentiments are yet to normalise after the Covid second wave,” said Raghunandan N.L. of Emkay Global Financial Services.</p> <p>&nbsp;</p> <p>Anticipating a revival in demand, two-wheeler makers have been lining up new models and offering attractive finance options. TVS has launched the Jupiter 125 CC scooter and Hero MotoCorp has launched a new variant of its Pleasure scooter and the Xtreme 160R Stealth Edition. Bajaj Auto launched the KTM RC 125 and RC200 earlier this month.</p> <p>&nbsp;</p> <p>Even carmakers are offering EMI holidays and longer loan durations. “We expect good demand during Navratri and Dussehra, particularly from tier 1 and tier 2 cities,” said Wiseline Sigamani, associate general manager (sales and strategic marketing), Toyota Kirloskar Motor. Honda, Hyundai, Renault and Nissan are also offering discounts in varying degrees.</p> <p>&nbsp;</p> <p>The demand for CNG-powered vehicles has been on the rise as their running cost is much lower than petrol and diesel vehicles. “Diesel has come down to 16-17 per cent now of the total industry, while CNG is now 12-13 per cent,” said Srivastava. Here also, the semiconductor shortage is playing spoilsport. The waiting period for the Maruti Suzuki Ertiga CNG, for instance, is nine months.</p> <p>&nbsp;</p> <p>Electric vehicles are also seeing strong demand. In September, 34,316 EVs were sold, a three-fold jump from 10,637 units sold a year ago, according to JMK Research. Month-on-month EV sales were up 19 per cent. Electric two-wheelers and passenger three-wheelers are driving the EV sales, followed by cargo three-wheelers and passenger cars. Hero Electric in partnership with Massive Mobility plans to set up 10,000 EV charging stations across the country. Earlier this year, Hero MotoCorp tied up with Taiwan’s Gogoro to set up a massive battery-swapping network. Ola Electric, which recently launched an electric scooter, also plans to build a nationwide fast-charging network.</p> Fri Oct 22 19:34:35 IST 2021 chip-shortage-is-a-long-term-problem-says-maruti-suzuki-shashank-srivastava <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q. How is the demand in the festive season?</b></p> <p>&nbsp;</p> <p>A. From a demand perspective, if you look at those parameters of enquiries and bookings, those are pretty strong. Reiterating the original thesis that demand for public transport and shared mobility is coming down and demand for personal mobility is going up. It is reflected in the demand pattern.</p> <p>&nbsp;</p> <p>But, the problem is supply, unlike previous years. Just before Navratri, there is a shradh period, which is inauspicious as per the Hindu calendar. During this period, generally, the retail is slow, but wholesale happens, with the resultant buildup in stocks at dealerships. So, when demand spikes in the Navratras, the vehicles are supplied to the customers.</p> <p>&nbsp;</p> <p>This time, the spike in demand seems to be there, but on the supply side, we have not been able to increase the stocks. So, the dealership stocks at the beginning of the festive season have been low and that is a worrying factor, because it means waiting periods have gone up, pending bookings are going up, that is an across-the-industry-phenomenon and it is certainly true for Maruti as well.</p> <p>&nbsp;</p> <p><b>Q. How long is this chip crisis going to last and how are you addressing it?</b></p> <p>&nbsp;</p> <p>A. It is a slightly long-term problem as you have to build fresh capacities of chip manufacturing for this to go away. What we have been doing as a small-time measure for the past six-seven months—because we have a large portfolio of vehicles with added different levels of electronics—depending on the availability of chips, we have been trying to adjust production across models and variants of the same models. So, for instance, we may be making more Swift V and VXI, not Z grade. We have 14 brands. So in that sense, we are a bit better off. However, in the last month, after doing all these adjustments, we are seeing it becoming difficult.</p> <p>&nbsp;</p> <p>We are also trying to supply vehicles, prioritising those geographies, depending on the festive season. So, we prioritised vehicles to Kerala in August for Onam and to the west in September for Ganesh Chaturthi. Now, the Pooja in east India is very important. Dussehra is big in Karnataka. Dhanteras is big in central, west and north India. So, whatever supplies we have available, we will try to maximise retail by modulating dispatches to different geographies.</p> <p>&nbsp;</p> <p><b>Q. Essentially, the underlying demand is there.</b></p> <p>&nbsp;</p> <p>A. Exactly. If you see, the estimated bookings in the industry are around 4.5 lakh to five lakh. We have close to about 2.2 lakh bookings pending.</p> Fri Oct 22 19:26:56 IST 2021 tatas-air-india-acquisition-will-give-aviation-sector-the-lift-it-desperately-need <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>L</b>ong before Yana Gupta injected some blood-red oomph into flight safety demos at Kingfisher, and before Indigo stewardesses in their Pan Am vintage look taught India a lesson or two in ‘6E’ efficiency, the original mascot of Indian aviation was a portly, whiskered gentleman in a turban.</p> <p>Created by Umesh Rao, an artist at the ad agency JWT, in consultation with Air India’s then commercial director Bobby Kooka, the Maharaja made multiple generations not just in India but around the world dream of the glamorous travel aboard the ‘palace in the sky’. It made Air India an epitome of Indian hospitality and world-class excellence.</p> <p>The exuberance amid India’s chattering classes over the government confirming the sell-off of the beleaguered national carrier to Tata Sons stems a lot from this nostalgia. And the weight of expectations.</p> <p>The salt-to-software conglomerate, after all, was the original owner of Air India. Even after it was nationalised after independence, J.R.D. Tata continued to run the airline through the glorious years of aviation in the 1950s and 60s, maintaining its high standards, and then some. Until, of course, a change of government at the centre saw prime minister Morarji Desai unceremoniously dumping Tata. The <i>babus</i> took over and the Maharaja’s downward spiral kickstarted.</p> <p>The nosedive reached its nadir with Air India’s disastrous merger with Indian Airlines in 2007. The company has not made profits since then, as a classic Delhi (where Indian Airlines was based) versus Mumbai (where Air India was based) turf war to wrest control of the new entity played out. For the record, the capital prevailed, even as the airline’s loss of capital ballooned.</p> <p>A crash-landing was averted with occasional refuelling—bailouts running into thousands of crores of taxpayer money many times over the past 13 years. And, after a series of near-misses and ‘zero visibility’ cancellations, the government finally managed to deplane the white elephant. Hopes are obviously up that the long-cherished symbol of ‘India’s best’ could again regain its place up among the best in the skies.</p> <p>“Air India can grow and become one of the finest airlines in the world. But that can happen only in private hands,” Ashwani Lohani had told THE WEEK when he was chairman and managing director of the airline in 2019.</p> <p>“It is a very, very good buy,” said Sidharath Kapur, former CEO of Adani Airports &amp; former executive director of GMR, which runs two of India’s biggest airports at Delhi and Hyderabad. “It is good for the government, it is good for the Tatas and it is good for India’s aviation sector. Having a strong domestic and international airline like AI under Tatas will support developing International hubs in India, which was a lost opportunity for India.”</p> <p>“The consolidated Air India and Air India Express will catapult Tata into a league of mega carriers, with over 200 aircraft, flying to every part of the world,” said Jitender Bhargava, former executive director of Air India. “What would have taken Vistara 10 years and a lot of expenses, they are getting it on a platter.”</p> <p>But the road to a possibly glorious tomorrow is paved with uncertainty and challenges. The first being the question of how to deal with four very different airlines in the kitty “(The Tatas) will in due course of time amalgamate the airlines, because otherwise it can’t become an economical operation,” said Bhargava. But it will test Tata’s mettle, with very little in common between the four. Air India and Vistara are full-service carriers, but have different aircraft types and organisational structures. Air Asia India is a domestic low-cost carrier, while Air India Express is an international low-cost carrier, with one using Boeing 737s and the other Airbus A320s.</p> <p>“History clearly suggests that mergers have not worked well in Indian aviation, be it Jet Airways and Air Sahara, Kingfisher and Air Deccan or Air India’s own merger with Indian Airlines,” warned business guru and motivational speaker Vivek Bindra. Vinamra Longani, head of operations at Sarin &amp; Co, a law firm specialising in aircraft leasing and finance, said the four airlines had vastly different cultures. “They are unique in their own way and have their own set of problems,” he said.</p> <p>Then there is the trickier challenge of dealing with the 14,034 employees. As per the terms of bidding, no employee can be fired in the first year and a voluntary retirement scheme has to be offered after that. With around 5,000 permanent employees retiring over the next five years and 4,000 staff on contract, Tata will have to deal with it nimbly. Unlike those in the other carriers, Air India unions are vocal and a lot will depend on how they conduct themselves. While the medical benefits issue seems to have been settled by the government, pilots remain an unhappy lot, with a list of demands ranging from arrears with interest to promotions.</p> <p>“While AI has good trained manpower, work needs to be done over HR policies and culture,” said Kapur. “Other areas to address will be dealing with the high manpower, upgrading the ageing fleet and improving maintenance. Given the Tatas will have multiple airlines, work needs to be done on integrating operations, connectivity, network planning, manpower planning, route development and fleet optimisation. They will have to do a deep dive and over a period of 3-5 years restructure their entire operations.”</p> <p>Bhargava pointed at multiple areas of “wasteful expenditure”. The crew complement on Air India’s long haul flights, for instance, is way higher than other airlines. “The ability to optimise costs and streamline operations will be a formidable challenge and the key to profitability,” said Suman Chowdhury, chief analytical officer at Acuite Ratings.</p> <p>While India’s aviation market is yet to come to its senses after the pummelling by the pandemic—all airlines are bleeding—the Air India sale does come as a silver lining. “The prospects are looking good,” said Bindra. “India is already bilaterally engaging with countries to establish a mechanism for mutual recognition of vaccine certificates. So, these steps, along with factors like revenge travelling and businesses opening, would surely bring ‘<i>achche din</i>’ again for Indian aviation.”</p> <p>It is this sense of optimism that has also seen two airlines waiting in the wings. One is the new avatar of Jet Airways being readied for take-off in early 2022 by its new owners—the Dubai-based Murari Lal Jalan and London-based investor Kalrock Capital—who snapped it up from bankruptcy courts.</p> <p>“Jet 2.0 aims at restarting domestic operations by Q1 of 2022 and short haul international operations by Q3-Q4 of 2022,” said Jalan, who would become the non-executive chairman of the new entity. “Our plan is to have 50 plus aircraft in three years and over 100 aircraft in five years.”</p> <p>The other one is Akasa (means ‘sky’ in Sanskrit), an ultra-low-cost airline floated by ‘Big Bull’ Rakesh Jhunjhunwala, which is expected to take flight by summer. The airline got a no-objection certificate from the government a week ago and is planning to place an order for about 50 Boeing 737 Max aircraft soon. “We believe that having a robust air transportation system is crucial for our nation’s progress,” said Vinay Dube, CEO of Akasa.</p> <p>That is no mean feat considering the dire market scenario. Every airline in the country, nay world, has been losing money since the pandemic broke out. Air India’s annual losses rose from Rs8,556 crore before Covid to about Rs10,000 crore this year. And, oil prices have been zooming up. Aviation turbine fuel prices have gone up 9 per cent in the last month, and 80 per cent in a year. Fuel cost comes to as much as 40 per cent of the cost of running an airline these days.</p> <p>“High oil prices and pandemic issues will get addressed over a period of time,” said Kapur. India had 14 crore domestic air travellers a year before Covid hit, and expectations are that it will be surpassed once normalcy is restored. “Even if you look at an average middle class Indian travelling once a year, the potential is three times what it is currently. India is an underpenetrated market for air travel,” he said.</p> <p>While that makes the field attractive for entrepreneurs, for the regular Indian wannabe flyer, the rush of many airliners means the effective index cost of travel has plateaued or actually come down in the last decade. While that helps, sometimes it is more than just economics. As Bindra put it, “Air India is India’s pride, it has an emotional connect with Indians. Its relaunch will benefit passengers and Indian aviation in terms of low fares and more options to fly.”</p> <p>—<b>With Pradip Sagar</b></p> Thu Oct 14 17:41:37 IST 2021 operating-air-india-fleet-will-cost-the-tatas-more <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Apart from reviving the ailing Air India, its new owner will have to shell out a few thousand crores to run its huge fleet. The Tatas will have to spend nearly Rs2,000 crore for repairing AI’s grounded aircraft. Another Rs1,000 crore will go towards cabin upgrades of the entire fleet.</p> <p>Air India operates 141 aircraft, including Air India Express’s 24 Boeing B737-800s. At least 43 of these are leased. The Air India fleet includes Airbuses (A319-100, A320-200, A320-200neo, A321-200) and Boeings (B747-400, B777-200(LR), B777-300(ER) and B787-800). The number of permanent employees per aircraft at Air India is 133, and 55 at Air India Express.</p> <p>Despite having its maintenance, repair and overhaul facility in India, Air India has a dismal record of fleet maintenance. About 20 per cent of its aircraft has been grounded over the past few years owing to lack of spares. Currently, 23 aircraft in its fleet are grounded.</p> <p>There is little AI engineers can do when spares are not available. A key Air India official said, “Engineers of Air India are well qualified, but the outdated work practices (from the monopoly era) and demoralised workforce has led to poor maintenance of aircraft.”</p> <p>Private airlines only do line maintenance and scheduled checks locally; major overhauls are usually done in London and other European cities as it is cheaper than setting up and maintaining their own facility in India.</p> <p>Air India has several aircraft on sale and leaseback (SLB). In the SLB model, an airline acquires the aircraft at an attractive price and sells it to a lessor—ideally at a profit—and leases it back for its own use. AI did it to improve cash flow, though it is a costly proposition in the long run. Most of AI’s Boeing 787 Dreamliners are SLBs.</p> <p>Experts believe that to successfully run Air India, the Tatas may have to lease new aircraft and upgrade interiors of existing aircraft, especially executive class seats, to match rivals.</p> <p>&nbsp;</p> Thu Oct 14 17:26:27 IST 2021 how-earlier-government-tried-and-failed-to-privatise-air-india <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Perhaps there is such a thing as third time lucky. The privatisation process of Air India that achieved fruition recently is the third attempt of the Indian government to offload the money-guzzling national carrier. In fact, attempts were on as early as at the turn of the century.</p> <p>Atal Bihari Vajpayee, who was prime minister from 1998 till 2004, had kicked off an ambitious project to divest government ownership of many public sector companies, with aluminium maker Balco, VSNL in telecom infra and ITDC in hotels to be the first off the block. The government’s thoughts soon veered towards Air India.</p> <p>In May 2000, the Union cabinet decided to sell 60 per cent of its holding in Air India. Tatas were keen then, too, forming a joint venture partnership with Singapore Airlines to bid for the airline that was once theirs. The Hindujas were the other serious contender. However, the disinvestment process did not move forward and both players withdrew from the race two years later.</p> <p>Before the next attempt at privatisation 18 years later, the airline went in for a disastrous strategic merger with domestic carrier Indian Airlines, under civil aviation minister Praful Patel. It only made its bottom line worse, with AI lapsing into a morass of loss it never recovered from.</p> <p>Patel’s successor, Ajit Singh, even exasperatedly said in an interview that “privatisation is the only way to save Air India”. But true to the United Progressive Alliance’s stated resolve to not go for disinvestment, no move was undertaken.</p> <p>After the UPA fell and Narendra Modi took over as prime minister, the Union cabinet again bit the bullet, this time putting up 76 per cent of the airline’s stake for sale. It was a ‘zero visibility’ cancellation of take-off this time, as the deadline came and went in 2018 with no bidders. Whispers in the market made it clear that no private player was ready to take on the debt-laden burden of the airline and on top of it deal with interference from the government that held the remaining 24 per cent stake.</p> <p>With realisation dawning, the government formed a group of ministers under Home Minister Amit Shah to actively pursue the sell-off. They sweetened the deal by offering 100 per cent stake, hiving off the debt into a separate asset management company and letting the bidders quote enterprise value. And third time’s obviously a charm as the government finally got the albatross off its back. For the Tatas, though, the hard work is just beginning.&nbsp;</p> Thu Oct 14 17:23:53 IST 2021 we-must-assess-ibc-success-relation-objective-reorganisation <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q. Five years ago, the insolvency and bankruptcy code was enacted so that stressed assets could be resolved in a time-bound manner. What are the key achievements of the IBC?</b></p> <p>In a short span of five years of its existence, the Insolvency and Bankruptcy Code, 2016 has established the supremacy of markets and the rule of law in the resolution of stress and professionalised the process of stress resolution. From providing freedom of exit to rescuing companies in financial stress to releasing idle resources from inefficient uses to helping creditors realise their dues and, most importantly, bringing about a behavioural change amongst the debtors and creditors alike, the list of achievements of the Code is a long one. As per the latest Doing Business 2019 report, India has made a quantum leap in its ranking in resolving insolvency parameter to 52nd position from 136th rank three years ago.</p> <p>There is a tendency to consider the Code as a panacea for all economic evils and then look at its success in relation to those. Instead, we must look at its success or otherwise in relation to its objective, which is reorganisation, as stated in its long title.</p> <p>The Code provides for reorganisation in two ways, first by the rescue of the company through a resolution plan, failing which, by the closure of the company through liquidation. It enables the market to make the choice. The market usually chooses to rescue a company if its business is viable or close it if it's unviable. The stress of over 20,000 companies, for which applications have been filed for initiation of insolvency proceedings, has been resolved. The resolution has happened both prior to admission and after the admission, and by way of withdrawal, resolution plan or liquidation. What is important to look at is the time frame of and the cost incurred in such resolution, and the quality of resolution in terms of value maximisation. In terms of all three parameters - time, cost, and quality of outcome - the Code has delivered a multiple of those obtained under the erstwhile regime.&nbsp;&nbsp;</p> <p><b>Q. In some of the early resolutions, we saw banks recovering a sizable portion of their dues. But, in some of the recent cases, we have seen hair cuts of as much as 95 per cent to creditors. Are lenders getting a raw deal now?</b></p> <p>It is axiomatic that a company coming to IBC does not have adequate assets to fully repay all its creditors. The companies, which have been rescued by resolution plans till March 2021, had assets valued, on average, at 22% of the amount due to creditors when they entered the IBC. This means that the creditors were staring at a haircut of 78% to start with. The IBC not only rescued these companies but also reduced the haircut to 61% for financial creditors.</p> <p>About a year ago, Ghotaringa Minerals Limited, and Orchid Healthcare Private Limited caught media attention. They together owed Rs 8,163 crore to creditors, while they had absolutely no assets when they entered the IBC process. Obviously, creditors had to take a 100 per cent haircut. On the contrary, Binani Cements and MBL Infrastructure have yielded zero haircuts, in addition to rescuing the companies. Why does IBC yield zero haircut in one case and 100 per cent in another depends on several factors, including the nature of business, business cycles, market sentiments, and marketing effort? It, however, critically depends on at what stage of stress, the company enters the IBC, as much as at what stage a patient arrives in the hospital. The best hospital can do little if the patient reaches with a substantial haircut to his health. Similarly, if the company has been sick for years, and the assets have depleted significantly, the IBC may yield a huge haircut or even liquidation.</p> <p>It may be appropriate to see a haircut in relation to the assets available on the ground and not the claims of the creditors. Because the market offers value in relation to what a company brings to the table, and not what it owes to creditors. IBC maximises the value of the assets at the commencement of the process, not of the assets which probably existed earlier.</p> <p><b>Q. Do you think banks are perhaps delaying starting insolvency proceedings against stressed borrowers?</b></p> <p>Banks weigh various options available to them. They choose IBC only when they find it better than any other option in a case of a stressed asset under the circumstances.</p> <p>Subject to their commercial wisdom, they should use it in the early days of stress, when the value of the company is intact, and close the process quickly before value recedes further, to minimise the possibility of liquidation or even avoid haircut. In the early days of default, enterprise value is typically higher than the liquidation value and hence the stakeholders have the incentive to resolve the stress of the company rather than liquidate it. The longer it remains in stress, the higher is the loss of its value. With the passage of time, the possibility of resolution of stress by a resolution plan decreases or a resolution plan yields a larger haircut.</p> <p>There was some reluctance in the early days of IBC, which required an amendment in banking law enabling the RBI to direct banks to invoke IBC in specific cases. The reluctance has disappeared as the banks experienced wholesome outcomes of IBC.</p> <p><b>Q. The conduct of the Committee of Creditors has also come into question of late. IBBI too reportedly is looking to increase the capacity of CoC. What are the issues here and what needs to be fixed?</b></p> <p>The Code rests on the commercial wisdom of the CoC. This requires the CoC to have the capability to distinguish between a viable company to be rescued by a resolution plan and an unviable one to be closed through liquidation. It needs to assess the feasibility and viability of competing resolution plans. It needs to visualise limitless possibilities of the resolution, including restructuring by way of merger, amalgamation, or demerger; a change of management, technology, or product portfolio; acquisition or disposal of assets, businesses, or undertakings; restructuring of the organisation, business model, ownership, or balance sheet; strategy of turn-around, buy-out, acquisition, or takeover; and so on. It needs to visualise the underlying value of the distressed asset and make the value visible to the prospective resolution applicants.</p> <p>Further, it needs to play its role in accordance with the Code. There are several instances where its conduct has not been above board. In some cases, it has strayed into matters which do not fall into the commercial domain and has unduly influenced the resolution professional. If any of the decision-makers does not play its role, as envisaged in the Code or does not cooperate or resorts to active non-cooperation or malafide actions, the process may not either conclude in time or yield the optimum outcome. To address the issues, the IBBI has been organising workshops for banks and has recently proposed to introduce a code of conduct for CoC.</p> <p><b>Q. Data from IBBI shows of 2,653 CIRPs that were closed as of March 31, liquidation was commenced in as many as 48 per cent of them, while a resolution plan was approved only in 13 cases. Why is that so?</b></p> <p>This narrative of more CDs landing up in liquidation is not correct. You are watching only the end game, where you see about 2600 cases reaching the finishing line, that is, ending up with a resolution plan or liquidation. Please consider the universe of companies for which applications are filed for initiation of the IBC process. Over 90 per cent of them are closed midway either before or after admission. Of the universe, the percentage of companies proceeding for liquidation is negligible. I am not even considering the resolution happening outside IBC, but on account of IBC.</p> <p>Further, of the companies proceeding for liquidation, three-fourths were defunct, and of the companies rescued, one-third were defunct. This means that two-thirds were defunct to start with. The companies ending up with liquidation had assets, on average, valued at about 6% of the outstanding debt, when they entered the CIRP. If a company has been sick for years and its assets have depleted significantly, the market is likely to liquidate it.</p> <p>In value terms, companies accounting for 70% of the stressed assets were rescued, while those accounting for 30% of the stressed assets proceeded for liquidation.</p> <p>I anticipate that post disposal of pre-IBC legacy matters, as relatively ‘recent’ stress cases, are dealt with, liquidations will be less. Let me make it clear that liquidation per se is not all bad. It is one of the means of reorganisation envisaged under the Code. It is through liquidation that the resources sunk in the failed firms are released for more efficient uses in the economy.</p> <p><b>Q. The IBC has gone through several amendments in the past few years. Do you think in legislations like this, where there was no precedence, a periodic review is the way forward?</b></p> <p>An economic law is essentially empiric, and it evolves continuously through experimentation. The Code is no exception. The Code has witnessed six legislative interventions since its enactment to strengthen the processes and further its objectives, in sync with the emerging market realities. Each of the six amendment Acts addressed specific issues which could not have been anticipated earlier. Addressing the issues promptly is testimony to the dynamism of the journey and the commitment of the Government to the underlying reform. A standing committee, the Insolvency Law Committee, continuously reviews the implementation of the Code to identify issues and make recommendations to address them.</p> <p><b>Q. In bankruptcy cases, should existing promoters be given a chance if they come up with a credible plan?</b></p> <p>There is absolutely no prohibition on promoters wresting control of their companies through a resolution plan. The prohibition is only on a person, whether a promoter or not, who does not have credible antecedents. Any person, who is connected or related to the prohibited person, is also prohibited. This disincentivises opportunistic behaviour and helps to reduce moral hazards.</p> <p><b>Q. What are key things that you feel need to be addressed to make IBC more effective?</b>&nbsp;&nbsp;</p> <p>An insolvency proceeding is like an orchestra where many constituents have specific roles. In particular, the CoC needs to be in the shoes of businessmen and its conduct needs to be above board; Government needs to submit claims in time and avoid litigation relating to claims post-resolution, and it must ensure a clean slate for successful resolution applicant; the Adjudicating Authority needs to have adequate bench capacity to admit applications for commencement of insolvency proceedings, approval of resolution plans and dispose of applications in respect of avoidance transactions, in a time-bound manner; and promoters and board of directors need to avoid resistance to commencement of insolvency proceedings on frivolous grounds and extend all co-operation to the IP in running a business as a going concern. Some process improvements are required to ensure certainty of outcomes. Markets for distressed assets should become deeper so that for every distressed asset, there are many resolution plans for value maximisation.</p> Mon Oct 11 15:56:26 IST 2021 bad-bank-will-help-banks-clean-their-books-but-wont-solve-problem-of-npas <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Many things have </b>been tried by the government and the Reserve Bank to fix the problem of bad loans that have plagued India’s banking system for a long time<b>—</b>from debt recovery tribunals to the scheme for sustainable structuring of stressed assets<b>—</b>but with little success. The Insolvency and Bankruptcy Code implemented five years ago was widely seen as a solution that would work. It had some initial successes. But after that recoveries fell sharply and cases started dragging on, putting some banks into an existential crisis.</p> <p>Now the government has a solution for that<b>—</b>a bad bank, which will take over a chunk of the non-performing assets from banks, thus reducing the stress on their balance sheets while also trying to get a better resolution for the assets.</p> <p>Bad banks, or asset reconstruction companies (ARCs), are nothing new in India, but their impact has been limited as they were all in the private sector. The process of sale and transfer of bad loans to private ARCs has been very slow owing to valuation issues and the huge upfront capital required to buy large non-performing assets. The government bad bank, or the National Asset Reconstruction Company Ltd, is expected to address such problems. “The NARCL is expected to buy out Rs2 lakh crore of bad assets over time, which would be 45 per cent of what all ARCs have collectively acquired till March 2021. That’s sizable, not only in the context of banking sector NPAs but also for the ARC industry,” said Krishnan Sitaraman, senior director and deputy chief ratings officer at the ratings agency CRISIL.</p> <p>In the first batch, bad loans worth Rs90,000 crore are expected to get transferred to the NARCL.</p> <p>The NARCL and the India Debt Resolution Company (IDRCL) will play a critical role in the management and resolution of large corporate bad loans. The NARCL, in which state-owned banks will hold 51 per cent stake and private sector lenders the rest, will aggregate and consolidate stressed loans. It will pay up to 15 per cent of the net asset value upfront in cash and security receipts will be issued for the remaining. The government will provide Rs30,600 crore guarantee for these security receipts.</p> <p>“The sovereign guarantee will support the regulatory provisioning requirement of the RBI and allow banks to free up that capital without the burden of additional provisioning, effectively allowing more participation from the banks to resolve their NPAs through the bad bank,” said Anish Mashruwala, partner, J. Sagar Associates.</p> <p>The IDRCL, in which public sector banks and financial institutions will hold 49 per cent, will manage the assets and engage market professionals and turnaround experts.</p> <p>Some of the NPAs are several years old and recoveries in such cases have been dismal. “The average recovery run rate of insolvency proceedings barring certain large assets has been early double digits. Most of the Rs90,000 crore in the first phase will accrue from the list one and two that the RBI had asked the banks to move to the insolvency process a few years back. Chances of material recovery from these assets look bleak,” said Nilanjan Karfa and Amit Nanavati, analysts at Nomura Securities.</p> <p>So, how efficiently the stressed assets are resolved under a new mechanism will be a key thing to watch. “One can argue that the bad bank is likely to become a warehouse for stressed loans without expected recovery, as it will be difficult to find buyers for legacy assets,” said Kunal Shah, an analyst at ICICI Securities. “If initial cash receipts are more or less equivalent to the amount invested by banks, would it then be merely shifting the problem from one place to another without fundamentally solving it?”</p> <p>It might, however, to an extent solve the problem of banks getting shortchanged in resolutions. According to the Insolvency and Bankruptcy Board of India (IBBI), as of June 30, 2021, there were 396 insolvency cases with approved resolution plans. Of the total claims of more than Rs6.82 lakh crore, financial creditors could recover just under Rs2.46 lakh crore, which is just 36 per cent.</p> <p>In the approved resolution of the bankrupt Videocon, billionaire mining baron Anil Agarwal’s Twin Star Technologies’ offer was Rs2,962 crore. The admitted claims were to the tune of Rs64,838 crore, which meant lenders would have to take a haircut of more than 95 per cent. Bank of Maharashtra, which had a small portion of the loan, appealed against the order in the National Company Law Appellate Tribunal and obtained a stay.</p> <p>More recently, on August 12, the Chennai bench of the NCLT ordered the liquidation of Siva Industries and Holdings. The erstwhile promoters of the company had offered a one-time settlement of Rs328.21 crore, which was rejected by the tribunal. The admitted claims in this case from financial creditors were Rs4,863.87 crore. The claims from operational creditors and other creditors were Rs461.02 crore and Rs40.55 crore, respectively.</p> <p>In the resolution of the bankrupt carrier Jet Airways, which has been sold to a consortium of Kalrock Capital and Dubai-based businessman Murari Lal Jalan, financial creditors would recover only 5 per cent of their total claims of around Rs7,807 crore.</p> <p>Legal experts blame lenders for accepting such lowly payouts in some of these resolutions. “India’s bankruptcy resolution system is hampered by low recoveries and long delays. Banks got a bad deal in the cases of Videocon and Jet Airways and this was due to creditors’ acceptance of an unreasonable bargain,” said Sonam Chandwani, managing partner at KS Legal and Associates.</p> <p>Creditors lose patience because many cases have been going on for a long time. The IBC stipulates that the resolution process be completed in 270 days. However, IBBI data shows that 79 per cent of the ongoing cases have exceeded the time limit. “The IBC intended to expedite the corporate insolvency process; nevertheless, the lag caused by litigations has crept into the process,” said Chandwani.</p> <p>In the initial years of the IBC, some large NPAs, like Essar Steel and Bhushan Steel, were resolved and creditors recovered a fair bit. In the Essar Steel case, for instance, the lenders recovered 92 per cent of the Rs49,000 crore claims.</p> <p>One reason behind the low recoveries now is that many of the underlying assets have lost their value over time. “Any buyer that is coming in is buying for the current worth and not for the value that banks have on their books,” said Tarun Bhatia, MD and head of South Asia for Kroll, a provider of services related to valuation, governance and risk. “What is outstanding with the banks is not an input to the valuation itself. If a certain company has lost its core value, then the buyer is only going to pay for certain benefits.”</p> <p>Videocon, for instance, had acquired Thomson’s colour picture tube business a decade ago, which will command little value today for a buyer given that most of the world has switched to LCD and LED televisions. In the case of Jet Airways, most of the planes were leased and offices rented. The slots it had commanded had also been allocated to other airlines.</p> <p>Some of the NPA accounts have also been declared as fraud by banks, where there was usually a disconnect between the assets and the loans. “A buyer will only offer to pay that much amount based on the actual assets on the ground and the utility of the assets to him. If an entity borrowed Rs100 and the assets are worth only Rs50, then you can’t expect the buyer to pay anything more than Rs50,” said Jindal Haria, director at India Ratings and Research.</p> <p>Experts say, to avoid huge haircuts, lenders should initiate the insolvency process early when a stressed company is still operational. That way, there are chances that the value of the asset could be maximised. Also, say analysts, lenders should keep a watch on how loans were used by companies.</p> <p>The IBC has been a step in the right direction. But, changes may well be necessary if it is to become more efficient.</p> Thu Oct 07 15:45:33 IST 2021 ambani-vs-adani-coming-war-for-green-energy <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>The air was smokey and sulphurous,” said Varun Sivaram about what greeted him when he got off a train in Korba, deep in Chhattisgarh. With more than a dozen coal-fired power plants as well as India’s largest open-pit coal mine, Korba is a crucial link in India’s power sector, producing cheap electricity that powers the country’s development aspirations.</p> <p>&nbsp;</p> <p>Korba is also one of the most polluted places on earth.</p> <p>&nbsp;</p> <p>For Sivaram, senior adviser to US Special Presidential Envoy for Climate John Kerry, Korba is a “hellscape,” symbolic of India’s “deadly addiction” to cheap power from coal. To him, the question is simple, “Should India sacrifice development for breathable air?”</p> <p>&nbsp;</p> <p>Two-thirds of India’s energy needs are met by polluting fossil fuels—primarily coal, but also oil and gas. India is the only major country that is increasing its coal consumption. Not surprising, as it has coal reserves that can satisfy its energy needs for at least 300 years. That lure of cheap energy, however, comes with a lethal sting in its tail—carbon emissions that are the third highest in the world, leading to not just air pollution, but global warming and climate change.</p> <p>&nbsp;</p> <p>“There is huge international pressure on India to reduce,” said Debasish Mishra, partner at Deloitte India. “The only way that can happen is renewable energy, through solar plus storage.”</p> <p>&nbsp;</p> <p>India has been lumbering along on increasing its non-polluting renewable energy capacity by setting up solar and wind farms over the years. But, lack of economic viability and little interest from state governments and distribution companies were obvious. India has often missed its clean energy targets, and will most likely miss the ambitious one to achieve 175 gigawatts (GW) of power through renewable sources by 2022. Currently, the total capacity, including small hydel projects, is estimated to be around just 100GW.</p> <p>&nbsp;</p> <p>Cue in the richest man in the country to shake things up.</p> <p>&nbsp;</p> <p>“We will transform our legacy business into a sustainable, circular and net-zero carbon materials business…(and) help transition India and the world from an industrial civilisation to an ecological civilisation,” declared Mukesh Ambani at the annual general meeting of Reliance Industries in July, signalling a pivotal shift for the conglomerate.</p> <p>&nbsp;</p> <p>Reliance plans to pump in Rs75,000 crore into its new energy business, the biggest single investment in green energy in India. The plan includes building four factories to manufacture critical components for an end-to-end renewable energy ecosystem—solar photovoltaic (PV) modules, storage batteries, electrolysers to split hydrogen from water, and fuel cells to convert hydrogen into mobile and stationary power.</p> <p>&nbsp;</p> <p>“Surya dev has blessed India with almost limitless sunlight,” Ambani said. “I envision a future when our country will be transformed from a large importer of fossil fuels to a large exporter of clean, solar energy solutions.”</p> <p>&nbsp;</p> <p>For Reliance, it is both a paradigm shift that was the need of the hour and an opportunity it could not let go by. The company’s foundation is in oil and petrochemicals, which is likely to slow down in the years to come, and just like its foray into telecom and retail last decade, another shift was in order. The Union government’s production-linked incentive scheme (PLI) for solar PVs notified in April, which offers Rs4,500 crore in benefits to those who set up manufacturing units, has only sweetened the deal.</p> <p>&nbsp;</p> <p>“The potential for renewable energy in India is nearly 1,000GW (currently we are at around 100GW). The economic impact of achieving the Paris agreement targets could boost the global economy by $26 trillion by 2030 and create 24 million jobs. This highlights the potential for this sector and justifies the interest shown by corporate powerhouses,” said Divakar Vijayasarathy, founder and managing partner of DVS Advisors LLP.</p> <p>&nbsp;</p> <p>Ambani’s foray into green energy is significant beyond the investment amount or the fact that he will square off with fellow Gujarati billionaire Gautam Adani in a battle royale for the ‘green pie’. Adani is planning to invest $20 billion in 10 years across renewable energy generation, component manufacturing, transmission and distribution.</p> <p>&nbsp;</p> <p>The sudden gold rush of big guns from private and public sectors into green energy could literally transform the face of India. “There is a huge interest from corporates who have installed some large capacities,” said Sanjay Aggarwal, president of the PHD Chamber of Commerce and Industry. “A lot of players have grown fast, because of the FDI and valuation they have been able to attract.”</p> <p>&nbsp;</p> <p>Tata Power has announced that it would no longer build coal power plants, putting its future eggs all in the renewables basket. The public sector NTPC earlier this month told its investors that it planned to instal 60GW of renewable energy capacity in a decade. Indian Oil Corporation chairman Shrikant Vaidya recently said his company was “investing in solar and wind energy in a big way”.</p> <p>&nbsp;</p> <p>“More than contributing, corporates are driving this space,” said Bose Verghese, head of green initiatives at Infosys, which became carbon neutral last year. “New technologies and innovations (in green energy) carry high risks and high initial costs. (So) corporates can invest in such technologies and help startups and entrepreneurs in this space,” he said.</p> <p>&nbsp;</p> <p>Startups, too, have flourished in the game, more so with valuations than with actual power supply and net gains. Gurgaon-based ReNew Power, which supplies power from solar and wind farms, entered the unicorn club a few years ago. While investment worth Rs1 lakh crore is estimated to have flowed into this sector in the past three years, this year’s PLI scheme could increase this torrent. US giant First Solar recently announced a Rs5,000 crore investment to set up a PV solar module plant in India, while Hyderabad-based Premier Energies announced an investment of Rs1,200 crore over the next two years. Kolkata-based Vikram Solar and Mumbai-based Waaree Energies are looking at hitting the stock markets to cash in on the surging interest in the sector.</p> <p>&nbsp;</p> <p>Globally, investments are now redirecting to businesses that are mapped to be high on the environmental and sustainability aspects, referred to as ESG funds. “Globally, many investors have declared that they will not invest in coal-based power generation or in refineries. In renewables, the profits may not be high, but the valuations are going high because investors believe that is the future. And their shareholders are asking them to invest in ESG compliant firms,” said Mishra. A recent study showed 90 per cent of millennial investors will invest only in green businesses.</p> <p>&nbsp;</p> <p>But, as usual, there are challenges galore in India, particularly the gap between talk and action. For instance, 20GW of solar and wind power projects were auctioned in the past three years, but less than one-fifth of them have been commissioned. Then there is this disconnect between the Centre’s targets and state government priorities. “Many projects awarded by the Centre get stuck as state governments go slow in allotting land,” said an industry observer.</p> <p>&nbsp;</p> <p>Policies could also do with a firming up. While Prime Minister Narendra Modi has often been emphatic in the government’s push for green energy—the latest target is to achieve 450GW by 2030—no roadmap is in place. This is particularly troubling because there is a conflict between the coal lobby and the international pressure to go carbon zero.</p> <p>&nbsp;</p> <p>“In a country like India, a combination of solutions is what is required,” said environmentalist and AnantU fellow Ruchie Kothari. “But we definitely do not need any more coal. We may not have a definite strategy to get there, but it is definitely feasible.”</p> <p>&nbsp;</p> <p>The wind may be blowing in favour of a cleaner, greener India and world. The biggest drawback of solar and wind energy, that they are intermittent, may be solved soon with the availability of better battery storage solutions. It is estimated that solar power, last auctioned at less than 02 a unit in May, could hit a price below 01 by 2030. These factors combined would mean there would be no credible reason left anymore to mine coal and use it to produce electricity.</p> <p>&nbsp;</p> <p>“Storage, if available at the right cost and quality, is the ideal catalyst for large scale solar adoption in our country,” said Gagan Vermani, CEO and founder of the solar startup MYSUN. “The cost of storage has substantially reduced over the years (and is expected) to make financial viability by 2023.”</p> <p>&nbsp;</p> <p>A green future beckons, and for India, it is time to walk the talk. Not just because it offers dividends and prosperity. Ambani was not really going hyperbolic when he said new energy was the “most exciting, most challenging and the most purpose-driven mission” he would be pursuing in his life.</p> <p>&nbsp;</p> <p><b>More power to you</b></p> <p>&nbsp;</p> <p>Technology is proving to be the disruptor in all aspects of life, and the power sector is no exception. Electricity produced in a conventional power plant and distributed through a wired grid could soon become a thing of the past.</p> <p>&nbsp;</p> <p><b>Hydrogen</b></p> <p>The buzz is the highest when it comes to hydrogen. The power potential of hydrogen was never in doubt, considering its intensive use in steel and fertiliser factories. The challenge was generating it in a viable manner. Electrolysers are used to split water into oxygen and hydrogen, but now it seems this could finally be done in an eco-friendly manner using renewable energy.</p> <p>&nbsp;</p> <p><b>Fuel cells</b></p> <p>Think those Eveready batteries, but strong enough to power up your home. Fuel cells storing green hydrogen, if tech advances keep pace as promised, could run anything from an off-shore oil rig to buses and cars.</p> <p>&nbsp;</p> <p><b>Biomass</b></p> <p>Go beyond those compost pits by your neighbourhood RWA. Energy from biomass―referring to organic matter like dead plants and organisms―is produced by harnessing methane, produced by biomass waste decomposition. It already contributes to more than 5 per cent of America’s energy consumption, derived from burning waste as well as from ethanol. The Indian government is seriously looking at using ethanol, made from sugarcane, as an alternative fuel.</p> <p>&nbsp;</p> <p><b>Oceans</b></p> <p>Ocean waves can produce immense energy, but the jury is still out on this one. The main problems stem from the need for heavy machinery, which may disturb the marine ecological balance, as well as the fact that this energy can be intermittent and would require either supply grid or storage solutions.</p> <p>&nbsp;</p> <p><b>Body heat</b></p> <p>Not an OTT title. Stockholm railway station uses the body heat of its 2.5 lakh daily users to power a nearby office building. A mall in the US redirects the body heat of its visitors through pipes into a storage tank, which is then used to heat the building in winter.</p> <p>&nbsp;</p> <p><b>Cheers to that</b></p> <p>Our personal favourite renewable energy source―alcohol waste! In Scotland, many whisky makers redirect grain used in the distilling process to power thousands of homes nearby. All the more reason to have an extra peg!</p> Thu Sep 30 16:18:23 IST 2021 why-you-should-invest-in-mnc-funds <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>When it comes</b> to employment, multi-national companies are a preferred lot because they are considered as cash-rich companies with strong fundamentals. They have a wider bouquet of businesses with their global presence. So, why not consider investing in them as the traits mentioned earlier make for an ideal investment as well?</p> <p>In India, MNCs are present in sectors such as consumer, automobiles, industrial manufacturing, metals, information technology, cement and pharma, to name a few. When you hear the names of companies like Colgate, Hindustan Unilever, Nestle and Tata Motors, you know every single household is using their products. Then there are companies such as Castrol, Ashok Leyland, Bosch, Siemens, Hindalco and Ambuja Cement that cater to the industrial needs.</p> <p>Let us consider what makes MNCs special and why they should be a part of one’s portfolio.</p> <p>&nbsp;</p> <p><b>Wider moat</b></p> <p>When you invest in stock market, you should look for a company with a competitive business moat that sets it apart. A moat represents the ability to stave off competition and to thrive in the market place. It could be in the form of strong brands, patent rights or low-cost manufacturing ability.</p> <p><b>Robust management</b></p> <p>This is one of the basic requirements one needs to look at when investing in a company. Strong management is the backbone of any successful company. It ensures corporate governance and operational efficiency, which ultimately leads to maximising shareholder wealth.</p> <p>&nbsp;</p> <p><b>Technological edge</b></p> <p>MNCs generally have good technical know-how, innovative engineering and production processes that give them an edge over peers. Consumers tend to prefer products manufactured by MNCs owing to their quality.</p> <p>&nbsp;</p> <p><b>High RoE</b></p> <p>Return on Equity helps identify well-managed companies by measuring how much profit a company generates from its total net assets. It ensures the efficient use of available resources. A high ROE is indicative of competitive advantage that separates them from their peers. MNCs usually stand atop on the RoE chart.</p> <p>&nbsp;</p> <p><b>Strong fundamentals</b></p> <p>Most MNCs tick the boxes when one analyses the fundamentals of the companies before investing. A strong balance sheet indicates a company has no significant debt, allowing financial freedom to fund operations, meet obligations and withstand negative surprises. It puts the company in a position to re-invest the capital into overall growth of the company. Besides, such firms offer high dividends.</p> <p>&nbsp;</p> <p><b>Strong global brand</b></p> <p>MNCs are characterised as having strong global presence by consistently promoting universally appealing messages that promotes a “global”culture.</p> <p>&nbsp;</p> <p><b>Investing in MNCs</b></p> <p>When it comes to investing into the MNC space, investors have the option of Indian MNCs such as Cipla, Infosys, Hindalco, Tata Motors and Wipro, and global MNCs listed in India like Grindwell Norton, P&amp;G Hygiene &amp; Healthcare and Cummins. Currently, there are a few mutual fund houses that offer MNC funds through which an investor can conveniently take exposure across MNC space.</p> <p>One of the standout funds in this space is the ICICI Prudential MNC Fund. Apart from investing in Indian and global MNCs listed in India, the fund allows an investor to take exposure to global MNCs that are not listed in India such as Amazon, Bank of America and Ralph Lauren. Since markets around the globe perform differently each year, diversification to international markets may allow investor’s portfolio to take potential advantage from stocks listed outside India. As of August 2021, 20 per cent of the portfolio consisted of foreign equities. The fund has managed to outperform the benchmark since inception (June 2019). On a one-year basis, it has delivered 63.98 per cent as compared to 36.97 per cent by its benchmark, Nifty MNC TRI. Starting an SIP with a long-term view of at least 5 years would give you better risk-adjusted returns.&nbsp;</p> Thu Sep 16 21:22:50 IST 2021 business-luxury-carmakers-are-betting-big-on-electric-in-india <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>THE E-TRON IS ONE HECK</b> of a ride, even for an Audi. The sports utility vehicle is quick, sporty and luxurious. It can race from zero to 100kmph in just 6.8 seconds. And, it is loaded with all the bells and whistles you would expect in an Audi.</p> <p>&nbsp;</p> <p>The e-tron, launched in July, is the German carmaker’s first electric vehicle in India, and it joined an impressive fleet of EVs that luxury carmakers are showcasing in the country. The first luxury EV to come to India was from Mercedes-Benz—the EQC electric SUV, last October. In March, Jaguar Land Rover launched the Jaguar I-Pace SUV.</p> <p>&nbsp;</p> <p>Mercedes, the runaway leader in the Indian luxury car market, said on September 9 that it was expanding the retail sales of the EQC from the six metros to 50 cities. The first batch of EQCs allotted to India sold out; Mercedes is accepting bookings for the next batch.</p> <p>&nbsp;</p> <p>Mercedes unveiled the EQS luxury electric sedan earlier this year. A derivative of its top-of-the-line S-Class, the EQS is likely to make its way to India next year. “The EQS sets a new benchmark in the luxury EV segment globally. It is surely a strong potential product for the Indian market,” said Martin Schwenk, managing director and CEO of Mercedes-Benz India.</p> <p>&nbsp;</p> <p>These may be baby steps for the luxury carmakers in the EV market, but they seem to be ahead of the mass-market players. India’s largest carmaker Maruti-Suzuki, for instance, is yet to launch an EV. It has been testing an electric Wagon-R. Mahindra has been working on many models, but has managed only one on the road (the eVerito). Hyundai has one model (the Kona), Tata Motors has two (the popular Nexon EV and the recently launched Tigor EV) and MG has one (the ZS EV). And, that is it.</p> <p>&nbsp;</p> <p>On the other hand, luxury carmakers are rapidly scaling up and setting definite targets to become all-electric. Mercedes, for instance, has announced it would go all-electric by 2030, where market conditions allow. It plans to launch only EV architectures from 2025 and there will be an electric variant available for all its passenger vehicles. “The tipping point is getting closer,” said Ola Källenius, chairman of Daimler AG and Mercedes-Benz.</p> <p>&nbsp;</p> <p>In India, EVs account for a small share of the passenger vehicles market. In the last financial year, 4,588 electric four-wheelers were sold; it was just about 3,000 a year earlier. In contrast, the overall passenger vehicle sales last year was 27.11 lakh units.</p> <p>&nbsp;</p> <p>India may not be ready yet to wean itself off fossil fuels, but luxury vehicle makers are optimistic about improving demand for EVs. “It would be fair to state that the EV industry is evolving in India and volumes may increase multi-fold in the coming years,” said Balbir Singh Dhillon, head of Audi India. Globally, Audi has plans to launch only EVs from 2026 and will stop manufacturing petrol and diesel engines from 2033. In India, it is aiming for 15 per cent of its sales from EVs by 2025.</p> <p>&nbsp;</p> <p>Electric vehicles’ green quotient is a big draw for the potential customers of luxury vehicles. “There is a growing concern around pollution in cities and overall environmental sustainability, which is triggering the demand for EVs,” said Rohit Suri, president and managing director of Jaguar Land Rover India. “The 21st-century luxury customer is also keen to adopt the latest in technology, and EVs are absolutely at the top of the pyramid in this aspect.”</p> <p>&nbsp;</p> <p>Jaguar is planning to become an electric-only brand in four years. Also, 60 per cent of Land Rover SUVs globally will have zero-emission powertrains by 2030. Suri said that JLR’s India strategy would align to the global plans.</p> <p>&nbsp;</p> <p>Swedish luxury carmaker Volvo will phase out diesel offerings by the end of this year. The company plans to launch the electric XC40 Recharge in India soon and one new EV each year from 2022. “We have the ambition to achieve 80 per cent of our sales from electric cars by 2025, and by 2030 Volvo Cars will become an all-electric car company,” said Jyoti Malhotra, managing director, Volvo Car India.</p> <p>&nbsp;</p> <p>What makes luxury carmakers think that the tide is turning in favour of EVs and go ahead with grand plans even as the wider adoption of EVs in India is way behind global markets?</p> <p>&nbsp;</p> <p>A key is the percentage price differential when one is looking to shift from a petrol or a diesel vehicle to an electric car, said Rajeev Singh, partner and leader, automotive sector, at the consulting firm Deloitte. “A luxury car is already in a certain price bracket. At that price bracket, while moving from an internal combustion engine to electric, the increase in price as a percentage is comparatively less than price increase in a compact car.”</p> <p>&nbsp;</p> <p>Also, electric cars naturally give several features that luxury carmakers strive for, said Singh. For instance, low noise and low vibration.</p> <p>&nbsp;</p> <p>A key issue that is hampering a big shift to EVs in India is the limited charging infrastructure, even in big cities. Currently, there are fewer than 2,000 charging stations in the country. “Charging anxiety remains one of the key feedbacks of early adopters of EV in India,” said Schwenk.</p> <p>&nbsp;</p> <p>Things, however, are changing. Private players like Tata Power and fuel retailers like Hindustan Petroleum are setting up fast chargers. Central and state governments also plan to improve charging infra, and carmakers have been setting up fast chargers at their network points, apart from providing home charging solutions.</p> <p>&nbsp;</p> <p>And, the carmakers are sharing the charging infra. Mercedes has opened up its 100 charging stations to Audi and Jaguar. Collaboration is going to be very important since the cost of infrastructure is very high, said Singh of Deloitte. “If each company decides to be completely independent, then it will become a big challenge. That is where the government effort is going to be important. There can be some way where there is more amount of standardisation that happens,” he said.</p> <p>&nbsp;</p> <p>Luxury EVs can afford to pack in higher capacity batteries compared with mass-market EVs that need to keep costs in check. The Audi e-tron 55, for instance, has a 95kWh lithium-ion battery that gives a range 359-484km on a single charge. The Jaguar I-Pace has a range of around 470km. The Mercedes EQC can go up to 450km on a full charge, said Schwenk.</p> <p>&nbsp;</p> <p>Governments have been looking to incentivise electric vehicle usage. The goods and services tax levied on EVs is 5 per cent, compared with 28 per cent on petrol and diesel vehicles. However, some of the components in EVs are still taxed at 18-28 per cent.</p> <p>&nbsp;</p> <p>The EV push by luxury carmakers comes at a time when Tesla, the global leader in electric vehicles, is scaling up rapidly in markets like the US, Europe and China. Tesla is planning a launch in India and to set up a plant in Karnataka. “We want to do so, but import duties are the highest in the world by far of any large country,” said its founder, Elon Musk, earlier this year.</p> <p>&nbsp;</p> <p>The import duties on EVs are same as those on petrol and diesel cars. “The customs duty does not differentiate whether you are importing an electric car or an ICE car. That is why some of the companies are making a business case to say these should be treated differently, because one is a cleaner vehicle as compared with the other,” said Singh.</p> <p>&nbsp;</p> <p>The import duty on completely built cars is around 60-100 per cent. One reason behind the high duties is that the government wants automakers to make in India. Luxury EVs, despite the growing sales, are far away from a stage that will make a case for local production. “To set up even an assembly plant, you need a certain minimum volume. The overall luxury car market is small at 35,000-40,000 units today. A small percentage of that will become EV and the volume will get divided among a few players. So, none of them will have the business case to set up an assembly facility in India, unless the volumes go up,” said Singh.</p> <p>&nbsp;</p> <p>The hope is that the many launches in the luxury EV space will help generate enthusiasm among potential customers who would demand more affordable products. Once volumes gain traction, costs will reduce and the charging infra will expand, helping the luxury EVs to gain momentum and, in turn, drive the wider market.</p> Thu Sep 16 20:38:08 IST 2021 will-ondc-kill-amazon-and-flipkart-as-we-know-them <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>The mood was</b> light in Lutyens Delhi. A cantankerous Parliament session had just ended and the ‘Amrit Mahotsav’ festivities for the 75th year of independence were being launched. Commerce Minister Piyush Goyal, however, was all business as he chaired an innocuous meeting at his office, a virtual gathering of about a dozen people to discuss a project the government had initiated. Goyal did most of the talking, laying down the roadmap for what, in true <i>sarkari</i> style, had its own new-fangled abbreviation—ONDC, or Open Network for Digital Commerce.</p> <p>Later that night, as the government issued a statement outlining the rough contours of the project and its aim, alarm bells started ringing. From the glitzy glass-and-steel towers of Bengaluru all the way down to the US, the uneasy whispers had just one question. Is this aimed at finishing off Amazon and Flipkart in India?</p> <p>The official government note was circumspect. “ONDC is a globally first-of-its-kind initiative that aims to democratise digital commerce, moving it from a platform-centric model to an open network,” it said. “[It] will enable buyers and sellers to be digitally visible and transact through an open network. No matter what platform or application they use.”</p> <p>Goyal was more blunt. It will end the monopolistic practices in digital commerce in India, he declared. “ONDC will not just be limited to products but also to services,” he added.</p> <p>In one stroke, ONDC went from being just another government initiative to perhaps the most potent weapon the ruling dispensation has yet unleashed on India’s e-commerce duopoly. By Goyal’s definition of “not just limited to products”, it instantly made its target not just Amazon and Flipkart, but virtually every online seller in the country—anyone from a ticket booking site to a food delivery aggregator.&nbsp;</p> <p>According to Pallab Saha, general manager (India) &amp; chief architect at The Open Group, a Silicon Valley-based global consortium working towards open technology standards, “ONDC is aimed to completely rewrite and re-architect the digital commerce landscape in India. A revolution is imminent, and revolutions by definition are disruptive.”</p> <p>This “revolution”can make life difficult for e-commerce players. Right now, they work on their own proprietary platform, often using their own software. The information analytics generated is kept to themselves while algorithms are tweaked and configured as per their inferences. Remember how allegations used to fly thick and fast that Amazon India promoted its subsidiary companies like Cloudtail and Appario Retail by putting them at the top of search results offered to a shopper? Well, now ONDC mandates all online businesses to operate using the same ‘open source’ standards that the committee, possibly a regulatory body at a later stage, notifies.&nbsp;</p> <p>In a marketplace-centric model, a buyer first selects a platform and then searches for a product there; in the new model, the buyer will search for the product first and then pick the right seller offering that item. The platform the seller is on becomes secondary.</p> <p>“It has been evident in the past that open-source platforms have helped small players and organisations innovate and develop a more sustainable model,” said Sumit Shandilya, adjunct professor, School of Management, BML Munjal University, Gurugram. “This would certainly provide all the small and medium fishes in the ocean with an opportunity to grow big, and simultaneously give a boost to Make in India.”</p> <p>While what shape ONDC will take remains unclear, the power-packed composition of the committee makes it clear that the government means business. Nandan Nilekani, non-executive chairman of Infosys, and retired bureaucrat R.S. Sharma, who were the forces behind Aadhaar, are on it. So is Dilip Asbe, MD and CEO of the National Payments Corporation of India (NPCI), the entity behind Unified Payments Interface. The standardised open-source platform of UPI, where many private players like Google Pay and Paytm offer mobile money transfer services, has been cited as the model envisaged for rolling out ONDC.</p> <p>But the presence of two other members in the committee leaves no doubt as to which way the cookie crumbles—Praveen Khandelwal, secretary-general of Confederation of All India Traders (CAIT) and a loud critic of e-commerce companies, as well as Kumar Rajagopalan of Retailers Association of India. There is no representation of the e-commerce companies.</p> <p>Along with the dramatic growth of e-commerce in the past few years, on rise has been the opposition against it, particularly from physical retailers. Allegations by CAIT and others have ranged from predatory pricing and prioritising certain sellers to the foreign ownership of Amazon and Flipkart.&nbsp;Though an Indian startup, Flipkart was taken over by the American retail giant Walmart in 2018.</p> <p>Goyal had also not bothered to hide his dislike of tech giants in general, and Amazon in particular. In January 2020, when Amazon boss Jeff Bezos announced an investment of $1 billion in India, Goyal said, “It’s not as if they are doing a favour to India when they invest a billion dollars.” Bezos was not given an audience with Prime Minister Narendra Modi or Goyal during his last India visit.</p> <p>While the pandemic sparked an even more widespread adoption of online shopping—a Bain &amp; Company report says the market grew 25 per cent last year—it has also been met with more resistance. This has come in the form of government pronouncements, inquiries by the Competition Commission of India, court cases and even a new draft e-commerce policy that sought to put stringent curbs on operations of e-commerce entities.</p> <p>ONDC goes beyond all these and intends to change the rules of the battle itself. But how much will it benefit the small shopkeeper and trader, and how much will it help in providing more freedom of choice to consumers?</p> <p>“ONDC is not going to help the small businessman, if that is the intention,” said a senior official at one of the top e-commerce players who did not want to be named. “It is skewed towards the middlemen, who are politically connected and have been pressuring the government to crack down on us. If you want to help MSMEs, as per the PM’s call to push for Indian exports, it can’t happen with this current open-source internet. It can only happen with someone like an Amazon, who is also present on the other side.”&nbsp;</p> <p>An industry insider even argued that there was a pattern in the steps taken against the American e-commerce giants. “It is always related to trade talks with the US—these are then used to put pressure on the US government and negotiate something better out of them.”</p> <p>While there is consternation in the e-com world, none of the big players is willing to comment on the development. A leading fresh food e-tailer’s strategy team told THE WEEK that it had advised the CEO to not respond to queries about ONDC as it was “sensitive in nature”.</p> <p>ONDC could end up as sweeping in scale as some of the national digital public network initiatives, like GSTN, UPI or the CoWIN app, and that brings with it its own issues. “E-commerce is a complex business where every business has its unique supply chain and processes and it will be a challenge for the government to have standardisation,” pointed out Kapil Makhija, CEO of Unicommerce, which has been working with sellers from tier-2 and tier-3 cities.</p> <p>For leading e-commerce players, it will be a tough reconfiguration, including a complete revamp of their systems and losing advantages like control over the user interface and consumer behaviour insights. For the government, it will provide better control over what is sold and bought. For example, in UPI, a recent government stipulation set a market share limit of 40 per cent for any service provider, immediately dampening the growth of market leader PhonePe (interestingly, owned by Walmart).</p> <p>It also remains to be seen if the physical world retailers get a level playing field advantage because of ONDC. “Trade wars were always about survival of the fittest and never about the survival of the privileged,” said Shandilya. “Let’s wait and see who is the fittest of them all.”&nbsp;</p> Thu Sep 09 17:15:53 IST 2021 indias-5g-networks-will-rely-on-indigenous-technology <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Sixty-seven countries</b> have active 5G networks, according to an S&amp;P Global Market Intelligence report. And this group is rapidly expanding. India, however, is likely to take a while to get there. Though the department of telecom took the crucial step of allocating trial 5G spectrum to telecom companies in May, it is said that spectrum auction and commercial rollout of 5G services might happen only next year.</p> <p>DoT has allowed trials in rural and urban areas of Delhi, Mumbai, Bengaluru, Kolkata, Pune and Hyderabad, and Gujarat. Telecom companies can use their existing frequency and have also been allotted additional spectrum for this. Reliance Jio, India’s largest telecom services provider, has started trials in Mumbai; Airtel, the second-largest player, is at it in Gurugram and Mumbai. Vi, the third-largest, has started 5G trials in Pune and Gandhinagar with its network partners, Finland-based Nokia and Ericsson of Sweden.</p> <p>Historically, telecom equipment and architecture were the domain of a handful of multinational companies. India’s 5G network, however, is getting a local touch, thanks to the emergence of platforms like the Open Radio Access Network (O-RAN) Alliance and the partnerships that Indian telecom companies have inked with local and global partners.</p> <p>Jio, for instance, says it has indigenously developed the next-generation 5G stack, which will make the technology affordable and accessible. A protocol stack refers to a group of protocols that are interoperable. Jio has collaborated with global technology firms to develop an open and interoperable interface-compliant architecture-based 5G solution.</p> <p>“Together with our partners, we have tested the Jio 5G solutions in India and we successfully demonstrated speeds well in excess of 1 Gbps. Our made-in-India solution is comprehensive, complete and globally competitive,” said Mukesh Ambani, chairman of Reliance Industries, at its annual general meeting a month ago. Jio has installed 5G networks in its data centres across India and its trial sites in Navi Mumbai.</p> <p>Last year, Qualcomm Ventures, the investment arm of American chipmaker Qualcomm Inc, invested Rs730 crore in Jio Platforms. Qualcomm Technologies and Jio, along with Jio’s subsidiary Radisys Corporation, have been developing open and interoperable interface-compliant architecture-based 5G solutions with a virtualised RAN. RAN is essentially a type of network infrastructure (radio base station and antennas, in simple terms) used for mobile networks.</p> <p>“Radisys is a company that works on virtual RAN or open RAN. We work with them very closely. We have worked in the US along with them and demonstrated quite a few examples of what 5G can deliver,” said Rajen Vagadia, VP and president, Qualcomm India and SAARC.</p> <p>And, it is not just Jio; Airtel and the Tatas, too, have joined hands in developing 5G network solutions. Tata has developed O-RAN-based radio and NSA/SA core, and has integrated a totally indigenous telecom stack, leveraging the capabilities of its group companies and partners. NSA, or non-standalone architecture, is essentially 5G built over an existing 4G network, while SA or standalone architecture, is independent 5G with no connection with any existing network. Separately, Tata Consultancy Services, a software giant, will bring its expertise in systems integration, with the network and equipment increasingly embedded into the software.</p> <p>Tata is now looking to strengthen the hardware expertise through the acquisition of a controlling stake in Tejas Networks, a developer and seller of networking products. Tejas’s products range from broadband access to optical transmission. This should help in making networking gear. “Tejas Network was started with a vision of creating a top tier global telecom equipment company from India. The association with Tata Group will accelerate the realisation of this vision and enable us to address the large market opportunity available to us to build a financially strong global company,” said Sanjay Nayak, CEO of Tejas Networks.</p> <p>“Local partnerships can catalyse the 5G infra rollout by speeding up the process of equipment manufacturing and setup,” said Lt Gen S.P. Kochhar, director general, Cellular Operators Association of India.</p> <p>Airtel will start the pilot in January 2022. It is also working with Qualcomm and will utilise Qualcomm’s 5G RAN platforms to roll out virtualised and open RAN-based 5G networks.</p> <p>The O-RAN Alliance was founded in February 2018 by some of the biggest telecom firms in the world—AT&amp;T, Deutsche Telekom, China Mobile, NTT Docomo and Orange—to shape the RAN industry towards more open, virtualised and fully interoperable mobile networks. It is now a worldwide community that includes mobile network operators, vendors, and research and academic institutions. Airtel is a board member of the O-RAN Alliance and TCS is a member.</p> <p>“The design of 5G is modular and this implies that the carriers can buy various components from different vendors and make the system work,” said Radhakrishna Ganti, associate professor, department of electrical engineering at IIT Madras. “This has been accelerated with the O-RAN consortium. With this modular architecture, it is now easy for Indian companies to provide 5G technology and products to the carriers.”</p> <p>The flexible and scalable architecture of O-RAN will create new opportunities for small and medium-sized businesses. “O-RAN allows you to use standard, ‘template-ised’, readily available off-the-shelf hardware and then put software on top of it and use that as a part of the network. Both Airtel and Jio are working actively on O-RAN,” said Vagadia.</p> <p>One big advantage that O-RAN architecture brings is the scalability of the network. So, instead of investing heavily in infrastructure like network towers and masts, telecom operators can use O-RAN small cells fitted on the existing infrastructure like light poles, and then scale it up as and when required.</p> <p>“Scalability of 5G networks comes with O-RAN. That is a massive value for a competitive country like India, where the ARPUs (average revenue per user) are a tenth of that of a developed economy. We are under financial stress and need to find optimal solutions. Here O-RAN comes as a massive advantage,” said Vagadia.</p> <p>Nokia is producing 5G equipment at its factory in Chennai. It was the first to make the 5G New Radio (the global standard for a unified 5G) in the country. It has also started manufacturing massive Multiple Input Multiple Output (mMIMO) solutions. MIMO is a radio communications technology used to multiply radio link capacity using multiple transmission and receiving antennas. This helps in improving data quality and radio transmission capacity.</p> <p>Apart from indigenous technology and architecture, India’s 5G networks will also have a local flavour. The department of telecom has encouraged companies to use the 5Gi standard, in addition to 5G, during the trials. Developed by IIT Madras, the Centre of Excellence in Wireless Technology (CEWiT) and IIT Hyderabad, 5Gi is one of the three 5G technologies that were approved by the International Telecommunications Union as a 5G standard.</p> <p>But, why is India pushing for its own 5G standards over the globally accepted 3rd Generation Partnership Project (3GPP) standard? “The 5Gi standard is built as an enhancement over the 3GPP standard and has the required capability for increased cell size coverage for rural areas,” said Ganti. “The 5Gi standard would provide better rural connectivity with fewer base stations, thus bridging the critical urban-rural connectivity divide in India.”</p> <p>Some telecom companies are reportedly unhappy with this requirement to use the 5Gi standards. Gopal Vittal, CEO of Bharti Airtel South Asia, had earlier said it would lock India out of the global ecosystem and slow the pace of innovation.</p> <p>The Telecommunications Standards Development Society of India (TSDSI), however, disagrees. “5Gi is a superset of 3GPP technology. Both technologies will interwork permitting roaming nationally as well as internationally. 5Gi handsets will work with 5G base towers and 5Gi base towers will work with 5G handsets,” a spokesperson for the TSDSI told THE WEEK.</p> <p>5Gi can play a big role in giving rural India access to a faster telecom network. “The greatest advantage of this technology is that it increases coverage to nearly 6km. This is sufficient to cover 95 per cent of India’s villages since they lie within 6km of BharatNet PoPs (points of presence). This also reduces the number of base stations required to provide rural coverage and thus the cost of total deployment will come down significantly,” said the TSDSI spokesperson.</p> <p>All eyes are now on the government, which is yet to decide on a date for the auction of the 5G spectrum. Some reports have suggested that it was likely to be delayed to 2022.</p> <p>A sensitive issue is going to be the price. The Telecom Regulatory Authority of India (TRAI) had earlier recommended a reserve price of Rs492 crore per megahertz of spectrum in the 3,300Mhz-3,600Mhz band. Telecom companies say the high pricing will make the commercial launch of 5G unviable for them. “India is a price-sensitive market,” said Kochhar. “Effective spectrum pricing is critical for a healthy sale of spectrums. Otherwise, high reserve prices can lead to spectrums remaining unsold, thereby making for unviable and unsustainable business cases.”&nbsp;</p> Thu Aug 26 16:23:04 IST 2021 despite-the-hype-over-electric-two-wheelers-they-are-not-buyers-first-choice <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Ashish Agarwal, a Varanasi-based businessman, uses a 2019 model Hero electric scooter for his daily commute. He says it is more convenient, easier to maintain and cheaper to ride than a conventional scooter. “Its pickup speed is faster than a petrol scooter and maintenance is minimal,” said Agarwal.</p> <p>&nbsp;</p> <p>Most users of electric scooters share Agarwal’s opinion. And many others are planning to shift from petrol scooters because of the exorbitant fuel prices. There has been a rash of e-scooter launches in the past year; by startups and traditional biggies, at different price points. The hype rose to a crescendo on Independence Day 2021 when Ola Electric launched its e-scooters—Ola S1 and Ola S1 Pro.</p> <p>&nbsp;</p> <p>Few businessmen are as optimistic about the future of e-scooters as Bhavish Aggarwal, the founder of Ola, who is on a mission to make all two-wheelers in India electric by 2025. “Ola is committed to leading the electric mobility revolution in the country and we have exuded the capability to build in India for the world,” he said at the launch.</p> <p>&nbsp;</p> <p>It might not be that easy, though. “It took more than a century to develop an ecosystem around internal combustion engine (ICE) vehicles,” said Rishi Bhatnagar, president of Aeris Communications, which provides IoT solutions to many electric scooter companies. “It may take time before a matured ecosystem develops around electric vehicles as they have been around only for a decade.”</p> <p>&nbsp;</p> <p>As per CRISIL Research, the high-speed electric two wheeler category expanded by almost seven times between April and July as compared with the same period last year. As a result, the penetration of electric two wheelers surged from 0.2 per cent of total scooters sold to 0.7 per cent in the period. “Although only 47,000 electric two-wheelers were sold till July in the fiscal year 2022, Ola Electric alone has received more than one lakh pre-bookings within 24 hours of starting bookings. This highlights the underlying latent potential in electric two-wheeler demand,” said Ajay Srinivasan, director, CRISIL Research.</p> <p>&nbsp;</p> <p>Experts at CRISIL said petrol prices crossing the psychological barrier of 0100 a litre had been a critical factor in driving interest for electric vehicles. The increase in incentives from the Central government and additional incentives from states like Delhi, Gujarat and Maharashtra have drastically brought down the prices of electric scooters. “As per CRISIL Research’s assessment, Ola S1 is almost 20 per cent cheaper to own even at annual usage of 6,000km at 0100 a litre of petrol for a vehicle registered in Delhi. Even if petrol prices were to correct to 085 per litre, electric scooters are expected to maintain their affordability lead over ICE counterparts at an annual usage of 6,000km,” said Srinivasan.</p> <p>&nbsp;</p> <p>The manufacturers are all upbeat about the market. “Of late, we have been getting three to four times more inquiries. We have witnessed a surge in sales in the range of 1.5 to 2 times,” said Nilay Chandra, director of charging infrastructure at Ather Energy, a Bengaluru-based e-scooter manufacturer. Ather’s 450 Plus and 450X were game-changers in the segment with their excellent build quality and connectivity features. It is currently present in 18 cities. Chandra said it would be in around 100 cities by the end of 2022-23.</p> <p>&nbsp;</p> <p>Most makers of high-end e-scooters are following Ather’s playbook, but also trying to offer something extra. Bengaluru-based Simple Energy, for instance, recently unveiled its first model, the Simple One, with Bluetooth connectivity, geo-fencing, over-the-air updates, onboard navigation and many other features and it claims to have almost twice the range of the Ather 450.</p> <p>&nbsp;</p> <p>Most of the high-end electric scooters are not sold as standalone products. “We have created a digital ecosystem for the consumers,” said Manu Saxena, vice president (future mobility), TVS Motor Company, which recently launched its first electric scooter, the iQube Electric. The company is also building the EV business around smart products aided by technology. “Our strategic tie-ups with government bodies like CESL and other public charging partners are towards building a network of public charging infrastructure that will help us expand into the next set of cities in the future,” said Saxena.</p> <p>&nbsp;</p> <p>Though manufacturers are vocal about expansion plans, there are concerns that e-scooters may remain an urban phenomenon. “Scooter ownership is not widely prevalent in tier III cities given their relatively higher cost of running as compared with motorcycles, and (because of) poor quality of roads. In case of electric scooters, the lack of availability of sustainable home charging and higher cost of acquisition compared with ICE motorcycles are likely to be the key impediments to their adoption in rural areas,” said Srinivasan.</p> <p>&nbsp;</p> <p>Availability of finance is another major challenge. Financiers are not yet comfortable lending to EVs as there is no reliable way to assess the value of repossessed vehicles, with battery price being a major component of their value. “Higher acquisition cost along with challenges on financing side were hurdles,” said Srinivasan. “With additional government incentives, additional state incentives and attractive pricing by Ola and Simple One, acquisition-cost related concerns are resolved to a great extent but financing scenario still remains a challenge.”</p> <p>&nbsp;</p> <p>The charging infrastructure could be a challenge even in urban areas. “In urban clusters, where most of the people live in apartment complexes, dedicated charging ports in parking space is a major challenge,” said Jinesh Gandhi, research analyst at Motilal Oswal Financial Services. “The charging infrastructure in rural and tier II and III cities also needs to develop. In rural areas where many people commute 50km daily on an average, the scooters may not take off in a big way.</p> <p>&nbsp;</p> <p>Much of the consumer anxiety, however, stems from a high upfront cost. While the running cost of e-scooters is lower, India’s price-sensitive consumers seem reluctant to pay a higher initial price for e-scooters. “A higher depreciation rate compared with fossil-fuel vehicles also influences consumers’ decision to stay away from EVs,” said Samarth Kholkar, co-founder and CEO of Blive, an EV experiential platform. “EVs can cover a limited distance on a single charge and thus have a higher dependence on charging infrastructure. India needs a strong network of charging stations for the EV market to prosper.”</p> <p>&nbsp;</p> <p>One way to tackle the charging infrastructure problem is developing a common platform for fast-charging. “Companies are slowly opening up patented technology to help bridge the gaps in the ecosystem,” said Kholkar. “For instance, Ather Energy recently announced opening its patented charging infrastructure tech to all e2W makers to enable a common charging infrastructure, which is a great step towards building a robust electric mobility ecosystem.”</p> <p>&nbsp;</p> <p>India is the largest market for two-wheelers in the world, and it offers a huge opportunity for manufacturers of electric scooters. That is why all big two-wheeler manufacturers have grand plans for the segment. Once the likes of Hero MotoCorp (a launch is imminent), Bajaj (launched the electric Chetak), Suzuki (planning an electric Burgman Street) and Honda are in the mix, the segment may well get over the hiccups and have a smooth ride.</p> Thu Aug 19 16:44:43 IST 2021 financial-freedom-through-sip-swp <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>IT IS A KNOWN</b> fact that while financial freedom remains an elusive goal for most of investors, they miss their goals by a wide margin often due to lack of planning and sometimes discipline. This is where products which automate savings and withdrawal at a time when it is required gain precedence.</p> <p>&nbsp;</p> <p>Freedom SIP and Freedom SWP (Systematic Withdrawal Plan), both by ICICI Prudential Mutual Fund, are notable products in this regard. Freedom SIP encourages an investor to invest regularly in a disciplined manner via SIP and enjoy the benefits of regular cash flows post completion of SIP period. On the other hand, through Freedom SWP, an investor, say during retirement days, can generate a cash flow stream through withdrawals in a systematic manner.</p> <p>&nbsp;</p> <p><b>Freedom SIP</b></p> <p>The journey to financial freedom through Freedom SIP comprises of three steps. First, an investor should decide a monthly SIP amount and choose a pre-defined tenure of 8 years, 10 years, 12 years or 15 years. Second, on completion of the SIP tenure, units accumulated are transferred to a pre-selected scheme which is mostly a hybrid fund. This step ensures that the corpus generated over the years is not exposed to undue risk which the equity market presents.</p> <p>&nbsp;</p> <p>Third, a systematic withdrawal plan is activated after the transfer. If a SIP is registered for eight years, then the monthly SWP installment is 1x monthly SIP Installment. In case of 10, 12 and 15 years, the withdrawal is 1.5x, 2x and 3x respectively. For example: If initial SIP registered for tenure of 12 years is 010,000 per month, then SWP will be 020,000 (2x 010,000). In this manner, a disciplined investor can create a sizeable corpus over the years and meet one’s long-term financial goals comfortably.</p> <p>&nbsp;</p> <p><b>Freedom SWP</b></p> <p>One has to prepare for retirement during the working years itself. Through Freedom SWP feature, an investor can manage his/her future growing expenses in a very simplified manner. This feature is an innovation over the traditional SWP and helps overcome the shortcomings of traditional SWP.</p> <p>&nbsp;</p> <p>In case of a traditional SWP, while expenses increase over the years due to inflation, the cash-flow from SWP remains constant, thereby resulting in a huge gap between expenses vs cash flow as the time progresses. However, when it comes to Freedom SWP, the cash flow gradually increases with time to meet one’s increasing expenses.</p> <p>&nbsp;</p> <p>Through this feature, investors can withdraw a fixed amount ie 6 per cent per annum from the investment corpus along with an option of annual top up of either 3 per cent, 4 per cent or 5 per cent. The point to note here is that through this feature, investors can register for monthly withdrawals only. So, how does this feature work?</p> <p>&nbsp;</p> <p>Under Freedom SWP feature, investors make a lump sum investment into any of the eligible schemes, which are mostly from the hybrid category. These schemes aim to benefit from volatility and manage equity exposure based on valuations. Thereafter, one has to make two choices—top up percentage and SWP start date.</p> <p>&nbsp;</p> <p>The SWP of 6 per cent per annum will be calculated on the basis of the lump sum invested. Through this arrangement an investor can ensure that he/she can maintain a certain lifestyle in future.</p> <p>&nbsp;</p> <p>For example: For an initial investment of Rs10 lakh and an initial SWP of 6 per vent per annum, the withdrawals over the next 5 years will be as follows:</p> <p>&nbsp;</p> <p>To conclude, financial freedom need not be an elusive dream. It can be a reality if one is ready to invest patiently over the longer time frames.</p> <p>&nbsp;</p> <p><b>Sivasankar is the chief consultant at Samish Financial Services</b></p> Thu Aug 19 19:53:41 IST 2021 the-turmoil-in-chinas-financial-markets-could-be-indias-big-opportunity <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>The world was an entirely different place for Jack Ma nine months ago. Ant Group, a fintech company owned by his retail giant, Alibaba, was all set for a $34.4 billion initial public offering, the world’s biggest. It had got $3 trillion worth of bids from individual investors across its dual listing in Hong Kong and Shanghai. The bidding for the IPO was so aggressive that the servers of some brokerage platforms in Hong Kong reportedly crashed owing to the overwhelming number of orders.</p> <p>Ant Group’s shares were expected to trade in Hong Kong and Shanghai on November 5, 2020. But it never happened. On November 3, Chinese regulators summoned Ma and told him that Ant’s days of relaxed government oversight were over; they later shut down the IPO saying there were shortcomings in the process. The<i> Wall Street Journal</i> reported that Chinese President Xi Jinping had personally halted the IPO because an outspoken Ma had irked the government. Though he was the poster boy of Chinese entrepreneurship, Ma always had an uneasy relationship with the government, as he seldom hesitated to criticise its policies. He was rarely seen in public after the botched IPO.</p> <p>While it looked like Ma had brought it upon himself by antagonising the government, it soon became clear that he was just a scapegoat. The Communist Party of China’s policy shift was what killed Ant’s IPO. In what is said to be the biggest ideological shift in the past 40 years (since Deng Xiaoping set economic development as the socialist country’s ultimate priority in the second stage of reforms in the late 1980s), the authorities started cracking down on developers, crypto miners, tech companies, health care providers and tutoring firms. All targets got hit with radical rule changes or aggressive regulation in the past nine months. China’s uber-rich lost $30 billion in the carnage in the markets between November 2020 and July 2021. And it was not Jack Ma, but his main competitor, Tencent Holdings Ltd’s boss Pony Ma, who lost the most. Pony, who strenuously avoids the limelight, lost $14 billion.</p> <p>Many analysts see it as the end of the four-decade-long free run of the market economy in China and the beginning of a new era wherein the government has put the ruling party’s core ideology before the interests of corporations and shareholders. “A new era that prioritises fairness over efficiency has begun,” said Alan Song, founder of Beijing-based private equity firm Harvest Capital.</p> <p>As much as it is an ideological whim, this shift was a response to the growing discontent among the Chinese middle class over exorbitant costs of housing, education and medical care. The reforms are seen as being beneficial to the masses at the expense of rich businesses. “These policies were announced to reflect the party’s progressiveness,” said Zhaopeng Xing, senior China strategist at ANZ, to Reuters. “They send a message that China is not a capitalist country, but it embraces socialism.”</p> <p>But they have raised questions about the future of Chinese companies’ engagement with foreign capital markets and foreign investment. According to the US-China Economic and Security Review Commission, there are 248 Chinese companies listed on three major US exchanges, with a total market capitalisation of $2.1 trillion. In 2020 alone, 29 Chinese companies debuted on the US exchanges. Some 60 more were planning to do it this year, according to the New York Stock Exchange. Many of them, however, are unlikely to materialise as Chinese regulators have announced that they would tighten rules for companies seeking to list or sell shares outside the country.</p> <p>The Chinese technology companies listed in the US are facing regulatory challenges there as well. The Holding Foreign Companies Accountable Act, signed into law by President Donald Trump in December 2020, is aimed at removing companies from US exchanges if they do not comply with American auditing standards for three years in a row. The rules also require firms to prove to the Securities and Exchange Commission, the US market regulator, that they are not owned or controlled by a foreign government. Many of the dual-listed Chinese tech companies have filed secondary offerings only in Hong Kong, which could be an indication that they are unlikely to comply with new US audits.</p> <p>American investors, too, seem concerned. Chinese ride aggregator Didi’s New York Stock Exchange debut in June was the second-largest among Chinese companies, after Alibaba’s IPO in 2014. However, On July 4, the Cyberspace Administration of China ordered app stores to remove Didi, after flagging violations about the company’s collection and usage of personal information. Its stock lost about half its value. The Invesco Golden Dragon China ETF (PGJ), which tracks US-listed Chinese shares consisting of ADRs of Chinese companies, has lost a third of its value from its February peak. ADR, or American depositary receipt, is a way for American investors to buy stakes in foreign companies.</p> <p>The developments could be a great opportunity for India, not just because global investors have already started looking for markets with stable policies, but also because many Indian startups seem ready to take it to the next level. After food aggregator Zomato’s spectacular IPO last month, e-tailer Flipkart, payments company Paytm, insurance aggregator Policybazaar, logistics company Delhivery and cosmetics retailer Nykaa are planning public offerings.</p> <p>Some of them are looking at an overseas listing. Flipkart and grocery seller Grofers are said to have explored a listing in the US through a special purpose acquisition company (SPAC). A SPAC is a company formed to raise capital through an IPO for acquiring an existing company. ReNew Power, India’s largest renewable energy company, is all set for a merger with a Nasdaq-listed SPAC at an enterprise value of about $8 billion. The new entity, ReNew Energy Global Plc, will be listed on the Nasdaq.</p> <p>“India will benefit from the Chinese crackdown on its tech startups, as people may become fearful of investing in China,” said Mohandas Pai, chairman of Aarin Capital and Manipal Global Education. It might have already started. The data compiled by research firm Preqin says the total value of venture deals in India in July ($7.9 billion) was higher than in China ($4.8 billion), a first in eight years.</p> <p>The real deal, however, will be in foreign direct investment. Thanks to the stupendous economic growth in the past few decades and rising wages, China is now an upper-middle-income country. That means manufacturing in China does not give as much of a cost advantage as before. In fact, many manufacturing companies have already shifted their operations to countries with lower labour costs. India’s per capita income is just about a fifth of China’s and it stands a good opportunity to attract at least a part of these investments. “The government should form marketing teams with state governments to market India to the world’s manufacturing companies,” said Pai. “We should talk to global manufacturers who are already here and incentivise them. The production-linked incentive scheme is a great start.”</p> <p>According to the World Investment Report 2021 by the UN Conference on Trade and Development, India was the fifth-largest recipient of FDI inflows in 2020. It received $64 billion, while China got $149 billion.</p> <p>It will take a while for India to match China’s manufacturing prowess, but what will work to its advantage (other than the cost factor) is the changing dynamics of global politics. Xi’s China is on a collision course with the US, as the communist nation no longer hides its ambition to become the world’s dominant power. While the two countries’economic interests have so far been only marginally affected by their political differences (they are still among the world’s largest trading partners), that is likely to change. And that will be India’s biggest opportunity to make it big.</p> <p>—<b>with Abhinav Singh</b></p> Fri Sep 17 12:34:59 IST 2021 auto-industry-has-been-forced-to-reconfigure-the-way-it-does-business-is-it-enough <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Indian automobile</b> industry’s days of glory had started waning much before the coronavirus hit India, with a protracted slowdown putting the brakes on sales in late 2018 itself. Things have only got worse since then. What is staring at the once-poster boy of India’s post-liberalisation economic engine is a tougher tomorrow, where every day is not just a survival game, but one played to a whole new set of ways and rules.</p> <p>“India’s auto industry will show a 20 per cent growth this year over last year. But if you compare it with 2018, the last time sales were growing, it is nowhere close,” said Rajeev Chaba, president and managing director of MG Motor India. “Having said that, Covid is unpredictable. Everybody is learning as we speak.”</p> <p>Sales may go up. In fact, June sales figures showed healthy signs after two months of sales drop. But they are much lower than the boom years of 2012-2018. Still, the auto sector is coming out of the ordeal by fire shaken, stirred and smarter.</p> <p>Lighter, too. “The automobile industry is glamorous with seven-star infrastructure, slick showrooms, music bands performing and pujas conducted when premium cars are sold. But Covid taught us that it is more important to be agile,” said Vinkesh Gulati, president of the Federation of Automobile Dealers Association.</p> <p>Just before the pandemic hit, the auto industry’s biggest worry was the impending imposition of BS 6 emission norms, which involved jacked up prices and investment in cleaner technology. But then, when the national lockdown shut down supply chains, factories, showrooms and deliveries overnight, it seemed like the last nail in the coffin. “Automakers took a little time to figure out the risk, but quickly took corrective measures and rose to the challenge…the industry started continuously innovating,” said Rajeev Singh, partner and automotive leader at Deloitte India.</p> <p>Buying a car or bike is a milestone for most Indians, and traditionally it involves umpteen visits to dealers and haggling over deals. All that went out the window as the industry quickly realised that many consumers were no longer comfortable with physical visits to showrooms. The solution? Digitisation.</p> <p>“All possible processes were automated,” said Gulati. Manufacturers revamped their websites for immersive experiences, while dealers cut down on showroom sizes and salespeople as well as the use of glossy brochures, instead sending PDF files with all details to customers, following up enquiries on WhatsApp video calls. Premium brands like Mercedes-Benz cut down on inventory with its new direct-to-customer retail model by holding car models centrally. This has reduced the cost to dealers not only for keeping vehicles in showrooms, but also security and showroom rentals.</p> <p>Digitisation is happening not just to the sale, but also for add-on processes like financing, insurance and registration. “From an average five to eight visits to a showroom before buying, now customers come in just twice or thrice,” said Gulati. “While you had to personally sign 20 papers earlier, now it is only two or so due to automation. Efficiency has gone up.”</p> <p>“A lot of companies cut down on the number of people visiting corporate offices and plants, with people working from home,” said Singh of Deloitte. “Barring the core team in manufacturing and quality checks, functions like logistics, procurement and marketing, they managed from home.”</p> <p>Interestingly, many new models have also upped their digital quotient, adding features like touch screens and facilities like live traffic, weather and music streaming through an internet connection on the go. “Features like the Internet of Things (IoT) and GPS systems will be prominent in automobiles,” said Pankaj Tiwari, chief marketing officer of the EV startup Nexzu. That, inadvertently, threw up an unexpected challenge in the process.</p> <p>Connected to a global supply chain—particularly China—for components and raw materials, India’s auto sector has been left clutching at straws as a global mismatch of supply and demand made many parts unavailable or expensive. Besides the scarcity of steel, aluminium, copper and precious metals, the global semiconductor shortage hit production in Indian plants—top-selling car models have waiting periods running into months.</p> <p>“Not imagining that consumption would come back so strongly after lockdown, we had allocated our requirement to other industries. But fortunately, or unfortunately, we came back very strongly,” said Vinnie Mehta, director general of the Automotive Component Manufacturers Association, the apex body of auto ancillary makers in the country. “The semiconductor problem is not going to go away very soon, as adding capacity takes two good years,” he said.</p> <p>The over-dependence on China means that any further localisation would take years. India, for instance, is a large producer of steel. Yet, most of the specialised steel that the auto sector requires is imported from China. “We have the technology in the country and the capability, but sometimes it is cheaper to import from China,” said Mehta. “The volume is not high and hence it is not economical to localise.”</p> <p>The solution to this, as suggested by a recent insight report by McKinsey, would be to focus more on the export market. “International markets, especially those in Africa that are similar to India, are experiencing a rise in per-capita GDP and reaching the levels at which automotive sales tend to expand significantly. By expanding internationally, Indian automakers will increase growth and sales volume while diversifying risks and reducing demand cyclicality,” said the report.</p> <p>That last bit is crucial. Buoyed by the ever-increasing sales figures between 2012 and 2018, many manufacturers had invested in expanding their capacities—which have now become an albatross around their necks. While brands like Bajaj and Hyundai have been exporting for long, many others have just started looking at this prospect.</p> <p>That is not the only pivoting the auto industry has had to deal with. While a mass-market shift to electric vehicles may still take a few years, the sector has realised that changes will be hitting it much more frequently. This ranges from new fuel options like ethanol being pushed by the government to shifts in consumer preferences.</p> <p>The SUV trend visible before the pandemic has now solidified into an across-the-categories preference at the expense of sedans, the car category conventionally considered the centrepiece in any brand’s offering. Many carmakers got into the compact SUV category initially because market leader Maruti Suzuki did not have a presence in that segment. After the pandemic hit, consumers now see added value in buying an SUV instead of a sedan, as they are more suitable for family mobility, long trips and even weekend getaways. Hyundai’s Creta, for instance, was selling just above 6,000 units a month two years ago; now it is selling nearly 12,000.</p> <p>“The kind of growth compact SUV has seen is not present in any other segment,” said Gulati. Conscious of the risk of infection, urban users are increasingly buying functional, affordable cars. Used cars are also finding more takers.</p> <p>With an uncertain future and the march of technology that will require carmakers to adapt quickly, analysts believe that a shakedown and consolidation is inevitable in the auto industry. “Development cost for alternative technologies is very high. Rather than bearing the burden by themselves, alliances would help it get shared between two or three players,” said Singh of Deloitte. “The results can be equally shared—the vehicle (brand) may be separate, but the core technology could be common.”</p> <p>For all the dramatic makeovers it has been subjected to, India’s auto industry will still be in the doldrums in the foreseeable future. It will take years to achieve real growth, and they will need to be on their toes to deal with faster changes in technology and consumer preferences. Electric vehicles are just waiting for a catalyst to go mainstream, while the spiralling petrol and diesel prices pose another clear and present danger.</p> <p>“Covid has caused deaths and economic stress, and the fuel prices are going up. But at the same time, there are so many positives, with personal mobility becoming even more important,” said Tarun Garg, director (sales, marketing &amp; service) of Hyundai India. “Vaccination is gathering pace. GDP estimates are still in double digits, which means the economy should come back. The Indian market has shown us that it is very, very resilient, especially if you look at the last two years. We are cautiously optimistic.”</p> Thu Jul 29 17:10:22 IST 2021 auto-industry-will-only-grow-from-here <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q</b>/<b> Over the course of the pandemic and looking forward, what has changed for India’s auto industry?</b></p> <p><b>A</b>/ 2018 was the peak for India’s auto industry, with around 3.5 million cars sold. Then there was a slowdown in 2019, and last year Covid happened. Last year I would have said that the auto industry had slipped by one and a half years. But after the second wave, I think we have gone back by two years. If you go month by month, the picture looks rosy. But if you compare it with 2018, we are nowhere close, yet.</p> <p>The second wave has been devastating, but we have learned our lessons. From that perspective, I think the auto industry will [only] grow from here. I believe strongly that we will cross 2018 figures next year. Only downsides we need clarity on are chip shortage, mismatch in logistics and raw material prices going up, which will force OEMs to pass on the cost to consumers.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> What are the reasons behind the semiconductor shortage and raw material prices going up?</b></p> <p><b>A</b>/ It is all due to a global mismatch of demand and supply. Most economies had scaled down their production during the pandemic. Suddenly, as countries start opening up, there is an unusual surge in demand for everything, because post-Covid everyone is trying to buy items and indulge. At ports, there is a shortage of equipment, lifts and labour—even the containers are not there. There is a huge global mismatch. So, the freight rates have gone up. In China, one container used to cost $3,500, but now they are charging $14,000!</p> <p>And there is a huge shortage of chips, needed for everything from mobiles to the auto industry. There is chaos right now. These are all unusual dynamics. Hopefully next year, they should sort out. But a return to actual prices may take up to two years.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> One of the shifts we have seen is the growing popularity of SUVs. Another is electric vehicles. Do you see a big uptake for EVs?</b></p> <p><b>A</b>/ EV as a trend is catching up. EV volumes maybe only 10 per cent in five years, but we have had a great start. MG Motor has disrupted the market in EV and our offerings represent the future of mobility. The Hector was the first connected car. Our EV is the best in the industry. The Gloster is an autonomous level one car, first in the segment. We will come out with more mobility solutions this year based on our CASE (Connected, Autonomous, Shared and Electric) vision.</p> <p>&nbsp;</p> <p><b>Q</b>/<b>Going forward, what are the shifts you foresee in consumer preferences?</b></p> <p><b>A</b>/ An obvious change we see globally and in India is connected cars. Touch screens, streaming music, live weather and traffic, call centre connections, these are going to become the cost of entry in the future.</p> <p>Millennials globally are much more conscious about sustainable supply chains, ethical sourcing and environment. The discussion in the mainstream segment will be much more than fuel efficiency and horsepower—it will be about entertainment, information, connectivity and sustainable way of doing business. In India also it will become very important in the next five years. Covid has accelerated this kind of thinking.</p> <p>In terms of trends, mobility solutions will come back. It may take one and a half years to two years to stabilise and settle down to pre-Covid situation, but it will come back—whether it is shared mobility, (car) pools or EVs.</p> <p>&nbsp;</p> <p><b>Q</b>/ <b>As a company, and the industry in general, how would you say you have transformed in the last 15 months?</b></p> <p><b>A</b>/ Covid taught us that staying connected to the community and ensuring we have the latest technology was fundamental. Community here means employees, dealers and customers. During both waves we did a lot of initiatives, whether it was making ventilators, producing masks or providing ambulances.</p> <p>Secondly, sustainability and digital. We are trying to make ourselves a very flexible company and provide very digital non-human contact solutions to buy a car, from our website to our showrooms. We are working with a lot of startups and trying to find a lot more solutions.&nbsp;</p> Thu Jul 29 17:05:32 IST 2021 advent-of-electric-vehicles-sets-the-munjals-against-each-other-over-hero-brand <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>IT IS ALL IN A NAME,</b> all in the family, but all is not well.</p> <p>&nbsp;</p> <p>A tussle over the ownership of the Hero brand is hotting up between two branches of the Munjal family, and at stake is the future domination of India’s two-wheeler market—the biggest in the world.</p> <p>&nbsp;</p> <p>“We are very clear on our rights, very clear on our assignments and very clear on the ownership,”said Naveen Munjal, managing director of Hero Electric. “If somebody comes in, we will have to take legal recourse.”</p> <p>&nbsp;</p> <p>Naveen’s side of the family runs the electric two-wheeler business with the Hero branding. It is the leader of the nascent segment, with a market share of 36 per cent and turnover of around Rs350 crore. On the other hand, Hero MotoCorp, headed by Naveen’s uncle Pawan Munjal, has around 37 per cent market share of the conventional two-wheeler automobile segment, and it is a behemoth with a turnover of around Rs31,000 crore.</p> <p>&nbsp;</p> <p>Hero MotoCorp is now all set to enter the electric vehicle space. Reports indicate that its first launch could happen in six months. The catch is that it might violate a family agreement.</p> <p>&nbsp;</p> <p>In 2010, a family division initiated by patriarch Brijmohan Lall Munjal, who founded Hero Group along with his brothers Dayanand, Satyanand and Om Prakash, had divided various areas of the business among four branches of the family. There was no restriction on one side of the family entering into a business where another family side was present or competing with them—but the right to use the Hero trademark and its variants was given only to one family wing in a specific area of business.</p> <p>&nbsp;</p> <p>The Pawan Munjal side of the family walked away with the biggest prize then, the fossil-fuel powered two-wheelers. Cut to 2021. Trends, technology, policy and regulation all seem to deem that the sun is setting on the conventional ICE (internal combustion engine) vehicle business, and that the future belongs to environment-friendly technologies. The family partition bestows non-emission (effectively meaning electric vehicles and all such future technologies) to Naveen’s side of the family. Pawan is Brijmohan’s son, and Naveen’s father, Vijay, is Dayanand’s son.</p> <p>&nbsp;</p> <p>So, Hero MotoCorp’s EV foray throws up a face-off. It has a stake in the Bengaluru-based electric two-wheeler startup Ather, and it has tied up with Taiwan’s Gogoro Inc to set up battery swapping stations across the country and make Evs.</p> <p>&nbsp;</p> <p>Naveen sees a potential violation of the agreement here. “Anybody can manufacture anything, there is no limitation on that. There is a very strong non-compete on the usage of the Hero branding. For non-polluting, environment-friendly vehicles as we defined it, the ownership of the brand is with our (wing of the) family,”he said.</p> <p>&nbsp;</p> <p>The stakes are high. ICE two-wheeler sales in India peaked at 2.1 crore in 2019, and they have been in decline ever since. EVs, however, have been capturing more and more mind space. They may still be a blip in the rear-view mirror, but they are catching up. More electric two-wheelers have already been sold in India in the first six months of this year than all of last year, according to the portal Autocar Professional.</p> <p>&nbsp;</p> <p>“A lot of pieces of the puzzle are in place now,”said Naveen. “The triggers for explosion (in growth) are already thereìThis year is going to be very, very critical.”</p> <p>&nbsp;</p> <p>In more ways than one, considering how quickly his uncle is pushing his play into the segment. Hero MotoCorp’s deep coffers and marketing muscle make it a formidable challenger, even when it is new to the game. “It is very difficult to predict the market scenario of the future,”said Shriyance Jain, business observer and managing director of the University of Engineering and Technology Roorkee. “Today, Hero MotorCorp is realising the possibility of an emerging market alternate to its own and which might, in turn, affect its present market share. If these factors were known earlier, it would have definitely affected the decisions made at the time of separation.”</p> <p>&nbsp;</p> <p>With the deep-pocketed Ola set to make a big splash entry, and traditional rivals like Bajaj and TVS increasingly shifting their focus to EVs, it might not be a good time for the Munjals to bicker. “They can amicably resolve this issue by dividing among them who will do what, to achieve economies of scale in case both of them want to use the Hero family name on their brands,”said Shiv Shankar Tripathi, assistant professor (strategic management), MDI Gurgaon.</p> <p>&nbsp;</p> <p>It is still not beyond the realm of possibility that some kind of settlement could be worked out by the first family of India’s two-wheeler industry. And possibly in the drawing room, rather than the courtroom.</p> Thu Jul 22 18:50:22 IST 2021 we-will-take-legal-recourse <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Has there been any rapprochement or any kind of informal understanding or talks that have happened on the Hero brand ownership issue?</b></p> <p>&nbsp;</p> <p>Nothing of that sort. Like I said, we are very clear on the ownership of the brand. That is how the brand was divided in 2010, when we had a family restructuring. And there has been no change since then. So, we are very clear on our rights, we are very clear on our assignments and we are very clear on the ownership. The point is that if somebody comes in, we will have to take a legal recourse. We still stand on that. There is no further discussion on that. There is no change.</p> <p>&nbsp;</p> <p><b>There is nothing that stops Hero MotoCorp from getting into making electric two-wheelers. The problem arises only if it uses the Hero brand name.</b></p> <p>&nbsp;</p> <p>The family restructuring said there is no non-compete on product categories. Anybody can manufacture anything, there is no limitation on that. But it is on the usage of the brand, Hero. So, for ‘non-polluting, environment-friendly land vehicles’, as we defined it, the ownership of the brand is with our (wing of the) family.</p> <p>&nbsp;</p> <p><b>It doesn’t say ‘electric’; just ‘environment friendly’.</b></p> <p>&nbsp;</p> <p>It doesn’t exactly say ‘electric’, because you can’t determine technologies—today it is electric, tomorrow it may be hydrogen fuel cells. So, it’s ‘non-emission, environment-friendly vehicles’.</p> <p>&nbsp;</p> <p><b>Could some kind of settlement be worked out? What’s your reading?</b></p> <p>&nbsp;</p> <p>Honestly, I don’t have a reading. We’ve just been focused on this sector for the past 14 years or so. We have built a very, very strong brand for environment-friendly vehicles, and that’s what we will continue to do. There is no reading beyond that.</p> <p>&nbsp;</p> <p>We are focused on getting our numbers through. We are at a very, very good position right now; we are already at our pre-second wave numbers, and that was our best ever quarter (Jan-March quarter of 2021)—we were shipping out 9,000 units a month. Next month, we are increasing our numbers. Our target is to reach one lakh this year. We are not getting distracted.</p> <p>&nbsp;</p> <p><b>It could also turn into a joint venture.</b></p> <p>&nbsp;</p> <p>Anything is possible. This is family at the end of the day. The point is not to fight at all. The settlement was done very respectfully. I would hope to maintain it that way. So, absolutely nothing is closed. No options are closed at this point.</p> <p>&nbsp;</p> <p><b>Electric has been growing phenomenally well. You also just finished a round of funding.</b></p> <p>&nbsp;</p> <p>Last couple of years have been very interesting. We got into this space in 2001. In 2004, we experimented with electric cycles, which didn’t work. Then, in 2007, the market began to take off.</p> <p>&nbsp;</p> <p>I was of the firm belief that this business requires a firm push from our side. Because it’s a new business and we are disrupting a well established sector, this disruption involves 500 per cent attention from our side—just 100 per cent won’t do. That’s why I was clear we needed a completely different team. So, in 2007, we started putting together a team which would handle EVs. So, the objective was to first unlearn everything we knew, as everyone came from an automobile background, and then re-learn as an entrepreneur. That’s where the journey began.</p> <p>&nbsp;</p> <p>We anticipated market to turn around very quickly. It did to an extent, but then it crashed—financial crisis happened, markets crashed, oil crash—a number of factors happened.</p> <p>&nbsp;</p> <p>Since then, there has been a gradual change in the market, till 2015-16, thereafter it accelerated. In fact, the change I’ve seen in the last one year is dramatically faster than what we’ve seen in the entire last decade. This is a push from the governmental standpoint. A lot of the pieces of the puzzle are in place now. We had FAME II, a good push from the government, but it didn’t quite work the way we [and the government] anticipated. We felt course correction was required, and that’s been the case with our business as well.</p> <p>&nbsp;</p> <p>And that’s exactly what’s happened in the last couple of months. FAME got enhanced, the policy change which went from Rs 10,000 Rs to 15,000, and policy cap from 20 per cent to 40 per cent, that impact [itself] is substantial, but the other ripple impact is much larger—within this, the batteries have gotten much cheaper. As a result, what we define as the ‘city speed’ category (45-55km speed) has become cheaper as they are now eligible for financing. It will become far more prevalent than it was before. Because of this one change, we will see multi-fold growth. Plus, it has been extended till 2024—that also certainly helps.</p> <p>&nbsp;</p> <p>Then, of course, you have the state policies. Including the latest one from Rajasthan, there are about 16 plus states with an EV policy (offering sops to the EV sector). A lot of them were manufacturing-led, subsidising or giving some incentives for manufacturers. We told them, that’s important, but what’s even more important (is for the measures) to be demand-led. Once demand comes up in a state, you will start finding an ecosystem for manufacturing becoming far more prevalent. So now with all these factors coming into play, we’ve had a huge jump in the last year in terms of pricing, the total-cost-of-ownership (TCO) gap between electric and (conventional) combustion engine has widened in favour of electric considerably. The gap was wide enough already, now it has widened even further more. That is becoming very very critical for EV. Now this industry is going to see an explosion of growth, from this year on. This year is going to be a very, very critical year.</p> <p>&nbsp;</p> <p><b>So, you can now have an affordable electric two-wheeler that is powerful enough?</b></p> <p>&nbsp;</p> <p>The factors you are talking about, to an extent, were there many years back. When we had lead acid batteries, they had their own challenges. Last year, majority of the market (about 70 per cent) was a low-speed market, but I think the scale is going to tilt in favour of vehicles which qualify for the policies this year, which means a vehicle going at 45km an hour, with a range of 80km. The range was never was an issue, it was more of an anxiety issue. We offer vehicles ranging from 80 to 200km; we offer portable batteries across our product range, which you can take up to your apartment and charge. That said, range anxiety is a factor, so we do have a charging station network in specific cities and areas, about 1,600 of them so far (to be taken up to 20,000 soon). What we have found is that sales go up in those areas, but usage is minimal. So, this is only for topping up for 15-20 minutes. Clearly, we understand this infra is important.</p> <p>&nbsp;</p> <p>Other thing we’re doing is with roadside mechanics. They didn’t understand EVs well, so we’ve been training them—6,000 so far, and we’ll raise it to 25,000 in two years time. Attrition is very high.</p> <p>&nbsp;</p> <p><b>What is the indigenisation level in the industry—are we looking at R&amp;D, or is it all still imported?</b></p> <p>&nbsp;</p> <p>We have a very strong R&amp;D. But what we are not doing is basic tinkering at the chemistry level. That is best left to the specialist companies, they have the wherewithal to do that, they understand this far better. What we’re able to do in a very practical sense is to get the vehicle on the roads, test the batteries on Indian conditions, the heat, water, the cold and the potholes and see they are the best we can get for our Indian conditions. That is what we’ve been doing. Clearly, we’re gonna collaborate with a number of companies on this, and we have been doing it. This is not something we’re gonna manufacture in-house. We may assemble the batteries at some point of time, but that is actually a much lower value-add than manufacturing them. Cells are not being manufactured in India at this point of time. There is a new PLI scheme for advanced cell chemistry (ACC) manufacturing, and I understand a few companies have applied for it. In the next couple of years, we would see battery manufacturing also coming into India. It’s a chicken and egg situation, you know. How big is the demand, and that is when you increase supply. Now, demand has started increasing, so it makes commercial sense for someone to set up a battery manufacturing plant. Till such time, the batteries and cells are going to be imported, assembled and packaged here and supplied to us by our partners. That’s one part.</p> <p>&nbsp;</p> <p>The second is the evolution of the technology itself. We are now in the gen 4 of the battery itself. Cell chemistry is changing dramatically. Just like the performance of your computer or cellphone now is far better than one from a few years ago, the chemistry is also getting better. The batteries now last longer, the aH is higher and so on. There are projections that solid state batteries are going to come in, sodium batteries, aluminium batteries are going to come in. But it’s not something that is going to come in overnight. Any new technology take about 5 to 8 years to get established—manufacturing, testing, recyclability have to be found out, we have to find out how they perform under Indian conditions. We have batteries we are testing which will not come out until 2 to 3 years. That’s a constant process. As technology evolves, prices will continue go down to a certain level Now, 150 per kWh, there are projections it will go below 100. Then what’s going to happen is that battery density will improve, performance will improve. Investment that is going into this field, on a global level, is immense, whether it is EVs, IoT, autonomous driving, battery technology, charging infra. You’re going to see very, very different vehicles on the roads from what you see right now. They’re going to be far superior than what we have right now.</p> <p>&nbsp;</p> <p><b>You said this year is going to be critical. So, what would be that point of inflection, when EV takes off? What is it that’s needed, and when?</b></p> <p>&nbsp;</p> <p>A lot of those factors are already here. India is not necessarily the cheapest market, but it is a value sensitive market. We look at performance, price, durability. From that perspective, a great deal of factors are already in place. Now let me give you some of them, FAME on the basis of what money you are getting back. Financing is also going to fall in place. State policies, we’ve already got 15-plus states with an EV policy, what they’re doing, in many cases, is adding on benefits on top of the central policies. For the customer, it’s never been a better time than to buy an electric vehicle than now, and the next couple of years.</p> <p>&nbsp;</p> <p>Let me give you some numbers—if you take the ICE pyramid, 85 per cent of the vehicles are commuter or entry level vehicles, up to a price point of Rs 90,000 for a BS6 vehicle. When you look at electric, in a state with no subsidy, the vehicle’s gonna be around Rs 60,000 for a city speed (50km speed/80km range). It’s already lower than an ICE vehicle. In states where there is a subsidy, that amount comes lower to Rs 50,000, depending on which state it is.</p> <p>&nbsp;</p> <p>Now, look at TCO—if you are using a vehicle for 40 to 50km a day, you’re using average one litre of petrol, which is average Rs 100. For an EV, that’s about one-and-a-half units of power. That’s about 12 rupees! 12 x 100 rupees. If you look at a three-year period, that’s Rs 1 lakh versus Rs 12,000.</p> <p>&nbsp;</p> <p>The triggers for explosion (in growth) is already there. Now, what we need is awareness. The other is, we should have long-term policies in place for conversion. Many countries have already set targets, by 2030 or 2040 we will have this much conversion to electric, to emission-free vehicles. In India, we still don’t have such goals in place. Let me give you an example: If we didn’t set a target for BS6, how many would have converted? It was a very tough change, needed a lot of investment. It doesn’t have to be tomorrow, but set a target in a few years.</p> <p>&nbsp;</p> <p>The other is to have a dense charging infra in place. It can take care of the range anxiety.</p> <p>&nbsp;</p> <p>On our website, a customer can find us by a dealer, charging point. Nobody’s really using our charging points, it is more of a marketing expense. It is just like charging your mobile or computer—the same thing’s going to happen here also.</p> <p>&nbsp;</p> <p>We’ll reach a point where we may not need charging, we could make do with denser batteries.</p> <p>&nbsp;</p> <p><b>FAME is on till 2024. Do you think by that time the cost of economics would work for the companies, that they would have have scaled up enough by that time to not need these incentives?</b></p> <p>&nbsp;</p> <p>There could be a number of other steps as well. One is creating awareness. Second, import duties on batteries. Till such time we are pushing this industry through, let’s say for the next 2-3 years, everything should work in sync with each other, in terms of duty structure. And everything should be milestone-based—one million mark, this is what will happen. Two million, this will happen, like that. And localisation of even components not manufactured here, should happen. That establishes the industry very well. The other factor is a nudge, through B2B sector, to actually start delivering through EVs. A lot of B2B delivery is through old vehicles. So a nudge to the delivery sector to start delivering through EVs—that’s a saving for the rider, saving for the company and it’s beneficial to the environment. You’re not incurring any extra cost.</p> <p>&nbsp;</p> <p>The issue is that in an aggregator model, the driver is responsible for the vehicle, so the regular delivery guy uses an old vehicle he buys at a nominal rate but high interest. For him, an EV’s cost price may be too high. But a nudge in that area—how is that leasing going to happen to that guy, that’s very important. Once that conversion happens, it’s going to be in hundreds of thousands, I believe that is going to happen soon. Those are some of the factors. Some of these blocks are already in place. So now, we got to create that conducive ecosystem in place for electric mobility to really take off.</p> <p>&nbsp;</p> <p><b>What kind of product expansion are you looking at?</b></p> <p>&nbsp;</p> <p>We as a family historically have been a two-wheeler focused one. We’ve dabbled in three-wheelers in the past, but that’s not something we’re gonna get into it again not in the near future. This market is big enough to keep us more than busy for the time being. The number that we are looking at is a bare minimum of a full million. That is something certainly doable. We are already scaling up our factories to 3 lakh a month, and soon to one million and beyond. We are also seeing how the market’s evolving, and accelerate. That million number may happen sooner rather than later, is what I am saying.</p> Thu Jul 22 22:29:28 IST 2021 global-investing-a-portfolio-diversifying-option <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>WHEN IT COMES</b> to portfolio creation, one cannot ignore the importance of having a diversified portfolio. It is widely believed that the best way to create, conserve and multiply wealth is through diversification. The basic idea here is to have one’s capital spread across different industries, markets and/or financial products to protect your corpus from negative developments in a particular asset class. Most of our portfolios are concentrated in a single market and currency and lack foreign asset investments. Today, investors have the opportunity of considering geographical diversification as well.</p> <p>&nbsp;</p> <p>Markets around the world perform differently every year. As a result, diversification across international markets may allow an investor’s portfolio to deliver better returns compared to domestic markets. Thanks to digital platforms and a variety of other innovations, the borders around investments have come down. Many investors want their children to study abroad and Indian rupee generally tends to depreciate over time. Investing in international assets would prove to be a good hedge against the rupee depreciation and may prove to be a good investment in dollar assets which would help fund the future foreign studies.</p> <p>&nbsp;</p> <p>While at it, it is imperative to be mindful of the risks associated as well. In case of international investing, the risks associated could be market risk, credit risk, leverage risk, liquidity risk and interest rate risk. These risks are dependent on the current market scenario of the respective countries.</p> <p>&nbsp;</p> <p>There are several ways in which an Indian citizen can take exposure to international markets, especially the US markets. One can directly invest by opening a brokerage account (say in the US) and start investing. Every year, an Indian resident is allowed to transfer upto $250,000 (per individual) under the RBI’s Liberalised Remittance Scheme (LRS). Apart from direct investing, investors can opt for options such as feeder funds, mutual funds or country specific ETFs.</p> <p>&nbsp;</p> <p>While all of these options are available, investors often realise that they do not have the requisite knowledge as to which country to invest in, what is the nature of opportunities available in those countries, how to go about reallocating based on economic trends etc. Apart from all these, there are expenses on remittances that one should know about. Keeping all this in view, the easiest way to invest in overseas market is through Indian mutual funds that are investing abroad.</p> <p>&nbsp;</p> <p>If you are an investor wanting to invest in the US markets in order to take exposure to global companies operating in sectors such as e-commerce, digital platforms and social media, then opt for a mutual fund which invests specifically in technology space or bluechip US names. On the other hand, if you are an investor looking to take exposure to various geographies through a single fund then consider investing in a fund like the ICICI Prudential Global Advantage Fund. This is a fund of funds scheme—an umbrella fund that invests in other mutual fund schemes/exchange traded funds (ETFs) that invest in international markets.</p> <p>&nbsp;</p> <p>The fund invests across both developed and emerging markets. Given the lower co-relation between major economies it invests in, the risk element is reduced to a considerable extent. The scheme has a hassle-free approach and investors don’t need to take any stress of changing allocation between countries. The icing on the cake is that the scheme is tax efficient since there is no tax impact on rebalancing in the underlying schemes. Over the past one year, the scheme has delivered returns to the tune of 26.24 per cent.</p> <p>&nbsp;</p> <p><b>Venkataramakrishnan is the founder of Viruksham Financial Services</b></p> Thu Jul 22 17:58:22 IST 2021 infra-led-growth-is-a-force-multiplier <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>After many rounds of lockdowns and business recovery, India Inc has made it clear that beyond stimulus, beyond loans and beyond cash transfers, the single most important measure that can pull India back from the brink of a disaster is vaccination. So it did not come as a surprise when industry veteran T.V. Narendran, global head of Tata Steel, one of the biggest steelmakers in the world, made a clarion call for appointing a vaccine minister. In his first interview after taking over as president of the Confederation of Indian Industry, Narendran spoke about vaccines, the importance of technology as a geopolitical and economic strategy and how rural India could lead us to normalcy. Excerpts:</p> <p>&nbsp;</p> <p><b>If a third wave of the pandemic is inevitable, how can the government and industry mitigate the pain points better?</b></p> <p>Vaccinate. It reduces the chances of getting the virus and if you do get it, the impact is lower. That is step one. Step two is to make sure that we continue to build up infrastructure and prepare hospitals for the surge. There are multiple dimensions to the preparation that we need to do, like oxygen, but the most important one is making sure that more and more people are vaccinated.</p> <p>&nbsp;</p> <p><b>How different is the economic scenario now compared with the unlocking after the first lockdown?</b></p> <p>&nbsp;</p> <p>Wave one had a significant economic impact. But in wave two, it was more of a humanitarian crisis than an economic crisis. Wave two has been more severe on the psyche of people, because almost everyone has been directly or indirectly impacted. We did not have the same economic impact because we did not have a complete lockdown as we had in wave one. In wave one, the lockdown was sudden, so all of us were underprepared.</p> <p>&nbsp;</p> <p>In wave two, even though there were local lockdowns, the industry was better prepared. For instance, the industry has created facilities to take better care of migrant workers so that they did not go back. Factories were safer than the communities outside, because strong protocols were in place.</p> <p>&nbsp;</p> <p>The global economic conditions have also changed. Last time, globally, when everyone was dealing with a pandemic, the only country which had started recovering was China. This time you are already seeing the US recovering, Europe starting to come out and China back to pre-pandemic levels. A lot of stimuli has been announced by governments. So the global economic sentiment is more positive than it was when we came out of wave one.</p> <p>In India, the rural markets led us out of wave one. This year we hope the same will happen. I think we are seeing some signs that the rural markets are not as bad as we feared a few weeks ago. With a good monsoon, we hope it will once again lead the recovery back to normal growth.</p> <p>&nbsp;</p> <p><b>Business recovery seems swift, but certain sectors have been terribly affected, like hotels and aviation. Do you think any further stimulus package should be there on a sectoral basis?</b></p> <p>&nbsp;</p> <p>The high contact sectors have been significantly impacted—aviation, restaurants, retail, travel and tourism. These are huge employment generators. They have already suffered for more than a year. The larger companies will survive, but the smaller ones will struggle. So we [need to] support them with specific initiatives which can help them, like bringing aviation fuel under GST and encouraging people who have been vaccinated to travel within India by giving incentives on leave travel concession.</p> <p>&nbsp;</p> <p>We also have to make sure that the consumption economy is not impacted because people have spent more money than they had planned for medical expenditure. Can we have a 3 per cent GST cut for six months on consumer goods? Can we look at increasing the allocation for NREGA so that more money can flow to the rural economy? The other sector which struggled last year and is still struggling is MSMEs. So how can we continue to help them?</p> <p>&nbsp;</p> <p><b>Perhaps the government would also like to move from being a service-oriented economy to a manufacturing economy.</b></p> <p>It is important. A lot of the services jobs are in urban centres, whereas you need to create jobs across the country. Will it be easy? Certainly not, there is a journey to go through. The IT sector took off because we have a very good telecom network, so you did not have to navigate through the challenges of Indian roads and ports. That is why we have been encouraging the government to spend more on infrastructure. If you want manufacturing to be set up in India, we need to make sure that the competitiveness is not diluted outside the factories—you can have a world-class factory, but outside, they depend on the quality of the roads, the quality of the ports and so many other things.</p> <p>The journey to having manufacturing from 15 (per cent of the GDP) to 25 (per cent, the government’s stated goal) is not easy, but it is essential. Otherwise, we will struggle to create jobs across the country.</p> <p>&nbsp;</p> <p><b>Forecasts predict a post-pandemic boom.</b></p> <p>&nbsp;</p> <p>When large economies like the US and China continue to spend their way out of trouble, the rest of the world will benefit. That is the reason for optimism. In India, if we get our reforms and policies right, and leverage the demographic advantage we have with our technical skills, we can create opportunities.</p> <p>&nbsp;</p> <p>India has traditionally seen consumption-led growth. But now the government is spending a lot more on infrastructure than in the past. This infrastructure push and infrastructure-investment-led growth is also a force multiplier. So, if consumption-led growth continues and you have on top of that an infrastructure push, I think we are well-positioned to go up to the 9 per cent growth needed to hit the $5-trillion economy by 2025.</p> Thu Jul 08 17:04:42 IST 2021 kaushik-basu-book-is-a-fascinating-journey-into-the-heart-of-babu-dilli <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>RABINDRANATH TAGORE PEERS</b> over his shoulder as a silent spectator to the conversation. In fact, Tagore seems to be a constant companion, beyond his pride of place on the wall in Kaushik Basu's study. A former chief economic adviser (CEA) who has not hit controversy—a rarity these days—Basu is back in academia at Cornell University. His morning has been “punishing” and the Zoom interview has been pushed back 15 minutes for him to grab a coffee.</p> <p>&nbsp;</p> <p>Basu's stints in the government (CEA from 2009 to 2012) and the World Bank (chief economist from 2012 to 2016) have been turned into a rather dauntingly titled&nbsp;Policymaker's Journal: From New Delhi to Washington, DC&nbsp;and he is bound to make headlines for his rather candid take on the economy. “An economy which is on the rise, it is too early to tell, but it is floundering right now,” says Basu, who recently received the prestigious Humboldt Research Award.</p> <p>He faithfully kept a diary; hurried, and sometimes, illegible notes detailing his experience—slightly wide-eyed, baffled with the vivid colourful descriptions of life in North Block. His observations are delightful, honest, philosophical and always amusing. “I decided right at the beginning that I have to record it,” he says. “It was the shock of life in government and North Block, which was completely different to my world, the flat world of academia where I had spent my career.”</p> <p>&nbsp;</p> <p>Basu’s jottings provide a fascinating journey into the heart of the&nbsp;babu&nbsp;Dilli with its archaic, quaint idiosyncrasies. Early in job, his driver Manbir—a recurring character—“gently’’ admonished him, “Now that you are not a professor, but the chief economist of India, you don’t need to wear a seatbelt.”</p> <p>&nbsp;</p> <p>The perks of the job included access to a well-maintained bathroom on the first floor for secretaries where “three nicely laundered towels marked ‘Finance Secretary’, ‘Revenue Secretary’ and ‘Expenditure Secretary” were on three racks. Basu's staff waged a personal battle till he was allowed to use it, victorious when a fresh towel marked ‘CEA’ appeared. And a bureaucratic lesson: “To any question that you may be asked, you never say you don't have an answer. If you don't have an answer to the question asked, then give an answer to a question for which you do have an answer, never mind no one asked that question.”</p> <p>&nbsp;</p> <p>Peppered generously with anecdotes—a dinner party at 7RCR with Deepika Padukone, L.K. Advani, Mukesh Ambani, Nirupama Rao, Sonia Gandhi and no alcohol; encounters with Rahul Gandhi who “has a moral compass” (him referring to “CP” left Basu baffled—he meant Congress President Sonia); his conversation with Madeleine Albright over Kim Jong-il (she found him “quite personable”); meeting and hitting it off with Vikram Seth (he romanced a mannequin outside his window with whiskey); a soup and tea meeting with Chandrababu Naidu; a fondness for Nitish Kumar; interrupting the People’s Bank of China’s governor at a lecture on the express orders of Pranab Mukherjee; and suggesting to President Barack Obama to remind Indians of their country's history of plurality. Basu believes the conversation led to Obama's final lecture at the Siri Fort auditorium.</p> <p>&nbsp;</p> <p>It is easy to see that the Obama meeting is a favourite story, the kind recounted and retold often at gatherings to become a highlight, like a perfect dish. “I began the meeting by saying ‘Mr President, we have met once before’. He nodded but I am not sure he remembered,” recounts Basu, settling to a familiar rhythm.</p> <p>&nbsp;</p> <p>He was at that time the chief economist at the World Bank and Obama was to come to India as the chief guest for the Republic Day. “The bulk of the meeting was about the economy, India and US economic relations,” he recounts. (Another of Basu's passions. “We are two countries similarly founded.”) “During the end of the conversation, I said ‘Mr. President, remind Indians of this heritage that is common of openness and tolerance.’ It was laughed off,” he recounts. But just as he was leaving, an adviser came up to him and asked him, “Is there anything in the Indian writings that these were principles?” “I said, ‘Of course, just go and read the constitution…’ Then, it was a surprise when Obama referred to the same. You never know whether it was my sentence that triggered that,” he says.</p> <p>&nbsp;</p> <p>Basu loves a good story, and he retells it in the best way—wry, with an eye for details, with his impressions in good measure. But more than just his account of Delhi, it records a past which was less divisive, and certainly simpler and more open. He met Arun Jaitley at the North Block on July 4, 2014, as the finance minister was putting final touches to his first budget. “I asked him if he had met the erstwhile prime minister since he took office,” he writes. Jaitley replied that he had not. Basu recommended that he should. Jaitley called his secretary and fixed a time.</p> <p>&nbsp;</p> <p>Basu also met Prime Minister Narendra Modi—a 35-minute conversation on the economy at 7RCR “where most of the decor was unchanged”. He left “his office feeling good.” &nbsp;“I have to say that he gave me a very good hearing,” he says. “I said ‘Prime Minister, India should be held together as an inclusive society.’ I walked out feeling that he listened to me very carefully. I had broad ideological differences with the government, but thought that they would run the economy well. But subsequently, the running of the economy has been a big disappointment.” His assessment? “We are relying only on gut feelings without the honest bureaucrats and honest advisers which has happened several times during my time in government,” he says.</p> <p>&nbsp;</p> <p>This book, however, does not delve into the current economic crisis. It is not about the economy or a triumphant we-handled-it-better sort of book. “As a senior bureaucrat, you expect an incident of corruption or something. I was never privy to anything like that,” he says.</p> <p>&nbsp;</p> <p>It is, however, a book that hopes to restore the halo of respectability to former prime minister Manmohan Singh. Basu worked closely with Singh, often turning to him for advice, offering it, watching him from close quarters and remained in touch with him till the pandemic broke out. “I think, in many ways it requires a deep courage to be the person he is,” says Basu. “Contrary to what people say, you need to have courage to be modest as a prime minister. He has that courage.”</p> <p>&nbsp;</p> <p><b>Policymaker’s Journal: From New Delhi to Washington, DC</b></p> <p>Author:Kaushik Basu</p> <p>Publishers: Simon &amp;<br> Schuster India</p> <p>Price: Rs699,</p> <p>Pages: 375</p> Thu Jul 08 16:58:48 IST 2021 murthys-are-bigger-than-any-film-director-ashwiny-iyer-tiwari <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Ashwiny Iyer Tiwari is an avid filmmaker and writer. She has directed popular Bollywood flicks such as <i>Bareilly Ki Barfi</i> and the recent Kangana Ranaut-starrer <i>Panga</i>. Iyer is now aiming to write and direct a biopic on the Infosys co-founder Narayana Murthy and his wife Sudha Murthy. The biopic will trace the journey of the Murthys and the iconic Infosys brand. In a conversation with THE WEEK, Tiwari talks about the biopic and why she finds the Murthy couple so special.</p> <p>&nbsp;</p> <p><b>Q\ Your views on the biopic on the Murthys and Infosys?</b></p> <p>&nbsp;</p> <p>A\ As a Indian citizen belonging to a middle-class family, I feel that the Murthy story resonates with every Indian who may not have business families supporting them but do want to be entrepreneurs. The younger generation. The middle class is the new India. And stories like theirs only make each and everyone pursue their dream even more aggressively.</p> <p>&nbsp;</p> <p><b>Q\ What prompted you to make a biopic on the Murthys?</b></p> <p>&nbsp;</p> <p>A\ I am a big fan of Sudha Murthy and eventually want to be like her. Their simplicity and learning capacity at this age is inspiring enough for me to not say I am done with my work. There is so much more to do. They teach you that every day.</p> <p>&nbsp;</p> <p><b>Q\ Did you meet the Murthys? What was their reaction to the biopic?</b></p> <p>&nbsp;</p> <p>A\ Yes, my meeting with Sudha Murthy turned from a meeting with a director to talking about anything under the sun. More like a daughter speaking to her mother.</p> <p>&nbsp;</p> <p>Our first meeting with Infosys co-founder and mentor Narayana Murthy was more like an interview where he had read everything about me on Wikipedia! He wanted to know whether I tick all the boxes of competency, life choices—spearheading this important story from our country to the world. He said he believes in deadlines and hopes that I am not the creative ones who will say after a while 'oh today I am not in a mood to write'. After a few days, I received a mail from him saying how delighted he was to meet us. The journey had begun already in my heart. I had to make the Steve Jobs or Facebook of the world called Murthys and proudly present it to the world. Their admiration gangs are too many. They are bigger than any film. They are the life to follow.</p> <p>&nbsp;</p> <p><b>Q\ When can we expect the biopic to release?</b></p> <p>&nbsp;</p> <p>A\ I am still writing it and there is a long way to go. I cannot commit anything now.</p> Fri Jul 02 20:01:54 IST 2021 infosys-at-40-journey-of-the-it-giant <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Sudha Murthy, </b>social entrepreneur, writer, teacher and wife of IT doyen N.R. Narayana Murthy, still remembers that April day in 1981 when she handed over her savings of Rs10,000 to her husband. “It was a lot of money at that time,” says Sudha, who was then an engineer with TELCO (now Tata Motors). With that money, Murthy and six other engineers together founded Infosys on July 7, 1981.</p> <p>“The first headquarters was our house in Pune, near Deccan Gymkhana,” says Sudha. “For us, it was not just a brand or a company, but a thought to change India’s future with software. My husband and the other co-founders thought it was a legal and ethical way to become prosperous.”</p> <p>In the next couple of decades, Infosys prospered and became a blue-chip firm. And now, on its 40th anniversary, it has a market capitalisation of approximately $79.74 billion and employs more than 2.5 lakh people worldwide. The company’s journey has been both challenging and eventful. And, right from the start, it is teamwork that helped Infosys face the challenges.</p> <p>Sudha recalls the initial days of the company. “It was like one big family,” she says. “The other founding members completely trusted Murthy as an elder brother and a father figure. When those stationed abroad came to India [for short visits], my husband would ask them not to take any house [for rent] and rather stay with us.”</p> <p>The challenges to start a company, especially an IT company, in India during the 1980s were aplenty. For instance, importing a computer required multiple visits to Delhi. Bank officials were reluctant to lend to a software business, as they were unaware of it. Getting even a telephone connection took several years.</p> <p>“On every count, we had lots of friction to do business during the first decade of the company,” says Sudha. “Getting the first customer was very challenging. Brand India did not have a good image outside then. People were very sceptical about any software developed in India. We gradually overcame all those problems through our determination, hard work, discipline and optimism.”</p> <p>US-based Data Basics Corporation was the first and only customer for Infosys for a long time. “We were small then. The projects were also small,” says Kris Gopalakrishnan, co-founder of Infosys and current chairman of Axilor Ventures. “We initially developed an enterprise resource planning software for their apparel manufacturing package. We had to prove that we can develop world-class software sitting here in India. We would develop the software here and then send its [installation disk] to the United States. It would usually take two weeks to reach the US. The software would then be installed and supported locally in the US. This continued until the communication link [for real-time collaboration] was set up in the late 1980s.”</p> <p>Sudha recalls another anecdote from the early days. “My husband believed that whatever be the financial situation of the company, we should be able to pay our employees on time,” she says. “The client used to give us a cheque at the end of every month. Once it so happened that there was a delay of a few days. We needed around Rs20,000 to pay the salaries. So, I went to a bank for a loan. I told them they could keep my jewellery as mortgage. The bank officials laughed at me and said that they cannot give money just like that as they have to check for the genuineness of the jewellery. Then they said that there was some overdraft [available], and gave me the money. The officials told me that they did not want to keep my jewelry, but I insisted that they keep it.”</p> <p>Sudha adds that Murthy will not compromise on anything when it came to being ethical. “Once I wanted to make an international call to my husband as he was abroad,” she says. “I needed to speak to him urgently as our son, Rohan, was unwell. I called him from the office. My husband immediately asked me to deposit Rs100 in the office as it was a personal call.” There are other stories, too, about Murthy’s integrity. In 1984, Infosys decided to import a super minicomputer for their overseas projects. But when the machine landed in Bengaluru, the customs officials demanded a bribe. When the Infosys manager who was handling the import informed Murthy about the issue, he asked him to find an alternative instead of paying the bribe. The manager replied that the company has to pay a customs duty of 135 per cent and appeal for a refund. Murthy said: “Do it.”</p> <p>An interesting fact about Murthy is that he cannot drive. “I used to be Murthy’s official driver,” quips Sudha. But the Infosys founder did know how to drive his firm to the growth track. By the time Murthy stepped down as the company’s chairman in 2011—on turning 65, following the company policy—Infosys had a market capitalisation of Rs1.86 lakh crore.</p> <p>Data Basics Corporation remained the only client until 1987, but from then the number of customers multiplied. By then, Infosys had set up sales and marketing offices in the US and had started marketing their services directly. “We were the first company to champion the global delivery model and stayed true to it,” says Gopalakrishnan. “At that time, many US companies were also doing software development, but locally. They started adopting this model only after Indian companies had worked hard in debugging it.”</p> <p>According to Gopalakrishnan, from 1985 to 1987, Infosys had tried its luck with hardware development, too. “We succeeded, but not as [much as] we had hoped for,” he says. “We sold that business. In 1985, we also entered the banking software business with Finacle.” Finacle is one of the top three core banking software packages in the world now. “As an Indian company, we wanted to have some services in India,” adds Gopalakrishnan. “We thought that we would enter the Indian market through a product, and we chose banking to be the industrial vertical to be in.”</p> <p>Infosys founders were sure that the requirement for custom software would grow and it was a valid business proposition. And, just as they foresaw, Infosys grew very rapidly in the late 1990s until the early 2000s. “Many times we had second thoughts about how things would finally shape up,” says Gopalakrishnan. “In 1989, we got a $1 million offer for the company. Fortunately, we decided to continue.”</p> <p>Nandan Nilekani, co-founder and non-executive chairman of Infosys, says that over the years, the company has faced several challenges, and came out stronger from each one of them. “I still recall that it took us over two years to get our very first computer,” he says. “Fast forward to today, an age characterised by digital disruption across industries, Infosys is not only re-imagining itself to create more value for its stakeholders, but also helping incumbent enterprises across the world to accelerate their digital journeys.”</p> <p>Salil Parekh, managing director and CEO of Infosys, says he is very optimistic about the future roadmap of the company. “The opportunity we have on our hands today is a fantastic one,” he says. “A key imperative for success in the digital era would be nurturing and transforming talent. Infosys has always believed in creating a strong foundation for its talent pool through strategic investments in world-class learning infrastructure.”</p> <p>Rajiv Ranjan, a former Infoscion and founder of peer-to-peer lending platform PaisaDukan, feels that brand Infosys inspired the entrepreneur in him. “Infosys [imparted] me with the strengths of good governance, innovation and community development to start my venture,” he says.</p> <p>Ranjan adds that the strong foundation laid by its founders has kept Infosys in good stead. “Over the last 40 years, the iconic company has gone through ups and downs, ranging from several international recognitions to sexual harassment cases, favouritism charges and even issues concerning financial frauds,” he says. “The net outcome has ups in its favour owing to the high corporate governance standards that it has set for itself. The fact that the valuation of Infosys has grown from zero to billions and still growing shows that the foundation laid by the promoters has stood the test of time.”</p> Thu Jul 01 17:19:21 IST 2021 ashok-soota-writes-on-the-x-factor-of-infosys <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>The Indian IT </b>industry took off in the early 1990s. Before that, it was just a tiny industry with TCS being the Big Daddy, Infosys representing the future aspirations and Wipro being the challenger. During the 1990s, the IT sector grew by 60 per cent, and in the 2000s the growth rate touched 25 to 30 per cent. The 2010s saw the growth slowing down to about 10 to 12 per cent, but on a much larger base. Infosys had all the ingredients to be in the top two, in terms of growth, almost all through this period.</p> <p>Although Infosys never overtook TCS, for over 20 years, it was seen as the flag-bearer of the Indian information technology industry, until TCS reclaimed the mantle. In the early 1990s, the value proposition of the Indian IT industry was attractive in terms of cost reduction. Customers made a beeline for Indian shores. The key criteria for vendor selection were good governance, ability to scale rapidly and strong processes to ensure quality delivery. TCS, Infosys and Wipro had all these in good measure and it is therefore not surprising that they pulled ahead of the others during the 1990s.</p> <p>The X-factor of Infosys was its continuity, commitment and energy of a team of seven techpreneurs, and the leadership provided by N.R. Narayana Murthy. Infosys was the price leader for much of the period from 1999 to 2010. They were continuously testing the price envelope while the rest of us followed. The premium pricing for services which, in my view, were not too different from say TCS and Wipro, also gave them superior profitability.</p> <p>One of the less glamorous and mostly thankless jobs is delivery. Business leaders invariably get the credit and the sales team will often point out the business they lost due to poor delivery. At Infosys, I only heard praise for their delivery, and the credit for this goes largely to Kris Gopalakrishnan, who handled delivery, and S.D. Shibulal, who looked after operations.</p> <p>The finance function at Infosys, led by T.V. Mohandas Pai for the most part, laid a strong, data-based foundation. In the human resources department, they had an innovative leader in Hema Ravichandar. Infosys also created what was at that time the most generous employee stock ownership plan, largely driven by Murthy’s philosophy of sharing the wealth.</p> <p>The IT industry is India’s first globally competitive industry. As the flag-bearer for the same, the importance of Infosys goes far beyond its impressive growth and financial results.</p> <p>—<b>As told to Abhinav Singh</b></p> <p>&nbsp;</p> <p><b>Ashok Soota, executive chairman of Happiest Minds Technologies Limited, is one of the pioneering leaders of the Indian IT industry</b></p> Thu Jul 01 17:07:56 IST 2021 pandemic-deepens-the-divide-between-centre-and-states-in-economic-matters <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>As a parable, it is almost cute. A father who makes a promise to his children, while asking them to go out and make a life for themselves in the world out there. “I will be there whenever you need me,” he assures them.</p> <p>&nbsp;</p> <p>But things do not pan out as expected. Trouble hits, the going gets tough, and the father does not live up to the promise. “Even the father was not equipped to handle it,” said Nikhil Gupta, chief economist at Motilal Oswal Financial Services, who loves using the example to describe the tussle between the Union government and states over tax revenues.</p> <p>&nbsp;</p> <p>Beyond stories is the hard reality of the fiscal tug-of-war between the Centre and states. Fault lines and turf wars which were bubbling for decades have boiled over into a gloves-off spat, sparked off by the perilous state of state finances and the unravelling of the Goods and Services Tax (GST) formula.</p> <p>&nbsp;</p> <p>The issues go much beyond the confrontation over compensation money. The original GST rollout assured that the Centre will ‘compensate’ states for anything less than 14 per cent growth in revenues from GST for a period of five years. It was done mainly to sweeten the deal and get states to agree to accede most of their tax streams into a unified central structure. However, a protracted economic slowdown, followed by a pandemic and lockdowns, saw the Centre not paying up the dues on time. With coffers drying up and with social and health spending rocketing, states were at their wits’ end.</p> <p>&nbsp;</p> <p>Matters came to a head at GST Council meetings last year when Finance Minister Nirmala Sitharaman suggested a formula for states borrowing from the markets. Opposition states played hardball, adamant that it was the Centre’s job and that the compensation money was a promise that was to be kept. Sitharaman blinked and agreed to borrow the money, with a compensation cess to be charged over and above GST beyond the five year period (which ends in June 2022) and paid back to the states. “When the promise was made, nobody in their wildest dreams had any idea that a once-in-a-century event like this would happen,” said Gupta.</p> <p>&nbsp;</p> <p>For a decision-making body that took pride in arriving at all decisions unanimously, the past few months have been less than pleasant for the GST Council. Many of the crucial decisions in the last four meetings, since the compensation issue blew up, were not unanimous. Many, in fact, came through after heated discussions, with state finance ministers distinctly grouped along party lines. In the last meeting, discussions got heated over slashing the tax on Covid drugs and vaccines. The meeting broke up without taking a call, leaving it to a group of ministers (GoM). The GoM recommended slashing of taxes on many Covid items, ranging from medicines and ambulances to even furnaces, most of which were accepted by the council.</p> <p>&nbsp;</p> <p>But allegations flew thick and fast that Sitharaman had slyly composed the GoM with ‘yes’ ministers. There was none from Congress-ruled states. “FM treats the GoM as an extension of the NDA and its supporting parties. All (state) FMs who express a contrary view are treated as errant schoolboys,” sniped former finance minister P. Chidambaram.</p> <p>&nbsp;</p> <p>The irony is delicious. As the chief minister of Gujarat, Narendra Modi was a champion of greater fiscal autonomy for states. After becoming prime minister in 2014, he replaced the Planning Commission with NITI Aayog, saying, “States…do not want to be mere appendages of the Centre.”</p> <p>&nbsp;</p> <p>His government’s actions, however, spoke otherwise, particularly in its second term and loudly after the pandemic hit. The daily-changing dos and don’ts of the lockdown were micromanaged down to district levels by bureaucrats sitting in Delhi. Many Central schemes were left to states to implement, while the credit went to Modi and the BJP.</p> <p>&nbsp;</p> <p>Getting states itchy has also been the increasing share of cess and surcharge in Centre’s tax revenue. They now account for 15 to 18 per cent of overall revenues. The catch? The Centre gets to keep all of it. “Increasing share of cess and surcharge in the gross tax revenue has reduced the size of the divisible pool,” said Suyash Tiwari and Saket Surya of PRS Legislative, in their paper ‘State of State Finances’.</p> <p>&nbsp;</p> <p>Tamil Nadu’s finance minister P.T.R. Palanivel Thiagarajan recently suggested a rework of the ‘one state, one vote’ rule in the GST Council. States that contribute more, he argued, should get a proportionate representation in voting rights. The logic is simple—the concept of taxes being paid to the Centre and distributed between states has not worked the way it should have, that is to help weaker states prosper by doling out more to them. Instead, as pointed out by experts, the weaker states have become profligate. “The reason why (less well off) states like UP and Bihar could maintain their account surplus is that they get a lot more from the Centre,” said Sunil Kumar Sinha, principal economist at India Ratings and Research.</p> <p>&nbsp;</p> <p>The compensation cess (to be paid to states) collection this financial year is expected to fall to Rs77,000 crore while the requirement could top Rs3 lakh crore. Additionally, Rs61,000 crore is pending to be released to states for dues from the lockdown period till January this year. “When you have national and sub-national governments, these issues are bound to crop up,” said Sinha. “It is a reality in this country.”</p> Fri Jun 25 17:06:38 IST 2021 give-some-additional-power-of-taxation-to-states <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>C. RANGARAJAN,</b> who was the governor of the Reserve Bank during the crucial period of India’s transition to a liberal economy, is still one of the most sought-after voices on economic matters. In an exclusive interaction, he talks about the effects of the pandemic, the rising inflation, and the relationship with the Centre and the states on fund distribution.</p> <p><b>What do you think about the current state of the Indian economy, especially after the second wave of the pandemic?</b></p> <p>&nbsp;</p> <p>The contraction of the Indian economy in 2020-2021 is now estimated at 7.3 per cent, which is lower than the contraction of 8 per cent estimated earlier. As far as the growth in the current financial year is concerned, many analysts had earlier estimated that the growth rate could be in double digits. Now they have revised their estimates downwards and the RBI has estimated the growth rate at 9.5 per cent.</p> <p>&nbsp;</p> <p>To compensate for the contraction in the economy in 2020-2021, it will have to grow at 7.8 per cent at the minimum. My own estimate as far as the current year is concerned is that the economy could grow at 9 per cent. However, that is predicated on two assumptions—if suitable policy measures are taken by the government in order to stimulate the economy and, more importantly, the lockdown is lifted as early as possible. Without the lifting of the lockdown the growth rate cannot pick up and even increased government expenditures will not work.</p> <p><b>What should be the priority of the government to revive the economy?</b></p> <p>&nbsp;</p> <p>In order to revive the economy, government expenditures should be maintained at high levels. There are certain types of expenditures that are imperative. I would like to classify these expenditures into three categories. First, the expenditure on health care, which involves the extension of hospital facilities including expenditures on drugs, ventilators and vaccines. This is going to be a big burden.</p> <p>&nbsp;</p> <p>Second, the expenditures on vulnerable groups who have been affected by Covid-19. The most vulnerable group is that of migrant labourers and therefore expenditure in the form of some cash distribution is a must for them.</p> <p>&nbsp;</p> <p>Third, there are certain stimulation expenditures that the government can do. These expenditures are in addition to what the government is contemplating. The budget talks about Rs34.8 lakh crore as the total expenditure. I feel that this may have to go up and the fiscal deficit will have to go up by one percentage point. Government expenditure in any form acts as a stimulus.</p> <p>&nbsp;</p> <p><b>There is a feeling that the Centre-state financial relationship has worsened during the pandemic. What are the fault lines and what would be your recommendations to fix things?</b></p> <p>&nbsp;</p> <p>The relationship between the Centre and states has been aggravated in the recent period, mainly for two reasons—the problems associated with the GST compensation and the other relating to the expenditure on vaccination. In addition to the general problems, these two issues have created a situation in which the Centre and the states are not moving together. As far as the GST compensation is concerned, finally some arrangements have been made that could have been made earlier.</p> <p>&nbsp;</p> <p>The issue of compensation is controversial because the money required to make up for the loss—if the growth rate is less than 14 per cent of the basic taxes collected by the states—is a fairly large amount. However, this is a difficult year and both the Centre and the states face a problem. It could have been approached by the Centre in a better way and it would not have led to a feeling among the states that the Centre was trying to get out of a commitment which it had already made. It is not only a commitment, but a part of the Act.</p> <p>&nbsp;</p> <p>Secondly, with regard to vaccination, initially the Centre started to pay for everything, but then tried to shift half of the burden to the states. This in particular was a very bad move and certainly aggravated the relationship between the states and the Centre. Finally, the Centre has agreed to take the burden. In both cases the Centre could have behaved better.</p> <p>&nbsp;</p> <p><b>What are the other issues related to fund transfer between the Centre and the states?</b></p> <p>&nbsp;</p> <p>I feel there are a few other issues relating to the adequacy of fund transfer to the states from the Centre, and the way the funds are allocated. One relates to the vertical transfer and the second relates to the horizontal distribution.</p> <p>&nbsp;</p> <p>With regard to the horizontal transfer, what we are hearing from a few states is that the present criteria are biased and in favour of the low-income states. The basic reason for setting up a finance commission and evolving a formula is to create a situation of equalisation—that is the poorer states require special support and therefore the criteria used is in favour of the poorer states.</p> <p>&nbsp;</p> <p>For instance, one of the criteria used is the distance criterion—they take the highest per capita income state and measure the distance of the particular state in relation to that level and the farther the state is from the highest per capita income state the more funds it gets. Theoretically speaking, the highest income state will get nothing, but some adjustments are made by the finance commissions. In the formula used, this distance criterion has a weight of over 50 per cent; so half of the resources that are transferred are being judged by the distance criterion.</p> <p>&nbsp;</p> <p>The higher income states now feel the pinch, and therefore some adjustments may be necessary in the way in which the weights are given to the various criteria and one has to look at it carefully. But the principle of equalisation cannot be totally sacrificed. And this principle is adopted not only in India but everywhere.</p> <p>&nbsp;</p> <p>Another issue that I mentioned earlier is how much revenue of the centre should be shared with the states. Each finance commission has been trying to increase the share by two or three percentage points. The 14th Finance Commission, however, made a big change and that is because the Planning Commission, which was also distributing funds, got almost abolished by that time and what the Planning Commission was doing also effectively got transferred to the finance commission. I would suggest that besides looking at what the share should be, we can also think of giving some additional power of taxation to the states.</p> <p><b>What are your views on GST? Can states be given more taxation rights?</b></p> <p>&nbsp;</p> <p>The GST is a good measure, and once the teething problems are over it will give good revenue to the Centre and states. We should work towards making the GST function better and more efficiently. At the same time, we can also think of allowing the states to levy income tax, which indeed is followed by some federations. This is the case in the US also where the states have the power to levy income tax. The states there have been very careful not to raise the rate much because they know that if one state raises it beyond a certain level then people and companies may move out.</p> <p>&nbsp;</p> <p>In fact, there are some states in the US that do not levy any income tax. I think this is something one should look at. If this is done, perhaps some of the higher income states will be satisfied.</p> <p>&nbsp;</p> <p><b>What is your opinion on direct monetisation?</b></p> <p>&nbsp;</p> <p>There is a near consensus that the government expenditure should increase. It is in the context of a situation in which revenues are not as buoyant. In this situation, perhaps the fiscal deficit may go up from 6.8 per cent to 7.8 per cent of the GDP. Then there is also a proposal that in order to compensate the loss of revenues to the state governments the Centre will have to borrow.</p> <p>&nbsp;</p> <p>As per my estimates, the overall borrowing of the Centre alone for FY 2021-22 would be Rs16.3 lakh crore. In FY 2019-20, which was the last year before the Covid pandemic, the borrowing was half of it. The government cannot fulfil this high level of borrowing without RBI support. The RBI support can be in two forms—direct and indirect. Direct support is monetisation—that is the bonds are picked up by the RBI directly and, as a consequence of it, money is created and handed over to the government. However, it is indirect monetisation that is happening currently and the RBI is pushing liquidity into the system and there is enough liquidity so that the banks and others can easily subscribe to the loans of the government.</p> <p>&nbsp;</p> <p>We should refrain from direct monetisation. We had abolished direct monetisation in the 1990s and it was reiterated by the FRBM Act also. However, the only problem here is that the large injection of liquidity into the system in order to support the high borrowing programme can result in inflation. The policymakers should be conscious of this. All those who plead for higher levels of government expenditure must also be conscious of the fact that it involves higher borrowing and higher support of the RBI, and that can result in inflation. The inflation has already started rising, and according to the latest information, retail inflation has already crossed 6 per cent and wholesale price inflation is in double digits.</p> <p><b>What are your views on Modern Monetary Theory (MMT)?&nbsp;</b></p> <p>&nbsp;</p> <p>In my view MMT is not a monetary theory and rather it is a fiscal theory. What the MMT says is that a government which has a sovereign power to issue notes can borrow to any extent and there need not be any rules as to how much it should borrow. The argument is exactly the same as I had mentioned about monetisation, namely that if the borrowing exceeds what is being absorbed by the people and the companies then that will be met by the subscription by the central bank of the country and therefore the government need not worry.&nbsp; The MMT says that the only limit here is perhaps the impact on inflation and that they accept but otherwise they say that as long as the currency can be issued by the government in collaboration with the central bank of the country then there is no limit on the borrowing. I think they are underestimating the impact on inflation because of such a policy. I do not think it is acceptable.&nbsp;</p> <p>&nbsp;</p> <p><b>Some sectors such as travel and hospitality, airlines and retail have been badly hit by the second wave of the pandemic? What can be done to revive these sectors?</b></p> <p>&nbsp;</p> <p>Some of these sectors will not be able to grow unless the lockdown is lifted and mobility is restored. If people are not traveling from one place to another place there would be no demand for accommodation. Lockdown has to be lifted with all precautions to allow these sectors to revive. Only if people feel safe to travel then only they will travel and only then these sectors will regain their growth. RBI has brought out some financing mechanisms for the units in these sectors with a special line of credit so that the banks can utilise those resources for the purpose of lending to these sectors. To some extent a credit guarantee scheme is also being introduced .i.e. if there is a default the government will bear the loss. These are limited in nature and I believe that many of these service industries will really come back into operation only when people travel without the fear of covid and the lockdown is removed.&nbsp;</p> <p>&nbsp;</p> <p><b>What are your views on job creation? The second wave of the pandemic seems to have left lakhs of people unemployed?</b></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>In my view employment is not very different from growth. Growth and employment go together therefore once growth picks up, the people who have now been thrown out of employment will come back. I particularly see it in the services industry. Currently due to restrictions on movement, activity is not picking up and once it happens then employment will come back. Many companies in the hospitality sector have really not used the services of the informal sector due to the pandemic and therefore the informal sector has been thrown out of business. Some help in terms of providing relief to the people who have been thrown out of employment through cash can be done. The real pick up in their activity will happen only when the lockdown is fully lifted and the economic activity picks up.&nbsp;</p> <p>&nbsp;</p> <p><b>There have been talks about making India a $5 trillion economy. When will we reach there?&nbsp;</b></p> <p>The current situation is that we have virtually lost two years. In FY 2019-2020 India's GDP was $ 2.7 trillion. The decline in 2020-21 will be compensated by the growth in 2021-22 so at the end of FY 2022 we would be where we were at the end of FY 2019-2020. So we have to move from $ 2.7 trillion to $ 5 trillion. All calculations show that in order to reach the $ 5 trillion economy from a $ 2.7 trillion economy the growth of the Indian economy has to be strong with an annual growth of 9 percent for the next five to six years. That is a big challenge indeed.&nbsp;</p> Sat Jun 26 18:22:03 IST 2021 tata-motors-stellar-show-in-a-difficult-year-could-be-start-of-a-dream-run <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>TATA MOTORS LAUNCHED</b> the hatchback Indica in 1998. Though the company had been making trucks and buses for decades and utility vehicles for many years, it was its first attempt at cars. Indica was also the first car to be designed and manufactured by an Indian company. It was a good start. Tata Motors sold about a million Indicas, and went on to make several other models and cornered a market share of 17 per cent in a decade.</p> <p>&nbsp;</p> <p>But things went south soon, as the company struggled with the ambitious Nano project. By 2013, its market share slipped to single digits, and questions were raised about its sustainability. Though it churned out at least one model every year, none made any impact till the Tiago in 2016 and the Nexon a year later. A game-changer came in 2019, in the form of the Harrier, made on the Omega platform derived from the Tata-owned British carmaker Jaguar Land Rover.</p> <p>&nbsp;</p> <p>Even as the automobile industry struggled to deal with the pandemic and lockdowns, Tata Motors’s passenger vehicle sales surged 69 per cent from a year ago to 2,22,025 units in the year-ended March 2021. This is when the sector saw a drop of 2 per cent in sales. It was the highest sales in the segment for Tata Motors in eight years, helping it regain the third spot behind market leader Maruti Suzuki and Hyundai Motor India. “Tata Motors gained market share across segments, leading to overall market share of 8.3 per cent, on the back of a strong product portfolio,” said Jinesh Gandhi, research analyst at Motilal Oswal Financial Services.</p> <p>&nbsp;</p> <p>A good response to the Altroz premium hatchback pushed the company’s share in the compact segment to 15.4 per cent, said Gandhi. His analysis also shows that volumes of the Nexon SUV accelerated 47 per cent. The Harrier and Safari SUVs helped the company gain a market share of 16.1 per cent (up 650 basis points) in the SUV segment.</p> <p>&nbsp;</p> <p>The company’s electric vehicles business grew three-fold in the last financial year, largely driven by the Nexon EV, which was the largest selling electric car in India—with sales of more than 4,000 units since it was launched in January 2020. Tata Motors is building an ecosystem for EVs with the support of group companies. Tata Power, for instance, is helping set up the charging infrastructure across cities. With Tata Chemicals, it is evaluating technical partners for establishing a lithium ion battery manufacturing plant.</p> <p>&nbsp;</p> <p>The strong momentum helped Tata Motors report a standalone net profit of Rs1,646 crore in the March quarter against a net loss of Rs4,871 crore a year ago. “Tata Motors has surprised investors with market share gains, margin improvement in ICE (internal combustion engine) segment, while grabbing customer mind space via EV offerings,” said Nishant Vass, analyst at ICICI Securities. In the past one year, Tata Motors shares gained 240 per cent, with the company’s market cap crossing Rs1.11 lakh crore.</p> <p>&nbsp;</p> <p>India’s automobile sector saw a good recovery after Covid-19 cases ebbed and the country opened up in phases by the end of last year. A devastating second wave, however, hit demand in the April-June quarter. A semiconductor shortage is also hurting automakers globally. The expectation, however, is that demand will bounce back quickly as states start easing restrictions and preference for personal mobility will gain momentum.</p> <p>&nbsp;</p> <p>Sales of sports utility vehicles have been on the rise in India, with their share hitting 35 per cent of all passenger vehicles sold in the first five months of 2021. Tata Motors has a strong presence in the segment. After the success of Nexon, Harrier and Safari, it is now getting ready for its next big launch, a micro SUV codenamed HBX. Based on the Altroz platform, the HBX will be positioned below the Nexon, taking on the likes of the Mahindra KUV100.</p> <p>&nbsp;</p> <p>Things seem to be turning around for Jaguar Land Rover, too. In the January-March quarter, JLR’s retail sales were 12.4 per cent higher than the previous year, at 1,23,483 units. More importantly, in China, sales doubled in the period. Sales in North America, another major market, were up 10 per cent. In the UK and in Europe, though, sales slipped 7 per cent and 5 per cent, respectively. Adrian Mardell, the CFO of JLR, recently told investors that overall orders currently are around one lakh units. The Defender SUV that made the global debut in 2019 has been selling quite well.</p> <p>&nbsp;</p> <p>JLR is important for Tata Motors, as it constitutes half of the company’s global unit sales and accounts for almost 80 per cent of its consolidated revenues. Under Thierry Bollore, the new CEO who joined in September 2020, JLR is moving fast towards electric mobility. Jaguar, which launched the all-electric I-Pace last year, will be an electric brand by 2025. Land Rover will launch its first fully electric vehicle in 2024. By the end of the decade, all Jaguar and Land Rover models will be available in electric. “Our estimation is, about 20 per cent of our sales will be all electric by 2026 with a commitment for tailpipe zero by 2036,” Mardell told investors. JLR, however, will face stiff competition, as its traditional rivals have all been building strong electric portfolios.</p> <p>&nbsp;</p> <p>Tata Motors is also focusing heavily on reducing its debt, as a part of its plan to become debt free in three years, as envisaged by Tata Group chairman N. Chandrasekaran. The company reduced its net automotive debt by Rs7,300 crore to Rs40,900 crore last year. JLR’s net debt reduced by £300million to £1.9 billion as of March 31, 2021.</p> <p>&nbsp;</p> <p>At the same time, both Tata Motors and JLR are not slowing down on investments. JLR has planned capital expenditure of £2.5billion to £3billion a year over the next few years. In the domestic business, Tata Motors will invest around Rs3,500 crore. “Having seen three quarters of performance, we are very clearly seeing that once the pandemic or all the lockdowns are out, there is definitely a demand resurgence that happens. Therefore, this time, it’s not a business continuity plan, it’s a business agility plan. We want to be as flexible as we can,” said P.B. Balaji, group CFO of Tata Motors.</p> <p>&nbsp;</p> <p>There are, however, plenty of challenges to overcome. Like others, Tata Motors is also struggling with the global semiconductor shortage and disruptions in the supply chain. Analysts also point out that the business, commercial vehicles in particular, is cyclical. Another wave of Covid-19 and fresh lockdowns could dent the recovery.</p> <p>&nbsp;</p> <p>Tata Motors is also dealing with management changes at the top level. Guenter Butschek, the CEO and managing director, was due to depart at the end of June. The company had announced that Daimler Trucks and Buses executive Marc Llistosella would be the new MD and CEO, but later said he was not coming.&nbsp;Butschek is stepping down from June 30, but has agreed to continue to be associated with the company as a consultant till the end of the current financial year.</p> <p>&nbsp;</p> <p>Butschek had played an important role in turning around Tata Motors. Most models that drive its sales were launched during his tenure. Also, Pratap Bose, the designer behind the company’s ‘impact design language’ in the domestic passenger vehicle business, recently quit. Martin Uhlarik, who was until recently the head of design for Tata Motors European Technical Centre, was appointed the new global design head.&nbsp;</p> Fri Jun 25 16:55:20 IST 2021 we-will-keep-launching-evs-every-year <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>How do you intend to sustain last year’s strong performance?</b></p> <p>&nbsp;</p> <p>Our strong comeback in FY21 has been on the back of unleashing the full potential of each and every product in our portfolio. In addition, we have a few launches planned for this financial year; the major one being the sub-compact SUV HBX (Hornbill). All these levers will strongly position us to not only hit but also sustain a double-digit market share. In the first two months of FY22, we are already at a year-to-date market share of 10.4 per cent. Going forward our strategy will be to strengthen our product portfolio.</p> <p>&nbsp;</p> <p><b>Will the launch of the HBX be delayed because of the pandemic?</b></p> <p>&nbsp;</p> <p>We have announced that we will launch HBX in the calendar year 2021 and we are on track. However, the sudden impact of the second wave combined with negative consumer sentiment has resulted in subdued demand, which, we expect, may see a strong recovery in the coming months. We also have a precarious situation on semiconductors. Once we have assessed the situation, we will announce the launch date.</p> <p>&nbsp;</p> <p><b>What kind of impact has the semiconductor shortage had on Tata Motors production? What is the solution to the crisis?</b></p> <p>&nbsp;</p> <p>We had undertaken many steps, like releasing long-term firm schedules released with buffers, reviewing of model mix towards availability, spot purchases and use of alternate raw material meeting the specifications. In addition, to protect ourselves in the long run, we are working closely with our direct suppliers to identify alternative suppliers.</p> <p>&nbsp;</p> <p><b>The Nexon EV is the largest selling electric passenger vehicle in the country. How has Tata Motors managed to overcome the challenge of limited charging infra and people’s apprehensions about the range of Evs?</b></p> <p>&nbsp;</p> <p>We had undertaken many initiatives to educate customers on aspects of charging and driving for maximising range. We also continue to expand the charging network with the help of Tata Power, which is planning to increase the network in various cities and highways to more than 2,500 this year.</p> <p>&nbsp;</p> <p><b>What are Tata Motors’ plans in the EV space?</b></p> <p>&nbsp;</p> <p>We have announced the Altroz EV and there are other products in the development pipeline. Both our new architectures—Alpha and Omega—are electrification ready. We will keep launching new EVs and also keep upgrading the existing ones, every year from now on.</p> Thu Jun 24 22:13:51 IST 2021 flexicap-equity-fund-an-equity-all-rounder-fund <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>EXPERIENCED INVESTORS</b> will vouch for the fact that being flexible can help capitalise on investment opportunities arising from time to time. While equity continues to be the only asset-class that help beat inflation, is tax efficient and offers potential capital appreciation, one also has to recognise the truth that the asset class is also very volatile. But, with the right amount of flexibility, equity investing can be a truly rewarding experience. For a retail investor, flexicap is a category of equity mutual funds which combine the best of dynamism, diversification, risk mitigation and growth opportunity.</p> <p>&nbsp;</p> <p><b>What is a flexicap fund?</b></p> <p>&nbsp;</p> <p>A flexicap fund is an equity scheme that can invest in opportunities across the market capitalisation spectrum. Such a fund, at any given point in time, has the flexibility to go dynamically overweight/underweight across large, mid or small-cap depending on their relative attractiveness. The interesting detail here is that among the equity mutual fund categories, flexicap is the second largest. As per AMFI data, there are 25 flexicap funds with over 84 lakh folios, managing assets worth Rs1.59 lakh crore.</p> <p>&nbsp;</p> <p><b>How it works?</b></p> <p>&nbsp;</p> <p>In a flexicap fund, it is the fund manager who decides the market cap attractiveness on the basis of prevailing market conditions. With no minimum or maximum prescribed exposure limits in terms of market cap, flexicap funds can act as good compounders over long term with low potential risks relative to mid and small cap funds. While large caps hold the potential to deliver better returns owing to limited downside, it is mid and small caps which in an upmarket condition help generate better capital appreciation.</p> <p>&nbsp;</p> <p><b>Why invest now?</b></p> <p>&nbsp;</p> <p>Over last one year period (as of June 8, 2021), Flexicap funds on an average have gained 56 per cent, which is much better than large cap, and many thematic and sectoral funds. If the period under consideration is extended to three years, flexicap funds have generated 13.12 per cent CAGR, which is higher than international, tax-saving, and many thematic funds. Over a five-year period, this category has clocked in a CAGR of 14.3 per cent. This shows that a good flexicap has the potential to act as a sturdy anchor to the portfolio, helping the investor navigate various market conditions.</p> <p>&nbsp;</p> <p>It is very likely that market volatility may prevail in near term given the evolving developments around pandemic situation and global growth recovery. Barring few pockets of the market, valuations in certain pockets are still reasonable. So, investing in select opportunities with reasonable valuations across market cap may be beneficial for investors seeking wealth creation in the long-term. This is where Flexicap funds can play a big role. The ideal risk-reward for a good flexicap fund will be middle of the diversified space (moderate) as the market-cap allocation is managed dynamically.</p> <p>&nbsp;</p> <p><b>Things to consider</b></p> <p>&nbsp;</p> <p>Given the various flexicap funds on offer, it is important to consider a few things before investing. Firstly, focus on the investment approach. A mix of top-down and bottom-up approach, to identify opportunities in large, mid and small cap space will be beneficial.</p> <p>&nbsp;</p> <p>Second, a fixed or static strategy on m-cap exposure will not work. Thus, a good flexicap fund will be one where large/mid/smallcap allocation will be assessed and re-balanced on a periodic basis. For making this decision certain fund houses rely on in-house model. For example, in the case of ICICI prudential Flexicap Fund, the market cap allocation is based on an in-house model which takes into consideration various factors for deciding the relative attractiveness. Given the prevailing market conditions a 0-50 per cent allocation to small and midcaps can be considered as optimal with the remaining being invested in large caps.</p> <p>&nbsp;</p> <p>Bolstering this category further is the news that one of India’s leading asset manager, ICICI Prudential Mutual Fund, will be launching the new fund offer of ICICI Prudential Flexicap Fund which will the open for subscription from June 28 to July 12. A flexicap fund, especially one which is dynamically managed, is ideal for meeting long term financial goals. It is best to have an investment horizon of at least five years to make meaningful gains.</p> <p>&nbsp;</p> <p><b>Shiney Sebastian is managing director, Affluenz Financial Services (I) Pvt. Ltd, Kochi</b></p> Thu Jun 24 22:10:16 IST 2021 local-social-media-players-are-disrupting-a-market-dominated-by-global-tech-giants <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Information is power. And, the battle playing out between Big Government and Big Tech is to control that power. While the collateral damage of this tussle could be your freedom of expression, the advantage may well belong to a bunch of upstarts—India’s up and coming desi social media players.</p> <p>&nbsp;</p> <p>Though there have been many attempts by the government over the years to muzzle social media, intermediary rules that came into effect after a three-month grace period two weeks ago are the most lethal yet. They make it mandatory for social media companies to appoint nodal officers to take down posts that authorities find objectionable, and trace the origin of messages on services like WhatsApp.</p> <p>&nbsp;</p> <p>“The government is committed to ensuring the right of privacy to citizens… but no fundamental right is absolute,” said IT Minister Ravi Shankar Prasad. “The rule to trace the first originator of [a] message is required for prevention, investigation or punishment of very serious offences.”</p> <p>&nbsp;</p> <p>But privacy activists are not convinced. “Big tech like Facebook, Twitter, Instagram, WhatsApp and Google often make terrible policies and decisions that harm millions of Indians… [but these] rules do not fix these issues and end up harming your rights,” said Apar Gupta, executive director of Internet Freedom Foundation.</p> <p>&nbsp;</p> <p>WhatsApp promptly filed a case against the new rule, alleging it violated the privacy of its users, while Twitter announced it would not “compromise on freedom of expression and privacy of its users”. The company, already in the crosshairs of authorities for its refusal to remove some posts that the government found ‘incendiary’ as well as for the ‘Toolkit’ controversy, has now been given a strongly worded ‘last warning’ by the IT ministry. To further muddy the waters, Google claimed in court that intermediary rules did not apply to it as it was a search engine and not social media.</p> <p>&nbsp;</p> <p>Make no mistake. With 60 per cent of Indian voters having at least two social media apps and an average Indian spending 2 hours 36 minutes every day on social media, the fight is not just a government vs big company one; it is a battle for control of your hearts and thoughts.</p> <p>&nbsp;</p> <p>The advantage could be to the domestic social media ecosystem that has risen up in recent months. Interestingly, most local social media apps had complied with the new rules within the deadline, unlike their global rivals. Said Aprameya Radhakrishna, CEO and co-founder of Twitter’s desi clone Koo: “Complying with the new guidelines by the government within time clearly shows why it’s important to have Indian social media players thriving in the country.”</p> <p>&nbsp;</p> <p>A blueprint already exists. The trickle turned into a torrent the last monsoon after the government started banning Chinese apps. The ban on the wildly popular TikTok, which had acquired 16.7 crore users in India in a short time, opened the floodgates for swadeshi social. Said Umang Bedi, founder of VerSe Innovation, which runs the leading news aggregator DailyHunt: “In the first three days after the Chinese app ban, we noticed a lot of DailyHunt users downloading short video apps. We realised that there was a real need around short-form entertainment.” VerSe launched its own short video app, Josh, in a few days. Nine months later, Josh has 9.4 crore monthly users.</p> <p>&nbsp;</p> <p>The gold rush has seen many domestic short video apps suddenly burgeoning in popularity. Moj, a short video app from desi social media platform ShareChat, amassed one crore downloads in just one week after the TikTok ban. Similarly, Roposo, another short video app that was languishing in the corners when TikTok ruled, claims to have crossed five crore downloads.</p> <p>&nbsp;</p> <p>“We have seen the market flourish as short-form video apps offer a platform for the audience to create content to showcase their talent and view their opinions,” said Shivank Agarwal, co-founder &amp; CEO of Mitron TV, a short video app that was launched before the TikTok ban, but has since seen its downloads cross 5 crore in less than a year.</p> <p>&nbsp;</p> <p>While the short video space is a lucrative one, attention has also been on other modes of social media. Way before China’s Ladakh incursion, the irrepressible Baba Ramdev had floated Kimboh as a desi alternative to WhatsApp, in 2018. But it was taken down by Google PlayStore because of software security issues. It later reinvented itself as Bolo Messenger.</p> <p>&nbsp;</p> <p>While the ban on PUBG directly led to the spawning of a desi alternative in FAU-G, efforts to replicate Twitter’s microblogging model has been on overdrive. Prime Minister Narendra Modi himself endorsed Koo after it won the government’s Atma Nirbhar App Challenge, and a flurry of VIPs have got on to this platform. It also won Google PlayStore’s ‘Best Essential Daily App’ award for 2020, and Radhakrishna is aiming 10 crore downloads “by the end of the year”.</p> <p>&nbsp;</p> <p>Serial entrepreneur Radhakrishna had earlier launched the local cab aggregator TaxiForSure (it was sold to Ola for around Rs1,500 crore) and Vokal, a site where users can ask doubts, and get answered in local language audio. “Our answering community asked why only answer, why could not we say what was on our mind. The first thing that came to my mind was that there were already products for that. Then we realised that the existing microblogging sites were all predominantly in English. So, we thought let’s start one for Indian languages.”</p> <p>&nbsp;</p> <p>The opportunity, it seems, is in the language. Said Jehil Thakkar, partner and leader (media and entertainment) at the consultancy firm Deloitte India, “English internet users have already adopted certain apps and will continue to stay with them. Getting people to transition is always going to be tougher than capturing white space, which presently exists in the Indian language social media space.”</p> <p>&nbsp;</p> <p>The mass adoption of smartphones in the hinterland and dirt cheap data plans have transformed the demographics of internet users in India. From being predominantly English-speaking and urban a few years ago, around 40 crore of the roughly 60 crore netizens are now local language users and spread across smaller towns and villages. This is expected to rise to 80 crore by 2024.</p> <p>&nbsp;</p> <p>“People may study English as an aspirational language, but even in a tier 1 city, forget tier 2 and 3, there is a lot of depth of local language use. Indians talk, denote their feelings and like to get entertained in local languages. Their pranks, greetings and their dreams are all in local languages,” said Virender Gupta, co-founder of VerSe.</p> <p>&nbsp;</p> <p>The scope of growth in the local space has seen many of these upstarts bagging generous funding from venture capitalists. While DailyHunt has been the cash cow of VerSe for years, the latest two rounds of funding were meant for Josh. Investors included Google, Microsoft and the sovereign fund of Qatar. ShareChat and its short video social media platform Moj got around Rs3,700 crore funding from Tiger Global, Twitter and others, which pushed the company into the unicorn club.</p> <p>&nbsp;</p> <p>“We are impressed with the team’s understanding of these rapidly evolving technologies and its ability to execute quickly, and we are excited to partner with them as they continue to build a great company,” said Scott Shleifer, partner of Tiger Global. The American investment fund has been super aggressive in India this year, investing in many desi startups.</p> <p>&nbsp;</p> <p>The ‘swadeshi’ tag of these apps, however, is open to interpretation. Investigative reports claim that Twitter clone Tooter is a re-packaged version of the American far-right site, right down to quoting American laws in its privacy policy and terms of service, while Mitron is alleged to be a reworked version of an app made originally by a Pakistani company. Koo, for all its nationalist proclamations, was left red-faced when its Chinese backers were revealed, leading to their exit a few months ago.</p> <p>&nbsp;</p> <p>Yet, in the end, what would matter more than bans and the government diktats would be how much the Indian firms can rise up to the market opportunities and challenges. And if they can take on the world. For the moment, though, the desi players are shying away. “First, I think, it is very important to go deep into India and conquer that,” said Radhakrishna of Koo. “We are building a very large digital media platform out of India to serve the rest of the world eventually,” said Bedi of DailyHunt.</p> <p>&nbsp;</p> <p>The global biggies, meanwhile, are upping their game. Instagram rolled out its Reels feature right after the TikTok ban, and the short video feature seems to be the focus of its algorithm now. Google and Facebook have rolled out additional features in the past months, including increased Indian language support. “International companies operating in India are aware of the market opportunities. We are the second biggest market at least in numbers, so I see them investing in products and content around the Indian language space,” said Thakkar of Deloitte.</p> <p>&nbsp;</p> <p>The desi trailblazers are not too worried about their home turf, though. Bedi calls it a “distinct value proposition for Bharat”. “What Indian companies can do in addition to great tech is to identify the culture of India and bring that to the forefront to drive engagement.”</p> <p>&nbsp;</p> <p>“Global players often find it difficult to localise based on region specifics,” chips in Akshay Saini, CEO &amp; co-founder of Tring, a social networking site to engage with celebrities. “Specific features should be added swiftly by domestic companies based on local requirements, as the global players may not be agile to quickly customise for local requirements.”</p> <p>&nbsp;</p> <p>Gupta said Indian apps did not ape global giants. “We have figured out our own secret sauce!” he said. It’s going to be spicy, with myriad local and international flavours going into the mix. The battle for India’s eyes, hearts and minds has just begun.</p> Thu Jun 10 17:10:46 IST 2021 new-social-media-rules-put-everybody-on-the-same-playing-field <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>How did the idea of Koo come about?</b></p> <p>&nbsp;</p> <p>I had started Vokal, where people could search and get answers in voice in Indian languages. Some people in the community asked why only answer, why could not we say what was on our mind? The first thing that came to my mind was that there were already products for that; why could not they use those? Then we realised that all the existing microblogging sites were predominantly in English. So, we thought let’s start a platform for local languages. We launched in March 2020, just before Covid hit.</p> <p><b>With the government vs Twitter spat, a whole lot of personalities and government departments are coming on board. How much of it was organic? Did you have a strategy?</b></p> <p>&nbsp;</p> <p>This came all of a sudden to us. We had started out with Indian languages, with voice and video options to say something on your mind; we made it easier to sign in, [and offered] hashtags in your own language. Then we saw Twitter getting into trouble in the US. That’s when we introduced English on Koo. We didn’t expect the Twitter incident in India to happen so early. We went live in English and then some of the major personalities, ministers to government departments, started joining Koo.</p> <p><b>There seems to be a slant towards a particular ideology. The prominent personalities you have all seem to be from the ruling party.</b></p> <p>&nbsp;</p> <p>It is important to have Indian technology as well for some of the fundamental uses of the internet, (like) microblogging. That’s the reason why some of the prominent personalities and government departments came to Koo.</p> <p>&nbsp;</p> <p>It’s a matter of time before the other side of the political arena also comes. We have extended our invitation to everybody. Congress leaders Kamal Nath and D.K. Shivakumar joined recently. Former prime minister H.D. Devegowda and former Karnataka chief minister H.D. Kumaraswamy are there. The recent surge is because of a particular reason; there will be other reasons for everybody else to join. It’s not by design, it’s about when each person feels like joining the platform.</p> <p><b>Your co-founder recently stated that what was illegal in the offline world would be illegal in the online world, too. But Koo is not enforcing any restrictions or guidelines.</b></p> <p>&nbsp;</p> <p>Koo does not exist if there is no freedom of speech or expression. We are building it so the voices of India who don’t know English can also be on the internet. That is the fundamental premise. There are a few people who might be up to some mischief. Even there, most things are black and white—child porn, harassing women, harassing anybody for that matter. Certain things like opinions that may be inflammatory may come in the grey area. That might be 0 to 1 per cent, though.</p> <p>&nbsp;</p> <p>In order to ensure Koo is safe, there will be certain guidelines, which will be in line with the laws of the land. The Internet is actually you being in a room that is infinite. You should be very conscious of what you say, the consequences of what you say. The responsibility of what you say and whether it will offend someone and lead to offline violence is something users should put to self-regulation, given the power the internet has.</p> <p><b>Do you think the government’s new rules for social media help? Or will it be problematic for operators like you?</b></p> <p>&nbsp;</p> <p>It definitely helps. It puts everybody on the same playing field. An international social media cannot handle something differently from what an Indian social media company would.</p> Thu Jun 10 17:02:35 IST 2021 games-made-in-india-get-special-love-from-indian-gamers <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>During the intensely restrictive lockdown, many people ‘kept company’ not just by Zoom calls or WhatsApp, but also by immersing themselves in online games. One of the intended repercussions of the Sino-Indian border skirmish last year, however, was a ban by the miffed Indian government on the hugely popular multiplayer game Player Unknown Battlegrounds, or PUBG. Though developed by a South Korean gaming company, the mobile version of the game was published by China’s Tencent Games.</p> <p>&nbsp;</p> <p>PUBG’s loss turned out to be FAU-G’s gain. FAU-G, or Fearless and United Guards, is an online multiplayer action game from Bengaluru-based nCore launched on Republic Day. It strode the ‘vocal for local’ anti-China wave, and some smart soft marketing from the likes of actor Akshay Kumar, to position itself as the desi alternative to PUBG. Excerpts from an exclusive interview with Dayanidhi M.G., founder and CEO of nCore:</p> <p><b>How did the idea for FAU-G come about?</b></p> <p>&nbsp;</p> <p>In 2019, Vishal Gondal, known as the father of gaming in India, joined us as a co-founder. In March [2020], we started developing a multiplayer shooting game. When the Galwan Valley incident happened in June, we decided to pause it and develop one mode of the game with hand combat mechanics and melee weapons based on the real incident in the valley. We had an uphill task of completing the development when the incident was fresh in the minds of Indian gamers.</p> <p><b>Akshay Kumar actively promoted the game.</b></p> <p>&nbsp;</p> <p>When Vishal mentioned the game we were developing, he took a keen interest and started working closely with nCore’s team. He even came up with the name FAU-G and gave inputs through the development cycle of the game. Given his popularity and fan following, the game’s promotion by him was instrumental in driving curiosity about the game first and installs eventually.</p> <p><b>Initially, there were some worries over dropping PlayStore ratings</b></p> <p>&nbsp;</p> <p>There was a record 40 lakh pre-registrations on Google PlayStore, the highest ever for any Indian game. There were more than 50 lakh installs on the launch day with the game climbing to #1 in top charts, again a first for any game made in India. The game had a rating of 4.5 in the first three weeks. It was then launched internationally on Android and on iOS. There are more than one crore installs of the game so far, indicating its popularity among Indian gamers. There were, however, some negative rage-based ratings that brought down the rating of the game.</p> <p><b>What would be the breakup of FAU-G’s user base?</b></p> <p>&nbsp;</p> <p>FAU-G is a game made for Indian gamers with a storyline revolving around the brave stories of the Indian Army. Naturally, the game is played predominantly in India, followed by Indians outside India as well as game enthusiasts. About 90 per cent of the user base is from India.</p> <p><b>What are your further plans?</b></p> <p>&nbsp;</p> <p>We are developing two more multiplayer modes in FAU-G, namely Team Deathmatch and Free For All/Battle Royale. The story and maps will be totally Indian, thus catering to the cravings of Indian gamers to play such a game made in India with Hindi voice over and text in it. A large number of gamers with smartphones from tier 2 and 3 towns have been waiting to play these modes with relatable storylines, characters and maps.</p> <p>&nbsp;</p> <p>We are also co-developing a cricket game with some big brands associated with the game. We intend to develop games based on Indian history and mythology, giving Indian gamers the long-awaited experience of playing roles of their favourite characters from our epics.</p> <p><b>PUBG is set to make a comeback. How well placed are you to meet it head-on?</b></p> <p>&nbsp;</p> <p>We truly believe that Indian gaming will be big to accommodate both local and international players. However, games made in India that the Indian gamers can connect well with will receive special love and adoption.</p> Sat Jun 12 11:40:33 IST 2021 will-launch-an-aiims-like-centre-baba-ramdev <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Baba Ramdev </b>is no stranger to controversy. He recently riled a large section of the medical fraternity by questioning the efficacy of Covid vaccines. But Ramdev remains unperturbed despite criticisms. His eyes are set on his next big project—a university that will produce “ideal” doctors who practise holistic methods of cure and prevention.</p> <p>Excerpts from an exclusive interview:</p> <p><b>Q</b>/<b> What is distinct about the way you have popularised yoga and ayurveda?</b></p> <p><b>A</b>/ We have done research and produced evidence-based results. Around 0500 crore has been spent on research so far; thousands of crores more will be spent.</p> <p>There is a principle in marketing—only that which is visible will sell. Until recently, no big celebrity was associated with yoga and ayurveda. Now celebrities are, and the result is that in every home, there are people who can talk about the benefits they have had from yoga and ayurveda. My contribution was that I reached out to the common man, spoke in his language, and thus connected with him.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> Does the belief in yoga and ayurveda negate belief in modern systems of medicine—especially allopathy?</b></p> <p><b>A</b>/ I have repeatedly said that modern medicine is indispensable for life-saving surgeries and illnesses. But these are just 2 per cent of the illnesses we face. The rest are lifestyle, genetic and incurable illnesses, for which allopathy has no answers. But we have proved that our ancient sciences can cure everything from high blood pressure to diabetes to cancer. I do not disrespect allopathy, but to label these ancient sciences as pseudoscience, alternative therapies or quackery is unacceptable.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> The Indian Medical Association was offended by your recent statement [that lakhs of patients have died because of allopathic medicines].</b></p> <p><b>A</b>/ I did not make any official statement against doctors. I only read out a video message. Yet, I apologised for it and placed on record my respect for all doctors and health care workers who were fighting this pandemic and had lost their lives. I want this controversy to end. But now, it has just come to this—that Baba Ramdev has to be abused. So be it.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> You said if allopathic doctors had all the answers, they should never fall ill. What did you mean by it?</b></p> <p><b>A</b>/ A doctor should be a health icon. Holistic health is possible only by living as close to the natural way as possible. That way, a doctor will be able to serve humankind to the best of his abilities. I am 55 years old and do not use any allopathic medicines. I will live till the age of 100 without using any such medicines. That is my way of being a health icon.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> First information reports have been registered against you in Gujarat and West Bengal. How do you intend to respond to them?</b></p> <p><b>A</b>/ We considered sending defamation notices. But my take is that we must channelise our energy constructively, and not bother about such matters.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> You have a large following. Won’t your statements create fear and apprehension?</b></p> <p><b>A</b>/ Most people agree with what I say. Even respected doctors like [cardiothoracic surgeon] Naresh Trehan have said that corporate culture has ruined health care. Most doctors have been captured by the profit culture of Big Pharma.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> This pandemic has not spared even healthy people. Don’t you think your statements can be counterproductive?</b></p> <p><b>A</b>/ People might look healthy on the outside, but their internal systems might be faulty. Going back to a lifestyle guided by nature is the only way to live healthy, sustainable lives. That is what this pandemic has taught us.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> Why are you against the pharma industry?</b></p> <p><b>A</b>/ I label them drug-medical mafia. It is an industry worth 0200 lakh crore worldwide. If anyone challenges this industry, will it not respond with the hate that it is displaying against us? There is no control over the pricing of drugs. Patents are misused to sell a drug worth 02 for 02,000. There is loot.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> Why should profit be a bad word when money is needed to invest in research and development?</b></p> <p><b>A</b>/ In any business, the return on investment is 5 to 30 per cent. Pharma is the only industry that makes profits that are 1,000 times the investment.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> Your company, Patanjali Ayurved, is also a profit-making enterprise. How could profit be a bad word then?</b></p> <p><b>A</b>/ We believe in ‘<i>arth parmarth ke liye</i>’ (money for charity). We invest our money in research for the greater good. We receive donations for our cause. It is nothing like the pharma industry.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> You have spoken about starting MBBS-like courses. How will these be different from the current ones?</b></p> <p><b>A</b>/ We will produce ideal doctors. They will have knowledge of allopathy, yoga, ayurveda and naturopathy. We plan to do this on a very large scale—something like AIIMS (All India Institute of Medical Sciences), and on a not-for-profit basis. The world’s best diagnostic and life-saving procedures will be taught. This long-term project will take five to seven years to take off.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> The government has taken steps to promote yoga and set up a ministry of AYUSH. What more needs to be done?</b></p> <p><b>A</b>/ The government’s intent is right, but provisions have to be made to fulfil that intent. Since independence, budgetary allocations for medicine systems other than allopathy have been negligible. This injustice needs to end.</p> <p>Even if there is a 10 per cent hike every year in the budget, it will take decades for these systems to catch up. The overall budget for health needs to be increased. As a society, we need to ask ourselves: what is this budgetary increase for? Is it just for building more infrastructure, or for creating a society of healthy people who do not need long-term medical interventions that have temporary benefits?&nbsp;</p> Thu Jun 03 15:31:53 IST 2021 the-real-impact-of-5g-would-be-felt-in-villages <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>A‘virus’ started spreading through the air waves in India in the third week of May. No, not the novel coronavirus. A flood of social media messages, from WhatsApp forwards to Facebook posts, saying that the new generation of ultrafast mobile technology, 5G, was responsible for the deadly second wave of the Covid-19 pandemic in India.</p> <p>&nbsp;</p> <p>One theory said that radiation from 5G base towers helped the spread of ‘corona’. Another said the strong radio waves were causing small changes to people’s bodies, making them more susceptible to the virus.</p> <p>&nbsp;</p> <p>With local leaders and farmers' groups in Uttar Pradesh, Punjab and Haryana pitching in with their fears and calling for a halt to 5G trials, the government was forced to come up with an explanation. While the ministry of information and broadcasting did a fact check and stamped the rumours fake, the Department of Telecommunications (DoT) issued a statement saying that there was “no connection between 5G technology and the outbreak of Covid-19”. The Uttar Pradesh Police ordered all district commissioners to crack down on those spreading 5G conspiracy theories. The Cellular Operators Association of India (COAI) called on states, particularly Haryana, to quell the rumours as they were getting out of hand.</p> <p>&nbsp;</p> <p>The irony is that 5G trials, or even the auctioning of spectrum to start the service, are yet to start in India! Because of many delays, the government’s clearance for trials—by telcos Reliance Jio, Airtel, Vi (formerly Vodafone-Idea) and MTNL—came through only a week ago.</p> <p>&nbsp;</p> <p>The trials will run for up to six months, though indications are that auction of 5G spectrum (radio bands needed by the telcos to offer the service in) may now be delayed till early next year. Experts estimate that this will push the public launch of 5G in the country to mid-2022.</p> <p>&nbsp;</p> <p>That is a shame because 5G services are now available not only in advanced markets like Europe and the US, but also closer to home in Thailand, the UAE and Singapore. In China, about 70 per cent of new mobile devices sold are 5G capable. Even the Parliamentary standing committee on IT voiced its concern over the delay recently: “India may miss the 5G bus!”</p> <p>&nbsp;</p> <p>Nitin Bansal, India head of telecom gear maker Ericsson, however, said India was not behind in its 5G roadmap. Ericsson is the frontrunner in providing 5G equipment to Indian operators, as Chinese firms Huawei and ZTE have been kept out of the trials. “5G rollout hinges on government policies, investments and device ecosystem. It’s about how soon the spectrum is freed up and made available given the need for accommodating increasing data traffic,” he said.</p> <p>&nbsp;</p> <p>Interestingly, soon after the second Modi government took charge two years ago, Telecom and IT Minister Ravi Shankar Prasad had declared that 5G trials would start in 100 days. Two months later, Reliance Industries chairman Mukesh Ambani called 5G ‘an exciting frontier’ at the company's annual general body meeting of shareholders, and said a made-in-India 5G solution would be ready for field deployment in a year. Reliance promotes Jio, India's largest telecom service provider.</p> <p>&nbsp;</p> <p>Some 700 days after Prasad’s promise and close to the second half of the year that Ambani had set as a target, 5G remains a blueprint at best. Spectrum auctions were postponed many times, partly due to telecom operators’ grouse that the base price is too high and partly due to the pandemic slowing down the government. While spectrum is provided in various bands, telcos have been clamouring for more millimetre wave band—much of which is in the kitty of defence and space departments, who use it for satellite navigation and communication. These departments do not seem to be in a hurry to give it up.</p> <p>&nbsp;</p> <p>Then there is the China factor. Even before the Ladakh clashes soured the relations between the two Asian powers, alarm bells had started ringing over using technology and equipment from Chinese players like Huawei and ZTE for 5G. The worry, also voiced by countries like the US, involved suspicions over their technology giving ‘backdoor’ access to Chinese intelligence. DoT sat on it for months, and took a decision much after many other countries, delaying the entire process for months. The Indian 5G trials order does not ban the Chinese firms per se, but it omits their names from those allowed. Chances are that once the actual deployment starts, DoT will bring out a list of ‘trusted sources’ from whom to buy tech and gear.</p> <p>&nbsp;</p> <p>For telcos, it is a bittersweet scenario. Quicker 5G rollout would mean more revenue and cost control, as the superior technology allows more customers per base tower compared with 4G. Revenues could also increase if they are able to charge more for the ‘premium’ 5G offerings.</p> <p>&nbsp;</p> <p>But it would also mean investing heavily in upgrading infrastructure. More cell towers will have to be installed, involving vexatious rentals and permissions across the country. Old copper wiring based networks, which now form about 70 per cent of India’s networks, may need to be converted to optical fibre. Operators like Vi are already bleeding heavily and additionally burdened by the Supreme Court’s order to pay the government aggregated gross revenue (AGR) dues that runs into thousands of crores of rupees.</p> <p>&nbsp;</p> <p>“The financial status of telecom providers is one of the reasons for the delay in 5G rollout,” said Rishi Bhatnagar, chairman, IET Future Tech Panel. “The money they spent on 3G and 4G has not given them enough returns to incentivise investments in 5G.”</p> <p>&nbsp;</p> <p>Yet, it comes as a silver lining to the cloud that India’s mobile users remain gung-ho about the technology. The latest Ericsson Consumer Lab study says 67 per cent of those surveyed said they intended to upgrade to 5G services the moment it became available. It was the highest in the world. At least four crore Indians could take up 5G in the first year of its arrival.</p> <p>&nbsp;</p> <p>The report also said Indian consumers were willing to pay as much as 50 per cent more for 5G plans. “Going forward, prices won’t be a problem,” said Parv Sharma, research analyst at Counterpoint Research, a leading telecom consultancy. “Operators might charge a bit of a premium for 5G because everybody wants to increase ARPUs (average revenue per user), but not so much that people would not want to upgrade.”</p> <p>&nbsp;</p> <p>From smartphone models ranging from an iPhone 12, which costs around Rs80,000, to Realme 8, a 5G smartphone priced around Rs15,000, a plethora of 5G phones are already available in the Indian market. “Smartphone customers today are prepared to invest more in future-ready 5G smartphones and as buying cycles increase, 5G mobile ecosystem will be further strengthened by both network and mobile brands,” said Rahul Sharma, founder of Micromax, which is set to launch its 5G-capable phone in the second half of 2021.</p> <p>&nbsp;</p> <p>While the common man is enthused over the impending increase in internet speeds and better video calls, focusing on that would be beside the point. “Apart from that, 5G will offer a much better ecosystem from an Internet-of-Things (IoT, the term used to describe machines being operated and tracked from a distance) perspective. It will offer better application for industries and agriculture,” said Parv of Counterpoint.</p> <p>&nbsp;</p> <p>And then there is the greater common good. “Autonomous tractors will be a better use case for India than autonomous cars,” said Bhatnagar. “Remote surgery will definitely benefit rural India as it will improve availability of experts for major surgical procedures. Such use cases will help in uncovering new business models and improve opportunities for India.”</p> <p>&nbsp;</p> <p>Telecom industry veteran Mahendra Nahata, whose HFCL is developing indigenous 5G technology, agrees. “Driverless cars can come, but we [should] have other priorities—remote education, medical diagnosis in rural areas, agriculture, industry 4.0,” he said. “These are the use cases that improve the life of people, improve governance, (and) need to be developed in India.”</p> Thu May 27 17:37:23 IST 2021 5g-has-potential-to-transform-industry-and-society-at-large <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q/ What are the ramifications of the delay in India's roadmap for 5G?</b></p> <p>&nbsp;</p> <p>A/ We don’t believe India is behind in its 5G roadmap. However, it's about how soon the spectrum is freed up and made available, given the need for accommodating increasing data traffic and creating new revenue streams. The 5G rollout hinges on government policies, investments and device ecosystem.</p> <p>&nbsp;</p> <p>Since 5G technology requires a lot of spectrum, it is imperative that spectrum is provided at reasonable prices with adequate blocks. To extend ubiquitous 5G network connectivity in India, it is important to provision street infrastructure; small cells and in-building solutions or fibre and ensure smooth implementation of rules under ‘Right of way’ policy. We also need devices at much more affordable prices.</p> <p>&nbsp;</p> <p><b>Q/ Telcos feel the proposed bid prices for 5G spectrums are too high.</b></p> <p>&nbsp;</p> <p>A/ Affordable 5G needs to be made available to the Indian operators. Given the ‘long-term benefits’ that 5G technology will bring to India, it needs to be viewed as critical infrastructure and the foundation on which we can realise the Digital India vision. Increased penetration of mobile broadband drives economic growth.</p> <p>&nbsp;</p> <p><b>Q/ The jury is still out on how much of an environmental concern the strong wavelength of 5G could have, particularly on birds. Has Ericsson studied this?</b></p> <p>&nbsp;</p> <p>A/ I would like to refer to WHO, Mobile &amp; Wireless Forum, GSMA and others for these questions. Over the past 50 years, a large amount of research on radio waves and health has been conducted. WHO and other expert groups have concluded that scientific evidence does not demonstrate any health effects associated with the radio waves from base stations.</p> <p>&nbsp;</p> <p><b>Q/ What sectors do you see to be early adopters of 5G in India?</b></p> <p>&nbsp;</p> <p>A/ High speeds and low latency output of the 5G networks will drastically pave the way forward for innovation and higher efficiency. In India, industries such as energy and utilities, manufacturing and health care are predicted to be the top three revenue drivers. From a consumer point of view, 79 per cent of the total service provider 5G digital services revenue will be driven by enhanced video and HiFi music.</p> <p>&nbsp;</p> <p><b>Q/ How prepared is Ericsson for the 5G rollout in India?</b></p> <p>&nbsp;</p> <p>A/ Our radio system hardware has been 5G-ready since 2015 and enables operators to upgrade to 5G with a remote software installation. We recently partnered with Bharti Airtel and implemented a successful demonstration of live 5G service over a commercial network in Hyderabad.</p> <p>&nbsp;</p> <p><b>Q/ How expensive would it be for an ordinary mobile phone consumer? And what value addition will he get from it?</b></p> <p>&nbsp;</p> <p>A/ 5G will unleash a new era of creativity for consumers. Initially, 5G will be a capacity enhancer in metropolitan areas. We predict that in 2026, 5G networks will carry more than half of the world’s mobile data traffic. More than 70 per cent of consumers expect 5G to provide better performance such as faster speed, better reliability and lower latency, (enabling) consumer offerings around gaming, video and artificial reality/virtual reality.</p> <p>&nbsp;</p> <p>Over time, new, exciting innovation for 5G will come in the areas of 5G for business and IoT use cases. Going forward, we will likely find the most transformative use cases in critical IoT, where the speed, latency and security of the 5G network will be key. Here we can see 5G’s potential to transform industries and society at large, with use cases such as smart manufacturing, smart cities, self-driving cars and advanced health care applications, just to mention a few.</p> Thu May 27 17:26:05 IST 2021 super-apps-will-take-amazon-reliance-rivalry-to-next-level <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>The 21st century is going to be the Indian century,” said Amazon’s Jeff Bezos during a visit to India in January 2020. He might have figured it out long before, as his investments are not limited to the billions of dollars he pumped into Amazon’s Indian business. Amazon Holdings, for instance, acquired a 5 per cent stake in department store chain Shoppers Stop in 2017. A year later, it acquired the hypermarket chain More from Aditya Birla Group through Samara Capital. In 2019, it picked up a 49 per cent stake in retailer Future Group’s promoter company Future Coupons.</p> <p>Amazon is now aggressively wooing small and neighbourhood merchants to its platform with the Local Shops on Amazon programme launched in April 2020. In a year, it has brought in 50,000 offline sellers and neighbourhood shops. “We have been very excited by the success of this programme, which we launched during Covid. It has been adopted by tens and thousands of local shops around us. We are committing to bringing one million local shops online on Amazon by 2025,” said Amit Agarwal, senior vice president and country manager of Amazon India.</p> <p>Amazon’s push to partner with the vast, unorganised brick and mortar retail market is hardly surprising. Mukesh Ambani’s Reliance Industries last year launched JioMart, an e-commerce platform, which has inked partnerships with a million merchants. Then there is Flipkart, now owned by the American supermarket giant Walmart, which is also going hyperlocal through its Flipkart Quick Service. It is ramping up Flipkart Wholesale, its digital B2B marketplace, and has recently started offering grocery on the app.</p> <p>Sandeep Karwa, Flipkart’s vice president, said hyperlocal capabilities could enhance the online shopping experience for consumers and boost supply chain operations for e-commerce companies. “It is important to explore ecosystem partnerships to strengthen such capabilities and accelerate faster, reliable deliveries to customers,” he said.</p> <p>Consulting firm RedSeer estimates India’s grocery market to grow at an 8 per cent compounded rate to $850 billion by 2025, compared with $573 billion in 2020. About 95 per cent of this market in the country belongs to neighbourhood grocery stores. “With a view to expanding consumer franchise, large online players have tied up with small retailers and invested in creating omnichannel platforms. Apart from better service, this also provides additional access delivery points at low cost for a B2C (business-to-consumer) or B2B (business-to-business) player,” said Harsha Razdan, partner, KPMG India.</p> <p>Amazon and Reliance are pumping in crores as they battle to gain a larger share of the consumer pie. Amazon dragged Kishore Biyani’s Future Group to the courts last year after he inked a deal to sell the retail business to Reliance Retail. While a single-judge bench of the Delhi High Court restrained Future Group from going ahead with the deal, a division bench stayed that order. This was later challenged by Amazon in the Supreme Court. The apex court has deferred the hearing till the end of June. Separately, the Singapore International Arbitration Centre is also yet to give its final judgement in the case. A SIAC interim order last year was in favour of Amazon.</p> <p>According to regulatory filings, Amazon invested Rs11,400 crore in its marketplace platform, wholesale business and payments platform in the financial year 2020. It has also launched a $250 million venture fund. Agarwal said it was going to focus on “three big priorities—SME digitisation, agri-tech innovations to empower farmer productivity and reach and health-tech to provide universal and quality healthcare for citizens.”</p> <p>The e-tailer has been strengthening Amazon Pay, offering railway tickets and bill payments among other things, and pushing Amazon Pay UPI (unified payments interface) through promotions. It has a popular music and streaming video service, which comes bundled with an Amazon Prime subscription. It also sees a big opportunity in the food delivery business, a market Swiggy and Zomato currently lead. The service, Amazon Food, is available in Bengaluru. A more robust Amazon Pay will push it more into the realm of super apps—applications that offer everything from chats to shopping and payments.</p> <p>Reliance Retail Ventures has raised Rs47,265 crore, selling a little over 10 per cent stake to investors including Silver Lake Partners, KKR, Mubadala, Abu Dhabi Investment Authority, Singapore’s GIC and General Atlantic. It acquired the furniture e-tailer Urban Ladder and Vitalic Health Private Ltd, which is into pharma distribution, sales and business support services and online pharmacy platform Netmeds. JioMart, which started out as a grocery delivery platform, is being expanded to other categories.</p> <p>Reliance has a network of more than 12,000 retail outlets. It also owns the iconic British toys retailer Hamleys and holds the rights to sell several luxury fashion brands in India. On the other hand, JioMart gives it a strong presence online, too, “They have the persistence to succeed over the long term,” said Govind Shrikhande, a retail industry veteran.</p> <p>Neither Amazon nor Reliance has officially talked about developing a super app. But Reliance’s MyJio app has already become a one-stop platform—it allows you to manage Jio mobile and fibre services, make bill payments, transfer money via UPI, stream movies, music and games, and even connect to JioMart. An integration of MyJio and JioMart could help build a super app, said a source.</p> <p>Tata, too, is said to be developing a super app, where all the Tata brands will converge. Its acquisition of the grocery e-tailer BigBasket will shake up things further.</p> Thu May 20 17:19:54 IST 2021 why-is-it-a-good-time-to-start-sips-in-mid-and-small-cap-schemes <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>The small</b> and mid-cap segments have been under tremendous pressure for about three years. The broader markets are typically known to be much more volatile than the large-cap space and they have stayed true to their element even during the correction seen in March. At a time when most of the market seems to be on a rally, there still are pockets of opportunities available in the broader markets.</p> <p>Currently, it can be said that equity markets, in terms of valuations, are in a neutral zone—they are neither cheap nor expensive. As a result, a staggered way of investment is recommended. The frothiness in valuations of the midcap and small-cap segment is not there any longer, and the segment has corrected itself compared to the large-cap in the past few years. This is at a time when global markets, including domestic ones, have rebounded sharply, recovering most of the losses incurred due to the pandemic in the backdrop of the GDP drop, earnings drop and uncertain economic environment. It has been a classic case of markets climbing a wall of worry. This has led to many investors missing out on the V-shaped recovery. Hence, a staggered way of investment at this juncture into midcap and small-cap is recommended to enable participation in the equity markets and in the meantime limiting the downside risks.</p> <p>Some key triggers that may influence markets are macro factors like inflation, interest rates, economic activity, vaccine rollout and global central banks’ stances. A scenario of rising uncertainty on macro factors and a low-interest-rate environment calls for a staggered approach to investing in midcap and small-cap funds. This would help in limiting downside risks.</p> <p>&nbsp;</p> <p><b>Fund Selection</b></p> <p>When it comes to investing in broader markets, ICICI Prudential’s schemes are among the best performing funds in their respective categories. This has been largely possible because of their exposure to large-cap companies in certain sectors where midcaps are not present and exposure to certain small-cap companies that hold the potential to become future midcaps, thus bringing an interesting blend into the portfolio. The schemes are nimble enough to take opportunities presented by the market. It is a known fact that these schemes have a stringent investment process and a well-thought-out investment strategy.</p> <p>In the small-cap space, the fund house believes that despite the rally seen in benchmark and broader market indices, there are several names on a bottom-up basis that have not participated in the rally thus far, and are well placed for a reasonable upside over the next one to three years. Even from a cyclical perspective, there are many companies that are favourably placed from a risk-reward perspective. Here, the point to note is that since these stories take time to play out, it is important for the investor to stay invested for at least five years. Therefore, the optimal approach here would be to invest through SIPs as they allow the investor to take exposure to markets at varying levels and benefit from cost averaging over the long term.</p> <p>&nbsp;</p> <p><b>Invest through SIP</b></p> <p>To successfully manage risk in midcap and small-cap investments, it is best for an investor to invest in a regular and consistent manner. This approach ensures that the long tenure of the investment takes care of the risk as it gets distributed across the investment period. By investing systematically, one opens the door to generate higher returns, as the companies continue on the potential growth path during the same period.</p> <p>&nbsp;</p> <p><b>The author is the director of Biju Associates.</b></p> Thu May 20 17:14:47 IST 2021 indian-startups-are-flush-with-funds-will-the-hype-sustain <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Along with pulsating last-ball finishes, pandemic scares and Pat Cummins’s generosity, a much-talked-about viral moment of this year’s IPL was something that actually happened off-field and on the screen. The reincarnation of the unflappable Rahul Dravid as a short-fused, tantrum-throwing road rager. Screaming at fellow drivers and smashing outside rearview mirrors with a cricket bat, the cricket legend, who had a reputation for his cool, mild-mannered ways, is seen off-character in an ad that was repeatedly aired in between matches.</p> <p>&nbsp;</p> <p>The advertiser, CRED, is a tech startup that offers credit card users rewards and cashback for paying on time. If the campaign, conceptualised by comedians of the erstwhile cult favourite AIB, became a talking point for upending celebrity images (another ad shows macho actor Jackie Shroff as a Zumba instructor and singer Kumar Sanu as an insurance salesman), it is no accident. CRED has made quite a splash that has disrupted traditional business models and signalled a new, seemingly limitless, horizon for Indian startups.</p> <p>&nbsp;</p> <p>“Fifty-nine lakh individuals are part of the CRED community. Today, CRED processes 22 per cent of credit card bill payments in India, including over 35 per cent of premium cardholders,” said Kunal Shah, founder of CRED.</p> <p>The success has seen investors come calling with loose purse strings. Last month, the Bengaluru-based startup raised $215 million in its latest round of funding, hitting a valuation of $2.2 billion. That made CRED a unicorn, an exhilarating term that refers to startups that are valued at more than $1 billion (roughly Rs7,500 crore).</p> <p>&nbsp;</p> <p>If you thought that is an incredible achievement for a company that is barely three years old, hold your horses. CRED is just one among a dozen Indian startups that were adjudged unicorns born this year. And six of these were dubbed so in the course of just one week last month, coming as a shot in the arm to a country ravaged by a ruthless second wave of the Covid-19 pandemic. These include Meesho, which helps individuals and small businesses sell their products through social media; Urban Company (earlier known as UrbanClap), which offers home services; Mohalla Tech, the parent company of Indian language social media platform ShareChat and TikTok wannabe Moj; and PharmEasy, which sells medicines online.</p> <p>&nbsp;</p> <p>Compare this to the 14 unicorns born last year and 10 in 2019. As 2021 is yet to cross the halfway mark, the prospects of further addition to the Unicorn club are highly likely. A NASSCOM estimate says there are some 216 Indian ‘soonicorns’(soon-to-be-unicorns) bubbling beneath the surface.</p> <p>&nbsp;</p> <p>“All indicators point to a 50 per cent growth in the number of unicorns that will arrive upon the scene in 2021 as compared with 2020,”said Gaurav Bhagat, business analyst and founder of the Gaurav Bhagat Academy. “As more and more companies around the world look for the money spinners of the future, their journey will bring them to Indian shores. If earlier the motto of the Indian entrepreneur was ‘small isn’t sexy, but it’s sustainable’, the new mantra is going to be ‘go big or go home’.”</p> <p>&nbsp;</p> <p>While unleashing the entrepreneurial spirit of Indian startups, the increasing confidence of consumers to do business on the internet and easier access to capital had a role to play, and so did the pandemic. The rising unicorn count is not in spite of the pandemic, but partly because of it.</p> <p>&nbsp;</p> <p>“Opportunities come during adversities,” said Apoorva Ranjan Sharma, co-founder of Venture Catalysts and managing director of 9Unicorns Accelerator Fund. “The pandemic has turned out to be a golden period for the Indian startup ecosystem. The willingness of consumers to pay for digital services has increased phenomenally, thus leading to good customer acquisition for them.”</p> <p>&nbsp;</p> <p>Lalit Keshre, co-founder and CEO of Groww, an online investment platform, said that the pandemic had accelerated digital transformation in India. “The economic uncertainty due to Covid nudged millions of Indians to re-look at how they managed their money,” he said. He should know, having been a product manager at Flipkart. “The process of investing in financial products in India was too opaque and complex. We brought an e-commerce-like simplicity and choice to the investing experience of Indians,” he said. Groww was started as a do-it-yourself investment platform, helping its millennial users invest in mutual funds without the hassle of brokers, and then it expanded into stocks, ETFs and digital gold.</p> <p>&nbsp;</p> <p>Groww’s latest funding round saw it joining the unicorn club. The company says it has 1.5 crore users. But Keshre feels it is just the beginning. “Only 3 to 4 per cent of our population is investing in equities. We want to expand this market by un-complicating finance for India’s millennials,” he said.</p> <p>&nbsp;</p> <p>The potential lights up in green dollar signs for western investors, witnessing the digital shift among Indians post the lockdown, the agile and rapid scaling up by Indian entrepreneurs and the opening up of new investment prospects after the Indian government shut out Chinese investors following the Ladakh clashes. After all, in volume terms, India is the biggest open internet market in the world, and it is still under-penetrated. Everybody wants a piece of the action.</p> <p>&nbsp;</p> <p>“The extremely low interest rate in the US has also raised the risk appetite,” said Bhagat about the flurry in funding in the past few weeks. Other factors, like the emergence of micro venture capitalists, retail and institutional investor interest in the primary market, hedge funds and a loose monetary policy for at least a few years (keeping interests low to spur business recovery after the pandemic) could mean increased investments, with more companies hitting one-billion-dollar valuations.</p> <p>&nbsp;</p> <p>Global investor biggies like Tiger Global and SoftBank have been lavish in throwing dollops of dollars at Indian startups. “We believe the market opportunity is huge,” said Scott Shleifer, partner at Tiger Global. The US-based investment firm, if speculations are to be believed, has plans to invest $3 billion in Indian startups. Another report says the company plans to conclude funding rounds with 25 Indian companies this year alone—only 10 have been announced so far.</p> <p>&nbsp;</p> <p>This obsession with Indian startups does say something about the country’s resilience and resourcefulness. “The new-age entrepreneurs are super innovative and disruptive; they are coming up with crazy ideas every day,” says Sharma. “VCs have stopped chasing me-too startups. They are looking at the pedigree of the founder(s) and what problem the product/service is solving. Just look at some startups that have created a whole new category.”</p> <p>&nbsp;</p> <p>All this action has not escaped the eyes of India’s big business houses. “Digital adaptation is now in people’s blood. Large successful traditional brick-and-mortar companies saw this coming and made a very effective pivot,” said Bhagat. Sharma, however, feels they are “late to the party”. “The new-age businesses are passionate about solving a problem, to disrupt and are more agile than the traditional behemoths,”he said. The solution would be to “acquire some of these innovative startups going forward.” That, in fact, is already happening, with Reliance Jio’s takeover of e-pharmacy NetMeds and Tata’s acquisition of grocery etailer BigBasket.</p> <p>&nbsp;</p> <p>While naysayers smell a bubble in this big billion rush, most experts have a different take. “It is a high risk, high reward game!” said Bhagat. “The detractors will be proved right in seven out of 10 cases, maybe even more. There will be more misses than hits, but the hits will cover all the losses and more!” The track record of Indian unicorns is a testimony to this. The country’s first unicorn InMobi (2011) and the early-year unicorn Snapdeal (2014), for instance, have had chequered trajectories since they were adjudged unicorns.</p> <p>&nbsp;</p> <p>But there are also examples that have soared to the stratosphere. While Paytm and OYO are already decacorns ($10 billion valuation), the latest round of funding of Byju’s puts its value at $16.5 billion, making it India’s most valuable startup.</p> <p>&nbsp;</p> <p>“At a time when traditional businesses were thrown out of gear by the pandemic, tech-based startups not only stayed afloat, but also went on to create massive businesses,” said Sharma. He is confident of more fat cheques flying in. And if one’s appetite for going big and gaining big is still not satiated, food aggregator Zomato could show the way. It has filed for a $1.1 billion IPO. How the stock is received could be a true testament to whether the unicorn success sagas are worth the hype.</p> Thu May 06 19:51:32 IST 2021 unicorn-valuation-is-like-having-a-meal-before-climbing-everest <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q/ How did the idea of CRED come about?</b></p> <p>&nbsp;</p> <p>A/ CRED is based on two insights. We wanted to build something that improved the lives of taxpayers, the nation-building minority. The second was that the audience we were targeting loved their credit cards, but nobody was building good products for them. This led to the creation of our core product, which enables CRED members to manage all their credit cards in one place. The product also enables members to keep track of their payment journey, providing due date reminders, alerts on hidden charges, and insights into their spending patterns based on usage across categories.</p> <p>&nbsp;</p> <p><b>Q/ While being valued as a unicorn, what swung the opinion of the VCs your way? How much of this Unicorn boom may be attributed to the pandemic and the transformation it has caused?</b></p> <p>&nbsp;</p> <p>A/ The pandemic’s role is primarily as an accelerant of existing trends, supercharging the growth of consumer internet companies, and advancing it by a few years, rather than a transformation. Increased comfort and confidence in using tech is a powerful behavioural accelerant that has benefited tech-enabled businesses.</p> <p>&nbsp;</p> <p><b>Q/ This milestone also puts a lot of responsibilities on you and your team</b></p> <p>&nbsp;</p> <p>A/ Unicorn valuation is like having a meal before climbing Everest. Every round that we have raised, the majority has been done by internal investors. We are now focused on our responsibility to various stakeholders—teammates, consumers, brands, institutions and investors, to grow the business and continue to deliver value to all.</p> <p>&nbsp;</p> <p><b>Q/ For any fintech firm, and especially something like CRED, where a lot of sensitive consumer data is handed over, stability and security are of paramount importance. What steps has CRED taken to ensure that?</b></p> <p>&nbsp;</p> <p>A/ As a platform built on trust, we are committed to the safety and security of member data. We are transparent about the data we access through government-certified credit bureaus such as CRIF and Experian, after obtaining the explicit consent of the user. It is on us to operate with integrity. We are PCI and ISO 27001 compliant and are in compliance with all applicable rules and regulations around user data. We have very high standards on data security and privacy.</p> <p><b>Q/ What are the opportunities and challenges in taking a startup model like this into the global market?</b></p> <p>&nbsp;</p> <p>A/ We are actively evaluating different markets, including those in Asia. It’s too early to say where and when, but the data points to an opportunity in low-trust markets where people hold multiple cards.</p> Thu May 06 22:03:24 IST 2021