Business en Fri Jul 05 12:32:59 IST 2019 pie-in-the-sky <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>On May 30,</b> human space travel entered a new era when a private company, for the first time, launched two astronauts into orbit. The Falcon 9 rocket and the Crew Dragon capsule that carried them were built and operated by SpaceX, a company founded by the billionaire Elon Musk. The launch, the first on US soil since 2011, was not only a reminder of America’s supremacy in technology, but also a prelude to how things might work in the sector in the future.</p> <p>Space missions are expensive, and they are mostly done using taxpayers’ money. The participation of private players not only takes some burden off the public exchequer, but also gives an opportunity for entrepreneurs. This is exactly why India wants increased private participation in the space ecosystem.</p> <p>Private companies currently play a minuscule role in India’s growing space business. The Space Activities Bill, on which comments have been sought, promotes commercial activities in space and suggests a regulatory mechanism for them. Interestingly, all this is proposed to be done through the Indian Space Research Organisation. As ISRO itself is a service provider for commercial launches through its subsidiary, NewSpace India Limited (NSIL), many people see a conflict of interest.</p> <p>“ISRO has been set up for space research, and is not a regulatory body, with scientists, project managers and engineers,” said Raju Prasad, chief of business development at Satellize, India’s first private company in space technology. “It has done a good job of designing and launching satellites and developing launch vehicles. But that makes good resources in one field a wasted choice for another. Regulators need to be more market savvy and have legal minds that are able to throw open industry with least regulation. Intellectual Property (IP) generated shall be deemed to be the property of the central government. So this seems to be largely about private sub contractors willing to handover whatever IP they develop to the government, rather than any real companies out there developing their own IP and keeping it.”</p> <p>Private players are not comfortable with ISRO’s opaque nature, either. This leaves limited avenues for private-public partnership, and even the open sectors are limited to contractors acting as outsourced manufacturing units.</p> <p>While the biggest challenge for private companies in the space segment in India remains getting spectrum allocation and launch permission, there are plenty of other problems as well. “Currently, there are a myriad of problems for satellite builders such as GST, security clearances, orbital slotting, and liability and insurance. Similarly, for downstream companies, there are problems pertaining to data acquisition (you can buy only from or through the National Remote Sensing Centre, even if the satellite is a foreign-owned private asset), making the whole process slow, opaque and expensive,” said Divyanshu Poddar, co-founder of the space startup Rocketeers. “India needs a better map policy and needs to liberalise access to and use of satellite data for private players. In the US, there is a single window clearance for all things and satellite data is freely traded by players like any other commodity. There are no government controls except with data pertaining to national security.”</p> <p>Encouraging private players to invest in original IP creation can go a long way in improving private participation in the sector. This will help them create their own products and IP, and become independent from ISRO’s supply chain. This will equip these firms to compete in global markets. “There is a lot of uncertainty on what is allowed for private sector and what is not,” said Yashas Karanam, director of Bellatrix Aerospace, a company which works with ISRO. “Since any object sent to space by a nation is governed by International Outer Space Treaty, the liability of a space object would fall on the country that permitted its launch. Hence, there was uncertainty on whether private companies can launch their own satellites and rocket. Now, the space industry hopes to have a predictive policy that would allow companies to operate out of India. With fingers crossed, we are hoping for a business-friendly policy that could ease foreign customers to work with Indian companies.”</p> <p>Unlike India, most space faring countries have clearly defined space laws, and private companies are encouraged to build their capabilities. They get contracts from National Aeronautics and Space Administration (NASA) and the European Space Agency (ESA) for technology development (both industrial and R&amp;D). Private companies in the US and Europe have access to NASA and ESA test facilities, patents and research grants. “In the US, the Commercial Space Launch Act facilitated the private enterprise of the commercialisation of space and space technology in 1984 itself. In other countries like China, Japan, Australia and the UK, the sector was opened up only in the past few years. Though we are late, it is good to see the government take this initiative,” said Pawan Kumar Chandana, co-founder and CEO, Skyroot Aerospace Limited.</p> <p>Private players have all welcomed the Space Activities Bill. “The government’s initiative is laudable and in the right direction,” said Narayan Prasad, chief operations officer at Satsearch, a marketplace for the space industry. “However, the mechanics of it are still unclear and needs to be spelt out. There is enough room to review the procurement process and change the base of it to incentivise the industry to invest and create products and services of its own. The emerging startups are looking in this direction and getting established industry players to move in this direction will help these companies service both the local economy and get a global market share.”</p> <p>Such a system will help private players move up the supply chain to become system integrators. It would also help ISRO become more agile and competitive, especially in the international market. “By offloading all the routine satellite making and rocket building activities to the private players, ISRO can focus on developing cutting edge space technology such as optical communication for satellites, robotic space exploration and removal of space debris,” said Rachana Reddy, a former ISRO space engineer who is now based in Germany. “It would also be able to focus more of its resources on the Gaganyaan mission and engage with other R&amp;D institutions in the country on various aspects of the human space flight.”</p> <p>Indian space industry is still in the nascent stage, and capital remains a major challenge. “Developing a new product in space industry requires significant investment on test equipment and other infrastructure, which many private players cannot afford,” said Karanam. “[Sharing] ISRO’s facilities will definitely open doors for the rise of India’s name in space, both with ISRO and its private ecosystem.”</p> Thu Jun 18 14:53:11 IST 2020 fright-in-flights <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>CAPTAIN NAVEEN KUMAR,</b> pilot of an Air India A320, returned home to Mumbai recently after a flight to Jakarta. Though he tested negative in a post-flight Covid-19 test, he said he is afraid of passing on the virus to his wife and two daughters, one of whom is an infant. He has a mandatory second Covid-19 test coming up, but the job Kumar loves has now become a cause for worry.</p> <p>&nbsp;</p> <p>His fear is justified. Despite stringent guidelines and standard operating procedures laid out by the ministry of civil aviation, incidents of pilots and crew being infected with Covid-19 has increased unabated. Around 50 pilots across the country are learned to have tested positive in the last few days. A 58-year-old Air India pilot, who retired in May, reportedly died of Covid-19.</p> <p>&nbsp;</p> <p>In the first two phases of the Vande Bharat Mission to repatriate Indians stranded abroad, Air India operated 423 inbound flights, bringing back 58,867 citizens, according to the civil aviation ministry. In the third phase, starting June 10, the carrier will operate around 300 flights to Europe, Australia, Canada, the US, the UK and Africa. Major private airlines, too, have offered their services for the third phase.</p> <p>&nbsp;</p> <p>Pilots said that the current protocols are not enough, though they have separate entry and exit gates and hardly interact with passengers. An A320 pilot, who has been flying regularly for the last month, said: “We cannot use protective headgear because we use our headset to communicate.” He also asked how the microphone could be disinfected and added that pilots use the same toilets as passengers.</p> <p>&nbsp;</p> <p>An office-bearer of the Indian Commercial Pilots Association (ICPA) said that for one Vande Bharat flight, pilots undergo three tests—pre-flight, post-flight and on the fifth day after landing. Most cases of Covid-19 are reported in the third test. However, the government is not following a similar procedure for the domestic sector, which was greenlit with effect from May 25. “Some pilots who come back after Vande Bharat [flights] are being asked to fly domestic flights without taking the (third) test,” he said. “By doing this, authorities are putting cabin crew and passengers at risk.” On May 30, a Delhi-Moscow Air India flight was forced to return midway after the ground team realised that the pilot was Covid-19 positive; there had been an error in the pre-flight test report.</p> <p>&nbsp;</p> <p>Meanwhile, Captain Deven Kanani, 51, a pilot with Air India, moved Mumbai High Court alleging that the national carrier is not maintaining social distancing norms. Kanani, who flew to Shanghai twice, on April 29 and May 10, and brought back medical supplies and equipment, has submitted photographs of a flight between San Francisco and Mumbai on May 14, showing all seats occupied. The directorate general of civil aviation’s order on March 23 had said that the middle seat should be left vacant. During the last hearing on May 22, the government informed the High Court that the new circular, dated May 22, issued while permitting domestic flights, does not say the middle seat needs to be empty. It stated that the May 22 order supersedes the March 23 order. Kanani’s lawyer Abhilash Panickar said that “based on information provided by the solicitor general of India during the hearing”, the spread of Covid-19 was 36 times more during air travel.</p> <p>&nbsp;</p> <p>In response to Kanani’s petition, the government said that the Vande Bharat flights brought back Indians from countries with a higher prevalence of Covid-19, and, therefore, higher rate of prevalence was likely among the passengers of those flights. “There is nothing to indicate that the passengers contracted Covid-19 during and onboard the Vande Bharat flights,” the government’s reply stated.</p> <p>&nbsp;</p> <p>Manish Mehta and his wife Payal, both cabin crew, have been flying regularly for the last one month. “Who is going to look after my (six-year old daughter) when I am in quarantine at my place and my husband is flying?” she asked. “Social distancing is not being maintained. Airlines are only looking at the commercial aspect. We risk our lives to perform our duty, but many of us face trouble from neighbours. One of my colleagues has been given notice to vacate the flat.”</p> <p>&nbsp;</p> <p>A senior cabin crew member—who lives with his wife, three kids, and a father who has undergone kidney transplant—said that crew have been testing positive at an alarming rate, in spite of all safeguards. “Mumbai alone has seen over a dozen cases of cabin crew testing positive,” he said. Reportedly, around 200 crew members are either Covid-19 positive or have been quarantined after passengers on their flights tested positive.</p> <p>&nbsp;</p> <p>With the resumption of domestic flights by private airlines, there have been cases of pilots getting infected during routine simulator training sessions. Early this month, a Vistara spokesperson admitted that two of their pilots had tested positive after flight simulator training.</p> <p>&nbsp;</p> <p>Interestingly, despite the challenges, there are also those who are thankful that they were able to keep their jobs. Said a pilot: “People are grateful for having their jobs, [rather] than [worrying about] putting their lives at risk.”</p> <p>&nbsp;</p> <p><i>Pilots and cabin crew have been given fictional names or left unnamed to protect identities as they are not authorised to speak to the media.</i></p> Fri Jun 12 14:07:10 IST 2020 signal-of-change <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>ON JUNE 7,</b> Reliance Industries raised Rs5,683.5 crore from the Abu Dhabi Investment Authority, by selling 1.16 per cent stake in its subsidiary Jio Platforms. This was the eighth deal that Reliance had struck in a few weeks with marquee investors that included private equity firms like Silver Lake, Vista Equity Partners and General Atlantic. One name, however, stood out among the investors—Facebook. The social networking giant picked up a 9.99 per cent stake in Jio Platforms for Rs43,574 crore on April 22.</p> <p>&nbsp;</p> <p>Facebook is not the only technology giant eyeing a piece of India’s telecom pie. Google is said to be looking for a 5 per cent stake in Vodafone Idea, and Amazon might make a $2 billion investment in Bharti Airtel. Though Airtel and Vodafone Idea denied the reports, industry watchers feel India is set to be Big Tech’s next big battleground. The reasons are obvious—despite being the second largest telecom market, India is still under-penetrated when it comes to smartphones and internet. The change has already begun; investment bank Morgan Stanley pointed out that data usage in the country in the past few years had seen a ‘hockey stick’ growth.</p> <p>&nbsp;</p> <p>The Covid-19 pandemic, which forced the country into a lockdown, might have been a tipping point for the industry. Morgan Stanley estimates that India’s internet users could jump to 914 million by 2027 from 670 million last year. Total online shoppers are expected see a three-fold growth, to 590 million from 190 million, while average spend per online shopper will surge to $318 from $171. That will generate a glut of data.</p> <p>&nbsp;</p> <p>“India is on the cusp of a revolutionary change in terms of demographics, telecom bundle pricing dynamics, digital penetration, technology adoption and content ingestion potential,” said Yash Jethani, research manager, regional telecommunications team, IDC. “India’s appetite for growth across chat apps, digital media, payments, e-commerce and online government services is also huge. Covid-19 only acts as a catalyst in digitalising manufacturing, banking and financial services and other industries, and the tech hyperscalers now need local partners who understand granular insights and requirements.”</p> <p>&nbsp;</p> <p>Undoubtedly, companies like Google, Facebook, Amazon and Microsoft that collect and use consumer data to drive online advertising see a huge opportunity in India. Jio, for instance, is India’s largest telecom company, and Facebook will gain from the data generated by its 380 million 4G subscribers. At the same time, Jio, which owns the largest retail network in the country and recently rolled out an online grocery service, will gain from Facebook’s digital expertise and Facebook-owned platforms like WhatsApp.</p> <p>&nbsp;</p> <p>“It is said that data is the new oil. I would argue that data is the new crude. And what companies like Jio or Facebook or Google do with this crude, converting it into big information, is going to shape the future business model in the telecom space,” said Neil Shah, vice-president of research at Counterpoint.</p> <p>&nbsp;</p> <p>Jethani said deals like the one between Jio and Facebook could be a win-win solution. “In a multi-cloud world where lock-ins are generally disregarded, it is imperative to find new partners that give you sufficient voice and video traffic in a young country like India to propel their cloud offerings into the edge via these telcos. In turn, the use of third platform technologies (mobile, big data, cloud computing, social media) will lead to better localised telecom offers,” he said.</p> <p>&nbsp;</p> <p>Many of the telecom operators are in urgent need of funds for their survival after the Supreme Court asked them to pay the dues in adjusted gross revenue to the Department of Telecom. These dues are in excess of Rs1 lakh crore. Airtel reported a loss of more than Rs32,000 crore in the year that ended in March. Vodafone Idea is yet to report its full year results, but in the nine months ended in December 2019, it posted a net loss of around Rs62,000 crore.</p> <p>&nbsp;</p> <p>They will also need a war chest for the upcoming 5G auctions. “Vodafone Idea’s cumulative funding need will be $2.3 billion, including hefty spectrum payments from financial year 2023,” said Deepti Chaturvedi, an analyst at the broking firm CLSA.</p> <p>&nbsp;</p> <p>Through the sale of stake in Jio Platforms, Reliance has now raised more than Rs97,000 crore. This, coupled with the Rs53,000 crore rights issue, will help the company significantly reduce its net debt, which stood at Rs1.61 lakh crore at the end of March.</p> <p>&nbsp;</p> <p>Vodafone Idea and Bharti Airtel, too, have huge debts. Airtel’s net debt, including lease obligations, stood at Rs1.18 lakh crore as of March 2020, while Vodafone Idea had a net debt of Rs1.03 lakh crore at the end of December 2019. “Their main aim is to get out of debt. Then only will they look to invest in the 5G networks,” said Shah. Vodafone Idea shares have risen by more than 69 per cent since May 29, when rumours about Google’s investment surfaced. The Amazon investment rumour pushed up Bharti Airtel shares by more than 6 per cent.</p> <p>&nbsp;</p> <p>Shah expects some of the Big Tech companies to emerge as telecom players in the country. “Like in Japan, where Rakuten (an e-commerce player) expanded into telecom as MVNO (mobile virtual network operator) and is now transforming into a mobile network operator,” he said.</p> <p>&nbsp;</p> <p>India’s telecom industry has seen cutthroat competition and price war since Jio launched its services three years ago. The industry, which had more than a dozen players at that time, now has just three private players and the state-owned BSNL and MTNL. Late last year, however, companies raised tariffs by 40 per cent. Analysts expect another round of hikes in the current year, which should boost the companies’ balance sheets.</p> <p>&nbsp;</p> <p>As they grow and embrace newer technologies, telecom companies will morph beyond just being utilities, and cloud computing will help them provide the scale. How they deal with data privacy and data-sharing pacts will be the thing to watch out for.</p> Fri Jun 12 12:21:25 IST 2020 india-can-be-the-factory-and-the-office-of-the-world <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>As the newly anointed head of India’s biggest business chamber, Confederation of Indian Industry, Uday Kotak has his task cut out—chart out a roadmap for corporate India to traverse the biggest challenge it has faced in a long time. His first shot is a 10-point agenda for getting growth back while saving lives and livelihood. Excerpts from an exclusive intervew:</p> <p>&nbsp;</p> <p><b>Q/Your 10-point agenda to build India in a post-pandemic world says getting growth back is non-negotiable. But it admits that of the four engines of economic growth, consumption, investment and exports have been lagging, and only government expenditure is propping it up. How do you get the rest to pick up?</b></p> <p>&nbsp;</p> <p>A/For a long time, consumption and government spending were holding up the economy. Just before Covid hit, slowdown of consumption also set in, so we were beginning to depend disproportionately on government spending. But the factor which has been a big challenge for a long time has been private investment. There could be a number of reasons for this—ease of doing business in India, real interest rates, opportunities, bureaucracy and, to a certain extent, the transition of Indian system to a much cleaner one which a lot of businesses were not used to. The transition had more or less happened; we have a much cleaner system [now]. But then, we had this accident in Covid-19.</p> <p>&nbsp;</p> <p>We now need to re-imagine investment. Let’s not think about investment in the traditional sense. We normally associate investments with factories, steel, cars, etc. But it is a lot more. Health care, for example, is 1.3 per cent of GDP. Why can’t it be 5 per cent or more? Similarly, with education and environment. We have to think of these in the medium term. In the short run, we have to fight the here-and-now battle of lives and livelihood.</p> <p>&nbsp;</p> <p><b>Q/There was a consumption slowdown even before Covid hit. Now the job losses and salary cuts and overall uncertainty have further affected growth. Is there anything that can be done?</b></p> <p>&nbsp;</p> <p>A/Think about the economy like the human body. The choice in front of us is to give steroid which will make the patient feel good for a while and make him assume everything is all right. Or, you decide [to give] medication which will medium-term solve this but it will have to be done for a few months consistently. That is what we say—part of the medicine is medium-term and part is here-and-now.</p> <p>&nbsp;</p> <p><b>Q/The rural-urban rebalance you talked about, and which some state governments are also targeting, envisages a sudden development of the rural hinterland, establishing industries and using the migrants who have returned to scale up quickly. How feasible is that?</b></p> <p>&nbsp;</p> <p>A/[The migrant worker] left his village to come to the city because the village had low prospects and income levels were better in the city. He lived in poor conditions and the job was not secure, but it was better than the village, so he struggled on. Then Covid happened. He was worried over the safety of his loved ones, lost his job. So he decided, enough of it, I want to go back and stay there. What is wrong in it? It is his choice. It is up to us industry and society to convince him that if he comes back, we will create an environment better than the choice he has taken. Why can’t we use this opportunity to create employability and sustainability and give the individual a choice, to be wherever he believes is his calling? And, if you really want him back in the factory, what are employers doing to make it worthwhile for him to come back?</p> <p>&nbsp;</p> <p><b>Q/You tweeted that India can be the back office of the world. In the 30 years of liberalisation, India has become a powerhouse in the services sector. Now, the focus of the government is to move from this to manufacturing, with the Make in India campaign and the get-business-from-China narrative.</b></p> <p>&nbsp;</p> <p>A/I don’t think it is [an] either-or [situation]. Make in India is an opportunity. These are turning points of history. The China-US situation is not something we created. Concentration of manufacturing in China is bothering most players in the world, and we are not doing anything to upset the apple cart. But if we are a competitive nation, we must get people to make in India on the strength of what we are. And we must do whatever it takes. Therefore, if we are to become the ‘factory of the world’, which is what China has been, we must try.</p> <p>&nbsp;</p> <p>But that does not preclude us from becoming back office. Work from home has taught us that we have the opportunity to also become the office to the world. Be it in California or in a village in India, if a worker has the skill required in the new post-Covid world, he can be operating from anywhere in the world and be hired by anyone, from Google to Jio. You don’t need to be the back office; you can be the front office of the world, and, without in any way upsetting our game plan of Make in India. Ideally, we should be both the factory and the office of the world.</p> <p>&nbsp;</p> <p><b>Q/The success of the government’s stimulus package hinges on quick and efficient disbursal of credit, which may not really happen because banks will just play safe. What is your analysis?</b></p> <p>&nbsp;</p> <p>A/MSME is a very big opportunity; the guarantee given by the government is real. The Rs3 lakh crore can happen between now and September. We should be going all out to make it happen. I am quite hopeful. In addition to the guarantees, we have made the criteria for MSMEs more liberal. Both these put together will certainly help the MSME sector.</p> <p>&nbsp;</p> <p><b>Q/Is there anything in the government’s stimulus package which you feel has been left out?</b></p> <p>&nbsp;</p> <p>A/One thing we obviously should have had at the top of our priority is to do whatever it takes to protect livelihoods. The government has done a lot—give food grains, first round of giving money to the bottom-of-the-pyramid women, etc. But if there is a way of protecting livelihood, including for people losing jobs, some ability to have at least a basic level of subsistence, we should not hesitate to do whatever it takes.</p> <p>&nbsp;</p> <p><b>Q/Are you saying, make a direct bank transfer?</b></p> <p>&nbsp;</p> <p>A/Whatever it takes. To protect lives and livelihoods is our No 1 duty as a nation. And that is a short-term here-and-now necessity. In the medium term, we have to transform Indian health care and education, and we have to transform our relationship with mother nature. That must take priority over short-term [demands] of business or industry based on pressures.</p> <p>&nbsp;</p> <p><b>Q/In this survivalist rush for growth, nature could well be a frontline casualty. How does one strike a balance?</b></p> <p>&nbsp;</p> <p>A/I don’t think there is an easy answer. Obviously there [has to be] a balance. There is a famous quote by John Maynard Keynes: “In the long run we are all dead”. There is a counter quote to that: “Keynes is dead, and we are in the long run!” Mother nature is like that!</p> <p>&nbsp;</p> <p>In Mumbai, I saw beautiful clear skies, the kind I’ve not seen in ages. How do we preserve this harmony with nature and, at the same time, get our growth back? If there is one thing I have learned in life, it is that it is never ‘either’ or ‘or’. The most powerful word in the English language is ‘and’!</p> <p>&nbsp;</p> <p><b>Q/Your growth projection—will it be V-shaped or L or something else? Everybody has been asking for an alphabet!</b></p> <p>&nbsp;</p> <p>A/I’ll give you one. The alphabet with which my name starts—Uday!</p> Fri Jun 12 12:17:39 IST 2020 untrodden-route <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>In 2018, India became the fourth largest automobile market in the world, racing past Germany. But the industry hit multiple speed bumps in the following year, and the sales slowed down. This year, the Covid-19 pandemic has brought the industry to a screeching halt. In April, not one vehicle was sold in the country.</p> <p>&nbsp;</p> <p>As the government has started easing the lockdown, the industry is beginning to rev up, albeit slowly, hoping that there will be some recovery by the beginning of the festive season.</p> <p>&nbsp;</p> <p>In the financial year ended in March 2020, passenger vehicle sales declined 17.82 per cent from the previous year, according to data from Society of Indian Automobile Manufacturers. Two-wheeler sales fell 17.76 per cent, truck and bus sales were down 28.75 per cent and three-wheeler sales dipped 9 per cent. Various factors hurt demand last year. New safety regulations pushed up prices, mandatory long-term insurance led to higher cost of ownership and the new Bharat Stage VI fuel emission norms caused uncertainty about the sale of BS IV vehicles. The Covid-19 pandemic hit harder, as the nationwide lockdown forced companies to suspend manufacturing, sales and service.</p> <p>&nbsp;</p> <p>The month of May, however, has given some hope for automakers. Factories started reopening, although in a limited capacity, and dealerships and service stations have also started functioning. Hyundai, the second largest car manufacturer in the country, restarted operations at its Sriperumbudur plant near Chennai on May 8. Maruti Suzuki, the country’s largest carmaker, restarted production at the Manesar plant in Haryana on May 12 and at the Gurugram plant on May 18. Volkswagen said 70 per cent of its dealerships had opened and dispatches from its production plant had begun. Most other manufacturers have also resumed their operations.</p> <p>&nbsp;</p> <p>And, they are all following a new set of guidelines for a safer work environment. Companies have also issued new standard operating procedures and safety initiatives for their dealers, which include minimal interactions and maintaining prudent social distance in customer engagements.</p> <p>&nbsp;</p> <p>Many key automobile markets, however, are in the red zone and cities like Mumbai, Delhi, Chennai and Ahmedabad continue to remain under strict lockdown. Automakers have devised innovative ways to tackle this. “There has been a noticeable shift in the recent past where digital models of retail and sales are garnering traction among buyers,” said S.S. Kim, managing director and CEO of Hyundai Motor India. The company was among the first movers, launching an online sales platform called ‘Click to Buy’ in January.</p> <p>&nbsp;</p> <p>Tata Motors recently launched its ‘Click to Drive’ online platform connected to all its dealers. Customers get to see video brochures and can pay the booking amount online. The car will be delivered at home, if the customer wishes so. “The lockdown was an opportunity to accelerate our digital journey and evolve new ways of working while servicing and supporting our customers,” said Guenter Butschek, managing director and CEO of Tata Motors.</p> <p>&nbsp;</p> <p>Maruti had already started working on making vehicle purchases easier. According to Shashank Srivastava, executive director (sales and marketing), a customer has to go through 28 touch points for buying a vehicle. “Last three years, we have worked very hard on digitalisation. Twenty-one points are already digitalised,” he said.</p> <p>&nbsp;</p> <p>Interestingly, luxury carmakers, who excel in customer relations, are also focusing on eliminating contact points. Mercedes-Benz recently launched the ‘Merc From Home’ digital sales platform, which enables customers to select and buy from across the product range. “This lockdown has opened floodgates for digital and online venture for high-value items like automobiles,” said Martin Schwenk, managing director and CEO of Mercedes-Benz India.</p> <p>&nbsp;</p> <p>BMW has launched a platform called ‘Contactless Experience’, where customers can explore and buy a car without visiting a dealer. “Since its launch in April, we have seen a tremendous increase in customer engagement, configuration requests and virtual product presentations on this platform,” said Arlindo Teixeira, acting president, BMW Group India. “As business dynamics evolve post the Covid-19 pandemic, the BMW Contactless Experience will play a crucial role in offering seamless sales and aftersales services to our customers.”</p> <p>&nbsp;</p> <p>Companies are also offering attractive finance options to lure buyers. For instance, you could buy a Mahindra SUV now and start paying monthly instalments from next year under its ‘Own Now, Pay in 2021’ plan. “The bedrock of each one of our schemes is to provide financial flexibility and peace of mind to our customers,” said Veejay Nakra, CEO, automotive division, Mahindra &amp; Mahindra.</p> <p>&nbsp;</p> <p>Hyundai has launched an EMI assurance programme, which would cover three car loan EMIs of customers under uncertainties such as a job loss. Many companies are offering attractive incentives for Covid warriors like doctors, health care workers and policemen.</p> <p>&nbsp;</p> <p>Despite these efforts, the road to revival is long and uncertain. “The Covid-19 crisis has intensified the already prevalent pressure on the automobile industry, but the challenges this time are multidimensional,” said Naveen Soni, senior vice president, sales and services, Toyota Kirloskar Motor. “The resumption of full-fledged operations and recovery will be gradual as the industry’s whole value chain revives.”</p> <p>&nbsp;</p> <p>As the lockdown has led to layoffs and salary cuts, many customers have postponed discretionary purchases. According to a survey by consulting firm Deloitte, 46 per cent respondents said that they were planning to keep the current vehicle longer than originally expected. Credit ratings agency CRISIL’s base case scenario indicates that sales of consumer discretionary products, which includes automobiles and consumer durables, will decline 12 per cent this year, compared with their long-term average of 12 per cent growth. If the situation gets worse, sales could fall 22 per cent.</p> <p>&nbsp;</p> <p>Automakers are hoping that the pandemic would make more people commute to work in their own vehicles rather than using public transport, which could give the industry a lift. “I think, all researches indicate very clearly that people would prefer personal transport over public transport and going forward we see that becoming a trend. Our projection is that it is going to remain for quite some time as far as the fear of Covid remains,” said Maruti’s Srivastava.</p> <p>&nbsp;</p> <p>Steffen Knapp, director of Volkswagen Passenger Cars India, said there had been increased interest in the used car business as people are on the lookout for accessible individual mobility solutions. “We are looking at doubling the business in the used car segment,” he said.</p> <p>&nbsp;</p> <p>Given that the auto industry has faced headwinds in two consecutive years, analysts expect companies to go slow on capacity expansions. “If at all companies had some budgets and plans for expansions, we should expect that some of those expansion plans could be suspended,” said Rajeev Singh, partner and automotive sector lead at Deloitte India.</p> <p>&nbsp;</p> <p>Companies may also cut down on their expenses in areas like new platform development and research and development. “Some organisations had very large business plans for alternative power trains, like electric. They may look to cut down on some expenses,” said Singh. Maruti has reduced its capital expenditure plan for the current financial year by 16 per cent to Rs2,700 crore. It spent Rs3,248 crore last year. However, no project-related long-term plans are being deferred.</p> <p>&nbsp;</p> <p>The Covid-19 crisis had brought along numerous other challenges. “The initial months will be utilised to understand the market trends and the demand curve. There are other factors such as low consumer sentiments, rebuilding of disrupted supply chains, including return of workforce, which will act as bottlenecks for the industry,” said Toyota’s Soni.</p> <p>&nbsp;</p> <p>French auto giant Groupe PSA has said that the launch of its debut vehicle in India, the Citroen C5 Aircross SUV, would be pushed to the first quarter of 2021. Some other companies, however, are going ahead with their launch plans. Skoda launched the Karoq SUV and Rapid and Superb sedans on May 26. Mercedes launched the AMG C63 Coupe and AMG GTR on May 27. Schwenk said that the company would continue with its investments planned for 2020, but would “calibrate the situation” and take actions accordingly.</p> <p>&nbsp;</p> <p>The stimulus package announced by the government earlier this month had nothing specific for the auto industry. SIAM has warned that the sector could see de-growth of 22 per cent to 35 per cent this year if India’s GDP growth is in the 0-1 per cent range. The industry employs about 3.7 crore people and contributes 15 per cent of Goods and Service Tax, amounting about Rs1.50 lakh crore a year.</p> <p>&nbsp;</p> <p>Rajan Wadhera, president of SIAM, said there was a need to reduce base GST rates from 28 per cent to 18 per cent for a limited period to boost demand. He has also called upon the need to provide liquidity support to dealers and for the government to include them under the MSME Act.</p> <p>&nbsp;</p> <p>An incentive-based vehicle scrappage policy has also been a long-standing demand of the industry. Union Minister Nitin Gadkari had recently said that a policy would soon be introduced. “One of the best ways of reviving demand at this point would be to come out with a scrappage policy, so that you incentivise those people who have vehicles more than 12-14 years old to change and buy a new vehicle,” said Singh of Deloitte. Additionally, a scrappage policy would also tackle the air pollution issue in the metros.</p> Fri May 29 18:01:04 IST 2020 new-ways-of-customer-engagement-are-required <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q/How hard has the lockdown hit the economy?</b></p> <p>&nbsp;</p> <p>A/The near-complete shutdown of economic activity has impacted industry majorly, especially the micro, small and medium enterprises (MSME) sector. The key challenge is of liquidity as cash flows have been disrupted. Businesses are unable to pay regular fixed charges such as wages, electricity charges, rent and other fixed costs. The second challenge is the operation of the entire supply chain; some inputs and raw material are not reaching factories, or have been delayed. The third challenge is the shortage of labour.</p> <p>&nbsp;</p> <p><b>Q/What are the ways to adapt to the ‘new normal’?</b></p> <p>&nbsp;</p> <p>A/Given the disruptions in supply chains, there are a number of adjustments that businesses will need to consider. New ways of reaching and retaining customers may be required. Technology solutions could be a higher priority with machine learning, internet of things and other new platforms being given more importance. Strategies may relook at inventories to be maintained, transport and movement of inputs, sourcing from different areas and so on. Remote working options would also be an option. Fundamentally, I expect this experience to encourage all of us to look at how we can make a step change in the productive use of people, space and time.</p> <p>&nbsp;</p> <p><b>Q/Do you think the remaining months can make up for the deficit caused by the lockdown?</b></p> <p>&nbsp;</p> <p>A/I do not think the demand in the rest of the year can compensate for the deficit in consumption. While necessities will definitely be sought as soon as markets reopen, deferment of non-essential large purchases is likely.</p> <p>&nbsp;</p> <p><b>Q/Can we look at ‘business-as-usual’ by Diwali?</b></p> <p>&nbsp;</p> <p>A/The Confederation of Indian Industry poll indicates that most businesses are expecting normalcy in the economy after a year or so. Some sectors could pick up earlier. We have to note that India has a strong outward engagement and in the world as a whole, the Covid-19 situation has not yet peaked. Therefore, supply chains across the world will be affected. Diwali is about six months away and that would be a best-case scenario, if the exit from lockdown goes well and the global supply chain movement reverts to normalcy.</p> <p>&nbsp;</p> <p><b>Q/What are the steps to be taken by the government?</b></p> <p>&nbsp;</p> <p>A/The government must first stabilise the situation for people at the lower income scales. We have suggested an additional Rs2 lakh crore of public expenditure towards this. Further, the government debt-to-GDP ratio is low, and there is a lot of space available on this count for further spending on enterprise support. A key challenge is to ensure that the stress in the real [estate] sector does not filter into the financial sector. Banks and other financial institutions must be protected and have adequate capital for onward lending to enterprises.</p> <p>&nbsp;</p> <p>In the medium term, the country must go in for land reforms, changing the labour regulations, and lowering the cost of doing business through a range of actions.</p> Thu May 28 19:27:16 IST 2020 value-for-money <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>THE PAST</b> few months have seen unparalleled volatility in the equity markets. In India, the benchmark indices lost almost 40 per cent of their value from mid-January to mid-March. There has also been a sharp upward movement for a few days, thereby limiting the correction.</p> <p>&nbsp;</p> <p>Such situations have been making equity investors anxious, as no one actually knows to what extent the markets can fall, or to what extent they can rise. Having said that, buying when the market is at low points is among the top strategies of seasoned investors.</p> <p>&nbsp;</p> <p>The question is, can an average retail investor make such decisions? Fear of losing precious savings usually prevents retail investors from taking such decisions. There is also the inability to determine what asset or company stock is a good buy when its price is falling. To address such gaps, asset management companies have come up with funds that follow the strategy of unlocking value in different assets or companies.</p> <p>&nbsp;</p> <p><b>What are value funds?</b></p> <p>Value funds are a type of mutual funds allowed under the equity mutual funds category. In a value fund, the fund managers are allowed to follow the value investment strategy with only one limitation, which is that the fund should have at least 65 per cent of its assets invested in equity and equity related instruments. This also means that the fund can take advantage of any opportunity arising in the equity market in any sector or company irrespective of the stock being a small-cap, mid-cap or large-cap one.</p> <p>&nbsp;</p> <p><b>How do the funds and their managers spot value?</b></p> <p>It appears quite simple when we hear an expert says that one should buy when the markets are low. In practice, there could be several variables at play when a stock price falls. The analysis can become even more difficult if the fall is sharp and it continues for a long period. Not every falling stock could be a value stock. It is possible that the stock in question is genuinely not worth the trading price. The art and science of separating the wheat from the chaff is what makes some of these value-oriented funds stand apart.</p> <p>&nbsp;</p> <p>A good value-oriented fund would have a well-defined and clear strategy in place to identity such value stocks. It is also possible that such funds have a lower or no exposure to otherwise popular stocks, and have a good amount of exposure to not very popular names. At the same time, a well-strategised value fund would not hesitate to change its position on a particular stock. Moreover, a good fund management team would not just look at the broad market sentiment around a stock, but would pay attention to outliers and special situations for the stocks in the portfolio.</p> <p>&nbsp;</p> <p>The ICICI Prudential Value Discovery Fund is among the oldest and largest in its category. With a track record of almost 15 years, it has delivered an average SIP return of 19 per cent, if we look at the five-year rolling returns of a monthly SIP in the fund between 2005 and 2015. The time period is important because it saw the entire 2008 global financial crisis unfold and then also the recovery that took place later. In the same 10-year period, the fund’s five-year rolling return was more than 12 per cent, over 80 per cent of the time.</p> <p>&nbsp;</p> <p>If you have ever thought about how financial experts spot value and would like to take benefit from the expertise, this could be a suitable fund for you. At the same time, this fund can also be beneficial to those who intend to gain from the growth opportunities through equities over a long term.</p> <p>&nbsp;</p> <p><b>The author is an expert with Amogha Financial Services.</b></p> Fri May 22 18:16:00 IST 2020 false-alarm <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>NIKIT SHAH,</b> a Mumbai-based software professional, was saving up to buy a house. He chose to invest in short-term debt mutual funds to build a corpus fast. Ashok Ghose, a Tata Motors retiree, also chose debt over equity to park a large portion of his savings. Debt funds are fixed income schemes, which typically invest in government bonds or securities that corporates issue to raise debt. Marketed as an alternative to bank fixed deposits, these funds are generally considered low risk. But, both Shah and Ghose were in for a rude shock.</p> <p>&nbsp;</p> <p>On April 23, Franklin Templeton India closed down six fixed income schemes, citing significantly reduced liquidity and unprecedented levels of redemption pressure. Shah had staggered investments of Rs8 lakh in two of the six schemes; Ghose had Rs3.5 lakh in three schemes. The six schemes together had over Rs25,000 crore worth of assets under management.</p> <p>&nbsp;</p> <p>While much of debt funds are in securities that have a strong credit rating—AA+ or higher—some could be in lower-rated papers. Over the years, Franklin Templeton created a niche in the lower-rated credit space. This meant higher returns for investors and the funds outperformed rivals for several years. Until, a black swan event like the Covid-19 pandemic hit the markets and people started redeeming their money, all at once.</p> <p>&nbsp;</p> <p>Sanjay Sapre, president, Franklin Templeton India, said that daily redemptions in the schemes and the funds being forced to borrow more money or sell liquid securities was an unsustainable situation as it was harming the investors who remained in the funds for those who were leaving them. He added that there had not been any default by any company these funds had invested in, no investment had been written off and they were also getting interest payments on the portfolio. “We will aim to give investors the maximum amount in the shortest possible time,” said Sapre.</p> <p>&nbsp;</p> <p>After the Franklin Templeton experience, Ghose is not taking chances with money invested in other debt funds. “I am withdrawing my investments from all other debt funds. As an old man, I cannot take the risk,” said Ghose. Shah, whose dream of buying a house is now in limbo, said he is pulling out all his money in debt funds and will park it in banks. Over March and April, investors pulled out over Rs24,000 crore from credit risk funds (a category where large chunk of investment is in securities that have low credit rating). Even other categories like low and medium duration funds saw outflows of around Rs35,000 crore.</p> <p>&nbsp;</p> <p>“The immediate issue is people wanting their money back, leading to liquidity and redemption pressures,” said Vidya Bala, cofounder, Prime Investor. However, pulling out of debt funds at this time may not be ideal, especially given that equity markets have been volatile and most equity funds have given negative returns over the last one year. In the same period, returns of some of the debt funds like gilt funds (those investing in bonds and interest bearing securities issued by governments) have been as high as 17 per cent. Another factor is that interest rates are falling. The Reserve Bank of India in the previous monetary policy committee meet slashed its benchmark repo rate by 75 basis points and more rate cuts are expected as it looks to lift the economy through 2020-2021. So fixed income funds will be attractive.</p> <p>&nbsp;</p> <p>“Franklin’s closure of funds was a one-off; all other asset management companies were able to manage redemptions smoothly,” N.S. Venkatesh, chief executive, Association of Mutual Funds in India, told THE WEEK. “Going ahead, there is no reason for investors to panic. They can reassess their credit risk fund investments, if they want to. But, the other funds like low duration funds and ultra short duration funds should give them better returns because of the interest rate scenario being benign and enough liquidity in the system.” Over 90 per cent of the assets under management of the mutual funds industry are in non-credit risk funds.</p> <p>&nbsp;</p> <p>A. Balasubramanian, CEO of Aditya Birla Sun Life AMC, said that following the impact of Covid-19, some fund houses have already become cautious by shifting portfolios more towards public sector undertakings, government securities and AAA-rated corporates. “We have become more risk averse, so avoid sectors that could have a slowdown and loss of revenue and therefore loss of cash flows; avoid companies, which are highly leveraged,” he said. “These steps we have already taken in our portfolio construction.”</p> <p>&nbsp;</p> <p>The Franklin Templeton issue shows that debt funds are not without risk. But, there is no need to panic. Waqar Naqvi, CEO of Taurus Mutual Fund, lists the key things that one needs to consider when putting money in a debt fund. “Investors should understand at least three risks,” he said. “The first being the interest rate risk (generally as interest rates are lowered the debt funds give a higher return depending on their duration), the second being the credit risk (whether each security held by a fund in its portfolio will pay back the money to the fund on the date of maturity) and the last being concentration risk (the fund should have its portfolio widely spread out over several securities).”</p> <p>&nbsp;</p> <p>Also, not all debt fund categories are risky. People must understand the investment mandate of a particular fund and the risk that it entails, especially credit risk, before investing and one should only invest in funds that match one’s risk profile, said Kaustubh Belapurkar, director, fund research, Morningstar Investment. He added that there were a few pockets which were safer, like overnight funds (which invest in securities that mature in one day), liquid funds, banking and PSU funds and corporate bond funds (in which 80 per cent lending is to companies with the highest credit ratings).</p> <p>&nbsp;</p> <p>“It boils down to having funds which are in general highly liquid in nature,” said Bala of Prime Investor. “If you have those, then there is no cause for concern. If you have funds that by nature are low rated and not liquid, then it may be time to reconsider your portfolio and ensure that these funds do not form a large chunk.”</p> Fri May 22 19:50:25 IST 2020 new-users-were-using-zoom-in-an-unsecured-way <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>AMERICAN COMPANY</b> Zoom Video Communications, which provides a platform for video meetings, webinars and chatting across devices, has grown globally from 1 crore daily meeting participants in December 2019 to 30 crore in April 2020. In India, entities that were earlier hesitant to use digital collaboration tools for day-to-day activities started using it due to the lockdown. Its increased usage in India also saw the ministry of home affairs (MHA) advising users of the security risks. Sameer Raje, the company’s India head, spoke to THE WEEK about the immense response and the security reinforcements. Excerpts:</p> <p>&nbsp;</p> <p><b>Q/ Zoom has become the top collaborative platform in India. What kind of traction have you seen since the lockdown was enforced?</b></p> <p>&nbsp;</p> <p>A/ Let me first make it clear that Zoom is not just a video calling app as popularly perceived. It is a complete unified communication and collaboration platform. What people are using is an app, which is just one component of it. The actual platform has a whole gamut of services. During the current Covid-19 lockdown in India, we saw an increase in use of the platform more by individuals for social purposes or small-time businesspersons working from home. People have started using it for hosting parties, family get-togethers and even to conduct weddings.</p> <p>&nbsp;</p> <p>On the other hand, many large enterprises and corporate setups increasingly used it as their employees are working from home. They were looking for business continuity solutions. Since schools are shut, teachers are using our platform to train kids. More than a lakh schools are using our platform across more than 20 countries, including India. Additionally, a lot of state and Central government departments are using our platform, too.</p> <p>&nbsp;</p> <p><b>Q/ Seeing the rise in usage, the MHA had warned against the use of Zoom.</b></p> <p>&nbsp;</p> <p>A/ It was quite unfortunate. There was a lot of misinformation. If you look at it carefully, there is a 600 per cent rise in cybercrime today in the world. Every person who is weighing in on the internet today is exposed to this threat of cyber war. This percentage is not a small thing. Let me make it clear that the Zoom platform is absolutely secure. It has never been exposed. Of late, unfortunately, there were new kinds of users who were using Zoom in a very unsecured way.</p> <p>&nbsp;</p> <p><b>Q/ What were the issues you faced with the many new users?</b></p> <p>&nbsp;</p> <p>A/ We never expected it to be used as a platform for legal weddings or even to have evening drinking parties together. When people started using the platform for such reasons, they started sharing the details on social media and that became dangerous. When using our platform or any other platform, even internet banking or even your email, please be sure that you have a password and not a generic one. People started using it, taking screenshots and sharing and posting the details [on the internet], hence getting bombed by unwanted intrusions. That was the problem. That is when the advisory came out.</p> <p>&nbsp;</p> <p><b>Q/ How have you tried to address those concerns?</b></p> <p>&nbsp;</p> <p>A/ We will not deny there were certain mistakes from our end as well. We rectified those mistakes within 24 hours. We are working with the government to explain to them the right things about the platform. We are also communicating with users the steps necessary to fix any issues. Since cybercrimes have increased, one can only imagine the new threats coming in on a daily basis. So, we always have to be on our toes. We have to be one step ahead of others. Zoom recently launched the 5.0 version that has AES 256-bit GCM encryption. Meeting hosts can report a user who is misusing the platform. An encryption shield appears in the upper left corner of a meeting window, indicating a secure, encrypted meeting. There are many more security features and we have [initiated] a lot of guidance surveys [for users].</p> <p>&nbsp;</p> <p><b>Q/ Did you lose any customers in India due to the home ministry’s advisory?</b></p> <p>&nbsp;</p> <p>A/ When most large corporates and enterprises sign up, they do their own due diligence. They are already well versed with technology. So, while they did have questions, they took the right steps and some of them came back. They had absolute confidence in our services. As far as individual users are concerned, there were a lot of questions. When we started addressing them, the right information went out and they accepted us.</p> <p>&nbsp;</p> <p>I have been working more than 18 hours a day for the last 45-plus days. Our current focus has also been to help women, health care workers, senior citizens and others stay connected.</p> <p>&nbsp;</p> <p><b>Q/ You face stiff competition in the country from many indigenous video apps and MNC players. How do you score over others?</b></p> <p>&nbsp;</p> <p>A/ Many of our competitors are saying that they are building Zoom competitors. That is an endorsement for us. But one of our strong USPs is that the Zoom platform is capable of running efficiently even on very low bandwidth. One can have a conversation even when there is a significant packet loss. We also have the capability to have around 1,000 participants on a video panel. Other players don’t have that.</p> <p>&nbsp;</p> <p><b>Q/ Is your platform free? What is your business model? Is India a high growth market for you?</b></p> <p>&nbsp;</p> <p>A/ No, it is not free. A lot of it [on the platform] is a subscription-based model. For individuals, it is just a 40-minute free version. We have a host of services beyond that, which are part of our platform and those are what enterprises use. Yes, India is one of the largest [markets]. By sheer size, probably [only] US and Japan would be ahead, but India would be not very far behind.</p> Fri May 22 19:51:18 IST 2020 tech-help <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>IN THE RAMAYAN,</b> Hanuman flew into Lanka carrying the Dronagiri mountain, a habitat for medicinal herbs like the Sanjeevani (believed to restore life). Sanjeevani was needed to treat Lakshman, who was mortally wounded in battle. Today, as the world fights the novel coronavirus, a Marut drone ferries medicines to homes in the bylanes of Begumpet, Hyderabad. Till a few weeks ago, Maruts were used to airdrop seeds in afforestation drives. But now, they have been modified to help fight Covid-19. The drone got its name from one of the many names of Hanuman—Maruti, the one born of air.</p> <p>&nbsp;</p> <p>For some startups in Hyderabad, the pandemic and an uncertain economy provide an opportunity. For instance, the team at Marut Drones had started repurposing the drones as early as February. “When Covid-19 started spreading, we knew that frontline workers would get affected,” said V. Prem Kumar, founder of Marut Drones. “We realised that usage of drones would be ideal as it would involve no human contact and there would be zero risk to lives. The drones could also cover a large area.”</p> <p>&nbsp;</p> <p>In the last few weeks, the team has grown from 18 to 40 people, and the number of drones has gone up to 23 from 13. The team has joined hands with the Telangana government, and has customised the drones to spray disinfectants, monitor crowd movement during lockdown and detect high temperatures using thermal cameras, apart from supplying medicines. While some of these services are still being tested, the drones have been deployed in nine districts of Telangana.</p> <p>&nbsp;</p> <p>Gopal Krishna, CEO of 3D Usher, had an epiphany while watching Game of Thrones during the lockdown. “We decided to design and manufacture face shields for policemen, doctors and others who interact with people,” said Krishna. Cofounded by Krishna and Faizan Mehdi, 3D Usher has offices in the US and India, and it exports metal and plastic engineering goods for aerospace, entertainment and other allied industries.</p> <p>&nbsp;</p> <p>By raising funds online, the startup initially manufactured and donated 2,000 face shields to hospitals and government bodies. With requests pouring in from Delhi, Bengaluru and other cities, another 30,000 face shields were donated.</p> <p>“Business will not be the same anymore,” said Krishna. “We have to understand what is required in the post-corona age. People will not be comfortable stepping outside and eating in public places. A new set of products is required.”</p> <p>&nbsp;</p> <p>Krishna is waiting for the lockdown to be eased so that he can manufacture around one lakh face shields and sell it through e-commerce sites and other distribution channels. Another product that the startup has designed is a stylus-like tool that can be hung on a keychain and be used to press buttons, like the ones in elevators. The product comes with a disinfectant box to help sanitise it after use. “We want to bring out the product soon as we don’t want to miss the bus,” said Krishna.</p> <p>&nbsp;</p> <p>Another startup, Quantela, collaborated with the state government and other companies to develop a website on Covid-19. Apart from providing statistics, the site will also help users access tele-medicine options. Sridhar Gadhi, founder and executive chairman of Quantela, said that their priorities changed after the pandemic. “Sixty per cent of the smart cities run on our platform. Earlier, our focus was on traffic, safety and security,” he said. “Now we will start focusing on pandemic management and public health. It is important to reform your product within the area you are working.” Covid-19 will change the customer buying pattern, needs and pricing in smart cities, he added.</p> <p>&nbsp;</p> <p>One of the popular tech landmarks of Telangana is its startup incubator, T-Hub, located in the IT corridor of Hyderabad. Nine startups in T-Hub are working on projects aimed at battling Covid-19. For example, Dimension NXG Pvt Ltd has created glasses to spot Covid-19 suspects. The glasses help identify individuals with Covid-19 symptoms from a distance of 3m to 5m and can be used indoors and outdoors. Wearers will see the real world, with an augmented overlay of body temperature readings of the individuals in front of them.</p> <p>&nbsp;</p> <p>Artificial Intelligence tools have been deployed by Tericsoft, a T-Hub company, to detect people who are coughing in a public space and also those who are not wearing masks. It can also track the number of people entering or exiting a venue.</p> <p>&nbsp;</p> <p>While Covid-19 has us all boxed in, entrepreneurs sure are thinking out of the box to stop its spread.</p> Fri May 08 20:00:18 IST 2020 friends-with-benefits <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Stand in front of the mirror. Scribble ‘oil’ in upper case on a piece of paper and hold it up. What do you see?</p> <p>&nbsp;</p> <p>It is an urban legend in the corridors of India Inc that Reliance Industries chairman Mukesh Ambani came up with the name ‘Jio’ for his company’s shift into digital economy from the mirror image of what has long been its core competency—oil and its derivatives, from polyester to petrochemicals. And last week, to ensure that the Ambani legacy outlives its original golden goose, he accepted a friend request from Facebook, worth nearly Rs44,000 crore, for a partnership that promises to upend the Indian business scape.</p> <p>&nbsp;</p> <p>“Together, our two companies will accelerate India’s economy,” said Ambani. “Our partnership will be a great catalyst to make India the world’s leading digital society.” Facebook founder Mark Zuckerberg explained further: “We are going to work together on some critical projects which will open up a lot of opportunities for commerce in India.”</p> <p>&nbsp;</p> <p>The binding agreement between Mark and Mukesh is technically for a minority stake of barely 10 per cent in Jio. But the optics are resounding—this is one of the biggest foreign direct investments in India, and it is significant considering it materialised during the peak of a global lockdown. Going by the valuation, Jio is now worth about Rs4.6 lakh crore, making up about half of the total Reliance kitty. For Zuckerberg, known for gobbling up competition or those with technologies he takes a fancy to (remember Instagram and Oculus Rift?), bagging a non-controlling share in a company is in itself against his modus operandi. The generous valuation of Jio platforms is his biggest investment since Facebook famously bought WhatsApp six years ago. So, what was the lure?</p> <p>&nbsp;</p> <p>If you do not mind the hyperbole, the reason is simple—world domination.</p> <p>&nbsp;</p> <p>Facebook is the biggest social media company in the world. Its WhatsApp messaging service, with 40 crore users in India, is a byword for information and communication in the country. While Reliance is India’s largest corporation and Mukesh the richest Indian in the world, Jio is the biggest telecom operator in the country, even as its rivals struggle under massive debts. Together, they make a formidable force.</p> <p>&nbsp;</p> <p>“Facebook and Jio will try to leverage each other’s user bases by driving synergies between the two platforms to target more than 500 million users which they might currently share among both the platforms, and target the next 300 million new internet users in India over the coming few years,” said Tarun Pathak, associate director at Counterpoint, a leading telecom and tech market research firm. “Combining it all gives you a comprehensive advantage, a potential to create a formidable entity,” said Professor Davinder Singh, assistant dean at the School of Management at BML Munjal University.</p> <p>&nbsp;</p> <p>Ambani had been talking about kiranas and ‘new commerce’ for two years now. Jio’s reach, Facebook’s tech prowess and WhatsApp’s pan-India accessibility can catalyse its scaling up to his liking. “The IT synergy Jio can get from Facebook cannot even be imagined,” said an equity adviser. According to a Motilal Oswal Institutional Equities report, “the renewed focus on the Jio app ecosystem and the grocery backend would open up multiple new e-commerce opportunities as the company plans to leverage JioMart and WhatsApp to enable small Indian kirana stores to transact digitally with their customers.”</p> <p>&nbsp;</p> <p>It is a win-win for both. Reliance was hoping to get rid of its Rs1.53 lakh crore debt by next year. The original plan of selling 20 per cent stake to Saudi Aramco had gone nowhere with the Covid-19 outbreak and oil price drop playing party poopers. The Facebook deal now puts that target back on track. Additionally, the consolidation in the telecom space and JioMart’s rollout will accelerate its drive to make money out of Jio, especially with the assured returns from its petroleum business now being in serious doubt post-lockdown.</p> <p>&nbsp;</p> <p>For Facebook, the stakes are higher. Shut out of China, the world’s biggest market, it had zeroed in on India as the next best thing. However, it found the going tough, facing the establishment’s ire over anything from its Free Basics plan to offer ‘affordable’ internet, the way it dealt with fake news, its refusal to give keys to its end-to-end encryption, and lately with WhatsApp Pay. While rival Google has stolen a march over it in the UPI digital payment sphere, WhatsApp Pay, which has been on beta testing for years, has not got Reserve Bank clearance. And, despite Facebook Marketplace, Instagram Shopping and the likes, Zuckerberg’s company is yet to make a foothold in the lucrative e-commerce sphere.</p> <p>&nbsp;</p> <p>“Having Reliance as your local partner helps. Facebook will be in a better position to convince policy makers of their agenda,” said Davinder Singh. Not to forget, the revenue the core ‘new commerce’ business promises.</p> <p>&nbsp;</p> <p>But never, for a moment, think that the two partners will be satisfied with that. “While they may start with linking kirana stores with locals, do not forget that the two together have access to the data of one-third of India’s population. You can sell anything on such a platform,” said a financial market adviser who did not wish to be named.</p> <p>&nbsp;</p> <p>Pathak said it might not be limited to just hyperlocal e-commerce. “They are likely to leverage other points going forward,” he said. The JioMart platform could expand to a ‘super’ status then, integrating anything from B2B and health care to learning and entertainment. The many acquisitions made by Jio, from music app Saavn to artificial intelligence firm Haptik, now falls into perspective.</p> <p>&nbsp;</p> <p>Fintech could be crucial to this. While WhatsApp Pay hopes to go live soon with ‘a little help’ from Reliance, Facebook still has not given up hopes of its digital currency ‘Libra’ becoming a global benchmark. Google Pay and Walmart’s PhonePe dominate the digital payment scene in India, but the government has been calling for a fresh retail payment infrastructure mode called New Umbrella Entity. Draft guidelines were issued two months ago, and it could be ripe for Jio-FB’s picking.</p> <p>&nbsp;</p> <p>Ambani himself makes it very clear. “In the days to come, this winning recipe will be extended to serve other key stakeholders of Indian society—our kisans, small and medium enterprises, our students and teachers, our health care providers and above all, our women and youth,” he said.</p> <p>&nbsp;</p> <p>But for that kind of an all-encompassing scaling up to happen, you need to tame the elephant in the room—big data. Facebook India was quick to clarify that data sharing was not part of the deal, but industry watchers are not convinced. “With the kind of integration we are seeing here, there will be some kind of information sharing so that the experience is smooth,” said Pathak. Davinder Singh said intelligently managing data would be much more valuable than all the money that would come in through e-commerce.</p> <p>&nbsp;</p> <p>While Reliance itself has declared that it would vet the deal through the Competition Commission of India for clarity on the immense data the combined entity will lord over, privacy advocates are already worried. “Any violation of privacy could lead to huge consequences,” said Kazim Rizvi, co-founder of the think-tank The Dialogue and co-chair (public policy) of Indian National Bar Association. “It is imperative that the government enacts a progressive data protection law as soon as possible.”</p> <p>&nbsp;</p> <p>The Jio-Facebook deal could have a domino effect on other tech players. “Combining technology and mobile platforms allow for synergies and convergence which will be hard to compete against for the companies in pure technology or pure mobile telephony,” said Davinder Singh. If not beleaguered rival Vodafone-Idea, at least Sunil Mittal’s Airtel is unlikely to give in without a fight.</p> <p>&nbsp;</p> <p>The same can be said about Amazon and Walmart-Flipkart, which dominate the Indian e-commerce space right now. Amazon boss Jeff Bezos had himself talked about investing a billion dollars in digitising small and medium enterprises in India during his last visit. “Google also might have ambitions,” said Pathak. “I won’t be surprised if there are more partnerships in this field in the coming days.”</p> Thu Apr 30 18:19:31 IST 2020 neighbourhood-catch <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Most businesses have been in survival mode during the lockdown, but not those of Mukesh Ambani. As soon as his Reliance Industries sprung a surprise by announcing a deal with Facebook, the business plan at the centre of it got a fresh leg up. JioMart—the company’s e-commerce platform that plans to link three crore neighbourhood grocers directly with consumers using Facebook’s messaging service WhatsApp—is now up on beta testing in three satellite towns of Mumbai.</p> <p>&nbsp;</p> <p>The timing could not have been better. With malls and big department stores closed, people have turned to neighbourhood stores for essential shopping. A McKinsey report says grocery purchase frequency has increased by 39 per cent since the outbreak began. E-commerce giants Amazon and Flipkart, as well as online grocers BigBasket and Grofers, have their hands tied with either government restrictions or a breakdown in their distribution network.</p> <p>&nbsp;</p> <p>JioMart, already available as a website and an Android app, is now accessible through a dedicated WhatsApp number, too. Making the service available through WhatsApp, it is assumed, will make it appeal to even the tech illiterate across India who may not use apps or surf the web, but still use WhatsApp to communicate. The messaging service has about 40 crore users in India.</p> <p>&nbsp;</p> <p>Once the order is successfully placed, the user is notified which nearby store will be catering to his order, along with details of time and delivery status. When WhatsApp Pay gets active (it is currently under beta testing, full-fledged operations throttled by Reserve Bank restrictions as well as litigation) and JioMart goes pan-India, the experience could get far more seamless.</p> Thu Apr 30 18:14:16 IST 2020 3d-for-the-needy <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>ON APRIL 6,</b> Wockhardt hospital in Mumbai was declared a containment zone after three doctors and 26 nurses tested positive for the novel coronavirus. This is just one among many instances of frontline health care professionals being infected while on duty. Nurses, doctors and paramedics countrywide had held protests to highlight the shortage of personal protective equipment (PPE). The issue had even reached the Supreme Court. Nagpur-based Dr Jerryl Banait had moved court to ensure WHO-grade PPE for health care professionals. The Supreme Court had asked the Union government for a response on the matter.</p> <p>&nbsp;</p> <p>The Indian Express, citing sources, reported that the country will require about 27 million N95 masks, 15 million PPEs, 1.6 million diagnostic kits and 50,000 ventilators by June. While there is no official data on how many health care professionals have been infected with Covid-19 in India; the ballpark figure as of mid-April is 50.</p> <p>&nbsp;</p> <p>Rohit Asil, director and co-founder of Fracktal Works, a 3D printing enterprise based in Bengaluru, first understood the magnitude of the issue when he spoke to a doctor based in rural Karnataka. The latter worked in a primary health centre, most of which are woefully understaffed. “They did not have even basic equipment like face masks,” said Asil. “The doctor seemed resigned to his fate. He said he was sure that he had been infected, but was worried only on one count: what his absence would mean for villages in the area.”</p> <p>&nbsp;</p> <p>Fracktal Works mostly produced automotive parts, but the doctor’s helplessness moved the company to print face shields—a PVC film face visor secured around the head by an elastic band—and donate them to health care facilities in Karnataka. Compared with a mask, the face shield had an additional advantage—it protects the eyes, too. Moreover, as an outer protection equipment, it helped elongate the lifecycle of N95 masks, already in short supply.</p> <p>&nbsp;</p> <p>The relative simplicity of 3D printing is what aids fast production. A Computer-Aided Design (CAD) file of the product is fed into a 3D printer, and the three-dimensional structure is broken down into two-dimensional layers and printed.</p> <p>&nbsp;</p> <p>3D printing has evolved by leaps and bounds over the years, transforming itself from a process limited to quick prototyping to playing a major role in the production of industrial and automotive parts, aviation mechanics, and even construction of houses. Bioprinting is an evolving system, where even tissues used for physical reconstruction procedures are produced with the help of a biopolymer gel.</p> <p>&nbsp;</p> <p>India is also quickly adapting to the evolving 3D-printing market; 6Wresearch says that domestic demand is projected to cross $79 million by 2021. Perhaps, the most high-profile example of 3D printing would be this: the GSAT-19 satellite launched in 2017 was fitted with a feed cluster antenna 3D printed by Wipro. 3D printing has its drawbacks too. For example, it might not be the best choice for mass production. A process like injection moulding, where molten substances are injected into a mould and then cooled, is cost-effective and yields much better results for bulk production.</p> <p>&nbsp;</p> <p>The initial design for the face shield produced by Fracktal Works was open-sourced, and it took around 40 minutes to produce a single batch. The team tinkered with the design and cut the production time by half. To raise capital, Asil and his colleagues launched a crowdfunding campaign. “We started off with an initial target of Rs1.55 lakh, (but raised) Rs5.2 lakh”. Thanks to the windfall, they doubled their initial target of 1,500 face shields and added hand sanitisers to the kit. “We made a new injection mould to speed up the process. The biggest problem we faced was logistics, because of the lockdown,” Asil said. Altogether, he said, the production cost for a kit came to Rs150.</p> <p>&nbsp;</p> <p>PPE manufacture is governed by strict international protocols and all the startups are adhering to these guidelines. Boson Machines, a Mumbai-based 3D printing company, had manufactured and distributed face shields to several institutions in the city, including Jaslok and Kasturba hospitals. “We ensure that the face visor has the height, breadth and cut to block any splatter from the patient,” said Arjun Panchal, co-founder of Boson Machines. “We have 250 machines for printing; each batch takes around two hours.” He said they can produce 6,000-7,000 pieces a day, each costing around Rs150. Finding capital and labour were the bigger challenges. “We started a crowdfunding campaign on Ketto,” Panchal said. “The machines are manned mainly by family members and two office staff. We hiked the production capabilities after a request from the Maharashtra government.”</p> <p>&nbsp;</p> <p>The Atal Innovation Centre (AIC) in Coimbatore, a startup incubator supported by NITI Aayog, was flooded with enquiries when startups under AIC started producing face shields. “We got requests for almost one lakh pieces when we could make only 1,000 per day,” said Ebin Ephrem Elavathingal, senior manager, AIC. “We got requests from places as far away as Sikkim and Mumbai.” The AIC first produced face shields based on their own design and donated them to sanitation workers in the city. Later, they supplied to the ESI Hospital in Coimbatore. The material costs alone came to Rs100 per piece. “We have now created an open source file with guide and designs simple enough for anyone with a 3D printer to start manufacturing,” Elavathingal said. AIC’s initial plan was to manufacture ventilators. Reportedly, 90 per cent of a prototype is done. It is expected to cost around Rs10,000; off the shelf ones cost between Rs4 lakh to Rs5 lakh.</p> <p>&nbsp;</p> <p>Many of the startups—Boson Machines, for example—have tweaked their initial designs based on inputs from doctors who used the products. The tweaking is easily done in the 3D printing ecosystem, but it would not have been as effortless in traditional production.</p> Thu Apr 30 18:08:37 IST 2020 double-edged-sword <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>In 2017, Chinese pharmaceutical company Fosun Pharma acquired 74 per cent stake in Hyderabad-based Gland Pharma for $1.1 billion. It was the biggest acquisition by a Chinese company in India, and only five other foreign direct investments by Chinese companies have exceeded $100 million. However, Chinese investors and technology companies have been far more active in India’s startup ecosystem, pumping in more than $4 billion. “Chinese FDI into India is small at $6.2 billion, but its impact is already outsized, given the increasing penetration of tech in India,” said a report by the think tank Gateway House.</p> <p>This is exactly why the government on April 18 announced new foreign direct investment norms, barring FDI via the automatic route from countries sharing land borders with India. In effect, it is now mandatory for investors, direct or indirect, from China to seek government approval before making investments in Indian companies. “The government does not want hostile takeover as, because of Covid-19, valuations of a lot of companies have seen a downfall. Other economies are also taking such measures,” said Roma Priya, founder of Burgeon Law.</p> <p>The apprehension is that the Chinese economy is relatively less affected by the pandemic and therefore Chinese companies may be keen on shopping. The government’s new FDI norms will enable safeguarding of Indian businesses against opportunistic takeover threats as they become “tempting targets in the current scenario,” said Vipin Sondhi, MD and CEO of commercial vehicle maker Ashok Leyland.</p> <p>Mahesh Singhi, founder of investment banking firm Singhi Advisors, said the new norms would ensure that ownership and management of Indian companies would not slip out of hands cheaply. “In some companies, including some large business houses, promoter stake is low. With the current beaten down valuations, these companies are vulnerable, not only because of a threat of hostile takeovers, but also with a fear of accumulation of a large chunk of stake by investors with hot money or by disruptive investors,” he said.</p> <p>About two dozen Chinese tech companies and funds have funded 92 Indian startups, according to data from Gateway House. Its study shows that 18 of India’s 30 tech unicorns have Chinese investors. Over the past few years, many of these startups have looked to grow aggressively, and Chinese companies like Alibaba and Tencent have been more than willing to fund this growth.</p> <p>So, will the move affect startup funding?</p> <p>“In the short term, the new FDI rules will have an impact,” said Makarand Joshi, partner, MMJC and Associates, a corporate compliance firm. Singhi said the startup technology funds would take a beating. “So, tomorrow if another Ola or Paytm goes to the market to raise capital, they will find it difficult not only to get new investors but also to meet the benchmark valuation expectations set by earlier rounds of fundraising,” he said.</p> <p>Some experts argue that with local capital availability limited and other major markets like Europe and the US struggling with the pandemic, imposing restrictions on investments from China may not have been the best thing to do. “China has been one of the power backers of our startup unicorns,” said Priya.</p> <p>China has said that the new rules are discriminatory and they breach World Trade Organisation rules. Meanwhile, as the world and India brace for a huge economic impact from the pandemic, India’s startups may well be in for a long wait before they can get fresh rounds of funds.&nbsp;</p> Thu Apr 23 16:12:25 IST 2020 cracks-in-the-wall <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Last August, Jaipur-based Ruchi Puri signed a management service agreement with OYO Hotels and Homes for a 20-room guest house at the Janakipuram locality in Lucknow. OYO had agreed to pay Rs1.6 lakh every month to her for operating the guest house. After getting the design approved by OYO, for which the company charged a design consultancy fee, Puri started the construction of the guest house and spent some Rs10 lakh for the initial work. However, a while ago, OYO started pushing for a revenue-sharing model or cancellation of the agreement. “OYO has breached the agreement and has no intention to honour it,” she said. “Recently, citing the Covid-19 lockdown, OYO sent an email to me, putting everything on hold. As a property owner I feel cheated. Despite my repeated requests, there has been no concrete response from them.”</p> <p>Like every hospitality company, OYO is in tremendous stress owing to the Covid-19 pandemic. But its problems had started much earlier—chinks in the business model, complaints by property owners, unsatisfied customers and the side effects of scaling up too quickly. OYO responded to the questions from THE WEEK with a statement from its CEO Ritesh Agarwal, who said the company would be placing some of its employees on furlough or temporary leave in the US and select other markets, and assured that there would be no lay-offs in India. However, salaries of all employees have been cut by 25 per cent for four months starting April. Agarwal said the company’s revenues had dropped by 50-60 per cent.</p> <p>In an interview with THE WEEK last year, Agarwal had talked at length about OYO’s ambitious plans to become the world’s biggest hotel chain by 2023. He had even undertaken a $2 billion share buyback. But things did not go as planned. Scores of property owners have been unhappy with OYO’s alleged indifference to their concerns.</p> <p>Amitabh Mohapatra, president of the Guest House Welfare Association in Gurugram, has always been a critic of OYO’s business model. In the initial stages, OYO purchased rooms from hotels at fixed prices, which was a lucrative proposition for the hoteliers as they did not have to worry about occupancy, he said. But soon OYO changed the model to a dynamic one wherein the control of the room rates and inventory rested with hotel owners. After that it introduced a minimum guarantee price scheme wherein it took the entire inventory and the responsibility to fill the rooms. “Hotel owners lost their individuality as they were prohibited from featuring their rooms on other booking platforms,” said Mohapatra. “When there was oversupply of rooms, OYO was not able to achieve the target. Then they started penalising hotel owners with hidden costs and did not give the assured minimum amount in full. They started delaying payments and finding excuses in the form of guest complaints, poor service, convenience fees and data subscription fees. These things were not mentioned in the contract agreement.”</p> <p>Another complaint has been about OYO manipulating prices and artificially controlling demand with fake bookings. “OYO has been indulging in discounting of hotel room rates without the permission of owners and has been charging below cost price and agreed rates. There have been cases of illegal charging of hotel service fees that were not passed on to the hotels. Then there is manipulation of the micro-market rates that forces hoteliers to reduce room rates, so they have more traffic on their platform,” said Nirav Gandhi, executive committee member of the Federation of Hotel and Restaurant Association India.</p> <p>These problems started aggravating with OYO’s expansion in foreign markets. “Your business model’s few small holes become bigger with unreasonable growth. As economies, India is different from China and both of these are different from the US. These were the three big markets of OYO. This is not a software product where one size fits all. Each market needs to be seen differently and there is no harm going a little slow on expansion,” said Sathya Pramod, former chief financial officer of Tally Solutions. OYO has been facing many labour issues in China, and many hotel owners have exited the platform owing to payment issues.</p> <p>Pramod said that OYO was in dire need of money. “The sheer size to which the company has grown will need it to raise more money. They have SoftBank supporting them, but SoftBank is going through its own troubles. You will need to put in money, cut on expansion plans and look at manageable growth,” he said.</p> <p>Experts also suggest a reshuffle at the management level. Kris Lakshmikant, founder of the executive search firm Head Hunters India, said Agarwal should have recruited talent from the hospitality background rather than technical people. “He forgot that OYO was part of the service industry. All the jazz has to be topped with personalised service. Unfortunately for him, many of the establishments he got enlisted were landlords who had no hospitality background. With a lot of money pumped in by SoftBank, the initial battles were easily won. But, gradually, SoftBank realised that money alone does not count,” he said.</p> <p>Many experts see a big opportunity for OYO in the post-Covid-19 world as a budget option, as businesses are heavily cutting costs. “OYO needs to shrink its aspirations for a while,” said brand expert Harish Bijoor. “It needs to refocus on its first operation that made it glow and shine, the India operation. Focusing on getting the India play back should be its first priority, even as it vacates markets such as China and the US. More funds is a function of focus. More funds is a function of making the model tick in a robust market. India is bound to be one after this pandemic is over.”&nbsp;</p> Thu Apr 23 15:58:00 IST 2020 prudent-steps <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>&nbsp;</p> <p>The ongoing spread of Covid-19 has rattled equity markets the world over. The pandemic has resulted in sharp corrections in the markets. For instance, the benchmark BSE Sensex in India dropped from a peak of close to 42,000 to below 26,000 between January and mid-March. While there has been some upward movement in the past few days due to global and national-level actions to deal with the Covid-19 impact on economy and society in general, the market continues to remain extremely volatile.</p> <p>The market correction has resulted in sharp fall in most people’s portfolios as the gains accumulated over several years have taken a severe beating.</p> <p>To deal with such situations, mutual funds have a specific category of schemes called the balanced advantage funds.</p> <p>&nbsp;</p> <p><b>What are Balanced Advantage Funds?</b></p> <p>The Securities and Exchange Board of India, which regulates mutual funds and overall capital markets in India, has categorised balanced advantage or dynamic asset allocation funds as open-ended dynamic asset allocation funds. These funds are a part of the hybrid schemes basket. This essentially means that these funds are allowed to change allocation from equity to debt or vice-versa, as and when required. Unlike other funds like equity or debt funds, the market regulator has not specified any asset-wise investment limits for these funds. However, asset management companies have their own defined limits for their own balanced advantage funds.</p> <p>&nbsp;</p> <p><b>How do these funds operate?</b></p> <p>The underlying principle for these funds is dynamic asset allocation. Asset allocation is nothing but a strategy used to keep the risks in a portfolio under check. This means that the entire corpus or amount being invested or already invested is not put in a single asset class. Parts of the corpus are put in different asset classes to avoid a major setback if any one asset class witnesses a tough phase. For financial investments, asset allocation is maintained by balancing the investments between debt and equity instruments. Following the same principle, balanced advantage funds aim to balance the risks by actively managing the investments going to equity and debt.</p> <p>&nbsp;</p> <p><b>What should you do?</b></p> <p>While it is always advisable to get an expert view on your finances, it becomes critical in difficult times to entrust the responsibility to experienced professionals. How to deal with your nerves when the market steeply moves downwards or upwards? A reactionary behaviour would be to sell or buy, respectively.</p> <p>However, a tried and tested model could give measured suggestions on what to do. The benefit of such models is that these cut out the noise that sentiments could create in such situations. The balanced advantage fund by ICICI Prudential Mutual Fund has one such model. This model has been in use for over the past decade and has successfully helped navigate volatile times with ease.</p> <p>Given its existence for over 10 years now, the model and the ICICI Prudential Balanced Advantage Fund has witnessed multiple sharp movements in the market, both up and down. This fund is the oldest and is considered a pioneer in its category. Also, this is the only fund in its category which has seen a complete market cycle. As the valuation of equity instruments moves to expensive territory, it calls for a reduction of allocation, and vice versa.</p> <p>If you are an investor struggling with psychological factors in investments like greed and fear, the scheme should be part of your portfolio to bring some much-needed balance.</p> <p>&nbsp;</p> <p><b>Kumar is partner, Inwise Wealth Consultancy LLP.</b></p> Sat Apr 18 10:00:22 IST 2020 keep-calm-buy-more <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>The equity markets peaked in January; the Sensex touched a life high of 42,273.87 on January 20, 2020. From that peak, in just two months, the market has plunged a mind-boggling 30 per cent and it could fall even more, given that there is still a lot of uncertainty about the Covid-19 outbreak and when it is going to end. In short, the equity markets are not for the faint-hearted. But, it is also equity that has given high, long-term returns. Raghvendra Nath, managing director, Ladderup Wealth Management, shares his thoughts on how to overcome such major events.</p> <p><b>Have patience. Markets always bounce back</b></p> <p>For somebody who started investing in capital markets three years back, or maybe six months to one year back, this experience is extremely painful; they have not only lost the returns that they had generated, but also their capital is down substantially. But, anyone who has been in the equity market for 10 to 15 years can confirm that a fall like this is succeeded by an equally aggressive move up. The timing of the move up is completely uncertain. For investors who are holding high quality stocks or mutual funds or even portfolio management schemes, remaining patient is the best thing to do now. Markets are down because of uncertainty. The moment that ends, markets bounce back. So, just stay invested.</p> <p><b>Increase equity allocations</b></p> <p>This is a good time to basically double investments, because you will find markets extremely cheap. The valuations, which used to be there around 2011-2012 have come back. These are basically good times to invest for someone who is not exposed to the market. You should be aggressive on equities because when you are investing at these levels there is a downside, but there will be substantial upside over two to four years later.</p> <p><b>Diversify your investments</b></p> <p>Diversification is always good. Having multiple asset classes and multiple investments within each asset class always helps you in lowering the overall volatility of the portfolio. We have never recommended a 100 per cent equity portfolio to anybody.</p> <p><b>Balance your portfolio</b></p> <p>You should always have a balanced outlook towards your investments because you are looking at optimising returns. Equity should find a predominant place in the portfolio of any investor who is under 60 years of age. Rest could be in things like fixed income, gold and real estate.</p> <p><b>Ensure some safety</b></p> <p>If you are looking for a safe haven asset, look at fixed income. Put your money in a fixed deposit of a strong bank.</p> <p><b>Tips for senior citizens</b></p> <p>Let us say a person has just retired. Consideration has to be that he has 20 to 30 years to live and in this period you have multiple market cycles. So, having a 30 to 40 per cent allocation to equity is not a bad thing at all. The thing is that this 30 to 40 per cent should remain long-term and people should be able to ride out the volatility and not panic and get out of it, creating a permanent loss.&nbsp;</p> Thu Apr 09 15:51:11 IST 2020 knits-in-knots <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>The Tiruppur knitwear industry may soon be on its knees. The textile hub, which exports apparel worth Rs26,000 crore every year, could witness a major setback with the Covid-19 outbreak forcing cancellation of orders, complete lockdowns and reduced import of raw material from China. Buyers from countries such as Italy, Germany, Spain, the UK and the US have already frozen or cancelled orders.</p> <p>“We thought the market this year would end in March, [with exports worth] Rs25,000 crore,” A. Sakthivel, former president of the Tiruppur Exporters Association (TEA), told THE WEEK. “But, till now, we have made only Rs23,250 crore. There is a decline in exports and the loss will be Rs1,750 crore.”</p> <p>Europe buys around 46 per cent of the exports from Tiruppur. Countries such as France, Italy, Germany, Poland, Spain and Denmark import most of their garments from here. The US and the UK together account for about 30 per cent of the exports.While T-shirts make up around 35 per cent of the exports, the rest is a mixed bag comprising pyjamas, dresses, kid’s wear and innerwear.</p> <p>The industry, which had been reeling from demonetisation and the GST rollout, received a double whammy in 2019, when famous brands such as Payless, Barneys and Forever 21 filed for bankruptcy. Other major brands like JCPenney, GAP, Sears and Victoria’s Secret cut imports, while Zalando, a major European ecommerce brand, shut its private label business zLabels and stopped sourcing from India. This brand alone was sourcing garments worth €20 million from India—the major hubs being Tiruppur and Bengaluru. “The big companies in Tiruppur managed their exports,” said Mahalingam Ramachandran, who runs an MSME unit in Tiruppur. “For small-timers like me who run micro-units, it is still difficult to cope. Bank loans were the only way out. But that is not possible in the current setup.”</p> <p>The knitwear hub has close to 1,200 registered units, of which 75 companies account for 50 per cent of the profits. The others units are mostly MSMEs that produce and export garments worth below 010 crore. “The MSMEs are the most affected,” said Sakthivel. “It is difficult for them to survive as the industry depends mostly on labour.”</p> <p>The industry employs six lakh direct and two lakh indirect labourers. The indirect labourers, most of them from north India, might not stay back in Tiruppur during the pandemic. “The attrition rate in our industry is already very high at 7 per cent,” said Sakthivel. “There is no guarantee that the labourers will come back to work.”</p> <p>Rough weather began in January, when raw material from China dried up. This triggered a fall in production; Tiruppur needs at least 500 tonnes of synthetic dye every month. “If this situation of increase in the price of raw materials, lockdown and stoppage of production continue, we will definitely go out of business in April 2020. The big units alone will survive,” said Ramachandran.</p> <p>To make matters worse, Tiruppur exporters have started losing out to smaller companies in Bangladesh, Sri Lanka, Cambodia and Ethiopia. These countries have clear access to the EU and the US markets because of free trade agreements. “We have already made several requests to the government to create a level playing field for us like the other countries have done,” said Sakthivel. “The competition is high due to the free trade agreements.”</p> <p>Sakthivel shared with THE WEEK an email from one his customers, dated March 18. It read: “Unfortunately, we are left with no option but to place on hold on any new orders being placed by Primark (the customer).” In another email, Primark sent a notice of cancellation of contracts and purchase orders.</p> <p>Said Raja M. Shanmugam, president of TEA: “The coronavirus outbreak and the virtual lockdown in major countries have totally emptied our markets across the globe. We do not know when the markets will regain their position.” A few weeks before the lockdown, Shanmugam had written to Finance Minister Nirmala Sitharaman about the extraordinary situation the garments industry was facing. “I have requested the finance minister to not categorise the units as NPAs for non-repayment of loans and to advise the banks to provide at least six months moratorium to help the units recover,” he said.</p> <p>Said Mahalingam: “Till last year, even when major brands announced bankruptcy, it was only a temporary problem. We had strong hopes of bouncing back. But now the problems will only compound in the coming months, as the entire world has to come out of the fear. This might result in a huge financial loss.”</p> <p>There is, however, a ray of hope—the Reserve Bank of India recently announced measures that would help textile exporters. “We thank the RBI for providing three months moratorium on payment of instalments of term loans,” said Shanmugam, “and for deferring by three months the [payment of] interest on working capital. &nbsp;</p> Sat Apr 04 14:10:14 IST 2020 labour-pain <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>When Gauri Shanker, a content writer, chose to be a freelancer, he was sure that he had the best of both worlds—the freedom to work on his own schedule and a steady income. But the current lockdown has upset his plans. On the second day of the lockdown, the agency that gave him projects told him that companies had stopped content sourcing for the next few months. Shanker is now clueless about how to meet his financial commitments; he is left hoping for the lockdown to end fast and things to get better. “No one is launching new campaigns,” he said.</p> <p>Most gig workers—those who work on a contract rather than permanently—in India share Shanker’s misery. Blue collar gig workers such as Ola and Uber drivers have returned to their villages. “This situation will not change soon. It is better to be with our families than to struggle in the city,” said Ravi Kumar, an Ola driver in Bengaluru, who hails from a village near Vijayapura in north Karnataka. He does not have any plans to return to the city soon.</p> <p>Broadly there are two sets of gig workers. The first set—professionals who provide services in software coding, content writing, creative design and photography—has been active in India for the past 15 years; its 1.5 crore-strong workforce accounts for about 25 per cent of the global skilled gig workforce. The second set are blue-collar workers on daily wages, mostly couriers, delivery staff for food aggregators and drivers with cab aggregators.</p> <p>“The lockdown situation exposes those in the informal sector and those who have minimal formal skills the most,” said Rituparna Chakraborty, co-founder of TeamLease. “While those with skills and those who commoditise their skills as service might still be able to do so remotely, that is not a possibility for the informal sector. Their ability to step out is where opportunities of making a livelihood starts and the lockdown completely takes away that opportunity. Hence, until and unless we see through the lockdown it is very difficult to predict the extent of impact they might face.”</p> <p>The digital gig economy is valued at about $200 billion worldwide. India, which is the fifth largest flexi-staffing economy, created around eight lakh gig job openings between March 2018 and 2019 just in Bengaluru and the NCR region. This number was poised to grow in 2020 before the Covid-19 pandemic struck. “We estimate that more than 80 per cent of freelancers work from home. In the recent past, this group has seen exponential growth with revenues increasing by more than 30 per cent in 2019 vis-à-vis 2018,” said Rohit Kulkarni,regional manager of Payoneer, a digital platform.</p> <p>In the case of blue-collar gig workers, the impact has been a mixed one. While more delivery persons are needed by the essentials and grocery e-tailers, other e-commerce sites have cut down their operation and cab-hailing services have completely stopped. There have been huge lay-offs in the aviation, tourism, travel and event management sectors. On the other hand, white-collar gig workers are yet to see the full impact of the lockdown, as many companies will reassess their business dynamics only after the lockdown.</p> <p>“If the lockdown continues for longer, then the impact would be deeper. But if this gets over in 21 days the impact will be minimal,” said Vineet Arya, founder of Outsourced CMO and Co-Hire. “The chances are that companies will be very cautious in getting service from gig workers, especially in the HR and marketing field. The HR field may be hit due to freeze in new recruitment and the marketing field will see reduced spending.”</p> <p>The crisis has brought to the fore the vulnerability of gig working. “Gig workers are paid either based on their projects or hourly. Also, freelancers do not have an employment contract, which makes them the most vulnerable workforce during a recession or lockdown. All these factors may contribute to a decline in the gig economy in the long run in India,” said Gaurav Vohra, co-founder and CEO of Jigsaw Academy.</p> <p>The current crisis may prod the government to enact a legislation to provide a social security net for gig workers. “In India, people are part of the gig economy for the real need of a job,” said Mansij Majumder, HR head, Manipal Global Education Services. “As long as the number of people available is more than the number of jobs, this will go on. What we will witness is an increase in investment in personal development. The gig worker will be thinking of ways to increase his savings, have a cover for the difficult times and on retirement planning. This pandemic has changed the normal.”&nbsp;</p> Sat Apr 04 14:06:53 IST 2020 india-can-be-a-7-trillion-economy-by-2030 <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Arvind Panagariya came to head the NITI Aayog in January 2015, when the Narendra Modi government started dismantling old structures, as part of a policy shift. During his 31 months at Yojana Bhavan, he saw up close what the country needed, and, perhaps, what was not working, and suggested many a change. In August 2017, he returned to teach at Columbia University. Now, the economist is back with a bolder and sharper agenda.</p> <p>Panagariya’s new book,<i> India Unlimited: Reclaiming the lost glory,</i> makes a compelling case for initiating vigorous reforms to put India on the growth trajectory, which would make it the third largest economy in the world by 2027. The book has arrived at a time when the world economy is in a crisis triggered by a pandemic and governments are thinking afresh to get out it. But anyone who wants to understand the direction Modi government is taking will understand it better through Panagariya’s book.</p> <p>Panagariya proposes a break from the country’s recent past, even from the bureaucracy which he says is rooted in socialist and leftist ideology. He recommends the repeal or overhaul of the MNREGA, the Food Security Act, the land acquisition act and the RTE Act—all initiated by the UPA government—as they have outlived their utility.</p> <p>Panagariya suggests migration of the large agriculture workforce to more productive jobs in industry and services. “The more we delay this migration, the longer will be the period of farmer distress,” says the book. To address the low output of workers in industry and services sector, he recommends allowing significantly larger firms in the manufacturing industry, and also export as an important course correction for economic transformation along with the services sector.</p> <p>Another suggestion is privatisation of public sector banks by repealing the nationalisation legislation, diluting government equity to under 50 per cent, and bringing them at par with private banks in terms of regulation by the Reserve Bank of India. Panagariya also charts out a system for setting up world class institutes at a time India is yet to come out with a new education policy.</p> <p><i>India Unlimited </i>nudges the government in the direction in which its many pro-reform supporters thought it was moving but it actually was not. Not everyone will agree with Panagariya’s prescription for India, but it certainly pushes the public policy debate further. Excerpts from an exclusive interview:</p> <p>&nbsp;</p> <p><b>Q/ The global economy is under stress because of the Covid-19 pandemic, which has created a twin challenge of demand and supply. How can we tide over this crisis?</b></p> <p>A/ First and foremost, we need to focus squarely on containing the virus. So far, we have been lucky to keep the spread to clusters. If the virus transitions from clusters to communities, our challenge and economic fallout will rise manifold. The key to limiting economic damage is to limit the spread of virus. For that, we need to majorly scale up the production of test kits and N95 masks. Ordinary citizens need to stay indoors and use masks and gloves when they go out. To help the vulnerable who may lose their livelihoods, the government must make generous cash transfers and provide increased volumes of subsidised grains. The target group for this could be urban BPL families under the Food Security Act.</p> <p>&nbsp;</p> <p><b>Q/ The rise in NPAs of banks have exacerbated the financial crisis. Many financial institutions and industries that have huge debt on their books are on the verge of collapse. When do you see things getting settle down?</b></p> <p>A/ There is no doubt that India’s financial sector has been subject to deep disruption. I discuss this in great detail in my new book, <i>India Unlimited</i>. Contrary to the practice in nearly all well-run countries, we allowed restructured loans to retain their standard classification. As a result, bad loans that should have been recognised as NPAs and dealt with on a regular basis over the years kept accumulating. The result was that by 2015, when the RBI finally confronted the reality, we ended up with massive NPAs. Even then, the clean up process did not begin till mid-2017. Moreover, the weaknesses in banking spilled over into non-banking finance companies. The RBI, the NCLT and the government are now working to put the sector back on its feet. But the experience in all countries shows that the job of NPA cleanup, if not done on a regular basis, takes a long time. We know the post global financial crisis story in the United States.</p> <p>&nbsp;</p> <p><b>Q/ There is a credibility crisis in the banking industry. How can the Central bank and the government make people repose faith in banks again? You pushed for privatisation of banks and other PSUs. Are you satisfied with the pace of privatisation?</b></p> <p>A/ In India, the government has always stood behind banks. The speed with which it has put Yes Bank back on its feet is a good example. This being said, much work needs to be done to strengthen the banking sector. The fact that so many scandals in both public and private sector banks went undetected for so long suggests that there are large gaps in their oversight by the RBI. While government backing keeps depositors confident that their money is safe in the banks, the cost of ensuring that safety in the face of the scandals to the tax payer is large. The RBI needs to ramp up its information-gathering machinery and regulation to detect the wrongdoing by banks early in the game. Privatisation is a separate issue.</p> <p>&nbsp;</p> <p><b>Q/ How do you see the Modi government’s effort on reforms. Has the emphasis on the ideological agenda taken the government’s attention off the economy and reforms?</b></p> <p>A/ I think this is a wholly false narrative. The media has been singularly focused on the social agenda items of the government and has neglected to highlight the rapid pace of economic reforms under Modi 2.0. [Recently], the Rajya Sabha passed bills providing for national commissions to regulate homeopathy and Indian systems of medicine. The Lok Sabha had already passed these bills. Along with the NMC Act, also passed under Modi 2.0, these new laws fully modernise the regulation of medical education in India. This is a huge reform that the past governments had been trying for more than a decade but without success.</p> <p>The cut in the corporate profit tax rate to 25 per cent for existing firms and 17 per cent for new manufacturing firms is another big bang reform under Modi 2.0. The launch of the reform to simplify personal income taxation with all exemptions ended is another major step. Reforms in the works include massive privatisation programme extending to Air India and BPCL, listing of LIC and a national commission on higher education. There are also several lesser reforms, but I will desist from making the list longer.</p> <p>As for Regional Comprehensive Economic Partnership, the government has not said no. It is seeking a better deal and may still sign it if other RCEP members grant some of the concessions India has sought.</p> <p>&nbsp;</p> <p><b>Q/ In your book, you have emphasised that to improve the lives of agricultural workers one needs to move more than half of the people into industry and services. But there is also a view that the agricultural sector has helped the country withstand many financial downturns that happened in the industry and services sector. Moreover, when we are staring at an all-time high unemployment rate, how do you think this migration from agriculture sector to industry will be possible?</b></p> <p>A/ The suggestion that agriculture lends stability to overall growth is an illusion at best and false at worst. For one thing, growth fluctuates a lot more in agriculture than in industry and services. More importantly, today, agriculture is less than 15 per cent of the GDP. Between 2013-14 and 2018-19, its growth average was 3.4 per cent. Even allowing for 4 per cent growth, the maximum agriculture can contribute to GDP growth is 0.6 per cent. This contribution is too small to stabilise any instability originating in industry and services. The reason why agriculture matters so much in India is that 44 per cent of India’s workforce is employed in agriculture. But, alas, a large part of this workforce is living on a very low income. Some 70 million Indian land holdings, accounting for 48 per cent of all holdings, are smaller than half a hectare. The average size of these holdings is only 0.23 hectare. Assuming that value added in agriculture is uniformly distributed over the cultivated area, the average value added on these 70 million holdings was just Rs41,000 per year per holding in 2017-18. No family can live on an income this small. Industry and services need to create many more good jobs for those dependent on these tiny land holdings.</p> <p>&nbsp;</p> <p><b>Q/ The Modi government has set a target of achieving a $5 trillion economy by 2024. You also say India could rise to $7.1 trillion by 2030. You mentioned that there were policy mistakes that led to the fall in GDP in 2011-12 and 2013-14. Is it achievable given the current economic conditions?</b></p> <p>A/ The $7.1 trillion target by 2030 is most surely achievable. Coronavirus has created greater uncertainty and the fallout from it can be significant in the next year, perhaps even in the next two years. But we will have a vaccine against it in about a year. That and the clean up of NPAs, which is under way, will pave the way for us to return to higher growth trajectory. Of course, many reforms will need to be undertaken as well. I outline these reforms in my book.</p> <p>&nbsp;</p> <p><b>Q/ Do you agree with the argument that demonetisation was a mistake, as the GDP growth slowed down in the past three years?</b></p> <p>A/ There is no evidence whatsoever that demonetisation caused the current slowdown. Demonetisation took place in November 2016. The growth rate in 2016-17 was 8.3 per cent. Even critics say that the effect of demonetisation had dissipated by the end of the last quarter of 2016-17. Any effect of a sharp and sudden decline in money supply must be felt in a collapse in prices. But no such collapse in prices took place because creative Indians found ways to transact.</p> <p>&nbsp;</p> <p><b>Q/ Another key suggestion is to end the monopoly of the IAS. The prime minister has taken many initiatives, but those seem to be half-hearted. Would you agree? Or are you seeking a systemic overhaul of the bureaucracy?</b></p> <p>A/ In my understanding, bureaucracy itself is the source of slower progress in this area. The effort by the prime minister is not half-hearted. We need a lot more outsiders with specialised skills. But this is not to imply that generalist IAS officers will not be needed. The system will always need generalists, but the current balance is not right. We need more specialists with decision-making authority.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>India Unlimited: Reclaiming the lost glory</p> <p>Author: Arvind Panagariya</p> <p>Publisher: HarperCollins</p> <p>Price: Rs799, Pages 370</p> Thu Mar 26 16:34:20 IST 2020 system-failure <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>When a crisis erupted at the cash-strapped Yes Bank a few weeks ago, the Reserve Bank of India was uncharacteristically swift in resolving it. The Central bank quickly floated a reconstruction plan, with the State Bank of India as the anchor investor. The plan was immediately approved by the government and Yes Bank resumed full operations in two weeks.</p> <p>About six months ago, Mumbai-based Punjab and Maharashtra Cooperative (PMC) Bank, one of the large cooperative banks in India, had a similar problem, and it has left thousands of depositors in the lurch. The rescue of Yes Bank raised their hopes. However, to their dismay, the RBI extended the restrictions on PMC Bank by another three months on March 21.</p> <p>“Why can’t someone come and put money in PMC Bank?” asked Jitsu Sheth, who had deposits worth Rs28 lakh in the bank. With the funds tied up, Sheth’s small business has come to a standstill: the past six months have seen her virtually taking to the streets to get the money back. “All I had was this money and now am dependent on help from relatives,” she said. “I can’t go begging on roads now.”</p> <p>PMC Bank had loaned money to the now bankrupt real estate developer HDIL and it had allegedly used dummy accounts to hide the exposure, which was about 73 per cent of its total loan-book. The bank’s MD and CEO Joy Thomas, several of its board of directors, and HDIL’s promoters Rakesh Wadhawan and Sarang Wadhawan were arrested. The Bombay High Court had ordered the sale of HDIL’s assets to repay the bank. However, that order was stayed by the Supreme Court.</p> <p>Just as the PMC Bank case was dragging on in Mumbai, trouble hit another cooperative bank in Bengaluru. In January, Guru Raghavendra Sahakara Bank plunged into a non-performing assets crisis, prompting the RBI to impose restrictions on the bank. A case has been registered against a former chief executive of the bank.</p> <p>As the cases are being fought in the courts, deposit holders of these banks can only wait and watch, hoping that some day they will get access to their hard-earned money. And they know that it is not going to happen anytime soon.</p> <p>Two dozen cooperative banks have gone under RBI restrictions in the past few years. Pune-based Rupee Cooperative Bank has been under RBI restrictions since 2013 and the Mumbai-based CKP Cooperative Bank was put under restrictions a year earlier. Last year, the RBI issued similar directions to Hindu Cooperative Bank based in Pathankot, Punjab. There is, however, no assurance that such banks will come out of the crisis because of RBI action. Madhavpura Mercantile Cooperative Bank, the oldest cooperative bank in Gujarat, was crippled in 2001 after loans worth Rs1,030 given to stock broker Ketan Parekh went bad. Parekh was later convicted in a stock market scam. The bank was shut down in 2012 by the RBI, as it failed to recover the money. More recently, Bhopal Nagrik Sahakari Bank was ordered to shut shop in January 2018, and Bhilwara Mahila Urban Cooperative Bank in Rajasthan was ordered to be liquidated in September 2018, with the RBI cancelling its licence for violating lending rules.</p> <p>A common thread in all these cases is lack of adequate capital and failure in recovering loans. CKP Bank, for instance, has a negative net worth of Rs23,918 crore. Rupee Cooperative Bank, which had deposits of Rs1,300 crore as of 31 March 2019, reported a loss of Rs665 crore.</p> <p>Why do cooperative banks fail so often? While the PMC Bank crisis was a clear case of fraud, Madhavpura Bank was brought down by a scamster. In Nagpur, two dozen people, including a former CEO and a director of Navodaya Urban Cooperative Bank, were arrested by the economic offences wing last November for allegedly distributing bogus loans. The bank went into liquidation.</p> <p>“If you are talking about cooperative banks in general, there are huge issues that come out of dual regulations. There are issues that come out of the disadvantage of size and there are also issues that come out of too much growth, and control and governance,” former RBI deputy governor Usha Thorat told THE WEEK.</p> <p>In the past five years, urban cooperative banks reported about 1,000 cases of fraud worth more than Rs220 crore. Lack of corporate governance practices and risk management structures in cooperative banks is a key reason for the problems. Said Satish Marathe, founder member of Sahakar Bharti, an NGO in the cooperative sector, and also a member of the RBI board, “It is necessary for banks to have risk management structures in place.”</p> <p>Political interferences and lack of professional managements are the other reasons. “There has to be a separation of ownership and managements. Many urban cooperative banks have board-led managements, and not many of these board members may be equipped to take decisions in today’s complex banking scenario,” said Marathe.</p> <p>The bigger worry, though, is their regulation. While scheduled commercial banks are regularly inspected and supervised by the RBI, that is not the case with cooperative banks. While they are also governed by the Banking Regulations Act, several regulatory powers that the Act gives the RBI have been diluted when it comes to cooperative banks.</p> <p>Urban cooperative banks (UCBs) are registered as cooperative societies under the State Cooperative Societies Act. Multi-state cooperative banks fall under the Multi State Cooperative Societies Act. Hence, the RBI cannot take action against an urban cooperative bank without the assistance of the state registrar of cooperative societies. Thorat said the Central bank should have the same regulatory powers over both cooperative banks and commercial banks. “Bringing everybody under Reserve Bank regulation will help. But, the issue about cooperative banks is how much state governments will be willing to give up,” she said.</p> <p>The RBI, through various committees over the years, has looked to address the issues. In 2015, a committee headed by then deputy governor R. Gandhi suggested conversion of urban cooperative banks into commercial banks, a move that would bring them under the direct supervision of the RBI. “Though UCBs were set up as small banks offering banking services to people of limited means belonging to the lower and middle classes, a well laid-out transition path is required for at least the larger UCBs to convert themselves into universal/niche commercial banks due to the changing financial landscape in the country and providing further growth opportunity to well managed UCBs,” said Gandhi.</p> <p>The RBI has now allowed voluntary transition of UCBs into small finance banks. UCBs with a minimum net worth of Rs50 crore and CRAR (capital to risk weighted assets ratio) of 9 per cent are eligible for such a transition. However, the transition will not be easy, given that the converted entities will have to maintain a CRAR of 15 per cent.</p> <p>After the PMC Bank crisis erupted, the Central government initiated steps that will give the RBI more powers over UCBs and multi-state cooperative banks. As per the proposed amendments to the Banking Regulations Act, which were approved by the Union cabinet last month, UCBs will now be audited according to RBI norms. Appointment of chief executives at these banks will also require prior permission from the Central bank. The RBI will also be able to supersede the management of a cooperative bank. “From the cooperative sector, those who are using the word bank in their name would be brought under the Banking Regulation Act, to be monitored and regulated by the Reserve Bank of India, which means they will have to follow the same rules and regulations, which govern any scheduled commercial bank,” said Finance Minister Nirmala Sitharaman.</p> <p>The RBI, however, will still not have complete control over the UCBs as the Registrar of State Cooperatives will continue to wield administrative powers over these banks. Nevertheless the Central bank has initiated several steps to strengthen UCBs. Banks with assets of Rs500 crore and above as on March 31 of the previous financial year should report credit information on all borrowers with aggregate exposures of 05 crore and above to Central Repository of Information on Large Credits (CRILC) maintained by the RBI. UCBs now have to submit CRILC report on a quarterly basis.</p> <p>The RBI has also directed UCBs to amend their bylaws and constitute boards of management, comprising people with practical experience in banking to facilitate professional management. Such banks will also have to do due diligence to determine the suitability of candidates being considered for inclusion in the board.</p> <p>Fundraising has been an issue for UCBs as they cannot raise capital via a public issue. The RBI has now given approval for setting up an umbrella organisation, which can provide liquidity and capital support to member banks. The umbrella organisation is also expected to provide IT infrastructure and capacity building facilities.</p> <p>On March 23, the RBI said that it was trying to revive PMC Bank. The depositors were offered a plan, under which part of their deposits would be converted into perpetual deposit instruments, essentially a bond, with a lock-in period of 10 years. Depositors, however, are not happy with it. “No depositor would agree to lock in his hard-earned money for 10 years,” said Sheth. She instead called for “out-of-the-box” solutions like selling the assets of bank directors and using that money to repay the depositors.</p> <p>For now, lakhs of deposit holders whose money is stuck in cooperative banks will have to wait for the law to take its own course and hope that the strengthening of regulations will ensure fewer troubles in the future.&nbsp;</p> Thu Mar 26 16:13:41 IST 2020 rebalancing-act <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>INDIA’S ECONOMIC</b> growth has slowed down in the past few years. In the July-September quarter, it was 4.5 per cent, the lowest in six years. Accordingly, the National Statistics Office has reduced its growth forecast for the year 2019-20, from 6.1 per cent to 5 per cent.</p> <p>&nbsp;</p> <p>How do you reposition yourself as an investor in such a situation, as such shifts in economic performance could alter the market returns, which could distort your calculations on financial goals? Historical data suggest that economic slowdown is accompanied by lower returns from equity investments. For instance, the year 2008, which witnessed the global financial crisis, saw equity returns dropping to (-) 51 per cent. At the same time, such phases could mean better returns in some other asset classes. In 2008, for instance, debt investments gave a return of 28 per cent.</p> <p>&nbsp;</p> <p>That gives us some direction on re-strategising in the time of slow economic growth.</p> <p>&nbsp;</p> <p><b>Rebalance your asset allocation</b></p> <p>In situations like the current one, you might have to change your course of action to achieve your medium- and long-term goals. While reliance on equity can be continued for the long-term goals, the medium-term ones could come under strain if those are dependent on high returns from equity investments. Accordingly, you might need to increase investments for the long-term goals and change course for the medium-term goals.</p> <p>&nbsp;</p> <p>For the medium-term goals, you would need to dedicate a higher portion of your investments to debt. This reduces the volatility that comes along with equity investments and adds a layer of safety to your medium-term goals. How can that be done?</p> <p>&nbsp;</p> <p><b>Medium duration funds</b></p> <p>You can explore medium duration funds, commonly known as medium term bond funds, for your medium-term goals. As per the mutual fund scheme categorisation by the Securities and Exchange Board of India, medium duration funds can invest only in debt securities of a duration of 3-4 years. These funds can invest in debt securities as well as money market instruments.</p> <p>&nbsp;</p> <p><b>How do you choose a good and reliable medium duration fund?</b></p> <p>Before choosing a debt fund, check not just the past returns, but also the composition of the portfolio. Try to understand if the scheme has excessive exposure to a single entity or a group of entities controlled by a single company, or a single sector. This is an important filter that you must apply, especially considering that some debt exposure went bad in the past few years.</p> <p>&nbsp;</p> <p>The next thing is the rating of the securities that the scheme invests in. Ideally, a big chunk of the investments should go to AAA-rated securities. This is the highest level of credit rating, which signifies lowest probability of default on repayments.</p> <p>&nbsp;</p> <p>But the credit ratings are given by rating agencies. So, it is important to check if the fund house applies some more filters and analyses the bond-issuing companies in-house before making the investments. All of these details are publicly available through the fact sheets that fund houses publish.</p> <p>&nbsp;</p> <p>Based on these parameters, you can consider the ICICI Prudential Medium Term Bond Fund. The scheme has an average exposure of just 1.8 per cent to 54 different securities. Moreover, 39 per cent of the scheme’s assets under management are invested in AAA-rated instruments as of January 2020, giving it an adequate exposure to the highest quality of debt papers in the market. Between July 2013 and February 2014, the average one-year return from the scheme stood at 12 per cent, and between June 2015 and October 2016 at 9.6 per cent. If you have not yet recalibrated your investments with respect to the changing economic environment, this scheme can be a good choice for you to refocus on your medium-term goals.</p> <p>&nbsp;</p> <p><b>Venkataramkrishnan is of Viruksham Financial Services.</b></p> Fri Mar 13 13:05:37 IST 2020 we-are-aiming-to-launch-the-sonet-this-year <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>WHEN KIA MOTORS</b> entered the Indian market last July with the Seltos sports utility vehicle, everyone thought the timing could not have been worse. The sector was suffering from an unprecedented slowdown and all the carmakers were struggling to deal with it. But Kookhyun Shim, managing director and chief executive officer of Kia Motors India, had his homework done, and the Seltos propelled Kia to the fourth spot in terms of sales, beating the likes of Toyota and Honda, in a few months. In an exclusive interview with THE WEEK, Shim talks about the success, the opportunity in the Indian market and plans for the future.</p> <p>&nbsp;</p> <p><b>Q/ What worked for Kia in India?</b></p> <p>&nbsp;</p> <p>A/ Because of the evolving preferences of consumers, the dynamics of the automotive market are changing rapidly. Therefore, it has become critical for any automaker to offer a variety of options along with the best of quality, safety and facility to consumers. To be successful in the Indian market, an automaker should be present across segments for customers to have multiple options. When we entered the Indian market, we conducted exhaustive market and customer research and were able to identify the unmet needs of India. By doing this we were able to plan our products and services in the country in a much better way. Our first product in India, the Seltos, has helped us in achieving the tag of the fourth largest carmaker in the country. We have received more than one lakh bookings and have delivered more than 60,000 units till date.</p> <p>&nbsp;</p> <p><b>Q/ How did you tackle the slowdown in the sector?</b></p> <p>&nbsp;</p> <p>A/ We are looking at the Indian market as one that is full of opportunities and one which is essential for our brand’s growth and will make us a truly global automaker. The challenges have largely been to convince and get people to trust in the Kia brand. Besides this, new environment-friendly and safety regulations are gaining traction in the country. Since we are already adhering to similar regulations in other markets we are not that worried about these.</p> <p>&nbsp;</p> <p><b>Q/ You are planning to introduce one new model every six months.</b></p> <p>&nbsp;</p> <p>A/ Kia has big plans for the Indian market. As we had promised earlier our aim is to launch a new product every six months. The Carnival, our latest offering, is a product above the regular MPVs (multi-purpose vehicles) available in India and caters to the need of luxury and comfort. With the Carnival, we are creating a new segment of luxury recreational vehicle.</p> <p>&nbsp;</p> <p><b>Q/ Your sister concern Hyundai is a strong player in India. How do you handle the competition with a group company?</b></p> <p>&nbsp;</p> <p>A/ Kia and Hyundai are two different entities. All Kia vehicles possess their own distinctive identities that are different from Hyundai models. This ensures that each brand’s models continue to appeal to different types of buyers. We believe that differentiated brand positioning, along with differentiated products, is the key to success.</p> <p>&nbsp;</p> <p><b>Q/ What are the new models and innovations you are planning to introduce in India?</b></p> <p>&nbsp;</p> <p>A/ We have already launched the Seltos and the Carnival in India, and recently unveiled our compact SUV concept Sonet at the AutoExpo. The Seltos and the Carnival address the gap in the Indian automotive industry with regards to consumer preferences. We are aiming to launch the Sonet by the second half of 2020.</p> <p><b>Q/ How are you planning the production to meet the growing demand?</b></p> <p>&nbsp;</p> <p>A/ We have invested more than $1.1 billion in our manufacturing plant in Anantpur in Andhra Pradesh and a total of $2 billion in supplementing infrastructure. The manufacturing facility in Anantpur has an annual production capacity of around three lakh units and we are confident of reaching 100 per cent capacity utilisation by 2021. Our initial target is to utilise the full capacity of our plant and then we will think about further expansion.</p> <p>&nbsp;</p> <p><b>Q/ What about the expansion of dealerships?</b></p> <p>&nbsp;</p> <p>A/ With 265 touch points, 206 sales points and 192 service centres across 160 cities in India, Kia is accessible to a majority of consumers. We are adding 50 more touch points by the end of this year.</p> <p>&nbsp;</p> <p><b>Q/ When do you think the Indian automobile sector will bounce back?</b></p> <p>&nbsp;</p> <p>A/ The market will pick up momentum eventually as there are now better and more advanced products in the market. Also, observing the available data, the individual car ownership in India is really low in comparison with other global markets, hence, there is a lot of potential in the Indian market. I strongly believe that as the economy revives, the customer sentiment will improve and the automotive market will also see a rise in demand.</p> Sat Feb 29 11:16:31 IST 2020 three-opportunities-for-india <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>THE START OF</b> a new decade is always a moment to look back and forward to reflect on important developments, challenges and opportunities. A key challenge today is how to deal with the process of globalisation. Or better, how to deal with a process of de-globalisation, a world economy becoming more fragmented.</p> <p>&nbsp;</p> <p>We saw international trade expanding rapidly during the 1990s. The integration of China (WTO member in 2001) and eastern Europe (fall of Berlin Wall 1989) into the world economy were transformative events and started a new process of globalisation driven by global value chains and a fragmentation of production across countries. At the same time, in the early 1990s, India unlocked its economy to the world by lowering its tariff rates. Since the early 1990s, the participation of India in the world economy has risen substantially and today India has become a major actor in the global economy.</p> <p>&nbsp;</p> <p>We can describe the period of 1990-2007 as a period of fast globalisation, and many countries, including India and the Netherlands, benefited enormously from the advantages of global trade and investment—access to new markets, greater specialisation opportunities, the increased ability to exploit economies of scale and scope and faster transmission of technology and innovation. But we also should not forget the advantage of greater competitive pressure on domestic firms to increase their productivity.</p> <p>&nbsp;</p> <p>Since the global economic crisis of 2008, growth of global trade has slowed. The decennium of the 2010s first saw a slowdown in global trade as a result of the crisis. More recently we saw a huge change in policies—a rise of protectionism and a crisis in multilateral trade policies. In recent years we have seen a surge in trade-restricting measures and an erosion of the rules-based global trading system. Coupled with rising government support across a range of sectors, this induced disruptions in global and regional value chains and reallocations of activities across countries. In fact, we have entered a period of de-globalisation. Global trade as a percentage of GDP is going down and global trade growth seems to have turned negative in 2019. Also, Indian exports as a percentage of the GDP has been going down since the late 2000s and India has seen a decline in global value chain integration since 2013.</p> <p>&nbsp;</p> <p>Two recent studies (OECD Economic Survey of India, December 2019, and the World Development Report 2020 from the World Bank) make clear that India has many opportunities to benefit from an enhanced participation in the world economy and from a higher participation in global and regional supply chains. It can boost growth, create jobs and reduce poverty. It would very much contribute to the success of the ‘Make in India’ initiative.</p> <p>&nbsp;</p> <p>Though unlocking the Indian economy to the world economy during a process of de-globalisation is not an easy task, India’s current position in the global economy offers opportunities to strengthen itself even in a more fragmented global economy.</p> <p>&nbsp;</p> <p>A first opportunity is the so-called “servicification” of manufacturing. Services are increasingly essential for the competitiveness of manufacturing as product differentiation, speed to market and responsiveness to changing consumer preferences gain prominence even for low-end manufactured products. India has a unique selling point in the global market—a comparative advantage in services. India has run a trade surplus in services since the early 2000s.</p> <p>&nbsp;</p> <p>To work on the ‘Make in India’ strategy, India is developing its industrial base and attracting export-oriented manufacturing investment. The service sector should play a key role in strengthening the ability of manufacturing and help improve their position in global markets.</p> <p>&nbsp;</p> <p>To further strengthen this position of the Indian manufacturing industry, it is important to address many domestic distortions. However, India could also liberalise imports and exports, and liberate firms from the limits of local inputs. India should reconsider its tariffs barriers, the complexity of the tariff structure and the requirements on local content. It is important to realise that seemingly small tariffs can substantially disrupt regional or global value chains. By restraining competition from imports or making imports of intermediate goods more expensive, India is raising the costs of inputs.</p> <p>&nbsp;</p> <p>There is always one very important “but” in opening a country to global trade and investment. Opening will lead to a reallocation of resources across sectors, across regions and within sectors across firms. In order to share benefits of international trade and investment throughout society, policies are needed to reallocate capital from declining sectors and firms to new ones and reallocating labour from sectors and firms negatively affected by international trade and investment to growing sectors.</p> <p>&nbsp;</p> <p>A second opportunity for India is to become the ‘food factory’ of the world. India is among the top producers of many agricultural products, but there is a huge potential to increase exports. India should deepen its international trade cooperation in agriculture by reducing tariff and non-tariff barriers, especially lowering trade barriers for inputs. At the same time, many distortions in agricultural markets on the national level should be addressed, like improving warehousing, infrastructure and cold storage. And India has to adapt its agricultural sector to the different and changing climate zones.</p> <p>&nbsp;</p> <p>A third opportunity is the role India could play as a leading nation in the architecture of global markets. We see weakening of multilateralism and the inability of the global trading system to adapt to new technological changes to address concerns on the use of industrial subsidies and the role of state-owned enterprises in international markets and to deal with differences in development between WTO members and their WTO obligations. Sustaining the rules-based multilateral system is key. To address the challenges in the multilateral trade system it is important to have a common understanding of the tensions and conflicts. This requires an in-depth analysis and debate between WTO members on the source of the problems, on the ineffectiveness of the WTO to address them and on long-term solutions. The G20 gives an excellent opportunity for having this fundamental debate on a sort of a re-engineering of the multilateral trade architecture. India, as one of the most important global players and having the G20 presidency in 2022, can play a major role in organising this debate.</p> <p>&nbsp;</p> <p>There is room for India to deepen its relationship with the global economy. Even if India would act alone on reducing trade barriers, it would give benefits in terms of growth and employment. And we all could benefit from a strong role of India as a leading nation in the G20. A role focused on improving and strengthening the global trade architecture.</p> <p>&nbsp;</p> <p>—<b>The author is the ambassador of the Netherlands to India.</b></p> Sat Feb 22 15:22:40 IST 2020 the-freedom-to-get-rich <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>THERE ARE</b> thousands of excuses to justify not making investments. But, there is just a simple way to overcome all these—Systematic Investment Plan or SIP.</p> <p>&nbsp;</p> <p>Many people often believe that they need a large sum of money to start investing. In fact, you do not. With SIP, everybody has the freedom to get rich if one is patient, disciplined and focussed.</p> <p>&nbsp;</p> <p><b>SIP by sip</b></p> <p>The best way to build wealth is by keeping aside a small amount every month before you start to spend. If you are in the early stages of your career, it does not even matter how much that amount is. One can start with even Rs1,000 a month.</p> <p>&nbsp;</p> <p>There are 2.98 crore SIP accounts that bring Rs8,500 crore a month. Put together, SIP investors have so far created SIP wealth of Rs3.17 lakh crore. SIPs are today the preferred way for both small and big investors thanks to the convenience: monthly saving, rupee-cost averaging, optimal risk-reward balance, and superior wealth creation potential.</p> <p>&nbsp;</p> <p><b>Automate for life</b></p> <p>The SIP way of investing allows you to automate saving and investing for life. You just have to decide how much you want to save/ invest every month, where you want to invest and for how long. At your chosen interval, the SIP money gets automatically transferred from your bank account and invested in the mutual fund of your choice. You are kept informed all along.</p> <p>&nbsp;</p> <p>SIP is just a common sense way to invest. But it is a habit that leaves a positive impact from the day you start. SIP helps you automatically prepare for life’s commitments such as house purchase, marriage and children’s education in a planned manner.</p> <p>&nbsp;</p> <p>SIPs are easy to maintain. Over an extended period, SIPs can deliver great returns. Plus, there are ways to obtain a steadier performance and build wealth at the same time using the SIP route. As your income rises, you can boost your monthly SIP or do a top-up SIP to plan for bigger goals or reach a goal faster. It is always up to you.</p> <p>&nbsp;</p> <p><b>Freedom in your reach</b></p> <p>SIP money keeps getting invested every month in the mutual fund of your choice and for as many years as you would like. Before you know it, the habit of investing will become a part of your life. You do not need to worry about markets. You do not need to be an expert. You just do your job and get your salary so that you can invest regularly. Everything else is managed by SIP.</p> <p>&nbsp;</p> <p>Things are easier with ICICI Prudential Freedom SIP, a unique plan which offers a monthly SIP investment that can give you a life-long return. Start a monthly investment of any amount. Select your tenure and start investing. After completion, you can get life-long monthly returns with Systematic Withdrawal Plan (SWP). An eight-year tenure can get you 1X of monthly SIP investment. A 10-year tenure can get you 1.5X of monthly SIP investment. A 12-year tenure can get you 2X of monthly SIP investment and a 15-year tenure can get you a 3X of monthly SIP investment. Plus, get 100 times life insurance cover on your monthly SIP investment just in case something unfortunate happens.</p> <p>&nbsp;</p> <p>Happy Investing!</p> <p>&nbsp;</p> <p><b>Author is founder of Omniwealth LLP.</b></p> <p><b>Email:</b></p> <p><b></b></p> Fri Feb 14 12:16:41 IST 2020 wheels-on-the-buzz <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Kenichi Ayukawa is still in awe of the diversity of India, his home for the past seven years. And that is exactly why he wanted the local research and development team of the company he runs, India’s largest carmaker Maruti Suzuki, to excel. It was well-placed trust, as the first model Suzuki designed and developed in India, the Vitara Brezza, has been a runaway success.</p> <p>&nbsp;</p> <p>When Ayukawa took charge of Maruti Suzuki India in 2013, the carmaker was having a bumpy ride in the aftermath of a labour crisis at its Manesar plant and also because of the diminishing demand for petrol vehicles. Its market share had dropped below 40 per cent and it seemed clueless about how to deal with the changing customer preferences. Ayukawa had come with a plan. Under him, Maruti moved from its bread-and-butter small car portfolio to more premium products. When he came up with Nexa, a premium network of dealership for the premium cars in the Maruti stable, many industry experts questioned the rationale behind the move. Nexa, however, turned out to be a masterstroke, as it became the first choice for Maruti customers who wanted to upgrade.</p> <p>&nbsp;</p> <p>In five years, Maruti regained lost ground, once again crossing 50 per cent market share thanks to the success of models like the Baleno and the Brezza. Bigger cars now contribute more than a quarter of the company’s revenues. And the India unit is the Japanese parent’s biggest contributor to volumes and profit.</p> <p>&nbsp;</p> <p>Ayukawa, however, now has a new set of challenges before him, and it goes beyond launching new models. As cars are becoming more and more technologically advanced, he has been trying to figure out how to control the cost of bringing in these technologies. “What is crucial is to balance cost and technology,” he said. That is pretty important for Maruti, as pricing remains the single largest factor that gives Maruti cars the edge over the rivals.</p> <p>&nbsp;</p> <p>Maruti has been investing in hybrid and electric models, but is yet to launch an EV. At the AutoExpo 2020 in Delhi, it unveiled the Futuro-E, an electric SUV concept, which probably would be the base of its electric portfolio in the future. An electric version of its popular Wagon-R hatchback was showcased at the last edition of the AutoExpo, and it is expected to be launched later this year. Ayukawa, however, is not willing to tie up his company’s future entirely with electric cars. “The next million green vehicles will include a range of technologies and powertrains such as CNG, smart hybrids and electric vehicles,” he said.</p> <p>&nbsp;</p> <p>And, Maruti remains unfazed by a slew of electric vehicles launched by competitors, as it thinks India is not ready for the change. “There are a few constraints to the development of EVs in India,” said Shashank Srivastava, executive director (marketing and sales), Maruti Suzuki India. “In developed countries 85 per cent of cars are parked in the same spot every day. In India, 85 per cent car owners do not know where we will park. We park wherever we find space. Why is parking important for EVs? You need a charger there. Then there is range anxiety. Another factor is that, in India, most of our electricity is made of coal. So, while we may reduce pollution on the roads, there may be more pollution where the electricity is made. Then we have shortage of electricity in many parts of the country.”</p> <p>&nbsp;</p> <p>Some of Maruti’s competitors, however, have a different perception of the market. Mahindra, for instance, is betting big on electric. It unveiled three electric vehicles at the AutoExpo, including eKUV100 with an attractive price tag of 08.25 lakh. “Our focus will not only be on growing our clean energy business unit through our electric mobility business, but also to provide cleaner engines as we approach the implementation of BSVI norms,” said Pawan Goenka, managing director of Mahindra and Mahindra.</p> <p>&nbsp;</p> <p>Mahindra also unveiled Funster, an electric convertible concept, and Atom, an electric urban mobility solution. This shift in focus seems well-thought-out, as Mahindra has been facing significant competition in its stronghold—the utility vehicle segment. In the fast growing SUV segment, its ageing models have been struggling to take on the the likes of the Kia Seltos, the Hyundai Venue and the MG Hector. But Mahindra has big plans for the segment as well. Next year it may launch an SUV the size of the Venue and a smaller SUV based on Ford’s B-Segment platform. Mahindra has a joint venture with the American carmaker.</p> <p>&nbsp;</p> <p>The catch, however, is that, everybody wants a bigger slice of the SUV pie. Kia, for instance, wisely chose the premium utility vehicle segment where the Toyota Innova has had a free run, to launch its next vehicle after the stupendous success of the Seltos. The Carnival offers a truckload of features at a competitive starting price of Rs24.9 lakh. At the AutoExpo, Kia unveiled a concept compact SUV called the Sonet, which shares the platform and engines of the Venue.</p> <p>&nbsp;</p> <p>With just one product on sale, Kia had become India’s largest mid-size SUV player and the fourth largest vehicle maker in India. The Sonet, which is expected to arrive in the second half of this year, may add significantly to the numbers, considering the pace at which the segment has been growing. Manohar Bhat, head of sales and marketing at Kia Motors India, said the company would increase the production capacity further to meet the demand. Some top trims of the Seltos have a waiting period of three months.</p> <p>&nbsp;</p> <p>Tata Motors, which made a splash at the AutoExpo with 12 passenger vehicles, seems to have already begun building a strong portfolio of electric vehicles. Natarajan Chandrasekaran, chairman of Tata Group, said the “mega-trend” of shift to EVs would only accelerate in the longer term, and it is even more imperative in India given that it had some of the most polluted cities in the world and because 85 per cent of our oil was imported.</p> <p>&nbsp;</p> <p>Tata, in fact, is focusing on developing an entire ecosystem for EVs, which will include new products, charging infrastructure, and battery cells and recycling. It forayed into the EV market two years ago with an electric variant of the Tigor compact sedan. Recently it launched the electric variant of its popular Nexon compact SUV and unveiled the hatchback Altroz EV. “Of course, you have the car. But, you need the charging infrastructure, you need battery packs, cells and also you need very good financing options. All of this is critical if this whole shift to electric mobility has to become successful,” said Chandrasekaran.</p> <p>&nbsp;</p> <p>Tata Group is looking to leverage the strengths of its companies to build end-to-end scale in EVs. “Tata Power will play a very critical role in EV charging facilities,” said Praveen Sinha, CEO and MD of Tata Power. “Already, it has 100 charging stations in eight cities and we propose to make it 300 by end of March, and about 650 in one year.”</p> <p>&nbsp;</p> <p>While Tata Chemicals is focusing on electric batteries and energy storage solutions, Tata AutoComp is looking at localising the critical components that go into EVs, like motors, inverters and transmission. “Our approach is fully focused on building a circular economy, which starts with battery actives, going on to battery cells and recycling of batteries,” said R. Mukundan, MD and CEO of Tata Chemicals.</p> <p>&nbsp;</p> <p>Development of local ecosystem is crucial for the growth of EV sales, as it will help build economies of scale and bring costs down, which will help boost consumer demand. “India has much catching up to do in terms of the four drivers of growth globally—battery price, demand incentives, supply push and charging infrastructure,” said Pushan Sharma, associate director at CRISIL Research.</p> <p>&nbsp;</p> <p>Prices are also a key factor in people shifting to EVs. “Right now oil prices have fallen and are likely to remain stable. That will have a bearing on people’s decision making,” said Gaurav Vangal, country lead for production forecasting at IHS Markit.</p> <p>&nbsp;</p> <p>Rather than the EV drive, however, the next paradigm shift in the Indian automobile sector could be engineered by the Chinese. All of the top three Chinese carmakers—SAIC Motor Corp, Great Wall Motors and Haima Automobile—had a strong presence at the AutoExpo. SAIC is already present in India through its subsidiary MG Motor India, which launched the successful Hector SUV last year. MG showcased 14 models at the AutoExpo. It may launch four products in the next two years. Rajeev Chaba, managing director of the company, said all those models had the potential to be launched in India. “We are assessing the feedback,” he said.</p> <p>&nbsp;</p> <p>Another Chinese giant assessing feedback was Great Wall Motors, China’s largest SUV maker. It unveiled the Haval lineup of SUVs at the AutoExpo, and is investing Rs7,000 crore in India. It will acquire General Motors’ plant in Talegaon in Maharashtra and set up a manufacturing unit for lithium-ion batteries and internal combustion engines. Hardeep Singh Brar, director of sales and marketing of Great Wall Motors in India, said India was a natural investment destination for the company. “India’s growing SUV segment makes it a perfect scenario for us to enter this market,” he said.</p> <p>&nbsp;</p> <p>Haima, the third Chinese player, has partnered with Bird Electric in India, and showcased a five-seater electric hatchback at the AutoExpo. The company said it would cost around Rs10 lakh and go on sale later this year. It might cost much less if the company achieves its target of localising production in 2021.</p> <p>&nbsp;</p> <p>The grand plans of Chinese carmakers have triggered concerns over them taking over the Indian automobile market, just like the Chinese smartphone makers took over the Indian market at the expense of local companies. But the Tatas and the Mahindras are no pushovers, and they have successfully taken on the might of the likes of GM and Ford. The Chinese may have a long game waiting for them.</p> <p>&nbsp;</p> <p><b>WITH KARTHIK RAVINDRANATH</b></p> Sat Feb 15 18:25:20 IST 2020 no-gains-by-repeating-targets-that-are-not-credible <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>There have been mixed reactions to the Union budget presented by Finance Minister Nirmala Sitharaman on February 1. Economic experts, market analysts and the people have all spoken about both hits and misses.</p> <p>&nbsp;</p> <p>While the budget gave a boost to the infrastructure and the agrarian sectors, and gave due attention to the technology sector and startups, little was done to boost the real estate segment and the bleeding automotive sector. Reforms around income tax aim to improve the spending capacity of individuals in order to boost consumption.</p> <p>&nbsp;</p> <p>Eminent economist and former deputy chairman of the Planning Commission Montek Singh Ahluwalia said that the budget is a “business-as-usual budget”. In an exclusive interview, he told THE WEEK that the budget does not present a clear strategy to address constraints that are hampering the growth of the economy. Excerpts:</p> <p>&nbsp;</p> <p><b>Does the budget come up to your expectations? Will it help to achieve the government’s aim of making India a $5 trillion economy?</b></p> <p>&nbsp;</p> <p>It is essentially a business-as-usual budget and not one which is designed to address the serious challenges facing the economy. Growth has collapsed, and this in turn is reflected in the very poor employment performance. The important point is that the slowdown is not just a cyclical phenomenon from which a rebound can be expected with a business-as-usual budget. Growth in the current year is likely to end below 5 per cent. A purely cyclical reversal could bring growth back to 6 per cent although it will take longer to achieve this than this budget projects. However, we grew at an average of 8 per cent in the first seven years of the UPA government. The fall from 8 per cent to 6 per cent reflects structural constraints. The budget does not present a clear strategy to address these constraints. The collapse of private investment and the poor performance of exports are the major problems. I do not think the budget offers any credible solution to these problems. Reducing the corporate rate of tax moves us to a better tax structure, but reviving confidence among domestic private investors requires a much larger effort that is missing.</p> <p>&nbsp;</p> <p>Reaching a $5 trillion economy by 2024 requires a growth rate of close to 9 per cent between 2019-2020 and 2024-2025. Since we are likely to get only 5 per cent growth in 2019-2020 and recovery next year will be slow, the $5 trillion dollar economy target cannot be reached by 2024. Of course, as along as the economy grows, we will reach $5 trillion dollars some years later, but that is not what the original target implied. Finance Minister Nirmala Sitharaman would have gained points for credibility if she had said as much. We do not gain anything by continuing to repeat targets that are not credible. The budget also repeats the target of doubling farm income by 2022. That is simply not on the cards given what is happening in agriculture.</p> <p>&nbsp;</p> <p><b>What were the plus points of the budget?</b></p> <p>&nbsp;</p> <p>A plus point is that the budget does not take any large fiscal risk. There was much talk about the need to expand expenditure to give the economy a stimulus but this ignored the fact that the budget is already quite expansionary. The finance minister was right in my view not to try and achieve the earlier fiscal deficit target by contracting expenditure. That would have been quite wrong given the lack of demand in the system. Ideally, the finance minister should have come clean on the size of the fiscal deficit and abandoned the off budget borrowings to finance the food subsidy which end up understating the deficit. I give her credit for coming half way by making the extent of these borrowings explicit. But continuing with them makes discussion about fiscal deficit targets and their trajectory meaningless. For example, reducing the measured deficit over time is of little relevance if these borrowings are allowed to increase. We should now talk of the fiscal deficit plus the off budget borrowings and fix a medium-term target for the two together.</p> <p>&nbsp;</p> <p>A credible plan for reducing the combined deficit of the Centre and the states in the medium term is absolutely essential because at present a realistic assessment of the combined deficit including postponement of expenditures takes it close to 9 per cent of the GDP. Since net financial savings by households is only 10 or 11 per cent of the GDP, it means the government sector absorbs almost all the savings leaving very little for the private sector. The burden of this scarcity falls on small and medium enterprises since the big ones resort to funding from abroad.</p> <p>&nbsp;</p> <p><b>And, the negative features.</b></p> <p>&nbsp;</p> <p>The decision to raise import duties on consumer goods is a big mistake. Reducing import duties was a key part of the economic reforms of 1991, aimed at making the Indian industry more competitive. The process was continued by the subsequent governments including the Vajpayee government. It yielded very good results in the sense that Indian industry became much more competitive and India’s share in world exports increased over the years. I personally think we could have reduced duties faster, offsetting it by a more aggressive policy of weakening the exchange rate, but the gradualism at least brought us continuity. That continuity has been consciously reversed. I worry about the danger of slipping into the same protectionist trap which produced poor growth in the prereform years.</p> <p>&nbsp;</p> <p>The finance minister has invited suggestions on what more needs to be done by September. I am sure she will be flooded by demands for more protection. I hope there is enough debate on this issue to persuade her to change course. We should also have a clear articulation of a principle. How high an import duty is acceptable? Industry organisations should speak on this issue because, if I am right, it is the industry that will suffer. Unfortunately, industry typically does not oppose protectionist demands from some of their own brethren.</p> <p>&nbsp;</p> <p><b>What could have been done in the budget to spur growth?</b></p> <p>&nbsp;</p> <p>Much of what needs to be done by way of structural reform is in areas outside the finance ministry. However, I would flag three issues which could have been in the budget. First I wish we had got a clearer game plan on how we are going to raise more revenues in the years ahead. Reform of the Goods and Services Tax is critical in this context. Everyone agrees that the GST is a major reform but it has performed poorly mainly because of poor design with too many rates and also too much lowering of rates. Admittedly, much of this is because of demands made in the GST Council. The finance ministry could have given a lead by indicating that the government would go to the GST Council with a proposal for a two-rate structure, with a separate tax on luxury goods. Unless a major GST reform of this type is implemented, there is little hope of raising the revenues we need to pay for the ambitious schemes that are being announced.</p> <p>&nbsp;</p> <p>Second, the continued proliferation of cesses which are not shared by the states should have been abolished or at least proposed to be phased out in three years starting this year. If necessary, the underlying rates could be increased; but cesses should go.</p> <p>&nbsp;</p> <p>Finally, I wish we had got a clearer statement on banking reforms. There has been talk of reforming the public sector banking system since 2015 but there has been very little action. Public sector banks will never have the flexibility they need to act commercially unless we get the finance ministry out of controlling the banks. Their privatisation is politically unacceptable—and that seems to be the case across the political spectrum. The P.J. Nayak Committee recommendations provide a via media to reduce the intrusive control of the finance ministry. All we have had so far is the proposal to merge 10 public sector banks into four. Merging 10 unreformed public sector banks into four unreformed public sector banks is not reform. It will only dissipate managerial energy on the problems of merger of the staff, which will only distract attention from the challenge of bringing about credit expansion.</p> <p>&nbsp;</p> <p><b>You mentioned that the collapse in growth has reflected on the employment performance. Your comments on the employment scenario in India?</b></p> <p>&nbsp;</p> <p>It is deeply worrying. Employment has not grown as much as we needed and much of the growth that has occurred is in low quality, informal jobs, which are unlikely to satisfy the young and increasingly aspirational entrants to the labour force. This is reflected in the fact that the rate of unemployment has increased and it has increased much more among the young and especially the educated youth. This is a recipe for social disaster. Part of the problem is the collapse in growth. An economy growing at 5 per cent will obviously generate far fewer jobs than an economy growing at 8 per cent. So reviving growth must be a top priority. If we want to create more jobs, we must bite the bullet on all the reforms needed to get faster growth.</p> <p>&nbsp;</p> <p>There is also another aspect and that is the nature of technological change which is making many existing jobs redundant. We cannot hold back this change especially if we want to integrate with global supply chains. However, while new technology will displace existing jobs, it will also create new jobs in the process. The question is whether we can position ourselves to benefit from these new opportunities. To do this, our economic policy must be sufficiently flexible. This calls for reforms that will make it easy for new businesses to be set up and also to wind up. It also calls for flexible labour markets. Unfortunately, our labour market is regarded as one of the least flexible. In some ways, this inflexibility prevents expansion of regular employment and encourages informal job contracts. Labour does not benefit from this situation. We also need to do a much better job of imparting employable skills.</p> <p>&nbsp;</p> <p><b>How do you think the Indian economy will shape up in near future?</b></p> <p>&nbsp;</p> <p>Indian economy grew at an average rate of over 8 per cent in the first seven years of the UPA government. We should at least try to get back to that rate. This will not be easy. We can probably get back to 6 per cent as purely cyclical recovery but going beyond 6 per cent requires deeper structural reforms. The agenda for such reforms includes completing the unfinished first generation reforms and undertaking second generation reforms. I have talked about this agenda at some length in my book 'Backstage The story behind India's High Growth years' which will be published in mid-February this year.</p> Fri Feb 07 14:53:31 IST 2020 hidden-dragon <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Chinese techpreneur Duan Yongping made headlines in the 1990s when his Subor gaming consoles successfully took on Japanese giant Nintendo. In 1995, he left the gaming industry and started an electronics manufacturing company called Bubugao, which later became BBK Electronics.</p> <p>&nbsp;</p> <p>The name BBK Electronics might not ring a bell for most Indians, but its brands are household names in the country. According to the latest data from market researcher Counterpoint Research, in the quarter ended in December 2019, three BBK brands—Vivo, Oppo and RealMe—held 41 per cent share of India’s smartphone market. A year earlier they held just 25 per cent. While Oppo’s market share rose from 7 per cent to 12 per cent, Vivo’s share jumped from 10 per cent to 21 per cent. Realme, which started as a sub-brand of Oppo, is now operating as a separate entity, and has captured 8 per cent of the market. OnePlus, also owned by BBK, is a strong player in the premium end of the market, competing with the likes of iPhone and Samsung’s Galaxy S series.</p> <p>&nbsp;</p> <p>Samsung, the world’s largest mobile maker, seems to be the biggest casualty of BBK’s dream run in India. Its market share declined to 19 per cent in the December quarter, from 25 per cent in the June quarter of 2019 and 20 per cent a year ago. Xiaomi, the fellow Chinese brand, retained its position as the single-largest brand in the country with a market share of 27 per cent.</p> <p>&nbsp;</p> <p>One thing that has worked for the BBK brands is aggressive pricing. Another thing is the big online sales and marketing push. “India is a price sensitive market,” said Upasana Joshi, associate research manager at market researcher IDC India.</p> <p>&nbsp;</p> <p>Vivo, Oppo and Realme spend significantly on online promotions. These brands seem to have a long-term commitment to India, and a clear strategy that keeps the customer at the centre. “Our growth in India has been a result of multiple factors—strong product portfolio across price segments, extensive distribution network, reliable aftersales service and substantial marketing inputs to build a strong brand,” said Nipun Marya, director, brand strategy, Vivo India.</p> <p>&nbsp;</p> <p>Online is the preferred channel for sales for all these companies. Around 80-85 per cent of Realme’s sales come from online channels. Xiaomi, which entered India in 2014, started with a big focus online, before expanding to retail stores. Even now, 60 per cent of its devices are sold online.</p> <p>&nbsp;</p> <p>Interestingly, Chinese phone makers keep their products competitive in the price-sensitive market by making them in India. Many of these companies have local assembly plants, and they are focusing on increasing local sourcing. “More than 99 per cent of smartphones that are sold in India are manufactured locally,” said Muralikrishnan B., chief operations officer of Xiaomi India. Xiaomi has more than 6,000 preferred retail partners and it is targetting the tier-III towns in a big way through 2,500 small format stores.</p> <p>&nbsp;</p> <p>Vivo, which has invested Rs4,000 crore in India, will invest another Rs3,500 crore over four phases to expand its manufacturing facilities. “As part of the phase-II expansion, the company plans to add 5,000 plus employees, taking the total employment in Vivo manufacturing facilities to 15,000,” said Marya. Vivo has set up 650 company-owned service centres as well.</p> <p>&nbsp;</p> <p>Though the brands owned by BBK compete against each other, the group has segmented them in such a way that each company gets its space to grow and synergies are harnessed. OnePlus, for instance, shares manufacturing facilities with Oppo. Oppo’s Android-based operating system, Color OS, is shared with Realme. Innovations by one company eventually go to other group companies. While OnePlus focuses on the premium end, Vivo is more mainstream across price points and Realme takes the main competitor Xiaomi head on in the entry and mid segments.</p> <p>&nbsp;</p> <p>Competitors are upping the ante in an attempt to halt the march of these brands. At the premium-end of the market, Apple is putting up a fight with a new price strategy. The iPhone XR, which was launched in 2018, has seen several price cuts in the past one year. It was the top selling smartphone globally in 2019.</p> <p>&nbsp;</p> <p>Samsung has announced the ‘lite’versions of last year’s flagships Galaxy S10 and Note 10 and some mid-range upgrades. The company had got a good response to the A series, selling more than two million phones in just 40 days. Samsung last year closed its last production plant in China, with its smartphone share there slipping to just 1 per cent. It certainly cannot afford to give up the fight in India. “Samsung needs to relook at the product portfolio with competitive pricing and maintain balance between online/offline offerings as the core strength of Samsung remains offline-heavy. In 2020, we will witness similar offerings by brands across channels to maintain parity and stay relevant,” said IDC’s Joshi.</p> <p>&nbsp;</p> <p>India is more than an important market for these brands, as they consider it an alternative to China as an export base. OnePlus has already begun manufacturing 5G phones here for exports. “India is one of the priority markets for OnePlus and is fast emerging as a regional headquarters for its expansion into global markets,” said Vikas Agarwal, general manager of OnePlus India. “OnePlus is building India as a global export hub.”</p> <p>&nbsp;</p> <p>Oppo, too, had announced that it was planning to make India an export hub and would double its production capacity to 100 million units. Xiaomi has been running a pilot project to export smartphones from India to Bangladesh and Nepal.</p> <p>&nbsp;</p> <p>India’s smartphone industry was a bright spot in the sluggish economy last year. It is estimated to have grown around 9 per cent. With companies getting aggressive right from the beginning of 2020, it may grow faster.&nbsp;</p> Fri Jan 31 11:57:16 IST 2020 risks-and-rewards <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>IN THE NEW YEAR,</b> it is important to take note of the lessons we learnt last year. For Indian investors, the first lesson is that the equity market will not always move upwards. The second is that even debt instruments carry risks. Investors in some debt funds, especially credit risk funds, were in for a shock when they realised that debt funds could result in a loss for the investors.</p> <p>&nbsp;</p> <p>A credit risk fund is a category of debt mutual funds. The Securities and Exchange Board of India has defined these funds as the ones that invest a minimum 65 per cent of the fund corpus in securities that have AA or lower ratings. In other words, these funds cannot invest in top rated (AAA) debt instruments. As the investment is not in the best quality of debt instruments, the interest paid by the bond issuer is higher. Accordingly, while the risk associated with the investments these funds make is higher, so is the opportunity for a better return.</p> <p>&nbsp;</p> <p>As highlighted above, these funds invest in bonds issued by companies. Since September 2018, several such companies defaulted on their repayment commitments. This has affected not just the returns that an investor earns, but, in some cases, also hit the invested principal amount itself, thereby depleting the invested capital.</p> <p>&nbsp;</p> <p>While it is true that these funds have had a turbulent year, that alone should not cloud our judgment. One of the most important aspects that financial experts look at is the prevailing bond yield spreads. In simple terms, this is the difference between two bonds of similar tenure, but having different ratings. This indicates the premium that an investor can demand or gets to invest in a lower rated instrument. If we apply the yield spread to credit risk funds over the Reserve Bank of India’s repo rate, the spread as of November last year was in excess of 4 per cent. Since 2011, the average spread has been in the range of 3 per cent.</p> <p>Once you have shortlisted credit risk funds for investment, try to understand the investment process followed by a specific fund. A good fund house will have a clearly defined process in place that will reduce the risk while maximising the returns. This is done by identifying opportunities in the large debt market. Currently there are about 1,000 companies that are rated ‘A’ and above by credit rating agencies, and only about 500 of these have been tapped by mutual funds. This means that mutual funds still have half of the pool to scout for opportunities. Other than credit ratings, mutual funds also analyse the track record, cash flow, asset quality and business risks of these companies.</p> <p>&nbsp;</p> <p>Once the asset management team of a mutual fund has an investment and risk management system in place, they need to adhere to their defined philosophy. This includes time-to-time review of the investments based on the changing risk reward as well as other macroeconomic parameters. That being said, when a fund house follows its defined philosophy, it will not be swayed by sudden movements in the yields of different securities. Rather, it will stick to its investments if the fundamentals are strong and in line with the defined philosophy. At the same time, the investments also need to be adequately diversified.</p> <p>&nbsp;</p> <p>The past 12-15 months have brought to the fore some instances where credit risk funds went against the ideal expectations of an investor. However, there were some credit risk funds that remained unscathed despite several defaults from bond issuers. Between September 2018 and October 2019, for instance, there were at least 22 defaults by bond issuers and the ICICI Prudential Credit Risk Fund had no exposure to any of those. This testifies that the scheme’s and fund managers’ processes are in place and are working well in favour of their investors. Accordingly, a Credit Risk Fund could be considered to be a part of your overall debt portfolio to give the returns some boost.</p> <p>&nbsp;</p> <p><b>Takeaway:</b></p> <p>&nbsp;</p> <p>Consult your financial adviser while taking into account the fund selection. Further, entrust your investments to a credit risk fund with a highly dependable track record across interest rate and credit rating cycles. With potential to deliver out-sized gains for the marginal credit risk they take, these funds should find increased allocation in portfolios of investors who have the ability to tolerate risk.</p> <p>&nbsp;</p> <p><b>Author is managing director of Assetz Premier Wealth Advisory.</b></p> Sat Jan 18 17:12:28 IST 2020 billion-dollar-dreams <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Gazal Kalra would have probably laughed if you had told her a few years ago that she would be running a trucking business. “I had never even met a truck driver when Deepak (Garg, who cofounded the logistics startup Rivigo with Kalra) came up with an ‘Uber for trucking’ idea,” she said.</p> <p>&nbsp;</p> <p>She is not complaining now, as Rivigo became a unicorn a few months ago. A unicorn is a new business, generally with a strong tech base, that is valued at $1 billion (roughly Rs7,000 crore) or more.</p> <p>&nbsp;</p> <p>For Kalra, however, it was never about the big bucks. “The idea was never to become a unicorn by x year or y year,” she said. “We were solving an important problem.” Rivigo offers a relay trucking logistics model where truckers drive only four or five hours and pass on the goods to the next driver in the relay. It speeds up deliveries and allows drivers to return home every night. “The more we spoke to truck drivers, the more we realised what a profound thing we were getting into,” she said. “We were solving an important problem. All these success metrics that the world appreciates are just an outcome.”</p> <p>&nbsp;</p> <p>Call it a big billion rush, or businesses that are changing the landscape, or simply the unleashing of the nation’s entrepreneurial spirit, India is now the third largest home of unicorns, behind only the US and China. In 2018, seventeen Indian startups became unicorns, including the likes of Flipkart, Ola, Swiggy and Byju’s. Ten more joined the list in 2019. Two Indian unicorns—Paytm and Oyo—are already ‘decacorns’, with a valuation of more than $10 billion.</p> <p>&nbsp;</p> <p>And, in 2020, of course, India is in the throes of an entrepreneurial revolution. Any youngster armed with a million-dollar idea has a very realistic chance of scaling up quickly into the big billion league. India has 9,300 startups at various stages, according to a report by the National Association of Software &amp; Service Companies. Some other reports say there are 24,000. With an estimated 216 ‘soonicorns’ (soon-to-be unicorns) bubbling just beneath the surface, NASSCOM estimates there will be more than 100 Indian unicorns in less than five years, commanding a total valuation of up to Rs27 lakh crore.</p> <p>&nbsp;</p> <p>It is leading to a gold rush, no doubt. “The unicorn wave in India has inspired us as entrepreneurs to aim not to be the best in India, but to be world class,” said Sharan Grandigae, founder of Redd, a design startup in Bengaluru. The chicken—and the egg—in this unicorn scramble has been global investors like SoftBank, Tencent and Tiger Capital who dole out thousands of crores of rupees. Total funding for Indian startups crossed Rs30,000 crore last year. “We have just scratched the surface of what India’s startup ecosystem could possibly achieve,” said Apoorv Ranjan Sharma, cofounder and president of Venture Catalysts, a funding firm. “Aspirational entrepreneurs are embracing technology and moving away from job-focussed mentality to start something of their own. This newly-identified startup spirit is what will lead to the creation of future unicorns.”</p> <p>&nbsp;</p> <p>Unicorns and their near-romantic appeal to the imagination of the young generation stems from the notion that regular guys can hope to succeed even without massive investments in offices and stores and a supply chain. “Indians are entrepreneurial by nature, and though there was always a stigma about failure, now, there are enough stories of successes spurring people on,” said Sandeep Aggarwal, cofounder of ShopClues, which became a unicorn in 2016. Aggarwal, who is also the founder and CEO of Droom, a soonicorn, however, said India had a lot of structural limitations. “Cost of capital (to start a business) is high; so is real estate,” he said.</p> <p>&nbsp;</p> <p>Technology is what comes to the rescue here. Droom, for example, has a proprietary solution called Orange Book Value (OBV), which evaluates the price of used cars and mobile phones. Similarly, Zoomcar—a Bengaluru-based vehicle rental firm which is racing towards unicorn status—has something called Cadabra that tracks a car’s usage, right from clutch position to braking and acceleration. “We mine this data to have a comprehensive behaviour analysis of our consumers and try to align our offerings accordingly,” said Greg Moran, CEO and cofounder of Zoomcar. “Technology is the secret that is enabling this revolution.”</p> <p>&nbsp;</p> <p>They are also getting inspired by stories of tenacity. Take, for example, twenty-somethings Farid Ahsan, Bhanu Singh and Ankush Sachdeva, whose regional language social media platform ShareChat is slated to hit unicorn status this year. The IIT Kanpur buddies worked on 14 projects, all of which flopped, before they hit gold with ShareChat. Said Sachdeva, who is CEO of the company: “ShareChat came from observing how Indians behave on the internet and this motivated us to discover the logic behind their thought process.” ShareChat has six crore regular users in 15 Indian languages, including Bhojpuri and Haryanvi.</p> <p>&nbsp;</p> <p>Or the case of Falguni Nayak, who chucked her fancy investment job in Mumbai after visiting a multi-brand beauty store during a business trip abroad. “I was amazed by the profusion of beauty solutions, displays and women behind counters offering advice. This made me realise there was such a huge gap in India,” said Nayak. “I saw the need for a multi-brand retail format that gives unbiased advice to consumers, guides them on beauty concerns and offers solutions that are easy to access across the length and breadth of the country.” The result was Nykaa, which started as an online beauty store, and later spread as real-world stores across the country. Nykaa is presently just $257 million short of unicorn status.</p> <p>&nbsp;</p> <p>For some of these people it was a matter of unleashing the entrepreneurship in their blood. Hari Menon, for instance, cofounded grocery e-tailer BigBasket after selling his first venture, FabMall hyper retail concept, to Aditya Birla Group. Many of these billion dollar babies, however, shirk away from the tag. “I am embarrassed that unicorn is the only aspect the media is talking about us,” said Yashish Dahiya, CEO and cofounder of, which became a unicorn in 2018. “We have added Rs8 lakh crore of life cover, which implies that Rs8 lakh crore can be paid to people if they die. That level of protection, social security, has been created in our country where it is the biggest issue. That is genuine achievement. What is $1 billion dollar valuation compared to that?”</p> <p>&nbsp;</p> <p>There is another reason, too. Hitting unicorn valuation may be like scaling a peak, but holding on or aiming for higher summits is a bigger challenge. InMobi (mobile advertising) and MuSigma (data analytics) ran into turbulence after they achieved unicorn status. Unicorns Snapdeal and ShopClues have seen their valuations dropping below the $1 billion mark.</p> <p>&nbsp;</p> <p>Valuation, in fact, is the elephant in the room. It is calculated based on a combination of a company’s current and future business model, the future earning capacity of the product or service it is offering and the percentage of control premium of the investor. One of the biggest reasons for the unicorn craze has been global investors loosening their purse strings for Indian companies. The total amount of funding for Indian unicorn wannabes doubled in 2018, to $4.2 billion.</p> <p>&nbsp;</p> <p>But the question is, how much is too much?</p> <p>&nbsp;</p> <p>“I think we are heading for a unicorn bust,” said PolicyBazaar’s Dahiya. “A lot of people in the unicorn club will not exist a few years from now.” Adding to the fear is the fact that many unicorns are yet to make profits and have high cash burn rate.</p> <p>&nbsp;</p> <p>Unicorns have also been shaken by the global meltdown of poster boys like Uber and WeWork. Uber’s initial public offering and listing on the New York Stock Exchange was sort of a disaster, with its valuation plummeting from $82.4 billion to $45.5 billion. The New York Times described WeWork’s failed effort to go public and the subsequent quitting of its cofounder &amp; CEO Adam Neumann as as “an implosion unlike any other in the history of startups”.</p> <p>&nbsp;</p> <p>“Valuations have become unrealistic,” said S. Ravi, former chairman of the Bombay Stock Exchange. Sarbvir Singh, managing partner (India) of venture capital firm Waterbridge, put it more succinctly: “It is fun to talk about valuation and you put in all that money, but you have to get money back also.”</p> <p>&nbsp;</p> <p>Ravi pointed out that the ‘disruptor’ effect of technology could also be a double-edged sword. “Everyone is overpricing themselves without realising that a product’s shelf life in the tech world is short,” he said. “Entrepreneurs should always remember that tomorrow someone could always come in with a newer idea, a newer format.”</p> <p>&nbsp;</p> <p>The way forward for unicorns and soonicorns is constant innovation and reinvention. “To stay ahead of competition and remain relevant to the consumers, one must constantly innovate and if after the initial burst, a company does not do this consistently enough, it faces the risk of going off track,” said Menon. In fact, many unicorns are trying various measures to stay relevant. Paytm diversified into ‘babycorns’ with Paytm Bank and Paytm Mall, while Ola is moving beyond ride-sharing to electric mobility with Ola Electric. Oyo is reported to be expanding into student housing and Byju’s is taking its form of edutech to western markets.</p> <p>&nbsp;</p> <p>While 2020 is set to see more Indian companies becoming unicorns, it could also possibly see WeWork-like meltdowns. The real story, however, is not one of billion-dollar valuations, but the celebration of the ordinary Indian unleashing his potential. “Take any field, see the apps, the startups, Indian boys and girls are shifting from traditional jobs into venturism,” said Ravi.</p> <p>&nbsp;</p> <p>While online shopping (e-commerce), digital payments (fintech) and delivery services (logistics) scored so far, experts believe the next spate of unicorns would be found in areas like electric mobility, agriculture tech, education and health care solutions. And, the unicorn saga may just have the panacea for the economic slowdown as well. “I believe the economic slowdown may inspire India’s next unicorn,” said Ravi. “Amid desperate times, ideas with the right potential find it easier to surface.”</p> Fri Jan 03 12:05:09 IST 2020 back-to-the-battlefield <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>In its 150 years of existence, Tata Group has had only seven chairmen. But that was not the only reason many people were shocked when Cyrus Mistry was removed from the chair on October 24, 2016. Mistry was handpicked by his predecessor, Ratan Tata, and propped up by the clout his father, Pallonji Mistry, carried in Bombay House, the Tata headquarters. The Mistrys own an 18.4 per cent stake in Tata Sons, the holding company of Tata Group.</p> <p>&nbsp;</p> <p>Mistry waged a legal battle against his removal, which was widely seen as an attempt to prove a point rather than out of a desire to get back the chair. On December 18, 2019, he secured a major victory when the National Company Law Appellate Tribunal ruled that the actions taken against him were illegal and he should be reinstated as the chairman of Tata Sons. Tata was given four weeks to comply with the judgment, but was ordered that Mistry be reinstated as a director immediately.</p> <p>&nbsp;</p> <p>It came as a surprise, but people close to Mistry said it was justice done. “For the Tata Sons board members (the NCLAT judgment is a) devastating commentary on their illegal, unethical and spineless behaviour,” Nirmalya Kumar, who was a member of the group executive council set up by Mistry and head of strategy at Tata Group, told THE WEEK. Soon after Mistry’s removal, the council was disbanded and Kumar was asked to leave.</p> <p>&nbsp;</p> <p>Though Tata Sons blamed the poor performance of the group companies and declining dividends under Mistry for his removal, Kumar said the truth was far from it. It was “corporate governance, transparency and the insecurity of Ratan Tata, as he felt some of his decisions being reversed and that would make him look bad in legacy,” he said. During Ratan Tata’s tenure, the group had made a global push with acquisitions like Tetley Tea, Jaguar Land Rover and Corus Steel. When Mistry took over, he focused more on profitability, than on big-bang acquisitions.</p> <p>&nbsp;</p> <p>Mistry’s counsel Aryama Sundaram said that the issue was not performance, but Mistry’s insistence on management transparency and shareholder rights. “The company should be a board managed company, which is working for the welfare of all stakeholders, not just for the benefit of the trusts who are the majority shareholders of Tata Sons. That was the whole purpose of corporate governance and Mistry was insisting on it,” he told THE WEEK.</p> <p>&nbsp;</p> <p>The battle was also about perceptions, and the judgment will cast shadows on a group that is known for its lofty principles. “There are various issues that are raised here, including the conduct of procedures in board meetings; how a non-board member intervened in a meeting; oppression of minority shareholders,” said Shriram Subramanian, managing director of InGovern, a Bengaluru-based advisory firm.</p> <p>&nbsp;</p> <p>Apart from restoring Mistry as executive chairman of Tata Sons, the NCLAT also termed the conversion of Tata Sons from a public to private company illegal. Though Tata Sons was initially a private company, after the insertion of Section 43A (1A) in the Companies Act, 1956, on the basis of average annual turnover, it assumed the character of a deemed public company from February 1, 1975. Under Companies Act, 2013, there is no automatic provision for conversion of a public company into private and vice versa. The company must file an application before the tribunal to do so. The NCLAT observed that no such application had been filed by Tata Sons. Sundaram argues that Tata Sons’ intention was to “get away from corporate governance, because under the new Companies Act, there are a lot of rules with regard to public limited companies.”</p> <p>&nbsp;</p> <p>The tussle is far from over, as Tata Sons is likely to challenge the verdict in the Supreme Court, seeking an immediate stay on the order. “It is not clear as to how the NCLAT order seeks to overrule the decisions taken by shareholders of Tata Sons and listed Tata operating companies at validly constituted shareholder meetings,” said Shuva Mandal, group general counsel of Tata Sons.</p> <p>&nbsp;</p> <p>Meanwhile, the Registrar of Companies has moved the NCLAT, seeking an amendment to the order and removing the word illegal on the conversion of Tata Sons from a public to a private company. The matter will be heard in the first week of January.</p> <p>&nbsp;</p> <p>The NCLAT’s judgment terming Mistry’s removal as executive chairman as illegal also makes the appointment of his replacement, N. Chandrasekaran, illegal. This raises questions about the validity of the many decisions taken by Chandrasekaran as chairman. Since his appointment in February 2017, he has been working on simplifying the group structure into ten business clusters. As a result, Tata Group companies have been working closer with each other.</p> <p>&nbsp;</p> <p>Stock markets largely shrugged off the verdict, with shares of most Tata Group companies gaining ground. Tata Consultancy Services and Titan, two companies that account for a large chunk of Tata Group’s market capitalisation, have gained around 3 per cent and 4 per cent, respectively, since the verdict came. The performance of other Tata Group stocks has been mixed. Tata Steel and Tata Chemicals gained 5 per cent and 2 per cent, respectively. But Tata Motors, Tata Global Beverages and Tata Power declined 2 per cent, 3 per cent and 0.5 per cent, respectively.</p> <p>&nbsp;</p> <p>“The belief among investors is that the core decisions taken by Chandrasekaran are in the interest of all the shareholders and therefore unlikely to be reversed even if the Supreme Court upholds the NCLAT order,” said Mayuresh Joshi, head of equity research India at William O’Neil and Co.</p> <p>&nbsp;</p> <p>The NCLAT verdict was a bolt from the blue. And the Mistry camp is celebrating it as a victory for corporate governance. But, the battle is not over yet, and the Supreme Court will decide who gets to control the salt-to-software behemoth.</p> Sat Dec 28 16:14:52 IST 2019 recovery-position <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>On December 14, State Bank of India received Rs38,896 crore from ArcelorMittal-Nippon Steel, an alliance of two of the largest steelmakers in the world that had successfully bid for the insolvent Essar Steel, as part of the resolution plan. SBI, the leader of a bunch of lenders Essar had borrowed money from, would distribute the amount among them. The operational and other creditors would get the remaining Rs3,104 crore of the Rs42,000 crore bid.</p> <p>&nbsp;</p> <p>It was the single largest recovery made by lenders under a corporate insolvency resolution process (CIRP), and probably the most emphatic evidence so far of the efficacy of the Insolvency and Bankruptcy Code (IBC) since it came into effect in 2016. Over the past 10 quarters, the number of cases submitted for CIRP has gone up significantly. While there were just 37 in the January-March quarter of 2017, there were 2,542 at the end of the July-September quarter of 2019, according to an analysis by the rating agency CARE.</p> <p>&nbsp;</p> <p>“The system is evolving, the palpable benefit is the improved credit behaviour and timely recognition of stress while the tangible benefit is the flow back of about Rs1 lakh crore (of stressed debt of Rs2.5 lakh crore) with the resolutions thus far. Litigations have been the unintended consequences. However, the regulatory as well as the court responses have been commendable,” said Mahaveer Shankarlal Jain, associate director at India Ratings and Research.</p> <p>&nbsp;</p> <p>A study by SBI’s research team says the success rate of companies in terms of closure under pre-2016 regulations varied from 16 per cent to 25 per cent. In contrast, the success rate under IBC is already 41 per cent. “It is among the best resolution outcomes and sends an unambiguous signal to promoters. Before IBC, the average time taken for resolutions was around six years, it has now come down significantly. Also, earlier for every one rupee, the recovery rate was around 25 paise, which has now increased to around 44 paise,” said Ajay Bodke, CEO and chief portfolio manager at broking firm Prabhudas Lilladher.</p> <p>&nbsp;</p> <p>Despite this, delays caused by various parties going to court remain one of the key challenges of IBC. As of March 2019, the average resolution time for the resolved 94 cases was 324 days, while the stipulated insolvency resolution timeline is 270 days. Of the 1,497 ongoing CIRPs, 36 per cent cases are pending for more than 270 days from the date of admission. “The delays are mostly on account of pending litigations motivated by competing interests and the time taken for deciding disputed claims,” said Charanya Lakshmikumaran, partner, Lakshmikumaran and Sridharan Attorneys.</p> <p>&nbsp;</p> <p>The Essar Steel case was also taken to the Supreme Court. In a verdict hailed by bankers and lawyers as a landmark judgment, the apex court said that the committee of creditors (CoC) would have a final say in the resolution plans under IBC. “This much awaited judgment settles to rest numerous points of law under the insolvency and bankruptcy code, which were tested in various courts. This should significantly reduce the scope for long drawn litigations under IBC and would eventually lead to faster resolutions of stressed assets,” said Rajnish Kumar, chairman of SBI.</p> <p>&nbsp;</p> <p>Bankruptcy had always been a messy affair in India, and lenders rarely got their money recovered. With meaningful amendments and encouraging court verdicts, IBC may change that. In November 2019, the government notified fresh rules that would pave the way for insolvency process being initiated against distressed non-banking finance companies and mortgage lenders. In what would be a test case, the RBI on November 29 filed an application for the initiation of insolvency proceedings against mortgage lender Dewan Housing Finance (DHFL). “Until this notification, there were no provisions for resolution and revival of NBFCs acting as financial service providers. Since no resolution and takeover was possible, the alternative banking sector was deteriorating and led to the devaluation of the entire financial sector,” said Lakshmikumaran.</p> <p>&nbsp;</p> <p>Bodke said the balance sheets of banks were being “repaired” thanks to IBC, and as recoveries happen, provisioning for bad loans would come down, credit costs would fall and profits would increase. In the financial year ended in March 2018, the gross non-performing assets of banks were around Rs10 lakh crore. By the end of June 2019, it went down by around Rs1 lakh crore.</p> <p>&nbsp;</p> <p>However, as the larger NPAs are getting resolved, analysts now flag risk of NPAs from the small and medium enterprises. “The smaller private banks clearly have a challenge,” said Shibani Kurian, head of equity research at Kotak Mahindra Asset Management. “Because this time around the stress has happened in the mid-corporate segment.”</p> <p>&nbsp;</p> <p><b>THE BIG DEALS</b></p> <p>&nbsp;</p> <p>Some resolutions under IBC</p> <p>&nbsp;</p> <p>◆ <b>Essar Steel</b><br> Acquired by ArcelorMittal for Rs42,000 crore</p> <p>&nbsp;</p> <p>◆ <b>Electrosteel Steels</b><br> Acquired by Vedanta for Rs5,320 crore</p> <p>&nbsp;</p> <p>◆ <b>Bhushan Steel</b><br> Acquired by Bamnipal Steel for Rs35,200 crore</p> <p>&nbsp;</p> <p>◆ <b>Monnet Ispat and Energy</b></p> <p>Acquired by a consortium of JSW Steel and Aion Investments for around Rs2,875 crore</p> <p>&nbsp;</p> <p>◆ <b>Bhushan Power and Steel</b><br> To be acquired by JSW Steel for around Rs19,700 crore</p> <p>&nbsp;</p> <p>◆ <b>Jyoti Structures</b><br> To be acquired by a group of investors led by Sharad Sanghi for Rs3,695 crore</p> <p>&nbsp;</p> <p>◆ <b>Alok Industries</b> <br> To be acquired by Reliance Industries and JM Financial ARC for Rs5,000 crore</p> Sat Dec 28 16:15:39 IST 2019 we-have-reasons-to-be-cautiously-optimistic <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>The automobile industry saw a glimmer of hope in October when the festive season registered an upswing in sales for the first time in several months. Luxury carmaker Mercedes-Benz became the inadvertent face of this revival, as it saw record sales during the period. A whopping 600 Mercs were delivered just on Dhanteras, the auspicious day of shopping ahead of Diwali.</p> <p>&nbsp;</p> <p>But the big question remains; is the worst over for India’s automobile sector? Or was the festive season spike just a flash in the pan? THE WEEK caught up with Mercedes-Benz India MD &amp; CEO Martin Schwenk for an exclusive interview. Excerpts:</p> <p>&nbsp;</p> <p><b>Mercedes had a great festive season in India. Did it come as a surprise?</b></p> <p>&nbsp;</p> <p>We were hoping for it, and we did plan for it. Early in the year, we scaled down our inventory. Then we started preparing for the festive season in early August, coming out with a programme called ‘Wishbox’. It has had a huge impact. We looked at how to help customers get rid of their apprehensions and I think we have been successful at it.</p> <p>&nbsp;</p> <p><b>Does this mean things are looking up for the auto industry?</b></p> <p>&nbsp;</p> <p>Inventory levels are down because wholesale has been reduced drastically. We see retail numbers coming back to some extent. So we have reasons to be cautiously optimistic. On the other hand, there is a wild card with the BS-VI standards coming in (Only vehicles with BS-VI emission norm compliant engines will be sold from April 1, 2020), and it is not very clear how that will turn out. We are very well prepared; we have a big folio of BS-VI engines already and our inventory of existing BS-IV vehicles is very low.</p> <p>&nbsp;</p> <p><b>How long would it take for the new safety features, which you demonstrated at the recent Safe Roads India Summit, to be on road?</b></p> <p>&nbsp;</p> <p>Some of the concepts displayed come after a couple of years, some after 12 months and some never at all! Especially when it comes to automated driving, India has quite some way to go—in regulation as well as complex road environments. If a concept works in India, it does not take us too long to bring it here.</p> <p>&nbsp;</p> <p><b>When it comes to driverless cars, when do you think we can see one being used by a regular customer, not a test driver?</b></p> <p>&nbsp;</p> <p>That is more a question of road environment than technology. The technology will be there in a few years, definitely on highways.</p> <p>&nbsp;</p> <p><b>Practically?</b></p> <p>&nbsp;</p> <p>The regulations are there. The question is one of enforcement. As soon as we stop having people walking on highways, then I assume that the systems can manage. As long as we have road situations in which many people do not understand or do not heed rules, or rules are not properly enforced, then it will be a massive problem for any automated system.</p> <p>&nbsp;</p> <p><b>Mercedes has said that electric vehicles are not the way forward for India and that you are looking at hybrids.</b></p> <p>&nbsp;</p> <p>We have not declared anything like that. We have said that we are always planning for the future, and new models will come at the right time and right moment. We will definitely do something in the electric space next year. But we have to see how this market develops. We see hybrids as an option which gives a longer range. It is a good parallel technology.</p> <p>&nbsp;</p> <p>Obviously we are very strong in internal combustion engine vehicles; our diesel cars conforming to BS VI are now super clean. That is why we are very confident and set a lot of emphasis on diesel as well.</p> <p>&nbsp;</p> <p><b>Do you think the auto industry will have an up-and-down cycle with BS VI coming in, or do you think it is going to fare better in the coming months.</b></p> <p>&nbsp;</p> <p>I do not think it is going to be all up and up. I do not know what is going to happen in March-April. It will be crucial. It all depends on inventories, the new models and what the prices are. I think the auto industry is careful now, but we will definitely see some irritations in this timeframe.</p> <p>&nbsp;</p> <p><b>So it will be an up-and-down scenario.</b></p> <p>&nbsp;</p> <p>By mid-2020 things should become normal.</p> Sat Dec 28 12:12:47 IST 2019 berry-active <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>A decade ago, when Barack Obama entered the White House, he wore his faithful companion on his belt: a BlackBerry. He had to pay a price for his brand loyalty. His team took away many of the features he loved, and added security features befitting the phone of the US president. He may not have been allowed to keep the BlackBerry he wanted, but it was a BlackBerry nevertheless.</p> <p>&nbsp;</p> <p>In the heyday of the Curve and the Flip it was a sign of sophistication to whip a BlackBerry out of your pocket. It was the must-have device from Wall Street to Dalal Street. The corporate world was so hooked to the brand that it earned the nickname ‘Crackberry’. But BlackBerry’s Achilles heel was its success. Those at the helm were so blinded by their product’s success that they failed to see the threat from Apple and Google. While the former came up with futuristic phones, the latter opened up the Android platform to other manufacturers who flooded the market with phones big and small. Between the iPhone and Android devices, all pockets were catered to. Apple served the faithful who could afford their expensive phones, while Android offered cheaper, and sometimes even better, alternatives. While all this was happening, BlackBerry shrivelled up thanks to lack of innovation.</p> <p>&nbsp;</p> <p>At its peak in 2009, BlackBerry, the brand owned by Research in Motion (RIM), had 42.6 per cent of the smartphone market share in the US, Apple had 24.1 per cent, Microsoft 19 per cent and Google just 2.5 per cent. Four years down the line, Android commanded 51.8 per cent market share, Apple 40.6 per cent and BlackBerry 3.8 per cent. In the same year, another behemoth went on its knees, before finally filing for bankruptcy—Kodak.</p> <p>&nbsp;</p> <p>Once synonymous for capturing memories, Kodak is now a distant memory. While it spent money on developing imaging technology for mobile phones and other digital devices, it held back from developing digital cameras for the fear of obliterating its film business. In 2001, it acquired Ofoto, a photo-sharing site, which could have been the predecessor of Instagram; but they used the site to try and get more people to print images stored in digital albums.</p> <p>&nbsp;</p> <p>When Netflix approached Blockbuster—the world’s largest home movie video rental service—in 2000 for a potential takeover for $50 million, CEO John Antioco said that it was too niche and that it would not make any money. By 2010, Blockbuster had filed for bankruptcy while Netflix posted revenues worth $2.1 billion. Reportedly, Blockbuster’s final video rental had a telling title—The End is Here.</p> <p>&nbsp;</p> <p>“Camera phones will be rejected by corporate users”—Mike Lazaridis’s (BlackBerry’s co-founder) famous comment from 2003 shows how blind the BlackBerry board was to changes in technology and consumer behaviour. When asked whether the iPhone would be a threat for BlackBerry going forward, then CEO Jim Balsillie said: “Apple and the iPhone is kind of one more entrant into an already very busy space with lots of choice for consumers. But in terms of a sort of a sea-change for BlackBerry, I would think that is overstating it.” Balsillie and others were proven wrong on September 28, 2016, when BlackBerry stopped designing its own phones. TCL Communication, BB Merah Putih and Optiemus Infracom currently design, manufacture and market BlackBerry phones under a license.</p> <p>&nbsp;</p> <p>Though Blackberry stopped designing devices in 2016, RIM had begun to see signs of improvement from 2013— when John Chen took over as CEO. In 2013, RIM also officially changed its name from RIM to BlackBerry. While manufacturing smartphones or making them appealing to consumers may not have been BlackBerry’s strongest suit, it sure had a strong foothold when it came to cybersecurity. So, Chen focused on that. And, BlackBerry’s pivot from smartphone manufacturing to a software and services company has been a success story so far and with the way things are shaping up under Chen, the future looks good for BlackBerry.</p> <p>&nbsp;</p> <p>“Our vision is to have a connected world in which you are safe and your data is yours and to be the world’s leading provider of the most trusted endpoint connectivity technologies. We provide a trusted foundation for the internet of things,” John Chen told THE WEEK.</p> <p>&nbsp;</p> <p>Chen’s staff echo his vision. “Trust BlackBerry,” says Neelam Sandhu, vice president, business operations, at the office of the CEO. “The company has championed data privacy and never monetised user data. Even today, when the opportunity to monetise user data is vast and easy, we have not taken it. As well, a culture of honesty and integrity is apparent across the company and translates into our customer and partner engagements.”</p> <p>&nbsp;</p> <p>Sandhu has been working with BlackBerry for over 10 years now, and has seen the transformation first hand. “During my first few years at BlackBerry, we were at our peak of success in the smartphone business,” Sandhu told THE WEEK. “It was when competitors entered the market and brought mobile apps to consumers, which we were not focused on, that we saw the decline in our smartphone market share. Since then we have pivoted from being a hardware company making smartphones, to a software and services company that connects and secures any endpoint. Looking back at the pivot, which was a massive undertaking strategically and operationally, I am in awe of how seamlessly it was done. It would make a great case study for strategic management and leadership programs. The environment we operate in has transformed as well. The market is now saturated with companies focused on ‘connecting and securing the world’ and the industry is recognising that the key—the differentiation—is in software and services, and not hardware, moving forward.”</p> <p>&nbsp;</p> <p>BlackBerry’s acquisition of Cylance in an all-cash deal is testimony to the fact that things are looking good for the company. BlackBerry is drawing on years of secure communications expertise to position itself as a global cybersecurity leader. BlackBerry software connects and protects over 500 million endpoints today, including cars, drones, the international space station, documents, phones, smart metres, wind turbines, power stations, smart watches and more. Its software is in over 150 million cars on the road today, including Ford, BMW, Mercedes-Benz, Toyota, Honda, Jaguar Land Rover and Subaru. All of the G7, 16 of the G20 and all NATO countries employ BlackBerry services. As far as the corporate world is concerned, BlackBerry software is used by 77 per cent of Fortune 100 companies, 100 per cent of Fortune 100 banks, 100 per cent of Fortune 100 energy companies, 100 per cent of Fortune 100 freight companies and 83 per cent of Fortune 100 insurance companies.</p> <p>&nbsp;</p> <p>With the world becoming increasingly connected, the main risk is the number of connected things. As the potential number of devices or end points that are connected grows, so does the attack surface area. The scale of this growth also poses a huge risk of manageability to people, which is where artificial intelligence and automated technologies come in. Risks to cybersecurity does not always come from hackers or other state actors. A lot of times it is from unintentional actions by people inside a network. It is in these areas that BlackBerry comes in with its three-and-a-half-decades of experience. BlackBerry’s heritage is security and that is what Chen is betting on: “Deliver the most trusted endpoint communications for the internet of things.”</p> <p>&nbsp;</p> <p>BlackBerry recently launched BlackBerry Intelligent Security, which assumes a starting point of zero trust and then builds a trust score based on various factors. Those factors include, location, user behaviours—are you left- or right-handed, do you move your mouse in a certain way and so on—job function and more. The solution constantly verifies a user identity, not just at the point of entry into the network or application. They also announced artificial intelligence-based security for cars. The technology is set to transform vehicle safety across a range of capabilities, including predictive software maintenance and cybersecurity threat protection. “Not only do our technology advances provide greater security, they support CIO/IT organisations with the growing and often 24/7 workload they have, and they enable people to connect in new and safe ways that they can trust without a doubt,” says Sandhu.</p> <p>&nbsp;</p> <p>BlackBerry’s journey may not have been the smoothest, but the software giant is certainly on the trajectory to becoming a global phenomenon again. Where Kodak, Polaroid and Blockbuster failed, BlackBerry became a shining example of making the shift. And the shift seemed effortless, though it may not have been.</p> Sat Dec 21 12:34:17 IST 2019 new-flight-plan <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>IT MAY BE A</b> maharaja in the skies, but it is just a gilded pauper on the ground. The king in distress is desperately looking for a knight in shining armour to take him out of turbulence.</p> <p>&nbsp;</p> <p>The question is, will Air India find that saviour?</p> <p>&nbsp;</p> <p>The government has made its intent clear. Finance Minister Nirmala Sitharaman has even set the deadline of March 2020 to sell off the beleaguered national carrier, and Civil Aviation Minister Hardeep Singh Puri told Parliament that it would have to be “closed down” or “privatised”. Ashwani Lohani, chairman and managing director of the airline, told THE WEEK that it could once again become one of the finest airlines in the world, but “only in private hands”.</p> <p>&nbsp;</p> <p>The Air India Specific Alternative Mechanism (AISAM), a committee headed by Home Minister Amit Shah and includes Sitharaman, Puri and Transport Minister Nitin Gadkari, shares the sentiment. The committee seems to have learnt from its past mistakes. In 2018, a sale attempt fell flat because there were no bidders. An Ernst &amp; Young analysis told the government the writing on the wall—no one wanted an airline in which the government held 24 per cent and might continue to interfere in decision-making. Not to forget the massive debt and liabilities (estimated at Rs58,000 crore and counting), volatile crude prices, fluctuations in exchange rate and the many conditions placed about eligibility of those wanting to bid.</p> <p>&nbsp;</p> <p>This time, the government appears suitably chastened. All of the airline is for sale and the successful bidder will have a full say on its future course. The winning bidder also gets the profit-making subsidiaries—Air India Express (which runs low-cost services to the Persian Gulf region) and Air India SATS (a 50:50 joint venture with Singapore Airlines for airport services). Not to forget the large pool of highly skilled and experienced staff, 169 aircraft and flying rights to 43 cities in 31 countries and 55 domestic destinations.</p> <p>&nbsp;</p> <p>The Union cabinet has sweetened the deal by hiving off working capital loans not backed by any asset (around Rs30,000 crore) into a special purpose vehicle called Air India Asset Holding Company. This company would also own AITSL (ground handling division), AIESL (engineering services division), Alliance Air (a subsidiary airline), Hotel Corporation of India (which runs the Centaur hotels in Delhi and Srinagar), and other assets, ranging from valuable real estate (including the iconic Air India building in Nariman Point in Mumbai) to precious art and artefacts that the airline has collected over the years.</p> <p>&nbsp;</p> <p>The idea is to monetise whatever possible, keeping in mind that even after getting the reserve price the winning bidder will pay, the government may end up with a loss. “It is better the government takes the haircut now, so it will not need to fund Rs5,000 crore (the ballpark figure of loss every year). It is a one-time cleanup,” said Kapil Kaul, CEO &amp; director (South Asia) of the Centre for Asia Pacific Aviation (India).</p> <p>&nbsp;</p> <p>The Augean stables of Air India are the stuff of nightmares and a textbook case for why governments should not be running airlines, or any business, for that matter. In 2007, the government ordered the merger of the two main state carriers—Air India, which primarily operated on international routes, and Indian Airlines, which primarily operated on domestic routes. The intention was to create a formidable state carrier which can become a global aviation heavyweight. What it turned out to be, however, was a bloated, unviable entity.</p> <p>&nbsp;</p> <p>The staff and departments of the two airlines never managed to integrate, leading to politicking and turmoil within the ranks. While political and bureaucratic interference merrily continued, the airline’s losses mounted. The net loss this year was Rs8,550 crore. A humongous order for Boeing planes from the last decade is still bleeding the company.</p> <p>&nbsp;</p> <p>Air India’s disinvestment was first suggested in the first spate of disinvestment by the Vajpayee government at the turn of the century. “It did not succeed because of bureaucratic shenanigans and the role of a private airline promoter who saw in a resurgent AI competition for his then-fledgling airline,” wrote Jitendra Bhargava, former director of Air India, in a newspaper article.</p> <p>&nbsp;</p> <p>The disinvestment process is laborious, and it is unlikely to keep the March deadline. While the government has already done its due diligence, one of the reasons for the delay is fixing the reserve price and issuing the request for proposal. If the reserve price is too low, it will invite criticism from the opposition parties; if it is too high, it will put off parties interested in buying the airline. Bidders will need time to study the expressions of interest and draft share purchase agreement. They will also need to go through all the data of the airline which would be made accessible to them. This could take a few months. Once a bid is chosen, the government will issue a letter of intent to the selected company, which would still need around six months to complete the transfer of ownership. “I would say, around this time next year or early 2021, Air India will be operating as a private airline,” said Kaul.</p> <p>&nbsp;</p> <p>Air India could still turn out to be a jewel. “Air India has a number of positives,” said Sidharath Kapur, an aviation expert who till recently was CEO of Adani Group’s airports division. “It is the dominant player in India on international routes, with excellent slots at all major international airports. It has a pool of skilled manpower and on the operations front has significant room for efficiency improvement. (Air India remains) the best bet to develop India as a major transit hub. With improvement in efficiency, I am sure that most Indians would rather use Air India for direct flights rather than use a hub in the Middle East or Europe.”</p> <p>&nbsp;</p> <p>It is not going to be a smooth flight, though. Many political parties and trade unions have come out opposing the sale. The RSS-affiliated Swadeshi Jagran Manch has said that it was “against national interest”. The Air India Employees Union (AIEU), the biggest staff union in the airline, also does not intend to let go without a fight. “Higher authorities took decisions like the disastrous merger, which led to losses,” said Nitin Mhatre, patron and former president of AIEU. “Why do the workers have to suffer for it? Pinpoint who is behind this state of affairs. Why has no action been taken against those responsible? If compulsorily retired, those above 40 will not get jobs. These are people with loans to pay, children studying, and they are staring at an uncertain future.”</p> <p>&nbsp;</p> <p>The government has made it clear that it will work out the best possible settlement for employees. “We are committed to securing a favourable deal for all employees,” said Puri. While the government has promised a one year job guarantee for all employees, unions have been pressing for two years or more. Their demands also include continuation of health benefits provided to serving and retired employees, and the free tickets staff are entitled to.</p> <p>&nbsp;</p> <p>Though the government seems to have cleared the decks for the sale of the national carrier, things could still go wrong. “If the government is resolute and not stuck too much on the reserve price, I see the sale going through,” said Kaul. “But you never know what is going to happen.”</p> Fri Dec 13 18:33:23 IST 2019 air-india-can-become-finest-in-the-world-in-private-hands <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>ASHWANI LOHANI</b> entered the Limca Book of Records for holding engineering degrees in four different streams. It seems the qualifications came in handy in his three-decade-long career that saw him head both Indian Railways and Air India. His ongoing second tenure as chairman and managing director of the national carrier might well see the airline’s privatisation. Lohani took time off to share his thoughts with THE WEEK. Excerpts from an exclusive interview:</p> <p>&nbsp;</p> <p><b>Q/You have been involved in many operational decisions, like issuing directives to pilots to close their announcements by saying ‘Jai Hind’. Do you feel getting into each and every small aspect of it is the way to go about it?</b></p> <p>&nbsp;</p> <p>A/Air India has issues related to processes and governance. I know my organisation requires major transformational reforms, in the way we enter into contracts, the way we enter into decisions, the way we do a lot of things. Till that is done, yes, there are times when I have to take off my boots and get down in the mud. It is an essential part of running an organisation. When you say or hear ‘Jai Hind’, it gives you a lot of pride. That is why we did that. And when you have pride, it helps out.</p> <p>&nbsp;</p> <p><b>Q/Was there a political side to the decision to serve only vegetarian food on domestic flights?</b></p> <p>&nbsp;</p> <p>A/It was purely my decision. Nothing political about it. That is a good part of this government; it does not interfere in such matters at all. One reason was that serving becomes easier; you do not have to keep on asking everyone. There have been cases in the Railways as well as in airlines of food getting mixed up, of a vegetarian being served non-veg food. This obviates that. And lastly, it definitely is a bit cheaper. So why should not we do it? It is administratively a better decision. And nobody travels to eat.</p> <p>&nbsp;</p> <p><b>Q/If the government sells all its stake, what will happen to Air India One, the VVIP plane operated for the president and the prime minister?</b></p> <p>&nbsp;</p> <p>A/Only the ministry can tell you about this. We are running it as long as it is with us.</p> <p>&nbsp;</p> <p><b>Q/The current sale move has Rs30,000 crore debt being hived off and held by a separate holding vehicle. Keeping that aside, how attractive is the airline to a prospective buyer?</b></p> <p>&nbsp;</p> <p>A/We are still the country’s largest airline in terms of revenue. Our domestic share is only 12-13 per cent, but our international share (of traffic from India) is about 18 per cent. We still have the best pilots and engineers. I would rate our cabin crew the best. We have solid staff, solid routes, and a lot of inherent strengths.</p> <p>&nbsp;</p> <p>There are a lot of weaknesses, too. We would like to do some more process reforms, add fleet, and change the way we work. But still, this airline has a lot of strengths. It can grow and become one of the finest airlines in the world. But that can happen only in private hands. Because our hands are always tied. I think it is a very, very good buy.</p> <p>&nbsp;</p> <p><b>Q/Initially, the government wanted to retain a 24 per cent stake. The new terms see it getting completely out. How did the change in thinking come about?</b></p> <p>&nbsp;</p> <p>A/Last time, we could not sell. Those ideas did not succeed. It is good. It will give total freedom to the new buyer.</p> <p>&nbsp;</p> <p><b>Q/Who all have shown interest so far?</b></p> <p>&nbsp;</p> <p>A/I cannot reveal that.</p> <p>&nbsp;</p> <p><b>Q/You have had many meetings with the unions. Are they on board with the sale?</b></p> <p>&nbsp;</p> <p>A/They are on board. The government and Air India are very clear that we will take care of the genuine interests of the employees.</p> <p>&nbsp;</p> <p><b>Q/Do they have any specific demands?</b></p> <p>&nbsp;</p> <p>A/They are concerned about their medical benefits and their passages (the perk of free tickets). Whenever there is a change of ownership, there always will be a lot of concerns. There are concerns, but there is no alarm. The staff knows that the government and management are taking all efforts to address those concerns.</p> <p>&nbsp;</p> <p><b>Q/Your crew-to-aircraft ratio is one of the highest in the world.</b></p> <p>&nbsp;</p> <p>A/Government organisations suffer from a lot of wrong perceptions. This is a totally wrong perception that we are overstaffed. We did not recruit for the last 25 years; we have now come to a scenario where we would like to recruit new staff. Our wage costs are at par with the private sector, despite high inefficiency. Staff is not high at all.</p> <p>&nbsp;</p> <p><b>Q/Air India Express, which is profitable, is also being bundled in for the sale. Wouldn’t it have fetched a better price if it was sold separately?</b></p> <p>&nbsp;</p> <p>A/The decision is to sell them together.</p> Fri Dec 13 18:32:36 IST 2019 market-gains <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>AN EQUITY</b> linked saving scheme (ELSS) is a diversified equity mutual fund scheme with a mandatory lock-in period of three years. Being an equity fund, a minimum of 65 per cent of its assets will be invested in equities/stock markets. An ELSS fund invests across sectors and industries. It can have a tilt towards large-caps and mid-caps, or can be flexi-cap, as per the discretion of the fund manager.</p> <p>&nbsp;</p> <p>Equity linked saving schemes are also known as tax saving mutual funds, as they help investors save tax up to Rs1.5 lakh under section 80C of the Income Tax Act. Most asset management companies in India have ELSS funds in their product suite, since they offer investors high returns with tax benefits.</p> <p>&nbsp;</p> <p><b>The tax benefits</b></p> <p>Let us say your total income is Rs12 lakh and you invest Rs1.50 lakh in ELSS in a financial year. The total taxable income drops to Rs10.50 lakh. As with other mutual funds, there is no maximum investment limit in ELSS. But do keep in mind that, only amounts up to Rs 1.50 lakh are eligible for a tax benefit. Also, do note that this exemption limit covers other investments and deductions.</p> <p>&nbsp;</p> <p><b>Returns are taxed</b></p> <p>Since ELSS has a lock-in period of three years, the gains on these funds are treated as long term capital gains (LTCG) and are taxed at 10 per cent. Prior to 2018, the LTCG on equity was nil. In the Union Budget 2018, however, it was announced that investors will have to pay 10 per cent tax on gains exceeding Rs1 lakh made from the sale of equity or equity oriented mutual funds. Dividend income is exempt from this.</p> <p>&nbsp;</p> <p>Also, since an ELSS is market linked, there will not be any guaranteed or assured returns.</p> <p>&nbsp;</p> <p><b>Advantage over other tax saving instruments</b></p> <p>ELSS has many advantages over traditional tax saving instruments like fixed deposits, National Pension Scheme and Public Provident Funds. It has the lowest lock-in period and the returns are generally higher than other tax saving instruments. Public Provident Fund, Employees’ Provident Fund and National Savings Certificate all have a minimum lock-in period of five years.</p> <p>&nbsp;</p> <p><b>Help in long-term wealth creation</b><br> Many investors believe that it is mandatory to sell these schemes after the lock-in period. That is a myth. An investor may continue with the scheme if it is performing well. Apart from saving taxes, an ELSS can help you achieve your long-term goals.</p> <p>&nbsp;</p> <p>In fact, it would be advisable for investors to link their ELSS investments to their long-term goals and stay invested in these schemes. Most ELSS funds follow a flexi-cap strategy. So these schemes can invest across market capitalisations depending on the fund manager’s view. However, if an investor is a conservative equity investor, this may not suit him. In such cases, the investor may consider selling the ELSS funds after the mandatory lock-in period and shift the money to a large-cap scheme or any other fund that suits his risk profile.</p> <p>&nbsp;</p> <p>ICICI Prudential Long Term Equity Fund has consistently given investors a good investment experience. Launched in August 19, 1999, the fund follows a multi-cap strategy and has a growth oriented approach. The fund has given an excess return of 5.8 per cent over Nifty 500 TRI/benchmark since its inception.</p> <p>&nbsp;</p> <p><b>The author is an adviser with Devi Krupa Financial Services.</b></p> Fri Dec 13 13:06:09 IST 2019 slowdown-also-creates-opportunities <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>ABIDALI NEEMUCHWALA</b> spearheaded many initiatives at Wipro that have helped the information technology giant become a nimble and agile organisation once again. A veteran with more than 25 years of experience in the industry, he had held key leadership roles at Tata Consultancy Services before joining Wipro. He currently lives in Dallas, Texas, in the US with his wife and three children, and travels to India for key meetings. In an exclusive interview with THE WEEK, Neemuchwala talks about his vision and how Wipro is geared to deal with the challenges. Excerpts:</p> <p>&nbsp;</p> <p><b>Q/ You have been working on a largely successful revival effort at Wipro. What is next?</b></p> <p>&nbsp;</p> <p>A/ When I took over in 2016, we identified six areas of transformation. We have made tremendous progress in most of those areas, such as driving growth in the digital business, improving the ability to cross-sell, localisation in key geographies and deployment of Wipro HOLMESTM (a cognitive automation tool) in our large customer accounts. My current focus is on creating a funnel of large transformational deals and accelerating our client mining process.</p> <p>&nbsp;</p> <p><b>Q/ Wipro has been known for being strong in the BFSI (Banking Financial services and Insurance) segment. Isn’t it a conventional and slow-growth segment?</b></p> <p>&nbsp;</p> <p>A/ BFSI as an industry and segment spends much more on technology than any other enterprise sector. The size of spends of this sector is also much bigger. This enables service providers like us to grow them into large relationships. The BFSI segment is also one of the early adopters of newer digital technologies and much of the differentiation that they have to offer comes from technology. In the last three years, based on the capabilities that we have built in digital technologies, we have been able to tap into these digital spends and have grown the segment ahead of our peers. I am also encouraged to see growth in our consumer business unit, especially in verticals such as consumer packed goods, media, logistics, travel and transportation. Manufacturing and healthcare is also seeing early signs of recovery, while energy, utilities and communications are expected to remain stable.</p> <p>&nbsp;</p> <p><b>Q/ There has been an increased focus on getting more business from the digital and cloud computing segments.</b></p> <p>&nbsp;</p> <p>A/ Digital transformation is a top priority for most of our customers. As a result, digital is at the forefront of all our offerings. Our proposition in Wipro Digital is anchored around redesigning business processes to be future ready, building enterprise agility and creating next-generation IT. We have a ‘business first’ approach to cloud adoption and have built domain centric solutions with our cloud service providers.</p> <p>&nbsp;</p> <p>Earlier this year, we called out four areas where we continue to make differentiated investments as a part of our ‘Big Bet’ programme—digital, cloud, engineering services and cyber security. Our investments in digital and cloud have created the requisite presence, experience and scale to support transformation. The strength of our offerings, our market presence and success are acknowledged by many industry analysts in their reports. Our consultative and design-led approach to process transformation is the key differentiator. Even in the current macro environment, both these practices continue to grow robustly. Our digital revenue grew 29 per cent last quarter and now contributes 40 per cent of our total revenues.</p> <p>&nbsp;</p> <p><b>Q/ You have been hiring locally in markets such as the US and Europe. How is it working for the company?</b></p> <p>&nbsp;</p> <p>A/ Hiring local talent has been one of the initiatives that we have driven since 2016. Our endeavour to localise the workforce has been successful in all our major markets. Locals today make more than 64 per cent of our workforce in the US. Campus hiring from the universities is playing a crucial role across all our markets. We have specially designed training programmes that enable university graduates to move successfully into customer projects. Hiring local talent has helped us navigate the supply constraints and service our customer demand faster than before in our overseas markets.</p> <p>&nbsp;</p> <p><b>Q/ What are the main challenges before Wipro? How is the overall business sentiment for IT services companies?</b></p> <p>&nbsp;</p> <p>A/ Prolonged slowdown in macroeconomic environment and geopolitical risks do impact the ability of our customers to spend on technology. At the same time, these situations can also create a huge opportunity for companies like us to innovate and provide the solutions that our customers need. We remain focused on winning at the marketplace. Our investments in our big bet technology areas, talent, localisation and building an innovation ecosystem have ensured that the fundamental building blocks are in place. My priority is now to create a funnel of multiple large transformational deals, strengthening the integrated delivery in a few verticals, driving sales-delivery continuum and empower the client partners to service the customer better by delayering. Though there is an overhang of macro uncertainty in certain sectors the overall demand environment has been stable. We continue to see a robust pipeline.</p> <p>&nbsp;</p> <p><b>Q/ Do you feel issues such as Brexit and the slowdown in the automotive sector will have an effect on the business?</b></p> <p>&nbsp;</p> <p>A/ Brexit and the slowdown in the auto sector cause uncertainties that could impact spends by customers in the short to medium term. At the same time, such situations also create opportunities for us to innovate and partner with our customers.</p> <p>&nbsp;</p> <p><b>Q/ In which all ways has Azim Premji influenced you?</b></p> <p>&nbsp;</p> <p>A/ Wipro founder Azim Premji is an exceptional leader who gives free hand to all professionals. His resilience, perseverance and humility have helped the company through ups and downs. At the same time, I am deeply influenced by his commitment to philanthropy. It means that there is a larger cause that unifies us all at Wipro. Post his retirement, he is always available to me and his son Rishad for continuous guidance and support.&nbsp;</p> Fri Dec 13 13:02:55 IST 2019 we-need-a-surgical-strike-on-the-economy <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>There are three ways to look at the slowdown in India’s economy. The first part of it is that the world economy has also slowed down. So, in reality, we are benchmarking against the rest of the world. If you benchmark against the rest of the world, we can still say we are better. But, with the opportunities that we see in India, we should be able to do much better. Countries like Bangladesh are growing at twice the pace of India.</p> <p>&nbsp;</p> <p><i><b>THE LOST OPPORTUNITIES</b></i></p> <p>In China, the textile business is down because of cost escalation. The opportunity has been taken by Bangladesh, Vietnam and Pakistan. Those are the challenges where I feel bad. It is not that we cannot grow faster, but we are not growing faster.</p> <p>&nbsp;</p> <p>There are several sectors in which we can do better. Housing and urban infrastructure is one. Tourism and textiles are other examples. These are not only multipliers of growth, but also employment generators.</p> <p>&nbsp;</p> <p><i><b>LIQUIDITY CRUNCH</b></i></p> <p>The liquidity in the system has dried up. Post demonetisation, liquidity moved into the banking system and mutual funds. Mutual funds and banks gave money to non-banking finance companies, who then lent it to everybody. After the IL&amp;FS crisis, banks are not lending and NBFCs do not have the capacity to lend. So, the second issue is non-availability of money in the system. There is excess liquidity in the banks and the capacity of the banks is huge. But, they are not lending.</p> <p>&nbsp;</p> <p><i><b>LACK OF DEMAND</b></i></p> <p>Demand requires a kickstart by somebody. One step that was taken by the government was the cut in corporate tax to 25 per cent. But, that really is a supply-side boost, which is good, but you also need to cut the rest of the taxes to 25 per cent. You cannot have 42 per cent individual income tax and 25 per cent maximum corporate tax. You need to rationalise that and bring that also to 25 per cent and give a booster to individuals, too.</p> <p>&nbsp;</p> <p><i><b>THE FIXES</b></i></p> <p>I am suggesting a very radical move. You need a 25 per cent cut in goods and services tax in order to raise the demand in the market for the next six months. That will act as a huge booster. People will buy cars, travel, take a holiday and buy houses.</p> <p>If they reduce GST by 25 per cent for six months, it will cost the government Rs1.2 lakh crore. The fiscal deficit will increase by 0.25 per cent. Increasing the deficit by 0.25 per cent or 0.30 per cent is a normal thing to do when an economy is moving down.</p> <p>You can remove Article 370, you can hold elections, you can do this and that, go to America and get things done, you can make bullet train happen, you can make airports happen, and this is one more thing to be done. Whatever needs to be done, needs to be done. If opportunity is going to Bangladesh, we should find out what they are doing and improve on it.</p> <p>&nbsp;</p> <p>I have also suggested a one-time rollover of debt by banks, like we did in 2008. During the crisis post the Lehman Brothers collapse, the RBI had done a one-time rollover at the option of the bank. Today, even positive net worth companies are going bankrupt. So, we need to correct that.</p> <p>&nbsp;</p> <p><i><b>THE TURNAROUND</b></i></p> <p>Let us say, I have got a cough and cold. I have taken a tablet; I have taken antibiotics. If I am still not all right, I will take an injection. So, when the economy is moving down, you need to keep on working on solutions. Why cry about the past—because of the demonetisation, because of GST, because of this and that? It happened. We cannot wish back everything.</p> <p>&nbsp;</p> <p>How do we resurrect the economy to be the best in the world; how do we raise the GDP growth to 10 per cent; how can we improve the liquidity situation; how can we see to it that there are no further NPAs created in the next six months? What are the medicines I am asking for? These are the simplest medicines used all over the world, and we have also used them.</p> <p>&nbsp;</p> <p>The interest rates have to come down, there is no option. In some countries interest rates have even been negative. So, there is no question of interest rates not coming down. So far, the interest rate cuts have not helped a lot in boosting consumption because they have done it too slow. You need to cut rates by 100 basis points (1 per cent) tomorrow, then some thing will happen quickly. You have to do it fast. It is a surgical measure. You have to do a surgical strike on the economy.</p> <p>&nbsp;</p> <p><b>Hiranandani is co-founder of Hiranandani Group, president of National Real Estate Development Council and senior vice president of ASSOCHAM.</b></p> <p>&nbsp;</p> <p>—<b>As told to Nachiket Kelkar</b></p> Sat Dec 07 17:35:44 IST 2019 economy-needs-healing-liquidity <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>A liquidity squeeze in the market in the October-December 2018 quarter caused a decline in economic activity. During that time finance minister Arun Jaitley was unwell and the government response was inadequate. The same trend continued from January to March 2019. There was an interim budget in February 2019.</p> <p>&nbsp;</p> <p><i><b>THE MISTAKES</b></i></p> <p>During the same time, the RBI also was going through a transition. It thought that its aim was to push liquidity into the banking system whereas the challenge at that time was not the lack of liquidity but the decline in lending. From April to June 2019 there was election activity. In July 2019, when the government was formed and the budget was presented, we had a new finance minister. It was not a good budget. It made many mistakes, especially by taxing foreign portfolio investment (FPI). After the budget, a decline started and the slowdown in economic activity continued till September 2019. However, before that, in August 2019, the government took some actions.</p> <p>&nbsp;</p> <p><i><b>LOW DEMAND</b></i></p> <p>Over the past few months, investment has not been very good and it was due to the low demand. Reports say that the government owes around Rs5 lakh crore to people who supplied goods and services to it. Broadly, it meant that there was a liquidity jam and the economy went down. During the period, there were floods and the agriculture sector was shaken up.</p> <p>&nbsp;</p> <p>At the moment, the government is trying to revive the economy and it has done a few good things. It has given a line of credit to NBFCs, though the implementation is still poor. The government has asked the banks to lend money and reports say that Rs4.5 lakh crore has been lent in the past few months. Besides, there has been an improvement in the GST collections for October-November 2019. The government has also constituted a fund of Rs25,000 crore for the stressed real estate sector.</p> <p>The government has reduced corporate tax, which has created a positive mood, and removed the surcharges on the FPIs, which improved the sentiment in the market. The impact of all this will most likely be felt in the January-March 2020 quarter.</p> <p>&nbsp;</p> <p><i><b>MORE TO BE DONE</b></i></p> <p>The RBI needs to do more. The crisis was aggravated because of the inability of the RBI to accept that a large part of the consumer lending was being done by the NBFCs and not banks. The RBI should have acted to provide liquidity to NBFCs. The finance minister is doing a tremendous job to revive the economy and slowly hope is coming back and some decent uptake is expected in January-March 2020.</p> <p>&nbsp;</p> <p><i><b>ATMOSPHERE OF FEAR</b></i></p> <p>The views of industrialist Rahul Bajaj that there is an atmosphere of fear are personal. It is true that there is fear among some sections of the industry. There is fear because today crony capitalism is not possible and you cannot manipulate government policies, you cannot rob the public, you have to pay your taxes and the drive against black money is going on. Tax terrorism has, however, come down a little bit.</p> <p>&nbsp;</p> <p><i><b>PERIOD OF HEALING</b></i></p> <p>There had been too many changes to recalibrate the economy—demonetisation, GST and RERA—in a short period of time. There is a need for healing because the industry cannot take any more reforms and shocks. The period of healing has to go along with increased liquidity.</p> <p>&nbsp;</p> <p>At the same time, the RBI has to be active; it is currently sitting in its ivory tower. It has to consider the NBFCs as an important part of the economy. It should include NBFCs in its quarterly and fortnightly reports and ensure that there is enough money with them. The banks should not keep on reducing interest rates on deposits. If you cut interest on deposits, the consumption level of the people will come down and it will hurt the economy.</p> <p>&nbsp;</p> <p>There should be more communication between the government and the industry. The government should call the chambers of commerce and industry and talk to them every month to calm things down. The government has to carry people along.</p> <p>&nbsp;</p> <p><b>Pai is chairman of Manipal Global Education Services &amp; former CFO of Infosys.</b></p> <p>&nbsp;</p> <p>—<b>As told to Abhinav Singh</b></p> Sat Dec 07 17:34:13 IST 2019 the-big-binge-theory <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>The medium has become the message. A combination of transformative technology and changing viewing patterns has spawned a new method and mode of entertainment that is taking India by storm.</p> <p>&nbsp;</p> <p>The new paradigm is called OTT, tech jargon for over-the-top media streaming platforms that provide audio and video content over the internet. The young and the old, especially in cities, have so taken to platforms like Netflix and Hotstar that OTT itself has become urban slang, along with related phrases like binge-watching (watching multiple episodes of a programme in rapid succession) and ‘Netflix and chill’ (watching Netflix with a romantic prospect).</p> <p>&nbsp;</p> <p>Another buzzphrase is ‘cutting the cord’, which refers to disconnecting cable and direct-to-home subscriptions and getting your fill of entertainment purely through OTT. “I have cut the cord; I now watch only OTT platforms,” said Mehak Joshi, who works with the ad agency FHO in Delhi. “I am a busy person. I want to watch short films or limited series—stuff that I like—at my convenience.”</p> <p>&nbsp;</p> <p>Mehak is in her twenties, but the OTT craze is not limited to Gen X, Y and Z. “My grandmother in Punjab has also quit watching TV,” she said. “She now watches the stuff she wants to watch, on-the-go, on her smartphone.”</p> <p>&nbsp;</p> <p>Jeetender Kumar, a housekeeper at a condo in Gurugram, asked his employer for an extra Diwali perk as he got his festival bonus and prepared to leave for his home in Uttar Pradesh. “I asked saab for his Amazon Prime Video password, so I could watch some of the Hindi shows [on the OTT platform]. They are quite slick and edgy!” Kumar said.</p> <p>&nbsp;</p> <p>OTT is no longer a metro phenomenon—services increasingly percolate to tier-III and tier-IV cities, and even small towns and villages. Nor is OTT a preserve of the youth; a Boston Consulting Group (BCG) study said women and older people would be the key drivers of OTT growth. Thanks to one of the lowest mobile data costs on the planet, India now has the world’s highest average per capita mobile internet consumption—13.9GB a month, according to the latest Ericsson Mobility Report.</p> <p>&nbsp;</p> <p>No prizes for guessing what most Indians are using it for. According to Manish Chopra, director and head of partnerships at Facebook, 75 per cent of all data consumed by Indians is used for watching videos. “And we are still at a very early stage of this entertainment revolution,” he said.</p> <p>&nbsp;</p> <p>The OTT revolution is a product of technology—like faster internet speeds and affordable handsets. Unlike in the west, most Indians access OTT on their phones. The decisive factor, though, is convenience. You can access programmes through any device, and watch them as much, or as little, as you want. “If I like a scene, I can repeat it,” said Mehak. “And if I want to skip a song while watching a film, I can do that, too.”</p> <p>&nbsp;</p> <p>Then there is content, which all OTT platforms focus on. Early this year, the final season of Game of Thrones had die-hard fans waking up early on Monday mornings to catch episodes, instead of choosing to wait till Tuesday night to watch censored versions on satellite TV. The buzz generated by Netflix shows like Sacred Games and Stranger Things this year has become the stuff of legend.</p> <p>&nbsp;</p> <p>OTT platforms are spending billions of dollars on creating captivating original content—like films, docu-dramas and stand-up specials. It means viewers are spoilt for choice. “We are aiming to create big, bold and pathbreaking content,” said Varun Narang, chief product officer at Hotstar, which is owned by Star India.</p> <p>&nbsp;</p> <p>Indeed, bold seems to be the buzzword—many OTT shows feature graphic violence, sex and foul language, something you do not normally see on regular TV, which is overrun by saas-bahu and mythology dramas.</p> <p>&nbsp;</p> <p>There is no reliable estimate of the total number of OTT users in India, but a majority of the 50 crore internet users in the country watch OTT content, one way or the other, on a regular basis. Most viewers watch the free content available on YouTube, Google’s ad-driven platform, and Hotstar, which has both free and premium sections. But the number of viewers paying to subscribe to platforms like Netflix or ALTBalaji is increasing.</p> <p>&nbsp;</p> <p>Netflix and Amazon Prime initially wooed urban, English-speaking audiences with top-notch shows like The Crown and The Marvelous Mrs. Maisel, but they eventually had to venture into producing Indian shows like Sacred Games and The Family Man to gain across-the-board acceptance. Netflix, despite being a global leader, has just 5.2 lakh subscribers in India—just a fraction of Hotstar’s 300 million users. Hotstar has been riding on its gargantuan library of desi content, sourced from its bouquet of channels in the Star network.</p> <p>&nbsp;</p> <p>Considering the rising popularity of content in Hindi and regional languages, the road ahead for OTT in India is clear—go local. In four years, says BCG, almost half (around 65 crore) of India’s internet users will be from villages, and most of them would access OTT platforms through their phones. “OTT could become the primary source of entertainment, once the masses have access to high-speed internet, smart devices and easy digital payments,” said Girish Menon, partner and head (media and entertainment) at KPMG.</p> <p>&nbsp;</p> <p>KPMG estimates digital media revenues in India to cross 038,600 crore by 2022. PricewaterhouseCoopers says the OTT segment in India is growing at double the global rate. Projections like these have attracted some of the world’s biggest content providers to India—the latest being Apple TV+ (launched this November) and Disney+ (to be launched soon).</p> <p>&nbsp;</p> <p>First off the mark with their OTT platforms were homegrown television biggies like Star (Hotstar, launched in 2014), Sony (SonyLIV, 2013) and Zee (first with DittoTV in 2012 and OZee in 2016, which were later consolidated into a new platform called Zee5 in 2018). Hotstar made a space for itself by live-streaming Indian Premier League matches from 2015 onwards, and OTT became a buzzword after the India launch of global leaders Netflix and Amazon Prime in 2016.</p> <p>&nbsp;</p> <p>The advent of cheap data plans and affordable smartphones soon brought about an OTT boom. Netflix and Amazon Prime had a lot of momentum, thanks to their treasure trove of gripping original content, besides their hyper-marketing strategies and freebie deals offered through telecom providers like Airtel and Vodafone.</p> <p>&nbsp;</p> <p>Interestingly, these strategies helped the whole industry grow, not just Netflix and Amazon Prime. An array of local players jumped into the fray—such as Voot (from Viacom 18, which owns channels like CNN-TV18 and Colors), MX Player (from the Times of India group), and ShemarooMe and ErosNow (owned by film production and distribution giants Shemaroo and Eros Entertainment).</p> <p>&nbsp;</p> <p>Even non-media players like Flipkart and Zomato have jumped on the OTT bandwagon. An e-commerce giant, Flipkart wants its platform to attract internet users in tier-II and tier-III cities to shop on its site. Being in the food delivery business, Zomato is creating OTT programmes that revolve around food, travel and health. “We have always attempted to broaden the interpretation and understanding of food through content,” said Durga Raghunath, Zomato’s senior vice president. “You can’t possibly watch all these food shows and not get hungry!”</p> <p>&nbsp;</p> <p>But, with so many players around, is a shakedown in the offing? Sanjay Reddy, managing director of the Hyderabad-based digital content company Silly Monks, thinks so. “There are 43 OTT players now,” he said. “Not all will become viable. Some will merge; some will cease to exist.”</p> <p>&nbsp;</p> <p>Kranti Gada, chief operating officer at ShemarooMe, disagreed. “We have more than 800 channels on cable; [40+] OTT players is nothing,” she said. “The landscape will evolve, and we will see a lot of partnerships and collaborations.”</p> <p>&nbsp;</p> <p>The collaborations are already happening. Zee5 has tied up with ALTBalaji to create and share content. Hotstar is available on Airtel’s DTH platform, while Tata Sky has partnered with Amazon to offer Tata Sky Binge, which offers new subscribers Amazon Prime free of cost for three months. Tata Sky Binge also aggregates OTT services like Hotstar, Eros Now, Hungama and Sun NXT into a single, cost-effective package.</p> <p>&nbsp;</p> <p>“We are in conversation with other key digital players to expand,” said Pallavi Puri, chief commercial officer, Tata Sky. “The consumption pattern is changing, so it is necessary to cater to each segment of the audience.”</p> <p>&nbsp;</p> <p>For DTH players like Tata Sky, the shift to OTT is a sensible move. A recent KPMG study said that as many as 1.5 crore households disconnected their cable and DTH connections in the first three months of this year.</p> <p>&nbsp;</p> <p>As a medium, OTT offers a more personal viewing experience than cinema or television, which is often watched in the company of family or friends. “A mass of niches” is how KPMG’s Girish Menon describes the OTT bouquet. “There are significant differences in the way content is consumed by, say, a user in Delhi and a regional language-speaking user in the south,” he said.</p> <p>&nbsp;</p> <p>Said Srishti Arya, director (international originals) Netflix India: “People’s tastes are broad even in a single country. We look at creating content that Indians enjoy.”</p> <p>&nbsp;</p> <p>But that is easier said than done. “Every piece of content has to be carefully scrutinised and curated,” said Kranti Gada of ShemarooMe. A mass entertainer like Golmaal, she said, is better off in the ad-driven section of the OTT, while something like Vodka Diaries, which works well with a niche, urban audience, can do well on the subscription side.</p> <p>&nbsp;</p> <p>Artificial intelligence plays a big role in curating content. Eros Now, for instance, has tied up with Microsoft to develop a next-generation platform with intuitive features, AI tools and a personalised recommendation engine to attract more users.</p> <p>&nbsp;</p> <p>Ultimately, though, OTTs have to bank more on content creation than technology. A plethora of A-listers in India have been joining the mad rush for creating original content for streaming platforms. The list includes director Anurag Kashyap, who helmed Sacred Games, and Shah Rukh Khan, who produced the new Netflix show Bard of Blood. “Content is surely king,” said Sanjay Reddy of Silly Monks, “and that will keep OTT ahead of the competition.”</p> Sat Nov 30 15:58:21 IST 2019 local-is-the-new-global <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Hoichoi means ‘fun and excitement’ in Bengali. It also stands for one of the most exciting developments in India’s over-the-top (OTT) streaming industry.</p> <p>&nbsp;</p> <p>Hoichoi is the first dedicated regional language OTT service in India. Owned by the Kolkata-based film production house SVF Entertainment, Hoichoi started streaming in late 2017. Its mix of original series and Bengali films has been a big hit—both in India and among the Bengali diaspora in the Middle East, Europe, Australia, Canada and the US. “On OTT, most users want to consume content in their local language,” said Vishnu Mohta, cofounder, Hoichoi. “[Ours is] a distinct brand that connects Bengalis worldwide.”</p> <p>&nbsp;</p> <p>The success of Hoichoi and similar regional OTT platforms has global biggies paying close attention. “Our original content from India is largely in Hindi, but we are also licensing films in various regional languages,” said Srishti Arya, director, international originals, Netflix India.</p> <p>&nbsp;</p> <p>Netflix’s lineup of original Indian content includes 16 series and 24 films, including Marathi films like 15 August (produced by Madhuri Dixit, and based on life in a Mumbai chawl) and Firebrand (produced by Priyanka Chopra, and based on the struggles of a female lawyer).</p> <p>&nbsp;</p> <p>The competition is not far behind. ALTBalaji is focusing on creating content in Tamil, Gujarati, Telugu and Marathi. Bigflix, the OTT platform from Reliance, offers films in nine regional languages. Amazon Prime will invest 02,000 crore to create original content in India.</p> <p>&nbsp;</p> <p>Getting a slice of the regional pie is not going to be a cakewalk, though. Users in India have distinct tastes, and platforms need to be ultra-sensitive. “Different users have different needs,” said Mohta. “We work on multiple genres and even make a mix of them to create original content that is unique. You will find a Byomkesh (an iconic detective show) on Hoichoi, and you will also come across a Charitraheen, an erotic drama!”</p> <p>&nbsp;</p> <p>Zee’s OTT platform has programmes in nine languages competing with content in English. “We are concentrating on each of them as if they were a completely different product; because a Bengali guy would like something different compared with a Marathi guy, who would prefer something different from what a Gujarati guy likes, and so on,” said Rohit Chadda, chief executive officer (digital publishing) at Zee.</p> <p>&nbsp;</p> <p>ManoramaMax, the OTT platform launched by Malayala Manorama in September, has already struck a chord with viewers in Kerala. “We have a total user base of three million, including users on Android and Apple devices and the web,” said Sathyajith Divakaran Nair, general manager (digital), Malayala Manorama. “We have launched original programming, and [in terms of budget] we are going about it in a way that it is sustainable.”</p> <p>&nbsp;</p> <p>Viacom 18, too, is betting on the regional wave. Having found that the Marathi version of Bigg Boss had 100 million views online, it launched a new channel, Colors Telugu, not as a cable-satellite offering, but on its OTT platform, Voot. Akash Banerji, Viacom 18’s digital head, summed it up best: “Regional has become the new national.”</p> Fri Nov 29 14:52:47 IST 2019 sos-call <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>It is no news that India’s telecom sector has been in trouble owing to a fierce price war and high duties and fees. But the quarterly results released last week have raised serious questions about the future of the sector and thousands of jobs. In the July-September quarter, the losses of four companies—Vodafone Idea, Bharti Airtel, Reliance Communications and Tata Teleservices—totalled up to around Rs1,06,444 crore. A big chunk of this amount is to make provision for payment to the government after the Supreme Court upheld the Department of Telecom’s definition of adjusted gross revenue (AGR).</p> <p>&nbsp;</p> <p>AGR is the usage and licensing fee paid to the DoT by telecom operators. There was a dispute between the two parties on how to calculate the amount payable. The companies will now have to pay 092,642 crore to the government, which includes the original charges, interest and penalties.</p> <p>&nbsp;</p> <p>“The sector is already reeling under a debt of around 04 lakh crore and is in dire financial straits as operators are making negative returns on their investments. The telecom EBITDA (earnings before interest, tax, depreciation and amortisation) continues to contract, while the interest expense of the industry continues to increase. With more than 1.19 billion subscribers, the sector is a key contributor to the Indian economy in terms of consumer benefit, employment and revenue generation, and contributes 6.5 per cent to the GDP,” said Rajan S. Mathews, director general of the Cellular Operators Association of India. He said the taxes and levies in the Indian telecom sector, which range from 29 to 32 per cent, are among the highest in the world.</p> <p>&nbsp;</p> <p>Finding a solution for the problem, say many experts, will be in the interest of the sector and country. “The AGR issue is a sensitive one and a solution should be a win-win for the government, the customer and the industry,” said T.V. Ramachandran, president of Broadband India Forum. “In the past also the sector had faced many challenges. In 1997 and 1998, when the sector was expected to collapse, a new National Telecom Policy (1999) saved it. It was then that the existing operators were migrated to a new revenue sharing policy. It was not a bailout package, but a quick settlement. There was a crisis in 2002 and that was also sorted out through an out-of-court settlement.” Ramachandran was the first CEO of Sterling Cellular, the predecessor of Vodafone India.</p> <p>&nbsp;</p> <p>These companies are now struggling to find funds to cater to their accounts payables. Considering the magnitude of the payables, they will have to find financiers and sustain their confidence for a long period of time. They are looking at bankruptcy if they are not able to do that.</p> <p>&nbsp;</p> <p>“Telcos are behemoths, and they employ a large number of people, service crores of subscribers and have accounts payables with hundreds of other companies in the ecosystem. If they fail, it would be too risky for the economy,” said Aditya Narayan Mishra, director and CEO of CIEL HR Services. “Right from the companies in the telecom tower business to equipment suppliers, engineering service providers and many others would lose huge sums of money.”</p> <p>&nbsp;</p> <p>The government has expressed its willingness to resolve the issue, as an important sector falling apart would dent its business-friendly image. Finance Minister Nirmala Sitharaman had said that the government intended to address the concerns of the sector and was not in a hurry to recover the dues.</p> <p>&nbsp;</p> <p>“It is not a comfortable thing for a government and the business sentiment it wants to portray to the world at large to have its major telecom networks collapse under the burden of debt,” said brand expert Harish Bijoor. “The second fact is that many jobs will be lost due to this crisis. As it is, there are job losses in different sectors. No government wants it to balloon out of proportion.”</p> <p>&nbsp;</p> <p>The loss of jobs, in fact, is something the government wants to avoid at the moment. Kris Lakshmikanth, founder of the executive search firm Head Hunters India, said that in the past few months many operators sacked thousands of employees primarily from the lower-end operational and temporary sales roles. “If things do not improve there could be further job cuts in the sector. I feel that in the long run, even some senior and mid-level people may lose jobs,” he said.</p> <p>&nbsp;</p> <p>To address the issue, the government will have to make significant changes in the spectrum pricing methods. Ramachandran said spectrum reserve prices are unrealistic and unaffordable for the industry. “That accounts for the major portion of the debt of the industry and it needs to be resolved. Also, the total duties on the sector are well above international standards. Since the spectrum is sold by auction, there is no basis for the high license charge. It needs to be addressed on a priority basis. Investors do not need special incentives; all they need is a fair marketplace and reasonable regulations,” he said.</p> <p>&nbsp;</p> <p>A fair marketplace would also serve customers better. “While the tariffs have been going down over the years, quality of service has been a huge concern,” said Mishra. “If any of the companies fail, it might further pull down the service standards and the drive for excellence will slowly decline. The future of the sector hinges on finding a way forward for financing the liabilities of the companies.”</p> <p>&nbsp;</p> <p>The AGR issue may have repercussions on the 5G plans of many companies as well. Bharti Airtel and Vodafone Idea have applied to participate in 5G trials, but it remains to be seen if they will be able to afford the spectrum and the gear.</p> Sat Nov 23 11:10:28 IST 2019 brain-and-brawn <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>SOUTH KOREAN CARMAKER</b> Kia entered the Indian market quite late. It launched its first product, the Seltos, a sports utility vehicle, on August 22, two decades after its sister company, Hyundai, came to India with the Santro hatchback. While everybody thought Kia got the timing wrong, as the market was witnessing a sharp slowdown in demand, the Korean company has just proved them all wrong.</p> <p>&nbsp;</p> <p>In three months, the Seltos has emerged as one of the best-selling SUVs in the country. In October, Kia sold 12,800 of them to gain the fifth spot in India’s passenger vehicle market, overtaking established players like Honda, Renault, Toyota and Ford. “While developing the Seltos, the idea was to offer a product that will address the needs and demands of the Indian customers in the mid-SUV segment,” said Manohar Bhat, vice president and head of sales and marketing, Kia Motors. “We were confident that the Seltos will emerge as a popular choice.” So far, the Seltos has attracted some 60,000 bookings.</p> <p>&nbsp;</p> <p>Passenger vehicles sales have been sliding for the past 11 months though they marginally rebounded in October owing to the hefty festival discounts offered by carmakers. While the total sales of passenger vehicles improved by less than 1 per cent, market leader Maruti Suzuki’s sales rose 2.3 per cent to 1.39 lakh units. It was the carmaker’s first monthly growth in the financial year. Though Hyundai’s sales in October fell 2.2 per cent, at 63,610 it registered the highest cumulative sales in 2019, thanks to its compact SUV Venue. Launched on May 21, the Venue has received more than 75,000 bookings. Hyundai’s first electric vehicle in India, the high-end SUV Kona, has also seen a demand better than expected. It racked up more than 300 bookings, said S.S. Kim, MD and CEO, Hyundai Motor India.</p> <p>&nbsp;</p> <p>Another model that bucked the trend is a surprise entry—Britain’s MG (Morris Garages), owned by China’s state-owned SAIC Motor Corp, has received a strong response for its Hector SUV. MG sold 9,670 units in four months and had to suspend bookings temporarily in July due to strong demand. The Hector has received some 38,000 bookings and the waiting period stretches to almost six months. Gaurav ß, chief commercial officer of MG Motor India, said the company has increased the production to 3,000 units a month.</p> <p>&nbsp;</p> <p>While a strong demand for SUVs has been a trend in India for a long time, what worked for the Seltos, the Hector and the Venue is that they are packed with technology. MG, for instance, calls the Hector the internet car, with features including an in-car Android-based tablet that has 4G connectivity. Hyundai debuted its BlueLink connected car technology in the Venue, and it has many safety firsts in the compact SUV segment such as vehicle theft tracking and immobilisation, panic notification and share destination.</p> <p>&nbsp;</p> <p>“A customer wants something that is exciting, while also providing a great value proposition. Then a customer is willing to pay, even if he has to wait a few months for the delivery,” said Karan Mehrishi, lead economist at Acuite Ratings.</p> <p>&nbsp;</p> <p>India’s automobile market had long been dominated by entry-level cars, like the Maruti Alto and Hyundai Santro. Of late, however, customer preferences are shifting towards bigger, more premium vehicles. Maruti’s Dzire compact sedan was its top selling car in September. For Hyundai, the Elite i20 premium hatchback is now its largest selling.</p> <p>&nbsp;</p> <p>Estimates are that utility vehicles would soon outpace hatchbacks in India. The shift is reflected in the sales trend this year. According to Society of Indian Automobile Manufacturers (SIAM), passenger vehicle sales declined 23.6 per cent year-on-year between April and September 2019. While passenger car sales slumped 30.30 per cent, the sales of utility vehicles slipped just 3.8 per cent. “Car owners in the Indian market are now looking at redefining their driving experience and the numbers clearly show the rising preference for SUVs, especially among young buyers. This trend is getting stronger as the aspiration of the Indian customers of owning an SUV has grown exponentially,” said Hyundai’s Kim. Hyundai is among the largest SUV manufacturers in India, with a market share of 21 per cent.</p> <p>&nbsp;</p> <p>Kia’s Anantpur facility in Andhra Pradesh has a production capacity of three lakh units a year. The company recently started a second shift at the plant to meet the demand for the Seltos. Bhat said if the demand remained strong, Kia would assess the possibility of a third shift. “SUVs are unlikely to fade away anytime soon,” he said.</p> <p>&nbsp;</p> <p>Carmakers have been exploring various ways to tide over the tough times. Mahindra &amp; Mahindra and Ford Motors recently signed definitive agreements to create a joint venture to develop, market and distribute Ford brand vehicles in India. Last month, German auto giant Volkswagen announced a merger of three units in India—Volkswagen India, Volkswagen Group Sales India and Skoda Auto India—into a single entity called Skoda Auto Volkswagen India. It has already announced plans for a new mid-size SUV.</p> <p>&nbsp;</p> <p>Despite the bleak scenario, carmakers expect a turnaround soon, and are gearing up for new launches. Hyundai is likely to showcase the next generation Creta at the AutoExpo next year. Kia is preparing to launch its luxury multi-purpose vehicle Carnival at the same event.</p> <p>&nbsp;</p> <p>“The market will pick up momentum eventually as there are now better and more advanced products in the market,” said Kia’s Bhat. “Also, the per individual car ownership is really low in comparison with other global markets and hence there is a lot of potential in the market.”</p> <p>&nbsp;</p> <p><b>KIA SELTOS</b></p> <p>Sold 26,500 units since August and has around 60,000 bookings</p> <p><b>What worked for it:</b> All engine options are BS 6 compliant; upmarket design and features; connectivity</p> <p>&nbsp;</p> <p><b>HYUNDAI VENUE</b></p> <p>Sold 42,500 units since launch and has some 75,000 bookings</p> <p><b>What worked for it:</b> Connectivity features; Hyundai’s reputation</p> <p>&nbsp;</p> <p><b>MG HECTOR</b></p> <p>Sold 9,670 units in four months and has around 38,000 bookings</p> <p><b>What worked for it:</b> Connectivity features; size; pricing</p> Thu Nov 14 16:05:58 IST 2019 balancing-act <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>As an investor, you might have come across the time-tested formula of ‘buy low and sell high’. When markets are volatile, you will find many people around you talking about this philosophy. But how do you bring that into practice? You never know what is a low point and what is a high point in the capital markets. To overcome this, asset management companies have come up with mutual fund schemes called balanced advantage funds.</p> <p><b>Balancing the risks</b></p> <p>Securities and Exchange Board of India has a clearly defined categorisation of mutual fund schemes. Under hybrid mutual funds, balanced advantage or dynamic asset allocation fund is an open-ended dynamic asset allocation fund. This means the fund can change allocation to equity and debt as required. While the market regulator does not impose any asset-wise investment limits for these funds, asset management companies have their own defined limits. Even these limits give immense scope to these funds to maintain a dynamic asset allocation.</p> <p>Asset allocation is a strategy used to minimise risks. Portions of your money are invested in different asset classes so that if one portion is hit by a negative development, the other portion can hedge the overall returns of the investment, thereby preventing sharp losses. This works because equity and debt markets react to the same events in a completely different manner. To understand this better, look at the returns of equity and debt, the two major asset classes in the year 2008, which saw a major global economic crisis. While returns on equity investments in 2008 were negative (-51 per cent), debt investments during the year gave 28 per cent returns. In the following year, equity returns were 78 per cent, while debt investments gave (-) 9 per cent.</p> <p>Accordingly, balanced advantage funds attempt to balance the risks by actively managing the allocation to the major investment buckets—equity and debt. Not only are the risks balanced for the investors, the tax treatment of the investment also remains favourable with taxation being like other equity funds, despite having an added layer of diversification.</p> <p><b>How does it benefit you?</b></p> <p>The concept of asset allocation is often talked about, especially while discussing investments. Similarly, the strategy of buying at lows and selling at highs is also discussed frequently. As mentioned above, what makes it challenging for a retail investor is not knowing what exactly is a ‘low’ or a ‘high’. Going a step further, even trying to foresee a low or a high could be difficult for retail investors. Hence, mutual funds have devised their own strategies based on the expertise of their respective fund managers.</p> <p>For instance, the ICICI Prudential Balanced Advantage Fund follows an in-house model. This model prompts fund managers to reduce equity exposure if equity valuation goes up. Similarly, the equity exposure is raised when the valuation goes down, thereby making equity assets attractive. This strategy can calm the nerves of conservative investors who might fear the sharp market movements. Accordingly, people with relatively lower risk appetites can use these funds to enhance their gains by stepping into equity with an added layer of strategy.</p> <p>&nbsp;</p> <p><b>Author is cofounder of Griffin Capital Advisors LLP.</b></p> Sat Nov 09 11:32:56 IST 2019 committed-to-long-term-opportunity-in-india <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><sub>Amit Agarwal seldom shows his emotions. But the Amazon India head is visibly happy these days. The e-commerce platform recorded its highest number of transacting customers and purchases this festive season. And, according to the research agency Nielsen, it also had the highest share of transacting customers and purchases across all online shopping platforms during this period.</sub></p> <p><sub>Agarwal has been steering Amazon in India since it started operations here. An Amazon veteran, he joined the company in 1999 and led several global initiatives in the formative stages of Amazon’s seller and web services and external payments businesses. He played a crucial role in Amazon’s international expansion, including launching its retail presence in Italy and Spain. Agarwal, who has a master's degree in computer science from Stanford University and a bachelor's degree from the Indian Institute of Technology, Kanpur, was also the global technical adviser to Amazon founder Jeff Bezos. In an exclusive interview, he talks to THE WEEK about how the e-commerce landscape in India is fast changing and the company's plans to deal with it. Excerpts:</sub></p> <p>&nbsp;</p> <p><b style="font-size: 9.75px; vertical-align: sub;">E-commerce still accounts for only a small percentage of retail in India. How is Amazon tapping into this market?</b><br> </p> <p><sub>India is at an inflexion point. In the next five years, it will grow to become a $5-trillion economy and a $1-trillion digital economy, driven by the world’s largest and youngest mobile internet base. Millions of small and medium businesses will embrace technology and become digital entrepreneurs. Our approach in India has centred on empowering the large base of small and medium businesses to serve customers. Amazon is India’s most transacted marketplace with more than 100 million customers. We will continue to use technology to enable millions of small and medium businesses. We are focused on making it easier for the next 100 million customers to shop with us, making it more affordable for them to consume more, and shop in their preferred language, even using voice.</sub></p> <p>&nbsp;</p> <p><sub><b>What really is making Indians shop online?</b></sub></p> <p><sub>We believe that customers globally are similar—they love selection, value and convenience, especially fast and reliable delivery. Our obsession with serving customers across these dimensions has allowed us to shape customer expectation of e-commerce beyond just value and earn their trust to become a part of their daily habit and a destination of choice to find, discover and buy anything online.</sub></p> <p>&nbsp;</p> <p><sub><b>Amazon recently opened its largest campus in Hyderabad.</b></sub></p> <p><sub>Amazon started operations in India in 2004 from Hyderabad. Over these years, we have invested significantly across 30 office spaces, the Amazon Web Services APAC Region in Mumbai, 50 fulfilment centres in 13 states as well as hundreds of delivery stations and sort centres, creating nearly two lakh jobs in India. The Hyderabad campus is our first owned campus outside the US and is the largest globally. It is a tangible commitment to our long-term thinking and plans for India and a continued reaffirmation of how India is a key talent hub as well for Amazon. We now have many global teams based in India, managing some of the most complex technology roles—financial operations, global selling technology, Prime Video global technology and so on.</sub></p> <p>&nbsp;</p> <p><sub><b>Why is the fashion segment so important for Amazon?</b></sub></p> <p><sub>Fashion is one of our fastest growing categories, with most new customers first shopping for fashion on Amazon. We are using technology and machine learning to make it convenient for customers to discover and find what they might be looking for. We have partnerships with large offline brands such as Shoppers Stop and Max.</sub></p> <p>&nbsp;</p> <p><sub><b>Is Amazon trying to bring in kirana stores to its fold in India. What opportunity do you see in the grocery business?</b></sub></p> <p><sub>We recently launched Amazon Fresh in four cities on This is in addition to Amazon Pantry. As we expand our services, we are increasingly partnering with the local stores, including the kiranas. We want to include them as part of our ecosystem and help them scale with us. Tens of thousands of local stores across 350 cities have expanded their daily operations to become digital entrepreneurs, acting as pickup and delivery points or offering assisted shopping to our customers.</sub></p> <p>&nbsp;</p> <p><sub><b>Amazon aims to surpass $5 billion in exports over the next five years. How do you plan to achieve this?</b></sub></p> <p><sub>Global selling was launched with a few hundred sellers in May 2015 and currently we have more than 50,000 sellers selling 150 million ‘Make in India’ products across 12 international marketplaces. More than 80 per cent of these sellers are from non-metro cities. The programme has witnessed a staggering growth, exceeding cumulative gross merchandise sales of $1 billion. We expect this to reach $5 billion by 2023. We have been seeing the category mix and product mix evolving each year. The increasing customer demand for traditional product categories such as home linen, leather, tea and sport accessories that India has always been known for is now supplemented by the growing popularity of Ayurveda products, STEM toys, beauty products, gems and jewellery as well as commodities such as coffee, ghee, natural herbs and spices. The aim of the programme is to encourage more exporters to come online, reach out to a global customer base and scale their businesses and build global brands.</sub></p> <p>&nbsp;</p> <p><sub><b>How different is the Indian e-commerce market from others that Amazon is present in?</b></sub></p> <p><sub>Though the relatively unorganised retail infrastructure, underdeveloped logistics, emerging payments infrastructure and other challenges pose headwinds in India, they also offer an opportunity to invent on behalf of customers. India is in a unique position to overcome these headwinds with its several catalysts, such as a young and consuming middle class and one of the largest bases of mobile internet users, a massive base of small and medium businesses, and a large entrepreneurial talent pool. We were surprised by how quickly customers had responded, how small and medium businesses were embracing technology, and the increasing rate of innovation in the country. With online retail penetration at low single digit levels, the long-term online opportunity is massive. We are committed to this long-term opportunity.</sub></p> <p>&nbsp;</p> <p><sub><b>While not at work, what keeps you busy?</b></sub></p> <p><sub>I like listening to music, strumming my guitar and binge-watching Prime Video originals. I do take time off to go on holidays with my family. I love mountains and long-distance treks. Australia is my favourite holiday spot. I de-stress by going on early-morning jogs with my music on. I also take on tinkering projects with my kids to de-stress myself.&nbsp;</sub></p> Sat Nov 09 10:54:17 IST 2019 trust-deficit <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>SARANG WADHAWAN</b> moved in Mumbai’s most-happening social circles and was known for throwing lavish parties—that were attended by the brightest stars of Bollywood—at his plush bungalow in the coastal town of Alibaug. Sarang and his father, Rakesh Kumar Wadhawan, owned a fleet of super-luxury cars, many speed boats, two private jets, a yacht and some hundred horses.</p> <p>&nbsp;</p> <p>The wellspring of the Wadhawans’ riches was their real estate and housing finance companies. The family’s tryst with business began with a non-banking financial services company, Dewan Housing Finance Ltd (DHFL), in 1984. They later make it big in the real estate business with Housing Development and Infrastructure Ltd (HDIL), which went public in 2007, raising Rs1,485 crore. The money was used to acquire huge land parcels, development rights for new projects and construction of ongoing projects. In 2009, the Wadhawans restructured their businesses, with Rakesh gaining control of HDIL and his brother Rajesh and sons Dheeraj and Kapil taking charge of DHFL, which is a separate independent listed company.</p> <p>&nbsp;</p> <p>In the recent years, though, the real estate business has been on the wane. Things particularly went downhill for HDIL when a key slum rehabilitation project in the Mumbai Airport area was cancelled by Mumbai International Airport Ltd following delays. HDIL initiated legal action, but the dispute was later settled by the two companies. The company had listed on the bourses at a price of over Rs500 a share. It closed last week at Rs2.13 a share. Its net profit in the year that ended in March 2019 stood at Rs106 crore on a revenue of Rs718 crore. In 2007-08, HDIL’s net profit was Rs575 crore on a revenue of Rs2,380 crore.</p> <p>&nbsp;</p> <p>In August, the National Company Law Tribunal admitted HDIL under the insolvency and bankruptcy code, following an application filed by Bank of India. The company’s annual report shows it has six subsidiaries. Documents filed with the Registrar of Companies, however, show several other companies linked to Rakesh and Sarang Wadhawan, which had little revenue but had received loans in the past. The Enforcement Directorate is looking into some of these companies.</p> <p>&nbsp;</p> <p>The Wadhawans ran into bigger trouble when Rakesh, chairman of HDIL, and Sarang, managing director, were arrested by the economic offences wing of the Mumbai Police on October 3 as the key accused in a multi-crore fraud at the Punjab and Maharashtra Cooperative Bank. The first information report says that between 2008 and 2019 HDIL had received loans from the PMC Bank’s Bhandup branch but never paid it back. “Even as the loans turned non-performing assets, PMC Bank’s managing director Joy Thomas and chairman Waryam Singh and other officials of the bank did not declare the loans as NPA and concealed the information from the Reserve Bank of India,” said the police.</p> <p>&nbsp;</p> <p>The police said fictitious accounts with lower loan outstanding were created in a bid to hide the stressed accounts of HDIL and group companies, and these records were then submitted to the RBI. Some 21,000 dummy accounts are said to be created. “We found that there had been irregularities and this caused a loss to the tune of Rs4,355.46 crore to the bank,” said the police. Singh and Thomas have also been arrested.</p> <p>&nbsp;</p> <p>The ties between PMC Bank and the Wadhawans go a long way back. The bank was started as a single-branch operation in 1984 with a capital of Rs10 lakh. But the capital had eroded within two years and the Wadhawans rescued the bank by pumping in Rs13 lakh. Again, when there was a run on the bank in 2004 following the failure of a few other cooperative banks, the Wadhawans deposited some Rs100 crore to help it tide over the liquidity crunch.</p> <p>&nbsp;</p> <p>However, just as troubles started mounting for HDIL in 2013-14, the company started defaulting on its loans taken from banks. Thomas, in a confession letter to the RBI, said that the loans were never classified as NPA. The bank had opened separate accounts for various projects of HDIL. The dues were not reported to the bank’s board as well.</p> <p>&nbsp;</p> <p>PMC Bank has 137 branches in seven states and deposits of around Rs11,600 crore. In the letter,Thomas said that in 2011, the bank’s advances were Rs2,000 crore, with the exposure to HDIL Group at Rs 1,026 crore. That has since grown and now reportedly is around Rs6,500 crore, around 73 per cent of its total loan book and four times the regulatory cap. RBI regulations say a bank cannot have exposure of more than 15 per cent of its total capital to a single account. For group companies, the limit is 20 per cent.</p> <p>&nbsp;</p> <p>After a whistle-blower blew the lid off the matter, the RBI imposed restrictions on the bank under section 35A of the Banking Regulation Act, restricting it from doing any business for six months. The bank’s board was superseded and an administrator was appointed. Deposit withdrawals were also restricted to Rs1,000 per account, but later raised to Rs10,000, Rs25,000 and Rs40,000.</p> <p>&nbsp;</p> <p>Though RBI Governor Shaktikanta Das claimed that the RBI acted “swiftly” and “promptly” as soon as the issue came to its notice and would not allow any cooperative bank to collapse, questions have been raised over how the regulator’s audits failed to detect a scam of this magnitude. Hapless depositors have been holding protests and meetings to try and get their money back. With the Central bank hiking the withdrawal limit to Rs40,000, about 77 per cent of the depositors will be able to withdraw their entire account balance. But, there are many who have fixed deposits worth significantly more. Under the current rules, depositor insurance covers only Rs1 lakh per bank account.</p> <p>&nbsp;</p> <p>“A package can be worked out where in Deposit Insurance and Credit Guarantee Corporation, large institutional depositors and the government chip in to mitigate a part of the loss,” said corporate lawyer Mukesh Jain. “This will restore the balance of the balance sheet of PMC Bank and make it an eligible target for takeover by another commercial or a large cooperative bank, thus protecting the retail customers.”</p> <p>&nbsp;</p> <p>HDIL, however, said that all its loans had enough security against them. The company has appointed real estate consulting firm Knight Frank to evaluate its properties that were secured with the bank. The value of these assets is estimated to be around Rs8,000 crore.</p> <p>&nbsp;</p> <p>Unlike other scheduled commercial banks, cooperative banks in India are governed by dual regulation—the RBI as well as the Registrar of Cooperative Societies. The PMC Bank issue has highlighted the need for stronger regulations. For now, though, all eyes will be on the ED probe into the PMC Bank money laundering case and what the RBI would do to ensure that the bank does not go down.&nbsp;</p> Mon Oct 28 16:04:48 IST 2019 poverty-alleviation-through-a-subaltern-lens <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>EVEN A FEW DAYS</b> ago not many in India would have heard about Abhijit Banerjee, Esther Duflo or Michael Kremer outside the small community of economists and those working in the development field. Today, every Indian who watches television or reads a newspaper is aware that they have been awarded the Nobel Prize in economics for something called randomised control trials, or RCT. The big coverage of this news is partly because much of the work using RCT has been based in India, but it is mainly because Banerjee is an Indian.</p> <p>&nbsp;</p> <p>I met Banerjee’s parents, both economists, long before I met him. His mother Nirmala Banerjee—or Nirmala di, as we call her—was a professor at the Centre for Studies in Social Sciences in Kolkata. Much of her work has been on the informal sector and in women’s studies. His father, Dipak Banerjee, taught economic theory at Presidency College. He, along with Mihir Rakshit and others, produced several generations of fine economists at Presidency.</p> <p>&nbsp;</p> <p>During his early years in Kolkata, Banerjee played with friends from a neighbourhood slum. Such companionship cutting across social boundaries is not uncommon in Kolkata. This close and early exposure to poor people, curiosity about their lives, a liberal environment at home and the rigorous professional discipline of his parents probably account for the combination of human empathy and rigorous research which is the hallmark of his professional work.</p> <p>&nbsp;</p> <p>I first interacted with Banerjee in 2012, when he got in touch to ask if I could help one of his PhD students at Harvard get access to income tax data which the Central Board of Direct Taxes (CBDT) had withdrawn from the public domain. That student was Mihir Sharma, a leading economic journalist, and the data he sought was not for his own research but for a research project led by Thomas Piketty. Piketty’s work, <i>Capital in the Twenty-first Century</i>, dealing with the rising inequality in the long-term dynamics of capitalism, became a best-seller and his analysis of income tax data from several countries is an important part of that work. But I completely failed to extract anything from the CBDT, which was quite possessive about its income tax data. It was years later that Arvind Subramanian as chief economic adviser was able to help Piketty get his income tax data from India.</p> <p>&nbsp;</p> <p>I met both Banerjee and Piketty again at a conference in Neemrana in 2014. That was where I met Duflo for the first time when I had the privilege of chairing a session where she was presenting her paper. By then Banerjee and Duflo were quite well known for their pioneering work using RCT as a tool. Duflo was Banerjee’s student before she became his co-researcher. They are now married and have two children. Banerjee and Duflo cofounded the Abdul Latif Jameel Poverty Action Lab (J-PAL).</p> <p>&nbsp;</p> <p>Kremer first established himself for his work in economic theory, but has moved on to rigorous RCT-based empirical research and he closely collaborates with Banerjee and Duflo. It was during his early years of field work in Kenya that Kremer pioneered the idea of adopting the tool of randomised control trials, a standard testing technique in medical science and agriculture, to research in the social sciences. His research engagement with India is no less than that of Banerjee. Precision Agriculture for Development (PAD), a non-profit organisation he cofounded, has applied the RCT technique to help lakhs of farmers in India to raise farm productivity and their incomes.</p> <p>&nbsp;</p> <p>The Royal Swedish Academy of Sciences awarded the prize to Banerjee, Duflo and Kremer for “their experimental approach to alleviating global poverty”. The core idea of this experimental approach is to apply an intervention or ‘treatment’ to a randomly selected sample of subjects from a larger population. The outcome of interest of the treatment group is then compared with that of the rest of the population, the control group. Since they belong to the same population and are similar to the treatment sample in all other respects, the researcher is able to isolate the effect of the treatment. Such randomised control trials are standard practice in the medical and some other fields, but relatively new in the social sciences. It provides rigorous evidence of the impact of the treatment.</p> <p>&nbsp;</p> <p>Three key features sum up this approach. By breaking down grand development issues into specific questions about how poor people see and respond to certain interventions in their real life conditions, this approach looks at questions of development from below, through the subaltern lens of the poor. Second, the RCT technique enables rigorous testing of propositions about specific cause-effect relationships or what works and what does not. Third, these test results provide the basis for evidence-based policymaking.</p> <p>&nbsp;</p> <p>The RCT approach has been applied across many fields. J-PAL, for instance, has conducted about 1,000 RCT evaluations in 83 countries in health, nutrition, health care services, education, finance, labour markets, governance, the environment and social support programmes. Each RCT seeks to answer some very specific questions, but collectively the sum of all RCT findings is leading to a whole different evidence-based paradigm of development. According to some reports, RCT-based evaluations have led to policies that have already improved the lives of over 100 million people worldwide.</p> <p>&nbsp;</p> <p>RCT has had its share of critics, including Angus Deaton, who was earlier given the Nobel Prize for his work on the rigorous estimation of poverty and inequality. However, the criticism is not so much about the value of RCTs but about their limits. For instance, if trials cannot fully ensure that the treatment group and control group are identical then the treatment effect becomes ambiguous.</p> <p>&nbsp;</p> <p>India has been a major focus of J-PAL research led by Banerjee and Duflo. While it has covered many fields, the impact in education and health has perhaps been the most impressive. For example, the finding that when children are grouped and taught according to their learning levels rather than their age or grades, and assisted through remedial teaching, there are vast gains in learning outcomes led to the ‘Teaching at the Right Level (TRL)’ programme. It is well known that government schools in Delhi have seen a huge leap in quality, but less known that the ‘Chunauti’ programme in Delhi government schools is in fact an application of the TRL approach. In health care, J-PAL’s finding that poor citizens are very sensitive to even small variations in drug prices has led to a WHO programme for free distribution of deworming pills. I have also referred earlier to the work being done in Indian agriculture by PAD.</p> <p>&nbsp;</p> <p>Let me conclude on a positive note with a quote from the laureates themselves. In an article published on October 16, Banerjee and Duflo had this to say: “...what gives us real hope for the future of policymaking in India is to see in the corridors of power as in the makeshift offices of NGOs and in press rooms all over the world not only a willingness but often even a desire to engage with facts, even uncomfortable facts.”</p> <p>&nbsp;</p> <p><b>Mundle is distinguished fellow at the National Council of Applied Economic Research.</b></p> Mon Oct 28 16:04:42 IST 2019 divide-and-rule <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>BEFORE UNION</b> Finance Minister Nirmala Sitharaman gave an adrenaline shot on September 20, the Indian equity markets had been going through a relatively rough patch. Just a day before she announced an array of measures intended to improve economic growth, newspaper headlines alerted many investors that all their equity gains in the calendar year 2019 had evaporated. Such moments certainly give anxiety to investors and they might even think of selling their holdings to prevent further loss. However, the market rallied soon after the finance minister announced the measures.</p> <p>&nbsp;</p> <p>So what should an investor do in such situations?</p> <p>&nbsp;</p> <p>Never keep all your eggs in the same basket. This is the philosophy behind asset allocation. If you keep all your investments concentrated in a single asset class, the probability of your portfolio getting hit in the tough times will be high. If you have spread your investments across different baskets, it is very unlikely that all of them will be negatively impacted at the same time or for the same reason.</p> <p>&nbsp;</p> <p>Different asset classes respond to an event in different ways. If one asset in your portfolio is not performing well, another asset can cushion the blow. In a falling market situation, this could translate into reducing the possibility or extent of losses. For instance, in 2008, the year which saw a global financial crisis, equity returns stood at (-) 51 per cent, while government securities earned a return of 28 per cent.</p> <p>&nbsp;</p> <p>According to a study, right asset allocation contributes more than 91 per cent of the portfolio performance over a long time. The factors that are often given more prominence, like selection of securities and market timing, contribute less than 5 per cent and 2 per cent, respectively.</p> <p>&nbsp;</p> <p>Bringing asset allocation into practice is not that easy because investors are prone to emotional decision-making. If you see the equity market going up, it is highly plausible that you would want to invest more in equities. There could also be an element of greed that could prevent you from diversifying your investments just because you see your equity investments growing. Even if you convince yourself to follow the approach of buying when the market is low and exiting when it is at the peak, the challenge remains, as it is not easy to predict the peak or the bottom. The market movements are based on several domestic and international factors. Moreover, selling of a financial asset involves taxation and paperwork. Hence, it is a good idea to entrust the responsibility of asset allocation in your portfolio to experts.</p> <p>&nbsp;</p> <p>To facilitate investors with their asset allocation, the capital markets regulator, Securities and Exchange Board of India, has allowed mutual funds to have a category in hybrid schemes, called dynamic asset allocation or balanced advantage schemes. One of the best performing and largest funds in this category is the Asset Allocator Fund from ICICI Prudential Mutual Fund.</p> <p>&nbsp;</p> <p>In order to prevent their own emotions from driving the decisions, the fund managers rely on an in-house market valuation model. This model evaluates the market valuations on an on-going basis and indicates the call that should be taken. If the equity market valuations are high, it would suggest to reduce exposure to equity. If the equity market valuation goes down, it would encourage the fund managers to increase investments in equity.</p> <p>&nbsp;</p> <p>Investors should take advantage of such mutual fund schemes. This will not only ensure that they have a reasonable asset allocation at all times, but also, as a consequence, result in optimal risk-adjusted returns.</p> <p>&nbsp;</p> <p><b>The author is director of Purplepond Investment Advisory Private Limited.</b></p> Mon Oct 28 16:04:37 IST 2019 xiaomi-never-hid-its-chinese-origins <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>With around 30 per cent market share, Xiaomi is the leader in India’s highly competitive smart phone market. It is also the leader in smart televisions and fitness bands. Interestingly, the Chinese company is on a Make in India mission—about 99 per cent phones it sells in India are made in India. “Not just the product, but the components are also made in India,” says Manu Kumar Jain, managing director of Xiaomi India. Jain, 38, was Xiaomi’s first employee in India, and has been instrumental in the company’s success. In an exclusive interview, he explains how the company maintains high quality at low price points, how it differentiates itself in the crowded market and the challenge of being a Chinese brand in India.</p> <p>&nbsp;</p> <p><b>Q/ It has been an eventful journey for Xiaomi and you. What were the initial challenges that you faced?</b></p> <p>&nbsp;</p> <p>A/ When Xiaomi came to India in July 2014, I was its first employee. We started off at a coffee shop next to the Flipkart office at Kormangala in Bengaluru. I came from an internet background and had cofounded the e-commerce company, Jabong, which I exited in 2014. When we started, only 6 per cent of the Indian retail market was online. When we decided to go for the online model with a partnership with Flipkart, many people advised us that we would never succeed in the Indian market. We brought in only 10,000 phones. We had around 10,000 Facebook followers at that time and thought that these people would buy our phones. However, when the sale went live, around five lakh people placed orders, and the Flipkart website crashed. Within three years, we became the number one player in India and even overtook Samsung. This was without spending on branding and advertising. Since then, for the past eight quarters, we have been the number one smart phone brand in the country. Now we are also the largest smart television brand and the largest fitness band brand.</p> <p>&nbsp;</p> <p><b>Q/ What clicked for Xiaomi in India?</b></p> <p>&nbsp;</p> <p>A/ First of all, we offer the best specs or innovation. For instance, our flagship, Redmi K20 Pro, costs around Rs30,000. It competes with phones that cost Rs60,000-70,000. Many of the brands have good specs but horrible pricing. We have been able to do this because we have cut down on all the possible costs. In the first three years, we spent no money on branding and advertising. We have started doing a bit of advertisement because we have now started concentrating on our offline business. Even for the offline segment we have only one level of distribution; dealers and retailers procure the products directly from us. At our factory, we have very simple operations, and as a result, our inventory costs and working capital costs are much lower than that of our competition. This is mainly because we launch very few phone models every year. Besides this, we have a business model on making less than 5 per cent of profit margin on all our hardware products. It is written in the board resolution of our company. We pass on all these benefits to the users.</p> <p>&nbsp;</p> <p><b>Q/ What differentiates Xiaomi in the crowd of Chinese mobile phone makers?</b></p> <p>&nbsp;</p> <p>A/ We are a startup and have a young workforce, mostly in their early or mid 30s. Most of them do not come from a smart phone or a consumer durable background. Rather, many of them come from an internet background. As an organisation we have never followed the conventional way of working and have always tried to disrupt the market by doing things differently. We also take decisions very fast—for communication we use chat, rather than e-mail. Our offices do not have cabins. We also believe that it is perfectly fine to make mistakes as long as you learn from them and as long as you do not repeat them.</p> <p>&nbsp;</p> <p><b>Q/ Has it been a challenge in India being a Chinese brand?</b></p> <p>&nbsp;</p> <p>A/ It really does not matter whether your origin is Chinese, Japanese or Korean or any other country. Any company that makes innovative and good-quality products and makes it available for a good price is a company which will win from a long-term perspective in the market. If we look at our India business, we are the most loved technology brand in the country despite being a Chinese headquartered company that is listed in Hong Kong. We have never hidden our Chinese origin. We have many cofounders who have worked in different parts of the world and have worked in prominent MNCs such as Motorola and Google. This has helped us in having a multinational approach. I have also never seen this sentiment in India that we should not buy Xiaomi due to its origin in China.</p> <p>&nbsp;</p> <p><b>Q/ You sit on the boards of many group companies?</b></p> <p>&nbsp;</p> <p>A/ I sit on the boards of some of the group companies, though I do not sit on the board of the parent company. I am also one of the group vice presidents. I am the only Indian on the board of the group companies.</p> <p>&nbsp;</p> <p><b>Q/ Are you seeing any slowdown in the smart phone market in India?</b></p> <p>&nbsp;</p> <p>A/ We are yet to see any major slowdown in our industry, especially the smart phone business, because a smart phone is not something that people buy splurging money unnecessarily. It has become a necessity in today’s world. We need it for almost anything, be it running a business, for work, for education, for entertainment and for booking a cab. We still feel that this industry will continue to grow. In 2018, 150 million smart phones were sold in India, but along with that there were 150 million feature phones that were sold, too. Forty crore people in India are still using basic feature phones and when even one member in a family starts using a smart phone then there is a positive traction in the market. For instance, my son’s nanny had a feature phone and I gave her a smart phone as a gift. Once she started using it other members of her family also started using smart phones. We feel that the market will grow and in the next three to five years, 200 million smart phones will be sold in India a year.</p> <p>&nbsp;</p> <p><b>Q/ How do you see the potential of 5G technology?</b></p> <p>&nbsp;</p> <p>A/ The government has announced that the 5G auction will be held later this year or early next year. We believe that 5G technology will be a game-changer, similar to 4G. When 4G was launched, the adoption was a little low initially. We were one of the first to launch a dual band 4G phone at the end of 2014 in India under Rs10,000. Even after the auction it would take some time for the operators to set up the 5G network in the country and then some of the flagship 5G phones will start coming in. The starting point is spectrum auction. We have introduced 5G phones in Europe, and China will move to 5G phones next year.</p> <p>&nbsp;</p> <p><b>Q/How do you plan to break into the fast-growing premium segment?</b></p> <p>&nbsp;</p> <p>A/ Today, most people buy expensive smart phones mainly as a status symbol. Some people even buy Rs1 lakh phones. Xiaomi phones compete with all the high-end phones selling at higher prices. We have premium phones without a premium price. Our focus will be on the mid-level segment only. In July, we introduced a very expensive phone, though not commercially launched, at Rs4,80,000. It was the gold version of Redmi K20 Pro, and only 20 units were made. We may auction them. It is easy to make an expensive phone by offering specs at a higher price, but the challenge is offering those specs at half the price.</p> <p>&nbsp;</p> <p>When we started, the average price point of a smart phone was Rs6,000. Now it is around Rs10,000. Four years ago, phones that cost more than Rs 15,000 formed only 5-6 per cent of the total market. Now they form 15-16 per cent of the market. India is still a price-conscious market; China, the US and Europe have much higher average prices of smart phones.</p> Mon Oct 28 16:04:30 IST 2019