Business en Fri Jul 05 12:32:59 IST 2019 beat-the-heat <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>The stock markets </b>have witnessed extreme volatility in the past few years. Earlier this year, they plummeted because of the pandemic but NIFTY bounced back almost to its original level and is trading just short of the all-time high in January. It is natural for retail investors to panic at these times. In 2008 also retail investors witnessed stock market crash and big recovery in a short span of time.</p> <p>For those who have invested in dynamic asset allocation funds, especially the balanced advantage category of funds, the impact has been minimal. The scheme sharply cuts equity exposure whenever valuation of index is expensive or a valuation-based model that holds lower equity levels at peak valuations. Thus by managing risk in equity and allowing the debt portion to anchor the portfolio, it keeps volatility lower. Hence this strategy is a good investing option in the hybrid equity category in all market conditions.</p> <p><b>Fair market value strategy</b></p> <p>Accessing the valuations of both debt and equity is an important parameter in dynamic asset allocation schemes. This scheme focuses on underlying valuation like price to earnings and price to book value and in debt, and the fund manager could take duration calls which helps make most of rate cuts and in the low interest rate regime.</p> <p>Basically the scheme rebalances the portfolio according to the fair market of equity, and helps in booking the profits in the equity portion during expensive valuation and moving to debt. For example, BAF model sold equity in January and Feb 2020, and booked profits and reduced equity level to as low as 30 per cent. It gradually increased equity levels post-crash in March, April, and May to as high as 80 per cent.</p> <p>Hence, dynamic asset allocation funds prove to be worth considering in all market conditions as this category books profit in stocks and also is a testament to this downside protection in the equity market. Thus, the category also helps the process of compounding with lower volatility in the long term.</p> <p><b>Behavioural bias</b></p> <p>In the times of stock market crash, investors tend to panic, decide differently under pressure and sell equity holdings instead of accumulating at lower levels. It is a human reaction to feel uncomfortable to see equity portfolios down. The psychology of investing says investors naturally have cognitive biases that affect portfolio-related decisions.</p> <p>In this testing time, by investing in dynamic asset allocations funds, one gets logical based investing and to avoid emotions based investing. As a result, the dynamic asset allocation category creates volatility-proof portfolios and leads to smoother investment experience and maximises investors’ returns and minimises investors’ risks.</p> <p>Dynamic allocation funds should be the core portfolio for first-time investors who have low risk appetite and for risk averse investors. Ideally, one should consider having this category of schemes in the current turbulent market environment.</p> <p>Among the balanced advantage category of funds there is one name that stands out-ICICI Prudential Balanced Advantage Fund. Considered a pioneer in its category, it is the second-largest scheme in this category with assets close to Rs27,000 crore, and it takes into consideration an in-house model that primarily looks at price-to-book model and decides on net equity asset allocation (30-80 per cent).</p> <p>It is a time-tested scheme with prudent asset allocation with more than 10 years’ track record and has seen a complete market cycle. Most of the schemes in this category have been launched within the past few years, especially post SEBI’s re-categorisation exercise.</p> <p><b>Author is the founder of www</b>.<b></b></p> Thu Nov 19 17:00:48 IST 2020 Jolly-good-ride <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>The World’s Favourite Indian.’ That is the tagline of Bajaj Auto. And why not? The Pune-based company exports motorcycles to 70 countries. Bajaj, however, is not the only favoured Indian among bike makers. TVS Motor and Hero MotoCorp, too, have over the past decade found plenty of customers overseas. Indian companies are among the leading players in many markets in Africa, Latin America and Southeast Asia.</p> <p>Bajaj’s motorcycle exports in October surged 29 per cent year-on-year to 2,01,659 units, its highest ever. In September, too, the company had reported record exports. TVS Motor’s two-wheeler exports grew 46 per cent last month to 80,741 units, from 55,477 units a year earlier. Hero MotoCorp’s exports in October rose 28 per cent to 15,711 units.</p> <p>Chinese companies once dominated the African continent with their cheap motorcycles. The only other option in these markets used to be expensive Japanese bikes. Indian bikes hit the sweet spot in between, of quality and price. In the year ended in March 2020, exports accounted for 42 per cent of Bajaj’s sales (21,71,105 units, including 18,69,220 motorcycles) and Africa accounted for 53 per cent of it. In many markets, Bajaj is the first or the second player.</p> <p>Srinivas Kantheti, who worked with Bajaj Auto before co-founding the two-wheeler financier WheelsEMI, attributes the success to creating a research and development base in India and creating a brand worldwide. “Opportunity was available 20 years ago in Africa and South America, but they were dependent heavily on either the Japanese two-wheelers, which were very expensive, or very cheap Chinese exports. In those days in places like Nigeria, China used to sell motorcycles out of a box. You get it assembled from a local mechanic. This is where Indians, Bajaj first and then followed by TVS, saw their opportunity of creating a market here, which almost gives Japanese quality at a price slightly higher than that of the Chinese,” he said.</p> <p>In several African countries as well as in a few markets in Latin America, bike taxis have become a popular mode of transportation and it is here that the sturdy build quality and competitive pricing of Indian bikes found acceptance. Indian companies have inked local distribution, retail and service partnerships in these markets, thus establishing a strong brand presence there. “Our international business is not a B2B business. It is not that we sell to some distributors and forget about it. It is a B2B2C business,” said Rakesh Sharma, executive director of Bajaj Auto.</p> <p>Royal Enfield, owned by Eicher Motors, has now 660 outlets around the world, including 585 multi-brand outlets and 77 exclusive stores. In the year ended in March 2020, it added 35 overseas outlets with a focus on Thailand, Brazil, Argentina, France and the UK. It exported 39,296 units in 2019-2020, which was a 89 per cent jump over the previous year’s exports of 20,825 units. Enfield is now starting local assembly operations in Argentina. This will be the first such assembly plant outside Chennai.</p> <p>Hero MotoCorp, the world’s largest two-wheeler maker by sales, does most of its business in India. A key reason for this was its erstwhile joint venture with Honda, which restricted its expansion overseas. Though as it has been going solo since 2011, the company has just begun expanding in markets like Latin America. “With the appointment of a new distributor in Peru, we have now expanded our global footprint to more than 40 countries in FY2020, up from just four countries in FY2012,” Pawan Munjal, chairman and managing director of Hero MotoCorp, told the company’s shareholders recently. Hero is looking to revive its scooter market share in Asia with new models and also deepening its financing network. It has gained a strong foothold in Bangladesh.</p> <p>Bajaj has incorporated a wholly-owned subsidiary in Thailand. It has also received local approvals to set up an international business centre and a research and development centre under this subsidiary. This R&amp;D centre will be Bajaj’s first one outside India, and will oversee the company’s business operations across the ASEAN region.</p> <p>TVS Motor is looking to boost its export volumes over the next three to five years and aims to improve its exports from its Indonesian plant. In April, TVS acquired British motorcycle company Norton. Sudarshan Venu, joint managing director of TVS Motor, sees immense opportunity to scale the brand globally.</p> <p>Frugal engineering has helped these companies design and develop motorcycles for export. “In less-than-150cc category motorcycles, there is no better place to design it than in India,” said Srinivas. “Now, it is going above to 200cc-250cc also.”</p> <p>Not surprisingly, Honda Motorcycle and Scooter India, the Indian unit of Japan’s Honda, now exports 18 two-wheeler models to 25 export markets in Asia and Latin America. In October, it began exporting SP125, its new motorcycle, to Europe.</p> <p>&nbsp;</p> <p>Some of the biggest names in motorcycles are now joining hands with Indian companies to develop new products. British bike maker Triumph has a partnership with Bajaj Auto to develop a new range of mid-capacity motorcycles and the first product is expected to be launched in 2022. TVS has an alliance with German auto giant BMW’s motorcycle division, BMW Motorrad. In September, iconic American brand Harley-Davidson announced its plan to pull out of India; in October it announced a partnership with Hero MotoCorp. Hero will sell and service Harley-Davidson motorcycles, and will develop and sell a range of premium motorcycles under the Harley-Davidson brand through a licencing agreement.</p> Fri Nov 13 12:05:02 IST 2020 guarding-wealth <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>THOUGH INDIA IS</b> going into the 5G era, it is best not to forget the 4Gs of wealth—get, guard, grow and give. If the investor is philosophical or spiritual, two more Gs—God and gratitude—could be added, said K.S. Rao, head of investor education and distribution development for Aditya Birla Sun Life Mutual Fund (ABSLMF). Rao led the panel of the World Savings Day webinar hosted by ABSLMF and THE WEEK.</p> <p>&nbsp;</p> <p>Other panellists were Amit Trivedi, popular personal finance writer and founder of Karmayog Knowledge Academy, and Dr Radhakrishnan Pillai, award-winning author and director of Chanakya Institute Of Public Leadership, University of Mumbai.</p> <p>&nbsp;</p> <p>Opening the session, Rao reminded viewers that unless the first two Gs were met, ‘grow and give’ did not stand a chance. He highlighted the famous case study of Anne Scheiber, a former employee of the Internal Revenue Service of the US and arguably one of the most successful dividend investors of all time. Her annual salary never exceeded $3,150. She retired at 51 in 1944 and died at 101 in 1995. In the intervening years, she grew her portfolio to $22 million and bequeathed it entirely to Stern College for Women, Yeshiva University, New York.</p> <p>&nbsp;</p> <p>Trivedi said that investment does comprise of art and science. “Like the saying goes, science can be taught, but art needs to be caught,” he said. “Unnecessary expenses, unnecessary risks and one’s own mistakes are the three things every investor must watch out for.” Trivedi also reminded viewers that money earned would most likely be spent anyway, but the discussion was about when the expenditure would happen. “Deferred spending,” he said, “is something every child should be taught.”</p> <p>&nbsp;</p> <p>Chanakya’s Arthashastra has been Pillai’s core area of interest and research for long. So, it was not surprising when he highlighted the importance of paristhiti (environment) and manasthiti (state of mind) in financial management. “State of mind matters a lot,” he said. “For example, there is a difference in being money minded and money conscious, just as there is a difference between having a trading mindset and a vision to create wealth.”</p> <p>&nbsp;</p> <p>Among other things, Pillai stressed the need for investors to have a rational and inquisitive mind. And also for the need to educate this mind. The example he shared was about an annual competition between Warren Buffet and Charlie Munger, vice chairman of Berkshire Hathaway. “Whoever reads the most number of books that year wins,” said Pillai. Not a laughing matter, considering that Buffet is 90 and Munger 96.</p> <p>&nbsp;</p> <p>The webinar ended with a Q and A session, where panellists took questions from the viewers and provided focused answers. The next webinar in the series will be at 4pm on November 11. Topic: Path to prosperity: Celebrating Diwali with personal finance.</p> Sat Nov 07 11:50:11 IST 2020 the-convention-will-increase-investor-confidence <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>ON OCTOBER 16,</b> the Kishore Biyani-led Future group’s plan to sell its retail business to Reliance got an unexpected blow when rival and minority investor Amazon got a stay on the proposed sale from the Singapore International Arbitration Centre. Around the same time, the Indian government was reportedly looking to overturn a Singapore-based Permanent Court of Arbitration award in the infamous Vodafone tax case, which said the Centre broke a bilateral agreement with the Netherlands by levying tax on the telco.</p> <p>&nbsp;</p> <p>Ironically, if Singapore has its way, future business disputes would get sorted more amicably, through mediation rather than cantankerous arbitration or litigation. That is the ambitious goal behind the Singapore Convention on Mediation, or the United Nations Convention on International Settlement Agreements Resulting from Mediation.</p> <p>&nbsp;</p> <p>The convention which came into force in September, aims to mediate and solve commercial disputes between companies or parties who are based in different countries. India has signed on, and as an official statement said, “Businesses in India and around the world will now have greater certainty in resolving cross-border disputes through mediation, as the convention provides a more effective means for mediated outcomes to be enforced.”</p> <p>&nbsp;</p> <p>India is among the 53 signatories, along with the US and China, but the convention will be implemented only six months later, once the government ratifies it.</p> <p>&nbsp;</p> <p>“By ensuring that a settlement reached by two or more international businesses becomes binding, the convention facilitates international commerce and the promotion of mediation as an alternative and effective method of resolving trade disputes,”explains K. Shanmugam, Singapore’s minister for home affairs and law, in an exclusive interview to THE WEEK. Excerpts:</p> <p>&nbsp;</p> <p><b>Q/How is the Singapore Convention on Mediation a turning point in international business? How does it resolve disputes better, as compared to earlier?</b></p> <p>&nbsp;</p> <p>A/Previously, when disputes arose, businesses had to enforce the mediated settlement agreement as a contract in accordance with each country’s domestic mechanism. With the Singapore convention now in effect, businesses can seek enforcement of a mediated settlement more readily by applying directly to the courts of countries that are parties to the treaty. This will support the development of international commercial mediation and encourage businesses to seriously consider mediation as an option.</p> <p>&nbsp;</p> <p><b>Q/How is this treaty different from pre-existing international conventions on this subject, including the New York Convention?</b></p> <p>&nbsp;</p> <p>A/The Singapore Convention (mediation) is the missing third piece that completes the international dispute resolution enforcement framework, joining existing instruments such as (arbitration) New York Convention for arbitration, and (litigation) the Hague Convention on Choice of Court Agreements for litigation. It has the potential to be for mediation what the New York Convention is for arbitration.</p> <p>&nbsp;</p> <p><b>Q/In cases where mediation fails, parties can still go for a court proceeding in their domestic territory, right? How does that pan out?</b></p> <p>&nbsp;</p> <p>A/If parties are not able to come to a settlement through mediation, they still have the option of turning to arbitration or litigation. The relevant processes for each mode of dispute resolution will apply.</p> <p>&nbsp;</p> <p>(But) if parties have reached a mediated settlement agreement on an international commercial dispute and one party subsequently feels dissatisfied and initiates court proceedings on the same matter, the mechanism in the Singapore Convention may not allow the matter to be re-litigated if the other party invokes the agreement to prove that the matter has been resolved.</p> <p>&nbsp;</p> <p><b>Q/Has the treaty come into force in India? Also, while the US and China are signatories, the EU (as well as the UK), a significant trading partner of India, is yet to become one.</b></p> <p>&nbsp;</p> <p>A/India has signed the Singapore convention and we look forward to India’s ratification—the convention takes effect six months after a country has ratified it.</p> <p>&nbsp;</p> <p>Indian businesses and their trading partners (including in the EU) are free to enforce their international commercial mediated settlement agreements in any country that is a party to the Singapore convention. We hope that more states will see value in the benefits that the Singapore convention will bring for mediation and international commerce, and look forward to welcoming more countries on board in the near future.</p> <p>&nbsp;</p> <p><b>Q/In what way does the convention help India’s standing on the ‘ease of doing business’ index?</b></p> <p>&nbsp;</p> <p>A/When India becomes a party to the Singapore convention, businesses will have a more effective way of enforcing their mediated settlement agreements on commercial cross-border disputes. It will increase investor confidence.</p> <p>&nbsp;</p> <p><b>Q/Would the convention apply to conflicts between companies that are global in nature, with multiple wings present in multiple countries? How does the law apply in such cases?</b></p> <p>&nbsp;</p> <p>A/Yes, it would. If a company is global in nature and has more than one place of business, the Singapore convention provides that the relevant place of business is that which has the closest relationship to the dispute.</p> <p>&nbsp;</p> <p><b>Q/What has been Singapore’s role in getting this convention in place?</b></p> <p>&nbsp;</p> <p>A/Singapore was involved in the convention from its early days. A Singaporean chaired the United Nations Commission on International Trade Law Working Group II on dispute resolution. Singapore played a key role in negotiating the texts of the Singapore convention and the Model Law at WGII. In August last year, Singapore hosted the convention’s signing ceremony and welcomed delegations from 70 countries.</p> <p>&nbsp;</p> <p><b>Q/What would be the next logical step, after this convention?</b></p> <p>&nbsp;</p> <p>A/We certainly hope to have more (countries) come on board to sign and ratify the Singapore convention. This will benefit international businesses, and will facilitate international trade.</p> <p>&nbsp;</p> <p>We also encourage businesses to consider mediation as an option when they face an international commercial dispute, now with the Singapore convention providing an efficient framework to enforce a mediated settlement.</p> Sat Nov 07 11:48:54 IST 2020 widening-gap <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Big brother throwing his weight around? Or ‘elder brother’ offering compassionate guidance? Be it either, the relationship between the Union government and states reached a new low two weeks ago over the Goods and Services Tax compensation issue. Despite the last-minute rapprochement salvaging the situation, there are many more cracks waiting to burst open. And not just in matters of economy.</p> <p>“The BJP has been far more aggressive in its pursuit of centralisation in its second term,” argued Yamini Aiyar, president and chief executive of the think-tank Centre for Policy Research, in a recent essay. “The grammar of cooperative federalism has been eschewed in favour of ‘one nation’.”</p> <p>What does this rift mean for a country struggling to deal with a pandemic? “Regaining the spirit of ‘Team India’ in the current downturn is an imperative. Otherwise people will continue to suffer,” said Pradeep S. Mehta, secretary general of Consumer Unity &amp; Trust Society, an international consumer advocacy organisation.</p> <p>There are, however, arguments that the current circumstance requires a different approach. “In a pandemic situation, some powers have to be ceded to the Centre for a standardised approach,” said Shashank Tiwari, government strategy &amp; transformation leader, PricewaterhouseCoopers India.</p> <p>The GST deadlock came about on the question of how to foot the amount due to the states. States had given up almost all their tax-generating powers (with the exception of petroleum products, alcohol and land) to the Centre for the sake of a uniform GST tax structure across the country, on the promise that the revenue will be shared equally and any shortfall in 14 per cent annual growth rate will be compensated. Since its inception in 2017, the GST Council, where the Union and finance ministers got together and decided on all matters amicably, was hailed as an example of the federal setup.</p> <p>However, it all unravelled pretty quickly in 2020. A powerful Central government and a dip in tax collection led to the perfect storm that rained on this bonhomie. While Rs2.35 lakh crore was calculated as the total shortfall, Union Finance Minister Nirmala Sitharaman said states should borrow this money, with a cess being extended over the highest GST slab to pay it back.</p> <p>The BJP-ruled states fell in line, but others were adamant that the Centre should borrow and pay them as the money was supposed to be paid by the Centre. The impasse stretched over three GST meetings, with the last one ending with states like Kerala threatening to go to the Supreme Court. Nudged by the Reserve Bank of India and those who pointed out that it made sense for the Centre to borrow, Sitharaman backed down.</p> <p>“All this back and forth was unnecessary, and had the same solution agreed upon earlier, a lot of precious time could have been saved,” said Vivek Bindra, CEO of Bada Business. “Centre-state relations have certainly suffered a blow.”</p> <p>Kerala’s Finance Minister Thomas Isaac said it would take some time to repair the damage.</p> <p>The GST showdown is not the only instance of the Centre and states locking horns. There was an uproar when three farm bills were pushed through in Parliament in the last session. Punjab passed a bill in its assembly to override the Centre laws, while Rajasthan Chief Minister Ashok Gehlot said that the state, too, would negate the Centre’s move with its own bill.</p> <p>The recent recommendation to move health from the list of state subjects to the concurrent list (where it will be under the jurisdiction of both the Centre and the states), ostensibly may make sense in the times of a pandemic, but has not gone down well with many states. A similar change was suggested by the Ashok Chawla Committee for water resources a while ago.</p> <p>Adding fuel to the fire was the terms of reference for the 15th Finance Commission from the central government suggesting a re-examination of Centrally Sponsored Schemes (CSS), where the central government gives money for schemes but they are implemented primarily by local governments. The Commission is also set to examine “a separate mechanism for funding of defence and internal security”. Many fear this is another way to cut down the share of taxes due to the state governments from the divisible pool.</p> <p>“Why should there be CSSs for items in the state list? If the Union government should contribute for health because it is nationally important, should states not contribute for defence?” argued Bibek Debroy, chairman of the Economic Advisory Council to the Prime Minister, setting the stage for another prospective Centre-state clash.</p> <p>Hammering away at the powers and prerogatives of the states by the Centre is neither new nor limited to economic issues. In 1980, storming back to power at the Centre, Indira Gandhi wasted no time in gunning for the opposition governments in states. During the Emergency, she transferred five crucial subjects, including education and forests, from the state list to the concurrent list.</p> <p>Ironically, from being ‘vocal for local’ when he was chief minister, Narendra Modi seems to have taken an about-turn since he became prime minister six years ago. “It was expected that he would understand the perspective of states and make genuine efforts to empower states and practise cooperative federalism,” said Mehta. “While some laudable efforts were made in the beginning, the recent shift to ‘one nation’ policy is visible to enable him to take credit of successes, position him as a strong leader, and offer him a long-term stint at the Centre.”</p> <p>This was seen in the many schemes like Ayushman Bharat, Swachch Bharat, PM Kisan and Ujjwala, where bureaucrats from Delhi monitored the progress of implementation at the local level, irking state administrations. The BJP’s election campaign also went to town advertising these as ‘Modi’s schemes’, reaping rich dividends.</p> <p>The fault lines may be more gaping now, with both the Centre and states strapped for cash following the lockdown. But there seems to be no option but cooperation. “There are issues. But for the Centre, too, states are critical for growth as well as ground level implementation of schemes and stimulus measures,” said Sreejith Balasubramanian, economist (fund management), at IDFC Asset Management Company. “This deficit issue is not going to improve in just one year, so it is important that both coordinate in spending, to address supply side issues and get the maximum growth multiplier.”</p> <p>Lekha Chakraborty, economist at National Institute of Public Finance and Policy said this was an uncharted territory in Centre-state relations. “Coordination is significant to tide over this dual crisis—public health crisis and macroeconomic crisis. The debt-deficit dynamics between the Centre and states is the pivot. How we recalibrate the fiscal rules will be the game changer,” she said.</p> <p>But beyond the economy and the pandemic, the Centre-state tussle could continue to be vexing. “Powerful Central governments try to assert their power and tame state governments,” said Bindra, also a motivational speaker. “But in a country as large and diverse as India, the Constitution gives state governments distinct political and fiscal authority, and this must not be compromised.&nbsp;</p> Thu Oct 29 14:47:50 IST 2020 stocks-at-a-discount <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>BE IT THE NEIGHBOURHOOD</b> kirana shop or the modern retail outlet, bargaining gets best deals. The premise here is that the seller is not quoting a price that is favourable to the buyer. Hence, negotiations happen. Investing in stock market is quite similar. The only difference here is that things are online and it is a bit tough to negotiate with thousands of faceless investors sitting around the country trading by ‘ticks’.</p> <p>&nbsp;</p> <p>For a seasoned investor, however, there are always pockets of bargain available in the market. They often happen to be spaces that are overlooked, avoided or unloved by the crowd at large. For a long-term investor, they are an opportunity to make outsized gains, as you get to buy a good company at a price less than its intrinsic value.</p> <p>&nbsp;</p> <p>Spotting such opportunities may be a tough and time-consuming task for a retail investor. Also, one may not have the resources to find out the true value of a stock. This is where mutual funds come to the rescue. Investors who are looking for such opportunities can opt for the value category schemes where one gets an opportunity to own stocks that are thoroughly vetted by market experts but available at a bargain.</p> <p>&nbsp;</p> <p><b>Finding value</b></p> <p>Warren Buffett’s take on value is best summarised in this quote; ‘Price is what you pay; value is what you get’. Is the market price of a stock its true value? Not necessarily. Without understanding the intrinsic value of any object, you will be susceptible to deals that are only good for the sellers.</p> <p>&nbsp;</p> <p><b>Margin of safety</b></p> <p>Value-oriented equity mutual funds look for stocks that offer ‘value’ at the price it is quoting. The stocks in a value portfolio would be names which are available at a discount to its intrinsic value. But, how much should be the discount? This is where ‘margin of safety’ comes in. Like it sounds, margin of safety indicates the difference between intrinsic value of a stock and market value. The higher the difference, the higher is the margin of safety.</p> <p>&nbsp;</p> <p><b>Means to identify value</b></p> <p>There are various ways in which a value stock can be identified. It could be with the help of financial matrices such as the Price to Book Value (P/B) or Price to Earnings (P/E) ratio, to name a few. Once the stock becomes a part of the portfolio, the waiting begins. The aspect one has to remember while waiting is that markets can remain irrational for long periods of time.</p> <p>&nbsp;</p> <p><b>Why now?</b></p> <p>As the market recovered from the lows in March, it was quality and not value that led the recovery. In the times ahead, there is a good probability that value will make a strong comeback, as quality fatigue sets in. Also, there are several pockets in the markets that provide a good opportunity for investments with attractive valuations, healthy dividend yield, and earnings comfort.</p> <p>&nbsp;</p> <p><b>Fund pick</b></p> <p>Among the value funds, ICICI Prudential Value Discovery Fund is the largest with around Rs12,000 crore assets and it has an excellent track record basis the fact that 80 per cent of the time in the past 15 years its five-year daily rolling returns was more than 12 per cent. A SIP of Rs10,000 a month in the fund since inception would have grown to Rs64 lakh!</p> <p>&nbsp;</p> <p>The scheme is flexible in moving across market capitalisations to explore attractive investment opportunities. Currently, the portfolio suggests that the fund manager is bullish on software, pharma and power stocks while it is underweight on banking and financials. The portfolio composition suggests that the fund is well positioned to withstand volatility, owing to relatively higher exposure towards stocks/sectors that are offering high margin of safety and are defensive in nature.</p> <p>&nbsp;</p> <p><b>Author is co-founder, Griffin Capital Advisors LLP.</b></p> Fri Oct 23 15:49:32 IST 2020 cashbacks-are-not-sustainable <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>WITH MORE THAN</b> 230 million registered users, PhonePe has become a household name. The digital wallet and online payment company saw a spike in its business during the lockdown. Rahul Chari, cofounder and chief technology officer of the company, talks about the opportunities, challenges and intense competition in the segment and what the future holds for the digital payment platforms.</p> <p>&nbsp;</p> <p><b>How has the digital payments segment been affected by the pandemic and the lockdown?</b></p> <p>&nbsp;</p> <p>During the nationwide lockdown, digital payment platforms were an essential service given their utilitarian nature. According to NPCI, the UPI transactions in February 2020 were at an all-time high of 132 crore transactions, corresponding to a transaction value of Rs2.21 lakh crore. While there was a fall over the following two months owing to the lockdown, the rebound happened in May and June and the transactions have been increasing with each passing month since then.</p> <p>&nbsp;</p> <p>In September, UPI registered 180 crore transactions with a transaction value of Rs3.29 lakh crore. We saw the highest ever organic user acquisition during this period. Our new user acquisition numbers have increased by 50 per cent and it is heartening to see digital payments being adopted by users across age groups, income levels, and locations. The growth momentum is expected to continue in the festive season and the subsequent months with the economy opening up.</p> <p>&nbsp;</p> <p><b>What are the challenges that the segment has to deal with, especially when it comes to regulations?</b></p> <p>&nbsp;</p> <p>The digital payments segment is going through a massive growth cycle. The government and the regulators have played a critical role in enabling the growth. Regulations have played an enabling role for all stakeholders and we continue to adapt to any new changes. Merchant acceptance is a very important factor contributing towards growth of digital payments and merchant discount rate (MDR, a fee merchants are charged for processing card transactions) plays a critical role in fuelling the growth of acceptance across the country. Without any incentive the prevailing zero MDR regime will impact investments in building merchant acceptance. We are hopeful that the government and regulators will consider the needs of the payments ecosystem and bring in a reasonable MDR structure.</p> <p>&nbsp;</p> <p><b>Acquiring new customers and retaining them are a challenge for digital wallet companies. How do you deal with it?</b></p> <p>&nbsp;</p> <p>When the product experience and the service quality are good, there is natural affinity and loyalty from customers. Service quality parameters such as the speed of transactions, customer support and user interface matter more to customers in the long run. This is because beyond a certain value of transactions, reliability of the transaction plays a more important role than the incentives.</p> <p>&nbsp;</p> <p>We have always maintained that cashbacks are not sustainable and our cashback disbursal has significantly gone down over the past 12 months. We use machine learning to decide when somebody needs an incentive and typically incentivise only the first transaction. The cost of acquiring users and the need for capital is lower now than what we had spent in 2018 and 2019. We believe that as long as we provide a safe, secure and user-friendly digital payments platform and continue to innovate, the adoption and usage will take care of itself.</p> <p>&nbsp;</p> <p><b>What are some of the key consumer trends in the digital payments segment and what is its future in India?</b></p> <p>&nbsp;</p> <p>The new environment has already started changing consumer and business habits across a variety of sectors. We will continue to see a surge in the adoption of digital payments in the country across all demographic segments. Businesses, both online and offline are keener than ever to partner with digital payment platforms to accelerate their growth. In particular, offline merchants are embracing additional business models including home delivery in addition to opening up a digital presence. Users are also increasingly comfortable buying financial services products digitally. Payment platforms with their large consumer base and a wide variety of use cases will actively enable and shape the above consumer and business habits.</p> <p>&nbsp;</p> <p><b>What will be the key focus areas for PhonePe over the next few years?</b></p> <p>&nbsp;</p> <p>Our focus will be on growing our user base to 500 million from the current 230 million, launching more products in the financial services space, growing the offline merchant network to 25 million, covering every corner of the country and partnering with more brands on our Switch platform. Currently we have 220 partner apps.</p> <p>&nbsp;</p> <p><b>There have been reports that PhonePe is planning an IPO in the next two years.</b></p> <p>&nbsp;</p> <p>PhonePe has a line of sight to become profitable by 2022 and plans to file for an IPO in 2023. It is a bit too early to comment on the specifics.</p> Fri Oct 23 15:48:31 IST 2020 tough-stake <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>December 18, 2019</b>, was a day of celebration for Cyrus Mistry, who had been sacked unceremoniously as the chairman of Tata Sons in October 2016. The National Company Law Appellate Tribunal (NCLAT) had ruled that day that the sacking was illegal, and he would have to be reinstated as the chairman of Tata Sons. The NCLAT verdict sent shockwaves through Bombay House; the Tatas did manage to get a Supreme Court stay on the order a few days later.</p> <p>The Shapoorji Pallonji Group (SP Group) owned by the Mistrys had invested in Tata Sons in the 1960s. Reports suggest that J.R.D. Tata was not quite happy with having an outsider in Tata Sons. But the two sides shared a cordial bond over the decades. The relations soured after Cyrus was fired overnight. And it got worse when the Tatas blocked SP Group’s move to raise funds by pledging their shares in Tata Sons.</p> <p>The Mistrys, who have an 18.4 per cent stake in Tata Sons, needed the funds to tide over the crisis triggered by the Covid-19 pandemic. The Supreme Court has barred the group from selling or pledging any Tata Sons shares until October 28, when it is likely to start hearing the final arguments in the case. This judgment might have been the final nail in the coffin, which prompted the Mistrys to finally decide that the time had come to separate from the Tatas.</p> <p>The Tata Trusts—which are into various philanthropic activities—hold 66 per cent shares of Tata Sons, which in turn exerts control over a 100-odd companies manufacturing salt to software. The SP Group pegs its stake in Tata Sons at around 01.8 lakh crore. This is based on the value of the operating companies as well as the brand value of the Tatas. The Tatas may not agree to the valuation, and they do have a right of first refusal, according to the articles of Association of Tata Sons. While the SP Group has reportedly lined up institutional investors for the stake sale, the Tatas may not want the shares falling into the hands of a third investor. The Tatas have told the apex court that they are open to buying the SP Group’s stake. However, it is easier said than done.</p> <p>The Tata Group is also saddled with huge debt, notably in its power, automobile and steel companies. The SP Group in its statement alleged that debt in major Tata Group companies had increased by 01 lakh crore in the last three years. So, buying out the Mistrys may not be so easy for the Tatas.</p> <p>“It may not be easy for both parties to agree on valuations. It is also not clear how the Tatas are going to raise the funding required to buy the shares,” said Shriram Subramanian, founder and managing director, InGovern Research Services, a corporate governance advisory firm.</p> <p>Nirmalya Kumar, Lee Kong Chian professor of marketing at Singapore Management University and distinguished fellow at INSEAD Emerging Markets Institute, says Tatas may have to get an outside investor. But who will invest $20 billion with restraints on liquidity and transferability of those shares, he asks.</p> <p>If the Tatas want to buy out the stakes of the SP Group, there are four major options. “One option is to sell stakes in some companies like TCS; or divest some businesses completely; or raise some private equity funding; or raise some financing over a period of time,” said Subramanian.</p> <p>Proxy advisory firm Institutional Investor Advisory Services (IiAS) estimates that Tata Sons may have to sell a 16 per cent stake in TCS, which will bring down its shareholding to 56 per cent from 72 per cent. For the past several years, Tata Sons ability to infuse equity and provide liquidity support to its businesses has been driven by TCS dividends and buyback. According to IiAS, the sale of 16 per cent of TCS will restrict the financial flexibility of Tata Sons and somewhat weaken its ability to hold the group together.</p> <p>“The easiest way for this separation, if you want to do it, is to give them (SP Group) equivalent value of TCS shares, and tell them that they would be free to do what they want with those shares,” said Kumar. “This will resolve around two-thirds of the valuation issue, and Tatas will continue to hold a 51 per cent-plus stake in TCS.”</p> <p>Alternatively, experts suggest that Tata Sons could sell non-core assets and pledge the equity of its listed companies to raise funds. But that would mean that the group will be deeper in debt. The Tatas may also look at roping in institutional investors to buy out the SP Group stake. Sovereign wealth funds have also been reportedly sounded out.</p> <p>Exiting Tata Sons by offloading its stake will address the SP Group’s debt woes completely (According to CARE Ratings total reported debt of Shapoorji Pallonji &amp; Company Private Ltd on standalone basis stood at 011,745 crore as on March31, 2019). The decision to separate from the Tata Group has lifted the shares of the two listed companies of the SP Group—Sterling &amp; Wilson, and Forbes &amp; Co—over the past week.</p> <p>But are these celebrations premature? Time will tell.</p> Thu Oct 01 15:46:59 IST 2020 old-trade-new-tools <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Two years ago, </b>a late evening meeting changed Kishan Rathor’s perspective on agriculture. After the meeting, with agriculture startup Gramophone, he decided to divide his 10-acre farm in Dewas district of Madhya Pradesh into two. He used traditional methods of sowing <i>moong</i> (green gram) in one half and in the other he followed the advice of Gramophone’s app.</p> <p>“The production cost decreased, while output increased from 22 quintals to 27 quintals,” said Rathor. “It was the first time I realised agriculture can be profitable.” He is classified as a medium farmer; 13 per cent of the farmers in the country fall into this category, which is under threat of being pushed into poverty if the farmers do not use resources well. Luckily for them, increased penetration of cheap smartphones in rural areas has opened up access to information like never before. And the younger farmers are willing to try new things on their farms.</p> <p>Over 1,000km from Dewas, in Muzaffarpur, Bihar, litchi farmer Sunil Kumar, too, harnessed the power of technology. As lockdown disrupted supply chains, he got himself listed on Kisan E-mart, powered by Pune-based startup Agri10x.The listing caught the attention of a London-based buyer. After a deal was negotiated, the purchaser’s kin checked the produce prior to shipping.</p> <p>There are over 500 such agritech firms and many of them were founded in the last five years mostly by IIT and IIM alumni. They are bringing innovation into agriculture, primarily digitising the farm-to-factory and farm-to-fork processes, and focusing on minimising wastage across the supply chain and empowering farmers to make informed decisions.</p> <p>Though the market penetration of these firms is only around 1 per cent, the entry of a new wave of entrepreneurs is starting to transform the way food is produced, marketed and consumed. Covid-19, the bane of millions worldwide, became a boon for agritech companies. These companies also stand to benefit from the Centre’s agricultural reform laws, which diluted the Essential Commodities Act, gave legal framework for contract farming, and allowed farmers to sell to anyone, anywhere. As a result, they are now poised to scale-up operations. As per a recent Ernst &amp; Young report, agritech in India has a market potential of $24 billion by 2025.</p> <p>“We help farmers increase their productivity and reduce production costs by 20 per cent by giving right advice, and managing their farms through a technological platform, right from sowing to harvesting,” said Tauseef Khan, co-founder, Gramophone. “This is something which is in the control of the farmers, unlike prices and output which are dictated by market dynamics. We help them reduce uncertainty in decision making.” He added that they also educate farmers about scientific agricultural practices and provide better quality seeds, and better crop protection and crop nutrition products than what is available in the market.</p> <p>Gramophone’s Krishi Mitra app allows farmers to engage with experts and even send them pictures of their crop on WhatsApp. The platform also uses advanced image recognition technology to process farmer queries and return relevant information.</p> <p>Karthik Jayaraman, CEO and co-founder, WayCool, a Chennai-based company, said that the improvement of road networks in the last 20 years has made movement of goods easier and is one of the enabling factors for the agritech space. “Second is the transformation in the cost of communication and the digitisation of money, which enables faster movement.These are important components of the supply chain and we thought now was the time,” he said.</p> <p>He added that with the government reforms, the focus had shifted from ramping up production to ramping up the supply. Jayaraman said that the focus should now be on improving the supply chain by building infrastructure to improve cold storage, even in villages.</p> <p>In another critical area of the agricultural value chain comes companies like Agribazaar, which replicates the mandi using an online aggregation model. A farmer lists his produce and buyers like merchants, traders and corporates can place orders. Once the transaction is complete, Agribazaar picks up the produce and the payment is credited to the farmer’s bank account.</p> <p>“Our app is helping local farmers go [pan India],” said Amith Agarwal, CEO and co-founder, Agribazaar. He said that in April 2020, the app facilitated the transport of over 8,000 trucks worth of produce, even from far-off places like Ladakh, Sikkim and Lakshadweep. “The response during this lockdown was encouraging,” he said. Founded in 2016, the startup has connected around 10,000 traders and processors, and over 100 farmer producer organisations with its network of over three lakh farmers across 36 states and Union territories. The app has facilitated sales of Rs14,000 crore since its inception, said Agarwal.</p> <p>Agri10x partnered with the government to help farmers access their marketplace to sell their produce, like the litchi farmer in Muzaffarpur did. “We now have access to the government’s common service centres (CSCs), access points that deliver e-services to rural and remote areas in the country,” said Pankajj Ghode, founder and CEO, Agri10x. “We charge a trading fee of 6 to 10 per cent, which is equally divided among farmers and traders. The two players save a lot of cash, which would otherwise be spent on middlemen. The size of the operation itself is enormous as volumes start from 200 tonnes and go up to 1,000 tonnes.”</p> <p>AgNext, a Mohali-based company set up by Taranjeet Singh, measures the quality of agricultural produce. Using its in-house Qualix platform, it helps food-processing businesses analyse the trading and safety parameters of commodities. It provides test reports over the phone within 30 seconds.</p> <p>The pandemic has brought about a visible change in consumer behaviour. Safety concerns have come to the fore and consumers are reading the labels more closely. Ninjacart, a Benguluru-headquartered fresh food supply chain company, introduced “end-to-end food footprint traceability” for fruits and vegetables. “Footprint is Ninjacart’s first but significant step towards ensuring food safety,” said Thirukumaran Nagarajan, co-founder and CEO, Ninjacart. “It allows the consumer to trace the complete footprint of the products purchased from Ninjacart. For every product one buys from Ninjacart, it will tell you the farmer details, warehouses that handled the produce, the truck that carried the item to stores and more.”</p> <p>Before the government’s recent reforms, each state had a different set of rules and it was hard for agritech companies to understand. “We could not expand our base outside south India as we did not know the rules,” said Jayaraman. “At some places, we had to pay extra for every kilo bought from farmers. Grains could only be sourced through APMCs (agriculture produce market committees).”</p> <p>The dilution of the Essential Commodities Act is also a boost. Jayaraman explained: “There is demand for onions in the Middle East,” he said. “But we were not reliable suppliers as we could not store under the Essential Commodities Act. Now, with reforms, storage has been made possible.”</p> <p>A report by Maple Capital Advisors pegged that venture capital investments in agritech startups are expected to exceed $500 million in the next two years. Pankaj Karna, managing director, Maple Capital Advisors, said: “The golden age of Indian agriculture may well have just begun, backed by unparalleled digital access to farmers, overarching reforms and government support.”&nbsp;</p> Mon Oct 05 16:45:36 IST 2020 winds-of-change <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>THERE IS A</b> category of funds in Europe that saw record inflows of nearly $65 billion in just three months between April and June. The category saw an unprecedented inflow totalling $10.4 billion in the US market in the same period. Combined with the first three months of 2020, the cumulative half-year flows in US stood at $20.9 billion, which is just a tad lower than 2019’s full year flows of $21.4 billion.</p> <p>&nbsp;</p> <p>So, which is this category of funds that investors are falling over each other to invest? What is the potential they see, especially amidst a global pandemic that has caused most asset class losing their sheen?</p> <p>&nbsp;</p> <p>Welcome to the world of Environmental Social and Governance Funds, popularly known as ESG Funds. It is also called sustainable investing by a growing community of fund managers and investors who believe that the time has come to look at companies that respect factors like responsibility towards the planet, social obligations and good corporate governance.</p> <p>&nbsp;</p> <p><b>What is an ESG Fund?</b></p> <p>Simply put, an ESG Fund would only invest in companies that incorporate in their operations and functions, things like efficient disposal of waste, conservation of water and energy, climate change, gender equality, women empowerment, labour rights, donating for social causes, strong internal controls in terms of efficient management and ethical practices among other things.</p> <p>&nbsp;</p> <p>In terms of broad sectors, companies involved in alcohol, tobacco, gambling and controversial weapons are often kept out of ESG ambit.</p> <p>&nbsp;</p> <p>One may feel that while ESG is quite big on the global scale, it is still nowhere in the reckoning in India. Quite true to a large extent, but the winds of change are here, and could be here to stay for the long haul.</p> <p>&nbsp;</p> <p><b>Return generation potential</b></p> <p>Let us first see the benefits of ESG investment in terms of returns—after all returns are what everyone invests for—and then the options that Indian investors have.</p> <p>&nbsp;</p> <p>Not many might be aware but there is a Nifty 100 ESG index that serves as the benchmark for the few ESG Funds that are offered by mutual funds in India. More importantly, the ESG index has managed to outperform the benchmark Nifty in the recent past as Covid issues continue to impact the stock market.</p> <p>&nbsp;</p> <p>From the highs in January, the 50-share Nifty fell by around 40 per cent by March and since then has gained a little over 53 per cent. On the other hand, the ESG index fell around 37 per cent between January and March and since then has surged over 56 per cent.</p> <p>&nbsp;</p> <p>In terms of total returns, an investment of 0100 in ESG index would have got you 0226 in the last nine years while the same in Nifty would have made 0198. So, numbers clearly favour ESG index over the benchmark Nifty.</p> <p>&nbsp;</p> <p>Incidentally, in the current calendar year, the ESG index is marginally in the green while the Nifty is down nearly 5.50 per cent.</p> <p>&nbsp;</p> <p><b>Investment avenues</b></p> <p>Now, the all-important part of investment avenues. Well, if the returns are there then investment options are what one needs to know. As mentioned earlier, there are not too many options currently though three fund houses—Axis Mutual Fund, SBI Mutual Fund and Quantum Mutual Fund—offer ESG Funds.</p> <p>&nbsp;</p> <p>ICICI Prudential Mutual Fund has come out with a New Fund Offer (NFO) of its ICICI Prudential ESG Fund which is currently underway and is open till October 5, 2020. The fund will have both growth and dividend options along with the option of direct plan in both the variants.</p> <p>&nbsp;</p> <p>Corporates today are increasingly aware that millennial generation is increasingly mindful of the ESG practices they follow. Also, regulations are catching pace in the ESG space, all of which is leading to more compliance in terms of ESG practices. At such a time, it is interesting to see that an increasing number of fund managers and investors are looking at ESG investing. In the years ahead it is very likely that deep pocketed pension funds, large institutions and even millennial, which account for 60 per cent of our population who are comparatively more aware of environmental and social issues, would actively scout for ESG complaint funds to invest their money.</p> <p>&nbsp;</p> <p><b>The writer is managing director, InvestAscent Wealth Advisors Pvt Ltd.</b></p> Fri Sep 25 19:27:49 IST 2020 far-from-over <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>During a retail industry summit in September 2016, Kishore Biyani, founder of Future Group, said: “We would love to be seen as a consumer goods company having its own distribution.” Four years hence, Biyani, who was the king of modern retail in India, has been left with just that—his consumer goods company, apart from apparel merchandising and a small furniture retail business. He agreed to sell much of his retail business to Mukesh Ambani’s Reliance Industries.</p> <p>&nbsp;</p> <p>Biyani’s entry into retail business was in 1987, when he launched Manz Wear. It was renamed Pantaloon Fashions, one of the few fashion and apparel retail chains in the 1990s. The first Pantaloons store opened in 1997 and the brand soon became popular. In 2001, Biyani launched Big Bazaar, among the first modern big box hypermarket chains. Over the next two decades, he would go on to establish an empire that spread across fashion, lifestyle, grocery and consumer electronics retailing.</p> <p>&nbsp;</p> <p>Along the way, he made many marquee acquisitions. But, as his empire grew, so did his debt. In 2012, as the debt rose to Rs7,800 crore, Biyani sold Pantaloons to Aditya Birla Group. That would not deter his ambitions, though. The same year, he acquired Big Apple, a convenience store chain in the National Capital Region and, two years later, Nilgiris, a retail chain in South India.</p> <p>&nbsp;</p> <p>The biggest move was in 2015, when he acquired the retail business of Bharti Group. In 2016, he acquired the retail business of Heritage Foods, a company promoted by former Andhra Pradesh chief minister N. Chandrababu Naidu. The next year, Future Retail acquired hypermarket chain HyperCity from Shoppers Stop.</p> <p>&nbsp;</p> <p>But, the debt continued to rise. It is estimated to be around Rs13,000 crore now. After earnings took a hit because of Covid-19, servicing the debt became a challenge and Biyani was left with little choice but to sell the retail business. Future’s key group companies—Future Retail, Future Lifestyle Fashions, Future Consumer, Future Supply Chains and Future Market Networks will merge into Future Enterprises Limited. The retail and wholesale business, which includes key formats like Big Bazaar, fbb, Easyday, Foodhall, Nilgiris, Central and Brand Factory, would be sold in a slump sale (for a lump sum without values being assigned to individual entities) to Reliance Retail. Future Group will also sell the logistics and warehousing business to Reliance Retail. The deal is worth Rs24,713 crore.</p> <p>&nbsp;</p> <p>The deal will help Reliance expand its already large, albeit electronics-heavy, retail business and become India’s largest grocery and fashion retailer, in terms of revenue. As per broking firm Sharekhan, its total store area would increase by 83 per cent to 52.5 million square feet. Reliance Retail will also invest 11,200 crore in the preferential share issue of Future Enterprises for a 6.09 per cent stake and Rs400 crore in warrants convertible into equity shares, which when converted upon payment will result in a further 7.05 per cent stake.</p> <p>&nbsp;</p> <p>“As a result of this reorganisation and transaction, Future Group will achieve a holistic solution to the challenges that have been caused by Covid-19 and the macro economic environment,” said Biyani. “This transaction takes into account the interest of all its stakeholders including lenders, shareholders, creditors, suppliers and employees, giving continuity to all its businesses.” But, what does this deal leave Biyani with?</p> <p>&nbsp;</p> <p>Much of the proceeds will be used to repay debt. There are also dues pending to suppliers, vendors and landlords. As per a letter by Dhairyashi Patil, president of The All India Consumer Products Distribution Federation, written to Biyani, the outstanding “is in hundreds of crores.” Biyani is learnt to have told suppliers that part of the deal’s proceeds has been set aside to repay all such dues.</p> <p>&nbsp;</p> <p>Post this, Future Enterprises will be largely debt-free. It will retain the manufacturing and distribution of FMCG goods and integrated fashion sourcing and manufacturing business and its insurance joint ventures with Generali and the joint ventures with NTC Mills. The company has been in talks to sell the insurance ventures.</p> <p>&nbsp;</p> <p>Future Enterprises has said the deal with Reliance will help it expand with a focused business model and a stronger balance sheet. “There will be around 14,000 crore of food manufacturing and Rs3,000 crore of fashion and garment manufacturing that will remain in Future Enterprises,” said a source in the know. More importantly, there is a supply agreement with Reliance Retail and Fashion. So, Future Enterprises will be manufacturing the brands for the Reliance ecosystem, which will be a strong revenue stream. Future Enterprises will also be able to create new brands in the fashion and consumer goods space and ink supply deals with other firms.</p> <p>&nbsp;</p> <p>Biyani is not one to remain quiet. People who have known him a long time say he remains gung-ho about the opportunities that lie ahead. Retail industry veterans say that Biyani’s knack for building brands will help him emerge in a new avatar. “Biyani is a brand man,” said Govind Shrikhande, former managing director of Shoppers Stop. “So, brand manufacturing and FMCG manufacturing, the huge food parks that he has built will be with him; that is a big opportunity.” Over the years, Future Group has invested in setting up large food parks that would help it strengthen and expand its private brands. Future Consumer Ltd, which is headed by Biyani’s elder daughter Ashni, now houses close to 25 FMCG brands and it has in the recent past inked deals with global consumer goods firms like New Zealand’s dairy major Fonterra, US-based organic food maker Hain Celestial and beverage brand Sunkist. Biyani will come back strong on the brands, manufacturing and FMCG fronts, said Shrikhande.</p> Fri Sep 11 19:24:41 IST 2020 in-for-the-long-drive <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>THE MANTRA</b> we are looking at is rethink, reimagine and recalibrate your business,” said Shashank Srivastava, executive director of Maruti Suzuki, at THE WEEK auto webinar on ‘Powering Past the Pandemic’. As the lockdown and its business travails ricochet across the board, this is a philosophy that is helping not just Maruti, but all automakers to weather the Covid storm.</p> <p>&nbsp;</p> <p>‘So far so good’ seemed to be the consensus in the webinar panel, which included Gaurav Gupta, chief commercial officer of MG Motor India, Santosh Iyer, vice president (sales &amp; marketing) of Mercedes-Benz India, and Tarun Garg, director (sales and marketing, and service) of Hyundai Motor India, besides Srivastava. Rebound has been positive, and better than expected, they all agreed. Yet, with the precarious state of the economy, change in consumer behaviour, worries over a second wave of infections, and more crucially, uncertainty over the arrival date of a vaccine, there was no magic mantra anyone was proffering to break the coronavirus spell.</p> <p>&nbsp;</p> <p>“I am not an astrologer or a scientist,” quipped Garg. “I wish I could know how many days away a vaccine is. But, I would say that the Indian economy has been resilient in the past. I believe very strongly that car penetration being what it is, customers are still looking to buy a car.”</p> <p>&nbsp;</p> <p>But the rules of the game have changed, perhaps irrevocably. Despite being the third largest in the world, the past few years have not been good for the Indian auto industry. Even before the pandemic hit, it had become the poster boy of the country’s economic slowdown, with sales in a free fall right from the autumn of 2018. Since then, it has been all downhill, with threats of newer technologies like electric mobility, youngsters preferring shared cabs to buying a vehicle, stricter emission norms and the hike in the cost of insurance and loan, all taking a toll.</p> <p>&nbsp;</p> <p>THE WEEK webinar, thus, came at a crucial juncture—what the industry is planning to do will have a domino effect not just on the auto sector, but the very trajectory of the economy and the consumption patterns. And, the four doyens had all the answers.</p> <p>&nbsp;</p> <p><b>Unusual business</b></p> <p>“The pandemic and the lockdown have given us a great chance to relook at what we were doing,” pointed out Gupta. Even while helping local communities and tying up with ventilator makers, auto companies also started looking inwards. This meant new ways of doing business, from cutting costs and newer models to increased digitisation.</p> <p>&nbsp;</p> <p>“The pandemic has made us much more agile, more innovative and more flexible,” said Garg. For instance, a launch usually would have meant fancy hotels, inviting scores of journalists and influencers, test drives and road shows. But Hyundai was forced to launch a new model through an online webcast during the lockdown, only to realise that it could reach millions of potential buyers instantly.</p> <p>&nbsp;</p> <p><b>What buyers want</b></p> <p>The triple effect of a global disease spread, the lockdown and the resultant churn in the jobs market were bound to change customer behaviour. The thing is, auto makers are still figuring it out.</p> <p>&nbsp;</p> <p>Take, for instance, the spiralling popularity of sports or multi utility vehicles. Though as a category it went up 8-9 per cent in the past few years, it dramatically shot up by 26 per cent as sales re-started after the lockdown, something Srivastava found “surprising”. “There is a huge uptick in pre-owned cars. And, first-time buyers are increasing,” he said. With the fear of infection topmost in public mind, it seems the shared cabs success story has been brought to a fateful halt, at least for now.</p> <p>&nbsp;</p> <p>“Customers are looking for brands that can provide solutions, something very different,” suggested Garg. This has already translated into subscription models, balloon schemes, and different formats of loans and EMIs.</p> <p>&nbsp;</p> <p><b>Rebound</b></p> <p>Clutching at green shoots, auto companies have been relieved by the sales rebound in June, July and August. September, November and December make the festive season when sales normally stay robust. But worries abound. “There has been a faster rebound than expected, especially in the SUV segment,” said Gupta. “Having said that, we are still not out of the woods.”</p> <p>&nbsp;</p> <p>And the carmakers have modest expectations. “Even if we can come to last year’s level (when the slowdown had already led to decline in sales), I would call it great,” said Iyer.</p> <p>&nbsp;</p> <p><b>Festive offers</b></p> <p>Of course, there is one tried and tested formula to push sales—give discounts. The problem? While sales are down, costs have gone up, right from the investment in BS6 technologies to currency exchange fluctuations that make import of components costlier.</p> <p>&nbsp;</p> <p>“We will have to increase prices,” said Iyer. “There is a lot of stress in the system. So, to expect freebies or deals will be a fallacy, at least for a majority of OEMs.”</p> <p>&nbsp;</p> <p>The other companies, however, are still in a dilemma. “We need to get volumes up, but cost has also gone up. We are debating on how to balance this out,” said Srivastava. There would be more offers on the financing aspect, mobility membership programmes, add-ons and faster delivery, rather than outright price discounts.</p> <p>&nbsp;</p> <p><b>Moving forward</b></p> <p>“The auto industry-GDP co-relation is very high,” said Srivastava. “Going forward, auto demand will depend on the GDP performance, as also on (public) sentiment. Cars are a discretionary purchase.”</p> <p>&nbsp;</p> <p>While the rebound after the lockdown has been satisfactory, there is a worry that there could still be a dip after the festive season, once the rural harvest bonanza and the urban Diwali bonuses run out. As such, projections are that the overall industry will be down by around 23 per cent this financial year. Adding to the uncertainty is that it could still go either way—a vaccine upside (if it hits the market faster) and a virus downside (if the spread continues unabated).</p> <p>&nbsp;</p> <p>If there is one sentiment that is powering all the four honchos to look beyond the woes of the pandemic, that is hope and optimism, though tempered with some caution. “We remain optimistic!” exclaimed Gupta. “This is like a T20 match; you play every over and try to get the maximum runs.”</p> <p>&nbsp;</p> <p>Iyer summed it up succinctly: “Why waste a good crisis? If we can figure out new ways of doing business, that would be a positive outcome to this crisis.”</p> Fri Sep 04 11:40:35 IST 2020 app-on-top <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Joy Sebastian, 44,</b> wears many hats. When he is not at his office in Infopark Cherthala, an IT park in Kerala’s Alappuzha district, Sebastian helps out at a people's hotel in the neighbourhood, mentors students at the local library or takes classes on palliative care in local panchayats.</p> <p>Sebastian was in the news recently as the developer of India's own videoconference app—a next-generation alternative to the popular Zoom (made by a US company that has workforce and servers in China). Sebastian’s Techgentsia Software Technologies won a national competition organised by the Union information technology ministry for developing a world-class videoconference app, a crucial service during the pandemic.</p> <p>Sebastian's Vconsol outsmarted products from 1,983 companies, including topnotch IT firms like HCL and Zoho. Apart from winning Rs1 crore as prize money, Vconsol also bagged the contract to provide videoconference solutions to all Central institutions for the next three years. “The trials have already started and every government institution will be able to use it soon,” said Sebastian.</p> <p>Vconsol can support up to 80 active and 300 passive participants simultaneously with minimum bandwidth, providing good audio and video quality. “The government's demand was for 18 active participants, but we could offer a more capable product,” he said. Vconsol has addressed all security concerns and has all the features available on Zoom’s premium variant.</p> <p>Sebastian said the jury must have selected his product as it married sound technology with the best security features. “I was sure about the quality of my product, but not so much about my presentation skills,” he said. He should know. Job interviews were always a big headache for him. “I would always clear the written tests for campus selection. But I always lost out in interviews because of my poor English,” said Sebastian, who hails from a family of poor fishermen in Alappuzha. “I did my schooling in Malayalam medium, in government schools.” He got his first job after an interview board allowed him to talk in Malayalam. “Luckily, they valued my knowledge and skill sets over my English,” he said.</p> <p>Sebastian keeps this in mind while hiring. “A majority of my 65-member team have rural backgrounds. They may not speak polished English, but they are the best, technologically,” he said. “Vconsole is a software filled with the qualities of the countryside.”</p> <p>Sebastian attributed his success to the good-heartedness of those around him. He grew up in a one-room house built by the government. He now lives with his wife (a high school teacher), two kids and his parents. He is also grateful to Kerala’s public education system. “If there were no good government schools or colleges, people like me would never have dared to dream high,”he said.</p> <p>Sebastian’s motto is—help those in need. After his big win, one of his Facebook friends asked if he would still be able to help out at the people’s hotel. “I will always be there,” he replied. “This award may have changed the profile of the company, but I will not allow it to change my life.”&nbsp;</p> Thu Aug 27 15:02:52 IST 2020 space-craft <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>IT IS QUITE</b> possible that, in some years, we might hear a modified version of American composer Bart Howard’s classic ‘Fly Me to the Moon’ from humans living in space colonies longing to visit earth. Sounds farfetched, right? Well, not if a young Hyderabad startup has its way.</p> <p>&nbsp;</p> <p>Skyroot Aerospace, a two-year-old company with a mix of 40 scientists and engineers, want its rockets to be the catalyst for human habitation and exploration in space. Not surprisingly, many in the team idolise Elon Musk and SpaceX.</p> <p>&nbsp;</p> <p>Skyroot Aerospace is equally ambitious. Its immediate plan—assemble a rocket in less than 48 hours and send it to space whenever required.</p> <p>&nbsp;</p> <p>While SpaceX launched its first rocket, Falcon 1, six years into its existence, Skyroot Aerospace is in a hurry; it wants to launch its first rocket by December 2021.</p> <p>&nbsp;</p> <p>On August 13, the company put out a video of it test-firing an upper-stage rocket engine, called Raman, reportedly making it the only private company in India to successfully do so.</p> <p>&nbsp;</p> <p>It helps that the minds powering the startup are former Indian Space Research Organisation employees. CEO Pawan Kumar Chandana was an ISRO engineer closely involved with rocket launches and co-founder Naga Bharath Daka was an ISRO flight software engineer who designed and realised multiple avionics modules for launch vehicles. They are supported by senior vice president of propulsion V. Gnanagandhi, a Padma Shri awardee and former director at ISRO’s Liquid Propulsion Systems Centre.</p> <p>&nbsp;</p> <p>The startup is currently developing three rockets—Vikram-1, Vikram-2 and Vikram-3—which will act as small satellite launch vehicles (SSLV) carrying payloads ranging from 225kg to 720kg. The team wants to tap into the global market of small satellites and is also designing its own software and using 3D printing for rocket hardware. The company wants to be the most affordable satellite carrier in the segment, and charge around Rs15 lakh a kilo. It has already raised Rs31.5 crore and is looking to raise Rs90 crore more in a year. A few more rocket stages will be tested before the big launch.</p> Thu Aug 20 18:29:45 IST 2020 we-want-space-flight-to-be-as-cheap-as-air-flights <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q/ Is this your first attempt at test-firing an upper-stage rocket engine?</b></p> <p>&nbsp;</p> <p>A/ Yes. This is a full-scale one. We have done short-scale and smaller ones in the past. This is the actual engine that will be launched later. This is only the upper stage and there are many other stages involved, which will be tested in the next one year. They will all be integrated closer to the final launch. We want to give it our all and [attain] perfection. It is quite rare for rocket engines to be successfully test-fired in the first attempt, so that is a great achievement.</p> <p>&nbsp;</p> <p><b>Q/ What sets the Vikram series apart from other small satellite launch vehicles?</b></p> <p>&nbsp;</p> <p>A/ It is the simplicity of the rocket. It is a simple rocket that can be manufactured, assembled and launched very fast. Then there is the cost. It will be much cheaper than other rockets in similar segments in the international market.</p> <p>&nbsp;</p> <p><b>Q/ The Indian government recently opened up the space sector to private players. How has your company streamlined plans after this decision?</b></p> <p>&nbsp;</p> <p>A/ It has come at the right time. In the next one year, most of our sub-systems and rocket stages will be tested. Our hardware is in the final stages of manufacturing. We can now use ISRO facilities, which was not the case earlier. So, this will help our testing. Also, launching requires licencing and regulatory procedures. We feel there will be no delay from the government’s side and that perfectly matches our timeline.</p> <p>&nbsp;</p> <p><b>Q/ Can you talk about the usage of 3D printing technology in your rockets’ bi-propellants?</b></p> <p>&nbsp;</p> <p>A/ The bi-propellant fluids that you are talking about are hypergolic, [whose components ignite] once they come into contact. The inside channels of the injector should not leak and, for that, we need to create two independent channels to make sure there is no explosion. It is a very critical technology. It can only be done using 3D printing. Conventionally, we used to have multiple parts assembled together. There were separate parts for the oxidiser and for the fuel. In these assembled parts, leakage is a problem. Now, all these are integrated into a single piece and the channels are made in such a way that [the components] are independent of each other. Only once they come out into the rocket chamber do they mix and burn. This way, there is more flexibility in designing sub-sets. Usually, it takes several months to manufacture (using the earlier method), but we hardly took two to three weeks. Due to this [3D-printing] technology, reliability will increase and failure points will decrease.</p> <p>&nbsp;</p> <p><b>Q/ Your team plans to insert various satellites into multiple orbits in a single mission. Could you elaborate?</b></p> <p>&nbsp;</p> <p>A/ It is very rare to insert multiple satellites into multiple orbits. We have seen multiple satellites being inserted into a single orbit. So, what happens here is that different satellites require different orbits. If you are taking 20 to 30 satellites, five of them want to go into one orbit, and another five want to go to different altitudes. All this is possible with our rocket because it can restart.</p> <p>&nbsp;</p> <p>The restarting phase is a critical technology and is very rare. We need to design engines specifically crafted for that. Our engine and our propellants are perfect for restarting. We can restart the rocket as many times as we want and send it to as many altitudes as we want.</p> <p>&nbsp;</p> <p><b>Q/ SpaceX is working on reusable rockets and there are other agencies focusing on reusable rocket parts. What about your rockets?</b></p> <p>&nbsp;</p> <p>A/ Reusability has more advantages when it comes to bigger rockets. In huge rockets, the hardware is so costly that it is worth creating hardware infrastructure around it to bring it back. When it comes to smaller rockets, they are better off being single-use.</p> <p>&nbsp;</p> <p><b>Q/ Can you talk about the small satellite-launch market? How is it looking for players like you?</b></p> <p>&nbsp;</p> <p>A/ In the next five to seven years, more than 10,000 small satellites are set to be launched. And up to 2027, the cumulative market will be [worth] close to $15 billion. Currently, there is only one operational player, a New Zealand-US company, which serves the small-satellite segment; it launches smaller satellites with small rockets. There are a few other companies in advanced stages of development and a couple of others that had their first launch but did not succeed. In the next two to three years, you will see up to five companies doing their first launch, and we will be one of them.</p> <p>&nbsp;</p> <p><b>Q/ In terms of business, are you looking at the global market?</b></p> <p>&nbsp;</p> <p>A/ When it comes to launching satellites, more than 90 per cent of our market is overseas.</p> <p>&nbsp;</p> <p><b>Q/ Does this also mean that you will tie up with companies outside India for launches?</b></p> <p>&nbsp;</p> <p>A/ Yes. It depends on the customer’s requirement. From India, a lot of orbits can be reached. If there is an orbit that cannot be reached from India, we can go to different places and launch from there.</p> <p>&nbsp;</p> <p><b>Q/ What is your ultimate goal?</b></p> <p>&nbsp;</p> <p>A/ The goal is to create a space-based economy. Today, we have an earth-based economy. We feel that resources are only available on earth, and that is because we cannot go to space at a very low cost. In the long run, we want space flight to be as cheap as an air flight so that anybody can go to space. Either for space tourism or to utilise the resources there.</p> <p>&nbsp;</p> <p>Space has plenty of planets, comets, asteroids, and a lot of metals and resources readily available. Going to space becomes easier when it becomes existential. We can create a space-based economy where human beings can travel and live there. Expanding humanity out into space is the ultimate goal.</p> <p>&nbsp;</p> <p><b>Q/ What are your thoughts on Elon musk and SpaceX?</b></p> <p>&nbsp;</p> <p>A/ SpaceX is the biggest inspiration for any space company, not only us. It is basically a showcase of what a single company can do. We also want to go as close to SpaceX as possible.</p> <p>&nbsp;</p> <p><b>Q/ Would you associate with government projects, including in the defence sector? What are the advantages of such an association?</b></p> <p>&nbsp;</p> <p>A/ India has a lot of requirements, especially in defence, when it comes to launching a large number of satellites or building different kinds of rockets. It will be a huge advantage because private companies can build things much faster as there will not be much red tape.</p> <p>&nbsp;</p> <p>If we want to order parts, we have to just choose our vendor and buy it in a few days. When it comes to government organisations, they need to go for a purchase order and it takes a really long time to even buy simple things. Compared with bigger organisations, operationally, startups can be more efficient, bolder and faster. Because of fewer rules and regulations, there is more innovation in smaller companies.</p> <p>&nbsp;</p> <p><b>Q/ How was your personal experience working with ISRO?</b></p> <p>&nbsp;</p> <p>A/ It was phenomenal. I loved working there. In fact, I had a lot of hands-on experience working on various launch vehicles. It gave me great exposure, which actually [gave us] the confidence to build something ourselves. That was only possible because of the exposure and the fascination I had after working on India’s largest rockets for five to six years.</p> Fri Aug 21 13:31:16 IST 2020 focus-on-focused-equity-funds <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>THE YEAR 2020</b> has been a roller coaster ride, especially for investors in the equity markets. The year began with euphoria as Indian benchmark indices scaled new heights. However, the spread of the Covid-19 pandemic brought an abrupt end to the party. The subsequent weeks witnessed sharp fall in these indices. But the tide turned again quickly, with markets showing a sharp recovery since the lows touched in March.</p> <p>&nbsp;</p> <p>The situation makes it difficult for an average investor to decide what to do and what not to do. The sharp recovery, led by some selected high-quality stocks across the spectrum make many people sit back and think that the same stocks were available at a steep discount just a couple of months back. The quality of those stocks and the companies was never in question hence an experienced and skilled investor or a fund manager would have doubled down on those stocks in such a period.</p> <p>&nbsp;</p> <p>That being said, such ups and downs are part of market cycles and hence it is good to be prepared for the next round of opportunity. One way to do that is by investing in Focused Equity Funds. Let us understand how this category can help you.</p> <p>&nbsp;</p> <p><b>What is a Focused Fund?</b></p> <p>Focused Funds are a category of equity funds as defined by the Securities and Exchange Board of India. As per the market regulator’s categorisation, these funds portfolio can hold up to a maximum of 30 stocks. The portfolios of this type of fund largely tend to have a multi-cap approach.</p> <p>&nbsp;</p> <p>From an investor point of view, one way of looking at any fund is where it fits in the risk-reward spectrum. Some funds come with high risk while some others come with a relatively lower risk. One way in which risk goes up or down is through diversification. Accordingly, a large-cap equity fund could aim to reduce risk by investing in over 50 stocks. Similarly, a sectoral fund would invest only in a handful names in a targeted sector, thereby increasing concentration risk.</p> <p>&nbsp;</p> <p>The Focused Equity Funds hit a sweet spot between the two categories explained above. So while the portfolio of such a fund will be a little concentrated, it will not be very concentrated to take the risk to dangerous levels. At the same time, the diversification will not be so wide that the gains become miniscule. In other words, these funds are concentrated yet diversified!</p> <p>&nbsp;</p> <p><b>Is it a good time to invest in Focused Equity Funds?</b></p> <p>As the sharp recovery of the markets is already indicating, quality businesses and their stocks will continue to perform. However, there could be phases where this type of fund may witness a temporary blip in performance. However, the recovery is also expected to be equally sharp.</p> <p>&nbsp;</p> <p>That being said, uncertainties still remain as global and local economies continue to reel under the impact of the spread of Covid-19. As a result, in the near term several companies across sectors will be impacted by the disruption brought about by the virus. In the light of this, it makes absolute sense in placing your faith in high quality businesses. For a lay investor, this can be easily achieved through investing in Focused Equity Fund which aims to invest in good quality businesses across the spectrum and is market capitalisation agnostic.</p> <p>&nbsp;</p> <p><b>Picking a winner</b></p> <p>There are several offerings from various fund houses in this category. However, if one looks at the consistency in fund performance across market cycle, there is a fund which stands out of the pack and is ICICI Prudential Focused Equity Fund.</p> <p>&nbsp;</p> <p>The performance of the fund can be easily gauged on how the fund performed over the last six months—a time when markets were at its volatile best. As on August 17, the fund returns stood at 7% vis-à-vis the peer group return at -6%. The numbers are similar for a three-month and one-year periods as well, indicating significant out-performance compared to its peers.</p> <p>&nbsp;</p> <p>What also makes this fund special is the methodology the fund house uses to pick stocks which are to be a part of the portfolio. All the stocks selected by the fund manager have to be market leaders, or have a strong balance sheet, or are low-cost producer sin their area of speciality or are having an attractive valuation vis-à-vis its potential. Such an organised approach ensures that the selection remains largely on the side of the impeccable. Moreover, it is a multi-cap focused fund, thereby, not restricting itself to only large or popular names.</p> <p>&nbsp;</p> <p>If an investor wishes to partake in the India growth story and gain from the potential of the Indian economy, investing in a Focused Equity Fund like ICICI Prudential Focused Equity Fund can be a good starting point.</p> <p>&nbsp;</p> <p><b>Author is consultant at Nila Investment &amp; Services.</b></p> Fri Aug 21 12:06:33 IST 2020 trade-winds <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Saurabh Arora always invested in real estate. He had tried trading stocks, but burnt his fingers during the 2008 financial crisis and had stayed away ever since. The Delhiite, however, recently started buying blue chip stocks. At a time when the economy has taken a knock from the Covid-19 pandemic, what made Arora take the plunge once again?</p> <p>“I have followed stock markets for some time and done a lot of reading,” he said. “Now I am buying stocks that I am confident will ride the crisis and do well in the long term.”</p> <p>Some 500km away from Delhi, in Kota, Rajasthan, medical practitioner M.S. Suri, 65, also has been learning the tricks of the trade in equity investing. At an age when most people would be content with bank deposits or debt funds, Suri is waiting patiently for the markets to correct themselves and then buy again. “Earlier, I was also a conservative investor,” he said. “But now I have changed the strategy after I got in touch with financial advisers. Buying stocks has become a hobby for me. I sold some recently, and I am now waiting for a correction so that I can re-enter and invest in pharmaceuticals, an area I understand well, as well as consumer goods and good quality infrastructure companies.”</p> <p>Typically traditional investors, Indians always considered equity markets risky, and therefore parked their money in bank deposits or other fixed interest bearing instruments like small savings certificates and public provident fund. Buying real estate and gold were other preferred avenues.</p> <p>That, however, is changing, as many of them have woken up in the past few years to the advantages of systematically investing in mutual funds. Now they are venturing into the capital market and buying stocks. The number of people opening demat accounts and starting trading in equity has steadily been growing. That number jumped a few notches up since the stocks crashed in March and the pandemic forced people to stay at home.</p> <p>The average daily turnover of stock exchanges in June was Rs61,395 crore, a 69 per cent jump from the average daily turnover of Rs36,432 crore recorded in the year that ended in March 2020.</p> <p>Nithin Kamath, cofounder and CEO of Zerodha, India’s largest online stock broking firm, said it was adding 70,000 to one lakh new customers a month even before the pandemic struck. In the past few months, it added 1.5 lakh to two lakh new customers a month. Upstox, another online broking firm, has seen its customer base jump from one lakh to 10 lakh in two years. Ravi Kumar, its cofounder and CEO, said it hoped to double that in the next six months.</p> <p>The growth is not restricted to online brokerages. Motilal Oswal Financial Services is now averaging around 5.5 lakh account openings a month. Angel Broking has recorded its highest monthly client additions, about a lakh, since the lockdown started.</p> <p>Ajay Menon, CEO of broking and distribution division of Motilal Oswal Financial Services, said a large number of clients who open accounts are first-time investors and many of them are coming from tier II and tier III towns.</p> <p>These first-time investors, interestingly, are confidently venturing into the derivatives market and options strategies. Volumes in the derivatives segment rose 22 per cent year-on-year in June. “Motilal Oswal has seen strong momentum in account opening and market share gains across cash, derivative and advisory products,” said Menon. “We think this trend may continue as clients have got hooked onto digital platforms, the corporate sector is looking more confident of the revival and global markets have rebounded, wiping out the entire loss post Covid.”</p> <p>A big reason behind the growing interest in stocks is the fall in interest rates. Interest rates have been reduced all over the world as central banks and governments have pumped in money in the form of stimulus measures. In India, the interest rate at which the Reserve Bank lends to banks (repo) is 4 per cent, the lowest in two decades.</p> <p>This has in turn led to lenders slashing their deposit rates. State Bank of India is now paying an interest rate of just 2.7 per cent on its savings bank deposit accounts, and the highest term deposit rate for general public is 5.4 per cent. HDFC Bank is paying 3 per cent interest on savings deposits up to 150 lakh and fixed deposit rates max out at 5.50 per cent. “Falling interest rates on savings raise the attractiveness of equities,” said Dhiraj Relli, MD and CEO of HDFC Securities. As a large number of people have been working from home in the past few months, many of them are dabbling in equities during their spare time and see it as an additional source of income.</p> <p>“The Indian customer is an intelligent individual and will move money where he sees the best return,” said Ravi Kumar. “When other asset classes are not doing well, it makes more sense to invest in equity market, where returns in the longer period have shown to be better.”</p> <p>In the last decade, Indians invested heavily in property. In the recent years, however, especially after demonetisation, the residential real estate market has been subdued. According to consulting firm Knight Frank, between January and June, house sales in India’s top eight cities halved to 59,538 units, a ten-year low. “A lot of people realised that all of a sudden they couldn’t sell their gold or land quickly in this environment to meet their short-term financial needs and that they should be keeping their savings instead in financial assets, which are more liquid and you could have access to money on a rainy day,” said Kumar.</p> <p>The emergence of new platforms makes it easy to buy stocks listed not just in India, but also the blue chip companies listed globally. Upstox, for instance, is launching global investing on its platform that will allow buying stocks from 60 exchanges.</p> <p>As the stocks started looking attractive when the equity markets crashed in March, there was a huge inflow of investors. In the same period, major economies rolled out trillions of dollars in stimuli. The surge in retail investments on the one hand, and the huge stimuli on the other, have led to one of the fastest rebound in equity markets. The Sensex almost touched the 38,500 levels on July 28, just four months after it hit a low of 25,638.90 on March 24.</p> <p>The biggest question, however, is how long will this rally last, given that the pandemic is showing no signs of subduing and several sectors remain badly impacted. While the rating agency Fitch expects India’s GDP to contract 5 per cent this year, another agency, Nomura, sees the economy shrinking by 6.1 per cent. Given this uncertainty, should investors continue to pour money into equities?</p> <p>Avinash Gorakshakar, director, research, at ProfitMart Securities, said the markets were not looking at the fundamentals at all and the rally was purely liquidity driven. “The central banks are driving the markets. As long as there is going to be an easy money policy, a lot of liquidity will come into the markets and will chase equities from emerging markets.”</p> <p>If investors want to continue investing directly in equity, then choosing the right stocks is crucial at all times; more so when overall economic uncertainties persist. “There is no better wealth creation tool than equity. But, never compromise on quality,” said Anant Laddha, a certified financial planner and founder of advisory platform Invest Aaj for Kal. “You should always go for growth stocks, focus on fundamentals and not just look out for stocks that are cheaply available.”</p> <p>But, many investors are splurging cash on penny stocks hoping to make a quick buck. For instance, shares of a bankrupt telecom company have soared 350 per cent since June 1. “This is a trading market, where everybody just wants to play the<br> momentum. There are many companies, which have poor balance sheets, no corporate governance. There are a category of investors who are willing to take the extra risk. But, once a fall comes, these will be the first ones to get destroyed,” warned Gorakshakar.</p> <p>There are worries ahead. The RBI’s Financial Stability Report has warned that gross non-performing assets could surge to 12.5 per cent by&nbsp;March 2021 from 8.5 per cent in March 2020. Several sectors like airlines, retail and infrastructure have been hit hard and there are no turnaround signs yet. Public sector banks may also need another round of government recapitalisation given the pressure on their balance sheets. Even large companies, like Maruti Suzuki, reported a loss in the June quarter. “At the current valuations, you have to be very selective,” said Gorakshakar. “I don’t think today is the time that you can go out and buy confidently.”</p> Thu Aug 13 17:54:57 IST 2020 current-situation-is-accelerating-shift-to-digital-business-models <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>New Jersey-based Cognizant Technology Solutions is one of the largest IT services companies in India. After a decade of rapid growth, the company underwent large scale restructuring recently. The company had a dream run under CEO and co-founder Francisco D’Souza, from whom Brian Humphries took over last year. In the short period at the wheel, Humphries has focused on giving the company a strategic direction. In an exclusive interaction with THE WEEK, he talked about the restructuring and the growth challenges. Excerpts:</p> <p>Q/There have been several high profile exits from Cognizant of late.</p> <p>&nbsp;</p> <p>A/We are focused on returning Cognizant to its position as the IT services industry bellwether. To achieve this, we need a combination of Cognizant veterans and newcomers who can bring in fresh perspectives to our business. That is why I have sought to create a senior leadership team that balances internal promotions with external hires. We decided recently to hire a more senior Indian MD who will join our executive committee. A comprehensive search is under way, and it has seen a lot of interest.</p> <p>&nbsp;</p> <p><b>Q/What kind of challenges does Cognizant see in the current business scenario and how do you see things shaping up in the future?</b></p> <p>&nbsp;</p> <p>A/We are confident that our industry, geographic and customer segment mix, strong balance sheet, momentum in our digital imperatives, and growing competitiveness allow us to compete well on a relative basis, regardless of the macro environment. While there are certainly demand challenges in some sectors such as travel and hospitality, we believe that the current situation is leading customers to accelerate their shift to digital business models. This secular trend plays directly into our strategy around our four digital imperatives. Companies that proactively manage this crisis will emerge stronger than those that assume an eventual return to business as usual.</p> <p>&nbsp;</p> <p><b>Q/Cognizant has been witnessing growth challenges for quite some time. What are you doing to fix it?</b></p> <p>&nbsp;</p> <p>A/We are gaining commercial momentum. This is illustrated by our bookings trends, which grew 14 per cent year-over-year in the first half of 2020. North America, which grew more than 25 per cent in the first half, is particularly strong. This momentum speaks to how well clients have embraced our strategy and have responded to our renewed sense of client centricity. It also (illustrates) how our executives and their teams have embraced our focus on growth.</p> <p>&nbsp;</p> <p>At the same time, we are making noteworthy progress in the digital space with revenue up by 14 per cent in Q2, and 1H 2020 digital bookings up almost 50 per cent year-over-year. Digital is now 42 per cent of our mix. This becomes a virtuous circle as the greater our digital mix, the greater our overall company growth prospects. As digital reshapes business landscapes and competitive environments, Cognizant is focused squarely on four key areas where we believe we have industry leading capabilities, deep industry knowledge and the best global service delivery teams. These are cloud, digital engineering, internet of things, and artificial intelligence and analytics.</p> <p>&nbsp;</p> <p><b>Q/How does Cognizant intend to grow—organically or inorganically?</b></p> <p>&nbsp;</p> <p>A/Our growth strategy has two parts. First, we are protecting and optimising our core portfolio, which includes increasing efficiency, tooling and automation and delivery optimisation, protection of renewals, strengthening our industry alignment, and scaling our international footprint. And second, we are building leadership positions in the four key digital imperatives I had mentioned earlier. We are investing aggressively in these areas. And as we do so, we expect to accelerate our revenue growth. The two parts of our strategy reinforce each other. It is our core portfolio that has built our strength in the market and that historical strength means that we know how to help clients transition from managing their current legacy state to enabling their digital future.</p> <p>&nbsp;</p> <p><b>Q/What has been your approach while hiring local people in overseas markets, particularly in the US?</b></p> <p>&nbsp;</p> <p>A/North America is 75 per cent of Cognizant’s revenue and we have a momentum in the region, with bookings up by 27 per cent in 2020. Our customers expect us to have diversity and inclusion in our workforce to represent society at large. As a global company, we are committed to hiring in all geographies. We are building a global delivery network with centres throughout the world that will complement India, which will always remain our major delivery centre and is home to our two lakh talented and engaged colleagues. Building a global delivery network is important because we need to better reflect today’s world of agile development, where solutions are created in a rapid, iterative and flexible manner by having more near-shore and onshore skills, more automation and greater access to talent.</p> <p>&nbsp;</p> <p><b>Q/What about campus hiring?</b></p> <p>&nbsp;</p> <p>A/We plan to hire 20,000 new graduates in India this year and have strong relationships with major Indian universities. We are also investing in upskilling and reskilling tens of thousands of our employees in newer digital technologies where we are seeing demand above industry averages.</p> Fri Aug 07 10:45:55 IST 2020 peace-and-perseverance <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>SHOULD I STOP</b> investing in ongoing Systematic Investment Plans? I am ready to invest, but where should I put my money? I have lost my job; is there an order in which I should liquidate my assets? The rain of questions during THE WEEK-Aditya Birla Sun Life Mutual Fund webinar series highlighted two things: investors are worried, and hungry for credible information.</p> <p>&nbsp;</p> <p>The tumult in the bourse, the uncertainties of the job market and the worldwide health scare have all contributed to this feeling of deep unease. The webinars were launched against this backdrop, to reassure investors and to fill the knowledge gap. From a purely financial theme, the series quickly widened its scope to include well-being, too.</p> <p>&nbsp;</p> <p>Financial speakers on the series were K.S. Rao, who heads the investor education and distribution development wing of Aditya Birla Sun Life AMC Ltd; Gaurav Mashruwala, author, expert on yogic wealth and founder of financial planning firm ACE; Amit Trivedi, author, trainer and founder of Karmayog Knowledge Academy; and Dhirendra Kumar, founder of financial advisory firm Value Research. To this galaxy of financial gurus, the last two episodes added two sought-after motivational speakers: Gaur Gopal Das of ISKCON and Dr Hansaji J. Yogendra, director of The Yoga Institute, Mumbai. Yogendra’s session also had a virtual yoga class by Varsha Gala, a certified yoga practitioner and PhD research scholar.</p> <p>&nbsp;</p> <p>As a seasoned investor educator, Rao says, “Often, what affects an investor the most is not the fluctuations in the market, but the fluctuations of his own mind. Unless one invests holistically and harmoniously, the rewards can be elusive.” He cannot stress enough the fact that an “informed investor is a protected investor”.</p> <p>&nbsp;</p> <p>A master of plain speak, Mashruwala says that one question often asked by investors is, “How big should my corpus be for me to retire?” His answer: “I tell them that they can never retire. You are basing your retirement on a number. And you arrived at that number after considering variables. What happens when these variables change? Change is constant. Hence, you can never retire.” As with many things in life, retirement, too, is a decision that must be based on multiple factors. In fact, the upcoming webinar is exclusively on retirement planning.</p> <p>&nbsp;</p> <p>Mashruwala also spoke at length on yogic wealth and said that it was based on three kinds of riches—social, physical and financial. “It is like a three-legged stool,” he said. “Many investors do not realise that their wealth is incomplete if one of the legs is missing.”</p> <p>&nbsp;</p> <p>Emphasising the need to remain calm in these uncertain times, Gaur Gopal Das, popularly known as Prabhuji, said that while “worry does not rob tomorrow of its sorrows, it certainly does rob today of its joy”. A former engineer with HP, he quoted from the scriptures and corporate case studies with equal ease. The quote that stayed with listeners much after his session was one by American writer William H. Johnsen: “If it is to be, it is up to me.”</p> <p>&nbsp;</p> <p>The graceful Yogendra told viewers that she had a free tool to help them make decisions calmly. “Pranayam,” she said. “Pran is bio-energy and ayam is management. Manage your breathing and your body will come into balance. Your thoughts will soon follow.”</p> <p>&nbsp;</p> <p>There were hilarious moments like the time a young investor asked Trivedi if this was the right time to invest. Trivedi had a grin and a question for him: “Why do you want to invest at all?” He elaborated that all investments must be tied to goals. One does not invest or stop investing because the market is down. One can certainly re-look one’s portfolio, Trivedi said, but that is a rational process and not a knee-jerk reaction.</p> <p>&nbsp;</p> <p>Kumar’s thoughts were in line with other panellists’. A simple habit every investor must follow is to write down his plan and stick to it, said Kumar. “You decide you will invest when the market is down by 10 per cent. When it touches that mark, you will wait for it to go down further,” he said. “However, if you write down your decision, you are more likely to carry it out. It is a promise to yourself.”</p> <p>&nbsp;</p> <p>All panellists agreed that these are unprecedented times and that new rules will be in place going forward. This was reflected in a recent tweet by Kumar. It was the photo of a mug with the abbreviation EBITDAC. The abbreviation minus the C is known—earnings before interest, taxes, depreciation, and amortization. C for coronavirus.</p> Fri Aug 07 10:43:09 IST 2020 what-we-expected-to-happen-in-three-years-happened-in-three-months <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>India-born Rajesh Subramaniam started his career in FedEx as an entry level marketing analyst 29 years ago. He rose through the ranks to become president and chief operating officer of the courier behemoth last year. In an exclusive interview with THE WEEK, Subramaniam talks about his company’s strategy during the pandemic, its prospects and his early life in Kerala and Mumbai. Excerpts:</p> <p>&nbsp;</p> <p><b>Q/ The past few months must have been challenging for FedEx. How did you deal with it?</b></p> <p>A/ Currently, we have found ourselves on the frontline of the war against pandemic, with more than five lakh employees delivering aid and medical supplies across the globe and keeping commerce in motion. Our organisation has helped transport 31.8 kilotonnes of PPE kits since February 1, including over 1 billion masks, across the globe. At the same time, we have orchestrated more than 100 chartered flights and 1,000 ocean containers to supply critical PPE kits. We have also facilitated the transport of more than 7,300 humanitarian aid shipments globally through collaborations with our non-profit partners. At the same time, we have continued to see a significant surge in e-commerce shipments as people stay at home and order online.</p> <p>Our strategy was built for this growth. We were skating to where the puck was going, but instead, the puck came to us. What we expected to happen in the next three years happened in a matter of three months. We are also reimagining FedEx at the intersection of physical and digital networks. We are also excited about our recently announced alliance with Microsoft to leverage data and technology to add value.</p> <p><b>Q/ What kind of changes have you made in the style of functioning at FedEx?</b></p> <p>A/ I believe in three roles of the leader—vision, team, and execution. It is critical to establish the vision, and make sure we have the right team in place to take the vision forward and execute it. I am also highly focused on a culture fuelled by collaboration and teamwork. I believe we are stronger together, and the best ideas and results come when we share ideas and work together across the company.</p> <p><b>Q/ What have you learnt from the chairman and founder of FedEx, Fred Smith?</b></p> <p>Within a few months of joining the company, I had the opportunity of meeting our chairman and founder, Fred Smith. He spoke to a small group about his vision for the future of FedEx, particularly regarding international expansion. He is an inspiring leader, and his vision, which was well ahead of its time, got me hooked. I was lucky to be part of the conversation that early in my career, and I immediately knew I wanted to be part of the global growth.</p> <p>Five years after that meeting, I was working in management at the FedEx headquarters in Memphis. I got an opportunity to go to Hong Kong to be part of our Asia Pacific division as the managing director of marketing. It was a calculated risk, but it was a unique opportunity to be part of the FedEx growth story in Asia. I learned a lot—it was like running a small business inside of a big business. The scope of the job was vast, as I was responsible for many aspects of the business. This was a pivotal part of my career, and to this day, I credit my seven years spent in Hong Kong as the single biggest move that helped me both personally and professionally.</p> <p>I was promoted while in Asia, and then the next opportunity was to be the president of our operations in Canada. My time spent in Canada was again an experience I will never forget. There is true learning as you move from a staff function, in my case marketing, to then run as a general manager of operations, for the whole company in Canada. When I first moved to Canada I visited the stations and met with our frontline couriers at 5:30am. I quickly learnt that they were dealing with different issues, and it became evident how vital communications was to the role. Then, an opportunity came to be part of a reality TV show the Big Switcheroo in Canada. (CBC TV). I swapped jobs with somebody from the frontline for a week, and it all played out on reality TV. I learnt a great deal from my time in Canada, the biggest of which was that at the end of the day, the FedEx business is a people business. We can talk about customer experience all we want, but at the end of the day, it is people interacting with people.</p> <p><b>Q/ You studied chemical engineering. How did the transition to FedEx happen?</b></p> <p>A/ When growing up in India studying maths, physics and chemistry, you are on a straight and narrow path. If you do reasonably well at the IIT, then you are likely to get a scholarship to go to the US. That was my case. I arrived in the US with a $2 bill in my pocket, which I still have, to attend Syracuse University for my master’s. It was only after that point that I began to think ‘is this a career I want to be in, or do I want to broaden myself and go into the world of business?’ It quickly dawned on me that I needed to be thinking broader, that I needed to look for opportunities outside of engineering. I figured the logical path to take would be to get an MBA. I found the cheapest of the top 20 schools I could go to—the University of Texas in Austin.</p> <p>I graduated in 1991 when the US was in the middle of a recession. Jobs were very tough to come by, especially for somebody like me who did not have a green card. I had been through several interviews and many times I was asked about my green card. So when I walked into my interview with FedEx, I didn’t say good morning or even hello. Instead, I walked in and right off the bat told them I did not have a green card and did not want to waste their time if that was going to be an issue. They looked at me, baffled, and said, “Son, let’s first figure out whether you have what it takes to work at FedEx, then we will worry about the paperwork”. I was hired as an entry-level associate marketing analyst.</p> <p><b>Q/ How were your growing-up years in India?</b></p> <p>A/ I was born in Thiruvanantha-puram and it was a simple way of life focused on education. My father retired as DGP of Kerala and my mother a doctor. From the beginning I had a big focus on sports. My father is an ace sportsman, and sports have been our passion. I played everything, but focused primarily on cricket and badminton. At age 15, after my education at the Loyola School in Thiruvananthapuram, my father thought that it was prudent for me to move on to Mumbai. Overnight I moved from a nice, comfortable house in Thiruvananthapuram to a 200-square-foot apartment in the middle of a teeming city. Honestly speaking, I enjoyed my time in Mumbai. This change was made very quickly, so the ability to adapt to change and thrive in new circumstances was instilled in me at a very young age.</p> <p>I was also fortunate to be selected to IIT Bombay. It was a fantastic experience of four years with wonderful colleagues who remain lifelong friends. My biggest learning from IIT Bombay was how to compete in a tough environment. I also learned how to be logical, analytical and strategic. While I studied chemical engineering, I do think these core skills were instilled in me for the rest of my life.</p> <p>My wife, Uma, who is an IIM Ahmedabad graduate, was at FedEx in the early 90s. When we moved to Hong Kong, we decided that one of us had to take the back seat. It could have easily been the other way, and she would have been more successful than me. We have two children whom we are very proud of.&nbsp;</p> Sat Aug 01 18:01:27 IST 2020 the-great-wall-of-india <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>It seemed like a detail so small that scant attention was paid to it. Amid a long list of proposals, reforms, wish lists and tax and duty rejigs in Nirmala Sitharaman’s last budget presentation, there was an innocuous item—customs duty on toys, tricycles, dolls and scale models imported into India was sought to be hiked from 20 per cent to 60 per cent.</p> <p>It was one of the first salvos India had fired against China in what has now become a trade war, though it took a while for many to realise the significance. The Indian toy market, worth Rs1.12 lakh crore, had been flooded by Chinese products. Additionally, the government started enforcing high BIS quality standards on all toy imports, even while offering subsidies and land at concessional rates to Indian toy makers.</p> <p>China’s deep involvement in India’s business scape goes beyond the usually-talked-about trade deficit, the dominance of Chinese majors in India’s telecom sector and the dragon’s deep coffers fuelling India’s startup success stories. “Chinese business presence in India is huge,”said trade economist Anusree Paul. “There are more than 75 companies in e-commerce, fintech, aggregation services and logistics.” The total Chinese money invested in India is around 06 lakh crore, spawning 1.87 lakh jobs.</p> <p>While Chinese tech and telecom brands like Xiaomi, Oppo and Vivo are household names in India, names like Sany, Dezan Shira or Benling are unlikely to ring a bell. Yet, these are the flag-bearers of the Chinese juggernaut in India. “Apps and mobile handset makers apart, China’s ‘smart’investment has been in garnering the lucrative B2B contracts and infrastructure projects from India,”said a government official who did not wish to be named. “The public may not be familiar with these brands, but that is where big bucks and deep inroads can be made.”Sany, for instance, is among the world’s biggest concrete machinery makers and it has six units in India, with the main manufacturing plant in Chakan, Pune.</p> <p>Chinese investments in metals and renewable energy sectors are more than Rs55,000 crore each, way above telecom and auto sectors that get talked about more. “Manufacturing generated the highest number of total jobs and greatest investment, with a total of 1.46 lakh jobs and $22 billion dollars of investment,” said a report by fDi for CII. “Electricity and construction have the largest project size on average in terms of investment and jobs creation.”</p> <p>Interestingly, even while improving its technological prowess with research labs like those of Huawei in Bengaluru, China has also been following a two-pronged strategy to make the maximum out of the Indian ecosystem. One, using their experience in executing cost-effective and big-scale construction, these firms bid for big government infrastructure projects. And two, making long-term investments in sunrise sectors like electric vehicles and solar/wind energy projects.</p> <p>A paper by Brookings Institute (March 2020) says Chinese companies like Lany, Longi and CETC aim to invest $3.2 billion dollars in India’s renewable energy sector. Chinese automakers in India have lined up EVs. Ironically, two out of three memoranda of understanding that Maharashtra signed with Chinese companies on the very day of the Galwan clash involved Chinese automakers Great Wall and Photon.</p> <p>With the tide turning, that strategy may just come face to face with the great wall of India. While the ban on Chinese apps like TikTok made headlines, even more significant were the restrictions India brought about on Chinese companies in the infrastructure and heavy industries area. The Maharashtra MoUs were the first to be put on hold, along with the Rs471-crore signalling work on the Kanpur-DDU railway line given to Beijing National Railway Research.</p> <p>Nitin Gadkari, Union minister for transport and MSME, also banned Chinese firms from road construction, saying he will tweak norms. “Construction norms are not good, so I have asked to change it…so we can encourage Indian contractors,” he said. With Rs100 lakh crore set to be invested in constructing roads, it is a blow to Chinese business interests.</p> <p>The power ministry has announced a ban on power equipment sourced from Chinese companies besides cancelling an order for 20 lakh smart meters. The state-run telecom operator BSNL was forced to put on hold its Rs8,697 crore 4G tender, when the Telecom Export Promotion Council alleged that it ignored ‘Make in India’ norms to favour foreign (read Chinese) companies. NITI-Aayog also pitched in, suggesting that BSNL rework its tender to use only India-made equipment. TRAI chairman R.S. Sharma put in his own bit by saying local telecom gear makers must be given preferential market access.</p> <p>The trick with these piecemeal responses, which were followed by a sweeping order on July 23 limiting Chinese companies from bagging government contracts and making security clearance from the home and external affairs ministries mandatory, seem to be to get the economic boycott message across loud and clear, even while keeping India immune from accusations of targeting China or contravening the World Trade Organisation norms. That is why none of the government decisions mentions China directly. An order in April banning automatic FDI, as well as the end-July amendment on government orders, speak only of countries India shares land border with, while the ban on power equipment says it is applicable to ‘prior reference countries.’ Even the 100 per cent inspection of Chinese shipments at Indian ports was carried out without any written order.</p> <p>The biggest lacunae in India’s strategy, however, is that the balance of trade is heavily lopsided in China’s favour. Even if India stops all imports from China, it just forms 3 per cent of the total exports of the People’s Republic. In contrast, 14 per cent of the materials India imports are from China, including crucial raw materials on which India’s pharmaceutical industry is dependent, and components for anything from electronic products to mobile phones and automobiles made in India.</p> <p>The bigger question is if Indian industry will give up Chinese imports and raw material that give them immense cost advantage. JSW Group chairman and managing director Sajjan Jindal announced that his company would bring down its $400 million import of clinkers, the base rock for manufacturing cement, from China down to zero in two years. A few others also have made similar statements.</p> <p>“We have faltered as a country by going for the ‘cheapest’ as the only criteria,” said Vinod Sharma, managing director of Deki Electronics. “That is not very strategic. We have to always be careful not to put all our eggs in one basket.”His game plan? Work towards an alternative over the next 18-24 months, with the government providing incentives ranging from ‘star rating’to GST rebates for companies going for increased localisation.</p> <p>Mukesh Aghi, CEO and president of the US-India Strategic Partnership Forum concurred. “You have to divert from China,”he said. “There is no other option. We have to move from cheap goods to quality goods. It is not just cost that should define your process. Look at it strategically. Let us say your profit goes down 5-7 per cent, it is still worthwhile. Once you do that, you will find ways to innovate, to become efficient and competitive.”</p> <p>However, knee-jerk responses like slowing down imports from China at Indian ports only seem to have boomeranged. “That, and measures like cancelling MoUs, only make us lose credibility when we go back on our word,” said Chandrakant Salunkhe, president of the India China Business Council. “We support any move in our national interest, but it should be systematic. Let China learn the lesson from our strong points.”</p> <p>India knows well the limits of its economic muscle, and is hoping for a strategic leverage. But the developments could mark a turning point in India’s trade plans. “We must move in mission mode to be <i>atma nirbhar</i> in at least 15 critical sectors,” said Deepak Sood, secretary general of Assocham. “We should work on a twin track of not only investing more to ramp up capacity, but also ensuring that the end consumers get best quality products at internationally competitive prices.” Assocham has come up with a two-year roadmap to ramp up domestic capacity in 15 large import items, ranging from oil and electronics to steel.</p> <p>The move to reduce dependency on China could be significant in a post-Covid-19 world order. “India will have to muscle its way onto the high table,” said Aghi, “and make sure it does not instead end up being part of the menu.”&nbsp;</p> Thu Jul 30 16:04:37 IST 2020 xi-jinping-sees-breaking-up-india-to-be-of-great-benefit <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q/ Where is the US-China technology war headed?</b></p> <p>A/ The winner of the US-China tech war will dominate our era. Beijing was not considered a tech contender a decade ago. Now, some call it a leader. America is already behind in critical areas. Focused on other matters, Americans did not mobilise themselves to meet Beijing’s challenges. Now, the Trump administration is thinking of how to get back control of cutting-edge technologies. Just look at how the US is now going after Huawei Technologies. At the beginning of the year, Huawei looked like it was going to dominate 5G. Now the company is in retreat in the world’s most important markets.</p> <p><b>Q/ How should India respond to Chinese aggression—military versus economic costs?</b></p> <p>A/ India needs to put more forces on its border than China has. Ultimately, however, it will be economic pressure that forces the Chinese military to pull back. Boycott of Chinese goods, banning of China’s apps, removal of Huawei equipment from India’s telecom backbone, ejection of Chinese businesses and the like will pressure China to return to its side of the border for good. India must teach China a lesson it will never forget.</p> <p>The costs imposed on China must be greater than the benefits Beijing believes it obtains with its hostile conduct. Because Xi sees breaking up India to be of great benefit, New Delhi—and the Indian people—must be willing to impose severe measures on him and his dangerous regime. India’s only option is to be strong. If it is not strong now, China will dismember India. India is in the same position as the rest of the world when it comes to China. India cannot think it can escape decades of misguided policy towards Beijing without cost.</p> <p><b>Q/ How has the Covid-19 pandemic impacted China’s relations with the rest of the world?</b></p> <p>A/ An arrogant Xi Jinping, who has always believed his China should dominate the world, saw an opportunity during the coronavirus pandemic to extend Chinese influence while countries were stricken by and preoccupied with the disease. China’s generals thought they would catch the Indian Army snoozing on the border.</p> <p><b>Q/ Is China overtaking a declining US?</b></p> <p>A/ No. China has reached the limits of what it can do. There is wide disagreement on why China has gone full “wolf warrior”, as it is called. Some believe China went on this bender because Xi thought China was strong, and others argue he did so because he thought his regime weak. I am in the latter camp. I think Xi saw a closing window of opportunity. The arrogant leader knew China’s economy was stumbling, the environment was giving out, the Chinese people were restless, and the country’s demography was entering a long period of accelerating decline.</p> <p>India is of particular concern for Xi. The Chinese people take great pride in being the world’s most populous tribe, and he knew that India was just about to overtake his country in population size. Xi could see that demographic trends, which he could do nothing about, would mean India would soon leave China in the dust. For Xi, it was now or never, the last moment to humble India.</p> <p><b>Q/ What does the future hold for China’s ambitions of emerging as a superpower?</b></p> <p>A/ China has reached the limits of its power, and in the ordinary course of events would be starting down a decades-long slide into weaknesses. We should, however, be aware that a declining China is still a dangerous one—perhaps even more dangerous than a strong one. Xi, presiding over a deteriorating situation, now has all the reason in the world to lash out, especially because he has seen that Chinese intimidation has worked in the past. If India stands its ground, it will prevail.&nbsp;</p> Thu Jul 30 15:59:38 IST 2020 metal-dictator <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>G</b>old, almost as a rule, gains when there is an uncertainty in the economy. The economic turmoil triggered by the pandemic has been no exception. On July 27, gold prices hit a new high of $1,944 an ounce, beating the previous record of $1,921 in 2011. So far in 2020, global gold prices have surged 27 per cent. Spot gold prices in India topped 052,000 for 10 grams on July 27. In rupee terms, gold has rallied 28 per cent this year, on top of the 25 per cent rally it had in 2019.</p> <p>“The rally in gold is ferocious and we are seeing a relentless demand for the safety from coronavirus turmoil,” said Rahul Gupta, head of research (currency) at Emkay Global Financial Services. “The political decisions to increase stimulus packages is keeping gold prices higher.”</p> <p>Over the past few months, central banks around the world have slashed interest rates. In many developed economies, they are currently near zero. The stimulus signals in the US is more pain ahead for investors and that is making them rush to gold. In the Indian market, the depreciation in rupee also weighs on gold prices. “Weak macro indicators, global uncertainties due to trade war, geopolitical tensions, fears of global slowdown and a U-turn in monetary policy stance by the US Federal Reserve augured well for gold prices,” said Dhiraj Relli, managing director and CEO, HDFC Securities.</p> <p>In the first six months of 2020, global gold exchange traded funds saw inflows of $39.5 billion. In India, much of the gold is held in physical form. Indian Gold ETFs saw inflows of Rs2,040 crore in April-June, taking their total assets under management to Rs10,857.44 crore.</p> <p>Experts say gold prices could rally further over the next few months. “The overall situation remains supportive for gold,” said Anuj Gupta, deputy vice-president (commodities and currencies research), Angel Broking. “Till Diwali, gold may test $2,000 an ounce and in the domestic market we are expecting around Rs53,000-Rs54,000 per 10 gram level. My recommendation is to book some profit; if someone holds gold, then she could book profit on 30-40 per cent of the holding.”</p> <p>Compared with fixed income instruments, on an average, gold has done 2-3 per cent better in the past 20 years. But this might not be the time to invest in gold because the risk reward is not in favour. “Gold may go up another 5 per cent or maybe 10 per cent. But, small investors are not going to exit when gold goes up 5-10 per cent. This Covid-19 will be a thing of the past maybe in eight or 12 months and when the economic rebound happens, assets like gold, which don’t serve any productive purposes, will come down,” said Raghvendra Nath, managing director of Ladderup Wealth Management.</p> <p>Experts say that there would be long periods of underperformance by gold. For instance, the last time gold topped $1,900 per ounce was in 2011. If one had invested at that peak, he hardly has made any money in the nine-year period that followed.</p> <p>One can invest in gold by buying the physical metal or buying digital gold through platforms like Paytm, MMTC-Pamp and SafeGold. There are also gold ETFs and gold funds that are offered by mutual fund houses. The sovereign gold bonds are a good bet, considering that these bonds offer an annual interest of 2.50 per cent, which can act as a hedge when the investment underperforms.&nbsp;</p> Thu Jul 30 18:40:56 IST 2020 divide-and-earn <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Imagine switching</b> on the television to catch the exact moment your favourite batsman hits the century. What if you have a knack for accurately predicting how things shape up? Magical, isn’t it? Like in cricket, successful investing is all about knowing which asset will perform and which will not. The key is allocating more money to the right asset, while lowering the exposure to others.</p> <p>So, in order to maximise gains, one has to have the right allocation in the right asset at the right time. Investment products like asset allocator funds that successfully execute the triple ‘right’ strategy are able to create sizeable wealth over the long term. Also, they smoothen the investing experience by being less volatile.</p> <p><b>Asset allocator fund</b></p> <p>The typical reaction of investors when an asset class corrects is that of fear. Similarly, investors become euphoric when asset prices rise sharply. If Warren Buffett’s golden words of ‘be fearful when others are greedy and be greedy when others are fearful’ are practised, then you would realise the typical investor reaction described above is exactly the opposite.</p> <p>To practise disciplined investing across assets, one needs to have an efficient model that follows time-tested rules. This is exactly what an asset allocator fund does. It is easy to say buy low, sell high for equity allocation, but it is difficult to implement. What is low? What is high? When do you enter and exit? Should you allocate to equity or debt? Will you miss the rally if you redeem? All these questions are easily answered when you have an asset allocation fund in place, which also emerges as an all-weather solution for investors who are willing to stay invested for the long term.</p> <p>Asset allocator funds predominantly invest in equity and debt. A good asset allocator fund tries to achieve the optimum allocation of debt and equity based on the relative attractiveness of the asset classes. In order to achieve an unbiased view on asset class allocation, several funds tend to use models based on which investment decisions are taken. Such model-based approach ensures that human emotion, which could play spoilsport, is always kept at bay.</p> <p>Over the last decade, we have seen different events taking centre stage. When Indian markets corrected in 2008, most of the investors sold their equity holdings. By 2015, when markets rallied sharply, very few were ready to sell. And when markets reached peak valuation across market capitalisations in January 2018, investors expected the rally to continue and generate even more returns. This clearly shows that it is very difficult for a lay investor to take prudent decisions. This is where asset allocation funds come in handy. These funds are designed to remain objective in such situations.</p> <p>When investing in an asset allocation fund, an investor gets the benefit of an actively managed portfolio with the investment corpus diversified across asset classes, constant monitoring and re-balancing, better risk adjusted returns and tax benefits.</p> <p><b>Why invest now</b></p> <p>Over the past three months, equity markets have moved over 36 per cent, creating one of the sharpest rallies ever. Now, it is time to take a prudent step when investing for the long term. Markets are no longer cheap as they were three months ago. So, it is time to go for a fund which will help an investor stay ahead of the curve. And one fund which helps an investor achieve this is the ICICI Prudential Asset Allocator Fund. Historically, this fund has proven that it has the capability to stay ahead of the curve.</p> <p>Helping the fund managers decide the optimal asset allocation is an in-house model which has been successfully put to use over the past several years. Between March 2020 and May 2020, an investment of 010 lakh would have become 028 lakh, about 27 per cent more than Nifty 50. This clearly shows that sticking to the right asset allocation and the right fund matters.</p> <p>&nbsp;</p> <p><b>Author is founder, Swarn Wealth Management.</b></p> Thu Jul 16 17:18:25 IST 2020 flight-plan <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Hindustan Aeronautics Limited (HAL) has often been in the news for the wrong reasons, be it the long project delays, quality issues or labour problems. But the aircraft-maker—India’s only one—is trying to shed that image. With an order book of Rs50,500 crore and a number of big projects in hand, HAL is all set to take on the multinational giants that have been looking for a piece of the Indian aerospace and defence pie.</p> <p>&nbsp;</p> <p>“Our current production projects include Su-30 MKI aircraft, Light Combat Aircraft Tejas, Dornier Do-228, Advanced Light Helicopter Dhruv, Chetak helicopter, and engines and aerospace structures to fulfil the requirement of our customers, mainly from the defence services,” said R. Madhavan, chairman and managing director of HAL. “HAL is also undertaking upgrade programmes of Mirage 2000 and Jaguar DARIN-III.”</p> <p>&nbsp;</p> <p>HAL recorded a turnover of Rs21,100 crore for the financial year ended in March, which was 7 per cent more than the previous year. Then the Covid-19 pandemic played spoilsport, and the company is trying to overcome the stress on production by working with private suppliers. “HAL has roped in many private organisations to provide components,” said Air Marshal B.K. Pandey, former head of the Headquarters Training Command of the Air Force. “However, the main assembly of the aircraft and the helicopters rests with HAL.”</p> <p>&nbsp;</p> <p>HAL has faced many challenges from time to time. Delayed schedules, difficulty in procurement of spares, and human resource problems have been regular. It took around three decades for the company to develop the Light Combat Aircraft Tejas. Pandey, however, said these problems were similar to those of aerospace and defence companies around the world, and HAL was not entirely responsible for the delay. “Partly, the Indian Air Force has to be blamed for delayed deliveries by HAL,” he said. “The Air Force keeps changing its requirements. It should be part of the process of developing an aircraft rather than a bystander. On the other hand, the Navy is somewhat fully involved in the process of an aircraft’s development.” In its initial years, said Pandey, HAL did far better. “It started developing the first fighter, HF-24, in 1956, and delivered it in 11 years,” he said.</p> <p>&nbsp;</p> <p>It is exactly that kind of efficiency that HAL needs at the moment, as private players have started challenging its dominance in the domestic market. The company has been struggling to sell its products even to the Air Force.</p> <p>&nbsp;</p> <p>In fact, HAL seems to have woken up to the challenge. “The second batch of the Hawk aircraft orders were produced ahead of target,” said S. Mallikarjuna Swamy, former executive director of HAL. “The company has also taken steps in advance on orders of trainer aircraft, combat helicopters and the development of engines.” Experts suggest that the government should let the company explore the civilian market for helicopters and small planes.</p> <p>&nbsp;</p> <p>About half of HAL’s revenues come from international deals to manufacture aircraft engines, spare parts, and other materials, which include the fighter jet programme with the Sukhoi Corporation of Russia, the contract to manufacture aircraft parts for Boeing and the multi-role transport aircraft project with Ilyushin of Russia. HAL is planning to set up logistics bases in Indonesia, Malaysia, Sri Lanka and Vietnam, which would help it sell its products and act as service centres.</p> <p>&nbsp;</p> <p>HAL has a longstanding relationship with the Indian Space Research Organisation. “All launch vehicles of ISRO have parts manufactured by HAL,” said Madhavan. “We have a dedicated aerospace division to support ISRO’s requirements. We are focusing on more technology-intensive requirements and have set up a new facility for manufacturing cryogenic engines to support ISRO’s programmes.”</p> Thu Jul 09 17:27:17 IST 2020 competitive-private-industry-gives-an-opportunity-for-hal-to-evolve <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q/What is the current status of the production of LCA Tejas?</b></p> <p>&nbsp;</p> <p>A/The order for the first 40 aircraft is categorised into two tranches of 20 each—initial operational clearance (IOC) and final operation clearance (FOC)—with 16 fighters and four trainers in each batch. The delivery of the first 16 fighters in IOC configuration is complete. The FOC for the fighter variant was issued to us in February 2019. This FOC variant additionally comes with air-to-air refuelling capability, close combat gun, additional drop tanks, BVR (beyond-visual-range) missile capability, updated avionics and flight control software suite. The FOC variant will reduce the maintenance man hours and turnaround time.</p> <p>&nbsp;</p> <p>The first LCA in FOC standard took to the skies on March 17, 2020. We had achieved the feat within a record time of 12 months after the release of the Drawing Applicability List (DAL) and SOP by CEMILAC. On May 27, FOC standard LCA Tejas was inducted into the IAF Squadron ‘Flying Bullets’, marking a major milestone for us.</p> <p>&nbsp;</p> <p>Similarly, the production of eight LCA twin-seat trainers based on the provisional design document provided in June 2019 is also progressing at HAL. The current LCA manufacturing capacity established at HAL is for eight aircraft a year. The capacity is being augmented for production of 16, for which a second production line has been set up and entire structural modules of front, centre, rear and wing are being manufactured through our outsource partners.</p> <p>&nbsp;</p> <p><b>Q/How do you view the growing competition from the private sector?</b></p> <p>&nbsp;</p> <p>A/I feel that a vibrant, competitive private industry base in the country is an opportunity for HAL to evolve and exert for greater challenges. The aerospace and defence (A&amp;D) industry involves complex technology, high investment cost, long gestation period, stringent quality requirement, long development cycle and tedious certification process. This acts as a major challenge for new entrants. The recent past has witnessed a paradigm shift in defence procurement procedure with the introduction of the strategic partnership (SP) model. SP provides the opportunity to the Indian private sector for making an entry into the industry with a product by collaborating with an original equipment manufacturer.</p> <p>&nbsp;</p> <p>Currently, the defence manufacturing ecosystem in the country is developing. We have spearheaded this by collaborating with private players, foreign OEMs and academia for various production and development projects. We are also making significant efforts toward the development of a skilled workforce through an apprentice training programme, Aerospace and the Aviation Sector Skill Council and other skill development initiatives. We are also aiming to become a major system integrator and have outsourced different activities to different private vendors.</p> <p>&nbsp;</p> <p><b>Q/There are talks of making India more self-reliant in defence production. How would it benefit HAL?</b></p> <p>&nbsp;</p> <p>A/We play a significant role in the domestic aerospace industry in terms of service provided to the Indian armed forces and the aerospace manufacturing ecosystem. In order to ensure maximum utilisation of existing defence and aerospace facilities in the country, the urgent need is to provide orders for aircraft and helicopters manufactured and developed by HAL under Make in India.</p> <p>&nbsp;</p> <p><b>Q/Has there been an exodus of talent from HAL because of the arrival of multinational aerospace companies?</b></p> <p>&nbsp;</p> <p>A/It is in line with the industry average and there has been no mass exodus. Though the advent of MNC aerospace companies can result in talent drain, in my opinion, the learning opportunities and the challenging and inviting work environment and pro employee policies of the company will help HAL retain the workforce.</p> Thu Jul 09 17:23:57 IST 2020 veteran-viewpoint <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>JAWAHARLAL NEHRU</b> and Narendra Modi represent two distinct models of governance, both steeped in their ideological moorings. One common thread in both of them, however, is an emphasis on massive industrialisation for economic growth. While Nehru looked at public sector-driven industrialisation as an engine for social justice, Modi wants to keep the two objectives separate. It is between these two extremes that Maruti Suzuki chairman R.C. Bhargava slots his prescription for making Indian industry globally competitive. In his new book, Getting Competitive: A Practitioner’s Guide for India, Bhargava praises Modi for making the manufacturing process competitive, a key ingredient that was missing in Nehru’s socialist vision.</p> <p>&nbsp;</p> <p>Bhargava, 85, has a unique vantage point: His first assignment as an IAS officer was in the Uttar Pradesh secretariat in 1956, when Nehru gave a socialistic roadmap for the country. After serving as a bureaucrat for two decades, he spent the following four in building Maruti.</p> <p>&nbsp;</p> <p>Having experienced bureaucracy from both sides, he suggests that the current cadre management system be changed to a cadre of specialists for industrial and economic management, something which the government is pushing with the lateral entry of domain experts. He goes a step ahead to suggest that the government and industry exchange officers for three years.</p> <p>&nbsp;</p> <p>Bhargava offers a template which he argues would work for India, which is torn between a socialist past and the capitalist pull—the Japanese way of working and living. He recommends it even for the top management of India Inc. He goes on to discuss other aspects like the role played by reliable supply chains, the need to empower policymakers and the downside of not factoring consumers in policymaking.</p> <p>&nbsp;</p> <p>The book has come at a time when both corporations and individuals have been forced to hit the reset button and the country at large is focusing on the need to become self-reliant and competitive. As the lockdown-induced humanitarian crisis unfolded, a debate has already started on the ways the government, industry and civil society need to adapt to rewrite the India story. This book is a valuable contribution to that debate.</p> <p>&nbsp;</p> <p><b>Getting competitive: A Practitioner’s Guide for India</b></p> <p>By R.C. Bhargava</p> <p>Published by</p> <p>Harper Collins</p> <p>Price Rs599, Pages 240</p> Thu Jul 09 17:19:45 IST 2020 india-should-target-15-per-cent-growth <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q/ Apart from policy intervention, the book says the Japanese management style is best suited for Indian conditions. The behavioural shift appears to be a tall order.</b></p> <p>&nbsp;</p> <p>A/ It is necessary to understand what aspects of Japanese management I am suggesting Indian industry should adopt. There can be no doubt that if workers believe that their future job security and quality of life would be best ensured by their company becoming and remaining highly competitive and prospering as a result, they can make a big contribution to making that happen. That would create a win-win situation for the management and all others and be in the national interest.</p> <p>&nbsp;</p> <p>Managements need to understand this, as otherwise it is unlikely that global competitiveness can be achieved. They should therefore look for ways to make this happen. That is the essence of the Japanese management system. Incidentally, this kind of management effort would also help to build trust with the political system and be more in consonance with our political and social conditions, making it sustainable over the long term.</p> <p>&nbsp;</p> <p><b>Q/ The book draws comparisons between the Nehruvian approach to industrialisation and Modi’s.</b></p> <p>&nbsp;</p> <p>A/ The fundamental difference is that in the Nehruvian approach competition was deliberately excluded by policy. There was no objective of making public or private enterprises competitive. There was no realisation that customers, who are the citizens of India, would gain if manufacturing resulted in better quality and lower-cost products. The recommendation in the book is that the emphasis should be on maximising competitiveness and various recommendations have been made on what the government and industry can do. One of these is that manufacturing costs should not be increased to help achieve social justice goals.</p> <p>&nbsp;</p> <p><b>Q/ The increased focus on the need for India to become globally competitive is also translating into calls for banning imports from China.</b></p> <p>&nbsp;</p> <p>A/ The call to ban imports from China is for reasons other than achieving global competitiveness. Ban on imports is not required for achieving competitiveness. Indian products can compete on merits if manufacturing becomes highly competitive as a result of the political system and industrialists working together to achieve this objective, and adopting the correct policies and strategies.</p> <p>&nbsp;</p> <p><b>Q/ You mentioned that despite the 1991 reforms, growth has been fettered by the lack of demand. What are your suggestions for keeping the cost of production low?</b></p> <p>&nbsp;</p> <p>A/ Reducing costs of production is one of the essentials for becoming more competitive. If the governments, Central and state, fully accept that they have to help in making this happen, in all their interfaces with industry they should see how costs can be reduced. Governments provide infrastructure, many inputs, and create an environment for industry to function. All of these can become more efficient and be provided at lower cost. Time has a cost and reducing delays would lower costs.</p> <p>&nbsp;</p> <p><b>Q/ How do you see the demand for the car industry changing as people will prefer personal vehicles?</b></p> <p>&nbsp;</p> <p>A/ It is too early to make any long-term forecast. Presently, there is a shift towards smaller hatchbacks. Customers may again change their thinking in the future.</p> <p>&nbsp;</p> <p><b>Q/ Maruti Suzuki has been the market leader because of the brand and pricing. New players are now vying for consumer attention with jazzier products and competitive prices.</b></p> <p>&nbsp;</p> <p>A/ The car sector has been competitive for many years. Such competition is good for the industry as well as for customers. MSIL will continue to do its best to remain competitive.</p> <p>&nbsp;</p> <p><b>Q/ In a changed world after the pandemic, what are the lessons for the industry?</b></p> <p>&nbsp;</p> <p>A/ An opportunity has been created to change our ways of doing business. India has failed to develop fast enough in the past decades and the current opportunity should be used to remedy this by making manufacturing highly competitive and targeting a growth rate of around 15 per cent a year. That will benefit everyone.</p> Fri Jul 10 11:06:54 IST 2020 cover-drive <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Pearly Gupta, a Mumbai-based media professional, was relieved when her 31-year-old brother returned home after being cured of Covid-19. The hospital bill, however, came as a rude shock. Her brother had spent nine days in a private hospital, and his treatment was covered by a group insurance plan provided by his employer. The plan, however, did not cover the cost of consumables—single-use items like masks and personal protective equipment.</p> <p>“The total cost of the treatment was Rs2.59 lakh, in which consumables accounted for more than 01 lakh,” said Gupta. “This had to be borne by us. I feel one should carefully go through the fine print before finalising any health insurance cover.”</p> <p>With Covid-19 cases surging across India, insurance companies are offering a range of plans to offset the rising cost of treatment. There are plans that cover the cost of PPE kits and even outpatient bills. Companies are developing new products as per the guidelines recently issued by the Insurance Regulatory and Development Authority. The IRDA has asked all general and health insurance companies to offer a standard, short-term policy—called Corona Kavach—with a minimum sum insured of Rs50,000 and a maximum of Rs5 lakh. The new plans, which will also cover home treatment expenses, will be valid till March 31, 2021.</p> <p>“Our health insurance policy covers Covid-19 treatment,” said Shanai Ghosh, executive director and CEO, Edelweiss General Insurance. “We also have a modular product with optional benefits that can be used to cover various illnesses, including Covid-19. Usually, most policies have a waiting period of around one month, except for accident cases. Some coronavirus-specific policies launched recently have a waiting period of 15 days. But we have obtained special approval from the IRDA to waive this for our policy.”</p> <p>According to Ghosh, consumables make up around 50 per cent of Covid-19 treatment costs. “So we have decided to pay reasonable charges for PPE kits for Covid-19 admissions. We are not charging additional premium to cover medical expenses related to Covid-19.”</p> <p>In the early days of the outbreak in India, treatment costs were low because patients were being admitted to government facilities. After the number of cases began surging, a few private facilities opened up and costs increased. With private hospitals increasingly playing a role now, treatment costs are expected to stabilise.</p> <p>Bajaj Allianz General Insurance has introduced ‘Corona Care’, a Covid-specific group policy that will help those who do not have a holistic health insurance policy. It has a waiting period of 15 days and covers pre- and post-hospitalisation expenses for 30 days.</p> <p>The company says it has a mechanism to fast-track Covid-19 claims. “The moment a claim is notified to us, we get in touch with the hospital, check the Covid-19 report of the insured, understand the condition of the insured, and communicate to the hospital the decision [to provide] cashless treatment,” said Gurdeep Singh Batra, head, retail underwriting, Bajaj Allianz General Insurance. “We also have an in-house health administration team for our customers that enables us to settle claims faster.”</p> <p>ICICI Lombard General Insurance is offering a policy that gives the entire sum insured if the policyholder contracts Covid-19. The company has also reduced the waiting period of its regular health insurance policies from 30 days to 15 days. “We cover costs related to Covid-19 treatment claims as per policy terms and conditions,” said Sanjay Datta, chief of claims, underwriting and reinsurance, ICICI Lombard General Insurance. “We are continuing to pay for all necessary diagnostics and PPE kits for claims that we are receiving.”</p> <p>HDFC ERGO General Insurance offers a product that covers individuals aged 18 or above, and their dependent children from the 91st day of their birth. There is no upper-age entry limit, subject to underwriting terms and conditions. “We have over 11,000 network hospitals empanelled with us and most of the private hospitals authorised by state governments [for Covid-19 treatment] are already part of this network,” said Ravi Vishwanath, president, accident and health, HDFC ERGO. “We are also regularly checking the hospitals that state governments are authorising, and empanelling them on to our network, in case they are not already part of it.”</p> <p>Universal Sompo General Insurance Company have introduced a Covid-specific policy that covers additional expenses besides regular hospitalisation costs. Policyholders can claim expenses up to the sum insured even if they choose home treatment. “In all our existing health products, the inpatient hospitalisation expenses for Covid-19 treatment is covered as per standard policy terms and conditions,” said Bisheshwari Singh, chief marketing officer, Universal Sompo General Insurance Company. “There is no change in the coverage and premium as such for the Covid-19 cover.”</p> <p>Singh said the company has not tied up with any government hospital because only private hospitals offer cashless facilities. “Treatment in government hospitals is often free of cost,” he said. “However, out-of-pocket expenses incurred by a patient in a government hospital, including pre- and post-hospitalisation expenses, are covered under reimbursement mode, subject to the terms and conditions of the policy.”&nbsp;</p> Thu Jul 02 19:12:51 IST 2020 major-drop-in-revenue <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>While public hospitals have been waging a war on Covid-19, private hospitals have been fighting a perception battle. They have been facing flak for not pitching in to contain the pandemic and for placing a high price tag on treatment. But the pandemic has taken a toll on private hospitals, too, leading to a loss in revenue. In an interview, Dilip Jose, MD &amp; CEO of Manipal Hospitals, details the challenges faced by private hospitals and the way forward. Excerpts:</p> <p>&nbsp;</p> <p><b>Q</b>/<b> How do you see the impact of Covid-19 on private hospitals?</b></p> <p><b>A</b>/ The lockdown and restriction on movement have significantly reduced the number of people accessing hospitals. The later part of March and the whole of April saw only urgent care and emergencies at most hospitals. As bulk of the costs associated with running a hospital is fixed, the drop in revenue resulted in large losses. We have been able to manage the cash flow by cost reduction and deferral with the support of all business associates and banks, and have avoided layoffs at all levels, including contract employees.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> What is the cost of Covid-19 treatment in private hospitals?</b></p> <p><b>A</b>/ The cost of Covid-19 treatment would vary depending on the severity of the disease. Major increase in cost occurs when a patient ends up requiring critical care and has serious comorbidities.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> At a time when hospitals are burdened with reduced revenues, there is increasing pressure to bring down the cost of Covid-19 treatment. What does that mean for private health care?</b></p> <p><b>A</b>/ The reduction in revenues of hospitals from April onwards is on account of the lockdown restrictions.... Treating Covid-19 patients is not at all expected to plug this gap in revenues. Given the criticality of the pandemic, most hospitals are stepping up to work with the state governments to ensure that everything possible is being done to care for the Covid-19 patients. Some of the recent changes in guidelines on early discharge would also help in significantly bringing down the cost of treatment.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> What are the additional costs now?</b></p> <p><b>A</b>/ The increase in operating costs during the pandemic has been essentially on account of the additional safety protocols. In terms of material costs, these are for PPEs of doctors and staff treating Covid-19 patients, increased consumption of masks and gloves as well as use of sanitisers. Other costs incurred include setting up of separate fever clinics in hospitals, thermal scanning equipment as well as those related to social distancing requirement. More than these incremental costs, what has had a major impact on hospitals is the major drop in revenue as all elective and non-emergency procedures were stopped.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> How are hospitals managing their expenses?</b></p> <p><b>A</b>/ Most hospitals have reported about 30 to 40 per cent of the normal revenue in April. Since the cost structure of hospitals is mostly fixed, this has led to significant cash losses in the month. There are instances of smaller hospitals and nursing homes closing down operations already. Others have managed by cutting expenses to only bare essentials, and by deferring payments, additional borrowings and even slashing payments to doctors and employees.</p> <p>&nbsp;</p> <p><b>Q</b>/<b> Do you expect the government to support the industry?</b></p> <p><b>A</b>/ The government has taken some early steps already. The moratorium announced by the Reserve Bank of India, too, would help. What is required in the short term is support with affordable working capital. In the medium term, the urgent need is to catch up on investments required to create a robust public health care infrastructure across all levels. As a percentage of GDP, our current spend is way below the requirement and a sharp focus on this area would make us better prepared to face challenges of the future, which might be even more complex than the current one.&nbsp; </p> Thu Jul 02 19:07:23 IST 2020 well-oiled-machine <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Mukesh Ambani takes deadlines seriously—not just the ones he gives his employees, but also those he sets for himself. In the annual general meeting of Reliance Industries Ltd on August 12, 2019, Ambani, the company’s chairman and managing director, said he had “a clear roadmap to becoming a zero net debt company within 18 months”. On June 19, 2020, Ambani announced RIL had become net debt free, nine months ahead of the scheduled date.</p> <p>What helped him achieve the feat was not just his core business of petroleum and petrochemicals, but also the telecom company he launched just four years ago. Jio is now India’s largest telecom company with more than 380 million subscribers; the strong base, which Ambani amassed using disruptive business tactics, helped him attract marquee investors. While Facebook acquired 9.99 per cent in Jio Platforms, a clutch of private equity players and sovereign wealth funds have picked up stakes of varying magnitude, pumping in Rs1,15,693.95 crore altogether.</p> <p>RIL also raised Rs53,124.20 crore through a rights issue, which was the largest ever in India. Earlier, in December 2019, RIL inked a definitive agreement with BP to form a new petroleum retailing joint venture in India. In total, RIL has raised about Rs1.75 lakh crore. It is also working on a deal with Saudi Arabia’s Aramco to sell 20 per cent stake in its oil and petrochemical business.</p> <p>The fundraising could not have been timed better, as RIL’s traditional petroleum refining and oil and gas businesses were hit hard by the crash in oil prices and the lack of demand for fuel. “The trend over the next few years is towards cleaner fuels,”said Mayuresh Joshi, head of equity research at William O’Neil and Co. “Ambani had read the trends well. He had also read the trends that online and consumer discretionary are going to be the new oil. He invested a lot more in these businesses.”</p> <p>Jio today is not just a telecom company. In the past few years, it made many key acquisitions like Haptik, Radisys, Reverie Technologies, Embibe and C-Square, which will help it build a strong portfolio of future tech like artificial intelligence, internet of things, natural language processing and virtual and mixed reality. Jio has partnered with Microsoft to offer cloud-based solutions to small enterprises as well.</p> <p>While beefing up the technological backbone, Jio has also ensured a constant supply of content to its customers, through its deals with Balaji Telefilms and the music streaming app Saavn, and the Network18 media and entertainment business it already owns. RIL has majority stakes in cable TV companies Hathway and Den Networks. “The marquee investors see Jio Platforms as a unique consumer platform with distribution strength that can be leveraged across connectivity, commerce and credit using technology prowess to stay ahead of the curve,”said Axis Capital analysts Shashi Bhusan and Anand Shah.</p> <p>Having become debt free, Ambani has now set his sights on bigger things. In a letter to shareholders on June 23, he said the Jio-Facebook partnership would “digitally enable and empower India’s 60 million micro, small and medium enterprises, 120 million farmers, 30 million small merchants and millions of SMEs in the informal sector, in addition to empowering people seeking various digital services”.</p> <p>A month earlier, RIL had launched JioMart, a digital platform connecting neighbourhood grocery shops with consumers across 200 towns and cities, which will take on the likes of Big Basket, Grofers and Amazon. JioMart will act as a centralised procurement and delivery platform between manufacturers and merchant partners. It will also enable digitisation of merchants through Jio point of sale (PoS terminals) at the back end and JioMart app at the front end.</p> <p>Reliance Retail, RIL’s retail arm, is already the largest organised retailer in the country, operating 11,784 stores. The Jio-Facebook tie-up will give Reliance Retail huge opportunities through WhatsApp and Instagram, which Facebook owns.</p> <p>Goldman Sachs analyst Nikhil Bhandari forecast Reliance Retail’s gross merchandise value (GMV) to surge to $83 billion in financial year 2029, from $5 billion last year. Online grocery will alone account for $45 billion in GMV. “Reliance and organised retail overall still have a significant opportunity to gain share from the unorganised and fragmented market, especially in grocery and fashion,”<br> Bhandari said. “Reliance’s market share in tier 3 and tier 4 cities is a real differentiator when compared with other modern retailers, online and offline, with Reliance having a significant lead in developing the ecosystem in these towns.” Ambani has plans to list the retail business within five years.</p> <p>The platform approach will be RIL’s biggest advantage while taking on its e-commerce rivals. “RIL has scale in telecom and brick and mortar stores, and it has brands. With Facebook, it now gets access to social media platforms and it owns media companies. So, it is as far reaching as Amazon is in the US or Alibaba is in China,” said Govind Shrikhande, a retail industry veteran and former managing director of Shoppers Stop.</p> <p>RIL recently identified financial services as a separate business. It had joined hands with State Bank of India for Jio Payments Bank in 2018. It has also ventured into consumer lending and insurance broking. The segment reported a revenue of Rs1,271 crore in the year ended in March 2020, and analysts reckon it is well placed for strong growth, riding on the strengths of the digital and retail platforms.</p> <p>“The model of new commerce platforms can aid RIL’s financial services business to capture consumer loan origination,”said the Axis Capital analysts. “Moreover, as the platform achieves scale, it may also aid in capturing loan requirements for the small businesses.”</p> <p>&nbsp;</p> Thu Jul 02 16:27:08 IST 2020 obstacle-course <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>It happens, but rarely, that a state learns from its official animal. But Uttar Pradesh is assigning to itself the most marked characteristic of the barasingha, the 12-horned deer that flourishes in swamps. From the sludge of the ruin left by the Covid-19 pandemic, the state is forging a path to economic growth through its micro, small and medium enterprises (MSME) sector.</p> <p>Drawing equal parts applause and bewilderment, Chief Minister Yogi Adityanath seems to have outrun the Centre and other states on the track to achieving a swift economic revival. On April 16, as the contours of the crisis were emerging, he first spoke of turning it into opportunity. The chief minister insisted that the first of the two big road projects to the east, the Purvanchal Expressway, become operational by the end of the year. Connectivity would bring investment to the state’s most deprived region and also harness the power of its workforce, which forms one of the largest chunks of out-migrants in the country.</p> <p>This was followed by a rush of announcements, including a Covid-19 response and industrial revival strategy, a relook at labour laws, a single-window approval system for projects, an online portal (MSME Sathi) for grievance redressal, mapping the skills of returning workers and matching them to available jobs, exploring the possibility of attracting companies shifting their production bases from China and the launch of a startup fund.</p> <p>Sidharth Nath Singh, UP’s MSME minister, said that all of this was being driven and marked by Adityanath himself (see interview). Navneet Sehgal, the state’s principal secretary for MSME, said that the response was possible because Adityanath foresaw the situation. “The chief minister had a clear vision of the magnitude of the challenge,” he said.</p> <p>One example of the sure footedness of this response is the speed with which the state’s self-help groups affiliated with the National Rural Livelihood Mission (NRLM) turned to making masks, sanitisers and personal protective equipment (PPE) kits almost as soon as the lockdown was announced. At last count, they had earned 08 crore from sales.</p> <p>The state has sought to build new partnerships while strengthening old ones. Mukesh Aghi, president and CEO, US-India Strategic Partnership Forum (USISPF) told THE WEEK that the body was “encouraged by the focused efforts of the state in ease of doing business and actual grounding of investments”. He said, “The government has been in close contact with us and has been supporting our membership on all aspects of investment facilitation as well as for issue resolution related to business continuity matters during this pandemic.”</p> <p>The state industries department has displayed a high level of preparedness to tackle the uncertainties of the pandemic and infuse its own non-fiscal measures to steady economic processes. The issuing of e-passes and enabling production, movement and distribution of essential goods were quick and fuss free. It was also quick to operationalise industries such as packaging, without which essential goods could not be delivered.</p> <p>On the issue of continuous process industries, the department’s officials took their own calls. In the Kanpur division, Sarveshwar Shukla, joint commissioner for industries, permitted fertiliser and chemical factories to run to avert a potential disaster like the chemical plant gas leak in Visakhapatnam on May 7. “Such industries require a 15-day shutdown or startup time. If not monitored properly, the industrial scale gases used in production can cause damage, said Shukla.</p> <p>However, for all its ability to survive in the bog, the barasingha is an animal of middling pace, much like the government’s investment efforts. In February 2018, the state hosted its first investor summit, in which 1,045 memorandums of understanding (MoUs) worth Rs4.28 lakh crore were signed. Only 371 of those have matured into investment announcements and by May 2020, only 106 had started commercial operations.</p> <p>Alok Agarwal, president of the Indian Industries Association (IIA), Kanpur, one of the bodies that has signed an MoU for matching the skills of three lakh workers said: “The chief minister is well intentioned, but his government believes too much in grand gestures. A single-window online system of clearance (Nivesh Mitra) has been in place for a while now, but there is no time limit as to how long it might take to process an application. This defeats the purpose of a transparent mechanism.”</p> <p>The state’s MSME sector is its surest driver for change. In 2018-19, there were 89.99 lakh units in UP—the most for any state—which provided employment to 1.65 crore people. There is however distressing fine print in these numbers. Land is plentiful in the state, but its allotment is knotty. Loans given to the sector are easy on paper, but banks are distrustful of entrepreneurs.</p> <p>In January 2018, the government launched a ‘One District One Product’ (ODOP) scheme that is now the centrepiece of this sector. Under this scheme, 57 products with a strong traditional skill and production base across the 75 districts have been identified, and entrepreneurs helped out. The initiative is modelled loosely on China’s one-town one-product scheme, and the state is hoping it will draw investors now pulling away from China.</p> <p>Sehgal said that the scheme’s operational life had given the government a clear start on fine-tuning it during the crisis by sanctioning common facilitation centres that would enhance the quality of the products. Fourteen such centres have been sanctioned for Rs92.07 crore. “In Sambhal, we make unique buttons from animal bones, which were sent to China for finishing, as button makers could not afford the machine for it. Now that will be possible in the district itself. Such common centres will generate both direct and indirect employment,” said Sehgal. Almost 80 per cent of the state’s export basket is made of these products, which include silks from Varanasi and leather shoes from Agra and Kanpur. However, that is not necessarily an unalloyed positive.</p> <p>Arvind Mohan, economics professor at Lucknow University, pointed out that the state needed to identify products to cater to the needs of its 22 crore people. According to Mohan, the key to an economic flourish in the state would be a “new kind of public-private partnership”. “Under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) for example, a percentage of the state’s labour can create permanent and productive assets for use in the MSMEs and thus reduce their input costs,” he said.</p> <p>Brij Kumar Bajpai, director of the Giri Institute of Development Studies (GIDS), said that much of what the government could do had already been suggested by previous studies it had commissioned. He cited one such research on the doubling of farmers’ income by 2022-23, conducted by GIDS in the state in 2019. “The report contains suggestions on coordinated commercial agriculture of fishery, animal farming and orchards; effective control on post-harvest losses, partnership with private sector to create infrastructure for food processing... but these were not paid any attention till a section of the media reported on it. The government must use the advice of the specialists it has and not just rely on bureaucracy,” said Bajpai.</p> <p>Sunil Vaishya, former chairperson, IIA (Kanpur), said that while the state’s pandemic rush was notable, it needed to get the more mundane bits in order. “Investment comes when basic needs like law and order, electricity supply and infrastructure are met. Jobs come in when manufacturing units are set up, but the state has received more investment in the service sector. The state should nurture and build relationships with investors within the state, who are its biggest investors,” he said.</p> <p>One way of solving old problems has been offered by tweaks in the labour laws in the state. Amit Shukla, legal consultant to corporates and the Lucknow-based district secretary of the Confederation of Indian Micro, Small and Medium Enterprises said: “Labour laws have scared off investors from UP. It is almost impossible to fire a non-performing worker. Successive governments have not overhauled [the laws] for fear of a political backlash. This government has shown the will to bring changes.”</p> <p>The immediate goal seems to be to protect the state’s migrant workers from suffering like they have during this crisis. However, these workers may not want to stay back when it is business as usual. On June 1, when the Pushpak Express to Mumbai restarted, many of those who boarded it at Lucknow were UP natives. Among them was Hari Om Soni, a 50-year-old jewellery maker from Basti, who had worked in Mumbai for 35 years. He was returning with his 23-year-old son to his two younger daughters and to living quarters that measures 10 by 12 feet. “What will my small slice of land in the village get me? When old and weak, I might return permanently. For now, there is work to be done,” he said.</p> <p>And till there is that, the charm of the barasingha might not be readily visible. &nbsp;</p> Thu Jul 02 16:11:38 IST 2020 we-have-a-realistic-idea-of-where-we-are-headed <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q/The state’s MSME sector has moved quickly to respond to the economic challenges of the pandemic. How was it made possible?</b></p> <p><b>A/</b>The leadership of Chief Minister Yogi Adityanath has pushed us. He has wanted us to come up with something out of the box every day. We have a good team. We had a job to do much like doctors, to keep the economy healthy and running.</p> <p><b>Q/There have been variable figures about how many people could be employed through the sector.&nbsp;Are there realistic numbers to work with?</b></p> <p><b>A/</b>We have signed four MoUs for providing 11 lakh jobs. There are 40 lakh people being employed through MGNREGS. From the start of the lockdown, we processed 19,000 loan applications and gave them to the banks. As a thumb rule, every loan provided will generate employment for eight to 10 people. We are mapping the skills of 15 lakh workers who have returned. So yes, we have a realistic idea of where we are headed. There is convergence of departments such as panchayati raj and rural development to provide jobs.</p> <p><b>Q/There is apprehension that the Migrant Commission will take away the freedom of the state’s workers by negotiating on their behalf.</b></p> <p><b>A/</b>We are not here to negotiate the freedom of workers; we are only concerned about migrants not being provided every social security they are entitled to, in whichever state they are. This is something we will be taking up with other states. We are looking after the welfare of our workers, not holding them back.</p> <p><b>Q/What about concerns that changes in labour laws will curtail rights of labourers?</b></p> <p><b>A/</b>There are many clauses in our labour laws that are redundant and create unnecessary problems for investment and entrepreneurship. These needed checks and by doing so we have given the message that UP is a progressive state and open to changes. There are no changes to the minimum wages to be paid or the number of working hours.</p> <p><b>Q/What about attracting foreign investment, given that UP is competing for investment moving out of China?</b></p> <p><b>A/</b>A committee headed by the chief minister has examined the domestic competition and the competition with southeast Asia. We have quickly introduced sectoral reforms where needed. Among the states, we have been the first to initiate dialogue with Japan, which is giving $2.2 billion to firms moving out of China. Among the European nations we have been in touch with, Denmark has shown interest to transfer its expertise on high technology MSMEs, for which we have signed an MoU.</p> <p><b>Q/Allotment of land to set up enterprises has been a major challenge. How is that to be tackled?</b></p> <p><b>A/</b>We have received a legacy with the UP State Industrial Development Corporation (land allotting agency in the state), which we are trying to reform. We have started with GIS mapping of land to make its availability transparent.</p> <p><b>Q/The state’s other challenge is the imbalance between the east and the west. How will it be rectified?</b></p> <p><b>A/</b>This has been addressed by this government’s employment and industrial policies. We are developing a water pipeline project in Bundelkhand in addition to an expressway (connecting to Delhi). The Purvanchal Expressway will be operational soon. These will contribute to correcting intra-state imbalances.</p> <p>&nbsp;</p> Wed Jul 08 12:05:58 IST 2020 precarious-states <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p>Imagine that you are a villager in India. You live in a close-knit village which follows the feudal system, with the zamindar lording it over from his mansion. There are only a few specific jobs, confined to your mohalla, that you are allowed to do and make money out of; the larger part of the earnings from the fields you toil in go straight to the landlord, who has promised to return your share in due course.</p> <p>&nbsp;</p> <p>Then, out of the blue, everything goes awry. Not just in the village but the entire region. A locust attack, otherwise uncommon, takes place, destroying all means of livelihood. The zamindar issues a diktat that all work, in the fields and otherwise, should be stopped and the villagers should drop what they are doing and take refuge inside their tenements. This is the only way to save yourself, and the village, he tells his startled fellow citizens, who are now not just facing an unknown enemy swarming all over the fields and dashing hopes of their regular subsistence earnings, but placing a question mark over the expected ‘cashback’ from the landlord.</p> <p>&nbsp;</p> <p>Virtually every state in India right now is you, reeling over a double economic whammy—the Covid-19-induced lockdown has reduced their own meagre revenues to a trickle, and the Centre, on whose handouts the states depend on for a good chunk of their expenditure, has been forced to tighten its purse strings. The result? The economic position of every Indian state is a shambles.</p> <p>&nbsp;</p> <p>“Punjab’s financial situation is extremely critical,” says Chief Minister Captain Amarinder Singh. Goa Chief Minister Pramod Sawant says the state has had to face “extreme hardship,” while West Bengal Chief Minister Mamata Banerjee says her state is “financially starved”. Chief minister after chief minister has sent SOS letters to Prime Minister Narendra Modi asking for urgent financial help.</p> <p>&nbsp;</p> <p>The economics is spilling into political friction. Centre-state relations have not been exemplary since Modi came to power in 2014, but now, the gloves are off. Not just between New Delhi and the states, but between embattled states themselves, boxed in from both sides of having to deal with rising infections as well as dwindling incomes.</p> <p>&nbsp;</p> <p><b>AN UNEQUAL RELATIONSHIP</b></p> <p>Indian states essentially spend money from two sources. First is the income they make directly from the few things they are allowed to tax, like petrol, diesel and liquor as well as revenue from land transactions. All other goods and services are taxed under GST, the money going to the Centre from where the state’s share is given back later (and sometimes, not soon enough). The other source of money is what is ‘devolved’ from the Centre, like plan allotment and budgetary allocation for Central government schemes like highways.</p> <p>&nbsp;</p> <p>The issue? Over the years, problems such as changes in the tax structure like GST and their own profligacy have left most states financially weak. Many borrow way beyond their means. While rules like the Fiscal Responsibility and Budget Management Act limit how much states can borrow, previous debt and interest piling up has been a common feature. Tamil Nadu, for instance, has a total debt of Rs4.56 lakh crore, while Karnataka will have to pay more than Rs22,000 crore alone in interest this year. According to a report by the Reserve Bank of India, Punjab has the worst debt-to-GDP ratio at nearly 40 per cent, followed by Uttar Pradesh at 38 per cent.</p> <p>&nbsp;</p> <p>“States are now more dependent on the Union government,” says Avani Kapur, director (accountability initiative) and fellow, Centre for Policy Research. “While part of this is inherent in India’s fiscal structure where states are the big spenders and the Centre controls the purse strings, the situation has been exacerbated by the introduction of the GST… eroding the ability of states to raise their own revenues.” For example, while money raised by states themselves was 55 per cent in average of their total expense in 2014, it has fallen to barely half now.</p> <p>&nbsp;</p> <p>“The state of state finances is bad, no doubt about it,” says Hemant Sharma, principal secretary (industries), Odisha. “But that is because state finances are directly dependant on economic activity and devolution from the Central government.”</p> <p>&nbsp;</p> <p>The lockdown hit both. Money coming in from alcohol, petrol and electricity, the main sources of direct revenue for states, virtually plummeted overnight when the national lockdown with its draconian provisions kicked in on March 25. And, for all practical purposes, most Central schemes and grants approved for this year will remain suspended till the end of the financial year, as the Centre itself is strapped for cash. Ratings agency ICRA estimates that tax devolution from Centre to states will be down by 30 per cent this year.</p> <p>&nbsp;</p> <p><b>ALL FALL DOWN</b></p> <p>Adding to the woe is the fact that not only are states on the frontline of fighting the pandemic, with health care being a state subject, they also have immense expense obligations, ranging from salaries to pensions to social security schemes. To go back to the initial imagery of the villager being an Indian state, imagine how it would be while your salary has been cut. You are now saddled with the unenviable task of not only providing for your family members, but also shelling out for Covid-19 treatment of infected relatives. Not a good ‘state’ to be in, right?</p> <p>&nbsp;</p> <p>For example, in the month of April which was completely washed out by the lockdown, Kerala’s finance minister Dr T.M. Thomas Isaac could only watch helplessly while the state’s revenues crashed to just over Rs1,000 crore—it was four times that in the corresponding period the previous year. Meanwhile, the state’s expenses went up from nearly Rs9,000 crore to more than Rs15,000 crore. The result? The state’s deficit crossed 40 per cent of its budget in just the first month of the financial year.</p> <p>&nbsp;</p> <p>The horror story is repeated across the board. Telangana Chief Minister K. Chandrashekar Rao had to make do with 25 per cent income compared with the previous year, while Nitish Kumar in Bihar had to be satisfied with 18 per cent. Amarinder Singh during one of the prime minister’s video chat with chief ministers claimed that Punjab’s income had crashed to 12 per cent. Chhattisgarh’s GST revenue fell from Rs1,200 crore to Rs200 crore in April, while that of Jharkhand went from more than Rs800 crore to a little more than Rs100 crore.</p> <p>&nbsp;</p> <p>So, the states did what they always do—clamour for help from Modi and Finance Minister Nirmala Sitharaman. Only, this time the Centre itself was trying hard to figure a way out of its own snare to throw any benevolent scraps their way.</p> <p>&nbsp;</p> <p><b>CONDITIONS APPLY</b></p> <p>The only direct relief came as part of Sitharaman’s ‘Covid stimulus’ series of announcements, with the limit on how much money states can borrow increased from the existing 3 per cent to 5 per cent. But it comes with a catch. Only an additional 0.5 per cent is unconditional. Anything further depends on how fast the state digitises ration cards and sets about reforming their electricity sector. Obviously, it has not gone down well, especially among opposition-ruled states. “This is violative of the country’s federal structure,” says Amarinder Singh.</p> <p>&nbsp;</p> <p>“Increase in borrowing powers of states is a step in the right direction, however, if it is made conditional, it constrains the fiscal space,” says Lekha Chakraborty, economist and professor at the Delhi-based National Institute of Public Finance and Policy. “The fundamental change has to come in debt deficit dynamics.”</p> <p>&nbsp;</p> <p>“Most of these consumption drops, like the electricity consumption lost for the 60 days or so of the lockdown, cannot be recouped in the latter part of the year. They are a net loss,” says Hemant Sharma of Odisha. “Of course, as industrial activity restarts, there is going to be a rebound in some sectors. But no state is sure at the moment as to how much of the loss can be made good in the months to come.”</p> <p>&nbsp;</p> <p><b>DISUNITY IN DIVERSITY</b></p> <p>While the states are on the same boat as far as dwindled revenues go, the misery has been different for different states. By a twist of fate, the more developed states have been the hardest hit. According to a Crisil study, top eight states affected by the pandemic, like Maharashtra and Tamil Nadu, accounted for 65 per cent of manufacturing, 60 per cent of construction and 53 per cent of services, meaning the overall impact on the economy was further accentuated by businesses being affected here.</p> <p>&nbsp;</p> <p>Liquor, too, can make or break fortunes. Uttar Pradesh and Telangana, for example, are most dependant on excise from liquor, affecting these states that much more as revenues dried up during lockdown. Alternatively, Gujarat, a dry state, depends way too much on petrol and diesel tax, and got battered as lockdown dialled it down to a trickle.</p> <p>&nbsp;</p> <p><b>BEST FOOT FORWARD</b></p> <p>Ditched by the Centre and left to their own devices, states have surprisingly resorted to a level of dexterity and enterprise many of them are not really a natural at—rolling out the red carpet to investment. Besides the ‘Atmanirbhar Bharat’ and the ‘vocal for local’ narrative, states were also catalysed by a specific exhortation to them from Modi to woo businesses leaving China.</p> <p>&nbsp;</p> <p>Thus, while Gujarat wrote to the Japanese government and business houses, offering them land and subsidies, Uttar Pradesh has set up an economic task force to showcase its business hubs bordering Delhi, and the upcoming defence park and the Jewar airport. “We have been receiving good response from foreign businesses who want to invest,” says Chief Minister Yogi Adityanath in an exclusive interview with THE WEEK.</p> <p>&nbsp;</p> <p>German footwear brand Von Wellx shifted out of China to set up a footwear unit in Agra on the invitation of the Uttar Pradesh government, which says the project will throw up 10,000 direct and indirect jobs. Says Ashish Jain, director and CEO of Iatric Industries which handles Von Wellx’s Indian operations, “The UP government was very eager to help at different levels and has also announced economic packages for companies moving in. This was a major parameter.”</p> <p>&nbsp;</p> <p>Invest India, the Union government’s investment promotion agency, recently facilitated a series of meetings for states like Maharashtra and Telangana with global electronics majors like Apple, Intel, Samsung and LG. States like Haryana, Andhra Pradesh, Tamil Nadu and Karnataka are also interested in following suit. Invest India plans to conduct similar sessions for other sectors, too, starting with pharmaceuticals.</p> <p>&nbsp;</p> <p>From Assam, which highlights its subsidised electricity for industries as a USP, to Punjab, which points out how its ‘Invest Punjab’ department’s single-window clearance facility assures ease of business, and Odisha which touts its stable and well-administered investment-friendly climate, the go-get-it attitude is palpable. Andhra Pradesh Industries Minister Mekapati Goutham Reddy recently said, “We call ourselves ‘providers’. We were the fastest in opening up after the lockdown.”</p> <p>&nbsp;</p> <p>Guruprasad Mohapatra, secretary of the Union government’s department for promotion of industry and internal trade (DPIIT), says each state can be a champion in their areas of strength. “As we aim for more global brands (as part of the PM’s call), states will play a major role in this.” Sawant recently wrote to Modi that the economic slowdown would help in exploring other opportunities.</p> <p>&nbsp;</p> <p><b>WHAT ABOUT THE HERE-AND-NOW?</b></p> <p>Not everyone thinks it is the right approach, though. “To me, it looks quite weird to compete for factories moving out of China at the state level,” says Chakraborty. In her view, the focus should be on increasing public health infrastructure and services and in tackling hunger and loss of livelihood issues. “Decisive public infrastructure investment alone can attract private investment,” she says. “Ease of doing business, judicious labour reforms and climate-related policies are crucial determinants.”</p> <p>&nbsp;</p> <p>With investments still a work in progress, there is also the question of what the states can do to meet their dire scenario right now. There is, of course, hope-against-hope for some financial assistance yet from the Centre. “Reforms, of course, will help, but will take time. Meanwhile, some additional funds to state governments is definitely desirable,” says Sharma.</p> <p>&nbsp;</p> <p>GST compensation is something states are banking on—as agreed when the GST Council was set up. The Centre is supposed to make up for any drop, if actual revenues to states do not grow by 14 per cent every year. Sitharaman has convened the next GST Council meeting in July only to discuss whether they can borrow from the markets for GST compensation. Meanwhile, reports that the Centre may try to wriggle out of paying by invoking the force majeure (act of God) clause (though the provision is not there in the GST Act) has further alarmed desperate states.</p> <p>&nbsp;</p> <p>Other options include debt restructuring, tapping the bond market and, of course, squeezing money out of your own sources. “The shift is already beginning, with the proportion of revenues coming from alcohol and stamp duties increasing,” says Kapur. A tried-and-tested means to increase state income has always been ‘hitting the bottle’. As liquor vends re-opened, for example, Delhi Chief Minister Arvind Kejriwal did not think twice before slapping a 70 per cent Covid cess on liquor. West Bengal, Andhra Pradesh and Haryana promptly followed suit with their own price hikes. Starved of their poison for more than 40 days during the lockdown, relieved tipplers did not particularly seem to mind.</p> <p>&nbsp;</p> <p>Just as the Centre’s Covid relief package aims at structurally reconfiguring business and industry, states are also hoping that the shake-up throws up fresh opportunities—Adityanath manoeuvring to optimise the return of migrant labourers by putting them to work in industries which he hopes will come up soon is only a case in point. Haryana Deputy Chief Minister Dushyant Chautala summed it up succinctly at a business continuity webinar recently, “If I see it as a crisis, it will be hard. [So why not] see it as an opportunity?”</p> Fri Jun 26 12:05:00 IST 2020 safety-of-investors-who-come-to-up-is-my-guarantee <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q/State finances have been badly impacted by the lockdown. How can the Centre help?</b></p> <p>&nbsp;</p> <p>A/In these testing times, the Centre’s assistance has been of great help. Financial assistance from the Pradhan Mantri Garib Kalyan Yojana helped in making food grain available to the needy, while the second package of Rs20 lakh crore is proving to be helpful in strengthening the economy of the states, especially in boosting the micro, small and medium enterprises (MSME) sector. It is also helping in supporting street vendors, youth and workers who have returned from other states.</p> <p>&nbsp;</p> <p><b>Q/What are the innovative ideas Uttar Pradesh is considering to tide over the financial crisis?</b></p> <p>&nbsp;</p> <p>A/Our focus is entirely on ‘work for every hand and employment in every household’. Priority is also being given to the production of indigenous goods. This will further open up new job opportunities. Besides, we have also started several prestigious projects such as expressways, dedicated freight corridors and medical colleges. Thousands of workers are already engaged in these projects. Our government is also working on the concept of creating a land bank for setting up industries.</p> <p>&nbsp;</p> <p><b>Q/Uttar Pradesh has been wooing businesses leaving China, especially Japanese companies.</b></p> <p>&nbsp;</p> <p>A/We have been receiving good response from foreign investors who want to invest in Uttar Pradesh. We are talking to companies that want to shift their bases from China; we will provide [them] space. German footwear company Von Wellx is going to invest in Agra. Similarly, we are talking to many other interested companies. Japanese companies have shown interest in the Electronic City of (the upcoming) Jewar airport. Besides, they are also showing interest in logistics parks and the food processing sector. Apart from this, the industrial institutions with which we have signed MoUs under groundbreaking ceremony-1 and groundbreaking ceremony-2 are also setting up their units.</p> <p>&nbsp;</p> <p><b>Q/Uttar Pradesh does face challenges as far as industrial townships and skilled workforce go. It is also deficient in other parameters that companies look for.</b></p> <p>&nbsp;</p> <p>A/This land is full of rich resources and opportunities, whether we talk of manpower or infrastructure. The previous governments might have had a lax approach towards utilising available resources due to which people had to migrate to other states in search of jobs, but we are committed towards taking Uttar Pradesh to the pinnacle of development.</p> <p>&nbsp;</p> <p>Our policies in different sectors are attracting huge investment. We are also making the changes required, following Covid-19. We are providing 24-hour electricity. Land is available for investors, and their safety is my guarantee. We will have the maximum number of expressways in the country. In the coming days, there will be metro connectivity in other major cities (besides Noida and Lucknow). The nation and the world will connect with Jewar airport (coming up near Greater Noida).</p> <p>&nbsp;</p> <p>As the state with the largest population, we are the most endowed as far as human resources are concerned. There is no market bigger than Uttar Pradesh. Apart from a population of more than 23 crore, half of Bihar and Nepal depend on us for their economic, educational and medical needs. World-class IIT, polytechnics and ITIs provide lakhs of skilled human resources every year. All these things have to be communicated to investors. MoUs and investment projects progress are now tracked online. This will help existing investors and give new entrepreneurs the confidence to invest in the state.</p> <p>&nbsp;</p> <p><b>Q/What can be done to sort out the present economic crisis? There are people without income and there is drop in consumption.</b></p> <p>&nbsp;</p> <p>A/We are already far ahead in this process and have taken several measures to keep the wheels of the economy running. During the lockdown, we ensured that there was cash flow in the rural and urban economy. We bought food grain at MSP (minimum support price) from the farmers. We purchased 3.47 lakh quintal of wheat and Rs3,890 crore was paid directly into farmers’ accounts. Along with this, Rs2,000 was deposited in the bank accounts of the farmers twice under the Pradhan Mantri Kisan Samman Nidhi. Throughout the lockdown, crushing continued in 119 sugar mills in the state; 12,000 brick kilns were running and 2,500 cold storages continued to function. Around 25 lakh workers have been working in these three industries and we ensured that they were paid salaries. About 94 per cent of the units in the state paid salaries to their employees and Rs1,700 crore was paid to the companies from the government.</p> <p>&nbsp;</p> <p><b>Q/How does Uttar Pradesh plan to capitalise on the migrant labour force which has returned to the state?</b></p> <p>&nbsp;</p> <p>A/Workers coming back from other states are our asset, and providing them employment is our priority. So far, more than 32 lakh migrant workers have returned to Uttar Pradesh. They are being engaged in MSMEs, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme and other industries after mapping their skills. Their data is also being provided to labour and employment exchange offices in every district. The insurance cover of all workers is also being ensured. Many large industrial bodies including FICCI and the National Real Estate Development Council are coming forward to provide employment. Recently, we received a demand from the Noida Apparel Export Cluster asking for nearly two lakh workers—tailors and support staff. So you see, these workers have already started their contribution in building a new Uttar Pradesh.</p> Thu Jun 25 19:37:44 IST 2020 it-is-very-difficult-for-the-states-to-survive-on-their-own <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q/Is the Covid-19 situation in Rajasthan under control?</b></p> <p>&nbsp;</p> <p>A/Rajasthan has been at the forefront of the war against Covid-19. The number of cases as on June 22 stands at 14,997 of which active cases are only 2,987. Our recovery rate of 77.5 per cent is the second highest in the country and the death rate of 2.3 per cent is much less than the national average. Total tests done so far is 6.99 lakh and the testing rate per million is over 8,500, which is among the top three states. The rate of doubling of cases is 27 days, again much better than the national average.</p> <p>&nbsp;</p> <p><b>Q/How big a challenge was the issue of the stranded migrant workers?</b></p> <p>&nbsp;</p> <p>A/The challenge was of an unforeseen scale. But we were sensitive to the problems of migrant workers. We created an online platform to register workers who either wished to come to Rajasthan or go out. More than 24 lakh migrants registered on it. Initially, five trains were provided for Rajasthan, which was totally inadequate. Looking at the huge number of migrants, we started free Shramik buses. We made arrangements for food, water and lodging. We ensured movement of more than 19 lakh migrants with an expenditure of Rs25 crore.</p> <p>&nbsp;</p> <p><b>Q/What is being done to help migrant workers returning to the state?</b></p> <p>&nbsp;</p> <p>A/Providing suitable employment to migrants is one of the top priorities. An online Rajkaushal Labour Employment Exchange has been made operational. It has already registered 53 lakh workers and 11 lakh employers. We have already provided employment to more than 50 lakh people under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme, which is 18 lakh more compared with last year. This is one of the highest in the country and it includes a sizable number of migrants.</p> <p>&nbsp;</p> <p><b>Q/How has the state’s economy been impacted?</b></p> <p>&nbsp;</p> <p>A/The lockdown has crippled our economy and has caused suffering for daily wage earners and migrants. It has become very difficult for the states to survive on their own. The states are fighting the pandemic at the ground level, but the package announced by the Centre does not contain any direct assistance to the states. It does not have any relief for the poor or any support to people who have lost their jobs. Industries are struggling because of the shortage of workforce, lack of demand and unavailability of working capital.</p> <p>&nbsp;</p> <p><b>Q/What steps are being taken by your government to revive the economy?</b></p> <p>&nbsp;</p> <p>A/The state government and its agencies are working tirelessly to bring back all activities to an optimal level and bring the economy of the state back on track. Concrete steps are being taken to create a conducive environment for the revival of industrial units. We have constituted a task force headed by former Union finance secretary Arvind Mayaram to suggest a combat plan and policy interventions. We would come out with policies realigned to the needs of different sectors. We will be hand-holding trade and industries and the various sectors that would help speed up the economic growth of the state.</p> <p>&nbsp;</p> <p><b>Q/You demanded Central assistance to deal with the situation.</b></p> <p>&nbsp;</p> <p>A/The economy of the states is in the doldrums. Certain demands were put forward to the Centre by us for the benefit of all the states. Unfortunately, no direct financial assistance to the states has been granted in the Rs20 lakh crore package by the Centre. Only very small assistance under the State Disaster Response Fund and the PM Cares Fund has been committed to us. But the situation warrants a much more substantial direct assistance to the states.</p> <p>&nbsp;</p> <p><b>Q/Do you agree with the Centre on ending the lockdown when Covid-19 cases are on the rise?</b></p> <p>&nbsp;</p> <p>A/We have seen a large number of cases in the past few days following the opening up of economic activities and allowing the movement of migrants. Looking at the critical financial conditions of the states, it has become essential to resume economic activities. Covid is not going to vanish soon. Hence, we will have to learn to live with it for quite some time with strict observance of precautions. Covid containment should remain the top priority. We should continue with the same strictness in containment and hotspot areas, while in the rest of the areas, all activities should be resumed with required precautions.</p> <p>&nbsp;</p> <p>The whole country has been under lockdown for more than 70 days. It is high time we restarted economic activities. It is essential for economic revival.</p> <p>&nbsp;</p> <p><b>Q/You have alleged that the BJP attempted to buy your MLAs.</b></p> <p>&nbsp;</p> <p>A/There were reports that a huge amount of cash had been brought into Jaipur. At a time when the BJP should be fighting Covid-19, it is conspiring to topple governments. The Rajya Sabha elections were to be held two months ago. The elections were postponed because the BJP had not been able to complete horse-trading in Gujarat and Rajasthan.</p> <p>&nbsp;</p> <p><b>Q/So, the Rajya Sabha elections were postponed as part of a conspiracy?</b></p> <p>&nbsp;</p> <p>A/Pressure was put on the Election Commission to postpone the elections. And now, the same elections were conducted at a time when we have more COVID-19 cases.</p> <p>&nbsp;</p> <p><b>Q/How stable is your government?</b></p> <p>&nbsp;</p> <p>A/They tried to replicate what they did in Madhya Pradesh. However, our MLAs did not fall into their trap. Inducements were made, but I am proud to say that the six MLAs from the BSP who had joined us have continued to be with us, and it has happened only in Rajasthan that 13 independent MLAs supported the government without the offer of money or post.</p> <p>&nbsp;</p> <p><b>Q/What kind of inducements were made to your MLAs?</b></p> <p>&nbsp;</p> <p>A/There were reports of cash transfers happening in Jaipur. There was talk of advance amounts being offered: accept Rs10 crore as advance, Rs10 crore more will be paid later and then Rs5 crore more.</p> Thu Jun 25 19:35:13 IST 2020 unlimited-and-open-health-expenditure-is-not-sustainable <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>Q/The Kerala government’s efforts to contain Covid-19 were well-appreciated. But the state has had to pay a huge price.</b></p> <p>&nbsp;</p> <p>A/The containment strategy that Kerala adopted has been very effective and widely appreciated. But you are right, it comes at a heavy cost—not only the direct health expenditure but also the relief expenditure….</p> <p>&nbsp;</p> <p>The total expenditure in April and May has been Rs23,771 crore—24 per cent higher than that in the previous year. On the other hand, the overall revenue declined by 17 per cent to Rs9,774 crore. The gap of Rs13,997 crore has been filled by front-loading the annual market borrowing….</p> <p>&nbsp;</p> <p><b>Q/Kerala may be the only state to provide free Covid-19 treatment and quarantine facilities. It may be a great ‘citizens first’ approach, but how long can the state afford to do it?</b></p> <p>&nbsp;</p> <p>A/We could do well on the Covid-19 front owing to the sustained high investment in the health sector over the last century. Forty-eight per cent of the population depends on the public health system for treatment, [which] is free…. The institutional quarantine cost is borne entirely by the state, except for those who opt for private facilities. The question you raised regarding financing of health expenditure is very relevant. Unlimited and open health expenditure is not sustainable. We are debating the possibilities of cross subsidy.</p> <p>&nbsp;</p> <p><b>Q/How much has the government spent on Covid-19 management?</b></p> <p>&nbsp;</p> <p>A/The first file I signed in the new financial year was the allocation of Rs607 crore for the Medical Service Corporation. The total budget allocation is only Rs324 crore. It overshot in the first month itself. The expenditure of the health department during April-May was Rs1,300 crore. And this does not include the quarantine expenditure.</p> <p>&nbsp;</p> <p><b>Q/Remittances from the Gulf account for more than 30 per cent of the state’s GDP. But now with people there losing jobs and coming home, it will be a tough challenge.</b></p> <p>&nbsp;</p> <p>A/We are expecting around 5 lakh non-resident Malayalis from abroad and other states in India to return. The fall in remittances is going to have a reverse multiplier impact on Kerala economy. We are expecting the state economy to contract by 10-15 per cent during the current fiscal. Some of the returnees will be able to re-migrate after the pandemic. We are expecting a sharp increase in the demand for health personnel in the west and the Middle East post Covid-19. With the excellent brand image of the Kerala health sector, we are hopeful that our nurses and paramedics would be able to tap into this potential. An urgent massive skill upgrade and finishing programme has been drawn up for this purpose.</p> <p>&nbsp;</p> <p><b>Q/Kerala’s economy has always been about ‘no-production and all-consumption’. Therefore, Kerala suffers more than any other state in such crises. Is it possible to change this pattern?</b></p> <p>&nbsp;</p> <p>A/Kerala is a consumer economy, with the highest per capita consumption in the country. Our per capita income is 60 per cent above the national average. We have failed to link the high savings availability and high consumption demand to the possibility of expanding the domestic production.</p> <p>&nbsp;</p> <p>We are trying to shift to a new development paradigm. Quality jobs have to be generated for the educated youth in knowledge, skill and service industries. An earnest effort is being made to attract private investment into the sectors of core competence by improving the ease of doing business and creating high quality infrastructure. The Rs50,000 crore infrastructure stimulus package that is being implemented through the Kerala State Infrastructure Investment Fund Board would play an important role in creating the appropriate environment for growth.</p> <p>&nbsp;</p> <p><b>Q/You were one of the first finance ministers to request a hike in the borrowing limit of states, and the Centre has now hiked it from 3 per cent of gross state domestic product to 5 per cent.</b></p> <p>&nbsp;</p> <p>A/It is a step in the right direction. But imposing conditions on market borrowings is totally wrong. The Centre is setting an unacceptable precedent. This can be used to undermine even the limited autonomy that the states enjoy today. The economic package takes micro-managing state policies to a ridiculous level. For example, the power sector reforms have three components: reduction in aggregate technical and commercial losses, reduction in average cost and average revenue gap and introduction of direct benefit transfer to farmers. For compliance to the first two sub conditions, 0.05 per cent of GSDP each and, to the third, 0.15 per cent of GSDP additional borrowing would be permitted. Sadly, some clever guys sitting at the Centre think that they are a fountainhead of wisdom to micromanage the diversity of India.</p> Thu Jun 25 19:32:03 IST 2020 risk-and-rewards <a href=""><img border="0" hspace="10" align="left" style="margin-top:3px;margin-right:5px;" src="" /> <p><b>EVEN THOUGH DEBT</b> as an asset class has faced some turbulent times of late, it provides some interesting investment opportunities. For a medium- to long-term investor, dynamic bond funds are worthy considering.</p> <p>&nbsp;</p> <p>What are dynamic bond funds?</p> <p>&nbsp;</p> <p>There are debt funds for different durations of investment. For instance, to park surplus cash for a short term, investors use liquid funds or short-term bond funds. Investors looking to invest in debt funds purely from a long-term risk appetite perspective choose long-term bond funds. But what if you are ready to take a little more risk of volatility? In that case you can choose the dynamic debt funds.</p> <p>&nbsp;</p> <p>As per the Securities and Exchange Board of India, dynamic bond funds are open-ended debt schemes that are allowed to invest across a spectrum of duration. Based on the varying market scenarios, this category of scheme allows the fund manager to tweak the duration of the portfolio, with an aim to generate higher returns. The fund manager can take a call to change investment patterns within debt category across a whole range of duration—right from long term bonds like government securities to short term debt papers like short-duration corporate bonds.</p> <p>&nbsp;</p> <p>What makes these funds attractive now?</p> <p>&nbsp;</p> <p>The investment calls taken are largely based on the macroeconomic factors that determine the overall interest rate trajectory in the near to medium term. At present, the interest rates are going down and are expected to remain so due to the measures taken by the government to spruce up the economy. Moreover, fiscal deficit and current account deficit also seem to be pointing to conditions favourable to a lower interest rate in the near term.</p> <p>&nbsp;</p> <p>Interest rates and prices of bonds are inversely related, that is they move in the opposite directions. This means that lower interest rates or interest rates moving downwards are likely to result in prices of bonds going up. It must be remembered that for longer-term investments government bonds with a sovereign guarantee are among the popular instruments for investment. Accordingly, lower interest rates could mean that the prices of such long-term papers could go up, providing an arbitrage opportunity to investors who are amply prepared in advance. The dynamic bond funds have the scope to do that, among many other things.</p> <p>&nbsp;</p> <p>How do you choose one?</p> <p>&nbsp;</p> <p>When looking for a dynamic bond fund, the important aspect to check is the consistency in return profile over the years. Secondly, check if the fund house has a well-defined system on which which the allocation is decided. A proper system will ensure that the fund remains agile and makes the required changes in the portfolio according to the changes happening in the macro-economic environment.</p> <p>&nbsp;</p> <p>One fund that ticks all of these requirements and has been a flag-bearer for the category is ICICI Prudential All Seasons Bond Fund. As of May 30, 2020, this fund has out-performed its peer group average on one-, three- and five-year periods. Moreover, the portfolio investment calls are based on an in-house model that takes into account various factors such as current account deficit, fiscal deficit as well as credit growth to indicate the steps to be taken. If the past performance is something to go by, this model has worked in favour of the fund, and its investors. Currently, the fund has increased its exposure to longer maturity instruments having the best level of security—sovereign government bonds.</p> <p>&nbsp;</p> <p>To sum up, dynamic bond fund as a category is poised to reap the benefits of the current bout of volatility seen in debt markets. As a long-term investor, it is important to ensure that you have a debt fund which keeps up with the changing marcos.</p> <p>&nbsp;</p> <p><b>Author is director of Vardhana Financial Solutions Private Limited.</b></p> Fri Jun 26 11:08:44 IST 2020 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