Business

the-week-aditya-birla-sun-life-amc-seminar-in-kottayam

Sat Mar 18 17:58:04 IST 2023

THE HALL AT Hotel Aida in Kottayam was packed when K.S. Rao―executive vice president and head of investor education at Aditya Birla Sun Life AMC Ltd (ABSLAMC)―rose to greet residents of the city of lakes, letters and latex. Earlier in the day, Rao was at the Saintgits group of educational institutions to present ABSLAMC’s flagship training programme for students―My First Paycheque.

At the Aida, the crowd was a mix of seasoned investors and beginners. As always, ABSL brought a stellar panel to Kottayam, and in the lead was Rao, ably supported by Sandeep S., regional head of ABSL AMC Ltd (Kerala) and Rajesh Krishnamoorthy, an independent director, financial expert and former country head of the Financial Planning Standards Board Ltd. The theme: Life Goal Planning with Mutual Funds.

After Rao’s detailed presentation on money management, Krishnamoorthy led the discussion by defining life goals and financial goals. “They are not the same,” he said, “but they are so intimately connected to each other that people mistake one for the other.” Sandeep followed up by outlining goal-based investment in general, and then tying it to mutual funds specifically. “The idea is to match a goal and a timeline to an avenue of investing,” he said. “Once the goal is clear, the timeline offers itself. With these two facts in front of us, it becomes easier to choose whether we need to board an autorickshaw, a bus or a plane to get to our destination.”

Rao then spoke in detail about retirement planning using mutual funds and about the need to start early to build a corpus. The discussion led to SWPs and how the mutual fund world was an alphabet soup! Sandeep decoded the more obvious ones, beginning with SWPs.

“An SWP, or systematic withdrawal plan, is a mutual fund investment plan, through which investors can withdraw fixed amounts at regular intervals,” he said, adding that it often was used for tax planning. The next abbreviation that came up was STP, or the systematic transfer plan. Krishnamoorthy and Rao discussed how investors often used it to shift resources from one scheme to another to maximise gains and to safeguard the corpus during market fluctuations. Sandeep also touched upon the Har Ghar SIP initiative to popularise mutual funds among investors.

The importance of wills and nominations came up next, with the audience pitching in with questions and opinions. Krishnamoorthy elaborated on the topic, and the crowd was in splits when Rao quipped that writing a will was not a death wish, but mere common sense!

Naturally, the volatility of the markets came up for discussion when the floor was opened to the audience for a question-and-answer session. The panellists reassured the audience that the Securities and Exchange Board of India is a very capable watchdog of the industry. The high tea that followed saw many delegates grabbing the panellists for a quick chat to clear doubts and gain insight into personal situations.

the-week-master-the-mind-and-manage-your-money-seminar

Sat Mar 18 17:54:06 IST 2023

Got your first salary? What next? Partying with friends or family? Buying the latest smartphone? How about saving money? The earlier you start saving and investing, the better, isn’t it?

But that is easier said than done. How and where can you park your money? How much would you need to invest each year to meet your life goals and build a retirement corpus? Equity investing can be rewarding over time, but the risks associated with it and the long-term patience required to build a large corpus may not be every one’s cup of tea. So, then?

A seminar organised by THE WEEK, in partnership with Aditya Birla Sun Life Mutual Fund, tried to answer many such questions. Titled ‘Master the Mind and Manage your Money’, it was held at the Narsee Monjee Institute of Management Studies in Mumbai, and saw good participation.

The speakers included K.S. Rao, executive vice president and head of investor education and distribution development at Aditya Birla Sun Life AMC; Alpa Shah, founder, Empower Education, author and finance professional; Amit Trivedi, author and personal finance expert; Kiran Telang, author and financial planner; and Vinod Bhat, portfolio manager and chief of knowledge management at Aditya Birla Sun Life AMC. Dr Ramesh Bhat, vice chancellor, SVKM’s NMIMS Deemed-to-be University addressed the audience at the start as the venue partner for the event.

“Protecting wealth is not sufficient as inflation eats away your money. Wealth maximisation is important. We need to take certain risks, understand them and create wealth,” said Rao.

Perhaps, it is time for today’s generation to think differently. With rising costs and increasing life expectancy, investing first and then spending from the leftover income could be more ideal, said experts.

While investing over the long-term helps in building a sizeable corpus, starting one’s investment journey early is equally important as the earlier you start, the higher your corpus, thanks to power of compounding.

Like beginning to invest $5,000 per month after college, assuming that annual returns is of 12 per cent, it could grow to around $1.75 crore over a 25-year period. “But delaying it by even five years will leave you with a significantly lower corpus of around $94 lakh,” said Rao, “Delay it another five years, and the wealth corpus that you accumulate could come down to $48 lakh.”

Agreed Alpa Shah, “If you start your Systematic Investment Plan (SIP) five years late, you are half rich; 50 per cent of your wealth is gone when you retire. That is the impact of compounding and starting early.” Shah felt that as soon as students get a job and start earning, they should start systematic investments in mutual funds.

One common mistake, said Bhat, is when a person invests when the market is rallying. And when there is a correction, he would panic and sell, instead of buying low and selling high.

Said Bhat, ”That is where the principle of asset allocation comes into the picture. Starting from fixed deposits, gold and real estate, which are low risk and low return, to hybrid and equity mutual funds, which have moderate risk and returns, to direct investments in stocks, which have highest risk, but potentially higher returns. The best principle to follow is to invest in multiple asset classes.”

Financial planner Kiran Telang said one should be mindful and take decisions based one ones goals. ”If you have invested in a recurring deposit or in a liquid fund, what happens in the stock market should not impact you. You should know your focus, goals and invest accordingly. That is how mindfulness can be an important factor while investing,” said Telang.

Engineer-turned-life coach Gaur Gopal Das shared insightful thoughts on this aspect, which drew a lot of enthusiasm.

is-multi-asset-investingthe-right-move

Sat Mar 04 12:05:34 IST 2023

FOR INVESTORS IN INDIA, since the second half of 2022, the equity markets have been extremely volatile. Both of India’s benchmark indices have experienced unexpected volatility on February 1, triggered both by euphoria and dismay. On that day, the sensex both gained and lost 1.7 per cent, and the Nifty was no better. If these recent movements of the stock market have put you off investing, it is time for you to consider multi-asset investing.

What is multi-asset investing?

As the name suggests, multi-asset investing is a strategy that involves optimal diversification by allocating your corpus to a variety of assets. These include stocks, bonds and real estate and even gold and cash, depending on the market outlook and volatility. The idea behind multi-asset investments is to minimise your risk, by dividing your corpus across various asset categories, while also enabling you to gain maximum returns and participate in the growth of each asset category. For instance, if you were following a multi-asset strategy on the day of the Budget, then the loss you made in equities would have been offset by the gains you would have made in the bond market that day, where yields trended lower due to a strong buying sentiment.

Benefits of multi-asset investing: While you already know that multi-asset investing allows you to limit the downside, here are some more benefits of investing in it:

Optimal diversification: Since the multi-asset investing strategy prompts you to divide your corpus across major asset classes, your portfolio becomes diversified and, as you know, diversification is the first rule of investment. A diversified portfolio allows you to overcome the high levels of risk associated with asset classes like equity, while it also helps you earn better returns than more stable assets like debt.

Flexibility to meet targets: Often people, while considering an investment strategy, have a goal at the back of their minds, which could be purchasing a new vehicle or a new home or gaining the ability to enjoy an early retirement. Since multi-asset investing involves all major asset categories, your investment has the flexibility that is required to attain these goals. When the market is stable, you obtain high returns from equities and, when it is volatile, you can minimise your losses, taking refuge in safer options like debt and gold components.

Active management: Multi-asset funds allow you to fulfil your diversification objectives through a single avenue; they are actively managed by experienced fund managers who study the market and take portfolio decisions primed for optimal returns. The active management of such funds ensures that you never face unnecessary risk. Whenever the situation demands, the fund managers are prepared to shift your corpus from a risky asset to a safer one, and vice versa, thus offering you the full benefit of market fluctuations, while also protecting you from the negative side of it.

Should you opt for multi-asset investing?

Now that you know all about the multi-asset investing strategy and its various benefits, all that remains to be seen is whether this style is the right fit for you or not. As an investor, your decisions should be based on your personal profile, which includes your risk appetite, return requirements, investment horizon and financial goals.

Multi-asset investing is a great choice if your risk appetite isn’t extremely high and you find yourself dissuaded by the market’s volatility. Further, if you are not keen to maintain a diversified portfolio, or you dislike tracking the market and taking regular investment decisions, then a multi-asset fund will enable you to access professional fund management services while also enjoying the benefits of a well-diversified portfolio.

Among the various multi-asset funds available, ICICI Prudential Multi-Asset Fund emerges as one of the leading names in this category, thanks to its consistent performance across market cycles. The fund’s history over the past 20 years is notable for never having produced losses or negative returns over rolling five-year periods. Thanks to the covered call practice, the fund manager is able to deliver returns even in a range bound or sideways market.

So, in the current market environment, if you are faced with this confusion, then picking a multi-asset fund for investing could become your best financial decision of 2023.

Biswas is a mutual fund distributor.

lithium-discovery-in-jammu-and-kashmir-benefits-future-prospects

Fri Feb 17 15:27:49 IST 2023

WITH INDIA STRIKING ‘white gold’ in Jammu and Kashmir―5.9 million tonnes of it―its quest to have 30 per cent electric vehicles by 2030 has received a massive boost. The lithium deposits, reportedly the world’s second-largest, will help India become self-sufficient in making lithium-based batteries for vehicles and gadgets. It could also make the country an exporter of the metal, which has huge demand worldwide.

For Reasi district, the discovery at Salal Kotli is another feather in its cap―it already has the 345MW Salal hydel project and the world’s highest railway bridge at Kouri. This latest discovery is expected to further spur developmental activity in the area and create economic opportunities for its residents.

Om Prakash Bhagat, director of Jammu and Kashmir’s geology and mining department, said that the Geological Survey of India presented a report of the discovery, on February 9, to the mining ministry. “The report has four stages―G1, G2, G3 and G4 (see graphics),” he told THE WEEK. “Work on G3 and G4 stages has been completed. Now G2 and G1 stages, considered advanced stages, will be done. We will either do a G1 and G2 investigation or issue a composite licence for auction.”

Shafiq Chaudhary, district mineral officer, said the discovery was made after four years of hard work. “We are all excited,” he said. “We have demarcated the reserve (the mining area is around 2km long and 1km wide) and 200 families living on that hill will have to be relocated.” Additionally, a school, two government offices and a panchayat building would also be relocated. “Once the auctioning takes place, the processing will begin,” he said.

Experts, however, have cautioned that the government needs to adopt the latest technology to minimise the environmental impact of the extraction.

The Centre has launched schemes worth at least $3.4 billion to encourage and speed up the manufacture of electric vehicles and make them affordable. This discovery will help with that. It will also help India’s aim of becoming carbon-neutral by 2070.

The discovery was discussed during the recent Central Geological Programming Board meeting in Delhi. Union Mining Minister Pralhad Joshi said Jammu and Kashmir would wholly own the mines despite being a Union territory. “The discovery will help reduce the cost of manufacturing for electronic gadgets, including laptops and phones,” he said. “Once operational, it will save India 026,700 crore spent on importing lithium and lithium-ion batteries from Hong Kong, China, Indonesia and Vietnam. It will also fetch significant revenue for Jammu and Kashmir for socio-economic development, and it will help India meet its climate change goals as per the Paris Agreement.”

Interestingly, 26 years ago, the GSI had talked of finding traces of lithium in the region. In its final report on the geo-chemical survey for base metals and lithium in the Salal area, from 1995 to 1997, the GSI had noted: “The bauxite column in Salal-Panasa-Sangarmarg (Saroda Bas) and Chakar areas appears to be a promising horizon for lithium and may be taken up for further detailed work.” Sadly, no follow-up meant the lithium, if any, remained hidden.

Abdul Majid Butt, a noted geoscientist from Kashmir, said he, too, had discovered lithium deposits during a magnesite investigation in Jammu’s Balliganga Katra a decade ago, but those could not be processed because lab facilities were not available. “There is also a possibility of lithium discovery in Bandipora in north Kashmir, where I have been working for some time,” he said. “But, the findings will need to be verified.”

adani-companies-stock-price-variations

Sat Feb 11 16:02:52 IST 2023

Dhanji Street in south Mumbai’s Zaveri Bazaar is dotted with jewellery stores and diamond merchants. It was here that the young Gautam Shantilal Adani got his first taste of trading in the 1980s. He sorted stones at a diamond merchant’s place in the mornings, and then went to college. Soon he became so good at the job that he dropped out to become a full-time diamond trader.

Diamond trading requires quick thinking and swift action. You buy diamonds in one country, trade them in another, cut them in yet another one and then sell the finished stones in a totally different country. This experience has perhaps helped Adani to build an empire that now spans coal mining and power generation to running ports and airports.

As his business expanded, the stocks of his companies became the darling of the market. The group’s flagship, Adani Enterprises, for instance, surged from Rs229.75 on January 24, 2020 to Rs3,434.50 on January 23, 2023―a 1,384 per cent increase. Some of the other group stocks like Adani Ports, Adani Power, Adani Transmission, Adani Green Energy and Adani Total Gas gained between 99 per cent to as much as 2,120 per cent in this period.

Their fall from the peaks was equally spectacular, after a report by US-based short-seller Hindenburg Research sent shockwaves across the markets on January 24. The report accused Adani Group of engaging in “brazen stock manipulation and accounting fraud scheme over the course of decades”, and also pointed to the “substantial debt”, including pledging shares of the inflated stock for loans, putting the entire group on precarious financial footing.

The stinging report came just a few days before the opening of Adani Enterprises’ follow-on share sale to raise Rs20,000 crore, prompting the group to quickly react. “The report is a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts,” shot back Jugeshinder ‘Robbie’ Singh, group CFO, a day after the Hindenburg report was released. A few days later, Adani Group released a 413-page response to Hindenburg’s allegations.

Despite the spirited defence, the shares of eight listed Adani companies were under intense selling pressure since the report released. Between January 24 and February 6, Adani Enterprises shares corrected 54 per cent and Adani Total Gas slumped 60 per cent. Other group stocks fell between 28 per cent and 54 per cent. Even, the cement makers Ambuja and ACC, which Adani acquired in 2022, declined 24 per cent and 15 per cent, respectively.

Though the Adani Enterprises FPO got fully subscribed―despite retail individual investors staying away from it―owing to strong interest from non-institutional investors, Adani Group withdrew the issue and refunded all investors.

Gautam Adani said the withdrawal was to “insulate the investors from potential losses”. That might not be the only reason, as Adani Group had hoped to widen its shareholder base through the FPO. That plan did not work out, as retail investors gave it a skip. “There might have also been second thoughts over stock prices crashing further,” said a senior executive at a stock broking firm. “Historically, some companies that went public and saw their prices crash later have had to take measures like bonus issue to pacify investors. Instead of all that, Adani might have thought it would be prudent to just return the money.”

Gautam Adani’s first venture was Adani Exports, a commodity trading firm he set up in 1988. Soon he realised that owning a port could provide a base for scaling up the trading business. So, he bought land from the Gujarat government and set up Mundra Port, which became operational in 1998.

Today, Adani Group owns and operates more than a dozen ports across India’s east and west coasts, with an operating capacity of 538 million metric tonnes. It is the largest ports operator in India, handling around 31 per cent of the country’s total cargo volumes.

Adani had the Midas touch. He expanded from trade and ports to power generation, FMCG and construction. He is planning to commission refineries, petrochemicals complexes, specialty chemicals units and hydrogen plants in a petrochemical cluster in Mundra. Adani Airport Holdings is the the largest private airports operator in India, with seven airports in its kitty.

This expansion at break-neck speed has come on the back of several acquisitions and partnerships. The group has also borrowed heavily over the years; to the extent that some analysts say it is over-leveraged. The group, however, denies that. Its net debt to EBITDA (earnings before interest, taxes, depreciation and amortization), which was at 7.6 times in 2013-14, is now 3.2 times, said Jugeshinder Singh. The group has a healthy cash-flow as well.

After the Hindenburg report and the battered reputation, however, the group will not be able to do business the way it used to. “Adani’s bargaining power with banks and external institutions will obviously get impacted. In the existing projects, where the execution is good, that is fine. But, if there is any delay in any project, markets will react negatively,” said a stock broking firm executive.

The Adani companies are already under increased scrutiny. S&P Global Ratings has downgraded its outlook on two group companies to negative. Credit rating agency ICRA said in a statement that the group’s large, debt-funded capital spending programme remained a key challenge.

Financial institutions like Credit Suisse, Citigroup and Standard Chartered have already stopped accepting bonds of Adani Group firms as collateral on margin loans, according to reports. “Sustained selling could trigger debt collateral margin calls on the promoter pledge shares, and this could mean further selling of shares,” said Shriram Subramanian, founder and managing director of the proxy advisory firm InGovern. “Also, the withdrawal of the Rs20,000 crore FPO means that some projects would likely have to be slowed and put in cold storage.”

It is to mitigate this danger that the promoters prepaid around $1.1 billion of debt backed by shares of Adani Ports, Adani Green and Adani Transmission ahead of their maturity in September 2024. Adani Group’s bonds and shares rallied after this announcement on February 7.

The group currently has total debt of about $24 billion. About two-thirds of it is from overseas sources such as bonds or foreign banks and raised using its infrastructure assets or shares as collateral. The dip in the value of its stocks means a corresponding dip in the value of this collateral. This has made lenders cautious; loans will no longer be cheap or easy to come by.

And the group is unlikely to approach the stock market anytime soon. “They will have to tell the market very clearly that nothing was wrong. Till then, probably, they will not come to the market,” said J.N. Gupta, former executive director of Securities and Exchange Board of India and founder of Stakeholder Empowerment Services, a proxy advisory and corporate governance firm. “An independent verification of things will assuage the feeling and restore their reputation. They should engage reputed agencies to everything, a peer audit should be done, so that financial figures are reassured and governance practices are reassured.”

The sell-off in Adani shares has caught the attention of the regulators. SEBI, the markets watchdog, is monitoring the crash and stock exchanges have put several Adani stocks under their additional surveillance measure framework on a short-term basis. Intraday trading in these stocks would require 100 per cent upfront margin, which would curb speculation and short-selling.

The Reserve Bank has sought data from banks on their exposure to Adani companies. Of the group’s total debt, Indian banks account for less than 40 per cent. Dinesh Kumar Khara, chairman of State Bank of India, clarified that loans to Adani Group have been given for projects with tangible assets and adequate cash flows. SBI’s outstanding exposure to Adani Group is about Rs27,000 crore, or about 0.88 per cent, of its total loan book.

After withdrawing the FPO, Adani told investors that his group’s balance sheet was healthy and it would continue to focus on long-term value creation and growth would be managed by internal accruals. They would also continue to focus on timely execution and delivery of projects, he added.

Adani, however, might have to delay new projects and monetise some assets to get out of the woods. One positive thing is many of its projects like ports, airports and cements are well capitalised and have healthy cash flows, and are mostly unaffected by the movement in stock market.

“I find the structure of Adani Group very clean, because there is no cross-holding,” said Gupta. “Every company is standalone and there is no company relationship in the form of investments, loans and advances, except Adani Enterprises, which is like a venture capital company.”

Adani’s biggest assets were his business acumen and political clout. The controversy is likely to diminish his companies’ ability to get lucrative government contracts, which, in turn, will affect the group’s revenue streams. “In the immediate term, the group has to reassure investors that basic company operations are unaffected and all projects are going as per schedule,” said Subramanian of InGovern. “In the medium term, it needs to engage more with the investor community by getting more equity research coverage and also diversify its investor base.”

Many of the group’s new businesses that need huge capital expenditure come under Adani Enterprises. Though the parent company has enough cash to support them, that might not be an ideal arrangement in the long term. Adani Gas and Adani Green have huge debt but limited cash flows, which could become a problem.

The quick-thinking instincts Gautam Adani gained as a diamond trader helped him build a business empire. They may well come in handy in defending it.

allegations-against-adani-headache-for-bjp-government

Sat Feb 11 12:41:27 IST 2023

Over the next 15 months, elections are set to dominate the discourse in India. In that context, the 106-page Hindenburg report against industrialist Gautam Adani may well become part of the script for an intense political war.

In view of the Gujarati tycoon’s perceived proximity to Prime Minister Narendra Modi and the group’s massive growth in the last few years, opposition parties latched on to the report and demanded investigations by market regulators and even a joint parliamentary committee (JPC) probe into the alleged irregularities.

Congress leader Rahul Gandhi, seemingly energised by his recent 3,500km-walk, led his party’s attack: “During the yatra, youth kept asking me, ‘How is that Adani is so successful? How did his net worth jump from $8 billion to $140 billion USD since 2014?’” Rahul has been consistent in attacking the government for its “pro-corporate” image. He had limited success in 2015 when his “suit boot ki sarkar” jibe forced the Modi government to make a policy shift to earn a pro-poor image.

The Trinamool Congress, the Janata Dal (United)-Rashtriya Janata Dal alliance, the Samajwadi Party and the Aam Aadmi Party have taken up the issue to embarrass the BJP, which is a key opponent in their states. The opposition’s main argument against the corporate house is its business links with public sector entities like the State Bank of India and the Life Insurance Corporation of India.

Banks have a loan exposure of around Rs80,000 crore to the Adani Group, of which the SBI has lent around Rs27,000 crore. However, SBI chairman Dinesh Kumar Khara said the bank’s loans to the group were 0.88 per cent of its books and that it does not envisage any challenge. Similarly, the LIC’s investment of around Rs36,000 crore in the Adani Group is 0.97 per cent of its assets under management at book value. Also, the group has offered to return its debt early to restore market sentiment.

“Indian markets are well regulated by the RBI and SEBI,” said BJP spokesperson Gopal Krishna Agarwal. “Even Finance Minister Nirmala Sitharaman reiterated that the regulators are doing their job. The RBI has given explanations regarding the loans given by the banks to various entities. Markets are resilient. Moreover, the Congress has been doing the same thing with different issues, be it Rafale or Article 370. It has been lying that Rs15 lakh crore loans were waived. Even on the farm laws, it created a false narrative.”

After Rahul flashed pictures of Modi with Adani, the BJP hit back with images of the industrialist with Rahul’s brother-in-law Robert Vadra and also with Congress chief ministers. The BJP said that Rahul’s allegations that Modi helped Adani’s business to flourish was false and challenged him to prove his claims against the prime minister in Parliament.

The opposition’s offensive against the government in the Adani issue may feel similar to the 2018 Rafale deal allegations. But, unlike the Rafale deal, the common man could be directly affected by Adani Group’s problems, if they persist and have an adverse impact on the economy. This, in turn, could take away the sheen of the 2023 Union budget’s infrastructure push. And, if the crisis spirals, it has the potential to extract a political cost from the Modi government.

Responding to the opposition’s allegations on Adani, Modi said that his government was focused on dalits, tribals, and backward and marginalised classes. “People trust Modi,” he said in the Lok Sabha. “The trust in Modi was not because of newspaper headlines or TV appearances. I have spent my life for the country. They (the opposition) cannot comprehend the trust the country has in Modi. Will 80 crore people getting free ration trust these people?” He went on to enumerate the number of beneficiaries of various government schemes. “They will trust me instead of you,” he said.

The political war over the fortunes of the Adani Group is likely to escalate in the coming days as the opposition will insist on constituting a JPC to probe the matter. A demand that is unlikely to be met by the government―the last investigative JPC was set up in 2013. The BJP’s counteroffensive may focus on Adani’s investments in Congress-ruled states and the industrialist’s rise during the UPA regime, well before the NDA came to power in 2014.

BJP MP Ravi Shankar Prasad said that Rahul Gandhi had not learned anything from past experiences. “Before the 2019 elections, he attacked the PM with the chowkidar jibe (on the Rafale issue),” he said. “What happened then? Where did the Congress reach? They are again making such allegations. The electorate will teach them a lesson in 2024.”

With multiple assembly elections scheduled for this year and India’s presidency of the G20 summit, the allegations against Adani can be a headache for the government if the issue drags on, as it would have to work hard to shift the focus back to its agenda.

hindenburg-report-adani-analysis

Sat Feb 11 12:35:40 IST 2023

When the Hindenburg airship went down in 1937, the disaster was especially dramatic for a couple of reasons. The German passenger airship’s trip was being closely followed by the public and the media when it caught fire over Boston. As a result, the fire and the collapse were photographed by news crews. In a rare event, a voiceover was also recorded over the newsreel, giving people a play-by-play. The infamous accident, which killed 35 of the 97 people on board, marked the end of the hydrogen airship.

In the age of internet and live-streaming, the explosive Hindenburg report about the Adani Group sparked its own fire. The report from the US short-seller alleges that the Adani Group is filled with hot air, fuelled by debt and offshore shell companies. In the PR battle that followed, the corporate alleged that the report was a “concerted attack against India”. The spin was widely ridiculed online and had to be abandoned.

The fallout in India has been contained so far. Finance Minister Nirmala Sitharaman asserted that the regulatory environment in India was strong, and SEBI has so far been mum about any investigations into the allegations. The fallout internationally has been more severe, with Credit Suisse, the Citigroup and Standard Chartered no longer accepting Adani bonds as collateral against margin loans, and Moody’s noting that the group may find it harder to raise funds in the next couple of years.

The globalisation of stock markets has seen many international investors pouring money into listed companies in India and China. Both international bond holders and blue-chip investors held Adani stocks and bonds. This included Norway’s largest pension fund KLP, which had holdings in Adani Green Energy as part of its ESG investments. (It has exited these).

Analyst Shuli Ren pointed out last week that the reason so many international investors invested in Adani company debt is that companies like Adani Ports and Adani Transmission are rated “investment grade”, drawing investors who put money in low-risk corporate debt. But as the crisis spiralled, these investors quickly pulled out.

India has been trying to set itself apart from China as a stable democracy that is well-regulated and welcoming of foreign investments. The truth is more complicated. The Adani crisis has thrown a spotlight on our business environment.

The reality is that the “Infosys” model is not a common one among India’s listed companies―more than 90 per cent of India’s listed companies are family owned and have sons, daughters and cousins in senior management, and extended families holding large percentages of the shares. The Ambani and Adani empires have dominated India’s infrastructure spending―over just two years, Adani Ports has reportedly bought three Indian seaports for $2.6 billion.

Studies show that family-owned businesses tend to be less transparent and have weaker governance, and perform worse than non-family owned companies. This makes it essential for regulators and governments to keep them at arm’s-length and examine the holding structures and disclosures of these companies more closely. It should not take a US-based short-seller to wake us up.

Rather than looking the other way and reviving the old accusations of “foreign hand” or “jealousy for India”, we should focus on bringing the reality closer to our rhetoric of being a “well-regulated, transparent democracy”. Else our claims will sound like just more hot air.

The writer, a Chevening fellow from London School of Economics, is co-founder and CMO of Trendlyne.com and was in the founding group for Aadhaar with Nandan Nilekani.

optimum-benefits-sans-stress

Sat Feb 11 12:24:17 IST 2023

ASSET ALLOCATION IS a crucial component of successful investing and is essential to a positive investing experience. It is an evergreen strategy that every investor should adhere to, regardless of market cycles. The adage―‘Do not put all your eggs in one basket’―is a good analogy for asset allocation strategy.

If the basket falls or gets damaged, there is a good chance that all eggs might be useless. In other words, asset concentration can be a very risky proposition at times. It is advisable to diversify investments across asset classes to manage risks and achieve risk-adjusted, stable, and better returns over time.

However, given the fact that all assets go through cycles with different dynamics of valuation, investors find it hard to proportionately allocate their investments. In the process, they develop undue affinity to one asset class, which is dangerous investment behaviour. It is here that schemes such as the multi-asset come to the rescue of investors in an effective way.

Essentially, there are three popular asset classes among the masses: equity, debt and gold. Each has distinct characteristics and importance in one’s investment journey. For instance, equity plays the role of wealth creator, but also goes through phases of consolidation and growth. Despite cycles, the long-term average returns from equities have been around 15 per cent. This makes equity a crucial constituent of an investment portfolio.

On the other hand, debt aims to offer portfolio stability and provides opportunities for consistent returns over a longer time horizon. On an average, debt has offered a return of 7-8 per cent in the long run. Even though equity and debt offer a mix of growth and stability factors, gold has historically acted as a good inflation hedge and often emerges as a protector of the overall investment portfolio.

A multi-asset mutual fund scheme is a solution-based financial product. As per the SEBI scheme category mandate, such a scheme will invest at any given time a minimum of 10 per cent in three or more asset classes. In effect, a multi-asset scheme combines more than three asset classes into a single portfolio that includes investments in equity, debt and gold at any given time. In addition, this category fund may invest in infrastructure investment trusts (InvITs) and real estate investment trusts (REITs). The scheme endeavours to offer long-term returns by managing asset-related risks. This helps investors get optimum benefits from all asset classes while avoiding stress over asset allocation.

Since behavioural finance plays an important role, a multi-asset fund, is well-suited to handle investors’ emotionally driven impulsive investment decisions. Generally speaking, impulsive actions may result in failure of being able to stick to asset allocation, which can at times be detrimental. A multi-asset scheme controls these challenges.

Typically, the average equity allocation is nearly 65-75 per cent, while 20-25 per cent of assets are allocated to debt and the remaining funds are invested in gold and other assets. Historically, it is seen that investors who have maintained their asset allocation during the various equity bull runs without succumbing to “greed and fear” are the ones who have emerged wealthier.

One of the oldest and the largest offerings in this category is the ICICI Prudential Multi-Asset Fund. The fund offers investors exposure to a variety of asset classes through a single fund. The fund manager has the flexibility to invest across market capitalisations and sectors in this truly diversified scheme while aiming to produce absolute returns over a longer time frame. Given the market valuations, for equity allocation, the fund is known to follow a counter cyclical approach and the net equity levels can be in the range of 10-80 per cent.

In light of the expensive equity valuations and rising interest rates amid high inflation, the relevance of staying invested across multiple assets has increased manifold. Various factors like concerns about a global economic slowdown, high inflation, and rate hikes by central banks worldwide have induced fear of uncertainty from a short-to mid-term perspective. At this point, investing in a multi-asset category can get one access to the best of each asset class while limiting the risks associated with asset concentration.

The writer is wealth head, Figital Technologies (p) Ltd.

g20-tourism-meeting-rann-utsav-in-kachchh-gujarat-2023

Sat Feb 11 12:20:09 IST 2023

Guru Kharet is a picture of confidence as he talks to his customers, even those from foreign shores. The 21-year-old from Hodka, a small village in Gujarat’s Kachchh district, is one among hundreds of artisans who do brisk business, especially in winter.

Until a few years ago, artisans like him travelled to various parts of the country, year-round, to earn a living by selling their craft. Now, because of the famed Tent City in Dhordo, near the Rann of Kachchh, they are happy at home. “We did not even know how to speak properly. Now, we handle foreigners, too,” said Kharet, in the same breath showering praise on Prime Minister Narendra Modi.

Tent City was set up in 2005, but took its current form in 2012, state tourism secretary Hareet Shukla told THE WEEK. The brainchild of then chief minister Modi, the city is a semi-permanent structure that works on a public-private partnership model. It is spread over five lakh square metres and has tents to house visitors. These are dismantled every year. It also hosts the wildly popular Rann Utsav, which is held when the winter sets in and the desert turns white.

Unlike Karet, 23-year-old Nanji Marwada does not have the capital to set up shop in Tent City. But, he has also benefited from the tourism boom and sells his wares just outside the city. There are many others like him, who sell anything from art to food in a cluster of stalls. “Our income has definitely increased,” he said. “Earlier, we were dependent on cattle rearing. Now, even our small restaurants and bhungas (traditional round huts) do good business.”

Over the years, several small “resorts” with bhungas and tents have come up on the sides of the 70km stretch between Bhuj and Dhordo.

People even come from Ahmedabad to do business here. Raj Bhatt’s family, from there, are puppet makers. Six of them operate in the Rann, and each earns around Rs1.5 lakh during the four months of tourist season, he said. They charge Rs200 per person for a photo-shoot in traditional outfits and also earn by playing the dhol. As the ninth-pass Bhatt, 25, begins playing the famous song ‘Vagyo Re Dhol’ from the Gujarati movie Hellaro, young and old start doing the garba. Incidentally, the movie, which focused on women empowerment, was also shot in Kachchh.

“Tent City has helped in exponential growth,” said Shukla, who first came here as the district development officer. “Otherwise, because of the Banni grassland, the villagers could rely only on cattle rearing to some extent.”

Shukla pointed out the increase in khoya shops to indicate the growth and reminisced about the times he used to accompany the sarpanch of Dhordo to where Tent City now stands.

The latest feather in its cap is that Tent City was chosen to host the first Tourism Working Group meeting of the G20 between February 7 and 9. As more than a hundred delegates debated on themes of green tourism, MSMEs and destination management, India showcased one of its best landscapes, thereby also hinting at the unlimited variety that the country offers.

Inside, the city offers a fulfilling stay in suites and cottages, depending on the tourist’s purse. From the Darbari and Rajwadi suites to the non-AC cottages, there are several options to choose from. In the Darbari suite, you even get a private dining area.

For recreation, there are bicycle tours within the city and outside, camel rides, cultural programmes, 360-degree photography and what not. But, you have to pay separately for each.

Outside the city, you can visit places like Dholavira and Mata No Madh, which are a couple of hours by car.

Another brainchild of Modi―the Smriti Van Memorial and Museum atop the Bhujiyo Dungar (hill) in the middle of Bhuj―has also put the region on the world map. Built in the memory of the 2001 earthquake victims, Smriti Van is divided into two parts: the van (forest) and the museum, both powered by a solar plant. These are spread over 170 acres.

The memorial is said to have the world’s largest Miyawaki (a method of afforestation) forest, with more than 2.2 lakh plants. These are watered by 50 check-dams on the hill.

The museum is spread over 11,500sqm and gives insights into the earth’s surface, the fault-lines, how nature works on stones and so on. Sections are dedicated to the 2001 earthquake and its aftermath, and there is also a simulation of a quake.

Suganya Pradeep, 33, from Puducherry, visited the memorial with her husband, Pradeep, and son, Pragdeesh. She said they could now relate with what happened in 2001, and Pragdeesh said he would be able to visualise concepts when his teacher talks of earthquakes and other disasters.

Smriti Van is a project of the Gujarat State Disaster Management Authority; KPMG manages it. While the exteriors have been done by Vastu Shilpa Consultants, founded by the late architect B.V. Doshi, Design Factory India has done the interiors.

Smriti Van also provides jobs to the locals. Savita Chavda, an MBA from Bhuj, gave up a career in management to become a guide at the museum. Arjun Barda, a library manager, said he enjoys his work a lot as he gets to meet people from different walks of life.

A source closely working with the project said that it is one of the first to be built in memory of those who had died in a natural disaster.

Sources said the second phase of the project has been approved, and it will be developed in such a manner that visitors will require about one and a half days to look around. It is also expected to use learnings from other countries.

With India hosting the G20 summit later this year, more eyes from around the world are bound to discover several such gems all over the country.

union-budget-2023-highlights-analysis

Sat Feb 04 14:30:18 IST 2023

Everything, everywhere, all at once. There is a method in the spend-big-or-go-home madness that the finance minister has reiterated her faith in with the Union Budget 2023, even though a lot of it rests on hope.

Nirmala Sitharaman’s budget, the last full one before the Lok Sabha elections next year, was a no-holds-barred buildup on spending from her own previous budgets (and the super budget that was lockdown’s ‘Atmanirbhar Bharat’ stimulus measures). While a whole lot of government spending last year was primarily in infrastructure like roads and ports, the largesse now has a wider arc―agritech, affordable housing, green energy, railway, airports and even helipads.

“This budget injects new vigour into India’s development trajectory, [it] will realise the dreams of an aspirational society that includes poor, middle-class people and farmers,” said Prime Minister Narendra Modi, shortly after Sitharaman tabled the budget in Parliament.

FOLLOW THE MONEY

In the run-up to the budget, Sitharaman had two paths before her―continue with the spending pattern or get conservative in controlling the runaway fiscal deficit (the gap between what the government earns and what it spends). The pandemic had seen the fiscal deficit shoot up to nearly 10 per cent, while the fiscal responsibilities rules limit was 3 per cent.

Interestingly, Sitharaman has pulled a bunny out of her hat by going in for both―spending even bigger, even while setting ambitious targets for taming the fiscal deficit. “This is a budget that has been beautifully balanced,” she said, besides adding how “fiscal consolidation has not been kept on the back burner.” The fiscal deficit has already come down to 5.9 per cent, but Sitharaman is emphatic that it would be brought down to 4.5 per cent in three years.

ALL ROADS LEAD TO…

Ever since the Covid pandemic started, the Modi government had embarked on a strategy of gambling on big capital spending, under the premise that it would beget growth in the long run. In fact, in this year’s budget, the capex has been increased over and above last year’s massive amount by 33 per cent―the effective spending estimated for the upcoming financial year will be a ginormous 013.7 lakh crore, which is about 4.5 per cent of the country’s gross domestic product (GDP). “Investment in infra will increase demand in multiple industries. It has a multiple beneficial impact,” said T.V. Narendran, managing director of Tata Steel.

It may be beneficial in the long run as well. “This capital expenditure, the government hopes, will lay the foundation for the future,” said Sethurathnam Ravi, economist and former BSE chairman. “Without growth, it is difficult to bring the fiscal deficit down.”

The motive is clear in the many customs duty rejigs, which will join the ‘Atmanirbhar Bharat’ initiatives announced earlier; all pushing the same thing―manufacturing locally. “The government has aimed to boost domestic manufacturing by simplifying manufacturing duties and indirect taxes. This decision is a much-awaited one,” said Arjun Bajaj, director of the company that makes Daiwa televisions. The budget has lowered import duties on items like TV panels, mobile phone components and camera lenses, aiming at not only domestic manufacturing, but also attracting global makers to set up factories in the country.

Even the reworking of personal income tax slabs has a motive. “The government has created more disposable income at the lower end and the middle income which will find ways into consumption, in turn boosting the economic growth,” said Shishir Baijal, chairman and managing director of the realty consultancy Knight Frank India.

It is a strategy the government is sticking to. That the government’s capital expenditure will spur the private sector to spend more, thus creating jobs, jacking up consumption and fuelling trade. With the expansion of the economy, tax and duty revenues will start flowing in. But there are big problems here.

ALL EGGS IN ONE BASKET

The first one is that reality has veered wildly off the original script. The expected capital expenditure from businesses have not really materialised. On more occasions than one, a frustrated finance minister had called them out. While big corporates were waiting for a revival of private consumption before they made business bets, the small and medium business were handicapped as they have not fully recovered from the impact of the lockdown. The easy loan scheme launched for them by the government as part of stimulus measures has had only limited success, mainly because banks were reluctant to loosen their purse strings.

Yet, North Block, the Raisina Hill monolith that houses the finance ministry, has continued to place its faith on the same strategy. This is because of a windfall coming in from unexpected quarters. The new economy, consisting mainly of tech firms flush with foreign funds and a curious K-shaped economy with the ‘haves’ splurging big (while the ‘have-nots’ are retreating into invisibility), has been seeing record GST revenues on a monthly basis. In the chaotic post-Covid economy, certain sectors made hay while others struggled. India’s exports boomed in 2021-2022 before it started cooling down eventually.

Even the Ukraine war―which led to fluctuations in commodity prices, oil prices and the value of the rupee―did help in some trade gains as India quickly moved in to take advantage of the west’s sanctions on Russia. But this kind of windfall cannot be expected to last forever. There are already the threats of high inflation and a global recession in the air, no matter how many times you repeat the phrase “Indian economy is resilient”.

Secondly, where is the money going to come from? For all the higher tax revenues, the cold truth is that the government will end up borrowing quite a bit, even if there are provisions for many of the ambitious projects to be public-private partnerships or to be funded jointly with state governments.

To fall back on an upward swing in revenues to take care of the mounting debt is foolhardy. “The global economy is very fragile,” said Ravi. “Our exports are already slowing down. We also have to be watchful of currency fluctuations, as well as fluctuations in the price of commodities.”

Sitharaman knows it too well. Many calculations in the last budget, based on the then price of crude oil went topsy-turvy when Russia invaded Ukraine, sending oil prices up and the value of the rupee down. It is another matter that those fluctuations led to a windfall for India later.

By doling out liberally for a rainbow spectrum ranging from the rural poor to the urban lower middle class, Sitharaman may have sewn up the political benefits. But when it comes to the economy, the best laid plans would depend on a lot more than praying for a best case scenario. “The budget aims that fiscal impulse is maximised to improve potential growth,” said Madhavi Arora, lead economist at Emkay Global Financial Services. “This requires continued financial sector reforms and better resource allocation.”

bjp-poll-centric-calculations-union-budget-2023

Sat Feb 04 14:29:20 IST 2023

Everybody loves a good budget. Finance Minister Nirmala Sitharaman kept her fifth and the government’s last full Union budget before the 2024 Lok Sabha polls short and simple. Those looking for big reliefs may have been disappointed, but the government made sure that its key ‘constituencies’―especially the middle class and women―benefitted or can look forward to the fruits of development. The two headline-making announcements―income tax sops for the salaried class and the increase in capital expenditure to rev up economic growth―will keep voters happy, for now.

The last time the government announced sops for the salaried class was during the interim budget presented on February 1, 2019, two months before Lok Sabha polls. Then, the tax exemption limit was raised to Rs5 lakh. Now, with little over a year to go for Lok Sabha polls, the government has revised the tax exemption limit upwards to Rs7 lakh. Unlike in 2019, the salaried class would have enjoyed the benefit of lower taxes before casting its vote in 2024. The government will forgo Rs35,000 crore in revenue.

Prime Minister Narendra Modi had initiated the freebies versus development debate, so it was only prudent for the budget to focus on the latter. With government revenues booming, Sitharaman announced a 33 per cent increase in capital expenditure to Rs10 lakh crore―3.3 per cent of the GDP. The aim is the multiplier impact that investing in infrastructure would have on growth and employment. And, the aspirational class would be happy with new roads, ports and airports coming up near them. This is the third year in a row that the government has increased capex. This signals not just continuity, but also an intent that jobs be linked with development, instead of giving freebies. Similarly, promises like building 50 tourism spots, 157 nursing colleges, 50 additional airports and malls to promote and sell state-specific products, will keep the middle class moving and the aspirational class happy.

The Modi government has evidently realised that development makes for good electoral politics. It may have stopped short of using the much-maligned India Shining slogan, but it aggressively showcases new highways, metros, waterways and airports as symbols of a new India. Sitharaman announced a record outlay of Rs2.40 lakh crore for railways. The government has announced new Vande Bharat trains in many states and the increased outlay for railways will come in handy for announcing more new projects and sprucing up infrastructure, especially in the Hindi heartland, where railways projects have been used as political tools in the past.

The assembly elections in 2023 have also been kept in mind. An outlay of 05,300 crore was announced for the Upper Bhadra irrigation project, which would benefit drought-prone areas of Central Karnataka. For Telangana, the Indian Institute of Millets Research in Hyderabad will be supported as a centre of excellence.

In the last nine years, the government has created a beneficiary network which is then aggressively wooed during election campaigns. Sitharaman announced the numbers of these beneficiaries during her speech: “11.7 crore household toilets under Swachh Bharat Mission; 9.6 crore LPG connections under Ujjwala; 220 crore Covid vaccinations for 102 crore persons; 47.8 crore PM Jan Dhan bank accounts; insurance cover for 44.6 crore persons under PM Suraksha Bima and PM Jeevan Jyoti Yojana, and cash transfer of Rs2.2 lakh crore to over 11.4 crore farmers under PM Kisan Samman Nidhi.” We envision a prosperous and inclusive India, said Sitharaman, in which the fruits of development reach all regions and citizens.

Women have shown different preferences and poll percentages compared with men. Sitharaman, who wore a red sari, proposed the Mahila Samman Savings Certificate with a fixed interest rate of 7.5 per cent for two years. The deposit can be made in the name of a woman or a girl. The limit is Rs2 lakh and the scheme will have a partial withdrawal facility. Elaborating on women-centric initiatives, the finance minister said that as part of the Deendayal Antyodaya Yojana-National Rural Livelihood Mission, 81 lakh self-help groups have been established by enrolling rural women. “By establishing huge producer firms or collectives with each having several thousand members, we will enable these groups to achieve the next stage of economic empowerment,” she said. The prime minister said in praise of the budget that miracles could be performed if women self-help groups were further strengthened.

In a relief to senior citizens, who are also a supportive, middle-class constituency for the BJP, Sitharaman announced raising the limit for the Senior Citizen Savings Scheme from Rs15 lakh to Rs30 lakh.

The budget also caters to new constituencies. This includes tribals―who can be decisive in election-bound states in the northeast, and in Chhattisgarh, Madhya Pradesh and Rajasthan. “The Pradhan Mantri Particularly Vulnerable Tribal Groups Development Mission will saturate families and habitations with basic facilities such as safe housing, clean drinking water and sanitation, improved access to education, health and nutrition, road and telecom connectivity, and sustainable livelihood opportunities,” said Sitharaman, adding that Rs15,000 crore will be made available to implement the mission over the next three years. There is also the announcement that 38,800 teachers and support staff will be recruited for 740 Eklavya Model Residential Schools, serving 3.5 lakh tribal students. A scheme for makers of handmade goods was also announced; Vishwakarma is a broad category of artisans where most of the people belong to backward and marginalised castes.

Before the Delhi municipal elections, the BJP took hordes of people to showcase houses built for slum-dwellers. Though the party did not do well in the elections, it revealed a crucial tool in its poll outreach. Sitharaman announced that the outlay for the PM Awas Yojana has been increased by 66 per cent to over Rs79,000 crore.

Similarly, in view of the increased penetration of mobile phones and smart TVs, the government cut taxes on them. A national digital library for children and adolescents will make available quality books across geographies and languages―another way to connect to the rural population.

The government has already announced that it will continue to supply free food grains to over 80 crore people. Sitharaman said the expenditure of about Rs2 lakh crore will be borne by the Centre.

The budget proposes to spend Rs2,200 crore on high-value horticulture and set up an agriculture accelerator fund to finance farm startups. However, the overall allocation for the agricultural sector has been reduced from 3.84 per cent of the total budget last year to 3.20 per cent this year. The Samyukt Kisan Morcha (SKM), the umbrella body of farm unions, has decried the cut and also the reduction in allocation on rural development (5.81 per cent to 5.29 per cent) and in MNREGA funds (Rs90,000 crore to Rs60,000 crore).

A statement from the SKM said: “Since the general economy and especially the rural economy is still in deep crisis, it is unbelievable that the government has hacked down the allocation for MNREGA to Rs60,000 crore, a dramatic cut of Rs30,000 crore. The government should stop fooling farmers and seriously focus on resolving the critical issues of farmers like legal guarantee of MSP, crop insurance, reduction of input costs and steady availability of inputs.”

The opposition was quick to deride the budget as election-centric. “This budget is big on announcements and short on delivery,” said Congress president Mallikarjun Kharge. “The budget makes no effort to find a solution to massive unemployment. Inflation is hurting every household and the common man is in trouble. There is nothing in the budget that would reduce prices of items of daily use.”

Whether the critical voices reach the common man or not, the highlights of the budget are highly likely to do so. Because the BJP’s massive cadre will soon be on the ground, hard-selling this budget as a manifesto.

startup-industry-issues-fund-crunch

Sat Jan 28 15:32:25 IST 2023

NOT SO LONG AGO, the buzzword in the startup ecosystem was unicorn, a moniker for startups valued over $1 billion. Every startup dreamt of becoming one, and India has minted some 100 unicorns so far. In 2021 alone, 42 startups became unicorns.

In 2023, though a different species is garnering attention—the cockroach. No animal can match a cockroach’s ability to survive changing environments and move forward. And that is the need of the hour now in the startup world, which is stuck in a funding winter.

In 2020 and 2021, the world was awash with funds injected by central banks to tide over the Covid-19 pandemic. Money was not an issue and startups raised funds in multiple rounds. Last year, however, the weather turned bleaker as central banks tightened the liquidity screws and geopolitical tensions cast a shadow from Ukraine to Taiwan, and industries struggled with supply-side challenges. With a recession looming over major developed markets, and investors turning more cautious, startups are switching to the survival mode. They will have to struggle hard, but still keep moving forward, just like the cockroach.

Data by Tracxn, which provides market intelligence for startups and private companies, says that total funds raised by startups in India in 2022 plunged 39.2 per cent year-on-year to $25.4 billion from $41.8 billion. There have been 1,939 funding rounds last year, compared with 2,903 rounds in 2021.

It is not that funding dried up completely. Seed-stage funding declined just around 18 per cent to $1.4 billion from $1.7 billion. Early-stage funding remained fairly stable, $6.9 billion in 2022 against $7 billion in 2021. Late-stage funding, however, slumped more than 48 per cent to $16.9 billion in 2022, compared with $32.8 billion in 2021.

“We have been building at backbreaking pace for almost a decade now. It was raining unicorns. This is a welcome change where everyone is just taking a step back. Things are slowing down a little bit and there is more focus on the fundamentals,” said Manu Rikhye, partner at venture capital firm Merak Ventures.

The challenges have had a huge impact on the startup ecosystem. “You now see companies talking about path to profitability versus growth. Earlier, growth was getting rewarded; just focus on growth at all costs. Now, the shift has been towards more sustainable growth and achieving profitability in a finite amount of time,” said Neha Singh, co-founder and CEO of Tracxn.

Many startups had to take a fresh look at their businesses, and some had to scale down or shut down altogether. Eight startups put up the shutters last year, including edtech players Udayy, Lido and SuperLearn; business-to-business commerce platform ShopX; and celebrity engagement platform GoNuts.

Ola, which operates a ride hailing service, shut down its quick commerce platform Ola Dash and its used-car business Ola Cars, looking to focus on its rapidly growing arm Ola Electric. Similarly, edtech company Unacademy closed its global test prep business, citing failure to find product and market fit.

Some estimates say 18,000 people were laid off by startups from across sectors in 2022. There were a lot of job cuts in the edtech space as companies that had expanded during the pandemic saw their growth momentum losing steam once normalcy set in.

“There was a lot of pandemic-driven extra demand that went away once schools came back,” said Shruti Srivastava, investment director at Avaana Capital, which has backed startups like Nykaa, Urban Company and Delhivery. “Being cognizant of how and where money is being spent needs to be embedded from day one. Growth itself should be driven in a judicious manner, instead of growth at all costs.”

The slump in tech stocks globally has also soured investor sentiments, especially in late-stage funding. Several new-age tech companies went public in the past few years. One97 Communications (parent of the fintech company Paytm) raised Rs18,300 crore in 2021 in the largest IPO in the Indian capital market at that time (it was eclipsed by LIC’s Rs21,000 crore issue in 2022). The stock has plunged 45 per cent from its 52-week high and 75 per cent from the issue price.

PB Fintech (which operates insurance aggregator platform Policy Bazaar), FSN E-Commerce Ventures (which runs beauty commerce platform Nykaa), restaurant aggregator Zomato, CE Info Systems (MapMyIndia) and Cartrade Tech also went public. Their valuations have all corrected sharply from their peaks. PB Fintech has declined 57 per cent from its peak; Cartrade has retreated 44 per cent from its highs; and CE Info Systems has fallen 35 per cent. FSN Ecommerce and Zomato have also declined more than 55 per cent from the peak. In comparison, the BSE Sensex went up by around 5 per cent in 2022.

“In late-stage funding, the impact in India has been more,” said Tracxn’s Singh. “There were investors like Tiger Global or Softbank, which also had a large public market portfolio. With the public market portfolio so much in the red, you saw them talk about going slow in the private market as well.”

The poor performance of tech companies that got listed has clearly impacted the valuations of unlisted startups. For instance, the valuation of hotel room aggregator Oyo, which has plans to go public, reportedly fell from around $12 billion when it filed draft papers in 2021 to around $6 billion in 2022.

Tech startups seem to have gone into a wait-and-watch mode amid the weak capital market conditions before heading for an IPO. Delhivery and Tracxn are the only two startups that have hit the stock exchanges in 2022. E-commerce company Snapdeal, automobile marketplace Droom, wearables brand Boat and API Holdings (PharmEasy) have deferred their IPO plans.

Pankaj Makkar, managing director of Bertelsmann India Investments, said that in 2020 and 2021, the “market went ahead of itself” and correction that happened was welcome. “If you are growing at 70 per cent of the rate that you were growing, it is fine. But, at the same time, continue to keep moving towards the path of profitability, which you should have been doing before also,” he said.

Crucially, it is no longer the founders’ market. “Six to eight months ago, everybody was funding everything. What has happened now is that we are all in a wait-and-watch mode. Where we are investing, we are more careful about the valuations. Good startups are still getting funded. But, there is just a pause,” said Madhu Shalini Iyer, partner at Rocketship VC, a Silicon Valley-based venture capital firm.

So, which are the sectors where startups are still getting funded?

Consumer internet companies continue to see a lot of traction. From a size of around $46 billion in 2020, the sector is estimated to touch $111.4 billion by 2025 and $350 billion by 2030. There were several large funding raising deals in this space last year. For instance, food delivery startup Swiggy raised $700 million from a clutch of investors. Pune-based B2B commerce firm ElasticRun raised $300 million from investors led by SoftBank; fintech company Stashfin raised $270 million; and social media company Sharechat raised $255 million.

There were several big acquisitions in this space as well. Zomato picked up quick commerce firm Blinkit, Reliance Retail invested in quick commerce firm Dunzo and inner-wear brand Clovia.com, and e-commerce shipping platform Shiprocket acquired a majority stake in the e-commerce SaaS platform Pickrr.

Enterprise software and SaaS (software as a service) startups, including those helping small and medium enterprises go digital, are getting strong investor interest. Estimates are that funding in SaaS companies touched $6.5 billion in 2022.

Investors are also keen on companies that focus on climate tech. In November 2022, Merak Ventures and Huddle launched a climate tech focussed accelerator programme. “Climate is one of the largest challenges that humanity faces, and innovation and technology can make the most impact. In the next 12-months or so, we are going to actively focus on climate tech as a sector, within which we will focus on specific sub sectors like agri-supply chains and mobility to all things carbon,” said Rikhye of Merak Ventures.

Avaana Capital is also bullish about climate tech startups. “Everybody agrees that transport is one of the largest contributors to greenhouse emissions. So, mobility will see a lot of innovation happening in terms of vehicles, battery tech, charging infrastructure, charging times and public transport,” said Srivastava of Avaana. It has already invested in electric vehicle startup Turno, climate career platform Terra.do, agritech startup Eeki Foods and in Intello Labs, which has launched an AI-powered agri-produce trade exchange platform.

Space technology is also getting attention on the back of recent success of some startups in the sector. A decade ago, there was only one startup in this space; now there are about 100. Events such as the country’s first private rocket launch—Vikram-S by Skyroot Aerospace—and the launch of the satellite Anand by another startup, Pixxel, have boosted the interest in this sector.

While the base is still low, compared with some other sectors, the total funding the private space startups received in 2022 was up about 60 per cent to more than $108 million.

Iyer of Rocketship says investors are now increasingly looking for unique ideas. Rocketship has invested in companies like Apna (platform connecting jobseekers with employers), Khatabook (a digital ledger app for small businesses), Jar (a daily gold savings app), Uravu Labs (a deeptech startup creating sustainable water out of air) and Agnikul (space tech).

“India is now producing blueprints for the rest of the world and this is because these are new ideas that are homegrown and have worked really well. They are not ‘me-toos’ of anything from the US,” said Iyer.

Bertelsmaan India has backed some 20 companies and several of them have reached a critical mass in the past few years, like the meat delivery startup Licious, digital lending company LendingKart, online furniture seller Pepperfry and Shiprocket. “Any company that is tech and tech-enabled, which is a high-growth company trying to innovate to solve big problems in a large market with good unit economics, is the company we are willing to back,” said Makkar.

Companies that are focused on connecting gig workers and employers are also seeing good traction. Bengaluru-based work fulfilment platform Awign, for instance, recently raised $15 million from investors, including Bertelsmann India, Amicus Capital, and Michael and Susan Dell Foundation.

Will investors warm up to startups in 2023?

“I think it will get worse before it gets better,” said Rikhye of Merak Ventures. “The pendulum in conversations, in discussions, in forums has swung the other way, where there is a lot of conservatism, a lot more apprehension.”

Iyer said it would be 12 to 18 months before the uncertainty settled down. But, good companies would continue to attract investors and the bar was really high now. “A lot of VC funds died in difficult downturns. If you don’t deploy capital in good companies, then you are dead,” she said.

So, as the economic uncertainty continues, it is a challenge spotting the right startup. For startups themselves, it is a balancing act of becoming efficient and profitable, and ensuring that they emerge out of this funding winter on a stronger footing. “You should not come out of this downturn limping,” said Iyer. “You need a balance that you are spending the right amount of money and making sure you are growing really well.”

Startup funding in 2022

Funds raised by startups in 2022 declined 39 per cent to $25.4 billion

Funding rounds in 2022 declined to 1,939, from 2,903 in 2021

Seed stage funding was down 18 per cent to $1.4 billion

Late stage funding was down 48 per cent to $16.9 billion

Early stage funding was stable at $6.9 billion against $7 billion in 2021

In 2022, 23 unicorns were created in India; in 2021, 42 unicorns were created

2,404 startups closed down, compared with 1,012 in 2021

Edtech was among the worst hit sectors, with 25 startups shutting down

About 18,000 people across startups were laid off in 2022

budget-2023-significance-direction-of-indian-economy

Sat Jan 21 14:10:00 IST 2023

FORGET COVID WAVES; it is time to ponder over the waves and undercurrents of the river. The river of economics we all are swimming in, that is. Sanjay Kumar, a tax and public policy veteran and a former bureaucrat, uses the analogy to convey the mood on the eve of this year’s union budget.

THE WAY OF WATER

“Growth is like the water flowing in the river. As long as there is water in the river, we can manage the economy. But if the water dries up, [the pebbles and rocks on the river bed] will hurt us.,” Kumar, now a partner with Deloitte India, said.

It could well be a case of your river being half full or half empty, depending on how you look at it. Referring to all the business confidence and CEO surveys pouring in expressing optimism about stellar growth in the coming financial year, Indian economy’s future sounds all hunky dory in the year of a possible recession―good (news) enough to warm the cockles of Finance Minister Nirmala Sitharaman’s heart. The river is full and flowing, and hey, $5 trillion economy, here we come sailing in, it would seem.

But there are also the veritable pessimists in the mix, who see the river not just half empty, but running shallow. They point to the over-the-board spending the government was forced to do in the Covid years, which saw fiscal deficit (the gap between the money government spends and the money it earns via taxes) shooting up to 9.3 per cent. The recommended upper limit is 3 per cent. Right now, even the best estimates are that it will not fall back to the recommended level for at least another three years.

Or the current account deficit (the difference between the country’s exports and imports) being at a nine-year high. ‘Private consumption’, the term that refers to spending by the common man, an important requisite for any economy to be buoyant, has not yet picked up despite some ‘revenge buying’ and festive season spurts.

“The single most important issue for the government is inflation,” said Ashish Gupta, consulting CEO of the Federation of Associations of Indian Tourism & Hospitality (FAITH). “All [budget] measures should be focused on bringing it under control.”

A RIVER RUNS THROUGH IT

Most worrisome of all, they warn of a possible recession hitting the advanced economies. While India is less likely to go into a recession, the tailwinds of a recession hitting rich countries it does business with could well have a sizeable downstream impact―on jobs, business growth and the much-needed foreign investment.

“The economy is substantially expensive now, from the petrol we pay for to the bike we buy,” said Saket Dalmia, president of the PHD Chamber of Commerce. “Prices of commodities have skyrocketed all over the world, with the geopolitical situation causing price fluctuations. But the good part is that this government understands it, and is responsive.”

HELL OR HIGH WATER?

For Sitharaman and company, not to forget Prime Minister Narendra Modi who has been doing his own series of pre-budget consultations, the preferred plan would be to go in all guns blazing, spending big and hoping it hits the bullseye.

It is a strategy the government has stuck to since the onset of Covid―first coming in with a series of stimuli and restructuring measures billed ‘Atmanirbhar Bharat’, followed by a budget that raised capital expenditure spending by a bold 35.4 per cent, primarily on infrastructure.

The hope? A domino effect of better infrastructure, coupled with simplified laws that will not only improve ease of doing business, but also nudge the private sector to make capital investments, leading to job creation, increased spending and improved GDP.

But it came with its own challenges. India Inc has, mostly, not risen to the call, preferring to wait and watch, even while shrewdly trying to get the best benefits and exemptions out of the government’s largesse. On more occasions than one a frustrated finance minister had called them out.

THE SHAPE OF WATER

While tax collections have been stellar for a while with GST collections scaling new records month after month, it might not continue to be so. Inflation, though easing up at the moment, and the expected global recession would mean that balancing the account books and finding means to bring down debt should take priority.

India’s GDP grew 8.7 per cent in 2022. Even the best estimate pegs it at just 7 per cent this year. In fact, a Goldman Sachs prediction says it would go below 6 per cent. And the brunt of the global recessionary tailwinds would see growth falling further to even 5.5 per cent in financial year 2024, going by advance estimates.

Then there are the geopolitical uncertainties―the Ukraine war came virtually out of nowhere and turned the post-Covid hopes of a quick recovery topsy-turvy―and China with its unnerving potential to waylay the best-laid plans.

Throw in the fact that nine states will go to the polls in 2023, and that this is Sitharaman’s last full-fledged budget before the Lok Sabha elections in the summer of 2024, and you realise the political stakes could not be higher.

There is a lot riding on what the lady unveils on February 1 in Parliament―right from whether Narendra Modi’s legacy will also include being a three-time prime minister, to the very direction the Indian economy will take in this new world order.

EVERYTHING, EVERYWHERE, ALL AT ONCE

While managing the fiscal deficit better will be a headache, many believe the trend of big spending of capital will continue. Tax collections improved by 26 per cent last year, while inflation in December dropped to 4.9 per cent from persistently staying above 7 per cent in the first few months of 2022. Leading economists, at their meeting with the prime minister at NITI Aayog a week ago, are said to have recommended the capex push.

“The message this government is giving is clear―it wants to help industry flourish, it wants to make India competitive and it is willing to go the last mile to protect the industry from the recession that is coming in many parts of the world,” said Dalmia.

“Spending on infra will facilitate trade as well as ease of doing business,” said Sanjay Kumar of Deloitte, who pointed out how the investment in existing infra and processes has helped in reducing the release time of export shipments substantially, as per a Central Board of Indirect Taxes & Customs (CBIC) report. “Such improvements facilitate trade. And it is expected that similar higher infra allocation will continue to be made. These will further help in easing the supply side constraints, making the country more competitive,” he said.

INTO THE DEEP

But in an election year, the hinterland can expect its share of mollycoddling, too. “This budget is going to be [all about] the rural economy, the lower middle class and the middle class,” said Sethurathnam Ravi, economist and former chairman of BSE. “Budgetary allocation for agriculture and rural economy, including incentives and tax breaks, will be higher.”

Many believe it is an idea whose time has come, and not just because of the polls. “A massive education of farmers, upskilling and digitisation, teaching them to use technologies, all is required,” said Kumar.

Considering how schemes like MNREGA (rural job guarantee) Ujjwala (gas connections to the rural poor) and direct benefit transfers have been pivotal to election wins in the past, the focus on rural economy is expected to look beyond agriculture, into matters of health care and education. “Twenty-seven per cent of the country does not have the wherewithal to access health services,” said Sanjay Kumar. “A public health infra in place will help an individual to reduce own expenditure on health and well-being, allowing them to focus and spend money on education, housing and living.”

RIVER OF DREAMS

And maybe, the macroeconomy picture might just gel well with that perpetual dream of the salaried class and professionals on the eve of every budget―the raising of income tax exemption limits. Sitharaman has been professing her middle-class credentials at public meetings.

The current exemption limit is Rs5 lakh, and expectation is rife that it may be raised by Rs1 lakh or Rs2 lakh. A rationalisation of capital gains tax, as well as provisions like the five-year limit on the 15 per cent corporate tax slab introduced in 2019 are also on the wish list.

For Sitharaman and Co, the challenge is simple enough―build on the blueprint of past budgets by big-ticket capital expenditure to facilitate business and trade, even while offering enough revadi to the masses so that they are cajoled into spending and reviving the economy―all the while, keeping an eye on the fiscal deficit math. The contents of her red bahi-khata pouch holds the key to how exactly she hopes to do that, and how bountiful the river will be in the years to come.

KEY EXPECTATIONS

* Target for 2023-24 fiscal deficit likely to be set at 5.9 per cent

* Fiscal consolidation to be supported by lower subsidy spending

* Gross borrowing in 2023-24 seen at around Rs115.5 lakh crore, compared with Rs114.2 lakh crore in 2022-23

* Nominal GDP Growth (includes inflation) in 2023-24 seen at around 10 per cent to 10.5 per cent, compared with 15.4 per cent projected in 2022-23

* Capital expenditure in 2023-24 likely to be increased to around Rs19 lakh crore, compared with Rs17.50 lakh crore projected in 2022-23

* Steps to boost consumption, particularly rural

* Increase allocation to rural employment scheme (MGNREGA)

* Enhanced schemes like production-linked incentive to further boost manufacturing and exports

* Keep market borrowing in check

* Rationalise long-term capital gains

TEXT: NACHIKET KELKAR

pm-economic-advisory-council-member-sanjeev-sanyal-interview

Sat Jan 21 12:32:10 IST 2023

Q Despite initiatives like Make in India and production-linked incentives, India’s trade deficit with China has been widening. What should we do about it?

A The bilateral deficit with the Chinese is growing, but do note that we are providing various schemes to win away investments and insert ourselves into the supply chain. We cannot wish away the Chinese in the short run. They are part of the global economy and they are an important source of all kinds of inputs into things that we want to do. So, for the time being, we have to be willing to trade with them. Even in the long run, we have to accept them as part of the supply chain. However, at the same time, we are making sure that we are creating capacities for various things in India. For example, India has now emerged as a serious player in manufacturing Apple phones. We are the second largest producer after China and we will catch up with them in the next two years. Samsung has its largest smartphone manufacturing facility in Noida. We are now working with Taiwanese companies to create fab plants in India. We are already a major supplier of pharmaceuticals.

We are finally entering a new field, which is defence and space. We had a sector, but we were not into export of these. But we are now building capacities to be able to export these things. And, of course, our services export is doing well. People don’t realise we export now as many services as we do merchandise goods. And, our services exports are growing robustly even now.

Q Many states have decided to switch to the old pension scheme. What are the problems you see in this move?

A The issue with the old pension scheme was that it was unfunded. I have no problem with people giving pensions, but the question is whether it is funded. And, the issue here is not the Centre-state issue at all. Because, the real issue is intergenerational, not intergovernmental. The problem is if you do not have a funded pension scheme then effectively you are setting up a tax for future generations. Because, after all, somebody will have to pay for those pensions. So, the issue that we have to tackle is intergenerational equity. If you do not have intergenerational equity, what will happen is that current generations will create liabilities and debt, which future generations have to pay. So, we need to be careful that we do not leave behind unfunded liabilities for future generations.

Q Some states say the Union government is undermining fiscal federalism.

A I do want to want to get into the political debate. But there is an important principle here that everybody should be aware of: the states do not borrow on their own steam, they borrow essentially with the implicit guarantee of the Central government. Since the states benefit from the sovereign guarantee of the Central government, the Central government quite correctly puts limits on this. Otherwise, every state government will borrow as they wish. So, some tight limits have to be retained. Otherwise, you will end up losing control of the borrowings in the country. There are different regimens. For example, the US allows default by local governments. So, for example, the city of Detroit defaulted. That is not a possibility here in India because there is an implicit guarantee from the Central government. If you look at the spreads, irrespective of the quality of the fiscal management of the state, the spreads of the states are almost the same. If they are almost the same, then you see there is no incentive for any state to maintain fiscal control. So, it has to be done top-down.

fiscal-consolidation-plan-in-budget-2023

Sat Jan 21 12:26:03 IST 2023

CAPITAL MARKETS had a volatile 2022. The BSE Sensex swung 13,000 points, eventually closing 5 per cent up for the year. In 2023, too, returns could be modest, ranging between 5 and 7 per cent.

This will be the last full budget before the Lok Sabha elections in 2024, and it “comes at a time when the government is trying to weigh spending priorities, without compromising on fiscal prudence and the inflation target,” said Santanu Sengupta, India economist at Goldman Sachs.

Several key states are going to the polls this year. So, there could be some populist measures in the budget, along with the focus on growth. “A strong push for rural infrastructure, sanitation, rural and agri credit, Make in India, production-linked incentives and perhaps some relief for the middle class in taxation; it will be populist, but at the same time, growth and reforms oriented [budget],” said Amisha Vora, chairperson and managing director, Prabhudas Lilladher Group.

Of course, the government will try not to be too populist, as it wants to get the fiscal consolidation plan, which had been derailed by the additional spending during the pandemic, back on track. This will be closely watched by financial markets as well as rating agencies.

The expectation is that the government will meet the fiscal deficit target of 6.4 per cent of the GDP for the current financial year, but there will have to be some spending cuts, given the incremental subsidy spending. Sengupta expects the government to consolidate the fiscal deficit to 5.9 per cent next financial year by reducing subsidy spending.

“[The government] still has space to increase the expenditure because of higher nominal growth; we have reasonable amount of tax collection,” said Kaustubh Gupta, co-head of fixed income at Aditya Birla Sun Life Asset Management.

A key area of concern for Finance Minister Nirmala Sitharaman would be the slowdown in rural consumption. “With a global growth slowdown looming large, the budget needs to focus on sustaining the domestic growth momentum, while demonstrating a continued commitment towards fiscal consolidation and limiting the rise in the market borrowings,“ said Aditi Nayar, chief economist at ICRA.

While inflation has started cooling down and a strong start to rabi sowing should help the drive near-term momentum, Sitharaman may look at policy support as well to revive the rural economy. “One potential area is increasing allocations towards the rural employment scheme, MNREGA. Besides this, allied schemes such as crop insurance, rural road infrastructure, low-cost housing, power and utilities, food-processing industry are the other focus areas,” said Radhika Rao, senior economist at Singapore’s DBS Bank.

The private sector has, of late, been reluctant to do capital expenditure, owing to the pandemic, supply-side challenges and slowing consumption. Things are unlikely to change much this year. So, the government may have to continue to do the heavy-lifting. “The need to spur a revival in the investment cycle still rests on the public sector, as a slowdown in global growth and tighter financial conditions emerge as speed-bumps for private sector activity,” said Rao.

Last year, the government had budgeted capex of Rs7.5 lakh crore, which included Rs1 lakh crore in loans to states. In 2023-24, the centre is likely to set a target of around Rs9-9.5 lakh crore, feels Rao.

ICRA is also expecting the government to target a double digit growth in capital expenditure to Rs8.5 lakh crore to Rs9 lakh crore. Robust direct tax collections and GST inflows will help; the net tax receipts in 2022-23 are expected to exceed the budgeted amount by Rs2.1 lakh crore, it estimates.

Balancing between higher spending and fiscal consolidation, the government may push its asset monetisation plans. However, disinvestment could be an uphill task amid tighter liquidity conditions and volatile capital markets. “While many PSUs are slated to be sold and some work has been done in the past, that window may be rapidly closing, given the tight global liquidity, which would make eliciting global interest or a global fund raise by domestic companies more difficult,” said Prateek Agrawal, executive director, business and investment strategy, Motilal Oswal Asset Management.

Last year, the government sold 3.5 per cent stake in Life Insurance Corporation of India (LIC), raising Rs20,560 crore. The government has also been trying to sell oil marketer Bharat Petroleum (BPCL). However, volatility in oil markets has thrown this process off track. Other planned divestments like Shipping Corporation of India, BEML and Container Corporation have not gone through so far as well.

“A shortfall cannot be ruled out in the uncertain macroeconomic environment where raising of capital and appropriate pricing are concerns,” said Dipanwita Mazumdar, economist at Bank of Baroda, who expects FY24 disinvestment proceeds to be budgeted at around Rs40,000-Rs50,000 crore. “A clarity on disinvestment is very important to give market a clear signal.” said Mazumdar.

The global uncertainties led to huge foreign investment outflows from India’s capital markets in 2022. Foreign portfolio investors sold about Rs1.2 lakh crore from equity markets. However, that was offset to a large extent by strong domestic inflows. Mutual funds, in particular, have seen huge inflows via systematic investment plans (SIPs). Monthly SIP flows now exceed Rs13,500 crore, 90 per cent of which are in equity schemes, according to the Association of Mutual Funds of India. Domestic institutional investors pumped in Rs1.9 lakh crore in to equities in 2022, a record.

In this backdrop, market experts feel Sitharaman could look at measures to make mutual funds more investor friendly. One demand is addressing the difference in tax treatment between equity mutual funds and unit-linked insurance plans offered by life insurance companies. Currently, long-term capital gains in equity-oriented mutual funds are taxed at 10 per cent, if the gains exceed Rs1 lakh. ULIP proceeds, on the other hand, are exempt from income tax if the life insurance sum assured is 10 times the annual premium and withdrawn after a lock-in period of five years, said Jimmy Patel, managing director of Quantum Asset Management.

“Since ULIPs are essentially investment products that, like mutual funds, invest in securities, there should be no difference in tax treatment. This will offer investors better leeway to choose an investment product that fits their financial goals and tax-saving needs,” he said.

Market experts, however, do not expect the finance minister to tinker with the existing capital gains taxation. Currently, long-term capital gains (LTCG) on equity and equity mutual funds are taxed at 10 per cent for a holding period of more than one year. LTCG on debt funds are taxed after a holding period of three years at a flat 20 per cent rate after indexation. “Given the volatile global situation, India needs vibrant markets this year to sustain growth and investor interest,” said Vora. “Stability in tax rates (LTCG) will be positive for the markets.”

the-future-belongs-to-electric-vehicles-auto-expo-2023

Sat Jan 14 13:12:32 IST 2023

Deepak Pandit, an academic at BML Munjal University in Gurugram, is a bit confused. He is looking for a new car, and despite being an expert on the matter, he is not sure whether to go for an electric vehicle (EV) or a tried-and-tested internal combustion engine (ICE) car.

“The future is bright for EVs, but there are fundamental issues―there aren’t enough charging stations. And once everybody starts charging vehicles, do we produce that much electricity?” asked Pandit, who is the chair professor at the Institute of Innovation and Entrepreneurship at the university. “Infra for charging is not there beyond urban areas, and how do you even claim the subsidies? Regulatory and scrapping [of used batteries] issues still remain. I am [still] debating.”

It is a debate almost all Indians go through. India’s auto industry hopes the Auto Expo 2023, from January 13 to 18, will help put these doubts and debates to rest.

But will it? Or is there more than meets the eye?

Maruti Suzuki, the nay-sayer among the electric crowd, kicked off its Auto Expo outing by unveiling its first electric SUV. The concept car is not immediately for sale, though. Maruti launched two ICE models as well, for the actual market.

Others, too, have jumped on the bandwagon, in tune with the Expo’s themes of sustainability and connectivity. While Hyundai launched its much anticipated IONIQ 5 EV, Tata Motors, which has an early-mover advantage in India’s nascent EV car segment, launched EV versions of Harrier and Sierra.

MG Motor India not only unveiled a new variant of the Hector, its original ‘internet inside’ car, but also is set to shake up the market with as many as three new EV launches, the MG4, the MG5 and the MG6.

The line-up on the two-wheeler side―which has seen more traction in the EV space with a host of startups making their presence felt―is even bigger. Mumbai-based Liger will showcase the world’s first self-balancing electric scooter, while nostalgic motobuffs can welcome back LML, which once straddled India’s scooter segment with its Vespa tie-ups, this time in an all-electric avatar. Ultraviolette, promoted by actor Dulquer Salmaan, is expected to launch its high-performance electric bike at the expo.

Interestingly, all this ‘electrifying’ action is not limited to new model launches, but covers the whole gamut from battery technologies to innovations in connected mobility. But the question is, are we putting the cart before the horse?

“Researchers say that about 17 to 20 per cent of cars will be EVs by 2030; then what about the rest?” asked Shashank Srivastava, senior executive officer of Maruti Suzuki.

Auto makers, who had resisted a NITI Aayog suggestion a few years ago that only EVs be sold in India, have since then seen the writing on the wall. But it has not been easy. Rajat Verma, CEO and founder of Lohum, a battery technology company, puts it in perspective, “It is not a question of the market being ripe or not. It is imperative for us to transition to Evs.”

That brings with it its own problems, though. While EVs have had a fabulous time of late―the government’s Vahan portal says more than 10 lakh EVs were sold in India in 2022, a three-fold increase from the previous year―four-wheeler passenger EVs have been lagging, clocking at just about 18,000 cars in the first six months of this financial year.

The reasons are not far to seek. Despite the subsidies provided under the government’s Faster Adoption of Hybrid and Electric Vehicles (FAME 2) policy and a few sops by some states, EVs still do not match up in the cost-to-performance ratio. Then, there is the hurdle of battery and charging. Range anxiety―the fear of an electric vehicle running out of charge while being out on the highway and without a charging station on the horizon―is very real in India. The number of authorised charging stations, as per the government’s E-AMRIT portal, is less than 1,000. Counting in private charging docks takes the number to 1,800 or so. To make matters worse, almost all of them are in urban areas.

Battery technology and standardisation continue to be irritants. “The total time taken to charge the battery of an EV depends on its capacity and miles offered. High-end vehicles will undoubtedly take a longer time to get fully charged. Even though governments are trying to improve the availability of charging stations and further increase electricity generation, the presence of merely 1,800 charging stations in a geographically large country such as India is not enough to present a strong case for EVs,” said Greg Moran, CEO and co-founder of the car sharing platform Zoomcar.

Looming on the horizon is the big geo-strategic worry of an over-dependence on China for the lithium ion battery technology. “Lithium and many components come from China. From a policy perspective, the government will have to take a call,” said Pandit. “Once everybody gets on the EV bandwagon and there is a huge demand for lithium ion batteries, it will become like oil.”

From depending on West Asia for oil, will we end up depending on East Asia for batteries?

“Trends indicate that battery material shortfall in the near future is almost inevitable,” said Verma of Lohum. “Depending on imports would lead to continued geo-strategic monopoly of a few nations over raw materials, enabling them to control prices with disproportionate influence.” Companies like Lohum salvage lithium ion battery raw materials through recycling and low-carbon refining, but more needs to be done. “Supply constraints are unlikely to wear off until we fully indigenise the supply chain,” said Verma.

Localisation efforts are already on―the government has offered a production-linked incentive scheme for advanced chemistry cell (ACC) batteries. A big ticket investment in the area is Suzuki’s Rs10,000 crore for electric vehicles and batteries in Gujarat.

While batteries and raw materials are a problem area, an issue that most people do not realise is that the electricity that powers electric vehicles may not necessarily be clean. “We should be talking not just about the tailpipe emissions (where EVs are far superior, with emissions almost negligible), but also well-to-wheel―what total emissions it takes to produce the electricity,” said Srivastava of Maruti Suzuki. “For example, in India, most of the electricity is made from thermal power, which is actually quite polluting.” In fact, Maruti’s argument has been that EVs are not the only route to achieve zero carbon emission norms, but it could also be cleaner fuels like CNG or biofuel.

“It will be tech agnostic,” said Srivastava, “Which means, as long as you achieve those emission targets by deploying any technology, whether it is EVs or hydrogen, it works.”

“The market is poised on an upward trajectory and the mix is changing, first from hatchback and sedans to SUVs, [and now] EV is in the mix,” said Pandit. “We will definitely use EV, but there could be one or two new technologies in between which could make us go in a different direction. Right now, the candidate technology we have is hydrogen and lithium ion, and that could change to sodium ion batteries. Technology round the corner will address which road we take.”

maruti-suzuki-senior-executive-officer-shashank-srivastava-interview

Sat Jan 14 13:08:20 IST 2023

Q/Is the worst over for the Indian auto industry?

A/The Covid situation seems to have receded into the background, though in the past few months we have seen spikes in some countries. It is not over and we have to closely monitor the situation. The supply chain situation with the lockdown during Covid seem to be not there [any longer]. So in that sense, there is an improvement.

On the semiconductor situation, the nadir was in August 2021 when we could only produce 40 per cent of our planned production. But now it is at 94-95 per cent. The thing is that 95 per cent was achieved last April, but it has not changed beyond that. So we still have a semiconductor issue in the industry, especially for specific chips. This situation is likely to continue for some more time.

On the sales front, 2021-22 was a slight improvement over 2020-21; there was a 13 per cent growth. And the current financial year has been very good as far as volumes are concerned. The volume expected this year is 3.8 million, which is the highest ever; the previous highest was 3.37 million in 2018-19.

That is fine, but going forward we have to be very careful to not read too much into these figures. Because while it is a record 3.8 million, this 13 per cent growth has happened over a four-year period, which is actually not so great. Secondly, there would have been an element of pent-up demand in this year’s volume which may not be there [going forward]. And third is, we are also looking at the three red flags of inflation, liquidity and high interest rates.

Q/The focus of this year’s Auto Expo is on EVs and sustainability. Though Maruti Suzuki was reported to be testing its electric cars quite a while ago, there is still no hint of a market launch.

A/Maruti Suzuki will have the global unveiling of its electric SUV at the Auto Expo. There is a consensus in the industry that with emission norms getting tighter all across the globe and also in India, EVs will become mainstream. But what is not in consensus is when it will happen. The question is not ‘whether’ but ‘when’.

For the ‘when’ part, we have had many researches, and there is a sort of a consensus that the EV adoption will be different for different categories. In two-wheelers and three-wheelers it will be faster, in four-wheelers, it will be slower. Within four-wheelers, it will be faster in larger four-wheelers, compared with smaller ones. Also, in usage pattern, fleet usage will be more than individual usage. And it will vary from country to country. It depends on how you make the electricity that power these vehicles.

The two major constraints to the adoption of EVs in India are the high cost of acquisition, and charging infrastructure―which is non-existent in the country at the moment. On the price front, you need to reduce the battery cost. Maruti Suzuki is spending Rs10,000 crore in setting up a battery plant. Maruti Suzuki believes the inflection point for adoption of EVs will come at a later stage. In the meantime, we should be focusing on reducing emissions, by looking at alternate fuels like CNG, biogas and also hybrid.

The localisation of components of powertrain of EVs will be done as there are common components when it is hybrid. When you get volumes, then localisation is possible. That is why at Maruti Suzuki we believe the path to electrification will be through hybridisation.

Q/Do you think ICE will survive?

A/It really depends on how quickly the development and adoption of technology happens. By 2030, projections are that 17 to 20 per cent, and in 2032 about 28 to 30 per cent, will be EVs. Obviously ICE are going to remain for quite some time. What we need to do is improve the fuel efficiency so that the environmental effects of ICE vehicles are less. That is why we are saying that we should carefully look at such cleaner fuels like CNG or biogas or flex fuels and so on.

air-india-needs-rigorous-training-and-a-cultural-transformation

Sat Jan 14 13:04:43 IST 2023

THE TATAS ACQUIRED Air India last year after losing it nearly seven decades ago. She was an enchanting princess when the government snatched her through nationalisation in 1953. Air India! The name conjured images of exotic destinations and distant mystic lands. It had romance. If you were an air-hostess, you were a young goddess in the skies as unattainable as an apsara. If you were an Air India pilot, you were the most sought after knight in the skies.

That was then, when J.R.D. Tata ran the airline. She has now returned to the Tatas―decrepit and severely dented in her reputation for customer service, with shabby aircraft, frequent delays and cancellations, and horrendous passenger experience.

Paris, the prince of Troy, stole Helen, the wife of King Menelaus of Sparta. Menelaus led a war against Troy, killing Paris. While one can imagine what passions drive men to wage wars to repossess the women they love, one wonders what possessed Ratan Tata to win back Air India, now an impoverished relict.

Yet there was great cheer in the country when the Tatas took over Air India. There was hope in the air that the national carrier will blaze a trail once again under the famed Tata leadership and recapture its glory days.

But we jumped the gun. Stuff happened. A drunken passenger urinated on a lady in the business class of the airline on a flight from New York to Delhi and exposed himself to her and to the fellow passengers. Close on the heels of that horrendous incident, news emerged that there was one more case of a male passenger peeing on a lady on another Air India flight. It never rains but pours. It sent shock waves and has damaged the reputation of the airline which the Tatas were trying to rebuild from the ashes.

We all know Murphy’s Law: Anything that can go wrong will go wrong. In aviation, Murphy’s Law is: If an aircraft part can be installed incorrectly, someone will install it that way. In Air India matters, one is now tempted to say, you never know what will befall you next time you fly.

The moot point is: How do you handle a situation when things go wrong? That the Air India crew bungled it is evident. They did not use their judgment while serving liquor to the man with the loose fly, and did not swiftly discipline him and restrain him to his seat. They had no empathy for the victim and were insensitive to her request to shift her to another seat or upgrade her. That is unforgivable.

They put emotional pressure on the lady to accept the offender’s apology and compromise, and urged her not to press charges with the police. All these show they were unprofessional, thoroughly incompetent and uncaring. One can probably attribute all this to the fact that the old Air India’s deeply entrenched, indifferent, bureaucratic culture cannot be wished away by letters and lectures by the Tata management.

It will take long rigorous training and deep cultural transformation. It is by no means easy. A moribund organisation has to be shocked into action to overcome its natural sloth and complacency. Fixing the engines and shabby cabin interiors, or giving a fresh coat of paint and new liveries, is easier than changing the employees’ attitude and culture.

The Tatas are themselves like a large government. That won’t do in an airline. They have to figure out how to make Air India autonomous for quick decision-making, and make it nimble and sensitive to achieve excellence in customer service.

That takes us to the central question of the unspeakably repulsive episode. Yes, the captain and crew thoroughly screwed up. But the lady sent a letter about her nauseating experience to the chairman of Air India, who is also the chairman of Tata Sons. Why all these defensive statements in cliched bureaucratese, a month later, that they share her distress and will strive to do better. Only after the media reported the incident did the airline go to the police, suspend the crew and order an inquiry.

One wonders why the Tata management was not shocked enough to spring into action with lightning speed. What was required was not good PR on how to contain or ward off bad publicity or strategising and deploying smart people to do damage control. The need of the hour was the good sense to do the right thing. The Air India chairman and the CEO should have immediately called a news conference and offered a sincere apology to the lady and her fellow passengers and the public who hold the Tatas in high esteem. What was needed was genuine remorse and a pledge that the Tatas will re-dedicate themselves to improving service excellence.

To stand up, look in the eyes of the public and apologise and seek forgiveness would have been the best way to redeem oneself and win back trust. That would have also sent the right message to the employees and the public.

J.R.D. Tata was unique. He was India’s first licensed pilot in 1929. He was a dashing aviator and a visionary entrepreneur. In 1932, he flew India’s first commercial flight carrying mail and two passengers from Karachi to Chennai via Mumbai on a single-engine hopping flight. That saw the birth of Tata Airlines, which eventually morphed into Air India in 1946. It was a pioneering feat.

JRD combined in himself all the magical qualities that make a great leader. Vision, magnanimity, charity, insight, decisiveness in complex situations, courage, charisma and talent for grooming younger people.

It may not be possible to find someone to replicate JRD today. It may not be necessary, either. It is a starkly different era, the aviation landscape has changed vastly and the Tatas are a sprawling global empire today. But JRD can inspire the top management of Tata Sons and Air India if they study how he ran the airline.

Air India may be a tiny unit in that conglomerate but it is a precious jewel in the Tata crown. Rebuilding quality in Air India seems an insurmountable challenge. But what is life without a challenge? And the Tatas have always overcome and thrived on challenges.

If the chairman of Air India brings back the glory days it will be a fitting homage to JRD.

―Captain Gopinath is the founder of Air Deccan.

secure-your-debt-allocation-with-an-all-weather-dynamic-bond-fund

Sat Dec 31 12:35:44 IST 2022

OVER the past few years, the craze of investing in equity mutual among common investors has grown rapidly, with monthly SIP books consistently breaking records and approaching $2 billion. However, Indian savers’ affinity for owning debt mutual funds continues to be lacklustre, despite its ability to provide stable returns in a volatile market. Additionally, it offers a relatively better risk-return profile when compared to other traditional options. It must be noted that several categories of debt mutual funds have underlying assets that are backed by government securities.

Investor refrain

So, why do common savers have a relatively lower affinity for debt mutual funds? To begin with, the relationship between the bond price and interest rate is inversely proportional. In simpler terms, one can make money even in a falling interest rate market. However, this exercise is not as simple as it sounds theoretically. Even for seasonal debt market experts, predicting the trajectory of interest rates is quite difficult. Benchmark interest rates that the central bank typically sets are dependent on several macroeconomic variables ranging from inflation, unemployment, currency movement to interest rate stance of global central banks. Therefore, it becomes a tortuous task for a common investor to form an opinion on the direction of interest rates to take a calculative risk.

In such a situation, investing via a debt mutual fund, especially the dynamic bond fund, emerges as a viable option for investors who want stable returns without worrying about the direction of interest rates. This category fund holds the potential to generate a reasonable return regardless of market conditions, thanks to its strategy of investing across maturities and credits. The biggest advantage is that the fund manager can invest across a wide spectrum of durations, from 1-10 years, making it the most palatable instrument for a saver who isn’t bothered about the interest rate direction.

There are several schemes available in this category. Of these, ICICI Prudential All Seasons Bond Fund is one of the top names in this category. It is the biggest scheme in terms of assets and has a consistent track-record of over 10 years. Since its inception in May 2009, the fund has managed duration in various interest rate scenarios and delivered NAV growth in all these conditions. An in-house model forms the basis of the investment decision for the fund. Owing to timely manoeuvring, investors who have remained invested in the fund has benefited from the fund across varying timeframes. Over 3, 5 and 10 years, the fund is among the top performer in its category delivering 7.1%, 7.2% and 9.3% respectively (data as on November 30, 2022).

Workings of a dynamic bond fund

A debt fund manager has the liberty to invest in securities with different time horizons. Dynamic fund managers keep shuffling funds’ average maturity periods, depending upon their view on interest rates.

When the central bank turns hawkish, the dynamic bond fund manager increases allocation to bonds with a shorter maturity period. This helps them mitigate market loss. On the other hand, when central bank commentary turns dovish, fund managers will increase allocation to higher maturity bonds to profit from capital appreciation. So, in the current macroeconomic environment, if one considers buying dynamic bonds, they should look for funds with a Macaulay duration of less than three years. A shorter Macaulay duration reduces bond price volatility. It must be noted that the RBI has hiked benchmark interest rates by 225 basis points in the last one and half years.

The fund manager’s assessment of the interest rate direction determines the share of allocation to government securities and corporate bonds. So, when interest rates are low, the dynamic bond fund typically behaves like an accrual scheme with a focus on earning interest income primarily from the coupon that is held until maturity. On the other hand, when interest rates are high, the scheme will behave like a long duration scheme.

While choosing a fund in this category, there are several options available. But it is crucial to check the fund manager’s experience navigating previous interest-rate cycles. Investors should approach this category with a time horizon of three years and above in mind.

Managing Partner, I Scale Financial Concepts

green-hydrogen-future-fuel-of-india

Sat Dec 24 16:26:39 IST 2022

JAPANESE CARMAKER TOYOTA and the International Centre for Automotive Technology started a pilot project a year ago to test the Mirai, a mid-size sedan powered by hydrogen fuel cells, for the Indian roads and climate. The project was launched by Nitin Gadkari, Union minister for road transport and highways. Gadkari has been riding the car for a while now and is convinced that “hydrogen car is the future of this country”. Within a year, he feels, India will have cars, buses and trucks running on green hydrogen.

Gadkari’s colleague, Railway Minister Ashwini Vaishnaw, is also confident of getting hydrogen-powered trains to India in 2023. The Railways had invited bids a year ago for hydrogen fuel cell trains and, initially, two diesel-electric trains will be converted to operate on green hydrogen fuel cells in the Jind-Sonipat section in Haryana.

India might have just started exploring mobility powered by green hydrogen, but the world has already been betting big on it. Last year, in the German state of Lower Saxony, the route between Cuxhaven and Buxtehude became the world’s first to be connected by trains running only on green hydrogen. Under the plan, 14 hydrogen-powered trains manufactured by the French company Alstom are replacing 15 diesel trains.

These Alstom trains are emission-free in operation and have a range of 1,000km. “Our Coradia iLint is the world’s first passenger train to run on a hydrogen fuel cell that generates electrical energy for propulsion. Specifically developed for use on non-electrified lines, this train emits only water vapour and condensation, while maintaining high performance,” said Olivier Loison, managing director of Alstom India Cluster.

A hydrogen train costs 25-35 per cent more than a diesel train. “But, there will be savings on maintenance, and the costs of fuel cells are also expected to come down,” said Loison.

The Toyota Mirai is already being sold in Japan, the US and in some European countries. It runs on a fuel cell system that produces electricity from a reaction between hydrogen and oxygen. There are no tailpipe emissions other than water. It consumes about 4kg of hydrogen to travel 500km. Some other carmakers are also at it.

About 15,500 hydrogen-powered cars were sold worldwide in 2021. It is just a tiny drop in the 66 million cars sold last year. But, hydrogen car sales are growing; last year they were double that of the pre-pandemic levels, suggesting that the technology could be ready to go mainstream.

Automobiles, however, are just one of the many use cases for green hydrogen. It could be used in the petrochemicals industry; steel makers are looking at it as a means to produce green steel; hydrogen is used to produce ammonia, methanol and other chemicals; it could emerge as an alternative fuel powering the shipping industry; it could one day even be used for heating homes and powering appliances, transported through the existing gas pipelines.

But, where do you get green hydrogen from? Hydrogen is largely found in water (which is a compound of oxygen and hydrogen) or as hydrogen gas, which is combustible. Green hydrogen is produced by a method called electrolysis, which breaks down water molecules into hydrogen and oxygen by using electricity. This is a highly energy-intensive process. Currently, green hydrogen costs around $6 a kilo.

To produce green hydrogen on a mass scale, you need large electrolysers. They cost $600-800 a kilowatt, according to a white paper by Siemens. At this rate, green hydrogen production is expensive. Also, if much of the electricity used for the production of green hydrogen is non-renewable, it negates the very purpose of adopting green hydrogen.

Nevertheless, experts bat in favour of green hydrogen as it could be highly beneficial for developing economies like India that are heavily dependent on imported oil. “We import $160 billion worth of energy. We have to reduce that import bill. We are the world’s third-largest carbon footprint creator, because we emit about 3.6 giga tonnes of carbon dioxide. We have to bring that down. There is also this aspiration of creating 450 gW of renewable energy by 2030. There green hydrogen will play a very critical role,” said scientist Raghunath Mashelkar.

It seems some of India’s biggest corporations share the view. Reliance Industries is investing Rs75,000 crore in its new energy business. Part of the plan is setting up four giga-factories. One of these will be an electrolyser factory to produce green hydrogen and a fuel cell factory to convert hydrogen into power.

Adani Group, earlier this year, entered into a partnership with TotalEnergies of France to create what would be “the world’s largest green hydrogen ecosystem”. Adani New Industries Limited plans to invest $50 billion over 10 years in green hydrogen. In the initial phase, the company will develop production capacity of 1 million tonnes a year before 2030. Green hydrogen is a natural adjacency for the group, which is already a large player in the solar energy space as well as thermal power generation and transmission.

India’s largest fuel retailer Indian Oil, engineering and construction company Larsen & Toubro and renewable energy firm ReNew Power also have big plans for green hydrogen. “Green hydrogen can not only help us to decarbonise various industrial sectors, but also provide energy security, which is critical to support the country’s economic growth,” said Subramanian Sarma, whole-time director and senior executive vice president (energy) at L&T.

L&T recently commissioned a green hydrogen plant at its A.M. Naik Heavy Engineering Complex in Hazira, Gujarat. The plant is designed for an electrolyser capacity of 800kW. Currently, it is producing 45 kilo green hydrogen a day, which will be used for captive consumption.

State-owned power producer NTPC is setting up a green hydrogen mobility project in Leh Ladakh. It will see five fuel cell buses running in and around Leh. The renewable energy arm of NTPC also has a pact with Gujarat Gas where green hydrogen will be produced and blended with piped natural gas and will be used for cooking in NTPC’s Kawas township.

Tata Motors, India’s largest commercial vehicle maker, has been developing hydrogen fuel cells and testing this technology for a few years. It has won an order from Indian Oil to supply 15 hydrogen fuel cell buses that are being developed. Testing of the second-phase prototypes is expected soon.

Indian Oil will be producing green hydrogen in stages. As a first step, it will be implementing a 5 KTA (40 mW) green hydrogen plant at Mathura refinery and a 2 KTA (16 mW) plant at Panipat refinery. “The company is venturing into green hydrogen production and is targeting 5 per cent of hydrogen produced by it as green hydrogen by 2027-28 and 10 per cent by 2029-30,” it told shareholders some time ago.

Tata Motors believes green hydrogen will be an important stepping stone in achieving its net-zero ambitions. “The availability of hydrogen and the cost of hydrogen are the important barriers you have to overcome,” said Rajendra Petkar, president and chief technology officer. He said getting down the costs of producing green hydrogen will determine the growth and success of the industry.

“It is evident that the cost of green hydrogen must be substantially brought down to make it affordable and realise its full potential,” said L&T’s Sarma. “Various industry players, including L&T, are working on different initiatives to bring cost competitiveness. The cost of green power generation and storage, technology advances in electrolyser manufacturing and the application of material science to indigenise supply chain components are the areas that are being worked upon.”

Cost is the key. Mashelkar, who is chairman of Reliance Innovation Council, said green hydrogen costs needed to come down to $1 to $2 a kilo from the current $5 to $6 a kilo, if it was to become affordable. He believes it is possible through research, innovation and policy changes. “Look at the electrolyser which splits water. As the size of the electrolyser goes up, the costs come down. So, with scale the costs come down,” he said. He also pointed out that after splitting water, we get medical-grade oxygen as a byproduct, which could be sold separately.

Reliance Industries chairman Mukesh Ambani believes that India can produce green hydrogen at $1 a kilo in a decade. “Although the costs of hydrogen from electrolysis today are high, they are expected to fall significantly in the coming years. New technologies are emerging for hydrogen storage and transportation, which will dramatically reduce the cost of distribution,” he said at a climate conference earlier.

Reliance New Energy Solar had signed a pact with Denmark’s Stiesdal to manufacture the latter’s hydrogen electrolysers in India. The partnership would “accelerate cost reduction and commercialisation of their pressurised alkaline electrolyser technology”, Ambani told Reliance shareholders a while ago.

It is not just the production cost. Transportation of green hydrogen is not easy and needs infrastructure development, said T.V. Narendran, managing director of Tata Steel. “Why is coal so popular in India? Because, it is easy to move. You can move it by rail, you can move it by ship, the ports can handle it. If you want to switch from coal to gas, you need the pipelines and the LNG terminals. And then if you want to switch to hydrogen then you need that. The cost and complexity of this transition needs to be thought through,” he said.

The International Renewable Energy Agency (IREA) has identified that moving to green hydrogen-based heavy industries would require a major technological shift in their core industrial processes. “The change must be led by policy makers who, through policies and regulation, can accelerate the change and drive investments in this direction,” it noted.

The World Bank says the demand for hydrogen was 87 million metric tonnes in 2020, and it is expected to grow to 500–680 million metric tonnes by 2050. However, 95 per cent of current hydrogen production is fossil-fuel based. So, it is hardly green. Green hydrogen production will need to get much of its power requirement from renewable sources.

The green hydrogen policy notified by the government this year offers waiver of inter-state transmission charges for 25 years to producers of green hydrogen and green ammonia from the projects commissioned before June 30, 2025. So, a company that is producing green hydrogen in one state could have renewable energy plants in any other state. Green hydrogen and green ammonia plants will also be granted open access to sourcing renewable energy within 15 days of receipt of application. The government is planning to set up manufacturing zones for green hydrogen and green ammonia production plants.

Storage of hydrogen is a bit tricky, as its small molecule is difficult to contain and leaks will add to green house gases. “Hydrogen itself emits no carbon dioxide when burned or used in a fuel cell. But when emitted into the atmosphere, hydrogen contributes to climate change by increasing the amounts of other greenhouse gases such as methane, ozone and water vapour, resulting in indirect warming,” said Steven Hamburg, chief scientist at the Environmental Defense Fund (EDF), and Ilissa Ocko, senior climate scientist at EDF.

Clearly, there is a long way to go for green hydrogen to go mainstream. Bringing down costs would be a key enabler. While companies around the world are taking big steps in green hydrogen technology and usage, there are many concerns and challenges that will have to be addressed for it to really live up to being green.

nalanda-university-is-regaining-its-lost-glory

Sat Dec 17 20:42:32 IST 2022

It is a sweltering monsoon morning at Rajgir in Bihar’s Nalanda district. The overnight rain has made the air even more humid. THE WEEK’s Deputy Photo Editor Salil Bera and I are in a taxicab, dripping with sweat as we travel through the town. Our destination: the new, 455-acre campus of Nalanda University, a modern incarnation of India’s oldest university that now lies in ruins.

The new university is located a few kilometres away from the town―on a rocky, barren terrain overlooked by the Rajgir hills. Construction started in May 2017; work has been progressing steadily since.

We exit the cab near an imposing red building reminiscent of the old university. It is the main administrative block, which houses the office of the vice chancellor. Construction is complete; a tricolour flutters in the wind.

Inside, the air is comfortably cool. The building uses an innovative cooling technology called DEVAP, or desiccant-enhanced evaporative air-conditioning. DEVAP uses evaporative coolers and a drying agent (silica gel that comes in packets labelled “Do not eat”, for instance) to cool interiors. It is an eco-friendly and energy-efficient technology. Prof Sunaina Singh, the vice chancellor, says DEVAP has helped university buildings reduce energy consumption by 20 per cent.

Singh’s office is both grand and modern, with the university logo and idols of the Buddha prominently displayed. The floor space is dominated by a large workstation and conference table.

The Nalanda University was created by Parliament in November 2010. The idea of a modern university on the lines of the ancient one was first proposed at a summit of East Asian countries in 2007. The objective was to “advance the idea of an Asian community” and “act as a bridge for students in different parts of south Asia”. The university is under the external affairs ministry.

“Nalanda University aims to create a new workforce, a new think tank, a new human resource that will work towards building regional peace and harmony through the intellectual route,” says Singh.

The university started functioning in a temporary facility at Rajgir in September 2014. It was shifted to the new campus, located around 10km from the ruins of the old university, in January 2020. Apparently, 80 per cent of the construction is now complete.

From the administrative block, we travel two kilometres to the newly constructed auditorium. It has already hosted an international conference. The auditorium uses a mix of natural and ‘smart’ lights―the roof has shafts to let sunlight in, along with smart lights that can be controlled by cellphones. “The [smart] lights can be set according to the lux requirement (the brightness level needed), which in turn can be adjusted according to the natural light inside,” explains a supervisor. “This helps us save energy.”

A short walk from the auditorium is the guest house. It has 70 rooms, one of which vice president M. Venkiah Naidu stayed in when he visited the university last year to attend a conference.

Near the guest house is the academic block with modern classrooms. All rooms have adjustable, ergonomically designed chairs and tables, and a courtyard where students can rest between classes. Overlooking the corridor of the academic block are bottle-shaped structures―alcove-like spaces where students can hold discussions.

Perhaps the most impressive structure is the grand amphitheatre surrounded by a large waterbody. The amphitheatre can accommodate thousands of spectators. The waterbody is named Kamal Sagar, and it is meant to be a gigantic tank that harvests rainwater.

Waterbodies, big and small, now make up 40 hectares of the once-barren campus. Rainwater harvesting has been so efficient that the university does not need groundwater now. Kamal Sagar alone has water that can last for months, apparently.

The university has also been harnessing renewable energy in a big way. Solar and biomass plants satisfy part of its needs. Consumption is expected to go up once the residential blocks for students and the faculty are opened. The buildings are now mostly complete, and many students have already moved in. Nearby, a stadium is also receiving finishing touches.

“Eighty per cent of our students are from East Asian countries,” says Singh. “There are also a few students from Canada, Australia, New Zealand and even the US. The university offers MSc and PhD in ecology and environment studies, and also a course in historical studies that teaches historiography and archaeology. Then there is a programme on Buddhist studies, philosophy and comparative religion. Most of the students come and register for Buddhist studies. Last year, we started offering masters in Hindu studies; we also have masters in world literature.”

Singh says efforts are on to transform Nalanda University into a research base that links existing knowledge centres in member countries of the Association Southeast Asian Nations (ASEAN). It is already a nodal institution for AINU, or the ASEAN-India Network of Universities.

After touring Nalanda University, we go to the Nava Nalanda Mahavihara, deemed to be a university under the Union ministry of culture. The Mahavihara is just a stone’s throw from the Nalanda ruins. It is not as big as the Nalanda University campus, but it is teeming with students.

The Mahavihara was started in 1951 by a Buddhist monk called Jagdish Kashyap. “This university was a result of his vision and efforts,” says Prof Baidyanath Labh, the vice chancellor, pointing at a picture of the monk in his office.

According to Labh, Nalanda was the oldest centre of learning in the world. Apparently, it was called a mahavihara, which means a great monastic centre of learning. The term vishwa vidyalaya (university), which is now used to describe Nalanda, was not used in ancient times, says Labh.

“We are carrying the legacy of the old mahavihara that was established by Kumaragupta, emperor of the Gupta dynasty,” he says. “It was called Shri Nalanda Mahavihara, and it taught not just Buddhism and subjects related to it, but also vedas, mathematics, astronomy, medicine and metallurgy. Of course, the primary focus was on Buddhism, especially Mahayana Buddhism.”

The most authoritative document about the old university is a travelogue written by Hiuen Tsang, a Buddhist scholar-monk from China who visited Nalanda in the seventh century. “Hiuen Tsang studied in Nalanda for almost four years; it is also said that he taught for one year. On his return to China, he carried 657 manuscripts back with him,” says Labh.

A few kilometres from the campus of the Nava Nalanda Mahavihara is a memorial dedicated to Hiuen Tsang―a hall built in Chinese architectural style surrounded by lush trees. Inside is a statue of the great scholar, and the surrounding walls have paintings that chronicle his life and travels. “A museum and meditation hall are being planned next to the memorial. The meditation hall will accommodate around 200 people,” says Labh.

The Nava Nalanda Mahavihara has signed memorandums of understanding with universities in Thailand and Sri Lanka. Labh says the growing opportunities in history-related fields are driving a growth in the number of students. “Students in India mainly pursue degrees that will help them land jobs. Now, those who study history, culture and archaeology are also getting jobs―in the Archaeological Survey of India (ASI) and other academic domains. We are getting a good number of students from Pondicherry, Kerala and Maharashtra. Many students come from the Deccan College [Post-graduate and Research Institute] in Pune, which is considered India’s top college in archaeological studies.”

Malavika J. Babu, 23, of Kottayam in Kerala is pursuing MA in ancient history and archaeology at the Nava Nalanda Mahavihara. She says she had apprehensions about moving to Bihar for higher studies. “When I decided to pursue higher studies in Nalanda, my parents were concerned about my safety,” says Malavika. “But that changed. I have never felt unsafe here; in fact, I am highly impressed by Bihari hospitality.”

Tashigyalpo, a student from the Central Institute of Buddhist Studies in Leh, Ladakh, has started a six-month visit as part of his PhD programme. “I want to be near the place that is linked to the origin of Buddhism,” he says. “I regularly interact with the teachers and get interesting insights about Theravada and Mahayana Buddhism. I am trying to study linkages between Nalanda and Bodh Gaya.”

Nalanda’s rich historical connection with the Pali language, the sacred language of Theravada Buddhism, has also been attracting students from abroad. One of them is Aliya Boud of Laos, who is pursuing BA in Pali literature at the Nava Nalanda Mahavihara. “Many senior monks from our region in Laos studied here,” says Aliya. “Since the place is closely associated with the Buddha, I also wanted to study here.”

Nyarnadasand, a 32-year-old monk from Myanmar, is pursuing a PhD in Pali at the Mahavihara. He has been stuck in Nalanda since the pandemic began, and the political upheavals in his country have also not helped. “I want to go back, but it is taking time. Many monks from my country want to study in Nalanda, but are unable to do so because of the uncertainty there. I want to finish my PhD by 2024.”

According to Dhamma Jyoti, who teaches Pali at the Mahavihara, there is great interest in the language among students in southeast Asia. In fact, more than 60 per cent of Pali students are from southeast Asian countries.

“The political and economic problems in countries like Myanmar and Sri Lanka have prevented many students from studying here,” says Jyoti, who hails from Ladakh. “Also, many foreign students who went home during the pandemic have not returned. We are awaiting their arrival.”

ruins-of-nalanda-university

Sat Dec 17 20:05:16 IST 2022

The Nalanda ruins are just a stone’s throw from the Nava Nalanda Mahavihara University in Bargaon. A world heritage site, it has archaeological remains from the third century BCE to the 13th century CE, including stupas, shrines, viharas and art works in stucco, stone and metal. The entire area is protected and maintained by the Archaeological Survey of India (ASI).

The most ancient university of the Indian subcontinent, Nalanda was engaged in the organised transmission of knowledge over a period of 800 years.

The ruins of Nalanda university are spread across an area of 23 hectares and include 11 viharas and 14 temples, besides many smaller shrines and votive structures.

British surveyor Francis Buchanan, who in 1812 noticed Nalanda’s importance, described it as the ruins of Kundalipur. Later, in 1847, archaeologist Markham Kittoe attempted to identify Bargaon ruins as ancient Nalanda, and Alexander Cunnigham confirmed it in 1861. It was only in 1915, under American archaeologist D.B. Spooner, that regular excavation of mounds at the site commenced, and it continued up to 1937.

There were multiple temples in the ruins of Nalanda, including Hindu structures, which implied education was not just about religion.

Temple No 3 is the oldest structure and dates back to third century BCE. Apparently, it had seven successive phases of construction. The first three stages were small and concealed. The rest were extensive. The location was initially a stupa, which later expanded as a chaitya (prayer hall) of the panchayatan form. It is believed that emperor Ashoka consecrated the corporal remains of Sariputta, one of the foremost disciples of the Buddha, with construction of a stupa that became the nucleus of Nalanda.

world-famous-buddhist-centre-mahabodhi-temple-bodh-gaya

Sat Dec 17 20:03:16 IST 2022

The Mahabodhi Temple, a world heritage site in Bodh Gaya, is one of the most sacred Buddhist centres in the world and was restored more than once. The Bodhi tree, under which the Buddha is presumed to have attained wisdom, stands here. The area around the temple is well guarded. There is strict security checking at the entry point, and mobile phones are not allowed.

Professor Kailash Prasad from the department of Buddhist studies at the Magadh University in Bodh Gaya, said, “It is difficult to say who built the Mahabodhi Temple. It was built in the present shape in the sixth century. Alexander Cunningham [British army engineer] restored it in the 1880s. The height was as per the description of the [Chinese monk] Hiuen Tsang, who was an important link between Bodh Gaya and Nalanda. One of the inscriptions found at Nalanda says the building of the ancient Nalanda university resembled the sky-touching temple of Mahabodhi.”

Near the Mahabodhi Temple, there are temples built by several Asian countries.

Prasad said the old Patna, Gaya and Nalanda regions, which once formed Magadha, were all centres of education. There were other universities in the region, too, like the well-known Vikramshila university. Recently, archaeologists found the remains of an ancient university at Telhara, near the ruins of Nalanda. It is being claimed that Telhara was like Nalanda. While Vikramshila was a centre of Mahayana Buddhism, different systems were taught in Nalanda. When Nalanda declined, it is believed, Vikramshila rose. There are references that there was a learning centre called Vajrasana.

Said Prasad, “Bodh Gaya stands as the most important pilgrimage centre for people from Buddhist countries, whether they are from the Mahayana sect or the Theravada sect. There are 150 Buddhist monasteries in Bodh Gaya today. Myanmar has taken special interest in the Mahabodhi Temple, and has carried multiple renovation works here.”

At the Magadh University, at one point, there were 300 foreign students. Today, few local students are interested in learning Pali. The number of foreign students has come down. Foreign students come from Thailand, Myanmar and Vietnam. There was a time when there were 50 students from Vietnam alone in the Magadh University. They were mostly nuns and monks.

how-tamil-nadu-namakkal-got-into-the-fifa-world-cup-qatar

Sat Dec 17 19:20:15 IST 2022

THE CLUCKING of hens fills the air as I enter a sprawling poultry farm at Kurumbapatti on the outskirts of Namakkal. As the gate opens, pipes spray sanitiser over the car. As I step out, the same thing happens to me. Drenched in sanitiser, I walk into the layer farm (where egg-laying poultry is raised for commercial purposes).

Inside, I am surrounded by hens in cages. Thousands of them in an enormous hall—in total, the facility has around 54,000 hens. In the first hall, the only space that did not have hens in cages was taken up by trays of eggs, stacked to a height of over 10 feet. The bird droppings fall on the ground, while the eggs fall in an adjacent tray. A small tray above the egg-tray is filled with granules. A huge drum with maize, jovar and soyabean in granule form moves from one end of the hall to the other and drops 110gm of granules in front of each bird. As the drum moves, the hens pull their heads into the cage. As soon as the food drop is made, the heads come out excitedly.

Namakkal has been excited since the FIFA World Cup began in Qatar last month. “Exports have gone up by 2.5 crore eggs this month, of which around 1.5 crore have gone to Qatar,” says K. Singaraj, president, Tamil Nadu Poultry Farmers Association. Before the increased demand, Namakkal used to export around two crore eggs a month to the Middle East and the Maldives.

Namakkal is a small town in west Tamil Nadu—360km southwest of Chennai and 250km south of Bengaluru. It is close to the picturesque Kolli hills and the closest river is the Cauvery. The name Namakkal, according to historians, was derived from namagiri, meaning single rock. Atop this rock—a hillock at the centre of the town—is a fort, built in the 17th century by king Ramachandra Naicker. But, the town’s most noteworthy feature now is its poultry farms—around 1,100 of them. They produce five to six crore eggs daily (of the 18 crore produced in India). This has made the town, which is the headquarters of Namakkal district, a poultry hub in India, second only to Hyderabad.

It all began in the early 1970s when Namakkal was struggling to keep its agriculture alive. While the Cauvery watered the southern part of the district, the rest went dry. As a result, farmers started small layer farms (around 100 chickens) in thatched-roof sheds. The farms grew to the next level in the early 1980s and the farmers (who now had 1,000 to 2,000 chickens) shifted from thatched roofs to tiled roofs. Slowly, the business began flourishing and many young entrepreneurs joined it.

But, the lack of scientific knowledge and frequent disease outbreaks among the birds led to major problems. To resolve this, the government of Tamil Nadu set up a veterinary college in Namakkal in 1985. The college was tasked with studying and resolving the problems of the local poultry industry. Then came the National Egg Coordination Committee, which worked towards fixing a fair price for eggs and avoiding exploitation by middlemen.

Slowly the business stabilised and exports grew, especially to the Middle East. But, as per Vangili Subramanian, president, Tamil Nadu Egg Marketing Society, the growth in exports dwindled because of “various issues, including bird flu”. Now, Namakkal has another chance to ramp up its exports and it seems to be better prepared.

C. Panneer Selvam of Abi Egg Traders says that Namakkal has been preferred by Qatar because of the ongoing conflict in Ukraine and the higher cost of eggs in Turkey. Namkkal eggs cost $31 at the port of delivery for a box of 360, whereas the eggs from Turkey cost $34. Apart from the lower cost, the quality of Namakkal eggs is also a decisive factor. The weight is 52g per egg, which is the export standard because larger eggs may break, and the eggs are printed with the manufacturing date and expiry date. The shelf life of eggs is 21 days. Apart from this there are the hygiene and sanitisation standards.

As I experienced, a vehicle entering a farm is sterilised and disinfectants are sprayed on the passengers. “Poultry farm premises and buildings should comply with requirements for isolation from the environment and strict observance of principles of hygiene and disease prevention,” Shreya P. Singh, Namakkal collector, tells THE WEEK. “We maintain the standards.” A poultry farm is also methodically prepared for the entry of each new batch of hens.

They begin laying eggs from around the 30th week. “The eggs are from middle-aged birds, from 35 weeks to 60 weeks,” says Panner Selvam. “After 60 weeks, they are sent for meat.” If cared for well, birds can be productive till 80 weeks. Veterinarian Periyasamy, who uses only one name, works for the animal husbandry department. He says a low level of antibiotics are used as growth promoters and that this cannot be termed hormones. The aged birds are sent to north Kerala and parts of north Karnataka, where people prefer chewy chicken.

Poultry farm owners take utmost care to avoid disease outbreaks. “The dead and diseased birds are immediately disposed of and all norms prescribed by the government and the animal husbandry department are followed by the farm owners,” says the collector. In fact, Namakkal was recently declared a bird flu-free hub.

Till a few years back, samples had to be sent to Bhopal to test for bird flu. But, now the testing is available at the Tamil Nadu Veterinary and Animal Sciences University, Chennai. According to Singh, the animal husbandry department ensures periodical vaccination for the chicks.

Apart from exports, Namakkal is the major supplier of eggs for the mid-day meal schemes in Tamil Nadu. “These eggs are the cheapest protein source and cannot even be called non-vegetarian as it is lifeless (they do not hatch as they have not been fertilised by roosters),” says Periyasamy. “The government has realised this,” adds Panneer Selvam, “and it is supporting the growth of the business.”

the-risks-associated-with-metaverse

Sun Dec 18 11:27:44 IST 2022

A dystopian future is a common theme in science fiction. The 1992 novel Snow Crash by Neal Stephenson was set in such a future—the 21st century after a global economic collapse. The world’s territory has been carved up into sovereign enclaves run by big business. It is an unpleasant existence for the common man, to say the least.

Stephenson describes a technology that resembles today’s multiplayer online video games. It is a computer-generated universe that is projected on to users’ goggles and pumps into their earphones. Users can build things in this virtual reality, including spaces where the laws of physics are ignored, and combat zones, where the digital avatars of users can hunt and kill each other. In order to build, they have to pay the Global Multimedia Protocol Group, the company which operates the technology.

Some of Stephenson’s characters were constantly online, logged on to this fictional universe—it was an escape from reality. The author called his digital world the metaverse.

Thirty years later, a Google search with the term metaverse returns over 20 crore results in 0.40 seconds. Headlines like “Life in the Metaverse” and “How will businesses use the metaverse?” pop up. Then there are mind-boggling numbers—investments of billions of dollars; trillions in projected value. There is no mention of Stephenson or Snow Crash. Wikipedia, unhelpfully, tells us that the metaverse is a “fictional universe”.

To be fair though, what else is Wiki supposed to do? Because the metaverse has not been fully realised, at least not yet. There are primitive versions in video games that allow users to wear virtual reality (VR) headsets to experience projections similar to Stephenson’s description. Gamers also spend real-world money on virtual goods and services and hang out with the avatars of fellow gamers (there are even concerts your avatar can attend). But, while gaming has helped us imagine the metaverse, the feel is not enhanced enough. Moreover, accessibility remains an issue, especially at scale.

So what would qualify as a fully realised version? Tech CEOs have different visions. Mark Zuckerberg, who renamed Facebook as Meta (hereafter referred to as Facebook in this article to avoid confusion), talks about a VR or AR (augmented reality) where we can socialise, collaborate and attend meetings or events. Microsoft’s Satya Nadella has explained how the company’s initiatives also include an enterprise metaverse, on which businesses can build “digital twins” of offline infrastructure to better monitor their supply chains. Google, Amazon and Apple are also working on their metaverses, but have been guarded about their plans. Other major players currently working on various aspects of the metaverse include technology and entertainment company Tencent, Epic Games, other gaming platforms like Unity and Valve, and chip giant Nvidia.

Irrespective of what their approach is, these business leaders seem to agree upon the potential of the metaverse. According to Nvidia CEO Jensen Huang, the metaverse economy will be larger than the economy in the physical world, which translates to over $100 trillion! As of 2021, the global metaverse market revenue was around $60 billion. It is expected to grow at a CAGR of 40 per cent to hit $1.5 trillion by 2030.

Zuckerberg explained how his vision is a natural extension of existing technology. He told The Verge that with smartphones, we already have something that people access from the moment they wake up till they go to bed. “I think that that’s not really how people are made to interact,” he said. “A lot of the meetings that we have today, you’re looking at a grid of faces on a screen. That’s not how we process things either. We’re used to being in a room with people and having a sense of space where if you’re sitting to my right, when you speak, it’s coming from my right. It’s not just all coming from the same place in front of me.”

India is projected to be a key market for the growth of the metaverse. This is because India is already a huge market for digital payments and mobile gaming. Startups like Bolly Heroes (a platform to buy rare non-fungible tokens related to Bollywood stars) and NextMeet (an avatar-based, immersive meetings platform) are expected to drive market expansion. Tech Mahindra has also launched its TechMVerse for businesses to build immersive experiences and transact in the metaverse.

Ramanathan Srikumar, chief solutions officer, Mphasis, told THE WEEK that the metaverse has the potential to transcend today’s interfaces across applications. “For example, imagine going into [the simulation of] a human body to learn anatomy or into the sub-atomic domain to study physics or the ability to simulate surgery before operating on patients,” he said.

However, while much of our lives are now online and the pandemic accelerated the adoption of technology, a fully realised metaverse requires technology that is not yet ready. For example, as Zuckerberg explained, “To get AR glasses that we wear all day, they have to be normal-looking glasses, right? So you’re basically cramming all of these materials to build what we would’ve thought of as a supercomputer 10 years ago into the frame of glasses that are about five millimeters thick—you have chips, and holographic wave guides, and things for sensing and mapping out the world, and batteries and speakers, all this stuff, and it just needs to fit into these glasses—so that is a real challenge.”

Natarajan Radhakrishnan, president and global chief information officer, HGS, said that despite the excitement around the metaverse, we are still in the “hype stages” of the technology. Therefore, the metaverse continues to be largely hypothetical till date. But experts argue it is already time to start looking at the potentially dangerous aspects of the metaverse. The dystopian view, so to speak.

A case in point is the horrible experience a user had on Facebook’s Horizon Worlds platform. Facebook had released Horizon Worlds, its free, online VR video game, in December 2021. It had also released Horizon Venues, an app to attend live events in VR, which has now been merged with Horizon Worlds. In February 2022, a British woman said that while she was using Horizon Venues, a few male avatars virtually gang-raped her avatar and took photos of the crime. (The platform has safety features that, when enabled, stop avatars from getting into another’s personal space.)

The survivor, who initially froze in shock, recovered to take off her VR headset and signed out from the platform. She said her physiological and psychological response was as though it had happened in reality because the VR has been “designed so the mind and body can’t differentiate virtual experiences from real”.

Social media has fuelled criminal behaviour in the digital space, largely without consequence. In the metaverse, “keyboard warriors” can move around and harm others. Girish Linganna, aerospace and defence expert, says that India has been unable to deal with social media, with platforms “outrightly shunning the law of the land”. He adds that legislation on the metaverse was scarce the world over, but points out that is not necessarily bad. “Think of 3D TVs,” he said. “They were the next big thing in the early 2000s. They have vanished from market and mind. If laws react to technologies faster, there will be a lot of noise but to no avail.” The Digital India Act would link cybercrimes to the Indian Penal Code and that, he said, was a move in the right direction.

Apart from concerns about virtual violence, there are fears that the metaverse could become a digital prison where Big Tech controls the narrative. Moreover, there are plenty of problems that remain unsolved from the social media era: radicalisation, privacy, misinformation, platform regulation. In the metaverse, misinformation may appear more real because of the immersive experience. Similarly, radical messages could leave a bigger mark on the target audience.

Therefore, experts say the push for governance standards needs to start much before the metaverse becomes a reality. IT and innovation adviser Sudin Baraokar said that there was an urgent need for greater collaboration across public, private and startup ecosystems with regard to deciding on standards for the metaverse. He added that metaverse standards will also help the developer and technology community for engineering and development, and testing and compliance.

The technology standards are going to be driven by industry leaders. A Metaverse Standards Forum has already been initiated with a goal to develop interoperability (for example, allowing users to move virtual assets across metaverse platforms). The forum consists of around 2,000 members, including IT firms and standards bodies. Kanchan Ray, chief technology officer, Nagarro, said that a governance layer will probably slowly creep in and it could be a good thing. “I feel that we might not need a ‘metaverse police’ soon, but it won’t hurt to have a 911,” he said.

Another concern regarding the metaverse is the risk of addiction. Ray said that there was a serious risk to mental health in some users. But, he added that research into the metaverse was covering social topics like human emotions and possibilities in health care. Ultimately, he said, we need to be patient and not jump to conclusions. “This is a mix of complex technology and game-changing innovation, and it will mature over the next five to six years,” says Ray. “When matured, it will enhance our lives.”

Also, it will be difficult to formulate policies at this stage. Ritika Amit Kumar, CEO and co-founder, STEM Metaverse, said: “Lawyers are trying to understand the scope of the metaverse. Currently, India is watching and trying to comprehend. Policies are, however, in the pipeline.”

Another key element of the metaverse is identity. “To this effect, the industry has worked on solutions to give more control to users over their identity and data, and can decide what to share, when to share and with whom to share,” said Srikumar of Mphasis, adding that this will reduce the control of companies. “Standards for the metaverse in general are just forming now, but a lot more needs to be done in terms of safety, security, and well-being of the user.”

Smart gadgets, smart cars and smart homes prove that a more immersive future is on the way. The metaverse is not something that would materialise overnight. Instead, it would be increasingly normalised by technological advancements—more immersive video games, more realistic looking online avatars, a better way of video calling—all steps, big and small, bring it closer.

Therefore, it is necessary for the general public to start following what is happening in the world of metaverse research. After all, some of the world’s smartest people are pouring billions into the idea. If, or more likely when, they are successful in building this new digital world, we will be ones populating it. Even if we are not driven to it by a dystopian reality, like Stephenson’s characters were, we are likely to be lured in, one way or the other. Social media has already proven this.

electronic-waste-management-in-india-cerebra-integrated-technologies

Sat Dec 17 17:39:52 IST 2022

A trip to the e-waste recycling plant at Narasapura Industrial Area in Karnataka reminds one of the famous Kolar Gold Fields, which used to be near the plant decades ago. Run by Cerebra Integrated Technologies Ltd, the Narasapura plant has a similar function―it is an ‘urban mine’ where precious metals and useful material are separated from electronic waste.

Cerebra is one of the largest organised e-waste processing companies in India. Spread across 12 acres at Narasapura, it has three facilities with a built-up area of two lakh square feet. Inside the buildings are huge piles of old monitors, keyboards, modems and laptops―e-waste getting ready to be ‘mined’. Around 80 people work in three shifts here.

Cables and wires of various kinds are heaped up in one facility. They would yield copper and aluminium. There is a dedicated area for crushing printed circuit boards and segregating plastic and other material. Cerebra also provides dedicated e-waste processing facilities for specific customers.

Urban mining could well be the next big sunrise industry in the larger technology sphere. “Opportunity-wise, urban mining is phenomenal,” says Ravi Neeladri, CEO, Cerebra. “If it weren’t so big, it would not have been mentioned in the economic survey and the Union budget.”

E-waste can yield not just plastic, copper and aluminium, but also precious metals such as gold, silver and palladium. But a lot of processes go into the segregation and mining part. “A tonne of ore from a gold mine can yield gold worth around $400, whereas a tonne of good-quality PCBs (printed circuit board) can give gold worth $38,300. This is the reason urban mining is getting such traction,” he says.

India is the third largest generator of e-waste in the world. Every year, the country churns out 3.1 million tonnes of electronic waste, which the growth of the urban mining industry can help turn to wealth. According to Neeladri, refining copper from copper cables is more energy efficient than extracting copper from copper ores.

The precious metals being mined at Cerebra include palladium, copper, gold, silver and nickel. “Palladium is used in circuit boards and computer chips for multi-layer ceramic capacitors,” says Neeladri. “Precious metals can also be recovered from household appliances, IT and telecommunication equipment, consumer electronics, and small industrial, professional and medical tools.”

Neeladri says urban mining in India has a long way to go before it catches up with developments in the west. “Governments there ask OEMs (original equipment manufacturers) to charge a certain amount from customers who purchase electronics items. The money will only be returned when the customer returns the used item at their own expense. Concepts like that do not exist here. In the European Union, one can dispose one’s electronic waste by going to a designated area, dropping the waste and paying [the waste processing company].”

Around 95 per cent of e-waste in India ends up with kabadiwalas, or untrained scrap collectors. They take whatever is useful and dump the rest. The absence of a proper channel―for people to dispose their e-waste and for e-waste companies to access them―is the biggest challenge that urban mining in India is facing.

The market potential, however, remains huge. The global electrical and electronics market is expected to grow from $3.08 trillion in 2021 to $4.1 trillion by 2026. The increasing volume of e-waste across the world is driving the demand for processing and recycling technologies. The Economic Survey of India for 2018-19 had highlighted that India can extract $1 billion worth of gold from mining urban e-waste.

With sustained economic growth and the increasing pace of digitisation in India, there has been a huge uptick in the use of electronic items, especially in tier-II and tier-III cities. But experts say urban mining clusters in India have only reached the developing stage. There are no significant clusters that can be counted as fully developed. Though majority of the e-waste in India are processed by players in the informal sector, they cannot be counted as urban mining clusters.

“Players in the informal sector are processing e-waste in an inefficient, and potentially unsafe, manner,” says Masood Mallick, CEO of the Hyderabad-based e-waste management company Re Sustainability Ltd. “Urban mining, which is in the formal sector, can lead to the safe and efficient recovery of resources. Because of the rapidly increasing demand for electronics, it is critical that efficient refining technology takes a firm place in the Indian economy. It will reduce import dependency, increase safety awareness, and build a circular economy.”

Mallick says an effective and sustainable refining system would provide enormous opportunities for India’s economy. He says his company’s facility in Hyderabad is the first of its kind in Asia. It is positioned to achieve certification as the first LEED Platinum facility in Asia. (LEED, which is the acronym for leadership in energy and environmental design, is a widely used green building rating system.) The facility is spread across 13.26 acres, and it has a processing capacity of 20,000 tonnes.

New companies are joining the urban mining bandwagon. Bengaluru-based Metastable Materials, for instance, is trying to change the outlook on how urban mining processes can be carried out by borrowing from old mining practices. Metastable claims to be one of the first in the world to recover as much as 90 per cent of material from dead lithium-ion batteries without the use of any chemicals.

It is developing a new technology to extract lithium, cobalt and nickel out of dead batteries. Metastable is also in the process of commissioning its first urban mining unit on the outskirts of Bengaluru, which will be capable of handling as much as 6 per cent of India’s current recycling needs.

“The future is promising given the exponential rise of electric vehicles,” says Shubham Vishvakarma, founder and chief of process (engineering) at Metastable Materials. “The volume of end-of-life lithium-ion batteries that will be discarded from EVs and consumer electronic devices would require the industry to scale up. India simply cannot lose the opportunity to let such valuable resources go to waste.”

Vishvakarma says sustainable processes are needed to keep the hazardous lithium-ion batteries out of landfills. Also, India does not have its own mines for rare metals like lithium, cobalt and nickel. “A major challenge in urban mining is the processes used themselves,” he says. “Current industry practices rely heavily on the use of chemicals to extract metals like cobalt, nickel, lithium, copper and aluminium from lithium-ion batteries, which are going to be a major contributor to e-waste in the coming years.”

Currently, Delhi, Mumbai and Bengaluru are gradually developing as urban mining clusters. But a key challenge to the industry is absence of awareness about the need for disposing e-waste in a safe manner.

“The [disposal process] is dominated by the informal sector, which does not cater to global health norms,” says Kudiarasu Selvan, managing director, E-Cycle Solutions, Bengaluru. “The quantum of e-waste generated in India is such that there is huge potential for existing and upcoming organisations. But it will be difficult to predict the future of the sector until there is a paradigm shift in public thinking regarding e-waste.”

expansion-of-rubber-cultivation-in-north-east-india

Sun Dec 11 11:41:51 IST 2022

In 2017, two companies partly owned by rubber farmers in rural Kerala exported sheets of natural rubber to a manufacturing company in São Paulo, Brazil’s commercial capital. In money terms, it was a low-value, low-volume deal―around 60 metric tonnes worth around Rs1 crore―but in terms of historical significance, it was rather big.

A bit of backstory first: Brazil is the home of rubber, because of which the tree that yields natural rubber is called Hevea brasiliensis. In the 19th century, the rubber tree grew only in the Amazon rainforest, which helped Brazil nearly monopolise the global rubber market. The British, ardent free-marketeers when faced with monopolies not their own, dispatched an explorer named Henry Wickham in the 1870s. Wickham collected around 70,000 rubber seeds from groves in Amazon and smuggled them to the Royal Botanical Garden in London. The ‘theft’ helped the British jump-start cultivation in colonies in Southeast Asia, effectively ending Brazil’s dominance. Within decades, cheap but good-quality rubber from fledgling Asian plantations finished off the Amazon wild rubber industry.

In short, the consignment from Kerala to São Paulo was sort of a homecoming. The deal also reflected the vagaries of the modern international commodity market―much like the Arabs who have to import sand from Europe and Australia (because wind-blown desert sand is too fine for construction), Brazilians have to occasionally depend on rubber farmers who are half a world away in Kerala.

This year marks the 120th anniversary of the first rubber plantation in India. In 1902, a group of enterprising Europeans―J.J. Murphy, J.A. Hunter, K.E. Nicoll and C.M.F. Ross―established a plantation called the Periyar Syndicate at Thattekkad in Kerala’s Ernakulam district. It was one of the earliest such ventures that was started soon after the rubber tree’s ‘migration’ out of South America, and it quickly expanded to include estates carved out of the virgin Western Ghats.

In the 1940s, when World War II drove a commodity boom, the area under rubber cultivation in Kerala soared. Driving conversions from forest to plantation were rubber evangelists―missionaries, royals, bureaucrats and journalists. Funds were raised, forests were cleared, local partnerships were formed, and estates were born. In most parts where the “tree that shed white blood” took root, entire communities prospered. A reason was that most of rubber plantations in India were, and still remain, smallholdings that created a mutually beneficial network of growers, tappers, processors, dealers and manufacturers. (In Brazil, on the other hand, most of the benefits of the Amazon rubber boom were reaped by “rubber barons” who controlled captive labour and numerous wild groves.)

To maintain the momentum in rubber cultivation even after independence, Parliament passed an act to form the Rubber Board, which was headquartered in the heart of the Indian rubber boom, Kottayam. The idea was to promote systematic and scientific cultivation. In the subsequent decades, production grew so steadily that India is currently the world’s fifth largest producer of natural rubber, after Thailand, Indonesia, Vietnam and China. Within India, Kerala accounts for more than 70 per cent of the output, with takers even in South America.

History aside, the rubber industry in India is at a crossroads. India does not produce as much rubber as it needs―the deficit is more than four lakh tonnes, nearly a third of the total consumption in the country. Synthetic rubber, which cannot wholly replace natural rubber, may not be the answer. Relying on imports, too, is not economically sustainable. The only viable solution is to drastically expand the area under cultivation.

The question is, is there space for expansion? “Today, Kerala is almost fully saturated, so the next best bet is the northeast,” said K.N. Raghavan, executive director, Rubber Board. “There is Tripura, where we have done a fairly good job. There is space in Assam and other northeastern states as well. The plan is to spread cultivation to another two lakh hectares in five years.”

To describe the plan as ambitious would be an understatement. Even Tripura, India’s second largest rubber producer that recorded a speedy expansion in area of cultivation, could manage only 86,000 hectares since starting out in the 1960s. Two lakh hectares in five years could be an improbable target, but achieving even a fraction of it could revolutionise the economies of the seven northeastern states.

The Rs1,000-crore project, conceived by the Rubber Board and backed by the Automotive Tyre Manufacturers Association (and, therefore, named the Northeast Mission of Tyre Industry for Rubber Augmentation, or NE-MITRA), involves widespread planting of a cold-resistant rubber clone specially developed for the northeast. (India has also become the first country in the world to develop a genetically modified rubber plant. The GM rubber, which has been planted in a Rubber Board research farm near Guwahati, will be in the field-trial stage for the next seven years.)

“The northeast project began in 2021,” said Raghavan. “The first year, we planted around 3,860 hectares; this year, around 23,369 hectares―so more than 27,000 hectares in two years. We have around 50 field offices in the region to help the resourceful farmers there. We are not just growing rubber; we are also helping the socioeconomic upward movement of the whole region.”

In the past two years, a whopping 51 lakh rubber saplings from nurseries in Kerala have been transported by rail to all northeastern states. The hope is that the new plantations will not just create an economic miracle, but result in the social uplift of communities as well. The overarching objective is to replicate the experience in Tripura, where the rubber boom of the past three decades has helped curb insurgency. The rapid rise in the area of cultivation has resulted in scores of militants taking up farming and related activities. According to the state government, there are around 60,000 rubber cultivators in Tripura now―a far cry from the early years when Rubber Board executives tasked with helping farmers lived in fear of being kidnapped by militants.

Another peripheral, but nevertheless ambitious, aim of NE-MITRA is to help India occupy a prominent place in the global rubber pricing system. Currently, it is Singapore, which produces very little natural rubber but has traditionally been a rubber trading hub, that plays a major role in determining international prices. The Rubber Board recently started an electronic trading platform that apparently makes physical trading easy, transparent and fast.

“If it gains some momentum, then in future we can incorporate some amount of futures [trading] also,” said Raghavan. “Then it will be properly controlled. If we do succeed in that, probably we would be in a position to determine international prices some time in the future.”

rubber-board-executive-director-k-n-raghavan-interview

Sat Dec 10 17:29:50 IST 2022

Q\ How did the plan to expand rubber cultivation in the northeast come about?

A\ Our original proposal was to plant one lakh hectares in 10 years. When we submitted it to Union Minister [Piyush Goyal], he said, ‘Make it two lakh hectares in five years.’

The earlier plan involved taking loans from NABARD (National Bank for Agricultural and Rural Development). But funds were difficult to obtain that way. Banks were not keen on giving loans in areas where land documents were not in order. It is very difficult to find proper land documents in tribal areas. Also, the communities in the region are known for being credit-averse. So, for these reasons, the NABARD scheme did not take off.

But financial support for the project was still needed. There was also the fact that growers needed to be financially supported throughout the seven years the plant took to mature. So the minister advised us that we take help from tyre companies. They can chip in, he said, because ultimately what is produced will be utilised by them. They get a new source of rubber. Four tyre companies―MRF, Apollo, CEAT and JK Tyre―came together and agreed to contribute Rs1,000 crore (Rs50,000 per hectare) for this project.

Q\ Are there concerns about the quality of rubber being produced in the northeast?

A\ The tyre companies are very finicky about quality. Thanks to their involvement, quality of the output has been improving. A lot of interventions have happened. Ultimately, when the buyer intervenes and says, ‘I want this thing’, and you see the result in increased prices, it serves as a motivation for farmers.

Q\ What has been the progress so far?

A\ We have planted on 27,229 hectares in two years. The target was just 30,000 hectares―5,000 in the first year, and 25,000 in the second year. The target next year is 50,000 hectares.

The first challenge [when the project began] was to transport the planting material. Last year, we hired trains to transport the entire planting material from nurseries in Kerala. This year, we needed to transport only around 30 per cent of it, because private nurseries had come up there.

Q\ How did India become a rubber deficit country?

A\ Till 2001, we were producing enough rubber for the domestic industry, and rubber was a restricted item for import. If there was a shortage, it was imported through various channels. In 2001, the government opened up [and removed international trade barriers]. Anyone could import rubber. It did not immediately affect the domestic market, because international rubber prices also went up. But around 2005, our automobile industry underwent a huge revolution. The number of vehicles suddenly went up, prompting tyre companies to expand their capacity.

Now, tyre companies can build a plant and get it certified in a year. But it takes seven years for a farmer to nurture a rubber tree till it matures. By the time the trees matured, imports had increased.

Q\ What is the future of natural rubber? What would be the factors likely to influence it?

A\ Take Michelin, which is a company that has its own estates. They are planning to make all their products sustainable by 2050. Natural rubber is a sustainable product, whereas synthetic rubber is not. If more companies follow Michelin’s way, there would be greater demand for natural rubber, and in turn, greater need for plantations.

A second factor is the technologies to reclaim rubber―from tyres and other used products. How successful will those technologies be? That will also be a critical factor. I believe that there will be a healthy mix of these technologies and the demand for natural rubber.

A third factor we are exploring is carbon credits and sustainability certification. There have been promising developments of late. There are currently two [carbon credit-related] markets―the ‘compliance’ market and the ‘voluntary’ market. The compliance market is based on the UNFCC (UN Framework Convention on Climate Change), while the voluntary market is based on the Paris agreement. Rubber does not figure in the UNFCC carbon credit plan; but there is potential for [rubber tree-based] afforestation in the voluntary carbon market. So some groups have come forward to explore these opportunities.

The idea is that Rubber Board act as an interlocutor, negotiate with these groups, get these things certified and ensure that carbon credits are generated. Somebody will sell the credits, and the money goes to the farmer. If this link can be established, it can be a gamechanger for the natural rubber industry.

zoho-corp-ceo-and-cofounder-sridhar-vembu-interview

Sat Dec 03 11:29:19 IST 2022

SRIDHAR VEMBU’S journey with Zoho Corp, which he co-founded in 1996 and has been leading since 2000, has been an eventful one. Zoho is now the largest software product company in India and is among the major SaaS (software as a service) companies in the world. An alumnus of IIT–Madras and Princeton University, Vembu is a Padma Shri awardee. In an exclusive interview, he talks about the opportunities, the challenges and a possible recession. Excerpts:

Q/ There have been talks about a recession. How would it affect Indian SaaS and other technology companies?

A/ Most of the companies in the SaaS space have not been profitable. This is the fundamental issue now when the recession is about to strike. It has mostly been because of the excessive marketing expenditure, as they have spent a lot of money on customer acquisitions because there are too many players in the ecosystem. Recession is a time when such kind of overcapacity issues get resolved. The process is painful. However, in terms of customer adoption, I am very bullish that more and more organisations will adopt the SaaS model.

Q/How does the Indian market compare with the more mature SaaS ecosystems in the west?

A/ Those gaps have vanished and Indian customers and organisations are as much savvy as those in the mature markets. Today if you do not offer the latest and the best, you do not sell in India. Generally, the issue is the global economic landscape. I call the global economy a large earthquake zone. The issue has been of overcapacity that is specific to our industry, and Indian companies are chasing only a few customers. Broadly, the Indian market has caught up now and has seen rapid adoption of SaaS. Indian customers are, however, much more price sensitive than their western counterparts and are much less influenced by marketing. Indian customers are now realising the true value of cloud computing, too, but they are resistant to the high prices charged by companies.

Q/ Many Indian startups in the SaaS space have tasted success in the global arena. Where do you see them going ahead?

A/ For many SaaS startups, growth rates have come down and in the last year the costs of marketing and employee retention have gone up. It is a situation where the markets are slowing down and the costs are going up. Additionally, there are margin pressures and all these are challenges for Indian SaaS startups. Though all these issues will resolve, it will take time. It will not be an overnight phenomenon. I am still bullish about Indian SaaS companies making their mark in the global arena.

Q/ How is the funding for SaaS startups in India?

A/ Funding has slowed down as it all depends on how the public market rewards these companies. If the public markets slow down, the venture capital (VC) funding also slows down. Public markets are way down this year and VC funding has become very tough. It is difficult to predict as to when it will recover. Generally it takes two to three years, but I just cannot predict exactly when.

Q/ Recently, you said India’s thinking was dominated by what happened in the US and the UK.

A/ I do not accept the thought of many thinkers and experts in the US that there is only one economics for everyone. Economic thinking should be contextualised to our own population, our needs, our culture, our society and all of that. For example, our family structures figure in our economic thinking though very often we think that one size fits all and think that what works in the US and the UK will work here as well.

Economics cannot be delinked from one’s culture, social and other aspects. Take, for instance, weddings. They are an important part of the Indian culture and a critical part of the Indian economy. Weddings are one of major drivers of spending in our economy. Also, take the case of gold. Nowhere will you fiund such an infatuation with gold as in India. Economic thinkers and experts who ignore these factors cannot give meaningful advice. Such factors have to be taken into account while doing the forecasting for the Indian economy.

Q/ What are the new technologies that SaaS companies are working on?

A/ There are different fundamental technologies that range from databases to artificial intelligence. Many of the earlier SaaS companies are aiming to base their services around public cloud. Many SaaS companies investments are also going towards their cloud infrastructure. Zoho is working on fast database technologies on GPUs. We are also building data centres across the world to host those databases closer to our customers.

simplify-your-investment-plan-with-freedom-sip

Fri Nov 25 17:17:05 IST 2022

A SIZEABLE NUMBER of retail investors have invested in mutual funds through systematic investment plans, also known as SIPs. At the start of 2021-22, the total number of SIPs in India was around 38 million; this increased to almost 54 million at the start of 2022-23―a growth of 53%. The Association of Mutual Funds (AMFI) in India estimates that by the end of September 2022, this number will have increased to over 58 million. This brings us to the question what makes people trust SIPs.

What is an SIP?

SIP enables investors to systematically invest money in a mutual fund scheme on a monthly, weekly or quarterly basis, depending on the investor’s cash flow. A monthly SIP would mean that the pre-decided amount would get debited from the bank account and get invested in the mutual fund scheme of one’s choice. This simplicity factor is one of the major attributes of SIP, which is very attractive from an investor point of view. SIP enables investors to make automatic, recurring investments of any size, even as little as Rs500. Given the automated nature of investments, the cycle will continue for decades without being disturbed by the emotions of greed and fear.

What follows an SIP?

The SIP feature would cause wealth to grow and accumulate over time. This advances us to the cycle’s next stage, namely withdrawal. When it is time to use the accumulated corpus, the market may be experiencing bearish or bullish trends. If the market is seeing a correction, it may be difficult to sell equity assets at this time. On the other hand, if the market is rising, your desire for more growth may prevent you from reaping the rewards of your self-control and patience over the previous few years.

In such a situation, the solution of withdrawing from the corpus generated is the exact opposite of SIP. Rather than withdrawing the entire accumulated corpus, you might consider withdrawing a fixed amount each month. In this scenario, the fund house will liquidate a portion of your investment to credit a set amount into your bank account each month. The remaining sum is still being invested and will increase in value over time.

The systematic withdrawal plan, or SWP, is the name given to this method of gradually liquidating mutual fund investments. This feature is best suited for long-term financial objectives like having a passive income during retirement, covering a child’s higher education expenses, and similar goals. You can continue to invest in SIPs till your retirement and then start an SWP to receive a regular income.

Make hassle-free financial planning a priority

Investors previously had to set up an SIP and SWP on their own. But as of late, fund houses have introduced features like the Freedom SIP, an optimised solution that combines the advantages of both SIP and SWP. ICICI Prudential Freedom SIP is one such feature.

In the SIP phase, the monthly SIP amount will be invested in a source scheme. Typically, a source scheme can be one of the equity or hybrid mutual fund schemes, intended to increase investments. For instance, as a target scheme for 20 years, you could choose to invest in a large-cap fund or a balanced advantage fund category scheme.

At the end of this period, the market value of the accumulated funds will be shifted to the investor’s chosen target scheme, which should ideally have a lower risk profile than the source scheme. It is from this scheme that the monthly withdrawals will be initiated. The beauty of the arrangement is the fact that the withdrawal amount will be a multiple of the SIP amount. The number of SIP years is used to determine the multiplier. For instance, if the monthly SIP amount is Rs10,000 for 10 years, then the SWP amount will be 1.5x the SIP amount, i.e., Rs15,000. Similarly, if the SIP duration is 15, 20, 25 and 30 years, the multiplier will be 3x, 5x, 8x and 12x respectively.

To conclude, discipline is the cornerstone of sound financial planning. By opting for features like the Freedom SIP, your investments are well on their way to achieving financial objectives without complications.

Akhileshwar Jha is director, G A Financial

ondc-ceo-t-koshy-interview

Sun Oct 30 12:48:06 IST 2022

MANY CALLED IT the ‘Amazon/Flipkart killer’ when the Narendra Modi government first unveiled the plans for the Open Network for Digital Commerce a year ago. Slowly being tested and rolled out in various parts of the country, the government’s ambitious venture to re-configure e-commerce checks boxes ranging from politics and ideology to economics and national interest.

But the proof of the pudding will be in winning over the hearts and wallets of the some 20 crore Indians who shopped online last year and the 45 crore who are expected to do so in four years. That is the unenviable task entrusted with Thampy Koshy, digital pioneer who has on his CV milestones ranging from demat settlements and Aadhaar in India to pension reforms in China. ONDC’s first CEO took time off his busy schedule to explain his blueprint to change the way India shops online. Excerpts from an interview:

Q/ ONDC is often referred to as both ‘like UPI’ and ‘the Amazon-Flipkart killer’, at least in the public’s mind.

A/ It does resemble UPI in the sense that in the same way we are trying to broaden participation. But the latter, I would say, is a wrong narrative. ONDC is not trying to compete with anybody; we are not creating a super platform in competition with the existing players. What we are trying to do is to make an inclusive agenda which will enable any platform or app to have equal opportunities in the field of commerce.

Why the talk about Amazon is that the current digital commerce all over the world works on a model where entities establish their platform using proprietary technology, providing end-to-end services from selling to buyer interface. When you create any such operation, what happens is that the entity which reaches a certain threshold the fastest in terms of usage will get the network effect of feeding on itself and will become bigger and bigger, with very limited opportunities for anybody else. It kills the competition.

Q/ We have seen that in social media.

A/ Everywhere. Whether it is in food or social media or e-commerce or mobility, hotels or travel, you see this kind of concentration happening. When this happens, the entity which has high concentration will be able to dictate terms on how the industry has to evolve. That kind of oligopoly and monopoly takes away competition and reduces options.

This is a concern all over the world, from the US and Europe to even a controlled economy like China’s. Some countries have tried to control it by regulation. Whereas in India [we are using] technology and enabling policies to address this issue. It gives an equal opportunity to everybody. Then their success and failure becomes a function of what they have to offer, not the stranglehold they have on any segment of users due to technology and investments. We have created a standard protocol which helps the industry to unbundle the building blocks of transactions like seller interface, warehouses, logistics, buyer interface, all of them.

Today all of them are one package deal. When an entity has a package deal, it ends up determining how the seller should sell, what should be the pricing and branding strategy, the commission, the discounts, everything. Whereas when you enable unbundling, the power goes back to the endpoints, to the sellers and buyers. And it also enables significant competition. While this will de-segregate the building blocks, the common ONDC protocol will ensure there is seamless commerce, because it enables everything to be stitched together.

Q/ It is not restricted to products, is it?

A/ Products and services, it could be anything. Wherever there is a product to sell and/or buy, they can prepare a catalogue using ONDC protocol, an offer can be made and a contract made for fulfilment. And the beauty is that even logistics is available as a service. You don’t have to worry about going and tying up with a delivery service provider.

Q/ Coming to the technology part, one of the allegations against the Big 2 was that they favoured in-house sellers through the algorithm. How does ONDC platform keep it neutral?

A/ In your mind, you are thinking like a platform. ONDC is not a platform. Secondly, [what you mentioned] was possible because the seller and buyer were captive users. When a buyer puts in his requirements through his buying app, say through a bank or telco or any platform, the buying agent’s interest will be to help the buyer make the right decision. The platform’s interest is with the buyer, he does not even know who the seller is. This will naturally reduce the propensity of any seller to do things behind the back of the buyer.

Q/ Many expected ONDC to roll out quickly. Somehow the pace seems to be a bit slow.

A/ Abracadabra happens only in fairytales. Look at any transformation project―UPI, UIDAI, all of them took time. Nothing happens overnight. But this will certainly be faster than all of them. It will take a few months for everything to come together. We started in five cities, now we are in 80 cities, only for limited users. In Bengaluru, we have opened up to the public. Next year this time you will see a significant shift. Any national transformation project takes two or three years to reach its full potential.

Q/ Would you say ONDC gives a fillip to local, small-time businesses?

A/ There is an enormous possibility for local producers to make their products visible. And that is where we are making extra efforts to help the local businesses.

Q/ Will there be regional languages and audio support?

A/ All of them. Each of the buyer applications will add regional language support and improvising. We are actively encouraging people to work on it. The beauty of ONDC is that it is throwing up enormous opportunities for everyone to innovate. In the current market, you don’t have that option. If you want to set up [an alternative] e-commerce operation in India, it is going to be hugely expensive. Only one or two people can manage it. But here, in six months, if a friend of yours wants to try out his new app, he gets the opportunity.

many-indians-have-found-their-feet-in-the-us-startup-scene

Fri Oct 14 16:58:59 IST 2022

His village in Himachal Pradesh got electricity when he was 13. Running water came two years later. It was not an easy childhood, but that did not stop Jay Chaudhry from earning an engineering degree from IIT BHU and going to the US for higher studies. He worked in many large technology companies there after that. In 1995, he came to know about the internet browser Netscape and was fascinated by the world wide web. He wanted to start a company that offers cyber security solutions.

Chaudhry and his wife, Jyoti, quit their jobs and started SecureIT in 1996. He ran sales and marketing and she managed finance, human resources and operations. SecureIT was later acquired by Verisign. His second venture, AirDefense, was acquired by Motorola, and the third one, CipherTrust, was bought by Secure Computing. The fourth one, CoreHarbor, was taken over by AT&T. Chaudhry currently runs Zscaler, which offers cloud-based cyber security solutions. He founded the company in 2007 and it went public in 2018. He has a net worth of $8.1 billion, according to Forbes.

In 2000, far away from American shores, in a small apartment in the Mumbai suburb of Andheri, Pranay Agrawal, Srikanth Velamakanni, Nirmal Palaparthi, Pradeep Suryanarayan and Ramakrishna Reddy started a data analytics company called Fractal Analytics. Those were early days for AI and analytics in India and they eventually moved to the US, which already had a big AI market. Today, the New York-based company generates 70 per cent of its revenue in the US, and turned a unicorn this year, after raising $360 million from TPG Capital Asia.

Chaudhry and the founders of Fractal Analytics took different routes to the promised land, but they are all part of the long list of Indian-origin founders of US startups. Ilya Strebulaev, professor at Stanford Graduate School of Business, and his team studied 500 US unicorns and their 1,078 founders, and found that as many as 474 of them, or 44 per cent, were born outside the US. “A large number of unicorn founders are first-generation immigrants. Internationally, 10 countries were the birthplaces of more than 10 founders, with India, Israel and Canada as the top three, followed by the UK, China and Germany,” said Strebulaev. India topped the list with 90 startup founders.

Some of them are quite big names there. Baiju Bhatt, for instance, co-founded the commission-free stock trading app Robinhood, which became a rage during the pandemic. Or Rohan Seth, a former Google employee who co-founded the popular social audio app Clubhouse.

What’s behind so many Indians finding their feet in the US startup scene?

Indians are accepted as CEOs in America now, which was not the case even a decade ago, said Deepak Sekar, who went to the US in 2003 to do his PhD. He worked with the data storage company SanDisk after that, but soon decided to pursue his own dreams. He started Chowbotics, a food robotics firm, in 2014.

“When you look different, speak with a different accent and come from a different culture, it is not easy,” he said. “I had to learn a whole bunch of skills to be considered CEO material by investors. The emergence of high profile Indian CEOs at Google, Microsoft, IBM, Pepsi and Twitter made things easier,” he said.

Chowbotics’ first commercially released product, Sally, made salads. There were not many companies in the space at that time. In 2020, just when the Covid-19 pandemic started upending markets globally, food delivery company DoorDash acquired Chowbotics. Sekar now runs the artificial intelligence-driven e-learning company, Prof Jim, along with Pranav Mehta.

The robust growth of the startup ecosystem in India played a part in bolstering confidence in Indian entrepreneurs in the US, said Chaudhry. But the journey has been an uphill climb, involving a lot of hard work and effort. For instance, when Fractal Analytics shifted base to the US in 2005, one of its assignments from FMCG giant P&G was for just one week and worth just $2,000. “The first five years were very difficult,” said Agrawal. “It took us a while to get there.”

One of the biggest challenges was funding. Chaudhry said when he approached a venture capital firm, his business plan was rejected because he “lacked experience in creating startups”. His company, Zscaler, has clients from around the world, including Siemens, MAN Energy Solutions and AutoNation.

Most of these companies maintain a strong connection with India. A third of Zscaler’s offices, for instance, are based in India. Prof Jim’s entire research and development team is also based in India. Fractal Analytics has some 3,000 employees in India. Last year, it doubled its workforce and will add 40-50 per cent more people over the next five years. The company also works with several multinationals who have their global innovation centres in India. It has plans to go public via an IPO on the Indian stock markets.

Thousands of Indians go to the US every year to pursue higher education and work there. According to the annual report of US Citizenship and Immigration Services, the number of Indian students in the US rose 12 per cent to 2,32,851 in 2021. And most of them dream of a future there.

“I had no background in entrepreneurship but I saw the opportunity to do something in the internet security space and I took it,” said Chaudhry. “It was not easy by any means, but taking these risks have led me to reap the rewards.”

in-us-what-matters-is-the-quality-of-idea

Fri Oct 14 16:54:48 IST 2022

Fractal Analytics was born in 2000 in a small apartment on the outskirts of Mumbai, where six friends came together and set up the data analytics company. Five years later, they moved its headquarters to the US and went on to cater to large corporations like P&G, Colgate and Microsoft. Pranay Agrawal, cofounder of Fractal Analytics, talks about this incredible journey in an interview:

Q/ Why did you move to the US?

A/ It was clear that to create high impact from the work that we were doing, we needed to work with larger, mature companies. In search of that we came to the US. Today, about 70 per cent of our revenue comes from US companies, about 15-20 per cent comes from European companies and about 10-15 per cent comes from companies headquartered in Australia or Asia.

Q/ How were the initial years in the US?

A/ It was tough and slow. It is not as if we had a robust sales engine or that we were bringing a lot of market access. The first five years were very difficult but we won clients like P&G, SAP and Microsoft. And once we had five to seven clients, then it started gaining momentum. One of the first assignments from P&G back in 2005 was a one-week assignment for $2,000. Today, they are one of our top five clients. You have to keep showing up. I think that is a critical part in the journey.

Q/ You turned unicorn this year. What are the key areas that you intend to focus on?

A/ We are using the funding for a few big things. One of them is creating products under Fractal Alpha, where we have already incubated different companies. We have a lot of opportunity in the marketplace to bring products that are AI engineering relevant. The second big area is acquisition. In December we announced the acquisition of Neal Analytics. They are a Microsoft technology-based AI and engineering company. We also acquired Samya, which is a management and demand forecasting platform.

Q/ You were one of the early Indian startups to go to the US. What is your view of the startup ecosystem there?

A/ The ecosystem for creating new businesses and creating value is strong. There is a lot of talent that is wired to do this work. A bunch of other things like infrastructure are also robust. That helps. If you look at the places where a lot of startups happen in the US, it is an open environment where what matters is the quality of your idea and your solutions.

theres-a-lot-more-confidence-in-indians-in-the-us-than-earlier

Fri Oct 14 16:52:33 IST 2022

Jay Chaudhry went to the US three decades ago for higher studies. He worked in many big tech companies and then went on to set up several startups. He currently runs the cybersecurity firm Zscaler. Excerpts from an interview:

Q/ Your story is like an American dream come true, from a village in India to building successful global enterprises in the US.

A/ There were limited basic resources when I was growing up in a small village called Panoh in Himachal Pradesh. But seeing my parents, both of whom were farmers, working hard to provide for our family taught me the importance of hard work, integrity and ethics. While my father never had the chance to go to school, he always encouraged me to study and I was good at it. After high school, I decided to pursue higher education in electronics engineering at IIT BHU.

I came to America for further studies and found myself working at large technology corporations for over a decade. I was fascinated by the internet and the world wide web. I believed that it would be critical to secure the internet against cybercriminals looking to exploit it. This inspired me to kickstart my first internet startup.

Q/ What were the kind of challenges you faced as an entrepreneur?

A/ After completing my education in the US, I had the opportunity to join large technology enterprises—IBM, NCR and Unisys. My tenure in these companies allowed me to take on various roles, from engineering to sales, marketing and management. It was around this time that internet adoption was beginning to gain traction in the US. My fascination with the web drove me to pursue my first startup venture in the internet security industry.

It was a difficult road ahead. When we first drafted a business plan and took it to a venture capital for funding, they rejected it because we lacked experience. From that instance, the choice was clear—either we give up on the startup dream and go back to our comfortable jobs or we invest everything we have in our startup dream. We decided that the risk was worth it.

Q/ Many US unicorns were founded by Indian immigrants. Tell us something more on the startup culture there.

A/ When I launched my first startup, SecureIT, in 1997, there were very few Indian leaders. After SecureIT was sold, the main question I had was ‘what’s next?’ At that point, I reached out to one of my mentors, Khan Vulreki, for advice. He told me of The Indus Entrepreneurs (TiE) organisation he was initiating to help fellow Indian entrepreneurs.

There are great entrepreneurs in the US who hail from India and the numbers are growing. Perceptions are changing now. Today, there’s a lot more confidence as we are seeing more success stories when it comes to business leaders with Indian origins, such as Robinhood or Sprinklr.

indian-techies-should-do-more-than-mundane-jobs

Fri Oct 14 16:50:11 IST 2022

Deepak Sekar’s journey from IIT Madras to a PhD in the US and then a job in Silicon Valley is what most Indian techies aspire for. But Sekar did not stop there; he started his own company, Chowbotics, a food robotics firm. It was acquired by DoorDash in 2020 and now Sekar is focusing on using AI to create online learning content. Excerpts from an interview:

Q/ How did you overcome the challenges in the US?

A/ Indians tend to be more accepted as CEOs in America now. But 10 years ago, that wasn’t the case. When you look different, speak with a different accent and come from a different culture compared with the stereotypical CEO, it is not easy. I had to learn a whole bunch of skills to be considered CEO material by investors. The emergence of several high-profile Indian CEOs made things easier.

Q/ There are many startups in the US founded by Indians. What can India learn from the ecosystem there?

A/ To truly make an impact on the world, you need to solve difficult problems, analyse them in depth and be thorough. Today, truth be told, US-located engineers score higher on that front than India-located engineers. The workforce in the US has more people with masters and PhD degrees. While doing those degrees, you learn to analyse things in depth. Not just that, a good portion of India’s workforce has people in IT services and consulting jobs. In those roles, engineers often get mundane tasks that people want to do in low-cost locations. Even in multinational tech companies, Indian teams often get mundane jobs while the most interesting engineering projects are done by US engineers. Spending years of your career doing mundane tasks does not train engineers to do deep technical work, and many engineers lose interest in engineering as well.

Q/ How do you think tech like AI is going to evolve and change our world over time?

A/ You already have AI like GPT-3 that can write like Shakespeare, generate marketing copy, write software code automatically and even write essays on any topic of your choice. Over the next decade or two, the way computing power is evolving, we are projected to have AIs with complexity comparable with the human brain. I believe that will change the world.

Many mundane programming jobs will be automated. You will have advanced robots that can communicate well and do useful tasks at home. We will no longer be limited by language. For example, you can have one person speak in Hindi on a Zoom call and it will get translated in real time into English for another person.

accelerate-your-portfolio-with-transport-and-logistics

Fri Oct 14 16:44:40 IST 2022

IN A VOLATILE MARKET, every investor is concerned about one thing—how will his portfolio perform. Then comes the concern about where should you invest to make the most of the volatility. As is usually said, a market plunge is the best time to invest in fundamentally strong avenues, as you can enjoy the benefit of buying more assets for less. In mutual funds, you can also benefit from the concept of rupee cost averaging, especially if you have a systematic investment plan in place, as your money will be able to get you more units, thus helping you earn higher returns when the market makes its rise. If you have been considering thematic investment opportunities in the current market scenario, here is some food for thought.

Why thematic investing

Going for thematic investing helps you leverage the potential inherent in a theme you believe in, be it consumer durables, pharmaceuticals, transport or logistics. You can simply pick the theme you are bullish on, and invest in the different companies comprising the underlying theme. This investment strategy adds firepower to your portfolio while also helping you diversify across different companies adhering to the theme you believe in. You also narrow down your research universe, making the investing journey much simpler and streamlined. One of the major themes you should consider backing is transport and logistics.

Transportation and logistics

Considered as an economic growth engine, the transport and logistics theme consists of industries broadly classified under 3 key sectors – Auto Original Equipment Manufacturers (OEMs) such as manufacturers of 2-Wheelers, 3-Wheelers, Tractors, etc., Auto Ancillaries manufacturing batteries, electronics, tyres, etc. and Logistics companies catering to the supply chain, rail, shipping, etc. This diverse categorisation makes the transport and logistic theme an exceptionally diversified one capable of offering robust returns to investors. Let us consider each of these categories in detail.

As we evolve, luxuries turn into necessities, and this is extremely true in the case of automobiles. In this scenario, the auto original equipment manufacturers sector, with its presence across different products, offers multiple investment opportunities. Moving to the next component, auto ancillaries add a lot of value to the automobiles we see on the road. Indeed, the automobile sector is incomplete without the ancillary industry, including elements such as sensors, protective side trims on door panels, seat upholstery, instrument panel, fuel tank door, etc. The third category is logistics, a part of the ecosystem which supports both the luxury and the necessity. As a simple example, consider your shopping patterns – how frequently do you use an Amazon or Flipkart for delivery? Each time you place an order, it is logistics which steps in to fulfil your order and deliver the items you purchase. Logistics helps you get anything, anytime and anywhere.

With the increase in user demands and requirements, and the focus on an aspirational lifestyle, the transport and logistics theme is set for a surge, making it an excellent investment opportunity.

Ways to invest

Once you are convinced about the potential of the theme, you will consider ways through which you can invest in it. One of the easiest ways to capitalise on the theme is by investing in a transportation and logistics based thematic fund which is actively managed. This will ensure that the fund manager will carry out trades which will work for the portfolio in the long run. Such a fund will typically invest in companies like Bajaj Auto, Mahindra & Mahindra, Tata Motors, TVS Motor, Eicher Motors, Ashok Leyland and Maruti Suzuki. Under the auto ancillaries, Amara Raja Batteries, Apollo Tyres, Motherson Sumi Wiring, MRF, Minda Corporation and Bosch are some of the names which could be a part of the portfolio. The fund will also invest in logistics majors such as Blue Dart Express, Container Corporation of India, Delhivery, Gujarat Pipavav Port, Shipping Corporation of India, Mahindra Logistics and VRL Logistics, thus offering your portfolio the acceleration and power it requires to shine. These names are only indicative in nature such that the readers/investors can have a better understanding of the universe of investments.

To conclude, as India moves to be a $5 trillion economy, transportation and logistics could play a vital role in this phase. ICICI Prudential AMC has recently launched ICICI Prudential Transportation & Logistics Fund and the NFO period is open from Oct 6 to 20, 2022.

The author is the founder of Gururam Financial Services Pvt Ltd

new-generation-of-ambanis-are-leading-reliance-to-a-new-era

Sun Sep 25 13:18:42 IST 2022

December 29, 2021, was the 89th birth anniversary of Dhirubhai Ambani. Reliance Industries Ltd, the company he founded in 1973 and helped become an industrial behemoth, celebrated the occasion—as it does every year—as Reliance Family Day. Only that this time RIL’s 2.3 lakh employees got an indication of what the future would look like for India’s largest company, as Mukesh Ambani, chairman of RIL and Dhirubhai’s son, mentioned a “momentous leadership transition”.

Ambani, 65, has three children—twins Akash and Isha, 30, and Anant, 27. Though all of them have been involved in the family business, it was the first time that he had talked about succession. “We should guide them, enable them, encourage them and empower them... and sit back and applaud as they perform better than us,” he said.

The succession plan is well and truly under way. On June 28, Reliance announced that Ambani was stepping down as director of Reliance Jio Infocomm, a telecommunication services provider, and Akash was appointed chairman of the board of the company. Reliance Jio Infocomm is India’s largest telecom operator and a unit of Reliance Jio Platforms, the RIL subsidiary that houses all its digital businesses. Mukesh remains the chairman of Jio Platforms.

Isha has been given a leadership role at Reliance Retail, India’s largest retailer, and Anant is being groomed for bigger responsibilities in RIL’s new energy business. While a formal announcement of Isha’s elevation is yet to be made, Ambani mentioned it in no uncertain terms. “Akash and Isha have assumed leadership roles in Jio and retail, respectively,” he said, addressing shareholders at the company’s 45th annual general meeting on August 29. “Anant has also joined our new energy business with great zeal.” Anant is spending a lot of time in Jamnagar in Gujarat, where Reliance is developing a huge new energy complex.

There is clearly a well-thought-out plan. “Whether it is telecom, retail or new energy, they are all scalable, and quick scalability has been Reliance’s strength. Family and business incumbents want to give equal growth opportunity businesses to their scions so that there is fairness in division of wealth as well as responsibilities,” said Chitra Singla, associate professor, strategy area, Indian Institute of Management, Ahmedabad. “Assigning specific roles to children in scalable businesses is a good decision.”

Ambani had learnt the lesson the hard way. His father died intestate in 2002, and what followed was a bitter feud with brother, Anil, for the control of the businesses. Their mother, Kokilaben, brokered peace in 2005 by splitting the empire. While Mukesh got Reliance Industries (oil and gas, refining, petrochemicals and textiles), Anil was given Reliance Communications (telecom), Reliance Capital (financial services), Reliance Power (electricity generation and distribution), Reliance Infrastructure and the entertainment business.

Despite the split, the brothers continued sparring in court over the supply of natural gas to Anil’s power plants. But in 2010, they reached an agreement and cancelled all non-compete agreements they signed in 2006—but for the one on gas-based power generation.

Ambani clearly wants to avoid his father’s folly. “It is essential to demarcate businesses to heirs and prevent cross-holdings,” said Siddharth Mody, partner at the law firm Desai & Diwanji. “Most of the conflicts that take place during generational changes stem from interference in businesses from other heirs. Hence, when a diversified business is passed down, it is ideal for each heir to have complete ownership and control of the demerged/independent business.”

It was in 2014 that Akash, a Brown University graduate, and Isha, a Yale and Stanford alumna, were appointed to the boards of Jio Infocomm and Reliance Retail Ventures. “The transition had to happen at some point,” said Mayuresh Joshi, head of research at William O’Neil. At the AGM on August 29, both were on their own—Akash giving details of Jio’s big plans and Isha talking about retail and Reliance Foundation.

Akash and Isha have played a part in key decisions at Jio. It is said that Isha, tired of the poor internet speed in the country, nudged her father back in 2011 to start Jio. Both Akash and Isha were part of the discussions between Jio and Meta (parent of Facebook), which led to Meta picking up 9.99 per cent in Jio Platforms for Rs43,574 crore in April 2020.

Jio Platforms has got investment also from technology giants Google and Qualcomm, private equity players KKR and Vista Equity Partners, and sovereign wealth funds PIF of Saudi Arabia and Abu Dhabi Investment Authority.

Isha, who briefly worked at Mckinsey before joining the family business, was instrumental in the launch of the online fashion portal Ajio in 2016, and she played a key role in several deals and partnerships struck by Reliance Retail.

Despite being the biggest players in their sectors, Reliance Jio Platforms and Reliance Retail Ventures are subsidiaries of RIL. Mukesh remains the chairman of RIL and his wife, Nita, is on the board. She is also the chairperson of Reliance Foundation. P.M.S. Prasad, who has been with RIL for four decades, Hital Meswani, who was involved in the petrochemicals complex in Hazira and the refinery in Jamnagar, and Nikhil Meswani, who played a major role in making Reliance a petrochemicals giant, are also on the board.

The day-to-day operations of Reliance Retail is run by V. Subramaniam and Jio is headed by Pankaj Mohan Pawar. Akash and Isha will be assisted by young managers like Kiran Thomas, director of Jio, and Anshuman Thakur, the head of strategy at Jio. Reliance has hired many experienced executives from top retail companies as well. “In my opinion, giving children the chairperson’s role is more of a signal to the market and the Reliance stakeholders that the family would like to retain control over decision making,” said Singla.

Reliance has had many transformations in the past seven decades. What Dhirubhai started as a small textile business in the Masjid Bunder area in Mumbai became a major oil refiner and a petrochemical giant under Mukesh. Now, as the third generation of the Ambanis takes charge, the group is the largest telecom player in the country as well as the largest retailer, even as the legacy businesses continue to grow.

Akash’s elevation comes at a time the Indian telecom industry is on the cusp of a huge shift, with Reliance emerging as the biggest bidder in the 5G spectrum auctions in August. It spent Rs88,078 crore to acquire pan-India spectrum in the 1,800 MHz, 3,300 MHz and 26 GHz bands. Crucially, it also acquired spectrum in the sub-GHz bands of 700 MHz and 800 MHz, which could give it an edge over rivals. Jio’s spending on 5G spectrum was more than twice that of main rival Bharti Airtel, which spent Rs43,084 crore.

Jio’s customer base already is around 42 crore, ahead of Airtel’s 36 crore and Vodafone Idea’s 26 crore. Started just six years ago, Jio registered a revenue of Rs81,587 crore and a net profit of Rs15,487 crore in 2021-22.

Jio is planning to launch 5G services in Mumbai, Delhi, Chennai and Kolkata by Diwali. By December 2023, Ambani wants its 5G to reach every town in the country. It is spending Rs2 lakh crore to build the pan-India 5G network.

Akash, as chairman, will lead the company’s transition into the 5G era and its efforts to widen the subscriber base. While it is all set to tackle the first challenge, adding customers has become increasingly tough in the saturated mobile market. In the past few months, Reliance, like the other two competitors, has lost subscribers. In April, some 75 lakh people gave up their connections (mostly second SIM cards) after tariff hikes by companies.

On the other hand, expansion in the retail sector continues unabated. Reliance Retail opened some 2,500 outlets last year, taking the total store count to 15,196, spread across super markets, wholesale markets and consumer electronics stores. It has also scaled up its digital business rapidly through platforms like Ajio and the grocery delivery service JioMart. Digital and new commerce now accounts for 19 per cent of its core retail sales.

“We undertook more than 220 million transactions during the (April-June) period. That is more than 60 per cent growth over the pre-Covid period. So, our business is growing on a strong note,” said Gaurav Jain, head of strategy and business development at Reliance Retail. He said that daily orders on the digital platforms had grown 64 per cent from a year ago and the merchant base on the new commerce side had scaled up three times in a year.

India’s retail sector is estimated to be worth $1.3 trillion by 2025. The share of organised retail is expected to double to about 15 per cent of the total market in that period. “Reliance Retail tried to do many different things in the initial years,” said Govind Shrikhande, an industry veteran. “But the blueprint became clear by 2015-16, and they decided to go in-depth across retail segments.”

Size, he said, mattered for Reliance. “Whenever they enter new businesses, whether they can reach a huge size is a big consideration for them. Also, there are business cycles that will keep coming. Any retailer needs the financial muscle to ride out these cycles. While many of them have struggled, Reliance didn’t have that worry given their finances,” said Shrikhande, former managing director of Shoppers Stop.

The financial muscle is quite visible in its acquisitions and partnerships. In 2019, it acquired the British toy retailer Hamleys. This year, it entered into a long-term partnership with GAP, to bring the American fashion brand stores to India. It has already partnerships with multinational brands like Marks and Spencer, Superdry, Steve Madden, Burberry and Vision Express, among many others. It is also bringing Britain’s popular sandwich and coffee chain Pret a Manger to India; a move that will see it take on the likes of Subway and Tata Starbucks Coffee.

Reliance has inked deals with several homegrown designer labels like Abu Jani Sandeep Khosla, Ritu Kumar, Abraham and Thakore, and Rahul Mishra, among others.

While scaling up the retail business, the company is also building a strong wholesale presence across categories like grocery, electronics, garments and pharmacy. Its decision to expand into the fast-moving consumer goods segment is key to this. “The objective of this business is to develop and deliver high quality, affordable products which solve every Indian’s daily needs,” said Isha at the AGM. It has also been making inroads in the wholesale pharmaceuticals business after the acquisition of online pharmacy NetMeds in 2020.

In the e-commerce space, Reliance faces tough competition from the deep-pocketed Amazon and Walmart-owned Flipkart. That might be about to change with JioMart partnering with instant messaging app WhatsApp. In what is said to be a global first, JioMart on WhatsApp will let users browse through its grocery catalogue, add items and make payments. “If executed well, RIL will be able to significantly leverage WhatsApp’s large user base in India to grow its new commerce business,” said Anil Sharma, analyst at Kotak Institutional Equities.

In April, RIL-backed Viacom 18 launched a dedicated sports broadcasting television channel and went on to acquire the digital media rights for the Indian Premier League (IPL) tournament. It has also bagged the broadcasting rights for this year’s FIFA World Cup in Qatar. It was not unexpected, as Akash is an avid sports fan and is often seen at the IPL matches of Mumbai Indians, the team RIL owns. He led Viacom’s charge for IPL digital media rights. IPL is the most-watched sports property in India (total viewership of about 350 million) and its digital rights will come in handy for the young Ambani in expanding Jio’s subscriber base and tapping more customers for its fibre broadband service.

Analysts, however, have a word of caution. “Viacom18’s winning bid of Rs58 crore a match for IPL 2023-27 implies cost of Rs63-65 crore a match including production/hosting costs. It looks like Viacom18 would incur losses in the initial years and perhaps break even in the 2026-27 season,” said Jaykumar Doshi, research analyst at Kotak Institutional Equities. Also, the competition between Disney (Star has IPL’s television rights) and Viacom18 for advertising money could reduce the bargaining power for both, unlike in 2018- 22, when Star owned both.

RIL’s biggest bet will be in the clean energy sector. It plans an investment of Rs75,000 crore, which includes Rs60,000 crore towards setting up four giga factories and Rs15,000 crore in value chain, partnerships and future tech. The goal is 100GW of renewable energy by 2030.

Ambani has a knack for scaling up quickly, and that is where acquisitions can play a big role. In the new energy business, RIL has acquired 40 per cent stake in Sterling & Wilson Solar, a company owned by Shapoorji Pallonji Group, and bought solar panel manufacturer REC Solar Holdings and the assets of lithium battery maker Lithium Werks. Reliance will have integrated manufacturing, from raw silica and polysilicon to finished cells and modules.

It has now announced a new giga-factory for power electronics (application of electronics to regulate electricity). “One of the key components linking the entire value chain of green energy is affordable and reliable power electronics,” said Mukesh at the AGM. “We are building significant capabilities in design and manufacturing of power electronics and software systems, integrating with our capabilities of telecommunications, cloud computing and IoT platform.”

RIL aims to start production of battery packs by 2023 and scale up to a fully integrated cell-to-pack manufacturing facility by 2024, which will have an annual capacity of 5GWh, expanding to 50GWh by 2027. It will also be setting up 20 GW of solar energy generation capacity for captive use by 2025 and will progressively begin transition from grey to green hydrogen from that year.

Separately, the company will invest Rs75,000 crore over the next five years to expand capacities in existing and new value chains in its oil-to-chemicals business.

Analysts at Motilal Oswal Financial Services say RIL’s consolidated revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) could clock 13 per cent and 15 per cent compounded annual growth, respectively, over financial years 2022 to 2024. That is without factoring in any incremental growth from 5G capex and new energy. “Retail, telecom, and new energy can be the next growth engines over the next two-to-three years, given the large technological advancements and ambitious growth targets. However, the same can dent its existing single-digit return ratios in the near term,” said the analysts.

Currently, all the businesses of the group are held under the listed parent RIL. Ambani has in the past said that Jio and Reliance Retail would be separated and listed on the stock exchanges. The listing could smoothen the succession process and all his children may hold individually listed business, with the parent RIL overseeing the empire.

“When the businesses are in very different industries, listing them separately could help in better organisational structure and faster decision making. From a family point of view, listing businesses separately is a clear division of wealth. In Reliance’s case, Mukesh Ambani is trying to give equal opportunity businesses to his three children, and he wants to establish those businesses under his supervision. Therefore, advance planning is being done,” said Singla. One advantage RIL has is that its businesses are distinctive, barring a slight overlap in the retail and telecom businesses.

“RIL’s business segments are very well positioned to benefit from segment tailwinds, given its solid leadership position and well-integrated business structure,” said Avishek Datta of the stockbroking company Prabhudas Lilladher.

Big changes are coming to India’s largest company. The elevation of Akash as the chairman of Jio Infocomm and the big renewable energy push are just the beginning. And it will not just reinforce its pre-eminence among Indian corporates but also unlock significant value for its shareholders in the years to come.

a-debt-fund-for-all-seasons

Fri Sep 23 15:59:39 IST 2022

Based on the investor’s profile, mutual fund portfolios feature a mix of equity and debt funds, in varying proportions. For instance, if you are someone who has a high risk appetite, a large part of your portfolio would be dedicated to high risk-high return equity mutual funds. Across portfolios, prudent investors choose to allocate a portion to debt funds as these schemes are known to be relatively safer than equity funds. In addition to diversification, such funds are likely to offer stable returns, especially during volatile markets, making them an excellent part of the portfolio. Even within debt funds there are multiple options available for a debt investor. One of the categories to invest is dynamic bond fund which provides flexibility to a fund manager to move across maturities and credit.

Reasons to invest in dynamic bond funds

Dynamic bond funds can be defined as debt funds which park their corpus in fixed income and money market instruments such as sovereign bonds and corporate bonds. As mentioned earlier, dynamic bonds invest in securities across different maturities, thus offering investors benefits such as reasonable returns, tax-efficiency, flexible investment horizons and better liquidity. They also allow investors to ensure optimal diversification across corporate bonds and government securities, facilitating robust returns without compromising on security. The biggest advantage of dynamic bond funds is the modified duration which is maintained in a range of 1-10 years, making it a hugely versatile investment.

Dynamic bond funds for volatile markets

Typically, dynamic bond funds aim to benefit from interest rate volatility and increase their duration when interest rate is expected to fall, thus benefiting from capital appreciation. Further, the scheme has the option of reducing their duration when the interest rate is expected to rise, with the aim of mitigating risks from marked-to-market losses. Such factors make dynamic bond fund particularly suitable for the current market conditions, wherein the yield curve is moderately steep.

Additionally, changes in macro-economic factors can prompt dynamic bond funds to lower or increase their duration as required. For example in a worsening macro environment like high inflation, current account and fiscal deficit would potentially lead to rise in interest rates, as seen by the consistent repo rate hikes by the Reserve Bank of India in recent times. This has prompted dynamic bond funds to pivot towards a lower duration to ensure optimal returns even during volatile situations. Further, the fund can increase exposure to credit as and when spreads are available at reasonable risk.

ICICI Prudential All Seasons Bond Fund

With a modified duration of 2.35 years, based on the macro-economic factors, and a yield to maturity of 7.16%, the ICICI Prudential All Seasons Bond Fund is an excellent option for investors keen on building positions in dynamic bond funds and meeting the market volatility head-on. The fund invests in high and medium quality debt instruments ranging from low to long maturity.

Given the current market scenario, the scheme’s Macaulay duration has been maintained at 2.47 years, with sizeable exposure towards spread assets for better accrual income. Also, the fund offers a good mix of instruments which benefits from higher term premium and better liquidity. Based on the interest rate scenario, the scheme takes tactical calls on investments in corporate bonds and gilts. Accordingly, when the interest rates are high, the scheme will behave like a long duration scheme and when rates are low, it will act as an accrual scheme, offering robust returns across market conditions and helping investors benefit from the move, irrespective of whether yields fall or rise.

Considering the current market condition, the scheme has maintained its exposure to higher maturity government securities to benefit from term premium, while enjoying good exposure to spread assets for better accruals. Going forward it is very likely that the scheme would endeavour to ensure exposure to spread assets with a rating above AA-. With a moderate risk rating, and the ability to help you diversify and earn stable returns across volatile markets, the fund is an optimal offering for a debt investor with a long term investment horizon. To summarise, dynamic bond fund is an evergreen product since they provide reasonable returns in all market conditions.

The author is from Affluenz Wealth Advisors.

experts-want-more-debate-on-moonlighting-before-it-is-shunned-completely

Sun Sep 25 13:20:17 IST 2022

Wipro fired 300 employees for doing it; TCS COO N.G. Subramaniam said it was an “ethical issue”; Tech Mahindra CEO C.P. Gurnani supported it; and Infosys said it would terminate contracts of those found guilty.

Moonlighting is not a new concept, but the pandemic gave it a bigger spotlight. As lakhs of India’s IT professionals started working from home, they found more time to take up a second or third assignment. The major reasons for doing so—extra income, the chance to prove their capabilities in different jobs, non-recognition by employers, and utilisation of spare time.

As employees started working from anywhere during the pandemic, managers could not supervise them. “IT companies saw a huge demand during the pandemic as every industry sector wanted to digitise its processes,” said Aditya Narayan Mishra, MD and CEO of CIEL HR. “The demand for IT professionals increased, but the supply was not adequate. Hence, companies were desperate to get employees on board without conducting due diligence.”

A few experts THE WEEK spoke to said that moonlighting could not be bracketed one way or the other. “It prevails due to talent shortage in the market, backed by the increasing demand for niche skills in the IT sector,” said Arjun Ramaraju, CEO of software firm Conneqt Digital.

Experts pointed out that the gig model was viewed negatively, too, but has now become an accepted mode of employment globally. Therefore, rather than curbing it altogether, it would be fruitful to discuss whether moonlighting can be explored in a transparent, compliant and secure manner.

Said Sarita Digumarti, chief learning officer of online learning portal Unext: “I do believe that the definition of moonlighting is currently vague. Is it moonlighting when a software developer takes up gigs as an artist or a musician after work hours? Before implementing strict laws and outrightly being dismissive about it, bringing in a sense of clarity on what moonlighting means would be a good start to develop newer policies for the future workforce.”

She recalled a recent report from Kotak Institutional Equities, which said that, of the 400-odd people surveyed, close to 65 per cent knew of professionals who were “moonlighting”. “This is also an inference to understand why 42 per cent of them prefer WFH,” said Digumarti. “Dual income is obviously a good sign from an employee’s perspective. But if we ask at whose expense, a lot more dimensions would open up.”

Said Prerna Kohli, director of human resources at Cyware, an IT company in Bengaluru: “Moonlighting has garnered attention because it is a violation of the employment agreement and [creates] a reasonable degree of risk to the proprietary information and the operating model of the employer. Companies must deploy security tools and techniques to detect and prevent risks associated with moonlighting, such as data leakage and abuse of intellectual property. Beyond policy measures, HR leaders must maintain clear communication with all employees to avoid conflicts or a drop in performance. Recruitment practices should also be reevaluated to highlight high-risk profiles during the hiring process.”

HR experts believe that about 30 per cent of IT employees have moonlighted at some point in their career. “Given the intensity of messages that are coming from the IT bigwigs, there is a likelihood that moonlighting as a phenomenon is prevalent in certain pockets and is growing,” said Alok Shende, MD of Mumbai-based Ascentius Consulting. “However, to cast aspersions on all individuals indulging in moonlighting might not be appropriate. There could be individuals working on... opportunities that might not be available in their daily 9 to 5 jobs. Companies must... offer avenues to moonlighters so as to co-opt them in the formal process.”

Experts say that employers should develop a clear policy that helps employees be open about the secondary jobs and pick the ones that do not hurt the organisation. “Employers need to conduct stay interviews and regular feedback sessions, provide career progression plans for the employees, and give them challenging work to make them feel trusted and create a sense of belonging,” added Mishra. “This will increase the employee retention rate and enhance the company’s performance.”

The question now is whether moonlighting will have a long-term impact on the industry. “Overall this could have a great impact on the IT companies and also the people,” said Sathya Pramod, CEO, Kayess Square Consulting Private Limited and former CFO of Tally Solutions. “Attrition, which was already high, will increase. This will lead to the quality of work being compromised. On the other hand, it will also increase the costs since these companies will need to maintain a bench more than what was earlier the norm. Employees will start a ‘try and buy’ scheme whereby they will moonlight and figure out if the new place is better. In the long run, it is not great even for employees. There will be mental breakdowns and the greed for money will lead to them overpricing themselves and when the demand for professionals goes down, it will be impossible to adjust to the new normal.”

A few HR pundits, however, said it was too early to predict the impact. “HR leaders must put in place corrective policies and talk to their employees to proactively prevent this issue... rather than reacting through hasty measures,” said Kohli. “In the long term, the entry points during the screening process have to be strongly governed to eliminate the chances of moonlighting. [The practice] is prevalent mostly among employees with three to six years of experience.”

There is also the expectation that the industry will eventually settle down. “An efficient means would be to re-look at employment contracts,” said Ramaraju. “For companies, security and confidentiality must be treated as non-negotiables, while for employees, transparency, flexibility, and an encouraging environment are key to maintaining harmony. Needless to say, there needs to be more debate.”

web-exclusive-sugar-cosmetics-never-shied-away-from-dreaming-big

Sun Sep 04 10:10:57 IST 2022

Vineeta may wince if her brand is compared to Nykaa, considering the travails of that unicorn recently, but it is a good template. Like Nykaa, SUGAR is also female-led startup success story having a massive physical presence (more than 100 own stores besides being available at 35,000 touch points across 500 cities), and nearing unicorn status after having being valued at more than half a billion.

But its future trajectory may just include a public listing rather than more funding series. THE WEEK asked Singh to share her thoughts on how she came up with the business idea and what being a startup in today’s India involves. Excerpts:

Q/ How did the idea for SUGAR come about and how did you do it differently?

A/ I have always been passionate about building a company with women at its core. While trying to build my previous startup, which was a monthly subscription-based company for grooming products, we gained a lot of insight into an average modern-day consumer’s wants and also the problems they were facing. We realised that even though the cosmetics market had a lot of multinational brands to choose from, there weren’t many that were catering specifically to Indian skin types and tones. Indian women would either have to import their base products from overseas or wear shades that didn’t match them due to the lack of availability. This is what paved the way for us to start SUGAR Cosmetics to fill this white space.

Q/ How is setting up a business been different as compared to conventionally? How has technology helped?

A/ From the process of gathering data to connecting with our consumers, since its inception, technology has been a major factor in the growth of SUGAR Cosmetics. The Indian beauty industry is an extremely competitive market with an ever-evolving technology landscape that has helped it grow remarkably over the past decade. Interacting with and focusing on consumer needs has taken the front seat, and with the help of the latest technology, beauty brands are now exploring new markets such as virtual platforms like Facebook, Instagram, and more, to engage them. Social commerce platforms have been popular where consumers can purchase products directly from within the social media app.

Technology has played a major role in accelerating personalisation offering, which is crucial for the Gen Z and millennial consumers, who want products that not only make them look beautiful but also reflect their personality. With the advancement of technology, brands are now also using artificial intelligence (AI) to spearhead product innovation and drive higher customer engagement.

Q/ The journey to become a unicorn.

A/ Our focus has always been to build our brand and make our products available for all of our consumers. Being my third startup, SUGAR Cosmetics has taught me the power of determination and resilience, the path has been challenging - I recall times when we were out of stock and yet couldn't order a new batch of products because we didn't have the money. However, even during these times, I’m glad to have had the privilege to work with a remarkable and supportive team.

Customer satisfaction is extremely important to us which is why we are constantly innovating, staying true to our uniqueness, and continually improving our chart-topping products as a routine practice. Taking into account what our customers think of us and their feedback whether positive or negative makes scope for us to be better.

Q/ Future potential and challenges?

A/ As our next steps, we plan on building and expanding our core pillars - our retail footprint by enhancing the retail marketing and visual merchandising experience, our product line and our product distribution. We intend to go stronger on our omni-channel approach to expand our product ranges and to be able to grow the brand on an even larger scale. Increasing our distribution channels in India and beyond, along with creating an even stronger base on our D2C platforms will be focused on.

We also will be looking at creating solid content to keep educating and engaging our SUGAR community across all platforms – digital and otherwise. Employing more than 10,000 women and an IPO, we want to make SUGAR one of India's Top 3 brands in the total colour cosmetics market. Getting to that point will be a challenge but we never shied away from aiming higher and dreaming big.

ideas-are-taking-centrestage-in-indias-booming-startup-ecosystem

Sun Sep 04 10:51:37 IST 2022

I am going to build the McDonald’s of India!”

The business bug bit Eshwar K. Vikas fresh out of college. He started Mukunda, a restaurant serving idli and dosa at a mall in Chennai, borrowing from his parents and friends to rent the space and set up a self-service model with large screens and LED lighting. He bought the batter from someone else and set about with his ‘McDosa’ dreams.

“Business was good from day one,” Eshwar recalled. So much so that he committed the blunder of his career—a second outlet on a franchisee model through a friend. “That was when I realised we were not able to maintain the consistency of the batter,” he said. To add to his woes, the ‘dosa master’, the guy in the kitchen, left. Customers stopped coming back, complaining that the quality had gone down.

An engineer, Eshwar wanted to solve the issue by getting a machine that can make dosas uniformly. The problem? There wasn’t one.

He did not give up. He refashioned an Archimedes screw, used to pump concrete mix in construction, into a pump for dosa batter. A person was assigned to design and make a tawa (wok) for the machine. And presto, Eshwar had pivoted from running a ‘manual’ restaurant into an automated kitchen.

Today, Eshwar is the go-to man in kitchen automation and robotics, with his machines DosaMatic, Eco Fryer, RiCo and Wokie used to make dosas, rice, noodles, momos and curries without human intervention. In the latest funding round two months ago, by the likes of Zomato which is rumoured to be using his machines in its 10-minute delivery, he raised around Rs60 crore. Driven by the demand, Eshwar has pivoted into running micro cloud kitchen factories, where he runs the machines in one location, uses ingredients supplied by multiple brands, and delivers through agents of Swiggy and Zomato. “Kitchen automation has slow scale of growth, but kitchen-as-a-service will grow very fast,” he said.

Ambitious, innovative and riding on technology and easy funding, people like Eshwar are driving an entrepreneurial revolution in India. It is fuelled by massive investor cash inflow from abroad, and indications are that even a recent tapering of this stimulus-driven funding will not slow down India’s tryst with the business bug.

“Fifty-three crore youth are the future,” said Dharmendra Pradhan, Union minister for education, skill development and entrepreneurship. “They will have to become employers to make India an entrepreneurial economy.”

The number of Indian unicorns—startups with valuations of more than $1billion dollars—crossed 100 early this summer. That makes India the fastest growing startup ecosystem in the world, and also the third largest, after the US and China. Indian Angel Network, a firm that invests in startups, said it got 30 applications for funding in 2006, the year it started; today it gets 75 a day.

Last year, around Rs28,000 crore was invested in privately held startups, with about 400 of them getting investor money for the first time. No longer is a bank loan or a handout by parents the only source of funding for a business with a good plan. The explosion of private investors, angel funds and venture capitalists has ensured that there are multiple sources a sharp mind with a bright idea can tap.

“It is a great time to be an entrepreneur in India,” said Vikram Gupta, founder & managing partner of IvyCap Ventures, one of India’s leading funding companies. “See how Zomato created value without turning in profits. Questions of ‘how can a startup be valued at a billion and not even have profits’ have already been answered.”

The rush of the ordinary Raj and Rahul (and his mate from IIT) becoming entrepreneurs is surprising because getting a salaried job had always been considered a better option in India than the risky proposition of starting one’s own business. Padmaja Ruparel, founding partner of Indian Angel Network, recalled how her parents told her to look for a job when she started her business. “Today parents come to me saying ‘my son is doing a startup’,” she said. “When I tell them about the possibility of failure, they say, koi baat nahi, we will look for a job then!”

The tipping point, perhaps, was the 1991 economic reforms. Out went the quota and licence raj, and entrepreneurship bloomed. While the first wave had existing business leaders expanding their coffers or multinational biggies making their presence felt, the dot com boom and the e-commerce explosion made it all real for ordinary aspirants. Governments, too, turned proactive, offering funds and looking for startups with innovative solutions to problems.

Somewhere along the way, failure became a stepping stone for learning, rather than a dead end. “Today, entrepreneurs do not fear failure, and are envisioning building world class companies out of India,” said Vishesh Rajaram, managing partner at Speciale Invest, an early-stage venture capital firm.

Education also played a part, with many private universities and coaching centres focusing on practical training and setting up entrepreneurship cells. “We are slowly moving away from employment seeking education towards skill-based and entrepreneurship-focused education,” said Ashish Munjal, co-founder and CEO of Sunstone, a higher education group.

Yet, the true enabler of change has been technology. “Technology helps you speed up your business and execution,” said Manish Rathi, co-founder of the bus operator IntrCity. “Idea is still at the core of it, but tech has made it simpler.”

He should know. While some of the big private bus transport companies took decades to build a fleet, IntrCity took just about two years. “What are we doing different? Technology,” said Rathi. “Traditional businesses depended on trusted hands, usually relatives, to monitor new branches or inventory as businesses expanded into other locations. For us, it is simply technology. We are able to add 50 new buses a month because technology helps us monitor and keep track of performance.”

“Technology is the only way to reach out to a large number of people faster,” said Vikram of IvyCap. For investors, it is even more important—a company that can scale up fast using technology is very attractive, because a typical VC would be looking to cash out in a few years.

The process of startups getting funded works both ways. Anyone from international investors like SoftBank and Tiger Global to local funds created by families or companies and even Union ministries and educational institutions is ready to invest in startups that appeal to them. Funding also ranges the whole gamut, from early seed (first time) and angel investors (providing mentoring to startups who have just about started operating) to multiple series, which are titled Series A, B, C and so on. Some companies at a later stage then venture on to the stock markets by going for an IPO.

Investor Arjun Vaidya breaks it down: “50 per cent depends on the founder, the person or persons behind a startup. We look for whether they will be resilient when things are tough, and whether they are best placed to solve the specific problem at hand.” The remaining he breaks down to 20:30 between whether the market for the product or service is big enough and the rest on the business metrics, ranging from sales, growth velocity, gross margin, profitability and team members.

Of course it helped that the past two years had investors flush with cash looking for opportunities. This was fuelled by the excess money pumped into the system as a post-Covid stimulus measure by countries like the US and Japan, which made its way into India. However, with interest rates on their way up, particularly in the US, this easy liquidity is set to be squeezed. Does that mean the joy ride is over?

“A large number of startups will find it difficult,” said Ruparel of Indian Angel Network. “[But] an investor will always look for good opportunities. A good company is not only about growth. Problem-solving products and excellent entrepreneurs will always find takers.”

The confidence of Indian startups is also visible in their trajectory. Earlier, startups built products meant for the US and other western markets. Then came the big play with the likes of Swiggy, PayTM, Byju’s and the likes, where entrepreneurs built products for the Indian market and scaled them up successfully. And now, Indians are building products for the global market, be it fintech, space or defence.

“We have the potential to become the hub for the global startup ecosystem—we are diverse, large in terms of land space and demography, and we have the buying capacity,” said Vikram of IvyCap. “These are great ingredients for startups to come here and set up businesses.”

safety-net

Sat Aug 27 12:20:12 IST 2022

THERE HAD NOT been an easier time to get a personal loan than the past few years, thanks to the boom in digital lending driven by the thriving fintech companies. Just a few clicks on the smartphone and you have the money in your bank account. Data from the Digital Lenders Association of India shows that digital lending went up from around $75 billion in 2018 to $200 billion in 2021. It is expected to rise to $270 billion this year.

But the fertile ground also brought up many weeds. Complaints have been aplenty about exorbitant interest rates, misuse of customer data and unethical recovery practices. There has also been a spurt in unregulated loan apps. In the 2021-22 financial year alone the Reserve Bank’s integrated ombudsman scheme received some 7,800 complaints about digital lending apps and recovery agents, prompting the regulator to crack the whip.

The RBI had constituted a working group on digital lending in January 2021. It has now firmed up a regulatory framework based on the report and inputs received from various stakeholders. Under the framework, all loan disbursals and repayments will have to be between the bank account of the borrower and the regulated entity, without any pass-through or a pool account of the lending services provider. Also, the lending services provider’s fees and charges should be paid by the regulated entities and not borrowers.

The RBI has also said that the data collected by the lending apps will have to be need-based and with clear audit trails and the explicit consent of the borrower.

The new guidelines are clearly aimed at incorporating operational discipline while empowering the end consumers, said Joginder Rana, vice-chairman and MD of CASHe, a digital lending platform. “With borrowers being given the option to accept or deny consent for use of specific data, the RBI aims to give the charge back in the hands of the customer,” he said.

The RBI norms will also help push unregulated players out of the market. “Because of loopholes, certain section of digital lenders had started taking advantage. With the guidelines coming in, the unauthorised or unregulated players will vanish from the ecosystem and serious players will become stronger,” said Vivek Veda, co-founder and CFO of digital lender KreditBee.

The new regulations require all digital lending to be reported to credit information companies regardless of the nature or tenor. “This will benefit all prudent consumers paying back their loans, including short-term consumer loans, by giving them a clear insight into their overall credit burden,” said Adhil Shetty, CEO of BankBazaar.com.

While customers stand to benefit from this, the requirement to set up a grievance redressal mechanism will lead to higher costs for some of the smaller companies. “In many small NBFCs, the cost of compliance will increase,” said Veda. Over time, however, the customer acquisition costs would come down as the number of players in the market falls, he said.

Lenders are likely to be a lot more careful in their partnerships with fintechs. “The restriction on access to mobile phone resources could require lenders and LSPs to explore other methods of assessing borrowers’ creditworthiness,” said M.B. Mahesh, analyst at Kotak Institutional Equities.

Experts say some of the issues still need to be addressed, like the first loss default guarantee, which is an arrangement in which a third party compensates a lender if the borrower defaults. “There are a few proposals from the draft paper, which have been accepted in-principle by the RBI’s working group but require further examination by the RBI, including FLDG, baseline technology standards for digital lending apps, and framework for web-aggregators of loans,” said Anand Dama, analyst at Emkay Global Financial Services.

Separately, there are some recommendations for the consideration of the government such as banning unregulated lending activities and creating self-regulatory organisations like Digital India Trust Agency. The Digital India Trust Agency is expected to verify lending apps before they can be publicly distributed through an app store. Unverified apps will be considered unauthorised.

The RBI has clearly taken first steps towards strengthening the digital lending system. What more checks and balances it puts in place and how it addresses the remaining issues will be closely watched.

RBI’s regulatory framework for digital lending

Loan disbursals and repayments to be executed between the borrower and the regulated entity

Fees and charges to be paid by the regulated entities and not borrowers

A look-up period, during which the borrower can exit a loan without any penalty

Regulated entities and LSPs to have a nodal grievance redressal officer

Data collected by the digital lending apps to be need-based

All lending to be reported to credit information companies

Concerns

A grievance redressal mechanism will lead to higher costs

Fintechs with active NBFC arms have an advantage over those without

Lenders to be more careful in their partnerships with LSPs/fintechs; this might push out small companies

No clarity on first loss default guarantee, in which a third party compensates a lender if the borrower defaults

a-memorable-meeting-with-rakesh-jhunjhunwala

Sat Aug 20 12:08:18 IST 2022

WHEN I PITCHED a story on Rakesh Jhunjhunwala in mid-2015, I had my doubts on whether he would agree to a meeting. He rarely gave media interviews; there would at most be a couple a year, and that too in business magazines or pink newspapers.

Despite the odds, I had to try. I got the board line number of his company, RARE Enterprises (named by taking the first two letters of Rakesh and wife, Rekha) and spoke to a receptionist. She gave me his email address and I mailed him. There was no reply. I tried again. This went on for 25 days. Then, suddenly one afternoon in June 2015, I got a call from a Mumbai landline number. “Hi, this is Rakesh Jhunjhunwala calling. When would you like to meet me?” I said, “At the earliest.” I landed at his office at Nariman Bhavan in Mumbai with our chief photographer Amey Mansabdar. It was morning and the Big Bull was sitting at his desk, surrounded by screens that flashed stock market updates. He got up to greet us, but suddenly got an urgent call; he asked us to postpone the meeting to later in the day. I was afraid that he would change his mind and cancel it.

Fingers crossed, we reached his office in the evening. This time, he was in no rush. We were ushered past a big portrait of Lord Balaji at the entrance and into his cabin; it had an excellent view of the Arabian Sea and several idols of Lord Ganesha. He greeted us with his white shirt untucked and led us to a huge conference table. “These Ganesha idols inspire me,” he said. “All of them are gifts. I am not very religious, as you may think on seeing these idols. But, yes, I do believe that God is the giver of all wealth.”

During the two-hour conversation, I got a glimpse into how he analysed a company’s performance. “People look at profits to judge the performance of a company,” he said. “But I look at the different factors that drive those profits. For instance, Infosys capitalised on the IT opportunity and succeeded.”

Jhunjhunwala, who has been called the Indian Warren Buffet, recalled a lunch meeting with the billionaire investor in Delhi. “Though I have been compared to him, I am nowhere near him,” he said. “I have neither his skills nor his wealth. In fact, I do not have as much wealth as people think I have. But, yes, I have much more than I need.”

As a stock market expert, he believed that one should never be afraid to make mistakes; no one is perfect. However, the mistake should be such that the investor should have the ability to live to fight another day. He felt that investors must approach the market with optimism and an open mind. He also believed that stock markets were “Like women, volatile and difficult to understand and cannot be taught but have to be learnt.”

It was Jhunjhunwala's father, an income tax department employee, who had set him on the investing path. Radheshyam Jhunjhunwala had taught his son to always aspire, but never envy someone because he had got something by God’s grace. Father and son lived together in Mumbai, and would discuss stocks every day till the former died.

Jhunjhunwala's initial investment was 15,000; he later supplemented it with a borrowed capital of 120 lakh. He made 125 lakh in the first year and never looked back. One of his first investments was Tata Tea. Another early investment that paid off was Sesa Goa, the iron-ore exporting company.

Asked about his net worth and assets, Jhunjhunwala said, “Personal wealth is like a woman’s age; it cannot be discussed in public.”

An issue that bothered Jhunjhunwala was the average Indian's lack of exposure to the stock market, compared with other countries. He felt that individuals should invest some amount in equities every month.

Though stocks were his passion, Jhunjhunwala was also an avid reader. “As a child I was a voracious reader, mostly of adventure and history books,” he said. “I even read comics—Phantom, Tarzan and Mandrake. My father used to motivate me to read and recommended books.” He was equally fond of horses and loved to see them race. He used to be a regular at the Mahalaxmi Race Course in Mumbai.

At home, he was a doting father to daughter, Nishtha, and twin sons, Aryaman and Aryavir. He was also full of praise for Rekha, who was his pillar of strength. He considered charity his fourth child, and was concerned about child malnutrition and women’s education in India.

This May, seven years later, I approached him for another interview; he was in the thick of launching Akasa Air. This time he was quick to reply and recalled our earlier meeting. He called me from his personal number. “Let us do it sometime in June,” he said. When I reached out in June, he said, “I am not in good health. Forget the interview for now, we will meet after two months.”

That interview never happened.

rakesh-jhunjhunwala-was-always-bullish-on-india

Sat Aug 20 12:04:13 IST 2022

AMERICAN BILLIONAIRE investor Charlie Munger once said that big money was not in buying and selling, but in the waiting. Rakesh Jhunjhunwala’s investment style echos this strategy. Case in point—his holding in Titan Company.

Jhunjhunwala began investing in the Tata Group-owned watch and jewellery maker back in 2002. And, in 20 years, its worth alone has risen to over 111,000 crore. Stock exchange data for the April to June quarter shows that Jhunjhunwala and his wife, Rekha, together held 4,48,50,970 shares of Titan, which gave them a 5.05 per cent stake in the company.

Over the years, starting from 1985, Jhunjhunwala had built a portfolio of 32 stocks through the privately held RARE Enterprises. Apart from Titan, he and his wife also invested in several other Tata companies like Tata Motors DVR (2.95 per cent stake), Tata Communications (1.08 per cent), Rallis India (9.81 per cent) and Indian Hotels (2.12 per cent), indicating his faith in the Tata Group. “He had tremendous regard for the Tata Group,” noted N. Chandrasekaran, the chairman of Tata Sons, in his condolence message.

Jhunjhunwala’s other notable investments included ratings agency CRISIL (5.48 per cent stake), farm equipment maker Escorts, footwear company Metro Brands (14.4 per cent stake), gaming company Nazara Technologies (10.03 per cent stake), Aptech (23.37 per cent stake) and Fortis Healthcare (4.23 per cent stake). He also backed Star Health and Allied Insurance, in which he and his wife held 17.49 per cent stake.

His long-term bets have paid off; the day he died, on August 14, his net worth stood at over $5.8 billion, according to Forbes.

“[He was a] man with a sixth sense about stock bargains,” said Raamdeo Agrawal, chairman and co-founder of Motilal Oswal Financial Services. He calls Jhunjhunwala “yaaron ka yaar” (a friend among friends).

“When I hear Rakesh Jhunjhunwala’s name, the first thing that comes to my mind is his love for India, his love for the markets, his love for his friends and his love towards life. Rakesh was a very unique personality,” said Agrawal.

Not all of Jhunjhunwala’s bets were successful, though. For instance, he had invested in Mandhana Retail, which sold actor Salman Khan’s Being Human brand. He sold the shares last year at a loss. Similarly, his bet on Dewan Housing Finance Ltd (DHFL) also backfired after insolvency proceedings were initiated against the mortgage lender.

His name also cropped up in an insider trading case related to Aptech shares. Jhunjhunwala, Rekha and eight others settled the matter in 2021 by paying Sebi 137 crore. While Jhunjhunwala paid 118.5 crore, Rekha paid 13.2 crore.

Following Jhunjhunwala’s death, what happens to his property, including the stocks he held, is a question many would have had. He had made arrangements to ensure a smooth succession and is learnt to have left his assets to his wife and three children. “Rakesh Jhunjhunwala, a true nationalist, lived a life committed to the India story. His unwavering belief in Indian entrepreneurs and enterprise will certainly outlive him. True to his nature and unerring eye for detail, he had planned and meticulously executed a smooth transition to sustain and enhance his legacy,” the RARE Group said in a statement.

The smooth succession and the fact that his investments will continue to be managed by his company are the reasons why there will not be any impact on the shares of companies he had invested in, say analysts.

After his death, the performance of stocks has been mixed. As of August 17, Titan shares were up 0.8 per cent from the closing price on August 12. Tata Motors (DVR) gained 3.2 per cent, Indian Hotels rose 1.2 per cent, and Tata Communications was down 1.7 per cent. Aptech has corrected 0.8 per cent, while CRISIL is down 1.3 per cent. Star Health, meanwhile, is up 0.8 per cent and Nazara Technologies gained 3.4 per cent.

Jhunjhunwala was a firm believer in India and was always bullish on the country’s growth story. His investment in the low-cost airline Akasa is a case in point. India’s airline industry has struggled over the last few years and made huge losses during the pandemic. But, Jhunjhunwala was convinced that a well-run frugal airline could succeed in an under-penetrated market like India. He put his money where his mouth is and invested $35 million for over 40 per cent stake in the airline.

Just a week before Jhunjhunwala died, Akasa launched its maiden flight. Vinay Dube, founder and CEO of Akasa, said they would honour his legacy, values and belief by striving to run a great airline.

But, with its biggest backer no more, will it impact Akasa’s growth story? Unlikely, say experts. “Airlines are a long-term investment, where break-even takes years. So, one would like to think that the investment made by Jhunjhunwala was one that should survive him not being there,” said an industry observer.

Akasa has a strong management. Dube is an industry veteran and was formerly CEO of Jet Airways and later GoAir (now Go First). Co-founder Aditya Ghosh was earlier the president of IndiGo, India’s largest airline.

“We are thankful that Mr Jhunjhunwala supported us in recruiting some of the best aviation talent in the country. He wanted us to have a top-notch leadership team that made all day-to-day decisions at the airline without having to fall back on him or any other investor,” said Dube.

He added that, thanks to Jhunjhunwala, Akasa was well-capitalised to induct 72 aircraft over the next five years. The airline has so far received three aircraft. “Our financial platform is strong enough to allow Akasa to place an aircraft order in the next 18 months that will be significantly larger than our first,” said Dube. “In simple terms, our growth is secure.

booster-stp-to-help-navigate-volatility

Sat Aug 20 11:59:40 IST 2022

DO YOU WANT TO invest lump sum in equity markets but unsure how to go about it? Or else do you have a lump sum amount waiting to be invested in a manner where you can make the most of a volatile market? If the answer to either of the question is yes, then it is time you are introduced to a feature by the name of Booster STP. This is a solution put together by one of the leading fund houses to get investors out of the lump sum investing fix.

Before we talk about what a Booster STP is, let us look at how a traditional STP functions. Here, the investor parks lump sum amount in a debt fund (source fund) and sets up an STP into an equity fund (target fund). Assuming that the frequency of transfer is monthly in nature, after STP is set up, on a particular date every month, the fund house will automatically transfer a specific amount from debt fund to equity fund. As a result, you get to experience the same advantage of SIP while earning from the debt scheme as well.

Now, let us consider Booster STP. This is an improved Systematic Transfer Plan that allows an investor to transfer varying amounts from source fund to target fund at predetermined intervals based on market valuations. For determining market valuation, the fund house will use an in-house developed Equity Valuation Index (EVI), based on which the transfer multiplier will be determined. The multiplier ranges from 0.1x to 5x and is determined using EVI. As a result, this mechanism allows an investor to make the most of market volatility.

At the time of signing up, an investor provides a base installment amount which is meant to be transferred to the target scheme. The actual transfer amount can vary between 0.1x to 5 x of the base instalment amount. When the equity valuation index signals that the market is expensive, Booster STP will allow only a small portion (0.1x) of the base instalment to be transferred. In contrast, if the equity valuation index signals that the market is cheap, a significantly higher portion (5x) of the base instalment will be transferred. For instance, if the initial instalment is, let’s say, $1,00,000, the investment would range from $10,000 to $ 5,00,000 (0.1x to 5x), depending on the market valuation.

WHY BOOSTER STP MAKES SENSE IN THE CURRENT SCENARIO

There is a fair amount of consensus that, over the next one year, the equity market will be volatile. So, if you are a lump sum investor, opting for a variable transfer amount works out to be better that a fixed amount, thereby making the most of the volatile times. With the help of Booster STP, an investor need not worry about the right investment amount and the right time to invest. Instead, let the model guide the fund house to make an impartial investment decision.

The Booster STP feature is just a year old as it was launched in July 2021. So, if one were to compare how Booster STP has stacked up against traditional STP over the last one year, the results is startling at best. The assumption here is that the investor has invested Rs12 lakh in the source scheme (ICICI Prudential Savings Fund) in July 2021. If one were to go the traditional STP way, an amount of Rs1 lakh was transferred every month for the next 12 months. However, with Booster STP, the multiplier over the last one year varied from 0.1x to 0.4x and hence also the transferred amount.

As of June 2022, the investment amount in case of traditional STP will be worth $11.20 lakh as compared to $12.13 lakh generated by the Booster STP. The difference in investment value under the two methods is $93,000 or 8.29 per cent. This clearly shows how Booster STP could provide sizeable outperformance to its investors.

To conclude, if you are looking to deploy your investment in a manner by which you can benefit from market volatility, Booster STP feature is a worthy consideration.

Writer is partner, Hindustan Capital