Business

green-warriors-of-india-clean-energy-innovations

Sat Jul 29 12:54:45 IST 2023

Deep tech and new age energy are not epithets that flash in your mind while entering the Log9 headquarters near the Jakkur Aerodrome in northern Bengaluru. The whitewashed building is airy and filled with potted greens, with retrievers waddling around in the designated kennel area in the garden outside. An al fresco buffet dishes out hot meals on the rooftop, while geeks in tee-and-jean ‘uniforms’―the average age seems to be firmly on the right side of 30―roam about between foosball tables and smart meeting rooms.

But make no mistake, this understated campus is virtually the epicentre of India’s desperate thrust in a new global gold rush―a scramble for sustainable energy using clean sources and technology. Earlier this summer, Log9 turned heads and made headlines by making India’s first lithium-ion cells. Former ISRO chief K. Sivan gushed: “I want to see Log9 become another ISRO.” Log9 is barely eight years old, but already valued at Rs2,000 crore.

The reason for this palpable excitement is all in the requirements of the new energy mix. Just like black gold, aka oil, clean energy sources like solar and wind depend on ‘white gold’ or ‘green gold’―minerals and metals like copper, cobalt, zinc, silver and, especially, lithium. These are the raw materials that go into making batteries that power electric vehicles and other clean technologies.

The issue? Some of them, like lithium, are only available in a few parts of the world, where a veritable geopolitical gold rush has begun for control of these assets. Just like nations going to war for oil in the past, there is now a cold war over these resources.

India is in an unenviable position. The feasibility of the lithium deposits in Kashmir and Rajasthan is yet to be ascertained. Meanwhile, China, with its edge in new energy technologies and influence over mining contracts in Africa and South America, where minerals like lithium are found, is dangerously ahead in the race.

Obviously, India is not going to let China have a walkover. The government has started production-linked incentives for advanced cell chemistry, while most of the biggies of India Inc―Tata, Ambani, Mahindra, Adani―are jumping on the bandwagon, having revealed their intent to invest heavily in new age energy.

Yet, it is mostly in inconspicuous startup campuses like Log9’s that the revolution has begun, ignited in the minds of ambitious STEM graduates and entrepreneurial hopefuls. THE WEEK travelled across the country to meet some of these innovators who want to rewrite the rules of the game and are daring to dream the impossible, while putting India first.

THE CIRCULAR SHOT

Lohum and BatX give jugaad a good name with intrepid innovation

IN THE GRIMY outbacks of western Uttar Pradesh, in an otherwise unremarkable industrial belt, are a clutch of factories that deal with scrap. Not your everyday waste, though―startups Lohum and BatX take used battery packs from electric cars and two-wheelers (primarily), and rip out hard-to-get minerals and metals like lithium for reuse.

Essentially, these companies use their patented technology to give a deep tech spin to the great Indian jugaad―if you do not have it, just reclaim and adapt. Lohum, in fact, is one of the biggest, billing itself as the world’s largest producer of sustainable battery raw materials through recycling.

“How do you talk about clean energy and yet go into mining, one of the most unclean activities, to get clean energy? A reasonable compromise is recycling,” pointed out Lohum founder and CEO Rajat Verma.

“Just like the availability of oil, there are barriers in availability and technology for countries like India, which do not have natural resources like lithium and cobalt,” said Utkarsh Singh and Vikrant Singh, co-founders of BatX. “To make India atmanirbhar, the only way is recycling. That is what triggered us to start this business.”

BatX developed its own hydro-metallurgy process to extract the materials. Lohum, too, has its own cleaning and extraction process, developed and patented by its 500-strong research and development team. “Recycling is an economically and environmentally superior activity,” said Verma of Lohum. “Throw in the geopolitical component and ESG (environmental, social and governance framework), then it checks all the boxes. Our idea is that we will use recycling to pave the way for energy transition.”

Battery packs are first dismantled to figure out how many good cells are left. The good ones go to a repurposing facility while the bad ones go for recycling. Each material of value is extracted and goes through its own unique process.

China is estimated to have around 40,000 recyclers, while Lohum and BatX are possibly the only two in India. That could change soon, once the windfall of batteries from the initial crop of bikes and cars turn up for recycling.

Meanwhile, these companies are not ready to rest on their laurels. Verma is looking at refining of materials like lithium, an area where China has a virtual monopoly, and becoming the largest chemicals and metals green energy company in India. “India has the fifth largest chemical industry in the world, with a cost factor similar to China and a large pool of chemical and energy talent,” he said. “We just have to go out and look for investors who are willing to take it to the next level.”

THE PATHBREAKERS

There is a reason why India’s clean energy sector is waiting to see what Log9 does next

FOR ALL ITS lofty aims of becoming nanotechnology and sustainable energy pioneers in the country, the first time Log9 hit national headlines was because of something entirely different. During Covid-19, founders Akshay Singhal, Pankaj Sharma and Kartik Hajela came up with a “Corona Oven”―a microwave-like contraption that could nuke the pesky coronavirus on anything, from your wallet to car keys.

Fast forward to 2023, the boys and their installations in Bengaluru and Hyderabad are the cynosure of all eyes in the green energy ecosystem in the country―after coming out with India’s first electric vehicle cells and first commercial li-ion manufacturing facility, the aim, and expectation, are sky high. “We will develop indigenous li-ion cells with the intent to revolutionise the mobility and energy sector, and collaborate with leading and evolving OEMs (original equipment manufacturers) across all segments to deploy our batteries and contribute to electric vehicle adoption in India,” said Sharma, co-founder and director.

While Log9 is into finessing and improving lithium battery technologies in formats like LTO (lithium with titanium oxide) and LFP (lithium with iron phosphate) to make them more energy dense and suitable for Indian conditions (read scorching Indian summers), they are also looking at future technologies, like the much-talked about sodium-ion batteries and aluminium fuel cells (AFC).

“AFC is an energy generation system that uses aluminium as fuel and with its high energy density, can provide long driving range to vehicles,” said Sharma. “It is more commercially viable and practical for the long-haul transportation sector in India as India is one of the biggest producers of aluminium.” He feels that the future could be a combination of li-ion alongside AFC as an on-board refueller. “It can be the next-gen ultimate solution for the electric mobility sector,” he said.

While Log9 has initiated early pilots, co-founder Singhal warned against getting overexcited, as technologies take time. “It is not like creating a protein bar,” he quipped.

THE PIVOT

Top dog in conventional batteries, Amara Raja is daring to make the biggest transformation in its history

WHEN TRENDS AND technology change dramatically, they are often not too kind to incumbents. Ask anyone from silent era movie stars to companies like Eastman Kodak and Blockbuster. In a world where electric mobility and clean tech are the buzzwords, where does that leave Amara Raja, one of India’s biggest lead-acid battery players?

For the Rs8,000 crore, Tirupati-based conglomerate that retails under the familiar Amaron brand, a smart pivot was in order. “About three years ago, we took the revolutionary step to transform ourselves from being just a battery manufacturer to being in the business of energy and mobility solutions,” Amara Raja Batteries Chief Technology Officer M. Jagadish told THE WEEK. “Under this transformation, we set up the new energy vertical and recently broke ground for setting up the Amara Raja Giga Corridor for lithium-ion cell and battery pack manufacturing.”

The eventual Rs9,500 crore plant in Mahabubnagar, Telangana, will be the biggest yet in the country, with the company’s memorandum of understanding with the state government also including an energy research and innovation centre in Hyderabad. “We are keenly engaged in creating an India-centric ecosystem for the design, development and manufacturing of advanced cell technologies,” said Jagadish. “All of this will cater to the fast-emerging electric vehicle sector, renewable energy markets and energy storage systems.”

Shrewdly enough, Amara Raja is not putting all its eggs in the new energy basket. Even while it is pumping money into clean energy, it is also doing major research aimed at improving lead-acid batteries, like looking at using newer materials to improve performance, decrease weight and increase durability. “L-acid battery technology has been around for more than 100 years and we believe it will continue to exist for many more years to come due to its high-level of maturity, cost effectiveness and its strong circular economy compliance,” said Jagadish.

MISSION IMPOSSIBLE?

This Simple yet sweepingly grand vision could just be possible

SUHAS RAJKUMAR’S Simple One, a sleek electric scooter with a range of over 200km went on sale last month, though hindered by the withdrawal of government subsidies and vendor networks (the e-scooter was initially available only in Bengaluru). But, what sets his Yelahanka startup, Simple, apart is the complex route he took. On the road from roadmap to on-the-road, Simple One created everything in-house―power train, software, hardware and mechanical components.

“We want to become the Apple of EVs,” said Rajkumar. “That is a big term to use, but that is our agenda. We want to develop an R&D culture in India and manufacture in India. Today, what most companies in India do is assembling, not manufacturing. What we are doing is design, manufacture and assemble in India, so that we have cost control, product control and eventually a customer experience that is beyond what they have experienced in the last 25 years of two-wheelers in India.”

His vision for the road ahead is even more obsessive, if not frightening. Though still only in planning stages, Rajkumar is looking at bringing out India’s first locally built, hydrogen-fuelled car.

“There are hyper-performance hydrogen cars on track and recently Union Transport Minister Nitin Gadkari went to Parliament in a hydrogen car,” said Rajkumar. His vision? An Indian hydrogen car by 2027 or so, either built from the ground up, or in collaboration with global majors like Toyota (he has reached out), which is investing heavily in hydrogen technology for cars.

“We have room to think beyond lithium, to think of hydrogen-based technologies,” he said. “We will crack hydrogen soon―whether as hybrid or pure hydrogen format. Hydrogen will definitely be part of the automobile industry going forward.”

Rajkumar is clear on why he is dreaming the impossible. “If we are not adding value, then we should not be doing this,” he said. “The very existence of Simple is for innovation and to pave the way for technology.”

THE DREAM AND THE DRIVE

Uday Narang wants to transform the Indian heartland through green technology

IT IS A TALE of two villages. Or rather, bridging the gap between two types of villages―one, the idyllic village in Switzerland that Omega Seiki Mobility (OSM) founder Uday Narang calls home and the other, those in the heartland of his home nation.

“It is beautiful to hear ‘Tesla is coming’, etc, but we cannot leave the majority of this country behind,” said Narang. “Rural is where this battle for clean energy will be won or lost. And I want to help my country. I could have been chilling in my village in Switzerland. It is heaven! But, this is a country that needs this solution. Sometimes in life you find a cause, and this is my cause.”

In 2022, OSM launched electric cargo rickshaws for the semi-urban and rural markets. Recently, it came out with the OSM Stream City, an electric urban passenger vehicle that could prove a cleaner option to the ubiquitous autorickshaws. OSM’s line-up is already on the roads, even as conventional biggies like Bajaj, Piaggio and M&M are said to be working on medium-speed cargo or passenger vehicles.

An international commodity trader and hedge fund manager, Narang said he understands the importance of having control of commodities, and how “absolutely superbly” China has played the game. “I am not a fan of China, but they beat everyone at their own game,” he said. “India has the youngest and most aggressive population in the world. We have got to learn the lesson.”

Narang is already walking the talk, and thinking beyond just scooters and e-rickshaws. His target? The first three-wheeler running on hydrogen, still an evolving technology in much of the world.

“We have been working on it for two years,” said Narang. While R&D was one part, two other allied areas have been taking up time―one, continuous testing to ensure there is no room for error, and the other, setting up the supply chain network, right from components down to the charging infrastructure.

OSM is aiming for the unveiling by December, but as Narang himself said, testing and safety are paramount. “We cannot just put products on the road (like some are doing by just raising funds and bringing in inferior technology),” he said. “This is a marathon, not a sprint.”

OSM’s dreams go beyond the current products. It is looking at setting up a $200 million EV plant in Tamil Nadu, to add to its existing plants in Faridabad, Haryana and Chakan, near Pune. The company has interest in making drones, too. “I want to say I did something to help my country,” he said. “That is what is driving me. Sometimes, the biggest risk of all is taking no risk at all.”

the-search-for-alternatives-to-lithium-ion-batteries

Sat Jul 29 12:44:35 IST 2023

ALUMINIUM FUEL CELL

ALUMINIUM REACTS with oxygen to create power. Aluminium is converted into aluminium hydroxide, which can later be converted back to aluminium, thus providing an environment and pocket friendly circular ecosystem. The cells could be much lighter, too.

However, it still has issues like low power density. Ironically, aluminium was a focus for alternate cell chemistry even before lithium entered the picture, and India has an inherent advantage. “It is a less hazardous material, there is no scarcity of it and India is the world’s fifth largest producer,” said A.K. Prasada Rao, professor, BML Munjal University in Haryana. “We even generate a lot of scrap from automobile waste and we have the wherewithal to convert this into battery grade aluminium.”

SODIUM-ION

“SODIUM-ION AND solid-state cell chemistries are estimated to grow to more than 5 per cent of the global total by 2030,” said Pankaj Sharma of Log9. “The reason for the slow growth is the lack of chemistry know-how, scalability issues and commercial viability.”

That could change in the coming years. Sodium as a likely battery option faces issues ranging from its reactiveness, low energy density and higher weight. “The challenge is using it on industrial and commercial scale,” said Rao. Naga Phani B. Aetukuri, assistant professor, Indian Institute of Science, Bengaluru, believes that considering its weight it could be used more in stationary storage.

HYDROGEN

“THE ONE CLEAR alternative to lithium will be green hydrogen,” said Uday Narang, founder of Omega Seiki Mobility that is aiming at a hydrogen-powered three-wheeler by this year-end.

The excitement over hydrogen is palpable (India has already announced a Green Hydrogen Mission), almost to the extent that the general belief is that even if it takes time, it will be the panacea to all our energy worries in the future.

And why not, when the theory sounds absolutely simple―hydrogen reacts with oxygen in an electrochemical cell to produce electricity, with water being the byproduct. Electricity and water? Win-win, right?

The big ‘but’ comes when you are reminded it is the stuff thermonuclear bombs are made of. And the big ‘if’ depends on how we tame it for practical, commercial use in the coming years.

Vehicle makers are already envisaging a near-future scenario―2030 is the year many tout―when trucks and buses will be running on hydrogen fuel cells. Watch this space.

LITHIUM REDUX

FOR ALL ITS scarcity, China’s stranglehold on its entire cycle and a plethora of possible alternatives, lithium may just refuse to bow out. Countries and companies are trying to improve lithium cell technologies―lithium nickel-manganese-cobalt oxide and lithium nickel-cobalt-aluminium oxide are making the rounds as alternatives.

“There is a high chance that the Indian battery ecosystem will adopt lithium iron phosphate chemistry,” said Phani. It is safer in India’s hot weather.

a-balanced-approach-for-growth

Sat Jul 08 17:16:57 IST 2023

IN MUTUAL FUNDS, large- and mid-cap funds have gained significant popularity among investors in India. These funds offer a balanced investment approach by combining large-cap stocks’ stability with mid-cap stocks’ growth potential.

What is a large- and mid-cap fund

The Securities and Exchange Board of India (SEBI), the regulatory authority for mutual funds in India, has classified mutual funds into various categories based on their investment objectives, asset allocation, and market capitalisation. As per SEBI’s classification, large- and mid-cap funds are open-ended equity schemes. Also, these funds must allocate a minimum of 35 per cent of their assets to large-cap stocks and a minimum of 35 per cent to mid-cap stocks.

According to SEBI, large-cap companies are defined as the top 100 companies in total market capitalisation. In contrast, mid-cap companies are ranked from 101st to 250th in terms of market capitalisation. The segregation between the companies is done twice a year―January 1 and July 1. This list is made available on amfindia.com for reference.

Benefits of Investing in Large and Midcap Fund

Growth potential: Large- and mid-cap funds expose investors to stable, well-established companies (large-caps) and emerging companies with growth potential (mid-caps). This balanced approach allows investors to benefit from the potential upside of mid-cap stocks while mitigating some of the risks associated with investing solely in mid-cap funds.

Diversification: These funds provide diversification benefits by investing in a mix of large-cap and mid-cap stocks. Large-cap stocks tend to be more stable and less volatile, providing a cushion during market downturns, while mid-cap stocks can deliver higher returns during bullish phases. This diversification helps reduce overall portfolio risk.

Active fund management: These funds are managed by experienced fund managers conducting in-depth research and analysis to identify high-potential stocks. Their expertise in selecting a well-balanced portfolio can generate better risk-adjusted returns than passive investment strategies.

Long-term capital appreciation: Large- and mid-cap funds are well-suited for investors with a long-term investment horizon who seek capital appreciation. As these funds invest in companies with growth potential, they have the potential to generate attractive returns over the long run.

Category Performance

The performance of large- and mid-cap funds can vary based on market conditions. It is important to note that past performance does not indicate future results. However, historical performance analysis provides insights into how a fund has been managed thus far in varying market conditions.

Historically, large- and mid-cap funds have shown the ability to outperform large-cap funds while offering potentially higher returns than pure mid-cap funds. During bullish phases, mid-cap stocks tend to outperform large caps, driving the performance of this category. In more challenging market conditions, the stability provided by large-cap stocks helps mitigate downside risks.

However, conducting thorough research and due diligence is crucial while selecting specific funds within this category. Factors such as the fund’s performance track record, expense ratio, fund manager’s experience, investment philosophy, and risk management practices should be considered.

If you are an investor who is considering to make an equity allocation and has an investment timeframe of five years and more, this category offering can be a good fit to your portfolio. Given the nature of the fund, it is best to stagger one’s investment through SIP route such that you get to accumulate units across various market conditions and average down the ownership cost over a period of time.

While there are several offerings in this category, one of the prominent name is the ICICI Prudential Lareg & Midcap Fund. The fund is known for its robust performance across various market phases. In terms of SIP, over the past three and five year timeframes, the fund has consistently delivered 20 per cent plus returns, beating both its benchmark and its peer set.

Author is founder of DhiFin Capital

clarity-amid-confusion

Fri Jun 16 16:58:39 IST 2023

WHEN THE HOLDING period is expected to be less than three years, your options in the mutual fund universe may seem limited as a short period leaves little room for risk. Pure equity funds go out of such an equation. In debt funds, though, returns may be reasonable, taxation cuts into return. This is where equity savings funds come in. Being equity-oriented, their tax treatment is more favourable than debt funds. Plus, equity savings funds hedge the better part of their equity exposure. So, the risk level is well within limits for short-term periods of one to three years. This is the reason why when markets seem confusing, equity savings funds are a clear choice.

Equity savings funds form a key component of the hybrid schemes. There are 22 mutual funds that can be classified as equity savings funds. Put together, they manage Rs 16,000 crore in assets under management. There are 3.6 lakh investor accounts associated with equity savings funds.

Why now?

Equity savings funds could be an attractive option in the current backdrop due to three factors. One, signs of expected volatility in equity markets are visible. Two, there is interest rate volatility in the fixed income space. Third, equity valuations are not cheap. Thus, equity savings funds are ideal for investors who are looking for relatively stable returns with low exposure to equity. Or, investors looking for an alternative for parking funds with measured equity allocation or investors looking for an investment avenue that can complement arbitrage schemes in the current volatile environment.

The main objective of equity savings funds is three-fold:

Low-beta: This is done by investing in a handful of stocks and the aim is to keep the beta of the portfolio low.

Risk-adjusted returns: A combination of derivative strategies and fixed income is used to achieve this aim.

Taxation: Equity savings funds are taxed like pure-equity funds on account of gross equity exposure of 65 per cent or more. Additionally, arbitrage exposure for hedging risks helps maintain equity taxation.

Different mix for different markets:

Equity savings funds aim to limit downside when there is volatility and aim to generate potential returns when markets are stable. This twin approach is ensured by a layered portfolio approach. In the first layer there are gross equities, stock arbitrage for hedging and debt/cash. Delve deeper and you will find in the second layer are net equities that give concentrated exposure to a handful of stocks. In the third layer, there could be call option writing, usually deployed in a range bound market. It helps in generating income in the form of premiums.

In different types of markets, the mix in equity savings funds work differently. In a bull market, net equities help capture upside. Writing call option delivers premium for accrual income. Arbitrage gives the accrual income plus portfolio balancing opportunity. In a flat market, all three strategies other than equity will help deliver returns. In a bear market, writing call option, arbitrage and debt counterbalances the potential for negative return.

Final word

Equity savings funds can be used by any investor with a timeframe of one to three years. It is good for those in the higher tax-brackets, since it is a more tax-efficient option. Risk averse investors can also experiment with equity savings funds given the minuscule unhedged equity exposure.

While there are several fund in this category, one of the consistent performers here is the ICICI Prudential Equity Savings Fund. The fund is known for its conservative approach and steady performance.

For an investor looking to invest in this category, it is important to understand that your chosen fund has a clear strategy and is consistently following it. Also, do remember to check if the fund in the past has done the job of containing volatility downsides well.

Bharat Bhatter is Managing Partner, Ishpar Growth Partners LLP from Chennai

startup20-initiative-by-g20-india-aims-to-develop-startup-ecosystem

Fri Jun 16 15:48:18 IST 2023

It is the S factor. India just sexed up what was originally a multilateral endeavour aimed at geopolitical and trade hobnobbing. Under India’s presidency this year, the Group of Twenty (G20), which consists of 19 major economies and the European Union (plus global financial organisations like the IMF and the World Bank) has been smartly pivoted into a vehicle for promoting the country as a destination for investment and tourism.

The S factor that is unique at the centre of it all is Startup20. A first-of-its-kind venture in the annals of G20, it was started this year during India’s ongoing presidency, as the country insisted that the existing Business 20 (B20) forum for global businesses was not sufficient to deal with the startup ecosystem as it also catered to large corporations and other trade matters as well.

Startup20, instead, would be the focused base for fostering startups. In fact, a policy communique issued at the end of the Startup20 meeting in Goa spoke about “scouting startups globally, funding them collaboratively, mentoring them contextually, and scaling them internationally…. setting the stage for a vibrant and thriving global startup ecosystem”.

By extension, India hopes to reap the dividends that will accrue from projecting the nation as a global hub for startups.

“Within a few years, we were able to become the world’s third largest ecosystem for startups,” said Amitabh Kant, G20 Sherpa and former CEO of NITI Aayog, recently. “Startups can play a crucial role in the development story of a nation, if not the world.”

For the Indian establishment, startups is a unique success story it would like to project, and capitalise on. But that is not all. There is a very clear objective behind the setting up of Startup20, which, after meetings in Sikkim and Goa, will have its main summit in Gurugram next month.

The objective is simple and precise. To clearly position India as the global go-to hub when it comes to setting up startups, getting the right talent pool of experts and skilled workers, and a bouquet of funders, from venture capitalists to private investors, to pitch to.

But is the world listening?

“India will continue to be one of the top destinations in the world. Maybe even become the startup destination,” said Kris Gopalakrishnan, Infosys co-founder and chairman of the CII National Startup Council. “Because the need for good solutions is there in India, and every industry will require this.”

These companies [if they want] can start up in any part of the world, said Gopalakrishnan, “So we need to make sure that there is a very good reason to remain in India.”

India does have a thriving startup universe that is the envy of the world. Literally out of nowhere, the past decade or so has seen as many as 115 Indian startups achieving unicorn status, that is a valuation of more than one billion dollars (around Rs8,000 crore equivalent). Their combined valuation estimates them to be worth an astonishing Rs28 lakh crore.

Even better, the number of startups in the country has rocketed exponentially―from 415 in 2016 to 86,000 in 2022. In fact, some estimates put the number at close to a lakh.

More than the valuation, the ideas and problem-solving skills these startups spawned have had the world queuing up. The foremost among them are on the fintech side, where uniquely Indian innovations like the Unified Payments Interface (UPI) is now being increasingly adopted around the world as a quick and cheap mode of money transfer and shopping.

“Digital fintech is an example of Indian startups building solutions for a particular issue India faces, that can then be applied to other economies,” said R. Dinesh, president of the Confederation of Indian Industry (CII), the premier national business chamber that has already set up two centres of excellences aimed at nurturing startups in the country.

That could well be a stepping stone to a global future. “India is well positioned to become a global startup hub,” said Ninad Karpe, partner with the venture capital firm 100X.VC, “Given the size and scale of the Indian market, there is a lot of headroom for a lot more startups in India. The overall ecosystem is now more robust than a couple of years ago, with many incubators, venture capital (VC) funds and government support.”

Aditya Malik, a startup mentor with the CII, feels India’s attraction lies in a combination of its talented skill pool that can churn out solutions needed by its vast population. “India’s domestic market offers immense potential for growth and scalability… while the country’s demographic dividend and diversity foster innovation. Additionally, India’s IT services industry is a global market leader, providing a strong foundation for tech-driven startups.”

Yet, for all its successes on the unicorn stage and the whole G20 push, India, as the world’s startup capital, may still be a dream that will have to wait.

“I think creating a conducive market for global startups is down the road,” said Dinesh of CII. “I don’t think we should hurry into that situation. Here we have enough of a large demand from the domestic side for you to actually have startups focusing on India solutions. Then, as it evolves, we can go onto global solutions.”

Practical issues also abound. Post-Covid global reconfigurations may have made India notch up some ‘China plus one’ brownie points and its position in various global ease of doing business indices may have improved drastically in the last few years, but it is still not an automatic go-to favourite.

“Inadequate physical infrastructure, unreliable power supply and limited access to high-speed internet in rural areas are still a problem, and stall c-commerce and tech startups from growing,” said Saumya Kumar, director, I-Venture, Indian School of Business (ISB). “The regulatory environment is bureaucratic and tough to navigate.”

Funding is another problem area. The bigger startups hit headlines bagging big ticket bonanzas, but the environment to meet investors, make pitches, interact and network for is still less than ideal for early stage startups. “India has the potential to become a global go-to point for startups to pitch [but it] still has some [time] to go before that happens. We need to see a lot more global VC and PE funds setting up office in India,” said Karpe of 100X.VC.

Particular issues vex foreigners coming in to set up trade in the country. “Specific challenges for startups that come to India are around issues relating to protecting trademarks, copyrights, and patents,” said Kumar of ISB, “If startups get into legal or compliance issues, it takes them a lot of effort to figure a way out. They waste a lot of energy figuring things out instead of focusing on building their business.”

Taxation is also a vexing issue. “The government needs to reform the taxation system for startups and research to encourage investment in innovation. This can be achieved by offering tax incentives, simplifying tax regulations, and providing clarity on tax policies while avoiding retrospective tax policies. Also, the government should consider providing tax holidays or exemptions on ESOPs (Employee Stock Ownership Plan], reducing capital gains tax on unlisted investments in companies, and streamline tax procedures to reduce compliance burdens,” said Kumar.

While the government has earmarked GIFT City in Ahmedabad almost like a free port for entrepreneurship, experts feel more such hubs, and elsewhere, are required. “GIFT City, a special economic zone, offers numerous benefits to foreign entrepreneurs such as tax breaks, customs duty exemptions, relaxed foreign exchange controls, and single-window clearances. [It’s] an attractive option for foreign businesses. However, it’s crucial to consider other factors like skilled labour availability, cost of living, infrastructure, and political stability when choosing a business location in India.”

So will the G20-fuelled dream get stuck at ‘angel’ stage itself, or will it fly up into the unicorn universe? “It will happen automatically. Other developing markets will definitely come to India,” said Dinesh, “I don’t think we need to do anything different. The thing is, we are building solutions which can be replicated in other parts of the world. [Just] continue to build up startups so that they have global solutions available for us.”

upcoming-car-launches-in-india

Fri Jun 02 15:15:40 IST 2023

It may give you strong vibes of the erstwhile Gypsy, but Maruti Suzuki’s Jimny is so much more than the action vehicle of choice of every cop flick in the 1990s. Once you get over the nostalgia, you will see that the Jimny is strictly in tune with the 2020s' sensibilities. Big, brawny and muscular, it takes the tough with the smooth, awash with features like door defogger, rear wiper and washer, and hill hold and hill descent control.

When India’s biggest carmaker announced its intend to launch Jimny in January, it was pivotal to its strategy to capture marketshare in the crucial sports utility vehicles (SUV), which account for 43 per cent of all passenger vehicle (PV) sales in the country. Maruti controlled barely 12 per cent of this segment. “We needed to do better in the SUV segment if we were to increase our market share,” said Shashank Srivastava, senior executive officer of Maruti Suzuki. “When we looked at it last year, there were 42 competing models, but Maruti had only one—the Brezza.” While Fronx, a smaller SUV, was launched recently, Jimny would be the real thing. Even before announcing a launch date (now set for June 7), Jimny notched up 30,000 bookings.

That in itself symbolises the biggest transformation the Indian auto industry has seen in recent years—big is now beautiful.

“Definitely, buying habits have changed,” said Sunjay Kapur, president of the Automotive Components Manufacturers Association (ACMA). “With affordability going up, people have started buying larger cars.”

And buyers are looking past the entry-level models. “Manufacturers have launched various aspirational models capitalising on better market sentiments,” said Rajesh Menon, director general of the Society of Indian Automobile Manufacturers (SIAM).

Ever since Maruti opened up the market in the 1980s and international majors joined in in the 1990s, the Indian car buyer had mostly looked at small, affordable models, primarily in the hatchback segment. The descendants of the ubiquitous Maruti 800—the Alto, the Zen and the WagonR—were all small cars notching up big numbers.

Korea’s Hyundai figured out the magic mix right on its debut, roping in Shah Rukh Khan as brand ambassador and launching a string of successful small cars, starting with the Santro. Ford learnt the lesson the hard way, though. After the lacklustre performance of its fully-loaded sedans, the American carmaker struck pay dirt only after it launched the small car Figo in the late 2000s. General Motors, which gave up on India a few years ago, too, had a similar story to tell—its volumes coming mostly from the small cars Spark and Beat rather than its premium sedans.

The shift started in the mid-2010s, ironically, by Ford itself, even though it could not prevent the carmaker from leaving India eventually. Its compact SUV EcoSport, launched in 2013, was a runaway hit. The smart pricing probably had something to do with the initial acceptance. But once Indians got used to seeing and experiencing bigger SUVs with all the features and frills, there was no looking back.

Deloitte, which runs a global auto survey every winter, came up with something curious this year—for the first time since it started doing the surveys, more than half the Indians it surveyed said they intended to buy a car costing more than Rs10 lakh. They weren’t bluffing. In March 2023, for the first time, cars costing 10 lakh and more crossed the 50 per cent mark in sales.

“This is an important milestone for India because it was always known as a small car, low-priced, market,” said Rajeev Singh, partner, Deloitte. “Each and every auto client has seen not just a growth in numbers, but the average price of cars shift significantly in the past two years.”

This premiumisation spree, while primarily fuelled by SUVs, has reaped some surprising dividends, too, along the way. For instance, even while all signs pointed to an SUV surge, Volkswagen came up with the Virtus sedan last year. It was a runaway success. “We believe the love of sedans never went away,” said Volkswagen brand manager Ashish Gupta.

While there is a general feeling that the pandemic and its insecurities sparked feelings of ‘you-only-live-once’, which led to consumers splurging on pricier cars, experts say there is more to it. “I would not say it was Covid that made people suddenly willing to spend,” said Singh of Deloitte. “There is a new generation of buyers who are coming in. They have a different mindset.”

It is a generation that grew up in the post-liberalisation era of plenty. As they come of age and enter the workforce, a new sensibility in spending is also coming into play. “They don’t withhold themselves from spending,” said Singh.

This has seen luxury brands like Mercedes and BMW seeing the average age of their buyers going down, from 42-45 years to 36. “It is the average age, which means there are some buyers who are even 30 or 32. These are the young customers who are changing the market,” said Singh. “Going forward, their numbers are only going to increase, as will their ability to earn and spend. Soon, we will have to look at another set of buyers, those born in 2000 or later — their choices are going to be very different.”

This new breed of car buyers and their sensibilities might have pushed up India’s PV industry up the value chain; but will they help the pivot into clean energies?

So far, the answer seems to be ‘No’. Most of the electric PV launches have been snapped up by taxi fleets, though Tata Motors managed to break the Rs10-lakh psychological barrier with its Tiago EV earlier this year. Then MG came out with the two-door Comet EV aimed at the young urban buyer.

EVs constitute just about 1.5 per cent of the total passenger vehicle market, and estimates are that it will go up to 10 per cent by the turn of the decade. “As infra for EV charging gains pace coupled with incentives to manufacturers under the PLI scheme, there is bound to be increased adoption of EVs in the future,” said Menon of SIAM.

More importantly, majors like Maruti Suzuki believe that multiple technologies will coexist, like CNG, biofuel and ethanol blends, along with electric. Green hydrogen is another big focus area. “While electrification is one part of exploring alternate fuels, the internal combustion engine will (continue to) exist,” said Kapur of ACMA.

After a few tough years, automobile sales are booming again. Yet, there are concerns. The two-wheeler market is yet to recover, hinting at continued distress in the purchasing power of rural Indians. This could get aggravated if the monsoons are delayed or diminished. But in a changing world, pivoting to face circumstances, somehow, seems to be an Indian hallmark.

“The challenges are the opportunities,” said Kapur. “In a world where everyone is going electric, it’s almost like a level playing field again. So everyone has got an opportunity!”

MARUTI SUZUKI JIMNY

Launching: June

Price: Rs10 lakh

Sporty and masculine, the Jimny will be part of Maruti’s push into the SUV segment, along with Fronx. Jimny will take on the Mahindra Thar in the 4x4 off-road segment and will be crucial in Maruti's shift to SUVs.

HYUNDAI EXTER

Launching: July

Price: Rs6 lakh

With front and rear dash cameras, sunroof and all connected features, don’t mistake the Exter for your smartphone! Hyundai has realised the need to protect and strengthen its UV portfolio, and this compact SUV loaded with features is a crucial link. And possibly a price point the young Indian car buyer will love.

HONDA ELEVATE

Launching: June

Price: Rs11 lakh

Honda has had a chequered ride in India. It did come out with models in the UV segment like the CR-V and the BR-V, but the timing could have been better. It is now making its biggest bet ever on the Indian car market with Elevate, which will take on the mighty Creta and Seltos.

VOLKSWAGEN TIGUAN

Launched in May

Price: Rs35 lakh

Volkswagen tasted blood in the Indian market last year with the Virtus, when it took a gamble of betting on sedans when the entire market focused on SUVs. With the 2023 edition of the Tiguan, which has loads of features aided by intelligent technology, it is back for more.

AUDI Q8 E-TRON

Launching: Around Diwali

Price: Rs1.02 crore

The German luxury carmaker will make a major push in its EV strategy for India with the Q8 E-tron. With better charging and battery capacity, not to mention the luxury class comfort and improved aerodynamics, will this revolutionise the high-end segment’s move to electric?

airport-expansion-in-india

Sat May 20 12:28:12 IST 2023

It’s not a garden in a terminal; it’s a terminal in a garden!” That is how Hari Marar, managing director & CEO of Bengaluru International Airport, refers to its recently launched Terminal 2. ‘Garden terminal’ is a departure from the steel-and-glass template for most global airports, with a nature theme filling up the terminal complex with six lakh plants and 10,000 sq.ft of green walls, and the use of sustainable materials like bamboo and locally-sourced granite in construction. Bengaluru T2 was among the nine buildings CNN listed as those that will “shape the world in 2023”.

In fact, it is already happening. A month ago, walking up this garden path, Foxconn chief Young Liu was so impressed that the contract manufacturer for Apple’s iPhone promptly agreed to build a manufacturing facility near the airport investing Rs8,000 crore. It will create 50,000 jobs.

“It was great to note the infrastructure readiness… and the availability of social infrastructure around the plot earmarked for the project,” Liu wrote later to Karnataka Chief Minister Basavaraj Bommai. “The efficiency of cargo handling at the airport does have a significant bearing on our operations and metrics, as we rely on air freight for our multiple products to a considerable extent.”

Bengaluru T2 is just one of the poster boys of India’s aviation boom, as the country taxies for take off into becoming the world’s biggest domestic aviation market, as Civil Aviation Minister Jyotiraditya Scindia mentioned in an interview with THE WEEK a while ago. “Look at the growth potential,” he said. “You have just 14 crore flyers out of a population of 140 crore. Which other aviation market has the potential that India has? I am looking at 40 crore air travellers by 2027.”

According to the Directorate General of Civil Aviation, 3.75 crore passengers travelled on domestic flights in just three months from January to March this year―a growth of 21 per cent. It is usually a lean season, compared with summer holidays in May and June or the festive season from October to December. In fact, the DGCA estimates an air passenger growth of 52 per cent this year.

All those passengers, and the many aircraft that carriers have ordered to fly them, also need airports and runways. And that is an area that has not kept pace with the spike.

“Big aircraft orders demonstrate the confidence in the India aviation story. But they also need bases to park the aircraft,” said Sidharath Kapur, who was earlier head of the airports divisions of Adani and GMR, two of the biggest private airport operators in India. “Airlines can expand quickly―order new planes or lease to increase capacity. But airports cannot do that. Airport expansion takes years, so airports need to be planned well in advance.”

Despite the number of airports in the country doubling from 74 in 2014 to 141 last year, the real McCoy will be the blitzkrieg in this area in the months to come. A total of Rs98,000 crore have been earmarked for airport expansion across the country over the next two years; a third of it by the state-run Airports Authority of India itself. In addition to the much-talked about new airports adjoining Delhi and Mumbai, a clutch of other airports, some new and some upgraded, are getting ready. Additionally, the government also plans to develop 100 airports by next year under the UDAN regional connectivity scheme.

In November, Prime Minister Narendra Modi inaugurated Donyi Polo airport in Itanagar, the first in Arunachal Pradesh. A month later, he did the honours at Mopa, launching Goa’s second airport. The tally of Mopa (officially Manohar International Airport) in just three months of operations―4,800 flights and 6.64 lakh passengers.

Come September, the country’s biggest airport will get even bigger. The Indira Gandhi International Airport in Delhi is adding a fourth runway and opening the renovated and expanded Terminal 1. A fourth terminal is also being planned. It also has India’s first elevated cross taxiway, which can help decongest the airport.

“After the completion of the Phase 3A expansion project by this year, the terminal capacity of Delhi airport will increase to handle 10 crore passengers a year and the airside capacity to 14 crore,” said I. Prabhakara Rao, deputy managing director, GMR Group, which runs Delhi, Hyderabad and Mopa airports.

Delhi’s numero uno position, however, will soon be challenged by a suburban neighbour next year. The under-construction Noida International Airport in Jewar in Uttar Pradesh will not only act as the secondary airport for the national capital region, but eventually become the biggest in India, with four runways and a massive multimodal cargo hub, spread across 80 acres.

“Noida Airport will enhance connectivity for western UP and add capacity to Delhi NCR, while acting as a catalyst for infrastructure development, economic growth, and employment opportunities in the region,” said Christoph Schnellmann, CEO of Noida International Airport. “The airport is set to be the logistics gateway of northern India and will help establish Uttar Pradesh on the global logistics map.”

Therein lies the true scope and purpose of airport expansion―as a catalyst for economic growth, beyond just a fancy transit hub for the well-heeled. The Jewar airport might push the massive scaling up of industrialisation of the largely agrarian belt between Noida and Agra, just like the second airport planned at Dholera near Ahmedabad, which will come smack on the Delhi-Mumbai industrial corridor.

Similar is the case with the second airport in Visakhapatnam at Bhogapuram, being built by GMR and expected to be operational in early 2027. “It will act as an economic multiplier in the growth of Andhra Pradesh, and support development of cargo, warehousing and other economic activities including commercial property development in its vicinity,” said Rao of GMR.

Already, an uptick in property rates has been noticed in plots near the upcoming Noida airport. A study by property consultants Anarock after the foundation stone laying ceremony of the airport pointed out how commercial activity, particularly warehousing, saw increased momentum around the airport.

“Over the short-to-mid-term, the area in and around the airport will undoubtedly witness significant development activity by players who hold suitable land banks there,” said Santhosh Kumar, vice chairman, Anarock. “Many players have been hoping to cash in on this mega project since it was announced and bought up large land parcels in the vicinity. For these far-sighted developers, the time to come forward and weigh the best options is finally at hand.”

The location is key here. “The airport’s proximity to major industrial corridors, such as the Delhi-Mumbai Industrial Corridor and the Eastern Dedicated Freight Corridor, will further enhance its potential for industrial growth,” said Avneesh Sood, director of Eros Group, a leading realty player. “This will result in the development of industrial parks, warehousing, and logistics facilities, leading to job creation and economic growth in the region.”

But, is everything gung-ho for the end user, the Indian passenger? Sidharath Kapur feels all is not well yet. “Many challenges need to be addressed, from capacity and operational points of view,” he said. “There will still be shortages and there will be requirement and gaps in airport capacity in the next five years.”

Despite the big-ticket airports under construction and numbers being touted, airport operators would still not be able to match the capacity with the growth in demand. Kapur gives the example of Chennai. An integrated terminal was opened recently, but plans for a second airport have been moving slowly. “Passenger growth can be very fast,” he said. “You will need another airport in a few years time, and you need to plan it at least seven years in advance.”

The biggest issue is land acquisition. “It is not easy and it is very expensive,” said Kapur. “It takes time and needs to be done by the government. That is one major gap.”

But airport operators have their reasons. “Airport terminals are designed for a capacity that should be able to meet the peak load for over 99 per cent of the time in a year,” said Marar. “It is to be noted that designing to the busiest hour may lead to overbuilding the infra, with significant cost implications for both airlines and passengers.”

The implication of this strategy came home to roost across the country in December, as the year-end rush saw mob-like scenarios and unending queues at all major airports. The public outcry forced Scindia to visit Delhi’s overflowing T3. Bengaluru saw a record 1.07 lakh passengers two days before Christmas.

Another major issue is connectivity. Seamless connectivity is essential for airlines like Air India and Indigo to realise their ambitions of going global and retrieving India’s international passengers from Gulf carriers. But it remains a mirage. For instance, a passenger arriving by a domestic flight at Mumbai’s Terminal 1 and needs to board an international flight from Terminal 2 will have a harrowing time, right from transferring between terminals. The situation would worsen once secondary airports come up in Delhi and Mumbai. It is unclear whether anything is being planned to connect Mumbai and Navi Mumbai airports (both managed by Adani) or the two airports in the NCR that are 90km apart.

“These challenges need to be addressed,” said Kapur. “We need to redesign our airport infra to ensure we can meet our aspirations for growth.”

sweden-minister-for-infrastructure-and-housing-andreas-carlson-interview

Sat May 20 12:22:22 IST 2023

What attracts Sweden to India’s aviation sector?

India is one of the world’s largest and fastest growing air transport markets. India and Sweden’s joint commitment towards green transition in the aviation sector and finding more sustainable solutions in aviation [can] drive us into the future. In Sweden, and across Europe, we see a lot of vibrant and innovative companies leading the way to reduce emission, to lower carbon footprints and also to help build a fossil-free airport. A Swedish company will have electric planes in the air in five years and that is something we talked about with our Indian counterparts; how we can help India to develop a green aviation sector.

Are you looking at direct connectivity between India and Sweden?

We hope to once again establish direct flights between Stockholm and New Delhi. We had discussions with Air India and other Indian airlines. I think it would be a very popular route; we already have business and trade co-operation, and we have a great Indian diaspora in Sweden and we also see increasing interest in tourism to India. I am quite confident when I say that a new direct route will be successful, and that was one part of the discussion.

What was the key agenda of the meeting with minister of state for civil aviation V.K. Singh?

We have an MoU between Sweden and India to deepen our co-operation and we discussed how we can cooperate on air traffic management, airspace design and also how to reduce carbon footprints, lower emissions, strengthen competitiveness and improve connectivity.

India is a larger country, but Sweden is one of the EU’s most widely spread-out countries. We have similar challenges when it comes to rural connectivity. With India planning all the investments in airports and aviation infrastructure, there is also a need for smaller planes to far-flung areas. That is something we have worked at very hard in Sweden, like the electric plane that is under development. It can work on short-haul flights in the beginning, but they can have up to 800km range with 35 passengers when combined with electricity and bio-fuel. With just electricity in the first phase, they will have a range of 200km, so we discussed that a bit. This company, Heart Aerospace, is paving the way not just in Sweden, but also on a global scale. Already discussions are on with big companies in the US.

Speaking of emissions, what are the technologies and ways in which Sweden can help Indian aviation?

Sweden’s airports are already 100 per cent fossil-fuel free. Next step is the plane itself. Electrification for short-haul flights. Hydrogen is kicking up speed. The low-hanging fruit is of course increasing use of bio-fuel and induction of Sustainable Aviation Fuel (SAF). A big step for the Swedish government is to step this up, as also increase cooperation on these with India.

India and EU have signed a memorandum in aviation cooperation. What are the best practices India can adopt from the EU when it comes to aviation safety?

Air traffic management services and airspace design are areas where we can learn from each other and share best practices. MoU creates a platform to work forward. It’s a start for greater co-operation.

noida-international-airport-ceo-christoph-schnellmann-interview

Sat May 20 12:18:50 IST 2023

What are the unique Swiss features the Noida airport will have?

The airport will be a confluence of Swiss efficiency and Indian hospitality. Being a digital airport, Noida International Airport (NIA) will provide a seamless and contactless flow by means of technologies such as indoor geo-location, identity management, flow management, data mining, and internet of things.

Beyond passenger traffic, what kind of transformation will the Noida airport bring about?

Noida Airport will connect the greater Delhi area and western Uttar Pradesh with other cities in India and the world. The airport will enhance connectivity for western UP and add capacity for air travel to/from Delhi NCR, while acting as a catalyst for infrastructure development, economic growth, and employment opportunities in the region. It is set to be the logistics gateway of northern India and will help establish Uttar Pradesh on the global logistics map.

With western UP comparatively underdeveloped, the business for the new airport will take a long time to materialise. Also it can only grow by cannibalising the Delhi airport.

NIA will be a convenient alternative to Delhi airport, and will save time for travellers in the region. Planned at a strategic location, NIA will add airport capacity to the region and complement the existing aviation infrastructure catering to the people of Delhi, Noida, Ghaziabad, Aligarh, Agra, Faridabad, and neighbouring areas.

The post-Covid revival of the Indian aviation sector has been phenomenal and will require more aviation infrastructure to serve the growing demand.

Additionally, NIA will become a key air cargo gateway for north India. The airport will develop an ecosystem that consists of state-of-the-art infrastructure and product offerings supported by best-in-class procedures that incorporate Swiss efficiency, simplicity, and quality. The integrated multi-modal cargo hub at NIA will play a crucial role in establishing the state of Uttar Pradesh as the logistics gateway for north India, with quick, convenient connectivity to and from manufacturing hubs.

What kind of revenues do you expect in the first five years? What would be the mix―passengers, retail, cargo?

Broadly, we will have airlines, hotels, cargo, and other such commercial partners. We recently awarded Roseate Hotels and Resorts the concession to build a 220-room property while Air India SATS will develop a multi-modal cargo hub at the airport. We are identifying other strong and experienced partners to operate key services such as retail, food and beverage, and other non-aeronautical services which will be key for our revenue streams.

How significant would cargo mix be to the new airport’s vision? What is the status of the proposed high-speed rail link to central Delhi?

The cargo and logistics infrastructure and ecosystem will cater to a differentiated catchment and several upcoming industrial clusters in NCR and Uttar Pradesh, creating a cargo gateway for northern India. Spanning 80 acres, it will comprise an integrated cargo terminal combined with an integrated warehousing and logistics zone. This unique logistics zone will offer a transshipment centre, as well as a warehouse zone for freight forwarders and integrators. It will also provide for transportation facilities to support road-to-road, road-to-air, and air-to-road movements.

While we are working to develop the airport, the government’s endeavour is to establish easy connectivity [from Delhi] to the airport.

indian-hotels-company-limited-ceo-puneet-chhatwal-interview

Fri May 05 19:10:40 IST 2023

Puneet Chhatwal is these days called the man of the moment. The managing director and CEO of the Indian Hotels Company Limited (IHCL) deserves every bit of the attention for the company’s historic performance last year. When Chhatwal joined IHCL in November 2017, the group had been making losses for the previous seven years—Rs1,740 crore cumulative. He turned it around in a year, reporting a profit of Rs101 crore in 2017-18. This shot up to Rs287 crore the following year and Rs354 crore in the next. Then the pandemic hit and the hospitality sector was badly affected. IHCL registered a loss of Rs720 crore in the first year of the pandemic, followed by a loss of Rs248 crore in the next.But, as restrictions eased and travel resumed, it was game time again for the hospitality industry. And for IHCL, it was momentous. It recorded its highest ever profit of Rs1,003 crore in 2022-23, wiping out the losses of the pandemic.What did Chhatwal and team do differently? The key change was to target India’s heterogenous market to capture different segments. Prior to that the focus was only on the ‘Taj’ brand. He reimagined the brandscape to create a holistic hospitality eco-system with new brands like SeleQtions, and transforming the Vivanta and Ginger brands. He further bolstered the Taj brand to reach a milestone 100 hotel portfolio and being recognised as the World’s Strongest Hotel Brand. Another key step was making IHCL asset light. Before Chhatwal, it owned or leased 64 per cent of its properties. In a short span, he increased the 36 per cent managed portfolio to 50 per cent. Chhatwal’s current strategy, AHVAAN 2025, which in Hindi means a call to action, is to keep IHCL profitable while being iconic. It has four goals—300 hotels by 2025-26; a 50:50 distribution between owned/leased and asset light properties; 33 per cent EBITDA margin; and zero debt. He has already achieved goals 2, 3 and 4.

Excerpts from an exclusive interview:

Q/ How did you achieve these fantastic results?

A/ Nothing is achieved overnight. We embarked on this journey of aspiration with seamless execution in December 2017, which we communicated to the market in February 2018, calling it Aspiration 2022. We had six consecutive quarters of profitable growth. And then Covid hit. Everything went for a toss. But even during Covid, we did not stop; we continued our journey, and Aspiration became AHVAAN 2025, post Covid. But during Covid, we created a RESET, where ‘R’ stood for revenue growth when there is no revenue to grow. So how would you grow revenues? ‘E’ excellence in whatever we do, keeping people safe. ‘S’ being spent optimisation on whatever the money that was being spent. It was time to create effective asset management; that is the second ‘E’, and then T being thrift.

RESET 2020, in hindsight, accelerated the speed of change, which was required to accomplish Aspiration 2022, to a different level. So that the base became so strong, the speed of change was so strong, that we were able to communicate far bigger bets on 2025 than we were undertaking for 2022. So even going from one of the best years, 2017-18 of 17 per cent margin, to 25, and 25 to 33, in a capital intensive industry, especially with our international presence, which gets consolidated reserves, is a very difficult number to achieve. We got there, not by default, but by aspiration, which was big, with seamless execution from the management team. The positive guidance from the board, in good and in bad times, led to this superlative performance.

Q/ IHCL had around 64 per cent of properties owned/leased compared to 50 now. That was part of your plan for 2025 and you have already achieved that. Do you think that’s something you will continue with?

A/ We feel very strongly that we are blessed to own or have the ownership of the business via lease in some of the most iconic assets in the world. So if you own the Taj Mahal Palace on a lease, or a freehold of the Taj Lands End, or on lease the Lake Palace in Udaipur, or on lease The Pierre in New York, or the ownership of the asset in London. It is very important as the ultimate objective of the strategy was to be not only iconic, but also the most profitable hospitality ecosystem from South Asia. We wanted both. And to get both, you need to find the right balance between asset heavy and asset light. When we embarked on this journey, we were very mindful of this.

It is also opportunity driven. And it is also very much driven by the spirit of the founder of that community; is not just another stakeholder, rather the purpose of the existence of the business. So community in our case means also creating new destinations, like we did with Goa, we did with Kerala, and we did with the Andamans. We are on the drawing board of the Lakshadweep, the northeast, with a lot of properties. We will not shy away from putting money in these projects. The northeast is a great opportunity.

That is what has defined the group. We say very proudly that the ethos is intact; which means you can keep changing business strategy but you don’t change the core values. This is very important to us.

Q/ You position the Taj as the main brand. And then you’ve got SeleQtion, which you have introduced; Vivanta is below that. Then you have got Ginger. You have presented yourself that you are there in every segment.

A/ It would be fair to say that we have actually introduced the new brand architecture, even though we have used some of the old names because they were very good. The thought process behind those brands was absolutely right and may have got derailed through macroeconomic situations that were beyond our control.

So, we have reimagined Ginger and Vivanta. The only brand we have not reimagined is Taj. We introduced SeleQtions, amã Stays & Trails and Qmin. We also reimagined Taj Sats. That was our RRR strategy even before the movie RRR came—reimagining our brands, restructuring our portfolio and reengineering our margins. Why change something when it has been well thought through? And what is not working within that you just need to make sure the model works. And today it is proven that our model of Ginger and Vivanta works.

Q/ Which are the key hotels that are coming up in the next financial year?

A/ We will be opening at least 20 hotels including one in Mumbai, a Taj at The Trees at Godrej Properties in Vikhroli. Ginger will open in Santa Cruz; we are very excited about it. We are opening Vivanta in Tawang, which is almost on the border with China. We are opening another Ginger in Kochi. And another Taj in Kolkata, called Taal Kutir. We will have a second one in Tirupati. We will be also going to some state capitals, where we are not present.

Q/ Is MICE (meetings, incentives, conferences and exhibitions) tourism something IHCL will be looking at in a big way? A lot of hotels now entering India are trying to concentrate on MICE tourism. You are doing it in Rajasthan and Goa. Do you have other markets that you will consider for MICE tourism?

A/ Kerala is there, a very important one. All the main cities, the top 20 cities in India, we should be the market leader. Taj Malabar will be fully renovated in a year from now. We will also evaluate the development of the island opposite Malabar. We are also opening our 100th Taj near the Cochin International Airport.

Q/ How about business travel?

A/ In India, it is back; internationally, there is still room for improvement. London, New York, San Francisco, Cape Town, still at around 90 per cent of the pre-Covid levels. And maybe within that 90 per cent of pre-Covid is the revenue level, but the business segment is still maybe around 80. But that drives optimism. Because at some point it will come back and it will exceed 100.

Q/ Is there an internal strategy for airport hotels. There is a Taj in Santa Cruz and a Ginger is coming up there. Then you have the Kempegowda in Bengaluru. Then the Kochi CIAL.

A/ Airport hotels give you a lot of visibility. I would say what is close to my heart is a 360-degree growth proposition. And growth is not just growth in number of dots on the map, rather growth of top line, growth of margins, growth of people. Most important, people, because if you are able to help your people grow, they will do the rest. Without losing your core values, of course.

Q/ Among your international properties, you mentioned Maldives and Dubai are back on track.

A/ Maldives and Dubai did very well during the pandemic. They were the best performers, followed by Goa and Rajasthan. These and Uttarakhand were the top five markets for us.

Now Sri Lanka is slowly but surely coming back. London is behind. The US has some way to go and Cape Town also. We own Cape Town 100 per cent, we own San Francisco 100 per cent, and London also. We own the leasehold of The Pierre. We are blessed to have these properties. Because two of the three largest lodging markets in the world are New York and London. We are present in two. These are the kind of assets that put you on the map to become the world’s strongest hotel brand. You cannot be the world’s strongest hotel brand if you are only India-centric. We have the obligation to grow our footprint internationally. We recently announced a Taj and a Vivanta in Dhaka. But why not one more hotel in London? Why not a bit more in the UK where there is a strong Indian diaspora. Why not a hotel on the European continent? Why not Singapore? Why not Bangkok? Why not Bali? So the strategy of acquiring single assets, as they say, is a thing of the past.

We will address each opportunity through the lens of asset light model.

increase-in-electronic-goods-manufacturing-and-export-from-india

Fri Apr 28 15:47:31 IST 2023

Think exports from India and what usually come to mind are software services, pharmaceuticals and textiles. Maybe it is time to take a closer look. Exports of electronic goods from India jumped 50 per cent in 2022-23―from $15.66 billion the previous year to $23.57 billion. India’s readymade garments exports in the same year was just around $16 billion.

Electronic goods was the sixth largest commodity group in India’s goods exports last financial year and had a share of more than 5 per cent in total merchandise exports. While it has been steadily improving in the past five years, the trend accelerated in 2022-23, said Madhavi Arora, lead economist at Emkay Global Financial Services. Exports of electronic goods are growing at four times the rate of total goods exports.

Interestingly, a big driver of the trend is mobile phones. Exports of mobile phones from India touched Rs90,000 crore in 2022-23, according to India Cellular and Electronics Association. “India’s smartphone exports were as low as $0.4 billion in FY14, even falling to nil the following year, but the China plus one story (a strategy where companies avoid investing only in China), as well as the government’s production-linked incentive (PLI), helped boost external shipments to $11.1 billion in FY23,” said Arora.

Apple, makers of the iPhone, accounted for about half of the mobile phone exports from India. Not surprisingly, increasing production in India was on agenda when Apple CEO Tim Cook met Prime Minister Narendra Modi and Union minister Rajeev Chandrasekhar during his recent visit.

It has been only five years since Apple began manufacturing iPhones in India. But it quickly ramped it up, tripling production in the last financial year. India now accounts for around 3 per cent of Apple’s total iPhone production.

Apple is expected to further ramp up local assembly in India. Foxconn of Taiwan, a major manufacturer for Apple, is planning to set up a new factory in Karnataka. The investment is estimated to be around $700 million. Tata Group has been in talks with Wistron, another manufacturer for Apple, to acquire its iPhone assembly plant in Karnataka. Apple is expected to start assembling Airpods and iPads in India as it looks to grow its local production share to around 25 per cent.

What works in India’s favour are Apple’s attempts to reduce its dependence on China for manufacturing and India’s potential as a growing market for its products. The Covid pandemic disrupted supply chains globally. China’s zero Covid policy and geopolitical tensions with the US forced companies to look at alternative markets to boost production. The PLI schemes rolled out by the Modi government also made India attractive for companies looking for alternatives to China.

“The PLI scheme has been a significant driver for local manufacturing in India,” said A. Gururaj, managing director, Optiemus Electronics, a homegrown contract manufacturer. Companies are also taking advantage of the skilled labour force in the country, he said.

The PLI scheme extends an incentive of 4 per cent to 6 per cent on incremental sales of goods manufactured in India in a few segments. Under the PLI scheme for smartphones, the government allocated incentives worth 040,951 crore between 2021 and 2026.

Manufacturing sops apart, India’s 1.4 billion population presents an attractive opportunity for these companies. “India’s emergence as a destination for electronics companies is primarily driven by the growing demand for electronic products in the country. India has a large and rapidly growing middle class, which is driving demand for consumer electronics such as smartphones, laptops and several other electronic devices,” said Gururaj.

India is a booming market for expensive phones. “I see a tremendous potential in the over Rs30,000 and Rs50,000 market for mobile phones,” said Yogendra Sriramula, head of brand strategy at the mobile maker Vivo India. “During the pandemic, the market was need-based. Now it is shifting towards upgrades.”

In 2022, Apple, which makes only high-end phones, sold 6.7 million iPhones in India, compared with 4.8 million in 2021, according to market analyst IDC. It is, however, just a fraction of Apple’s global shipments of 226.4 million iPhones in 2022. Also, iPhone’s share in India’s overall smartphone market of 144 million is quite small. However, India is one of the few markets where Apple is growing in double digits.

Two brands―Apple and Samsung―dominate India’s premium mobile phone market. Apple has a market share of 60 per cent in this segment, and Samsung 21 per cent. “Before the pandemic, Apple’s total market share was just 2 per cent. In 2022, it is more than 6 per cent, which also means that people are buying more and more expensive phones,” said Neil Shah, vice-president of research at Counterpoint.

Cook was in India for opening Apple retail stores in Mumbai and Delhi, which is seen as an indicator of the importance of the Indian market. “The moment an Apple store enters the country, it is unfurling the Apple flag and saying we are here and we have got big plans. India is a market opportunity that no one can deny and therefore this is a big moment for the company,” said Harish Bijoor, brand expert and founder of Harish Bijoor Consults.

Apple, however, is unlikely to get a walkover in India as other phone manufacturers also have big plans and are taking advantage of PLI. “At least 90 per cent of the phones in the market, barring a few flagships, are now assembled in India,” said Navkendar Singh, associate vice-president IDC India. Till 2014, more than 90 per cent of mobile phones sold in India were being imported.

Chinese smartphone maker Vivo said it would invest Rs1,100 crore by the end of 2023 to expand its manufacturing capacity in the country. “We have an existing factory in Greater Noida set up in 2015. Now with this new investment, a new factory will come up in a location nearby, spread over 169 acres,” said Sriramula. The company increased its capacity from 50 million to 60 million in the beginning of 2022. It will make it 120 million in a phased manner. Vivo has been exporting smartphones made in India since 2022, and it plans to export one million Indian-made smartphones in 2023.

It is not just mobile phones. India has a $100 billion opportunity in manufacturing laptops and tablets in the country, according to electronics manufacturing body ICEA.

Vedanta recently signed memoranda of understanding with several Korean companies to establish an electronics manufacturing hub in India. The company is setting up a semiconductor and display fab unit in Gujarat.

With its substantial untapped market, India presents huge opportunity for growth. For instance, India has just 600 million smartphone users in a population of 1.4 billion. So, there will be enormous scope to boost sales by expanding the user base and upgrading the feature phone users, said Sriramula. In other segments, too, the penetration levels are low in comparison with global peers. This will drive more investments in local manufacturing in the years to come.

GAINING MOMENTUM

Exports of electronic goods from India jumped from $15.66 billion to $23.57 billion in 2022-23

Electronic goods was the sixth largest commodity group in India’s goods exports

India exported mobile phones worth $11.1 billion in 2022-23

India now accounts for around 3% of Apple’s total iPhone production

The government allocated production-linked incentives worth Rs40,951 crore between 2021 and 2026

climate-finance-expert-avinash-persaud-interview

Fri Apr 28 15:42:55 IST 2023

THE WORLD IS facing a confluence of problems that arose from Covid, climate disasters and regional conflicts. Barbadian economist of Indian origin Avinash Persaud is seen as a man who can help solve them. He is the key brain behind the Bridgetown Initiative of Barbados that sets out three ways to change how development finance works on the global stage. His pragmatic solutions to reform the international financial systems and climate financing are getting support both from the developed and the developing world. Persaud calls himself a “man in a hurry” and urges the world to make every effort needed to save the planet. Excerpts from an exclusive interview:

Q/ The world, especially the global south, is facing hardships because of many shocks―Covid, climate disasters, Russia-Ukraine conflict and a strong dollar. Do you think there is widespread pessimism in the global economic sphere?

A/ The world is at a very difficult place. You mentioned Covid. And that led to a significant increase in debt, a shock to our economic systems that not all countries have managed to get over. And then related to Covid, the big fiscal stimulus in the wealthy countries is now raising interest rates and [the result is a] strong US dollar. And that is compounding the problem. That is why an unprecedented number of countries around the world are facing a debt crunch, and appealing to the International Monetary Fund for short-term support. So, we are in a very uncertain, fragile place, underscoring the inadequacy of the international environment to help out emerging and developing economies.

Q/ Will the debt crisis in emerging markets affect India?

A/ India is not facing the same kind of direct debt crisis that several other countries are, but of course, Covid had a big impact. And, it has certainly placed some stress, and the country is recovering quickly, but that stress is there. But I think India is sufficiently big and strong, that it is not going to face the trouble we are seeing in small or middle-income economies, especially in Africa, which has been doubly hit by the Ukraine crisis in terms of food and fuel prices. But the international environment is still difficult. Interest rates are up, the dollar is strong. So, there are some headwinds against India’s recovery. And, so, policymakers will have to be very adept and smart at managing that.

Q/ The Bridgetown Initiative proposed by Barbados wants to reshape the current international financial system. As the main brain behind this initiative, could you please explain the initiative?

A/ Experts have identified that developing countries need a huge amount of money every year [for just green transitioning]; the number quoted is $2 trillion. But it is big money. And, if we stand there and say these countries must give us $2 trillion a year, that would be shouting into the wind. But what we have come up with is a system of finance that allows the $2 trillion to be achieved. And the system says: ‘Look, there are three things we need the money for’.

The first: things that generate money themselves; things like solar farms, wind farms, and a new hydroelectric power station. All these generate money themselves. So yes, we need investment, but getting investment in things that generate money is easier. We need to support the projects, we need to lower the riskiness of the projects, especially the foreign exchange risk. Imagine someone in Germany is investing in a project in India, the value of the rupee against the euro will make them not want to invest. But we need international investments because some of the technology and the materials are coming from abroad. So, we are saying that is a big part of the $2 trillion―about 75 per cent of it. So, the private sector, with some help, will fund that.

Then there is another bit in which there are no revenues, but [will provide savings in the future]. For instance, if I build a stronger seawall, it means that the next time the high tides come and the hurricanes and the monsoons come, then the damage caused will be less. And if I have less damage, I am making savings in the future. So, I can borrow to make savings for the future, I can use the savings to pay the interest on the mortgage. So, we say there is a second set of money that we can borrow, to spend. But the borrowing rates need to be very low, long-term, and low-cost. Because that then allows us to do even more investment in resilience than we would otherwise do. Because there is no point in being resilient in 20 years when the climate is changing today. And we have seen the heat waves India had last year, and the changing monsoon season; we cannot wait 20 years, and we need to build resilience today.

And then the final bucket is those things that produce no revenues, no savings, but we still need to spend the money [for it]. That is often in climate loss and damage. It is so from a bad monsoon or cyclone or tornado of sea level rising, creating costs. It is also about some of the transformation costs. If I turn the economy from being coal-powered to solar-powered, that is good from an energy point of view. But what about the coal miners? What about the town that was next to the coal mine? So, we need to spend money on protecting the livelihoods of people who will lose out from this transformation. We need grants for that. And we are all agreeing on a new global tax to help fund that transformation. After all, the transformation is good for the planet. So, the planet should contribute. And so, we need maybe a tiny tax on financial transactions, or maybe a tiny tax on all of the production of oil and gas, or maybe a tiny tax on shipping, or airlines that produce a lot of emissions.

Q/ But does this proposal take into consideration the historical responsibility of rich countries in causing global warming?

A/ Well, it is saying that they need to be part of the agency that is going to reduce the risks of investments in developing countries because of their historic responsibility. They, who are the main shareholders of the development banks, need to lead the banks into making more lending. And they will be bigger contributors to this global tax than other countries because they are bigger consumers. But we are not saying that it has to come directly from their governments. And so that is why they prefer it.

Some people may say, we should insist that they sign us a cheque. And I think that that is a little bit of a strategic, tactical issue, as opposed to simply a moral issue. The moral case to me is loud and clear. But if I sit here and demand rich countries to give me $2 trillion a year, I will get a big round zero. And I don’t think we have got time to waste in getting a big round zero. I am a man in a hurry, we have to make a difference in months and years, and I believe this strategy will make a difference. That does not mean that there should not be other people making the moral case. But it is just that I have been in this [development] business too long to understand that sadly, moral arguments are not enough.

growth-of-indian-luxury-real-estate-market

Sat Apr 01 17:47:26 IST 2023

It took DLF, India’s largest real estate developer, just three days to sell its luxury high-rise residential project, ‘The Arbour’, at Golf Course Extension in Gurugram. Priced around Rs7 crore for a four BHK apartment, they were by no means bargainous; and with 1,137 flats in five towers, the project was not a small one, either. But the developer sold flats worth more than Rs8,000 crore even before the project’s launch.

Its location, of course, worked in its favour. “The area has emerged as an accessible and aspirational location being a natural extension to Golf Course Road, with seamless connectivity to other parts of Gurugram, and Delhi and Faridabad,” said Aakash Ohri, group executive director of DLF.

There had been a limited supply of luxury housing projects in Gurugram in the past few years, and the gap had been widening with the increasing demand for larger homes with facilities like swimming pools, clubhouses, multiple parking and concierge services. There has also been a lot of pent up demand in the market, more so after the pandemic, said Vivek Rathi, director of research at real estate consultants Knight Frank. “Applications for the DLF project received were almost four times the number of flats that were on offer. That highlights that the demand is way ahead of the supply.”

Analysts say the premium real estate market is enjoying a strong economic momentum in most cities; there has been a slew of big-ticket deals in the high-end housing space in Mumbai and Bengaluru. A while ago, retailer Radhakishan Damani’s family and friends bought 28 luxury apartments in the Three Sixty West project in South Mumbai for around Rs1,238 crore. More recently, Niraj Bajaj, chairman of Bajaj Auto, bought a sea-facing triplex apartment worth Rs252 crore in the posh Malabar Hill area in South Mumbai from realty developer Lodha Group; it is said to be the country’s costliest penthouse. Property Deals exceeding Rs50 crore, in fact, happen quite often in the tony neighbourhoods of Bandra and Juhu. In Bengaluru, two properties were recently purchased in the Koramangala area by TVS Group for Rs86 crore, according to real estate consultant Zapkey.

The number of property registrations in Mumbai declined 8 per cent in February 2023 in comparison with a year ago―from 10,379 units to 9,511. However, revenue collections from property registrations crossed Rs1,100 crore, a 79 per cent year-on-year jump from Rs615 crore in February 2022, clearly indicating the rise in the sales of high-end properties, said Anuj Puri, chairman of property consultants Anarock Group.

Mumbai is now ranked 37 (92 in 2022) in the Prime Residential Index that tracks luxury housing prices in top 100 cities in the world. Bengaluru is ranked 63 and Delhi 77. “The value of the area sold in the residential real estate sector is expected to grow 8-12 per cent in FY2023 and a further 14-16 per cent in FY2024,” said Anupama Reddy, vice-president of the credit rating company ICRA. “The shift towards larger spaces, upgrade and preference for home ownership is expected to continue, thereby supporting the demand in the mid and luxury segments.”

One big reason for the recent spike in property deals is the cap on benefits on long-term capital gains (LTCG) deduction announced in the budget this year. Finance minister Nirmala Sitharaman said there would be a Rs10 crore limit for deductions on long-term capital gains tax for reinvestment in residential properties from April 1. Essentially, if one sells a house or any other asset and the capital gains are more than Rs10 crore, then the LTCG benefits that one could avail by investing in a new property would be only up to Rs10 crore and any amount above that will be taxed.

However, it might not be correct to attribute the spike only to the budget. “One of the key reasons we have noted luxury housing is doing well is the strong desire for home ownership across the country post pandemic,” said Rathi. “In this segment, a large chunk of consumers are cash buyers. They have the capital to go out and do the purchase and that becomes an ambition in times like these when Central banks have been reducing money supply and raising interest rates, which directly impacts consumer’s affordability in the lower segments, but not so much in the higher segments.”

Take, for instance, the Bengaluru-based developer Sobha. The contribution of homes in the Rs3 crore plus segment to the total sales has increased to 25 per cent in the nine months of 2022-23 financial year from just 6 per cent a year ago. Jagadish Nangineni, managing director of Sobha, said the company redesigned and launched larger homes to meet the changing demands.

The rich are looking at residential real estate as a favourable avenue for end use as well as as an investment. “In recent years, the real estate market has seen an increase in international investment,” said Ram Raheja, managing director of S. Raheja Realty. “Because of this, high-end developments that meet the desires of wealthy consumers have been created.”

The buyer profile in the segment has also been evolving. In markets like Bengaluru, for instance, IT professionals now account for around half of residential real estate buyers. Viswa Prathap Desu, chief sales officer of the Bengaluru-based developer Brigade Enterprises, said the luxury sector had seen an increase in demand largely because of a shift in customers’ preferences for larger homes with good amenities. “Bengaluru has had an influx of highly skilled professionals with disposable income to pay the premium for luxury homes in the city,” he said.

As the demand for luxury homes is on the rise, new hotspots have emerged for high-end projects all over India, even as the traditional areas, though saturated, continue to see good traction. Wadala in eastern Mumbai, for instance, has seen a few premium projects developed by Macrotech (Lodha) and Ajmera Realty. In the NCR region, the Dwarka Expressway is seeing development of upscale projects. North Bengaluru has also been seeing strong sales growth. “There has been a significant increase in demand for high-end residential properties such as bungalows in affluent urban areas or farmhouses in suburban regions, and vacation homes in the hills and Goa,” said Amit Goyal, CEO, India Sotheby’s International Realty.

Location and proximity to workplaces is a big aspect for luxury home buyers. Wadala, for instance, is not too far away from the business district of Bandra Kurla Complex in Mumbai. North Bengaluru has become attractive because of its proximity to the new international airport, aerospace park and IT hubs.

And the good run may last long this time. “If you look at the high frequency indicators, whether it is credit growth or GST collections, passenger vehicle sales, or the kind of investments being committed in India, all of those are indicative that money is coming in and till that happens, I don’t see a dearth,” said Rathi. According to a luxury outlook survey by Sotheby’s International Realty, 75 per cent of the wealthy believe real estate will do well over the next 2-3 years and 74 per cent of the surveyed high networth individuals (HNI) and ultra HNIs believe real estate is an important asset to hedge against inflation. Typically, real estate bull and bear cycles last 5-7 years and this post pandemic revival in luxury home sales could last a few more years if India clocks a growth rate of around 6.5-7 per cent. However, if there is a deeper economic slowdown or geopolitical tensions escalate, the narrative could change.

While the demand for luxury housing is expected to remain high, Goyal feels availability of the right kind of luxury properties will be a challenge. “We find that in hot vacation markets like north Goa, inventory is hard to come by,” he said. “It is also getting tough to get the right residential property in desirable locations in Delhi. New inventory will get added, but it takes time to build.”

the-luxury-quotient

Sat Apr 01 15:43:05 IST 2023

Typically, most new housing complexes these days come with parking spaces, children’s play areas and quality fittings. Mid-to-premium housing complexes generally have club houses and swimming pools in addition to the other amenities. Luxury properties, however, offer a whole different experience.

Buyers of such properties are affluent and well-travelled, and they wear and drive luxury brands. They are used to five-star experiences and expect the same at their homes. The number of such people is on the rise and realty developers are going all out to woo them.

It all starts with grandeur. You would expect grand lobbies with chandeliers and high ceilings and architecture designed by globally known names. In Mumbai, it could be a high-rise with huge windows and balconies opening up to stunning sea or city views. In Bengaluru, it could well be a huge bungalow with wide green open spaces within a gated compound.

These fully-air conditioned homes have lavish facilities, ranging from high-end security systems, smart lighting to fully equipped kitchens with top-of-the-line appliances and multi-car parking spaces. Just as the facilities inside, the amenities offered within the housing complex have to be equally grand. There will be infinity pools, multi-sport facilities, high-end spas, mini-cinema, cafes and restaurants, concierge services, leisure and conference spaces.

In some cases, developers collaborate with luxury brands to provide their customers premium lifestyle experience. Developers also organise curated events around arts, fashion and culinary experiences. A few years ago, a Mumbai-based developer had arranged exclusive displays of high-end cars from Porsche and Ferrari. As a developer put it, one has to feel special and pampered, and highly exclusive in a luxury property.

anarock-group-chairman-anuj-puri-interview

Sat Apr 01 17:44:25 IST 2023

How has the luxury housing market panned out in the top cities?

The bull run in Indian luxury housing continues even while property prices are on the rise. India’s most expensive city, Mumbai, saw revenue collections from property registrations touching a new high in February 2023 at Rs1,102 crore. This was a whopping 79 per cent jump against February 2022 collections. Interestingly, even while revenue collections went up significantly in the period in Mumbai, the total number of property registrations saw a drop of 8 per cent in the year, clearly indicating that the sale of big-ticket price homes saw significant movement.

If we deep-dive into data further, February 2023 has seen the highest revenue collection in Mumbai in the last five years in the same month. Also, in entire FY2023, we saw February record the maximum revenue collections. Even Anarock data indicates growth in luxury sales in all top seven cities in the post-Covid period against the pre-Covid one. For instance, nearly 10,500 luxury units were sold in Mumbai Metropolitan Region in 2019, while in 2022, a whopping 32,900 units were sold in the luxury category. Other cities also reported similar or more growth.

Who is the new emerging buyer of luxury real estate?

Besides the usual businessmen and film stars, a considerable number of young Indians from the entrepreneurial set, the nouveau riche including start-up founders and CXOs are the new clientele for luxury homes.

Do you think luxury housing sales will sustain through 2023, given that lending costs have risen and the government’s move to cap capital gains tax at Rs10 crore comes into effect in April?

The move by the finance minister to cap capital gains at Rs10 crore may have some impact on luxury housing sales. It could be a deterrent to an extent, especially for those who were looking to buy a residential home for investment purpose. However, to say that it will have a major impact on this segment is also not correct. As such, the end-user demand may not be entirely impacted by this move, but the impact may be felt more on the investment demand. Also, more than the primary market, I think the impact could be on the secondary market sales of the luxury and ultra-luxury homes.

large-and-mid-cap-fund-a-worthy-option-for-equity-investing

Sat Apr 01 15:36:02 IST 2023

GIVEN THE CURRENT ECONOMIC uncertainties amid global challenges pertaining to geo-political tensions, markets witnessed extreme volatility over the past one year. Its continuance is expected in the short- to mid-term. But the fact remains that India remains one of the bright spots in the global economy and one of the best ways to participate in the country’s growth story is to invest in Indian equities. Investors who wish to benefit from equities need to position their portfolios such that while it brings stability, one does not miss out on the opportunities which the market keeps offering from time-to-time. In other words, risks involved in equity investments need to be managed strategically with focus on long-term wealth creation.

While there are several categories of equity mutual funds, one of the interesting ones is large and mid cap funds. Large and mid cap funds are equity mutual fund schemes which invest primarily in companies with large market capitalisation and those which are second in the ladder―the mid-sized companies. Being diversified, such funds present a suitable equity allocation mechanism wherein investors can benefit from stable growth of established businesses (large cap component) and the high growth prospects in tomorrow’s big businesses (mid cap component). This aids in long-term wealth creation and helps investors reach their financial goals.

Essentially, large and mid cap schemes invest a minimum 35 per cent of the total assets under management each in large cap and mid cap stocks. Depending on the market situations and valuations, such schemes can take exposure to large businesses up to 60 per cent, while in mid-sized companies the maximum allocation can be up to 45 per cent. Further, there could be tactical investments in small-cap companies as well if the valuation turns attractive. Such investments tend to boost the portfolio’s return profile.

Very often investors tend to prioritise stability. As a result, they invest mainly into large cap names and end up missing out on the ability to generate inflation-beating returns. Therefore, a judicious combination of stability and focus on growth is a must in every investment strategy. By investing in large cap, one invests in names which are established and sector-leading. This will not substantially reduce risks owing to volatility, as such names are relatively stable in nature.

On the other hand, though exposure to mid-sized companies, one gets the opportunity to participate in companies with higher growth. But, they do pose relatively higher risk given their volatile nature. Hence, too much allocation to mid cap stocks may prove to be dangerous. Given that these companies are large-cap-in-the-making, they offer attractive value creation. Thus, rather than waiting to invest in such stocks when they grow bigger, it is prudent to invest early and be a part of their growth.

So, what is required is a mix of large and mid cap names. A do-it-yourself strategy may not work for the majority of investors, either due to lack of time to track markets or inadequate understanding about market dynamics. Hence, a professional investment manager is required. Thus, schemes like large & mid cap fund come to the rescue of equity investors through suitable diversification with smart allocation strategy as per the market conditions.

Among the various offerings in the category, ICICI Prudential Large & Midcap Fund is one of the steady performers across the market cycle. Currently, the scheme has selectively invested in stocks and sectors that stands to benefit from the economic recovery through a combination of top-down and bottom-up approach. Over the last three years, the fund has continuously outperformed the benchmark. Investors who seek long-term growth potential and have an investment horizon of five years and above may consider this scheme.

Managing Partner, HSB Associates, Ernakulam

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.