but building world- class highways without cleaning up stressed

Transcription

RNI No.35850/80; Reg. No. MCS-123/2015-17; Published on: Every alternate Monday; Posted at Patrika Channel Sorting office, Mumbai-400001 on every alternate Wednesday-Thursday
April 25-May 8, 2016
Half
Done
Building world-class
highways without
cleaning up stressed
assets is a job half-done
`40
n
The Power Sector
n
Market Indices
n
Suryalakshmi Cotton
n
tm Intl Logistic
From the Publisher
B u s i n e s s I n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d
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This issue consists of total 92 pages including cover
Nitin Gadkari, Union minister for road transport & highways, has a very
tough job.
Always impatient to get things done, he has been given charge of
rejuvenating the highways construction sector. His focus has been on
clearing the way for projects that have long been stuck, and also stepping
up the awarding of contracts for building new highways and expressways
right across the country. He also has charge of the ports sector, which is a
mammoth task in itself, but that is a completely separate story.
The problems with our highway sector are many. Projects were awarded
without the land acquisition issues being resolved. Nor were all the
government clearances in place, particularly from the environment
ministry. The companies bidding were often new in the field, and highly
leveraged. And banks threw money at projects without rigorous analysis
of how and when their monies would come back. And there were many
charges of cronyism in the rigged bidding processes often adopted. At the
first bumps in the road, and there are inevitably bumps in any business, the
sector came to a grinding halt.
From the moment the government decided to move away from building
roads departmentally and getting the private sector involved, a viable
business model sustainable in the long run just had not been worked out.
By contrast, in the telecom sector, in spite of changes from time to time,
a business model that works had emerged. This allowed the companies
to raise money continuously, which could be serviced, which allowed a
national roll out of services at an unbelievable speed.
Several years earlier, idfc had worked hard to structure a workable business
model. But that was soon overtaken by adhocism.
One result was that all the big seasoned foreign contractors, who tried to
enter the field, quietly exited one by one. Nor have we seen the emergence
of large domestic champions, that are globally competitive, as we have seen
in telecom, software and pharma. That itself is a giveaway that all is not well
in this sector.
Similarly, we have seen, comparatively, very little foreign capital being
invested in our highways programme. Again another telltale sign. Add to
this that there is no significant long-term corporate bond market in the
country to finance the creation of assets that are amortised over 30 years
and more.
It is against this background that Gadkari is struggling heroically to open
up an ambitious roads and highway programme. A successful programme
can add significantly to opening up the country, speeding up movement
of goods and people and can add a clear percentage point to our rate of
growth. Ultimately, his success will be judged, not only on the kilometres of
highways built, but if he succeeds in creating a healthy roads and highways
sector that keeps growing, with or without him.
We Are On www.businessindiagroup.com
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a p r i l 2 5 - M ay 8 , 2 016
Contents
•
No. 994
COVER FEATURE
30
Gadkari hits
the road...
... but building
world-class
highways without
cleaning up
stressed assets is a
job half-done
u
F O C U S u
u
CO R P O R AT E
R E P O R T S SURYALAKSHMI COTTON MILLS
u
52
scml
repositions
itself in the
denim market
TM INTERNATIONAL LOGISTICS
56
tmill pushes
itself to
expand in
freight logistics
VIKAS ECOTECH
Vikas catches
the eyes of
international
investors
Streamline the system…
45
… because the index business is on the cusp of a wave of growth
u4u
a p r i l 2 5 - MAY 8 , 2 016
58
No. 994
•
Contents
S P E C I A L
u
R E P O R T
u
Getting discoms into
profit sector
40
Solving the vexatious issue
through uday is critical to
fixing the power
u
I N T H I S I S S U E u
Advertising & Marketing
64
Automobiles
65
Books
86
Business Notes
20
Businessmen in the News
16
Column
Government &
Politics
redi-Go, recently had its
world premiere in India
u
24
• Rupee devaluation demand
comes a cropper
• Services, not
manufacturing, still attract
maximum fdi
• T he bjp seeks to cut its
political losses
u
Economy
62
Madan Sabnavis, chief
economist, Credit Analysis
& Research, recommends
caution while evaluating
India’s gdp growth of 7.6 per
cent in 2015-16, in the light
of the ground realities
u
Private Equity
Canbank Venture Capital
Fund invests in Him
Teknoforge
u
Automobiles
Datsun’s third model, the
u
Technology
csir- crri and BitChem
Asphalt look at improving
roads in India
u
65
Puratos supplies quality
ingredients to a host of
bakers, chocolatiers and fast
food makers
u
• Tamilnad Mercantile Bank has been
allowed to hold agms
• take Solutions concentrates on the life
sciences business
8
u
u
Corporate Woman 74
A veteran celebrates her
silver jubilee
64
Market News
78
• Goafest 2016 had big wins for the
advertising industry
u
14
• Get ready for a new bull run
• T hyrocare could be a prize catch
for investors
• I T majors show a mixed bag of results
u
20
• T he domestic foundry industry gears up to
bridge skill gap
• m&m’s farm equipment sector launches
Yuvo tractors
• T he country’s 100-plus amusement parks
are raising the adrenalin of children,
adults and the promoters alike
72
Enterprise
way from milk collection,
to farmer education,
to supplying specialty
dairy ingredients to
giant companies and
co-manufacturing for a
range of others under its
brand names
63
Editorials
Business Notes
on-demand services win
customers’ hearts
68 Prabhat has come a long
Hospitality
• Directing cerc to fix tariffs afresh is a
landmark decision
• Indian businesses could get hurt
• Keeping a cap on the surge price is a
good solution
u
67 MyGlamm’s beauty
Health
u
u
70
Start-up
66
icici Lombard’s Website
enables visitors to compare
hospital data
u
Follow-up
u
Interview
sbi Mutual Fund, which
90
manages `1.07 lakh crore,
recently gate crashed into the
top five mfs of India, elbowing
out uti, its nearest competitor
by a slender margin. Promoted
by the largest psu banks in the country,
Dinesh Kumar Khara, md & ceo, is optimistic
about the growth of mfs in the industry
u5u
a p r i l 2 5 - MAY 8 , 2 016
27, 39, 60, 77
Corporate Reports
52
Corporate Woman
74
Cover Feature
30
Economy
62
Editorials
8
Enterprise
72
Executive Track
82
Focus
45
Follow-up
14
Government & Politics
24
Guest Column
51
Health
76
Hospitality
68
Interview
90
Letters to the Editor
6
Listening Post
11
Market News
78
New Issues
80
Newscast
12
Panju’s Page
28
People
88
Private Equity
63
Selections
83
Special Report
40
Start-up
70
Technology
66
Issue No. 994 for the fortnight April 25-May 8, 2016.
Released on April 25, 2016
Printed and published by Ashok H. Advani for Business India.
Printed at Glaxy Asbestos and Fittings Pvt. Ltd.,
D-125 TTC Area, Navi Mumbai-400 706
Published at Nirmal, 14th floor, Nariman Point
Mumbai-400 021.
No reproduction is permitted in whole or part without
the express consent of Business India
To order reprints contact: Business India Production Cell,
14th floor, Nirmal Building, Nariman Point,
Mumbai-400 021. Tel: 2288 3942/43, 2204 5446
Letters to the Editor
u
u
Meticulous
‘The new dynamics in oil’
(Cover Feature, 28 March-10
April) was a meticulous scrutiny of the issues relating to
oil & gas on the global arena,
laying stress on India’s energy
security concerns. Its suggestions to form part of the concretised policy projection,
in addition to the existing
channels on all dimensions,
are indeed pragmatic. And
‘Shaky foundations’ (Editorials, 28 March-10 April)
strongly sought the protection of democratic values
and stressed the need for
constructive debates in the
Parliament, unlike the passing of Aadhaar Bill, which
circumvented its essential
enrichment, by coming in as
a Money Bill.
Niche area
u
Apropos ‘Millennial sensei’ (Corporate Report, 28
March-10 April), the Globsyn group has found a niche
area in skilling for employability. The corporate world
still requires trainers to provide the requisite skills.
And the employees need to
look for the right ways and
means to get over the wrong
notions of ‘freedom’ to do
what they like. It is essential they realise the ‘actual
or real’ work context and
adopt an attitude of ‘I will
and I can’, forgetting the
ego and ‘academic freedom’
and think that their interests are merged with those of
the employers.
M . K UMAR
V AZUTHUR RAGHA V AN
Delhi
Bengaluru
u
Against privacy
Wasteful exercise
u
R . S . RAGHA V AN
A . A . V ARMA
Bengaluru
Kochi
Not healthy
Eye opener
With reference to ‘Shaky
foundations’ (Editorials, 28
March-10 April), I feel the
Supreme Court has rightly
rejected the plea for a wider
use of Aadhaar. The biometric data gathered under the
Aadhaar scheme definitely
goes against the citizen’s
right to privacy.
Mumbai
With reference to ‘Bad Medicines’ (Focus, 28 March-10
April), while many disputes
regarding irrational drugs
are in court, I feel something
needs to be urgently done
on the issue of ‘irrational
pricing of drugs’ too – especially of medicines which
are life-savers or chronic-disease linked. Today’s pricing
robs Peter (consumers) to pay
Paul (shareholders), which is
not a healthy business model
for a developing country like
India.
u
Delhi
The ‘bad luck’ scenario, wellenumerated in ‘Honest to
God’ (Column, 28 March-10
April) is an eye opener for the
new business tycoons like Sanjeev Goenka and Narendar
Bansal, who are trying their
luck in ipl. Also, let’s hope
bcci ensures a proper and fair
game, in the interests of players and investors, instead of
allowing it to be glamourised,
monetised and played in an
ungentlemanly manner.
Re:
‘Shaky
foundations’
(Editorials, 28 March-10
April), the debate on the
relevance of Aadhaar and
how it should, or should
not, have been brought in
as a Money Bill, are all well
taken. But how about the
crores of rupees, tax-payer’s
money that is, which were
spent on the whole exercise?
Where were the doomsayers, then? This has become
a common practice, now –
perform in haste and then
criticise at leisure! Nobody
realises the value of money
which could, but sadly,
won’t, be used for the uplift
of the poor.
Bengaluru
MAHESH K UMAR
u
K . U . MADA
u
B . RA J ASE K ARAN
No strategy
Please refer to ‘Terror in Brussels’ (Editorials, 28 March-10
April). These brutal attacks
are not shocking to the common man anymore, as they
have become rampant the
world over. No religion is in
favour of the killing of innocent persons, but the socalled agents of God, in their
self-interest, spread messages
totally wrong and poisonous, especially to the youth.
Sadly, the countries affected
by terrorism are yet to devise
a common strategy to combat the growing evil.
How come?
This has reference to ‘The
Maharaja will regain glory’
(Interview,
28
March-10
April). How does a product of
the Indian Railway Service of
Mechanical Engineers qualify to turn around a carrier
in the aeronautical sphere?
Would the reverse also hold
good – can an aeronautics
specialist be tasked with beefing up railway operations? A
synergy in operations across
the functional spectrum,
I feel, is seldom realised,
owing to the ‘imbalance’ in
the intangible but seminal
cultural ambience, impinging heavily on the productivity output adversely.
D . V . K A K ADE
Mumbai
u
Ruling the roost
rbi governor, in an aggres-
sive mood, has cut rates and
made it cheaper for banks to
raise funds. The rate cuts will
help the borrowers, as the
borrowing costs will be lower
for both house and car loans.
Most analysts expected the
central bank to cut interest
rates before the budget. rbi
and Rajan stand for robust
growth, while industry seems
to be myopic about the cut in
interest rate.
C . K . SU B RAMANIAM
Navi Mumbai
u
Cutting corners
This letter refers to the recent
collapse of Burrabazar Flyover
in North Kolkata. It was being
constructed by a company,
which was already blacklisted
by other state governments,
as also the Railways. Also, the
project was running behind
schedule; so, probably, the
builder may have cut corners
to meet deadlines.
B AL GO V IND
Noida
u
Corrigendum
With reference to the issue
dated March 28 to April 10,
2016, our milestone story
on Triton Communications, showed the pictures
of the directors, Ali Merchant and Munawar Syed
as captioned wrongly.
u
Please address your letters to:
The Managing Editor, Business India
14th floor, Nirmal, Nariman Point, Mumbai 400021.
Fax: (91-22) 2288 3940
[email protected]
Please mention your full name and address
u6u
a p r i l 2 5 - MAY 8 , 2 016
Editorials
Computing relief
APTEL ruling, directing CERC to fix tariffs afresh, is a landmark decision
T
he onset of the new financial year has
brought good tidings for at least two
power producers – Tata Power and
Adanis. Their woes over the increased prices
of imported coal, making the operations
of their power plants in Mundra, Gujarat,
would soon be addressed by the Central Electricity Regulatory Authorities (cerc), which
has been directed to compute relief for the
two companies under the power purchase
agreement’s (ppa) force majeure clause.
Last fortnight, the Appellate Tribunal of
Electricity (aptel) ruled that the changes
made by the Indonesian regulatory authorities, resulting in increased coal prices and
making the operations of the power plants of
Tata Power and Adani’s unviable, was reason
enough to invoke the force majeure clause and
hence a relook at compensating the two companies by cerc was warranted. It directed the
cerc to revise the tariffs within three months
from the date of order. In a landmark judgment, aptel ruled that, though it was beyond
the scope of the regulatory authorities to provide compensatory relief in case of increased
cost of generating power, especially in case
where the projects were won through competitive bidding, the changes made by the Indonesian government were of a magnitude to
warrant a review.
Tatas, which had initially bid for the contract based on imported coal had taken a 30
per cent stake in an Indonesian coal mine,
to ensure steady supplies at a pre-determined
rates. In 2007, it had agreed to supply at a levelised tariff of `2.26 per unit. However, with
the Indonesian government mandating the
setting of the prices on a monthly basis, the
estimation of the fuel cost of Tatas had gone.
With the cerc refusing to reset the prices on
this account, on the grounds that this was
a commercial risk and could not be grounds
for making changes in the ppa, Tatas had to
ensure huge losses.
Adanis, on the other hand, had inked two
ppas with two state governments: one, of 1,000
mw, with the Gujarat government to supply
power at `2.35 per unit; and the second, of
1,424 mw, with the Haryana Utilities for supplying power at `2.94 per unit, preferring
to sell the balance capacity of its 4,620 mw
directly to customers at market rates. To that
extent, it incurred marginally lower losses.
cerc, on its part, had acknowledged in the
past that the ppas were sacrosanct and, once
inked, could not be changed. However, it had
allowed compensatory relief to some extent
to mitigate the injury of the two power generators. Much would depend on what is the
fair tariff which cerc would fix in the coming
weeks, given that the prices of international
coal have come down considerably, thanks
to the slump in industrial activities, the very
fact that aptel had recognised the problems,
paves way for a bright future.
One may argue that in a commercial contract, it is the contracting parties, which have
to absorb all commercial risks, besides making a thorough life-cycle estimation of a project before tendering a bid. While this text
book approach is good in theory, in practical realities have to be taken note off. Tatas’
being what they are continued to honour
their commitments even though they took
major hits in their book. Adani’s of course
had the flexibility of not running its plant at
full capacity and, thereby, mitigating costs.
But the economic costs of keeping world class
assets created by these two players idle/running at half capacity in a power deficit country have to be balanced with the arduous
task of reworking the ppa and fixing a tariff
agreeable to both have also to be considered.
Should the government look at working on a
ppa, which allows fuel cost as a pass through
cost is a decision it has to take in future.
Many regulatory bodies, world over allow
for changes due to increase/decrease in fuel
cost. There are pros and cons in both cases.
And a blanket decision cannot be taken
across plants as the type of fuel is also a major
determinant as was seen in the plant build
by Enron in the 1990s. Tying up for fuel supplies is essentially a commercial decision and
best left to the contracting companies and
cannot come as a diktat of the government.
As of now, however, the decision of the cerc
in fixing revised tariffs within the parameters
of the ppa agreement is being keenly awaited.
And a favourable rate could again see more
investments flowing in power projects by the
private sector and also facilitate revival of
some stalled power projects.
u
u8u
a p r i l 2 5 - MAY 8 , 2 016
[email protected]
Editorials
Brexit dangers
Indian businesses could get hurt
T
he visit of Barack Obama to the UK to
weigh in on the looming referendum by
supporting ‘a strong United Kingdom in
the European Union’ has predictably left supporters of Brexit seething. Some Euro-sceptics
say that just like the US would never accept a
court in Toronto overruling the Supreme Court
or agree to somebody telling them to open the
border with Mexico, the UK too is entitled to
its own decision making. Indeed, the issue of
Britain’s sovereignty cuts to the heart of the
Euro-sceptics’ argument for leaving the EU.
For one thing, these Britons believe that they
don’t have control of their borders. The concept of free movement means that anyone in
the EU can settle in the UK, whether they are
liked or not. The ‘Remain’ campaign – led by
David Cameron, and backed by a majority of
the country’s mps – is delighted by the show of
support from Obama, who is still highly popular in Western Europe.
Obama is not the only one alarmed at the
risks of Brexit. It now turns out that the negotiations on the proposed India-EU fta are being
delayed due to the uncertainty over Brexit. The
EU’s demand – that India must agree to eliminate the ‘high’ duties on automobiles over a
specified period of time, as a pre-condition for
resuming the free trade agreement negotiations – seems to be a strategy to buy time till
there is more clarity on the Brexit situation
and its economic consequences, according
to senior Indian officials in the loop. Indian
businesses too are worried.
In recent years, Indian investments in Britain have grown in scale and size, making India
the third largest foreign direct investor behind
the US and France. Recently, ficci was forced
to wade into the row, warning that the flow
of investments will suffer if Britain chooses to
leave the EU as this will create uncertainty for
Indian businesses. So, New Delhi has a stake
in the ongoing debate in the UK and must
articulate its stand, although politely.
Due to the deep historical links, Britain has served for decades as the gateway
to Europe for Indian businessmen. London
remains the number one place for those
wanting to establish offices and businesses
in Europe, as it clearly has a lot of pluses in
terms of the law, the judicial system, taxation, the language above all. Indeed, one of
the attractions of investing in Britain, is that
you get the whole EU market along with Britain. If Britain exits from EU, the path to the
rest of Europe becomes less clear. For one
thing, dealing with the EU separately would
mean setting up an office, say in Hamburg.
And who would want to stay in Hamburg
after having lived in London? Indeed, the
loss of Europe would outweigh any possible
benefits in the minds of Indian investors.
There are about 800 Indian-owned businesses in Britain. The biggest presence is
that of the Tatas, which owns the huge car
manufacturing company Jaguar Land Rover,
Tetley Tea and the troubled steel business,
which it is selling. According to estimates,
Indian businesses in Britain have helped create 110,000 jobs in the country. On a visit
to London last November, Narendra Modi
told the British parliament that India invests
more in Britain than in the rest of the EU.
One of the major advantages enjoyed by
Indian businesses with UK subsidiaries is the
free trade agreements that the EU has signed
with a host of countries. If the UK moves out
of the EU, then it will also not have access to
all these benefits that these trade agreements
offer with other countries.
Therefore, these companies need to really
rethink their strategies. However, while big
Indian companies using Britain as a bridge to
Europe worry about its exit from EU, many
small Indian businesses based in Britain and
selling mainly to the domestic market feel
they will benefit if the focus turns to the British economy. These businesses prefer closed
door, low competition.
It is still two months before the fate of
Brexit is decided. It is not just the Indian
business community that is echoing concerns about Brexit. In Goa, thousands of people who acquired Portuguese nationality in
recent years are wondering how they will be
impacted. Goa was ruled by the Portuguese
until 1961. Most of those who have taken Portuguese citizenship have gone on to settle in
Britain using EU provisions that allow them
to live and work in any of the EU’s member
countries. But the Goans who have emigrated
now worry that their days in Britain could be
numbered if it exits the EU. u
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a p r i l 2 5 - MAY 8 , 2 016
[email protected]
Editorials
Keep it level
Put a cap not ban on surge prices
U
ber has changed the way people
commute around the world. Today it
commands a valuation of $68 billion
– higher than some car manufacturers like
General Motors and Ford. Looking at its success, many have copied its business model
across the world – including India with players like Ola. But every success has its downside too. Wherever Uber has gone there
have been protests from local taxi operators as they feel that their business model is
under threat. On the other hand, more and
more taxis are added to the Uber fleet as customers love this new way to travel, which
they think is cheap, comfortable and provides a door-to-door service that traditional
taxis do not.
In the recent past Uber has come under a
lot of criticism for its surge pricing. In India
too authorities have similar concerns. Bangalore has announced its intentions that it
wants Uber and similar service operators
to charge a fare not higher than that fixed
by the government for normal taxis. It also
wants each operator to have a licence and
regulate the same. So far this is just a proposal mooted in February. At the same time,
the Delhi government had strong objections
on the surge pricing when the ‘odd and even’
rule was introduced in April. Arun Kejriwal,
cm, Delhi, tweeted, calling it “highway robbery” and threatened to take strict action.
Both Ola and Uber have suspended surge
pricing in Delhi.
While surge pricing has become a bone
of contention, with rates often going as
high as five times, it should be noted that
the consumer is intimated as to how much
of a surge would be charged prior to making a booking. Before Uber came everyone thought hiring a cab was a function
of rate per Km plus waiting charges, if any.
If you hire a car with driver you multiply
the rate with the Kms you travel. But Uber
came out with an innovative price concept.
It divided the cost into three parts: base
fare, rate per Km, and time taken to commute (not the same as waiting charges). So
when it says the rate per Km for UberX is
`10 (ex-Mumbai), it creates an impression
that the rate is very cheap and lower than
what normal taxis charge. But in reality the
customer ends up paying not less than `16
per Km on Mumbai roads when they travel
20 Kms. And when traffic is heavy the time
charge keeps increasing. This is at the normal rate. But the moment the surge goes to
five times, the effective rate goes to ` 80 per
Km for a car which is not even a sedan. This
is where the problems arise. In India, most
cities are congested and it takes longer than
usual to reach destinations. Running costs
for cars have also come down significantly
due to lower diesel prices, as well as better engineering at the manufacturing level.
Yet during peak hours when you need a cab
the most – the price can go up as much as
five times!
While Business India is against a ban on
surge pricing – as any business should have
dynamism – we definitely advocate a cap
on the surge amount. In addition, this cap
should be applied only to the rate per Km
rather than the base fare as well as travel
time. Any cab operator would be happy to
make `25 per Km (including travel time) as
this would give him enough money to run
his business with decent profits. But this
kind of surge pricing is absurd. We all know
that India has a very poor public transportation system. Adding to it, most times normal
taxi drivers are either not available or refuse
the fare for various reasons. That leaves very
little choice for the desperate passenger but
to use a cab service like Ola or Uber. It is high
time the local authorities set a cap on surge
prices; as also limit the timings when surge
prices can be charged. One can understand
surge pricing during peak hours, but it has
been observed that surge pricing exists even
late in the evening or early morning hours.
Local authorities are well within their
rights to cap surge pricing as they have done
with various other services, to create a more
level playing field amongst all operators.
Media reports suggest that Uber is banned
or subject to serious restrictions in Belgium, France, Germany, Italy and Spain. We
believe that Uber is a beautiful concept and
hence completely banning surge pricing may
not be the solution. A cap would benefit all
players as their service would become more
affordable to many more consumers. u
u 10 u
a p r i l 2 5 - MAY 8 , 2 016
[email protected]
Listening Post
Nurturing growth
The domestic baby and child care
market is showing a good deal of
traction and sensing this as a potential growth area, Ajay Piramal-controlled Piramal Enterprises is gearing
up to explore opportunities. Under
pa l A s h r a n ja n b h au m i c k
Piramal: new opportunities
its healthcare vertical, the company’s
consumer product division is building
up a product portfolio to cater to the
needs of the baby care market, which
has been growing at a cagr of around
20 per cent for the last five years and
is expected to continue this momentum. Last year, the company acquired
the three-decade-old Little’s India,
the country’s oldest baby care products brand. Little’s has a wide range
of products (0-3 years) across six categories including feeding accessories,
baby skin-care, baby grooming accessories, travel, baby toys and bath and
bed time. The company is also planning to expand its portfolio by adding more categories. Piramal also has
its own brand Jungle Magic, under
which it caters to the age group (5-10
years) through three variants of children’s perfume. The company is looking to leverage its existing distribution
network for expanding its market in
this new segment.
Defence play
Engineering and construction major
l&t is betting big on the defence sector. Though present in the space for
more than three decades, the company is now all geared up to leverage
its capabilities following government’s efforts to indigenise the sector under its Make in India initiative.
In the last decade or so the company
has invested over `8,000 crore in
upgrading and putting up new facilities (currently 10 facilities) which are
into the manufacturing of various
missile systems, land-based weapon
launch systems, air defence and
artillery systems and upgrades, naval
weapon launch systems with fire
control solutions, bridging systems,
avionics, surveillance and radar solutions. The company which is working
closely with various defence agencies
including drdo, has currently got
an order book of `20,000 crore and
expects the same to reach around
`50,000 crore in the next three years
as the government goes on to declassify more areas in the coming years.
The company’s annual turnover from
defence is currently around `3,000
crore, and it is also looking at export
markets. The company is also in the
process of bagging an order worth
around `150 crore from Vietnam for
supply of interceptor boats.
Finance draws
The extremely successful foray of
Ajay Piramal into the financial sector
has spurred several other promoters/
groups to look at the sector afresh.
Hero Fincorp, a group company of
the Hero group of the Munjals, is
planning to raise around `700-800
crore of equity from private equity.
One of the aims is to do a clone-up
of Bajaj Finance. Hero Fincorp which
started as a captive unit for funding two-wheelers has in its new avatar as an nbfc (earlier it was a leasing
company) built a diversified portfolio which includes property and
sme finance. By 2016-17 it expects
to have a book value of `5,000 crore,
and will be able to finance around
650,000 vehicles. Reports indicate
that Abhinandan Lodha of Lodha
group fame is also fine-tuning plans
for launching a new housing finance
company. More recently Standard
Chartered Bank’s ex-director and
head, Asia, has also taken a 20 per
u 11 u
a p r i l 2 5 - M ay 8 , 2 016
cent stake in Mumbai-based Centrum Finance, with the hopes of making it into another India Infoline.
Collection drive
Post the stern action taken against
Vijay Mallya over the collection of
dues of his company Kingfisher Airlines, several promoters are seriously taking steps to pare their debts.
Along with this the action of rbi
governor, Raghuram Rajan, coaxing banks to clean up their books of
npa s and bring it down to a reasonable level by 2017 seems to be having an effect on bankers. Most of the
banks’ managements have mounted
an aggressive collection campaign
across sectors. According to one analyst the total collection of the banks
is likely to go up by 90000-110000
crore over the next few months. The
collection, besides bringing more
cash in the banks, will also improve
their lending ability. Banks will be
allowed to take exposure of 8-9 times
their collections. One banker feels
that if metal prices, both ferrous and
non-ferrous, remain at the current
levels or improve further the npas in
the metal industry, will go down.
Unconvinced
Quite a few jewellers who had closed
shops to protest against the levy of tax
in the budget, have decided to reopen
their shops. However outside Mumbai, some jewellers, especially in cities
like Surat in Gujarat remain unconvinced. According to some reports,
fearing harassment by government
officials despite the assurance given
by the finance minister, jewellers are
planning to shut shop permanently.
To begin with, they are reducing
their exposure to diamond jewellery
and once the inventories are liquidated they plan to foray into the textiles sector which is showing trends of
moving up. The results of some of the
listed companies and their prognosis
will clarify matters. One view is that
listed companies like Titan which
houses Tanishq will stand to benefit
from the consolidation taking place
in the industry. u
[email protected]
Newscast
G O V T. & P O L I C Y
Exports to touch
$250-260 billion
According to government
of India estimates, exports
are expected to touch $250260 billion during 2015-16,
down from $310.5 billion
achieved in 2014-15. For
April-February 2016, exports
had declined by 16.73 per
cent to $238.41 billion, as
against $286.3 billion during
the corresponding period
last year.
Safeguard bodies
to merge
The government is
contemplating a merger of
two bodies, which handle
anti-dumping and importsafeguard functions. At
present, anti-dumping and
countervailing measures
are administered by the
Directorate General of AntiDumping and Allied Duties,
which functions under the
commerce ministry, while
temporary restrictions on
the import of a product
or higher duties normally
come under the ambit of
the Directorate General of
Safeguards, which functions
under the finance ministry.
Cairn-Vedanta
merger in trouble
The government has said
that the merger of Cairn
India with Vedanta will
happen only after the
concerned parties have
paid for the shares the
Income Tax Department
has attached, following the
`10,247-crore tax dispute.
The merger can go ahead,
only if the 9.8 per cent
shareholding of Cairn
Energy attached by the
income tax department is
paid for; or an equivalent
bank guarantee is furnished;
or approval is given for the
issue of fresh shares.
will continue to stay. There
is an addition as well: every
airline will have to maintain
20 per cent of the total
capacity in the domestic
sector all the time.
Cotton seed prices
The government has said it
will keep regulating cotton
seed prices and will not
allow companies to exploit
farmers. It had issued an
order in December to control
cotton seed prices, including
trait or royalty value,
effective from 2016-17 crop
year (July-June).
Dividend declared
As many as 321 companies,
including five public sector
undertakings, have declared
dividends amounting
to almost `45,000 crore.
Finance Minister Arun
Jaitley had proposed in
Budget 2016-17 that, if the
dividend income earned by
Above average
monsoon expected
The India Meteorological
Department (imd) has
predicted above-normal
rainfall this year at 106 per
cent of the benchmark –
the Long Period Average
Jewellers call
off strike
After keeping shutters down
for more than 40 days
against the proposed 1 per
cent excise duty on nonsilver jewellery, bullion
traders and jewellers have
called off the strike. The
proposed duty would impact
unaccounted trade, as the
excise levy would require
jewellers to maintain
records of gold
purchase.
IIP up 2 per cent
The Index of Industrial
Production (iip) was 2 per
cent higher than the level it
was in February 2015. The
cumulative growth for AprilFebruary 2015-16 over the
corresponding period of the
previous year stands at 2.6
per cent.
( lpa). This comes after two
successive years of deficient
monsoon. imd has said
rainfall during the monsoon
months (June-September)
would be well spread out.
Rule for airlines
Flying on domestic routes
for five years, which the
government has been
insisting on as a prerequisite for an overseas
permit, may go. However,
the requirement of a
minimum fleet of 20 aircraft
a resident individual, huf
(Hindu undivided family)
or firm exceeds `10 lakh,
it will be taxed at the rate
of 10 per cent in the hands
of the recipient. Public
sector companies such has
Coal India, ongc, nmdc,
Nalco and hpcl contributed
about 42.5 per cent of the
total dividend amount
announced in March.
Coal import
bill drops
India has managed to reduce
u 12 u
a p r i l 2 5 - M ay 8 , 2 016
its import bill of coal by
`28,000 crore in 2015-16.
“Record coal production by
cil has led to a reduction
in import by 34.26 million
tonnes, which has resulted
in a saving of `28,070 crore
in foreign exchange during
2015-16,” Coal Secretary
Anil Swarup has announced.
Oil PSUs authorised
The government has given
full operational flexibility
to government-owned oil
refiners – ioc, hpcl, and
bpcl – in sourcing crude oil
in the spot market. Unlike
private companies, psu
refiners have to undertake
a tendering process even
for sourcing crude in the
spot market, which often
prevents them from taking
immediate price advantage
resulting from delays in
finalising contracts.
Centre, companies
stick to their guns
The Union health ministry
is not inclined to lower
the area specification
for pictorial warning on
cigarette packets, even as
manufacturers like itc and
Godfrey Phillips continue to
keep their factories closed.
The ministry had written
to different government
departments to ensure strict
implementation of the new
rules. Cigarette makers have
closed their factories since
1 April, claiming ambiguity
over the pictorial warning
on cigarette packs. The
government has already
changed the rules, making
it mandatory for cigarette
makers to put the pictorial
warning to cover 85 per cent
of a cigarette pack’s surface –
up from 40 per cent.
Native cotton seeds
to be promoted
Concerned that whitefly
and bollworm attack could
harm Bt cotton crop yields,
the Central government
will henceforth promote
native cotton varieties in
Punjab, Rajasthan, Gujarat
and Andhra Pradesh. The
Newscast
decision to encourage
cultivation of indigenous
cotton was taken by the
Agriculture Ministry.
Probing offshore
holdings
The government has ordered
a probe over the alleged
offshore holdings of about
500 Indians named by the
International Consortium
of Investigative Journalists
(icij). It has set up a multiagency team to investigate
these offshore accounts.
CO M PA N I E S
Perfect step
Hong Kong-based Vistra
group has acquired il&fs
Trust Company (itcl),
the largest corporate trust
services provider in India for
an undisclosed sum. Vistra
group has also decided to
elevate itcl ceo Navita
Yadav as managing director
of the firm. “Vistra shares
the same values we do and
exceeded our hopes for a
firm we can combine with
and continue our tradition
of focused client service,
innovative solutions and an
environment our employees,
clients and associates want
to be a part of. Joining
the Vistra group is the
perfect next step in the
development of our services
and expertise for the benefit
of our clients,” said Yadav.
Tata to sell part of
its Europe ops for £1
Tata Steel is selling its long
products business in Europe
for £1 to Greybull Capital, a
London-based private equity
firm, which is arranging
a £400 million (nearly
`4,000 crore) investment
and financing package for
the business. The deal with
Greybull Capital will allow
Tata Steel to focus on the sale
of its strip business in the UK.
Rakuten opens
office in India
Japan’s e-commerce
company Rakuten has
established a business office
in Bengaluru. In Japan,
it operates the flagship
Rakuten Ichiba marketplace
with more than 40,000
merchants. The company
also helps traditional
retailers go online. About
40 per cent of Rakuten’s
revenue comes from its
Japanese operations and the
company is increasingly
looking at international
markets for growth. Outside
Japan, Rakuten operates in
several markets including
the US, the UK, Brazil, Spain,
Malaysia and Indonesia.
Lloyd’s branch in
Mumbai
RBI cuts repo rate
The Reserve Bank in its first
bimonthly monetary policy
for 2016-17, has cut the repo
rate by 0.25 per cent to 6.50
per cent. However, it has
increased the reverse repo
rate by 0.25 per cent to 6 per
cent. rbi has also retained its
gdp growth forecast at 7.6
per cent.
Rupee volatility
will be tackled
Lloyd’s, a global player
in the insurance and
reinsurance market, will
apply for a reinsurance
branch in Mumbai.
According to the company,
an onshore branch will
provide Indian reinsurance
brokers with local access to
its underwriting expertise
and innovative reinsurance
solutions for complex and
specialist risks, including
agriculture, infrastructure
and disaster management.
The rupee volatility, related
to about $30 billion of
the foreign currency nonresident (fcnr) bank deposits
maturing in September,
will be tackled by healthy
forex reserve position, the
Reserve Bank of India has
said. As concerns are being
expressed over the maturity
of over $30 billion in foreign
currency non-resident
deposits (fcnr) and currency
swaps, raised during the
rupee crisis in 2013, rbi
governor Raghuram Rajan
added they are fully covered
with rbi’s forward purchases.
Interface launched
The National Payments
Corporation of India, an
umbrella organisation for
all retail payments system
in India, has launched the
Unified Payment Interface
(upi), which will be a single
application for accessing
different bank accounts.
Anyone who has an account
should be able to send and
receive money from their
mobile phone with just a
virtual address, which will
not have any bank account
details. SEBI panel backs
action against NSE
The Securities & Exchange
Board of India’s technical
advisory committee has
recommended action against
National Stock Exchange of
India, after finding evidence
that some traders on the
exchange had unfair access
to market data and trading
systems.
R E G U L ATO R S
Registration, a must
for food e-retailers
Any e-commerce player
selling food products or
dealing in food business
will have to get registered
with the food regulator
Food Safety and Standards
Authority of India (fssai).
The authority has told
online retailers that if they
are dealing in food products
or allied businesses, they
have to register with the
fssai under the Food Safety
and Standards Act, 2006.
Ban on use of
animal guts
The Food & Safety and
Standards Authority of
India has proposed to put a
total ban on the use of the
animal parts at any stage of
manufacture of edible silver
foil. It has also proposed to
fix thickness, weight and
purity of the silver leaf.
u 13 u
a p r i l 2 5 - M ay 8 , 2 016
u
L A N D M A R K S u
Appointed: Arun Dutta,
as country manager, gsn
Games India.
u Sumesh Sachar , as ceo,
kef Infra.
u Sharad Agarwal , as head,
Lamborghini India.
u A mitabh Coomar , as ceo,
GoJavas.
u C.P. Gurnani, as chairman,
nasscom.
u M ukesh Kumar Surana , as
cmd, Hindustan Petroleum
Corporation.
u N aushad Forbes, as
president, Confederation of
Indian Industry.
u M anish Sharma , as senior
executive, global
executive council,
Panasonic.
Promoted: Wolfgang
Prock-Schauer, ceo, GoAir,
as managing director.
Retired: Prabha Prabhu,
as chief executive officer,
Madison bmb.
Died: Satyanand Munjal,
co-founder, Hero Cycles
group – he was 99.
u
SEBI brainstorms
the future
sebi has held a
brainstorming session to
reflect and debate on its
future and scaling up of its
activities. The programme
was carefully designed to
meet three broad objectives:
reflect on and rediscover
sebi’s near, medium and
long term agenda, develop
leadership and team
building in the organisation.
Industry leaders including
Aditya Birla group chief,
Kumar Mangalam Birla,
Kotak Mahindra Bank vicechairman and managing
director Uday Kotak, and
Manipal Global Education
chairman, Mohandas Pai
also participated in the
three-day meet. The event
was attended by more than
100 senior sebi officers
including its entire top
management.
u
Follow-up
sanjay borade
Moving on
I
In January 2015,
Business India
reported that, due to
a shareholder’s suit,
Tamilnad Mercantile
Bank was not able
to hold its agm for
five years. The bank
has been allowed to
hold all the agms on
29 January
n the third week of November 2015, the
Madras High Court permitted Tamilnad Mercantile Bank to hold all its pending six agms (for 2009-10, 2010-11, 2011-12,
2012-13, 2013-14 and 2014-15) on a single
day. And retired justice R. Balasubramanian
was appointed chairman of the agm.
The bank held all the six agms on 29 January. This is the not the first time the bank is
holding more than one agm on a single day.
In 2004 too, it held seven agms on a single
day. Among the businesses to be conducted
was the election of its non-executive directors,
nod for ipo, issue of bonus shares, dividends,
etc. The results of the agms were submitted in
a sealed envelope to the high court.
At the end of February, the court made
public the results of the six agms, after turning down the Tamilnad Mercantile Bank
Shareholders Welfare Association’s appeal
for a recount. Justice V. Ramasubramanian
and Justice N. Kirubakaran of the Madras
High Court, in their interim order, said that,
if normalcy is to be restored in the functioning of the Tamilnad Mercantile Bank, a fullfledged board would have to assume office.
And, this was possible either by declaring the
results, subject to the outcome of the cases,
or by nominating someone to the board. The
second option was ruled out, since rbi was
not agreeable to the nomination route, as it
fears conflicts of interest. Therefore, declaration of the results was the only option, which
allowed the elected directors to assume
charge, subject to the outcome of the litigation pending in all these proceedings.
tmb board has 13 seats. While one is for
the managing director & ceo and two, for
u 14 u
a p r i l 2 5 - M ay 8 , 2 016
rbi nominees, the other 10 are meant for the
non-executive directors. And the elections
were held for these 10 seats. Reportedly, there
were two factions – one, led by S. Vaikundarajan of Tamil Nadu-based V.V. Minerals,
and the other, led by S. Annamalai of Tamil
Nadu-based Pioneer Asia group. And the faction led by S. Annamalai won the battle. Both
groups hold close to 20 per cent stake each in
the bank. The first board meeting comprising the newly elected directors was also held
in the first week of March.
The bank had also sought permission to
issue bonus shares (500 shares for every 1
share held), which received shareholders’
approval. tmb has an equity capital of about
H2.84 million, comprising 284,454 shares of
the face value H10. The bonus shares (500
shares for every one held) will increase the
tally of outstanding shares by about 142 million shares, which will take the equity base
to H142.51 crore.
As of March 2015, the book value of tmb’s
share was H91,203, while advances were
H19,336 crore and deposits stood at H25,560
crore. Currently, the bank has 460 branches
and has been led by H.S. Upendra Kamath,
the former cmd, Vijaya Bank, since July 2014.
Interestingly, all the items listed in the
six agms, barring two, received shareholders’ approval. The two items which did not
get approval were the items relating to giving permission to shareholders to go public; and regarding the borrowing powers of
the bank – these were listed in the last agm
(93rd) too.
The bank wanted to go public, because it
felt it might fall short of its minimum capital adequacy requirements as per rbi’s norms
in the next one or two years. Reports say that
many shareholders opposed the move at the
agm.
Owners of Tuticorin Spinning Mills had
a stranglehold over the bank. Rivals of this
group then decided to sell their shares to the
Essar group. The presence of the Essar group
in one of the general body meetings caused
a huge furore and they could not take control of the bank, also because the Reserve
Bank objected to an industrial group owning a bank. Consequently, the group sold
its shares to C. Sivasankaran. Later, he was
asked to reduce his holding of 67 per cent,
which he had bought from the Essar group,
leading to Sivasnkarn selling his stake to 18
buyers. However, rbi has objected to voting
rights being given to these shares. The issue
is still pending in the court. u
[email protected]
Follow-up
Taking a turn
K
eeping in mind the need to curtail lowmargin business, take Solutions sold its
wholly-owned subsidiary take 10 Solutions in
the last quarter of 2014-15. As a result, its revenues for 2014-15 fell by 10 per cent to H729
crore. However, the company has improved its
operating margins by 2 per cent to 21 per cent
now. According to the company management,
it’s the divestment of low-margin businesses,
which has led to the increase in the operating
profit. take Solutions had divested some of its
supply chain management (scm) businesses.
The improvement of its operating margin to
21 per cent has led to the company posting an
operating profit of H158 crore, as against H153
crore in the previous year. But lower interest
cost and depreciation resulted in the net profit
going up by 20 per cent to H70 crore.
For the nine months
ended December 2015,
In October 2013,
take’s revenues were
Business India
up 42 per cent to H738
crore, while net profit
wrote about TAKE
increased by 107 per
Solutions’ plans
cent to H89 crore. “We
to curtail certain
are pleased to begin
business lines
2016 on a positive
in supply chain
note, with our Q3 revemanagement,
nue at annual revenue
run rate approachwhich did not add
ing H1,000 crore,” says
long-term business
H.R. Srinivasan, vicevalue. It is now
chairman & managing
concentrating on
director. “This reflects
the life sciences
the success of our strategy to emerge as a 360
business.
degree player in the
niche domain of life
sciences. And, we plan to continue to be a significant player in this space.”
For the third quarter ended December 2015,
the scm business contributed 25 per cent of
the revenue and life sciences business, 72 per
cent, while miscellaneous activities accounted
for the balance 4 per cent. For the full year
ended March 2015, while scm has contributed
29 per cent of the revenue and life sciences,
64 per cent, the miscellaneous accounted for
the balance 7 per cent. In 2012-13, scm had
accounted for 43 per cent and life sciences, 49
per cent. Clearly, take is concentrating on the
life sciences business.
The scrip is now trading at H158.1, which is
nearly three times its book value of H54.6. take’s
current market cap is H1,935 crore. u
l l l l l l l l l l Flashback
30 YEARS AGO
Going public
India’s stock markets are in the grip of a ‘new issue’
mania. A record sum of `1,900 crore was mobilised
through capital issues in 1984-85, but this year’s
figure has exceeded it, touching `2,500 crore. With
government policies being favourable and investors eager to deploy even large amounts of money
in the stock markets, more and more closely held
companies are expected to go public. And this
BUSINESS INDIA,
would clearly mean a stupendous growth in the
Feb 24-Mar 9
size of the Indian stock markets.
NOW For 2015-16, as many as 24 main board companies collectively raised `14,461 crore. If one includes the smes (small and medium
enterprises), the amount comes to `14,772 crore, as against `3,019 crore in
2014-15. In 2016-17, some 25 companies have received sebi’s permission to raise
over `12,500 crore. It may be pertinent to mention that in 2010-11, the amount
collected through public issues had totalled `33,098 crore.
1986
20 YEARS AGO
Moving centre-stage
The Madras-based Murugappa group, which
includes companies like eid Parry, ti Cycles and
Carborundum Universal, and is led by M.V. Subbiah, currently runs the multi-product `1,569 crore
group. “We hope to be a `5,000 crore by the end
of the decade.” He said.
NOW The Murguappa group today is a `26,900 crore
group, with companies such as Carborundum UniverBUSINESS INDIA,
sal, Cholamandalam Investment & Finance Co, CholaJan 15-28
mandalam ms General Insurance Co, Coromandel
International, Coromandel Engineering Co, eid Parry,
Parry Agro Industries, Shanthi Gears, Tube Investments of India and Wendt,
under its umbrella. The group has forayed into general insurance and changed
its logo in 2010. M.V. Subbiah has retired, with A. Vellayan and M.M. Murugappan, who belong to the family, now running the group.
1996
5 YEARS AGO
On a hyperbola
While textiles remains Arvind’s core business, it has
diversified into real estate, technical textiles and composite material used by automobiles and aerospace
industries, brands & retail, shirtings and woven fabrics. Its present turnover touches `4,090 crore.
NOW Arvind’s consolidated sales for 2014-15 stood at
`7,925 crore, with textiles contributing `5,069 crore
(64 per cent); brands & retail: `2,350 crore (30 per
cent); real estate: `109 crore (1 per cent); and others:
BUSINESS INDIA,
July 24
`397 crore (5 per cent). The dominance of textile business is still present. Arvind has forayed into e-commerce in 2014 through Arvind Internet. The management sees e-commerce as
a key growth driver for the group and aims for a `1,000 crore activity in a few
years. With effect from April 2015, Arvind has demerged its real estate business from its wholly-owned subsidiary.
2011
[email protected]
u 15 u
a p r i l 2 5 - M ay 8 , 2 016
C
hennai-based entrepreneur Anand P. Surana
has promptly made the new
award his Icegen Computing Inc won, a part of
his e-mail signature. “We
F
rom solar pumps to rooftop solar power generation is “a natural step of
diversification”, says Rounak Muthiyan, director,
Span Pumps. The Punebased company, which makes
both manual and solar-operated water pumps, last week
announced its foray into the
new segment under a separate identity, Kalpa Power.
“We have so far supplied
more than 6,000 solar pumps,
equivalent to about 5MW of
solar energy. This has helped
us to acquire the necessary
domain knowledge and thus
have a complete ecosystem to
run this business,” Muthiyan
explains. Initially targeting
are absolutely elated!” says
Surana. “This is by far the
most prestigious award. It
will take us places: Fortune
500 companies do take the
research and the results of
it extremely seriously and
honour us. We have already
started seeing their results
with customers, both old and
new ones!” Icegen, which
has offices in the US, the UK,
Europe too, bagged Frost &
Sullivan’s “Customer Value
Leadership Award” for excellence in best practices in rfid
and rtls Solutions in 2015.
Besides these specialisations,
the company is also into
a range of other activities
like software development,
asset management solutions,
healthcare solutions, contract services, mobile and
tablet apps, revenue cycle
management (rcm), blended
learning, cloud-based solutions and analytics. It
increases its clients’ productivity with high quality at
a lower cost as a result of its
global operations capability,
with its core focus on developing unique, valuable and
innovative enterprise-class
solutions targeting the medical and healthcare, banking
and financial and education
sectors. Its founder- ceo himself is also chairman of cii
Start-upreneurs, which organises an annual event to support, help and give exposure
to start-ups. u
Maharashtra and ncr, Kalpa
aims to tap the good potential
it sees in these geographies for
both commercial and industrial set-ups, which have high
power costs and ‘not consistent’ supply. The company
will provide complete design
optimisation and implementation support for groundmounted as well as rooftop
solar power generation. It also
has a “large pool of investors, who have an appetite for
about 150mw of solar power
generation plants” – translating into a value of about ` 900
crore. Kalpa uses advanced
gis-based modelling for solar
generation forecast, impact
of shadows of rooftops and
wind load analysis. It has also
developed proprietary solutions for automated cleaning
of solar power plants as well
as remote monitoring systems
from its control centre. u
realise their full potential and
capitalise on their talents.
With hdfc Life YoungStars
we have gone a step further and created a platform
where parents can help their
kids to showcase, and nurture their talents under the
guidance of our four talented mentors,” said Sanjay
Tripathy, senior executive
vice-president and head –
marketing, analytics, digital
and e-commerce. This initiative will invite talented children between the ages of 6
and 14, from across the country to participate in the competition by uploading their
video on its website www.
hdfclifeyoungstars.com. u
I
n keeping with hdfc Life’s
digital-first focus, the private life insurance company
has announced the launch of
India’s first ever digital talent
hunt for kids in categories
like dancing, singing, musical instruments and comedy. hdfc Life YoungStars is
driven primarily on the digital medium. “The insight for
this platform came from the
understanding that parents
are the first to spot a child’s
potential talent. hdfc Life
has always partnered with
parents through financial
planning to help children
u 16 u
a p r i l 2 5 - M ay 8 , 2 016
M
ahindra & Mahindra’s entry into
the branded dairy segment
aims to connect farmers
with customers who look
for fresh and high-quality
dairy products, according to
Ashok Sharma, president
& chief executive, Agri and
Africa & South Asia Operations. “Our Saboro milk
provides the assurance of
cream and nutrition, which
the our research showed to
be customers’ two biggest
requirements,” says Sharma,
who was in Indore to launch
the tractor major’s latest initiative in its ‘farm to fork’
model. “All our milk variants are specially fortified
with Vitamins A and D.”
Mahindra’s inherent farmer
connect and robust quality
systems, he says, will be a
big plus for Saboro – which
is a name derived from the
Spanish word Sabor, meaning taste. Mahindra Agri
Business also markets fresh
fruits under the brand. The
milk, in pouches, is available in four variants – double
toned milk, full cream milk,
protein rich milk and cream
rich milk. It will now introduce a range of fresh dairy
products in Madhya Pradesh
over the next one year. It
has put in place a technologically advanced milk
collection supply chain in
some 70 villages near Indore
where it works directly with
farmers to ensure that they
get the best value for their
milk and the consumers
get milk that is of the highest quality. u
C
Mhaske Leisure. The Fern
Residency is not only the
company’s first hotel in
Pune, but it is also the only
hotel in the heart of Pimpri midc . Mhaske Leisure
is planning to open several
more hotels all over India in
this calendar year, including
one more in Mumbai, and
others in Udaipur, Lucknow,
etc. Concept Hospitality is
an Indian-owned group,
managing ` 200 crore worth
of assets. u
oncept
Hospitality, which operates 88
hotels in 11 countries, has
inaugurated its first hotel
in Pune, The Fern Residency. The unit, a boutique
40-room budget hotel, is
owned and promoted by
Mhaske Leisure. “We are so
happy with the result and
corporate enquiries that we
are receiving, that we are
scouting for two more locations in Pune,” says Mahesh
Mhaske, executive director,
T
he Indian manufacturing
sector is going through an
exciting phase, says Shishir
Joshipura, managing director, skf India. “A growing working population, an
expanding middle-class, and
increased investments in
research and development
are some of the growth drivers,” says Joshipura, who was
speaking at the 13th edition
of the India Conference-2016
at Harvard Business School.
“Today, India is perceived as
an attractive destination for
manufacturing.” Customers
in the country, he points out,
nowadays prefer tailor-made,
application-specific technology and solutions rather than
accepting and adopting solutions from advanced markets. And investments in key
segments like infrastructure,
farm mechanisation, defence
and railways, as well as the
government’s capital spend,
are driving near and midterm growth. The conference, hosted by the graduate
students of Harvard University, brought together Indian
leaders from diverse backgrounds to talk about India’s
path to global leadership. The
Indian manufacturing sector,
they explained, is expected
to contribute 25 to 30 per
cent of the gdp and create
90 million jobs by 2025. skf,
a leading global supplier of
bearings, seals, mechatronics, lubrication systems and
services, has manufacturing plants in Pune, Bengaluru, Mysuru, Haridwar and
Ahmedabad.
u
formed strategic alliances
with leading service providers in the space of accounting,
legal,
recruitment,
insurance, web services and
a bouquet of essential services, allowing them to avail
discounted and preferential
access,” says Amit Ramani
co-founder of Awfis which is
also partnering with leading
realty companies and hospitality players, and aggregating the under-utilized
work-spaces, meeting rooms,
for creation of Awfis centres. u
I
n less than a year, Awfis
Space Solutions Pvt
Ltd has emerged as India’s
largest co-working company,
offering 1,500 seats across
Mumbai, Delhi and Mumbai
starting from the attractive
price of only `400 per person
per day. Awfis is the first company in this space which has
introduced a simple mobile
app that enables users to find
and book offices and meeting
spaces in its centres across the
country. Just like taxi booking
apps, users can book workspaces and meeting rooms
in real time. Bookings can be
made for durations ranging
from 1 hour to 11 months. The
start-up is targeting 12,00015,000 seats by December
this year, across seven major
cities. “To bring in more value
to our customers, we have
u 17 u
a p r i l 2 5 - M ay 8 , 2 016
M
ondelez India Foods
Private Limited has
announced the imminent
launch of its new biscuit
brand, Cadbury Bournvita
Biscuits in India. This new
biscuit will target the morning segment and will be
available on shelves from 1
May onwards. Bournvita Biscuits is the company’s second brand in the biscuits
category after Oreo, which
was launched in 2011. With
this Mondelez India expands
its category footprint from
creams to cookies. “Mondelez International is the
world’s leading Biscuits Company and India is a top priority for us. We see tremendous
opportunity for growth in
the Indian biscuit category.
Bournvita Biscuits brings
together the best of our
global category expertise and
innovation with our local
insights and experience,”
says Chandramouli Venkatesan, managing director.
The launch will be supported
by a high decibel integrated
marketing campaign and a
disruptive visibility strategy
in modern and traditional
trade stores. Bournvita Biscuits will be available exclusively through a pre-launch
on Snapdeal, India’s largest online market place, very
soon. It will then be available
across all major urban and
rural retailers from May. u
Visiting
E
tienne Sanz de Acedo,
global ceo, International Trademark Association (inta), a global body
of trademark owners, was
recently in India. With 6,700
members across 190 countries
(including India) inta says
the main concern of global
brands in relation to India
are the challenges relating to
Indian laws. The association
is talking to the Central government for drafting a voluntary code of best practices
to combat counterfeits in
e-commerce. “India is on the
verge of becoming a global
P
ower and automation
multinational abb has
entered into an agreement
with Indian Institute of Technology Madras for r&d in
microgrids, energy storage
and green energy. Microgrids
– decentralised power grids
that use renewable energy
generation to supply power
in remote locations and rural
areas – are an emerging field.
Ulrich Spiesshofer, ceo,
W
e too have suffered
from terrorism emanating from the territory of
Pakistan, most significantly
in Afghanistan, and those
who do it should be brought
to justice and brought to
account,”
said
Ashton
Carter, US defence secretary,
while addressing a joint press
conference with defence
minister Manohar Parrikar
after holding bilateral talks
in New Delhi. Explaining the
economic powerhouse. With
the National Intellectual Property Rights Policy expected to
be released soon and great
abb, said microgrids can
help provide electricity supply to over 300 million people without access to power
in India. The collaboration
will focus on energy storage –
battery technology – and the
control side of microgrid solutions. Bhaskar Ramamurthi,
director, iit Madras, said the
objective is to provide a solution that meet a household’s
power needs. iit-m is in the
process of launching a battery engineering laboratory
in which abb will be a partner along with leading corporates. The agreement provides
collaboration in microgrid
technology, energy storage
solutions and a large number
of internships for iit students
with abb. Ashok Jhunjhunwala, Professor, Department
of Electrical Engineering, iit
Madras, said a key objective
will be to bring down the cost
of power.
u
enthusiasm surrounding the
government’s ‘Make in India’
initiative, this is an exciting
time for the country and for
the global trademark community. inta is part of a working
group announced by India’s
customs commissioner in February for drafting a voluntary
code of best practices in combating counterfeits in e-commerce,” said Acedo. inta has
also been in discussions with
the department of industrial policy and promotion
and controller general of patents, designs and trademarks
in relation to collaborative
trademark examiner seminars and children’s education on ip. The association is
working to develop joint programming and projects with
global and Indian ip and
industry associations on pertinent issues, such as curbing counterfeiting in India.
This year, inta also plans
to launch its global anticounterfeiting initiative, the
Unreal Campaign, in India,
aimed at creating awareness
especially among students
(aged 14-18) about the dangers of counterfeiting and the
importance of trademarks.u
A
irbnb, the world’s leading community-driven
hospitality company, has
announced a strategic partnership with the Times
group. The tie-up is part of
Airbnb’s plans to focus on
developing the Indian travel
market. The Times group will
drive awareness of Airbnb
accommodations, and help
the San Francisco-based company create a localised presence for India. This is a key
partnership for Times Global
Partners, an initiative from
the Times group, that supports the launch and expansion of emerging global
digital companies in India.
Commenting on the partnership, Satyan Gajwani,
managing director, Times
Internet said, “We are excited
to partner with Airbnb to
transform the way Indians
travel. We look forward to
working closely with Airbnb
to evangelise community-
US’ relations with Pakistan,
he said, “We have a relationship with Pakistan which we
value and we also pursue it
in our interest. We have no
intention in conflict between
India and Pakistan in any
way.” Maintaining that the
US’ overall policy towards
India was completely different from the way it was
decades ago, Carter said, “It
is a thing of the past for us
to think about India only in
u 18 u
a p r i l 2 5 - M ay 8 , 2 016
driven hospitality.” Nathan
Blecharczyk,
co-founder
& chief technology officer,
Airbnb, said, “We are excited
about the opportunity that
India presents, and to have
one of the most respected
partners in the Times group.
We are working on adapting
our product for the Indian
market so that Indian travellers can live like a local anywhere in the world.” u
relation to Pakistan or Pakistan only in relation to India.
That’s the distant past.” Dispelling apprehensions in
India over the US’ offer to
sell F-16 fighter aircraft to
Pakistan, he said, “We have
a different vision of India; it
is one of the defining partnerships of the 21st century
in which all sorts of things
are going to be possible in
the future as we share many
interests.” u
Visiting
C
hris Young, senior vicepresident and general
manager, Intel Security,
was in Bengaluru recently.
The company has its largest
global development site in
India, where people develop
products and service solutions that are sold all over the
world. “Indian companies are
quite sophisticated in their
views on cybersecurity. The
traditional companies such
as healthcare and manufacturing as well as the new age
e-commerce companies have
a good understanding of the
cybersecurity problems and
solutions they need to put in
place to be effective. In fact,
some of the biggest Indian
companies are on a par with
their western counterparts
when it comes to protecting
their enterprises,” Young said.
Talking about cyber threats,
he said: “The latest threats
are more in mobile. Lots of
organisations have not viewed
mobile as the attack factor that
they need to worry about protecting in the same way they
think about pcs. The other
threat lies in ransomware,
an activity which we will see
continue to rise. Ransomware is an attack type mostly
used by criminals as they try
to extract money from users.
They make the user download
an encryption programme
that encrypts their file and
they ask for money in return
for the files to be decrypted.
It attacks both businesses and
consumers.” u
that Avaya today is a software and services company
that recruits the best talent in
the country spanning across
sales and services operations
and its r&d hubs in Hyderabad, Bengaluru and Pune.
He said that Avaya India r&d
generates 12 per cent annually of Avaya’s global patents. Nidal Abou Ltaif, Avaya
International president, said,
“t-hub promotes entrepreneurships, creates opportunities and fuels innovation.”
Avaya is holding its third
annual cxo India Summit
in Taj Falaknuma Palace in
Hyderabad, where 50 of the
country’s top cxos are meeting with Avaya executives on
innovation and the digital
transformation agenda. u
cheap labour and the key
drivers going forward will be
value-addition and technology, he adds. “There would
continue to be opportunities for the Indian job market for sure. But substitution
of certain jobs by technology
would mean that the role of
labour and labour arbitrage
is not that important. So, I
think the technology solutions to issues have an impact.
I think technology is going
to play a role in what those
opportunities, are going to
be in the future,” Kaye, who
heads one of the world’s largest management consultancies, said on a recent visit to
India. “With the increasing
levels of sophistication and
artificial intelligence, I don’t
think it is cheaper labour
that is going to be the driver,”
Kaye said. Allaying concerns
that the Indian job market
would take a hit, he said technology is going to play a role
and “the challenge is going
to be how do companies and
individuals in companies add
value and how do we manage
the situation where jobs can
be replaced by technology.”
Talking about the Indian
market, Kaye said he is excited
about the opportunities for
his group, which has nearly
7,000 consultants working
with it across the world. “We
are also excited about the tremendous talent that exists
within India u
A
vaya’s – a global technology company – leadership last fortnight met
with Telangana it minister,
Kalvakuntla Taraka Rama
Rao, and discussed a number of initiatives to support
the state’s ambitious plan
to become India’s leading
state for technology innovation. Rao presented to Kevin
Kennedy, ceo, Avaya, the
Digital Telangana initiative, a grand plan to build
and deliver connectivity to
more than 8.5 million households in the state, which is
scheduled to be completed
by 2018. Kennedy explained
T
here are many of opportunities in India’s job
market, says Stephen D.
Kaye, ceo, Korn Ferry
Hay group, a US-based consultancy giant. The outsourcing story is no longer about
u 19 u
a p r i l 2 5 - M ay 8 , 2 016
F
rench information technology services firm,
Capgemini group, with
half of its global workforce in India, is planning
to make the country its
`backbone’ by doing more
research and development
(r&d) work out of India.
Capgemini acquired Bengaluru-based it services
firm iGate Corp. in July for
around $4 billion (about
`26,500 crore), creating an
entity with a combined revenue of $14 billion. Paul
Hermelin, chairman and
chief executive, Capgemini, who was in the country
recently said, “Following
the iGate integration, we
wondered how we can put
India at the heart of the
group. The question is: is it
the heart, the brain or backbone? For me, it is the backbone of the group because
it (India) holds the group
together.” Inaugurating a
50-acre campus in Mumbai,
Hermelin said the company
will set up a new innovation
centre within the campus.
Called The Applied Innovation Exchange (aie), the
centre is expected to focus
on enhancing Capgemini’s service offerings, which
would be delivered to global
customers.
Capgemini,
which has eight such centres across the world, plans
to accommodate most of its
Mumbai-based workforce in
the new campus that has a
capacity of around 30,000
seats. Besides, it plans to
hire 25,000 to 30,000
employees in India over the
next one year. u
Business Notes
Casting a brighter future
sa n jay bor a de
The domestic foundry industry gears up to
bridge the skill gap to meet growing demand
T
he $18 billion domestic foundry
industry (metal castings sector) has drawn up a major skill
development plan to bridge the skillgap the sector is faced with, in its
attempt to meet the growing demand
of castings in the wake of government’s Make in India initiative. The
Institute of Indian Foundrymen (iif),
the apex body of 5,000-odd foundry
units in the organised sector, has prepared a roadmap, which will ensure
imparting of desired skill at almost
all levels of workforce.
Currently, about 2 million people
are employed in the industry directly
or indirectly, with an additional 1.5
million people required to handle
various processes of the industry in
the next 6-8 years. As a result of the
ongoing thrust on manufacturing,
the foundry sector, being a feeder
industry, will need to expand its production three-fold to about 30 million
tonnes from the current 10 million.
“Keeping in mind the emphasis
given on manufacturing, we have
to increase our production significantly, which will be possible only
when our industry has the adequate
manpower to back up that growth,”
says K. Samaraj, president, iif. “Not
only do we have to employ more
people, but we also will need to have
a workforce, which can meet our
skill requirement. Moreover, upgradation of the existing manpower is
also called for”.
Kolkata-based Centre of Education & Training has been appointed
as the nodal agency to implement
this pan-India skill development
programme across seven states –
including West Bengal, Tamil Nadu,
Karnataka and Maharashtra. iif has
devised these training courses (two
week long), which will be on job at
the floors of these foundries. Apart
from English, the course materials
will be in regional languages too. A
team of trainers have also been developed. The iif-training programme,
to be launched in the next two-three
months, will train more than 25,000
people in the next four-five years.
Moreover, there are also efforts
to strengthen and upgrade the
institutions and training facilities.
Towards this end, iif, in association
of with the government, is planning to strengthen the capacity and
capability of institutions indulging in imparting skill and training
to manpower, who are employed
in the foundry industry. There are
also moves to revamp the National
Institute of Foundry & Forge Technology (nifft), Ranchi, and set up a
u 20 u
a p r i l 2 5 - m ay 8 , 2 016
couple of more such institutions in
the country.
Recognising the significance of
the foundry industry in the manufacturing sector, the Union commerce
ministry has set up a Development
Council to address its issues (including skill and technology gap) in a
proactive manner. Headed by the
secretary, the Department of Industrial Policy & Promotion (dipp),
under the Union commerce & industry ministry, as its chairman, the
25-member council is deliberating
on various issues to put up an efficient production base in the country.
It has senior representatives of various ministries, leading ceos from the
industry, academicians from major
educational institutions, as also iif
representatives.
Gaining momentum After undergoing a robust growth period of more
than five years till 2010, the domestic
foundry industry has struggled in the
last few years on account of slowing
demand in domestic as well export
markets. However, things are expected
to change and the industry is likely to
gain momentum going forward. Most
of the demand is expected to come
from core sectors like automobile,
construction, defence, infrastructure
and agriculture. In the last decade or
so, the Indian foundry industry has
emerged as the third largest producer
of castings in the world after China
(40 million tonnes) and the US (about
12 million tonnes).
“Over the years, we have been trying to diversify our portfolio of industries we cater to,” says A.K. Anand,
director, iif. “Sectors like defence
present huge opportunities for us
and we are gearing up to tap them
with much improved capabilities”.
Apart from meeting the domestic
demand, the industry is exporting
castings worth $5.2 billion (including finished components) and there
is huge potential to improve its market share by increased value addition
and diversification to newer markets.
It is estimated that the exports could
go up to about $10 billion in the next
few years.
u AR B IND GUPTA
[email protected]
Business Notes
Tr ac to r s
Tracking
growth
M
ahindra & Mahindra’s Farm
Equipment Sector (fes), a
leader in the segment with 41 per
cent market share, has introduced
five new tractor models ranging from
30-45 hp under the brand Yuvo.
These products will be added to fes’s
existing range of 15-57 hp tractors.
“We always believe that our
responsibility is to bring the best
and the latest products to our customers. A few years ago, we set up a
new technology benchmark for the
tractor range offered in India. We
invested over R500 crore in Mahindra Research Valley (mrv), our r&d
Centre in Chennai. The first product from the new platform to come
out of mrv in 2014 was ‘Novo’ in the
50-plus hp segment. The Novo is the
most technologically advanced tractor available today, with the latest
features for the comfort of farmers.
It has helped us to increase our market share with 12,000 happy customers. Our latest offering of Yuvo range
of tractors demonstrates the commitment of Mahindra to enable farmers
to improve their yield and productivity,” says Pawan Goenka, executive
director, Mahindra & Mahindra. Built on a new platform, Yuvo can
be used across more than 30 different
farming applications. The advanced
technology of the Yuvo range helps
serve the diverse needs of farmers –
from land preparation to harvesting
as well as post-harvesting requirements. It is designed to deliver best
output in farming operations in any
soil conditions.
The 30-45 hp tractors contribute 75 per cent of the total industry.
“The Yuvo is designed based on consumer insights from varied farming
applications across the country,” says
Rajesh Jejurikar, president & chief
executive, farm equipment & twowheeler division, Mahindra & Mahindra. “This will further strengthen
our position in the tractor market”.
Mahindra has followed a policy of talking to customers before
it developed a new product. So, the
team collected feedback from customers across 12 states and these 7,000
odd inputs went into developing
Yuvo, which was then put through
140,000 hours of lab and field testing. Yuvo comes with an industry
best 400-hour service interval, thus
reducing visits to the service station.
The new tractors are available in 400
outlets in 15 states, where the price
starts at R4.99 lakh. Yuvo is manufactured at its plant at Zaherabad, Telangana, and is available in the domestic
market. The company also has plans
to export it to overseas markets. The
other players in the tractor business
are Tafe, John Deere, Sonalika and
New Holland.
New age technology Mahindra
also enjoys a strong presence in the
agri-business and closely works with
farmers on four factors – input costs,
productivity, less wastage and higher
productivity. These measures help
double the income for farmers.
Another initiative that has been
started by Mahindra is towards the
welfare of farmer community. The
company has forayed into agricultural equipment rental services with
the launch of ‘Trringo’, which operates as a franchisee model, and will
effectively bring in new age digital
technology to the tractor rental business. Trringo is a first of its kind in
the tractor rental business for those
farmers who may not be able to
u 21 u
a p r i l 2 5 - m ay 8 , 2 016
afford their own tractors and equipment. Mahindra wishes to tap into
the unorganised tractor and farm
equipment rental business across the
country, which is estimated to be
worth around R15,000 crore.
The latest icra report on the tractor industry, says that tractors’ domestic volumes are expected to grow at a
moderate pace, with an outlook of a
growth in tractor volumes (domestic
+ exports) of 4- 6 per cent in 2015-17,
with any major recovery in demand
to happen over the medium term.
On the long term front, icra continues to maintain a volume cagr
of 8-9 per cent for the tractor industry over the next five years, as longterm industry drivers remain intact.
India continues to remain a medium
hp market, with 31-50 hp constituting about 80 per cent of the total
domestic sales.
Mahindra’s total tractor sale
(domestic and exports) in 2015-16
was 213,591 units, as against 234,025
for the same period last year. After
two consecutive years of poor monsoons, which have led to a drought in
many parts of the country, affecting
farmers’ income, there is some good
news for tractors and the automotive industry – the India Meteorological Department’s prediction that the
rains are expected to be above normal
this year. This augurs well for farmers
and the tractor industry in general.
u S . M . B OOTHEM
[email protected]
Business Notes
A M U S E M E N T P AR K S
Growing glee
W
capital city with its offering 25 land
based attractions and 18 water-based
rides that have a capacity to cater
to more than 10,000 visitors a day.
Built in a record 15 months at a cost
of `250 crore, Wonderla Hyderabad
also looks set to add to the top-and
bottomlines of the parent Wonderla
Holidays Ltd, a listed company that
clocked a turnover of `181.87 crore
in 2014-15 and recorded increases
of 25.7 per cent and 35 per cent in
gross revenue and profit after tax,
respectively, for the third quarter of
the following financial year ending
31 December 2015. The amusement
parks accounted for nearly two-thirds
hen Appu Ghar was inaugurated in 1984 by the then
prime minister Rajiv Gandhi, it was
the beginning of India’s amusement park industry, which has since
grown to a `4,000-plus crore – and
growing – business. The pioneer,
named after the Asiad mascot – an
elephant named Appu, found an
instant connect with children. But it
had to cease operations in less than
a quarter of a century because the
India Trade Promotion Organisation
(itpo), which owns Pragati
Maidan in Delhi, stopped
extending its three-year
leases on the 63.3 square
metres of land in 1999.
International Amusement
Limited, the company
which ran the park, went
to court but finally lost
the case and had to shut
down in 2008.
While Appu Ghar was
reincarnated in Delhi,
Noida,
Gurgaon
and
Jaipur, a slew of other
operators
have
since
entered the scene. The Going up – and down! And up again...
first of these was Essel
World & Water Kingdom in Mum- of the revenue, while the resort busibai, which came up in 1989. Today, ness brought in the rest.
it is still India’s largest amusement
and water park as well as Asia’s larg- Safe environment “It has been
est theme water park, drawing an our endeavour to extend the best in
estimated 1.8 million visitors annu- amusement park technology with a
ally – of whom about 300,000 are safe entertainment environment to
students – for its 30-plus rides, water our guests,” says managing director
park, bowling alley, ice skating rink, Arun K. Chittilappilly – whose father,
and Aquadrome dance floor.
company founder-chairman KocOthers came up all over the coun- houseph Thomas Chittilappilly, pertry in quick succession, with those sonally supervised the setting up of
rated in the top six by various Web- the first Wonderla in Kochi in 2000.
sites being Adlabs Imagica in Mum- Originally named Veegaland after
bai, Kingdom of Dreams in Gurgaon, his own V-Guard which he set up
Ramoji Film City in Hyderabad and in 1977 to make voltage stabilisers,
Wonderla in Kochi and Bengaluru. the Kochi park, built on 14 hectares,
Today, the last of these has three offers 58 state-of-the-art rides and
parks, with its newest one set to give other allied facilities. That in BengRamoji a run for its money. Inaugu- aluru, on a 33-hectare property, has
rated by Telangana tourism minis- 62 land, water, hi-tech and kids rides.
ter A. Chandulal last fortnight, the Wonderla Resort, which adjoins the
20-hectare park promises “to redefine latter, has 84 luxury rooms, four banthe fun landscape” in the new state’s quet halls, a heated swimming pool,
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a p r i l 2 5 - m ay 8 , 2 016
an activity centre for children and a
full-fledged gym. Over the years, the
two have had more than 25 million
visitors from all over India.
The newest park boasts what Arun
Chittilappilly describes as the latest and the best in amusement park
technology. These include India’s
first reverse looping roller coaster,
Recoil, going up to a maximum
height of 40 metres and with six
inversions per ride, imported from
the Netherlands; the country’s first
space-themed flying theatre experience; cashless, rfid -based transactions facility across the park; and
the capacity to generate over 1 mw of
solar power. “We are going
to bring even more special
attractions in the days to
come,” he promises.
The
three-year-old
Adlabs Imagica at Khopoli,
off the Mumbai-Pune
expressway about half-way
between the two cities,
is modelled on Universal
Studios and has more than
25 themed rides, including the country’s largest roller coaster and 4D
simulation rides, and five
themed restaurants. All
this is intended to “enable
escapism through fantasy
and the bringing alive of stories”. It
has subsequently added a water park
and a five-star hotel.
Kingdom of Dreams, opened in
2010, “brings together the carnival
that is India” by showcasing Indian
culture and performing arts with
attractions like Culture Gully, an
arts, crafts, and culinary boulevard
complete with street performers.
Ramoji Film City is a huge film
studio complex where thousands of
Indian movies are filmed every year.
It shows visitors how movie sets come
to life, and also offers live shows, an
eco zone including a bonsai park and
a butterfly park. Activities include
all-terrain vehicles, bungee jumping,
zorbing and paintball.
With the global amusement parks
business at an estimated $100 billion,
India has a long ride ahead.
u SE K HAR SESHAN
[email protected]
Rajan’s no
Rupee devaluation demand comes a cropper
sa n jay bor a de
E
xports dipped for the 16th
month in a row due to contraction in shipments of petroleum
and engineering goods. For AprilMarch 2015-16, cumulative exports
declined by 15.9 per cent to $261.1
billion, against $310.3 billion in
2014-15 and $314 billion in 2013-14.
While the country’s overall gdp
growth has been robust and even fdi
inflows have been consistently growing, exports have been a weak area
for several months now. The government has maintained that the trend
of falling exports is in line with other
major world economies due to a
slowdown in global demand.
Despite attributing the decline to
weak global demand, it is clear that
the government is worried about the
weakening exports profile. Recently,
the commerce ministry is believed
to have made a strong pitch to the
rbi to devalue the rupee. In a letter
to the central bank, the ministry had
argued that devaluation would help
exporters compete with countries
such as China, Japan, Egypt and Brazil which have been devaluing their
currency. China’s currency devaluation is the most pronounced attempt
to increase the competitiveness of its
exports. China devalued the yuan by
4.4 per cent in 2015, after a decade
of strengthening. It carried out a second round of devaluation in January this year and again in February.
According to a report by Hong-Kongbased equity broker clsa, the yuan
will tumble 19 per cent by the end
of 2017 as depletion in foreign-exchange reserves has forced policy
makers to let investors set the value
of the currency.
However, the rbi is believed to
have turned down the commerce
ministry’s request to consider devaluation of the rupee to help exporters compete in countries which have
been devaluing their currency. The
rbi’s stand is that the rupee is close
to its normal value and should not be
Rajan: valid argument
tinkered with.
Last month, rbi governor Raghuram
Rajan dealt comprehensively with
the subject. Reacting to the demand,
Rajan pointed out that the rupee had
weakened by about 6 per cent against
the dollar since the beginning of 2015
and that while depreciation should
have helped our exports, the fact
remains that even other currencies
depreciated against the dollar. “While
we have gained an advantage versus
US producers, other foreign producers may have become even more competitive because their exchange rate
has depreciated more,” said Rajan. He
added that while the nominal effective exchange rate has remained relatively flat since early 2015, the real
effective exchange rate (nominal
effective exchange rate adjusted for
inflation) has been impacted because
of high inflation. As for devaluation,
a sizeable portion of the investment
made in the country based on an artificially low exchange rate will turn
out to be uncompetitive when the
exchange rate normalises.
Embarrassed commerce ministry officials now say that ideally,
they agree with the rbi. ‘‘Our currency is just slightly overvalued. But,
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a p r i l 2 5 - M ay 8 , 2 016
countries world over are devaluing
their currency and their exporters
are gaining in competitiveness solely
on account of this,” said an official.
Earlier, they had begun arguing
that while India followed a certain
fiscal policy, it didn’t have control over what other countries are
doing. For instance, if Russia, devalues its currency sharply, the price of
the Indian product will go up in the
market. If Brazil too devalues its currency, and Brazil is India’s competitor
in the Russian market for two categories of products, then India may not
be competitive there anymore.
Exports hit
The line of argument followed a
recent statement by commerce minister Nirmala Sitharaman that while
a positive impact of the Foreign Trade
Policy, which included the Merchandise Exports from India Scheme
(meis) and an interest subvention
plan, is being noticed, it was the volatility in exchange rates that was
hitting exporters’ performance.
The Economic Survey 2015-16
said that India should resist calls to
seek recourse in protectionist measures, especially in relation to items
that could undermine the competitiveness of downstream firms and
industries. India, according to the
Survey, could respond in three ways.
First, the most effective instrument
to respond to threats to overall competitiveness is the exchange rate.
Second, India should strengthen
procedures that allow wto -consistent actions, and third, India should
eliminate all the policies that currently provide negative protection
for Indian manufacturing and favour
foreign manufacturing.
“The rupee’s value must be fair,
avoiding strengthening. This can be
achieved through some combination
of monetary relaxation, allowing
gradual declines in the rupee if capital flows are weak, intervention in
foreign exchange markets if inflows
are robust, and being cautious about
any further opening to inflows that
could unduly strengthen the rupee,”
it noted.
u RA K ESH J OSHI
[email protected]
Whither flagship?
Services, not manufacturing, still attract maximum FDI
A
t a recent meeting of the International Monitory Fund in
Washington, finance minister Arun Jaitley took pride in the fact
that Foreign Direct Investment (fdi)
inflows have increased by 30-40 per
cent in the last two years and India
was now “the largest fdi destination
in the world.” This had happened as
India liberalised foreign investment
policies and created a ‘favourable
investment climate’ for investments
across all segments of economy – agriculture, manufacturing and services.
Jaitley forgot to mention that,
although India received an all-time
high annual fdi of $39.32 billion in
2015, the surge was led by the inflows
into the services sector rather than
manufacturing or infrastructure.
Prime Minister Narendra Modi’s flagship ‘Make in India’ initiative in
manufacturing and infrastructure
has not yet materialised dramatically
into fdi inflows even though entities
from several countries such as Japan,
China, France and South Korea have
announced their intention to invest
in India in various industrial and
infrastructure projects.
More than half of total fdi inflows
in 2015 came into the services sector, comprising software, financial
services, trading, hospital and tourism, according to an analysis of the
official data by the Department of
Industrial Policy and Promotion
(dipp) and Citi Research. In 2014, the
sector accounted for about a third of
the gross inflows. fdi into the sector in 2015 was 111 per cent higher
than in 2014.
Gross inflows are up more than 30
per cent to about $40 billion. Breakdown of the official data shows that
the inflows into the manufacturing
sector are up 6 per cent in 2015 after
the 19 per cent fall in 2014. fdi into
infrastructure in 2015 was marginally lower than in 2014.
While inflows rose significantly
into some sectors the bjp-led nda
Biswal: promoting Indo-US trade
government opened up, including
insurance, construction, broadcasting and tourism, the impact of the fdi
liberalisation measures in defence,
railways and retail is not visible.
Inflows to construction surged
by 188 per cent from $1.53 billion
to $4.41 billion, while insurance
received $581 million against $236
million – a 146 per cent jump. fdi in
Railways declined 67 per cent to $71
million from $213 million in the previous year. Air transport too saw lower
inflows – $50 million against $73 million. For mining the fall was from
$666 million to $547 million. The
defence sector is yet to receive fdi.
In the 20 months of the nda government, India has received total fdi
of $85 billion compared to $59 billion
in a similar period before that. fdi
outflows (Indians investing overseas)
declined 37 per cent, confirming the
change in investor sentiment. Senior
ministers have been comparing fdi
inflows during upa 2 with the twoyear nda rule now to highlight the
u 25 u
a p r i l 2 5 - M ay 8 , 2 016
improvement in the investment climate. The foreign investment inflows
in 2014 stood at $28.72 billion.
Quantum jump
While officials of the dipp have
been claiming that the easing of fdi
norms and improvement in ease of
doing business led to this quantum
jump, the fact remains that manufacturing is yet to attract any sizeable fdi. The US, for instance, has
invested over $15 billion in the past
two years alone. “There’s reportedly
a $27 billion pipeline of investments
coming over the next two years,”
Nisha Biswal, US Assistant Secretary
of State said at a meet on US-India
Economic Relations in New Delhi.
She added that fdi from the US could
double, if India continues to liberalise its investment regime. Even
though the US supports the ‘Make
in India’ campaign, she said companies involved in global manufacturing need transparency, predictability
and legal certainty.
Biswal also pitched for an India-US
bilateral investment treaty, saying it
was one of the best tools to promote
investment. “This would send an
important signal to US investors that
India is indeed open for business...
There’s some work to be done there...
but we are anxious to get started.”
Moody’s Investor services recently
noted that the rising fdi inflows, however, will continue to narrow India’s
external financing needs and mitigate the risk of a potential widening
of the current account deficit related
to weakening remittances. Indians
sent back $15.8 billion during the
third quarter (October-December) of
fiscal 2015-16, the lowest in 18 quarters, data from the rbi showed. But
the cad narrowed to 1.3 per cent of
the gross domestic product (gdp) in
the third quarter from 1.5 per cent
in the year-ago period. According to
Moody’s, this will increase the stability of financing and support the
country’s sovereign credit profile.
Singapore has emerged as the biggest source of fdi into India, followed
by Mauritius, the US, the Netherlands and Japan.
u RA K ESH J OSHI
[email protected]
Drought spectre
BJP seeks to cut political losses
E
ven though weather forecasters
– both public and private players – have predicted an abovenormal monsoon this year, the
spreading drought across the country is causing political alarm in the
bjp. Among the worst affected states,
which are reeling under drought
or drought-like conditions, at least
four – Maharashtra, Gujarat, Madhya Pradesh and Haryana – are ruled
by the bjp. Ten states have already
declared drought in some parts.
Drought is already a political issue in
the Bundelkhand region of UP, ruled
by the Samajwadi Party.
According to reports reaching New
Delhi, the rising temperatures have
triggered a severe water crunch and
aggravated rural distress leading to
people fleeing many of the affected
areas. The government recently
informed the Supreme Court that a
staggering 330 million people (more
than a quarter of the country’s population) are in the grip of drought and
consequently face drinking water
shortage and agricultural distress.
But the number of people hit by the
drought could be higher, as Bihar
and Haryana haven’t declared such a
condition, despite shortfall in rain.
Drought is a state subject and,
unless the state declares it, the Centre
cannot do anything. This argument
would have washed, if only Centre
did not underplay the crisis in Gujarat – it chose not to mention the
state in its report to the apex court –
despite the state itself admitting that
more than 637 villages were facing
severe water shortage. The impact of
the drought has been severe in Marathawada region of Maharashtra and
north interior Karnataka. In Maharashtra, turnover at Agriculture Produce Market Committee centres
has plummeted. Soyabean arrivals,
which used to be 60,000 bags (of 60
kg each) till 2014, have gone down
to 10,000 a day presently. With the
rural folk holding on to their small
savings for the tougher days ahead,
small businesses are floundering.
Caught napping
The Modi government was initially
caught napping on the issue of mgnrega arrears, which kept on piling
up. In the past, mgnrega has been
used successfully as a tool to mitigate
rural migration. It was only in April,
when the severity of drought became
obvious, that two tranches of `12,230
crore and `7,321 crore were disbursed
to the states.
According to weather experts, a
respite from the sweltering heat will
u 26 u
a p r i l 2 5 - M ay 8 , 2 016
come only towards mid-June when
the South-West monsoon advances
across the country. The worst is yet
to come. “As the sun moves towards
the north, heat conditions will be
felt in North and North-West India.
While heat wave occurs every year,
the severity is being felt more this
year due to the water shortage in
many states,” says Shivanand Pai,
lead forecaster at the India Meteorological Department.
Two successive years of deficient
rainfall and depleting groundwater
levels due to over-use have aggravated
the drought conditions, impacting the
farm sector and livelihoods. While the
country witnessed 12 per cent deficit
rainfall in 2014-15, the deficiency in
annual precipitation further widened
to 14 per cent during 2015-16.
The poor precipitation during
the last two years has led to reduced
water storage levels in the 91 major
reservoirs monitored by the Central Water Commission. Further, the
intensifying heat condition is resulting in rapid depletion of the water
levels in these reservoirs. As on 13
April, storage in the 91 major reservoirs stood at 35.839 billion cubic
metres (bcm), accounting for 23 per
cent of the total storage capacity of
157.799 bcm. The current water level
is 33 per cent lower than last year and
23 per cent lower than the 10-year
average of 46.724 bcm for the period.
Live storage levels in the Southern
Region stood at a mere 15 per cent
of the total capacity, followed by the
Western Region at 18 per cent, the
Northern Region at 23 per cent and
the Eastern Region at 34 per cent.
Aware of the political fallout of
drought, Prime Minister Narendra
Modi recently announced that his
government was working on a plan
to irrigate parched farmlands in
order to arrive at a permanent solution to drought in many parts of the
country. While India has become
somewhat better at dealing with the
consequences of inadequate rainfall
than in the past, there is a long way
to go before one can say the economy
and people have been as ‘monsoonproofed’ as they possibly can be.
u RA K ESH J OSHI
[email protected]
Column
Brought to a standstill
There now seems to be little chance of any forward movement in UN’s mediation efforts
U
nited Nations’ efforts to mediate in wartorn Syria are floundering and bloody
chaos might soon return to its previous
intensity after nearly two months of uneven
cessation of hostilities. If the mediation collapses in coming months, the UN, already
beleaguered by the alleged cover up of sexual
violence by some of its peace keepers in Africa,
will lose yet more credibility as an effective diplomatic tool for peace. Syria’s poison will also
worsen the enmity between Sunni Saudi Arabia and Shia Iran, while increasing the outflow
of refugees crowding into Turkey before finding
perilous routes to enter Europe.
Staffan de Mistura, who is mediating indirect contacts in Geneva among some of Syria’s
warring parties, says ‘ups and downs’ are normal but most indicators now look discouraging. The cessation of hostilities was a triumph
of diplomacy after nearly five years of carnage
and allowed the UN to deliver humanitarian aid
to the worst hit areas but it reached less than a
third of the people in need.
Some humanitarian workers have accused
President Bashar Assad’s regime of deliberately
blocking aid deliveries, including medicines
and baby foods, to towns and villages resisting
pro-government forces. Allegedly, Assad wants
to intensify the suffering of local people to turn
them against anti-government forces holding
those locations.
But the straw that broke the camel’s back was
the carnage caused by government aerial attacks
on 19 April on market places in two small towns.
Assad seemed to have lost patience with local
people, who used the cessation of hostilities to
hold protests there for more than 30 days running. The protests were against rebel groups,
including the al Qaeda-affiliated Nusra Front,
and government forces trying to evict them.
Mistura’s mediation does not include the
Nusra front and Islamic State, which hold nearly
two-thirds of Syria’s territory and are each other’s enemies. He is also using a troubled format
that forces him to talk separately with government representatives and those of rebel groups
brought together by Saudi Arabia in a High
Negotiations Committee ( hnc).
The hnc is a fragile group, since most of its
members were fighting one another before the
Saudis knocked heads in late 2015 to prepare
for Mistura’s mediation. Washington calls hnc
Brij Khindaria
members ‘moderate’ rebels and helps the Saudiled Gulf allies to arm and finance them.
The hnc’s goal is to oust Assad. It rejects any
transition process that might keep Assad in place
awaiting final political settlement in Syria. In
contrast, Assad’s goal is to stay in power using
diplomacy, political process or war to defeat all
rebel groups, including hnc members, Nusra
Front and Islamic State.
Mistura’s mandate from the UN Security
Council is to bring about a transition process that ends in elections within 18 months
for an inclusive government that controls all
of Syria without loss of territory to anyone.
Despite the seemingly insurmountable odds,
hope glimmered when the cessation of
hostilities occurred.
W
The author is
an international
affairs columnist
for Business India.
He can be contacted
at brij.khindaria@
businessindiagroup.com
u 27 u
a p r i l 2 5 - MAY 8 , 2 016
ashington and Moscow strong-armed the
Saudis and Assad respectively to obtain
the cessation mainly to alleviate the people’s
suffering. The cessation was also vital for Europe
because millions of Syrian refugees headed for
European countries, especially Germany, in
2015, causing near panic among politicians. The
hope was that stable deliveries of humanitarian
aid would make it unnecessary for people to flee
to Turkey and from there to Europe.
But that seems to be over now. On 19 April,
all hnc representatives withdrew from Mistura’s process. hnc head Riad Hijab cited repeated
violations by Assad’s forces to declare that his
delegation could no longer support a “political
process which prolongs the life of this regime”.
That took the wind out of this phase of Mistura’s efforts. Earlier, both Washington and Moscow had given the impression that a transition
arrangement including Assad was possible but
current obstinacy suggests that the US and Russia are losing control over their proxies on the
battle field.
Mistura will continue to talk to whomever he
can find and may even schedule another round
of mediation in a few weeks. But there seems little chance of forward movement without a new
back-door deal between Washington and Moscow to put much more severe pressure on their
allies and protégés.
In any case, Mistura’s mediation and the political process it seeks is mortally flawed, because the
most effective fighting forces so far, Nusra Front
and Islamic State have rejected it completely.u
Panju’s Page By Panju Ganguli
TCS IS PRETTY STRONG BECAUSE OF OUR
CAPABILITIES IN DIGITAL, GOVERNANCE,
RISK COMPLIANCE, INVESTMENT AND IN
TERMS OF OUR PRODUCTS AS WELL AS
STRONG TECHNOLOGY
MY LONG-TERM VISION IS TO MAKE HERO HONDA
A GLOBAL LEADER NOT JUST IN TERMS of SALES
VOLUMES, BUT IN EVERY SENSE OF THE TERM –
TECHNOLOGY, INNOVATION, PRODUCT LINE-UP,
WORLDWIDE PRESENCE AND GLOBAL BEST PRACTICES
N. CHANDRASEKARAN
CEO, TCS
pawan munjal
Chairman, MD, & CEO, Hero Motorcorp
u 28 u
A p r i l 2 5 - m ay 8 , 2 016
Cover Feature
Gadkari hits
I
t was a day unlike any other in
Palwal, a district town in Haryana located 60 km from the
national capital. The town has
been in the news for no other
reason than the stalled project that
runs through it, called the Western
Peripheral Expressway. Along with
the Eastern Peripheral Expressway, it
was planned 11 years ago to ease traffic congestion as well as air pollution
in New Delhi. Forming a ring around
the ncr area, the two expressways,
spanning 135 km, will ensure that
non-destined, diesel-driven trucks
and commercial vehicles coming
from north India and those heading
for central and southern parts do not
enter the city limits of Delhi. But the
dream was threatening to turn sour,
as the concessionaire kmp Expressway kept slipping up on deadlines.
However, any visitor to Palwal on
5 April could not have failed to detect
a frisson of excitement in the air.
The Delhi-Mathura road or National
Highway (nh) 2 that leads to Palwal had a vip convoy hurtling past
the industrial township of Faridabad towards this nondescript town.
One of the cars in the cavalcade was
occupied by Nitin Jairam Gadkari,
Union minister for road transport
& highways. After the bjp came to
power in Haryana in 2014, Gadkari
had in a meeting with the new cm,
Manohar Lal Khattar, decided to prioritise the completion of this project. Now, in 11 months, the 52-km
stretch from Palwal to Manesar, the
auto parts hub, had been completed
by a jv of kcc Buildcon and Dilip
Buildcon, and Gadkari was going
there to inaugurate it.
The Manesar-Palwal section, built
at a cost of `457.81 crore, is an access
controlled, six-lane, divided road with
1.5 metre wide paved shoulder on
each side and multiple under-passes.
Starting from Manesar, it intersects
the Delhi-Jaipur nh 8, Palwal-Sohnau 30 u
a p r i l 2 5 - M ay 8 , 2 016
Cover Feature
the road...
Rewari nh 919, Sohna-Nuh-Alwar
Road nh 248A and finally joins nh
2 near Palwal. Traffic from Mathura
and Agra and headed for Gurgaon,
Manesar or Jaipur can now use this
route instead of entering Delhi and
vice-versa, saving time and money,
even though the full impact on Delhi’s traffic congestion and pollution
levels will be felt only when the two
expressways are complete.
Speaking on the occasion, Gadkari promised to complete the entire
project within the next 400 days.
Once both the expressways are operational, he said, apart from reducing
traffic congestion and air pollution
levels in Delhi by half, farmers, traders and the people of the region as
a whole will benefit due to better
connectivity. In his speech, Gadkari noted that a strong infrastructure plays a major role in fostering
development. “Road building activity has caught speed, and today we
are building about 20 km of roads
per day as against the low of 2 km
per day which it had hit during the
upa government,” he said.
Gadkari’s speech evoked the necessary applause from the captive
crowd of bjp workers and the local
residents rounded up for the occasion. But he did not mention that it
was the previous Congress-led Haryana government that had terminated
the contract of kmp Expressways and
set the stage for the entry of a new
developer. Also, it was on the intervention of the Supreme Court in January 2015 that the project was revived
and new bids invited. In July 2015,
Essel Infraprojects was awarded the
work, with the likely date of completion of construction fixed at August
2018. But, given his style, Gadkari
announced at Palwal that the work
would be completed well beforehand
(in 400 days). Moreover, in a meeting with Delhi cm Arvind Kejriwal a
week later, he mooted eight elevated
corridors to take Delhi’s outgoing
traffic to the two expressways. This
will decongest Delhi’s traffic further.
It isn’t just the two peripheral
expressways that will form a muchneeded ringed bypass outside Delhi
that is making the news. Gadkari
has also prioritised the Delhi-Meerut
Expressway, which will cut travel time
between the two places from two
hours to 45 minutes. Detailed project
reports have been prepared for five
greenfield expressways – Vadodara-
Mumbai (473 km), Bengaluru-Chennai (264 km), Delhi-Jaipur (226),
Kolkata-Dhanbad (277 km), and
Delhi-Ludhiana-Amritsar-Katra.
An expressway is a controlledaccess highway, mostly six-lane
or above, where entrance and exit
are controlled by the use of slip
roads, the 93-km Ahmedabad-Vadodara stretch being the first one in
the country. Expressways not only
reduce travel time, but also propel the country’s economic growth.
The proposed expressways would
be ‘world-class’ in the sense that
those would match the quality and
specifications in advanced nations.
Among Modi’s senior Cabinet colleagues handling core portfolios,
Gadkari is seen as a man of action, a
human bulldozer of sorts who is trying to replicate nation-wide what he
did as pwd minister in Maharashtra more than a decade ago, building a string of flyovers in Mumbai
and the Mumbai-Pune expressway.
Long hindered by execution delays,
project cancellations, stalled projects, loss of lender confidence, leveraged balance sheets of developers
and sluggish traffic growth, the road
transport and highways portfolio
was regarded as one of the most challenging jobs in the Cabinet. The road
building industry, through its aggressive bidding and furious expansion
(during 2010-12) along with missed
estimates of toll revenue and traffic
growth, had taken a big hit, which in
turn had hurt returns to investors.
... but building worldclass highways without
cleaning up stressed
assets is a job half-done
u 31 u
a p r i l 2 5 - M ay 8 , 2 016
Cover Feature
New targets
There is little doubt that
things have moved since
Gadkari took charge. In
2015-16, about 10,000
km of highway contracts
worth `1 lakh crore
were awarded and 6,000
km were constructed:
These targets have now
been upped to 25,000
km and 15,000 km
respectively for 2016-17.
Out of the 25,000 km,
15,000 km will be
awarded by National
Highways Authority of
India (nhai) and 10,000
km by newly-formed
National Highway and Infrastructure Development Corporation Ltd.
In all, contracts worth `2.5 lakh
crore will be handed out, according
to officials. On the face of it, the new
targets are bewildering, considering
that in May 2014, when the nda took
over, 73 projects involving an investment of `1 lakh crore were stuck and
road building was crawling below
5 km a day.
Over the last two years, the government unveiled a comprehensive
exit policy for a developer to quit a
project two years after completion,
a measure to help the stressed sector monetise assets and unlock the
capital for future projects. This was
aimed at benefitting about projects
bid on the build-operate-transfer
( bot) basis with a locked in equity of
`4,500 crore. nhai was also allowed
to inject funds in languishing projects which are 50 per cent complete
on a loan basis at a pre-determined
rate of return, which would help
complete such projects. The hybrid
annuity model was launched, where
the risk has been substantially rebalanced between the private and the
public sector.
In addition, certain amendments
were made to the model concession
agreement to goad the private sector
to come forward. Compensation to
concessionaires for languishing projects on bot – toll mode for delays not
attributable to them – has been rationalised. All these steps were taken
at a time when the private sector’s
interest in public-private partnership
(ppp) had dwindled to the extent that
most such projects failed to get even
a single bid.
The slew of policy measures
including upfront land acquisition,
prior clearance from the ministry
of environment & forests and larger
share of Engineering, Procurement
Construction (epc) contracts, where
the government bears the entire
financial burden and funds the project, have raised the interest levels of
developers and contractors in road
projects. This is reflected in the award
by nhai alone of projects amounting to `42,800 crore spanning 3,421
km in fiscal 2015-16, according to a
14 March report by Emkay Global
Financial Services’ analysts Nitin
Arora and Kushan Parikh. Of these,
epc accounts for contracts worth
`29,300 crore, spanning 2,526 km;
bot, `10,800 crore for 803 km; and
hybrid annuity, `2,800 crore for
92 km.
The government now claims it
moved fast and did not flinch from
taking hard decisions, terminating contracts for 39 projects covering about 4,620 km, out of the
73 ‘stuck’ projects it had inherited. These projects are now being
restructured. Another 16 projects are
being revived so that they can be reawarded. Three projects have been
handed over to state governments.
In 18 cases, bids have been invited or
are being invited.
The government also claims that it
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a p r i l 2 5 - M ay 8 , 2 016
has permitted rescheduling of the premium
payment in 19 stressed
projects, where developers had promised paying
upfront premium and
then faltered. Actually,
this process had started
in upa 2, when several
projects which were
bid out with high premiums had got stalled
after developers were
hit by a cash crunch. A
major example was the
555-km
Udaipur-Kishangarh-Ahmedabad
highway project costing `7,700 crore, for
which gmr Infrastrtcure had forked
out an eye-popping annual premium of `636 crore. This project was
later cancelled.
Gadkari is also one .of the few
ministers who does not hesitate to set
new punishing targets, even warning
the nhai staff that he is not happy
with their performance and that they
should either shape up or ship out. At
a meeting in March, he bluntly told
them that his ministry has set up an
‘intelligence-gathering system’, using
gis technology for mapping all projects, monitoring construction and
status of land acquisition. At the cii’s
annual session in New Delhi, Gadakri announced that road construction in India has accelerated to an
all-time high pace of 20 km per day,
which is better than the peak of 15.7
km per day achieved during the upa
rule in 2012. By the time the Modiled nda government completes two
years in May-end, his ministry will
be constructing 25 km of roads per
day. He hoped to touch a target of 30
km in six months. Now the government is targeting 40 km (maybe even
more) a day in 2016-17!
Exaggerated claims?
While the effort by the government
to clear bottlenecks in execution is
there for all to see, how much it is
impacting the end result is debatable.
The February icra report on the road
sector says that the change is reflected
by the 45 per cent increase in the pace
of execution to 4.96 km/day during
Cover Feature
National Highways Development Project
Status of NHDP as on February 29, 2016
Golden
Quadrilateral
NS&W
Total
Total length (km)
5,846
7,300*
13,146*
Completed total till date (km)
5,846
6,427
12,273
Under implementation
Length (km)
0
295
295
Contracts (Nos)
0
36
36
Letter of award issued/agreement
signed and work to be started
Length (km)
-
163
163
Contracts (Nos)
-
3
3
Length to be awarded (km)
–
257
257
* Actual length at present
excluding 442 km
common length with GQ
is 7,274 km
However, this may again
change after preparation
of DPRs. The original
approved length of
corridors is 7,300 km.
April-November 2015 from 3.41 km/
day during April-November 2014. A
far cry from the official figures that
are being thrown around!
This is where an element of hyperbole comes in and some of the claims
can go off-mark, as targets keep
changing. As a senior highways ministry official points out, “Total construction in a year depends on how
much has been awarded in the past
three years. This means if we can keep
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awarding about 10,000 km a year, we
will be able to achieve the 30 km target in the next two years only.” Economists tracking the developments in
the highways and roads sector concede that the minister is given to
exaggeration. So when Gadkari says
that he is committed to contributing
at least 2 per cent to the gdp from
the roads sector, some take the claim
with a pinch of salt. In some ways,
Gadkari’s talk sometimes reminds
one of the flashy Kamal Nath during
the upa 2 days.
Experts feel that while interest in
road-building activity may have been
sparked off by the new policy moves,
the real key to reviving investment
cycle in the sector would be the
cleaning-up of stressed assets. That is
why few bidders are coming forward.
Nitin Patel, executive director, Sadhbhav Engineering, says that 2015-16
Cover Feature
The real issue
In 2014, bank debt to the national
highways sector was about `1,30,000
crore. In April 2015, the transport
sector accounted for 11.5 per cent
of stressed assets, and 14 per cent
of restructured stressed assets of the
banking system. The bank debt has
only grown further and this remains
an issue to be addressed before private investment can come back into
the sector in a big way. The fact that
70 per cent of these projects were
awarded by nhai were under epc tells
its own tale, as under this model the
government bears the entire financial burden unlike in the ppp projects, where money, partly or entirely,
has to be brought in by the concessionaire. Building highways through
the epc model therefore has an
inherent advantage for builders. The
hybrid annuity model brings ( ham)
focus back on the developers’ ability
to deliver prescribed quality in least
cost and time, and is amenable to
long-term financing. But it will take
time to click, as recent anecdotal
evidence reveals.
So, announcing and building
world-class expressways and highways without a cleanup of stressed
assets will be a job half-done. Indeed,
the lukewarm response to ham is evidence of the fact that most builders are still unwilling to put their
money on the table. The government
pushed this model basically to fasttrack roads and reduce the burden
on developers and financial institutions. The first such project – widening of nh 24 and construction of the
Delhi-Meerut Expressway involving
`7,000 crore – was launched in January by Prime Minister Narendra
Modi himself.
Under ham, the government provides 40 per cent of the project cost
during the construction period and
the release of funds is linked to the
progress of construction. The private player needs to raise the rest 60
per cent in the form of equity and
New law for road safety soon
I
t’s not just stepped up road
construction activity or
handing out of contracts that
will ensure Nitin Gadkari a
place in history as a successful road transport and highways minister. Road safety has
become a major issue with
loan. Since the overall
requirement is less, the
private bidder needs to
put less equity.
Similarly, as the loan
requirement is less in
comparison to the other
modes of ppp, banks
will also be comfortable to lend. The government pays back the
rest in instalments during the entire contract
period and it is linked
to the performance of
the private player and
the asset. “The recovery
of entire investment is
assured as the government takes all
the risks including collecting user
fee and thereby the rise or fall in the
total collection doesn’t impact their
return from the project. It brings
greater comfort to the private player
and banks to take up such projects.
Even if the private developer defaults
during construction, banks will get
back their loan with a slight haircut. This provision is not there in the
other two modes of ppp,” says a senior
official of the highways ministry.
Under the traditional ppp models
– bot-Toll and bot-Annuity – private
players need to put 30 per cent of the
project cost as their equity and the
rest 70 per cent comes in the form of
debt. While in bot-Toll mode developers recover their investment from
the collection of user fee, in botAnnuity the government pays back
the entire amount in instalments.
Officials have been claiming that
the hybrid annuity is also better in
comparison to epc.
But are the road developers
enthused by it? According to a report
by icra, the first project under the
was encouraging, with
the ministry and nhai
together awarding close
to 10,000 km of work.
While the awarding
pace has been fast, he
admits that the competition in hybrid annuity and bot-toll models
is less. There are hardly
five or six players coming up with the bids. In
the epc mode, of course,
there are more bidders.
“Going forward, we
are of the view that
since the number of
projects will be more,
the competitive intensity will go
down further because everybody will
have sizeable orders. The pricing will
benefit also,” says Patel.
Indian roads account for the
highest fatalities in the world,
almost 400 a day. The roads
in UP account for the highest
number of deaths, followed
by the road in his home state
of Maharashtra.
The lawmaker from Nagpur
appears to realise this, and
has woven in the theme of
road safety, which was largely
ignored by his predecessors,
into his ministerial brief. This
shows the smart politician in
Gadkari as road safety affects
the common man seriously.
“When the Modi government came to power, we
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decided to give topmost priority to infrastructure. When
I became the minister for
road transport & highways,
there were merely 96,000
km of highways. That makes
it only 2 per cent of the total
road network in the country,
which was used by around 40
per cent of total traffic. There
Cover Feature
the Solan-Kaithalighat
section in Himachal
Pradesh – did not attract
a single bidder because
of three major reasons:
u back-ended annuity
payments from nhai;
u absence of clarity on
payment by the concessionaire for maintenance of project stretch
during
construction;
and
u lack of clarity on
approvals.
Regarding approvals,
several parts of the RoW
(right of way) were under arbitration and there was limited visibility
on availability of land for the Kandhaghat bypass. Besides, there was little clarity on forest clearances and on
hill cutting near the Kalka-Shimla
track, a unesco world heritage line.
Subsequently, the nhai made several
amendments to the draft concession
agreement, including a revised annuity payment scheduler. Maintenance
of the existing road during construction has now been made part of the
bid price, while on RoW/approvals
the relevant clause was amended.
The bids for this project had to be
re-invited after incorporating the
above changes.
Subsequently, two projects were
awarded under ham, one each to Welspun and Apco Infratech (two packages of Delhi-Meerut Expressway),
aggregating to a total of 30.66 km of
road length. Twenty more are under
consideration. But the slippages are
obvious. nhai had set an award target of 1,400 km for ham, about 28 per
cent of project awards of 5,000 km
during 2015-16. Till January 2016,
are about 500,000 road accidents every year. But soon,
we will have over 2 lakh kilometres of highways and number of accidents brought to
half,” the minister says.
In fact, Gadkari openly
says that not being able
to get the Road Transport and Safety Bill passed
terms of traffic growth.
Under the model, revenue collection will be
NHAI’s responsibility,
while developers will be
paid in annual instalments over a period of
time, which means not
just low risk, but also low
returns from the project. The government is
also offering 80 per cent
of prior land acquisition
and forest clearance in
these awards.
Some builders even
feel that ham might
not work given that it
is similar to the earlier public-private
partnership model, except for the
difference that the private company
will now bear 60 per cent of the total
cost instead of 100 per cent earlier.
However, others say the model is the
safest for bankers to finance. “The
model eliminates the biggest risks
related to traffic or execution. Companies with weak balance sheets are
not comfortable in investing equity
and that has kept the competition
low,” said Vasistha Patel, managing
director at Sadbhav Infrastructure,
which has bid for six projects under
the new model.
ham – four-laning of
bids for 16 projects totaling 764.69
km worth `150.99 billion were called
for under ham, which are to be
awarded before March 2016. Given
the situation, the target of 1,400 km
is likely to be missed.
The absence of big road developers and lukewarm participation from
the rest in the nhai’s March bids for
five ham projects was further indication of something more will need
to be done to make road building
more profitable. Each of the projects
saw bids from only 4-5 builders such
as Sadbhav Infrastructure Projects,
mbl Infrastructures, Oriental Structural Engineers and Ashoka Buildcon. Industry sources say that the
weak interest signalled a long haul
for the country in the roads sector.
While big developers like Larsen &
Toubro, Hindustan Construction Co
and gmr Infrastructure are trying
to pay off their debts and take care
of their highly-leveraged balance
sheets, banks remain wary of large
greenfield projects.
Sources in the industry say that
ham does not promise high upside in
in Parliament so far is the
only ‘black spot’ in his ministry. He is pushing to get
Stake sale uncertainty
The fact that everything is not falling in place is also evident from
difficulty that some of the biggest
financially-squeezed developers are
trying to reduce debt by getting rid
of nearly 60 operational road projects. It was hoped that the stake
sale would help raise money for
existing commitments or for future
growth capital. But to most such
stressed developers, the situation on
the bill cleared in the current session. The Bill seeks
to come down heavily on
traffic offenders and proposes steep penalties of up
to `3 lakh along with a minimum of seven-year imprisonment for death of a child
in certain circumstances.
Designed after studying
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relevant laws of the US, the
UK, Singapore and Japan, it
is expected to bring down
accidents as well as fatalities.
It will also curb the racket
of bogus licences, as almost
30 per cent of the licences
in the country are bogus.
A Road Safety Authority is also on the anvil. u
Cover Feature
project. However, the
promoter will have to
return the funds from
the toll revenue to the
nhai at bank rate plus
2 per cent. Such funds,
which
are
already
applicable in projects
implemented on botToll basis, will now be
implemented in projects on bot-Annuity.
“While the one-time
fund infusion by nhai
for languishing road
projects shows positive intent, first charge
creation has become
a challenge in implementing the one-time fund infusion
scheme as the exposure of existing lenders will become subordinate to funding by nhai,” says Rohit
Inamdar, senior vice-president, icra.
An India Ratings report said that
funding shortfall may not be the
only reason for languishing projects,
but also delays in getting the appropriate approvals and clearances from
various government agencies. While
this has resulted in project deferrals
and cost overruns, the same has further increased the stressed loans in
the banking system. “Therefore, the
one-time funding may not help all
stranded projects, but only those that
needed financing,” the report says.
Today, the situation is such that
lenders already with high exposure to
these languishing projects are unwilling to commit more resources without the help from external resources.
The involvement of nhai as a bailout agency underlines the situation.
“Today, there is a clear disconnect
between what the government wants
to spend on infrastructure and how
much banks are willing to fund projects,” says Anubhav Gupta, analyst,
Maybank Kim Eng Securities.
the ground remains the
same, despite the easing
of rules to help them exit
their projects. According
to investment bankers
working on highway sector deals, potential buyers are looking for cheap
deals while lenders are
refusing to clear them.
Not every road project
on the block will be able
to find a buyer. The presence of multiple investors in some projects,
tough conditions laid out
by lenders, and differing
expectations on valuation are other delaying
closure of deals.
There have been media reports
that Hyderabad-based Gayatri Projects, which develops road projects on
build-operate-transfer basis, is looking to sell its stake in seven operational road assets. Also, Reliance
Infrastructure Ltd has been looking
to sell all of its 11 operational road
projects and has held discussions
with potential buyers. Creditors of
debt-laden infrastructure developer
ivrcl , which invoked the so-called
strategic debt restructuring initiative in December, are also looking to sell assets to recover dues. In
what was billed to be one of the biggest highway sector divestments last
year, Gammon Infrastructure Projects said it would sell a portfolio of
nine projects – six roads and three
power plants – to bif India Holdings,
controlled by Canada’s Brookfield
Asset Management Inc and infrastructure fund Core Infrastructure
India Fund, for `563 crore in cash.
However, the deal faced a hurdle
when lenders wanted the proceeds
to be used on certain other assets of
the company.
“Obtaining lenders’ noc is one of
the key hurdles since lenders want
to ensure appropriate usage of proceeds before giving such an noc,”
said Ashish Agarwal, director, infrastructure, Equirus Capital, an investment bank. Satisfying expectations
of multiple stakeholders of the project, where there is more than one
sponsor, is among other hurdles
companies face when looking to sell
their projects. Slow approvals from
lenders and difficulty in getting the
desired valuation from buyers is the
biggest hurdle to companies looking to sell their operational assets,
adds V. Sandeep Kumar Reddy, managing director, Gayatri Projects, an
infrastructure firm.
“There is a small segment of
buyers who are actively looking at
acquiring road assets as compared
to many road projects on offer for
sale. Consequently, there is a valuation squeeze for the buyers, while
the sellers feel that the prospects of
their road projects would certainly
improve as the economy picks up,”
says Navneet Singh, executive director & head, infrastructure group,
Avendus Capital.
It is not that divestments are not
taking place totally. Madhucon Projects, gmr Infrastructure, Welspun
Enterprises, ncc and Gayatri Projects
are some of the infrastructure companies that have successfully divested
their stakes in operational road projects. Multi-asset class fund manager
idfc Alternatives, US-based I Squared
Capital and Brookfield Asset Management are among the few financial firms in the infrastructure sector
looking to buy controlling stakes in
operational road projects.
Another issue is of stuck and languishing projects. Last October,
the Cabinet approved the proposal
for a one-time fund infusion from
the government to complete the
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a p r i l 2 5 - M ay 8 , 2 016
Some suggestions
Faced with the accusation of not
playing its part, the Indian Banks’
Association recently asked the government and the rbi to accord ‘priority sector’ status to road projects. As
per the priority sector norms, banks
have to necessarily provide 40 per
Cover Feature
cent of its total lending to the sector,
with the rate interest being lower
than usual corporate loans. Sectors
which presently qualify for priority sector include agriculture, education, renewal energy and msme .
Besides, iba has also suggested permitting flexible restructuring of long
term project loans with debts below
`500 crore. Many road projects have
debt below this level but have a long
concession period. Besides, iba had
proposed that the rbi should consider relaxing npa norms for bank
loans. In case of stalled projects,
where last mile funding has been
given by nhai, any restructuring
on account of the same shall not be
classified as restructured or npa. The
road transport and highways ministry is said to be examining these
ideas. But will the finance ministry
and rbi go along?
Manish Agarwal, partner, leader,
infrastructure, PwC India, says while
several projects are under bidding,
the competition is limited and the
bids are not aggressive. While the
public sector banks are still struggling with stressed assets, the private sector banks would probably
find this a good time to re-engage
with the sector. While this is a positive story, it may be insufficient to
get private sector investment in large
enough volumes. Public spending
will need to continue in parallel, at
least in the short term.
“Several recommendations of the
Kelkar Committee need to be implemented for ppp ’s to regain credibility, at national highways as well
as at the state level. A more proactive approach to ‘actionable stress,’
as recommended, will require bold
steps in taking a pragmatic view of
the government actions (or inactions) leading to stress. Hastening
dispute resolution processes will
require implementation of the proposed amendments to Prevention
of Corruption Act and to Arbitration Act. The proposed National
Facilitation Committee can better
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institutionalise the process of project
preparation ahead of bidding.
Removing the threat of cag audit
of spvs is important. The most radical recommendation, of setting up a
Tribunal by an Act of Parliament, to
enable re-negotiations in future, will
take some time to set up, but will go a
long way in increasing investor comfort. Implementation of these could
result in increased foreign developer
interest, as well as flow of long-term
pension and infrastructure funds into
the sector,” he feels.
In the 2016-17 budget, finance
minister Arun Jaitley announced
an outlay of ` 97,000 crore for the
roads sector, which includes `19,000
crore towards the Pradhan Mantri Gram Sadak Yojana (pmgsy) in
which Gadkari has no part to play.
Of the remaining sum, the budgetary support for roads and highways is
`57,000 crore, up from `45,000 crore
in the last fiscal. This will be topped
up by an additional `15,000 crore
be raised by tax-free bonds floated
Cover Feature
Signs of revival
So, has all this turned the situation?
An icra study in February pointed
out that the road sector is showing
signs of revival drawing on several
measures announced by the government over the last two years, despite
the fact that, under the new land law,
the cost of land acquisition has risen
by 122 per cent to `30 million per
hectare from `13.5 million in 2015.
Among the policy measures that have
emerged as key drivers in the execution of projects, icra has listed award
of projects only after 80 per cent
RoW is secured; focus on quick resolution of stalled projects; delegation
of power to regional offices to grant
forest clearances; and allowance to
file online applications to construct
rail under and over bridges. Other
measures like compensation to developers in case the delay is not attributable to them and relaxation in exit
norms should address some of the
liquidity issues faced by developers.
India has the world’s second
rebidding. irb was the
sole bidder for the project in its final round.
The initial round had
seen a handful of participants,
including
il&fs
Transportation
and hcc.
While the recent
policy moves by the
government represent
a forward movement,
clearly more needs to
be done. G. M. Rao,
chairman, gmr group,
a key player in infrastructure, sees a turnaround in the sector
over the next two
years. A combination
of factors, from the
government’s emphasis on development, reducing cost of
funds and growing interest of global
funds will drive the turnaround.
Banks switching over to an mclr
(marginal cost of funds based lending
rate) regime would also be a positive
for the sector. Noting that the firms
were stressed and looked to reduce
their debt burden, Rao said several
global funds were keen on investing
in the sector. Asset sale by infrastructure companies, he said, were bound
to go up as investments by such
funds increase. India Ratings notes
that prudent accumulation of orders
with a close correlation between the
capacity to execute and order book
size will be crucial to improvements
in cash flows and credit metrics of
individual companies.
Analysts expect the upcoming
awards to be increasingly skewed
towards epc and ham, given the negative cash flows from operations of
most builders. In the near term, public sector funding may have to drive
the growth of highways because
of the weak financials of most private developers and limited capacity to take up more projects. Indeed,
the government will have to handhold the private sector into investing
until roads become attractive again.
So, while the signs of a revival may
be visible, there’s a long way to go.
by nhai. To meet the
revised targets, the
highways ministry is
looking at additional
options to raise funds
through epfo and lic
and by leasing out
existing projects under
the toll-operate-transfer (tot) model.
Actually, the emphasis on roads and highways is part of a larger
plan to invest as much
as `2.21 trillion in creating and upgrading
infrastructure in the
current fiscal year. The
government is hoping that the increased
infrastructure spending will provide a
boost to domestic steel and cement
demand growth. Rating agencies are
somewhat sceptical about the gameplan. Fitch Ratings feels that the
demand for steel can grow if “project
execution rates pick up significantly”.
However, even Fitch, like other rating
agencies, agrees that there has been a
pick-up in road construction.
largest network of roads after the US,
spanning about 4.87 million km. But
the quality of its roads, however, is
ranked below neighbouring countries, including Pakistan, coming in
at 76 out of 144 countries, according
to a World Economic Forum 2014-15,
global competitiveness report. Apart
from adding new road projects this
year, the ministry along with nhai
and state agencies, plans to upgrade
existing ones. Cement, which has
a longer life, is being used in some
expressways instead of bitumen.
With Gadkari setting such a
scorching pace, there are bound to
be controversies. Recently, after irb
Infrastructure Developers won the
bid on bot-annuity to build the
`10,050-crore Zojila Pass tunnel –
India’s most expensive road project
– in Jammu & Kashmir on a single
tender, Congress leader Digvijaya
Singh alleged that the promoters of
irb – the Mhaiskars – were close to
Gadkari. Singh wrote to the prime
minister and approached Central
Vigilance Commission, seeking an
investigation into the matter.
irb, already one of the largest
build-operate-transfer road developers in India, had in January
estimated its order book at `16,430
crore. The firm has 20 toll-based
projects, of which 14 are operational.
Gadkari rejected all charges as false,
cancelled the award and ordered
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a p r i l 2 5 - M ay 8 , 2 016
u RA K ESH J OSHI
[email protected]
Column
Is interest rate in your interest?
The mismatch between declining interest earnings and rising cost of living has made a mess of
many retired people’s lives
I
nterest rates have been heading south slowly
and steadily over the past several years since
the transitioning of India from a developing
country to a country of opportunity. But, then,
it is a salvation for borrowers and damnation
for savers.
With the objective of aligning interest rates
on savings to the yield on securities/bonds, as
also to bring some level playing parties, the government had recently announced a reduction
of 70-100 basis points in interest rates on savings schemes such as pf, ppf, po deposits, Kisan
Vikas Patra, etc. Additionally, the rates will also
be reviewed every quarter.
Understandably, this has sent jitters down the
spines of the citizenry, particularly the retired and
the pensionless, as the reduction will substantially eat into their ability to sustain themselves
in a scenario of rising costs. Notwithstanding the
hype and sound of government agencies around
inflation rates falling, the cost of living has continued to rise, reducing the gap between earnings
from these risk-free savings schemes and costs.
This is making cringing and skimping a necessity for a significant multitude of our populace.
The clamour by public sector banks (and some
private sector banks too) to reduce the rates on
these instruments (for interest parity), so that
they can attract fixed deposits at cheaper rates
and lend at lower costs, seems to have worked.
The government, pressured as it is by poor business sentiment and mounting npas of banks, has
moved on this with an added argument of credit
injection to fuel growth in the economy. There
is, however, no mention of the high risks of fixed
deposits (the insurance covers only a maximum
fd of H1 lakh), compared to the guarantee of
safety of monies in pf, kvp, pod, etc.
The real rate of interest (the actual rate
charged minus the inflation rate) acceptable in
most developed economies is 1-2 per cent. Those
involved in business and commerce, appreciative as they are of the macro and micro level economics of the country and the world, harness
these changes by reworking their business plans
and yet make profits.
But, what about the hundreds of millions
of people who are either employed or contract
labourers or marginalised and who depend
solely on the interest income on their savings, meagre in most cases. Try explaining to
Nagesh G. Alai
them these economic theories when their stomachs are in a rumble and their health in a stumble. Their survival depends on every rupee of
interest they earn.
India has never had any worthwhile social
security system, except for the compulsory provident fund contribution of 12 per cent by both
the employee and the employer, with an added
attraction of tax free interest earning (at least
thus far; who can forget the government’s recent
attempt to tax withdrawals from pf and later calling it off due to a public outcry). Most of these savings get used for housing or marriage or medical
expenses, leaving little for daily bread and butter
in the retired stage. The opaque Employee Pension Scheme doles out a ridiculously low amount
of pension to be really a succour. The plight of the
unorganised contract/daily wage earners and the
marginalised is only worse.
I
The author is a senior
corporate professional.
He can be contacted at
[email protected]
The views expressed
are personal
u 39 u
a p r i l 2 5 - MAY 8 , 2 016
nstead of working to secure the lives of the
retired (who are going to be a significant third
of the population, going by demographic studies)
with a robust social security, the government is
reducing their interest earnings. Interestingly, it
has announced plans to recruit 220,000 employees into its various cadres over the next two years,
despite a bloating workforce and rising wage bills.
Deficits be damned. But the good thing for these
220,000 new employees is that, like the millions
of current government employees, they too will
get lifelong pensions! As will all the mps and mlas
and other government functionaries. Any wonder that there is a scramble for this sinecure?
The government clearly needs to wake up to
this real disparity of pension on the ground and
do something tangible to provide a social security for every citizen, who has been productive
and paying taxes – such as making an 8 per cent
contribution to a superannuation corpus (beyond
the 12 per cent for pf) compulsory and nonwithdrawable except for annuities.
Meanwhile, retired people can only pull along
with more financial prudence, belt-tightening,
handout of doles and, of course, the famed Indian
stoicism. The mismatch between declining interest earnings and rising cost of living has already
seen several sell or mortgage their lands and roofs
to stave off mortgaging of their lives. The country deserves a secure citizenry after 69 years of
independence. We are a far cry from it.
u
Special Report
Photos: sa n jay bor a de
Getting discoms into profit
Solving the vexatious issue through UDAY is critical to
fixing the power sector
P
iyush Goyal, the ever-smiling
minister in charge of power,
coal and new & renewable
energy, is on a roll. His ministry’s
energy efficiency programme has
already distributed over 79.9 million
(and counting) led bulbs nationwide. The world’s largest led lighting programme has helped India
save almost 2,079 megawatts (mw)
of peak electricity demand. Importantly, he has also managed to do in
two years what the upa government
found impossible to do in 10 – get the
state-owned monopoly coal miner,
Coal India Limited, to ramp up the
output of coal by almost 80 million
tonnes per annum. A liberalised policy, allowing swapping of coal, has
been instituted, which allows firms to
rationalise their freight costs by bartering coal with mines that are closer
to their power-generating plants.
“There’s significant improvement
in logistics taking place in coal-rich
states to get fuel to the power generating plants,” says Kameswara Rao,
leader, energy, utilities & mining,
PricewaterhouseCoopers India.
For those who lacked access to coal
linkage and captive sources of fuel,
Goyal has managed to auction coal
blocks, giving firms access to the fuel,
garnering huge sources of recurring
royalties for state governments. Gasbased power plants, which were idling
due to unavailability of fuel from
Reliance Industries’ kg d6 block, have
been given a dose of oxygen, by making available pooled gas to run their
units at 30 per cent plant load factor and get some revenues to service
salaries and bank debt payments.
The upshot: availability of power
seems to have improved, with peak
power deficit for the ongoing fiscal
year projected at just 2.6 per cent or
4,108 mw by the Central Electricity
u 40 u
a p r i l 2 5 - m ay 8 , 2 016
Authority. If realised, this level of
low energy deficits would be the second lowest on record since economic
liberalisation began in the country.
However, Goyal has a long way to
go in fixing the problem-ridden power
sector, which has emerged the biggest contributor to non-performing
assets of the banking system. “While
the sector accounts for 9.5 per cent of
total advances, it accounts for 35 per
cent of all stressed assets in the banking system,” says Suhas Harinarayan,
executive director, jm Financial Services. “We have reached a level today
where you have to restructure otherwise you cannot nurse the patient
back to good health,” adds R. Raghuttama Rao, managing director, icra
Management Consulting Services
(imacs). Of course, the banking system, groaning under bad loans given
to power generating firms, has been
given some measure of respite with
the government working with the
rbi to come out with a 5:25 flexible
restructuring scheme, which allows
banks to extend the repayment
period of the loans up to 25 years,
Special Report
making it easier for the borrower to
service the loans in a timely fashion.
A critical component of Goyal’s
strategy is the Ujwal Discom Assurance Yojna (uday) scheme, under
which state governments will by
March next year take over 75 per
cent of the debt (as on 30 September
2015) held by their distribution companies (discoms), the weakest link
in the power value chain. The balance 25 per cent of the debt is to be
serviced through state governmentguaranteed bonds issued by the discoms. (According to latest reports, the
government has decided to delay the
timeline of these bonds, fearing a glut
as eight states, led by UP, have already
issued them.) Concessional funding
will be made available to state discoms to upgrade their old and creaking infrastructure and usher them
into the digital age. So far, 19 states
have joined the uday scheme. About
90 per cent of the losses made by the
discoms are covered by the states that
have joined uday.
Archaic distribution system
A lot is riding on the success of this
financial turnaround and revival
package for discoms, as these companies are broke and struggling with
creaking infrastructure, unable to sell
power to those who need it, forcing
homes, shops, hospitals and malls to
invest in diesel generation sets, which
cost as much as `11-16 per unit for
electricity. It’s estimated that, at its
peak, almost 80,000 mw of power is
fired from diesel generation sets in
India. “The distribution system we
have is so archaic that, even if there
are certain customers who are willing
to pay marginal prices for power supply, our discoms have the capacity to
shut the whole system,” says Kaustav
Mukherjee, partner & director,
Boston Consulting Group India.
A key factor in the flawed working of discoms is that they are stateowned and state-controlled. The
state-owned companies have little
efficiency and customer focus. “The
power sector is in a mess, because discoms are not able to recover money
for electricity supplied. Even in states
where tariffs have been jacked up,
collections are abysmally poor. You
Piyush Goyal
has a long way
to go in fixing
the problemridden power
sector, which
has emerged
the biggest
contributor to
non-performing
assets of the
banking system
cannot provide cheap power to small
consumers and agriculture and then
not collect your dues too,” argues
Saumitra Chaudhuri, former member, Planning Commission.
According to the Union ministry of power, the accumulated
losses of state-owned discoms stand
at `3.8 lakh crore. Put another way,
that’s more than enough to fund the
finance ministry’s 2015-16 allocation of `34,699 crore to the flagship
rural employment guarantee scheme
mgnrega, for the next 10 years and
still have money left over! “The operational performance of discoms
shows a tremendous leakage between
the energy supplied and the cash
actually collected,” notes Vinayak
Chatterjee of Feedback Infra.
If the losses being incurred by discoms have to be curtailed, they must
be allowed to bill accurately and collect all their bills in a timely fashion,
with the full support rather than
discouragement of the state government and its law and order machinery. In tune with the objectives of
Electricity Act 2003, they must also
be allowed to raise tariffs for subsidised consumers, so that they can
cover the cost of supplying electricity. But there is a vast gap between
theory and practice.
“Discoms, as it stands, have neither the cash flow nor the fund raising
ability to come out with mediumu 41 u
a p r i l 2 5 - m ay 8 , 2 016
to-long-term power purchase agreements,” comments Sushil Maroo,
managing director, Essar Power. Tariffs in many states have not been
revised for years even to the limited
extent of compensating utilities for
inflation and higher fuel costs. In
most countries worldwide, fuel-led
generation costs increases are regularly passed on in retail tariffs. Pramod Deo, former chairman, Central
Electricity Regulatory Commission
(cerc), has a radical idea – wherever losses are high, either the tariffs
charged should be higher to cover
the costs or, the power cuts should be
for longer periods of time, compared
to areas where losses are lower. This
will force people to act responsibly,
helping the discom cover some of its
costs. But are there any takers?
Not only do discoms pile up accumulated losses, they still continue to
lose money because they sell power
below what it costs them to buy it. Rating agency crisil estimates that, the
country’s eight top loss-making discoms lose around `1.40 for every unit
they supply to their consumers. Take
Maharashtra, considered a progressive
state, as an example. It’s estimated
that it costs the government-owned
utility just over `6 to purchase a single unit of electricity. But it sells this
at an average price of almost half its
cost – at `3.11 per unit.
Since no one can continue in
Special Report
business by selling something for less
than what it costs them to make or
buy it, it’s no surprise that the corporations are dead broke. That they have
survived so long is merely because,
under two previous Central governments, they had received bailout packages that shaved off a good portion of
their losses. But they failed to correct
their habit of continuing to sell something below cost. “Tariffs charged by
discoms have to be increased, if costs
have to be recovered. Otherwise, we
are only deferring the actual problem for another 2-3 years,” says V.K.
Dhanuka, former ceo, il&fs Energy
Development Co.
“The key issue with discom bailouts is: how do you ensure that it
doesn’t create a sense of entitlement
and set the stage for a recurrence of
such episodes?” asks imacs’s Rao.
The fact of the matter is that taxpayer’s money is being doled out regularly by governments without any
clear idea as to when these bail-outs
will cease.
Ujwal future?
It is against this backdrop that Goyal
is promising that uday will achieve
what the Electricity Act and several
regulations thereafter failed to do –
get discoms into profit and make them
self-sufficient. This, he claims, will be
possible because states will take over
75 per cent of the outstanding debt of
these corporations, eliminating their
need to pay interest and repay principal on loans worth `3.22 lakh crore.
“We have had a financial restructuring package in 2002 and 2012 as
well,” says Goyal. “uday cannot fail
because it has been formulated after
8-9 months of serious introspection,
extensive consultations with bankers,
tax experts, investment bankers, state
chief ministers, state finance ministers and state finance secretaries.
We have a broad acceptance of this
scheme as we have looked at what is
politically feasible”.
But Chaudhuri points out that,
in 2011, a similar decision was taken
to transfer the liabilities of discoms
to states, but this couldn’t materialise, because banks couldn’t afford
to take such a large hit on yields on
their loans for such a large quantum
Discoms, as it stands, have
neither the cash flow nor
the fund raising ability to
come out with medium-tolong-term power purchase
agreements
Sushil Maroo
managing director, Essar Power
of lending. One way out could be for
the states to issue fresh loans, which
are subscribed by insurance and pension funds and, then, use those funds
to repay banks, saving the latter from
a hit on interest yields. Of course,
that would also mean that banks are
flush with large amounts of cash and
nowhere attractive to lend.
“uday takes away the pile of debt
and gives discoms a new lease of life
to make a fresh beginning; reduce
losses and make a positive return on
the power sold,” says Ravi Uppal, ceo,
Jindal Steel & Power. Interest costs for
some discoms have zoomed to almost
60 per cent of their annual loss, making it amply clear that debt levels are
unsustainably high, he adds.
By making available concessional
funding (a mix of grants and loans)
under Central government schemes
such as Deendayal Upadhyaya Gram
u 42 u
a p r i l 2 5 - m ay 8 , 2 016
Jyoti Yojana, Integrated Power Development Scheme and Power Sector
Development Fund, Goyal hopes the
under-equipped discoms will be able
to install smart meters and upgrade
their transformers resulting in lower
technical losses and better quality of
power supplied to consumers. “We
will have compulsory metering at
the distribution transformer level in
states which, when seen in the background of consumer indexing and
use of geographic information systems, will allow mapping of losses
right up to the feeder and transformer level,” he says and expects
the aggregate technical and commercial losses of discoms on power supplied to drop to 15 per cent of the
total by 2018-19.
Rao acknowledges that discoms
have high technical losses due to the
poor state of their cables, bad transformers and unmetered connections resulting in theft. Given their
financial plight, many have stopped
recruiting staff for years together.
“There’s a major challenge of institutional capability at state utilities
as staff profile is ageing and fresh
recruitment is curtailed. Combine
that with limited investment in
technology, delays in network refurbishment due to cash constraints
and you have a system where oversight is weakened allowing leakages
to take place,” says Rao. There are
reasons for morale of the staff to be
low, as they are mostly with obsolete equipment that can’t be replaced
because there’s no money to do so.
“We will fix circle level responsibility
to reduce losses with support and a
team from the government,” assures
Goyal, asserting that, for his ministry, outcomes are critical.
The rule of thumb dictates that,
for every rupee invested in generation, a similar investment is required
in transmission & distribution
too. However, with India’s discoms
engaged in a daily battle for survival,
they have no money to invest in anything. Reducing technical losses will
require infusing fresh blood and new
thinking. Training will have to be
provided on how to source power
efficiently and many a corrupt staffer
will have to be shown the door.
Special Report
Goyal hopes uday will usher in
better quality and perhaps quantity of supply to encourage consumers to pay their electricity bills and
reduce commercial losses for discoms.
Nobody takes issue with the fact that
aggregate technical and commercial
losses of 30 per cent need to at least
be halved.
But, is tackling technical losses
alone and ignoring commercial
losses a wise decision? After all, if
the state utilities can’t pass on cost
increases beyond their control, then
the entire reform exercise becomes a
sham. “You are losing money on current operations so adjusting debt on
past losses will not solve any problem. You have to take the difficult
decision and raise subsidised tariffs,”
says Chaudhuri.
uday envisages that discoms
should at least come to a ‘no-profit,
no-loss’ situation in terms of each
unit of power supplied by 2018-19.
“uday takes into account what we
have inherited and a permanent resolution for the future,” claims Goyal.
He forecasts that 20 discoms in the
country will be making a profit in
2018 itself.
“Under the World Bank-funded
and Power Finance Corporation-operated plan, formulated during the upa
2 regime, state utilities had to prepare
an operating & financial plan, which
would show a minimum 3 per cent
return to be earned by them. The
plans were prepared but compliance
was absolutely another matter. Compliance with the targets under uday
too will similarly be the challenge,”
admits Mukherjee of Boston Consulting Group India. Chaudhuri too
believes that reducing at&c losses is
‘a pie in the sky’. “It won’t happen and
hence your profit projections may not
materialise. Reform can succeed if we
can get utilities to report cash break
even without assuming at&c loss
reduction,” he adds.
How will the Central government
ensure that discoms under state control will toe the line, especially when
several states such as Uttar Pradesh
will go to the hustings soon? It is
something that isn’t clear to anyone
yet. There is scepticism in the private sector that Goyal’s dreams of
uday takes away the pile of
debt and gives discoms a new
lease of life to make a fresh
beginning; reduce losses and
make a positive return on the
power sold.
Ravi Uppal
ceo, Jindal Steel & Power
reducing the gap between the cost of
power purchased and price of power
billed will get to zero. Goyal does
seem open to the idea of quarterly
tariff adjustments to account for
inflationary pass-throughs but cautions that no government will allow
tariffs to be increased by even `1.5-2
per unit a year. “If you provide better
service levels, then moderate tariff
increases could happen,” says Goyal.
Show me the money
Years of tinkering with tariffs have
already led to a backlog of unbilled
increases, which have to be paid to
discoms. Plus, there is a huge gap
between current costs and revenues; but, the courage to face the
issue and fix the mess, does seem to
be lagging.
To understand why we need to be
ready to pay more for power, consider
u 43 u
a p r i l 2 5 - m ay 8 , 2 016
this. Agriculture and residential consumers in India tend to pay lower subsided tariffs for the power supplied to
them. This loss in supplying the agriculture sector is made up by charging other bulk consumers such as
shops, malls, cinemas, hospitals and
industries higher rates for the power
they consume. Deo illustrates how
this pans out in India’s most industrialised state, Maharashtra. “While
180,000 industrial and commercial
customers bring in 62 per cent of the
annual revenues, some 2 crore other
customers bring in the balance,” he
explains. “The cross subsidy levels in
many places have reached unsustainably high levels,” rues Rao of imacs.
Thanks to the slowdown in the
manufacturing sector, industrial
demand for power has been growing below its ideal long-term average or not growing at all. As a result,
experts estimate that subsidised agri
and residential group of consumers
now account for as much as 42 per
cent of the total consumption, putting a heavy cross subsidy burden on
the bulk consumers. “Tariffs have to
sustainably move to the extent that
agriculture and households, which
are massively subsidised right now,
can’t be so heavily subsidised anymore,” says Sumant Sinha, chairman
& ceo, ReNew Power Ventures.
Since the non-subsidised consumers are already paying a high tariff
for the power they consume, there
is only limited scope in raising their
rates further. At the same time, raising rates for what middle class city
dwellers pay for their homes and
what farmers are charged for their
pumps and homes is a political hot
potato. As a result, state governments
have adopted the easy way out – put
pressure on regulators not to allow
increase in tariff of subsidised consumers. This has meant that discoms
have been forced to borrow money
to fund these losses. Interest costs
on these loans push the electricity
distributors further into continuing
losses. Even where states have agreed
to fund the losses by way of grants/
budgetary allocation, the funds
come with delay of several quarters, forcing discoms to borrow from
banks, which worsen their already
Special Report
precarious financial plight.
“The most important issue to be
tackled in the power sector is reform
of the discom’s financial health. All
states need to adopt uday and meet
the operating targets set for discoms
– such as reducing the high average
technical and commercial losses,”
says Sinha. “If the discom becomes
defunct, other stakeholders in the
system are bound to. Discoms are
today collecting as little as 35 per
cent of their bill (excluding the subsidies receivable from the state). It’s no
surprise they can’t pay their suppliers and we are creating a sector that
is unviable,” adds Sardana.
uday asks states to take over only
5 per cent of these losses of discoms
from 2016-17 and increase this liability to a maximum of 50 per cent of
losses in 2020-21. No wonder, many
experts believe that what uday does,
is merely kick the can of worms down
the road for the next federal government to deal with, rather than putting discoms out of their misery once
and for all. “uday fundamentally
attacks financial problems at the lenders’ level,” says Chatterjee. “It also has
good intentions for the operational
improvement of the discoms.”
So far, few federal governments
have managed to see those intentions implemented in letter and
spirit, because all these moves would
be seen as unpopular and no one
wants to give the Opposition a stick
to beat them with at the hustings.
“Good economics in some cases
doesn’t translate into good politics,”
says imacs’s Rao.
PPPs ahead?
One way out of this mess is to privatise the distribution sector. “The
regulator cannot regulate the government itself. But, if there is a private sector it can ensure customers
get better services and tariffs,” said
Sardana. In effect, the state-owned
discoms aren’t held to account by
anyone as they know that if they
make a loss it will be backstopped by
taxpayer money.
In addition to outright privatisation, there is the go-between franchisee model, where the state discom
appoints a private enterprise to run
If low losses and higher
reliability of power supply can
be ensured in these cities, why
not in every city?
Anil Sardana
managing director, Tata Power
the business in a certain area for
it and achieve efficiencies. Some
experts suggest the government can
earmark 10-15 cities/zones initially
for private sector participation as
franchisees/otherwise and once the
awardees have successfully achieved
results, they can expand their ambit
of operations by another 50-100
km area contiguous to the city
allotted to them.
Whatever be the model, one thing
is clear; cities where private distributors are in charge of supplying power
for e.g. Ahmedabad, Surat, Kolkata,
Mumbai, Jamshedpur, etc, all have
uninterrupted 24x7 power of a quality that is significantly better than
the state average. “If low losses and
higher reliability of power supply
can be ensured in these cities, why
not in every city?” asks Anil Sardana,
managing director, Tata Power. “As a
start, the government should look at
privatising distribution in every city
in India with a million plus population. Open up these 115 cities and
allow people the freedom not to have
to rely on dg sets.”
Sardana points out that in Delhi,
its arm North Delhi Power managed to reduce loses from 53 per
u 44 u
a p r i l 2 5 - m ay 8 , 2 016
cent of electricity supplied to 9 per
cent in one decade. “The government of Delhi has saved `30,000
crore in savings on electricity losses
since 2002. This is money that can
be spent on providing social and
physical infrastructure,” says Sardana. Indeed, even in franchisee
models like Bhiwandi in Maharashtra or Agra, the high level of at&c,
losses, as they are called, have come
down and quality of power supply
increased under private sector management. “It has taken 70 years for
us to solve the discom issues and
we are still waiting for sustainable
solutions,” adds Sardana.
Today, if the private sector has
any hesitation in stepping into distribution, it’s because there are
doubts whether governments have
the conviction to take tough decisions. “Transmission & distribution
sector is more risky; so, the entrepreneur would have to ensure that
the state doesn’t interfere in the process of the regulatory tariff fixation,”
says Mukherjee.
“If distribution is in the hands
of private enterprise, governments
can whip firms lagging in areas into
shape but if they are in the business
then, the government can’t whip
itself,” says Sardana. He advocates
that, once the experiment with cities
is successful, the government should
even look at parcelling out distribution in rural areas with provision of
viability gap funding to ensure Prime
Minister Narendra Modi’s vision of
affordable and accessible 24x7 power
for all is realised.
uday thus needs vigorous monitoring as well as infusion of fresh
ideas that can be simultaneously
implemented to boost its goals.
Given their commitments to fiscal goals and the Central Pay Commission-inspired domino effect of
enhanced salary bills in the future,
this is probably the last time that a
massive clean-up of discom liabilities
can be borne by the states. If discoms
continue to be in the business of not
making money, then there is going
to be a huge intractable problem a
couple of years down the line.
u YASSIR PITALWALLA
[email protected]
Focus
Streamline the system…
… because the index business is on the cusp of a wave of growth
March 2014 they asked iisl to formulate an index that can help them
with the divestment. That index,
ndices play an important role in jv between s&p and bse, called Asia thus devised, came to be called the
the world of investments. Not Index, manages 37 equity indices that pse Index. It encompasses only those
only do they help investors to spreads over broad, sector, thematic, companies that were up for divestgauge the mood of the market, but strategy, sustainability and volatility ment and, hence, is free of major
they also help in terms of bench- issues and helps investors to make psus like bhel and ntpc.
marking stocks to understand how money. In that sense, between nse
Somehow, both nse and bse have
any one portfolio is faring vis-a-vis and bse, there are 91 stock indices for not invested enough resources to
the overall market trend. Also, indi- one to pick and choose from.
make people aware of the various
ces help in launching passive funds
Apart from these, these two insti- useful indices. Officials from both
called ‘exchange-traded funds’ (etfs). tutions also maintain customised iisl and Asia Index admit that most
The world’s first of its kind Dow Jones indices, which investors can look of the indices are not aimed at retail
Industrial Index, envisaged in 1896 at, for the purpose of benchmark- investors; they are meant to cater to
by Charles Dow, Edward Jones and ing. When the government of India the amcs and insurance companies,
Charles Bergstresser, continues to divested its holdings through etf in which use them either as benchbe one of the leading indicamarks or guides to float etf
tors in the US market, giving
One company dominating the Index with schemes with. However, it is
a hint of what’s happening in
high time these institutions
Min 20 per cent weightage
the US equity market.
spend their resources to make
Asia Index
In India, the concept of
these indices popular among
Index name
Company
Weightage
indices found the light of
retail investors. Since nse and
S&P BSE Capital Goods
Larsen & Toubro
55
expression with the launch of
bse spend a lot on educating
S&P BSE Consumer Durables Titan Co
41
the Sensex (Sensitive Index)
investors,
it would not be a bad
S&P BSE Teck
Infosys
38
in 1986. This was followed by
idea
to
introduce
a few slides
S&P BSE Metal
Coal India
32
the National Stock Exchange’s
during
their
road
shows on
S&P BSE Realty
DLF
25
the
little-known
indices
too.
nifty50, which has huge fan
S&P BSE Consumer Durables Rajesh Exports
24
They
would
help
followings among the market
amc s also to
S&P BSE Bankex
HDFC Bank
23
participants today – mainly
market etfs and expand the
S&P BSE Oil & Gas
Reliance Industries
22
young investors, as also those
aums of passive funds, which
S&P BSE Power
Power Grid Corp of India
22
who trade frequently on
continue to remain below the
S&P BSE Bankex
ICICI Bank
21
Futures and Options. Sensex
potential level in India.
S&P BSE Auto
Tata Motors
20
is the more popular choice
In India, etf investing is
S&P BSE Teck
Tata Consultancy Services
20
for older generations, say,
still small business, but has
above the age of 40. The levgood scope. “Indices are used
IISL
els of Sensex and nifty help
in different passive strategies
Nifty Auto
Tata Motors
20
via passive products such as
investors to understand the
Nifty Bank
HDFC Bank
32
index funds, etfs or strucmood of the stock market.
Nifty Bank
ICICI Bank
21
While many Indian investors
tured
products,” says Koel
Financial Services
HDFC Bank
26
are aware of the Sensex and
Ghosh,
head, business develFinancial Services
HDFC
21
opment,
South Asia, s&p Dow
nifty and their respective
FMCG
ITC
50
levels, there is little awareness
Jones
Indices.
“In India, this
IT
TCS
26
about various other indices
space
is
in
its
growth phase
IT
Infosys
26
that are available in the counand
there
is
a
need for an
Media
Zee
59
try, which investors choose to
understanding
on indexMetal
Tata Steel
22
rely on.
based
products
and
their utilPharma
Sun Pharma
35
ity.
As
this
space
is slowly
nse has a subsidiary called
Private Sector Bank
ICICI Bank
26
growing,
the
index
business
is
iisl (India Index Services
Private Sector Bank
HDFC Bank
24
also
developing
accordingly.”
and Products Ltd), which
PSU Bank
SBI
62
In August 2015, the Employmaintains 54 equity indices
Realty
DLF
28
ees’
Provident Fund Organincluding benchmark indiEnergy
RIL
47
isation
(epfo) announced
ces, sectoral indices, as well as
Infrastructure
L&T
31
thematic and strategy-based
that
up
to
5 per cent of the
MNC
HUL
24
indices. On the other hand, a
incremental corpus will be
I
u 45 u
a p r i l 2 5 - M ay 8 , 2 016
Focus
invested in the equity market, mainly
through etfs built around nifty50
and Sensex 30. At that time K.K.
Jalan, commissioner, Central Provident Fund, had hinted that, going
forward, they may consider diversifying the basket. This move offers
a big business opportunity for both
iisl and s&p bse . Globally, etf business has grown dramatically, based
purely on pension and life insurance
business. To give the issue some perspective, Ghosh gives some numbers.
“It took 19 years for global etf business to cross $1 trillion mark but the
next $1 trillion took only 3.5 years
and the $1 billion after that took
only 2.5 years.” The same way, she
feels that, once India reaches a certain threshold limit, the etf business would grow in India too. This
is where index-providing companies
can see a huge potential.
Right now, there are no numbers
available on how big this index business is. Suffice to say that amcs don’t
pay index companies for using their
indices as benchmarks, though globally it is done. However, index companies do get licensing fees for using
the etf Index. But, again, in India,
the fee paid is about one-fourth of
the rates prevalent globally. Sources
suggest that, in India, it is one basis
point for using the index for etf,
while the global norms indicate 4-5
Indices offered by IISL
Broad Market
Sectoral
Thematic
Strategy
Auto
Commodity
100 Equal weight
NIFTY
Nifty50
Next 50
Bank
CPSE
Alpha 50
100
Financial Services
Corporate Group
50 USD Index
200
FMCG
Energy
Dividend Opportunities 50
500
IT
India Consumption
High Beta 50
Midcap 150
Media
Infrastructure
Low Volatility 50
Midcap 50
Metal
MNC
Dividend Points
Full Midcap 100
Pharma
PSE
Quality 30
Free Float Midcap 100
Private Bank
Services
Value 20
Small cap 250
PSU Bank
100 Liquid 15
Growth sectors 15
Small cap 50
Realty
Midcap Liquid 15
Nifty 50 PR1x inverse
Full small cap 100
500 Industry Indices
Shariah 25
Nifty 50 TR1X inverse
Free Float small cap 100 —
Shariah 50/500
Nifty 50 PR2x leverage
Midsmall cap 400
—
—
Nifty 50 TR 2x leverage
VIX
—
—
—
basis points. However, globally, etf
players are forcing index providers to reduce the fees, due to which
index players are facing the heat. The
world’s largest players in index providing businesses are s&p and msci
– both with annual revenues in the
region of $500-600 million.
According to the annual report of
nse, iisl made a net profit of `34.29
crore as on March 2015, as against
`19.64 crore the previous year. In
other words, India Index is a smart
profit-making
venture,
showing
robust growth in its profits. These figures may have gone up in the current
year, as epfo money has started coming in from the second half of FY16.
One reason iisl’s profits are high is
the fact that nse pays licence fees for
nifty futures and options. According
to the annual report of nse for 2014-15,
it was `8.95 crore. Asia Index has relatively smaller profits of less than `2
crore for the year ended March 2015,
as is revealed by bse’s annual report.
In that sense, despite the nse breaking
away from s&p a few years ago, it continues to be the largest player in the
index business in the country. One
trade figure suggests that 77 per cent
of etf funds use iisl as their benchmark index; in terms of aum, its share
stands at 85 per cent.
Varieties of indices
There are various types of indices
– broad-based, sector-specific, thematic, etc. There are also indices that
capture the sector’s mood or business
house’s mood correctly. Some indices help investors play on themes
Indices offered by Asia Index
Broad Market
Sectoral
Thematic
Strategy
Strategy
Sustainability
Sensex
Basic Materials
Infra
Momentum
Carbonex
Sensex 1 month realised volatility
100
Consumer discretionary
Goods and Services
Manufacturing
Low Volatility
Grernex
Sensex 2 months realised volatility
200
Energy
500 Shariah
Quality
—
Sensex 3 months realised volatility
500
FMCG
PSU
Enhanced Value
—
—
All cap
Finance
CPSE
Dividend Stability
—
—
Large cap
Healthcare
—
Sensex 2x leverage
—
—
Mid-cap
Industrials
—
Sensex 1x inverse
—
—
Midcap Select
IT
—
Sensex 2x Inverse
—
—
Large Midcap
Telecom
—
Sensex Futures
—
—
S&P BSE
u 48 u
a p r i l 2 5 - M ay 8 , 2 016
Focus
sa n jay bor a de
Agarwal: three factor-based indices
like the momentum, volatility dividend capacity and so on.
Every investor wants to make
more money in the market than the
index indicates. To achieve that, iisl
has an index called Alpha 50, which
has given five-year returns of 18 per
cent cagr as on 31 March 2016, as
against a mere 5.81 per cent for
nifty50 for the same period. Similarly, iisl has the Dividend Opportunities 50 Index, the aim of which is
to provide exposure to high-yielding
companies, without compromising
on stability and tradability requirements. Those who are seeking to
ride on the dividend yield should
follow this index. Even if you can’t
invest in the index, at least one can
go through the constituents of the
index to buy companies. Since these
companies are mainly from good
business houses and are profit-making, one can make decent gains without taking undue risk.
The same way, bse s&p ’s bse
Momentum index or Dividend
Stability Index helps investors to
pick up different strategies to expand
returns from the market. But Ghosh
clarifies that Dividend Stability
Index has been devised, keeping in
mind the insurance sector, which
has a long-term view, which makes
the index perfectly fit into its investment strategy.
What is interesting about strategy-related indices is their weightage,
which is not a function of the free
float market cap, which one normally
sees in the more broad-based indices. They are called factor-based indices. The theme that has the highest
characteristics will have the highest
weightage, and so on. For example, in
dividend-yield indices, the company
that offers the higher dividend yield
will have higher weightage than its
free float market cap. “nifty has three
factor-based indices – Alpha, High
Beta and Low Volatility,” informs
Mukesh Agarwal, ceo, iisl. Globally
too, many of the index companies
are moving away from the free float
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a p r i l 2 5 - M ay 8 , 2 016
market cap to introduce new indices.
Going forward, the free float-based
market cap index may be restricted to
few broad-based indices and many of
the new indices may move to a new
methodology to a meet the changing
need of the investment world.
Serving little
Despite some of the new indices
being exotic, there are many that
serve little purpose. Many of the sectoral indices have one or two companies dominating the index – like bse
Capital Goods Index, which has l& t
astride it with a weighage of 55 per
cent. With this kind of dominance,
no fund manager would like to use it
as a benchmark, as even sebi guidelines do not permit a fund manager to put more than 15 per cent of
the aum in any one company. Similarly, iisl’s nifty fmcg Index has itc
with a weightage as high as 50 per
cent; s&p Consumer Durable Index
has Titan with a weightage of 41 per
cent – and so on. These indices do
Focus
not truly reflect the mood of the sector, as one company dominates the
index movement. What is needed is
that these indices should have individual weightage cap for companies,
so that any one company does not
dictate the outcome of the sector.
Similarly, there are indices with
almost similar names, which also
serve almost the same theme. Investors at large do not know what differentiates one from the other. For
example, nifty Bank, popular among
investors, reflects more of the movements in the private sector banks,
rather than the public sector banks,
whose weight in the index is only 12
per cent. What then is the need for
a separate private sector bank index?
Also, the name of the index is deceptive, as it implies that both private
and public sector banks have almost
similar weightage in nifty Bank.
iisl has four midcap indices and
five small cap indices, which are
named in such a way as to create
confusion among investors. They are
Midcap 150, Midcap 50, Full Midcap
100 and Free Float Midcap 100. One
is not sure which one he should look
at to understand what is happening
with midcap companies. Some of
these indices have been introduced
from 1 April 2016.
In the small cap space, there is
more confusion, as there are five
indices within it. Maybe it’s time
to have one single index that shows
the true mood of the mid cap and
small cap the way we have nifty and
Sensex that captures the mood of the
large cap.
Conflict of interest
A company going out of an index or
another coming in offers price-sensitive information, which one can
use to play the market. But what is
strange is that iisl has an Index Policy Committee, which has ceos from
amc s. Agarwal informs that this committee helps in making policy decisions, like the one they took recently
to include dvr in the nifty50 from 1
April 2016. With the inclusion of dvr
of Tata Motors, nifty50 now has 51
trading instruments, creating confusion in the minds of investors.
The key concern here is that the
Ghosh: need for understanding
ceos of the amc s knew that dvr
would be becoming part of nifty50
soon. Since only two dvr s are traded
in the country, it was obvious that
the dvr that would be included in
the nifty50 would be of Tata Motors.
This creates a conflict of interest, as
someone may use the information to
his advantage. When asked to clarify, Agarwal said that the people who
were on the committee were of high
integrity; hence, someone misusing
any information to an amc’s advantage is not likely. Ghosh said she was
not aware of any amc sitting on an
index committee anywhere in the
world. sebi must look into this issue
and ensure that the committee is
independent of the influence of any
consumer of the index.
As the world market is becoming more complex and integrated,
no one straightforward strategy can
u 50 u
a p r i l 2 5 - M ay 8 , 2 016
help you make money in the stock
market. These indices are good for
investors to formulate different strategies at various cycles in the market. If you are bullish on any one
sector, follow a particular index to
create alpha from the market. Similarly, when sentiment is down, play
on dividend the income theme and
low beta stocks and so on. But it is
high time the bse and nse endeavour to educate investors about these
indices, when they undertake road
shows for the purpose. sebi must also
look into the conflicts of interest and
ensure that there are no amc personnel in any of the committees put
together for index formulation. The
index business is on the cusp of the
next wave of growth, which should
augur well for iisl as well as s&p.
u SUNIL DA M ANIA
[email protected]
Guest Column
Postcard from Palo Alto
What a visit to the Facebook HQ evolves
A
nd the purpose of your visit?” asked the
US immigration officer, staring deep into
my jetlagged soul.
“Visiting Facebook in The Valley” I replied.
“And the nature of your business?”
“Setting up Wendy’s in India.”
“Wendy’s? The burgers? In India?”
I could see his point. Wendy’s, the brand
famous for the slogan “where’s the beef?” being
built in a non-beef-eating nation by some guy
with a British passport.
After a 10-minute grilling, I was released by
Homeland Security classified as a harmless fruitcake with a sub-continental fast-food fantasy.
For the record, we are setting up Wendy’s in
India and we were visiting Facebook.
Really, the story makes perfect sense, given that
India is home to 700 million Millennials who, of
course, are interested in many of the same things
as their Californian contemporaries. And this
includes burgers (perhaps with more spice).
India, with its billion mobile phones, 400
million Internet users and 125 million Facebook
accounts, has sensational stats and is second
only to China. For now!
Today, India matters to America the way
America matters to the Indian graduates who,
for more than 40 years, have come to The Valley
to pit their wits and pursue their dreams. Today,
Satya Nadella runs Microsoft and Sundar Pichai
runs Google. The list goes on.
In fact, Non-Resident Indians (nris) have
become a dominant diaspora not only in Palo
Alto, but across the US. And from where I’m sitting (New Delhi), the sub-continent is only just
getting in to its stride.
As I perched at the hotel bar, this intriguing
America-India dynamic came to life in the halfoverhead conversations of a young team from
the Boston Consulting Group, at least half of
whom were of Indian origin. Their conversation
fizzed; laughter erupted; drinks were drunk and
college sweatshirts worn. Not only did the nris’
US assimilation seem complete but, if you took
away the American accents, you could have been
at a bar in downtown Delhi.
The point is that the big world is small and
that very different places have very similar
people. Exhausted by this profound thought,
I retired to my exorbitant hotel room. Note to
travellers: Valley hoteliers, a rare species, charge
like a wounded rhinoceros.
Jasper Reid
After an early morning jog around the awesome Stanford Campus, I set off with my India
team to the Facebook Campus located at the
anarchically named Number One Hacker Way.
After checking in at reception, kaboom! Out
into the amazing world of Facebook hq – bathed
in Californian sun, with waves of bright, young,
hip guys and girls on their way to a day of coding, brainstorming or just hanging out at one
of the free Facebook eateries. I lost count of the
nationalities and the sheer difference of the
environment made me feel like a sort of corporate expatriate – an expat, squared. Or, perhaps
just a square expat!
W
The author is the
Chief Executive on imm
who invest in setting
up and managing
consumer brands in
international markets
u 51 u
a p r i l 2 5 - M ay 8 , 2 016
e continued our tour of the Campus finding ourselves in the same room as Mark
Zuckerberg. Starstruck, we enquired, sheepishly,
about a photo but were shoed away by security.
‘He’s at work’ was the very reasonable reason.
After our close encounter, we were shown a
vast plasma screen with Facebook interactions
happening live around the world. We clicked on
our home, the pixelated globe span and India
lit up like an enormous upside-down Christmas
tree. We felt very proud.
The two days on Hacker Way were fascinating and because Facebook is pretty much
global, the world felt like a digital village. In
fact, the idea of ‘expats’ seemed a little bit
dated; how are there expats when everyone
is a social-media citizen? Will there be expats
in the future? Zuckerberg seems to be asking
and, whether you like Facebook or don’t, it’s an
interesting question.
After as long a flight as you can take, we
landed in New Delhi to a foggy and polluted day
a million miles from the clear Californian skies.
The drive home took us past people who
weren’t on Facebook – poor, on the streets, looking for work, exposed in this very exposing city.
So much for folk being the same.
But here’s the hope – our India is emerging,
slowly, facing challenges but moving relentlessly
on. Imagine a nation, like America – a land of
democracy and opportunity – but with five
times as many people. Facebook and the digital revolution play a big part in the rise of India
and the citizens of the sub-continent are at the
heart of this revolution – whether living in New
Delhi or The Valley. No wonder Mark Zuckerberg
wants in on India. u
Corporate Reports
Weaving a growth pattern
photos: sa n jay bor a de
which is crucial for a global brand
like ours,” says H.S. Vishwanath,
senior sourcing director, South Asia,
Levi Strauss India. “We are more
than satisfied with the way scml
has extended its support in the last
six years,” adds Narahari N. director, central sourcing, Madura Fashion & Lifestyle. “Our brand derives
immense value in terms of innovation support in fabric, garments and
new wash finishes. This has greatly
helped Peter England to grow the
denim category substantially in the
last few years”.
“As a company, Suryalakshmi has been quite successful in bringing for us
L.N. Agrawal:
value-added player elevated products through
vertical integration,” compliments Rajesh Lalla, head,
sourcing, Lifestyle International (Landmark group). “The
he Hyderabad-based Suryalak- dominant market share in the midshmi Cotton Mills Ltd (scml market segment. It is a preferred sup- products developed are updated in
– market cap: `211 crore) has plier of denim fabrics to global brands fashion, which continue to delight
come a long way since it commenced and retailers such as Levis, Wrangler, our customers”.
“Offering more to our customers
its journey way back in 1962 as a Polo rl, dkny, jc Penny, Walmart,
6,000-spindle cotton spinning unit. Jones, ufo, Lee, Next, Marks & Spen- has been our focal point,” says LakHaving undergone a major transfor- cers and Zara. Besides, the company shmi Narayan Agrawal, 80, chairmation in the last couple of decades, makes garments for major brands like man, scml . “This intent has helped
the `700-crore company has emerged Levi Strauss, Bestseller (Only), Eagle, us emerge as an integrated valas a vertically-integrated denim Germany, Splash (Landmark Group ue-added player in the business of
player, which not only makes cotton of the UAE), Giovanni Galli, Portu- denim, which has evolved signifiyarn (capacity 26,000 spindles) and gal, etc. Known for its product inno- cantly as a product. While doing so,
denim fabrics (capacity: 40 million vations (launched over 250 products our strategy is aimed at becoming
metres per annum) but also denim in the last five years) and ability to the lowest cost producer by leveraggarments (capacity 5,000 pieces per produce a wide variant of high-value ing integration and manufacturing
day). It also produces an array of val- denim fabrics, the company is serv- efficiency”. Agrawal’s family was iniued-added and fancy polyester and ing more than 20 global brands across tially in cotton trading in Andhra
blended yarns (capacity: 61,000 spin- 27 countries. It also supplies to Indian Pradesh, after migrating from Rajasdles). Backed by 4,600 employees, retail labels like Allen Solly and Peter than. His father Dulichand Agrawal
had come to Hyderabad about 100
the company has three manufac- England of the Aditya Birla group.
“One of the key reasons for our years ago from Jhunjhunu in the
turing facilities in Andhra Pradesh
and two facilities in Maharashtra – long-standing relationship with Shekhawati region of Rajasthan. He
all certified with iso 14001:2004, iso Suryalakshmi has been its quality, was a cotton trader. After his passing
away at an early age, Lak9001:2008, Oeko-Tex and
shmi Narayan got into the
Sedex (Supplier Ethical Data
Financials ( ` Crore)
cotton business to support
Exchange) for quality, envi
FY2015
FY2014
FY2013
FY2012 FY2011
his family. He was only 18
ronment, health & safety
Net sales
705
702
705
669
601
that time.
and ethical practices.
Net profit 12.17
11.71
30.37
28.31
34.81
In 1961, he was perscml has emerged as an
Ebitda
83.78
85.93
105.02
94.48
97.07
suaded by D. Sanjivayya,
original denim manufacOPM
74.57
69.74
96.51
82.78
85.29
the then chief minister of
turer (odm) to leading global
Andhra Pradesh (who, as
and domestic brands, with a
Suryalakshmi Cotton Mills
repositions itself in the
denim market
T
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a p r i l 2 5 - m ay 8 , 2 016
Corporate Reports
also P.V. Narasimha Rao, the former
prime minister, were close friends
of Agrawal) to start a textile mill.
The Central government had allotted 18 cotton mill licences to Andhra
Pradesh. Though there were 300
applicants in the state, Sanjivayya
allotted him two licences. Agrawal
commissioned his cotton mill Suryalakshmi in 1964 in Mahbubnagar
district. The name was an amalgamation of his name with the name
of his Chennai-based friend Suryanarayana, who already owned three
cotton mills. Suryanarayana helped
him in setting up the project and
later in the management of the cotton mill. In gratitude, he transferred
one of the two licences allotted to
him to his friend.
Desired momentum
By 1970, the business achieved the
desired momentum. Agrawal had
been joined by his three brothers by
then, with only his eldest brother
keeping away from the family business. He founded three more cotton
mills – Suryavanshi Spinning Mills
in 1972, Suryalata Spinning Mills in
1983 and Suryajyoti Spinning Mills
in 1992. Two years after the establishment of Suryajyoti, Agrawal and
his three brothers divided the business, each taking over one company
into his fold. All these companies,
based out of Hyderabad (Suryavanshi: 100,000 spindles and garmenting capacity; Suryalata: 100,000
spindles and Suryajyoti: 90,000 spindles & 20 million metres of fabric),
are listed entities and doing well.
“All together we would have been
a large textile entity,” says Agrawal.
“But, more often than not, in order
to maintain a cordial atmosphere
within the family, one has to make
compromises and look forward to
a better future. It was an amicable
move and we all are happy today
pursuing our own interests”.
Even as the business was getting
split among the brothers, Agrawal’s
only son Paritosh joined the company as a trainee. An engineering
graduate, Paritosh, 45, is the managing director today, having become
a director of the company in 1994
and elevated to his current post in
Paritosh: looking at a niche segment
2006-07. He has played a major role
in the company’s diversification into
the manufacture of denim and, thereafter, into garmenting. It was he who
also decided to move out of Andhra
Pradesh and zeroed in on Maharashtra, which was wooing investments
through attractive industrial policies.
Moreover, the state had abundance
of cotton, while Andhra Pradesh was
faced with power and water issues.
In 1997, the company set up a
Shareholding
pattern (%)
Promoters 55.94
Others 43.64
Institutions 0.42
u 53 u
a p r i l 2 5 - m ay 8 , 2 016
denim capacity of 10 million metres
(subsequently expanded to 40 million metres) at Ramtek near Nagpur
in Maharashtra. It was a composite
unit, where the company invested
about `115 crore, even as its turnover was some `120 crore. “It was
a big move on our part,” says Paritosh. “Not only was the investment
big, but we were also venturing into
a new vertical – that too, away from
our home state. Since then, we were
desperately looking for some kind of
trigger that could take our business to
the next level of growth and decided
to take that plunge. Today, we have
emerged as a transformed entity and
are happy with the decision”.
The last decade or so has been
quite eventful for the company, as it
looks for a greater degree of integration, both backward and forward, in
an attempt to come up with a production chain, which can produce
Corporate Reports
Across the sector in FY15
Share price M cap
(Rs)
Total income PAT
(Rs crore)
EPS
(Rs)
Surya Lakshmi Cotton Mills
124
207
714
12.17
7.35
KG Denim
86
221
592
0.21
0.08
Aarvee Denims Exports
55
130
746
0.19
0.08
Nandan Denim
137
623
1097
51
11.28
Arvind Ltd
266
3856
5224
377
14.62
Source: BSE
high-value products in a cost-effective manner, with efficient control
over processes and supply chain.
Integrating forward, the company
put up a garmenting facility (capacity: 5,000 pieces per day of denim
wear; primarily, bottom wear, for
men and women) in 2007 at Thummaluru (Maheshwaram Mandal) near
Hyderabad. In a short span of time,
the company has been able to create a robust customer-base of global
brands and retailers.
“Our garmenting facility is world
class and in compliance with global
standards,” says Padmini Agrawal,
director, scml . “Working in close
collaboration with customers’ design
teams, we are in a position to cater
to fast fashion requirements, with
quick turnaround times. We will
look at expanding our capacity
going forward”. Wife of Paritosh,
Padmini has been looking after the
garmenting division of the company
since inception.
In the last four-five years, the company has undertaken a capex programme of more than `250 crore,
where it set up a 25 mw captive thermal power project at Ramtek, Nagpur. The `115-crore power plant was
commissioned in 2012. The company
has also put up a modern cotton spinning unit in Amravati near Nagpur,
the project going on stream in October 2015. The `131-crore project has
been funded by a long-term loan of
` 95 crore under the tuf scheme, as
also incentives provided by the new
state textile policy, along with equity
and internal accruals. The new project will also enable the company to
produce specialised and fancy yarns
(lycra, ring, slub and compact) for its
new range of denim fabrics. Apart
from meeting the captive need, the
facility will also meet the requirements of other global and local fabric
manufacturers.
The company also has a spinning
capacity of 61,000 spindles in Amanagallu near Hyderabad. Over the
years, this capacity (the oldest among
all the facilities) has undergone a
major moderniation phase and produces specialised high-performance
polyester and bended yarns for varied applications, catering to exports
and domestic customers.
In the last few years, the company
has been putting more emphasis on
product development and has established its own design-cum-r&d team.
It has also collaborated with denim
fashion designers from Europe (Indian
market primarily follows European
trend and forecasts) for the better
comprehension of the fast-moving
design and latest industry trends for a
much improved customer experience.
scml is now in a position to develop
as many as 100 variants of denim fabrics every season (in terms of textures,
designs, washes, fibre mix, etc).
Denim dreams
The company has recently introduced an array of unique shades and
performance-oriented new denim
fabrics (Cool Max, Bual Core, Bamboo, Tencel Rayon Viscose and others). All these products have been well
accepted in the market. In addition,
company’s new dobby design has
been a great success with its global
customers. It has increased its exposure to key clients like jc Penny, ufo,
Wrangler and Lee in the markets of
the US and Canada. It has also ventured into newer markets like Korea,
South Africa, South America (Peru,
Columbia and Chile) as also Turkey.
“Over the last few years, we have
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significantly strengthened our product development capability and that
is paying rich dividends in terms of
expanding our customer base and
getting into the newer markets.
Today, as a company we are well
positioned to fast-changing market
requirements with quality products
at competitive pricing,” says Sameer
Kulkarni, manager, business development, scml .
With all these measures in place,
the company is all geared up to
explore the opportunities that are
emerging in the booming domestic
denim market where it competes with
players like Arvind, Raymonds, kg
Denim, Aarvee, Nandan Denim and
others (see box). In the last five years,
the domestic market for denim has
grown at a cagr of over 15 per cent.
In fact, the last couple of years have
been quite remarkable for the industry
as demand has seen real upsurge both
on the domestic and exports market.
The domestic market in particular is
showing great signs of traction in the
wake of favourable demographics and
increasing income levels.
The boom in organised retail has
also added to the momentum. In the
last couple of years, more than 200
million metres of capacity has been
added, while the next two-three
years will see addition of at least 600700 million metres of denim capacity
in the country. The current domestic
capacity is pegged at around 1.20 billion metres, of which around 60 per
cent is consumed domestically, while
the rest is exported.
“The domestic denim market
is doing exceptionally well for the
last couple of years and the same is
expected to continue for the next
five-six years in the wake of fundamentals. Keeping in mind the abysmally low penetration level, the
domestic consumption will continue to grow at a robust pace,” says
Govind Sharda, president, Nandan
Denim, which is adding 39 million metres of capacity, taking its
total capacity to 110 million metres,
surpassing Arvind’s 108 milion.
“Denim as a product has come a
long way ever since it came into being
as a tough fabric. Over the decades,
it has evolved as a product and now
Corporate Reports
Diversification and robustness –
with multiple variants, it has emerged
as a fashion fabric from a mere performance fabric. The domestic market for denim is currently booming
and moreover with China reducing
its exposure to cotton textiles, the
Indian industry with abundance of
cotton will drive the export markets
as well. Things will continue to be
favourable for Indian players in coming years,” says P.R. Roy, renowned
textile consultant and former
advisor to Arvind Ltd.
Keeping all this in mind, scml
is also gearing up adequately. Having grown at a cagr of 10 per cent
for the last five years, the company
is now planning to double its turnover in the next five years. It is looking for a capex of `250-300 crore to
expand its denim (by 10-20 million
m) and garmenting capacity (5,0006,000 pieces per day) in the next
two-three years.
“All this will depend upon how
the market condition pans out,” says
Paritosh. “Going forward, our focus
will be to increase the share of our
value-added products across our verticals that can add to our realisation.
Denim and garments will be our
focus areas and there also we would
like to be in the niche segment. We
will also try to increase the share of
our exports in future”.
Currently, the company exports
about 20 per cent of its total production. In denim, the share of exports is
higher at about 30 per cent. Currently,
the denim division accounts for
about 53 per cent of its total revenue,
followed by yarn (about 39 per cent)
and garments, (about 8 per cent). For
the nine months ended 31 March
2015, the company clocked a turnover of `543 crore, against `540 crore
during the corresponding period in
the previous year.
High value fabrics
For 2014-15, the company has
reported a revenue of about `705
crore (2013-14: `702), with a pat
of about `12 crore (`11 crore). The
company is expecting a turnover of
some `765 crore for 2015-16. For the
last two fiscal years, the company
has been repaying a total loan of
about `104 crore. Its total loan outstanding is `180 crore (debt: equity
ratio 1:0.9).
“Our bottomline has been looking subdued for the last couple of
years, as we have repaid some portion of our loans. In terms of topline,
in 2014-15, our denim plant had to
face some labour-related issues, but
they have been sorted out and we
are now ready to see improved financials going forward,” says Siva Subramanyam P, vice-president, finance,
scml, who believes that the commissioning of new cotton spinning mills
in Amravati will add `50-60 crore to
the topline during the full year of
operations in 2016-17.
With all these developments in
place, scml is now well-poised to
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begin its next phase of growth. During the last decade or so, the company has changed into a specialised
denim player from a yarn manufacturer. In denim, the company has
consciously moved into the production of high-value fabrics, where the
realisation is much better. Integrating
forward, the company has also added
garmenting into its portfolio. This,
along with its spinning vertical, has
not only provided its portfolio more
robustness but also diversification in
terms of offering. In yarn also, it has
completely moved out of basic products and is focussing on fancy and
specialised categories.
All in all, the move is to elevate
itself in the value chain and thereby
enhance this realisation. The booming denim market will provide it
with much needed traction, something it has desperately been looking
for, for years. It has already developed a solid base of customers winning their trust; now, the time has
come to leverage the same. On the
market front also, there is a good mix
of exports and domestic demand,
which will only add to its inherent
hedging mechanism. No doubt, the
company has now repositioned itself
in the market, with a more vibrant
offering and is well geared up. However, it remains to be seen how it
executes its plans in this highly
competitive market place.
u AR B IND GUPTA
[email protected]
Corporate Reports
Growing wisely
t
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sajal bose
to any logistic need,” says T.V. Srinivas Shenoy, chief, marketing & sales,
ferro alloys & minerals division, Tata
Steel. “It also maintains complete
transparency and best ethical practices, just like any other company
in the Tata fold. tmill has the ability to customise and deliver logistic services with good operational
efficiency”.
tmill, a smart player in the industry, is quick in its response to the
changed business environment. The
company is now preparing to run its
own freight trains to carry commodities through participation in Indian
Railways’ Special Freight Train
Operators (sfto) scheme. The
Research Design & Standards
Murthy:
Organisation (rdso) of the
excited about
Railways has designed a new
sfto scheme
wagon for higher loads, the
wagon manufacturer Texmaco
developing the prototype wagon
as per the specifications of rdso. It
is now going through various trials
by the railways for fitness; the proTMILL pushes itself to expand in the freight
cess may take a few more months.
“We are excited about running
logistic business
our own trains under the sfto
scheme,” says Murthy. “It offers us
m International Logistic Limwhile nyk Holding (Europe) and iq vast opportunities to expand our
ited (tmill), a Tata Steel logis- Martrade have 26 per cent and 23 per freight logistic business in association with Indian Railways.” tmill
tic company, was incorporated cent shares respectively.
Beginning with port opera- had made several representations
in 2002, on the back of the growth
of Tata Steel’s exports. In the early tions, this mid-size, Kolkata-based to Indian Railways seeking certain
1990s, Tata Steel used to export its H850 crore logistic company has modifications and revisions in the
flat products and hr coils either from built a strong diverse business port- sfto scheme, as a result of which the
Kolkata or from Paradip Port. In the folio, offering today a single win- railways had tweaked the scheme
mid 1990s, due to non-availability of dow end-to-end logistical support to make it more attractive for operrakes at Paradip, exports of the com- for dry bulk, containerised and proj- ators. “We are the first company in
pany were diverted to Haldia Dock ect cargo, with services ranging from the steel product movement particunder Kolkata Port, which proved to port operations, shipping, freight ipating in the sfto scheme,” Murbe cost-effective to Tata Steel. In the forwarding, customs house agency thy adds. The company is expected
late ’90s, Tata was scouting for part- to inland logistics, warehousing and to kick-start the operation of private
nership for port operations, as Haldia tugging. Headquartered in the Tata freight trains for carrying steel coils
Dock offered one berth on ppp format Centre in Kolkata, tmill, a non- for Tata Steel under the sfto Scheme
for a period of 30 years. The company listed company, operates through its by September this year.
finally tied up with iq Martrade, Ger- offices in India, the UAE, Germany
tmill plans to invest about H150
many, which has vast experience in and China.
crore to buy 7-8 rakes initially. The
Tata Steel continues to remain railways will operate the rakes for
port operations, and agreed to form a
joint venture with it, with 49 per cent tmill’s major customer, constitut- tmill, in return for which the comshare holding. It won the tender in ing almost 65 per cent of the compa- pany will enjoy a freight concession
2001 and founded tmill in 2002.
ny’s revenue. “Our strategy is to grow of 12 per cent from the railways.
Subsequently, in 2009, nyk Hold- the business around Tata and, then, “Under the new design in sfto, each
ing (Europe) joined the venture as gradually move to non-Tata compa- rake carries 58 wagons, instead of the
a third jv partner, acquiring 26 per nies,” says R.N. Murthy, managing 43 carried in standard rakes, which
cent stake from Martrade. At present, director, tmill . “It is one of the few gives the operator a major cost beneTata Steel holds 51 per cent in tmill, companies which provides solutions fit,” says Anurag Garg, vice-president,
Corporate Reports
marketing (sales & business development). Indian Railways has launched
the sfto scheme to facilitate private
players to invest in wagons and earn
profits through transportation of
commodities. Through this scheme,
the operator would privately own
the freight train for transportation
of identified commodities.
In port management and cargo
handling, tmill provides full turnkey services to customers, covering
all activities from cargo operation in
or out of ship, to receipt or dispatch
of cargo from port premises at Kolkata, Haldia, Paradip and Vizag/Gangavaram ports. Operating since 2002
at Haldia bearth no: 12, tmill has
been handling dry cargo, except coal
and other black cargo, primarily for
Tata Steel. The 14,000 sq m berth is
equipped with a mobile crane and
back area, including a covered warehouse of 3,000 sq m. The new age harbour crane at the berth can handle all
types of gearless vessels. “We also built
a 5 km railway line, from the dock to
our stockyard, jointly with the port at
a cost of H10 crore last year. The railway linkage from our stockyard is
saving almost 10 per cent per tonne
in freight,” says Sudip Sinha, general
manager, operations, tmill.
The company has been handling cargo of 14 million tonnes
per annum. tmill has warehousing
facilities in Haldia, Jamshedpur and
Kalinganagar. “tmill has been our
preferred logistic partner for more
than a decade, working closely with
customer needs,” says Manoj Banerjee, commercial manager, Jindal
The portfolios
Tugging
5
Freight
Forwarding
20
Port
operations
35
Shipping
40
India, a Kolkata-based steel tube
manufacturer.
tkm Global, a wholly-owned subsidiary of tmill, caters to services
related to freight forwarding through
its offices in India, China, the UK
and Germany. tkm has developed
itself into an integrated logistics service provider with core strengths in
air and container freighting including project cargo.
International Shipping & Logistic,
a 100 per cent subsidiary shipping
business of tmill, operates from
Dubai to carry dry bulk cargo for its
various clients. But it does not own
any vessels.
Ups and downs
Overall, the shipping industry has
been going through a bad phase for
some time now. The Baltic Dry Index
( bda), an economic indicator for
shipping freight, is at an all-time low
now at 500-600, as against 11000
in 2008. Hence the company has
been achieving low volumes of late.
But it is trying to find some opportunity in this sluggish market. “We
are now exploring the idea of buying ships in this market, as they are
available at rock-bottom prices. This
will give us benefits when the market turns favourable,” says Sandipan
Chakrabortty, non-executive chairman, tmill .
Logistics, the backbone of the
Indian economy, has a guesstimated
size of H90,000 crore. The country
spends almost 14 per cent of its gdp on
logistics, as compared to 8-9 per cent
in a developed country. The industry
has been facing challenges of growth
for the last couple of years, due to the
slowdown of the economy. Delay in
several infrastructure projects and
trade woes are major concerns for
the segment. “Infrastructure around
the port in India has not been adequate,” says K. Swaminathan, director, services business, Balmer Lawrie,
which is primarily into the freight
forwarding logistic business. “There
is no creation of new capacity in
port. Therefore, logistic players are
struggling”. However, at the Maritime Summit in Mumbai recently,
the prime minister had spoken about
mobilising investments of H1 lakh
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Sandipan Chakrabortty: Diverse business
helping growth
crore, to double the port capacities to
3 billion tonnes by 2025.
“tmill is a reputed company from
Tata,” says Swaminathan. “It is primarily providing logistic support to
Tata Steel group companies and is
hardly seen participating in psu tenders. We do not see the company as
our competitor.”
While big logistic players are
struggling with recession, tmill
has continued to maintain a moderate bottomline. It has reported
a nearly 17 per cent jump in pat
at H42.15 crore during 2014-15, as
against H35.98 crore for the previous
year. Income has declined to H851.19
crore in 2014-15, as against H1096.38
crore in 2013-14. “The revenue has
dropped due to bad market conditions in the shipping business. But
we managed to retain our profit ticking. We have taken a conscious decision not to chase big turnovers but
focus on the bottomline margin in
shipping,” says Anand Chand, cfo,
tmill . “We have healthy, zero-debt
balance sheets, with a cash surplus
of H400 crore. The net worth of the
group has grown to H570 crore from
H282 crore five years back.”
During the nine month period till
December 2015, the group achieved
a profit of H40 crore, on a revenue of
H440 crore. Port operations and shipping are major revenue earners of
the group, while the rest comes from
freight forwarding and tugging.
u SAJAL B OSE
[email protected]
Corporate Reports
Detoxing to success
Vikas Ecotech catches the eyes of international
investors
R
ecently, the spotlight of ‘lead
poison’ was on Nestle’s Maggi
noddles, which has increased
the awareness of this deadly metal.
However, in India, this poison could
be ubiquitous in modern day life
and go unnoticed. It could be even
coming through the tap water that
is being carried through pvc pipes.
“According to the investigations by
the Quality Council of India, 33 per
cent of over 370 samples of water
from the top 26 cities of India have
tested positive for harmful content
of the metal, while another 2 per
cent of the samples failed to meet
even the lenient Indian norms of 50
parts per billion (ppb),” explains the
41-year-old Vikas Garg, md, Vikas
Ecotech Ltd (vel), formerly Vikas
Globalone Ltd. “Out of these, 31 per
cent of samples have even failed to
adhere to who standards of lead
content of less than 10 ppb.
Lead contamination due to pvc
pipes is one of the major contributing factors to ground water pollution
in India”. To solve the problem, Garg
advocates a ban on the use of toxic
materials like lead, barium and cadmium-based heat stabilisers in pvc
processing.
Garg recommends pushing for
toxin-free stabilisers, such as organotin, which means use of methyl tin
mercaptide (mtm) stabilisers, which
are lead-free, non-toxic, safe and ecofriendly. This material is sanctioned
by most international legislations, as
in the US and European countries, for
potable water pipes and fittings. Even
China’s pvc pipe-makers are under
pressure to give up lead stabilisers.
In India, while there is no legislative mandate to phase out lead-based
heat stabilisers, the National Green
Tribunal is pushing for one.
In India, progressive companies
that are opting for replacements are
expected to do well. So, where do
Garg: lead should be banned
Garg and vel come in? The company
makes rubber-plastic compounds
and additives that include thermoplastic rubber (tpr), mtm stabilisers,
plasticisers, flame-retardant additives and a host of other pvc and
pet compounds. In fact, most of the
product lines can be used as recycled
raw materials. vel also converts used
cooking oils to specialty additives.
“Recycling is our forte. We even have
a tie-up with Haldiram Ethnic Foods
for supply of their used oil,” says
Sunil Dhameja, vice-president, vel .
vel, a bse and nse listed entity, has
started gaining investors’ attention,
with Merrill Lynch Capital Markets
espana sa sbv reportedly buying 1.9
million shares of vel at H20.85 (paid
up: H1) in February alone. The share
touched its 52-week high of H24 on
11 January 2016, moving from a low
of H5.75 on 10 March 2015. Currently,
with 50 per cent of the company’s
stock in the promoter’s hand, the
counter is trading at H20, accounting
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for a market capitalisation of slightly
over H500 crore.
“Lead is banned in the US and
Europe in food-based pvc pipes. With
awareness on the increase, India and
other Asian countries are expected to
follow suit, banning lead-based pipes
here too. Vikas Ecotech’s mtm product could see a significant increase
in demand in such a situation,”
says Madhusudan Sarda, research
analyst, Vallum Capital Advisors, a Mumbai-based financial services firm, which sees vel as a good
investment candidate.
Finance to products
In its earlier avatar, vel was a nonbanking finance company, which got
listed on the bse during the leasing
boom of the mid-1990s. Subsequently,
the five Garg siblings had a business
separation, with Nand Kishore Garg
inheriting the leasing business. He
had been heading the company till
then and had started trading and distribution of petrochemicals and petrochemical products in 1972. “We
merged whatever we got into one
listed entity,” informs Vikas, the
eldest son of Nand Kishore. Today,
Nand Kishore is retired and into philanthropy in the education space. The
company, which started as agent for
Reliance, srf, gnfc, Nirma and other
mncs like Mitsui of Japan, Arkema
of France, etc, is now the principal
Share price
25
(`)
19
20
15
10
6
5
1 Apr 2015 – 21 Apr 2016
Corporate Reports
representative for a host of companies
in the north India market.
However, Vikas is inclined to move
to manufacturing where, he feels,
there would be good money to
be made, as India has the potential of becoming a manufacturing hub. “Several global companies
were phasing out manufacturing in
the 1990s,” says Vikas. “So, on trips
abroad, I started meeting technical people and scouted for technology for fine specialty chemicals”.
He has been entrenched in the business since 1994. And, today, apart
from heading strategy formulation,
he guides the company in day-today activities. With his experience in
polymer compounds and chemicals
spanning close to two decades, he
has been responsible for vel’s diversification into those areas. During this
time, Vikas, with his team, has put
up manufacturing units in Jammu
and Rajasthan.
vel, which backward-integrated
into manufacturing in 2003, has
been making high-end products,
used in the manufacture of agriculture and infrastructure components,
wires & cables, auto parts, textiles,
electronic goods, medical, writing
instruments, as also organic & inorganic chemicals. The company has
been exporting its products to 20
countries, including Bangladesh,
Pakistan, Sri Lanka, China, the UAE,
Turkey, Spain, Singapore, Germany,
Vietnam,
Turkmenistan,
Egypt,
Tunisia, and Ukraine, among others.
“Our products go into diverse
industries ranging from pipes, wires
& cables, packaging, polymers, automotive and even footwear,” says
Ashutosh Verma, ed, vel, who has
over 34 years of experience in the field
of plastics raw material and polymer
compounds, and is responsible for
business development and technical
support to customers. “Our clientele
includes some renowned names such
as rr Kabel, Relaxo Footwear, Liberty
Shoes, Escorts, kei Industries, Havells
India, Action International, Apollo
Pipes and srf.”
“We have been working with vel
since last year. Based on its material, we are doing development projects at our Ghauranda plant. It is a
Making widely used high end products
conscious supplier,” observes Yashbir
Singh, head, material management
division, Liberty Shoes, one of vel’s
customers, which is continuously
doing innovation in products.
“vel’s product quality and consistency in performance are on a
par with products available in international markets. Its timely service
and customer-oriented approach
is what we appreciate the most. As
India’s leading pipe manufacturer,
we rely on them for using organotin stabilisers to remove the harmful
effects of lead in food grade pvc and
cpvc plumbing and water systems,”
says Neeraj Jindal, plastics chemist,
Prince Pipes.
Moving up
On the financial front, vel posted
a total income of H214.72 crore last
year (2014-15) going up from H171.59
crore. The net profit too has moved
up – from H3 crore to H3.78 crore. In
fact, for the last two quarters, vel’s
financial results have been healthy,
in terms of increase in topline as well
as bottomline growth. “At times, the
topline growth has improved by close
to 75 per cent quarter on quarter,
while the operating profit (ebidta)
has gone up by 35 per cent,” adds
Vikas. “We are sure that this trend
and consistency will be sustained.
As much as 80 per cent of our revenues are generated from three key
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products – polymer compounds,
methyl tin mercaptide and epoxidised soyabean oil – a plastic stabilizer, as also plasticiser. All these
products have huge potential and
we are increasing our product-base,
both in terms of value and volume.
While expecting better returns, we
are mindful of the fact that the revenue mix will remain the same as
far as our products are concerned
at least for some more years. For the
past few years, we were focussed on
our growth path, achieving a cagr of
close to 25-30 per cent every year.”
Vikas wants to expand vel’s product base, customer base and manufacturing. “We are trying to capture
new markets,” he says. Vikas has
started work on setting up a manufacturing base in Dehej, Gujarat, with
the company already being allotted
eight acres of land there. “This will
be twice the current capacity and
help us cater to the markets of western and southern India. Proximity
to the port will allow us to increase
exports of products like mtm and
epoxidised soya bean oil too”.
The expansion is expected to go
on stream in the next 12 months.
However, a back-of-the-envelope calculation shows that, with a capex
of H100 crore, at full capacity, the
revenues could increase several fold.
u LANCELOT J OSEPH
[email protected]
Guest Column
Honest to God
They are the Beckham and Posh Spice of India
H
onest to God, I was actually as heartbroken as Virat Kohli was, when he and
Anushka Sharma split. While Virat’s reasons were purely romantic, mine were driven
entirely by academic considerations. As part of
my PhD thesis on Human Brands, one segment
of my study is focussed on looking at Power
Couples. Post Diwali, I completed the last leg of
my field work. But, alas, of the four top rankers in my study, two relationships were already
on the rocks. Ranbir and Katrina had formally
parted. And Virat and Anushka too had broken
up. That was reason enough for me to be crestfallen. In the last one week, however, news has
started to trickle in about a possible patch-up
between Virat and Anushka. My heart is full of
hope again!
Virat-Anushka, if together, are potentially
the David Beckham and Posh Spice of India. My
study covers 64 different attributes of a human
brand (or, in this case, a couple-brand). For the
purpose of this piece, I have extracted a little
more than 20 attributes to make a comparison
with the other front runners in the Power Couple space – Saifeena (Saif and Kareena) and AbhiAsh (Abhishek and Aishwarya). There is perhaps
no point in looking at Ranbir-Katrina (though
they clocked in a respectable second place), as
they are no longer together.
In all fairness, the recent and continued success of Virat Kohli has much to do with the superlative brand map of Virat and Anushka together.
Independently, Virat now stands at the top of the
listing for all sportsmen, pipping M.S. Dhoni at
the No. 1 slot, which he had comfortably occupied since Sachin Tendulkar moved into retirement. Virat Kohli, in fact, tops the entire list of
60 celebrities that I have covered in my study
with a sample of over 2,000 respondents in five
cities. I have been researching Human Brands for
well over 15 years and this is the first time that
a sports star has beaten the Bollywood parade.
Even at his peak, Sachin Tendulkar trailed the
troika of the Khans and Mr Bachchan by quite a
mile. So, Virat is special.
The combo of Virat and Anushka shows high
scores on pedigreed, upper class and prestigious,
though both of them come from fairly ordinary
backgrounds. That, I suppose, is the halo of success, and fame. Continued visibility in the limelight adds aura to personas. More importantly, as
a couple they are seen to be charming, beautiful,
Sandeep Goyal
graceful and high quality. All heavy superlatives!
But, where the Virat persona impacts scores
most significantly is on attributes like energetic,
tough, authentic and most importantly, fun.
Virat is the current flavour of the entire nation.
He can do no wrong. Every hit across the fence,
as also every loft over the fence, is cheered by
a billion fans. The rub-off on the combo brand
is immense. The couple is seen to be outdoorsy,
adventurous and full of energy. Music to the
ears of colas, sportswear, 4-W drives, bikes, tyres,
rugged holidays, and more.
For reasons best known to them, Virat and
Anushka may have parted and, hopefully, are
coming together again, but the general public
believes they are an mfeo (made for each other)
couple. And, in that score itself, they leave married couples Saifeena and Abhi-Ash far far
behind! Also, as a rub-off of Virat’s success, they
are seen to be ‘successful’ though Anushka’s run
at the box office has been reasonably arid for a
while now. Embellishing their mfeo image are
high scores for ‘loved by all’ and ‘trustworthy’,
which sequentially leads to high ratings on ‘like
us’. So, Virat-Anushka are not only good for each
other but, to me, the ordinary Joe, good for me.
I will not get into a classroom lecture on this but
pillar patterns such as these lead consequently
to ‘I-believe-in-them’ consumer responses.
W
The author is ad-man,
serial entrepreneur
and chairman, Mogae
Media. He can be
reached at sandeep@
goyalmail.com
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ere Virat and Anushka to get back together,
both of them being reasonably young (he
is 28, so is she), they would have a long innings
at the top as a power couple. Virat brings macho
and metro-sexuality to the combo brand; his
virility enhanced by playfulness, often hyped up
in his current endorsements, where he is invariably portrayed as both a high-achiever, and a
‘cool’ guy. Anushka independently scores high
on ‘beautiful’, ‘graceful’, ‘successful’ and ‘fun’.
With a double high on ‘fun’ for both Virat and
Anushka, it makes them a winsome jodi, whose
appeal cuts across product categories, and demographics. Coming to demographics, the appeal
of Virat-Anushka is high across both sexes, and
across age groups; and across both metros and
non-metros.
Both Saifeena and Abhi-Ash are Bollywood
couples. Both ageing. In both, the male is on
a downward spiral, with no visible successes
in the recent past. The female components
of both brands are also past their best before
Guest Column
date. As it is, BolThey are a golden
lywood
human
couple … rabb ne
brands find it difbana di jodi … with
ficult to score high
infinite
endorseon attributes that
ment possibilities,
demand physicaland when Virat
ity and toughness.
becomes
India’s
Also,
Bollywood
captain across all
success comes in
formats, Anushka
spurts, maybe one,
will surely make a
Virat-Anushka
Saif-Kareena
Abhi-Ash
or maybe two super
fabulous and pretty
hits in a year. A
First Lady of Indian
Charming
good
sportsman
cricket!
I wish them
MFEO 100
Courteous
brand like Virat
well. Together!
Trustworthy
Pedigreed
can, on the other
ps: Before I sign80
hand, score expooff, since we are
Prestigious
Like us
nentially high on
talking of human
60
both visibility and
brands, I noticed
40
performance with
that at the beginEnergetic
Authentic
the 300 days of
ning of the T20
cricket that we now
World Cup, Captain
20
Successful
have. That keeps
M.S. Dhoni had a lot
Intelligent
his brand super-irriof grey in his stub0
gated and engaged.
ble. By the second
On the contrary, Upper Class
match, the grey had
Helpful
Abhishek and Saif,
been dyed black.
with no super-hits
The
pre-mature
Tough
even normal hits in
grey had been effecFair
the last year, drag
tively black-washed,
down their respecmaking Dhoni look
Unique
Fun
tive couple brands.
a good five years
Kareena is still curyounger. The moot
Loved by All
High Quality
rent currency but
question is whether
Graceful
Beautiful
most of her scores
anyone
noticed?
are below average
At least the media
Virat + Anuskka
Saif + Kareena
Abhi + Ash
for heroines … signs of a fading star. Aishwarya
didn’t; because no one commented either which
too seems to be living off past glory.
way. Dhoni grey or black, does it really matter?
My view is: human brands need to be extra
careful as much in the looks department as with
s I said before, Ranbir-Katrina were second
their performance on stage or at the crease. Fans
to Virat-Anushka in my study. Their appeal
notice every little nuance. With tens of endorsecentred around ‘charming’, ‘prestigious’ and
ments riding on him and a debate already
‘beautiful’. Somehow, ‘fun’ scores were not high,
ignited on whether Dhoni should give up the
though individually Ranbir is Top Five on fun
captaincy or retire, Dhoni cannot afford to look
as an attribute. If they’d stayed together, Rangruff and ageing. There is a public persona of
bir and the Kat could’ve blossomed as a power
Mr Cool that cannot be allowed the luxury of a
couple. But then the heart has its reasons.
few grey hairs. Sunil Gavaskar, nearing 70, and
The only past precedent that we have of a crickRavi Shastri now in his late 50s both sport a full
eter-actress combo is Tiger Pataudi and Sharmila
head of black hair. Harsha Bhogle, whose bald
Tagore. He was royalty, and a swashbuckling
pate was fairly visible for some years, suddenly
cricketer. She was the leading lady of her times.
bloomed a full head of curly black hair. So, lookA full generation swooned every time she smiled
ing young is critical to the game of cricket …
through her deep dimples. But, Pat and Rinku (as
on it, or off it. Except that Harsha did not barSharmila was affectionately called) came together
gain for a ‘young’ Dhoni getting aggressive in an
when both of them were in sunset career mode.
unpredictable kind of way: getting him booted
Despite that, they did feature together in some
out of the ipl for being too critical of Indian
up-market ad campaigns in later years. But, they
were surely meant for greater peaks.
players and Indian pitches. Grrr…rr Mr Dhoni,
For the sake of both Virat-Anushka and all of
that’s not a cool thing to do!!! u
us, I hope Virat and Anushka cozy back together.
[email protected]
A
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Economy
Moving in the right direction
What is your perception on India’s
economic growth vis-a-vis the
global economy?
On India’s economic growth, we
should be careful how we interpret the numbers. To say that we are
the fastest-growing economy in the
world may be statistically right and
obviously we can take some pride in
it. But we should also remember that
we have revised the methodology
of calculating gdp and, even in the
years when we had done disastrously
under the old methodology, it looked
good when it was revised later. We
should look at these growth numbers
to study how we have moved from
7.2 per cent growth in 2014-15 to
7.6 per cent growth level in 2015-16,
because it does not jell with what is
happening at the ground level.
The 7.6 per cent number can be
misleading, because, at the ground
level, investments have been slow,
credit growth not happening, npas
building up, corporate profitability
under pressure and industrial production, just about crawling. We cannot possibly do a miraculous jump in
any economy. I would be more circumspect in interpreting the growth
numbers. We are moving in the right
direction but the number per se is
not impressive.
Are you happy with the latest
budget? Can it bring in faster
economic growth?
The government can do only a little bit. It can do only two things
– one, provide the right policy environment, which has been done well
by this government; and, secondly,
under the fiscal constraints we have,
the government has done the right
thing in terms of infrastructure
spending. However, it cannot completely overhaul the economy. Juxtaposed with the overall size of gdp (of
over $2 trillion), the government’s
infrastructure spending is a small
percentage. (Note, the government
has earmarked about $33 billion on
infrastructure spending, which is
below 2 per cent when compared to
its gdp size).
The impetus will have to come
from the private sector. But the private sector has its own set of problems because the capacity utilisation
in manufacturing has been low. The
Reserve Bank of India data shows
that the capacity utilisation is 70-71
per cent, because there has been no
big spending due to the low purchasing power, which in turn is due to
continuous high inflation, as also
the two bad monsoons we have had.
This has led to lower demand even
from the rural sector.
Can the Indian private sector bring
in growth, going ahead, now that
the government is stressing on
infrastructure spending?
Infrastructure is not taking off in
the private sector. The government
is doing its bit, but India is more of
a domestic economy and is not a
major exporter to make an impact in
the global economy. Are the companies in India in a position in all the
sectors to manufacture and flood
the global market? We have missed
a major phase of growth due to the
absence of big investment in manufacture. We have moved from an
agrarian economy to a service-oriented economy, because that has
been easier. All the start-ups are in
servicing. Nobody has risked going
into the manufacturing sector.
u 62 u
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sa n jay bor a de
Madan Sabnavis, chief economist, Credit Analysis &
Research, recommends caution while evaluating India’s gdp
growth of 7.6 per cent in 2015-16, in the light of the ground
realities. He tells Raghavendra Upadhyaya that, while the
government has taken advantage of low global crude oil and
commodity prices to give fairly good fiscal budgets in the last
two years, going ahead, its budgets are likely to be tighter
Will the ‘Make in India’ push by
the government make a change?
It is a good way to say that we believe
in manufacturing. Private sector has
to put in the money. Even fdi in our
country is $30-40 billion a year – in
some years, it is more and sometimes
it is less – and most of it goes into services, banks and insurance. Are the
companies in India in a position in all
the sectors to manufacture and flood
the market? It is a good way to say that
we believe in manufacturing, but the
private sector has to put the money.
What are your projections on
economic numbers?
The gdp will continue to rise and
reach a level of 9 per cent over the
next three-four years. Inflation, I
feel, will remain at 5-5.5 per cent
due to the agrarian shocks we have
had. Inflation can never remain
low for a sustained period of more
than five-six months, as food prices
see sudden spurts. So, interest rates
will keep moving downwards, but
it will be adjusted to the inflation
numbers. We are expecting only
a 50 bps cut in this financial year
(ending April 2017.) u
[email protected]
Private Equity
Forging ahead
Canbank Venture Capital Fund invests in Him Teknoforge
sa n jay bor a de
W
ith its ongoing strategy of
investing in unlisted companies with high growth
potential, Canbank Venture Capital
Fund Ltd (cvcfl), an arm of Canara
Bank, has been raising funds since
1989. Since then, it has raised five
funds and exited out of two. The last
fund – Emerging India Growth Fund,
which was garnered in 2010, has
picked up a minority equity stake of
26 per cent in Him Teknoforge for a
consideration of `30 crore, including
`7.80 crore towards partial buyout
of equity shareholding held by ifci
Venture Capital Funds Ltd. For this
deal, Him had got a valuation of over
`115 crore. After this transaction, ifci
Venture, which entered the company
in 2011 at `24 per share, has reduced
its holding to 14 per cent, while the
promoters hold 60 per cent.
“While `7.80 crore will be paid to
ifci, the balance `22.20 crore will be
invested in capex. The funds from
cvcfl shall be deployed towards
modernisation and adding plant and
machinery, as also tools and dies at
its existing forging and machining
units,” explains Vijay Aggarwal, the
first generation promoter, Him. A be
(mechanical) with 40 years of experience, he has developed Him into
a `200 crore manufacturer of forgings and machined components for
During the last three years, the
company has posted a top lines of
`171.09 crore (2012-13), `181.53 crore
(2013-14) and `190.49 crore (2014-15)
respectively, with operating profits
(ebidta) at `21.79 crore, `23.29 crore
and `27.60 crore, accounting for an
operating profit margin in excess of
13 per cent. The current net worth of
the company stands at `79.06 crore.
Expanding business
“We have been looking for funds
to expand and upgrade our operations, achieve full capacities of the
units and also to enhance the product value, besides increasing our
share of business from the existing
customers,” adds Rajiv Aggarwal,
ed, Him, who has been looking
Baskaran
after the finance of the comRajiv and Vijay: pany. “Him is able to offer comenhancing
petitive prices due to its presence
value
in excise-free zone at Baddi
(Himachal Pradesh) and the proxend use in agri-machinimity to major manufacturers of
ery, automotives, railways,
defence and oil & gas sectors, based tractors and commercial vehicles,
who constitute about 75 per cent of
in Himachal Pradesh.
The word ‘Him’ comes from our business.”
“The company envisages good
Himachal, where the company started
out. Today, it has two units in HP and business potential in widening its
two in Pithampur, MP, where it pro- product and customer base by underduces over 400 different parts and taking modernisation-cum-technolmakes forgings by using multiple cav- ogy upgradation and expansion at
ity dies. The parts are forged in both its existing plants,” says K. Baskaran,
carbon and alloy steel and weigh 0.5-50 md, cvcfl, justifying the investkg. It makes about 14,500 tonnes per ment. “The proposed capex will help
annum (tpa) of forgings and 1.98 mil- the company meet the demands of its
lion components annually. The prod- existing customers for the machined
uct range comprises gears, axles, shafts, components, which will enhance the
levers, flanges, assemblies, sub assem- value of Him’s operations”. Baskaran,
blies, non-gear/spider kits, etc.
a nominee of cvcfl, is also a
“Him caters to major oem clients, member of the board of Him.
The Indian forging industry has
including Mahindra & Mahindra,
Escorts, International Tractors, Preet now emerged as a major contribuAgro, avtec and Indo Farm Indus- tor to the manufacturing sector of
tries (agricultural sector); Ashok the Indian economy, which is estiLeyland, sml-Isuzu, Bharat Gears, mated to be worth at least $3 billion
(about `18,000 crore). About 25 per
ve Commercials, Oerlikon group
(automotive sector), as also Indian cent of the size of the forging indusRailways and the defence establish- try is export-oriented. “We look at
ments. It is expanding its customer this investment on a 2-3 year horibase and has added other custom- zon, by which time Him will be ripe
ers, such as zf Steering and Brakes for an initial public offer,” concludes
India, which will add to the revenues Baskaran, who is planning to launch
and improve the bottom-line,” says cvcfl’s sixth fund worth $100
Aggarwal. He is working on a proto- million by June 2016.
type of an e-rickshaw and hopes to
u LANCELOT JOSEPH
launch it soon.
[email protected]
u 63 u
a p r i l 2 5 - M ay 8 , 2 016
ADVERTISING
Sun, sand and wins
Goafest 2016 proved to be a year of big wins and surprises
for the ad industry
E
very year, there’s a party of a
different kind taking place on
Goa’s sunny beaches, where the
best and most creative of the advertising and media fraternity converge,
to discuss, debate and celebrate the
industry’s achievements and the
way forward. This year’s Goafest,
the annual advertising, media and
marketing festival, was no different,
with the Abby awards throwing up a
few surprises.
Spread over three days, discussions centered on a variety of topics, right from the top three things
that agencies can do better, to bringing the focus on client-agency relationships. A bunch of conclaves,
knowledge seminars and intense discussions, along with plenty of activities on the sidelines of the festival
kept people upbeat over the course of
three days.
The chairman of the Goafest Organising Committee, Nakul
Chopra said that along with giving young and enthusiastic talent
a platform for their work, it is also
their outlook to curate best-in-class
seminars and conclaves which will
provide opportunities for professionals from the industry to learn and
grow together.
Speakers like Carter Murray,
Worldwide ceo, fcb, were extremely
popular with the audience, as he
threw some insightful numbers and
talked about surviving and thriving in times of intense change,
particularly digital. He pointed out
that even though change is occurring, instead of freaking out and
trying to incorporate every change,
the marketing community needs to
believe in ‘their instincts’ and ‘data’.
He also added that ‘most marketers use data for only 6 per cent of
decisions. For everything else, they
believe in intuition.’ In later sessions,
panelists Karan Johar and R. Balki,
filmmaker and chairman, Mullen
Lowe Lintas Group, spoke about the
growing relationship between advertising and films. There was also a
highlight on gender sensitivity and
gender equality.
As for the highly anticipated Abby
Awards, it was big wins for some. For
the third year in a row, wpp agency
J. Walter Thompson, walked away as
the big winner, leading with a total
of 47 metals, including 5 golds. The
agency was rewarded for its works
done for clients like Airtel, Godrej
and Pepsi, among others. Following closely on the heels of J. Walter Thompson, were Taproot Dentsu
with 40 metals and Contract Advertising with a tally of 26 metals.
Japanese advertising firm, Dentsu
Aegis Network, was clearly the dark
horse in the Abbys this year, taking
away a total of 83 metals across the
media and creative Abbys, and making it the highest tally as a group,
across categories like film, digital, print, out-of-home, activation,
design and direct media, among
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others. With 6 gold, 32 silver and
45 bronze for a total of 83 metals,
the Dentsu Aegis Network units in
India proved that its creative reputation was also matching its business growth. The agency has quietly
been building its creative force, even
as its business growth has been evidence of clients’ faith in the group’s
capabilities.
Big step forward
Commenting on the win, Ashish
Bhasin, chairman and ceo, Dentsu
Aegis Network, South Asia said,
“Business growth can only be sustained on the back of fantastic creative work, and our performance at
Goafest 2016 is a demonstration of
that. He added that this is a very
happy reflection not just of the range
and depth of the agency’s talent but
also of clients’ trust in their abilities.
“And this is happening because the
business and planning heads at each
unit are getting behind the creative
100 per cent. This is another big step
forward in helping us achieve our
mission of being the second largest agency group by the end 2017 in
India, and overturning for the first
time the existing ranking which has
historically been in place for over 80
years in India,” he said.
The Media Abbys saw GroupM
agency, Mindshare walk away with
17 metals. Dainik Jagran took home
10 metals in the Publisher Abbys.
This year also saw the introduction
of new award categories, such as Gender Sensitive Awards and the Young
Abbys. There was also an increase
in the number of entries for Goafest 2016, totaling over 4,000. Interestingly, no Grand Prix was awarded
across any of the categories. In total,
419 metals were awarded this year,
including 38 gold metals, 134 silver
and 245 bronze metals.
Ad Club president, Raj Nayak
pointed out that with Goafest 2016,
their aim was to celebrate creativity,
originality and innovation. And that
proved to be the case as the festival
drew to a close with plenty of cheers
and the promise of more wins for
many young hopefuls next year.
u ARZOO DINA
[email protected]
Automobiles
Get set, redi-Go
to create a sense of dynamism. The
tall body structure enabled engineers
to deliver a spacious, bright interior
and high driving position in this
segment. Datsun’s Japanese team has
Datsun’s third model, the redi-Go, had its world premiere in India
worked on the entire design.
Built on the versatile Common
Module Family (cmf-a) platform
from the Renault-Nissan Alliance,
redi-Go is powered by an all-new
0.8-litre three-cylinder fuel efficient
engine paired with a five-speed manual transmission. This model is 25
kg lighter than its alliance partner’s
model, Renault Kwid.
“Datsun’s growth strategy in India
will continue to reflect our commitment to local engineering, development and manufacturing,” says
Guillaume Sicard, president,
Cobee with
Nissan India Operations.
other officials
“The Datsun redi-Go, as a
at the
tangible expression of this
world premiere
commitment, offers several
best-in-class capabilities.
A
fter the successful launch of
two products, Go and Go+,
Datsun, a global brand from
Nissan, is now offering its third product, the redi-Go, for India and global
markets. In recent times, India has
been playing a major role in showcasing international brands, as many
global automotive manufacturers
prefer to launch their products here.
Two years after entering the Indian
market, Datsun is now expanding
its new range of products. Datsun
redi-Go is India’s first Urban Cross,
a car that takes the best features of
a crossover and combines them with
the major attributes of an urban
hatchback. The car is designed and
developed in India.
The redi-Go is now set to take on
market leader Maruti Suzuki’s Alto
800. Datsun’s aim is to push this
brand aggressively to first time buyers. “We wanted to make a car that is
accessible and affordable. These customers have an achiever mind-set,
and value fun and freedom, and also
confidently strive for success. The
Datsun redi-Go symbolizes these key
values”, say company officials.
“In a sea of lookalike hatchbacks,
the Datsun redi-Go’s modern and
distinctive looks help it stand out
from the crowd,” said Vincent Cobee,
global head, Datsun, at the premiere.
“Aptly called Yukan in Japanese
(brave and bold), the design reflects
the sense of individuality of the people who will buy the car.”
“India is an important country
for us,” says Daniele Schillaci, executive vice-president, global sales &
marketing, Nissan Motor Co. “By
2020, India will be the third largest
car market in the world right behind
China and the US. The redi-Go will
further strengthen our market share
in India. The target is to achieve 5
per cent market share by 2020. We
are also expanding our dealership
network from the current 217 in 165
cities to 300 by 2017,” he adds.
The Datsun redi-Go, has a bestin-class ground clearance (185mm).
The distinctive ‘D-cut’ grille, headlamps and rear lamps are combined
The competitors
Price in R lakh (Ex-showroom, Mumbai)
Maruti Suzuki Alto 800
2.8 to 4.01
Hyundai Eon 3.04 to 4.40
Renault Kwid 2.9 to 4
redi-Go (To be announced)
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Marketing initiatives
The company has launched a 360-degree marketing and sales campaign.
The first step has been a dynamic
digital app which is currently available on Android and will also soon
be on ios. At the touch of a button,
customers will get all the information about the car, bookings and test
drives. So far, the response on the
new product has been positive.
Currently, the entry level hatchbacks available in the market include
Maruti Suzuki’s Alto, Hyundai Eon
and the Renault Kwid. These cars
are priced R2.80-4.40 lakh (ex-showroom, Mumbai). The Alto clocks
20,000 units a month, while the
Hyundai Eon’s sells 6,000 units
a month. Renault Kwid bookings
have crossed more than 100,000
units since its launch in September
2015 and the company has already
delivered more than 40,000 units to
its customers.
Bookings for the redi-Go will
open on 1 May 2016 and the delivery of the cars will commence from 1
June 2016. As far as the pricing of the
car is concerned, company officials
say it will be priced competitively.
u S . M . B OOTHEM
[email protected]
Technology
Green roads
CSIR-CRRI and BitChem Asphalt look at improving roads in India
T
he Central Road Research Institute (crri), a premier national
laboratory, is a constituent of
Council of Scientific and Industrial
Research (csir). And, in tandem with
the North-east (Guwahati)-based
BitChem Asphalt Technologies, an
arm of the H1,500 crore sm group,
csir- crri has launched value-added
bitumen (vab) plants to cater to the
needs of the road construction industry. csir, the national research organisation for roads, traffic and transport
planning in India has been carrying
out r&d in the areas of road and road
transportation and provides consultancy. It has also been pioneering the
cold mix technology.
Since 2008, BitChem has been
working with crri for the evaluation of cold mix technology at the
field level, based on mix design-based
binders, developed at Bitchem Knowledge Centre. And, by 2010, crri had
completed its study of cold mix technology under the Xth Plan. In 2011,
Bitchem took the first crri licence for
Northeast India and started investing in joint technology promotion.
Finally, in 2013, having received
acceptance across various states, the
crri-Bitchem relationship was formalised under an exclusive licence for
a pan-India basis. Together, they have
already mix-paved more than 2,500
km of roads in remote rural areas.
The sm group is mainly active as
a steel distribution company for the
Tatas, trading in met coke and gi
roofing solutions. “Hence, roads and
infrastructure are areas we are interested in,” explains Sarat Kumar Jain,
group cmd, BitChem Asphalt Technologies Ltd. “Together, we are taking a joint initiative to improve rural,
district and state roads connectivity,
using the technology to enhance the
quality of road work”.
“The ‘green road concept’ promotes energy-efficient and clean construction practices in the country,”
adds Rajeev Agarwal, ceo, BitChem.
Agarwal: spreading awareness
The brain behind BitChem, he
believes that the use of environment‐
friendly technologies can deliver
equivalent or better ‘quality life’ to
the public, “as desired on priority
for carbon footprint mitigation and
cleaner living for our country.” Agarwal, along with his team, has been
spreading awareness about ‘green
roads’ in Mumbai.
In the hot process, heating of bitumen takes place at 170 degrees centigrade and the laying takes place at
150 degree, while compaction is at
125 degrees. “The disadvantages of
hot mix technology are noise and air
pollution, high energy consumption
and limited working season (as no
work is possible during rains and cold
winters),” explains Agarwal, advocating the case of crri-Bitchem Cold
Mix technology. “It is also sensitive to
temperature control during the entire
process and unsafe to workers (the
thermal oxidation of bitumen due to
heating, et al). It is hazardous for public in general”.
In the new technology, the crriBitChem cold mix binders are mixed
at the plant or sites, without heating.
“It is not just the supply of ordinary
bitumen emulsions that we undertake.
We also provide the entire value chain
of technology from laboratory mix
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designs, to supply of tailor-made cold
mix binders to overseeing of the entire
mixing, laying and rolling activities,
through technical support and supervision services. The mix is also packed
in barrels and dispatched for paving of
the road at the site”.
Excellent work
This cold mix technology has already
been approved of by public works
departments (pwds) in India. “We
first rolled it out in North East and
then moved to Himachal and Uttarakhand,” says Jain. “It is now undertaken on a pan India scale”. Jain is
focussing on encouraging the usage
of cold road paving technologies for
reducing carbon emissions, eradicating occupational hazards to workers.
“I appreciate the excellent work
done by the BitChem team in promoting the cold mix in construction
to the roads under construction,”
says L.C. Goyal, former secretary,
rural development. “This is the way
forward to further development to
future”. Adds Rajesh Bhushan, joint
secretary & dg mrrda, mord, (*?*)
government of India: “The crriBitChem Knowledge Centre has made
an outstanding effort to make a new
and environment-friendly technology available to the engineers in the
road sector”. According to P.K. Mohapatra, principal secretary, rural development, “This environment-friendly
technology has revolutionalised road
construction in rural areas”.
“The initial cost of green roads is
10-15 per cent higher, but it lasts 50
per cent longer than hot mix and,
hence, saves on a long-term basis”,
informs Jain. Also, ‘green technology’
reduces carbon emissions and creates
a safe environment for the workers.
The potential for cold mix technology
in the country is over H5,000 crore. In
recent times, a lot of focus has been
given to highways; however, almost
80 per cent of roads in the country
are district and rural roads. Based on
various surveys, the addressable market size potential is 100,000 km per
annum The prime minister’s yojanas
also offer a big opportunity for the
use of this technology.
u LANCELOT J OSEPH
[email protected]
Health
Comparing hospitals
ICICI Lombard Website enables visitors to compare hospital data
sa n jay bor a de
Dasgupta: after a year of deliberation... success
P
icture this. Your knees have
been giving you a rather rough
time, and your doctor says you
would do well to have a knee transplant. He recommends that you get
it done at a hospital that is 20 km
away, but you would prefer an institution closer to where you live. The
doctor says your preferred hospital is too expensive. Since you have
lived in Mumbai for most of your
life, your choices appear limited to
the megalopolis, but your nephew
is urging you to travel to Chennai,
because he says the service is better
and the costs are at least 20 per cent
lower! So, how do you decide which
hospital to choose?
Until a month ago, the way to
make such a decision would have
been a mix of ‘word of mouth’, gut
feeling, and a variation of blind
man’s buff, but not anymore. A new
free service by icici Lombard, one of
the largest general insurance companies in the country, named as Health
Advisor enables visitors to the Website to compare room tariffs, package charges and even feedback about
the quality of service in various hospitals, even in different cities. At the
moment, the data is available for 10
cities but is likely to expand to many
more in the coming months.
Thus, if you are located in Jaipur,
you can find out that the twin-sharing room tariff for Cocoon Hospital in Durgapura is among the
highest at `4,000 per day, while that
for Narayana Hrudalaya is just `2,800
and the corresponding charges for
Santokhba Durlabhji Hospital is a
modest `2,500. It might also become
apparent that the room tariffs in
Pune, Jaipur, Hyderabad and Nagpur
are not different. Similar comparisons
can also be made for a variety of medical and surgical procedures, such as
a heart bypass operation, a session of
dialysis (for advanced kidney disease)
and even a caesarian section.
“We discovered through our
research that top 30 medical procedures accounted for 80 per cent of
the health needs of people in this
country, and about 50 per cent of
insurance claims were lodged by people using twin sharing rooms in various hospitals. Hence, we assumed
these parameters to enable the comparisons,” explains Amit Bhandari,
chief technology officer, icici Lombard, and the prime mover behind
the project.
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Bhargav Dasgupta, ceo, icici Lombard, explained at the launch function recently that they got the idea for
this service from the fact that their
call centres were receiving nearly 500
calls each month, and a majority of
them sought information on which
hospitals were better than others.
“Still we debated for a full year, about
whether we should go ahead and offer
this,” Dasgupta said.
Quality parameters
Once they had analysed the basic
data available with them, they joined
hands with the Tata Institute of Social
Sciences, Mumbai, to formulate 20
parameters to judge the quality of
service provided by each hospital.
These include: alos (average length
of stay), treatment outcomes, hospital acquired infections ( hai), postoperative recovery, patient falls and
readmission rates. Then they contacted hospitals across various cities
and got about 1,000 of them to come
on board with their data regarding
tariffs and other costs. While the
database is far from complete and
the charts show the details of many
hospital institutions as ‘not available’, the details which have been
provided are extremely useful.
To ensure the reliability and
authenticity of the feedback, the
website requires visitors to enter their
ip (in-patient) registration number
along with the dates of admission to
the particular hospital, even though
these details are not published on
the Website. Visitors who are merely
seeking information however do not
need to furnish all those details.
Another interesting point is that
the rates of room tariff and other
expenses mentioned on the Website are those supplied by the hospital concerned. This would often be
different from the charges that icici
Lombard reimburses to its insured
persons. While this may seem to be a
form of double standards, the justification given by the company is that
they reach a variety of bulk deals and
discounts with the hospitals, and
these rates may not be available to
an individual patient.
u SU M IT GHOSHAL
[email protected]
Hospitality
Food buddy
Puratos supplies quality ingredients to a host of bakers,
chocolatiers and fast food makers
u 68 u
a p r i l 2 5 - m ay 8 , 2 016
sa n jay bor a de
I
f you bite into a McDonald’s bun,
tuck into a Subway bread, moon
over a Cafe Coffee Day dessert,
or indulge in some luxuriant Belgian chocolate, you may be having a
Puratos product.
Family-owned
Puratos
was
founded in Groot-Bijgaarden near
Brussels, Belgium in 1919. Now in
over 100 countries, it manufactures
ingredients mainly for the B2B market in the bakery, patisserie and
chocolate industries. Well known in
the B2B market, Puratos avoids pushing the brand to consumers directly.
Customers are mainly from four verticals: artisans, small or chain bakeries, who operate through manual
processes and have some machinery; industrial customers who have
high volume automated lines such as
Britannia or ITC; food service companies which have specific needs Kanwar: catering to all
of standardisation, product ideation and creation such as McDon- helps customers ideate and increase
alds, Yum, Dominos; and retail stores production process efficiencies, with
which need consistent products for an array of products. Puratos also
their instore bakeries such as Reli- offers marketing services through
ance, Big Bazaar, Walmart. “Each consumer studies. Every three years,
customer’s requirements are differ- Puratos conducts a world-wide conent though they are all in the same sumer survey called ‘Taste Tomorindustry. With 96 years of experi- row’. This survey throws up trends
ence, we know their needs and cus- and changing taste patterns of peotomise products specifically for ple all over the world, helping custhem,” says Dhiren Kanwar, MD – tomers anticipate needs and connect
India, area director – South Asia at better with their consumers. The survey shows 78 per cent of consumers
Puratos Food Ingredients Pvt Ltd.
Small bakeries and food service in India agree that cocoa gives an
energy boost, while 73 per
companies are continucent agree that cocoa has a
ally challenged with the
high nutritional value.
requirement for new prodPuratos has a tailoructs to excite consumers,
made R&D and quality
but they lack the skills and
control facility in Ranjangmanpower to scale up. Here
aon, Pune. Seeds and flour
is where Puratos mixes
undergo rigorous testing
enable them to make prodhere. Products with local
ucts without the need for
flavours are also developed
skilled labour.
– be it need- or taste-based.
Besides supplying ingreTegral Satin
Puratos’ products are under
dients, Puratos has a techMasala Chai
three categories – bakery,
nical support team that
Velvet Egg Free
patisserie and chocolate. In bakery,
they manufacture improvers and
mixes which enhance bread products. This could be either a multigrain or a standardised masala bread
mix. Health products come under the
Puravita brand serving grains and
seeds such as 100 per cent wholewheat atta bread mix or high-fibre
mix. The patisserie repertoire includes
products such as cake-mixes, sponge
mixes, fillings and glazes. The fillings
come in various types, from being
flavoured to containing local fruits.
In the chocolate vertical, real Belgian chocolate is imported, and value-based chocolate and compounds
are also manufactured in India. It has
developed vegetarian products such
as eggless cake mixes specially for the
Indian market.
Healthy mix
Cremfil Ultim is another innovation; it is a hybrid chocolate product
with less fat, based on water technology. The recently launched cheese
cake filling also happens to be the
world’s first eggless cheese cake filling. Using water technology, Puratos
has reduced 1,000 tonnes of fat every
year. Being India-specific, there are
a
variety
of
masala
mixes
such as North
Indian or South
Indian
bread
mix. Regionally
available
local
fruits are used to
make signature
flavours such as
mango and pineOtentic
apple. “Puratos
supplies great raw material for me to
work my art,” claims chef Prashanth
Chembala of Le Pain Quotidien.
Though the company’s turnover
is still under `100 crore, in these past
seven years, Puratos India has grown
at 30-40 per cent year on year, making the Indian subsidiary the fastest
growing. Now in 50 Indian cities, the
west it still the main stay, although
other markets too are growing exponentially. A greenfield site in Ranjangaon, Pune was inaugurated
in January 2015. To incorporate
new technologies, the plant will be
Hospitality
We have taken a leap into
this and created a new segment specifically for home
bakers. We will now tailormake our products and services for home bakers. This
will include more knowledge, training, smaller size
packaging to help them
grow. Entrepreneurs have
the ability to grow exponentially and we intend to be a
part of their success stories”,
says Kanwar.
While
international
commodity prices for cocoa
impact the local market, the prices
of fat and sugar are mostly local. So
while prices of sugar and eggs rose
in Europe, there was no impact on
the local market. “As for cocoa, India
grows a very small proportion of the
international market. The only way
to reduce price would be to increase
cocoa production in India. This, we
hope, would be a good project for the
future,” says Kanwar.
expanded this month by
29,000 sq ft from its current
55,000 sq ft. They are also
open to local acquisitions.
“Our local market expansion has been well appreciated by our group, which
has encouraged them to
continually invest in India,
as seen in the new plant
installed last year. Our
ways to market are innovation and differentiation,
we are about creating markets and not copying mar- The baking school’s first batch of students
kets. Hence, we have a high
market share in some product lines, and the first batch of 46 students will
in others we are still finding our blue graduate this year. This pilot project
is ready to be taken around the world
ocean.” adds Kanwar.
Employing about 100 people at by the Puratos group, who has also
the moment, the company supports launched it in the favelas of Brazil.
Puratos plans to expand their
500 more. In order to address the
shortage of skilled manpower in the online reach through a helpdesk,
industry, two years ago Puratos part- which will give quick information
nered with Dr Rajesh Patil, chairman, and a constant connection via a tap
Shirvane School and Junior College, on the phone. “India, China and
Navi Mumbai, to launch a bakery some other countries have shown
school as a CSR project. Underprivi- us a boom in growth of the home
leged youth are trained for two years bakers and entrepreneurs segment.
INSPIRING BUSINESS
u bertie d’souza
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Start Up
Cashing in on beauty
MyGlamm’s beauty on-demand services win customers’ hearts
B
inding your feet to ensure they
remain dainty, or firmly lacing your corset for that perfect hourglass figure, or worse still,
gripping your neck with brass coils
to elongate it – looking beautiful
has always been a difficult pursuit.
Not anymore though. Or so promises Darpan Sanghvi, ceo of ondemand beauty service provider
MyGlamm, that offers everything
from waxing and threading, to hair
and make-up, and even body massages. So there’s no need to scramble
over to your neighbourhood salon,
or check in with your mother’s beautician if she can help you with the
smoky eye look you want. Instead,
pick your desired service and stylist
with the click of a few buttons on the
MyGlamm app, and voila! A trained
professional will be at your doorstep,
ready to “glamm” you up.
The nine-month-old company
recently secured a $6 million funding from French beauty product
maker L’Occitane International S.A,
private equity player Tano Capital
and Times group-backed Brand Capital, with each contributing $2 million. “We are the only guys with a
beauty guy inside the company,”
boasts Sanghvi of his backing from
the beauty expert; comparing his
privileged position to that of the
other pure-play tech-enabled beauty
service providers, who’ve received
far less in funding and that too from
venture capitalists or private equity
players. In fact, Sanghvi’s association with the L’Occitane goes back
to 2010 when, after much coaxing,
he was able to convince the French
enterprise to grant him the franchise
rights to set up L’Occitane branded
luxury spas in India.
Today, Sanghvi Brands holds the
exclusive rights in India for a portfolio of luxury wellness brands, including New York-based WarenTricomi
salons and spas, elle spa and salons,
Holyfield Gyms belonging to boxing
champ Evander Holyfield and Hollywood fitness trainer Ramona Braganza’s gyms, in addition to the
L’Occitane spas. With 50 locations
spread across the country, Sanghvi
claims to have broken even last year.
He attributes the success not only to
the increasingly affluent and welltravelled Indian consumers’ willingness to spend on luxury services, but
also to his revenue sharing agreements struck with real-estate providers. “I have 5,000 to 10,000 sq ft, large
spas. If we pay minimum guarantees
and fixed rents on that, it’ll kill us.
But as a luxury service provider, we
become a differentiator in the entire
development, whether you’re in a
hotel, a real-estate development or a
mall. So property owners were willing to do revenue sharing deals with
us,” explains Sanghvi, as he reaches
out to touch his wooden desk, thankful that “it all worked out”.
Sanghvi’s long and measured
view is also why the offline Sanghvi
Brands business – separate from the
online MyGlamm business – worked
out. After he set up his second spa,
Sanghvi established a training academy in his hometown Pune to ensure
a high level of service delivery and
quality, as well as to tackle the high
levels of attrition faced by the industry. “We continuously have 20-25
therapists getting trained in the spa
business. So we always have a pipeline of trained staff,” he says.
Premium offerings
On the strength of the expertise
gained from running this offline
business, Sanghvi decided to venture into the tech-enabled space of
beauty on-demand services with
MyGlamm. Currently the service is
only available in Mumbai and Pune,
but with the L’Occitane funding now
at hand, Sanghvi plans to expand his
reach to other cities too, beginning
with Indore. “MyGlamm is a boon
for smaller cities,” explains Sanghvi,
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who found that even though the cost
of MyGlamm’s services was higher in
Mumbai than in Pune, the average
order value in the financial capital
was lower at `1,400-1,500, compared
to `1,800 for Pune. Sanghvi attributes
this to the “exclusive” and “hyper
expertise services” that MyGlamm
offers, which salons in smaller cities don’t have. “People staying there
[smaller cities] don’t have access to a
Forest Essentials facial or High Definition brows or Novolash eyelash
extensions, or even simple things
like nail gel extensions. This is going
to create a revolution there,” claims
Sanghvi, flashing his brilliant smile.
It is on the back of these premium offerings that Sanghvi intends
to take on the competition – similar
beauty verticals such as Bangalorebased StayGlad, Delhi-based VanityCube and Belita in Mumbai and
Pune, as well as horizontals such as
UrbanClap and Housejoy, that offer
everything, ranging from a plumber
to a beautician, on-demand. Neighbourhood salons and freelance beauticians, who have always done home
visits and have loyal customer bases,
present stiff competition too.
Even so, Sanghvi claims to have
grown every month. “In October
last year we did 5,000-odd services,
and in March this year, we did more
than 15,000,” he says matter-of-
Start Up
sa n jay bor a de
Sanghvi:
hoping to
make it big
factly. MyGlamm’s March
2016 figures average to
about 535 services per day.
By comparison, UrbanClap’s
‘Salon-at-Home’ vertical, “receives
250-300 requests per day,” according
to the platform’s co-founder Varun
Khaitan. “We’re the last to start this
business, and today we are number
one,” says Sanghvi, adding that their
repeat customers constituted 73 per
cent of their business in March.
Sanghvi believes that his experience
in service delivery through Sanghvi
Brands’ offline salon and spa offerings, gives MyGlamm an edge over
the others. But as the service expands
across new geographies, how do you
maintain the quality of the service?
The ceo has a smart strategy in place
for that. Over the last few months, as
MyGlamm rolled out its services in
Mumbai and Pune, Sanghvi found
that managing his roster of 100 fulltime and 150 freelance “artists” as the
company refers to its beauticians and
stylists,was getting increasingly difficult. But at the same time, he wanted
to scale up and “blanket the city with
MyGlamm’s offerings.”
Achieving scale, maintaining
quality
“I was sick and in bed when the idea
of franchising suddenly occurred
to me,” recalls Sanghvi. He drew
up a blueprint where he
divided Mumbai into 50
zones, and Pune into 25.
A franchisee would be made
in charge of a zone, and he would
have 15 artists under him, servicing that area. It was a win-win plan
for everyone involved. The artists
would spend less time travelling
from once place to another, and so
could take on more appointments in
a day and thereby better meet their
targets, which are linked to incentives. Sanghvi would be relieved of
the responsibility of managing hundreds of artists on a daily basis. Revenue leakages would be kept in check
because all the bookings would flow
through the MyGlamm app. The
franchisees, on the other hand, who
would be responsible for the management of the artists, could become
entrepreneurs with as little an outlay
as `15 lakh. To put it into context,
according to the Lakhme Website, a
franchisee needs a minimum investment of `50-60 lakh and an owned
or leased space of 900 sq ft at least, to
open a salon. What’s also attractive
for a MyGlamm franchisee is that he
has no fixed overheads of rent, utility, housekeeping, electricity, front
desk staff and so on. On an 80-20
revenue sharing basis, with the franchisee getting the lion’s share, the
franchisee, according to Sanghvi,
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is ultimately left with a 20-25 per
cent margin. Moreover, the artists
would be full-time employees of the
franchisee ensuring a firmer commitment from them, compared to
freelancers.
As per Sanghvi’s plan, artist training would continue to be the responsibility of MyGlamm, so as to ensure
the quality in service delivery. The
company has two training facilities
– one in Mumbai and the other in
Pune – in addition to the training
academy built for the spa therapists.
“Our artists go through a rigourous
training programme, after which
there’s an evaluation, examination
and certification. Only certified artists feature on the MyGlamm app,”
explains Sanghvi.
This franchising plan is already
underway, with Sanghvi recently
signing up franchisees in Indore,
Mumbai and Delhi. The company is
also in the “final negotiation stages”
with franchisees in Jaipur, Kolkata,
Hyderabad and Chennai.
“We’re looking at 400-500 franchisees in the next two years,” says
Sanghvi. “Every city we franchise,
I’m going to invest in creating a
training academy,” he adds.
Sanghvi believes that MyGlamm
will break even in this financial
year. “At MyGlamm our monthly
run rate within about nine months
went to about `70 lakhs. Obviously
we burn money on the bottomline after corporate expenses, but
we are gross margin positive,” he
says. Other revenue streams such as
MyGlamm branded products are also
being worked on. “My internal goal
is to make MyGlamm the first profitable unicorn,” he adds measuredly.
“We’ve got the foundation, the strategy is right, we’ve got the opportunity and we’ve got the funds. Nobody
has everything. We’ve got it. So if we
don’t make it, it’s only our fault. It’s
as simple as that,” he reasons, justifying his tall claim. Then, as though a
reflex action, he again reaches out for
his wooden desk. “Touch wood, it’ll
all work out,” he signs off, breaking
into a broad smile, eyes twinkling
through his black-rimmed glasses.
u Va r s h a M e g h a n i
[email protected]
Enterprise
Prabhat has come a
long way – from milk
collection, to farmer
education, to supplying
specialty dairy ingredients
to giant companies and
co-manufacturing for a
range of others under their
brand names
Say cheese!
I
t all began, says Sarang Nirmal,
when he attended a presentation
by an Israeli company at an exposition in Mumbai in 1998, where he
heard that his home district Ahmednagar in Maharashtra was going
to be the biggest producer of milk
in the country. Back home, he got
together with his brother, sister and
sister-in-law, and they decided to get
into collecting milk from the famers
around, chilling it in a plant they set
up and selling it. The last stage happened early the next morning, at
dawn – which gave the business its
name, Prabhat!
The Nirmals belong to Nirmal
Pimpri village, near the famed temple town of Shirdi. “My father had to
leave home when we had a drought,
and went to work in a nearby sugar
factory making jaggery from sugarcane,” says the founder chairman
of what is now the Prabhat group of
companies. “He used to carry this
10 km on a bullock cart to Belapur,
which was the biggest gur market in
the area. But he didn’t want me to do
the same work, so he sent me to college.” Nirmal, who went on to do his
mba at Nashik in 1978, got his first
job in Pravara Sugar Factory, for the
princely salary of `600 a month.
But the enterprise bug had bitten
him even as a young man. It was a
matter of less than three years before
he bought 20 guntas (about half an
acre, or one-fifth of an hectare) of
land with a loan of `3.21 lakh from
the Maharashtra State Finance Corporation, and set up a waste paper
mill to manufacture paperboard. The
following year, 1982, saw him diversifying into paper cones, which are
used in the spinning industry.
He then applied to his banker,
Bank of Maharashtra (BoM), for
a loan of `1 crore. The application was recommended by his local
branch and went up to the regional
office in Ahmednagar city, then the
bank’s head office in Pune – where
it was rejected. But Nirmal was not
the type to take this lying down: he
wrote to the bank chairman-cummanaging director, giving ‘notice’
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that his entire family would fast
unto death outside BoM unless they
gave him the loan by a particular
date. “I marked a copy of my notice
to the Pune police commissioner,
too,” he recalls. “He sent someone to
the bank to ask about my problem.”
A few days later, he got a call asking him to meet the bank’s executive
director. The official heard Nirmal
out, saw that he was serious about
his action, and went through the file
again. When he saw that the family
had been farmers for 50 years, that
they had cows at home, and that the
applicant himself was educated and
had business experience, he went to
the cmd and got the loan sanctioned
immediately. “He gave me breakfast and tea, and encouraged me to
return home,” Nirmal says. “But I
insisted that the sanction letter be
prepared then and there and faxed
to the branch office!” It happened.
And only after he had spoken to the
branch manager did he leave.
Back home, he got back into the
business with a fresh burst of energy
Enterprise
– and recorded a collection of 430 litres
of milk the next day. With the help
of his wife, a bams (Ayurvedic Medicine and Surgery) doctor, he oversaw
the bagging and icing of this milk and
sold it, loose, in the market at Shrirampur. Prabhat Dairy also moved into the
Mumbai market the same year, using
a cold storage that charged 50 paise
a litre to pouch it. As procurement
increased, so did pouch sales. “So we
decided to expand our parent plant,
and get into something new by adding
value to the milk,” he recalls.
Enter son Vivek in 2006, and they
began building the business with
their first major contract, for supplies
to Cadbury (now Mondelez). “We
built a four-pillar strategy of global
standards and a global scale of infrastructure, excellent talent, direct
sourcing from farmers and brandbuilding,” says Vivek, joint managing director, Prabhat. “We realised
that the business is all about people,
so talent became our special focus
area. With the training we give in
our centres for both farmers and our
employees, together with our emphasis on a high quality culture, we have
built one of the best teams in India
in each area.”
I
n the milk business, procurement
is the most important aspect
of the business – so Prabhat set
about creating a network of more
than 80,000 farmers, from whom it
buys nearly a million litres of milk
every day. Adds Sagar Nirmal: “We
must keep the farmer at the centre
of our attention. If he takes interest
in the business, he’ll keep it going
for 100 years. We believe in making them our partners in progress.”
Ergo, the continuous training process – besides funding them or helping them get bank loans to buy more
cows or equipment.
With what the Sagars call their “cooperative spirit, with the dynamism
of a private player”, they now have
110 milk chilling stations to which
their farmers bring milk at fixed timings morning and evening, for a variety of tests, weighing and adding to
the white river that flows into the
storage tanks. The tests include not
just measuring the fat content and
other parameters on sophisticated
machines, but a taste test where one
of the staff takes a little in his mouth
to check if it is sour, and spits it out
into a waste stream.
The value-added products business moves in tandem with the basic
milk, and Prabhat – which launched
itself as a brand only three years ago
– is proud of the fact that it is the
one Indian company to have been
approved by Kraft for global supplies. “We are now the biggest manufacturer of condensed milk in Asia
and the third largest cheese producer
after Amul and Govardhan with our
Cheddar, Mozzarella and processed
cheese,” Nirmal says.
Prabhat also co-manufactures a
range of products including uht (ultra
heat temperature) milk, specialty
milk powders, curd, ghee, flavoured
ENTREPRENEUR
Sarang Nirmal
BUSINESS
Dairy
COMPANIES
Prabhat Dairy, Sunfresh Agro Industries
PRODUCTS
Liquid milk, condensed milk, flavoured
milk, milk powder, dairy whitener,
dahi, lassi, chhas, ghee, cheese, paneer,
shrikhand, ice-cream
PLANTS
Shrirampur (Ahmednagar district,
Maharashtra); Turbhe (Navi Mumbai)
FOUNDED
1998
EMPLOYEES
1,000
TURNOVER
`1,003 crore
milk, dairy whiteners, yogurts, processed and concentrated milk, and ice
creams for various institutional customers including Britannia Industries, Mother Dairy Fruit & Vegetable
and Heritage Foods. It has entered
into agreements for the production
and packaging of ghee for D’mart
and the Future Group, ice cream for
Mother Dairy, chhaas and dahi for
Heritage, Britannia and Reliance. And
it supplies speciality dairy ingredients
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for a range of ‘key clients’ including
Abbott, Mondelez, Britannia, Perfetti, Dominos, Pizza Hut, MacDonalds. In 2012, it got the ‘best strategic
supplier’ award from both Kraft and
Abbott Pharmaceuticals – for which it
makes a paediatric food additive.
With a range of quality certifications, both the plants have strict
checks on both incoming and outgoing material. The chairman himself insists on this philosophy – but
he was also the one who decided to
add the polite ‘Sorry’ to the stark
message. If one sample in an incoming milk tanker fails any test, for
instance, the entire load is discarded – and the quality assurance
department’s say on this is final. A
prominent board displayed in the
premises reads, “Sorry, No Compromise
on Quality”.
Most recently, in March 2016,
Future Consumer Enterprise, the
fmcg company of Future group, has
tied up with Prabhat to take its Nilgiris brand of dairy products to a
wider market. Under this agreement,
the dairy will provide processed milk
and milk products in retail packs
under the south Indian retail chain’s
brand name with the specifications
and in the pack sizes it needs. Tirumala (Lactalis India) has also contracted Prabhat to supply sweetened
condensed milk in tubes of different
sizes under the brand name of Lactel
Sshup, again according to Tirumala’s
specifications and with its branding.
Prabhat has also signed an MoU
with the Maharashtra government’s
Directorate of Skill Development,
Employment and Entrepreneurship (dsde&e) to help increase the
employment potential in the state by
enabling the supply of skilled manpower in the dairy sector, strengthening the training infrastructure
related to the requisite skill sets and
adopting new age technologies.
Considering Prabhat has so much
going for it, the young man who
started work on a monthly salary of
`600 now drives a Mercedes-Benz.
So does his son. And when the company went public two years ago, the
issue was oversubscribed.
u SE K HAR SESHAN
[email protected]
Corporate Woman
A
lways challenge yourself, says
R.M. Vishakha, md & ceo,
IndiaFirst Life Insurance –
the first woman chief of one of the
youngest life insurance companies
in the country. It is under her guidance that the company declared
its first maiden profit of `6.9 crore
in 2014-15. Present in over 1,000
cities and towns across the country through 8,500 partner bank
branches, the company has covered
10.3 million lives and has ` 9,061
crore of assets under management
as on 31 March 2016. IndiaFirst, a
joint venture between Bank of Baroda, Andhra Bank and Legal & General of Britain (44:30:26), has a
product range that covers the needs
of health, security/protection (term
insurance), savings and wealth.
It also has a wide range of group
insurance products, ranging from
credit life, term and employee liability (gratuity and leave encashment)
plans. The company, headquartered
in Mumbai and with a retail focus,
has been witnessing a year-on-year
growth of 35 per cent.
For Vishakha, daughter of a hal
officer, life was full of challenges
right from her early days. She had
to shuttle between Bengaluru,
Chennai and Hyderabad during her
school and college days, having to
go through new cultures and find
new friends. “A lot of my thirst for
independence came because of it. It
made me realise the importance of
thinking and doing things on your
own and never made me feel that
there was many things a girl cannot do. My choice for commerce
was achieved through a process of
elimination. I was not good at science and, so, could not even think
of medicine. I ended up taking combination of mathematics and economics,” says Vishakha candidly.
After completing graduation and
chartered accountancy, she travelled to Hyderabad all of 24, to start
her career as assistant manager, projects, New India Assurance, in 1987.
She got married at the age of 25
years to Rajesh, who she met during
her audit days at gtc, and moved to
Delhi in 1991. This was a big move
and “I learned a lot,” says Vishakha,
Challenging herself
A veteran celebrates her silver jubilee in private, life and general
insurance companies
giving due credit to Delhi for instilling in her an aggressive nature,
which helped her build a career in
sales. New India had appointed her
a branch manager by then, with
fixed sales targets and, as a woman,
she learned how to go about getting
the psu staff to do things her way.
“Politeness did not work. In a psu,
it is impossible to stop increments
or promotions,” rues Vishakha, who
learnt the art of negotiating on the
job and also never shied away from
hardcore aggression.
It was after 13 years in Delhi that
she chanced upon an opportunity
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a p r i l 2 5 - m ay 8 , 2 016
to move to the private sector insurance industry, which was opening
up. It was a new challenge for all.
She joined Birla Sunlife in Delhi as
the company’s zonal sales manager
for Northern India and, in 2003,
moved to become the chief manager, bancassurance & group business, Mumbai. In May 2006, she
moved back to general insurance as
the chief marketing officer, Universal Sompo General Insurance, heading both sales & marketing. In 2007,
Vishakha moved to idbi Federal Life
Insurance at a pre-licence stage, to
set up the bancassurance channel
Corporate Woman
sa n jay bor a de
and deliver business for three years.
“What I learnt there was ‘never to
go into a comfort zone’, and ‘challenge yourself all the time’,” says
Vishakha. She moved to IndiaFirst,
a seven-year-old company and the
18th player in the space.
H
aving consolidated its corporate
business and breaking even in its
fifth year, IndiaFirst began to focus
on retail business under her leadership. The company received a `150
crore capital infusion last September
from its three partners and Vishakha
now plans to use the money for growing business, as the company turns
its attention to micro-insurance and
retirement plan as well. She is all
praise for the Pradhan Matri Jeevan
Insurance, the tech route
I
ndiaFirst Life Insurance has launched
a mobile app Wealthify to help people with their financial planning. The
app is free to download and provides
guidance for Lifetime Goal Management and Retirement Planning. In case
of Lifetime Goals, the tool helps assess
the current assets and check if the same
will suffice to meet our goals. If not, it
will indicate a suggested savings amount
keeping in mind inflation, anticipated
returns and the time frame to achieve
each goal. The Retirement Planner helps
to plan for a steady income after retirement, based on what one anticipates
to be his/her needs every month. Additionally, the tool shows the amount of
life cover (protection cover) one may
need.
This tool can be used by the customer or by the company’s sales team
to facilitate need analysis. “We have
had a rating of 4.6-5 on the Google
Playstore and touched a store listing
of 1,690 in the first week itself. We
have not invested in any marketing
venture and yet have had a heartening response. We hope to promote it
among our sales partners, employees
and customers,” says Vishakha.
“The beauty of the tool is that it
helps match aspiration with reality,”
she adds. “We have many goals and
multiple needs. We need to balance
Jyoti Bima Yojana (pmjjy), which
has helped cover the uncovered and
given ‘a new direction to financial
inclusion’.
She still has a complaint about
pmjjy. The Maharashtra state government charges stamp duty of `40
per policy on an annual premium of
`330. The levy, though calculated
on the sum assured of `2 lakh, is
billed on the premium. Since most
insurance companies are registered
in Mumbai, they are forced to shell
out the amount up front. IndiaFrist
had paid a huge `10 crore on a `68
crore premium collected during the
last fiscal.
pmjjy poses another challenge too.
While, the enrolments were a runaway success, as were the claims, and
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a p r i l 2 5 - m ay 8 , 2 016
the demands of our daily lives while
keeping an eye on our future goals
and aspirations – the tool helps you
assess just that.”
The tool doesn’t ask you how much
you earn. It just takes stock of your
assets and matches it to your goals.
If there is a shortfall, the tool will let
you know how much more you need
to save to actually achieve those goals
keeping in mind the time and expected
inflation/returns.
Overall financial planning that supports goals and aspirations will lead to
informed purchases and satisfied customers. The idea is to encourage and
equip more and more individuals plan
their finances right. With the help of
this tool, any person can run scenarios
for themselves and, accordingly, decide
how much they need to invest, keeping
in account expected inflation, too.
Wealthyfi tool has witnessed over
1,300 downloads since its launch in
January 2016. Meanwhile, IndiaFirst
has reached 365,000 people through
Facebook; 130,000 people through
Twitter; and 220,000 over LinkedIn.
“We believe that technology is a big
enabler in any communication today
and we do not see any reason insurance industry should not make use of it
to the fullest extent,” says Vishakha, as
she targets the GenX. u
IndiaFirst alone settled 3,214 claims,
the data shows that an alarming 30
per cent of these claims came within
45 days of the premium paid. “This
raises doubts over the bonafides of
certain claims,” she says.
The industry has approached the
Finance Ministry to ask for a waiting period or lien of 90 days before
claims can be made. “We hope for
some action since the minister
sounded positive,” she says.
Vishakha sees a huge potential for business growth. For one,
the partner bank’s customer base is
large enough. Also, the pmjjy should
see renewals of policies, apart from
holding promise for new clientele.
u LANCELOT J OSEPH
[email protected]
Market News
Overview
Acche din for equity market
Get ready for a new bull run
S
entiment in the market has has made efforts to revive the rural due to the improved monsoon preagain turned positive. The rea- economy. With one rank one pen- diction. Its first target was lower sinson is obvious: good news flows sion (orop) and the VIIth Pay Com- gle digit growth for FY17, which has
– be it for the domestic economy or mission kicking in, in the next six been revised to lower double digit
on the global front. Let us start with months, companies are heading growth. As the monsoon progresses
the domestic economy where not towards better times. Maruti Suzu- we expect more companies – who get
only are the iip and wpi numbers ki’s, (India’s largest selling car com- substantial revenue from rural India
better than expected, but the mon- pany) management is now revising – to upwardly revise their targets.
Automobiles and auto ancillaries
soon is likely to be better this year its sales forecast for the current year
are segments that should do
with an imd forecast of 106
well due to the likely robust
per cent of long period averTop losers in BSE 500 in last one month
demand from rural India. Simage rainfall. In the last two
(% change)
ilarly, fmcg companies who
years India has struggled to get
Sunrise Asian
-30.45
a good monsoon due to the El
have been facing the heat of
Global Offshore Serv
-23.36
Nino effect. Water reservoirs
competition from Baba RamAshoka Buildcon
-22.65
are empty and many states
dev should be able to report
Jubilant LifeScience
-14.63
are facing acute drought situdecent gains in volumes. This
BEML
-12.37
ations. This has impacted the
may also give them some pricSunteck Realty
-10.92
economy severally.
ing power. Cement compaIpca Laboratories
-10.7
First, farm incomes went
nies too should see smarter
Jaypee Infratech
-10.16
down, lowering rural growth
growth as their rural demand
RattanIndia Power
-9.88
and second, some industries
is expected to be 33 per cent.
-9.83
Vaibhav Global
have had to shut factories temThe industry is also going
Polaris Consulting
-8.98
porarily due to low availabilthrough a consolidation phase
Shree Renuka Sugar
-8.74
ity of water. But now the rural
– pricing power can improve
8K Miles Software
-8.66
economy should start doing
going forward. In the last one
-8.53
KSK Energy Ventures
well and this should benefit
month Kakatiya Cement is
-8.53
Alok Inds
India Inc too, as many of the
up 112 per cent, while Sagar
Apollo Tyres
-8.5
companies are heavily depenCement is up by 38 per cent.
Bliss GVS Pharma
-8.09
dent on rural demand. A good
We feel that more action would
Phoenix Mills
-7.76
monsoon would not only
be seen in the mid- and small
United Breweries
-7.21
lift the earnings of the rural
sized cement companies as
United Spirits
-7.14
serving economy, but in the
they would see their margins
last budget the government Source: Accord Fintech
expand due to better demand
u 76 u
a p r i l 2 5 - M ay 8 , 2 016
Market News
underperformed the broader
and also may weigh in the
Top gainers in last one month
market as everyone is expectpossibility of being taken over
ing
the commercial launch of
by the larger players – push(% change)
Reliance
Jio which is expected
ing up the market cap. Many
Delta Corp
36.82
to be a game changer for the
are quoting much less than
Just Dial
35.76
telecom business. At a recent
the replacement cost, leaving
Yamini Investments
35.71
public forum Mukesh Ambani
enough scope to move up.
Dynamatic Tech
30.19
revealed that the company has
A better monsoon should
Himachal Fut. Commns
29.72
invested `1.5 lakh crore in this
augur well for tractor comRelaxo Footwears
29.16
panies too, which have seen
business (much higher than
DCB Bank
25.88
tough times in the last two
Bharti Airtel’s market cap). This
Amtek Auto
24.72
years. While there may not
is huge money and hence the
Escorts
24.41
be an immediate demand for
telecom success would decide
3M India
23.61
them, sentiment should be
the next course of price moveHeidelberg Cement
23.28
much improved on these counment for Reliance Industries.
GHCL
22.69
ters. Consumer durable comIt is too early to conclude
Hitachi HomeLife Sol
22.68
panies should also see smart
whether the results season will
DCM Shriram
22.4
growth in earnings. The heat
be good or bad. But market
Coromandel International
21.95
this summer has been above
men are anyway not expecting
GIC Housing Financew
21.83
normal and this augurs well
great numbers. The real action
Jindal Steel & Power
21.48
for manufacturers of refrigerabased on results is expected
Essel Propack
21.37
tors, air-conditioners and fans.
from September 2016 when
Credit Analysis
21.27
While demand for consumer
not only would the monsoon
Century Textile & Ind
21.15
durables was strong in urban
factor have played out, but the
India it was poor in rural India.
base effect would also have
This may also get corrected with the its gdp being revised upwards.
kicked in making the results look
monsoons and VIIth Pay CommisThe March result season has much better.
sion. There is a high probability that kicked in and 55 companies have
fiis have continued their love for
some consumer durable companies announced results. The results have India even in April. After pumping
may give capital appreciation in the been a mixed bag dominated by in `24,000 crore in March 2016, they
region of 50 per cent in the next one tech companies like Infosys, tcs have made additional net investments
year. The effect of better demand and Wipro. On the other hand, of `1,684 crore till 21 April. The marwill clearly reflect in the June quar- giant Reliance Industries declared its ket seems to be convinced that fiis
ter numbers.
results for the quarter ended March would continue to put more money
2016 where its sales decreased to into Indian equity as India is a comInternational cheer
`60,252 crore as against `67,470 crore pelling story for fiis – one they can’t
But this good news is on the domes- in the same period last year; but its afford to ignore.
tic side. On the international front net profit increased to `7,398 crore
In all probability the Indian
too the good news continues for the as against `6,381 crore for the same equity market is heading toward
market. First, there is a belief now period last year. The refining busi- better days as the convergence of all
that China will not have a hard land- ness continues to throw good money the positive factors are happening
ing. In its latest report the imf stated for the company. But in the last three one after another. Of course the Parthat China’s slowdown might not be months the Reliance share price has liament session is resuming and lots
of hope continues to rest on
quite as severe as first feared
the gst and Bankruptcies law
but its “momentous” shift
Reliance vs Sensex in last 3 months
from investment-led growth
to be passed. If that happens
110
is still having a chilling effect
the market will surge and the
on trade globally. Similarly,
Sensex may cross the 30000
105
though the imf lowered the
level by December 2016.
Reliance Industries
Investors sitting on the fence
world gdp growth rate from 3.4
100
are advised to start allocatto 3.2 per cent, it maintained
Sensex
ing funds to the equity marIndia’s gdp growth rate of 7.5
95
ket. In the next nine months
per cent for FY17 clearly givthe Indian equity market is
ing the signal that despite the
90
likely to be at a much higher
global slowdown India would
level. So get ready for a new
be able to keep its pace of econ85
bull run.
omy growth. If the monsoon
22 Jan – 22 Apr 2016
is really good there is a high
u SUNIL DA M ANIA
probability that India may see
[email protected]
u 77 u
a p r i l 2 5 - M ay 8 , 2 016
Market News
New issues
Global leader
Thyrocare, with healthy margins and a world leadership position,
could be a prize catch for the investors
u 78 u
a p r i l 2 5 - m ay 8 , 2 016
sa n jay bor a de
E
ven by the modest standards of
healthcare companies in India,
Thyrocare is quite a small
organisation. But it is a giant fish in
the relatively small pond of pathology laboratory testing (total value:
H37,700 crore). Hence, its annual revenues of H170 crore and ebidta (earnings before interest, depreciation, tax
& amortisation) of about H70 crore
hold much more value than the
numbers appear to indicate. Another
reason is that this segment of the
healthcare industry is fragmented,
with seven large national chains
accounting for a mere 5-7 per cent
of the market! Another 10 per cent
share is controlled by regional laboratory chains that are limited to one
state or region of the country, thus
bringing the organised sector to just
15-17 per cent.
But a sharp focus on one niche
area, namely testing for disorders
of the thyroid gland (a tiny organ Velumani: doing it right
located just behind the throat), has
enabled Thyrocare to become the Kolkata, Hyderabad and Coimbatore;
world’s largest laboratory for con- started conducting a wider range
ducting thyroid tests. It happened by of medical laboratory tests; and
an accident of circumstances; when planned an ambitious growth stratA. Velumani decided in 1996 to quit egy for Nuclear Health, its subsidiary
that focusses on ct scans and other
barc and start his own venture, he
turned to the only aspect of medical high-end investigations. But, even
care that he knew well. Thyroid dis- now, 70 per cent of the tests conease was, after all, the subject of his ducted in Thyrocare’s laboratory are
PhD. “Doing little and doing it right,” for thyroid, which however accounts
has been his ethos all
for just 20 per cent of
THYROCARE
along, and this has
the revenue, and 20
enabled Thyrocare to
per cent of the profISSUE SIZE
grow 38 per cent in the
its. On the other hand,
10.744 million shares, face
value `10
past four years, from
preventive healthcare
PRICE
H77 crore in 2011-12 to
schemes, which cur`420-446
H170 crore in 2015-16
rently form only 20
DURATION
(nine month ended
per cent of Thyrocare’s
27-29 April
December 2015).
workload, account for
LEAD MANAGERS
Yet, the company
about 50 per cent of
jm Financial, Edelweiss, icici
has diversified widely,
their revenues!
Securities
setting up regional
“With just one cenRegistrar
processing
laboratotral processing laboraLink Intime India
ries (rpls) in Delhi,
tory in Navi Mumbai,
we found it difficult to service the
Tier II locations in several states, and
so, we decided to set up four rpls in
the last financial year,” says Velumani, adding that the central laboratory was getting too congested. This
was largely because of Thyrocare’s
unique operational model, wherein
they would collect blood samples
(for doing thyroid tests) from over
25,000 collection centres all over the
country, fly them to their laboratory
in Andheri, a Mumbai suburb by 6
pm each day, and process the samples through the night. This meant
the results would be ready for the
prescribing doctors the next morning. But when they started getting
more than 20,000 samples a day, the
single laboratory was no longer able
to cope up.
Expansion plans
Since the new diversified strategy
requires a lot of capital investment,
the company has now decided to
go public with an Offer For Sale of
10.744 million shares in a price band
of H420 to H446 per share. Though
none of the accrued funds would go
into the company itself, its valuation would be clearer and the management could make a fresh issue or
leverage their balance sheet if they
needed to. There is a high probability that the company may borrow
to fund its future expansion. Of the
total shares on offer Agalia, a Mauritius-based financial services company, is going to sell about 10.207
million, while Velumani and his
family would offload the remainder
(slightly less than 600,000).
Considering that they have
recorded an ebidta of 35-40 per cent
over the past several years, and that
it is likely that they will continue to
do so, at least for the next few years,
most investors should make the scrip
a part of their portfolio. In fact, those
who are unable to get an allotment
in the current issue would be well
advised to look out for buying opportunities in the secondary market, as
the company has healthy margins
as compared to its competitors and
enjoys a world leadership position.
u SUMIT GHOSHAL
[email protected]
Market News
R E S U LT S
Jittery investors sell
IT majors show a mixed bag of results
I
nvestors are confused with the
mixed bag of results from it
majors Infosys, tcs and Wipro
and prefer to take some profits,
resulting in the stocks of all the three
falling below their weekly highs last
fortnight.
Last fortnight tcs was trading
at `2,423.50, off its weekly high of
`2,553.15. Infosys was down 0.7 per
cent at `1,218.10, off its weekly high
of `1,267.90. Lastly, Wipro was down
0.3 per cent at `557.60, and way
below its weekly high of `606.75.
hsbc on its tcs results report of
19 April, says that the company’s 4Q
revenue reassures that demand for
the it services is stable and not collapsing. Also, with the company’s
commentry on demand remaining
positive, hsbc keeps its Hold rating
and ups its target price to `2,685 (20
times the estimated FY18 earnings)
from `2,660.
“tcs reported a decent revenue
growth of 2.1 per cent on-quarter,
marginally better than our expectation of 2 per cent. Albeit modest, this
is a beat from tcs posting multiple
quarters of top line misses,” says the
research report. “We continue to see
tcs at the higher end of sector growth
of 10-12 per cent (for full year) and do
not see any major de-acceleration as
many expected on the street.
hsbc says that the tcs stock is
trading at 18.5 times its estimated
FY17 earnings, and is in line with
that of Infosys. “We think large scale
remains the key challenge over the
coming years and limits positive
growth surprise for the company,”
says the report, but adds the positive
is that tcs has a well-diversified portfolio and a strong digital practice,
which means the downside risk to
growth and estimates is low as well.
Credit Suisse says that while tcs
does not offer guidance, the management sounded quite confident
for FY17. “Our estimates for FY17
Sikka: proud of Infosys’s achievement
and FY18 are largely unchanged on
the back of the 4Q FY16 numbers.
Our tp moves up slightly (to `3,000
from `2,900) as we roll forward our
estimates.”
However, Credit Suisse in a recent
report downgraded the Wipro stock
to Neutral rating from Outperform,
as it says that Wipro’s 4Q performance fell short of expectations on
all three fronts, the revenue growth,
margins and guidance. “While
attractive valuations have enabled
the stock to hold up reasonably, we
believe that continued lack of visibility in growth acceleration and fundamental underperformance relative
to peers can be a drag on the stock
price. Also, while we keep our estimates and tp largely unchanged,
there is little potential upside left
now,” says the report. Credit Suisse
targets the stock at `650.
Infosys results
Infosys was the first to come out with
its quarter and annual results on 15
April. Among brokerages, clsa has
downgraded the stock to Outperform from Buy, and lowered its target to `1,325 from `1,350. It says that
profit margin looks softer than a year
ago and further levers are needed.
Deutsche maintains a hold target
at `1,200, as it sees the stock fairly
u 79 u
a p r i l 2 5 - M ay 8 , 2 016
priced at 18-times FY17 earnings estimate. Citi keeps its neutral target at
`1,225 from `1215, as it says that 1Q
margin performance will be something to watch out for and sees limited absolute upside. Nomura keeps
its Buy on stock and ups its target to
`1,315 from `1,270 as it remains reassured on growth outperformance of
Infosys versus its peers. Kotak ups its
target to `1,425 from `1,300, as it feels
the FY17 guidance is achievable at the
higher end despite high hurdle rate.
Morgan Stanley keeps its Overweight
and target of `1,300. Bank of America
ups its target to `1,430 from `1,350.
Infosys informed that its Q4 operating margin at 25.5 per cent, is
higher by 0.6 per cent from its Q3
operating margin of 24.9 per cent.
Also, its revenue guidance for FY17
of 11.5-13.5 per cent in constant currency and 11.8-13.8 per cent in dollar terms at 31 March exchange rates
is higher than its actuals for FY16. In
financial year ended 2016, its revenue
were $9,501 million, a growth of 9.1
per cent in reported terms and 13.3
per cent in constant currency terms.
The quarter performance also has
once again boosted the cash position
at Infosys. Its liquid assets including
cash and cash equivalents, availablefor-sale financial assets and government bonds were $5,202 million as
on 31 March, as compared to $4,765
million as on 31 December, 2015.
“I am proud of our company’s
achievements in my first fiscal year
as ceo of Infosys. At the same time,
I am humbled by the task that is still
in front of us. We started the year just
two quarters into a strategy to completely reimagine the notion of services and to transform Infosys. Over
the course of this year, we saw this
strategy, of bringing automation and
innovation to our clients, on a foundation of learning and education,
start to show results in the organic
growth of our client relationships, in
our win rates in large deals, and in
the types of projects we are seeing in
strategic areas where we never participated before. I am proud of what our
teams have achieved this quarter and
in the year,” said Vishal Sikka.
u R ag h av e n d r a U pa d h yay
[email protected]
Column
Acche din!
Strong fundamentals to take control over technical weaknesses
I
India has witnessed two consecutive years of
ndian markets are undergoing an interestweak monsoons, which has had a negative impact
ing phase, where the country’s macro-ecoon rural demand. India’s leading meteorologinomic fundamentals are steadily on the
cal agencies – imd and SkyMet have both foremend, but investors are confused about the road
to recovery, due to uncertain global factors and
cast above-average monsoons in 2016-17. This
uncertainty over earnings growth. Over the
will help revive rural consumption and support
past few years, India has seen consistent downagri-based industries.
grades in consensus earnings estimates causing
According to leading job portal Naukri.com,
turbulence in equity markets.
hiring in March 2016 has surged by over 22 per
sanjiv chainani
After five consecutive quarters of declining-tocent over last year, mainly driven by it softflattish earnings growth, leading companies are
ware, ites, telecom, banking and insurance. This
now expected to see some improvement. The ongofollows a strong growth of over 18 per cent in
ing earnings season is off to a decent start, with
February 2016.
both Infosys and tcs beating street estimates.
India is one of the few large global economies,
where government debt as a percentage of gdp has
India’s fundamentals have strengthened since
the new government took control. Despite two
fallen since 2006.
consecutive years of weak monsoons, inflation has
On the negative side, highly levered balanceremained under control. cpi inflation has eased
sheets of large corporates from the stressed sectors
continue to remain a drag. The ongoing clean-up
to 4.83 per cent in March 2016, while wpi inflaof books by public sector banks and lower comtion remained at minus 0.85 per cent, remaining
modity prices should keep earnings
in negative territory for the 17th month
Government debt as % of gdp of psu banks and mining and metal
in a row.
The ministry of finance has claimed
companies under pressure.
2006
2014
2015
that the government has successfully
The US
63.9 102.98 104.17
met its fiscal deficit target of 3.9 per
he risks from the ongoing global
Euro Area 67.3
94.5
93.5
cent for FY16. The government has furslowdown and uncertainties are
ther decided to stick to its earlier set fisstill not fully mitigated, affecting
China
31.49 41.14
cal deficit target of 3.5 per cent of gdp
investment flows and India’s external
Japan
168.8 226.1 229.2
sector. While India’s trade deficit narin FY17.
Brazil
55.48 57.19 66.23
rowed to over a five-year low in March
According to the rbi, implementa2016, exports fell by 5.5 per cent,
tion of the VIIth Pay Commission and
India
78.49 66.1
declining for the 16th straight month.
orop can put upward pressure of 1-1.5
Source: Investing.com
India’s services exports fell by 12.6 per
per cent on inflation but, at the same
cent in February 2016.
time, it will add 40 bps to gdp in 2016-17. Despite
On valuations, Indian markets are trading just
this, the rbi has maintained its retail inflation
above long-term average multiples, but on highly
target of 5.0 per cent in March 2017.
suppressed earnings base. As corporate earnings
Moody’s too has marked the government’s
pick-up, markets will start looking inexpensive
‘Make in India’ initiative a huge success, with net
on forward earnings. Another valuation metfdi inflows hitting all-time highs in the beginric of ‘market cap to gdp’ is still at an attractive
ning of 2016. The rise in fdi points to stronger investor interest in India. India’s ‘Make in
level of ~65 per cent, even after the sharp rally
India’ initiative is seen to be stimulating oil conof over 1000 points on the nifty50 from Februsumption. iea sees India as fastest growing crude
ary lows. This shows tremendous potential for
Indian markets to move up as global uncertainties
consumer through 2040.
subside and earnings pick up.
iip for February 2016 grew by 2.0 per cent,
On a technical basis, the nifty50 has just closed
driven by strong performance in mining and elec- The author is managing
tricity sectors. This positive growth has come after
above 200 dma, which stood at about 7875. It needs
director of Value Line
three consecutive months of contraction. The core
Advisors Pvt Ltd. a
to be seen if markets can sustain and trade above
sector of the economy such as cement has witCategory I Merchant
these levels and break the range on the upside
nessed strong uptick in volume growth, driven by
banker. He can be
going forward. It is time to remain fundamenan improvement in construction activities, such as
reached at sanjiv@
tally bullish, in an otherwise technically cautious
road projects and urban infrastructure projects.
valuelineadvisors.com
Indian market.
u
T
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Executive Track
A growth hub
New leader
The Panasonic Corporation has reiterated its focus on India as a driver
for global growth by announcing
two strategic management promotions. Daizo Ito, previously president,
Panasonic India, has been elevated to
The National Association of Software
& Services Companies (nasscom)
has announced the appointment
of C.P. Gurnani as its chairman for
2016-17. He succeeds B.V.R. Mohan
Reddy, and is part of nasscom’s
executive council and md and ceo
of Tech Mahindra. Gurnani will lead
and assist nasscom in catalysing the
growth of the Indian technology
and services industry and enabling
the fulfillment of its future goals
and aspirations. The executive council also announced the appointment
of Raman Roy, cmd, Quatrro Global
Services, as the vice-chairman.
On board
Sharma: taking charge
the role of managing executive officer, Panasonic Corporation; chairman, Panasonic India; and regional
head, isamea region. Taking charge
from Ito, Manish Sharma has been
appointed executive officer, Panasonic Corporation & president & ceo,
Panasonic India & South Asia, from
his most recent role as managing
director, India. He is the first Indian
and the youngest ever to become an
executive officer of the corporation;
reaffirming its focus on India.
Zee shuffle
Ashish Sehgal, who is currently heading ad sales of zeel, will be designated
as coo, Zee Unimedia, the new subsidiary of Zee Entertainment Enterprises Ltd (zeel). He will be responsible
for driving sales opportunities across
broadcasting, digital and print. He
will report to Punit Goenka, md and
ceo, zeel. Meanwhile, Bhaskar Das,
who is currently group ceo of Zee
Media Corporation Ltd (zmcl), will
take up the role of president and chief
growth and innovation officer of
Zee Unimedia. Das will be responsible for growing and evolving content,
and creating opportunities to exploit
niche brands within the portfolio
of broadcasting. Das will report to
Sehgal in his new role.
fcb Ulka brings on board Saad Khan
as vice-president, strategic planning. Khan has spent over 17 years
building brands and has worked
with some of the biggest advertising houses in India like Leo Burnett,
Lowe Lintas, DentsuMarcomm and
Euro rscg. In 2011, he founded ‘Marketing Unplugged’ along with Suman
Srivastava, vice-chairman – strategic
planning, fcb Ulka group.
Climbing up
icici Prudential Asset Management
has announced the appointment of
Anish Tawakley as head of research.
He will report to S. Naren, cio. Prior to
joining icici Prudential Mutual Fund,
Tawakley was head of the Barclays’
Asia ex-Japan (aej) sell side financials
sector research team with direct coverage of Indian financials. Past experience includes buy side analyst and
global sector pm at Bernstein, and
management consultant at McKinsey.
Veteran steps in
To help grow brands in the age of
intricate consumer dynamics, Tarun
Nigam steps in as executive vice-president, ddb MudraMax-Media. Nigam
has two decades of experience, and as
erstwhile ceo and co-founder of pm
Media Solutions and coo, Graphisads,
his earlier stints include utv, Group M,
Starcom MediaVest, etc. He has worked
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with several established brands like
Aircel, Benetton, Diageo Radico, Gillette, Hero Honda, Hero Cycles, Oracle,
lvmh, Samsung, Suzuki Motorcycles,
Starwood Hotels, vlcc, Wrigleys,
Yahoo and Makemytrip.com amongst
others. At ddb MudraMax-Media,
Nigam will be operating out of the
agency’s Gurgaon office and will report
to Sathyamurthy Namakkal, executive director, ddb Mudra group, and
president, ddb MudraMax.
New officer
Kenstar recently announced the
appointment of Milan Wahi as its
chief operations officer with immediate effect. In his new role, Wahi
will be responsible for contributing to Kenstar’s by and large strategy for establishing it as one of the
most preferred premium small home
appliances brands for consumers in
India. For the most part, he will oversee brand building, product development and distribution expansion for
Kenstar. Wahi has an extensive background with over 24 years of experience in various consumer sectors like
fmcg, consumer durables, etc. Previously, he has served as the chief operating officer of jk Dairy and as md of
Lotte India Corporation.
Moving on
After spending more than 23 years at
the agency, Rajeev Sharma, national
planning director, Leo Burnett, has
decided to move on to explore newer
avenues. Sharma joined Leo Burnett
in 1994 as vice-president based out
of the agency’s Delhi office and after
three years in the role he moved to
Mumbai to lead planning as national
planning director. Some of the brands
he has worked on include McDonald’s,
Godrej Consumer Products, Bajaj
Auto, Heinz, Reebok, Ariel, Bajaj Electricals, Tata Capital, Dabur, Pillsbury,
etc. Sharma has played a significant
role in building Leo Burnett’s reputation as India’s most trusted integrated
communications company that has a
sharp focus on strategy. He was also
instrumental in bringing Leo Burnett’s
best global practices to India. u
[email protected]
Selections
P r e s e n t i n g
L a
R é s e r v e ’ s
g a r n e t
a n d
d e e p
p u r pl e
m a g i c
Days of wine and roses
C
ome quickly! I am tasting
stars!” we heard at the first
sip. Grover Zampa Vineyards proudly poured its new-look
La Réserve wines at Sahar’s jw Marriott’s barbecue. European wines
were imported for many years but, for
about two decades, India has made
excellent, award-winning wine. This
is creditable, considering the really
hot, dry or ultra humid climate vintners have to cope with for, in wine,
terroir can be everything.
Grover Zampa Vineyards spoke of
its award-winning La Réserve. Their
first vintage (1998) was a creation
of love and care with the renowned
French oenologue, Michel Rolland,
and aimed at honouring tradition,
sophistication and finesse. Today, La
Réserve, regarded as the best in this
category, is loved by epicureans in
20 countries and has received many
honours, including bronze and silver medals. It won an international
trophy for its Art Collection Sauvignon Blanc in 2014 along with 57
major awards in the last three years,
(including 25 in the last year alone) at
the prestigious Cathay Pacific Hong
Kong International Wine and Spirits
competition, New York World Wine
and Spirits competition, Decanter
World Wine and the Decanter Asia
Wine Awards. It was the first Indian
wine chosen by a 3 Michelin-star restaurant and by L’Arpège, that most
esteemed Paris restaurant.
“Over the last 18 years, La Reserve
has charmed the world with its class
and elegance,” says Sumedh Mandla,
ceo, lr. “The change comes as a part
of our strategy to stay relevant to
changing times and evolving consumer behaviour. We introduced a
unique concept – La Réserve Barbeques today, to provide an experience to wine connoisseurs and
enthusiasts, while making them discover the pleasure of pairing the La
Réserve range with barbeque delicacies.” Absolutely delicious too, with
fresh oregano and marjoram-scented
pasta cooked al dente and a rich Parmigiano-Reggiano, the hard, grainy
cheese! (Some say ‘Parmesan’ but
European law today forbids this.)
“A good paring is one where
there is a perfect match and balance
between the components and structure of wine and the food it is paired
with,” adds Mandla. “We at jw Marriott Mumbai Sahar are delighted to
host this significant event. The wines
Mandla, Karishma Grover and Kapil Grover: charming the world
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Full-bodied with intensive flavours
from La Réserve are the best India
has to offer, they complement the
quality of the products we provide
our guests,” says Saeid Heidari, general manager, commenting on the
launch and association. “Our team
of chefs has carefully studied every
detail of the wines and carved out
gorgeous barbecue delicacies to complement them.”
Great finish Grover Zampa states La
Réserve is created with passion and
reverence for tradition, with handpicked grapes from their oldest Cabernet Sauvignon and Shiraz vines.
Matured over six months in new
French oak barrels, the wine gains
‘intense structure and complexity,
balance and its finish is exquisite:
long and almost magical’. Hand–
picked and bunch pressed Viognier
grapes from the best parcels of land
at the vineyards are used and vintage
after vintage has been really appreciated internationally.
Grover Zampa Vineyards are pioneer wine producers, with wineries
and vineyards in the Nandi Hills, Karnataka and in Maharashtra’s Nashik
valley. With carefully limited yields,
sustainable viticulture and selective
hand harvesting, their winemaking
is carried out by oenologists under
the direction of Michel Rolland and
winemaker, Mathias Pellisard. This is
Selections
the result of a merger between Vallee
De Vin and Grover Vineyards, the
largest exporter of wines to over 20
countries. Steven Spurrier, renowned
expert from the famous English wine
magazine, Decanter, rated La Réserve
as the ‘Best New World Wine’ at
a tasting in Germany (2005). La
Réserve was described as having “a
powerful bouquet of luscious ripe
red and black fruits with an exquisite
Pa r k
H yat t
G oa
hint of spice, chocolate, coffee beans
and vanilla and a finish that is long,
ample and almost magical.” This
full-bodied wine has intense flavours
and smooth tannins.
“I have enjoyed great health at a
great age because, every day, since I
can remember, I have consumed a
bottle of wine except when I have
not felt well. Then I have consumed
two bottles,” a bishop said and who
s h o w c a s e s
t h e
s tat e ’s
Cashing in on cashews
I
ndia currently ranks as the largest
grower, processor and exporter of
cashew in the world. Goa, Kerala,
Andhra Pradesh, Maharashtra, Odisha
and Tamil Nadu are the major cashew
producing states in India. According to the Cashew Export Promotion Council of India, 1,18,952 tonnes
of cashew kernels, valued at nearly
`5,500 crore, were exported in 20142015. It is believed that cashew originated in Brazil and was introduced
to Goa by the Portuguese, mainly to
control soil erosion. Subsequently, it
spread as a popular cash crop to the
other parts of the country. Yet, not
much is written or publicised about
cashew, which is consumed all over
the globe as a snack or utilised as a
preferred food ingredient for various
dishes and desserts.
are we to contradict such eminent,
holy men?
With wine, woman and song
or a (magical) man, music and garnet wine, one could be really happy
although Forbes did report that one
of its wealthy heroes chose rather
decisively, “She gets to keep the chalet and the Rolls, I want the wine.” u SWAPNA V ORA
[email protected]
c a s h e w
p o t e n t i a l
The beginning of summer is the
ideal time for this unique celebration, being the harvesting season for
cashews. Even cashew feni is seasonal
and distilled from March to May,
based on the cashew harvest. Incidentally, cashew feni was given geographical indication registration in
2009-10 as a specialty alcoholic beverage from Goa. While on feni, it is
interesting to note that the Goa government has just initiated the process
to tag this drink as a heritage brew of
Goa. It is the first liquor product to
obtain such a status in the country,
which may enable it to get a marSawhney:
ket outside the state.
promoting the
The inaugural event on the first
Cashew Trail
Sunday of April (3 April) brought
alive the farm-to-the-table experience. A group of Harley Davidson
enthusiasts covered the route from
Though only about 25 per cent Madame Rosa Cashew Farm in Valof the world cashew output is culti- poi to Park Hyatt at Cansaulim in
vated in India, it is among the largest South Goa. An excursion to a cashew
cashew processors in the world. India farm and cashew factory allows one
imports raw cashew nuts for process- to witness the typical process of fruit
ing from countries in Africa like picking, sorting and distilling from
Gambia, Bissau, Ivory Coast, Ghana urrak to feni. (While feni is fermented
cashew fruit juice or neero distilled
and Tanzania.
It took a novel initiative by Park twice or thrice, urrak is the first distilHyatt Goa Resort & Spa five years ago late of fermented cashew juice.)
The entire process can be fascito showcase the legacy of the ‘humble fruit’ of Goa – the cashew in its nating to visitors. After plucking the
many forms and manifestations – brightly-coloured cashew fruit, the
to national and global audiences. cashew seeds are separated from the
Cashew Trail 2016, which just con- fruit. A big stone basin is used for
cluded in Goa, was the latest edition crushing the fruit by foot (by stompof an annual ritual aimed at showcasing on it as they stomp on grapes
ing the fruit in its true glory. While to make wine) to remove the neero,
Goa had a coconut and cashew festi- which is collected in a large earthen
val last year, this event is dedicated pot, buried in the ground and left to
ferment for several days before being
only to cashews.
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Selections
sent for distillation. Feni is supposed
to provide a lot of health benefits,
when had in moderation. It goes well
with fried mussels or fish.
Cornucopia The urrak and feni
are extensively paired by chefs and
mixologists to create various exotic
dishes with meat, fish, vegetables
and desserts. Bread fruit, tapioca,
chilies, pineapples and tomatoes
were used along with cashew to provide delightful cocktails. Cashew-inspired gourmet experiences included
the cashew masala dosa, salads with
cashew fruit & nuts and urrak-infused
desserts and chocolates.
“Cashew Trail has become a
landmark in the Goan calendar of
events which involves key people
and enhances the Goan experience,”
explains Shobhit Sawhney, gm, Park
Hyatt Goa Resort & Spa. In addition,
the hotel has collaborated with Goa
Tourism Development Corporation
to offer helicopter and balloon rides
to tourists from India and overseas
who travelled to Goa. The guests are
picked up by helicopter from the gardens of the 45-acre hotel.
Cashew Trail is also an attempt to
leverage exotic features of cashew-
based spa treatments. Unique treatments have been developed where
ayurveda and aroma therapy are
combined with contemporary spa
techniques. “Cashew oil has a lot of
vitamin E – which is easily absorbed
by the skin in its natural form,”
explains Ratheesh Kumar, a wellness
expert. This helps in retaining moisture and prevents free radicals which
trigger the process of aging. Also on
offer are a line of cashew-based cosmetic products like cashew soaps,
oils and scrubs.
u SU V ENDU B ANER J EE
[email protected]
H ot e l G r a n d Sa r ova r P r e m i e r e , Go r eg ao n , M u m ba i , l au n c h e s a n a l f r e sco lo u n g e
Get Tipsy
on the Terrace
H
otel Grand Sarovar Premiere
in Goregaon has given this
western suburb in Mumbai a
new al fresco lounge – The Tipsy Terrace. Literally on the terrace, T3, as
it has popularly come to be known,
is positioned as a “value for money”
logical extension of the hotel’s F&B
operations.
You have a space, you use it. It
does make business sense. But when
you have only a seasonally-restricted
six months, you better have all your
gastronomical salvos to make that
place a go-back-to once it restarts.
Notwithstanding the challenges,
Rahul Chitnis, F&B Manager at
Grand Sarovar Premiere, points out
crackers.
Tandoori
the positives, “Being
prawns are tossed
operational only for
in Schezwan sauce.
six months, it gives
Executive Chef Kamus an opportunity to
lesh Rawat’s Jhingha
experiment with new
China is the most popideas and menus. Every
ular nibble.
time we reopen, we try to
To optimise business, spechange the look/feel/cuisine
Rawat: loves
of the outlet. This time we to experiment cial promotions are T3’s key
strategy. It showcases live
decided to opt for value-forscreening of sporting events such as
money Indian cuisine and drinks.”
Before T3, Marhaba served Ara- IPL matches and offers packages for
bic food for three years. And before the same. It also hosts private dinMarhaba, Twist served dishes “with ners for corporate groups. It has a
a twist”. T3 serves fusion food to juke box with a choice of over 5,000
primarily complement cocktails songs of various genres.
and other drinks. The South Indian
u bertie d’souza
papadam is substituted for prawn
[email protected]
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Books
‘Kaka, mala vachva!’
A compelling story from then to now
A DREAM CALLED SHANIWARWADA
By Sanjay Shankar Dongre
Exhibition copy
Pp 60
S
anjay Dongre’s book, A Dream
called Shaniwarwada illustrates
history with photographs. This
is the story of Bajirao, who built
Shaniwarwada fort, and of his sons,
who contributed to its glory and fall.
Shaniwarwada, built in 1732 for the
Peshwa rulers of the powerful Maratha Empire, was the centre of Hindustan’s politics until 1818, when
they lost to the East India Company
after the Third Anglo-Maratha War.
After Aurangzeb’s death, while the
Mughals fought each other, the Marathas controlled 80 per cent of today’s
India, Pakistan and Afghanistan:
from Kabul to the northeast to the
far south. Mumbai, Delhi, Kolkatta,
Kabul, Lisbon, Paris, London: everyone was aware of their might. Huge
histories tangled with myths, murder,
money lie amidst today’s weeds.
Shaniwarwada,
designed
by
Shivram Limaye and constructed by
Kumawat Kshatriya from Rajasthan,
was the Peshwa fortress and home:
heroic, tragic and possibly haunted.
Storyteller Dongre’s pictures point to
‘bravery, treachery, romance, pride,
manipulation, brutality, even the paranormal’. He shows its high, formidable
walls and crumbling stones alongside
sunlight and the relentless growth of
gaudy nature. Can these fallen stones
speak? The fortress is bleak and unattended. The teenaged heir, Narayanrao
was killed by hired assassins, Hyderabad’s Gardhis, so his uncle, Raghunathrao, could inherit the palace and
power. Raghunathrao did get the
throne: his reign lasted but one year.
Narayanrao was actually to be captured but dhara (capture) was changed
to maara (kill). Rumour has it that his
body was hacked into bits and on a full
moon night, some still hear the young
Peshwa screaming Kaka, mala vachva,
for help that never came.
Raghunathrao, Peshwa Bajirao’s
second son, was a great general who
defeated the Rohilla Afghans, imprisoned Delhi’s emperor, Ahmad Shah
Bahadur, and replaced him with
Alamgir II. ‘He stamped Maratha rule
over the north’ and freed Mathura,
Vrindavan, Gaya, etc, from Muslim
rule. His clever financial management
and efficient military campaigns
increased prosperity. Like Emperor
Ashoka, the Marathas ruled over a
vast part of Hindustan and their alliances with and against the British,
wars with the Afghans, their flight
from Pune to Varanasi, their power
and ultimately their defeat at Panipat
are described here with facts, fantasy
and photos. Dry ancient stones make
fame and fortune trivial.
Many Rajputs, Mughals and Nepalis
intermarried for mutual survival and
at least nominal friendship and love
stories, as always, preferred anarchy, the breaking of tradition. Bajirao
married Mastani, possibly the daughter of Raja Chhatrasal (1649–1731)
of Bundelkhand. When the Pathan,
Mohammad Khan Bangash, invaded
his kingdom (1727-28), Chhattrasal
sought help from Bajirao, who was in
the vicinity. Grateful, he gave him his
daughter, Mastani, and a third of his
kingdom, including Jhansi, Sagar and
Kalpi, 3.3 million gold coins, a diamond mine and villages. However,
some sources call her the Nizam’s
daughter: when Chhatrasal defeated
the Nizam in 1698, the canny Begum
offered her daughter to the most dominant power in Central India.
Shaniwarwada’s legendary glory,
its gardens, paintings, art, carved
wood and the grandest fountains of
its time are described in various documents. After the British took over,
it was the officers’ residence for a
decade until 1828 when a major,
mysterious fire destroyed the fort
with its riches, presumably the best
in Hindustan then. The fire burnt
for seven days leaving only the huge
walls and gates. When soldiers have
gone, what remains is weeds and the
wind: Shaniwarwada was abandoned
and no one has lived there since.
Dongre is ‘a visual artist’ who
makes history enchanting so it is not
about dull dates and maps with endlessly changing borders while droning on about who won and who lost.
His book, different from the dry, perhaps unfeeling, writing of the outsiders, has succeeded in telling a
compelling story from then to now
involving, as stories must: kings,
palaces, Rajput beauties, Muslim
Nizams, villainous assassins hired
for silver and strong, stony fortresses
with slits for throwing boiling oil on
enemies and doors big enough for
elephants bearing howdahs.
u SWAPNA V ORA
[email protected]
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Books
Preventing a crisis
King believes in the capitalist approach
The End of
Alchemy
By Mervyn King
Published by
Little Brown
Pp 430
T
here’s a crisis coming, and
Mervyn King, former governor
of the Bank of England, says
it’s time to co-ordinate efforts and
protect one’s own country against it.
During his term at the UK’s central bank for a decade till 2013, King
has had a bird’s eye view of the world
economy. His book is a thoughtful
analysis of global economic developments. It goes beyond pointing a
finger at bankers – who are blamed
for much of the mess the world finds
itself in – to identify the underlying
problems that led to the crisis and
what can be done to prevent one in
future.
With the fall of the Berlin Wall,
developing countries like China,
Russia and India adopted a more
capitalist approach to the economy, bringing in labour that rivalled
counterparts in advanced economies. This caused savings to increase
in developing economies, even as
their advanced counterparts continued to spend through borrowings. This led to the odd situation of
advanced country debt (US) funded
by a flow of savings from developing
economies (China).
A fresh flow of capital reduced borrowing rates, inducing bankers to
devise new ways to increase returns
for shareholders, by creating financial
products like derivatives and collateralised debt obligations. They were
fully convinced of having discovered
a new form of financial ‘alchemy’,
until 2007-08 when such products far
outgrew the underlying real economy
on which they were based.
It led to the crisis of 2008, when
advanced countries like the US, UK
and the EU were forced to ease fresh
money into the system, and pursue
low interest rates to prevent their
banks from failing and economies
from collapsing. In Keynesian economics, theoretically, this should
have eventually led to a revival in
demand until a stage is achieved for
interest rates to be raised again.
But it’s been six years since the
easing began and demand remains
subdued, stoked only in the short
term by another fall in interest
rates. With interest rates near zero,
and braver steps into unknown territory like negative interest rates
– what comes next? If monetary policy is no longer effective and must
rely solely on fiscal policy, there is
little use for Central banks.
“The 10-year real rate (on indexlinked government bonds) expected
in 10 years’ time, has averaged a little
more than 1 per cent in recent years
and by late 2015 was still below 1.5
per cent, well below any level that
could be considered remotely ‘normal’. Markets do not expect interest
rates to return to normal for many
years,” he says. “If real interest rates
remain close to zero, the disequilibrium in spending and saving will
continue and the ultimate adjustment to a new equilibirium will be
all the more painful,” he adds.
When interest rates at all maturities, from one month to 30 years, all
fall to zero, then money and longterm government bonds become
perfect substitutes (they are both
government promises to pay, at
zero interest) and the creation of
one by buying the other makes no
difference.
Debt in advanced economies has
reached levels where asset prices have
risen, causing a drag on the consumer’s willingness to spend. Cracks could
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emerge on the surface from several
places, including emerging countries
that are highly indebted (external
debt), in China with its weak financial sector, in the Middle East with
rising political tensions, or the Euro
area with its fault lines. It could be a
local crisis or a full blown one.
The GDP in Greece has already
collapsed more than that in the US
since the Great Depression. When its
debt was restructured in 2012, private sector creditors were bailed out
and much of the debt is now owed to
the European Central Bank and the
International Monetary Fund.
The ratio of Greece’s government
debt to GDP has continued to rise and
is almost 200 per cent of GDP. Tied
to the euro region, it does not have
the option to lower its exchange rate
to stimulate trade. Its debt is denominated in currencies that are likely to
rise relative to Greek incomes.
The inevitability of restructuring
Greek debt means that taxpayers in
Germany and elsewhere will have to
absorb substantial losses. In a zero
sum game, this is the price that current account surplus countries might
have to pay if only to achieve equilibrium. King points out that Germany must remember that of the 132
billion gold marks it owed the Allies
in 1924, it could pay less than 21 billion marks by 1932.
Except for a rare reference, India
does not find much mention in King’s
book, recovering as it is from a phase
of high inflation and low growth
where traditional economic tools still
apply. Indeed, emerging countries
find themselves at the receiving end
when interest rate policies reverse in
advanced economies. There are a few
thoughts in King’s book, however,
that are relevant for India.
Take his perspective on banking
for instance. The distinguishing feature of a bank is that its assets are
long-term, illiquid and risky, while
its liabilities are short-term (customer deposits, in particular), liquid and perceived to be safe. Returns
on risky long-term assets are higher
than returns that the bank offers on
its short term liabilities. And within
this difference is the risk it takes to
make a profit.
Books
The system works, if all depositors
never start to withdraw their money
at once. That would force the bank
to either demand immediate payments of loans it has made or default
on claims of depositors. In normal
times, a bank can avoid accumulating risk to its portfolio. But when
there are large swings in the economy, risk makes the value of the
assets of a bank uncertain and prone
to volatility.
Indistinguishable problem
Most banks finance themselves
with small amounts of shareholder’s equity. When a crisis emerges, it
is not easy to distinguish a liquidity
problem from a solvency one. Banks
will always claim that their problems
result solely from illiquidity rather
than a fall in the value of their assets,
says King. And the usual solution to
such crises is a combined effort of
both Central bank and taxpayers.
The problem with banks that are
too big to fail, is their interconnectedness. In an economy with 100
banks, the first bank could issue
demand deposits and invest in securities issued by other banks with maturity of six months. The second bank
issues liabilities comprising securities with a maturity of six months,
and invests in a bank with a maturity of 12 months. In this cycle, if
the 100th bank were to default on its
liabilties, ripples would be felt right
down to the first bank. Even though
the first bank had only lent for short
term period.
There are more loopholes in the
system. When the ECB (European
Central Bank) lent to several banks
all over Europe in December 2011, it
still couldn’t solve the crisis. It lent
at very low interest rates – with collateral in the form of claims on their
better loans – and expected the banks
to repay. That created a serious problem for those in the market, like pension funds and insurance companies,
that were looking to lend to banks.
With the proportion of a bank’s
assets available to act as collateral for
debt diminished, the cost of unsecured funding started to soar.
In such a case a Central bank must
u 87 u
a p r i l 2 5 - M ay 8 , 2 016
assess the situation and move in as
lender of last resort at a penalty rate.
It must also assess the liquid assets of
a bank well in advance, so in the case
of a crisis the central bank knows the
extent to which it can provide funds
instantly. Turning to bailouts creates
risk to taxpayers and incentives for
banks to expand the ‘alchemy’ of the
system. Indian public sector banks are
all too used to returning to the promoter, the government, for capital.
King has refreshing perspectives
throughout his book – from the abolition of the gold standard to the
need for consumer price inflation targeting – which is timely to read. The
domestic Indian economy remains
resilient and is on a path to stable
growth, even as it remains vulnerable to external events.
There is no better way to generate
wealth in an economy than through
the capitalist approach, says King.
But the inherent nature of capitalism requires nuts and bolts in place
to prevent another liquidity crisis.
u RYAN M A X I M RODRIGUES
[email protected]
People
Timeless
love
Highest honour
A
nil Chaudhry,
md and country
president of energy
management
and automation
specialist Schneider
Electric India, was
recently honoured
with France’s
highest civilian
award, the Legion
of Honour. The
award is given
in recognition
of outstanding
contributions to
French society over
the course of at least
20 years of one’s
professional career.
Chaudhry has
made a significant
contribution
towards
strengthening
Indo-French relations,
working for over three
decades to ensure
French business interest
in India and the world.
“It is with great honor
that I receive this
profound recognition
given to me by the
French Embassy.
The distinguished
history of this award,
and its long list of
eminent awardees,
leave me humbled
and tremendously
inspired to live up to
the noble principles
it represents,” said
Chaudhry as he
accepted the award,
conferred upon him
by the Ambassador of
France to India, H.E.
François Richier. u
Good scrap
A
K
hushii, an ngo that works to
uplift and empower children
and women, launched a coffee
table book featuring photographs
of 125 eminent fathers with their
daughters. Titled Timeless Portraits of Love, Captured by
Khushii, the book features
portraits of Rahul Bajaj, Rana
Kapoor, Habil Khorakhiwala,
Mahesh Bhatt and many others along with their daughters.
“Each page in the book, is a story
of a father’s love for his daughter, each photograph captures
the quiet gleam of an abiding
relationship. This book is sure to
bring joy to daughters far beyond
those who grace its pages,” said
cricketer Kapil Dev, who not
only features in the book alongside his daughter, but also heads
the organisation. u
ccorHotels
has launched
a
sustainable
development programme, planet
21 which echoes
the urgent need
to focus efforts in
the 21st century
to change production and consumption patterns. This
year, the theme
for the campaign
is ‘My Positive
Local Impact’ that
includes preserving and protecting the natural
environment as
well as involving local artists
and communities to display
their commitment to society by making use
of
substances that can
be
reused. Sofitel Mumbai bkc liaised
with local artist Manish Agrawal to
showcase some of his work. Agrawal, an
architect and interior designer, highlights
recycling and the concept of reduce, reuse
and upcycle, through his creations. He
has created unique objects out of scrap
u 88 u
a p r i l 2 5 - M ay 8 , 2 016
and recycled products like newspaper, used bottles
and keys. He has
attempted to make
unique
items
which are useable
in day to day life
and are strong,
durable and aesthetic. On display
are a helicopter, a
three-seater sofa,
a relaxing Maharaja-style
chair,
and an exclusive
iPad study chair
– all made from
only newspapers
and thread. Going
a step further,
Agrawal has also handcrafted an array of
creative chandeliers using plastic bottles,
as well as artefacts such as pots and vases
made from other recycled material. “The
PLANET 21 initiative is a programme
that involves the hotel and its ambassadors, as also encourages guests to make a
conscious contribution towards the wellbeing of our world. Each year we at Sofitel Mumbai BKC take a step forward to
make this world a heathier, greener and
better place for the generations to follow,” says Biswajit Chakraborty, general
manager, Sofitel Mumbai bkc. u
People
Like father, like son
Deserving award
T
D
r Sunil Kant Munjal, jt. managing director, Hero MotoCorp, and chairman, Hero
Corporate Services was recently conferred the
Sir Jehangir Ghandy Medal for Social and
Industrial Peace, by xlri – Xavier School of Management, Jamshedpur. The award was presented at
the college’s 60th Annual Convocation. “I humbly accept this great honour. This recognition is
not mine alone; this is due to thousands of people
within our organisations and those working with
the organisation,” said Munjal as he accepted the
medal. He also dedicated the award to his father,
the late B.M. Munjal, who incidentally received the
same medal 16 years ago. u
T
heta healing practitioner and
trainer Sajeda Batra has been
busy at work helping CEOs of banks
and finance professionals deal with
physical and emotional issues with
the energy healing technique. Theta
healing, according to Batra, works
by tapping into a client’s “theta
brain wave” – a semi-conscious
brain wave that takes over when
a person delves into a meditative
state. In this manner a Theta healer
is able to connect to the person’s
energy and scan it for strong held
thoughts or beliefs that might be
causing a particular ailment. “We
believe that every physical illness
that comes to us is because of an
emotion attached,” she explains.
Once the issue is identified, a Theta
he British Deputy High
Commission Mumbai’s former head of communications
and public affairs for Western
India, Shireen Dinshaw Mistry, was awarded an Honorary
mbe by the Duke and Duchess of Cambridge in person during their visit to Mumbai. The
award, approved by Her Majesty
the Queen, recognises Mistry’s
contribution towards building
strong relations between India
and the UK, during her 23-year
tenure with the British Deputy High Commission, Mumbai. “Shireen Mistry has been a
Magic touch
u 89 u
a p r i l 2 5 - M ay 8 , 2 016
powerful and impressive advocate for strong and friendly relations between India and the UK.
On top of that she has been the
link between the media in Western India and the British government and a popular, high profile
member of the British Deputy
High Commission staff. I am
delighted that Her Majesty has
graciously approved this award
and that His Royal Highness
The Duke of Cambridge agreed
to present it to Shireen. She
deserves it,” said Kumar Iyer, British Deputy High Commissioner
in Mumbai. u
healer connects to the “Universal
life force” or the “highest and
purest form of energy,” as Batra
expounds, to send “unconditional
love” or energy from this higher
source to the client to heal the
person and produce changes in
his thought patterns. However,
before undertaking any kind of
scanning or healing, a Theta healer
first always asks the client for his
informed consent to tap into his
energy body. In an earlier avatar,
Batra set up and ran Beetroot, a
carefully curated children’s toy
and book library, clubbed with an
activity centre, but turned to her
calling when she chanced upon
Theta Healing through a friend. u
Interview
Domestic investors will
eventually balance FIIs
sbi Mutual Fund, which manages `1.07 lakh crore, recently
gatecrashed into the top five mfs of India, elbowing out uti,
its nearest competitor by a slender margin. Promoted by the
largest psu bank in the country, Dinesh Kumar Khara, md
& ceo, is optimistic about the growth of mfs in an industry he
feels has a long way to go. Speaking to Daksesh Parikh, he
dwells on the reasons for the growth of mutual funds in the
traditional hotspots and beyond the top 15 cities/towns where
sbi’s branches score over others
What has attracted retail
investors back to mfs?
Growth was one of the common
factors across parties during the
elections held a couple of years
ago. I think the focus on growth
was taken seriously by investors
who realised that growth is bound
to happen. Investor programmes
and advice by distributors also
helped in establishing the presence
of mfs in new territories/markets.
Tax efficient products, as also
stories about the wealth created by
investors earlier, haVE helped bring
in new investors.
What are the factors that have
heightened interest in B-15 cities/
towns?
The top 15 markets and those
beyond the top 15 have also seen a
lot of retail investor participation in
mfs over the last few years. Besides
increased investor awareness, I feel
the consistency of performance and
the distribution community has
played a major part in educating
investors about the benefits.
Volatility has always spooked
investors. This time around there
seem to be more funds steadily
flowing into equity.
Better investor awareness,
consistency and conviction has
ensured a higher level of confidence
amongst investors. Common
investors are also realising that
India is a better place to be in
– given the overall slowdown in
global markets. This strong belief
of participating in India’s growth
story has been one of the factors
to have dispelled fear and exits
from the mutual fund industry.
Investors, even in smaller towns
and cities, have access to news and
information which strengthens
their conviction.
it is – not too low, not too high –
the consumption story will pick up.
There will be more liquidity in the
hands of consumers. The perceived
buoyancy will also deter fiis who
will stay invested till such time
as they perceive India as a better
growth story vis-a-vis
other markets.
Will the lower interest rate
regime spur more funds into
equity?
How wealth was created in the
past should be explained. If it is
better propagated, the investor base
can be widened even further. The
common kyc norm, if accepted
by sebi for all investors, will be a
good move. Lastly, the mandatory
warnings about investments
being subject to market risks is
quite a dampener and can be
better framed.
Lower interest rates are bound
to translate into an improved
working of corporate, which will
translate into better earnings. With
companies looking for instruments
to park short-term surpluses,
products like dynamic bonds and
short-term debt funds are expected
to do well. I am quite optimistic
about more funds coming in from
the corporate sector in the near
future.
Can desi investors (retail, mf, dii)
become big enough to counter fiis?
Eventually yes. It is bound to
happen. The way it is going, by
the time the global economy starts
picking up, domestic investors will
become a significant force to reckon
with. India will continue to remain
a bright spot. A good monsoon, as
widely expected, will see a much
better growth trajectory in the
economy. With crude being what
u 90 u
a p r i l 2 5 - MAY 8 , 2 016
What can be done to promote
more awareness?
Do you foresee more consolidation
in the industry?
I feel it is bound to happen. With
the top 10 fund houses controlling
around 75-80 per cent of the total
aum there are around 34 funds
houses vying for the balance 20 per
cent. With compression in profit
margins on one hand and the
higher investments required
in research and skillsets for
managing the funds efficiently,
many fund houses are bound to
exit. Quite a few of them are fence
sitters anyway.
u
[email protected]

but building world- class highways without cleaning up stressed

Transcription

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