Athe45ybusiness india 20 july 2015 by amauteruasa

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 Monday-Tuesday

July 20-August 2, 2015

housing Finance cos

modi in cenTral asia

audiâ&#x20AC;&#x2122;s new drive

dilip buildcon

`40

The $400 bn

The transport sector is opening up to fresh investments and ideas

opportunity

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

Publisher Ashok H. Advani Managing Editor Parthasarathi Swami Executive Editors Lancelot Joseph, Daksesh Parikh, Sarosh Bana, Sunil Damania (Mumbai) Deputy Editors Shonali Shivdasani (Mumbai), Sajal Bose (Kolkata) Consulting Editor Sekhar Seshan (Pune) Assistant Editors Arbind Gupta, Ryan Rodrigues (Mumbai), Yeshi Seli (Delhi) Principal Correspondent Krishna Kumar C.N. (Mumbai) Senior Correspondent Saloni Jhunjhunwalla (Kolkata) Correspondent Rohit Panchal (Mumbai) Sub Editor George Fernandes Photo Editor Palashranjan Bhaumick Photographers Sajal Bose (Chief Photographer), Prakash Jadhav, Sanjay Borade, Sumeet Sawhney (Sr. Photographers), Sorab Mehta Design Trilokesh Mukherjee Group Art Director Bertie J. D’Souza Art Director Mukesh Pandya Graphics Prajakta Sawant Cartoonist Panju Ganguli Manager – Design Cell Mathew Thomas Production Team Balachandran, Chandrakant Lad, Kisan Kumbhar, Laxman Pisal, Najeeb Fatehi Sr. Vice President – Advertising Sales Mira Lawrence (Mumbai) Asst. Vice President – Advertising Sales B. Anand (Hyderabad) General Managers – Advertising Sales Deepak S. Ahire (Mumbai), Sumati Rekhi (Chennai), Salman Khalil (Lucknow) Asst. General Manager – Advertising Sales Support Bridget Mascarenhas Asst. General Manager Advertising Sales Shahnoor Mistry (Mumbai), Aasif Iqubal Khan (Delhi) Branch Manager P.L. Baluja (Kolkata) Sr. Manager-Sales & Distribution S.S. Kannan (Chennai) 28353964 Editorial & Administration Office: Nirmal, 14th floor, Nariman Point, Mumbai 400021. Tel: 22852943 Email: biedit.mumbai@businessindiagroup. com Fax: 22883940. Marketing and Advertising: Nirmal, 14th floor, Nariman Point, Mumbai 400021. Email: bipladvtg.mumbai@ businessindiagroup.com. Tel: 22883938-46 Fax: 22883940 Circulation/ Subscription: 1&2 Regent Chambers, Nariman Point, Mumbai 400 021 Tel: 22820348/22820619 E-mail: subs@businessindiagroup.com Bangalore: 27 Wellington Street, Richmond Town, Bangalore 560 025, Tel: 080-22102444, Telefax: 080-22102446 Kolkata: Krishna Villa, 100 Park Street, Kolkata 700017. Tel: 22893359 Telefax: 22878455 Delhi: 268 Masjid Moth, Uday Park, New Delhi 110049, Telefax: 41643047-53 Hyderabad: Pent House II, Usha Deluxe Apartments, Motilal Nehru Nagar, Begumpet, Hyderabad 500016 Telefax: 040-66490099 Chennai: Prasad Chambers, III Floor , Flat No. 14, Door No. 97A, Peters Road, Gopalapuram ,Chennai 600 086. Tel: 044 28351703 / 28353964 / 28353394 Kochi: 39/6266B, Krishna Prasadam, Alappat Cross Road, Opp: Ezhuthullil Avenue, Kochi 682016. Phone: 9846091797 Lucknow: Sunshine House, 9/11, (M.N.H.S), Sector 9, Vikas Nagar, Lucknow 226022. Tel: 0522-6565222, Cell: 09415180290. Registered Office: Nirmal, 14th Floor, Nariman Point, Mumbai 400 021 Tel: 22883938/47 Fax: 22883940 Annual Subscription Rates India `750 Students (India only) `500 for 1 year on submission of current year’s ID card. Overseas (One year only) Airmail to Pakistan `4,700 or US$85. To all other countries `6,600 or US$120 Rates include airmail charges. Please add `20 for cheques not drawn on a Mumbai bank. Cheques to be drawn in favour of “BIPL A/c Business India”. Unsolicited manuscripts will not be returned. Distribution India Book House Ltd Newsstand `40 This issue consists of total 92 pages including cover

prime minister modi and his government have the ability to dream big. the plans that are being made for the transport sector – roads, railways, waterways and ports and airlines – envisage a rapid transformation of each of these sectors in the coming years. our railways network built largely by the British in the 19th and the first half of the 20th century used to be the envy of the world. But over the years there has been a gross under investment in our railways, in spite of the key role they play. they lag behind woefully, both in terms of the extent of the network as also the technologies used. the railway minister, suresh prabhu, is charting an ambitious plan to at least start catching up. similarly nitin gadkari in charge of highways and also ports is also determined to kick-start an ambitious highway building programme. over the last several years for a variety of reasons the highway building programme initiated during prime minister Vajpayee’s time had almost come to a halt. new plans have been drawn up for inland waterways. more importantly, an ambitious plan to accelerate the growth of the port sector has been spelt out. such transformation of the transport sector will of course allow growth across a variety of sectors including agriculture and manufacturing. with proper transport linkages, different estimates peg an additional 1-2% to the annual rate of growth of gdp. But investment in the transport sector, on the scale envisaged, more than just enabling growth can make the transport sector a growth vehicle itself. this would also add to the rate of gdp growth. although our national experience since independence seems to indicate that transport infrastructure can only grow slowly, the experience of countries like Japan, various european countries and of course china has shown that it is possible to radically transform a country’s transport infrastructure in a finite period of five to ten years. as in many other areas in india we have seen too many missed opportunities. one area, that even this government seems to be bogged down, is the air transport sector. this sector has been neglected too long on the grounds that air transport is not for the common man. in fact, it is largely government policies that can easily be changed at the stroke of a pen, that have held up the development of air transport which is also a generator of large scale skilled employment. one of the main deterrents has been the crippling taxes on fuel. the other has been the application of service taxes which make it cheaper to have aircraft serviced in dubai and singapore, ironically by skilled indian personnel! similarly, the 5/20 rule for allowing indian carriers to fly overseas, and the contorted rules for foreign investment in indian carriers has in effect given away the major chunk of india’s international traffic to carriers from the gulf and se asia. all this in spite of the fact that we have a legacy of over 400 airports, big and small all over the country. moreover, even this government is doggedly insistent on keeping air india as a government owned airline, whatever the cost. the big dreams are a great start. it is time now to act big.

we are on www.businessindiagroup.com

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Contents

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

•

no. 975

COVER FEATURE 36 The $400 billion opportunity india’s transport sector is opening up to fresh investments and ideas

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 Monday-Tuesday

`40

HOUSING FINANCE COS MODI IN CENTRAL ASIA AUDI’S NEW DRIVE July 20-August 2, 2015

DILIP BUILDCON

The $400 bn

The transport sector is opening up to fresh investments and ideas

opportunity u

F O C U S

CO R P O R AT E

AUDI INDIA

R E P O R T S

60 audi india has got its strategy right to don the role of the leader in the luxury car segment in india

DILIP BUILDCON 64 dilip Buildcon moves to cover a dozen states, as a part of its pan-india mission ESS DEE ALUMINIUM 66 the pharma packaging major concentrates on exports, backed by newer technologies

Central Asian odyssey modi’s five-nation tour had a five-fold objective

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FREUDENBERG INDIA 69 freudenberg & co kg is all set to expand its presence in india in various niche areas

no. 975

•

Contents

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

S P E C I A L

R E P O R T

An impressive show 54 housing finance players have maintained the momentum despite a slowdown in the realty market

Government & Politics

• Compulsory TU recognition, hiked minimum wage cause unease • Conflicting signals in civil aviation ministry • FSSAI gets both flak and praise

u u

Banking

it is high time that top public sector bank chiefs be appointed

Advertising & Marketing

StartUp

what is in store for housing. com and its former ceo

aviation

Banking

Business notes

Businessmen in the news

chatzone

13 45, 72

corporate reports

cover feature

cybernews

csr

editorials

executive track

a quarter century on, a once start-up Baggit has made its presence felt across india

f&B

focus

Aviation

follow-up

government & politics

guest column

interview

Editorials

Follow-up

• Granules India, a Hyderabad-based pharmaceutical company, has lived up to its expectations • Manipal Education & Medical Group has decided to enter the diagnostic business

Business Notes

advertising & marketing

• Indian players will have to gear up to competition in iran • A state has no business interfering in bank lending targets • T he present government aims to train 40 crore indians by 2022.

executive focus

F&B

Vistara’s first six months of flying have seen the airline constantly innovate as it tries to grow its market share

IN THIS ISSUE

column

the arrival of wendy’s completes the presence of all top american Qsr chains in india

• jgt, a jute product, will be used for making roads in Bihar • Fitness bands arrive the Indian market • Entrepreneurs, investors and corporate honchos brainstorm on new business • New age banking

CSR

usha’s vision is helping the underprivileged rural women find new hope

Market News

126

• Markets seem to have discounted the immediate concerns and is looking at the future • It may be a little too late to get into the IT sector now, and it may be time to review one’s portfolio • Smarter growth in the loan book and reduction in npa levels can bring back investors to public sector banks • A kash Singhania head of equity, deutsche amc, says that the chinese stock market crash will not have a meaningful impact on FII inflows u

Interview

Shivraj Singh Chouhan, chief minister of madhya pradesh asserts that he had done no wrong and is confident about his ability to ride the storm

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letters to the editor

listening post

market news

newscast

panju’s page

people

portfolio talk

selections

special report

start-up

Issue No. 975 for the fortnight July 20-August 2, 2015. Released on July 20, 2015

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

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

A tribute

‘making a mark’ (cover feature, 22 june-5 july) was a worthy tribute to B.g. Bangur of scl . the patriarch has well-bridged the factors of production and checkmated the competitors, establishing the supremacy of scl through quality and development. and ‘the ‘vow’ factor’ (editorials, 22 june-5 july) serves as aide-memoire to the centre – to fulfil its solemn vows towards economic growth. B. r ajaseKar an

Bengaluru u

Slip shows

‘politics and paranoia’ (focus, 22 june-5 july) argued the case of bringing in a fix on security clearances. here, what sticks in the craw is the new government’s antisouth posture. as the article says, the marans and the sun tv group are not the only promoters of media houses who have cases pending against them. also, how do the cases against the marans affect the quality of performance of the sun channels? sun has been the favourite channel in the south, which is reason enough for a concerned minister to see ‘red’. such instances show that nda’s ‘national’ image is gossamer thin, with its antisouth & east bias coming though clearly. a . a . Va r m a

Kochi

At last!

the recent clearance of the Vizhinjam port project, alluded to in ‘politics and paranoia’ (focus, 22 june-5 july), clearly reveals who pulls the strings in today’s political scenario. for 25 years the project was buffeted about between the upa (with peripheral interest in Kerala, an occasional minister in the cabinet notwithstanding) and nda (unconcerned about the state, as it has no representation there). But the moment the current promoters see a way to milk the project for profits, the government condescends.

which are already kitty, the mps now enhance their perks tially. apparently, knows no limits.

sh a n m uga m m u da li a r

Pune u

Take heed

with reference to ‘a code for ministers’ (editorials, 22 june-5 july), i feel if sushma swaraj and Vasundhara raje are proved guilty, the bjp ’s image would be as tarnished as the congress’s was after the commonwealth games scandal. so, modi should ensure that such a situation does not arise.

pradeep Kumar K.K.

m. Kumar

Mumbai

Delhi

Big enough?

tentacles of a behemoth endeavouring to monopolise the media are clearly seen in the recent victimisation of a southern media major by the new government (focus, 22 july-5 july). after etv, cnbc and cnn-ibn (all of which surrendered meekly), now it’s the turn of the sun group to be set upon by this carnivore. remember, the group will be fighting not just attempts of a hostile takeover, but also a manipulative and partisan government, which aids and abets, as well. is sun big enough to resist its overtures?

in their want to substanavarice

Phase ’em out

emergency was a period when corrupt political heavyweights emerged from the dark to engulf the nation. such specimens exist even now and they do not belong to any one party. so, the pm’s initiative to phase out such elements, if sincerely implemented, will be greatly appreciated by one and all. But, what is required is not just a code for ministers (editorials, 22 june-5 july), but a more comprehensive and massive poll-reforms. s .c . ag r awa l

mohan nair

All at fault

too much democracy, with too little accountability and discipline, becomes an impediment to progress. all political parties are equally at fault in creating such a crisis. see the humanitarian consideration offered to an absconder from law (editorials, 22 june-5 july)! also, see the politicians trying to feather their own nests, without any concern for the common man. not content with all the perks and freebies,

a d i t i s a c h d e Va

Savelife Foundation, New Delhi u

Warn them

please refer to ‘no immediate relief for nestle india’ (newscast, 22 june-5 july). in the debate over ready-tocook food, one important aspect is being ignored: the effects of packing material on such food items. most ready-to-eat items are sold in plastic packets or bags and even stored in them at home. some manufacturers of plastic packets and containers claim their products are not harmful. if this is so, that information should be stated on the product. if not, people must be warned of the serious health risks of the use of plastic and should be dissuaded from using them. m a h e s h K a pa s i

Delhi u

Great reading

bhel’s history made enthrallDelhi

Chennai

the official gazette, which is incorrect. on 12 may 2015, the central government has only notified the guidelines for protecting good samaritans from harassment, while trying to help road accident victims. and, these guidelines have been issued to comply with the order of the supreme court.

Only guidelines

in ‘roadside relief’ (editorials, 22 june-5 july), you have mentioned that a good samaritan law has been passed by the government of india via a notification in

ing reading. this is an institution to which stalwarts like V. Krishnamurthy had rendered yeomen service to raise it to the level it is today (corporate milestone, 25 may-7 june). p. g . K r i s h n a m u r t h i i y e r

Kochi

Please address your letters to:

the managing editor Business india 14th floor, nirmal, nariman point, mumbai 400021. fax: (91-22) 2288 3940 letters@businessindiagroup.com Please mention your full name and address

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Editorials

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

dealing with a new iran Indian players will have to gear up to competition

he landmark nuclear deal between iran and major world powers is an important signal coming out of a region torn by terror and mistrust that problems can be solved through negotiations. under the agreement, western sanctions would be lifted in return for iran agreeing to longterm curbs on its controversial nuclear programme. a snapback mechanism will restore sanctions if iran does not live up to its commitments. on whole, it is good news since it eases nuclear tensions for the time being in a strategic part of the world. the deal has several implications for india, which hopes to reinvigorate its economic and strategic engagement with tehran. india was among a handful of countries doing significant trade ($14 billion) with iran despite the sanctions and pressure from the united states. india primarily imports oil from iran, but has been hampered by restrictions placed by global powers. it had to scale down the level of imports. this involved payment in indian rupees, with the money kept in an indian account. and indian exports particularly project exports where bogged down by this sanctions. iran’s strategic location, as a gateway to central asia, is key to india’s ambitions to get a foothold in the region. as pakistan continues to deny india access to central asia via land, a road and rail network via chabahar port in southern iran is important for india. it will open up a trade route to central asia and afghanistan and help india to send goods there. this is why india withstood diplomatic pressure and signed a deal to develop the chabahar port. indian firms will lease two existing berths at the port and operationalise them as container and multipurpose cargo terminals. the initial euphoria that india will now be free to import as much iranian oil as it likes and that it will have unfettered access to iranian business has now settled down and expectations are getting tempered by reality. it is unlikely that in an era of subdued commodity prices, iran will offer discounts on crude sales. Besides, for iran to increase oil exports, it needs relief from measures that block its access to global funds transfers and embargoes that prevent ships carrying

iranian oil and refineries processing it from being insured. according to a goldman sachs analysis, an increase in iranian oil exports can only occur once sanctions relief occurs, tentatively in early 2016. exports would also increase as floating storage of 40 million barrels is drawn down. iran may now play hard to get, or even turn to more competitive international players. it may also look for more diversified economic partners in other areas as well. if indian players are hoping for a bigger piece of the iranian development pie, they will have to seriously gear up to the competition. of course, they will be able to cash in on a certain amount of goodwill that exists for them. india is iran’s top rice supplier and it can also increase its exports of other agricultural products such as sugar and soybeans. india’s pharmaceutical, textile and it companies can boost their business which they couldn’t earlier because of the sanctions and high shipping charges. the farzad B gas field where indian companies discovered oil and gas in 2008 typifies the challenges india will face. india has already invested around $100 million to develop the facility but production was stalled due to sanctions. new delhi recently rushed in a delegation to discuss the project, as signs emerged that sanctions on iran would be lifted after the nuclear deal. But iranian reports say tehran has rejected india’s proposal and plans to auction the site instead. if there is a tender process, it will be difficult for indian companies to compete with french, american and chinese oil firms which will come in with abundant resources and the latest technology. russia and china, which have been supportive of iran, may try to convert this goodwill into economic gains also. india will now have to work out a new arrangement with a more business-savvy iran, which may no longer calls the us the great satan. this will call for a sustained effort from our foreign office, culminating perhaps in a visit by prime minister narendra modi to tehran. indeed, after his successful visit to the central asian republics, a visit to iran is in order. remember, iran was also the first islamic republic that prime minister narasimha rao, with his shrewd insight into strategic and geopolitical issues, had visited. u

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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

a bad precedent A state has no business interfering in bank lending targets

n india’s most industrialised state maharashtra, a criminal case was registered against a branch manager in akola district by the district collector, for refusing a loan to a farmer on ‘flimsy’ grounds. also, after a meeting with state-level bankers’ committee in June, first information reports were filed against 24 banks across various parts of the state, for not granting loans to farmers. the state’s chief minister devendra fadnavis has gone on record to say that if bankers “refuse to extend financial assistance to farmers in distress, the district administration will initiate criminal proceedings against bank managers”. since then, the indian Banks association has written to the rbi which has, in turn, advised the state government that it is competent to advise banks. the all india Bank employees association has taken the issue up with the finance ministry, which is expected to step in. it is obvious that phadnavis’ comments are influenced by an urgent need to employ all possible measures that can prevent farmer suicides – especially, in the rain shadow regions of the state. farmers in deep distress due to less than adequate or untimely rainfall, or with crops devastated by hailstones, have written letters to the administration seeking ‘clearance’ to commit suicide. But coming from phadnavis – his wife being an associate vice-president with private sector axis Bank – such comments and actions are bizarre. he has stepped beyond his mandate to appease a voter base. had he made such statements on foreign trips to places like the us or davos, would he be able to attract investments, any if at all, to the state? no business will be able to succeed in an evironment that demands charity first. Banking is no different from any business, and lending in any form needs to be viable and sustainable. this is a banker customer relationship, and must be treated as such. it is true that excesses committed by bankers must be corrected, but it is for the regulator to ensure that such issues are taken care of. a publicly listed bank is accountable to not just promoters, but its minority shareholders as well. it is accountable to the millions of depositors that have placed their trust

in the bank. when a bank performs poorly due to bad lending practices, it should not be because a politician directed that lending. it is in the better interest of commercial banks, private or public, to have a social responsibility towards the states they operate in. a bank’s prosperity lies in the prosperity of its customers. subsidised loans, or charity or philanthropy, however, must be channelled through specific schemes that are run by them in alliance with the governments – which must then pay for such subsidies, waivers or any other freebies that it may choose to give. it cannot affect the core business of the bank. if the state government needs funds diverted to poor farmers, it should set aside an adequate amount from the state government’s budget. this is the government’s job, not the bank’s. to ensure that banks are doing their part, the regulator has already set targets for priority lending that all banks have to meet. failure to do so invites penal action by the reserve Bank of india. phadnavis’ statement is even more unseemly, coming at a time when most nationalised banks have actually exceeded targets in agriculture lending over the last few years. instead, the chief minister has left room for the opposition to attack him. the nationalist congress party’s sharad pawar has questioned why a loan waiver could not be borne by the government, which has made provisions for lbt and toll exemptions. in most districts, the (co-operative) banks are in a bad shape and in no position to provide loans to farmers, he said. in a situation where public sector banks are reeling under non-performing assets, phadnavis has set a bad precedent and a recipe for disaster. lending cannot be directed by the state that has no role in assessing a borrower’s potential to repay. the viability of a loan can only be assessed by the banker that approves the loan, and who is held accountable for it. flouting rules and selective loans towards non-performing borrowers, can meet a state government’s short term goals. But this is a disaster in the long run, not just for the bank but also for the state. u

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Editorials

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

herculean task The present government aims to train 40 crore Indians by 2022.

rime minister narendra modi, on 15 July, launched an ambitious project that aims to train over 40 crore people in india in different skills by 2022. the initiatives include national skill development mission, national policy for skill development and entrepreneurship 2015, pradhan mantri Kaushal Vikas yojana (pmkvy) scheme and the skill loan scheme. these were launched to mark the first-ever world youth skills day in the country. at the event, modi also unveiled the skill india logo with the tagline – ‘Kaushal Bharat, Kushal Bharat’ (skilled india, successful india). for a nation as diverse as ours will skilling be an easy task? probably not. there are many critical factors to be considered here. a report in 2007 stated that double-digit growth in india will be possible only if the country is able to make available 200 million graduates and 500 million skilled people by 2020. given the factors such as a large demographic divide, mapping skills, formalizing the process of skilling, provision of infrastructural arrangements, low learning curve of the audience and a huge gender disparity, the government does have a gigantic task on their hands. the dawn of national skill development council or nsdc (a legacy of the previous manmohan singh government, embraced by modi) with dedicated sectorial councils is a testimony to the serious commitment of the government to the skilling space. nsdc has been set up to activate the skill development process across india, while building scalable skills training projects. presently, nsdc is already working in 20 high-growth and unorganized sectors to enhance the skilled workforce between 25 per cent and 85 per cent depending on the nature of the industry. the narendra modi government with its initiatives such as make in india, digital india and now the world skills day, is making all the right noises. however, one of the key challenges of building skilling solutions is to make them scalable and hence a digitally skilled india is one answer to that. technology and digitalization have seeped into us as a nation. every youth might not be able to read and write in india yet, but we are

not surprised to see each one of them carrying their personal mobile and electronic gadgets. hence, the pertinence of technology cannot be ignored to make this initiative a success. if india is solely focused on addressing these broad points with a hawk-like focus on digitized skill enhancement it can leverage the demographic dividend while resolving the issue of youth unemployment, building industry specific skills and enhancing entrepreneurship in india. the concentrated effort of the central government towards the ‘skill india’ mission substantiated by state level governments will make india a human capital powerhouse. however, the questions remain as to whether india has the skilled manpower and technical curricula to facilitate this as the country embarks on its ‘make in india’ vision. an analysis of the curricula with that of the us has showed that an engineering graduate there spends 40 per cent of his time on the shop floor against nine per cent in india. american engineering graduates are promoted with grades/credits they score for projects or research in labs. in india, maximum weightage is given to theoretical knowledge. there is an enormous gap between the skills needed by industry and what academia is producing, resulting in a deep fracture in the talent-supply chain. By 2020, almost 60 per cent of india’s population of 1.3 billion will be in the working age group of 15-59 years. if adequately skilled, this demographic dividend could make india a global hr powerhouse. while there are institutes to create a skilled workforce at the technician level, and even special training institutes for engineers in software, computer hardware, etc, there are very few training schools for engineers in core engineering disciplines, especially electronics and aerospace engineering design, and none that include robust processes, documentation and project management. around 500 million skilled human resources across various sectors would be required in the next five years as per the nsdc. even as nsdc and various ministries and institutions are on a collaboration spree to bridge the gap, it will be a herculean task to meet the 2022 targets. u

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Listening Post

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

who’s next? as the deal between Kishore chabbria’s allied Blenders & distilleries and dhanukar’s tilak nagar industries seems to be moving ahead, other liquor deals too seem to be in the offing. according to a mersanjay Borade

Chabbria: spirited newsmaker

chant banker, the delhi-based lalit Khaitan-run radico Khaitan limited (rkl), an india-based spirits company, is scouting for a jV partner. the company is engaged in the manufacture of liquor and has three distilleries and one jV with a total capacity of 150 million litres and 33 bottling units spread across the country. the company is one of the largest providers of branded imfl to the canteen stores department (csd), which has significant entry barriers. rkl’s brands include after dark whisky, magic moments vodka, morpheus brandy, contessa rum, old admiral brandy and 8 pm. its liquor business also includes rectified spirit, country liquor and imfl and its products include silent spirit, cane juice spirit, malt spirit, grain spirit and ethanol. the company’s pet division produces a range of pet bottles and jars for industries, such as pharmaceutical, cosmetics, home and personal care, edible oil and confectionery. after the takeover of mallya’s usl , is this the next newsmaker?

Bet on replacement suprajit engineering ltd (sel) one of the largest manufacturers of mechanical auto cables, with a 65 per cent market share in two-wheelers and 25 per cent share in four-wheelers,

is looking at a diversification into four-wheelers, exports, after-market and the non-auto sector. the aftermarket holds huge potential and the two-wheeler replacement market alone is estimated at `630 crore per annum (equivalent to sel’s current annual revenue). currently, the replacement market is largely unorganized. sel has a meagre 8 per cent market share (despite a 22 per cent cagr over 2012-15), as its products sell at a 25 per cent premium to local players due to superior quality (sel’s cable life is about two times higher) and it has the cost disadvantage of being tax compliant (Vat @12 per cent). however, implementation of gst would reduce cost advantages for unorganized players, providing a level playing field for sel .

good governance as the `7,500-crore sujana group turns 30 next year, its founder chairman y.s. chowdary continues to pull out of the business, to concentrate more on his government responsibilities. these continue to grow for the union minister of state for science and technology and the telugu desam party (tdp) parliamentary party leader. sujana is now looking at divesting most of its manufacturing units in a consolidation move that will leave chowdary, 54, focusing on urban infrastructure. in the new andhra pradesh state, he continues to play a mentorship role, bringing his business background to bear on capital and financial structuring. plans include converting the road transport corporation’s bus stands into multi-operator terminals, generating the finances to establish hospitals on their upper storeys, and improving the running of the government guest houses. he also wants to have a ‘healthy ap’ three years from now, screening the health of every one of the state’s 55-million population.

a strategic move ludhiana-based trident ltd, one of the largest integrated home textile players in the world, is putting in place a major plan to expand its base u 12 u

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in the domestic market. the `4000crore company which exports over 60 per cent of its bath linen (towels) to global brands like ralph lauren, calvin Klein, jc penney, ikea, target, wal-mart, Kohl’s, sears and sam’s club, has planned a massive brand building exercise to capture the fastgrowing indian market as well. this is also being seen as a strategic move as it will not only reduce its overdependence on overseas markets, but also enable it to explore the indian market with its own brands for better realization. the company is already selling its products in india under its own brands like essentials, classic, everyday, indulgence, cuddlies and has a presence in 100 multibrand retail outlets. the company is also entering bedsheeting by setting up an integrated capacity in Budhni, madhya pradesh where it last year also commissioned its new towel facility of 200 million pieces, making it the largest manufacturer (total capacity: 360 million pieces) of towels in the world. the vertically-integrated (spinning to weaving, dying and processing) bed linen capacity of 36 million metres, is expected to go on stream by the end of this year. trident’s Budhni facility (bath and bed linen) is coming up at a total project cost of `2500 crore which is part-funded under tuf as also the state government’s textile incentive scheme.

ola aggressive ola cabs is growing aggressively. But it has even more ambitious plans. it is spreading its footprint across smaller towns and cities with a view to beat its nearest rival, uber, globally. according to reports, the company is targeting 1 million daily cab rides by early next year. uber is not revealing the number of rides taken by passengers using its service globally, but apparently it is less than a million. of course, in money terms, uber, which bills in dollars in the us, is much bigger. analysts feel, if ola continues to grow at this rate it might well overtake uber in volume terms. insiders say that a grand celebratory party will be thrown before the end of this year. u

Chatzone

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

Rajan meets Rajas

Raghuram Rajan, governor, rbi, was recently surprised by a question asked by Rajas, a student of Standard viii from a school in a Mumbai suburb. “The mere rumour of the US cutting down on the federal stimulus saw the rupee crash in value,” Rajas had queried. “When will we see an Indian action affecting other countries so intensely?” Rajan answered: “It’s a great question. I have been saying that the US should worry about the effects of its policies on the rest of the world. So, if I stood by that, we should not be

Rajas: surprising Rajan happy down the line, when Indian policies affect the rest of the world adversely. We would like to live in a world where countries take into account their policies on other countries and do what is right broadly, rather than just what is right, given the circumstances of their country.” As to the second part of the question, “My guess is that, by the time you (Rajas) are old enough to get a job, we (India) will be a significant force in the world economy...,” the governor added. “I suspect, by the time you are my age, we will be one of the two or three great economies in the world and you as central bank governor will have to decide the kinds of policies that are appropriate for the world and not just for India at that time.”

Maternity leave!

When it comes to offering paternity leave, no one can beat maverick British billionaire Richard Branson.

After introducing ‘unlimited’ vacations for employees last year, the UK-based Virgin group is now offering some members of the staff up to a year’s parental leave on full pay. Its investment arm Virgin Management has introduced a new initiative, giving all employees in its London and Geneva offices a year’s full pay for shared parental leave. Of late, tech companies in India too are going out of their way to woo their employees. Recently, Accenture India extended its maternity leave benefits to five months of paid leave, making it one of the first companies in the sector. Most of the major it companies in India, including Infosys, Capgemini, Microsoft and hcl technologies, among others, offer three months of paid maternity leave. After relaxing maternity and paternity policies, e-commerce major Flipkart is now offering an allowance of `50,000 to employees looking to adopt children. The ‘adoption allowance’ can be used towards legal, agency and regulatory costs or any other expenses that may arise during the adoption process.

A corporate museum

In a first of its kind in India, noida-headquartered Dharampal Satyapal (ds) group, known for products like Rajnigandha, Baba, Catch, Pass Pass and Tulsi, has set up a corporate museum. The museum, spread over 10,000 sq ft, took three years to complete. The objective of this museum is to preserve the 85-yearold legacy of the ds group for future generations. The museum has been divided into five zones. These zones, aided with multimedia, show the group moving through various phases. Since the group’s main business is based on flavours and fragrances, the company has put a spot named

LiRiL giRL: la la ra la ra ‘Forest of Fragrances’. One can experience eight main flavours and fragrances going through this area. In the West, there are a number of corporate museums, the popular ones among them being Harley Davidson Museum, Milwaukee and Hershey Foods Museum, Hershey (both in the US) and Porsche Museum, Zuffenhausen (Germany).

The icon is back

The iconic Liril ad that created waves in the 1980s to 1990s is back! In fact, the fmcg major Hindustan Unilever is resurrecting the product itself. What was so special about the Liril ad? Created by Kailash Surendranath for the ad agency Lintas in 1975, the first commercial featured Karen Lunel, an Air India hostess smiling and dancing under a waterfall in a green bikini (the soap’s colour). She did not say anything – there was just a song playing the background, La La Ra La Ra, which has attained cult status by now. It was so successful that there was a series of such ads later featuring Preity Zinta, Pooja Batra, Hrishitaa Bhatt, Tara Sharma and Deepika Padukone, among other models. The current ad, also conceptualised by Lowe Lintas, features Anabelle, a Brazilian model. Alyque Padamsee, former ceo of Lintas and the creator of the ‘Liril girl’ told a national

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daily, “I feel vindicated because there are some appeals that are timeless.”

Show me the route!

Henceforth, all listed companies have to publish the route map to the venue where it is holding its annual general meeting (agm). Colgate Palmolive (Mumbai), Shriram Transport Finance (Chennai), Biocon (Bengaluru), ifb Industries (Kolkata) are some of the companies, which have published the route map to their respective agm venues either in the annual report or in the agm notice.

Regulate or not?

In 2012, the Central Electricity Regulatory Commission (cerc) had taken upon itself the responsibility of regulating the tariff for power generated by Sardar Sarovar Narmada Nigam (ssnnl), which generates 1,450 mw of hydro power capacity. The power generated is distributed among Madhya Pradesh, Maharashtra and Gujarat in the ratio 57:27:16. All the three states were opposed to ssnnl’s power tariff being regulated by cerc. However, the regulator, in a recent ruling, said that, with the coming into effect of the Electricity Act in 2003, ssnnl has become a powergenerating company and sells power in more than one state. Hence, it falls under the commission’s jurisdiction. u

CyberNews

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

entertainment on demand eros international has formally launched its online entertainment platform erosnow in india – available online on the website and as an app on ios and Android. erosnow has made its entertainment content available on demand, including its library of 3,000 indian films, for free. it competes with spuul (which has a library of 1,000 indian films), hungama. com’s service hungama play (which offers about 3,000 indian and english movies), times internet’s Boxtv, zee entertainment enterprises’ dittotv, star india’s hotstar (which offers star india’s television and sports content,

Slow in highspeed access A ‘state of the internet’ report released by Akamai reveals interesting information. Four countries in the world posted average peak mobile connection speeds above 100 mbps: Australia Japan

149.3 126

Singapore

116.4

Thailand

105.4

In the first quarter of 2015, the global average connection speed for the first time reached 5 Mbps – a 10 per cent increase over the previous quarter. South Korea

23.6

Ireland

17.4

Hong Kong

16.7

Sweden

15.8

The Netherlands

15.3

Japan

15.2

In the table of 15 countries, India is at 14th position with 2.3 Mbps, before Indonesia’s 2.2 Mbps.

with Bollywood & regional movies from other studios), singtel’s hooq, reliance group’s Bigflix and google’s youtube. these companies want to have a share of the film and television market in india, which will be worth $19 billion by 2020, as per a kpmg estimate. growth in mobile usage, app downloads, internet consumption, wireless data

speeds and users’ preference for on-demand content are factors in favour of the online content streaming companies. And as mobile takes centre-stage, dth companies will also have to adapt to it, to stay relevant. netflix and hulu, which are popular in the us, aren’t available in india yet. But, according to reports, netflix plans to begin operations

in india next year. content streaming business is driven by who owns the content that people want to see and whether it has an exclusive partnership with the content owner. gradually, it will shift towards in-house content creation, which will be available only on their platforms. At present, some services are free, while others are subscription-based. the free content is ad-supported. streaming content online also presents opportunities for advertisers who want to reach out to the digitally native customers. leading consumer brands in india, such as hul, are engaging with content creators to find new ways to integrate the brand’s story in the script of the content. u

used branded apparel, anyone? india is indeed a unique market, driven by aspirations. At a time when fashion e-commerce companies like myntra and Jabong are partnering exclusively with internationally renowned brands to sell their products online, e-commerce marketplace startup darveys.com is working with merchants to retail products of international brands. And, then, there are startups, which act as a marketplace for those who own branded garments, as also accessories, and wish to sell to those who can’t afford original pieces. start-ups such as envoged, share wardrobe, etashee, stylish play

and elanic are marketplaces that enable branded apparel owners to sell to customers. interestingly, these start-ups offer only women’s apparel. According to reports, premium women’s wear market in india is expected to be ` 9,000 crore, of the total `1.40 lakh crore women’s apparel market. But, given that the base market of people using branded apparel is already small, there is not enough supply of affordable branded clothes to meet the demand. that’s where other startups such as flyrobe, swishlist, liberent and Klozee fill the void and offer branded

clothes, designer wear and accessories on rent. u

digital literacy intel india is working with the government of india to impact 5 million citizens by the end of 2015 with skills to compete in the global digital economy. to reach 5 million citizens, intel has launched the digital skills training application, which comprises modules on digital literacy, financial inclusion, healthcare and cleanliness in five indian languages. this application is available freely on the Android play store, while a similar offline training module is also made available in seven indian languages. u r o h i t pA n c h A l rohit.panchal@businessindiagroup.com u 14 u

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Newscast G O V T. & P O L I C Y

India, US sign FATCA

india and the us have signed an inter-governmental agreement (iga) to implement the foreign account tax compliance act (fatca) to promote transparency on tax matters. the us had enacted fatca in 2010 to obtain information on accounts held by its taxpayers in other countries. it allows us financial institutions to withhold a portion of payments made to foreign financial institutions (ffis), which do not agree to identify and report information on us account-holders.

Forex pool pact

the central banks of the brics countries have signed an agreement on a $100 billion foreign exchange reserve pool, which is being set up by the five member nations to help each other in case of any problems with dollar liquidity. china will make the biggest contribution to the pool at $41 billion. india, russia and Brazil will donate $18 billion each, while south africa’s investment will be $5 billion. technically, the money will remain on the banks’ balance sheets – to be unlocked as soon as any of the brics member states ask for help.

UK closes tax loophole for HNIs

high net worth indians and other foreign-origin individuals are likely to be hit, following the uK government’s announcement that a part of Britain’s 100-year-old nondomicile tax regime would be abolished from april 2017. under the current non-domicile rules, residents whose permanent homes are deemed to be outside of the uK do not have to pay tax on any foreign income, provided they pay an annual

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

charge of £30,000-90,000.

in all metro and capital cities, to help government know the standard being maintained by operators and their requirements.

FII holding is part of FDI

the insurance regulatory & development authority of india (irdai) has issued a clarification that holdings of equity in an indian promoter company held by foreign institutional investors (fiis), other than the foreign promoters of the applicant and their subsidiaries and nominees, will not be part of the foreign direct investment (fdi).

Political parties under RTI ambit?

India and Kazakhstan ink deal india and Kazakhstan have inked a deal for a renewed long-term supply of natural uranium. Kazakhstan, a leading uranium producer globally, will supply 5,000 tonnes of uranium to india during 2015-19, thereby emerging as the biggest source of uranium for india, besides canada and australia.

Tax-free bonds

the government has permitted seven public sector entities to issue tax-free bonds worth `40,000 crore in the current financial year. national highways authority of india, indian railways finance corporation, housing & urban development corporation, indian renewable energy development agency, power finance corporation, rural electrification corporation and ntpc are the entities in question.

DoT to conduct audit

the department of telecommunications (dot) has ordered a special audit of quality of service parameters across the country in the wake of rising call drops. a special audit of quality of service parameters, focussed on network performance, would be carried out by the department of telecom

the supreme court has sought response from all national political parties as to why they should not be brought within rti ambit, to make them more accountable to public. a bench headed by chief Justice h.l. dattu issued notice to all six national political parties – bjp, congress, bsp, cpi and cpi (m) and ncp – seeking their response to declare them public authorities under the transparency law. the bench also issued notice to the centre and the election commission, asking them to make their stand clear on bringing political parties under the rti act.

Reworking FTA strategy

the government is set to rework the way it does free trade agreements (fta s), moving to a more liberal regime on routing of thirdcountry goods. rules of origin are at the heart of these agreements, as they are meant to check routing of third-party goods via countries with which an agreement is signed.

CO R P O R AT E

Uber to invest in Hyderabad

uber technologies inc will invest $50 million over the next five years in hyderabad, which will create thousands of jobs and entrepreneurship

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opportunities, says the company. uber has signed an mou with the state government, saying it plans to establish a support facility for its ride-hailing app in the city, which would function as a ‘helpdesk’ for the company. once the facility is open, india will have uber’s second-largest employee pool after the us.

United Spirits exits UB

diageo-controlled united spirits has exited united Breweries, selling its

remaining stake of 3.21 per cent stake to heineken for `872 crore. in a filing to the stock exchanges, united spirits said it no longer remains a promoter of united Breweries – which position has now been transferred to heineken. after the sale, heineken will own 42.06 per cent stake in united Breweries, while the ub group will hold 32.76 per cent.

Rosneft comes to Vadinar

russian oil company rosneft is taking a 49 per cent stake in essar oil’s Vadinar refinery, with plans to raise capacity subsequently. the two companies have also signed a long-term contract for supplies for the purpose of refining at the Vadinar facility. the contract

Newscast

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

envisages supply of 100 million tonnes of crude oil for 10 years. the refining capacity of Vadinar is 20 million tonnes per annum (mtpa). the companies also plan to raise the capacity to 45 million tpa by 2020.

One of its kind event

hosted by ied communications ltd, automation expo is hailed as a successful and one of its kind international shows in the south east asian region. the 10th edition of ‘automation 2015’ will be held from 24-27 august 2015 in hall nos. 1 and 5 at the Bombay convention & exhibition centre, goregaon (e), mumbai. according to M. Arokiaswamy, managing director, ied Communications, “automation 2015 will display the world’s latest technologies under one roof. the exhibition provides indian companies an exclusive opportunity to take a peek into the latest international technologies. automation 2015 is certainly a must-go-to event for all industries.” over the last decade the indian automation industry has witnessed a big churning, resultant new ideas and new opportunities have emerged. finally it has taken wings and made a mighty impression in the global scenario.

the fair has participants from india, germany, switzerland, usa, uK, Japan, china, south Korea, taiwan, singapore, italy, france, hungary, sharjah (uae), netherlands etc. automation 2015 will also organise knowledgebased technical conferences. an in-depth discussion with experts on the subjects: “Business performance” and “safety & security for plants to avoid disaster”.

STOCK MARKETS

NSE gears up for e-IPOs and start-ups

to ensure smooth implementation of new norms for e-ipos and listing of start-ups, nse has asked its trading members to upgrade infrastructure and provide adequate training to concerned officers. the move follows capital market regulator sebi issuing a new set of guidelines on e-ipos as well as new regulations for listing of start-ups on domestic bourses.

Delisting of suspended stocks

Don’t charge check-in baggage

the directorate general of civil aviation (dgca) has turned down a proposal by a few airlines to charge

Trujet, the latest to enter domestic skies

board, deadline for which expired on 31 march 2015.

Related-party business norms

the corporate affairs ministry has asked sebi to align its guidelines for related party transactions with the amended companies act, which will significantly ease the strict rules for listed companies.

the dgca has granted a regional air operator’s permit (aop) to turbo megha to operate a regional airline trujet, making it the fourth new airline to take to indian skies. in march, dgca had issued an aop to the Bengaluru-based air pegasus. prior to this, tata sons’ lowcost venture with airasia Berhad, named airasia india, had started services in June 2014, while Vistara launched operations on January 2015.

Revising M&A policy

RBI amends NBFC takeover norms

the insurance regulator irdai is planning to look into insurance companies’ corporate governance issues, in an exercise aimed at protecting the policyholders’ interest. the regulator has proposed that insurance companies strengthen the structure of their board and expand it so that there’s no conflict of interest between different roles such as investment committee and audit committee.

rbi has amended the norms

the Bombay stock exchange has proposed to delist more than 1,000 companies, as trading in their shares have remained suspended for more than seven years for various penal reasons. the exchange has proposed that a final notice be issued to the companies, which have been suspended for seven years or more, to complete the formalities for revocation of their suspension within three months. a follow-up letter has also been suggested to provide a further period of one month for the compliance.

R E G U L ATO R S

check-in baggage. in a recent circular, the regulator has said that airlines can levy charges only on baggage exceeding the free limit of 15 kg. three budget airlines – indigo, air asia india and spiceJet – had approached dgca with a proposal to be allowed to charge check-in baggage.

for acquisition or transfer of ownership for nonbanking finance companies (nbfc s). the central bank has said that any takeover or acquisition of control of an nbfc, which may or may not change management, would require prior written approval from rbi. prior nod would also be needed in cases where there is acquisition or transfer of more than 26 per cent shareholding in the nbfc’s paid-up equity capital.

Women directors for PSU boards

to ensure parity between listed psus and their private sector peers, sebi has asked the government to fill all vacancies for women and independent directors at the central public sector companies. all listed companies, whether psus or from private sector, are required to have at least one woman director on their

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the telecom industry wants the regulator to take steps to revise the mergers & acquisitions policy to facilitate consolidation, help cut costs, improve services and reduce debt. according to the companies, consolidation will lead to efficiencies of scale and allow operators to reduce costs and ease decisions for potential investors as well as improve service offerings.

Better governance

IndiGo, Jet Airways under CCI scanner

competition commission of india (cci) is in an advanced stage of taking a final decision on cartelisation allegations made against five carriers, including market leaders indigo and Jet airways, with respect to introduction of fuel surcharge for cargo transportation. the other three airlines that have been probed in this matter are spiceJet, goair and air india. u

Follow-up

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

on schedule

In February 2013, Business india had reported that Granules India was looking at the finished dosages segment to take it to the next level. The company has progressed along these lines and is looking at crossing the `1,000-crore mark ‘within two years’

. Krishna prasad, founder & cmd, granules india, a hyderabad-based pharmaceutical company, has lived up to his expectations. in 2013-14, the company’s consolidated sales had increased by 43 per cent to touch `1,096 crore, with its profits rising at a faster pace of 131 per cent to `75 crore. according to the company, its growth was primarily driven by increased capacity utilisation. for example, the paracetamol (which contributes 42 per cent of consolidated sales) facility increased production from 600 tonnes per month to 1,200 tonnes and the metformin (which contributes 24 per cent of consolidated sales) facility improved from 80 tonnes per month to 165 tonnes. during 2013-14, granules made an acquisition, “by purchasing auctus pharma,” announced Krishna prasad to the shareholders. “we are excited about it, because auctus provides compelling opportunities that can take our company to the next level, by giving us access to 12 lucrative apis in a facility that has regulatory approval from leading agencies including the us fda.” granules acquired the company by paying `102 crore. hyderababd-based auctus pharma makes u 18 u

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bulk drugs and intermediates, through its facilities located in Bonthapally and Visakhapatnam. auctus’ sales in 2013-14 were `11.42 crore and loss recorded, `6.45 crore. after merging with granules india, its consolidated sales for 2014-15 were up by 18 per cent to `1,293 crore, while net profit increased by 21 per cent to ` 91 crore. “auctus incurred a loss of `13 crore in the first three quarters of 2014-15 but, in the last quarter, it had achieved a break-even with a small cash profit. we expect that auctus would continue to start making profits from now onwards.” said Krishna prasad. “during the fourth quarter, auctus’ revenue was `44.2 crore and its profit, `2 lakh and we just broke even,” announced V.V.s. murthy, chief financial officer at an investor conference. during 2014-15, granules had commercialised the sale of abacavir, an antiretroviral drug, which was developed in-house. in the fourth quarter of 2014-15, its revenues from abacavir were `8 crore. the company expects to launch four-five apis (active pharmaceutical ingredients) in 2015-16. during the same financial year, it put up an additional pfi (pharmaceutical formulation intermediates) capacity of 4,000 tpa at gagillapur, which has now been completed, with the total pfi capacity at granules going up to 18,400 tpa. this module is expected to contribute to the revenue in the current quarter. granules has a 50:50 joint venture with Belgium’s ajinomoto omnichem for crams (contract research & manufacturing services) business. in february this year, a new plant at Visakhapatnam under this joint venture was inaugurated. this facility will make apis. the facility has yet to be approved by us fda. till such time, the joint venture will be supplying intermediates to ajinomoto. granules has five facilities – at gagillapur, Bonthapally, jeedimetla, Bonthapally (auctus) and Visakhapatnam (auctus). this does not include the joint venture facility. granules’ current market cap is `1,777 crore. in march this year, granules reduced the face value of its scrip from `10 to `1. and a dividend of ` 0.50 per share has also been recommended. at the end of june, the board approved the issue of 40,95,230 warrants, informs Krishna prasad, at a price arrived at in accordance with the sebi guidelines. By end june, the promoters were holding 48.59 per cent, while individuals’ (nominal value up to `1 lakh) share was 17.52 per cent. u feedback@businessindiagroup.com

Follow-up

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

a good fit r

anjan pai, md & ceo, manipal education & medical group, has decided to enter the diagnostic business. according to reports in the press, the group is all set to buy private equity peepul capital’s stake (the fund reportedly holds 80 per cent) in the chennai-based diagnostic company, medall healthcare, for `1,000 crore. medall healthcare, founded by raju Venkatraman (a product of iit and iim), had entered into the medical diagnostic business by acquiring another chennai-based company precision diagnostics in 2009. the company was into imaging and radiology. the founders of precision diagnostics too were absorbed into medall. private equity player peepul capital had helped VenkatraIn February 2014, man’s foray into diagBusiness india nostics with a loan of had reported that ` 90 crore in lieu of an the expansion, undisclosed quantum corporatisation and of stake. subsequently, modernisation of medall made a few other acquisitions and the Manipal group had started with the grew in size. today, it has 60 centres spread educational division over chennai, Bangaduring 1993-2000. lore, tiruchirappally, The revamp still tirunelveli, pudukottai and rajapalayam. continues in 2013, the company had received accreditation from nabal (national accreditation Board for testing and calibration laboratories) too. in 2012, medall had acquired a ct scan laboratory – Virudhnagar spiral ct scans and labs. this acquisition was expected to bolster its presence in the district of Virudhnagar and the madurai-tirunelveli belt. medall then was focussed on buying out stand-alone centres. in 2011, it had acquired the chennai-based iravatham laboratories too. also, earlier, in february 2010, it purchased a 91 per cent stake in clumax diagnostics and research centre (radiology and pathology) in Bangalore. peepul capital has been looking for an exit for some time now. for ranjan pai too, it is perceived as a good fit. u

l l l l l l l l l l Flashback 30 YEARS AGO

Up, up and away

On the Bombay Stock Exchange, which accounts for 60 per cent of all-India business in stocks and shares, daily volumes have increased at least six to seven times…… But, suddenly, a Rip Van Winkle, snoozing in Dalal Street for another decade or so, would wake up, rub sleep from his eyes, and find himself, as it were, in a different land. NOW In those days, there was no electronic trading, BUSINESS INDIA, which was introduced only in March 1995. It got a JULy 29-AUGUSt 11 severe jolt from a newly-formed exchange – The National Stock Exchange (nse), which was incorporated in 1992 and commenced trading in debt in June 1994. In November the same year, it entered the equity segment. In less than a year (October 1995), nse had become the number one exchange, which it continues to be even now. With the near demise of regional stock exchanges, the country has only two bourses – nse, which enjoys roughly 85 per cent share in equity (cash market) and bse, the balance. But the volumes on bse (equity cash market) averages a little over `3,000 crore per day and trading is fully electronic.

1985

20 YEARS AGO

Accelerating for now

But, next year could be different, with the likes of Daewoo, General Motors and Peugeot set to enter the India market. Sales in 1994-95 topped the 200,000 figure for the first time, reaching 206,000 as against 160,000 in 1993-94. NOW As of 2014-15, Maruti has sold 1,292,415 vehicles. It continues to be the market leader, with a market share of close to 45 per cent. Hyundai comes second it BUSINESS INDIA, terms of market share. Other car-makers – M&M, Tata APRIL 10-25 Motors, as also almost every other major player in the world, such as Toyota, gm India, Honda, Mercedes, Volkswagen, Renault and Ford – are also present in India.

1995

5 YEARS AGO

Metallurgical magic

What started as a small foundry in 1978 as Ahmedabad Induction Alloys (aia) Pvt Ltd, has today become the world’s second largest manufacturer of hcmis (high chromium milling internals). Post the capacity expansion executed to produce 200,000 tonnes of hcmis, aia is short by just 35,000 tonnes to match the capacity of its rival and the world’s largest manufacturer – the Belgium-based MagotBUSINESS INDIA, teaux International sa . NOV 29-DEc 12 NOW aia in an investor presentation said it has a capacity of 260,000 tonnes at present and has intentions of adding another 180,000 tonnes (greenfield expansion), which would take the total to 440,000 tonnes. Magotteaux of Belgium has a capacity of 350,000 tonnes, making aia still the number two. aia and Magotteaux are the two largest players in the hcmis segment. The greenfield expansion should catapult aia into the number one slot. aia’s consolidated turnover for 2014-15 stood at `2,184 crore.

2010

feedback@businessindiagroup.com

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Businessmen in the News

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scorts Limited, one of india’s leading engineering conglomerates, last fortnight announced a strategic relationship with Cognizant, to modernise its technology landscape and achieve the company’s vision of digitally transforming its businesses. this multi-year, multi-million dollar engagement spans all of escort’s businesses, including agrimachinery, material handling and construction equipment, railway equipment and auto components. cognizant will enable escorts to improve control and collaboration across its value chain by mobileenabling its workforce and integrating multiple systems used by vendors, sales partners, and customers. cognizant will set up a transformation office to help escorts embrace adaptive production lines and demand-based manufacturing practices, and develop new digital capabilities in areas such as

elhi-based Koenig Solutions has emerged as one of the largest it training companies in the country. it currently boasts of the

erragni Consulting offers niche solutions and services in the much-needed space of people consulting and customer experience. the pune-based company, started in 2009, partners with organisations and their leaders in converting the dormant potential of their employees and their customers into behaviours that drive business profits and facilitate corporates to compete on a sustained basis. thet opened an office in singapore recently. terragni designs, develops and executes strategies and

mobility, analytics, cloud, telematics, and machine-tomachine communication. “escorts is poised for a leap forward with its transformative business strategies. we are working passionately towards becoming the most trusted and innovationled engineering company,” said Rajan Nanda, chairman and managing director, escorts. “this strategic engagement is expected to create a positive impact on the entire escorts ecosystem,” said nikhil nanda, managing director, escorts. “As multiple stakeholders replace traditional value chains and embedded technologies prepare to unleash the next wave of smarter products and services, there has never been a more exciting time for technology innovation in the manufacturing and engineering industry,” said R. Chandrasekaran, executive vice chairman, cognizant india. u

world’s largest offshore it training facility at its delhi campus where it has 70 classrooms and 30 testing stations and provides end-to-end solutions including accommodation. moreover, it has four other centres, one each in Bangalore, goa, shimla and dehradun. Koenig has also opened a centre in dubai to meet the ever-growing demand of its customers in the middle east region. serving customers in over 50 countries across the globe, the company is an authorised training partner for big names like microsoft, cisco, oracle, sap, novell, Adobe,

Apple, Android, symantec and others. Backed by a pool of 300-odd full time corporate trainers, the company is generating around 80 per cent of its revenue from its offshore training segment where it has recently also added online training. “over the years, we have evolved as an innovative and quality training organisation which thrives for meeting customers’ expectations in all possible manners. going forward, our online segment will play a key role in driving our overall business,” says Rohit Aggarwal, founder and ceo, Koenig solutions. u

programmes for corporates. through its independent as well as uniquely integrated offerings, the company has been associated with names like reliance money, mobile store, Apollo, sandvik group and others in areas such as healthcare, manufacturing, retail and financial services. “in this highly competitive marketplace, the success of any organisation lies in how it optimises the strength of its pool of workforce as also motivates its customers in order to achieve the set goals in a much sustained manner. we work

with our customers offering them customised solutions,” says Anil Pillai, director of terragni consulting. u

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rivate sector hdfc Bank recently launched payzapp, a mobile-pay solution pre-loaded with smartbuy, a hub of e-marketplaces. the app allows the bank’s customers to use their cellphones for deals and discounts on e-commerce portals such as flipkart, cleartrip, goibibo, expedia, and mobile/dth recharge and bill pay facilities. speaking about the launch, Parag Rao, business head (cards, payment products and merchant acquiring services), said, “for the customer, whose world has now converged on his mobile device, this innovation will mean that he’ll be able to complete every type of payment and purchase from a single app with a single pin.” As of fy15, 63 per cent of all transactions at hdfc Bank are conducted through digital channels. u

Businessmen in the News

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et Airways has introduced its revamped website, the theme of which is #designed to delight. the project took the Jet team about 12 months to complete. the website is built on the latest trends and, after analysing the customer behaviour, would provide personalised service. “the

irah Hospitality has acquired a 30 per cent stake in hopping chef, a brand by gritty foods llp that supplies not food but chefs to your homes. hopping chef was launched in december 2014 as a platform to provide fine dining service

aduvendra Mathur, cmd, Exim Bank of India, has signed a multilateral co-operation agreement, along with chairmen/ presidents of other member development banks of

new Jet Airways website will provide guests with a refreshed, one-stop service for all their travel requirements,” said Cramer Ball, chief executive officer, Jet Airways. “the use of latest trends in user experience, design, personalisation and technology, will provide a unique experience which, to those who are looking for good food at their homes. mirah decided to diversify its portfolio to the online food space as well. hopping chef will help mirah to enhance its current portfolio. “with this new alliance, i am hoping to provide quality chefs for those who are looking for a global food experience”, explains Gaurav Goenka, md, mirah hospitality. hopping chef, founded by Shaival Chandra (currently ceo), dhaval udeshi and sid ugrankar, is valued at `10 crore. currently, the brand has 15 chefs on board, with the tally likely to increase to 75-100. “this arrangement with mirah hospitality will establish footprints in new geographies,” says chandra. u

brics nations, expressing their intent to co-operate with the new development Bank (ndb) promoted by the brics nations. the agreement, signed in the presence of heads of states of the brics

we believe, will ensure our guests keep coming back”. the website has been built with a mobile first approach, as mobile phones are playing a major role in airline bookings. Also, Jet Airways offers the seat selection ancillary service complimentary while booking. u

he 51-year-old Sunil Udupa, cmd, Securens System Pvt Ltd’s usp is passion right down to the bottom. “our usp was the seamless integration of video integration and two-way audio. from atms to bank buildings and bank branches, we have started diversifying to educational sector, including monitoring school buses, retail outlets, food commissaries and co-operative housing societies,” explains udupa, who has embarked on an inorganic growth path by bidding for nelco’s e-surveillance business. udupa is looking at expansion into the international market starting with indonesia, where securens has partnered with an indonesian company to

get an order with bca Bank, one of the largest banks in indonesia. securens is an enterprise iot (internet of things) company supplying esaas (E-Surveillance as a Service) based e-surveillance services including business intelligence and analytics for the bfsi and retail sector. u

countries last fortnight in ufa, russia during the brics summit 2015, is expected to enhance co-operation between brics development banks and the ndb. K.V. Kamath, the newly elected

first president of the ndb, in his address during the annual meeting of brics interbank co-operation mechanism, stated that the ndb intends to act in speed, leveraging the strengths of the existing institutional infrastructure in brics nations. in his address, mathur said that the development financial institutions of brics nations could play a significant role in regional development in the continents they represent. in yet another development, mathur and luciano coutinho, president, Brazilian development Bank ( bndes) signed a co-operation agreement on the sidelines of the activities associated with the Annual meetings of the brics interbank cooperation mechanism. u

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Visiting

arviz Aghili, md, Middle East Bank (meb), iran’s largest private bank, was in mumbai to explore business opportunities for

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his bank. the bank, which plans to have an office in mumbai, has formed a joint venture with IndAsia Fund Advisors, a corporate

finance and investment advisory firm run by Pradip Shah, to facilitate trade and investment flows with iran. lifting of economic sanctions on iran, will open huge business opportunities for investors across the world. india is best-suited to grab these, Aghili said. once that happens, business opportunities worth $150billion will open up for foreign investors, he added. he found sectors like infrastructure development, pharmaceuticals, automobiles and consumer goods ideally suited for joint ventures and trade opportunities. u

iscussed initiatives in aerospace, defence and civil aviation during my meet with ceo @Airbusds, Bernhard Gerwert,” tweeted prime minister narendra modi last fortnight. the prime minister’s twitter post was sharing his experience during his meeting with Bernhard gerwert, ceo, Airbus Defence & Space. earlier in the day, gerwert recalled the prime minister’s visit to the Airbus manufacturing facility in toulouse, in April, and the positive atmosphere and interest. he also expressed Airbus’s keen interest in becoming a partner in the ‘make in india’ initiative, through a cluster approach with regional partners. u

nicharm India, a wholly-owned subsidiary of unicharm corporation, a Japanese manufacturing company engaged in health and hygiene products inaugurated its new production plant at sri city in Andhra pradesh, with an investment of `300 crore. Takahisa Takahara, president & ceo, unicharm corporation, and yukihiro Kimura, managing director, unicharm india, were among those present on the occasion. takahara in a statement said the plant would enable the company to expand business in india. “sri city offers world class infrastructure facilities. its proximity to international air and sea ports will

s technology giant cisco has announced that it is committed to manufacturing in india and will invest $2 billion in the country this year. “we are investing big in india,” said John T Chambers, chairman & ceo, Cisco Systems, who was in the capital last fortnight. “we are committed to manufacturing in india and we need to skill people here for the jobs. we plan to directly and indirectly invest up to $20 million to train additional

greatly facilitate our imports and exports. Availability of land is an additional advantage for expanding our plant in phases,” he added. u 1,20,000 students by 2020”. talking about india’s manufacturing, chambers said that cisco will organise a conclave of 75 of its key suppliers in Bengaluru in february to accelerate the development of india’s electronics manufacturing ecosystem and to drive collaboration on product development. the company invests $1.7 billion every year, which includes $250 million on r&d in india, added chuck robbins, ceo -designate, cisco. u

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hile there are rapid changes in technology, lifestyle and elsewhere, there have not been significant changes in the design of workplaces. “workplace has to be more agile,” says Marc Shamma’a, director, strategy & workplace, Cushman & Wakefield. “give people choice to how, when and where they work.” ‘Alternate workplace strategies’ is a new service line in cushman & wakefield started by shamma’a last year. it helps companies come up with design concept. mncs and indian technology companies are warming up to the idea. “young tech companies in india want to have cool and sexy workplaces,” he adds. the benefit for companies in implementing alternate workplace strategies is cost per head goes down, as available space, utilised better, creates an environment that promotes openness and creativity. u

Business Notes

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

engineering applications. in the last three decades, jgt has been used in well over 200 pilot projects successfully in various parts of india. “we are overwhelmed by the positive response from the government of Bihar. the innovation and efficiency of the technology of using jgt has earned significant support in Bihar. the jute industry also urges the government to expedite the use of this jute product in at least 15 per cent of the road construction undertaken by the pradhan mantri gram sadak yojana,” says subhakriti majumdar, director general, indian Jute mills Association. jgt can be tailor-made to suit sitespecific technical requirements. it is absolutely environment-friendly and cheap. extensive studies with field applications in road construction, river bank construction and slope management have demonstrated the effectiveness of jgt in strengthening road sub-grade, soil erosion control of river banks and superficial soil control. the us and european countries have also used jgt for slope stabilisation. indian roads congress (irc) has recommended the use of jgt. Bureau of indian standards, control of erosion of Banks and waterways and the research design and standards organisation of the ministry of railways have also indicated the suitability of jgt over various applications.

exploring a new segment JGT, a jute product, will be used for making roads in Bihar

hile the jute industry in the country is struggling to survive, as it is primarily dependent on the manufacturing sacks for food grains, the national Jute Board (njb), under the ministry of textiles and the rural works department of the government of Bihar, in association with indian Jute mills Association (ijma), has endorsed the use of Jute geotextile (jgt) in pradhan mantri gram sadak

yojana for construction of roads in the state of Bihar. gt is one of the most important diversified jute products, with a potentially large-scale application. it is particularly effective where roads are constructed over weak sub-grade soils. jgt is efficient in the protection of banks and beds of waterways, strengthening of roads, stabilisation of embankments, consolidation of soft soil and other soil related u 25 u

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Innovative it is a tested product for making rural roads and almost 15 per cent cheaper. “the demand for jgt is increasing in various parts of the world. however, absence of adequate awareness and standards and specifications seem to be affecting the possible expansion of the market. But with the time and benefit of its usage, the product will become popular,” says t sanyal, chief consultant, njb. pwc was assigned by the njb to conduct research on improving market presence of jgt. “it is a modern and innovative technology and cheaper alternative for rural roads which has been successfully used in some pilot projects across the country. it can be easily manufactured in the existing jute mill without making any investment,”

Business Notes

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

says raghavendra gupta, chairman, ijma. “however, unless authorities and engineers in road construction are made convinced of its advantage, it will not be commercially viable for the industry. hence, it is important to conduct more such awareness programmes in the country.” gupta owns fort william Jute mill, a part of hooghly group of Jute mills in west Bengal. jgt scores over other materials because of its eco-friendliness, water absorption capacity, drapability and price competitiveness. with more than 4.5 million farming families and 350,000 workers engaged with the `10,000 crore jute industry, which is mainly concentrated in the eastern part of india, jgt will prove to be a big boost to the erstwhile flourishing industry of india, if implemented across different projects in rural and urban india. u sAJAl Bose feedback@businessindiagroup.com

FITNESS BANDS

let’s become fit t

here are many parallels between developed markets like the us and india when it comes to adoption of technology and gadgets. fitness activity tracking bands, particularly fitbit have received good response in the us. it has about 85 per cent of the fitness activity tracking band market in the us by sales. can fitness bands be successful in india? the us-based fitbit, which went public in June this year, has sold 20.8 million fitness activity tracking bands since inception in 2007. the band collects the data of the person (number of steps taken, distance walked, number of hours of sleep, heart beat rate) wearing it and shares it with the coach wirelessly via a smartphone app. there is a separate subscription that has to be purchased to make sense of the data and to use it to become fit. this service is powered by artificial intelligence, data analytics

But, according to co-founder Aarti gill, renewals were very low and people were not sticking to what instructors were saying. this particular coach service didn’t require a user to have a fitness band. “Very few people would love to wear those bands,” says gill. dumbelled has identified lack of social motivation as a factor coming in the way of people trying to become fit and it now creates private social circles for corporates, local communities who can be provided coaching. its product is called fitcircle and it has 2,500 users. its subscription is available for `1,500 a year. According to gill, in this model there is peer-to-peer support and it acts as a motivating factor. in the app-led personal coach based model, there’s only one motivating factor – the coach, like goqii or – data analytics engine which acts as a coach, like fitbit. and historical data of the users. the newest entrant in the fitness fitness bands have been available band market is goqii. A fitness techin india since 2009, when mohammed nology startup, goqii started by serial hussain naseem started getActive. it entrepreneur Vishal gondal launched was the first company to launch fitness bands in the country fitness bands in the counin october last year. And aseem wanted try and naseem its primary offering is to understand how the not the band, but the human coach model, subscription-based where a human sits g goqii human coach behind the data, will service available on work in india. in the its app. ““service on human coach model, the top of data is based on the data, the what people like,” coach gives instructions says gondal, ceo, aseem says, to the user. naseem goqii. the coach serhile as a concept this “while vice works with 35 fitness model looked good, bands, of different at an individual level, Naseem: unsure about coach model brands and it’s not everyone is aware of mandatory to use what he is doing, what he needs to do the goqii branded band. it has about and what he is not doing to remain fit 25,000 customers and it aims to have and healthy. human coach led model 50,000 customers by the end of the works only in acute problems”. year. these customers are served by getActive decided against launch- about 250 coaches. many others are ing a human coach platform and in various stages of training and by instead launched an app, designing the end of the year, it’ll have 1,000 it like a game. it challenges users to coaches. the 3-month coach subcontinue progressing in the game. scription is `3,999. the coach in this model is a virtual coach, like fitbit. getActive has sold Profitability is not an issue fit40,000 bands so far. bit, the biggest fitness band comdumbelled, a fitness technol- pany in the world is profitable. in ogy startup based in mumbai had fy14, its net profit was $131.8 milstarted offering a subscription based lion on sales of $745.4 million. And human coach service two years ago. it’s valued around $9 billion, more u 26 u

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Business Notes

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

than double of $4.1 billion, its valuation at the time of listing on June 18. other global fitness activity tracking band brands are Jawbone, Xiaomi, Apple watch. these bands start from `1,000 onwards. getActive, with 40,000 users is profitable with `3.2 crore turnover last year. dumbelled claims to be profitable but does not disclose its turnover. people like cool gadgets, but the problem is that like with any toy, excitement wears off soon after and then the subscriptions are not renewed. According to naseem, the subscription renewal rate in the us is 15-20 per cent. his startup getActive claims to have 60 per cent renewal rate because of its game-like app where users get rewards. dumbelled’s fitcircle which was launched in february this year has 80 per cent renewal rate. low subscription renewal may not be an immediate concern for fitbit in a fast growing global market, as it expands in Asia pacific, to become a global player. corporate and insurance companies are one of the biggest customers for fitness technology companies globally. corporate want their employees to be healthy and fit to work and if a person is maintaining fitness with the help of these bands, then even his insurance premium could come down. in the last 3 years, less than 1 million fitness bands have been sold in india. But, the future is bright as spend in india on health, fitness and wellness is increasing. u r o h i t pA n c h A l rohit.panchal@businessindiagroup.com

I N N O V AT I O N

evolving ecosystem t

wo tenets of success at start-ups that large companies can pick are that ‘purpose drives plans’ and ‘pace trumps perfection’, said ravi gururaj, product council chair, nasscom, and one of the main speakers at the inaugural edition of india innovation forum (iif 2015) in Bengaluru

social enterprise, sounding a practical note. he obviously speaks from experience. embrace, which develops high-quality healthcare technologies to reduce infant and maternal deaths in developing countries, has created a low-cost incubator that has so far saved the lives of more than 200,000 newborn babies in 10 countries. innovators, he adds, must be brave enough to make new mistakes.

Gururaj: being successful

last fortnight. “start-ups, on their part, can learn to think autonomic and imbibe modular thinking from large companies”. he also spoke of survival in a vuca (volatile, uncertain, complex and ambiguous) business world, while addressing top innovators, entrepreneurs, vc s, impact investors, ceos and thought leaders at the two-day session. iif, organised by northwest and supported by the executive education arms of top global business schools, including uc Berkeley haas school of Business, ucla Anderson school of management and yale school of management, aims to provide a platform for like-minded people and organisations to establish a dialogue on innovation and enterprise. the 150-plus senior executives who got together to share their expertise with the start-ups at the first meet were a diverse group from top indian and multinational companies. “don’t expect the gratitude of the world while innovating to make a big impact,” warned rahul panicker, co-founder, embrace innovations, a u 27 u

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Panel advice At intuit india, the Bengaluru-based subsidiary of the us-headquartered payroll management software major, vice-president and managing director Vijay Anand stresses the need for design thinking to get embedded in the organisation so that every employee is enabled to innovate. “the purpose has to be to design for customer delight and exceed expectations – not with features but with deep customer empathy,” he adds. manipal hospitals managing director and ceo Ajay Bakshi strikes the medical note when he talks of the ‘neural basis’ of creativity and innovation. there is, he believes, a great need as well as opportunity for innovation in the healthcare domain. iif 2015 had a number of panels: for start-ups, venture capital and impact investment, which saw the participation of leaders in the fields who discussed innovation in the context of the challenges that indian start-ups face, and the fact that innovation for large social impact is not charity but scalable and can be profitable. Budding entrepreneurs, they advise, must innovate by staying focussed on customer pain-points. An interesting angle on ‘20-something (year old) college dropout founders’ is that such entrepreneurs are better fitted for areas like mobile apps, which need deep connect with young demographics. domains like enterprise software and analytics, on the other hand, need domain expertise and wider business experience, which are typically found in older entrepreneurs. young or old? take your pick! u seKhAr seshAn feedback@businessindiagroup.co

Business Notes

CON FE R E NCES

new age banking l

ast month the indian chamber of commerce (icc) held a summit in mumbai called, ‘Banking Baithak: chintan. manthan. parivartan.’ over the past decade the banking industry has witnessed several positive developments on the technology front. And according to stalwarts attending the summit, the indian banking industry is expected to grow exponentially supported by technology intensive processes and customer friendly models with focus on innovation, convenience and cost effectiveness. hence, there is a need for much greater banking and credit penetration going forward. the indian financial system remains bank-dominated with commercial banks accounting for over 60 per cent of the financial sector assets. it is therefore essential for the indian economy, striving for an accelerating, sustainable and inclusive growth in the medium to long-term, to have

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

a healthy and growing banking system. the summit brought together leading bankers, regulators, government and corporate professionals and other stakeholders enabling them to discuss various opportunities and challenges in the new Age Banking and other key issues in this sector on a common platform. speaking at the summit, Arundhati Bhattacharya, chairman, state Bank of india, said, “if there is one initiative of the new government that has excited the international imagination, it has been the Jan dhan yojana. the pradhan mantri Jan dhan yojana known as pmjdy is the biggest financial inclusion initiative in the world and has surpassed the original target of opening bank accounts of 7.5 crore of uncovered households in the country by 26 January 2015, with banks already opening 11.5 crore accounts by 17 January 2015.” Value of banking According to roopen roy, president, icc and md, deloitte india, “Banking industry has undergone a tremendous change, with technology and non-bank businesses u 28 u

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Rajeev Singh, Roopen Roy, Arundhati Bhattacharya, Vishwavir Ahuja and CVR Rajendran: serving customers through better technology

providing new options for safeguarding and managing their finances, customers will continue to depend on banks only as long as banks can provide service and value that cannot be found anywhere else.” Adds Atanu sen, former md & ceo, sbi life insurance & Advisor, state Bank of india, “technology improves inexorably to enable breakaway value. technology will reduce costs of doing business, enhance business productivity as well as better manage business risks in the delivery of financial services to all people in a fair, transparent and equitable manner at affordable cost.” All in all, indian banks are deployed technology-intensive solutions to increase revenue, enhance customer experience, optimize cost structure and manage enterprise risk. however, there is a wide variation in the technology agendas and implementation capability across different players of the banking industry.u

Government & Politics

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

mixed signals Compulsory TU recognition, hiked minimum wage cause unease

t a time when the modi government is planning to fasttrack labour reforms and trade unions (tu) are girding their loins in response, twin moves by the union labour ministry are being watched with concern by both employers and employees. in the first move, factories across the country might soon have to compulsorily recognise a trade union as a representative of its workers and engage in dialogue with it in case of a dispute. the labour ministry is mulling a proposal to empower a tu in a factory as the ‘principal bargaining agent’ for settling a dispute or engaging in a discussion with employers. the union would be treated as a representative of the workers in the respective organisation based on membership, after a verification drive. A tu that gets a majority support of the workers in a factory will be deemed the sole bargaining agent. in case there is no majority, those with a prescribed percentage of support will be recognised. while this move will ensure that tus with limited support in an establishment don’t become trouble for employers in a factory that has multiple unions, it will give legitimacy to the tus on the basis of clearly enunciated laws. it could end the practice of employers creating their own unions, claiming these had the

highest membership and engaging with these in case of disputes. the second move relates to ensure uniform minimum wages across the country. the centre has hiked the national floor level from `137/day to `160/day with effect from 1 July in view of the rising consumer price index for industrial workers (cpi-iw). this was last revised from `115/ day to `137/day with effect from 7 July, 2013. trade unions, however, said the move does not make sense as many states such as Kerala, are already paying a much higher amount. Besides, tus have been asking for a ‘national minimum wage’, not ‘national floor level’ minimum wage. ‘’we have been demanding at least `15,000 per month, and this comes to only over `4,500 per month,’’ said tapan sen, rajya sabha mp and general secretary, centre of indian trade unions. currently, there is no provision for recognition of tus in india’s central labour laws. A provision in this regard would be inserted in the proposed industrial relations Bill, after discussions with industry and workers’ representatives are held soon. however, as the law is under the concurrent list of the constitution, states will be free to either frame their own laws or follow the one mandated by parliament. to implement mandatory recognition of a trade union, u 30 u

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parliament had passed the indian trade union (Amendment) Act, 1947, but it wasn’t notified. though there is a fundamental right to form unions and a statutory right to get them registered, there is no corresponding legal obligation on employers to recognise a particular tu, even if it meets the terms of registration. typically, managements refuse to recognise small or regional tus. maharashtra, west Bengal, madhya pradesh, Bihar, Kerala and odisha have enacted rules for recognition of tus. in maharashtra, a trade union functioning for at least six months is accorded recognition if its membership exceeds 30 per cent of the overall employee count. in fact, maharashtra was the first state to do so. Bihar and madhya pradesh follow the same model. in Kerala and west Bengal, a secret ballot is held to recognise a tu as the sole bargaining agent. Giving strength explaining the rationale of their move, labour ministry officials say that multiple trade unions fighting for their respective rights are a threat to industrial relations. the current law only provides for registration of unions, not recognition, and this lacuna has been in existence for 90 years. legislation in this regard will give strength to freedom of association and collective bargaining; unions’ rights will be consolidated and this will lead to agreeable solutions and, consequently, fewer disputes. the officials maintain that the refusal of employers to recognise tus has been a trigger for many industrial disputes in india. in 2009, there was a long stand-off between the workers and management of mrf ’s tiruvallur plant in tamil nadu over recognition of a trade union. in 2011, maruti suzuki’s manesar plant had witnessed a 13-day stand-off, with the workers demanding recognition of a new tu. the workers complained the tu recognised by the company wasn’t representative of them. in both cases, however, employers had a different perspective. u rAKesh Joshi rakesh.joshi@businessindiagroup.com

Government & Politics

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mid-air divergence Conflicting signals in civil aviation ministry piB

Raju and Sharma: growing dissonance

hose watching the functioning of the nda government closely say that if there is one ministry that warrants prime minister narendra modi’s immediate intervention, it is the ministry of civil aviation. the growing dissonance between union civil aviation minister Ashok gajapati raju and his junior colleague, minister of state (mos) for civil aviation mahesh sharma, is sending out confusing signals on several policy matters. raju belongs to the telugu desam party and is said to be close to Andhra pradesh chief minister n. chandrababu naidu; sharma is the Bharatiya Janata party mp from gautam Buddha nagar, which overlaps noida and greater noida. the bjp is keen to get work on a new international airport at Jewar in greater noida started well before the 2017 assembly elections in uttar pradesh. the proposed airport will also be part of sharma’s parliamentary constituency. in fact, sharma had promised to resuscitate the project before he assumed office on 12 november, 2014. Apart from the new airport, the other issue on which the two have sent out conflicting signals are in regulating air fares and charging extra for check-in baggage. officials of the ministry confess they are in a bind and have not issued any instruction to the dgca regarding levying charges on passengers for carrying

check-in baggage. As far as the airport at Jewar is concerned, since no word or approval has come in from the up government, whose consent is a must for the project, there is no question of the matter moving ahead. on 25 June, sharma approved the proposal for the ncr’s second airport – in raju’s absence, and without the state government’s clearance! Asked whether the proposal had been forwarded for the approval of the cabinet – as sharma had indicated – raju had said, “i won’t know… land is a state subject, aviation a central subject. Both the state and the central government have to be on board… i don’t even know whether it (proposal for a new airport) should go to the cabinet.” earlier, while answering a question in the rajya sabha, raju had said the government had no plan to change a rule that stipulates a minimum 150 km between two airports, virtually ending hope for the greater noida airport. raju also said the decision on the proposal to charge passengers for check-in baggage should be left to the aviation regulator, directorate general of civil Aviation (dgca). “nothing is free, everything is paid for, whether it is your baggage or ticket or things like that… Airlines at one point of time were considered elitist, now it is not and there are multiple people who (travel by air). we will do nothing to discourage innovation but whatever is accepted by the regulator u 31 u

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has to have a reason,” raju said. however, two days later, sharma said that he had directed the ministry not to consider such a proposal from some no-frills carriers as the move would discourage the potential travellers. “we have got a proposal from low-cost airlines to charge for check-in baggage. we have rejected it and there will be no consideration at the aviation ministry level. we will not want to put this burden on passengers,” he had said. Divergent stances some domestic budget carriers have proposed a charge for check-in baggage, while incentivising travelling light through a ‘zero Baggage fare’ scheme. passengers can now carry up to 15 kg of check-in luggage free. the ministers have also been disagreeing on regulating air fares in the country. while raju has on several occasions said that putting caps and floors on fares would have implications and that pricing should be left to the carriers, sharma has held that mechanisms would be put in place to check ticket costs. in may, raju had said: “we realised that going into floors and caps will push up costs for some and pull down costs for others. fares are not regulated anywhere in the world. the problem that we have is last-minute emergencies. is it not possible to ask the airlines to reserve some seats for emergency travellers and release the seats last minute for people travelling due to an emergency…” with the dgca analysis for air fares in 2014 not detecting any irregularities in price movements, the ministry dropped plans for fare regulation. sharma, on the other hand, said that “predatory pricing’’ by airlines is a big issue. A large section of the public and even parliamentarians have raised the issue that airlines charge `30,000-40,000 for a ticket when a passenger has to travel in some emergency, he noted. needless to say, both raju and sharma have avoided commenting on their divergent stances, which has left the ministry’s bureaucracy nonplussed. u rAKesh Joshi rakesh.joshi@businessindiagroup.com

Government & Politics

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

watchdog’s bite

regulators, however, continue to work with fssai. last fortnight, while assuring consumers about the quality of maggi noodles imported from india, the canadian food inspection Agency said, “we are continuing to monitor the situation in india and are working with our international regulatory partners.” earlier, the uK food standards Agency asked for test reports from the indian food regulator through “european commission channels”.

FSSAI gets both flak and praise

ood safety and standards Authority of india (fssai), the food watchdog, has been in the news for a variety of reasons. After the food safety regulator ordered the recall of maggi noodles and banned its production and sale, media attention has turned to fssai. the watchdog was called by a parliamentary panel about the maggi controversy and the presence of toxic content in packaged food. food processing minister harsimrat Kaur Badal has even accused it of being “the big elephant in the room” of the industry and “creating an environment of fear”. last month, fssai had banned maggi, saying it is “unsafe and hazardous” for human consumption after it found excessive levels of lead and taste enhancer monosodium glutamate (msg). consequently, nestle had to recall maggi from markets. with fssai cracking the whip further, hul withdrew its Knorr chinese noodles and indo nissin recalled its top ramen noodles, pending approval from the regulator. Actually, fssai has very little presence in the field. it does not lift samples. the maggi order was necessitated after state after state reported something wrong with it. fssai is a policymaking body, it only frames standards. But look at the domino effect of the maggi controversy. the ministry of food processing has decided to set up a task force to help companies cope with the prevailing environment following the order for countrywide recall of maggi noodles. “we have set up a task force with the prime minister’s assent to bring the industry’s issues to the table when dealing with the fssai. since the agency is under a different ministry, this step was taken to ensure better coordination,” Badal recently said. “the fssai’s systems need to be streamlined. it is blocking innovation in the industry. A lot needs to be done with the recent

Badal: slamming fssai

roadblocks causing a fear psychosis in the industry.” the task force will address issues related to product approval and help understand guidelines. the cell will have officials from the pmo and the ministries of health and food processing. “the government will ensure an environment in which the industry can progress. the quality of food is extremely important, but the industry’s growth and consumer safety have to work together,” the minister said. But while Badal may have slammed fssai, some states feel that it should be given more powers. A resolution to bring the fssai under the consumer affairs ministry was passed at the meeting between states’ and union territories’ food ministers and the centre recently. fssai currently functions under the aegis of the health ministry. foreign food safety u 32 u

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Consumer affairs saryu rai, food minister of bjp-ruled Jharkhand, recommended that it be brought under the food and consumer affairs ministry, an opinion echoed by representatives from himachal pradesh and Karnataka. “it became a unanimous decision and we want the centre to do this. there are lots of cases with regard to labelling and safety standards for the food industry and we feel that the authority should be brought under consumer affairs,” said rai. But, it is unlikely that the agency will answer to a different boss anytime soon. union food and consumer affairs minister ram Vilas paswan, who chaired the meeting, said: “this was not on the agenda, but states came together to make this demand.” ministry officials, however, point out that such a move was unlikely given that the fssai is a statutory body. further, the food safety and standards Act, 2006, derived from the global codex Alimentarius, establishes a health paradigm. when the food safety and standards Act was being promulgated, there was confusion about where the institution should be located, whether under health or some other department. typically, since the basis of the Act was the codex, which is mostly health-related, it was decided to locate it under the health ministry. however, the fact remains that paswan has been quite proactive on the maggi controversy. his ministry even decided to file a complaint with the national consumer disputes redressal commission on the issue. u rAKesh Joshi rakesh.joshi@businessindiagroup.com

Panjuâ&#x20AC;&#x2122;s Page By panju ganguli

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

W e ar e N o. 1 I N eN gIN ee rIN g S e rv IceS IN I N dI a , aN d IN t h e top 6 IN t h e Wor l d. t h e r e IS a lot o f h e a dro o m for groW t h h e r e b ecau S e co m paN IeS WaN t to opt I m I ze t h e I r r&d Sp eN dS.

W e ar e a lo N g-t e r m p l ay e r. W e S e t u p p l aN tS for 50 y e arS. at t h e Sam e t I m e, z I N c prIce IS g o od, oI l h aS r ecove r e d to $65 aN d copp e r prIce IS alS o b e t t e r. I b e l I e ve t h IS IS t h e t I m e to I NveSt.

ANANT GUPTA, CEO, HCL Tech

ANil AGArwAl, Chairman, Vedanta u 34 u

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The $400 billio India’s transport sector is opening

Central plan outlay on transport-related infra sectors 2015-16 (in ` crore)

n parts, the story of india’s transportation sector sounds almost apocryphal and reflective perhaps of the slogan that was later used to promote its tourism potential: incredible india! in 1963, when isro launched its first rocket from the thumba equatorial launching station in the paddy fields of Kerala in the presence of Vikram sarabhai and homi Bhaba, it was transported to the lift-off site in a bicycle, because there was no regular road leading to it and no compatible mode of transport too. the second rocket was a bit bigger, so it had to be transported in a bullock cart! india has come a long way since then. But bullock carts continue to ring a bell. A 2000 book on india’s

Railways: 98,365 communication revolution had the catchy title: From bullock carts to cyber marts. Bullock carts, which were once the quintessential rural transport vehicle, have improved in design and technology. most have been replaced by jeeps, motorcycles and other modes of transport, which now ply on all-weather roads. But they continue to be an object of common use – and reference. cut to 2015, where the modi government, as part of its effort to revive the economy, is turning its attention to the transport sector, in an attempt to leapfrog over the country’s bullock cart image. the idea is to leverage a revamp of the transport sector, to put the economy into a high-growth phase. the strategy is not new. in 2013, the world Bank had estimated u 36 u

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Roads & bridges: 85,182 that the transport sector alone will require an investment of nearly $500 billion (3.6 per cent of gdp) over the next 10 years, to be part of an overall push to stimulate overall infrastructure investments to 6.8 per cent of gdp during the Xiith plan (2012-17) and 8.0 per cent of gdp during the Xiiith plan. during upa 2, when it was obvious that all modes in the country’s transport network had come under severe pressure, the government set up the national transport development policy committee under economist rakesh mohan to project transport requirements and policy over a 20-year horizon. the committee’s work was made difficult because of the prevailing economic slowdown then and it had to assume the

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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

on opportunity up to fresh investments and ideas

Civil aviation: 5,361 rate of growth would return to its potential in the coming years and ensuing decades. Also, there had been a shift in traffic from railways in favour of roads, partly in response to the stepped up allocation for the roads sector. the committee came to the conclusion that a massive effort was required to enhance investment in the railways, involving significant modernisation and reorganisation. in its report delivered in 2014, the committee noted that while transport investment is a response to an emerging demand, it is an economic growth driver in itself. transport planning and provision, therefore, must be seen as central to the growth planning process. the committeeâ&#x20AC;&#x2122;s findings only served to underline how far we

Shipping: 1,136

Inland water transport: 207

were lagging behind. the share of the transport sector in overall infrastructure investments barely increased from 2 per cent of gdp during 1995-99, well after the economic reforms had begun, to an average of 2.6 per cent of gdp between 2007 and 2011, despite the impetus given to highways and roads under the Vajpayee regime. thatâ&#x20AC;&#x2122;s why accessibility and connectivity are still limited. only 20 per cent of the national highway network (which carries 40 per cent of traffic) is four-lane, while one-third of the rural population lacks access to an all-weather road. the modi government has been quick to grasp the seriousness of the situation and put the revamp process into high gear. it has already begun the process of implementing some of u 37 u

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the rakesh mohan committeeâ&#x20AC;&#x2122;s recommendations, such as electronic collection of road tolls under a single standard, a new highways authority for the northeast, building smaller ports along the coast and setting up new logistics parks along major transportation hubs. Apart from fresh investments, fresh ideas are doing the rounds of transport ministries after a long time. in fact, if statements by senior ministers and top officials are any indication, the five years of the modi government could see investments of almost $400 billion pouring into the sector. sample the pointers: u suresh prabhu is talking of $120 billion investment in railways. u nitin gadkari says the government is looking at an investment of $160

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s u m e e t s Aw h n e y

Prabhu: will he turn around the Railways?

billion by 2019 in highways, ports and shipping. u with domestic traffic expected to reach 160-180 million, and international traffic in excess of 50 million by 2020, the aviation sector can absorb another $120 billion investment, according to civil aviation ministry officials. u Both prabhu and gadkari are confident of the railways and roads/shipping/ports adding 2 per cent each to the gdp after a few years. Budgetary boost to begin with, finance minister Arun Jaitleyâ&#x20AC;&#x2122;s 2015-16 budget set the focus on bridging the infrastructure deficit (see box: Central plan outlay) by giving railways the top place among central government enterprises in terms of plan capital expenditure during 2015-16, overtaking the traditional high capex spenders â&#x20AC;&#x201C; petroleum and power sectors. helped by a sharp 32 per cent hike in budgetary support and a sharper 70 per cent rise in bonds and debentures, the railways will spend 54 per cent more on plan capex during the year. roads and bridges, another major emerging capex-hungry infrastructure, but a heavily public exchequerfunded segment, took the second place in central plan capex plans for 2015-16, made possible by over 14-fold increase expected in external sources, particularly, bonds and

debentures, and 51 per cent in budget support. in addition, Jaitley has proposed to allow tax-free bonds in railways and roadways (along with irrigation) to help raise significant debt capital. there are several factors imparting an element of urgency to the need for upgrading our transport infrastructure. first, there are the demands of a growing population, which is expected to rise to 1.3 billion in 2020. According to a projection by united nations population division, the population will stabilise at 1.72 billion by 2060 and india will overtake china by 2020 â&#x20AC;&#x201C; a decade sooner than the earlier projection. to reduce the pressure on local resources such as water and power, the government needs to tackle the impact of overpopulation by investing in infrastructure and creating satellite cities, so that all of the population is not concentrated in one area. this approach can only work, however, if the government is willing to make or generate long-range financial investments. simultaneously, the government will have to stop the urban sprawl and start to embrace sustainable medium-tohigh density residential and business districts along public transport corridors. efficient transport and mass transit systems will hold the key. this will reduce the reliance on private vehicles in cities, thus alleviating road congestion whilst also reducing pollution and emissions. it will have a positive net effect on economies, as it will reduce infrastructure costs, cut down travel and transit time, improve health outcomes by reducing pollution and boost the productivity of workplaces. then there is the question of redressing geographical inequities. An efficient system of transportation can serve as a vital bridge between the economically developed and underdeveloped parts of the country. recognising the big divide between the prospering west and faltering east, modi has spoken of the need to a serious attempt to bridge this growth gap. if he succeeds, growth engines could follow a spatial pattern that spans the length and breadth of u 38 u

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the country, rather than being confined to industrialised states like maharashtra and gujarat in the west or tamil nadu in the south. this is where the concept of smart cities comes in. A smart city will provide a nucleus around which growth will pick up in concentric circles. port cities, developed around new ports, will also fuel the growth as the trade to gdp ratio spirals up. growth will also follow a dendritic pattern (where resources travel randomly to form diffusion-based growth) with projects like delhi-mumbai industrial corridor beginning to mushroom. since growth will happen along such concentric and elongated patterns, transport of people and material will happen along such patterns onto the hinterlands. the transport sector, in such a scenario, will not only facilitate the formation of such growth patterns but also help in accretion of growth. the other obvious reasons for reform are our deplorable roads, poor-urban-rural connectivity and painfully slow road transport. this incidentally is stymieing our logistics industry, which is crucial for the growth of trade and business. the logistics industry depends critically on timelines in which products and services have to be delivered to a particular destination. india currently

Freight corridors will boost the infrastructure sector

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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

piB

ranks 54 out of 160 countries in the world Bank’s logistics performance index. the success of the ‘make in india’ programme also hinges on ramping up our transport infrastructure and increasing the logistics efficiency. take the long-delayed delhi-mumbai and ludhiana-Kolkata freight corridors. currently, freight trains suffer second class treatment, in comparison to express and passenger trains in the use of rail tracks. As a result, goods never reach their destination in time. Both industry and the railways suffer as a result. exporters, anxious to reach their consignments to destinations within deadlines prefer to move their goods by road, clogging them in turn, even though it is a far more expensive mode of transportation. in fact, according to mckinsey, transport losses could cost india $140 billion in 2020.

Gadkari and Chibber: financing has never been an issue

Domino effect As mentioned earlier, the shift to roads led to a sharp decline in share of freight carried by railways from 86 per cent in 1950-51 to 36 per cent by 2011-12, even as total freight traffic grew exponentially. in comparison, in many countries, about 50 per cent of freight moves through the railway network. this is where our freight corridors will play a part. providing sA n JAy Bor A de

exclusive and separate tracks for freight trains will reverse this trend. once complete, freight trains will ideally move on the western and eastern corridors at speeds of 100 km/hour or more; this move should revive the logistics industry and decongest the traffic on the main tracks that cater to passenger trains, allowing them in turn to move faster. the freight corridors were conceived by the upa and it goes to the credit of the modi government that it has embraced the idea, with the cabinet committee on economic Affairs recently fixing a revised cost estimate of `81,459 crore – more than double the originally estimated `28,181 crore – for it. According to government estimates, the construction of the western and eastern corridors will create demand for 2.7 million tonnes of cement and 1.6 million tonnes of steel. that’s a huge boost for the two infrastructure industries. it will also create demand for electric equipment and cables, signalling equipment and other infrastructure required to run trains. new locomotives and rolling stock too will be required. thousands of people will get employed in the construction of the corridor and other facilities along the corridor, including logistics parks to handle cargo and townships where people will live. the government is looking at various investment options to ramp up u 39 u

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the transport infrastructure. it is trying to change the ‘chronic underinvestment’ in the railway sector through market borrowings, internal generation and ppp. A slew of policy initiatives to fast track stalled road projects – encouraging e-governance, using a new, hybrid annuity model to deal with the lack of private interest, making obtaining environmental clearances and acquiring land easier – have been put in place to increase the pace of road construction and bring back the investors. strikingly, no senior minister is throwing up his hands in despair at the challenge ahead. Bolstered by Jailey’s budgetary boost, they are instead making their own plans to augment the financial outlays. gadkari says financing has never been an issue in the ministry of road transport and highways (morth) and it has 112 projects completed through government funds to be sold to foreign insurance and pension funds. many foreign funds were ready to extend funding of `2-3 lakh crore on 0.50 per cent interest. “the ministry has a `42,000 crore budgetary allocation. it can also raise `70,000 crore from tax exempted bonds besides we have annual toll collection of `7,0008,000 crore. if we securitise these for 15 years, we can get `1,20,000 crore,” he said. earlier this year, the railways signed an mou with life insurance

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New tRaNSpoRt goveRNaNCe paRadIgm India’s transport governance must move must move towards five significant changes during the coming decade: Creating a consolidated Transport Ministry to focus on systemic performance;

Setting up Office of Transport Strategy to coordinate transport policies at the national level;

Clearly decentralising policy and planning authority, including urban transport, to constitutionally recognised urban and metropolitan governments;

Building a comprehensive regulatory environment to govern transport flows; and

Building an inter-disciplinary cadre of transport experts.

Source: Rakesh Mohan Committee

corporation ( lic) to raise `1.5 lakh crore over the next five years. the investment by lic, to be made through `30,000 crore of bonds issued annually by rail entities, such as indian railway finance corporation, would be channelised by the railways in capacity augmentation projects. the bonds will come with a five-year moratorium on interest and loan repayment. “we are negotiating with various companies (sovereign funds, pe firms, etc) for funding rail capex,” says prabhu. several highvalue contracts will be given out in the next six months, he adds. The importance of waterways one of the most transformative steps taken by the government is to declare 101 waterways as national waterways. share of water in freight transport at 6 per cent in india is abysmally now, as the corresponding figures for the us, Japan and china are 12.4 per cent, 34 per cent and 47 per cent respectively. compared to roads and rails, water is not just cheaper; it is also a more environment-friendly means of transport.

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

“india is blessed with a number of water bodies,” says Vinayak chatterjee, cmd, feedback infrastructure services, which advises companies. “But this sector has been surprisingly neglected.” he is pleased that the minister has zeroed in on a historically neglected sector. take Jal marg Vikas, a world Bank-assisted project to develop the stretch on river ganga between haldia in west Bengal and Allahabad in uttar pradesh and make it navigable for ships with a depth of at least three metres. the project, worth `4,200 crore, has the potential to serve a number of big cities such as haldia, howrah, Kolkata, Bhagalpur, patna, ghazipur, Varanasi and Allahabad, their industrial hinterlands, and several industries located along the ganga basin. the benefits are immense. As the rail and road corridors of this region are already saturated, the development of this stretch of the river would create an alternative mode of transport. huge quantities of bulk cargo can pass through the river. transport costs of shippers will fall. in another significant move, the government is contemplating setting up five more major ports in the country. india cannot sustain a high growth phase for as long as china did without investing in ports. the container ports at shanghai, shenzhen, hong Kong, ningbo, guangzhou, Qingdao and tianjin each handle capacity of more than 10 million teu (twenty foot equivalent units), while no such high-capacity port exists in india. Jawaharlal nehru port at navi mumbai, the largest container port in india, has a capacity to handle 4.8 million teu, compared to 29.1 million teu at shanghai. Amongst indian states, gujarat has been a pioneer in adopting the strategy of port-led development, with significant results. while, in the 1980s, the state grew at only 5.08 per cent per year (national average was 5.47 per cent), this accelerated to 8.15 per cent per annum in the 1990s (against the all-india average 6.98 per cent) and subsequently to more than 10 per cent per annum, substantially benefitting from the u 40 u

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port-led development model. under the sagar mala project, an exercise is on for the first time to seriously promote port-development, strengthen the maritime sector and incentivise a shift towards coastal and inland water transport to take the burden off the roads. And 12 ports have been identified for the project. indian ports currently handle 90 per cent of our export-import trade volume. the project aims at developing access to new development regions with intermodal solutions and promotion of the optimum modal split, enhanced connectivity with main economic centres in the hinterland and beyond through expansion of rail, inland water, coastal and road services. this is necessary to avoid over-crowding at ports which has been delaying much-needed coal deliveries to power plants and supplies of iron ore for steelmakers. mcKinsey and aecom, the us infra giant, are currently carrying out the national perspective plan study as part of the sagar mala initiative. then there is the Bharat mala project, which is currently on the drawing board. the project comprises an estimated 5,500 km of highway length with an investment in excess of over `55,000 crore all along borders and coastal areas, stretching from the north-east part of india till western india. Apart from providing connectivity to the ports under the sagar mala project, this project will provide seamless connectivity along the borders with nepal, Bangladesh, china, pakistan and Bhutan, which is crucial for strategic reasons. New tricks of the trade to get thing moving, the government is trying all tricks of the trade to attract private investment in highway building. some 1,231 projects measuring 37,000 km of roads have been firmed up for award this fiscal year. An ambitious target of awarding highway projects worth `3.5 lakh crore in the next six months is ready. with major infrastructure companies going through financial stress and many bidding conservatively for road-building projects, new and regional players are now grabbing a

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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

construction) mode with defect liability period (dlp) and without dlp. this will help to raise funds for new highway development. it will create a new business vertical for those players who are interested in operations and maintenance of the roads with tolling rights over, say, a 20-year tenure. “we have built in enough clauses to increase the comfort level of the lenders in the model concession agreement for build, operate and transfer (toll), which will be amended shortly,” says chhibber, commenting on the issue of reviving bank lending, which continues to be a challenge, given the bad loans most banks have on their books from lending to this sector. “the banks are expected to do due diligence when they lend money to developers” in order to attract investments, the government has now offered road developers the chance to choose their own routes where they expect high-volume traffic. currently, the centre decides the entire route before seeking bids. under the new system, it will only decide the two end points – say, nagpur and pune – while letting any interested private firm pick the route it deems the most profitable in terms of toll earnings. the new arrangement will adopt the ‘swiss challenge system’, under which a private operator proposes a project and makes a bid, which the government publicises while inviting third parties to match or exceed it. if a competitor betters the original bid, the first proposer gets a chance to match it and bag the contract. the original proposer has the ‘right of first refusal’, meaning that a competitor can be awarded the contract only if the first proposer refuses to match its superior bid. “private-sector investors can now design their own routes and conceptualise projects according to their choice,” explains a senior official in the morth. “earnings from tolls are the biggest incentive for road construction firms. so, we want to let them choose the alignments where they feel they will get the highest vehicular traffic. they can assess for themselves and decide.” u 41 u

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s u m e e t s Aw h n e y

large share of orders awarded by nhai. the new bidders include the essel group and tata, and regional players like Bhopal-based dilip Buildcon, udaipur-headquartered gr infra and sadbhav engineering of mumbai. over-leveraged financials due to excessive exposure to highways and other infrastructure projects, equity crunch, constraints like banks reaching the ceiling as per sectoral exposure norms, coupled with regulatory and other hurdles, had resulted in developers shying away from ppp projects. the government’s renewed focus on ppp appears to have revived some interest. the new ‘hybrid annuity’ model envisages developers contributing 60 per cent of the investment and the government bringing in the remaining 40 per cent. the government will also acquire 90 per cent of the land, estimate traffic and collect the toll, which means developers will be spared the uncertainty over revenues as also the task of collecting the toll. in return for constructing, operating and maintaining the roads, concessionaires will get from the government a biannual annuity and a fee. the model also builds in a bigger penalty for any delay on the part of either the government or the concessionaire in meeting their commitments. there is a time limit of one year for terminating a project if either the government or the builder fails to fulfil its obligation, preventing the project from getting off the ground. to address issues which had earlier stalled road projects, the government is taking conscious steps including emphasis on better project preparation and land acquisition, simplified procedures for appraisal, exit policy for concessionaires, amicable settlement of disputes, amendments to the model concessionaires agreement and one-time infusion for languishing projects. Besides, multilateral funding agencies like world Bank and adb have been roped in. Vijay chhibber, road secretary, points out that the government is in the process of finalising the modalities to hive off completed highway projects which have been built on epc (engineering, procurement and

Chatterjee: water transport has been negleted

this is the first time the centre will be trying out the ‘swiss challenge system’, although states such as Andhra pradesh and rajasthan have adopted the method for a few state highway projects. the pickyour-own-route plan will make its debut with a proposed Vadodaramumbai expressway, tentatively estimated at 350 km, that has been stuck for years because of land and fund constraints. industry experts say the system has pluses and minuses. “the private entity is required to make a lot of initial investment (over the planning and evaluation, for instance) which he may not be able to recover unless he wins the contract,” says Vishwas udgirkar, senior director, infrastructure, deloitte india, a consultancy firm. “it, however, allows players to conceptualise projects of their own interest. An infrastructure company owning a port, for instance, may want to develop the last-mile road to improve accessibility.” the government’s moves have revived investor interest but infrastructure players are looking for new possibilities. “in india, importance is given only to building roads,” says Karunakaran ramchand, md, il&fs transportation network. “that’s not

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pA l A s h r A n JA n B h Au m i c K

Roads pave the way for rural-urban connectivity

long-term strategic thinking. you have to plan maintenance, as it brings down lifecycle costs.” But, il&fs has been doing its planning: its acquisition of elsamex, the spanish operations and maintenance company, should now come in handy. Awakening the giant A lot is resting on prabhu’s ability to turn around the railways, the biggest central enterprises in terms of size and employment. cash-starved, our British-built rail system has added just 11,000 km of track in the 67 years since independence, and the network has come to symbolise the poor state of our infrastructure. china has managed 14,000 km of new lines in the five years to 2011. the government’s strategy now puts railways in the larger backdrop of kick-starting growth by a spurt of public investment which is supposed to crowd in private investment further down the road. According to the economic survey for 2014-15 authored by Arvind subramanian, the backward and forward linkages of the railways imply that the multiplier effect of re1 in the railways is `5 in other sectors. in the latest rail Budget presented by prabhu, the plan outlay has increased by 52 per cent over the revised estimates of 2014-15 and gross Budgetary support by 33 per cent. Accounting for inflation, the increase stands at a still lower 21 per cent. in order to stay true to the plan

outlay, the railways is banking on a surge in internal generation, market borrowings and ppp. internal generation is unlikely to pick up anytime soon, market borrowings and ppp are constrained in the current environment of bad debts and poor regulatory structure. prabhu’s diagnosis – ‘chronic under-investment in railways’ – is correct but he will have to work hard to fashion a financial game plan. the government has already decided to allow fdi in certain segments of the railways, like coach manufacturing, station development, suburban rail and high speed network. massive investment is required for upgradation and expansion of its network. “there has been no investment in the railways for the last 20-25 years... we have to create 30,000-40,000 km of railway lines connecting many parts of india,” says prabhu. where can the railways raise money from? to begin with, the railways have access to `1.5 lakh crore of debt from the lic for five years. An exercise within rail Bhawan has now revealed that indian railway catering & tourism corporation (irctc), which has less to do with catering and tourism and more with online ticketing, could be one of the uncut gems in the government’s haystack. thanks to its public sector status, it is punching far below its weight and worth. irctc makes `10-20 on every ticket u 42 u

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sold from its website. in 2013-14, it sold more than `15,000 crore worth of tickets, earned revenues of ` 955 crore, and net profits of `72 crore. that profit figure may look tiny, but the real asset irctc owns is the hot customer data it owns and which can be mined to sell even more products and services. irctc has 31 million customer data, gets over 2 million hits a day, and books almost 600,000 tickets a day. irctc knows its customers, and their annual spends on railway or airline tickets. it can leverage this information for growth in multiple directions. remember, the valuation of home-grown e-commerce wonders like flipkart, snapdeal or makemytrip is derived not so much from their sales margins or profits, but from the knowledge they have of their customers and their purchase habits. it is only now that a valuation of irctc is being done with the help of icici securities and microsoft. irctc can fetch huge disinvestment cash, but prabhu will have to ensure that the money goes into his pocket and not that of finance minister Jaitley. this is where inter-ministerial coordination will be necessary. Also, synergies will have to be built up. for instance, the government is targeting up to $1 billion of private investment by 2017 to build rail lines linking ports and national networks to ease growing congestions. such investment would more than double the $400 million that the railways have attracted in the decade since they allowed limited private participation and help fund crucial ‘last mile’ links to ports. prabhu wants private companies, which have held back from investing in freight lines because of the struggle to win the necessary approvals, to build more of the last mile links where bottlenecks bite the most. companies will now be allowed to part-own new rail lines for variable periods of time rather than a fixed number of years, says mukul saran mathur, executive director, ppp, ministry of railways. the railways will also take on more of a project’s financial risks. the government had given approval to domestic infrastructure

Cover Feature

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

sA n JAy Bor A de

companies such as navayuga and Balaji infra to build up to 316 km of lines within two years. the ministry also wants foreign operators which own stakes in indian ports, like denmark’s maersk, to invest but so far none had shown any interest. the government estimates port operators will spend $8 billion over the next two years to expand capacity to meet rising imports. But the rapid expansion worries port operators, who say that even if they double up their cargo handling capacity, there aren’t enough wagons to carry them. most indian ports only have access to two-thirds of the wagons they need, and the shortage is one reason why ships have to wait for two days more to get berthed and unload than the international average. the railways, which have a monopoly on the provision of goods wagons, are failing to provide sufficient wagons to service the extra cargo. wagons are largely made by domestic companies texmaco rail & engineering and titagarh wagons, who would benefit if the railways’ finances improve and more wagons are bought. sooner than later, prabhu will have to revert to the final report of the Bibek debroy committee on restructuring the indian railways, despite the resistance it has run into from the trade unions. the report has suggested a process of gradual reforms, involving the introduction of commercial accounting practices and greater decentralisation of powers, allowing the entry of the private sector, and the setting up of an independent regulator within a five-year time frame. one of the most transformative suggestions made is allowing private sector to run trains. it has suggested exposing railway production units to competition, and the creation of an environment conducive to private investment by giving confidence to private players through transparent accounting processes. this has to be seen in the context of the failure of the public-private partnership route so far in both the road and railway sectors. implementing the debroy report will be a challenging task. for instance, the suggestion to set up

The good times seem to be back for civil aviation

an independent regulator will essentially mean setting up a body outside of the powerful and centralised railway Board, which might resist such a move. there are media reports that the tus are being instigated by section in the railway Board to oppose the report. But modi, who initiated the setting up of this committee, and prabhu, known for his dynamic approach, should persevere. they must take the railway unions into confidence and implement the measures. Both have declared the railways is not going to be privatised. winning their trust now would be key to the implementation of the measures. The aviation potential the good times seem to be back for civil aviation. the fall in global crude prices has depressed the aviation turbine fuel prices which in turn directly affects the financials of airlines. for the first time in 10 years, Air india is expected to post an operating profit this fiscal. A committee is closely monitoring the `30,000 crore bailout package that it has benefitted from. But the committee should also examine the question: can Air india survive without the periodic infusion of funds? perhaps this is the time to re-examine the question of ownership of Air india. spiceJet, which was on the verge of closure under the marans, has become stable under the leadership of its original promoter, u 43 u

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Ajay singh. Vistara and Air Asia have made an impressive entry. india is currently the ninth largest aviation market in the world, with a size of $16 billion. it is projected to be the third largest by 2020. it is one of the least penetrated air markets in the world with 0.04 trips per capita per annum, as compared to 0.3 in china and more than two in the us. But india’s middle income population is expected to increase from 160 million in 2011 to 267 million by 2016, and further up to 400 million by 2020. that is where the growth of the aviation sector will come from. Already, indian carriers plan to increase their fleet size to reach 800 aircraft by 2020. According to a calculation by the Airports Authority of india, the number of passengers passing through indian airports will jump from 1.55 billion now to almost 2.1 billion by 2020. the dramatic growth across the board will be fired by the emergence of lowcost carriers catering to this growing middle class, And, as the economy grows, the growth will also be fuelled by business and leisure travel as well. Already, large scale collaborations/ m&a deals – etihad Airways & Jet Airways; tata group & singapore Airlines, tata group & Air Asia – have fructified. growth in aviation will push up the demand for mro facilities. that’s where the policy creases will have to be ironed out. A ficci-kpmg ‘indian

Cover Feature Aviation 2014’ report points out that india’s current mro market size is estimated to be around $700 million. By 2020, the total indian fleet would double in number, making it critical to have a strong domestic mro industry. According to industry sources, merely 5-10 per cent of the mro work for domestic scheduled carriers is carried out in india, while most of the maintenance activities are outsourced to third-party service providers outside the country. this is a classic case of scoring self-goals. the government needs to formulate a strategy to check the outflow of mro revenue, foreign exchange and jobs. on the ministry’s plate currently are final approvals for the greenfield airports under public private partnership at navi mumbai and mopa (goa). the Airports Authority of india plans to spend $1.3 billion on non-metro projects between 2013 and 2017, focussing on the modernisation and upgradation of airports. in all, it aims to bring around 250 airports, including no-frills ones, under operation across the country by 2020. it plans to develop guwahati as an inter-regional north east hub and Agartala, imphal and dibrugarh as intra-regional hubs. indian airports are emulating the sez Aerotropolis model to enhance revenues, focus on revenues from hotels, retail, advertising and vehicle parking, security equipment and services. A new aviation policy is on the cards to boost growth and ease business in the sector. it would look at three major pillars – reducing cost of acquisition of aircrafts, running of airports and working with states to moderating taxes on atf at the state level, says r.n. choubey secretary, civil aviation, elaborating on the new policy expected to be taken up by the cabinet shortly. “we are working to see that all states can bring down the vat rates to 4 per cent on atf; this is crucial as india has to import crude oil and moderate fuel prices are a key component to making the industry competitive.” the new policy will have to address concerns recently voiced by international Air transport Association (iata) that outdated policies,

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

Water ways hold immense benefits

multiple authorities and the lack of a comprehensive plan have hobbled the aviation sector. tony tyler, ceo, iata, recently pointed out that india imposes rules and requirements that are not seen anywhere else. “some of them, like the route dispersal guidelines, stem from the understandable desire to see the benefits of aviation connectivity extend to places, which would not be served, if it were left to market forces to drive airlines’ decisions about networks and fleets. But the world was a different place over 20 years ago, when these rules were put in place. is this really the best way to achieve the purpose for which the guidelines are still being implemented?” tyler asked. the 5/20 rule, for instance, permits a domestic airline to fly abroad only after completing five years of domestic operations and having a fleet of 20 planes. this rule was established with the aim of ensuring that international flights would only be operated by safe and financially robust carriers. surely there are other ways of achieving this now. the transport sector in india currently faces many challenges but also presents path-breaking opportunities. such an exercise will not be without obstacles. in all transport sectors, government policies, procedures and regulatory framework are being made futuristic, pro-active and aligned to stakeholder expectations. land acquisition issues, for u 44 u

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instance, will have to be resolved by breaking the political logjam: a move is now afoot to let the willing states take their own initiatives and come out with respective models. environmental concerns will have to be addressed. “we would like to convert a significant part of the transportation system into electric, bio-fuel, etc, so as to reduce pollution and simultaneously accomplish the goal of ‘make in india’,” says gadkari. But that is easier said than done, given the lack of progress so far in the use of bio fuels. given the inter-modal nature of transport, a consolidated ministry of transport will help immensely in optimising outcomes and saving resources. different ministries and departments operating in silos clearly lead to sub-optimal outcomes. china, the only other large country which had a separate ministry of railways has now fused it into a ministry of transport. the rakesh mohan committee had made a similar suggestion (see box: New transport governance). modi should now bell the cat. like most of its programmes, the transport upgrade plan of this government is ambitious. modi, gadkari, prabhu and the rest of the team are dreaming big. perhaps, that is the way it should be, even if 50 per cent of the results are achieved. u rAKesh Joshi rakesh.joshi@businessindiagroup.com

Column

B U S I N E S S I N D I A ◆ 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

Build ‘honest’ bridges Delhi’s diplomacy should be vigilant, reducing suspicions among rivals

hile India cannot be cajoled into becoming a US-backed bulwark against China’s rise, its own rise as a great power would benefit greatly if it grows into a new diplomatic role as a honest broker in tense relations among Washington, Beijing and Moscow in Eurasia and South Asia. India is not just a South Asian power in an environment made unsafe by Pakistan’s chronic animosity and Afghanistan’s failing governance. It must also be a major influence on the region stretching across Eurasia to South East Asia. At the moment, India’s economic, trade and financial powers are far less than those of China but it would be unwise to get involved in a rivalry in those areas. In economy and trade, co-operation is much healthier and more productive for all sides. In the military spheres, India has more than enough nuclear and missile strength to deter any large-scale Chinese adventurism. Beyond strengthening our borders, settling disputes over demarcation and policing parts of the Indian Ocean, there is no need for military rivalry. Some of the Narendra Modi government’s wisest decisions include being an early bird in the Asian Infrastructure and Investment Bank (AIIB), the New Development Bank of the BRICS and the Shanghai Co-operation Organisation. Modi’s visits earlier this month to Central Asia and actions in the BRICS and SCO Summits in Ufa, Russia, heralded new constructive engagement with non-Western economic partners. Economic gains from this engagement will be huge, if our infrastructure bottlenecks and taxation and investment policies do not hinder them. But Delhi will have to work hard to carve out lucrative enough slices for Indian businesses. Indian think-tanks and business associations must gear up to steer Delhi in clear commercial directions to derive concrete benefits from the new institutions and off-head bureaucratic theorising. There is a lot at stake since all three institutions directly challenge US influence. In particular, Russia and China want to use them to end US dominance over global financial and investment systems backed by Europeans. There are fundamental differences in the world views of Beijing and Moscow, including their attitudes towards Washington and they may never become close economic partners in Asian geopolitics. Yet, they do have a common

BRIJ KHINDARIA

goal of eroding US power in Eurasia and the Asia-Pacific regions. Foreign minister Sergei Lavrov was blunt, saying the Ufa meetings illustrated ‘a new poly-centric system of international relations’, including the increasing influence of ‘new centres of power’. A Chinese statement said the “evolution of the SCO is taking place at a complicated stage in the development of international relations and amidst the emergence of a multi-polar world”. Giving edge to their words, Russia and China also set up a new working group on combining Moscow’s Eurasian Economic Union (EEU) and Beijing’s multi-billion dollar Silk Road Economic Belt under SCO auspices. This is significant because EEU members would receive financial and technology boosts from China, luring them away from the EU’s attractions. That would help Russia to consolidate its regional power as a thorn in the side of the West, following Vladimir Putin’s annexation of Crimea and Ukraine’s destabilisation.

The author is an international affairs columnist for Business India. He can be contacted at brij.khindaria@ businessindiagroup.com

fter Iran’s expected entry, the SCO would control around a fifth of the world’s oil and represent nearly a half of the global population. The BRICS account for a fifth of the world’s economic output and 40 per cent of its population. Because of the serious challenges to its dominance, Washington’s reactions are unpredictable. One reaction could be to put pressure on Delhi to enter a tighter embrace, thus provoking hostilityin Beijing and Moscow. For India’s economy, both sides of this bread – Western and Eastern – are buttered. This is not a ‘for me or against me’ choice as some in US government and Congress might argue. Nor can India be non-aligned since geopolitics and economic globalisation have moved too far. Now, the opportunities lie in becoming an honest bridge maker of economic diplomacy among the US, China and Russia, while at the same time building more business connections with the EU. Faced by strategic changes in the global balance of economic power, Delhi’s economic diplomacy should be a vigilant leader, reducing suspicions among the key rivals in our wider region. India’s representatives will also have to fight tooth and nail to extract advantages for Indian businesses since China is the chief donor in all three institutions and will expect the lion’s share. ◆

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Rana on being conferred with the BSE-SKOCH

L-R: Deena Mehta, CEO, Asit C Mehta Investment Intermediaries Ltd.; S. Ramadorai, Chairman, BSE; Rana Kapoor, MD & CEO, YES BANK; Ashishkumar Chauhan, MD & CEO, BSE and Sameer Kochhar, Chairman, Skoch Group ring the ceremonial bell to mark 10 years of YES BANKâ&#x20AC;&#x2122;s listing on June 11, 2015 at Mumbai

My heartiest congratulations to Mr. Rana Kapoor and YES BANK on the 10th anniversary of its listing. I am certain that they will continue to ensure sustained WEALTH CREATION for their investors in the future as well.

ASSOCHAM congratulates S. Ramadorai, Chairman, BSE and Ashishkumar Chauhan, MD & CEO, BSE for transforming BSE, an iconic institution in Indiaâ&#x20AC;&#x2122;s economic history that has successfully completed 140 years of operation. S. Ramadorai Chairman, BSE

The Associated Chambers of

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Kapoor AWARD for BANK & INSTITUTION BUILDING

5DQD .DSRRU 0' &(2 <(6 %$1. EHLQJ FRQIHUUHG WKH ÂżUVW Âľ%6( 6NRFK $ZDUG IRU %DQN ,QVWLWXWLRQ %XLOGLQJÂś E\ 0DQHND 6DQMD\ *DQGKL Honâ&#x20AC;&#x2122;ble Union Minister for Women and Child Development on June 11, 2015 at Mumbai

This award recognizes Mr. Rana Kapoorâ&#x20AC;&#x2122;s stellar professional journey of 35 years â&#x20AC;&#x201C; as an industry leader and banker par excellence. Mr. Kapoor founded YES BANK in 2004 and under his able stewardship, WKH EDQN KDV HPHUJHG DV RQH RI WKH ÂżQHVW ÂżQDQFLDO LQVWLWXWLRQV LQ WKH FRXQWU\ Additionally, Mr. Rana Kapoor, in his dynamic role as President of ASSOCHAM, has ushered in a wave of positive changes across key growth sectors at a national level. In the process, Mr. Kapoor has brought about a renaissance and reinvigoration amongst the 4 lakh+ member base of the 96-year old Apex Chamber of Associations.

Commerce and Industry of India

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Guest Column

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

partaking the digital transformation Non-banking financial companies have a major role to play in helping MSMEs realise their dreams

-commerce is not just the flavour of the year high rates that bleed their margins, setting a but is here to stay, given the reach, convevicious cycle in process. A report by the internanience and the changing consumer habtional finance corporation (ifc) estimates that its in india. recent government announcements the total finance requirement of the msme secalso stress the importance of the digital ecosystor is $650 billion, comprising demands of $520 tem. At the launch of digital india week, the govbillion as debt and $130 billion in equity. eviernment has laid out an ambitious plan to build dently, there is a strong need for somebody to broadband highways, universal access to mobile fund these msme’s dreams. connectivity and public internet access, thereby A J A y s r i n i v A s A n estimating to enhance internet penetration from on-banking financial companies (nbfcs) 300 million to 500 million, within two-and-ahave been playing this part for some time half years. A direct outcome of this will be seen now and the role of these institutions and their on the indian e-commerce industry. importance in funding such segments has been recent industry reports pegged the indian increasing. in the e-commerce space, nbfcs have e-commerce market at $13.6 billion in 2014 and started exploring ways and products using techforecasts that by the end of 2015, it will cross the nology to develop and assess credit filters like $16 billion mark. these reports estimate that the social credit score, integration with net banking e-commerce market has been growing at a cagr and accounting software for immediate reconciliation of realisations, integration with logistics of 37 per cent since 2011 and, within the next partner, online psychometric five years, it will be worth $100 tests, online de-dupe checks billion, contributing 4 per cent The International Finance across various databases of the to the country’s gdp. promoter and borrowing instiA look at the e-commerce Corporation (ifc) estimates that tution. the reliance on non-fiecosystem throws up interthe total finance requirement of nancial credit parameters will esting insights. the thrivbe critical for lending the much ing e-commerce market place the msme sector is $650 billion, needed unsecured liquidity to is being fuelled by a large comprising demands of $520 this segment. and growing pool of micro, trends support this and small and medium enterprise billion as debt and $130 billion in there are now examples of (msme) players, who are retailequity. Evidently, there is a strong e-commerce players realising ing through the larger marketthat critical to their growth place platforms like snapdeal, need for somebody to fund these is the growth of such vendors flipkart and Amazon. these and likewise the growth of msme s, which would have msme’s dreams. their funding options. As an had challenges in building example, e-commerce major their own distribution netsnapdeal it is believed runs a special targeted works, have found huge benefits in the reach programme, which facilitates its own sellers of the e-commerce players. in fact, according receiving loans from a panel of several nbfcs. to a recent report, snapdeal has 100,000 sme retailers, flipkart 30,000 and Amazon 25,000. if india is to grow at 8 per cent plus, the questhe e-commerce industry, on an average it is tion that needs to be asked is where will the fundsaid, sees 30,000-50,000 new sellers joining the ing come from. the domestic banking sector is platform monthly. dominated by the psus, which are still underdespite the acknowledged contribution of capitalised and unable to expand their book the sme sector to the economy, a recent statissignificantly without additional capital. india’s e-commerce journey promises to be powered by tic states that only about 33 per cent of msmes its small businesses and finding the right financhave access to funding from banks and financial ing partner for these businesses is critical. nbfcs institutions. this problem further compounds, given the significant drive by e-aggregators and potentially are the suitable answer to this but market places to allow more of such vendors the key to success is developing a robust seamThe author is ceo online. deprived of funds, these msmes have less model on the back of technology developed financial services credit filters. Aditya Birla group depended on other sources for liquidity at very u

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Central Asian odyssey

Modi’s five-nation tour had a five-fold objective

he break-up of the soviet union in 1991 led to the creation of central Asian republics which are resource-rich and share cultural and historical links with india. But, since india does not share a common border with any of the five central Asian states – uzbekistan, Kazakhstan, turkmenistan, Kyrgyzstan and tajikistan – and the land route was effectively blocked by pakistan’s refusal to allow road transport from india and the rise of the taliban in Afghanistan, bilateral relations never bloomed to their full potential. the region got sporadic attention from indian leaders. in fact, the ties have been kept alive by the visits of the leaders from the central Asian republics. uzbek president islam Karimov visited india in 1991, 1994, 2000, 2005 and 2011. last fortnight, however, narendra modi became the first indian prime minister to visit all five central Asian states during a single trip. the pm combined the trip with the brics and the shanghai co-operation organisation (sco) multilateral summits at ufa in russia. the sco summit saw the beginning of

Modi inaugurates the Traditional at an economic and conthe full-fledged accession Medicine and Yoga nectivity corridor linking of india to the organisaCentre, in Ashgabat, c central Asia. india, on its tion. the brics summit Turkmenistan part, is looking to speed was marked by the launch up its economic growth evelopment Bank of the development and central Asia has much to onvenand the pool of convenoffer in terms of raw materials and tional currency reserves. modi also met his pakistan counterpart, as a market for indian exports. “we nawaz sharif, on the sidelines of the see it as part of our extended neighufa summit to work out an agree- bourhood,” says a senior official of ment on resumption of the stalled the external affairs ministry. the recurrent themes of modi’s composite dialogue. the importance of modi’s visit to stops during the visit were enhancing the central Asian republic was under- connectivity and energy relations, lined by the fact that the region is combating terrorism, cementing back in the news for several reasons. defence ties and economic linkrussia under Vladmir putin has been ages. diplomatic observers see four trying to consolidate its influence in tangible outcomes of the modi visit. a region, seen as its ‘backyard’, given its fractious ties with the west after Securing energy needs its annexation of crimea – part of the the central Asian countries are former soviet republic of ukraine – resource rich. india is looking at in 2014. china has announced its silk investing and building partnerships road economic Belt initiative, whose in the region for natural resources to focus is developing economic corri- meet our rising demand for energy. dors among china, mongolia, russia, Kazakhstan, for instance, is one of central Asia, west Asia, southeast the biggest uranium producers in the Asia and south Asia. iran, which has world as it has a share of 38 per cent just successfully concluded talks to in the total output of the mineral. have western sanctions related to its Between 2009 and 2014, Kazakhstan nuclear programme lifted, is looking had provided india with 2,100 metric

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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

and could be a steady source of the resource for south Asia. the joint statement welcomed the establishment of the ‘tapi ltd’ special purpose vehicle for the project and the ‘leaders reaffirmed their strong commitment towards timely implementation of this strategic project’. timely completion of the project will be mutually beneficial for both india and turkmenistan, as the latter currently depends on oil exports to china for revenues and would find an alternate source after the completion of this project.

tonnes of uranium. in the renewed five year period contract (2015-19), india would get 5,000 tonnes of uranium. this would allow us to start operations in many nuclear plants, which are currently closed due to lack of fuel. the joint statement also made a mention of a feasibility study for ‘exploring the possibility of transportation of oil and gas either through pipeline or as lng from Kazakhstan to India’. in the coming years, the government should look at expanding engagement with Kazakhstan in the oil sector through ongc Videsh limited. the public sector firm recently started exploratory drilling in the satpayev block and should look at gaining a stake in other oil fields as well. A major landmark of india’s engagement with central Asia is the tapi (turkmenistan-Afghanistan-pakistan-india) project – an ambitious pipeline for transporting natural gas from central Asia to south Asia. the proposed 1,700-km pipeline is a $10 billion project, passing through Afghanistan and pakistan. turkmenistan has the world’s fourth largest reserve of natural gas

FTA with EEU india is mulling a proposal to sign a free trade Agreement (fta) with the eurasian economic union (eeu), which has russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia as members, and will see the inclusion of tajikistan later this year. modi’s visit could expedite the feasibility studies that are under way. An invitation to join the bloc was extended by russia, and a joint statement for establishment of a joint study group between india and the eeu was signed when commerce minister nirmala sitharaman visited russia recently. there are reports of iran, egypt and israel considering the possibility of signing ftas with the eeu.

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Vietnam too has signed an fta with the eeu. Linkages for ‘Make in India’ the pm’s central Asian focus had different strategic underpinnings from his earlier trips to us, china, europe and Japan where he was essentially looking at attracting foreign investment and convincing companies to set up or scale up production in india. for ‘make in india’ to succeed, india will have to improve its freight connectivity with other countries to promote exports. the international north south transport corridor (instc) is a ship, rail and road connectivity project for moving freight between india, iran, Azerbaijan and russia. the project promises to cut the costs involved in transporting goods to central Asia by 30 per cent. first mooted by india, iran and russia in 2000, with 10 more countries signing on to the project later, the route connects mumbai in india to Bandar Abbas port in iran and from there to another port known as Bandar-e Anzali in northern iran ran on the Modi pays tribute caspian sea coast. at the bust of Lal from there, goods Bahadur Shastri, are expected to in Tashkent, be transported to Uzbekistan

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Modi with the President of the Republic of Kazakhstan, Nursultan Nazarbayev

Astrakhan in russia and onwards to central Asia. india sees this route as shorter than the current one through the suez canal and the mediterranean sea. while the suez canal route takes 45-60 days, the north-south corridor will take 25-30 days. from india’s point of view, the northsouth corridor will help india bypass pakistan and yet reach out to central Asia. india is also looking at a second route through iran’s chabahar port that will help it join another transit corridor linking iran and oman with several central Asian republics. there were discussions over uzbekistan and turkmenistan joining the instc. modi also proposed that the Kazakhstan-turkmenistaniran rail link could get linked to the instc. discussions have also been initiated with Kazakhstan on a dedicated freight terminal. Support for UNSC seat like its predecessor, the modi government is working towards building

global support for its push for reforms in the structure of the un. there has been an effort to get as many countries as possible to endorse india’s claim for a permanent seat in the un security council. it is expected that these endorsements would help in initiating a larger multilateral dialogues on the agenda of unsc reforms and paving the way for india’s entry in the future. the central Asian countries voiced their support for a permanent seat for india. Countering Chinese Influence A key focus of the pm’s trips in the last one year has been to counter the growing influence of china in Asian and African economies. despite having strong cultural ties with many central Asian economies, india not been able to match china in economic and energy co-operation. hopefully, modi’s visit would help in advancing our strategic interests and enable indian firms to expand operations in central Asia. uzbekistan u 52 u

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has agreed to create favourable conditions for investments by indian companies. A joint Business council has been formed between india and Kazakhstan. there would be annual military exercises between india and Kyrgyz republic. tajikistan has sought india’s engagement in hydro power generation. But new delhi will have to keep in mind that building stable partnerships with countries requires regular follow up on bilateral discussions with solid action. A meeting between heads of state merely initiates the process. this is something that the chinese have been able to do with great success through private investments and intergovernmental deals. mindful of the fact that india does not share borders with any of the central Asian republics, modi stressed the themes of connectivity and invoked india’s cultural linkages with central Asia during each stop. “we share deep historical, cultural and civilisational links. tajikistan is

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the nearest to india among all central Asian countries. we are separated by a narrow corridor. our linguistic links are the closest in central Asia... we discussed measures to tap the rich potential in trade and commerce and to encourage joint ventures and investments,” modi said after meeting tajik president emomali rahmon. “we agreed to further strengthen our defence co-operation. it is a strong pillar of our strategic partnership,” modi odi said of ties with elhi has tajikistan. new delhi developed the Ayni air PM and the base in tajikistan as well President of Kyrgyz as operated a field medRepublic, Almazbek ical unit at farkhor Air Atambayev, Base, where the wounded Kyrgyzstan orthern Alliance Afghan northern alifighters – opposed to the taliban – were treated between 1996, when the hardline islamist militants took Kabul and 2001, when they referring to the proximity of were routed by the us-led alliance. both tajikistan and india to Afghanistan and pakistan, modi said: “we are both located in the proximity of the main source of terrorModi with the ism. combating terrorism President of and extremism has always Tajikistan, been an important and Emomali Rahmon at productive area of co-opthe bust of Gurudev eration. At a time of growRabindranath ing threat of terrorism, we Tagore have resolved to intensify our co-operation further.” combating terrorism, especially with an eye on the increasing influence of the sunni hardline islamic state of iraq and the levant (isil) in central Asia, was a theme modi referred to in his other stops in predominantly muslim central Asia. in Kyrgyzstan, modi said both countries had a “shared interest in combating extremism and terrorism that has become a threat without borders”. there were pacts to boost co-operation in medicine and information technology. india is also looking at tapping the country’s enormous hydel power potential. in turkmenistan, modi pushed for the early realisation of a gas pipeline starting from that country and running through Afghanistan and pakistan onwards to india (tapi), as well as for connectivity between india u 53 u

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and turkmenistan. “the most significant initiative in our relationship is the tApi gas pipeline. this could transform regional economic co-operation and bring prosperity along the route... we underlined the need to implement the project quickly,” modi said. the two sides signed seven agreements including one to boost defence co-operation. in Kazakhstan, india and the Kazakh government signed five agreements that included sectors such as defence, railways and uranium supplies. “we are pleased to have a much larger second contract for purchase of uranium with Kazakhstan and expanding our civil nuclear co-operation,” modi said after talks with Kazakh president nursultan nazarbayev. “Kazakhstan is our biggest economic partner in the region. we will work together to take economic ties to a new level,” he added. during modi’s uzbekistan visit, both sides discussed strengthening bilateral economic relations, the possible spillover effects of militant islam from Afghanistan, ways to improve connectivity with the landlocked central Asian nation and implementing the contract for supply of uranium from mineral-rich republic. u rAKesh Joshi rakesh.joshi@businessindiagroup.com

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An impressive show

Housing finance players have maintained momentum despite a slowdown in the realty market

dfc ltd, indiaâ&#x20AC;&#x2122;s premier housing finance company, saw its loan book growing by 16 per cent (y-o-y) to `2,28,200 crore during the financial year ended march 2015. during the same period, lic housing finance, the second largest mortgage finance player, reported a growth of 19 per cent in its loan book of `1,08,400 crore, while dewan housing registered an increase of 24 per cent in its loan outstanding to `51,000 crore. for indiabulls housing finance, the annual growth was 30 per cent to `46,000 crore, while pnb housing financeâ&#x20AC;&#x2122;s loan book expanded by as much as 59 per cent

to `16,800 crore. other relatively smaller housing finance players such as repco home finance, canfin homes, gic housing finance and icici home finance also witnessed a significant growth, ranging from 15 per cent to 40 per cent. Backed up by this impressive growth in their loan books, shares of these hfcs have also risen 17-77 per cent in the last one year, even as the benchmark sensex managed just 8.3 per cent of gain. shares of hdfc have moved up by 40 per cent in the past one year, while lic housing finance has surged by over 50 per cent. dewan housing gained 17 per u 54 u

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cent and shares of repco have risen 40 per cent. the top-most performer has been indiabulls housing finance, whose shares saw a phenomenal rise of 77 per cent in the last one year. the overall home finance market has seen a robust credit growth of 22 per cent during 2014-15. in fact, the market has been growing at a cagr of over 21 per cent for the last four years. of the total loan book of hfcs, individual housing loans constitute about 73 per cent. the balance is made up of construction finance (13 per cent), loan against properties (8 per cent) and corporate loans (6 per cent). the domestic individual housing loan market is currently pegged at `10.6 lakh crore (2014-15), as compared to `8.9 lakh crore in 2013-14 and `7.5 lakh crore in 2012-13. in

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Portfolio composition of HFCs Individual home loans

73%

13%

Other Loans against corporate loans properties

Construction finance

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pA l A s h r A n JA n B h Au m i c k

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fact, in the last five years, the market has almost doubled from the `4.5 lakh crore it stood at in 2009-10 “the housing credit has grown steadily over the last five years or so. Almost all players have witnessed impressive traction in their loan books with stable profitability indicators. moreover, they have been able to maintain the asset quality,” says Vibha Batra, group head, financial sector ratings, icra ltd, who believes that hfcs will continue to maintain this momentum in the coming years as well. importantly, this kind of growth in the housing finance market has come at a time when the real estate sector has been passing through a sluggish period for some time now. sales have been down. in locations

like mumbai and delhi-ncr, developers have been struggling to keep themselves afloat in the wake of unsold inventories. According to Brookfield financial, at the end of Q1 2014-15, the total unsold inventory across the top seven indian cities was 7,39,588 units, of which mmrmumbai and ncr-delhi account for 28 per cent and 31 per cent, respectively. Besides, the launch of new residential units also declined by 33 per cent from 66,114 units in Q4 2013-14 to 44,062 units in Q1 2014-15. challenged with this slowdown in demand, the real estate industry has faced liquidity crisis, even as banks and other traditional funding sources have gone slow in supporting the sector. developers have been forced to restrict the supply by either shelving project launches or delaying them for an unlimited period. property prices in all major cities have more or less been stagnant after seeing highs in 2007-08. on the one hand, this has prompted investors to move out from the market while, on the other, actual buyers have been adopting a ‘wait and watch’ stand through most of the period in the past, in anticipation of correction in property prices as also reduction in interest rates. “though the last couple of quarters have been favourable for the real estate sector with the rbi reducing key rates in the backdrop of moderation in inflation as also government’s initiatives as regards housing for all by 2022 and smart cities, the market is still to gain its due size. in fact, the last few years, have been quite depressed for the real estate market, where

Mistry: affordability levels gone up

developers found it tough to sell their inventories,” says Anshuman magazine, chairman & managing director, cbre south Asia pvt ltd. “the residential market has been moving slow for the last few years on account of various micro and macro issues, even as fundamentals continue to be intact. things are gradually stabilising and we can expect some momentum in the next 12-18 months,” states shashank Jain, executive director & partner, transactions group, pwc. New opportunities despite this subdued real estate demand as also a tough operating environment and low affordability levels, the housing finance market has shown not only a great deal of resilience but also an impressive growth. As a changed strategy, most of the players have diversified their loan portfolio and tried to venture into smaller locations (tier ii and iii cities) where the real estate markets have continued to be steady, backed by actual users. these cities have seen not only rising incomes, but also an increase in organised supply of housing with the emergence of a new local builder community. even some of the established developers have also entered these locations in order to explore the opportunities.

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in fact, some of the new hfcs have grown by over 50 per cent. But, despite catering to these newly emerging segments, the quality of overall assets has not been impacted. “there is a huge population which is underserved,” says sujan sinha, managing director & ceo, shriram housing finance ltd. most of them are self-employed and don’t have access to organised funding. this is where we see a massive opportunity. in fact, in the last four years of our existence, we have witnessed a significant growth in our portfolio, where almost 95 per cent customers are self-employed in the unorganised sector of the business”. “we have been able to maintain the growth momentum on the strength of our focused approach and targeting customers from self-employed and affordable housing segments which offer higher growth potential,” says V. raghu, executive director, repco home finance ltd. “geographically, we have focussed on smaller cities and will continue to pursue this strategy going forward as well”. repco saw its loan book growing by 29 per cent to `6,000 crore in 2014-15, even with almost 80 per cent of its customers being self-employed and casual labourers. “the retail home loan category continues to be our primary focus. As a distinct strategy, we look at selfemployed customers and have product offerings that become attractive for this group. that strategy has

helped us grow the book. As we move forward, affordable housing is a priority for us with increased footprints in tier ii and iii cities, where the ecosystem of organised housing supply is gradually building up,” says Vasu ramaswami, ceo, l&t housing finance, which came into being in october 2012, after l&t finance holdings acquired indo-pacific housing finance. its loan book grew from `2,000 crore in 2013-14 to about `4,000 crore in 2014-15.

Supply overhang while smaller housing finance companies have grown briskly from a smaller base, bigger players have also kept their pace intact despite real estate sector headwinds. they have aggressively diversified their portfolio by building specialised capabilities to face the challenges in a more Sinha: huge population underserved effective manner. over the last few years, they have also expanded their moreover, there is now a bigger reach in the smaller cities and also emphasis on building stocks in the tried to serve the large customer base mid and affordable segment, where of underserved population in a bid the demand-supply mismatch is to negate the downturn in the bigger only increasing. several housing cities. interestingly the perceptible finance companies are also focussluggishness in the market is also due sing on a huge underserved self-emto the fact that investors who constiployed population with small-ticket tuted almost 30-40 per cent of the housing loans. there is also emermarket demand earlier, have left the gence of newer housing finance playreal estate market. And these invesers, which are primarily focussing on tors are not the target market of hfcs small ticket loans of `5-15 lakh and reporting a phenomenal growth. – big or small. According to an icra report, a numunlike actual buyers, these investors have never depended on home ber of smaller hfcs have entered the loans for buying properties and, niche space of affordable housing and hence, even if the self-employed real estate marcustomer segPeer comparison ket has slowed, ments. these Housing finance company Loan book Gross NPA ROA ROE the actual buysmaller hfcs have (` billion) Growth y-o-y (%) (%) (%) (%) ers have continbeen growing HDFC 2,282 16 0.7 2.5 20.3 ued to buy and at a much faster LIC Housing Finance 1,084 19 0.5 1.3 18.1 support the marpace than their ket to a great larger counterDewan Housing Finance Corp 510 24 0.8 1.3 15.1 extent. moreover, parts but again Indiabulls Housing Finance 460 30 0.9 3.7 30.8 the supply overon a miniscule PNB Housing Finance 168 59 0.2 1.3 15.6 hang plays a large base. for 2014-15, Gruh Finance 89 27 0.3 2.5 30.9 part in the case smaller hfcs have Canfin Homes 82 40 0.2 1.2 14.1 of those highreported a portICICI Home Finance Co 77 15 1.8 2.5 13.1 end properties folio growth of Sundaram BNP Paribas Home Finance 68 7 2.5 2.0 20.0 where prices are over 30 per cent, GIC Housing Finance 66 24 1.7 1.7 16.2 too high. most of as compared with Repco Home Finance 60 29 1.3 2.2 15.9 the builders who about 19 per cent entered the highin the case of As on March 31, 2015. Source: ICRA end segment larger players. u 56 u

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during the peak period of 2007 in portfolio is accounted for by retail anticipation of making a big money, loans, while the average ticket size are currently struggling to find buy- hovers around `20 lakh. ers. they have not been able to reduce the indian market continues to be the prices either due to high cost of highly underserved. mortgage peneland and other inputs. major markets tration in india is at a nascent stage like mumbai and ncr have been the with housing credit as a percentage to gdp at a meagre 8.2 per cent, as worst affected ones. “no doubt, the real estate market against over 50 per cent in develhas been down. But the fundamen- oped economies like the us and the tals continued to be strong across all uk. (it is now almost forgotten that locations. primarily, affected prop- for almost 50 years after indepenerties are those where location and dence the rBi banned banks from pricing have not matched the buy- giving housing loans. the construcer’s expectation. this took some toll tion industry was tarred as a speculaon the sentiment of actual buyers tive activity!) this provides massive also in the short term. But overall, potential to the market, which has the locations with the right kind of been expanding in the backdrop of housing stocks have generated rea- favourable micro and macro-ecosonably good response,” says Amit nomic indicators. with rising dismodi director, aba corp, a noida- posable income and tax incentives based developer & vice-president, by the government, affordability has improved over the years. with Hooda: all set for the next phase credai, western up. “genuine home buyers have the demographics favourable, where always been present in the mar- 60 per cent of indian population is provided by the government,” says ket. unlike major cities, smaller cit- below 30 years of age and only 31 keki mistry, vice-chairman & chief ies have shown steady progress. this per cent of population is urban, the executive officer, hdfc. with hdfc, is where a big chunk of demand has demand for housing and home loans the total loan book is `2,28,200 come from. the rising income levels has grown unabatedly. currently, the crore (2014-15), about 71 per cent in these locations have given rise to urban housing shortage is estimated is individual home loans, while the many first time home buyers. more- at 18.78 million units. remaining 29 per cent is constituted over, government’s focus on affordby corporate/construction and other able housing has encouraged more Huge demand expected loans. while its individual home and more projects coming up in this “the mortgage penetration in india is loans have grown (y-o-y) by 17 per space,” states harshil mehta, ceo, abysmally low at present and, hence, cent, the non-individual segment there is enough room for improve- has increased at a slower rate of 14 dewan housing finance ltd. ment. given the favourable demo- per cent. hdfc’s average loan size hfc s have also been innovative and come out with customised and graphics that we as a country enjoy, was about `23 lakh for 2014-15. market specific products. in one such we anticipate generation of huge “At present, the market for housing move, there are concerted efforts by demand for home loans in coming loans is quite small in india. A large the lenders to keep the emis of loans years. over the years, the affordabil- population in smaller cities and rural unchanged by increasing the tenure ity level has also gone up with ris- locations has no access to home loans of the loans during the higher inter- ing incomes and fiscal incentives and this is where the huge opportunity lies for all the est regime. furplayers. going ther, they have Portfolio mix and growth forward, these tried to enhance locations will also their exposure to Loan growth (%) % Share receive favourable individual/retail Home loans Other loans Total loans Other loans Home loans supply side in the loans by keeping 27 25 29 25 25 wake of governa check on con27 26 ment’s various struction/corpo24 24 24 24 22 75 75 75 73 21 22 20 initiatives. the rate loans. this 71 19 19 17 market is all set to has helped them 15 15 enter into its next in offsetting the growth phase,” slowdown in this states Ashwini segment of their hooda, deputy portfolio. cur2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 managing direcrently, about 75 Figures ending March. Source: ICRA tor, indiabulls per cent of their u 57 u

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solution (ocas) for instant approval of home loan applications. it has over three million home loan customers, with an individual home loan portfolio of about `1,60,000 crore. “over the last few years, we have also diversified our portfolio. given the low penetration, there is massive scope to further enhance our reach. moreover, through initiatives like project tatkal, we are aiming to revamp our processes to achieve higher efficiency,” says Jayanthi lakshmi, chief general manager, real estate, habitat & housing development, sbi. currently, the banking sector commands 63 per cent of the housing credit market, while hfcs, along with nbfcs constitute the remaining portion.

on both the growth and profitability front. mono-line business with domain expertise, lower operational cost and alm portfolio remain key positives. even when compared on the asset quality front, hfcs have performed quite well,” says deven choksey of k.r. choksey securities. According to an icra report, hfcs have been able to maintain their asset quality, despite the increase in interest rates in the recent past. the gross npa stood at 0.70 per cent as on march 2015, as compared with 0.74 per cent as on 31 march 2014. the experience has been that most people are mortally afraid of losing their homes. so that even if there are delays in making payments on home loans, usually the borrowers pay. in this manner many npas get Banks vs HFCs however, analysts believe that, in regularised too over time. however, the medium to long term, hfcs will given the increased focus of some of increase their market share in the the players on relatively risky prodMagazine: glimmer of hope wake of their focussed approach. ucts (like loan against properties and their expertise and domain knowl- builder loans) and the change in the housing finance ltd. As per Anil kothuri, ceo, edel- edge will be of real use when they borrower profile towards the selfweiss housing finance ltd, the over- diversify their portfolio into the employed segment (where income all market dynamics is gradually underserved population. Besides, streams could be more volatile) this changing. the market is becoming they are also targeting high-growth could lead to some increase in the broad based and thus there is trac- segments like affordable housing and npas from current levels. neverthetion in demand. with the changing self-employed customers. hfcs will less, the strong monitoring and condemographics and inclusive growth, also benefit due to their superior ser- trol processes, borrowers’ own equity a large latent population is turning vice levels. however, banks are also in the property and the large prointo a potential customer base for likely to maintain a sizeable share portion of borrowers staying in selfhome loans, and hfcs are trying to of the market, given their competi- occupied property could reduce the tive interest rates, considering their impact of the above mentioned conreap this opportunity. in order to explore the potential extensive network and broad cus- cerns on asset quality to an extent. in the home loan market, the coun- tomer base, access to stable low-cost “overall the gross npa for hfcs is try’s largest home loan lender state funds, and their compulsion to meet expected to remain range bound Bank of india is also gearing up. it priority sector lending targets. between 0.7-1.1 per cent over the “in our view, hfcs will stand to medium term,” views the report. has recently launched an initiative to provide doorstep services and expe- gain given the resilience exhibited Backed by stable asset quality, hfcs dite the home have also been loan application able to maintain Market size & break-up of home loan portfolio among HFC & banks process. the initheir profitabiltiative, known as ity indicators – Total housing credit % Share (` trillion) ‘project tatkal’, return on Assets Bank HFC and NBFCs will help get the (roA) of 2.2 per 63 70 64 64 69 66 loan within 10 cent and return 10.6 days after receipt on equity (roe) 8.9 of the applicaof 18.8 per cent 7.5 tion form and rel– for 2014-15. 6.3 5.5 evant supporting “we expect that 4.5 36 37 36 34 31 documents. the hfc s will con30 bank has recently tinue to maintain also introduced this momentum, 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 an online cusgoing forward, Figures ending March. Source: ICRA tomer acquisition as well owing to u 58 u

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are not long dated (average maturity of 3-5 years) and many have reset clauses, thus giving the hfcs some flexibility to reset the rates. “At the same time, given the limited sources of long-term funds to match the tenure of home loans (average maturity: 8-10 years, including prepayments), asset liability management continues to remain a challenge for hfcs,” says the report.

Jain: gradual stabilisation

reasonable growth expectations, stable/softening interest rate environment and stable asset quality,” says Batra. investor sentiment for the housing sector has also improved as reflected by the recent capital infusions to the tune of around `1,800 crore in various hfcs in 2014-15, reporting gearing levels of 7.5-8.0 times. According to an icra report, hfcs will need additional external capital of `18,00028,000 crore to grow at 20-22 per cent over the next five years, assuming an internal capital generation of 16 per cent, while maintaining the capitalisation levels (7.0-8.0 times) at current levels. part of this capital could also be in the form of mortgage guarantee from government or the national housing Bank (nhb). As for the funding mix, the hfcs have a diversified funding base with the larger players being more active in the debt market and their smaller counterparts relying more on bank funding and nhb refinance. As per icra’s estimates, 40-45 per cent of the hfc borrowings were at fixed rates of interest, which could pose an interest rate risk for these players in a declining interest rate scenario. however, the risk is somewhat mitigated by the fact that these borrowings

Change awaits Apart from the growth in loan outstanding, the domestic mortgage market is heading for a structural change. while the market continues to be dominated by the five large groups (sbi, hdfc, lic housing finance, icici group and Axis Bank, accounting for 60 per cent of the total housing credit), there is emergence of a number of new hfcs, which are targeting newly-emerging and fast-growing segments of affordable housing and self-employed customer segments. “entry of more players will help increase the penetration levels of home loans and set up a mature base. going ahead, these hfc s, along with nbfc s will make the market more homogenous and ensure an inclusive growth to take the market to its next second phase of growth,” says d.r. dogra, managing director & ceo, care ratings, who believes that the home loan market will grow in a very steady manner in the medium to long term. on the supply side, the government’s recent initiatives to provide housing for all by 2022, as also the creation of smart cities, will go a long way in putting in place the right kind of atmosphere to create a robust mechanism for organised supply pipeline for housing stocks in smaller and newer locations. Also with better roads and metros being built it becomes easier to build at greater distances from city centres where land costs can be much lower. moreover, various state governments have introduced initiatives to encourage developers to launch projects in the affordable housing space. “on the financing side, relaxation of regulations for the affordable housing sector such as higher loan to value (ltv) u 59 u

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Ramaswami: Tier II, III cities will develop

ratios (such as inclusion of stamp duty charges, etc, for calculation of ltv) and lower interest, long-term bonds for affordable housing with relaxations on crr/slr requirements are likely to improve the fund flow to the segment,” says the icra report. with all these developments in place, the domestic housing finance market will not only continue to maintain its growth momentum, but also achieve better growth rate in the wake of improving micro and macro economic indicators. the real estate market has almost bottomed out and is expected to regain its sheen in the next few quarters. the government’s various policy measures to streamline the sector will gradually start showing positives results. Besides, its impetus on affordable housing, will not only create much needed housing stocks, but also help build a suitable ecosystem on a much wider geography. this along with hfcs thrust on smaller locations will help broaden the market base and thus bring in the much desired depth in the market. investors are already evincing their interest in the space and this will also help hfcs to garner the much needed capital at competitive prices for future growth. u A r Bi n d gup tA feedback@businessindiagroup.com

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King gets it right A

s many as 14 teams from india were in the fray at the final leg of the india tournament of the Audi Quattro cup, held in the picturesque Kemmer course in istanbul, last fortnight. these teams were the winners of the 13 regional tournaments held in india which saw around 1,500 golfers participate. the winning team will be participating in the 25th global Audi Quattro cup, competing against the 54 global teams, each winners from their respective countries which collectively had 90,000 golfers in the fray. last year the indian team had come fourth. Joe King, country head, Audi india, an ardent cricket lover, was practising his swings at the first course. on being asked about his handicap, King questions “starting with the swing, the putt...?,” with a dead-pan expression. Behind the nonchalant, devil-may-care attitude of the wannabe golfer it is difficult to perceive the mind of an astute professional at work. “golf is a great way to engage with the customers, it’s a competitive sport, it’s one that anyone can play, and with a handicap system it’s something that is open to everyone,” he points out adding that “Audi is a brand for young achievers and Audi Quattro cup is an important platform for us to engage with them in a sporty, progressive and sophisticated manner that is synonymous with the Audi brand.” A 47-year veteran with over 25 years in the automobile sector in Australia, having worked with the best global leaders including toyota and bmw, King took the reigns as the country head on 1 september, 2013. having made his mark in building up the distributor network for Audi in Australia earlier, King was the natural choice for the indian markets. “opportunities certainly lie in an exciting market; even more so in an exciting country and culture,” King had pointed out in an earlier article in Business India. (see King of roads, Business India, may 12, 2014). leveraging on the strong foundation laid by his predecessor michael perschke, Audi has been able to retain the top spot in the estimated `35,000 crore

Audi India has got its strategy right to emerge as the luxury car leader in India u 60 u

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luxury car market for two years in a row. in fy15 it clocked double digit growth to sell 11,292 cars, up from 10,851 in fy14 and 10,002 vehicles in fy13, ahead of its two competitors mercedes-Benz and bmw, (see chart). while Jaguar cars are increasingly visible particularly in mumbai and delhi, tata’s jlr sales have yet to make a significant impact in the industry. it is difficult to get quarter by quarter data of the companies, and it is quite possible that between the three luxury car manufacturers, competition is heating up with everyone trying to get back at the top slot which Audi india had wrested, within 7 years of its operations in india. King does not, however, like to bask in the glory. “i think that the no.1 story is not the most important thing. At the end of the day, it’s the way forward and the way we have got here which are more important.” for 2015 Audi had planned 10 product launches across all segments – A range, the Q range and the performance car range. King does not believe in taking the trodden path followed across the globe. of the 5 launches done till now, it took the lead in launching the first open car, the Audi A3 cabriolet. King, who is not averse to taking risks, also took the lead in bringing the first entry hatchback with manual transmission.

Good strategies King claims that leadership is not about launching a slew of products or sales volumes. “it is about bringing in the right product that our customer wants, a wide area network and after-sales service, profitable dealer partners, and a strong customer connect. if you get all of this right, you can continue to grow and lead. these four pillars are all interrelated. the strategy that we followed has held us in good stead so far, and we will continue to follow it going ahead.” King has invested heavily in manpower to get the right dealers. to groom talent many of the front-end facing employees have undergone the global certification tests. King often travels across india to get a first-hand feel of the changing consumer preferences and building customer connect. Audi was the first

amongst the three luxury car producers to open a dealership in guwahati, in the northeast. Audi also connects with its customers through social media and organises events through the Audi club. recently it did an event in the Jim corbett park and Kabini to see tigers, where customers drove down in their own cars. for Audi it gives them a weekend to mingle freely with the customers and get a first-hand view of their experiences and suggestions. Besides strengthening emotional bonding through such events King feels that it is important to build loyalty amongst customers. “i think our ability to listen to the customer and bring in the right product at the right time has got us where we are today and that will take us further in the future.” the company undertakes other initiatives of organising getaways for its members.

Top gear

2012*

Audi

Mercedes-Benz

BMw

9,003

6,840

9,375

2013

10,002

9,003

7,327

2014

10,851

10,201

6,812

2015

11,292

–

* April to March

– Source: Industry

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King’s speak Joe King speaks to Daksesh Parikh on the sidelines of the 25th Audi Quatro Cup Tournament held in Istanbul, recently. The final team from the tournament will represent India in the tournament in Mexico later in the year. King speaks on diverse subjects including Audi’s vision and strategies to stay ahead in the luxury market for cars Are you happy with what you have achieved in the past two years? You would be completing two years in India? I am the sort of person who never looks back much, I am always looking forward. So I think when my time in India is done, that would be a time to look back on what’s being achieved. I believe one needs to have the right strategy and stay focussed on what is to be done. Our consistent performance reaffirms my belief that this is the right approach. There are always things to do and that keeps me motivated and going. we can always get better and that is what we are working on and that is the approach we take every day. When you came to India how did you reach the pole position in such a short time? It has been a wonderful journey for Audi in India and in 7 years, we have come from zero to the No. 1 position. I think that the No.1 story is not the most important thing. At the end of the day, it’s the way forward and the way we have got here which are more important. we are here for the long run. It’s a marathon where you have to get the fundamentals right. It is a bit like the government policies, you can be a populist and push to become No.1 and say hey that’s great. But at the end of the day, it’s got to be sustainable, it’s got to be profitable and it’s got to have a strong foundation because there is absolutely no doubt that the market tomorrow could triple or quadruple overnight. But in any developing country, you could also see a rapid decline so you have to have a very strong fundamental in place to be able to handle the peaks and falls. What have been your winning strokes?

For us, leadership is not just about launching a slew of products or sales volume; it is about bringing in the right product that our customer wants, a wide area network & after-sales service, profitable dealer partners, and a strong customer connect. If you get all of this right, you can continue to grow and lead. These four pillars are all interrelated. The strategy that we followed has held us in good stead so far, and we will continue to follow it going ahead. If you look at the network footprint, we’ve invested with partners who own their territory, so we have an excellent dealer network. we have 23 investors who cover our 40 dealerships, soon to be 42. we have expanded with our partners. we have been the first to move in to new territories like Guwahati where we are the only one in the entire Northeast, which is a very important market for us. The second thing is we have invested a lot in manpower development so almost 95 per cent of our customer facing staff has gone through a global certification process. we are focussed on the right manpower and the right products, both of which are very important. Audi India continued towards its commitment to offer world-class products suited for Indian customers at the right time. Did your nontraditional strategies pay? we have demonstrated that we are prepared to take risks with the products that we introduce in India. As always, Audi has taken the lead in launching segment first products like the Audi A3 Cabriolet (open top car) and the Audi RS6 Avant, they are really important for us strategically as we opened up new segments with these models as these are new body styles. Instead of bringing in an entry luxury hatchback, we brought in an entry luxury sedan because we

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felt that’s what the Indian consumers have been looking for and I think we have been proven right with that. we brought in manual transmission in a luxury car, the only one to have done so and it’s been a phenomenal success in the Audi Q3. And then finally I think our customer connect has been extremely strong which has enabled us to make the right choices. I think our ability to listen to the customer and bring in the right product at the right time has got us where we are today and that will take us further in the future. Looking back do you recall any event/incident which you felt would really change the equation in the market? Yeah, I think one of the critical things we did was to introduce the sedan rather than a hatchback in Audi A3. I think that was a key movement. I think it showed the market that we are willing to take risks; we aren’t just prepared to bring every model. And I think manual transmission in the Audi Q3 was also

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term and it’s exactly the way we need to approach the market. What is your strategy for the future? Are you looking at getting into all price points? Our strategy is not to bring every model that is available in the world. we are very circumspect about which models we bring and they would have to make sense not only from a strategic point of view, but mostly from a customer point of view. Do you see the potential of the market doubling in the next five years? I don’t like to limit what the market could do because I think a developing market could do a lot more than double. The market could really take off in the coming years and I think what the Modi government is doing is very good and the fundamentals of the economy are very strong. So we could see a period of very rapid growth. I wouldn’t like to say it will only double in five years, it could double next year quite easily.

important; that was my predecessor but it was a very critical decision because it proved that we are a brand with a long term strategy and we are prepared to take risks in the market. How does Audi ag in Germany perceive the Indian market? India is a key strategic market so we are considered in the top 10 even though we are not huge from a volume point of view. what this means is we are present in almost all monthly meetings in the Audi ag board for a review and present our understanding of what’s happening here. India is a strategic focus market for Audi ag, and one amongst six Technical Reference Markets globally (Germany, USA, China, Japan, Russia). Audi also inaugurated the Audi Technical Service Centre in Mumbai, a pioneering step towards strengthening Audi’s after-sales service in the market. we also organise Focus Group Discussions where the team of Audi ag comes down to understand customer perspective via customer forum. we are keyed in the long

What will prevent your competitors from doing something which you are doing, better connect with the customers or better connect with the dealers? My motto always has been – those who follow will never lead. we are really not competition-focussed; at the end of the day, my job is to create the best foundation and the best long term solid business growth of the Audi brand in India. And that’s what I will work on as long as I am here. You need to have the best network; at the same time, you need to have a really strong customer connect. Our consistent performance reaffirms our belief in our strategy. Consumer tastes are so fickle. How do you plan to counter this? You need to have a long term perspective there. A lot of cars have been here a bit longer than their lifecycle and are now going through a change. So there will certainly be some more going ahead. It’s not about looking at everyday sales; it’s about ensuring that we have a really good business for the future. u

with a view to maintain customer loyalty, Audi has launched a buyback scheme which allows a customer to merely hand the car back and buy a new car. Audi Approved plus certifies used cars to open up a new market for Audi to resell customers’ cars to new buyers and supports the resale value. in a bid to counter the perceptions that Audi parts are not available across india, Audi opened a new warehouse in Bangalore. this is in addition to the existing ones in delhi ncr. About 98 per cent of its parts are available in the country. the company claims that its warehouse strategy has really helped and also ensured that the total cost of ownership of Audi is as low as possible. King claims that “we are not here to make a quick buck, we are not here to throw every last car at the customer. we are here to build a long term relationship with the customers and maintain a position as a leading luxury manufacturer not just leading from a volume point of view but leading from a reputation and a customer experience point of view.” Bright future given that the total market for luxury cars is limited with not more than 34,000 annually, india still remains high on the radar of its parent Audi ag. it is a strategic focus market for Audi ag. Audi is clearly taking long term bets on india. with a view to mitigate shortage of trained technical manpower in future, Audi has initiated the technical Apprenticeship programme (tap) in collaboration with three training institutes in india. tap is specific to Audi’s syllabus and is designed to generate a ready pool of industry ready professionals. while King does not like to speculate on the scenario, five years down the line, he is quite optimistic. An ardent fan of modi, King believes in favourable conditions, “i wouldn’t like to say it will only double in five years, it could double next year quite easily.” hopefully with the rise in incomes and the increase in the hni class, King’s call may well come true. u dA K s e s h pA r i K h daksesh.parikh@businessindiagroup.com

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Ready for take-off

sA n JAy Bor A de

at the centre under Atalji, he gave the country a vision for infrastructure development, and as a result roads emerged as a sunrise sector. As young excited entrepreneurs, we also decided to jump into it, eager to participate in the upcoming opportunity,” explains Jain. the company has not looked back since then and dbl soon expanded its presence to six more states – tamil nadu, telangana, Andhra pradesh, Karnataka, uttar pradesh and rajasthan. today the company’s core business is undertaking engineering & construction projects across india in the roads, irrigation and urban development sectors. “As a result of the natural growth of our road construction business, as well as the recent government support to the infrastructure sector and rising opportunities in new business areas, we have expanded into irrigation and Suryavanshi urban development businesses and Jain true go-getters too,” says Jain. the company’s Dilip Buildcon moves to cover a dozen states, net/unexecuted order book as of september 2014, is `5,665 crore as a part of its pan-India mission (2.4 times its revenues for 2013-14), consist of 28 third party road epc projects, two of its own road bot ilip suryavanshi and deven- Builders Association. Jain, younger of the two partners, projects, two irrigation projects and dra Jain have many things in common. they are both sons is ed & ceo, dbl, who joined the two urban development projects. of government servants, did civil company in 1995, after a stint as an Although dbl has been in busiengineering, but did not follow the assistant professor at mahatma gan- ness for around three decades, it has footsteps of their fathers, deciding dhi college, Bhopal. he looks after grown at a blistering pace only over instead to get into business. they are project-implementation and ensures the last five years (see Financials). As a also extremely driven and motivated timely completion of the projects private sector road-focused epc conindividuals, with an unquenchable undertaken by dbl, which has won tractor, during the five and half years, thirst for excellence and innovation. the company many ‘bonuses’. the the company has completed construcsuryavanshi, with over three duo, together with their families, tion of 47 road projects in madhya decades of experience in construc- hold 90.25 per cent in dbl. the bal- pradesh, gujarat, himachal pradesh tion industry, is founder & cmd of ance 9.75 per cent is with a private and maharashtra with an aggregate the `2,322 crore (march 2014) dilip equity firm, Banyan tree, which had Buildcon limited (dbl). Armed with invested `75 crore in 2012, but is lookFinancials a degree in civil engineering, he ing for an exit in the forthcoming ini(` crore) started his entrepreneurial journey as tial public offer (ipo). the company 2,384 Total income a builder and developer in 1988-89, has already filed a drhp with the capEBIDTA 1,919 when he set up the proprietorship ital market regulator, sebi. soon, dbl firm dilip Builders in Bhopal. in the expects to be a listed entity. initial years, construction of buildin the early days of its existence 1,190 ings for commercial purposes was his the company focused on construcmajor focus area. “subsequently, with tion of residential, commercial and the growing emphasis on infrastruc- office buildings, all centred around ture development in the country, mp. At that time the company’s cli473 525 437 especially in madhya pradesh, we for- ents were various government depart264 233 93 42 ayed into construction of roads and ments, private developers such as highways,” says suryavanshi, who Ansal, psus and banks. “however, in 2010 2011 2012 2013 2014 is also president, madhya pradesh 1997-98, when bjp came into power

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length of approximately 5,367.83 lane kilometres, achieving a 78.44 per cent continuous year-on-year revenue growth for the four financial years till march 2014. dbl completed construction of over 5,000 lane km of road projects since 2009. “we use in-house production facilities to make many of the essential structures, sections or components used in the projects to ensure highquality, low-cost and timely supply. thus, we have a competitive edge in terms of cost-effectiveness and quality of work,” adds suryavanshi,. dbl is also unique from its competitors as it owns the equipments it uses. it maintains a modern equipment fleet of 4,723 vehicles and other construction equipment, made by big names, such as caterpillar, schwing stettar, metso, wirtgen, to name a few. these equipment’s are managed and tracked through gps. dbl is also one of the large employer in the country’s construction industry having a full time staff strength of over 12,000 on its rolls. “the company’s success over the last few years can be attributed to a combination of factors, including the ability for successful and timely execution of epc projects, its focus on geographically clustering the projects for efficiency and profitability. the substantial investment in, and efficient use of, their construction equipment bank and in-house production of structural parts for the projects is also another of the firm’s strengths. it has managed to complete most projects ahead of the respective scheduled completion dates,” observes c. Venkataramana, md and co-promoter sunil hi-tech, who was earlier md, essel infra.

during his essel days, Venkataramana had identified dbl as a company to reckon with and had sub-contracted major work to it. this included the first 25 km ratlam road built at a cost of `120 crore (in 2008), which dbl delivered six months ahead of schedule. “they are true go-getters and are getting into the league of the l&ts of the world”, acknowledges Venkataramana. in fact, with the company invariably completing projects ahead of schedule, it has earned a total of `1,60 crore as ‘early completion bonus’ across projects completed in the last five or six years. in financial terms, dbl’s execution skills have kept it ahead of its peers (see table). for example, in the last four years (2001-14), the revenues of sadbhav engineering (a `2,359 crore company) grew at a compounded annual growth rate (cagr) of 2 per cent, while its operating profit margin (ebidta) was 9 per cent. the revenues of supreme infra ( `2,159 crore) during the same period grew at a cagr of 33 per cent, while operating profit margin was 14 per cent. however, for dbl, while the revenues grew at a cagr of 73.2 per cent, the profit margins was at 21 per cent. Next generation to take the company to the next level, dbl has already started grooming the second generation. rohan suryavanshi, dilip’s elder son, has been recently been roped in as head, strategy & planning role. the 28-year-old rohan holds an mba in finance and management from the wharton school at the university of pennsylvania. he is responsible for business strategy, financial planning, streamlining existing business

Peer comparison

Revenue* (` crore) CAGR* (%) EBITDA (%) RoCE (%)

Dilip Buildcon

Sadbhav Engineering

Supreme Infrastructure

Ashoka Buildcon

2,256 73.2

2,359 2.0

2,159 33.0

1,618 13.2

21.0 26.6

9.0 12.6

14.0 17.6

13.0 16.5

processes and improving reporting and transparency. “As the economic growth of a country is dependent on availability of reliable and high-quality infrastructure, the policy focus in india has been on boosting infrastructure investment. such investments have increased manifold over time, with increased private-sector participation in the country. the Xiith five plan year has also laid special emphasis on infrastructure development. we are looking at this closely”. says rohan. dilip’s younger son Karan, a bba from symbiosis has also been involved in the business since the past 5 years. his responsibilities include overseeing the operation and execution of the various projects. crisil research expects investments of `7.30 lakh crore in the roads sector over the next five years (2014-15 to 2018-19) – 1.7 times the investments made in the last five years. it also expects investments to increase for national highways from `1,10,000 crore during the last five years (2009-10 to 2013-14) to `2,20,000 crore during the next five years (2014-15 to 2018-19) – a growth of 1.9 times. investments in state roads are expected to grow too – by 12 per cent over the next five years. while those in rural roads will continue to remain sluggish (rural roads accounted for about 16 per cent of the overall roads sector investments in past five years). policy changes, coupled with projects being awarded on epc basis, will drive investments in the roads sector, which saw private interest drop significantly over the last few years. “private investments are expected to decline in the national highway projects, mainly due to the weak financial position of most developers. Also, the experience with bot projects awarded recently has not been encouraging, with a majority of projects awarded on bot basis having been stalled either due to funding constraints or delays in land acquisition and clearances. the government has therefore reverted to epc contracts,” states the report. dbl as an epc player seems to be in the right spot. u lAncelot Joseph lancelot.joseph@businessindiagroup.com

* March 2014. **FY2011-2014 u 65 u

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photos: sAJAl Bose

Rags to riches

Jogeswari, which made sachets for oral rehydration powder. he was then on a daily wage of `15. After having spent a few nights on the pavement or railway stations, he shifted The pharma packaging major Ess Dee Aluminium to mira road, sharing a room with 10 others. through dint of hard work, concentrates on exports, backed by newer technologies dutta became the supervisor of the unit in 1991. this is where he learnt the nitty-gritty of the printing and packaging businesses. his luck opened when the aged owner wanted to sell the unit and migrate to england. using his small savings and loans from friends, dutta bought the unit for `16,000, with a promise to pay `2 lakh more in instalments over the next one year. he thus became the owner of the unit, with a workforce of 12 people, when he was less than 20 years old. he soon figured out that Dutta: taking aluminium foil-based packagEss Dee to ing was the future for pharma the leadership and several fmcg products. position with an eye on what was happening in the industry, dutta managed to take an aluminium packaging company on lease and started producing diversesized packaging for pharma companies. soon, he became a supplier for cipla, unichem and hoechst marion roussel. Also, he successfully convinced indal to give him a foil distributorship in 1994. indal then had the monopoly to supply basic alueople who like tinkering around pharma packaging sector is about minium foils to large pharma comare often the first adopters of `9,000 crore, of which a vast majority panies like pfizer, glaxo, smithkline new technology. sudip dutta (about `7,500 crore) is controlled by a and reckitt and colman. But, when hindalco acquired had developed a knack for packaging large number of unorganised players. and ended up mastering the discidutta’s success story reads like indal in 2000, the company stopped pline to produce fine quality alumin- a reel life hero’s adventure. he was giving foils to dutta. he then decided ium foil packaging. And his yen for born in a lower middle class family to go for backward integration and technology has led his company ess in the steel city durgapur, west Ben- started an aluminium foil rolling dee Aluminium to be the national gal. his father, after retiring from the mill at Vasai near mumbai in 1998, leader in high-end pharmaceutical army, had taken the job of a secu- by importing aluminium sheets from packaging in india. rity guard in hindustan fertilizer gramco in Bahrain. “we partner almost every large corporation and sudip grew up in pharmaceutical company and have that locality. the untimely demise Growing company more than 50 per cent of the market of his elder brother and father, a few that was the beginning of his eventshare of the `1,500 crore organised months apart in 1989 put an end to ful journey and he never had to look market,” says dutta, chairman, ess his carefree childhood, forcing him back thereafter. “i would not have dee. “pharmaceutical companies to give up his studies when he was become an entrepreneur had i stayed contribute 80 per cent of our turn- in standard Xii and go to mumbai in back in durgapur. Bombay had given me the opportunity and a new lease over, with the rest coming from fmcg search of a livelihood. in mumbai, dutta who had to of life,” recalls the 43-year-old dutta, companies”. Amcor, Bilcare and gujarat foils are the other organised play- fend for himself, found a job in 1989 reminiscing in his sprawling corner ers in the segment. in india, the total as a loader in a small workshop in room of ess dee house, Kandivali,

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mumbai. he has faced the usual ups and downs of the business cycle and grown an `850 crore business empire, which employs 2,000 people at present. ess dee is now a listed company, with a current market capitalisation of about ` 990 crore, where he holds about 58 per cent. the share trades at about `300 on nse . ess dee focuses on advanced aluminium packaging solutions. it offers technologically advanced products that are designed to meet industryspecific quality standards, as well as customer specifications. the business primarily involves the cold rolling of aluminium foil stock into aluminium foil, which is further converted into printers’ stock through lamination, to be used for strip packing or as coating for blister packs. the company claims to be the first in india to make high-end pharmaceutical packaging products like ‘cold form blisters’ and ‘child-resistant blisters’. ess dee’s product portfolio has enhanced significantly over the last two decades. the company has 11 units spread across maharashtra, daman, goa, sikkim, Bangalore, himachal and west Bengal, with an aluminium rolling capacity of 37,000 tpa and conversion capacity of 44,000 tpa. dutta was lucky that, even as competition was growing, giant aluminium companies hindalco and Vedanta (which had bought india foils from Khaitan) changed their focus from being makers of aluminium foil for pharma and fmcg packaging, to the core aluminium business. A chunk of the pharma and fmcg clients of these companies then shifted

Shareholding pattern Indian public

14.82%

FIIs

19.95%

*Includes MFs/ UTI/ banks, 0.08%

Others*

7.26%

Promoters

57.97%

Ess Dee’s core team (l-r) Desai, Bhattacharya, Ray and Basu

to ess dee for the packaging. “we are the one-stop solution company for eco-friendly pharma packaging,” says Ashis Bhattacharya, managing director, ess dee. “over the years, our reputation has come to rest on our ability to get work done quietly and on time, irrespective of the order volume”. the fact that the company’s units are adjacent to the various pharmaceutical hubs has also helped. gsk, pfizer, sanofi Aventis, novartis, wyeth, cipla, reckitt Benckiser, lupin, cadila, dr reddy’s, wrigley, cadbury, perfetti, nestle and hindustan latex are among the top pharmaceutical, food and fmcg customers of the company. despite the slowdown, the demand for foil packaging has remained unaffected and is still growing at 18 per cent in india. “this year, our growth is at par with the industry,” adds Bhattacharya. Moment of triumph About 35 per cent of the company’s revenue comes from exports to europe, latin America, Africa, the uAe, south east Asia and Bangladesh. the company is now planning to set up a manufacturing facility in europe to strengthen its export market, though the management is tight-lipped about it. “ess dee is our key supplier in india and europe,” says debrabrata chakravorty, president, global sourcing, lupin limited. “the company is enterprising and u 67 u

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technology-friendly. And, its quality is among the best in the industry”. dutta’s moment of triumph came, when he acquired india foils, the Kolkata-based, bifr-interred, oldest foil manufacturer in india, from Vedanta group in 2008 for `160 crore. the move surprised many in the industry. the Vedanta group had taken over india foils from the Kolkata-based B.m. Khaitan family in 2000 but, after finding it a non-core operation, it put the company on the block. the acquisition consolidated ess dee’s position in the aluminium foils market, while also getting extended support from the then communist government in Bengal. ess dee aimed to take advantage of the india foils brand to strengthen its foray into the fmcg packaging sector. “we had been looking for expansion into the eastern india market,” says dutta. “so, we kept a close watch on india foils. some of the senior executives of india foils, who joined our company, helped us to identify the problems, which gave us confidence to buy the company. Also, our plan was to export to neighbouring countries through india foils units”. two years later, in 2010, dutta merged india foils into ess dee and also invested `220 crore in its hoera unit, to revive the caster and rolling mills. But he failed to modernise the Kamarhati unit, due to labour issues. “the efficiency of the Kamarhati unit had reached zero,” explains dutta.

Corporate Reports “we needed to upgrade its technology and engage a trained workforce to run it. some 250 of the existing workforce was given a choice to shift to our other plants, but they refused. we will wait till this durga puja and then take a final call”. meanwhile like several other first generation entrepreneurs dutta has become an nri, based in singapore, since 2011, to handle the export market of ess dee. “Aluminium foil offers the best protective barrier, be it for food or for medicine,” says satya ray, marketing director, ess dee. “we produce a diverse range of foils packaging, measuring from 6.3 to 40 micrometres and supply units of 10 kg to 100 tonnes. reliability, quality and uninterrupted supply are the usp of our company”. the company primarily operates its sales and distribution network using a hub-and-spoke model, which allows the company to provide customised packaging solutions to its customers across india. “ess dee’s quality is consistent,” compliments Vinay satiga, commercial manager, wrigley india, a leader in confectioneries. “they supply packaging for our prime chewing gum brand ‘Boomer’. they are among the top five packaging suppliers of our company. we trust them to maintain the confidentiality of our new products and packaging”. ess dee stayed up-to-date in technology and invested in the capacity expansion. the company is investing `350 crore through internal accruals and bank loans to expand its high quality packaging capacity at daman. the expansion process is going on, using german technology. ess dee entered into an agreement with the chemnitz university of technology, germany, last year, for printing and packaging-related technology development initiatives. the plant in daman, the largest of the company, is fully automated and maintains the highest safety standards. Major acquisition About 70 per cent of the company’s products from daman are exported. the current expansion exercise at daman will increase the company’s

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

Daman plant: major contributor to the export volume

rolling capacity from 37,000 tpa to 46,000 tpa and conversion capacity from 44,000 tpa to 72,000 tpa by september this year. “the technology tie-up with chemnitz university of technology has now put us on a par with global peers. it will improve our efficiency and cost,” says Vinaya desai, director, r&d, ess dee. “it is going to play a major role in developing niche products, and should emerge as an attractive alternative to customers against competition, giving various innovative anti-counterfeit measures and offering new generation packaging solutions, she adds. “ess dee is the market leader in aluminium packaging and has grown exponentially in the last two decades,” says sanjay patel, managing director, green pack foil, a gujarat-based competitor. “its quality is among the best in the industry. however, the company needs to focus more on customer services. it is good to have ess dee as a competitor, as it makes other companies work harder”. As on march 2015, ess dee’s net turnover was `856 crore, as against `719 crore in march 2014 – a growth of 19 per cent. But the net profit declined to `37.40 crore from `50.80 crore in the corresponding period – due to high interest cost. “we had undertaken technology upgradation and expansion in the last few years,” explains Arnab Basu, head, finance. “so, the interest cost had gone up. however, we have been able u 68 u

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to maintain a good ebidta margin for the last three years. we are in the process of taking measures to reduce the interest cost and find some cheap funds.” “the company is a market leader in the segment and has expanded its operation. But the high interest cost is still a concern. pharma companies spend merely 3.5-4 per cent on packaging; hence, ess dee, as the leader, can easily increase the price marginally and pass it on to the customer and improve their margins,” says a Kolkata-based research analyst. “ess dee has been working hard and has raised its benchmark for international technology tie-ups,” says manish srivastava, former director, cimb securities, singapore, who has been tracking the company. “partnership with the german company is a huge leap for the company, primarily for its export market. export is a different ball game in pharma packaging, because of the safety aspect. And, this technology tie-up is expected to help the company achieve better price realisation in export. its stock is worth looking at for long-term investment.” ess dee has taken upon itself to increase its export to 60 per cent in the next three years. given the expected growth in the domestic pharma industry, this may augur well for the company. u sAJAl Bose sajal.bose@businessindiagroup.com

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Charged up

minister narenda modi’s ‘make in india’ campaign, which aims to turn the country into a global manufacturing hub. the company’s strategy towards india has been charged up by regional developments too. freudenberg’s global business had a mixed fortune in 2014. while it had moderate growth in europe, primarily due to improved economic conditions in germany, spain and italy, the conflict in ukraine had a negative impact on its russian business. similarly, even as its north American business did well, weak economic conditions in Brazil and Argentina impacted the group in other emerging markets in south America. meanwhile, india’s gdp has been rising from 4.7 per cent in 2013 to 5.6 per cent in 2014, according to estimates by consensus economics, international monetary fund and european commission. this compared favourably with the us’s gdp growth from 2.2 per cent to 2.4 per cent, as also the negative growth witnessed in other bric countries during the same period ((russia’s gdp fell from 1.3 per cent to 0.5 per Graf and cent; Brazil, from 2.5 per cent Grossmann: Freudenberg & Co KG is all set to expand its to 0.1 per cent; or china, from gung-ho 7.7 per cent to 7.4 per cent, presence in India in various niche areas on India mainly because of its single child policy). not surprisingly, india remains chieving an average growth (mainly leather), the `1,497 crore rate of 23 per cent year on year company has eleven operating busi- a cornerstone of success for the since 2006 and clocking an ness units today, employing 3,000 freudenberg group – a market of conimpressive 32.8 per cent growth for people at about 50 locations. on a siderable potential, which has made a 2013-14 in a stagnant indian econ- global scale, freudenberg, with its substantial contribution to freudenomy would have made anyone jump 11 business groups, operates in 60 berg’s innovative strength. commitwith joy – but not Jorg matthias countries, employing 40,000 associ- ted to systematic investment in india grossmann, managing director & ates. it develops and produces seals, for the long term, freudenberg has chief financial officer, freudenberg vibration control technology com- kept aside a war chest of €32.6 milindia, who is determined to increase ponents, filters, non-wovens release lion (`2,282 crore) for the purpose this growth further. “we lost ter- agents and specialty lubricants, and is planning to step up the pace rain during 2011-13, especially in as well as mechatronic products. of involvement in 2015-16, which is china, but india has done exception- the group offers its customers tai- expected to double india’s contribually well,” grossmann reasons. “And lor-made, innovative technological tion to the company’s global revenue india is an excellent market oppor- products and services in automotive, (currently 4 per cent) by 2018. tunity, with a strong middle class mechanical and plant engineering, freudenberg has devised a fourearning $6,000 per capita annually, textile and clothing, construction pronged strategy to increase its marwhich is a good sign.” and mining, energy, chemical, oil & ket share here. it plans to partner freudenberg chemical specialities gas industries. customer groupings strong domestic players or global also include companies in the med- players with a strong indian presse & co kg is a division of the germany-based €7.04 billion (`56,860 ical technology, civil aviation and ence, and enhance its ‘buy & build’ strategy, usually applied to new marcrore) freudenberg group of com- semi-conductor sectors. for freudenberg, what has whetted kets. All its future investments will panies. in india since 1925, when it started exporting raw materials its appetite in india has been prime be concentrated in four clear fields

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Corporate Reports

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Parameshwarn: long-term commitment

110, the two companies at this location plan to serve customers from a wide range of industries, such as the automotive, energy and food industries, as well as wind energy (india is among the largest wind energy harnessers world-wide). “for the freudenberg group, india is a market with one of the world’s biggest potentials,” says Viju parameshwar, president, Klüber lubrication india. “long-term commitment for long-term success is a characteristic of the freudenberg group, which means we will definitely be investing and expanding in this region over the next years as well”.

– chemical surface treatment, medical technology, oil & gas and industrial filters, as also research and development in india. profitable and sustainable growth in established markets will be achieved through new innovative products. And, the focus will be on strategic regions, such as india and china. “the decision to partner players who have both a global, and also indian presence will benefit this group in the long run,” says maruti Kadam, associate, Karvy stock Broking. “it will spare the company the need to make large investments initially.” freudenberg is already on an expansion spree! it has invested `135 crore in the new production site of chem-trend (a global leader in specialty release agents and process chemical specialties), as also Klüber lubrication (a world market leader in specialty lubricants) in mysore, which will start production in August 2015. this is one of the largest investments of the freudenberg group in the Asia-pacific region, where more than 20 products will be developed and manufactured – mainly for the customers in the south east Asia and pacific region. while the site measures 40,000 sq m, the new factory and buildings are spread over 17,000 sq m, which also hosts product development facilities and major tribology testing facilities, such as the fzg gear research centre – the only one Klüber has outside munich and the only one in india until now. with the employee strength touching

Expansion plan in february 2015, freudenberg sealing technologies expanded its commitment in india substantially, when its joint venture, sigma freudenberg nok, a leading manufacturer of technologically demanding and high quality sealing and vibration control solutions, opened a second, completely new factory in Basma, punjab, at a cost of `155 crore (it already has a unit in mohali since 2001). this highly modern production facility is spread over 23,000 sq m, employing 2,000 people, and mainly makes radial shaft sealing rings and o rings. the demand for its products mainly comes from industries, such as automobile, agriculture, construction machinery, mining, power and steel. targeting niche areas, freudenberg gala household products opened a new factory for mechanical cleaning products in Adas, gujarat in 2011, in a joint venture with galaBrush india ltd – at an investment of `20 crore. while the entire plant is spread over 30,000 sq m, the first phase has a production area of 5,500 sq m and storage space 2,500 sq m. it makes mechanical household cleaning products – such as the gala no-dust Broom, which was launched in february 2014. sold under the brand name gala and priced at `159, this broom, which has a lifespan of three years, “does not leave any dust on the floor, unlike conventional brooms,” says georg graf, ceo, freudenberg regional corporate centre, india. “And, until december 2014, as many u 70 u

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as 1.7 million brooms have been sold, with 85 per cent of the customers expressing satisfaction over the quality of the product. large-scale demand has been coming in from tier 1 and tier 2, especially from the west, north and south india. Because of the product’s success in the local markets, we now plan to export it,” he adds. the broom had taken 12 months to develop and involved gainful interaction among indian, german and italian freudenberg r&d teams. its success has spurred the company to increase the broom’s production tally by 130 per cent. And, in a bid to increase its household products in india, a new production line has been started in April 2015, which includes strengthening the r&d department. the company has also come up with another household product – gala spin mop – on wheels, which is to be launched during the second half of 2015. this product will ensure comfortable and ‘healthy’ cleaning which the consumers can use, holding themselves in an upright position. the product also contains a micro-fibre mop, with a bucket and wringer. in line with the group’s strategy to ‘buy & build’, freudenberg filtration technologies (fft) acquired punebased pyramid filters in April 2012. fft has been providing superior filtration solutions, highly efficient industrial and automotive filter elements and systems, as well as system solutions for the capacity and efficiency enhancement of gas turbines and compressor. the acquisition was crucial to freudenberg, as pyramid filters develops air-filter elements and systems for room cleaning applications in the pharmaceutical, medical, food and chemical industries. with staff strength of 60 people at its manufacturing site in pune, pyramid’s Viledon eee.sy (energy efficiency enhancement system) has been offering an all-in-one inlet air mass enhancement system for gas turbines, engines and compressors. the take-over of pyramid will now allow freudenberg to expand its portfolio in india, not only offering customers (mainly india, pakistan and Bangladesh) a comprehensive range of filters for suspended particles,

Corporate Reports

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but also “develop world-class, cleanroom filtration solutions to become a global technological leader in filtration,” says Kirti Kelkar, founder & director, pyramid filters india. As part of its expansion plans, the group has earmarked `7 crore for eagle Burgmann ke to set up its plant in chennai. this freudenberg group company designs, makes and supplies non-metallic expansion joints and fabric compensators. `4 crore of this allocation has already been spent on the new production facility, which makes one-stop solutions. it employs 152 people and is spread over 6,500 sq m at sriperumpudur. An additional `3 crore has been earmarked for machines that will make steel frames for non-metallic expansion joints, flexible couplings and metal bellows, which used to be made earlier in a rented location. the aim of the new plant is to be the first in india to provide complete, high-quality, expansion joint solutions under one roof. R&D and training progresses to bring in all these innovative solutions, freudenberg india is ramping up its research and development facilities. A sum of `2,183 crore was earmarked for r&d in 2014, as compared to `1,934 crore in 2013. As much as 3.8 per cent of the company’s global sales is earmarked for research and development. with india lending significant momentum to innovation, freudenberg operates four r&d facilities, where products for the indian and south-east Asian and pacific region are developed and tested. they are located at mysuru, mohali, pune (which has been expanded) and Adas gujarat – all having fully automated, computerised, state-of-the-art equipment to test seals for refineries, petro-chemical and chemical plants, as well as power stations and other industries. in the first major step to increase its presence in india, the group had opened a freudenberg regional corporate centre india (frcci) in Bengaluru in 2013 – the fourth such unit, after south America, north America and china – which will give professional support and services to the eleven business groups, to implement

global standards and guidelines. it will also combine the know-how of business groups and corporate functions and support all indian units in the areas of finance and insurance, as also human resources, infrastructure & project management, communications, tax & legal advisory, health & safety and environment. “our long-term aim, through frcci, is to strengthen our position in key strategic growth markets,” says graf. “we would also expand market leadership in our market segments, support sustainable growth, focus on technology, quality and customer service and develop and train our employees.” under its skill development schemes for employees and potential employees, frcci conducts programmes to bring indian associates up to international standards. the global talent management effort identifies the top talents through regional talent dialogues spread over germany, china, north and south America and india, as also develop and apply talent and skills group-wise, exchanging high-potential employees between business groups and offering international career opportunities. “such programmes not only help all-round development, but also make the associates realise they are a vital cog in the entire group,” says rajiv shah, associate professor & chairman, placement, t.A. pai management institute. frcci’s field (freudenberg india entrepreneurial leadership u 71 u

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development) programme trains and develops freudenberg’s future managers in sales, operations and finance, attracting the best talents from the indian educational institutes and universities (mainly indian institutes of management in Bangalore and Kozhikode, the indian school of Business and the national institute of industrial engineering). to motivate the associates to become more creative and to share ideas, frcci has launched the freudenberg ‘idea pool’ – an initiative for new business ideas. here, associates are invited to submit ideas and suggestions for new products, advanced processes and groundbreaking technologies. All the ideas are carefully examined. if an idea is developed through to start-up, the responsible freudenberg associate receives a financial award of up to `21 lakh and the possibility of being involved in the implementation of the business idea. freudenberg’s focus in india is on expanding its chemical business operation in india, which saw it investing about `135 crore in mysuru, making it the company’s largest investment in the Asia-pacific region and one of the group’s most modern facilities. the group’s global strategy is to accelerate the pace of the ‘buy & build’ strategy in the new markets. the four clear fields identified for priority for future investments are chemical surface treatment; oil & gas; medical technology; and filtration technology. india will continue to be a priority market, where the group will always screen the indian market and take opportunities aligned with its strategy. “our slogan is ‘less administration, more innovation’, says grossman. “in 2014, india’s economy grew by 5.6 per cent – one of the fastest growing economies in the world today. with a growth of 6.3 per cent forecast for 2015, india is already the third largest economy and some 50 per cent more productive than Japan, which is in the fourth place. As per its long-term commitment, freudenberg will continue to invest in india. u roBin ABreu feedback@businessindiagroup.com

Banking

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

headless entities sA n JAy Bor A de

It is high time that top public sector bank chiefs be appointed

ot having a chief at the helm continues to affect the operations of india’s top public sector banks. if on the one hand a slow economy has affected bank lending growth, on the other hand the banks are under-capitalised, have rising non-performing assets and falling profits. in such a situation some of the largest public sector banks in india – punjab national Bank, Bank of Baroda, united Bank of india, syndicate Bank, canara Bank, indian overseas Bank and oriental Bank of commerce – haven’t had a person in charge for more than six months. the delay in appointment clearances, this time around, has been exceptional. the names of six managing directors and 14 executive directors, which were cleared by the previous government, were scrapped by the new ruling bjp party. then it changed the rules of the game. first, the chairman and managing director post at public sector banks was split to give the board more say in the running of the bank.

the government constituted a group comprising of the rbi governor, secretary (expenditure); and secretary (department of school education and literacy) to revamp the selection process of whole time directors in psbs. the group recommended expansion of the interview panel for the post of whole time directors to six members from five, and the panel to be further broken into three sub-panels. the six member sub-panel of the appointments board now consists of three professionals with banking sector experience and three other professionals without direct conflict of interest. each sub-panel gives marks to the candidate and at the end of interview process, the weighted average of marks is the candidate’s marks for the interview. the revised methodology is meant to ensure a greater level of transparency in the selection process of whole-time directors. the government now plans to set up an autonomous Banks Board Bureau, a super authority for psu lenders to recommend board level u 72 u

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appointments and advise on strategies for raising funds as well as mergers & acquisitions – the board itself being headed by the secretary, department of financial services. the board will eventually be responsible for selection of head of public sector banks, non-executive chairmen and non-official directors. it is also expected to steer consolidation in the public sector banking space. for the post of managing director – in particular for five top psu banks punjab national Bank, Bank of Baroda, Bank of india, canara Bank and idbi Bank – guidelines were revised requiring candidates to be within the age group of 45-55 years, with 15 years of mainstream banking exposure. they also need to have three years of board experience to be eligible. Slow process this requirement has not gone down well with public sector bankers, who have spent entire careers at the banks. subject to a slow promotion process (pnb had no promotions for seven straight years in the 1990s), they are no longer eligible for the post. A case is pending in a delhi court questioning the change, the applicant a 73-year-old man who the court has supposed is an acting “front”. lastly, for the first time in the banks’ history since nationalisation in 1969, the post of managing director was opened up to private sector participants who were willing to take up the post. while the move was well intentioned, the applicants for the posts were not found to be eligible to take charge. the ball finally has fallen into the rbi’s court, which last fortnight recommended 10 names to the finance ministry it found to be eligible (it had recommended the previous list of names also that were scrapped by the new government). these names have now been forwarded for clearances from the appointments clearing committee and central vigilance. But it remins to be seen how much more time the government will take to make the final selections. u ryA n m A x i m rodr igu e s feedback@businessindiagroup.com

Column

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towards an achhe din in the near future Tangible steps are needed to control the population in some acceptable way

he obvious about the Vyapam scam in mp or the teachers’ recruitment scandal in haryana or so many other admissions or recruitments rackets is the pervasive corruption. what is not obvious is the chase of few opportunities by the plenitude of people pining for decent living. the much-touted demographic dividend in india could be a misleading marketing spiel, given the huge disparities amongst the populace, most of who have been living on doles and subsidies even after 68 years of independence from the raj. political rajas of independent india have replaced the raj’s hold over masses and classes and their grip is only getting ‘vice’r. the population of india, which was under 300 million in the 1940s, has now quadrupled to 1.2 billion, putting an immeasurable pressure on the country’s resources; it is little wonder that the lot of the masses leaves much to be desired. india, with an area of about 3.2 million sq km, has a per capita land mass of about 2,400 sq m and a per capita gdp of about $ 1,650. let us see how the tiger compares with the dragon. china, whose population at about 1.4 billion is just about 15 per cent more than india, has thrice the land area, a per capita land mass of 7,100 sq m (three times larger) and a per capita gdp of about $7,500 (4.5 times higher). let us see how india compares with its other brics brethren. Brazil, russia and south Africa, on per capita land mass and per capita gdp, are way ahead of india with 42,000 sq m/$11,600; 115,000 sq m/$12,500; and 25,000 sq m/$6,500 respectively. Any comparison with developed countries like the us or the uK or germany or others will only make the picture more dismal. Quite clearly, india is reeling under its own weight and has a long way to go and a huge catch up to do. And it is going to be that much more daunting with its population estimated to touch 1.5 billion by 2030. in spite of this staggering reality staring at our face and impacting our people’s well-being, there have been no effective or sustained policy initiatives to control the burgeoning population numbers. india was one of the first countries to have a population policy way back in 1952 to address the issue of decreasing mortality rates and population boom. given the

nAgesh g. AlAi

sensitivity of the issue, the overall approach has been of softer means like free family planning clinics, free contraceptives, mass messaging of hum do humare do and the likes. the medical termination of pregnancy Act passed in 1971 allowed abortions and unwanted births and is an enabler in a way and a freedom to women. we also had the national population plan conceived in 2000 to address issues such as contraception, reproductive health care, etc. the long-term objective was to have an economically sustainable population by 2045. while the above measures did see the average annual population growth coming down to about 1.5 per cent post 1980s, compared to the earlier 2.5 per cent, the overall approach has been quite lackadaisical. Birth and birth control have always been seen as a sensitive and private matter, given the culture and class diversity of our country. And warped minds like sakshi maharaj are no help when they flame the fire by exhorting hindus to beget four children to counter the growing muslim population. this maharja, of course, is no sakshi to the wisdom of either the hindus or the muslims, who know what is good for them.

The author is a senior corporate professional. He can be contacted at nageshalai@gmail.com The views expressed are personal

hile a country like china can push through one-child policy (which, in fact, has helped them stem numbers) and draconian pre-birth permits, india will hardly be able to do it and neither should it, given our ethos of democracy and freedom. But, india can certainly take a leaf out of its competitor’s book and put in place some graded innovative financial incentive schemes (or disincentives) linked to the number of children. it could be as simple as providing the highest incentive for one child, a lesser incentive for those with two children and a punitive higher tax rate or lower social benefits for those with more than two children. such a scheme, if thought through well, could well stand the test of scrutiny and be seen as reasonable. the time is ticking. tangible steps are needed on a war footing to control the population in some acceptable way (which will educate and enthuse people). otherwise, the illusory demographic dividend could become an inimical demographic disaster. Achhe din may as well be 50 years away and not the recently reset time frame of 25 years. u

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Advertising & Marketing

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

R E TA I L I n g

Bag lady A quarter century on, a once start-up Baggit has made its presence felt across India

t started with an initial investment of `7,000 in 1990 in mumbai (it was still Bombay then). nina lekhi, founder of Baggit, had no idea then that what was initially her passion would become, via quite a few challenges en route, one of india’s most successful bag brands a quarter century on. Baggit is currently present in 101 cities across india. there are 37 Baggit outlets and the brand is present in 300 multi-brand retail stores. the brand has also just started retailing in the uK. “our products are not only fashionable, but also have functionality, which connects with our consumers, thus, making us a hit in the indian market.” Baggit, which reported a revenue of `70 crore last year, aims to reach `100 crore this fiscal, at a growth rate of about 40 per cent. it has about 500 employees currently. As the brand expands, a public offering is on lekhi’s mind. the initial ad hocism of the project was reflected in the way the brand name was arrived at – while singing mj’s ‘beat it’ or being more for lekhi’s pocket money than a serious venture. failure to get through her desired art course at sophia’s was a setback which she compensated with courses in textile design and interior decoration. lekhi initially worked with other brands including shyam Ahuja. “in those times we used to get t-shirts with simple slogans on them,” she recollects. “my friends and i thought that like t-shirts why don’t we have bags? that’s when i thought of making bags – Bags with Attitude.” first set of bags were made on canvas with funny one-liners written on

getting staff was not a challenge either. “when we began, hiring was more like we needed someone – it didn’t matter whether he or she was a showroom assistant, or a receptionist or a production head. we would hire that person and train him over the years. A lot of people we hired in the initial years are still with us after the 25 years. today, we need things to get faster so people are recruited from their specialised sectors. we believe in converting industries in to universities, where we are always on the learning curve growing the person ahead. letting people to take up new things helping them grow.”

Full-scale business the business also had a growth cycle of its own, she says. “we bought new machines, got more space, improved processes, built quality checks when volumes got too much and that’s how the business today has become full scale.” Baggit has always been reasonably priced, and currently retails from about `1,400- `3,000. lekhi says the them. those bags had expanding retail sceundyed rope hannario also helped the dles and with no zip, brand grow. malls sold for `35. “After that have been a boon to the entire lifestyle indusfirst set was successful i try, she says. “we are in started experimenting an industry where buywith canvas. next time i Lekhi: continuous ing and spending is decided to make colourinnovation mostly dominated by ful bags, thus, started using coloured canvas.” the ini- women. A major part of our target tial bags were sold from exhibitions group is working women who freand multi-brand shops. then Amar- quent malls for an easy and convesons and later oberoi’s started selling nient shopping experience, which them, and the journey was well and has not only changed the lifestyle of truly on, with the first store opening consumers in metros, but also in tier ii cities and is still growing.” in 2000. Baggit’s advantage, says lekhi, lekhi admits that challenges were more internal than external in those has been its indian identity, easily early years. “i don’t think there connecting with the indian user and was competition as such; i the eco-friendliness of the brand, recall a very popular brand “which is well appreciated by today’s called images which sold fashion and environment conscious leather bags. my context has consumers”. lekhi wants Baggit to be present in always been doing it differently. my bags were differ- “all cities in india”. given her deterent, hip, appealed to young, mination, she might yet make it! fashionable women and i u su m A n tA r A f dA r innovated continuously.” feedback@businessindiagroup.com u 74 u

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Aviation

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innovating to grow

is held responsible for the low load factor by aviation experts. though the segment is catching up globally, it is being seen as too early for india. “our premium economy uptake, while slow initially, has seen steady increase in its appeal,” says yeoh. “we have observed that many ceos and mid-level corporate executives are choosing our premium economy product and appreciating it. it’s an integral part of our cabin configuration, offering a lot more for a little extra whether it’s personal space or enhanced comfort.” the benefits in this segment for Vistara include segVistara’s first six months of flying have seen the airline regated check-ins, constantly innovate as it tries to grow its market share ample space, and more meal choices besides other s Vistara completes six months 27.9 lakh passengers. exclusive features. of flying, india’s most ambi- comparison to AirAAppreciation has tious airline launch in recent sia india may be closer come from on-time years has been under immense scru- in terms of time operperformance, which tiny. Backed by huge corporations ated – it started flying “has been consistently – it is a joint venture between tata six months earlier. Airthe highest in the sons and singapore Airlines limited Asia, a low cost airline industry ever since our (sia), – its genealogy could hardly be and with greater seating Yeoh: for the long run launch,” says yeoh. capacity per plane than more perfect. the indian aviation space is Vistara, has 1.3 per cent market share indeed with an otp of 98.5 per cent unforgiving though, and has seen (0.94 lakh passengers). in may, Vistara topped all airlines. many airlines shut shop in the last with the lowest number of comdecade. Almost all the operational Load factor plaints for any indian airline at 0.2 airlines are reporting losses with the At 71 per cent, the lowest of all air- per 10,000 passengers, it seems to be marked exception of indigo. yet the lines, load factor share remains meeting customer satisfaction too! potential prize is enormous – india is another worry for Vistara. yeoh innovations are where Vistara slated to be the third largest aviation admits that the airline was launched hopes to entice the indian flyer, which in low season, coupled with the fact yeoh hopes will make the airline get market globally by 2020. phee teik yeoh, ceo, is confident that most travellers had booked their loyal members. its value based points that Vistara is in it for the long run. tickets before the airline commenced accrual in frequent flyer programme while his dearest wish is to carve a its sales, and limited initial schedule, was a first. its unique food service niche on medium haul international affected load factors. “it is hearten- has been noted. within the next few destinations, the airline is, for the ing to see that our loads have been months, the Vistara fleet will incorpomoment, constrained by the 5/20 gradually improving as we scale up,” rate the most advanced in-flight entertainment system of in-flight wireless rule. this forbids an indian airline he says. the premium economy segment streaming, says yeoh. “we are also from flying abroad before five years looking forward to open Vistara’s very of operations and with a fleet of 20 own signature lounge at t3 in new planes – though Vistara has been Taking off delhi by August 2015.” there are also actively campaigning to have this u Vistara has six planes – all Airbus strategic partnerships with airline rule junked. A320s (same as IndiGo, which now has and non-airline brands which will get meanwhile the airline has con97 planes) – and operated 237 frequenfructified. next on Vistara’s radar are centrated on growing its domestic cies by mid June. The airline plans to weekend flights – between mumbai market, where it has been a struggle add more three aircraft this year. and goa. with the high traffic season to gain market share, which stands u Vistara now flies to ten destinations ahead for the rest of the year, Vistara at 1.3 per cent in may, according in its first six months of operations – could look at closing the year stronger to the latest dgca figures – carryDelhi, Mumbai, Ahmedabad, Hyderathan industry estimates. ing 0.93 lakh passengers. the corbad, Goa, Pune, Bengaluru, Lucknow, responding figures of market leader u su m A n tA r A f dA r Bagdogra and Guwahati. indigo stand at 38.9 per cent and feedback@businessindiagroup.com

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Start-up

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

putting the house in order What is in store for Housing.com and its former CEO

e are shocked,” says an employee of real estate portal housing.com, after rahul yadav, ceo, housing.com was asked to leave the company by investors in the board meeting held on 1 July, 2015. the reasons cited by the board for his removal were his behavior towards investors, partners and the media. yadav had dropped out of indian institute of technology, Bombay in 2011 to start housing.com. the portal has received $110 million in riskfunding since 2012. But, housing was not yadav’s first stint at entrepreneurship. while at iit, he had started exambaba.com, a digital archive of iit-Bombay’s previous year’s question papers with solutions. he had also started recharge 123, an online portal for mobile recharge before co-founding housing. By all indicators, he was an influential leader at iit-B, while still in the second year. in the general secretary elections there, he made sure that the candidate he was backing won. And he did win. Also, at iit-B, yadav wasn’t bothered with what everyone else was doing or planned to do. “he was very actively involved with the entrepreneurship cell of the institute, organising and managing events,” says pranil Bafna, co-founder and ceo, indiareads.com. Bafna and yadav stayed in the same hostel and are friends. Bafna and yadav were planning to do a startup together, but, yadav had already begun working on housing with other iit-B students. raising funding was easy for housing.com as the technology they developed made it possible to list real estate classifieds with real pictures and accurate information, winning big investors’ and customer trust. zishaan hayath, an iit-B graduate, an angel investor and ceo of toppr, invested $75,000 in housing in July 2012. haresh chawla, ex-network18

Yadav: fallen from grace ceo and managing partner, india

Value fund invested $300,000 in march 2013. in June 2013, nexus Venture partners invested $2.5 million in housing. last year, it raised $18 million from helion and $90 million from softbank. Public spats the year has been eventful and rocky for the company. in february this year, a car driven by housing cofounder Advitiya sharma met with an accident in mumbai and sharma’s two colleagues lost their lives. police booked sharma for rash driving. yadav, in an e-mail to shailendra singh, md, sequoia capital india in march alleged that singh was doing inhuman and unethical things with housing. this email was made public by someone on Quora which led to a public spat between the two in which yadav abused singh. post this controversy, the Economic Times carried a story saying investors of housing were looking for a new ceo. After the publication of this story, rahul said in an e-mail “investors called me to say times is behind you, be ready for such a u 76 u

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story” among other things. that prompted Bennett, coleman & co to send a legal notice to locon solutions, which runs housing. in April, housing had started a `120 crore marketing extravaganza. next month, yadav called investors and other board members intellectually not capable of holding any discussions and quit as the ceo of housing. And several days later, he withdrew his resignation after a board meeting. then in the same month, yadav decided to pledge his 4.57 per cent equity stake in housing, estimated to be valued at between `150-200 crore to his employees and challenged deepinder goyal of zomato and Bhavish Aggarwal of ola to pledge their shares to their employees. he also passed derogatory comments against serial entrepreneur and angel investor ravi gururaj. towards the end of June, yadav misled journalists as he replied ‘yes’ to some and ‘no’ to some after he was asked if Quikr was acquiring housing.com. And on 1 July, housing. com fired him from the company. in all this, housing did acquire a few companies, but, that never received due attention. did the Vcs make a mistake in designating yadav as ceo? Venture capitalists invest in people and not business plans, which change as startups grow. And as for the employees, they still believe in the vision of the company. some senior people did choose to leave housing, thinking of it as a sinking ship. But, after yadav’s ouster investors have appointed rishabh gupta, coo, housing as interim ceo. it was reported that housing will be sold to Quikr. But housing’s co-founders have convinced investors about the future and vision of the company and even got them to engage with employees to answer their questions. those who know yadav believe that he is very smart and he must already have a better idea in mind. on 15 July, yadav announced on facebook that he’ll back in action in 30 days. u r o h i t pA n c h A l rohit.panchal@businessindiagroup.com

F&B

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

Burgers on the menu The arrival of Wendy’s completes the presence of all top American QSR chains in India

ood will be served at your table, and in plates. it will be pricier than the average Aloo tikki burger from across the road. for regulars, yes, the Baconator, frosty and the smoky chipotle are there, but so are a number of unique offerings only for wendy’s in india, such as the spicy Aloo crunch burger (different from its cousin in a different brand) and masala chai. wendy’s, one of us’ mega qsr (quick service restaurants) with over 6,500 outlets in 31 countries, has just opened its first outlet in india in gurgaon, and it aims to stand out in an increasingly crowded indian qsr market. so, why will the average person pay more for their burger? sanjay chhabra and Jasper reid, directors, sierra nevada restaurants, the franchisee for wendy’s in india, are at pains to point out the ways in which wendy’s is going to be difrom the aforeferent. from mentioned service ndian and uniquely indian dishes, chhabra says, the team “spent two years developing every aspect of the wendy’s customer offer, while retaining the core identity and values of the brand”. o, while the look and so, feel of the restaurants has been updated for india, with an emphasis on warmth and local materials, elements that link it back to its American roots are also present. chhabra is quick to claim that the format is fast casual or qsr+ rather than qsr, though it might take a while for the young indian customer to register the difference. the target are the ‘millennials’ – those who have been around and seen the world, he says. “customer tastes are evolving and this is a value

for money market,” he says. “there is a customer that aspires for superior products.” prices of burgers at wendy’s will start from about `59, though most items are priced in triple digits. the menu is rather vast, and besides burgers, meanders through salads, baked

other country where it opened in simultaneously with india. “india is a growing, dynamic market, which is attracting the attention of leading brands around the world,” acknowledged emil Brolick, president & chief executive officer, wendy’s. chhabra admits that the brand is not as well known in india as its competitors, but is confident that some exposure will work wonders for the brand. expansion in india will be slower though, with the focus for the next two years only on delhi-ncr. “in the first year of operation, we propose to add 8-10 outlets

Chhabra and Reid: value for money market potatoes, chili bowls and natural cut french fries. f fruit drinks, sodas, tea and coffee complete the beverage section. what comes from the us are the flavours – sauces such as the ghost chili or the barbeque while the chicken patty format is the same as developed in the company r&d centre in Arkansas. the average store size at 2,0002,500 ft2 – will have seating for about 80, though in a variety of formats. the outlet music playlist is by coke studio. Expansion drive following its qsr counterparts in the us, wendy’s has been on an expansion drive, with Brazil being the u 77 u

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of wendy’s in delhi-national capital region,” say the directors and follow it up with a similar number in a year or two. they do see potential however to carve a niche in the indian food services market, which is valued at about `3 lakh crore. while the branded segment is still small, there have been sporadic bursts of rapid growth, especially when the economy has been strong. chhabra sees a big gap for qsr plus, and is open to exploring the food court model later on. “india is an underpenetrated market for the restaurant sector,” is his irrefutable claim. it is also one with the highest rate of turnover and the future of wendy’s could well depend on how the initial response to ‘qsr with a twist’ is. u su m A n tA r A f dA r feedback@businessindiagroup.com

CSR

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

sAJAl Bose

power of stitching

in rural india. financial independence and empowerment have given women self-confidence and reliance. today, more than 36,000 learners t have completed their training Nagira at course from usha silai schools her training and nearly 11,000 learners school: totally continue to get trained in changed sewing skills every day. the women, on an average, have started earning `3,000 per month, with the highest earnings touching `18,000 per month. “we also help these women to sell their products.” once it starts functioning in a village, usha triggers interests amongst the people in the adjoining villages too, with the community members demanding that it start similar schools at their villages too.

Usha’s vision is helping the underprivileged rural women find new hope

hree years ago, 20-year-old nagira gazi sat outside her crumbling home in durgapur village, 24 parganas district, west Bengal, counting the grains of rice on her plate. one step from starvation, she then got lucky and came into contact with usha silai training school in 2012, through hdc, a local ngo, before her ailing father – a vegetable seller – decided to marry her off against her wishes to reduce the family burden. she took a seven-day residential training from the school. on completion of her training, she was given a usha sewing machine, a certificate, a signage and course materials. today, nagira is training 35 women of her village and charging a monthly fee of `150 from each for a six month course. she also stitches a range of garments such as salwar suits, baby frocks, blouses and other embroidery items. “usha silai school showed me the way to beat my hardship. today, i earn `10,000 per month and have bought one more sewing machine. i send my brother to a good school. And, our family now lives a respectable life,” says nagira. she now wants to open a boutique. nagira’s is not an isolated case. there are many like her, whose life has changed once they were trained by the usha silai schools across the country. A nationwide initiative towards empowerment of rural women, usha silai school imparts

sewing skill for free, while also providing them with sewing machines to earn their livelihood. the rural women chosen for the training are identified with the help of local ngos. they expected to have some knowledge of sewing and be of basic literacy level. After one week’s training on cutting, tailoring, sewing and repairing of sewing machine by the experts, these women set up their own silai school in their villages and train other women for a fee. the schools are run by usha international limited, an affiliate of the siddharth shriram group. the company with the well known brand usha has long been in the manufacturing of automatic and manual sewing machines and also a diverse range of consumer durables and industrial products. starting from a small beginning in 2011, usha has now set up over 10,150 silai schools, stretching across the remotest villages of india, covering 29 states and five union territories. usha also takes its services to the neighbouring nepal and Bhutan. “our philosophy is: through charitable approach, facilitate the community in self-sustainability and liberate the members from dependency,” says priya somaiya, executive director, usha social services. this unique community service has acted as a catalyst to starting a whole new ecosystem of start-ups u 78 u

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On their own feet “i have a deep conviction that women can stand on their own feet and not be helpless in adverse situations,” says Krishna shriram, executive chairman, usha international. “they just need to become more aware of their innate strength. the silai school platform facilitates women to become more self-sufficient. we firmly believe that women would use their earnings more responsibly and improve the quality of lives of their family and community”. the company recently lunched ‘share your love’, whereby, over 1 per cent of the sales proceeds from the sewing machines will go to silai school programme. for the first time, usha has created a ppp model with the murshidabad district administration in west Bengal, to train 75 women at domkal, who are from below the poverty line. As per this model, usha will provide the sewing machines, course material and technical experts, while the district rural development cell will arrange hostel facilities for the residential stay of trainees, during the seven day training and related logistics. “this has proved to be an effective model for the women of the backward area,” says block development officer rabindranath misra. “we are now planning to extend its reach in the district jointly with them”. u sAJAl Bose sajal.bose@businessindiagroup.com

Market News

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

OVERVIEW

optimism pervades Markets seem to have discounted immediate concerns and are looking at the future

arkets heaved a sigh of relief last fortnight sensing the settlement of the greece problems, at least for the time being. while the delay in the monsoon did cause some consternation, as did the sudden decline in the chinese stock markets, there were other matters to dwell on. the monsoon session, (starting on 21 July) the status on the passage of the land bill, the gst bill, and more important the corporate results for the first quarter of fy15. the ruffled sentiments which followed the decline in chinese markets were taken in stride as the markets felt that it was more of a knee-jerk action and would hardly cause more than a ripple, as of now. the new initiatives announced by the government also provided some cheer to the market. through various schemes the government aims to train around 40 crore youth by 2022. in particular the pradhan mantri Kausal Vikas yojana (pmkvy) which aims to train 24 lakh workers who lack formal education and are largely in the unorganised sector was seen as a major game changer. markets are now apparently looking forward to modi’s speech on the coming independence day and hoping that it will galvanise the markets further. modi is also expected to give a report card of the work done by various ministries and chalk out the way forward. over the month the sensex saw a rise of nearly 6 per cent to end at 26832 on 17 July, gaining nearly 1630 points. at these levels it shows a neat double digit jump. Banking and financial shares which make up a significant contribution to the composition of the sensex were also undergoing a rerating. the rationale was that with many banks writing off their stressed assets in fy15 and also selling some of them, they would again be able to generate liquidity to meet the expected surge in credit in the coming festive

season. edelweiss securities in its update on the psu banks is optimistic about the performance of the psu banks. it reasons that the reining in of staff cost, stabilisation in the riskweighted profile with a tilt towards retail focus could lead to efficient capital consumption. on relative ranking parameters it feels the sbi and Bank of Baroda fare better amongst the large banks and union Bank scores amongst the mid-size banks. the private sector banks have also got a shot in the arm following the approval by the union cabinet

Sensex vs Bankex 130 Bankex

120

110 Sensex

100

90 Jul 2014 – Jul 2015 Indexed to 100. Source BSE: Month end closing

Titagarh Wagons 150

Share price (`)

Turnover (` lakh)

1200

135

900

120

600

105

300

0 1 Jun – 17 Jul 2015

52 wk hi: `175 (1/3/15) / low: `38 (26/9/14) Change: 17% Marketcap: 1,209 crore

on the simplification of the fdi caps with a view to facilitate more foreign inflows. yes Bank, deemed to be a beneficiary, got a boost following rbi’s permission allowing it to set up a ifsc banking unit in gift city in gujarat. the shares at `805 were inching closer to its 52 week high of `910 reached in march earlier in the year. axis Bank likewise also saw the prices rise to `602, also near its 52 week high of `655. sbi’s proposal to retain a part of its profit and sharing the same with the employees also drew positive response from investors who felt that this would be a good move to retain talent. its proposal to sell a portion of its npa to arc saw shares grow from `255 to `270 over a month. Optimistic trends the hope of good times ahead has also seen midsize companies come back on the growth trail. titagarh wagon (market cap `1,200 crore) recently announced the acquisition of a company in italy. it also raised `150 crore through the sale of 15 million shares at ` 99.41 through a qip. meanwhile some of the results announced have given rise to optimism. zee entertainment saw a growth in profit to `242 crore from `210 crore on increased revenues of nearly 30 per cent in the last quarter compared to the comparable quarter. the growth was on the surge in advertisements by nearly 25 per cent. gruh finance, a company in the affordable housing finance, saw a rise of 20 per cent in pat. tcs’ results were also better on a sequential basis. the company announced an eps of `28.02 per share. while the earning season will be the major influencer in the coming days as will rbi’s policy announcement, investors have to be careful of global trends. the expected tightening by the feds, expected sometime in september could act as a dampner. deutsche Bank in its report feels that while this move could certainly impact fii flows, india could still be better off due to the differentiation policies followed by the fiis even in the emerging markets. u da K s e s h pa r i K h daksesh.parikh@businessindiagroup.com

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Market News

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

Coa l I n d Ia

why the price surge? The market seems to be going overboard

t’s quite a paradox that coal india’s share price is touching an all-time high, when the share prices of other international commodities players are at a constant decline, with many of them touching 52 week lows. what makes coal india defy gravity on the stock market? coal india is the fourth most valuable company in india, with a market cap of `2.75 lakh crore – considerably higher than some of its other energy psu peers like ongc or ntpc. such a high market cap is achieved when prices of international commodities including coal are at a constant decline. even coal india’s own financial performance has not been that great. there is nothing in the fundamentals to suggest that coal india should command such an astronomical value. for the year ended march 2015, the company reported a net profit of `13,726 crore. thus its trailing 12 month p/e is almost 20x, which is high for any pure commodity play. the consensus estimate is that coal india should report an eps of `30, giving a p/e 15 times at the cmp of `438. should a commodity psu command a p/e in double digits, when many of the private commodity players are

stuck in single digits? the fact is that even the company’s bottom line is not on an upward trajectory. on the contrary, it has been falling constantly in the last few years. for the year ended march 2015, it was down by 9 per cent over the previous year also, even a look at the institutional holdings in the company does not indicate any major change that would justify a surge in the share price. the total institutional holdings during the last three quarters have averaged 17-18 per cent, with no significant variations. with the government of india holding almost 80 per cent of the shares in the company, there is hardly any stake left for retail investors. there are only two institutions that hold more than 1 per cent stake in the company as on June 2015 – lic is the larger of the two, with a stake of 6.98 per cent (pared from 7.24 per cent as on march 2015), followed by the income fund of america, with a stake of 1.35 per cent. research reports suggest that coal india should be able to ramp up its production, going forward. also, non-linkage coal would be sold by the company at higher prices, with even linkage coal improving its realisation

Coal production over the years

Coal India vs Sensex

Actual

120

Expected (% CAGR)

Coal India

Sensex

7.8 110

6.1 10

5.2 7.6

* Estimates. Source: Ambit Capital Reseach

20 1

4 020 1

10 07 -2 0 20

20 1

07 -2 0

20 02

97 -

20 02

3.9

100 0

1.6 3

4.6

20 14 -

2.2

90 1 Apr – 13 Jul 2015 Indexed to 100

– which is why brokers are recommending a ‘buy’ on coal india. But some of the non-linkage users like steel also are passing through tough times due to the crash in international markets. Challenging times also, in india, the power sector itself is facing its own challenge in terms of plant load factor, which is believed to be 59 per cent for June 2015. recently, arundhati Bhattacharya, chairman, sbi, had expressed concerns that power sector could result in higher npas for the banks, suggesting that the sector was going through challenging times. if so, how can coal india see a substantial increase in production and its realisations? coal india recently announced its production and dispatch numbers for the first quarter of 2015-16, which indicated that its production was up by 12 per cent and the offtake, by 8.3 per cent. But the company needs to sustain this growth, going forward, to keep this kind of valuation. with a wage hike due by 2016-17, which is expected to increase its employee cost by 15 per cent, it will not be easy for coal india to report a healthy surge in the net profit soon, with employee costs accounting for a high 42 per cent of the company’s turnover. it could be that the market is going overboard in giving a premium valuation to coal india which, we believe, it does not merit. with the market not showing any great fancy towards commodity stocks, it would be interesting to see how long coal india can defy the trend. u su n il da m a n i a sunil.damania@businessindiagroup.com

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Market News

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

sa n Jay Bor a de

IT SECTOR

losing sheen? It may be a little too late to get into the IT sector now, and it may be time to review one’s portfolio

n the last few years investors have added significantly to their wealth by investing in the it sector. it companies did extremely well and their share prices kept moving up despite overall indices going nowhere. today tcs is the most valuable company in the country. there were reasons for it companies to do well. first most of the leading it companies were virtually debt free and hence the spiralling cost of borrowings did not hurt them. second they were not dependent on the growth of domestic economy as the bulk of their revenue continues to come from outside india. the slowdown in the indian economy hurt them very little. third the rupee depreciated against the dollar and that made it companies’ revenue surge and also helped them to improve their margins. last but not least, it companies normally have good quality managements with no concerns on corporate governance and hence even fiis loved them. with risk off strategy in vogue in the last few years, it was the safe sector to bet on. But now the scenario seems to be changing. some signs are emerging that investors’ appetite for the it

sector is ebbing. tcs, the big daddy of the sector, is losing its attractiveness to some investors. investors did not like its June quarterly results and gave a thumbs down. in the last six months it’s up by only 1.25 per cent which is a poor return by even tcs’ standard. But this is not tcs’ problem alone. the whole sector is losing its sheen. cnx it index, maintained and compiled by nse, is down by 8.65 per cent for the quarter ended June 2015 and ytd too is down by 1.60 per cent. on the other hand, the bse along with s&p has an it index called s&p bse it index, which is much broader as compared to cnx it, and it too underperformed. since January 2014, s&p bse it index is up by 12.54 per cent while sensex during the same period is up by 39 per cent. we have not seen this kind of underperformance for many years. what is interesting is that the it sector enjoys the second highest weightage in sensex and hence this underperformance signifies clearly that smart money seems to be moving out of the it sector. even mutual fund schemes having it as a theme have underperformed the broader market. morningstar that

MF industry exposure

BSE IT vs Sensex

Financial services

25.4 14.6

Industrials Consumer cyclical

Technology

9.8

135

Sensex

120

8.3

Healthcare Energy

5.7

Consumer defensive

5.5

Real estate

Indexed to 100

(%)

10.8

Basic materials

Utilities Communication services

150

5 105

BSE IT Index

2.7 2.2 1.1

90 0 Jan-Dec Jan n-Dec 2 n-Dec 2014 20

Jan-Jul 2014

tracks the performance of various mutual fund schemes shows that the it sector mutual fund schemes have given ytd average returns of 0.49 per cent as against large cap theme based mf returns of 5.98 per cent and mid-cap & small cap index returns of 9.44 per cent. Risk factors But there is another risk factor for the investors. there are many investors who have put money into diversified equity mutual funds schemes. in many of these diversified schemes the it sector is in the top three or four sectors in terms of sector allocations. since the it sector is facing headwinds there is a high probability that these schemes may also underperform the broader market returns and also their own benchmarks. investors who have invested in mf schemes would be wise to check the percentage of total assets invested in the it sector. data compiled by morningstar for Business india, suggests that equity mutual fund schemes, with all schemes put together, have invested 10.79 per cent of their funds in the it sector. this is the fourth highest allocation after financials (25.38 per cent), industrials (14.60 per cent) and consumer cyclical (13.95 per cent). it is necessary for investors to keep looking at the it results closely, as the market may not be kind enough to give them an extra premium. we have seen how tech mahindra’s poor results for march quarter saw the scrip crashing. investors should play their cards well. it may be too late to get into it sector now, and it may be time to review one’s portfolio. u su n il da m a n i a

Source: Morningstar

Source: Bseindia.com and Business India

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sunil.damania@businessindiagroup.com

Market News

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

PSU BANKS

can they bounce back? Smarter growth in the loan book and reduction in NPA levels can bring back investors to public sector banks

n the past one year there has been wide divergence in performance of public sector banks and private sector banks. hope of a quick turnaround in the economy and the expectations of reforms from the modi government created big hope for psu banks. even finance minister arun Jaitley’s announcement in the first budget speech about the merger of psu banks raised hopes that the psu banks can again be among the wealth creators. many investors have bought shares only to be dejected. almost every psu bank is quoting lower than the price at which they were quoting last year. only two psu banks are at a higher level than last year – the central Bank, up by 50 per cent and sbi by 5 per cent. the worst performer in the pack is united Bank which is down by 53 per cent. on the other hand, almost every private sector bank has surged. leading the pack is indusind Bank, which is up by 73 per cent followed by Kotak mahindra Bank (winner of our best bank award last year) up by 66 per cent. the most valuable bank, hdfc, is up by 33 per cent during the same period. do we expect this

Private sector banks 1yr returns (%) IndusInd Bank Kotak Mahindra DCB Bank Axis Bank Yes Bank City Union Bank 33 HDFC Bank 32.9 Federal Bank 21.2 Lakshmi Vilas 17.2 Karnataka Bank 15.5 ICICI Bank 8.8

-0.1 -26.4 -31.9 -38.6 Source: Morningstar

72.9 65.9 59.8 53.2 52.3

Karur Vysya South Ind Bk JK Bank Dhanlaxmi Bank

performance to turn around in the immediate future? maybe we need to wait for at least one more quarter before we see the psu banks back in the investors’ shopping list. this is despite some of the psu banks quoting at a very good price to adjusted book value. Monsoon factor the psu banks continue to face challenges on various fronts. first, loan growth is hard to come by as no new capex is coming up, which can boost capex related loan book. for the quarter ended march 2015 loan books of psu banks grew at a snail’s pace of 8.7 per cent while on the other hand, private sector banks saw them grow at 22 per cent. the June quarter being the lean season we expect the psu banks will not have substantial loan growth in their books. on the other hand, a poor

PSU banks 1yr returns (%)

Central Bank SBI

-6.8 -10 -13.6 -14.2 -16.8 -18.2 -20 -20.4 -22.3 -25.7 -28.3 -28.8 -29.7 -30.1 -33.4 -37.1 -37.2 -38.2 -41.6 -46 -46.6 -52.7

5.3

50.6

Bank of Baroda State Bank of Bikaner Indian Bank Union Bank State Bk Mysore Andhra Bank Vijaya Bank Bank of Maharashtra Punjab National Bank Allahabad Bank Canara Bank State Bank of Travancore IDBI Bank Corporation Bank Syndicate Bank Punjab & Sind Bank Bank of India Oriental Bank Dena Bank IOB UCO Bank United Bank

Source: Morningstar

monsoon can spoil the assets quality of the psu banks further as they have higher exposure to the rural economy. as per the imd data, till 16 July rainfall in the country is 6 per cent below long term average. if monsoon does not revive as expected it could further put stress on the psu banks’ assets quality. it is less likely that psu banks would see reduction in their npa level in the immediate future. on the other hand, it can go up as many of the banks have exposure to the metal and power sector. these two sectors are facing challenging times. this could only result in npas moving higher in the June quarter. it’s estimated that gross npa of psu banks would go up to 4.9 per cent for the June quarter as against 4.8 per cent in march. on the contrary, private sector banks’ gross npa is expected to go up to 1.2 per cent from 1.1 per cent of march 2015. there are two indicators that can bring back investors to public sector banks. these are smarter growth in the loan book coupled with reduction in their npa levels. till that time, investors may not want to touch them despite their attractive valuations. however, private sector banks continue to command rich valuations – indusind bank is available at 4 times to its fy2016e price to adjusted book value. Kotak Bank is equally expensive and so is hdfc Bank (3.8x). they may continue to command rich valuations till investors see value in psu banks. u su n il da m a n i a sunil.damania@businessindiagroup.com

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Portfolio Talk

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

sA n JAy Bor A de

‘expect a better market in 6-12 months’ Akash Singhania – head of equity, Deutsche AMC, manages equity AUM of `1,100 crore and also advises offshore funds. Talking to Sunil Damania he believes that the Chinese stock market crash will not have a meaningful impact on FII inflows Markets in the last few months are moving in a narrow range. What factors can lead the market to break out of the range and move higher?

last year (cy14) the market had given a return of 30 per cent and that had discounted the good macro-economic situation in india in terms of political stability, reforms, reduction in current account and fiscal deficit, lower inflation and declining interest rates. this year, the market has been flat as earnings have not picked up. in the march quarter, earnings were down almost 7 per cent and for June quarter they are expected to be flat. concerns about monsoon, investment cycle were weighing on the market and these concerns are now being addressed. so far, monsoon has been normal and we expect earnings to be around 10-12 per cent in fy16, primarily boosted by growth in december and march quarters. we have also seen investment cycle picking up with increase in production of coal; numbers of stalled projects are decreasing as more projects are getting regulatory clearances. so we will see a recovery in the next six months to one year. more importantly, interest rate cuts have happened in the last six months, but their effect comes with a lag and we may see some positive impact on commercial vehicles and industrial production. historically markets and earnings have done well after a third rate cut. so these are the few factors that lead us to a better market in the next six months to one year. Do you see China as a problem for Indian equity markets in terms of inflows from foreign institutional investors, as institutional investors

may sell in the Indian market to create liquidity?

on an average, for the last three calendar years, india has had equity inflows worth about $20 billion. even in this year, we have had inflows worth almost $6 billion. so this suggests that inflows into india will not get hampered by the rise in chinese market. when the chinese market rallied 150 per cent in the last year, the fii component in that market was quite low. Almost 80 per cent of the volume was driven by retail investors. we think inflows into india will continue because of the strong fundamentals of the economy and any volatility in the chinese market would not have a big impact on the indian market. The msci postponed increasing the weightage of Chinese shares in its emerging market index. Do you see an impact to fii inflows once it’s done?

there was talk that local chinese ‘A’ shares will be included in the index, but that has been postponed and no one is sure when they will be included in the index. it could be one or two years. there are many constraints on foreign investments in the chinese ‘A’-share market and therefore it is difficult to predict in what period they will be included in the emerging market index. once they are included, china will definitely have a bigger weightage on the index but the timeframe in which this can happen is uncertain. One of the research houses predicted a doomsday scenario for the steel sector. What is your view on the sector?

the entire metal sector has fallen u 83 u

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because of a fall in global commodity prices and low demand. the outlook for the next six months also remains muted. china, which had been a growth engine, has seen muted demand and increasing exports to india have hampered indian steel companies. there are other issues such as high debt in a few companies. overall the metal sector, including the steel sector, may see muted earnings growth and is likely to underperform the market. from a price to earnings perspective, the sector’s valuations are lower than the average five or ten year multiples. we would expect these stocks to rerate or outperform once the commodity prices stabilise. this will happen probably in the next couple of years when global gdp starts improving and china’s economic growth stabilises. in theory, demand and utilisation in the sector could also pick-up during that time. What is your view on the AprilJune earnings season? Do you see any surprises?

overall, we expect earnings to be flat. there could be positive surprises from oil marketing companies, selective industrials and the consumer discretionary sector. these three sectors saw a decline of 25-30 per cent in earnings in the last quarter and they are expected to have positive earnings growth. in terms of negative surprises, metal sector can see decline in profit due to the issues we discussed, but the market has factored this in. u

Executive Focus

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

CEO, glObal assEt and wEalth managEmEnt, EdElwEiss FinanCial sErviCEs

date of birth: 11 September 1977 academics: IIT, Kharagpur, BE, mBA, Kolkata, 2003 Career: Worked briefly with Tata Strategic Management and Cognizant Technology Solutions; Joined Edelweiss in 2004; Worked with the group in various positions – analytics head, trading, treasury, head retail capital markets

sAnJAy BorAde

Other activities: Steers the Sr. Leaders group, helps in hiring talent. Involved in strategic planning for the group and resource allocation. Part of the investment committee, EdelGive Foundation

the financial architect

itin Jain had developed a liking for capital markets since his childhood days in the nawabi city of lucknow. in particular, trading in equities fascinated him. Born in a business family, where his father indulged in investing in shares, his mother wanted him to be a topper and build a solid academic career. which he obliged, topping all his exams right through, schools, colleges and beyond. But his dream was to become a trader on bse . even during his student days at iit Kharagpur, he used to monitor companies’ growth and later dabble in markets, taking short positions, with a view to get a hang on the nuances of the capital market’s functioning. while he did enjoy his stint in

tata strategic management, which was his first job, it was not his ambition to become an advisor. But for freshers, opportunities were rare to find in brokerage houses, which in early 2000s, were largely dominated by individuals. Jain took up a job in the banking and capital markets division of cognizant technologies, which he thought, could provide him a gateway to the capital markets. And when opportunity came a-calling, thanks to a chance meeting with a friend, about a possible vacancy in edelweiss, a company which he had heard about a lot, he lost no time in making an application. taking note of his credentials and seeing his eagerness to try out u 84 u

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strategies, rasesh shah, founder & cmd of the firm, gave him an oppor-

tunity to be on his team. Joining as the head, analytics & trading. Jain soon started testing some of his own algorithmic trading strategies (which were subsequently institutionalised for the usage of the firm). the first bull-run that started around mid-2003 provided him ample opportunities of reaping good rewards, without taking undue risks. Jain’s effort saw him becoming a key member of the dedicated team managing the proprietary investments of the group. the design engineer from iit was known for creating winning strategies at the trading desk. “disciplined approach works across sectors,” he modestly acknowledges.

sAnJAy BorAde

Nitin Jain

Executive Focus

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

Because of his appreciation of the risk-reward functions, Jain, who has a record of catching on market trends ahead of others, became a soughtafter guest on television channels. identifying themes to ensure superior risk adjusted returns, Jain soon became the face of edelweiss Broking in the retail capital market segment. gaining exposure across multiclass segments, including equity and derivatives, Jain played an important role in the integration of Anagram finance, a company which was bought from the sanjay lalbhai group of Ahmedabad in 2010. Acquired at a cost of `165 crore, the company had a retail presence across 137 branches, with an 180,000 strong customer base. this marked a turning point for edelweiss capital. diversification into retail from what was till then a home-grown investment bank, with a presence in the capital markets through institutional broking, was also necessitated by the group making forays into insurance, housing and distressed assets, all in the same year. Besides expanding the geographic footprint, the takeover of Anagram provided a ready-made platform to the group for distribution of its insurance and mutual fund products. it also helped in increasing the touch points for housing finance and nbfc products. Jain demonstrated his leadership qualities and succeeded in making the loss-making division into a robust profit-generator in a span of less than four years.

rom a pure operating role which Jain played during his initial tenure, he has over the years been shouldering more and more responsibilities at the group level. At 37, Jain is the youngest member heading one of the key divisions – global asset management and wealth management – at edelweiss. in his new leadership role, he oversees the functioning of the credit cluster of the group, which has combined assets under management of nearly `23,000 crore. Besides heading gmwm group, Jain spends considerable time in building up the second rung leaders right through hiring and mentoring them. he also plays a significant role in devising

future growth strategies and allocating resources internally. his philosophy is simple. find the right set of people, empower them and treat them as partners to enable them to mesh quickly with the edelweiss culture, which has been cultivated over the last two decades of its existence. “we want to ensure that our working is based on the utmost level of transparency. At the end of the day, it is the trust and the bonding with our investors scrupulously built over the years, which is helping our growth.” the credit cluster, as gmwm is classified, includes the illiquid alternate space comprising private equity funds and asset reconstruction business. the arc business, where edelweiss has a 49.9 per cent stake, the

is now in the process of launching a couple of other funds, including edelweiss special opportunities fund ii and a real estate fund. given the favourable sentiments for india within the capital markets, the new funds are expected to mobilise funds from investors across mena, india and the far-east. the liquid segment in the credit cluster comprises mutual fund and wealth management services and the total aum is about `1,500 crore. in 2014, edelweiss acquired forefrontcapital, providing a platform for generating absolute returns to clients by offering value oriented equity services and multi asset allocation strategies. catering to over 200 clients including high net worth

At the end of the day, it is the trust and the bonding with our investors scrupulously built over the years, which is helping our growth maximum mandated by rbi, is the biggest component with assets worth `20,300 crore, half of which were acquired in 2014-15 from banks, which had accumulated huge npas and were eager to free capital. in the credit business, which is capital-intensive by nature, edelweiss puts quite a bit of its own capital to use sometimes – as much as 15-20 per cent. “not just its skin but large chunks of its body and soul,” says Jain. in the alternative investment fund or private equity segment, edelweiss manages four funds including a crossover fund (hybrid hedge fund), special asset fund, and e-star, an asset reconstruction fund. Also, offering collateralised loans to entrepreneur-promoter driven companies over various tenures, edelwiess is able to get good returns on its investments. its total aum in these funds is $500-600 million. with indian promoters willing to pay relatively high rates in lieu of equity dilution, the 2x to 2.5x coverage permits in-built safety. steady deployment has seen the funds targeting 20-24 per cent returns. it u 85 u

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individuals, family offices, corporates and banks, forefront had a presence in 20 cities. under Jain’s leadership, assets under this fund have quadrupled from `150 crore to `600 crore. Jain does not claim to be involved in the day-to-day operations, but he still remains the face the organisation for institutional clients and sovereign funds. notwithstanding his deep understanding of the markets and appreciation of the risks, Jain does try to keep himself abreast of the latest trends in global markets through books on the subject. on a non-working day (his workday is from 8 am to 7 pm) Jain spends a fair amount of his time with his two kids. the elder one, who is 12 years old, loves science and Jain is fond of teaching him the basics to lay a strong foundation and ensure that his passion for science does not get distracted by other fields. A movie buff, it is difficult for Jain to say with honesty that he has missed any new releases of late – be it hindi or english. u dA K s e s h pA r i K h daksesh.parikh@businessindiagroup.com

Executive Track

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

genext takes charge

pakistan (ap&p). under his leadership, the ap&p business has grown in double digits over the last decade.

drug major cipla has announced the appointment of samina Vaziralli as executive director on its board, paving the way for a bigger role for her, nearly two weeks after another heir apparent Kamil hamied quit the pharma company. Vaziralli, the

Veteran joins sarojini dikhale has recently been appointed the director & ceo of lic nomura mutual fund. a veteran with over 32 years of experience in the insurance industry, dikhale joins the amc from lic of india, where she was an executive director. dikhale had joined lic as a direct recruit officer in 1983 and has been with lic since then. she was designated zonal manager in 2005 and was deputed to the national insurance academy (nia), pune, as a faculty member, where she trained senior officials from the life insurance industry.

safe berth

Vaziralli: significant role

niece of cipla chairman y.K. hamied and daughter of vice-chairman m.K. hamied, has been part of the core leadership team since her joining the firm in 2011. Vaziralli, an alumnus of the london school of economics is in charge of cipla’s new venture division. previously, she was with the investment management division of goldman sachs. Vaziralli has played a ‘significant role’ in the company’s ongoing ‘transformation’, says a management note.

moving up procter & gamble hygiene and health care has announced a change of guard. shantanu Khosla, managing director and ceo, procter & gamble (p&g) india has decided to move on from p&g. al rajwani is to assume responsibilities as managing director and ceo of the company. al rajwani, has 34 years of experience at p&g and has worked across the us, canada, china, Korea, and more recently the arabian peninsula and

saif partners, a leading venture capital firm managing assets of $4 billion (about `24,000 crore) has recently strengthened its team by roping in alok goel as managing director. goel, a serial entrepreneur and advisor, has built several successful internet companies. he headed freecharge.in as the ceo and was the coo of redBus.in. he was instrumental in the sale of these companies. freecharge was acquired by snapdeal and redBus by naspers. goel had also earlier worked for google for five years. he had figured in fortune india’s prestigious ‘40 under 40’ list in march 2015.

a gift to il&fs ramakant jha, who spearheaded the project to develop a financial centre in gujarat’s capital gandhinagar, has been roped in as ceo for the smart city initiative of il&fs (the institution has joined hands with the state government to develop gujarat international finance tec-city, or gift). he will be replaced by ajay Kumar pandey, who has been appointed md & group ceo, gift. pandey comes with nearly three decades of experience, having worked in several prestigious telecomm companies, such as tata telecomm, tata teleservices and neotel. u 86 u

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smart move indiamart, one of india’s earliest online marketplaces, has appointed prateek chandra as its chief finance officer. Besides managing finance, chandra will be responsible for the company’s financial growth too. he comes in with 14 years of experience, having worked as cfo, ht media (radio: 104 fm) earlier. chandra had also played a significant role in the ipo of hmvl and the listing of exl on nasdaq, in addition to institutionalising the investor relations programme at ht media & exl (us).

hp’s new appointee hewlett packard has appointed llyod mathias as the head of marketing for the asia-pacific and japan region. mathias, who was earlier with tata services as cmo, will be based in singapore. he had joined hp as the marketing head for personal computers and printing division at hp last year.

change of guard Kim Ki-wan, executive vice-president, lg (home entertainment, overseas sales & marketing group) will take over as the managing director of lg electronics in india with effect from 1 august. Kim-Ki wan, who has been with the company for over three decades, had worked across regions. he was also the ceo, and global market officer, lg electronics. he will replace soon Kwon, who will relocate to lg’s headquarters in Korea to strengthen lg’s B@B business including commercial displays, globally.

third innings p. jayarama Bhat md and ceo of Karnataka Bank has got both the central bank and the board to serve for the third time for a period of three years. the appointment is effective midjuly. Bhat’s first term started in midjuly 2009. the bank is now in the process of documenting its “Vision 2020” under his leadership. u

Selections

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

Luxu ry i n T h e B i g A ppL e

An American beauty

Pierre Hotel: luxurious glory (inset) chef Biju

he toast of the town for almost a century, new york’s fabled pierre hotel has european grace and elegance. india’s beloved jrd would have approved! taj hotels (with staff studied by harvard because of their excellent service under difficult, even terrifying, circumstances), chose to manage this landmark with its grand traditions. the taj restored it, underlining its rich iconic status and possibly spending awesome, impressive millions. today, opulent with cream, ivory and gold interiors, the pierre, on fifth Avenue at 61st street, overlooks ny’s treasure: central park’s acres. A succession of companies managed it earlier and polished it, with its airy, high ceilings, natural light, gleaming marble, old gold accents and sound hushing carpets, to luxurious glory. ‘excellence’ and ‘elegance’ are often bandied around. what a great hotel offers is security, a sense of being home, while one purrs with

contentment: ‘right now, i am here where they take care of everything’. in new york’s pierre, the homesick can breakfast on idlis and sambhar alongside strawberry smoothies and croissants and alas, get fat on a great high tea thanks to chef Ashfer Biju. the famed restaurateur sirio maccioni’s ‘sirio’, provides italian fare and is unfazed by vegan requests. guests have included stars like elizabeth taylor, Viacom’s redstone, mohamed al-fayed, yves saint-laurent, president mitterrand and emperor hirohito, while literati, including John grisham and stephen King, call it their refuge. (satyajit ray checked in at mumbai’s taj and spent his birthday alone, perhaps pondering one of his wonderful creations.) American legends celebrate penniless immigrants, who after inspiration, perspiration and sheer luck, find success and lakshmi. some say charles pierre, once the owner and manager, u 87 u

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was born into hospitality for he apparently worked as a pageboy in europe, serving russian dukes and european royalty. As a 25-year-old at the fashionable sherry’s, he became acquainted with the powerful four hundred, people like J.p. morgan, the Astors and the Vanderbilts. this led to his opening pierre’s on park Avenue, where they hosted debutante balls and weddings. he soon sold it for a joint venture with otto Kahn, e. f. hutton, w walter p. chrysler and other w wall street financiers and promised it would be ‘characterised by simplicity and refinement’ and be club-like, with the renowned escoffier in charge. But maybe the french mean something different by ‘simplic ‘simplicity’? t the pierre was then described, rather dramati dramatically, as ‘a monument of beauty and a most majestic structure in all new york’. then, as is luck’s wont, in 1929 the great depression arrived, the formidable charles pierre declared bankruptcy but was soon reinstated by the new owners. in 1938, John paul getty purchased it for $2.5 million. A huge suite is still called getty and today, another is named tata. the pierre became the first to install radio and tV in all the rooms. in 1959, some residents bought its apartments but an international clientele continued its support and later realtor robert dowling took it over. during this time, edward melcarth created those beloved murals in the rotunda. the garden foyer looks Versailles-inspired, while his tromp l’oeil murals recall renaissance art with figures like neptune and Venus near a woman (mrs onassis?) with children, new york’s glitterati and his own patrons. A nehru-jacketed man stands, while goddess minerva surveys a young Adam and eve and the painter’s love: his cat, sasha. the pierre continues to reverberate with good gastronomy and gorgeous galas! u s wA p n A Vo r A feedback@businessindiagroup.com

People

Back to college

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

ondon-based steel baron L.N. Mittal has been inducted into the governing board of st Xavier’s college, Kolkata, from where he had completed his graduation. mittal ittal had passed from the college with a B com degree in 1969 after which he joined family business. the chairman and ceo of Arcelormittal, the world’s leading integrated steel and mining company, will join the board from July 2015. “mittal has accepted his alma mater’s offer,” said principal father felix raj. aj. Accepting his role, mittal wrote: “i will be happy to accept this offer and be a part of

my alma mater.” the college alumni association had conferred the ‘global Xaverian’ award on mittal in 2013 in london. giving company to mittal as a fellow member of the board would be industrialist Goenka, Sanjiv Goenka chairman, rp-sanjiv goenka group, who was also part of the body as an alumnus. the governing t body is the highest decision making authority of the elite college, which has already been granted autonomous status and the power to award degrees. sst Xavier’s is now eyeing a university status under ppp model. u

sAnJAy BorAde

Reshaping the world

iran Mazumdar-Shaw, founder and chairperson, Biocon, the Bangalore-based biological drug maker, has received yet another global recognition. she has featured in ‘the world view 100’ of the prestigious us-based Scientific American magazine, which has focussed a spotlight on the visionaries who continue to reshape biotechnology – and the world. surprisingly, mazumdar-shaw is the only person from india on this list. mazumdar-shaw appears on the list alongside scientists, business leaders, entrepreneurs, legislators, administrators and key media figures. Scientific American says the “the world view 100” list is a “collection of extraordinarily talented and effective people” and describes them as “seminal figures” who are “as complementary to

the emergence of the field (of biotechnology) as two parents are to a child.” the magazine quotes mazumdar shaw, “my philosophy has been one of differentiation. look at what’s there and keep challenging yourself to be different: if everyone is after generic products, how can you get into novel programmes? if you can do that, then you stand apart and you can do things more effectively.” the list was compiled from nominations by dozens of leaders in biotechnology and biosciences globally. the nominators were encouraged to select living experts currently working in the sector from a range of contributing areas, including industry, academia, public policy, finance, law and beyond. u

ata consultancy services (tcs), has completed building sanitation facilities for girl students in 1,000 schools across Andhra pradesh, telangana and Bihar as a part of prime minister’s clean india initiative. tcs had earmarked a budget of `100 crore for building dedicated sanitation facilities for girls in selected schools. the initiative aims to boost the enrolment rate and reduce the dropout rate of girl students in the adopted schools, and in turn, improve learning outcomes. “tcs is committed to the prime minister’s ‘swachh Bharat’ initiative of ensuring safety, dignity and equality for all girl students. we are happy to have completed building toilets in about 1000 schools,” said N. Chandrasekaran, ceo and md of tata consultancy services. tcs commenced the project in october 2014 and a special taskforce was constituted for the endto-end implementation. under the first phase of this sanitation initiative, tcs has successfully implemented building girls’ toilets in about 1041 schools spread across Andhra pradesh, telangana and Bihar u

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Clean record t

People

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

is two decades plus of social entrepreneurship have helped Pradeep Lokhande to bring change in india’s rural areas. lokhande’s achievements in reaching out to thousands of villagers have earned him the dsk foundation’s Self-Made Man award for 2015. “my work in villages and the social touch have been instrumental in this recognition,” says the founder- ceo of the pune-headquartered Rural Relations. “our objective now is to relate to tomorrow’s india by reaching out to 49,000 key and feeder villages, with a population of 2,000-plus, in the first phase. we believe in five mantras: employable education from the fifth standard; dignity to

Village worker

all professionals, especially farmers; technology; support to pwd (people with disability); and providing education, water, power, health, roads and sanitation to all these villages.” “today you are rich, but your feet are on the ground,” reads the citation for the `1-lakh award. “one hand touches the sky, the other is extended to help society.” lokhande and his team, who have been spearheading a postcard revolution to connect ‘non-resident villagers’ with their rural roots, have now launched a website, villagewiKY, to free access to rural relations’ entire database so that anyone can lend a hand in the five-point development programme. u

Women power

hile market regulator sebi has mandated listed companies to appoint at least one woman director on their board to create gender diversity, most of the family-owned companies inducted wives or daughters on the board just to comply with the norm. this defeats the purpose of empowering women in the corporate world. in an initiative, ficci ladies organisation (flo), ladies wing of the apex business chamber, which works for women empowerment, has taken a countrywide initiative to make its members competent for the board

room through proper training and workshop by top industry people. Manju Pachisia, chairperson, women directors committee, flo Kolkata, (second from left in picture), who recently organised a workshop and an interaction session with some eminent business personalities for over 700 of its members says, “the response was overwhelming. Quality of candidates participated for training was excellent. this will help the companies to acquire well-trained, talented women to join their boards.” pachisia is also director of the Kolkata-based skp securities. u u 89 u

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Steam build-up p

rocess efficiency leader forbes marshall has been judged the best workplace in indian manufacturing for the second time. “we are delighted at this continued ‘great place to work’ ranking,” says director Naushad Forbes, after great place to work institute, which recognises the best places to work around the globe, announced its latest ranking. “this is a result of an all-round team effort. we are particularly pleased that this high ranking is based heavily on a strong assessment by our own members.” the punebased company, which has been building steam engineering and control instrumentation solutions for 70-plus years, was ranked ninth overall among 708 of the country’s leading companies. it has consistently ranked in the top 10 in the past five years, and the top 25 in the last 10. the global institution studies companies in 40 countries around the globe, covering over one million employees, and picks organisations where “you trust the people you work for, take pride in what you do, and enjoy the company of people you work with”. forbes marshall scores well on credibility, respect, fairness, pride and camaraderie – where its ‘members’ have rated the management high. u

Interview

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

sa n Jay Bor a de

‘The truth should come out’ Shivraj Singh Chouhan, chief minister of Madhya Pradesh, is rated as one of the better administrators in the country. The Vyapam scam, however, has threatened to cast a shadow on his record of good governance. Chouhan, however, asserts that he had done no wrong and is confident about his ability to ride the storm

From being adamant about the Special Task Force (stf) probing the Vyapam scam to handing over the probe to the CBI, you seem to have done an aboutturn in 24 hours.

the stf had been doing a good job, the high court-monitored sit was also doing a good job. But, before that i wish to clarify that i was the one who ordered a thorough probe into the Vyapam issue. a small matter concerning irregularities in pmt admission test had come to light and preliminary probe pointed to a deeper malaise. i couldn’t sit back and not do anything since i had introduced a transparent system as the previous congress governments had done nothing. i thought rather than hand over investigation to police, it should be given to the stf, which would have done it better. the stf unearthed lot of irregularities after which some people went to high court for a cbi probe. the hc refused the plea but ordered court monitoring of the investigation through sit. even the supreme court initially refused to order a cbi probe, pointing out that the stf was doing a good job. in recent weeks, such was the atmosphere created that i thought it would eventually affect the well-being of the state, which has emerged as the best performing state in the last one decade…i felt a wrong impression was being

created about the state, a wrong perception, which would have been difficult to correct merely by saying that a fair investigation is being conducted. we are in a democracy and in a democratic setup, perception matters a lot and the conduct of the ruler, who is actually the servant of the public, must be above any criticism or questions. this is necessary if he has to work with full authority. that is why i wrote to the hc, requesting that the investigation be handed over to the cbi. Now that the Supreme Court has also ordered a cbi probe, how do you feel about it?

i welcome the sc order wholeheartedly. there was a burden on my heart. i request the cbi to begin investigation at the earliest so the truth comes before the country, the people, and justice is done. there is now a demand that the cbi probe should be monitored by the sc. my government has already said that it has no objection to sc monitoring the cbi probe into the Vyapam scam and disbanding the stf and sit. What about the series of deaths? Isn’t that mysterious?

every death is unfortunate and sad. we feel all the deaths (in the scam) should be probed. the state government had earlier written u 90 u

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to the high court for probing the deaths. The names of rss/bjp leaders and your wife are being linked to the scam. Has that dented your and the party’s image? Have you suffered any political loss?

there is no question of any loss. loss would certainly have been caused if there was any truth in the case. it is all courtesy the discredited congress leaders, who have lost election after election. even in the recent bypolls, we won. people (congress leaders) thought ruling was their birthright only because they were raja, maharaja or big…i was a nobody, i come from an average family. their big complaint is that a person like me has become cm for the third time. since they can’t win elections, they are dragging in my wife who is a housewife. this is not the first time they have levelled baseless allegations against her. But, each such allegation has turned out to be false. the public is not unaware. we will give the congress leaders a proper reply. Is the party with you? Uma Bharti appears to be upset.

the entire party and the leadership are with me. as for uma Bharti, she is my sister and i have deep respect for her. in a democracy, everyone has the right to speak and she has always been known to speak her mind. u