Mi december 2013 by MK Menon

www.moneyindices.com

VOL 1 ISSUE 6

ITâ&#x20AC;&#x2122;S ALL ABOUT BUSINESS

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Israel Turns East

Israel seems to be shifting its gaze from the West to the East

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Swedish Foray Consumer goods giant SCA targets Indian hygiene market

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You Can Win Motivational speaker Shiv Khera talks about success

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december 2013

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CONTENTS

40 Coke@20 ups the cola game

SCA to sweep Indian hygiene market

Swedish consumer goods giant SCA is seeking to take advantage of the low market penetration of hygiene products in India

In its 20th year, Coca-Cola India plans to invest $5 billion to deliver innovation, develop strategic ties, build customer loyalty, and ensure product affordability

The truth of Israelâ&#x20AC;&#x2122;s Look East policy Aroma, Prayers, Is Israel finally looking towards and Cycle

the East and shunning the West? Growing ties with India and China suggest a shift in its approach

You can win, says Shiv Khera

Led by a third generation entrepreneur, Mysore-based NR Group is chugging ahead to achieve a turnover mark of `1,000 crore

Shiv Kheraâ&#x20AC;&#x2122;s 30 years of research, understanding, and experience have helped people on the path of personal growth and fulfillment. Khera is also the author of the title You Can Win

Regulars 10 ECONOMY WATCH 16 PHOTOSPEAK 20 voices

MONEY INDICES December 2013

21 Asian Finmin Talks 38 world economy 56 ecopreneur

72 tech update 80 global INDICES 98 What money taught me

Industry Expert Startup Success 58

A stepping stone to studies abroad

Startup company Freshmentors.com aims to make the admission process easy and stress-free for students planning to study abroad

Cloud is the future, says Google arm

Google Enterprise is growing phenomenally in the UAE with tailormade solutions for businesses, says Abdel Wahed Bendaoua

NBFC/Fullerton 86

Lending: Fullerton in full rural mode

Fullerton India is charting out new strategies for achieving sustainable growth after escaping tumultuous weather

Entrepreneurship 50

Is the American Dream still alive?

BSE-SME BSE-SME is here to strengthen you

BSE-SME provides a world class platform to SMEs and investors, enabling them to come together and raise the equity capital

Either by choice or the lack there of, many young individuals in America have chosen to start their own businesses

Investment Guide: Mutual Funds 74

Introducing Contra-Cyclical Investing

Contra-cyclical investing is a strategy whereby an investor buys stocks when it’s the worst time to buy

Investment Guide: Derivatives 76 Play safe with derivatives

The value of the derivatives represents the future expectations about the market movements

Innovative Entrepreneur 52 Coffee and the magic cooker

Mohammed Rozadeen, a gas and electric welder from Bihar, has invented a low-cost coffeemaker using a pressure cooker

Tech/Motorola 72

Motorola revisits India with a budget phone

Motorola reveals plans to bring the recently-launched Moto G, a budget phone from the Googleowned company, to India

Event review 84

Ecopreneur A 19-year-old’s green vision takes shape

Param Jaggi, the CEO of Ecoviate, has developed a device that can convert carbon dioxide released from a car into oxygen

Special Story Man of iron will

Dr Capt C P Krishnan Nair, the Founder-Chairman of the Leela Group of Hotels, says,‘we are never too old to set another goal’

Social Entrepreneur Mentoring students via YuvShaala Kshitij Mehra has eventually found his calling in being a mentor and a friend to the youth of India

INKing the story of us

The fourth edition of the INK conference brought out the essence of life through different disciplines, voices, and perspectives

editorial@moneyindices.com

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December 2013 MONEY INDICES

Volume 1 Issue 6 | December 2013 Founder & editor Ravi Deecee

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MI INB

X media. As mentioned by people like Touseef Raina in your Cover Story, he has been running a government which is more communal and divisive. I don’t think any secular Indian would opt for a person like Modi. Salim Ashraf, Srinagar

‘2014 polls will change India’s course’

Kudos for presenting a balanced story on Narendra Modi! What I like the most about Narendra Modi is his strong will and character, which is lacking among Indian leaders. The BJP has made the right choice by projecting Modi as its leader. I am sure that the 2014 elections would change the course of India. Jia Sharma Vidrohi, Mumbai

Great story on Israel

‘Biased and inflated Cover Story on Modi’

Your cover story on Narendra Modi was biased and inflated. The Modi hype is being created by media companies like yours. Gujarat is ailing on many fronts, which you have not discussed anywhere in the story. Modi is a powerful political brand and he has used his power tactics to come out of the 2002 riots unaffected. Otherwise, he would have been behind bars. I respect the BJP as a national party, but they had destroyed its culture and secular functioning style by anointing Modi as its prime ministerial candidate, which would affect its electoral fortunes in the upcoming general elections. Abraham Punnoose via mail

Well done!

In the November issue, Money Indices had a mix of good features and articles, ranging from business to economy and politics, which is unseen in other titles. Great work by the team! Elizabeth Susan, Gurgaon

‘Secular Indians will not opt for Modi’

Narendra Modi has been trying to project himself as India’s new age messiah with backing from the

Pavan Soni’s story, titled ‘Israel: How diversity and adversity breed innovation’, was an excellent read. I was surprised to learn about the advancements of Israel on the technology and innovation fronts. I request the Money Indices team to bring out such interesting articles in the future editions as well. Manish Mohan, Dubai

Correction and Clarification

MXM India’s Editor in Chief and CEO Pradyuman Maheshwari’s quote in the Cover Story of the November issue was misinterpreted by the correspondent, and it may have shown him as a supporter of BJP’s prime ministerial candidate Narendra Modi. The misinterpretation is deeply regretted. As part of this clarification, we present the corrected version of the quote of Mr Maheshwari on Modi. Mr Maheshwari said, “I have heard him (Modi) speak live and would say he is as charismatic as Indira Gandhi, Atal Bihari Vajpayee, and Rajiv Gandhi. He has energised the cadre. However, one must also note that he has a dubious past and there is a question mark on Gujarat’s prosperity. What I like is that we needed an energised opposition and he has created that.”

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w w w. m o n e y i n d i c e s . c o m December 2013 MONEY INDICES

EDITORIAL

Live it up like an initiator!

From the corporate big league, we have Google Enterprise dwelling upon cloud computing and its clientele in the Middle East, and a quick review of Kochi’s INK Conference, which brought together a stellar line-up of achievers from diverse disciplines and geographies

At times, breaking away from the rush of the moment makes great sense. It not only comes as a welcome relief, but also helps in regrouping our strengths, ideas, and thoughts against myriad challenges of the day. This time, we have deliberately moved away from the growth hiccups, struggles, negativities, pressures, and fallouts of the Indian and American economies. For, beyond a point, too much despondency and tension can leave any normal reader disinterested in the mechanics of global business. So, we thought of packing this edition with some popular and not-so-popular stories of initiators, innovators, thought leaders, and standout economies. Leading the pack is Dr Capt CP Krishnan Nair, the Founder of Leela Group of Hotels. Even at the ripe age of 92, he hasn’t lost the spirit or will power to work for his country’s growth and development. If Capt Nair’s life is symbolic of well-crafted victories and successes, we have celebrated author, educator, business consultant, and entrepreneur Shiv Khera talking about the essentials for a win-win attitude in both personal and professional life. The young blood too is just as innovative and bold in its approaches as these seniors. While 19-year-old Param Jaggi is on a green revolution mission with a revolutionary device that can convert carbon dioxide released from a car into oxygen, Freshmentors is an online platform seeking to provide assistance to thousands of Indian students vying for admission in foreign universities. Kshitij Mehra’s YuvShaala is another attempt aimed at helping children in making good career choices. In the innovative entrepreneur section, we have featured a welder from Bihar, Mohammed Rozadeen, who has invented a coffeemaker using a pressure cooker. From the corporate big league, we have Google Enterprise dwelling upon cloud computing and its clientele in the Middle East, and a quick review of Kochi’s INK Conference, which brought together a stellar lineup of achievers from diverse disciplines and geographies. For hot wheel aficionados, we have news about some great offerings from the Dubai Motor Show. Pssst! Heard of the first Arabian Hyper car Lykan HyperSport 2014? In the world economy section, we take a look at Turkmenistan, which has posted strong economic growth in 2013 on the back of high growth of non-hydrocarbon economy. We also look into the growth status of Singapore, with some incisive observations from the International Monetary Fund. That leaves us with the Cover Story on a multinational company that continues to fizz up in the 20th year of its India operations. That’s where we “Open Happiness” with Coca-Cola. With all that, we hope to give you some much-needed inspiration for rejuvenation in the New Year. Happy holidays, and take care!

Ravi Deecee Editor

MONEY INDICES December 2013

ECONOMY WATCH UAE

Confidence up in Dubai’s realty sector DUBAI: “With a recent cooling in the rate of growth, regulatory measures introduced to help sustain and regulate Dubai’s property market are already starting to take effect,” said Steve Morgan, Head of Cluttons Middle East. The real estate consultancy said in a new report that the new regulations have positioned the market towards a more sustainable pace of growth, with reports of a new price bubble being premature. The report also said that steps announced by the UAE’s Central Bank in October to set limits on the size of mortgage loans for housing, along with the Dubai Land Department’s recent doubling of property registration fees from 2-4 per cent, are already impacting the volume of deals being recorded in Dubai’s residential market. “The vibrancy in the residential market has resulted in growing confidence in the real estate sector, but we believe concerns of the market overheating are still overly negative, especially given that despite the recent gains, average residential values remain well below the market peak,” Steve Morgan added. His comments come just days after the International Monetary Fund urged Dubai’s government to be ready to act if it sees very rapid increases in asset prices.

500 New Residential Plots at Al Furjan

DMC Center, Reuters Sign MoU to enhance services

DUBAI:Al Furjan is on its way for a makeover as Dubai developer Nakheel has said that it is set to launch more than 500 new residential plots in Al Furjan, which was recently hit by extensive flooding. Price of the plots, which cover between 4,800 and 13,000 sqft, will range from AED 1.1million and AED 3.3million. A Nakheel spokesman said: “This newly-released land is ideal for serious investors looking to develop new homes in one of Dubai’s most convenient, sought-after locations. We expect a high level of interest in this unique investment opportunity when our doors open for business.” Nakheel launched 400 new homes for sale at Al Furjan last month.

DUBAI: The Dubai Multi Commodities Centre Authority (DMCC) has signed a memorandum of understanding (MoU) with Reuters (Thomson Reuters) to further explore cooperation between the two parties by enhancing value-added products and services that benefit customers and free zone members. The MoU signing ceremony was attended by DMCC and Reuters officials, who discussed the terms of the new agreement which include a range of initiatives that add value to current products and services, with a focus on events, networking, and thought leadership. “Since the establishment of the DMCC Free Zone just over 10 years ago, we have welcomed over 7,500 member companies from across the globe to Dubai,” Ahmed bin Sulayem, Executive Chairman of DMCC, was quoted as saying. “The terms of the MoU signed with Reuters will no doubt enable us to further innovate for the benefit of our members,” he added. Today, DMCC is the largest and fastest growing free zone in the UAE.

MONEY INDICES December 2013

UAE

UAE to complete major building projects by 2030

UAE Economy To Grow 4.5 Per Cent This Year, Says Minister

ABU DHABI: The United Arab Emirates (UAE) will spend $329 billion on delivering major construction projects between now and 2030, according to a report from consultancy EC Harris. These programmes, defined as those with a cost of $1 billion or more and delivered over a short time-frame, will peak in 2016 with $40.4 billion being handed over, the research found. Across the Middle East, more than $1 trillion will be splashed out on infrastructure, energy, property, and transport projects over the same period of time, including $255 billion in Saudi Arabia and $156.8 billion in Qatar. The latter is due to host the 2022 FIFA World Cup, and the report highlighted potential labour shortages in the Gulf in the period running up to this event. “The Middle East is experiencing unparalleled economic and social development due to the large volume of mega projects planned and underway,” commented Alistair Kirk, Head of infrastructure, industry, and utilities, Middle East, EC Harris.

ABU DHABI: The United Arab Emirates’ gross domestic product (GDP) is expected to grow between 4 per cent and 4.5 per cent this year, according to the Gulf nation’s Minister of Economy, Sultan Bin Saeed Al Mansouri. “The UAE remains committed to its ongoing development and diversification of its economy in keeping with its Vision 2021, which seeks to make the UAE one of the best countries in the world by 2021,” Al Mansouri was quoted as telling Gulf News. Al Mansouri said that despite IMF predictions of weaker global oil prices next year, the UAE’s economy will surge ahead and grow even stronger. “The impact of oil prices is limited to only between 30 and 33 per cent, or its share in the GDP of the country. We are also planning to reduce this share to only 10 per cent in future,” Al Mansouri said. The UAE Minister of Economy also ruled out any cut in infrastructure projects.

UAE Power Demand to Exceed 40,000 MW by 2020 ABU DHABI: United Arab Emirates (UAE) Minister for Energy Suhail bin Mohammed Faraj Faris Al Mazrouei has said that the demand for power in the UAE will exceed 40,000 megawatts by 2020 at a growing rate of 9 per cent annually. He made the remarks at the inauguration of the New Nuclear International Conference (NNIC), hosted by the Emirates Nuclear Energy Corporation (ENEC) here between November 11 and 14. Al Mazrouei also pointed out that the UAE’s demand growth rate average is three times that of the international energy demand average. The conference brought together nuclear energy leaders from more than 40 countries to discuss the opportunities for new and developing nuclear energy programmes around the world, and exploring all aspects of the nuclear energy lifecycle.

December 2013 MONEY INDICES

ECONOMY WATCH WORLD

‘Best time to invest in South Africa’

Favourable economic prospects for Azerbaijan

JOHANNASBERG:You can double your investment in South Africa. Yes, that’s what Elizabeth Thabethe, South African Deputy Minister of Trade and Industry, recently said. “Those who invest in South Africa never go wrong, they double their investments. I give people the example of the Tatas,” she said. “Tatas are everywhere in South Africa. They’re doing so well, opening new outlets and growing their footprint,” Thabethe added. According to her, Indian companies doing business in South Africa testify how easy it is to set up and then do business. South Africa is providing a variety of incentives to companies. “South Africa and India are just not countries that happen to be together, there is a foundation. India steadfastly supported our struggle against apartheid. The Mahatma’s political career started in South Africa. In all this, there is the foundation of a deep and abiding relationship,” Thabethe said.

BAKU: Azerbaijan’s near-term economic prospects are generally favourable, with overall gross domestic product (GDP) growth projected at 5 per cent in 2013-14, following the successful stabilisation of oil output. Favourable oil sector developments will maintain a comfortable external position. Inflation is projected to hover around 3 per cent on the back of softer price pressures. Risks of a fall in oil prices emanate mainly from a potential deterioration in the global outlook. “The Central Bank of Azerbaijan should continue to strengthen the interest rate transmission mechanism and the banking supervision framework, as well as address the strong consumer lending growth. Near-term priorities include strengthening bank asset classification and provisioning rules, and introducing new macro-prudential measures. The capitalisation plan of the International Bank of Azerbaijan is a serious concern,” said Raja Almarzoqi, an economist with the International Monetary Fund.

US forum looks into statistics for global financial stability WASHINGTON: A forum organised by the Statistics Department of the International Monetary Fund (IMF) discussed the key role of statistics in support of effective policy actions taken by country authorities and policy advice provided by the IMF. The forum, the first of its kind, took place on November 12-13 in Washington, providing a unique setting for policy discussions on cutting-edge statistics among a broad range of stakeholders: academics, private sector analysts, data compilers, and decisionmakers. Recent progress in closing data gaps exposed by the global financial crisis; risk exposures in international and sectoral balance sheets; cross-border linkages and spillovers; shadow banks and global contagion; fault lines in the public sector; and potential problems from capital flows are among the important issues that came up for discussion. David Lipton, First Deputy Managing Director of the IMF, noted that the recent global crisis reaffirmed the relevance of traditional residence-based economic and financial statistics but stressed that the “crisis also revealed a need for more and better data, data that go beyond traditional statistics.”

MONEY INDICES December 2013

WORLD

Nod for private financing norms in Chinese province BEIJING: East China’s Zhejiang province has approved regulations on private financing for Wenzhou city. The regulations, approved at the sixth session of the 12th Standing Committee of the Zhejiang Provincial People’s Congress, are the first of their kind in China, Xinhua reported. According to the regulations, private loans involving more than three million yuan (about $0.5 million) or more than 30 lenders should be recorded by local financial management authorities or private lending registration service centres. China’s cabinet approved the establishment of a pilot financial reform zone in Wenzhou in March last year to regulate private finance after a crisis in the city in 2011. In Wenzhou, a large number of small and medium-sized enterprises used to resort to underground financing as stateowned banks failed to meet their needs.

European Parliament clears seven-year budget for EU

Indian-American Gargee Ghosh in Obama’s GDC

BRUSSELS: The European Parliament has formally approved a seven-year budget for the European Union (EU), paving the way for financial aid to boost several economic sectors. The Multiannual Financial Framework (MFF) was adopted by 537 votes to 126 during the Parliament session last month, allowing the EU to invest up to 960 billion euros (about $1.30 trillion) in commitments and 908.4 billion euros in payments. “This is a great day for Europe. The European Parliament has given its final blessing to the European budget from 2014 until 2020, thus bringing successfully an end to long negotiations,” said European Commission President Jose Manuel Barroso. According to the EU, investment of almost 1 trillion euros in some sectors could boost economic growth and employment. At least 70 billion euros will be available for a significant contribution to job creation through the European Social Fund and the European Regional Development Fund.

WASHINGTON: IndianAmerican Gargee Ghosh has been appointed as member of US President Barack Obama’s Global Development Council. Ghosh is currently the director of Policy Analysis and Financing (PAF) at the Bill & Melinda Gates Foundation. PAF is the Foundation’s internal policy shop focussed on priorities, trends, and innovations in international development financing. Its work spans aid policy, country financing, and engagement with international financial institutions. At over two dozen, the Obama administration has more Indian-Americans working in high places than any other administration. “I am pleased to announce that these experienced and committed individuals have agreed to join this Administration, and I look forward to working with them in the months and years ahead,” Obama said, announcing Ghosh’s appointment with several others. Ghosh has been at the Bill & Melinda Gates Foundation since 2012.

December 2013 MONEY INDICES

ECONOMY WATCH INDIA

Nilekani: Create platforms for entrepreneurs NEW DELHI: The Central government needs to create platforms for entrepreneurs to flourish in the country, the Chairman of the Unique Identification Authority of India, Nandan Nilekani, has said. He was speaking at a workshop on ‘Indo-US Startup Accelerator’, organised by the Federation of Indian Chambers of Commerce and Industry in partnership with the Indo-US Science and Technology Forum and the Department of Science and Technology. The UID platform was created after looking at the two successful innovations that took place in the US, namely internet and GPS, and both became platforms for numerous entrepreneurs and startups, said Nilekani. The joint commitment of all partners is essential to create an enabling ecosystem for the young and dynamic startups from India to make the big leap, the workshop suggested. T Ramasami, Secretary, Department of Science and Technology, pointed out that financial support and access to market, material, and technology are the challenges that entrepreneurs and startups face. “It is often seen that funds are easily available to already established entrepreneurs. However, startups find it difficult to acquire seed funding,” said Ramasami. “The government and entrepreneurs should learn and gain from each other’s experiences. Startups have the advantage of being sensitive to the needs of the place and can be a part of the development process. They already enjoy economies of scope but need to expand economies of scale,” he added.

RBI raises concern over non-performing assets

Manufacturing share in GDP at lowest in 10 years

MUMBAI: The Reserve Bank of India (RBI) has voiced concern over the rising nonperforming assets, or bad loans of banks, and said it would focus on monitoring their asset quality. The RBI said there was a need for an effective reduction in the non-performing assets (NPAs) and improvements in the loan recovery process. According to the RBI, it is necessary to stimulate and foster competition in the banking sector and liberalise licensing policies. Weakening domestic macroeconomic conditions combined with the continuing subdued global growth posed challenges to the banking sector during 2012-13, the RBI said in a report on Trend and Progress of Banking in India - 2012-13. “However, the comfortable capital base continues to lend resilience to the Indian banking sector,” it said. The RBI said growth of the Indian banking sector slowed down for the second consecutive year in 2012-13 amid slowdown in the domestic economy and tepid global recovery.

MUMBAI: The share of manufacturing in India’s gross domestic product (GDP) has declined to 15.1 per cent this year, the lowest level in the past 10 years, says a research report. The report was released on the eve of the 12th Manufacturing Summit organised by the Confederation of Indian Industry (CII). The survey was conducted jointly by the CII and Boston Consulting Group. Eighty-three per cent of executive directors of companies that took part in the survey think that slowdown in domestic demand had the biggest impact on India’s manufacturing sector in the past 12 months. More than 75 executive directors of manufacturing companies in India participated in the survey.

MONEY INDICES December 2013

INDIA

Inclusive growth possible only with inclusive governance: Pranab KOLKATA:“Our primary goal is to achieve inclusive governance for an equitable economic growth, for the biggest challenge before the Indian economy was ensuring inclusive growth, but it cannot be attained without inclusive governance,” President Pranab Mukherjee has said. “The biggest challenge is to ensure inclusive growth so that those in the margins benefit from new initiatives and new opportunities coming out of globalisation,” said Mukherjee. The President termed the changes which have taken place in the Indian economy over the past six decades as “remarkable”. He praised the rise in the literacy rate, food grain production, and exports of rice and wheat.

India will be No. 1 in printing sector NEW DELHI: By 2015, India is expected to occupy the number one slot in the printing sector. The Indian printing industry will reach nearly $20.9 billion by 2015. Minister of State for Commerce and Industries EMS Natchiappan stated this at the ninth edition of the international exhibition on printing and allied machinery industries (PAMEX 2013), inaugurated by him at Greater Noida near New Delhi.

More Indian commercial banks to foray into Africa NEW DELHI: Many more Indian commercial banks will soon be active in various parts of Africa. Some of them have already signed partnerships, facilitating business and financial flows between the two regions. The banking market in Africa holds vast potential for growth, and sub-Saharan Africa in particular has been attracting the interests of bankers around the globe. Retail banking in the region is estimated to grow 15 per cent annually by 2020. Mobile banking is being seen as a powerful driver after the success of the M-Pesa transfer service in Kenya and elsewhere. Among the Indian banks, Bank of Baroda (BoB) has the widest network of 45 branches in Kenya, Uganda, Tanzania, Botswana, South Africa, Mauritius, Ghana, and the Seychelles. BoB caters to various segments such as retail, corporates, and SMEs, and is planning 16 more branches. “The world is rediscovering the unharnessed potential of Africa. The bank sees good growth prospects in Africa. The increasing presence of Indian corporations in the continent provides further opportunities. The bank has identified many upcoming centres in the region and will

enhance its market share,” said V H Thatte, BoB’s Chief General Manager (International). Bank of India (BoI) and State Bank of India (SBI) are the other contenders. BoI is present in Kenya, Tanzania, and Zambia. It opened its first branch in Johannesburg and a wholly-owned subsidiary in Uganda last year. In August this year, Botswana awarded BoI and SBI new operating licences. SBI’s presence in the African continent extends to Angola, Egypt, Nigeria, and Mauritius. Its subsidiary, State Bank of India Mauritius, has established itself as a major player in Mauritius with 15 branches. Indian companies use Mauritius as an investment gateway to Africa. Canara Bank too plans to open its first branch in Johannesburg. India’s largest private sector lender, ICICI Bank, also has plans to open branches in Mauritius and South Africa. Central Bank of India is the second Indian bank to get approval to open a representative office in Nairobi after HDFC Bank. A representative office is limited to marketing and negotiating lending and trade finance deals with customers but cannot collect deposits from the public. As trade and investment ties grow, more Indian banks will be in Africa.

December 2013 MONEY INDICES

PhOTOSPEAK LA DÉFENSE

La Défense: a major business district near Paris, France

MONEY INDICES December 2013

LA DÉFENSE

pread over 560 hectares, La Défense is Europe’s largest purpose-built business district. It has 72 glass and steel buildings and skyscrapers with 180,000 daily workers, and 3.5 million square metres (37.7 million sq ft) of office space. Around its Grande Arche and esplanade (Le Parvis), La Défense contains many of the Paris urban area’s tallest highrises, and is home to more than 1,500 corporate head offices, including those of 15 of the top 50 companies in the world. The district is located in the westernmost extremity of the 10-km-long Historical Axis of Paris, which starts at the Louvre in Central Paris, and continues along the ChampsÉlysées, well beyond the Arc de Triomphe, before culminating at La Défense. The district is centred in an orbital motorway straddling the Hauts-de-Seine département municipalities of Courbevoie, Nanterre, and Puteaux. La Défense is primarily a business district, and hosts only a population of 25,000 permanent residents and 45,000 students. La Défense is also visited by eight million tourists every year, and houses an open air museum.

December 2013 MONEY INDICES

CORPORATE BRIEFINGS

HRX: Hrithik’s lifestyle brand MUMBAI: Bollywood actor Hrithik Roshan has joined forces with online shopping portal Myntra.com to manufacture his lifestyle brand, HRX. This brand will be sold only on Myntra.com. “Partnering with Myntra.com to launch HRX was the opportune decision as they are in sync with our philosophy and effortlessly helped in creating the brand, just as I visualised,” the ‘Krrish 3’ star said. The HRX collection is a combination of style and substance with inspiration drawn from the actor. Eventually, Myntra is expecting that the massive fan base of the star will be a major advantage for them. “Hrithik has a massive fan base and is widely respected for his passion for fitness. We are very excited about the opportunity to build original indigenous brands in India. We felt that we can create a very unique and lasting brand by taking inspiration from Hrithik’s work ethic,” said Mukesh Bansal, CEO and Co-founder of Myntra. The range starts from `499 for basic t-shirts and goes up to `2,499 for jeans and trousers. Extreme casuals and easy actives in apparel, and sports footwear for men are there in this collection. The products are lightweight and made of premium fabrics crafted with a contemporary slim fit. The line is dominated by vibrant colours.

Lupin launches generic gastric disorder tablets MUMBAI: Pharma major Lupin’s US subsidiary, Lupin Pharmaceuticals Inc (LPI), has launched the generic version of Rabeprazole Sodium delayed-release tablet, 20mg, in the US market. This fastest growing pharmaceutical player had earlier received final approval from the US regulator for the drug, indicated for the treatment of gastroesophageal reflux disease (GERD). Lupin has launched 11 products in the US market this year and received 15 approvals. As per IMS data, Lupin’s Rabeprazole Sodium delayed-release tablets, 20mg, are the generic equivalent of Eisai Inc’s brand Aciphex, which clocked in $864 million in July 2012-June 2013. Lupin Ltd is the fifth largest and fastest growing generic player in the US and the third largest Indian pharmaceutical company by sale.

Infosys to help Dutch on health project BANGALORE: Infosys Ltd, the global software major from India, will join hands with Commit, a public private research community in the Netherlands, for an improved health project through smartphone application. Infosys will provide technology and investment to Commit’s health project, being set up with a consortium of partners to promote a healthier society globally through smartphone application for end users. Drawing on its domain expertise in sensor networks, complex event processing, security and velocity data management, Infosys will enhance the project for effective use of the smartphone application. The application offers many a benefits. It gives personalised coaching guidelines on a user’s smartphone on vital statistics, exercise regime, long and short-term medical history, location, diet habits, and weather conditions. Both the partners will team up to enable the smartphone application to access data sources from a user’s Facebook and Twitter accounts.

MONEY INDICES December 2013

PERSONALITIES

Azim Premji is top Indian philanthropist

eet the most generous entrepreneur from India, IT tycoon and Chairman of Wipro Azim Premji. He has topped the list of philanthropists from India with a donation of `8,000 crore in the past year, according to the Hurun India Philanthropy List 2013 of China-based Hurun Report Inc. The Hurun India Philanthropy List is a ranking of 31 Indians who donated more than `10 crore in cash or cash equivalent between April 1, 2012 and March 31, 2013. Premji, who owns 57 per cent of Wipro, has donated 10 per cent stake in the company to Azim Premji Foundation, a non-profit organisation that promotes education in rural India. It runs programmes across Karnataka, Uttarakhand, Rajasthan, Chhattisgarh, Pondicherry, Andhra Pradesh, Bihar, and Madhya Pradesh. It is Premji who led Wipro to giant leaps through diversification. He transformed Western Indian Vegetable Product Ltd, a hydrogenated oil manufacturing

company, into a high-profile software company. Forbes selected him as the fourth wealthiest Indian and the 91st richest person in the world in 2013. He has been listed twice among the 100 most influential people by Time Magazine in 2004 and 2011. He is the first Indian to sign up for Giving Pledge, a global philanthropic initiative spearheaded by Warren Buffet and Bill Gates. Education was the most important area for Indian philanthropists, who made a total contribution of `12,200 crore.

CII President’s Award goes to Ratan Tata

ata Group Chairman Emeritus Ratan Tata has been honoured with the Confederation of Indian Industry (CII) President’s award for his outstanding contribution to the industry and nation-building. Speaking on the occasion, Union Finance Minister P Chidambaram said, “I admire him for creating wealth for millions of Indians and for many thousands across the world. I admire his passion to make small cars and his

passion to make new airline.” Ratan Tata has also been elected to the board of governors of East-West Centre, a US think tank promoting better relations and understanding among people of US and Asia Pacific. The board was established in 1960 by the US Congress to serve as a resource for information and analysis of critical issues of common concern. By bringing people together, it acts as a platform to exchange views, build expertise, and develop policy options.

December 2013 MONEY INDICES

VOICES

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MONEY INDICES December 2013

India’s en innova trepreneurial tors ha ve t po Google tential to buil he ’ if the d the ‘n cou ex card rig ht, and ntry plays its t ensure access s for mill ions of Internet Eric Sc it s citize hm ns. Executiv idt, e Chair man, G oogle

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ASIAN FINMIN TALKS

Volatility over currency intervention in Japan Taro Aso is of the opinion that as with any other country, Japan needed to ensure it retains currency intervention as a policy tool and be ready to take action when markets are excessively volatile

MI BUREAU

apanese Finance Minister Taro Aso is totally immersed in new policy implementation, even as the yen seems to be languishing against the dollar. The yen weakened broadly after Aso told a parliamentary committee that Japan must retain currency intervention as a policy tool. Even the euro, which was knocked lower against the dollar by worryingly weak euro zone data, held its ground at two-week highs versus the yen in the second half of November. The dollar crossed the 100 yen barrier, a high not seen since September 11, and the euro fetched 136.40 yen, as of November 22. Aso is of the opinion that as with any other country, Japan needed to ensure it retains currency intervention as a policy tool and be ready to take action when markets are excessively volatile. His comments came after data showed Japan’s economy slowed in the third quarter, although not by as much as feared. “The standout performer was USD/JPY,” said Stan Shamu, market strategist at IG in Melbourne. “A slower reading for Japan’s Q3 GDP saw talk of further stimulus from the BoJ ramp up along with comments by Finance Minister Aso who said FX intervention is a policy option.” The yen and the euro seem to be doing an unpredictable dance when it comes to stability in the face of new policies (in Japan, Europe, and the US). US Federal Reserve Chair nominee Janet Yellen robustly defended the Fed’s bold steps to spur economic growth and called efforts to boost hiring an “imperative”. While testifying to the Senate Banking Committee, Yellen indicated that she will press on with the Federal Reserve’s

unprecedented monetary stimulus until she sees a robust recovery. “Overall the tone of Yellen’s speech was dovish in line with expectations, and added limited new information for the market,” JPMorgan analysts wrote in a note to clients. The Nikkei share average jumped 2.1 per cent to a near six-month closing high on November 14, helped by the dovish comments from Yellen. Still, the fact remains that Japan is undergoing some major financial and economic changes. Not all of these changes are being welcomed by the people of the country, but the Finance Minister seems to be soldiering on nonetheless. One can only wait and see how far he goes.

US Federal Reserve Chair nominee Janet Yellen robustly defended the Fed’s bold steps to spur economic growth and called efforts to boost hiring an “imperative”

Taro Aso Japanese Finance Minister

December 2013 MONEY INDICES

CORPORATE

Swedish giant looks to sweep hygiene market With its recent entry into the Indian market, Swedish consumer goods giant SCA is seeking to take advantage of the low market penetration of hygiene products. Through the local hygiene business, SCA aims to become the most preferred supplier of personal hygiene products in the country By Dipin Damodharan

MONEY INDICES December 2013

SCA

he business climate of India may be tough as of today, but Sweden-based hygiene and forest products company, SCA,senses a great business opportunity in this part of the world. In November, the world’s secondlargest baby diapermaker entered the Indian market by launching two consumer brands, Libero and Tempo. Libero offers a full range of baby diapers and toiletries and comes as a potential threat to several multinationals, including Procter & Gamble, Kimberly Clarke, and Unicharm. The company says that the Libero baby care products come with skinfriendly natural ingredients that are good for a baby’s healthy skin, a major concern among mothers in India. Tempo, the world’s largest tissue brand, will be available in the form of box tissue, pocket handkerchiefs, wet wipes, and hand sanitisers. Since the tissue market in India is at its blossoming stage, SCA is sensing grand prospects in this sector. It has a sound plan to lead the

Aditi Gowitrikar, model

The child mortality rate in India is much higher than some of the underdeveloped countries due to inadequate precautions for handling infants. Knowledge-sharing regarding mother care and baby care and provision of premium quality products with brands like Libero could go a long way in reducing the mortality to some extent

Indian tissue market by combining premium quality Tempo tissue products with insights into the Indian food culture. “Around 40 per cent of Swedish companies functioning in India think that the current Indian business climate is non-favourable. Fifty-four per cent of companies find Indian labour regulations problematic to

their operation and growth,” says the Business Climate Survey 2013, conducted by the Swedish Chamber of Commerce in India (SCCI). But then, 8 out of 10 companies in the survey have decided to increase their operational activities in India. Why are they betting big on India? “We view the Indian market both as a challenge and an opportunity. We plan to address all segments, including traditional trade as well as organised retail, with the Svenska Cellulosa Aktiebolaget (SCA) help of third party distribution partners. And the market size Based in Sweden of babycare products in India Focus on hygiene and forest products stands at over `4000 crore and growing in healthy double Total employees: 36,000 digits,” Cecilia Edebo, VicePresident, Consumer Goods, SCA Turnover: €8.5 billion India, tells Money Indices.

December 2013 MONEY INDICES

CORPORATE

72% 7 8

of the Swedish companies in India feel that the Indian economic slowdown will be the biggest risk for their business in the country

out of 10 Swedish firms functioning in India agree that bureaucracy is problematic for their operations and growth

out of 10 Swedish companies in India will increase their operational activities in the country

Edebo seems more upbeat on the Indian market. “I have an aim to establish SCA as the preferred supplier of personal hygiene products in India. We see good opportunities to use our knowledge about hygiene and the needs of Indian consumers to provide a product offering that helps our consumers achieve a healthier and more comfortable lifestyle,” she adds. Though SCA Group reported sales of EUR 9.8 billion in 2012, Edebo is not ready to disclose details about the company’s financial targets in India. She points out that India’s large population and the low use of hygiene products provide a good business opportunity for SCA. Milind Pingle, Managing Director, SCA India, also agrees with Ebedo. “Given India’s large population and the low penetration of hygiene products, we see a great opportunity to build a local hygiene business. Combining our strong product offerings and brands with our experience and knowledge about hygiene will benefit both India and SCA.” Noted Indian model Aditi Gowitrikar also echoes the same view. “The child mortality rate in India is much higher than some of the underdeveloped countries due to inadequate precautions for handling

MONEY INDICES December 2013

Indians love to eat food with their hands, which is a compelling reason for all of us to opt for tissue papers, wet wipes, and hand sanitisers. Tempo being a global brand of repute is an ideal fit for any Indian who loves cherishing every morsel by using his hands” Karishma Kapoor infants. Knowledge-sharing regarding mother care and babycare and provision of premium quality products with brands like Libero could go a long way in reducing the mortality to some extent,” says Aditi. Meanwhile, Bollywood beauty Karishma Kapoor, who is promoting the brand, thinks Tempo tissue is an ideal product for Indians. “Indians love to eat food with their hands, which is a compelling reason for all of us to opt for tissue papers, wet wipes, and

SCA

hand sanitisers. Tempo being a global brand of repute is an ideal fit for any Indian who loves cherishing every morsel by using his hands,” she says. According to Edebo, the company has done a thorough research on the Indian market and developed a solid plan that takes into account regional specifics as well as preferences of their target audiences. Having started in Mumbai last month, SCA wants to extend the distribution of products to other regions in phases. SCA has plans to provide training to nurses and doctors at hospitals and clinics with the objective of improving

Given India’s large population and the low penetration of hygiene products, we see a great opportunity to build a local hygiene business. Combining our strong product offerings and brands with our experience and knowledge about hygiene will benefit both India and SCA

the lives of mothers and babies. The company says that information on the Libero web and mobile applications and a parenting booklet will capture the attention of pregnant mothers at an early stage. Two months back, SCA revealed its plans to set up a manufacturing facility for hygiene products in India with an investment of `145 crore. The facility is expected to commence production in 2015. The Mumbaiheadquartered firm is also looking at acquisitions in the hygiene and consumer tissue segments in India. SCA has successfully undertaken the acquisition route for quick growth in China. Coming to India is part of SCA’s long-term vision of growing its presence in these areas. While the lion share of SCA’s revenue comes from

Photo: Margareta Hed

Milind Pingle, Managing Director, SCA India

Cecilia Edebo, Vice-President, Consumer Goods, SCA India

We view the Indian market both as a challenge and an opportunity. We plan to address all segments, including traditional trade as well as organised retail, with the help of third party distribution partners. And the market size of babycare products in India stands at over `4000 crore and growing in healthy double digits

SCA HQ at Waterfront building, Stockholm, Sweden

Europe and North and South America, the company has identified West Asia, Africa, and India as important markets to expand its horizons.The company’s twelve largest markets are Germany, United Kingdom, United States, France, Sweden, Italy, the Netherlands, Spain, Denmark, Australia, Mexico, and Belgium. With its history dating back to 1929, the `85,000-crore SCA Group develops and produces sustainable personal care, tissue, and forest products. Sales are conducted in about 100 countries with around 36,000 employees under many strong brands, including the leading global brands TENA and Tork, and regional brands such as Lotus and Libresse. The NASDAQ-listed firm is also the world’s second largest supplier of consumer tissue products.

With its history dating back to 1929, the `85,000-crore SCA Group develops and produces sustainable personal care, tissue, and forest products. Sales are conducted in about 100 countries with around 36,000 employees under many strong brands, including the leading global brands TENA and Tork, and regional brands such as Lotus and Libresse. The NASDAQlisted firm is also the world’s second largest supplier of consumer tissue products

December 2013 MONEY INDICES

SPECIAL STORY

Man of

iron will If Dr Capt C P Krishnan Nair, the Founder-Chairman of the Leela Group of Hotels is a brand, ‘we are never too old to set another goal’ is its tagline.This recipient of Padma Bhushan put Indian hospitality on the global map, so it’s no wonder that he has a glorious life sketch to share with us By VISHNU Kaimal & Pushpa M

Capt Krishnan Nair

t was 7.30 pm on October 30, 2013, when team Money Indices met Dr Capt Chittarath Poovakkatt Krishnan Nair, who is to celebrate his 93rd birthday on February 9, 2014. And he was very energetic and enthusiastic as always, making it known that neither age nor time could incapacitate him. The man who entered the world of hospitality at the age of 65 knows quite well how to meet the global standards. “My vision of Indian hospitality was inspired by my mother, Madhaviamma, who would offer passing gurus full meal and water from our well. It was my mother who taught me how to treat guests as Gods. The very first lessons of human resource management were also taught by her. She loved and cared for her helpers very well, extending a helping hand whenever needed. And the output from the workers was actually double.” Capt Nair believes these motherhood principles have formed the basis of his management style.

Nations Environment Programme awarded him the Global 500 Roll of Honour Award in 1999. He was also awarded the “Hotelier of The Century” Award by the International Hotels and Restaurant Association, based in Geneva, Switzerland, in 2009. “You are only watching the victories. There is a lot of hard work and hardship behind it. Without hard work, nothing can be achieved. Aren’t you familiar with Jawaharlal Nehru’s quote which says success comes to those who dare to act? I was daring enough to act, to face challenges. I had the patience to act till the good was reached.”

Legacy of Leela

Capt Nair strongly believes it was his wife, Leela, who lighted the spirit of entrepreneurship in him. “Do you know it was Leela’s idea to make a luxurious hotel in Mumbai in our land near Chhatrapati Sivaji International Airport? Our house is near to this airport. One evening, we were sitting together, she asked You are only watching while First turning point me why we couldn’t start a hotel here in the victories. There our land. She knew very well about my The rainy evening in Kerala reminded dream to start a luxurious hotel that was him of his native place in Kannur and is a lot of hard work and on a par with the global standards.” his childhood days. Looking back to the hardship behind it. Without He explained the transition from school days, Capt Nair pointed out the a distinguished military career to first turning point in his life. “When I was hard work, nothing can be entrepreneurship, arguably one of the 10, the Maharaja of Chirackal visited our achieved. Aren’t you familiar meteoric rises to fame. “As an Army officer, school. I was sitting in the auditorium I married into quite a hospitable family. along with my friends. Apart from the with Jawaharlal Nehru’s My wife, Leela, is an excellent cook, and Maharaja, our Head Master and some quote which says success she was from a wealthy family that used teachers were on the stage, while the function was under way. Something comes to those who dare to to love serving guests. At a time, you could her father accompanied by 10 to 12 had happened within me. I was strongly act? I was daring enough to see guests. And she used to take pleasure in attracted by the Maharaja’s grace. I took act, to face challenges. I had cooking a hearty meal for them. She always my notebook and penned an instant wanted to look after people. Soon, Leela poem. I stood out, walked through the the patience to act till the compelled me to quit the Army and join aisle, stepped onto the stage, and recited good was reached her father’s handloom business. I started my poem. The Maharaja was very much Leela Lace Ltd in 1957. Eventually, we impressed by my action. At the very became the largest garment manufacturer in India. Then, moment, he asked me my name and other details, and we moved to Andheri in Mumbai and we got ourselves a bit announced a scholarship for my entire studies. If he hadn’t of land and a house fortunately. Once we moved there, we helped me then, I couldn’t have completed my higher studies. I was born into a poor family, as one of eight realised that there were thousands of taxis going towards children. My father, Appa Nair, was a government bill the airport. That is what gave us the idea for Leela (Hotel), collector, drawing a salary of `9, which was a small amount so that people didn’t have to travel that far. The then Chief to feed all of us.” Minister helped us a lot during that time.” He realised his Capt Nair then remembered about a prophetic letter three-decade-old dream with the launch of his first hotel in sent by the Maharaja. “He used to send letters to me. Once Mumbai as Hotel Leela in 1986, named after his wife. Apart he wrote to me –‘I am not a prophet or an astrologer. But from Mumbai, the Leela Group of Hotels made its majestic I am sure you shall bring glory to this place. You shall be presence in Bengaluru, Udaipur, Chennai, Goa, Gurgaon, known by all. And you may even conquer the world’.” New Delhi, and Kovalam. That prophetic blessing, along with his business All these hotels are adorned with lush green acumen, enabled him to bag even the Padma Bhushan surroundings. “As I was from a beautiful village in Kerala, Award. That’s not all. He’s won many more honours. The I had a special leaning towards greenery. So, I wished to American Academy of Hospitality Sciences had honoured create the ambience of Kerala around our hotels,” the him with a Lifetime Achievement Award and the United environmentalist in Capt Nair explained.

December 2013 MONEY INDICES

SPECIAL STORY

Dared to dream big with a bank balance of `5,000

At the age of 65, I started An extraordinary gentleman Capt Nair was elevated to the position Leela Group of Hotels. I of Chairman Emeritus and Founder made opulent hotels, magnificent Chairman at Hotel Leela venture palaces. I made a hotel in Bengaluru Limited. Capt Nair has been the of The Leela Group since its which resembles the Mysore Palace. Chairman inception in 1981. If you ask me how I went about A freedom fighter, an officer in the Indian Army, a pioneer in the doing it, I may not know. But at that handloom industry, and a major textile point of time, I wanted to do it; so I exporter, Capt Nair has risen to fame did it. That is how we stay ahead of and success through sheer grit and hard work. the competition. Today, while sitting Born on February 9, 1922 in Kannur, here and looking back, I can’t even Kerala, Capt Nair received his early education at a small elementary school believe that I made it. But here is in his native village. A born rebel, he joined the Freedom Movement at the a confession - After making eight age of 13 and later became an officer in hotels, I’m stretched out; but I am the Indian Army. In 1951, he resigned sure I will recover his commission and helped set up

The man behind the legacy of Leela admits that there were many moments of doubt and obstacles to overcome. “Of course, there were moments of doubt. When I built Leela Mumbai, I had no money with me. I approached State Bank of India for a loan. The bank asked me how much money I had. At that point of time, I had only `5,000 in my account. After checking the plan of the hotel, they asked me how I could make such a big hotel without any money. I said I had the land, I could raise the money. They didn’t believe me. But I knew I could and I did raise money with the help of my clothing customers in America. I raised `1.5 crore within three months. Even the Chairman of State Bank was surprised that I had raised the money in three months,” he added. “At the age of 65, I started Leela Group of Hotels. I made opulent hotels, magnificent palaces. I made a hotel in Bengaluru which resembles the Mysore Palace. If you ask me how I went about doing it, I may not know. But at that point of time, I wanted to do it; so I did it. That is how we stay ahead of the competition. Today, while sitting here and looking back, I can’t even believe that I made it. But here is a confession - After making eight hotels, I’m stretched out; but I am sure I will recover.” He said it with an emphasis to ‘I will’. This is his spirit; this is his will power at the age of 92. He advises youngsters to get the highest education they can. He asks them to dream big because where there is a will, there is a way. Today, his two sons, Vivek Nair and Dinesh Nair, and granddaughters Amruda Nair, Aishwarya Nair, and Samyuktha Nair are into the family business. And Capt Nair seems truly satisfied. But he has a small distress in his mind. “My India hasn’t reached its potential yet. My country hasn’t grown as I have grown.”

the All India Handloom Board. He was instrumental in developing and marketing the “Bleeding Madras” fabric in the United States, which met with legendary success in starting exports to the United States. By 2001, he was the recipient of the prestigious Golden Globe Award for the highest exports in clothing in India from the Ministry of Textiles, Government of India. His frequent business trips to Europe and America exposed him to international hotels like Adlon Kempinski, Dorchester Savoy, George Shank, and Waldorf Astoria, which reflected the highest standards of guest services and inspired him to make his first foray into the hospitality sector. At the age of 65, he started to build The Leela Group of Hotels, which has become one of the most celebrated Indian hospitality groups in the five-star luxury segment today. He set up the first Leela Hotel in Mumbai in 1986 and signed a marketing alliance with Kempinski. Today, The Leela Palaces, Hotels and Resorts has eight luxury properties in New Delhi, Bengaluru, Chennai, Mumbai, Gurgaon-Delhi NCR, Udaipur, Goa, and

Capt Krishnan Nair

Long before “environment” and “ecosystem” became buzzwords, Capt Nair had a vision for green spaces. Today, Capt Nair’s green vision has inspired The Leela Group’s enduring commitment towards building sustainable hotels and practising world-class green standards

A freedom fighter, an officer in the Indian Army, a pioneer in the handloom industry, and a major textile exporter, Capt Nair has risen to fame and success through sheer grit and hard work

Photo: Jose Jacob

Kovalam; with more hotels opening in Jaipur, Bengaluru, Agra, and Lake Ashtamudi in Kerala. His mission is to delight and exceed his guests’ expectations through gracious Indian hospitality, laid down in the ancient Indian scriptures as ‘Atithi Devo Bhava’(Guest is God). Long before “environment” and “ecosystem” became buzzwords, Capt Nair had a vision for green spaces. Today, Capt Nair’s green vision has inspired The Leela Group’s enduring commitment towards building sustainable hotels and practising world-class green standards. Each hotel, through its own individual programmes, contributes towards protecting the environment and conserving natural resources. Globally recognised as an hotelier, visionary, and environmentalist, Capt Nair has been the recipient of many prestigious awards. Acknowledging his invaluable contribution to the tourism industry, the Indian Association of Tour Operators and the Hotel Investment Forum India honoured him with the Hall of Fame Award in 2010 and 2012 respectively. Also, the three most coveted and prestigious awards for setting benchmark for excellence in the hospitality industry were conferred on him backto-back in 2011. These awards include the Lifetime Achievement Award at Hotelier India Awards, Lifetime Achievement Award at Condé Nast Traveller Awards, and the Lifetime Achievement Award by The Times Travel Academy. Additionally, for his untiring efforts in environmental conservation, Capt Nair was conferred the Global 500 Laureate Roll of Honour by the United Nations Environment Program in 1999 from Emperor Akihito of Japan; the ‘Green Hotelier of the Decade’ Award by Gulf Connoisseur; the ‘Green Hotelier’ Award by the Genevabased International Hotel and Restaurant Association and the Maharana Mewar Foundation’s Uday Singh Award for “Outstanding Practical Achievements in the Protection and Improvement of the Environment” in 2002. In 2008, Business Week, US, listed him among the 50 global octogenarians who still ‘rock the world’, and in 2010, the International Hotel and Restaurant Association conferred on him the ‘Hotelier of the Century’ Award. Capt Nair also received the Padma Bhushan in 2010 from the then President of India, Smt Pratibha Singh Patil. Even today, his indomitable spirit and enthusiasm see him working on elaborate plans for the future. For both, The Leela Palaces, Hotels and Resorts, and for India.

SUCCESS STORY NR GROUP

Mysore-based NR Groupâ&#x20AC;&#x2122;s pleasing fragrance brings life to the ambience of homes in many countries including Brazil, Chile, and the US. While its flagship brand Cycle Pure Agarbathies leads the charge, the group is known for having business interests in diverse sectors. The company is chugging ahead to achieve a turnover mark of `1000 crore

W By Dipin Damodharan

hen Arjun Ranga, the Managing Director of My sorebased Cycle Pure Agarbathies, talks about the genesis of a brand that finds space in our spiritual realm, the confidence and

MONEY INDICES December 2013

energy oozing from a third generation entrepreneur deflect our attention to the longstanding traditions of a business family. Founded by N Ranga Rao in 1948 with Cycle Pure Agarbathies as its first venture, NR Group had become a full-fledged manufacturer of incense sticks in 1959 with a marketing and sales team in place and designs patented for the first time in the industry. â&#x20AC;&#x153;He (Ranga Rao) believed that the Cycle Pure Agarbathies brand symbolised honesty and God-like quality and signified genuine

NR GROUP

Because of the Eastern Culture movement, the demand for incense has grown tremendously in countries like Brazil, South America, the US, Japan, and Australia. People in these countries have adopted spiritual practices of the East, like yoga, meditation, prayer, and so on

value for money. Today, this symbol is widely known and trusted. NR Group has ever since grown from a home-grown enterprise to a successfully run business. It has presence in India and abroad,” Arjun Ranga tells Money Indices. In the `1500-crore incense sticks market, NR Group’s flagship brand, Cycle Pure Agarbathies, has the largest market share. The company has posted a turnover of `800 crore, surpassing the Late Ranga Rao’s dreams and ambitions. Cycle is a highly influential brand name in India with many successful brand recall techniques. Just go back to the cricket World Cup of 2011. The group set off a campaign for Team India by distributing incense sticks (agarbathies) across India to pray for the team. The campaign was a huge success, as it cleverly connected the brand with India’s favourite game. Also, Cycle’s “Everyone has a reason to pray” campaign has communicated in a very

simple, yet powerful, manner the power of prayer and spirituality in everyday life. It was Ranga Rao’s idea to have a brand name that has a national appeal. Ranga Rao wanted a symbol that would be recognised everywhere. Also, there are some philosophical attributes to the name ‘Cycle’, like the cycle of life. “Right from its inception in 1948, NR Group has had a humble beginning. It was founded in a closed group and comprises the NR Family today. Cycle Pure Agarbathies has been the most important, first focus venture of NR Group. NR Group has always taken its business with time, laying more focus on R&D, innovation, and quality, right from the beginning,” says Arjun. “Ranga Rao was a perfectionist. He had established the Cycle brand name in the early 1950s with his extraordinary vision. He gained a foothold for NR Group with his passion for fragrance and thirst

December 2013 MONEY INDICES

Challenges: Labour-intensive category; logistical difficulties in distribution of raw materials, training, and collection of finished products; fluctuating prices of raw materials; and labour shortage for knowledge of fragrance creation. The art of creating fragrance was something that Ranga Rao learnt himself by reading books on perfumery. His vision has made NR Group a name to reckon with. Today, Cycle Pure Agarbathies is the market leader in the Agarbathi space,” says Arjun, recalling his grandfather’s achievements. NR Group trains rural women and gives them an opportunity to earn their livelihood by rolling agarbathies at home. The group today employs over 50,000 women all over the country, including the states of Andhra Pradesh, Tamil Nadu, Karnataka, Assam, Orissa, Madhya Pradesh, Maharashtra, and West Bengal. Women are trained to roll agarbathies at community centres. It takes the blending of over 60-70 ingredients to make one particular fragrance.

Diversification In 1982, NR Group forayed into electronics and marketing services under the flagship brand Rangsons Electronics and Rangsons Marketing Services that mostly concentrate on distribution, R&D, and marketing services. In 1989, NR Group took yet another leap by foraying into the Natural Essential Oils (NESSO) division. Besides that, NR Group’s innovation in fragrance creation led to the formation of Ripple Fragrances, a leading spatial home fragrance division in the country. NR Group is actively involved in Corporate Social Responsibility activities under the not-for-profit wing NR Foundation. It runs a free residential school for visually impaired girls from villages across Karnataka. Over the years, NR Group has diversified. This diversification took place during the time of the second and third generation entrepreneurs from NR Group. From incense sticks under the Cycle Pure Agarbathies brand, the group has expanded its reach to perfumes (Ripple Fragrances),

MONEY INDICES December 2013

Agarbathi industry size:

1500 crore

The Indian Agarbathi export market is close to 300 crore annually NR Group exports to over 60 countries NR Group’s turnover:

800 crore

functional aircare products (Lia brand of room fresheners and car fresheners), wellness home fragrance products (Iris brand), floral extracts (Natural and Essential Oils Pvt. Ltd (NESSO), and electronics (Rangsons Electronics). Rangsons Electronics is one of India’s leading EMS (Electronic Manufacturing Services) providers serving customers in India, the US, Europe, Japan, and China. Rangsons provides services to the medical, aerospace, defence, industrial, and telecommunication sectors, among others. Though the company has had a steady growth over the past several years, there are challenges in the form of labour shortage and raw material scarcity. “We have been more prominent in the southern markets. But competition is rising.Also, the unorganised market is adding to our woes. We are working on laying these challenges to rest,” says Arjun. “We at NR Group have always followed the advice of the elders within the family. It is our strong value system and immense belief in Indian culture and heritage that keeps us going. If NR Group has come so far, it definitely is because of all the advice and support from our elders. We are going ahead to give people more reasons to pray, provide more employment, and plan new products and variants in home fragrances and home décor,” says Arjun. A dynamic third generation business visionary, Arjun has successfully sustained NR Group’s market leadership by initiating bold marketing strategies. His enterprise and innovative skill sets have helped Cycle Pure Agarbathies to achieve growth figures which are rarely seen in mature FMCG categories in the Indian market. (With inputs from Lakshmi Narayanan)

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INDUSTRY EXPERT ABDEL WAhED BENDAOUA

Clo

e h t ud is says

, e r u t u f arm

Google Enterprise, the business solution arm of Google Inc, is growing phenomenally in the United Arab Emirates by providing tailor-made solutions to business houses in the region. Abdel Wahed Bendaoua, who heads the companyâ&#x20AC;&#x2122;s Middle East, Africa, and Eastern and Central Europe division, tells Money Indices how Google Enterprise has been helping companies in the region with the benefits of cloud computing By Prashob K P

December 2013 MONEY INDICES

INDUSTRY EXPERT ABDEL WAhED BENDAOUA

Google Enterprise helps organisations of any size shift from using on-premise solutions to cloud solutions

Abdel Wahed Bendaoua

Tell us about Google Enterprise.

Google Enterprise is an organisation within Google, responsible for delivering enterprise solutions to the market. Google Enterprise understands that organisations from different industries have different needs. For this reason, Google Enterprise has many tailored solutions to fit each industry, from aerospace to healthcare, media, and education. Google Enterprise helps organisations of any size shift from using on-premise solutions to cloud solutions. We also aim to make our product extremely useful to the end user while keeping it simple and accessible. This shift helps these organisations focus more on their core business. The big shift we have seen in the IT Industry in the last decade is that consumer technology has surpassed Enterprise technology. We see employees wondering why the technology they use at home and on a personal level helps them achieve personal things in a faster way than the solutions they use at work. We want to resolve that gap.

What is cloud computing?

This is a great question as we have heard different definitions for it in different countries. Many providers/ vendors give different definitions based on the strategy behind their legacy products. Cloud computing is the delivery of a specific service through a browser. You probably also hear about different cloud architectures like private cloud, public cloud, or hybrid. To know whether an offer is cloud computing or not, one has to ensure that the cost behind it is a 100% pure

MONEY INDICES December 2013

service cost and that the company will pay a given price, per user, per month, or per year. As soon as there are hardware costs, software costs, or any additional mandatory products to deliver the service, this is not a cloud solution.

Isn’t Google Enterprise something new to the companies in the UAE? How do you help them?

We deliver solutions for an incredibly fast growing number of customers in the Middle East. Most of the CIOs in the Middle East know the value Google Enterprise can deliver. We are conducting a lot of events with our partners like BRAMS to showcase our portfolio, namely in GITEX, where we realise there is a lot we can do. Many customers come to us with extremely precise questions as they know our products already. Google Enterprise is definitely not new to companies in the UAE. To give examples, JAFZA, Afza, Air Arabia, Julphar, Khaleej Times, Better Homes, Paris Group, Abu Dhabi Aviation, Zawya, Lulu Exchange, and Rak Ceramics have all moved from traditional solutions such as IBM, Microsoft or others to Google Technology.

How do you evaluate the app-based business scenario of the UAE market? From SMBs to large enterprises, real cloud solutions bring an amazing value. Companies can focus on their core business and not on implementing complex IT solutions. In addition to that, they really want to stop this “hard to follow” cycle of upgrading their infrastructure, renewing Enterprise agreements and so on. They want to know exact

ABDEL WAhED BENDAOUA

costs at the budget time and ensure they stay in that budget, and this can only be delivered through services in the cloud.

Who are your target customers and what kind of benefits can they enjoy through Google Enterprise?

Google Enterprise is definitely not new to companies in the UAE. To give examples, JAFZA, Afza, Air Arabia, Julphar, Khaleej Times, Better Homes, Paris Group, Abu Dhabi Aviation, Zawya, Lulu Exchange, and Rak Ceramics have all moved from traditional solutions such as IBM, Microsoft or others to Google Technology

Google Enterprise solutions are extremely advanced solutions that fit the needs of SME/SMBs as well as very large organisations. Solutions such as Google Apps have been deployed in small enterprises and in large ones too, such as Roche, Ahold, Docomo, Genentech, and KLM, just to name a few out of the five million companies. We are also proud to have amazing references in many industries from government to banking like BBVA, to retail like Ahold, and transport like KLM or Virgin. Google’s technology brings a huge flexibility to our customers. A company can increase the number of employees significantly without having to plan months in advance how the IT can scale to support the growth. IT can finally become a supporting industry to others instead of a challenge.

Our customers really enjoy the continuous innovation. The product is evolving and customers are enjoying its new functionalities and the new way of doing things with zero hassle and without complex upgrade.

How do you see the app-based business development and its future?

We believe that cloud is the future of IT. Some big IT players used to claim that cloud is just a trend and will soon disappear soon while others didn’t believe in it at first and then entered the market late. The reality is that cloud technology is the way to go for companies of any size. We migrate 5,000 companies to Google Apps every single day. From an operational perspective, Google has the right infrastructure and experience to handle such a big number of mass migrations from traditional solutions to Google apps.

How can startups benefit from Google Enterprise?

Startups are enjoying it. It has been the dream of many startups and now it’s become a reality. A decade ago, a startup had to use cheap solutions to save cost and this was impacting the startup from innovating faster. Today, a company of 10 employees can enjoy exactly the same technology as a company of 100,000 employees.

The Dubai government is promoting m-governance. Do you think this will give a better mileage to your operations in the region?

Mobility is part of our life today. The Dubai government is a visionary and innovative government. We also support many government organisations in the UAE to go mobile.

WORLD ECONOMY TURKMENISTAN

h c growt Economi is enistan m k r u T of h to reac d e t c e p ex cent in 10.1 per 0.7 per 1 2013 and 4 0 2 1 cent in Mi Corres

ponde

Turkmenistan posts

sound economic growth

conomic growth of Turkmenistan has been strong in 2013 on the back of high growth of nonhydrocarbon economy, supported by strong public investment. Economic growth is expected to reach 10.1 per cent in 2013 and 10.7 per cent in 2014. The current account will record a deficit in 2013 and 2014 owing to strong import growth, particularly in capital goods,” said Veronica Bacalu, who headed the International Monetary Fund (IMF) mission to Turkmenistan from October 31 to November 7.

MONEY INDICES December 2013

The IMF team discussed recent economic developments, government policies, and prospects for the economy of Turkmenistan. “A sharp and sustained decline in international energy prices is the largest possible risk to economic growth. Also, a slowdown in the country’s largest trading partners, China and Russia, poses some risks. Yet, the short-term impact of the materialisation of these risks would be limited as external buffers are large. Despite strong GDP growth, inflation is expected to be relatively low in 2013 given the high import content of fiscal spending, soft international food prices, price controls, and fixed exchange rate. Headline inflation is projected at 5½ per cent by end-2013 and 6 per cent by end-2014,” said Bacalu. “The budget surplus declined in 2013 because

TURKMENISTAN

Promoting more effective monetary policy requires eliminating directed lending and liberalising interest rates. While the exchange rate peg continues to be appropriate as an anchor for monetary policy, it limits the ability of the economy to absorb shocks and manage volatility. The authorities need to begin building capacity to introduce greater exchange rate flexibility in the longer term of increased capital spending. High levels of public investment, aimed at increasing productive capacity, may compromise long-term fiscal sustainability and weaken prospects for the diversification of the non-hydrocarbon economy. In addition, improved capacity to monitor expenditure efficiency and transparency could reduce opportunities for corruption. A new budget code, to be adopted by end-year, should help strengthen public finance management and introduce a medium-term fiscal framework. Expanding public finance coverage to include the extrabudgetary activities would be a welcome step. “Promoting more effective monetary policy requires eliminating directed lending and liberalising interest rates. While the exchange rate peg continues to be appropriate as an anchor for monetary policy, it limits the ability of the economy to absorb shocks and manage volatility. The authorities need to begin building capacity to introduce greater exchange rate flexibility in the longer term,” Bacalu said. The mostly state-owned banking sector is in need of reform to effectively support private intermediation. The introduction of International Financial Reporting Standards and the decision to raise bank capital are first steps to strengthen the state-dominated banking system. Introducing corporate governance standards in banks, improving banking supervision, and strengthening risk management practices are also essential. “A major acceleration of reforms is needed for the government to reach their objective of privatising 70 per cent of the non-hydrocarbon economy by 2020. The privatisation programme should be conducted in consultation with international financial institutions to ensure that best international practice is followed. Encouraging the growth of private enterprise requires improvements to the business environment and reducing opportunities for corruption. In addition, taking further measures toward manat convertibility for current account transactions, and following through with recently announced WTO accession plans would help facilitate trade,” Bacalu said.

Turkmenistan: Selected Economic Indicators 2009

2010

2011

2012

2013

2014 Projections

(Annual percentage change) Production and Prices Real GDP

6.1

9.2

14.7

11.1

10.1

10.7

Consumer price index (ave.)

-2.7

4.4

5.3

6.0

5.7

Gross investment

46.6

52.9

51.9

47.2

48.1

46.3

Gross savings

31.8

42.3

53.9

47.2

44.7

44.6

Total revenue

20.4

16.1

18.3

21.0

16.5

16.0

Total expenditure and net lending

13.4

14.1

14.6

14.7

16.3

16.5

Overall balance (+ =surplus)

7.0

2.0

3.6

6.4

0.2

-0.4

Reserve money

56.7

49.3

129.8

3.6

3.2

Manat broad money

68.6

74.2

52.1

32.8

30.0

27.0

(In percent of GDP) Investment and Saving

State budget

Monetary indicators

(In millions of U.S. dollars, unless otherwise specified) External sector Exports of goods

8,946

9,660

16,719

19,884

19,901

21,286

Of which: Hydrocarbons

8,419

8,617

15,817

18,743

18,691

20,048

Imports of goods

8,071

7,428

10,447

13,357

14,615

15,673

Current account

-2,981

-2,349

582

-1,389

-814

In percent of GDP

-14.7

-10.6

2.0

0.0

-3.4

-1.7

Source: IMF

December 2013 MONEY INDICES

COVER STORY

MONEY INDICES December 2013

COCA-COLA INDIA

ups the cola game

The effervescence of a brand lies in its ability to assimilate into the culture of a land, since taste, quality, and outreach are easily deliverables for a brand that has capital, knowhow, and expertise. If you know how to make a deep connect with various consumer segments, creation of a unique identity is a natural extension of social acceptance and marketability. And brands that continue to tickle our funny bone, or make a light-hearted social commentary on our way of living, enjoy high brand recall levels. So, it’s no wonder that Coca-Cola is capable of bringing an instant sparkle to the face of the young Indian consumer in its 20th year of operations in the country. Call it the vicarious pleasure one gets to enjoy at the expense of cola advertising wars or the sheer pull of the magical fizz, Coca-Cola is here to stay, with a greater sense of both objectivity and its target groups. Has the Indian economic downturn caused the company any hardships? Well, what has thirst to do with the ups, downs, or steadiness of an economy? The American cola behemoth has invested over $3.5 billion since its historic comeback into India on October 24, 1993. The investment story doesn’t stop there, as Coca-Cola India has earmarked an additional stash of $5 billion for spending in the next seven years, in line with Chief Executive Muhtar Kent’s dream of making India the company’s fifth largest market globally, in terms of volume. Currently, India is the seventh largest market for Coca-Cola. As the Indian subsidiary begins a drill to launch a retail attack via mass penetration in two to three years, Money Indices goes into the story of Coca-Cola India’s evolution, looking at its business model, market strategy, growth pockets, expansion plans, vision, challenges, and competition By Vishnu Rageev R

December 2013 MONEY INDICES

COVER STORY

n empowered middle-class has been fuelling the growth of India all these years, prompting multinational companies like Coca-Cola India, fondly called Coke, to (re)strategise and relook at its markets for a better share from the country’s continually widening multi-billion dollar retail basket. The company, which has seen six consecutive years of double-digit growth, will settle with an additional investment of $5 billion to deliver innovation, develop business relations and strategic partnerships, uplift consumer experience, ensure product affordability, and build countrywide brand loyalty in the coming years. Some interesting times are in store for Coca-Cola India, as the CEO of its historic rival PepsiCo, Indra Nooyi, recently announced an investment of $5.5 billion in the country by 2020. The proposed investments by these two cola giants, estimated at $10.5 billion, will restore foreign investor confidence at a time when India’s growth story has been hit by economic turbulences, pushing it to a decade low.

Achieving continued, sustainable and responsible growth in India is core to achieving our 2020 vision of doubling system revenues in this decade

Some interesting times are in store for Coca-Cola India, as the CEO of its historic rival PepsiCo, Indra Nooyi, recently announced an investment of $5.5 billion in the country by 2020. The proposed investments by these two cola giants, estimated at $10.5 billion, will restore foreign investor confidence at a time when India’s growth story has been hit by economic turbulences, pushing it to a decade low “We are here to be successful,” said Ahmet C Bozer, Executive Vice-President, The Coca-Cola Company (TCCC), at an interactive session in Greater Noida, after the opening of Coca-Cola’s 57th bottling plant in India. “India would continue to flourish and our $5 billion investment plan is very well on track. We do not anticipate it to come down. Rather, it can be more. I see India emerging as one of the top five markets for TCCC by 2020.” The non-alcoholic ready-to-drink beverage industry, which witnesses one of the largest investments in the country, has contributed significantly to the growth of allied industries. This industry is witnessing robust growth, driven by a combination of factors such as increased investments and innovations. Macro-indicators and the demographic dividends too favour robust growth for the beverage industry in India.

20 years of happiness In 1977, George Fernandes, the Industry Minister in the then Janata Party government of Prime Minister Morarji Desai, issued an exit order to Coca-Cola. Although reasons for the exit order are still unknown, it was widely rumoured that the exit was ordered because the company was reluctant to share its secret formula with the government. However, India was too big a market to be kept off its radar forever. “Our last two decades have been a journey of innovations, offering portfolio choices to consumers, contributing to the growth and development of the community and society in our own small way and playing a key role in bringing overall economic growth and development to India,” says Deepak Jolly, Vice-President, Public Affairs & Communications, Coca-Cola India & South West Asia. “Along the way, we have seen the acceptability of packaged beverages growing. Today, packaged beverages are a convenient and safe source of hydration, refreshment, and nutrition. Our lives are much easier with the pick and go options of packaged beverages, which have become a part and parcel of our everyday lives and count as good value-for-money options.”

Muhtar Kent CEO, The Coca-Cola Company

COCA-COLA INDIA

Coca-Cola India has specifically been adaptive to the Indian environment. The company learnt quickly from their initial mistakes and tweaked its business model. Instead of worrying about competition, the company focussed on the consumer, which was an apt strategy. “Over the last 20 years, Coca-Cola has made a genuine attempt to touch the lives of Indian consumers and be a part of their lives,” feels Jagdeep Kapoor, Chairman and Managing Director of Samsika Marketing Consultants Pvt Ltd. “Whether it is in terms of distribution spread or in terms of adapting to the Indian language in their advertising campaign, they have tried to be relevant to the Indian consumer through ‘Thanda Matlab Coca-Cola’ and the message of ‘Opening up Happiness’ and spreading indulgence through ‘Haan Mein Crazy Hoon’. Their focus on distribution, penetration and their aggressive ‘Prizing Sizing’ strategy has helped grow volumes and gain consumer acceptance.” Coca-Cola India currently provides direct and indirect employment to over 1,50,000 people. The company provides extensive support to community programmes across the country through a series of Corporate Social Responsibility (CSR) initiatives focussing on education, health, and water conservation. ‘Support My School’ campaign is the company’s flagship CSR programme which has revitalised close to 200 model schools in India.

Quenching India’s thirst For the Atlanta-based TCCC, a country of 1.2 billion people remains one of the last big frontiers as Indians on average consume only 12 eight-ounce bottles of Coke a year when compared with 230 bottles in Brazil and 92 bottles globally. Through horizontal expansion, the company is looking to increase per-capita consumption in India. “The non-alcoholic ready-to-drink beverage segment has been growing at a compound annual growth rate (CAGR) of 13 per cent since 2009, and is one of the segments that have defied the economic slowdown,” adds Arvind Varma, Secretary General, The Indian Beverage Association (IBA). “We expect the country’s beverage industry to continue to grow in double digits in 2013, despite the recessionary trends being shown by most economies the world over, including the Indian economy.” “We are working on a strategy to generate sales of our soft drinks across all seasons rather than just the summer,” adds Deepak Jolly. “We are working to de-seasonalise the business and want to make it a 12-month business. That means not just year-round marketing, but efficient distribution systems, reaching remote untapped markets, affordable pricing, innovative cooling solutions, and trade activation. Our spending will be in keeping with our brand plans, and our communication strategy will also be aligned to this business reality.” “Yes, it is critical for Coca-Cola to tweak their existing business circus in India,” says Ramanujam Sridhar, Founder and CEO, Brand Comm. “India’s beverage market has evolved and is as promising as any foreign market. You

might remember that earlier, beer was a beverage which was consumed only during summer. Today, there are customers for beer round the year. Coca-Cola also has to apply a similar strategy by creating occasions and moments in its customers’ mind so that they would come for it on a daily basis. Of course, it is a great brand.” The company has introduced many revolutionary strategies over the last 20 years. It even introduced a few innovations like solar cooler, Vitingo, Minute Maid Nimbu Fresh, PET bottles, fountains, dispensers, etc.

Growing portfolio and volume On October 24, 1993, Coca-Cola was launched in Agra. Since then, Coca-Cola India has taken rapid strides in the packaged beverage market, bringing two of the country’s largest soft drinks brands – Thums Up and Sprite – into its portfolio. Coca-Cola India is now one of the fastest growing brands, registering an 18 per cent volume growth during Q3, 2013. “We have registered volume growth in India for the past 29 consecutive quarters, 19 of which have seen double-digit growth,” informs Deepak Jolly. “Over the last six years, Coca-Cola has delivered double-digit volume growth in India. Two of the company’s core sparkling brands – Sprite and Thums Up – are the country’s top-selling soft drink brands. Trademark Coca-Cola is one of our fastest growing

We are not guided by elections. We are guided by the potential of India. We are not waiting for any election results. We are investing in India for its economic story

Indra Nooyi, CEO, PepsiCo

COVER STORY

Ahmet C Bozer, Executive Vice-President and President, Coca-Cola International, and Atul Singh, Deputy President, Pacific Group, The Coca-Cola Company, at the inauguration of a state-of-the-art Coca-Cola bottling plant at Greater Noida sparkling brands and Maaza is India’s largest-selling juice drink. Kinley is the country’s largest retail packaged drinking water brand.” Offering an unmatched portfolio of beverages, CocaCola India manufactures and markets brands like CocaCola, Diet Coke, Thums Up, Fanta, Limca, Sprite, Maaza, Minute Maid Pulpy Orange, Minute Maid Nimbu Fresh, Minute Maid Mixed Fruit, Minute Maid Apple, Minute Maid Guava, Minute Maid 100% Juice (Minute Maid Apple, Minute Maid Orange, Minute Maid Grape), Georgia, Georgia Gold, Kinley, Kinley Club Soda, and burn through a network of over two million outlets. Seemingly, India remains among the top growth markets for the American multinational. Other major growth markets are Thailand with 18 per cent growth, Russia (8 per cent), Mexico (3 per cent), and Brazil (3 per cent).

Cola business of Coca-Cola At the core of Coca-Cola’s business in India, as in the rest of the world, is its production and distribution network, called “Coca-Cola system”.

MONEY INDICES December 2013

In India, the Coca-Cola system comprises a whollyowned subsidiary of The Coca-Cola Company, namely Coca-Cola India Pvt Ltd, which manufactures and sells concentrate and beverage bases to authorised bottlers who use these to produce “our portfolio of beverages”, says Deepak Jolly. These authorised bottlers independently develop local markets and distribute beverages to grocers, small retailers, supermarkets, restaurants, and numerous other businesses. “In turn, these customers make our beverages available to consumers across India.” The Coca-Cola system in India now operates 58 manufacturing plants, catalysing economic growth and providing employment, explains Deepak Jolly. “Coca-Cola, along with its bottling partners, has robust plans to capture growth in India with investments in innovation, expansion of distribution network, cold drink equipment placement, and augmentation of manufacturing capacity.” The Coca-Cola system has already invested $2 billion in India between 1993 and 2011, refreshing and hydrating consumers more than 500 times per second. The company is also one of the largest buyers of sugar, mango pulp, and coffee beans in India.

COCA-COLA INDIA

Cola war Coca-Cola and PepsiCo together dominate the market for carbonated soft drinks in India, where soda sales overall are estimated to total $1.05 billion. Coca-Cola enjoyed leadership position in carbonates in 2012, accounting for 60 per cent of the total value of sales, points out a study by Euromonitor. “Stronger distribution in the existing categories and entry in new markets in rural India helped the company retain its strong position,” says the study. Coca-Cola and Pepsi are healthy and historic rivals and they would continue to be so, says Varma of IBA. “It is an ongoing market race all over the world wherever both these cola giants are present. India is not an exception. It is really difficult to say who is better than the other. India has enough room for both the companies to grow and multiply. The market would further open as they bring in more investments.” Elections or no elections, PepsiCo’s India-born Nooyi said the firm would invest $5.5 billion by 2020 to more than double its capacity. “We are not guided by elections. We are guided by the potential of India. We are not waiting for any election results. We are investing in India for its economic story,” Nooyi had told recently after her meeting with Finance Minister P Chidambaram. Pepsi had a head-start in India over Coca-Cola in its current avatar not only in terms of timing, but also in terms of distribution, reach, and product diversification (supported by Pepsi’s global M&A activity during the 1990s and 2000s), opines Devangshu Dutta, Chief Executive, Third Eyesight. “Pepsi has a larger proportion of noncarbonated beverages and a

as we move into the next phase of our journey in India, our success going forward will depend on our ability to win over consumers through world class marketing, says Deepak Jolly, Vice-President, Public Affairs & Communications, Coca-Cola India & South West Asia

packaged snack portfolio that Coca-Cola lacks, which potentially provides a larger share of wallet to Pepsi and provides avenues for consumers who may be looking at relatively ‘wholesome’ options.” Pepsi has 42 plants in India, including franchises. “India is a country with huge potential and it remains an attractive, high-priority market for Pepsi. We’ve built a highly successful business in India over the course of many years and we believe we’ve only scratched the surface. This investment is PepsiCo’s vote of confidence in India’s future,” Nooyi had said. Coca-Cola’s growth will primarily be driven by rural areas, as urban areas are facing a degree of saturation, as well as shifting to healthier options, such as fruit/vegetable juice and bottled water. The company has equipped retail outlets in remote rural areas with solar coolers. Smaller pack sizes are also driving sales in rural areas whereas PET bottles are pushing sales in urban areas. However, the company does not have any immediate plans to get into ready-to-eat market. Both – Coca-Cola and Pepsi – announcements (on investment) came on the same day and convey the underlying thrust of competition both the brands would engage in as they raise piles of money to stay ahead, avers Sridhar of Brand Comm. “Both the brands have good marketers and they must work for developing better connect and loyalty among customers. The pace at which they can travel into more rural areas with intriguing campaigns will ultimately decide the success rates.” Pepsi globally has been a challenger brand, feels

December 2013 MONEY INDICES

COVER STORY

our bottling system to develop Harminder Sahni, MD, Wazir end-to-end business strategies Advisors. “Although they are leaders, they still seem to behave like a that capture all the growth challenger or insecure leader. Cocaopportunities in the country.” Cola comes across as a far more Coca-Cola India’s marketing confident brand that is sure of future and commercial teams will In 1993, Coca-Cola acquired and acts calmly. This may make create integrated campaigns Thums Up from Parle’s them seem slower but that doesn’t from “screen to shelf”, while the make them less powerful.” operations teams will ensure that Ramesh Chauhan along with India is the largest market for “these plans are executed with a few other brands, Limca, Pepsi. It will continue to expand excellence in the marketplace Gold Spot, and Maaza, for $60 the range of foods and beverages in through our bottling partners”, its portfolio. In India, it has eight adds Deepak Jolly. million. Thums Up performed brands that generate `1,000 crore or To this, Sahni of Wazir Advisors far better than Pepsi and more in annual retail sales — Pepsi, says, “I observed that after a few Lay’s, Kurkure, 7UP, Slice, Mirinda, false starts over the years under Coca-Cola, although the Mountain Dew, and Aquafina. different management teams, parent hardly pushed it. As Coca-Cola has emphasised on Coca-Cola finally has found a what it can do in terms of serving direction in the last few years. part of Coca-Cola India’s the Indian consumer rather than Rather than trying to serve a bottle Vision 2020, the company being obsessed with competition, for `5 to everyone, they have feels Kapoor of Samsika Marketing plans to promote Coca-Cola managed to create a better connect Consultants. “In my view, this is the with consumers. I see the brand across the country over right approach. Growing volume and doing much better in coming years market share through awareness and other brands because of their brand equity.” availability has been a constructive Bringing Coke in Focus approach.” In 1993, Coca-Cola acquired “Over the last 20 years, we have Thums Up from Parle’s Ramesh built a solid foundation and attained Chauhan along with a few other strong momentum in our business,” brands, Limca, Gold Spot, and reasons Deepak Jolly. “Now, as Maaza, for $60 million. Thums Up we move into the next phase of our journey in India, our performed far better than Pepsi and Coca-Cola, although success going forward will depend on our ability to win over the parent hardly pushed it. As part of Coca-Cola India’s consumers through world class marketing, be a part of our Vision 2020, the company plans to promote Coca-Cola customer growth story, and collaborate strongly with our across the country over other brands. bottling partners. We will continue to work closely with

MONEY INDICES December 2013

COCA-COLA INDIA

significant role in attaining the company’s target, justifies Sridhar of Brand Comm. “With a per capita consumption Since the early 2000s, Coca-Cola faced severe criticism from of 14 per year for Coca-Cola products, as compared to the various consumer groups and watchdogs on a variety of global average of 94, the Indian market offers a huge growth issues, including health effects, environmental issues, and opportunity. An increasingly evolving middle class, higher business practices. In 2003, New Delhi-based Centre for disposable incomes, and changing lifestyles and habits are Science and Environment (CSE) had alleged that the top key factors that will fuel growth of the beverage industry.” 12 soft drink brands of PepsiCo and Coca-Cola contained On the future strategy, Deepak Jolly says, “We will pesticides and insecticides in excess of the limits set by the continue to focus on our strategy of offering consumers European Economic Commission. with a wide range of products in different packs at varying Adopting dual standards is a practice large price points, in keeping with our OBPPC MNCs follow, especially when it comes (occasion, brand, price, pack, and to developing countries, says a senior channel) architecture. This will be official at CSE. “In tests conducted backed with investments in cold drink in 2003, we found high levels of toxic equipment, horizontal expansion, pesticides and insecticides, high deeper rural penetration, optimal enough to cause cancer, damage route to market, and building brand to the nervous and reproductive love. Providing consumers with systems, birth defects, and severe choice and value continues to be disruption of the immune system. the cornerstone of our business Market leaders Coca-Cola and Pepsi strategy. We continue to be bullish had almost similar concentrations about the long-term growth of pesticide residues. At the same In terms of expansion of potential of India and remain time, CSE also tested two soft drink committed to $5 billion investment manufacturing capability, Coca-Cola brands sold in the US, to see if they in the country from 2012 to 2020.” contained pesticides. They didn’t. India shall either upsize capacity or In terms of expansion of This only goes on to show that the manufacturing capability, Cocaset up fresh production lines. companies were following dual Cola India shall either upsize standards.” It recently opened a bottling plant in capacity or set up fresh production Following the accusation, lines. The company plans to do so Greater Noida and a new Greenfield Coca-Cola took proactive steps at 100 or more production lines in to reassure the government and Plant at Chatta (Mathura district) different plants over the next five consumers about the safety of its years. It recently opened a bottling in Uttar Pradesh. The opening of products. However, sales in India plant in Greater Noida and a new declined 11 per cent in the third these bottling plants is in keeping Greenfield Plant at Chatta quarter of 2003. Later, India’s with the company’s long-term growth (Mathura district) in Uttar then Health Minister Pradesh. projections for business in India Sushma Swaraj termed The opening of the CSE’s findings these bottling plants “inaccurate”, telling is in keeping with the Parliament that while company’s long-term they found pesticide growth projections for in both drinks, they business in India and were not as high as will play a significant role the CSE claimed and that in expanding the soft drinks they were well within Indian business in India, says Deepak Jolly. standards. “They will not only catalyse economic Coca-Cola’s Deepak Jolly declined to growth but will also contribute to the development comment on the 2003 imbroglio. of the local community. This reflects our belief in India as a Vision 2020 strategic growth market with immense potential.” “Achieving continued, sustainable and responsible Coca-Cola’s billion dollar investment plan shows how big growth in India is core to achieving our 2020 vision of consumer goods companies can’t afford to ignore India’s growing middle class, estimated at about 20 per cent of the doubling system revenues in this decade,” Muhtar Kent had population. TCCC is working towards achieving the 2020 said recently. Vision of doubling system revenues and servings. So, what’s next after the “Open Happiness” campaign? India is a strategic growth market and will play a Coca-Cola promises to be personal and inventive.

2003 imbroglio

December 2013 MONEY INDICES

insights

Trend spotting: Commerce on Facebook BY Sramana Mitra

Social commerce is inevitably going to drive the future of social media companies. As advertising and commerce start to fuse, advertisers will look for ways to not only pay for eyeballs, but for completed transactions

ocial mediaâ&#x20AC;&#x2122;s impact on global ecommerce is being felt everywhere. By promoting products via social media outlets, ecommerce companies have invited customers to spread interest and awareness of their brands through liking, reviewing, and sharing products with their network of friends. Commerce on social media has become a hot trend for many ecommerce firms to jump on. A company that has successfully exploited ecommerce on social media is Bigcommerce, co-founded by Eddie Machaalani and Mitchell Harper in 2009. They are present in over 65 countries, within 25 different industries, and have processed $1,657,523,898 in transactions for 35,387 of their storeowners, generating annual revenues ranging from hundreds of dollars to tens of millions. With Bigcommerce, anyone can create an online store,

MONEY INDICES December 2013

A company that has successfully exploited ecommerce on social media is Bigcommerce, co-founded by Eddie Machaalani and Mitchell Harper in 2009

upload and manage his or her products, and market them anywhere on the web whether through social media, email, blogs, or independent websites. Free with membership is SocialShop, a free Bigcommerce app, which allows vendors to set up a functioning Facebook shop where friends can browse, buy, and share products without leaving the site. Also headquartered in Austin, Texas, is Volusion, an ecommerce platform vendor with flexible ecommerce software and hosting plans for all kinds of merchants. Created in 1999 from the bedroom of Founder and Chairman Kevin Sproles, who began coding shopping cart software, Volusion has over 40,000 online stores, $10 billion in merchant sales worldwide, and over 360 employees. Volusion also assists vendors with creating a website to showcase their products, then integrates it with various marketing outlets, especially through social media. With Volusionâ&#x20AC;&#x2122;s SocialStore, which comes free with membership, vendors can list products directly on their existing Facebook Business Page so that customers can view, purchase, and share their products instantly.

SRAMANA MITRA

But if this kind of native ecommerce on Facebook appears mundane to you, let’s go a step further. A company that wants to capitalise on the social commerce trend and both facilitate and simultaneously complete actual transactions on social media is enMarkit, a platform-independent ecommerce solutions company founded by ex-venture capitalist Vipin Aggarwal and Ekta Mittal, formerly of Amazon. They want to turn Facebook into an exchange for high-trust ecommerce. Imagine that you want to rent your beach house. What if there was a way for you to list it on Facebook so that your friends can see it? What if they could each rent it for a week? With built-in trust, you then have a closed group of people practising commerce amongst themselves. Sounds like AirBnB? Why, of course! Except, within a trusted circle. Now imagine that you are looking for a web designer. Very likely, you would go to Elance or oDesk and list your project. But what if you had a way to list your project on a similar exchange on Facebook, and ask your friends for recommendations?And what if five of your friends recommend the designers they have used? You get to choose the one you like, and then, immediately set up the transaction right there on Facebook.The designer, if he/she does a good job, gets a nice recommendation right there, and with some of enMarkit’s magic, the recommendation could go viral. Welcome to the future of social ecommerce. The enMarkit team has built two enabling solutions:

Imagine that you want to rent your beach house. What if there was a way for you to list it on Facebook so that your friends can see it? What if they could each rent it for a week? the F.A.S.T. (Fast Anywhere Secure Transactions) check out system is a universal payment link which vendors can use to sell their products on Facebook, Twitter, Google+, and LinkedIn, and ONE, the unified store front which shares buyers’ views, likes, bookmarks, comments, buys, and reviews amongst their online friends. There are no listing fees, no annual fees, and sellers only pay enMarkit an approximate 5% transaction fee when

they actualise a sale. Social commerce is inevitably going to drive the future of social media companies. As advertising and commerce start to fuse, advertisers will look for ways to not only pay for eyeballs, but for completed transactions. The above-mentioned trend of completing ecommerce transactions on Facebook offers clues into how the future is likely to evolve.

SramanaMitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs globally to reach $1 million in revenue and beyond. She is a Silicon Valley entrepreneur and strategy consultant. she writes the blog Sramana Mitra On Strategy, and is author of the Entrepreneur Journeys book series and Vision India 2020. From 2008 to 2010, Mitra was a columnist for Forbes. As an entrepreneur CEO, she ran three companies: DAIS, Intarka, and Uuma. Sramana has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology

December 2013 MONEY INDICES

ENTREPRENEURShIP

Is the American Dream still alive?

Gen Y Thinks So!

Americans are willing to buy new products again, innovators want to keep designing the next big thing, and investors are willing to put the money in the roots of the new economy â&#x20AC;&#x201C; the small businesses By Mahesh Narayanan

ither by choice or the lack there of, many young individuals in America have chosen to start their own businesses. So many have followed this route that some believe they are responsible for the resurgence of the American economy. Their message for the past few years has been clear: invest your time and money in us and we will bring the lacklustre economy back on its feet.

Need or Want?

With high employment resulting from the recent recession, graduates found it quite hard to land a conventional job. Many looked to take any job that came their way just to be able to pay their educational loans. Others saw that corporate structure was no longer as secure as many thought, seeing their own parents lose their jobs after working for years within an organisation. The meltdown of the financial industry has resulted in the loss of faith in large companies and government institutions.

But the growth in technology, especially in software and mobile application platforms, has laid the foundation for Gen Y-ers to work with startups from the beginning of their careers, having the need to take risks now, rather than later. Fortunately, the successful IPOs of Facebook, and now Twitter, has given more confidence for angel investors and venture capitalists to invest in smaller companies with young management teams.

Recent Trends

As with any entrepreneurial scenario, most fail while few have gone on to become very successful. But a wide open market for innovators and creative entrepreneurs has caused a revival in the concept of small business. A recent survey in America has shown that 40 per cent of the youngsters born between mid-1970s and mid1990s would like to start their own company one day, with 20 per cent of them already having started one. If you look at the recent graduates from one of the leading business schools in the country, Stanford, you will realise that 18 per cent of the class has decided to go on to become entrepreneurs,

Fortunately, the successful IPOs of Facebook, and now Twitter, has given more confidence for angel investors and venture capitalists to invest in smaller companies with young management teams

MONEY INDICES December 2013

MAhESh NARAYANAN

If you look at the recent graduates from one of the leading business schools in the country, Stanford, you will realise that 18 per cent of the class has decided to go on to become entrepreneurs, up from 13 per cent in 2012 and 5 per cent from 1990s up from 13 per cent in 2012 and 5 per cent from 1990s. While these numbers represent a small population of graduates, these numbers might not be too far from the general population of recent graduates.

Where are they going?

The new generation of entrepreneurs knows where the growth is. The largest growth of entrepreneurs is in the technology sector, especially information technology. As mentioned before, the web development and mobile application sector has opened the platform for applications to become overnight successes and make developers instant millionaires. Cleantech/ greentech has also seen a huge surge with the necessity for an alternative to coal and petroleum. Manufacturing, retail, and life sciences have also seen entrepreneurs flock to them in the recent years. Thereâ&#x20AC;&#x2122;s

also constant growth in real estate and construction, power and utilities, and oil and gas.

High growth vs Small business

High growth entrepreneurial enterprises account for less that 1 per cent of US small businesses. While most of the high-growth entrepreneurs are middle-aged white men with significant experience in various industries, recent graduates at the helm dominate small businesses. The reason to start these companies is not for the growth of wealth, as is the case with most high-growth companies, but the idea of working for oneâ&#x20AC;&#x2122;s self. It also gives the youngsters a handle on their work/life balance. Despite everything that has happened with the economy in the recent past,

young Americans still believe that the fate of their careers lie in their own hands. These past couple years, small businesses and high-growth companies have had a deep impact in the economy with job creations, innovation, and stability to the markets. Americans are willing to buy new products again, innovators want to keep designing the next big thing, and investors are willing to put the money in the roots of the new economy â&#x20AC;&#x201C; the small businesses. With so many advantages over many other regions of the world, including mature economies like the EU or Japan, the Millennials are bringing back American entrepreneurialism to the mainstream.

With so many advantages over many other regions of the world, including mature economies like the EU or Japan, the Millennials are bringing back American entrepreneurialism to the mainstream

Mahesh Narayanan is the CEO of PepVax, Inc with extensive experience in the healthcare and life sciences industry, and a strong focus in business development and business startup strategies

December 2013 MONEY INDICES

INNOVATIVE ENTREPRENEUR

Coffee

and the magic

ker

What are pressure cookers used for? For cooking? What if I say that a pressure cooker can be used to whip up a sudsy espresso coffee? Yes, Mohammed Rozadeen, a gas and electric welder from Bihar, has invented a low-cost coffeemaker using a pressure cooker

By Neethu Mohan

he history of coffee goes at least as far back as the 13th century and a number of myths surround the first use of this drink. Whatever they may be, there isn’t an energy drink that is as good as a cup of coffee. When it comes to the brewing part, there are different types of coffeemakers using a number of different brewing principles. And the combination of all these techniques and principles has turned coffee brewing into an art, and the advent of technology has simplified the whole coffee-making procedure. Take the case of Mohammed Rozadeen from Bihar. He’s invented a low-cost coffeemaker.

MONEY INDICES December 2013

Born in Champaran, Rozadeen’s childhood was dunked in hunger and poverty and because of these reasons, he couldn’t attend school. His life took an unexpected turn after the demise of his father; family responsibility fell on Rozadeen’s shoulders. Today, he works as a gas and electric welder.

The light bulb moment Rozadeen always loved to attend marriages and other social events. At these gatherings, he had noticed that not many people drink coffee on a daily basis and that most of them drank tea instead. When he went into the issue more deeply, Rozadeen learnt that coffee was not easily available in many places because electric coffee-making machines were quiet expensive. That’s when Rozadeen started

MOhAMMED ROZADEEN

thinking of a low-cost coffeemaking solution. With much hard work and investment of a major part of his time for incubation of his idea, he arrived at a model with the help of an old cooker and tubes of copper.

The magic cooker

The invention is basically a pressure cooker altered in such a way that it has a copper delivery pipe attached to its lid. This pipe enables the transfer of steam generated inside to a container outside

The invention is basically a pressure cooker altered in such a shift of the lever. The delivery tip of the copper way that it has a copper delivery pipe has been intentionally restrained so as pipe attached to its lid. This pipe to generate more pressure at the point of enables the transfer of steam release of steam. The safety valve below the generated inside to a container handle and the whistle has not been touched. outside. Made of locally available Rozadeen has named it ‘JP Ustad coffee cooker’. material, this device has a pressure releasing valve activated by moving Feedback a lever (screw driver originally used). Rozadeen has decided to prepare coffee Mohammed Rozadeen Gas welding helped him fix the cookers only on demand and on payment of 50 copper pipe on the top of lid, along per cent advance. He has sold over 1,500 coffee with the valve. And all this cost him cookers in Motihari, Bagaha (Indo-Nepal just `200 (copper pipe 2 ft long – `50, tap pipe – `30, screw border), Dhaka, and Bairgania in Sitamarhi district, Raxaul, driver – `10, tap bolt – `10, labour charges – `100).The cost Bettiah, Sugauli, Samastipur, and many other places. of a pressure cooker depends on its size and the device can Demand hits a high during the winter season. be fitted on any kind of pressure cooker. He has made the This low-cost coffee cooker has popularised coffee tip portion of the copper pipe thin to create more pressure in the rural hinterland. The device has great business at that point. potential at roadside hotels, tea stalls, and dhabas. Water is boiled inside the cooker. When adequate steam Hardcore coffee lovers can brew their coffee at home now. pressure has been produced, it is released with the upward Rozadeen’s ready to help.

Rozadeen has decided to prepare coffee cookers only on demand and on payment of 50 per cent advance. He has sold over 1,500 coffee cookers in Motihari, Bagaha (Indo-Nepal border), Dhaka, and Bairgania in Sitamarhi district, Raxaul, Bettiah, Sugauli, Samastipur, and many other places. Demand hits a high during the winter season

December 2013 MONEY INDICES

SOCIAL ENTREPRENEUR KShITIJ MEhRA

Mentoring students via YuvShaala

Kshitij Mehra has been associated with the education industry for five years now. A commerce graduate, he had interned at a prominent chartered accountancy firm. But he eventually found his calling in being a mentor and a friend to the youth of India By Neethu Mohan

shitij Mehra has trained thousands of students for management examinations and assisted them with counselling on personality development. His vision and passion prompted him to establish YuvShaala, through which he hopes to mentor young students of India and help them realise their dreams. From his personal experience of being a student, Kshitij had realised the wide gap between the education imparted in our schools and colleges. He now intends to utilise YuvShaala as a medium to bridge this gap. YuvShaala is a mobile organisation that conducts counselling workshops in schools and helps students in making career choices on the basis of their psychology and socioeconomic background. The main objective of YuvShaala is to enable a student to make an informed choice when it comes to deciding upon a professional path in his/her life.

Motivation to be a social entrepreneur “I took up social entrepreneurship because I am somehow not in favour of the NGO system, its working, and the attitude of people towards NGOs. Besides, if we are making profits, then it is our responsibility to contribute to the taxation of the country. Another reason was that everyone tries to work in urban cities, but no one wants to go and work at the ground level even when it is much easier to work at the ground level. You don’t face diehard competition there,” says Kshitij.

My initial investment was around `40,000 and our revenue model is based on the following parameters: a) if a school is ready to pay, we charge them on a per day basis. The number of working days depends on how big a school is. We divide students into a maximum group of 30; b) if a school doesn’t pay, we charge students for a three-day workshop; c) we charge institutes/colleges for advertisements in our magazines, which we distribute among students

MONEY INDICES December 2013

KShITIJ MEhRA

We have associated with schools and colleges in Punjab, Himachal Pradesh, Haryana, and Madhya Pradesh. And if you want to know the potential reach of our organisation, then it is India as a whole, every state, every district, every city

Initial investment and business model “My initial investment was around `40,000 and our revenue model is based on the following parameters: a) if a school is ready to pay, we charge them on a per day basis. The number of working days depends on how big a school is. We divide students into a maximum group of 30; b) if a school doesn’t pay, we charge students for a three-day workshop; c) we charge institutes/colleges for advertisements in our magazines, which we distribute among students.”

Problems faced during the initial days of YuvShaala “The first challenge was to get permission from the Himachal Pradesh Board of Education. I knew it wouldn’t be that easy to convince them that a thin guy wants to travel throughout Himachal Pradesh and guide students. But I never gave up and kept on requesting them by delivering presentations and explaining each of my plans in a step by step manner. Finally, they agreed. The second challenge was the initial capital for investment. I joined a high-paying job for some time, saved money for a couple of months, and started out on my own. People initially treated us as an NGO just because we were working with government school students. I am not against NGOs, but I don’t want YuvShaala to be treated like that. I want it to be self-sustained financially. It’s all about finding the right people to do the right job. At times, I still face this problem, because counselling is a very responsible job and I am very particular about who conducts workshops with us.”

Reach of YuvShaala “We have associated with schools and colleges in Punjab, Himachal Pradesh, Haryana, and Madhya Pradesh. And if you want to know the potential reach of our organisation, then it is India as a whole, every state, every district, every city.”

Social entrepreneurship in the Indian scenario “The country tried to reach out to the untouched areas through the NGO sector, but it has failed majorly in doing so. The youth wants to do something for the country, but

the salaries offered in the social sector are not that high. If the idea is to motivate or attract the youth of the country (towards social reconstruction), we need to pay them decent money. And that is possible only through social entrepreneurship. India is a growing country and we need aggressive action to take it to the next level. Here, social entrepreneurship is the vehicle which can take us there.”

Inspiration “I have so many role models. For me, one role model is not enough. So, when it comes to ethics, I have Ratan Tata as a role model. For leadership, I have APJ Abdul Kalam sir. For creativity, I have Steve Jobs. And when it comes to business, I even admire Vijay Mallya.”

Future plans “I want to spread YuvShaala at least in two more states by the end of this financial year. We are currently working in Himachal Pradesh, Punjab, Chandigarh, and Haryana. We are looking for tie-ups in Madhya Pradesh. We had a session with one of the schools in Indore on August 6, 2013… I believe the youth has immense potential, which is lost because of lack of proper guidance in the system. If they are provided with proper guidance, then they can be the valuable tools to push the growth and development of this country forward. This is also the reason I like hiring young people for my team. They do not have premeditated mindsets and they are more likely to take up any kind of challenge,” concludes Kshitij.

I have so many role models. For me, one role model is not enough. So, when it comes to ethics, I have Ratan Tata as a role model. For leadership, I have APJ Abdul Kalam Sir. For creativity, I have Steve Jobs. And when it comes to business, I even admire Vijay Mallya

December 2013 MONEY INDICES

ECOPRENEUR

A 19-year-old’s

green vision takes shape

Is it necessary to have a management degree or MBA to kick-start an enterprise? Do you believe that you can invent things only if you have a professional qualification? Nineteen-year-old Param Jaggi doesn’t think so. He was a normal student like any other ward in his class, but the one and only thing that differentiated him from others is his passion for nature and entrepreneurship. Today, he is the CEO of Ecoviate, an enterprise aiming to safeguard Mother Nature by Lakshmi Narayanan

MONEY INDICES December 2013

orn in India and brought up in the US, this teenager wants to help the world save its environment. His startup, Ecoviate, is an eco-friendly enterprise which produces a device for vehicles that helps control carbon dioxide emissions into the atmosphere. An Environmental Sustainability and Economics student from Vanderbilt University, Param had a great passion for nature-oriented entrepreneurship since his childhood. That’s why he used to spend hours in a lab, doing various experiments to save Mother Earth from different kinds of pollution. Param had set up his own lab at the age of 12. At 13, he experimented with bio-fuels (ethanol and methanol concentrations) to find a fuel that is dense enough to replace current fossil fuels. He kept on experimenting with the support of his family, and when he was 14, he designed a highly effective algae bio-reactor using household materials. That set the foundation for Ecoviate. The most important applications for this reactor were carbon capture and a cleaner alternative to smoldering trash. Later that year, he invented a micro-scaled bio-reactor that could be fit into the exhaust of motor vehicles. This came to be known as the ‘algae-based emissions system’, “the focal point of my research for the next few years”. At 15, he started working on the micro-scaled bio-reactor and began to explore alternative sources of energy. At 16, he secured admission at University of Texas at Dallas to programme and optimise microcontrollers. This helped him continue his research. And at 17, he established Ecoviate and worked for its patents, marketing, and

PARAM JAGGI

Algae Mobile is a device that converts carbon dioxide released from a car into oxygen. He hit upon the idea of building the device when he was learning to drive

Currently, param is working on a device that fits directly into the exhaust of any motor vehicle and reduces carbon emissions using acid/base reduction and photosynthetic algae

programming. “I knew that it would be an uphill task for me as a teenager,” says Param, whose ticket to entrepreneurship was his invention of the ‘Algae Mobile’ in 2008. Algae Mobile is a device that converts carbon dioxide released from a car into oxygen. He hit upon the idea of building the device when he was learning to drive. In 2009, he filed for a patent, which was approved this year. Since 2009, he has made different types of Algae Mobile, and that’s the main concept of Ecoviate, a research and development company that focusses on energy and environmental technologies. It also focusses on interdisciplinary sciences to create technologies that mitigate global warming, create alternative sources of energy, and stimulate an unprecedented green initiative. “Green technologies are comparatively expensive, not very efficient, and lack sustainability. Through Ecoviate, I am trying to create technologies that are not only good for environmental/energy systems, but also cheap, very effective, and completely disposable. By ensuring sustainability and creating cheaper consumer-friendly products, the company will be able to make a very large impact at a very low cost. Currently, we are working on a device that fits directly into the exhaust of any motor vehicle and reduces carbon emissions using acid/base reduction and photosynthetic algae,” says Param. Param’s father, Pawan Jaggi, is also an entrepreneur, serving as the Director of Ecoviate. At present, many people are working under Param on the green revolution project, which is being run from the US. As a reward for his inventions, Param has received accolades from various parts of the world. He was featured in Mental Floss’ ‘Whiz Kids: 5 Amazing Young Inventors’ and in Forbes’ 30 Under 30’s energy category. Now, Param is busy with the marketing and eco-awareness programmes of Ecoviate across the world.

December 2013 MONEY INDICES

STARTUP

Freshmentors: A stepping stone to

studies abroad Startup company Freshmentors.com is an online platform for aspiring students who dream of studying abroad. By offering proper guidance at every step, this startup aims to make the admission process easy and stress-free MI STAFF

reshmentors is a recently-launched web-based platform designed for prospective college students. It provides students with authentic information on admissions. The portal works like a buddy/mentoring programme whereby students from India are connected to high-achieving college students at their target universities in the USA, Canada, and Singapore. The portal has more than 120 top-ranking college students as expert mentors; and they guide students in the college admission process. Students can have free ‘Insta Chats’ (brief introduction chats) with the college mentors, and they can pick the right mentors. Once you select your mentor, you get one-on-one mentoring. Through one-to-one mentoring video chat, students can collect information about universities and scholarships, the total cost of the programme and stay, and details about internship. That means anything can be asked; you can even get inside information about a college’s culture, campus life, and career opportunities. As of today, over 500 students have benefited from the services and expertise of this startup company. And Freshmentors says that about 20,000 students plan to sign up for their services by next year.

MONEY INDICES December 2013

About 10 million students apply to various colleges every year. The procedure of applying to a foreign university or any premier Indian university can be very demanding and cumbersome. Acceptance rates at some top institutes are decreasing to as low as 5-6 per cent, leading to a highly competitive application process. Moreover, college students who apply for such universities have various queries about the courses, curriculum, scholarships, finances, internships, dorm life, meal plans, and more. Without correct universityspecific information, most students may end up seeking admission with half-baked knowledge. These realities laid the foundation stone of Freshmentors, which aims to bridge this gap effectively by providing all possible information. The core team of Freshmentors consists of five members - Natasha Jain (CEO), Sonia Agarwal (CMO), Rohan Goel (CTO),Tarun Garg (Product Lead), and Naman Shah (Business Development Manager). It was founded by IIT Kanpur alumni Tarun Garg, Rohan Goel, and Natasha Jain. Rohan and Natasha are graduates from Stanford University. Sonia (Babson College) and Naman (National University of Singapore) joined the team later.

Right guidance at every step Talking about the novel venture, Natasha Jain says, “With more and more students opting for higher education at

FREShMENTORS.COM

foreign universities, there is a need for proper assistance at affordable cost. Since the entire founding team has personally experienced the pains of the admission process, we identified distinct pain areas of the admission process and aim to provide solutions to students. Given the high rate of internet consumption by the youth in India, such an online counselling portal will be a boon for many students.” With advice and counselling coming directly from topranking college students attending the target universities, the company will ensure that the most current and accurate information about college admissions, applications, and campus life is provided. The mentors will even help in essay reviews, application reviews, guide through the admission process and other documentation. They help students write applications, review them, and give feedback prior to actual submission. The mentors assist students in selection of a topic, advise them on the flow of essays, and share sample references. They help students highlight key areas in their application, prepare for interviews, and consult on suitable scholarship, financial aid, and housing and dining options. All sessions are hosted on a high performance, scalable cloud-based platform. Freshmentors is designed to host 1,000 simultaneous video chats, enabling it to cater to clients proficiently. With 100,000 Indian students applying to foreign universities each year, the demand for college counselling in metros and mini metros is very high. Hence Freshmentors is expanding rapidly. Sonia Agarwal, the Chief Marketing Officer of Freshmentors, says: “We have partnered with several educational institutions, high schools, and private counselling firms like the reputed Princeton Review India, to distribute Freshmentors’ mentoring services in over 35 physical centres across India. With these partnerships, applicants can get guidance from mentors of Freshmentors as well as expert counsellors of the educational institutions. This gives the student a holistic perspective. We are also in maturing conversations with other leading educational entities.”

Mentor’s selection and training Currently, Freshmentors has approximately 120 high quality, handpicked, and highly trained mentors (current college students) from across universities like Stanford University, Harvard University, Yale University, Columbia University, Georgia Tech, IIT, University of Oxford, and more.“We are constantly

Sonia Agarwal

recruiting, training, and adding more mentors from varied backgrounds to our platform. Highest quality of mentorship is our number one goal,” says Natasha Jain. The mentors are the most important part of the platform. “We had to get the best high-achieving current college students as mentors. We have a very rigorous mentor selection process. All mentors on our portal are either recommended by other mentors, professors, or advisers. All mentors Natasha Jain were carefully recruited by Freshmentors after an application, interview, and training process depending on their college achievements, mentoring abilities, and success in their own college applications. Apart from good academic record, the mentors need to have good communication and interpersonal skills. The mentors need to be patient with prospective students and be able to give in-depth information,” says the CEO of Freshmentors. Freshmentors’ mentor training process is also exhaustive. Mentors need to first create detailed profiles on the platform. If their profiles are relevant, they are contacted for the first round of interview. After the interview, the mentors go through several training calls on different topics of the video chats. They are also required to do several sample essay reviews and application reviews. Upon completion of this process, it is decided whether or not the mentor profile will be made public on the platform for them to provide services to students. While the normal consulting agencies can help students identify the colleges and assist them with the application, the missing element is advice from a mentor at the student’s target university. Since mentors are studying the target courses/research subjects that a student aims to study, they can provide details on their experiences. Freshmentors believes that their rate is more affordable, when compared with professional consulting firms. The company was recently adjudged ‘India’s Hottest Startup’ by Conquest 2013, hosted by BITS Pilani. It aims to raise the first round of capital by this yearend.

December 2013 MONEY INDICES

MOTIVATION

You can

, n i w a r e h K v i h S s y a s

MONEY INDICES December 2013

ShIV KhERA

hiv Khera is always doing things differently. An author, educator, business consultant, successful entrepreneur, he is a much sought-after motivational speaker. All these areas are not so different, but he is doing it very differently. Because “Winners don’t do different things, they do things differently” is his philosophy and trade mark. Shiv Khera is the Founder of Qualified Learning Systems Inc, USA. He motivates and emboldens people, making them realise their true potential. His vigorous personal messages have taken him all over the world, from the US to Singapore. His 30 years of research, understanding, and experience have helped people on the path of personal growth and fulfillment. Khera is an activist and author of 16 self-help books including the international bestseller You Can Win, which has sold over 2.5 million copies in 16 languages. His other books are creating new records. Khera’s first book, You Can Win (JeetAapki in Hindi), was published in 1998. The focus of the book was on achieving success through personal growth and positive attitude. Khera has written three more books, Living With Honor (about living honourably and respectably in a fractured world), Freedom Is Not Free (about the need for action to reform the Indian society), and You can Sell (2010). Tens of thousands have benefitted from his dynamic workshops in over 17 countries and millions have heard him as a keynote speaker. He has appeared on numerous radio and television shows. He launched a movement against castebased reservation in India, and has founded an organisation called Country First Foundation whose mission is “to ensure freedom through education and justice”. He also joined a political party as National President in India, intending to contest the elections in Delhi. Shiv Khera was born in a business family which used to have coal mines at Kendua in Dhanbad, Jharkhand. Soon after the nationalisation of coal mines by the Indian government, he had to search for his own living. In his early years, he worked as a car washer, a life insurance agent, and a franchise operator before he became a motivational speaker. He has been recognised by the Round Table Foundation and honoured by Rotary International and The Lions International. By Vishnu Kaimal & Pushpa m

December 2013 MONEY INDICES

MOTIVATION

What inspired you to be a motivational speaker?

I heard Dr Norman Vincent Peale and followed his motivational teachings. It kind of got me going. I read, met people, and gradually saw my life change. At the end of the day, if a person wants to be successful, he needs to have attention, leadership, motivation, and values. Going into the future, there are three skills which people will need to adopt in order to be successful. These are:

a) People Skills; b) Selling Skills; and c) Prioritising Skills

a) People Skills: In order to succeed, creating relations is the most important factor. When people start out, they carry 90% of technical skill and about 10% of people skills, but as they climb up and go higher, the percentage of the skills inverses itself. Finally, P to P is more important than B to B and B to C. Either in life or in business, everything is person to person oriented. This goes on to show how important people skills really are. b) Selling Skills: Every person, throughout his life, is selling something, be it goods, skills, or anything else. And it is very important to have good selling skills because people buy what they want, not what they need. Robert Louis Stevenson accurately described selling by saying that “Everyone lives by selling something”. c) Prioritising Skills: People need to get their priorities in order, which is very important as skill is an ability but competence is skill along with the desire to get the job done.

How would you respond to a person who says “It’s easy for him to say, he’s successful”?

There are cynics everywhere who have a problem for every solution. All you can do is try and deal with it.

What is the difference between your books and your talks? Who would benefit more, a person who reads your books, or a person who attends your

MONEY INDICES December 2013

Words of Wisdom You never get a second chance in life to create a first impression Success is not the absence of problems, but overcoming problems. Success is not the absence of failure, but overcoming failure We judge ourselves by intention, but the world judges us by our action A good leader creates more leaders; but a bad leader creates only followers A good leader guides people, but a bad leader misguides Ability without dependability is a liability If you want to be happy, find out what makes you happy It is better to be honourable than to be honoured A vision is the ability to see the invisible. If you can see the invisible, you can achieve the impossible It is better to have none in an office than to have a wrong person Wages without work amounts to stealing There are many people who are honest, but do not have integrity. There are many people we do love, but we cannot trust all of them

motivational talks?

I don’t think there is a need to choose between the two. The books and talks are meant to complement each other. I don’t think either person will be losing out if he doesn’t have one or the other but it may be better if they got to experience both.

How can we overcome the fear of failure?

The only way to do this is by doing what you fear again and again. For example, the greatest fear that people have is the fear of public speaking, people fear it more than death. It seems to be a fact. But the only way to overcome this fear is to speak in public again and again. Start with small crowds and then work your way up. That’s how I did it. I spoke in prisons before I built up my confidence. The only way to overcome any fear is to do it and face it over and over again.

What is the significance of positive thinking?

Positive thinking alone cannot do wonders. It is just a supplement; not a substitute. Positive thinking combined with positive action increases the probability of success. A positive thinker focusses on solutions rather than problems. Positive thinking and positive believing are closely related. When people believe strongly enough in something, they will become action-oriented. These actions convert their passions to burning desires. Renowned boxer Muhammad Ali once said that when he was knocked down by

ShIV KhERA

The Science of Communication We communicate at three levels - physical, intellectual, and emotional. In public speaking, there are three levels of communications - visual, vocal, and verbal. Visual communication is the body language. 55% of our communications are contributed by our body language. Our gestures, postures, and expressions speak a lot. Vocal communications contribute to 38%. Only 7% comes under verbal communication. These non-verbal communications are just happening, not created by ourselves. So, it reveals our character. And the tone of voice is very important. How we say it is more important than what we say. Remember, positive words said in a negative tone have a negative meaning. When we are communicating over the phone, 55% of contribution by the body language is totally missing. Here, the remaining 45% becomes the 100%. Whatever may be the medium, be specific in communication. Be careful to avoid miscommunication

the opponent and called by the referee, it was not his skill but his will that helped him stand up and fight for the win. To succeed in life, we need two things. We need the skill and the will. I am telling you, between the two, the will is a little more important than the skill. Skill is an ability; but competence is the ability along with the desire to use the skills.

How can we set our goals effectively?

Goal-setting helps you realise where you are heading. It has a series of steps. A goal is a dream with a deadline, a clear direction, and a plan of action. So there is a SMART Rule for goal-setting. Each letter of the acronym stands for Specific, Measurable, Achievable, Realistic, and Timebounded respectively. Goals should be slightly stretchable; then only it would be motivating. Goals should be out of reach, but never out of sight. If a goal is out of sight, it will be de-motivating. A goal should have a starting date as well as a finishing date. You can set goals as short term, midterm and long term according to the time you have given. Goals you plan to achieve within one year come under short term. If it is

within 1-3 years, it is a midterm goal. If the period is up to 5 years, it is a long term goal. If the period is longer than 5 years, it is life term goal. These types of goals should have a purpose. Each goal should have six directions. These are the spokes of the wheel of our life. These spokes are familial, financial, physical, mental, social, and spiritual. If any of these is missing, the goals will be unbalanced and you will be in trouble.

What are the steps to achieve success in business?

Only three factors contribute to success in business customer delight, employee satisfaction, and cash flow. Be loyal to your customers, for loyalty brings dependability. Credibility and integrity are vital in business. Organisations with credibility make higher profits. Tactics wonâ&#x20AC;&#x2122;t help you much, for tactics are manipulated, but principles are based on the foundations of integrity. So, we need to keep up values such as sincerity, integrity, and honesty. Be trustworthy. Many companies and organisations are not destroyed by the outsiders, but destroyed by the sabotage by insiders. Remember, ego can destroy team work and effort.

December 2013 MONEY INDICES

INTERNATIONAL RELATIONS

The truth of

Israel’s Look Is Israel finally looking towards the East and shunning the West? The bilateral relationship between three of the world’s developing economies – China, Israel, and India – could well script the emergence of a new, unlikely tripartite alliance, if diplomacy of the trio wriggles out of the sticky points of engagement. While India and Israel have been partners for long, with the trade volume climbing from a modest $200 million in 1992 to $6 billion in 2012, Israel and China are inching closer to increase trade from a bilateral volume of $8 billion in 2012 to $10 billion over the next half decade. Meanwhile, trade between India and China has also reached a voluminous $66 billion in 2012 from $2.92 billion in 2000. There’s enough reason for the trio to tango together. Or won’t they? Money Indices goes beneath the surface to see if there’s more to the bilateral bonding By Vishnu Rageev R

benjamin netanyahu

MONEY INDICES December 2013

INDIA ISRAEL ChINA

East policy

t seems Israel has begun contemplating on a simple logic: Are near neighbours better than a distant cousin? A few days before he headed for New Delhi, Israel’s Economy and Trade Minister Naftali Bennett had said in Jerusalem that Israeli businessmen looking towards the US and Europe are committing a mistake and that they must start looking at India and China, “where we see a huge potential”. Bennett visited India between October 7 and 10, heading a large delegation of Economy Ministry officials and Israeli businessmen to enhance cooperation between the two sides in the field of economy, commerce, trade, innovation, and R&D. Prior to Bennett’s India visit, Israeli Prime Minister Benjamin Netanyahu visited China on May 8, speculating that China would play a major role as Israel’s Middle East mediator. Netanyahu’s China voyage was the first by an Israeli leader since 2007, and he had high hopes from the visit. “Israel and China must cooperate in the fields of science, technology, and manufacturing that can result in a win-win partnership

for both the nations. The difference between cooperating with China and other countries is that the effect can be more than tenfold, rather than just one or twofold,” Netanyahu had said during his visit. While diplomatic ties between Israel and the two Asian giants started in 1992, the Sino-Israeli relationship collapsed in 2000, when the US forced Israel to cancel a billion dollar sale of its Phalcon early warning aircraft systems to the latter. In the subsequent years, Israel also blocked China from accessing its most lucrative industry, weapons. However, SinoIsraeli relations have entered a new stage now, even as the Indo-Israeli bonhomie continues.

The Indo-Israeli connect

Sino-Indian relations have grown phenomenally over the last two decades, notwithstanding the pending issues of border conflict. From a modest level of $2.92 billion in 2000, the two-way trade reached $66 billion in 2012. Last year, it was decided to enhance trade with China to the level of $100 billion. In today’s scenario, world economies co-exist only through dialogues and cooperation

On November 15 this year, Prince Charles and his wife Camilla visited the Jewish synagogue in Kochi, Kerala, the oldest synagogue in the Commonwealth that dates back to 1568 AD. Referring to the copper plates of yore, Queenie Hallegua, its warden and one of the seven Jews who still live on the Jew Street that leads to the synagogue, told Prince Charles how over 1,000 years ago, the then King of Kodungallur, Bhaskara Ravi Varman, bestowed a few

December 2013 MONEY INDICES

INTERNATIONAL RELATIONS

Union Minister for Commerce and Industry Anand Sharma shakes hands with Israeli Economy and Trade Minister Naftali Bennett during a meeting in New Delhi privileges and titles on Joseph Raban, a Jewish leader. Both Bhaskara Ravi Varman and Joseph Raban were a forgotten lot until 1992, when India opened an official diplomatic bridge from New Delhi to Tel Aviv via Washington, after the disintegration of the Soviet Union. But have Indo-Israeli relations really blossomed beyond the obvious security and military collaborations? “Post-1992, I feel Indo-Israeli bilateral ties have evolved, rapidly covering the entire gamut of inter-state relations,” says Farah Naaz, who worked as an Associate Fellow in The Institute of Defence Studies and Analyses, New Delhi (IDSA). “Before 1992, India considered several factors which guided it to favour the Arabs and, therefore, adopt an anti-Israeli attitude. India’s tilt

MONEY INDICES December 2013

Israeli businessmen looking towards the US and Europe are committing a mistake and they must start looking at India and China, where we see a huge potential, says naftali bennett

towards the Arab countries was conditioned by its historical and cultural affinities, commercial interests in the region, and the anti-India policy of Pakistan, which was seeking pan-Islamic solidarity in the Arab world.”

Indo-Israeli bilateral ties

Alongside the emerging pattern of ties with Washington, India’s liberalisation drive reinforced relations with Israel in vital areas. As a result, Indo-Israeli trade volumes peaked from a modest $200 million in 1992 to $5.15 billion in 2011 and $6 billion in 2012-13. India and Israel experienced a convergence of interests in agriculture, farm research, science, public health, IT, telecom, and cooperation in space, says K M Seethi, Director, School of International Relations and Politics,

INDIA ISRAEL ChINA

Mahatma Gandhi University. “Israeli businesses keenly took advantage of synergies with India in areas like water technologies, information technology, and the like.” While Israel topped the list of arms suppliers to India in 2012, India officially became the globe’s largest arms importer. Besides missiles and drones, India shipped hightech tools of warfare, scooping up the Phalcon airborne radar and advanced electronic surveillance systems along with equipment to retrofit the now-rickety Soviet era weaponry. Although the size of the defence deals is a secret, Israel has reportedly overtaken Russia as India’s main defence supplier, breaking the $1 billion mark in new contracts signed annually over the past two years, estimates Naaz of IDSA. “Significantly, the US approves most of Israel’s deals with India, unlike China.” Besides defence deals, both the countries had signed an inter-governmental works plan in 2006 for improvement of India’s agricultural sector. The programmes are carried out in collaboration with the Israel Ministry of Foreign Affairs’ Centre for International Cooperation (MASHAV) and the Centre for International Agricultural Development Cooperation of Israel’s Ministry of Agriculture and Rural Development (CINADCO). “This was a milestone achievement for India,” says an official of the Union Agriculture Ministry. “We have implemented the first phase of the project in Gujarat, Maharashtra, Rajasthan, and Haryana. The whole idea is to bring in the latest technologies from Israel to upgrade our farming methods. An action plan has been made for the 2012-15 period, which further raises the scope of this project with the inclusion of seven more states,” adds the official. Indian farmers are regular participators and beneficiaries of the Agritech exhibition, which displays all innovations made by Israel in the field of agriculture. India has also collaborated with Israel in the field of water management and conservation. India faces severe droughts, and water conservation is essential to protect the livelihood of farmers and the rising population. India and Israel have already come up with a joint declaration for import of water technologies. The Bilateral Investment and Promotion Agreement (BIPA) signed between India and Israel is another big achievement, informs a senior official of the Commerce and Industry Ministry. “This agreement safeguards the interests of investors, making India’s economy more conducive for growth. There is also an agreement for avoiding double taxation and mutual assistance in customs-related matters. We also have an agreement in the field of health and medicine to procure technologies and foster effective knowledgesharing between the countries. All these (tie-ups) have removed various roadblocks in trade and commerce.” India and Israel have very good relations in the field of education with courses related to India and Israel being

diplomatic ties between Israel and the two Asian giants started in 1992, but the SinoIsraeli relationship collapsed in 2000, when the US forced Israel to cancel a billion dollar sale of its Phalcon early warning aircraft systems to the latter. In the subsequent years, Israel also blocked China from accessing its most lucrative industry, weapons. However, Sino-Israeli relations have entered a new stage now, even as the Indo-Israeli bonhomie continues

December 2013 MONEY INDICES

INTERNATIONAL RELATIONS

taught at each country’s universities. Most importantly, the Extradition Treaty and the Agreement for Transfer of Sentenced Persons show the strong faith that both the countries have in the rule of law. Furthermore, the upcoming seventh round of talks on the bilateral trade agreement between India and Israel will enhance economic exchange beyond government contracts and include private sector deals in information technology, agriculture, and energy.

The Sino-Israeli bonding

Tel Aviv and Beijing were engaged in arms trade much before establishment of diplomatic ties in 1992. Although the ties snapped for a short term, China emerged as Israel’s 11th largest foreign market in 2009 and went on to become Israel’s second largest market, next to the US, in 2012. SinoIsraeli relations are now ripe for further engagements as the duo search for more opportunities for cooperation. “In pursuing warmer ties with China, Israel hopes to leverage its skills in high technology and agricultural innovation to win the political support of the Chinese government, which has signalled that it wants to play a greater diplomatic role in the region,” according to a report published in The New York Times. “For Israel, China’s willingness to do business without attaching conditions related to human rights looks particularly attractive in the face of growing Western frustrations with the Netanyahu government’s policies in the occupied territories,” adds the report.

MONEY INDICES December 2013

Israel’s annual trade with China is expected to increase from a bilateral volume of $8 billion in 2012 to $10 billion over the next half decade, estimates Seethi of Mahatma Gandhi University. “Now, there could be efforts towards strengthening cooperation in high technology sectors, joint construction of industrial parks and technology transfer centres, boosting agricultural cooperation, and the like. This is in addition to strengthening the soft power potential of China by facilitating cultural exchange activities, such as the celebration of the 20th anniversary of diplomatic relations between China and Israel and “Experience China in Israel”. Media reports suggest that Confucius Institutes have been set up in Tel Aviv University and The Hebrew University in Jerusalem, offering Israeli friends a platform to learn about Chinese culture.

Sino-Israeli ties a threat to India?

Although India and China continue to be partners, Chinese soldiers are known for frequent border intrusions, which amplify issues of trust and confidence. Viewed from this perspective, does India need to worry about closer ties between Israel and China? Israel has a history of backing India with artillery during the Chinese aggression and the subsequent war in 1962, adds Seethi. “We must note that Sino-Indian relations have also grown phenomenally over the last two decades, notwithstanding the pending issues of border conflict. From a modest level of $2.92 billion in 2000,

INDIA ISRAEL ChINA

the two-way trade reached $66 billion in 2012. In today’s “All of a sudden, we have this fly in the ointment. So scenario, world economies co-exist only through dialogues now we hear people in Israel saying, ‘The hell with Europe. and cooperation.” Let’s go to China and India’,” Dore Gold, an Israeli diplomat, India and China are indispensable as far as any world was quoted as saying in The New York Times. Gold, who economies are concerned, informs Manik Mehta, a top visited Beijing to talk about diplomacy and the Arab-Israeli commentator on Asian affairs. “It is not a surprise that conflict, serves as President of the Jerusalem Center for Israel is looking towards a prosperous Public Affairs and has the ear of the East, instead of an ailing West. China Israeli Prime Minister. Here, the bigger question is: has ambitious targets to double its Can Iran complicate Sino-Israeli economy by 2020. I don’t see any Israel’s annual trade relations since the two nations’ threat emerging for India from Israel with China is expected bilateral trade volume exceeds $400 and China relations. Rather, it could billion, compared to that of $8 billion help India as Israel can voice for India to increase from a bilateral between Israel and China? “No, it on disputed areas.” volume of $8 billion in 2012 to is not complicated,” feels Yaacov China became India’s top trading Vertzberger, Professor at Department partner during the 2008-09-period, $10 billion over the next half of International Relations, Hebrew replacing the US, concurs Seethi. decade. Now, there could be University of Jerusalem. “Israel “Last year, it was decided to enhance cannot compromise on Iran’s nuclear efforts towards strengthening trade with China to the level of $100 plan. I think China would need Israel billion. China has decided to enhance cooperation in high technology more than they need Iran as Israel its trade with Israel to the level of sectors, joint construction of opens up trades and formulas. I just $10 billion in the next decade. think Israel would be working for Israel is precisely doing what India industrial parks and technology a tripartite model bringing Saudi has already undertaken all these transfer centres, boosting Arabia and China to dump Iran’s years. India has also initiated military programme. It is Saudi Arabia which cooperation with China in vital areas agricultural cooperation, and is the largest producer and exporter such as counter-terrorism, maritime the like of oil and not Iran. And India would security, etc.” continue to be a strong ally of Israel.” So, is there a possibility of a tripartite alliance? “Regarding the India’s political barrier scope of a trilateral engagement, I One of the reasons why India would say that it depends on a continues to be a laggard number of factors among its peers including the is because of its comparative political baggage. advantages that Indian politicos and each country diplomats support has vis-a-vis Palestine over Israel each other in not because they trade and other think of oil imports transactions. But from the Arab world, it can obviously but because of the happen,” points out domestic vote bank Seethi. politics. The 1992 affair Israel’s Eastern shift is seemingly continuing While there is an ongoing spat because India needs to fill up her between Israel and the US over arsenals, while Israel requires money Iran, Israel’s growing inclination to balance its GDP. towards China is further frustrating “The Left Front had criticised the US as well as its allies in the Indian Food Minister KV Thomas European Union (EU). In July, EU (then Kerala Tourism Minister) even prohibited the distribution for handing over a gift containing of its funds to Israeli institutions replicas of the copper plates from that operate in West Bank and East the Magna Carta of the Jews from Jerusalem. Kochi in 2003, when former Israeli

December 2013 MONEY INDICES

INTERNATIONAL RELATIONS

xi jinping

Benjamin Netanyahu

Prime Minister Ariel Sharon visited India,” says Ramesh Chennithala, President of Kerala Pradesh Congress Committee. Interestingly, the Left was part of the Congressled UPA I regime. Similarly, Workers of the All India Muslim Forum staged a peaceful sit-in outside Uttar Pradesh’s Vidhan Bhavan to protest against the visit of Ariel Sharon, the first ever by an Israeli Prime Minister. Holding aloft placards and raising slogans, protesters condemned the barbarism of the Israeli state against the Arab world in general and Palestine in particular. Later, they also burnt an effigy of Sharon. Uttar Pradesh has changed a lot since those days, says Amit Shah, a senior BJP leader and close confidante of BJP’s prime ministerial candidate Narendra Modi. “It was during our former Prime Minister Atal Bihari Vajpayee’s time that the relationship between India and Israel grew rapidly. Israel is our window to the world. We respect all countries and Israel has always been our most preferred partner,” says Shah. So, will the Arab World boycott India if we support Israel for their “genuine causes”? “I don’t think so because global communities understand our international commitments and obligations,” clarifies Shashank, India’s former Foreign Secretary. “Maybe in Iran, because they are developing nuclear facilities, it has become more difficult to stand by them as we had taken certain views in the IAEA Governing Body and also in the UN Security Council. I don’t think by supporting Israel any Arab nations would boycott India.”

Past tense, future perfect “Palestine belongs to the Arabs in the same sense that England belongs to the English or France to the French… Surely it would be a crime against humanity to reduce the proud Arabs so that Palestine can be restored to the Jews

MONEY INDICES December 2013

Manmohan singh

partly or wholly as their national home,” Mahatma Gandhi had said in 1938. “Gone are those Nehru’s pragmatic approaches towards Israel,” feels M Mahmood, retired Professor (Political Science) of Aligarh Muslim University. “Interestingly, Nehru was neither supportive of Israelis nor Arabs. He stood for India and her long-term prospects.” Tel Aviv has made budgetary allocations for reinforcing exports to the two giant Asian markets. Hence it all depends on how India can take advantage of the situation in a complex international business environment where flexible coalition is more fruitful in trade than fixed paths of transactions. The proposed free trade agreement between New Delhi and Tel Aviv needs to be worked out in accordance with the rules of the game, currently underway across the world. This game does not see the colour of the flag or the punch of ideology as fuel for a global trade drive. Hans Joachim Morgenthau, one of the leading 20th century figures in the study of international politics, wrote a book titled ‘In Defense of the National Interest’ in 1951. The book is a critique of what Morgenthau calls ‘deeply ingrained habits of thought and preconceptions as to the nature of the foreign policy adopted in the US’ by its 28th President, Woodrow Wilson. A few lines from the book read: “It is a cardinal principle of the “realist” theory of international relations that the foreign policy of a sovereign nation state ought to be in pursuit of the “national interest”. Any deviation from this course in response, for instance, to the pressures of domestic religious or ethnic minority groups, is fraught with peril and may lead to the defeat and even extinction of the state.” These lines are still relevant in the modern day.

INDIA ISRAEL ChINA

‘Tripartite alliance is a great idea’ In an interview with Money Indices, Carice Witte, Founder and Executive Director, SIGNAL (Sino-Israel Global Network & Academic Leadership), and Dr Shalom Wald, Senior Fellow, Jewish People Policy Institute, and member of SIGNAL’s Board of Academic and Expert Advisors, talk about the growth potential of Sino-Israeli relations and related issues MI BUReAU

During the past few years, Sino-Israeli relations have grown noticeably with positive dialogues and business partnerships. Which are the new areas of engagement that both the nations should focus on?

Shalom Wald: The new areas of engagement are exactly the same as we pursue with India too: water, agriculture, food, pollution/ cleantech, telecom, and homeland security. Carice Witte: There is also an interest in gaining a better understanding of Israel and regional affairs. There is growing cooperation in the area of academia. China welcomed SIGNAL’s initiative to establish Israel Studies Programs at universities across the People’s Republic.

Israel and India are partners, while India and China continue to have disputes in a few strategic areas. Do you foresee any scope for a tripartite engagement on the economic turf?

Shalom Wald: Tripartite economic engagement is a great idea, with big potential for all three. However, Israel’s resources limit us to only two economic attachés at our Consulate in Mumbai, and three all over China. The comparison between India-Israel and China-Israel on a strategic level, with India coming out better, is ill-conceived. With India, we have at least as many strategic disagreements as with China, particularly in regard to Iran. Both China and India pursue Iran policies without regard for Israel’s existential concerns. At least China’s MFA has

once said publicly that the rights of all UN members to exist in safety must be protected, and that holocaust denial is not accepted by China. India never said this publicly. And an event like the assassination attempt against an Israeli diplomat in Delhi in 2012, organised by the Iranian Embassy with the help of a well-known Shia Indian citizen, would have been unthinkable in Beijing. India did not even protest publicly, and the Indian accomplice has been released on bail and gets congratulation from his Shia friends. In China, he would have disappeared for a while, and after a suitable period, we would have learned that he was sentenced to death and executed Chinese style (bullet into his neck). Carice Witte: Economic development is of value to Israel, India, and China. If the three nations could find a platform for cooperation, it would be to their joint benefit. China is making sincere efforts to understand.

Carice Witte

Have Sino-Israeli relations outgrown Indo-Israeli ties? If yes, what would be the reasons for it?

Shalom Wald: It is impossible to answer this question. How do you measure “ties”? The main tie with India is the defence and weapons relationship, which is flourishing, whereas with China, we have nothing comparable due to the US pressure. As for trade: you can look up and compare the trade figures. Carice Witte: Israel’s developing relations with China do not guide Israel’s relations with other nations. Israel seeks ties throughout the world, including with India.

Shalom Wald

December 2013 MONEY INDICES

TECh UPDATE

a l o r o t o M

o t k c a b g n i m o c is

a h budget t i w a i d n I

phone

ecent After the r Moto G, a launch of ne from budget pho -owned the Google otorola company, M lans to revealed p markets bring it to ia and such as Ind Brazil MI Bureau

he much-embattled tech company known for its pioneering work in wireless telephone handsets and cellular telephones, Motorola has decided to re-enter the country. It had come as a surprise when Motorola made the announcement that it had decided to exit India as it had become increasingly evident that the company was not doing well

MONEY INDICES December 2013

here and in most parts of the world. A lot seems to have happened since then. After the recent launch of Moto G, a budget phone from the Google-owned company, Motorola revealed plans to bring it to markets such as India and Brazil. Priced at $179, this phone is much cheaper than its competition, the iPhone 5C. Moto G will be launched in India in January 2014 and is expected to be the first in a series of phones to come. With the launch, they will again try to make a market for themselves in India.

MOTOROLA

Earlier, Moto RAZR was one storage free on Google Drive for two of the best-selling handsets of all years. While the screen is not full HD times from Motorola in India. The and is under 5 inches, the battery life company will again try to gain and the processor ensure that the market share that it once held phone offers something new. Most here. However, the road to success is going low-cost smartphones in India by Karbonn, to be hard in India, which is currently led by Gionee, etc are using a Mediatek chip and not The new low-cost companies such as Samsung, Micromax, and a Qualcomm Snapdragon quad-core CPU. Add Moto G smartphone, Nokia. Motorola did bring some good phones the promise of 24-hour battery by Motorola, back then and we are excited to see what they which has a quad-core and many might just be tempted to try out this will bring next (after the Moto G). Here’s to smartphone. Motorola has also promised a processor and a 4.5new beginnings. dual-SIM version in select markets. The new low-cost Moto G smartphone, For Moto G, the three key selling points inch HD screen, will which has a quad-core processor and a 4.5appear to be price, battery, and the pure also get an update inch HD screen, will also get an update to Google OS. Given that Micromax and Karbonn Android 4.4 in the coming weeks. The price of are the number two and three smartphone to Android 4.4 in the the Moto G should come as welcome news to manufacturers in India, there’s no denying coming weeks Android fans in India. The phone is expected that price is the biggest factor for Indian to launch at the same consumers when they make a purchase. time it does in the While there are a number of cheaper Android US. If one were to go phones available in the market, none of these by current pricing come with the pure Google OS or even a and include taxes, the great battery life. Also, the recent 8 GB version could cost premium smartphone `15,000 (or a little above) while launches in India from the 16 GB could be in the `18,000 Galaxy Note III and higher range. Remember, this is to Nokia Lumia if one were to take taxes, etc into account, 1020 are priced even though under the current exchange rate, the over `45,000, and phones are priced at `11,300 and `12,600 for the 8 and not everyone has 16 GB versions. the budget to buy these Google launched the phone with the aim of reaching phones. Enter Moto G as an option. out to emerging markets, and given the price, it is a Now, one can only speculate on how the Indian consumer steal since the smartphone comes with the pure Google reacts to the phone. It will depend on how Google and experience. In a price-sensitive market like India, the Motorola market it in India, and yes, the final price. phone appears to be quite the deal. Key specs of the Moto However, it is heartening to hear that the company that G include: Qualcomm Snapdragon 400 processor quadbrought us the ever-popular “Flip-Phone”, is re-entering core CPU clocked at 1.2 Ghz, a 4.5-inch display with 720 p India. Maybe one can hope that the company will grace resolution (pixel density is 329 ppi.) The device also has a us with its ever-eclectic collection of smartphones and 2070 mAh battery, with Motorola promising up to 24 hours’ handsets that will give some variety to a market which has battery life on mixed usage. Moto G will also get Android been dominated by black rectangles of late. 4.4 KitKat by January 2014. Buyers will also get 50 GB

ear ening to h t r a e h is it t us However, at brough h t y n a p m o , is that the c lip-Phone” F “ r a l u p o the ever-p dia g In re-enterin

December 2013 MONEY INDICES

INVESTMENT GUIDE

Introducing Contra-cyclical investing is a strategy whereby an investor buys stocks when it’s the worst time to buy

By Sumeet Mehta

quity markets should ideally be seen confusing for retail investors, who are not sure how from windshields, but retail investors markets would perform, going forward. Also, with changing normally see it from rearview mirror. economic situation and growth drivers, it is not necessary This means while investing in equity that the sectors that outperformed the market would markets, investors need to focus on continue to deliver better returns than broad markets. This anticipated future performance, and needs to be elaborated for better understanding. not focus on historical performance. Before we proceed, let’s digress to understand Historical performance is factored in two terminologies – outperform and underperform. current stock price and may not offer Outperformance is a situation where in a stock or a sector any returns if investor doesn’t have a delivers better returns than the broad or specific benchmark view on future. This could be one of the reasons why retail index. Like in the case of a FMCG stock like Dabur or HUL, investors have not created wealth by investing in equities. returns delivered by these companies can be compared The current market scenario is directionless with added with returns delivered by either Sensex or Nifty or FMCG risks of high volatility. One of the reasons is that not all is index. On the contrary, stock underperforming the market, hunky dory in equity markets. While two benchmark indices means that stock has delivered lower returns as compared – Nifty and Sensex – have surged taking markets near the to benchmark indices. previous high, we haven’t Between 2002 and seen similar action in 2008, Indian equity other stocks and indices. markets saw a secular Many stocks are rally across all sectors, still trading at or near and growth was triggered all-time lows or 52-week by infrastructure, lows. In other words, this banking, and core sector. means that the current Other sectors rallied on rally in market is on the the back of trickledown back of spurt in stock effect arising out of prices of select stocks boost in infrastructure and cannot be really spending and reforms taken as an indicator coupled with increased of real all-round rally liquidity and FII inflows. in markets. This could Thus, we saw nearly all be one of the reasons stocks scale new highs. why markets have not However, now it is Many stocks are still trading at or near all-time lows or been able to sustain not so easy to find stocks 52-week lows. In other words, this means that the current themselves at the near and companies to invest all-time high it scaled in as it was between rally in market is on the back of spurt in stock prices of in the Muhurat trading 2002 and 2008. So, the select stocks and cannot be really taken as an indicator of session. mantra in investing is The current market to identify future trends real all-round rally in markets scenario is extremely and accordingly invest in

MONEY INDICES December 2013

CONTRA-CYCLICAL INVESTING

sectors that could deliver returns better than broad benchmarks. This style of investing in a market scenario, when it is unlikely for majority of stocks and also broad benchmark indices to perform well, is called contra-cyclical investing. Contra-cyclical investing is a strategy whereby an investor buys stocks when itâ&#x20AC;&#x2122;s the worst time to buy. Usually, the least attractive time to buy stocks is when the economy or sector is growing, companies and their revenues and earnings are growing on the back of overall economic growth, and investor sentiment is positive. In such a market scenario, valuations surge to unjustifiable levels with increased risks. We have seen this in all bull market cycles, when stock prices have shot up but have not delivered returns to justify the risk of buying stocks at such high prices. On the contrary, the best time to invest in equities is when conditions are exactly the opposite - slow or negative growth in economy and sectors, concerns about future of companies and their earnings, and bad investor sentiment. This is the situation we are in today or we were in 2009. in 2009, after the global financial meltdown in 2008, the scenario changed significantly. By 2009, sectors like infrastructure, real estate, core sector, etc had lost their flavour and we saw the consumption story overshadowing the investments and reforms story. This led to FMCG and consumer

the mantra in investing is to identify future trends and accordingly invest in sectors that could deliver returns better than broad benchmarks

durables sectors outperforming the market. During this period, markets witnessed that infra and other stocks badly underperformed the markets. Hence, in contracyclical investing, investors need to have in-depth understanding of the situation and likely future of the sector and company that is in a very bad shape today and have not performed well for quite some time in the past. That is why we mentioned about using windshields to see what lies ahead, instead of using rearview mirrors to judge a stock based on its past performance. It is also pertinent to note that in contra-cyclical investing,the investor needs to have patience and must hold stock for long term. It is worth noting that contra-cyclical investing has delivered maximum returns to investors who studied stocks and sectors which have not performed well for quite some time and are likely to perform better with change in economic and industrial or market scenario.

The author is Managing Director and Chief Executive Officer at Paradigm Corporate Advisors

December 2013 MONEY INDICES

INVESTMENT GUIDE

Play safe with

derivatives Illustration credit: Lorelyn Medina

Derivatives by themselves do not have any value, and most of these derivatives die over time. The value of the derivatives represents the future expectations about the market movements By Sanjeev Kumar G

n October 19, 1987, often referred to as Black Monday, the Dow Jones Industrial Average plunged 508 points, to that date the largest one-day drop in history. The Brady Commission identified the use of portfolio insurance models as a significant factor in the sharp decline in stock prices. When a large enough number of investors engage in this type of trend-following ‘dynamic hedging’, their trading demands can sweep markets along with them,

MONEY INDICES December 2013

elevating stock prices at some times and causing dramatic price drops at others. Eight years later, an earthquake on January 23, 1995 in Japan caused a steep drop in the Nikkei 225 equity index. This was the tipping point for the collapse of one of the then oldest banks, Barings in the UK, which boasted of having Queen Elizabeth as its customers, on February 26, 1995. Nick Leeson, the chief trader for Barings Futures in Singapore, had been accumulating positions in stock index futures on the Nikkei 225. He executed a trading strategy known as a “straddle”. A straddle will generally produce positive earnings when markets are stable but can result in large losses if markets are volatile.

As the market fell more than 15 per cent in the first two months of 1995, Barings Futures suffered huge losses, made even higher due to the sale of options, which implied a bet on a stable market. Finally, on February 25, 1995, the bank was unable to make the cash payments required by the exchanges. On March 3, 1995, the Dutch bank ING purchased Barings for the princely sum of one pound, providing the final chapter in the story of the 223-year-old bank. Long Term Capital Management Company (LTCM) was started by John Meriwether along with the Nobel laureates Merton and Scholes, who propounded the Black and Scholes model. In LTCM’s first two years of operation, it produced 43 per cent

DERIVATIVES

and 41 per cent return on equity and had amassed an investment capital of $7 billion. Making a 40 per cent return on capital, however, requires big bets. LTCM got into emerging markets, including Russia, to reduce its exposure to the US market. On August 17, 1998, Russia declared a moratorium on its ruble and domestic dollar debt as it defaulted on its government bonds. LTCM saw a single day’s loss of $55 million. In the first three weeks of September, LTCM’s equity tumbled from $2.3 billion to $600 million. LTCM was too big to be allowed to go down. It was bailed out to the tune of some $3.6 billion by a consortium of banks. On May 22, 2006, Sreedhar and Arun, two doctors in Cochin, in their thirties, lost `10 lakh on stock futures in National Stock Exchange, India, when Nifty came down continuously by 15 per cent in three trading sessions. Since they had nice jobs and good cashflows, they were lured by a small time Nick Leeson called Habeeb, a subbroker, who told them promising tales of making fortunes through futures market. They were told that they can actually buy stocks worth five times the money they keep with him as margin. They had put `4 lakh and borrowed `6 lakh at 15 per cent p.a. interest through personal loans to enter the game. But they never realised that the loss also would be five times, and on those three days, Nifty crashed by around 554 points to see that

First of all, to enter into the derivatives market, you need to keep margins ranging from `25,000 to `1.5 lakh for a single contract. So, if you are very small, you can close your eyes against this market forever. Secondly, you should have a good understanding about the basic concepts of derivatives and its uses. As you know, it is like a knife which can be used to cut the bread as well as injure a person they lost `10 lakh. The Nifty futures were closing within three days and they didn’t have the courage to put in money to roll it over to the next month. Had they bought the shares for `4 lakh instead

of buying the futures, they would have seen that their loss was nominal and would have recovered over the next few months without losing a single paisa. Though they lost money, they had to continue repaying their personal loan EMI of `20,800 every month which ended in 2009. Poor Sreedhar and Arun failed to

December 2013 MONEY INDICES

INVESTMENT GUIDE

realise that they were two helpless little kids in the fiery jungle of derivatives market. They didn’t realise that even learned people and big companies with huge research setups and information about global markets on their fingertips fail. The amount they lost is not in millions or billions, but it was a good part of their hardearned savings which in proportion will equal the billions lost by big companies. Do all these mean that small investors should avoid the derivatives market? First of all, to enter into the derivatives market, you need to keep margins ranging from `25,000 to `1.5 lakh for a single contract. So, if you are very small, you can close your eyes against this market forever. Secondly, you should have a good understanding about the basic concepts of derivatives and its uses. As you know, it is like a knife which can be used to cut the bread as well as injure a person. Derivatives derive their value from underlying assets. Derivatives

MONEY INDICES December 2013

When the prices have come down, you can cover it by selling the futures and buying back the stocks. In this way, you can arrest the losses due to an expected fall and also make some arbitrage profits. There are another set of derivatives known as “Options”. Options are nothing but a “right” to buy or sell. If you are buying a call option, you can exercise your right to buy a stock on or before a future date at a pre-determined price

by themselves do not have any value, and most of these derivatives die over time. The value of the derivatives represents the future expectations about the market movements. For example, if a stock has a price of `300 in the cash market, and if its one-month futures value in the futures market is `310, then `10 is the gain expected by the market in the one month. If the dividend yield and interest cost of investment for the one month is adjusted against this gain and if any balance is left, that is the extent to which markets expectations are. Usually, futures are a good hedge instrument based on different market conditions. If you feel that for a short duration, market may be bearish, but you still want to hold on to your stocks, you can sell the futures and protect your holdings if futures are priced higher than the stock price. This means if the stock price goes down, you will suffer a loss against your stock holdings but will make profit against the futures you have sold as you can buy and square

DERIVATIVES

Due to lack of knowledge and greed, many people tend to create open positions in futures and options, expecting huge profits. They fail to understand that the futures price tend to the spot price as the day nears the maturity date, and in case of options, the option price tend to zero as the day nears the maturity date

your futures position at a lower price. Similarly, if the futures price is lower than the cash market price, you can buy futures and sell your holdings. When the prices have come down, you can cover it by selling the futures and buying back the stocks. In this way, you can arrest the losses due to an expected fall and also make some arbitrage profits. There are another set of derivatives known as “Options”. Options are nothing but a “right” to buy or sell. If you are buying a call option, you can exercise your right to buy a stock on or before a future date at a pre-determined price. The “right” to sell a stock is called a “put option”. The options carry a price which would be the difference between the current

price and the pre-determined buy or sell price, which is known as “Strike Price”, if the strike price is less than the spot price in case of a call option or if the strike price is higher than the spot price in the case of a put option. So, as in the case of futures, if you expect the stock price to go down for sometime but still want to hold the stocks, you can buy put options and insure your stock price. This means that if the stock price goes down as expected, you can exercise your put option and sell at the strike price for which you have bought the option. Due to lack of knowledge and greed, many people tend to create open positions in futures and options, expecting huge profits. They fail to understand that the futures price

tend to the spot price as the day nears the maturity date, and in case of options, the option price tend to zero as the day nears the maturity date. So, even if the market moves as per expectations, the time decay factor will eat into open positions and render it loss-making propositions. You require lot of mathematical knowledge to calculate the intrinsic value of options, and unless you master it, it is better to take the advice of an expert on buying or selling options. Futures & Options are like medicines. They should be bought on the advice of an expert only and also for protecting your financial assets. The medicine is sweet. So, if you take it in more quantity, you will end up in hospital.

The author is Managing Director, Progno Financial Planning Systems

December 2013 MONEY INDICES

GLOBAL INDICES

Canada

S&P/TSX 13478.34

Uk FTSE 6674.30

Germany DAX 9219.04

United States S&P 500 1804.76

France CAC 4278.53

NSE Market Statistics (crores) Segments Capital market Equity Future and Options Currency Futures

TOTAL

22.10.2013

21.11.2013

11,267.67

10,386.73

-880.94

115,614.94

217,479.33

101864.39

Switzerland

Up/dn

7937.176

10633.98

2696.804

134819.786

238500.04

103680.254

Smi 8250.43

Mexico Spain

IPC 41199.02

IBEX 9677.40

Italy

Performance of various indices as of end Nov 2013 (in %) 1 month

3 month

6 month

1 year 12.09

CNX Nifty

9.83

9.7

6.22

CNX 500

9.4

9.71

3.51

12.28

9.18

-6.22

-1.7

CNX Nifty Junior

8.93

9.38

1.39

12.03

CNX Midcap Index

7.67

9.63

-3.63

-2.94

CNX DEFTY

MIB 18822.31

Brazil

BOVESPA 52800.74

Argentina MERVAL 5529.54

CNX IT Index CNX Bank Index CNX 100

8.39

13.68

46.38

45.42

19.29

14.55

-8.66

1.81

9.7

9.65

5.48

12.06

CNX Realty

2.72

-28.66

-26.5

CNX infrastructure

12.06

9.84

-1.49

-3.72

CNX Energy Index

7.78

4.97

2.08

4.04

CNX Fmcg Index

-0.12

0.78

4.76

CNX MNC Index

4.8

8.76

3.42

21.3 4.77

CNX Pharma Index

1.83

5.46

14.44

32.27

CNX PSE Index

5.48

7.45

-10.71

-8.63

CNX PSU Bank

16.31

5.11

-24.51

-20.94

CNX Service Sector

12.75

11.69

7.2

15.64

MONEY INDICES December 2013

US and Asian Market Indices Indices

22.11.2013

23.10.2013

change

16064.77

15467.66

597.11

Nasdaq Compsite

3991.65

3929.57

62.08

Shangai Composite

2196.38

2210.65

-14.27

Hang seng Index

23696.28

22999.95

696.33

Nikkie 225

15381.72

14426.05

955.67

Straight Times Index

3172.85

3204.80

-31.95

Kospi Compsite Index

2006.23

2035.75

-29.52

Dow Jones

GLOBAL INDICES Russia

RTS 1446.07

South Korea KOSPI 2006.23

Japan NIKKEI 15381.72

China

hong kong

SHANGHAI COMPOSITE 2196.38

HANG SENG INDEX 23696.28

Thailand

india

THAI SET INDEX 1359.07

BSE 20217.39

Saudi Arabia TADAWUL 8337.78

South africa

JSE 44435.61

New Zealand NZX 4818.00

australia ALL ORDINARIES 5330.30

Prices and Returns of Top 10 shares by Market Capitalisation Company Name

TCS Reliance

Price (22.11.2013)

Price (22.10.2013)

% change

52 wk

High

Low

(`cr)

2000.7

2087.35

-4.1512

2258.05

1223.75

391882.71

843.9

903.6

-6.60691

954.8

765

Market Cap

272662.63

FII and DII Statistics (in crores) Month

FII net purchase/sales

DII net purchase/sales

ITC

308.3

341.8

-9.80105

380

282

244526.65

Oct. 2013

18012.8

-4017.80

ONGC

278.15

285.75

-2.65967

354.1

234.4

237970.96

Sept.2013

12632.90

-2800.80

Coal India

267.75

292.95

-8.60215

374.05

238.35

169120.66

3334.75

0.436315

Infosys

3349.3

3447.9

2249

192328.92

HDFC Bank

642.35

668.75

-3.94766

727

528

153672.21

Bharti Airtel

336.35

352.1

-4.47316

373.5

279.35

134452.55

Aug.2013

-6200.00

1606.90

July 2013

-7120.20

-2168.60

June 2013

-9318.70

-268.80 *Data as on 23 November 2013

December 2013 MONEY INDICES

wORLD ECONOMY SINGAPORE

Singapore’s growth becomes erratic The IMF welcomed Singapore’s sound policies and skillful macroeconomic management that have spurred a rebound in economic activity and kept inflation in check. but...

MI Bureau

ince the robust recovery from the global financial crisis, Singapore’s growth momentum has eased and become more erratic,” observes the International Monetary Fund (IMF). Growth decelerated to 1¼ per cent in 2012 before picking up sharply in the first half of 2013. This reflects shifts in G3 (the US, Europe, and Japan) demand and global risk appetite. At the same time, the current account surplus narrowed sharply to a still-high 18½ per cent of GDP in 2012, and previously elevated inflation subsided to 2 per cent as house and car price appreciation eased in response to restrictive macro-prudential policies. Leverage rose strongly in recent years, real estate being a major beneficiary. Bank loans expanded briskly, reaching more than 170 per cent of GDP in mid-2013. Real estate-related loans grew especially fast and housing and construction accounts for 46 per cent of bank loans while household indebtedness is more than double household income. Nonetheless, the increase in credit appears to have provided only a muted impetus to real activity. “After rising some 55 per cent since 2009, house prices recently stabilised on intensive application of macroprudential policies. Appetite for real estate by both residents and non-residents has been fuelled by very low interest rates, ample global liquidity, provisions in the pension scheme that encourage house purchases, and the rise in the number of permanent residents. Nearly half of household

MONEY INDICES December 2013

wealth is held in the form of real estate. An escalating series of broad-based macro-prudential policies has contained residential property prices,” the IMF states in a recent report. Singapore’s large and highly-developed international financial centre has continued to expand despite volatile global conditions. Local financial markets absorbed expectations of future tapering (of stimulus package) by the Federal Reserve and the accompanying turbulence in emerging markets with limited volatility so far. Currency and equity prices weakened only modestly, but long-term interest rates have risen by around 1 percentage point.

Addressing challenges Shifting from labour-intensive growth and impending labour force aging are the two main challenges before the country. The authorities have embarked on policies to enhance labour productivity. Foreign worker inflows have been slowed and fiscal support for skills and technology upgrading and higher wages have been offered. These ongoing structural changes will slow the pace of growth, make inflation more responsive to an increase in demand, and permanently raise the real exchange rate. Rising life expectancy will sharply raise the old-age dependency ratio and increase the need for aging-related social spending. The near-term outlook is for GDP to grow by 3½ per cent in 2013−14, supported by stronger demand from major advanced economies, despite some softening in regional economies. Improved external demand will slow the adjustment in the current account, which is expected to narrow modestly to around 17½ per cent of GDP by 2014. A positive output gap and rising labour costs are projected

SINGAPORE

Singapore: Selected Economic and Financial Indicators, 2008–14 Proj. 2008

2009

2010

2011

2012

2013

2014

Growth (percentage change) Real GDP

1.7

-0.8

14.8

5.2

1.3

3.5

Total domestic demand

11.8

-7.6

6.6

6.5

9.7

4.1

3.4

Consumption

3.6

0.5

7.2

3.7

0.9

3.9

2.7

Private consumption

2.9

-0.5

6.2

4.6

2.2

2.5

2.8

Gross capital formation

28.5

-21.0

5.4

12.7

26.8

4.5

4.4

Saving and investment (percent of GDP)

Gross national saving

44.5

42.7

48.2

46.8

45.6

45.3

29.3

25.0

21.4

22.2

27.0

27.1

27.4

CPI inflation

6.6

0.6

2.8

5.2

4.6

2.5

3.1

Core CPI inflation

5.7

0.0

1.5

2.2

2.5

1.9

2.8

Unemployment rate

2.2

3.0

2.2

2.0

2.1

2.3

Revenue

24.2

19.3

20.6

23.5

22.9

21.9

22.3

Expenditure

16.3

18.0

15.2

14.5

14.9

16.1

17.1

Overall balance

7.9

1.3

5.4

9.0

8.0

5.8

5.2

Primary balance 2/

-1.0

-3.8

-1.1

0.5

0.8

-0.5

-1.5

Broad money (M2)

10.4

8.7

7.6

11.8

6.8

...

Credit to private sector

12.4

3.1

13.2

18.9

11.3

...

Three-month interbank rate (percent)

1.0

0.7

0.4

…

Gross domestic investment

45.0

Inflation and unemployment (period average, percent)

Central government budget (percent of GDP) 1/

to raise core inflation, but headline inflation is forecast to stabilise at 2½ per cent on smaller increases in housing rents and car permit costs. The IMF welcomed Singapore’s sound policies and skillful macroeconomic management that have spurred the rebound in economic activity and kept inflation in check. Meanwhile, the IMF counselled vigilance against a re-emergence of inflationary pressures and risks in the financial and housing sectors, and stressed the importance of further efforts to promote external rebalancing and address demographic challenges. “The rapid growth of credit and real estate prices in recent years could exacerbate aggregate sensitivity to macroeconomic shocks and interest rate cycles,” the IMF noted. It recommended a countercyclical capital buffer, steppedup onsite inspections of banks’ credit risk, and strengthened foreign currency liquidity practices by banks. It noted important legal changes adopted by the authorities related to the regime against money laundering and the financing of terrorism and called for vigorous enforcement of their international commitments in this area.

Money and credit (end of period, percentage change)

Balance of payments 3/ (US$ billions) Current account balance (In percent of GDP) Trade balance

28.8

33.5

62.0

65.3

51.4

52.4

53.9

(15.1)

(17.7)

(26.8)

(24.6)

(18.6)

(18.3)

(17.5)

42.8

49.3

66.0

72.7

60.9

63.1

67.4

Exports, f.o.b.

354.6

288.5

371.0

434.1

435.8

433.2

457.1

Imports, f.o.b.

-311.7

-239.2

-305.0

-361.5

-374.9

-370.1

-389.7

Financial account balance

-16.2

-24.6

-22.4

-44.2

-28.5

-28.6

-37.7

Overall balance

13.1

11.3

42.2

17.1

26.1

23.8

16.2

Gross official reserves (US$ billions)

174.2

187.8

225.8

237.7

259.3

283.1

299.4

(Months of imports) 4/

(6.5)

(5.6)

(5.7)

(5.8)

(6.3)

(6.6)

Singapore dollar/US dollar exchange rate (period average)

1.41

1.45

1.36

1.26

1.25

...

Nominal effective exchange rate (percentage change) 5/

3.51

-0.11

3.07

3.73

2.40

...

December 2013 MONEY INDICES

INK REVIEw

ing the

story of us

The fourth edition of the INK conference, centred on the theme of ‘All that Matters’, brought out the essence of life through different disciplines, voices, and perspectives MI Bureau

he fourth edition of the INK (Innovation and Knowledge) Conference, organised in association with TED, is an annual flagship event that took place in Kochi at the Le Meridian Convention Center in October. The conference provided a platform to a stellar line-up of achievers from diverse disciplines and geographies, enabling them to share their stories

MONEY INDICES December 2013

of success and meaningfully engage with an audience of over 600 people, comprising the youth, thought leaders, and members of the academic and business communities from across India. The fourth edition of the conference, centred on the theme of ‘All that Matters’, brought out the essence of life through different disciplines, voices, and perspectives. The conference, spread over three days between October 25 and October 27, witnessed the participation of more than 60 speakers from diverse fields who delivered their thought-provoking

INK CONFERENCE

talks across nine sessions, each uniquely named to symbolise the polarity of life. Commenting on the conference that was held for the first time in the city of Kochi, Lakshmi Pratury, Founder, Host, and Curator of INK, said,“Our conference is a celebration of heterogeneity. We believe that the state of Kerala and the city of Kochi in particular represent this diversity through the history, enterprise, and culture of its people. We believe that our conference would find an audience that is amenable to adapt to the tide of change that our array of speakers would bring about.” The conference was co-hosted by Nikesh Arora, Senior VP and Chief Business Officer, Google; Asha Jadeja, Founder, DOT EDU Ventures; John Werner, Project Innovator, MIT Media; Steffi Czerny, Cofounder and Managing Director, DLD Media; and Stefan Sagmeister, Grammy Award Winner for Designing. Some of the renowned people in the roster of speakers at the conference were Amar Hanspal, Senior VP, Autodesk; Rajeswari Kannan, Head, Media Technologies Lab, Nokia Research Center; Scott Cook, a financial software maven; Tod Machover, a musical innovator; Usha Uthup, a renowned singer; David Gallo, a deep ocean explorer; Varun Agarwal, Author of the bestseller “How I Braved Anu Aunty and Co-founded A Million Dollar Company”; and Roger Fisk, a PR Guru who devised the campaign for US President Barack Obama in the year 2007, among others. The speakers also included 28 members from the INK Fellows Programme in partnership with

Our conference is a celebration of heterogeneity. We believe that the state of Kerala and the city of Kochi in particular represent this diversity through the history, enterprise, and culture of its people. We believe that our conference would find an audience that is amenable to adapt to the tide of change that our array of speakers would bring about

Oberoi of Boheco, Girish Ramdas of Magzter, and Anu Sridharan of Nextdrop. “These speakers are icons for the current generation of Indians and their stories will inspire awe and leave an indelible impression on our audience. They are the agents of change who have gone against the tide, pursued their passion with creative thinking and overcome the inhibition of taking the proverbial ‘leap of faith’ – something which would be reinforced during the course of the INK Conference in association with TED,” added Lakshmi. The conference witnessed a high adrenalin performance by the Thiruvananthapuram-based voice and percussion ensemble ‘Asima’.

INK LIVE 2013

Google, such as ‘CNN Hero of the Year 2012’ Pushpa Basnet; inventors Luke Iseman and Ronak Samantray; meditation neurotechnologist Rohan Dixit; film makers Anand Gandhi and Shruti Ganguly; entrepreneurs Sanvar

INK LIVE 2013, an engagementoriented event, took place at BTH Sarovaram. Conceived specially for college-going youth and young working professionals, the threeday event witnessed a confluence of renowned artists, entrepreneurs, technologists, designers, and scientists engaging with the audience through lively discussions. In addition to providing the live telecast of the conference, INK Live saw the audience participate in all-day multi-disciplinary workshops. The eminent personalities whom the audience got to interact with were Joichi Ito, Director-MIT Media Lab; Ramesh Raskar, Associate Professor, MIT Media Lab; Kamran Elahian, a venture capitalist; Sunil Thankamushy, Creative Director, Virtual Worlds; and Vasundhara Das, a singer and actress. Co-hosted by Kenneth Sebastain, a renowned Bengaluru-based stand-up comedian, entrepreneur, musician, film maker and artist, the event also featured a great line-up of challenging, fun contests.

December 2013 MONEY INDICES

NBFC

Lending: Fullerton in full rural mode

With a diversified loan book comprising loans for SMEs, housing, two-wheelers, commercial vehicles, general equipment, and rural financial services, Fullerton India, a non-banking financial company fully-owned by Singapore-based $155 billion-worth investment firm Temasek Holdings, has quick fix solutions for reduction of unsecured loans, borrowersâ&#x20AC;&#x2122; increasing income requirements, and analysis of credit profiles of borrowers. Today, Fullerton India is charting out new strategies for achieving sustainable growth momentum after escaping tumultuous weather during the 2010 period, when it suffered huge losses due to a sharp rise in nonperforming loans MI bureau

MONEY INDICES December 2013

Shantanu Mitra ceo, Fullerton india

FULLERTON INDIA

t is a tough job for new financial services Rebooting Strategies companies, especially NBFCs, to crack the Indian When Fullerton India began its game in 2007, over 90 per market. Mumbai-based Fullerton India, which cent of its loan book comprised unsecured personal loans, marked its commercial debut in January 2007, averaging less than `25,000, lent mainly to those from has undergone a systematic transformation the lower strata of society. The company claims to have with tweaked strategies and synergies to cope changed that (misfit) strategy completely. Besides indisup with the growing challenges that once pulled creet lending, Fullerton India went on to add too many down their business prospects due to unsecured branches on a quick run, which was another mistake. (non-performing) loans, which were eventually Every business would require a little bit of tweaking written off. Interestingly, Fullerton India’s loan here and there, admits Mitra. “Between 2007 and 2009, book has now shifted from largely unsecured to secured we opened around 800 branches, giving away a lot of loans (40 per cent). The company aims to be 55 per cent unsecured loans to individuals. However, as we centralised secure by this fiscal-end, and if achieved, it would mean a delivery in terms of systems, processes, and capabilities great transition. in the later years, we closed over 400 branches in 2010-11 Fullerton India humbly started off with the group and rectified our business model. Similarly, as the monthly portfolio mainly catering to the personal loan and rural income requirements of customers rose from `5,000segment and has now moved on to lending loans for 7,000 in 2009 to `15,000 as of today, we have significantly commercial vehicles and home and merchandising through increased the amount of over 360 branches across the personal loans.” Now personal country. Today, the company is loans dispersed by Fullerton primarily exploring India’s cashIndia average `1,80,000. rich rural pockets. Fullerton India’s net profit Fullerton India presently offers a “Like all businesses, we also rose to `151.67 crore in 2012had our share of ups and downs. bouquet of services including financing 13 from `49.79 crore a year However, our business journey of small and medium enterprises for ago. The company’s loan book has been remarkable in India,” climbed 22 per cent from a year Shantanu Mitra, Chief Executive working capital and growth, loans for ago to `4,823 crore, up from ` Officer, Fullerton India, tells commercial vehicles and two-wheelers, 3,040 in the 2010 fiscal year. Bad Money Indices. “Today, we loans have dropped to 2.10 per home improvement loans, loans against employ around 5,500 people and cent of total loans from a peak have become a strong company property, personal loans, working of 11.25 per cent in the 2010 catering to the Indian market fiscal year, when Fullerton India capital loans for urban self-employed through 368 branches spread suffered a net loss of `717.09 across 400 towns and cities and loans for rural livelihood crore, largely because bad loans and over 15,000 villages and advancement, rural housing finance, had to be written off. providing financial solutions to “Yes, we were tested against over a million customers at their and financing of various rural micro the liquidity crisis in 2010 and doorstep.” enterprises among others we successfully came out of it,” Fullerton India presently adds Mitra. “At present, we have offers a bouquet of services diversified our investor portfolio including financing of small and we have 15 institutional and medium enterprises for investors against 12 earlier. Our reliance on commercial working capital and growth, loans for commercial vehicles paper is just about 20 per cent and that is in the one-year and two-wheelers, home improvement loans, loans against category. Our residual tenure has moved from 11 months to property, personal loans, working capital loans for urban 22 months. We look at recession loss multiplier. All these self-employed and loans for rural livelihood advancement, changes have taken place in the last three years.” rural housing finance, and financing of various rural micro Unlike in the 2009-10 period, Indian NBFCs are enterprises, among others. presently witnessing exponential growth, feels Saday Fullerton India plans to invest further in network Sinha, vice-president (equity research), Kotak Securities. expansion, mainly in underserved and under-banked rural “Fullerton India is doing its maths rightly. They have learnt geographies across India. The company intends to add from their falls by getting credit appraisal and underwriting about 30 new branches this year. “I see huge gold mine skills right. There is a rising demand for products offered by deposits in India’s rural belts. We aim to further navigate companies like Fullerton, especially in rural areas. However, through the unexplored routes for business success. Yes, they have to understand who their customers are primarily. you will see some action in that front in the months to While the urban areas need credit appraisals before come.”

December 2013 MONEY INDICES

NBFC

lending, they must know their customers in the rural areas through doorstep delivery and servicing. Rural India is also awakened much like urban India and it is difficult for any company to falsify this trend. Good business will always reap good profit.”

Identifying New Growth Pockets

value ratio) is 65 per cent and debt burden is capped at 70 per cent,” informs Mitra. Meanwhile, Fullerton India exited the gold and used car loans businesses. “The investment required in running gold business in terms of operational infrastructure, inner dynamics, and norms that the RBI came out with do not make sense. It made us uncompetitive against banks. There is no organised market in used cars. It is a matter of scale. We could not find competitive advantage because there was not much cross-selling opportunity,” justifies Mitra. According to a report published by CRISIL, titled ‘Retail NBFCs – The Shine is Back, But Will it Last’, “The core strengths of NBFCs lie in their sizeable presence in Tier II and III cities, given the NBFCs’ good understanding of regional dynamics, which enables them to build strong customer relationships. This, coupled with product innovation and superior product delivery, has enabled NBFCs to maintain and enhance their competitive positioning, despite stiff competition from banks.”

Fullerton India has identified the MSME (micro, small, and medium enterprises) space as its big business booster and is looking at collaterised lending in both rural and urban areas to fuel growth. Started off in 2011, the MSME lending business comes to around `220 crore (5.5 per cent of the company’s loan book). However, the target is to hike it to 12 per cent by 2015 fiscal-end. “We have to find out new growth pockets,” states Mitra. “The MSME market space is huge, which is relatively underserved. It comprises half of the economy. The Indian government is also keen on uplifting this sector. We would help this sector grow.” Furthermore, Fullerton India’s rural business accounts for 12 per cent of loans, mainly through the group lending Being Predictive Than Reactive model, across 139 branches in the Indian hinterland. Almost all non-banking financial companies had suffered “There are no hard rule physics in it. We have huge losses in the 2009-10 period, forcing them to consciously devised a lending model to a segment which restructure their businesses and reduce unsecured lending. is being ignored by microfinance companies. They (our In 2009, Fullerton India’s loan sourcing, collection, customers) would have an income of `1 lakh. They are underwriting, and management operations were entirely reliable. They have been with us for years. There is trust contained in the branch, making the manager of every between both of us. This is the segment whose income is branch “a CEO”, says Mitra, adding that this localisation gradually increasing and we are keen on lending,” explains of operations and the consequent lack of skills, when the Mitra. going got tough, led to a compromise on credit standards. The average ticket size for these group loans is small Fullerton India presently employs a team of 20 at `18,000, but Fullerton statisticians who study India is hoping that many market conditions and of these borrowers can be figure out interest rates sold other products like and their vulnerability in commercial vehicle and various customer segments. two-wheeler loans, or The company is looking to insurance through ICICI be more predictive rather Prudential Life Insurance, or ICICI Lombard General than being just reactive Insurance. to business shortfall. Last Fullerton India also fiscal, Temasek infused `150 has specific targets in the crore into the company, salaried segment. “Although taking the total investment we are not competing to `1,858 crore, but with with top banks, we have a capital adequacy ratio at significant presence in the 24.7 per cent. salaried segment. You must “Temasek will probably Temasek will probably remain invested in us note that in the salaried remain invested in us right segment, easy retail credit now, since we’ve been right now, since we’ve been through the pain access is there. Besides, through the pain and proved and proved ourselves. And now we’ll need at self-employed people do ourselves. And now we’ll not get personal loans. That least two or three years of strong numbers need at least two or three is an opportunity for us. years of strong numbers for for the investment to pay off. However, the There is inefficiency in the the investment to pay off. endgame is definitely to be quoted and listed market that we are taking However, the endgame is advantage of. Our portfolio definitely to be quoted and underwriting LTV (loan-tolisted,” adds Mitra.

MONEY INDICES December 2013

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BSE-SME

is here to strengthen you Ajay Thakur, the Chief Executive Officer of BSESME (Small and Medium Enterprises), is one of the captains at Indiaâ&#x20AC;&#x2122;s largest and biggest stock exchange, Bombay Stock Exchange (BSE). For the last 17 years, he has been in the BSE to create major milestones. He joined BSE Ltd as Head, Arbitration and Business Development. He has developed the derivatives segment of BSE Ltd and was also actively involved in the opening of regional centres across the country. He has more than 19 years of experience in the capital market BY PUSHPA M

MONEY INDICES December 2013

AJAY ThAKUR

business, from expansion to acquisition. Equity financing will ith an aim to provide a help lower the debt burden, leading to lower financing cost world class platform to and healthier balance sheet. It will help expand the investor’s the SMEs and investors, base, which, in turn, will help in getting secondary equity enabling them to come financing, including private placement.” Another main point together and raise the is that, the SME exchange will enhance company’s visibility. equity capital, BSE “Media coverage can provide SME with greater profile and launched the BSE-SME credibility which will lead to increase in the value of its platform on March 13, shares. By providing an exit option, they will get incentives 2012. Today, BSE Ltd is for greater venture capital participation. This will help reduce the market leader in this their lock-in period. Greater incentive for the employees is segment with 90 per cent market share. another point, and they can participate in the ownership “Initially, people couldn’t conceive the idea of SME of the company and benefit from being its shareholders. It exchange. So the pace was very slow. For the first few encourages innovation and entrepreneurial spirit. The capital months, only two companies listed. But within a year, the market will help distribute risk more efficiently…by transfer number of listed companies increased from two to 38. At of risk to those who present, there are are able to bear it.” 50 companies listed According to Ajay in this platform. Thakur, banking and Today, people are the capital market eager to know about are two pillars of it, and the response the financial system towards the SME on which the SME IPO platform is sector will grow remarkable. Even better. “Initiating larger companies a dedicated stock are coming forward exchange for to get listed,” says SMEs will lead to Ajay Thakur. As on mobilisation of the October 4, 2013, the diversified resources total fund raised by of finance and build these companies is a bridge between the `379.77 crore. Total SMEs, Private Equity, market capitalisation and Venture Capital is `2415.8 crore. The by providing an exit number of market route,” he adds. -makers registered The Securities with BSE-SME is 66. The Micro, Small, and Medium Enterprises (MSME) sector forms and Exchange Board The Micro, the largest generator of employment in the Indian economy. It of India (SEBI) Small, and Medium has given some provides employment to about 6 crore people through 2.6 crore Enterprises (MSME) guidelines regarding sector is the largest enterprises. A major portion of the industrial activity is being this SME exchange. generator of The CEO of BSEcreated by this sector. The MSMEs contribute 8 per cent of the employment in the SME exchange Indian economy. It country’s GDP, 45 per cent of the manufactured output, and 40 explained them provides employment per cent of our exports as follows. “Issuer to about six crore with post issue face people through 2.6 value capital up to crore enterprises. `10 crore shall be covered under the SME platform. Issuer A major portion of the industrial activity is being created with post issue face value capital between `10 crore and by this sector. The MSMEs contribute 8 per cent of the `25 crore may get listed at the SME platform and issue country’s GDP, 45 per cent of the manufactured output, and with post issue face value capital above `25 crore has to 40 per cent of our exports. necessarily get listed at main board of the exchanges. Benefits of SME Exchange There are suitable provisions for migration to the “The benefits are numerous,” says Thakur. “It provides the main board and to migrate from the main board. The SMEs with equity financing opportunities to grow their minimum application amount as well as minimum trading

December 2013 MONEY INDICES

BSE-SME

the sme exchange provides the SMEs with equity financing opportunities to grow their business, from expansion to acquisition. Equity Financing will help lower the debt burden, leading to lower financing cost and healthier balance sheet. It will help expand the investor’s base, which, in turn, will help in getting secondary equity financing, including private placement

lot shall not be less than `1,00,000. All existing trading members would be eligible to participate in the SME exchange without any further registration. Hundred per cent underwritten issues and merchant banker/s shall underwrite 15 per cent in their own account. The merchant banker to the issue will undertake market-making through a stock broker who is registered as market-maker with the SME Exchange. The merchant banker shall be responsible for market-making for a minimum period of three years.” There are some guidelines to be followed by market-makers too. “They shall be required to provide two-way quote for 75 per cent of time in a day, to be monitored by the stock exchange. The minimum depth of the quote shall be `1 lakh. The execution of orders at the quoted price and quantity are to be guaranteed by the market-makers. Not more than five market-makers are permitted for scrip. They can compete with other market-makers. Market-makers are allowed to deregister by giving one month notice to

MONEY INDICES December 2013

the exchange. The exchange shall prescribe the minimum spread between bid and ask price. During the compulsory market-making period, the promoter holding shall not be eligible for the offering to market-makers. Trading system may be order-driven. “Only the members of the stock exchanges recognised by the SEBI can act as a market-maker. The members desirous of becoming market-maker have to get themselves registered as market-maker with the BSE SME exchange by filing the registration form. These members should have a minimum experience of three years, minimum net worth of `1 crore. The market-maker shall have additional net worth of `1 crore for additional scrip,” he says. “As per ICDR Regulations, the company with the Initial Public Offering (IPO) has to offer a minimum of 25 per cent to the investors and some exemptions have been given for the finance companies. There is only restriction on the limit of the post issue paid up capital and it is `25 crore.

AJAY ThAKUR

There is no limit on the size of the IPO. It will depend on the premium of the share and how much dilution is proposed,” he says, giving details about the Minimum Public Offer.

Eligibility criteria There are some specific parameters to be fulfilled by an SME to get listed. “The first criterion describes about the Net Tangible assets of an SME. It should be at least `1 crore as per the latest audited financial results. The net worth (excluding revaluation reserves) of SME should be at least `1 crore as per the latest audited financial results. The track record of distributable profits in terms of Section 205 of the Companies Act, 1956 for at least two years out of immediately preceding three financial years and each financial year has to be a period of at least 12 months. Extraordinary income will not be considered for the purpose of calculating distributable profits. Otherwise, the net worth shall be at least `3 crore.” There are some other requirements too. “The postissue paid up capital of the company shall be at least `1 crore. The company shall mandatorily facilitate trading in demat securities and enter into an agreement with both the depositories. The companies shall mandatorily have a website. Certificate from the Applicant Company or promoting companies should state the following - The Company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR) (there are cases where a company out of BIFR is allowed).There is no winding up petition against the company that has been accepted by a court,” explains Ajay Thakur. “The trading time of this platform is from 9:00 am to 3:30 noon,” says Ajay Thakur, describing the trading system of the SME Exchange. “The BSE is leveraging the existing equity platform for the BSE SME. The BSE SME segment will be part of the BSE BOLT System. The SME Exchange will be included as a group in the BSE’s BOLT system such as M and MT Groups. The systems necessary for monitoring the marketmaking and providing the quotes are made ready K Him C er ach hattis ela 1% to comply with SEBI ga al rh P 1% r Odi Regulations.” sha adesh 3 % 2% Madh As of now, BSE is fully ya Pa desh equipped to launch the 3% Rajastha n 4% BSE SME platform.This trading system is different West Bengal 5% from the main board. Mainly, the compliance na 5% % Harya i 5 5% norms are much simplified. elh a D Half yearly compliance is ew tak N a required instead of quarterly rn compliance. The abridged Ka version of the annual reports need to be sent to the investors, instead of the entire annual report,

and posting the soft copy of the report on the website is sufficient. The issue expenses will be minimal on the marketing and stationery. However, the issue will be charged for underwriting, sub-underwriting, and responsibility of three years’ market-making. Market-making is compulsory for three years, unlike on the main platform. Listing fees on the BSE SME platform are minimal as compared to the main board. SMEs with paid up capital between `10 crore and `25 crore have the option to get listed either on the main board or on the SME Exchange.

Promotion This is the second time Ajay Thakur is visiting Kerala to educate on the SME Exchange. According to him, the response is positive. “Today, more entrepreneurs are reacting to this information.” The lack of awareness about the SME platform is an issue in India. So, BSE Ltd has taken some necessary steps to create awareness among SMEs. “Most of the people don’t know what the stock market is and how the capital market is useful for SMEs. Some sort of fear is also there in the minds of promoters. They fear other people may take over their companies and they doubt they have to pay 25 per cent of their income if they have got listed. So, we decided to create awareness among them. I have already visited around 200 places and met around 300 entrepreneurs during the last two years. We are keeping on knocking the doors of entrepreneurs. We make them realise that we could make them stronger.” The BSE-SME segment has already set a goal about the number of companies that will get listed by the end of the financial year. “This year, we are expecting to touch 100. My aim is to have at least one or two companies from each city. Then it will become a role model for other companies.” talk about investments in the stock exchange, and Ajay Takur doesn’t believe that it is a place to worry about. “Most of the investors don’t come to logical conclusion when they invest. After investing at wrong time, and having lost their money, they put the blame on us.” So, here is a valuable advice for investors from one of the top officials of the biggest and largest stock exchange of India. “When you invest in the stock market, apply your logics, do necessary research, and take a prudent decision. Try to understand the company. Always invest in the good companies and in the market leaders.”

84% SMEs are concentrated in just 10 states

h 8% rades

ra P Andh

sh 6 %

nja b

ade

rat 1

Guja

r Pr

10%

Utta

Tamil Nadu

Mahar ashtra 21

% s2

h Ot

Source: MSME Ministry data

December 2013 MONEY INDICES

DUBAI INTERNATIONAL MOTOR ShOw

t s r i F Arabian Hyper car

Lykan HyperSport 2014 Following a teaser campaign in 2012 and unveiling of the first Lykan HyperSport model at the Qatar International Motor show in January 2013, prominent automotive company W Motors S.A.L has finally launched the “Lykan HyperSport 2014”, the first Arabian hypercar in the world

he company represented the Arab world as the first Arabian manufacturer of Hypercars and officially marked the world debut of the “Lykan HyperSport 2014” (preproduction running car), an exterior prototype of the “Lykan HyperSport” (special W Motors blue color), and the world premiere of the design of the 2015 SuperSport model at the Dubai International Motor Show. The Lykan is expected to be ready for delivery by the first quarter of 2014. It was introduced at the show in the presence of Middle East Motorsport Petrol-head, GT Champion Prince Abdulaziz Turki Al Faisal. A vehicletesting took place after the event in the UAE along with the world-renowned official professional drivers from Ruf Automobile Germany. The Lykan HyperSport will soon make its official Hollywood debut as it features in one of the most famous and eagerly anticipated Hollywood franchises, which will be filmed in the UAE. W Motors S.A.L has also partnered

MONEY INDICES December 2013

unveiled

with several international names for the development of the Lykan HyperSport, such as Magna Steyr, Studio Torino, Ruf Automobile, University of Tokyo, and ID4Motion in the technical field, and Cyrus Watches and Quintessentially Lifestyle in the luxury segment. The Lykan Hyper Sport comes with a plethora of unique features:a Flat 6, Twin-Turbo Mid-Rear engine, engineered with the perfect balance between power, torque, and speed, offering 770HP and 1000NM of torque along a 6 speed Sequential or 7 Speed Dual Clutch transmission, 0 to 100 KM/H in less than 2.8 seconds with a maximum speed of 395 KM/H. It also features one of a kind holographic display with interactive motion and tactile interaction, an advanced ID4Motion dashboard, and a uniquely developed reverse mechanical doors system. Adding a touch of modern luxury, the Lykan comes with diamonds and sapphires encrusted LED lights, a 24h/24h Global Elite concierge service provided by Quintessentially Lifestyle, and a unique patented design Cyrus Klepcys watch dedicated to Lykan owners only. At a price tag estimated in the $3 million range, the Lykan could possibly turn out to be the world’s most expensive production car as well.

DUBAI INTERNATIONAL MOTOR ShOw

Audi Sports Models revealed Audi seems to be in good spirits as it bravely forecasts crossing the 10,000 vehicles per annum threshold in the Middle East for the first time in 2013

hile this year’s strategy focussed on increasing capacity and quality across the region, the German premium car manufacturer continued its product offensive with a dynamic range of new models and technology at the 2013 Dubai International Motor Show from November 5 to 9. The new Audi S3 Sedan, RS 6 Avant, and RS 7, which were revealed at the official press conference, showcase the company’s capability to transfer technology between motorsport and series production. “Motorsport is an integral part of the Audi DNA - it is not an end in itself for our company. All three of our new

models are prime examples. They are extremely sporty, but with engine downsizing and significantly less weight, we are able to achieve lower consumption and CO2 emissions at the same time,” said Trevor Hill, Managing Director of Audi Middle East. With the unveiling of the top-ofthe-line version of the Audi A3 Sedan - the 280 hp S3 Sedan, Audi enters the world’s largest market segment – the class of compact sedans. The third model in the successful A3 model line impresses with ultra-lightweight excellence, strong and very efficient drivetrains, and a great many high-end infotainment and driver assistance systems. Audi brings the A3 Sedan to the Middle East with a 1.4 TFSI and 1.8 TFSI engine featuring power outputs of 122 hp and 180 hp respectively. The Audi S3 Sedan with its 2.0 TFSI engine produces 280 hp and 380 Nm of torque. The sprint from 0 to 100 km/h takes just 5.0 seconds. The Audi A3 Sedan will be available in dealerships across the Middle East from early 2014 and the S3 Sedan in the first half of 2014. The base price will be AED 92,000 ($25,044) for the A3 Sedan; AED 147,500 ($40,132) for the S3 sedan. The new Audi RS 6 Avant unites 560 hp of power and 700 Nm of torque with unrestricted practicality for

everyday use and leisure. The high-performance Avant follows the Audi RS 4 Avant as the second estate model in Audi’s Middle East portfolio. Deliveries to customers in the region will commence with a base price starting from AED 450,000 ($122,506). The new Audi RS 6 Avant is self-assured and powerful. From a displacement of 3,993 cc, the directinjection twin-turbo V8 delivers 560 hp and a constant 700 Nm of torque between 1,750 and 5,500 rpm. Two twin-scroll turbochargers ensure that considerable torque is generated quickly. This large Avant accelerates from 0 to 100 km/h in just 3.9 seconds. The new Audi RS 7 combines the power of a sports car with the elegance of a large, five-door coupé. Having made its first Middle East appearance at the 2013 Dubai International Motor Show, Audi’s latest RS model is set to arrive in regional dealerships in early 2014, starting from AED 475,000 ($129,294). The heart of the RS 7 is the 4.0 TFSI engine. The twin-turbo V8 produces 560 hp between 5,700 and 6,600 rpm, with a constant 700 Nm of torque available from 1,750 to 5,500 rpm. The sprint from 0 to 100 km/h takes just 3.9 seconds. The new models are a prestigious addition to the Audi stable and are expected to propel the German car manufacturer to a new dimension of achievement.

December 2013 MONEY INDICES

WhAT MONEY TAUGhT ME

Rajesh Vardhan

Managing Director, Vardhman Group

Attending to the common man’s needs I joined my family real estate business early in my career while still completing graduation and law. Having grown up in a conservative Jain family, I know the values of family and the importance of having and providing a home or abode to the people. This thought of being a home facilitator encouraged me to join the business. Money is very closely associated with real estate development. I experienced two major depressions or slack periods in this sector (in 1995 and 2008). They embedded the importance of money, and I got to see how the flow of money changed the fates of many companies. Understanding the importance of money, we adopted a policy of not to be leveraged. This policy has helped us weather tough times and helped us grow systematically. As we grew, I took an active role expanding to sectors such as infrastructure, entertainment and hospitality, and retail food chain. I developed Western India’s first jewellery hub at Zaveri Bazar, Mumbai, by upgrading the iconic cotton exchange building into a palatial jewellery paradise known as “Jewel World”. After that, I got a beautiful opportunity to develop the world’s most affordable amusement theme adventure park in Mumbai. The park is affordable to the people. Today, as the Managing Director of Vardhman Group, which has more than three million sqft of work across Mumbai, I stand satisfied looking at my creation, with the urge to grow and develop landmark projects.

MONEY INDICES December 2013

aGE 47 profile He has been awarded the Indira Gandhi Priyadarshini Award in 1997 and the Rajiv Gandhi Shiromani Award in 2009 in Real Estate for “Outstanding Individual Achievement and Distinguished Services to the Nation”. He is the Chief Patron Member of the Jain Trade International Organisation (JITO). He has successfully envisioned and executed the world’s first marathon to promote non-violence for JITO. He likes reading, playing indoor sports, and travelling. In his efforts to give back to society, he has undertaken the process of starting a school in Mira Bhayander