Money Indices June 2014

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VOL 2 ISSUE 6

IT’S ALL ABOUT BUSINESS

KERENG/2013/52857

The Biocon Outlook A look at Biocon & Indian pharma’s evolution 36 P

JUNE 2014

`50, AED 7, $5

CONTENTS

India is fast losing its position of an ‘innovation partner’ and ‘pharmacy to the world’ due to lack of an enabling environment in the country, says Biocon CMD Kiran Mazumdar-Shaw.

Alongside the perspectives of the biotech leader, we take a look at Indian pharma’s credentials as ‘pharmacy to the world’

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India and South Korea have upgraded their relationship to a strategic partnership over the years, thanks to high-level visits and people to people contacts

Biocon Outlook & 36 Indian pharma

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‘Kerala aims for two-digit growth’ Nigeria Bleeds as Kerala is not faced with any kind Boko Haram Strikes

of financial crisis, asserts State Finance Minister K M Mani in an exclusive interview

Courting Korea

Heat over FDI in retail

Terror outfit Boko Haram is targeting schoolchildren to give a strong warning to the fairer sex pursuing education in Nigeria

India’s retail market is witnessing an unprecedented growth spurt with its overall value likely to arrive at `47 lakh crore by 2016-17

Regulars & Insights 10 ECONOMY WATCH 16 personality 18 PHOTOSPEAK

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MONEY INDICES June 2014

20 voices 21 finmin issues 44 startup

76 PERSPECTIVE 79 corporate insider 98 What money taught me

MANAGEMENT SPECIAL STORY/SAND IMPORT 58 Cambodian sand strikes gold?

Cambodian sand is being imported by some Indians today, in the face of paucity of river sand for construction activities

‘Learning should be fun’

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IIMT Founder Director Dr Prafulla Agnihotri gives an insight into IIM-Tiruchirappalli’s philosophy of learning and its activities in an interview

SOCIAL ENTREPRENEUR 47 Soulful sole-making

Paaduks is a social enterprise working for the upliftment of cobblers and their families through a novel way of shoemaking

Industry focus 72 On the factory floor

With this edition, we start a new series on factory visits.

Our first column is about our experiences at the world-class Netaji Apparel Park in Tirupur

ecopreneur 54

Painting the industry green

Providing superior quality products without any trade-off on environmental conservation seems to be the success mantra of RAK Paints

AGRIBUSINESS/JALBINDU AGRITEcH 90 Innovating the ‘E’ in Agriculture

If you know how to use information, communication, and technology in agriculture, you are in for good dividends

COLUMN 70

Rupee volatility & Hedging

Suresh Nair, Director of ADMISI Forex India Pvt Ltd, cites two scenarios where companies can mitigate their foreign exchange risks

meet the entrepreneur 55

Of human values and robotic vision

Meet Rajeev Karwal, who had been instrumental in shaping up the fortunes of some major firms and bringing out novelty in his own business regime

Product launch 52

IPL sponsor targets Kerala’s sanitaryware market Prayag Polymers is scripting a brand new innings in the sanitaryware market with 3,000 dealers across Kerala

social reconstruction

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The positive face of prisons Today, Kerala’s prisons are agog when it comes to transforming the lives of its convicts through some progressive means of atonement

State focus On a fast growth track

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The advantages of a robust investment climate and augmentation of the growth capacities of the industry come through in Karnataka’s model

Woman entrepreneur Championing the organic cause

Ritu mathur cares for the general well-being of people by providing them with healthy organic ready-toeat foods. She left her IT job nursing her lifelong passion for nature

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retail review

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Walmart walled in?

Sam Walton’s principles have worked well for Walmart. But the retail giant has had to contend with a few other issues of serious concern

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Volume 2 Issue 6 | June 2014 Founder & editor Ravi Deecee

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MI INB

X ‘Fruitful extraction’

The story on Arjuna Natural Extracts was informative.

The point is loud and clear that Kerala is a state that does know how to utilise the gift of natural resources and it has innovational companies that know how to make best use of these resources for development of health products. Examples like Neera and Ayurveda only serve to strengthen my point.

Augnus Christy, Mumbai

Doubt over banking licence

The RBI’s in principle nod for new banking licences proved to be a surprise package. While IDFC and Bandhan made the cut, a few major players missed out. The article “IDFC and Bandhan make the grade” helped me understand the reasons for grant of licence. But I don’t understand why firms like Reliance and L&T weren’t considered at all?

Sathish Menon, Bengaluru

‘Aviation sector needs attention’

Only a critical revamp of India’s aviation sector will enable it to fly high with its foreign peers. The cover story has thrown light on some of the serious issues plaguing Indian aviation. As a frequent flyer to foreign countries, especially Gulf countries, I’ve always wondered why the Indian government has not been able to reposition Air India as an air carrier that its countrymen can boast of.

I hope the new government would put both the aviation sector and its official carrier back on track.

Abdullah Majeed, Bahrain

‘True blood’

The article “Blood, sweat, and blood bags” introduced me to the brain behind Terumo Penpol. Only the rarest of rare have the courage to give up something as valuable as a career in the civil services and venture into unexplored waters. Balagopal has undoubtedly blazed a trail in entrepreneurship.

Christopher Charles, Chennai

‘Congress decimated’

Your political analysis, ‘Rambo Vs Rainbow: Courting the Indian bourgeois’, was an interesting piece. It was evident from the beginning of this electoral battle that the RSS had taken over Narendra Modi’s war room. Now, it’s time for the new BJP government to deliver on its promises.

The Congress has been decimated for good.

Nivedita Jayaram, New Delhi

Chameleon in Ukraine

The feature on oligarchs in Ukraine was an eye-opener.

Who knew that Ukrainian politics revolved around the ultra-rich who cared only for their assets? Rinat Akhmetov comes across a seasoned chameleon.

Martin Philip, Philadelphia

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w w w. m o n e y i n d i c e s . c o m June 2014 MONEY INDICES

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EDITORIAL

Fight for economic freedom

India needs to improve its rating on 10 kinds of economic freedom: freedom from corruption, fiscal freedom, business freedom, labour freedom, monetary freedom, trade freedom, financial freedom, investment freedom, government spending, and property rights. It isn’t going to be an easy repair job

How economically liberated are we Indians when it comes to the policy landscape? If you look at the growth curves between the liberalisation era of the 1990s and today’s recession-laden environment, a few energy sappers stand out: after the much-vaunted days of delicensing, our political leaders gradually entrenched themselves in a state of inspector raj, making it difficult for both domestic and foreign companies to break free from policy hangovers.

We as a country are not just contending with issues such as management of taxes and subsidies, inviting foreign direct investment, maintaining fiscal discipline, keeping capital expenditure in check, avoiding stimulus for continually bleeding PSUs, containing inflation rates, or making way for greater public-private partnerships. It’s got more to do with the growing importance of staying awake to the realities of globalisation and inclusive growth where both domestic and foreign players can find a level playing field.

It’s about generating enough job opportunities for the youth, maximising human resource potential, giving people greater opportunities to enhance their savings and income, creating a buffer for the homegrown industries against global economic shocks, keeping corruption out of the system, and upholding the rule of law.

So, the point being raised is here is, are we going to remain insular and unmindful of our policy environment? If India can improve its record on economic freedoms, you stand to gain a greater degree of economic liberation. As eminent economist Nirvikar Singh points out in one of our interviews in this edition, “There need not be any conflict between economic reform and liberalisation on one hand, and inclusive growth on the other.

The important thing is that the government performs its core functions well.”

India’s economic freedom score is 55.7, making its economy the 120th freest in the 178-country 2014 Index of Economic Freedom. Ranked 25th out of 41 countries in the Asia-Pacific region, India needs to improve its rating on 10 kinds of economic freedom: freedom from corruption, fiscal freedom, business freedom, labour freedom, monetary freedom, trade freedom, financial freedom, investment freedom, government spending, and property rights. It isn’t going to be an easy repair job. The body politic needs to rise above petty politics and understand the framework of our engagements in the globalised era in fresh light before setting the policy landscape in order.

Let’s just hope the Narendra Modi government ushers in a new era of growth where our rights and freedoms will be guarded every way.

In this edition, we’ll tell you about some new sunrise sectors that are trying to usher in better models of productivity by adapting to emerging trends in social entrepreneurship, green revolution, business and technology, and digital commerce. Our Cover Story focusses on the positives emerging from the domestic pharma industry, which has been mounting a spirited fight against foreign takeover of indigenous enterprises.

Enjoy reading!

Ravi Deecee Editor

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MONEY INDICES June 2014

ECONOMY WATCH UAE

UAE to invest in Athens airport

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nited Arab Emirates (UAE) Foreign Minister Sheikh Abdullah has announced the intent of the UAE to invest $9.7 billion in the redevelopment of a former airport in Athens. The airport, whose construction work is expected to begin by 2016, hopes to generate more than 40,000 jobs. The airport will include separate spaces for retail, residential, hotel, office, and leisure activities.

Sheikh Abdullah reiterated the eagerness of the UAE to boost investment as well as economic and trade relations with Greece.

Kuwait renews crude oil agreement with BPCL

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ulf news agencies have reported that Kuwait, one of the top oil producers, has signed a crude supply contract with Bharat Petroleum Corporation Limited (BPCL) worth almost $3.5 million a year.

Kuwait Petroleum Company (KPC) signed two contracts, one with BPCL, and another with its subsidiary, Bharat Oman Refineries Limited.

UAE all set to become the gold hub for the East

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rmed with the knowledge that the real demand for gold and other precious metals lay in the East, Dubai is all set to extract a sizeable market share of Europe and the US in the gold industry by constructing one of the world’s biggest refineries in the outskirts of the Dubai desert. The $60 million refinery built

by Kaloti Precious Metals in Dubai, UAE, can benefit greatly from its closeness to fast developing countries like China and India, two of the big consumers in the world. The move presents a big risk, however, as the demand could dip in the years to come, in light of the unparalleled gold import restrictions placed by India on the precious metal, in an effort to control its budget deficits.

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MONEY INDICES June 2014

UAE

Gulf countries face shrinking surplus

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hrinking fiscal surplus poses a danger to the Gulf countries. Saudi Arabia’s budget surplus, which was 8.3 per cent in the previous year, is expected to shrink to 4.9 per cent of GDP in 2014 and 3.7 per cent of GDP in 2015. The oil prices are also set to take a dip.

Oman is expected to fall into deficit and Bahrain deeper into the danger zone. The reduction in surplus calls for government restraints on spending.

MERS Coronavirus scare

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ollowing MERS coronavirus scare, butcher shops and restaurants in Saudi Arabia have registered a decline in sales. Acting Health Minister Adel Fakeih has warned citizens not to consume camel meat and milk. The decline in the prices of dishes containing camel meat could decline to as much as 60 per cent, reports suggest.

Fujairah International Airport set to expand

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bu Dhabi Airports and Fujairah Airport have signed a Memorandum of Cooperation (MoC) to develop an airport development master plan that will ensure the delivery of an efficient and adequate expansion programme for Fujairah International Airport.

The Department of Civil Aviation for Fujairah, owner and operator of Fujairah International Airport, intends to undertake an expansion programme to enhance the airport’s facilities.

Through this MoC, Fujairah Airport will benefit from the expertise of Abu Dhabi Airports in planning, managing, and supporting an airport expansion programme. This cooperation will see Abu Dhabi Airports assisting Fujairah Airport with the preparation of a list of proposed component projects that will form the expansion programme and provision of administrative assistance.

June 2014 MONEY INDICES

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ECONOMY WATCH wORLD

Economic recovery for UK on the cards

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he United Kingdom appears to be building on a strong recovery path and regaining the ground that it had lost during the global economic crisis, says a report by Focus Economics. According to a preliminary estimate released on April 29, GDP expanded 3.1% annually in Q1 2014. The print represents

the strongest expansion since Q1 2008. In February, industrial production rose 0.9% over the previous month in seasonally-adjusted terms, which marked the strongest expansion since June 2013. Moreover, consumer confidence returned to pre-crisis levels in March. In addition, house prices reached a six-year high in March.

SUMMIT debates Canadian growth

Thumbs up for Botswana upon recovery

he Bloomberg Canada Economic Summit, which took place on May 13 in Toronto, focussed on the drivers of Canadian economy, the business climate, and how current polities and politics are affecting business. Speakers from many different spheres of life addressed topics including the much talked about overdependence of Canada on natural resources and the outlook for liquefied natural gas, manufacturing autos and the tech industry, oil sands and solutions for the pipeline puzzle.

report by the International Monetary Fund (IMF) claimed that Botswana was undergoing a cyclical recovery in line with its major trading partners.

The economy grew faster than expected in 2013 at about 6 per cent, owing to the improved performance of the mining sector, the report said. It also added that the non-mineral sector slowed down from about 6 per cent in 2012 to about 5 per cent in 2013, reflecting recurring power supply disruptions and to some extent, the drought. The IMF congratulated the authorities for good macroeconomic management which ensured that for the first time in 15 years, both headline and core inflation stayed well inside the Bank of Botswana’s medium-term objective range of 3-6 per cent for a considerable period. On the external front, the current account balance turned into a surplus in 2013, supported by a rebound in diamond exports.

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wORLD

Madagascar faces fiscal spending pressures

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Zero growth for Republic of Palau in 2013

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n IMF report on the Republic of Palau noted that after two years of strong expansion, growth is estimated at around zero in fiscal year 2013, owing to declines in construction and tourism.

Inflation moderated to 2¾ per cent (annual average) in FY 2013, and it is expected to stay around 3 per cent in FY 2014. Growth is projected to increase to 1¾ per cent in FY 2014 and to 2¼–2½ per cent over the medium term driven by the recovery in tourism and infrastructure developments. The current account deficit deteriorated slightly in FY 2013 due to lower tourist arrivals and large reconstruction imports associated with typhoon Bopha, but tourism recovery and moderating food and fuel prices are expected to reduce the deficit in FY 2014–15.

n IMF report claimed that the Malagasy authorities have been able to maintain macroeconomic and financial stability during a difficult period of economic disruption over the past five years in Madagascar. However, low economic growth has interrupted the trend of improving social indicators and as a result of weak tax revenue performance and declining support from Madagascar’s development partners, the government has compressed fiscal spending and accumulated domestic arrears. In addition, budgetary subsidies for fuel and energy, more generally, have become very costly and have been crowding out the room for other priority fiscal spending with considerable cuts in public infrastructure and social spending, the report noted, adding that poverty is a critical issue for Madagascar.

Poor show by Cyprus, Slovenia

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ccording to a report published

by Focus Economics, the Euro area economy is expected to expand 1.2% in 2014, which is up 0.1 percentage points over last month’s forecast. The improvement was driven by stronger growth prospects for 10 of the 18 countries covered (Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia and Spain), while the outlook for three economies deteriorated (Estonia, Finland, and Latvia) and remained unchanged for five economies. Expecting the Euro area economy to accelerate slightly in 2015, the report forecast a 1.5% GDP expansion. The report pegged Cyprus and Slovenia as the worst performers in the EU region.

June 2014 MONEY INDICES

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ECONOMY WATCH INDIA

El Nino may hit the market harder

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eports by ASSOCHAM claim that below average monsoon rains could seriously affect the GDP as much as 1.75 per cent and pose a threat to the nation in the form of food inflation. El Nino, caused by the warming of ocean surface, is widely predicted to change wind flow patterns and cause erratic weather all over the world. The farming sector, intrinsically linked with all other sectors such as services and manufacturing, could play a major role in augmenting or lessening demand for products from other sectors. The report further underlined the need for government action in distribution of high quality seeds of alternate crops among farmers and scrapping of the Agriculture Produce Marketing Committee Act.

Air Asia all set to take off

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n a move that met with applause all around, the Directorate General of Civil Aviation has allowed Air Asia India to take off in Indian skies. Known for its ridiculously low fares, Air Asia might find it difficult to muscle in on the aircraft industry in India, given the stiff opposition from competitors. The company, which will test the waters with services solely from the Chennai airport, offers all economy seats in the aircraft, with choice seats and food costing extra bucks. Water, however, can be availed of for free. Other carriers like Indigo and SpiceJet have no option left but to cancel out the newcomer’s advantage with discount rates bordering on the preposterous, if they want to stay in the game.

Services sector displays further decline

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he services sector in India has registered a contraction in April, showing no break from its earlier trend, even as firms expressed concern over hiring more employees at a time when the sector displayed protracted growth patterns.

Businesses are reportedly waiting for a business-friendly government at the Centre.

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MONEY INDICES June 2014

INDIA

Hotel owners bearish on growth prospects

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he hotel industry is going through a period of asset sales, with many prominent brands going in for the Hail Mary approach of selling their properties at the earliest possible date. A recent example is that of Viceroy Hotels, the owners of JW Marriot properties, which is contemplating sale of assets to get a grip on their growing debt rates.

The industry is likely to display a dimmed growth rate owing to the arrival of lower number of business travellers and tourists.

Bad news all around for the hotel owners.

RuPay to enter Indian domestic card market

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uPay is all set for a launch in India. Just like VISA or Mastercard, RuPay can be help travellers book tickets on IRCTC. Similar to the traditional credit card system, RuPay can work via ATMs, point of sales, and online sales. RuPay can be availed of at point of sales counters, rural banks, and cooperative banks across the country. The lower cost of clearance and settlement of transactions, all of which will be processed domestically, can drive usage of the cards in the industry. RuPay debit cards can also be used for online transactions via RuPay PaySecure, an e-Commerce solution of NPCI.

IPHEX woos pharma importers into India

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ndia is seeking to cement its top position in the global pharma market by organising an international summit, christened IPHEX, in Mumbai that will allow importers from across the world to visit the regulated premises of Indian pharma industry. Indian pharma industry, which had posted an exponential growth rate for the past few years, has witnessed a decline to about 2.6 per cent growth.

June 2014 MONEY INDICES

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PERSONALITY DOVI FRANCES

Minting billions with a

‘hobby’

Financier Dovi Frances is an uncanny financier, considering that he wins all the time by identifying an opportunity before it presents itself MI bureau

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inancier Dovi Frances considers his work his hobby. At the age of 35, his hobby got him a unique distinction. On March 13, 2014, Frances and his firm, SG, LLC, were recognized by the Guinness Book of World Records for selling the world’s largest publicly disclosed life insurance policy. Frances helped put together a $201 million (£121 million) policy for a well-known Silicon Valley billionaire in the tech space. It involved more than a dozen underwriters to put together the transaction.

The $201 million life insurance policy more than doubled the previous world record, a $100 million policy sold by Peter Rosengard from the UK for US media mogul David Geffen in 1990. The policy features a combined death

benefit to be paid upon the death of the single insured that more than doubles the previous record, Guinness said in a statement.

Dovi Frances is the Founder and Managing Partner of SG, LLC, a company based in Santa Barbara, California.

Founded in 2010, SG, LLC also offers asset management and investments for high net worth individuals.

Ask him why the billionaire remains anonymous, and Frances replies, “The billionaire needs to remain anonymous for two motives: privacy and trying to keep the information from his benefactors.”

Dovi Frances

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MONEY INDICES June 2014

DOVI FRANCES

The winner Born in Israel, Dovi Frances’ father was an Israeli IRS agent who inherited a small auto garage outside Tel Aviv from Frances’ grandfather. His father turned the garage into a business with 400 employees and several locations. Frances spent around four-and-half years in the Israeli army.

During that time, he was in the infantry and attended the officers’ academy. He went on to graduate from a business school, and then followed his older brother to Deutsche Bank in San Francisco in June 2008.

Despite the financial market meltdown, Frances didn’t lose his job because he excelled in selling loans. During adversities, he thought of a new idea to get clients. He sent direct letters to non-client people who resided in properties in excess of $5 million. He sent out 2,000 letters and received two responses. One of those responses was from Sergey Grishin, a Russian billionaire.

After he managed to bring Grishin on board as a client, they did some deals together. As a result, Frances left the bank to launch SG, LLC. (SG stands for Sergey Grishin.)

Loan and asset management with SG

in the US and Russia. This recently changed on account of clients’ recurring requests for SG to have this capability in house. In January of 2014, SG began transitioning towards having in-house Rich Internet Applications (RIA) capabilities. It intends to launch an RIA platform in the third quarter of 2014.

In 2011, SG was hired to assist with the financing and management of four mega estates located in three different jurisdictions. In 2012, SG’s Lending Division successfully facilitated a $27,000,000 blanket loan covering the four estates. At the same time, SG’s Operations division took overall property management efforts, which also included a significant renovation project that has taken place in one of the estates. In February 2013, SG’s Lending Division facilitated a new blanket loan of $35,000,000 covering all four estates.

Over the past four years, SG, LLC has been featured in publications such as Forbes, Wall Street Journal, Kommersant, and Globes, often described as “L’Éminence Grise” (decision maker) to the wealthy.

Business

In 2012, Frances formed SGVC as the alternative SG was founded to help wealthy people secure jumbo loans. investment arm of SG, LLC. SGVC is a venture capital firm Since 2010, they’ve facilitated $550 million in loans for focussing mostly on early stage technology companies 450 families. They have an asset management business based in Silicon Valley, Los Angeles, and Israel. Since its for wealthy families as well as a venture capital business inception, SGVC has invested in some of Silicon Valley’s called SG VC. Frances said that he had planned to continue most prominent companies. to work hard so that when he’s no longer on this earth his Frances provides his high net worth clients with survivors would also have a better life. impartial advice related to financing for residential and Ask him why a billionaire would take up life insurance commercial property and aircraft and yacht acquisitions. when he or she has so many other assets, and Frances Recently, SG had been appointed as joint central agents replies, “In California, there are state death taxes that are with Merle Wood & Associates for the sale of 50-meter exceptionally high. If your properties are leveraged, then Delta, M/Y “Arianna” (motor yacht). M/Y “Arianna” had those loans are called immediately and need to be paid off. been listed for sale at $45.9 million. Last year, Frances So if you want to head yourself against such a risk (your managed four different aircraft transactions for SG Private beneficiary) can receive the proceeds (from life insurance) Wealth Advisors’ clients. without being exposed to taxes.”

Frances emphasises that personal time has tremendous SG has so far directly invested $240 million in technology value, but from a business perspective, you can’t even put and real estate. Clients pay SG a high six figure annual fee a price on it. According to a report by Tel Aviv-based IVC for its services. This global advisory firm operates in the US, Research Center, the most active micro venture capital Russia, and Israel. The firm provides high net worth clients fund in 2013 was SG, managing $25 million in capital, with with unique solutions to their complex financial needs.

11 first investments in total.

Since 2010, SG has facilitated over Describing his winning habits, $940 million in completed transactions Frances says on his website, “I am all through its Lending, Insurance, and Frances provides his high about winning. You win by seeing the Operations divisions. opportunity before it is present. You So far, SG has orchestrated and net worth clients with sense it well in advance. For that to bounded over $243,000,000 in life impartial advice related to happen, you need to have the desire insurance policies. They work with to win. If you are eager to win, you are leading life insurance experts to financing for residential never content. You never rest. You keep provide clients with cutting-edge and commercial property running. You are constantly curious. solutions for their wealth protection That’s exactly when this elusive line and aircraft and yacht and transfer needs. According to the appears. Logical dots are suddenly website of the company, SG initially acquisitions connected, an opportunity is seized and invested over $118,000,000 in mutual a victory follows.” funds through financial institutions

June 2014 MONEY INDICES

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Photo: Anshar/Shutterstock image

PhOTOSPEAK ZuRICh

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MONEY INDICES June 2014

ZuRICh

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urich, the largest city in Switzerland, is located at the northwestern tip of Lake Zürich. The city is home to many financial institutions including banking giants. Most of Switzerland’s research and development

centres are concentrated in Zürich and the low tax rates attract overseas companies to set up their headquarters there. Monocle’s 2012 “Quality of Life Survey” ranked Zürich first on a list of top 25 cities in the world “to make a base within”.

Zurich’s Old City Center along the Limmat river.

June 2014 MONEY INDICES

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VOICES

People have voted for hope and faith and I will do everything to fulfill their aspirations. There should be no room for pessimism, because with pessimism, nothing can be achieved. The government’s motto will be to be with everyone and for everyone’s development.

This is the time for new hope and strength Narendra Modi, Prime Minister of India

Our national companies in sectors of aviation, hospitality, ports, property development and others tell the UAE’s success story to people worldwide.

They are our envoys in all countries in which we invest. These companies bear greater responsibility compared to the government when it comes to representation of our national economy and boosting confidence in UAE investments in all sectors Sheikh Hamdan bin Mohammed bin Rashid Al maktoum, PM & Vice -president, UAE

Since 1993, we have been developing a port and a special economic zone in a phased manner at Mundra. During this period, different political parties were ruling the state. These governments allotted land during different phases of development after assessing the need and complying with all procedural requirements. We have not received any concession in land allotment Gautam Adani, CMD, Adani Group

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MONEY INDICES June 2014

I don’t think Ranbaxy brand will not exist. The companies will merge under Sun Pharma. Ranbaxy as a brand has a value, we can use that. It is a credible brand in India, there is a lot of emotional attachment. And also, if we see Sun as a company, we have not changed the name of companies.

In Ranbaxy, people may need a bit more clear direction and entrepreneurial push Dilip Sanghvi, CMD, Sun Pharma

I determine the monetary policy. I say what it is.

The government can fire me, but the government doesn’t set the monetary policy. So, in that sense, I am independent!

Well, I am happy to talk to the government. I am happy to listen to the government but ultimately the interest rate that is set is set by me Raghuram Rajan, Governor, RBI

fINMIN ISSuES

Filipino growth tempo is toast of Asia

Moody’s Analytics says that the Philippines economy is likely to grow the fastest in Asia this year.

The damage from Typhoon Haiyan will likely weigh on the country’s growth in the first half of 2014 as the recovery effort is expected only in the latter part of the year MI bureau

Benigno Aquino

T

he Philippines was the fastestgrowing economy across Asia in the first quarter of 2013, with its GDP rising by 7.8% yearon-year (y-o-y), thanks to gains in manufacturing and construction.

The three-month expansion marked the highest quarterly growth rate since President Benigno Aquino assumed office in 2010 and contrasted sharply with a slowdown elsewhere in the region.

However, growth prospects dimmed in the aftermath of Typhoon Haiyan in November 2013, which killed more than 6,000 people and left millions homeless.

Despite the devastation, the Philippines is expected to grow at above 6 per cent in 2014. By most estimates, inflation is expected to stay at around 2-3 per cent, while the Philippine Central Bank (BSP) will most likely maintain its current interest rates for much of 2014. This means a steady upward trend in consumption, real estate, and domestic investments.

Three years into his widely-hailed presidency, Benigno Aquino is finally feeling the heat. Recent months have been a difficult period for the country, with a stream of corruption scandals, disasters, and (alleged) oligarchic collusion in the electricity sector capturing the political imagination of an increasingly energised middle class.

According to Ramon Casiple, one of the country’s most respected political

commentators, the President has failed to demonstrate optimal leadership on almost all major developments in recent months, due to his “condescending or evasive positions”.

Real challenge Underemployment and poverty are some of the major problems in the country. Still, there are positive signs.

According to Moody’s Analytics, the Philippines economy is likely to grow the fastest in Asia this year. In its latest report, the economic analysis unit of Moody’s said the Philippines’ GDP has the potential to grow between 5.3 and 6.5 per cent this year, lower than last year’s 7.2 per cent and the government’s target of 6.5-7.5 per cent for 2014.

Moody’s Analytics said the damage from Typhoon Haiyan will likely weigh on the country’s growth in the first half of 2014 as the recovery effort is expected only in the latter part of the year. “Similarly, our 2014 forecast for Asia is broadly unchanged, although weak first quarter data have accentuated downside risk. GDP growth for the full year will be below potential, particularly if the first quarter undershoots, but we expect growth to accelerate in the third quarter, nearing potential rates in most of the region by year’s end,” opines Glenn Levine, Moody’s Analytics economist.

Cesar V Purisima, Secretary of Finance and in-charge of the Department of Finance, observed that the 2015-2016 inflation target is consistent with the country’s current inflation dynamics and outlook for the next couple of years.

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INDuSTRY TREND RETAIL

Heat over

FDI in retail

India’s retail market, combining both organised (6%) and unorganised (94%) segments, is witnessing an unprecedented growth spurt with its overall value likely to arrive at a whopping `47 lakh crore by 2016-17 from `23 lakh crore in 2011-12. However, much of the next wave of growth will depend on the politics over permitting foreign direct investment (FDI) in multi-brand retail trading (MBRT). The recent call by the Bharatiya Janata Party (BJP) to disallow FDI in multi-brand retail has made India’s retail investment climate somewhat cloudy as major expansion plans by global majors including Wal-Mart, Carrefour, and Tesco will remain on paper if it shows no flexibility in stance. The logic put forth by the party that multi-brand retail trade by global players will lead to displacement of mass retail jobs is said to be based on a clear intent to win over a section of the electorate that includes about six million small retailers. For the time being, the party is seemingly forswearing the benefits of FDI in MBRT, which would have helped the country curb food inflation, contain price rise, remove inefficiencies, create logistics and related infra facilities, implement proper supply chain management system, check unfair trade practices, encourage competition, prevent labour exploitation, and empower the farming community to some extent

T

By Vishnu Rageev R

oday, Indian retail is standing at a critical intersection where the cumulative potential of all growth multipliers rests on judicious decision-making, and what makes this political process of judgment difficult to surmount is a raging debate over inclusion or exclusion of foreign players as the centrepiece of the retail economy. For, the opening up of the retail economy could jeopardise the livelihood and existence of small indigenous traders. Even as this question of subsistence continues to pit the swadeshi against the trappings of globalisation, the government has moved ahead with a well-measured liberal approach towards augmenting trade in line with the growth potentialities by

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inclusion of foreign players in the centrepiece of its retail policy.

At present, India permits 100 per cent foreign direct investment (FDI) in cash-and-carry wholesale stores, 51 per cent FDI in single-brand retailing for foreign retail chains operating on its soil, and 51 per cent FDI in multi-brand retail trading (MBRT). But for interest in expanding their presence through cash-and-carry wholesale stores and single-brand retailing, foreign retail giants are yet to come forward with well-thought-out proposals for MBRT. Why so? The MBRT policy comes with certain riders that are difficult to comply with. A foreign investor should have a minimum investment of $100 million, 50 per cent investment in backend infrastructure, and procure 30 per cent of products sourced from small industries. Further, a restriction on location of outlets exists, with only cities

RETAIL

with a population of one million or more allowed to have FDI-infused multi-brand retail formats. Finally, it requires prior approval from respective states. Other than the bottlenecks that may or may not be worked out in their favour, foreign retail giants are cautious of the emerging political environment, with the Bharatiya Janata Party (BJP) openly advocating protection of small traders and farmers from unfair competition. Foreign retail giants fear a drastic overhaul in policies with the BJP at the Centre.

“It is not good for any government to revoke a policy which has been put into practice after a huge thought process,

deliberations, and consultations by the previous government,” feels Amitabh Kant, Secretary, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry. “Changing an already implemented policy framework simply for the heck of changing is not a welcome move.

Governments are not permanent but certain policies must exist regardless of which government breathes life into it. Approval of FDI in MBRT was not made hastily. It has to be looked from a broader sense as the policy would enable India to open its window to global investors and retailers alike. We need to improve our infra facilities, we need to support our youth with new job

As many as 12 states, mostly Congressled, had agreed to allow global retailers to open super market chains.

The other states include Maharashtra, Karnataka, and Andhra Pradesh

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INDuSTRY TREND

Retail market share in India

11% 3% 3% 4% 5%

60%

6% 8%

Food and Grocery Mobile and telecom Jewellery pharmacy

Apparel Food service Consumer Electronics Others

Source: India Retail Report 2013, Images Group

opportunities, we need to supplement our farmers with new methodologies, we need to contain inflation, and we need to take our GDP to the next level. The policy is a step towards achieving it all. Any rehearsal of this existing policy would have an adverse impact on India’s economic future.”

Ashutosh Limaye, Head - Research & REIS, JLL India, says, “The 2012 announcement of permitting 51 per cent FDI in MBRT did signify a strong positive outlook for the retail and allied sectors like real estate, although it had a few riders in it. The announcement elicited a feeble response owing to clauses such as the mandatory 30 per cent sourcing (of products) from India. Besides, only cities with population of more than 10 million were eligible for establishing such stores. There were strong apprehensions about the policy’s implementation as it required approval from respective states. In fact, the first major decision that the Aam Aadmi Party-led government took once it assumed power in Delhi was to block FDI in MBRT. I think such moves by political entities are sending out wrong signals across the world to investors who have spent time investing and creating assets in India.”

Foreign players in a logjam?

A cloud of uncertainty looms over the future of foreign retailers, particularly Wal-Mart, Carrefour, and Tesco, with the BJP promising to keep FDI

out of MBRT. However, to their Indian counterparts, like Mukesh Ambani-owned Reliance Retail and Kishore Biyaniled Future Group, the move seems to have opened a new window of opportunity.

“It is a misconception that Indian retail companies are less equipped than their foreign counterparts,” says Kishore Biyani, Founder and Group CEO of Future Group.

“It is a fundamentally wrong judgment that only a foreign hand can add up to India’s expansive retail market. All major Indian retail houses are up to date on front-end and back-end technology and infrastructure-related affairs.

We have been in the trade for quite some time now. We have set up world class facilities. The government must support the players who have conceptualised, nurtured, and implemented the concept of organised retail trade in India.” Biyani is credited with creating some of the country’s most successful retail chains, including Big Bazaar, Planet Sports, Ezone, and Home Town.

Meanwhile, anticipating hurdles in MBRT, the US-based Walmart, the world’s largest retailer, announced plans to open 50 cash-and-carry wholesale stores in four to five years, while Carrefour of France, the second largest retailer in the world, which already has five cash-and-carry stores in the country, is reportedly negotiating with Bharti for partnership in cash-and-carry trade. Britain’s Tesco, the third largest retailer in the world, recently sealed a 50:50 joint venture agreement with Trent Ltd, a unit of Tata Group. Germany’s Metro, which is the first to enter the country, presently operates 16 cash-and-carry stores.

“Cash-and-carry formats suit these foreign-born retailers well,” says D S Rawat, Secretary-General, Assocham. “India is different from the geographies that

It is a fundamentally wrong judgment that only a foreign hand can add up to India’s expansive retail market.

All major Indian retail houses are up to date on front-end and back-end technology and infrastructure-related affairs. We have been in the trade for quite some time now. We have set up world class facilities. The government must support the players who have conceptualised, nurtured, and implemented the concept of organised retail trade in India

Kishore Biyani

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RETAIL

What difference will it make if we move ahead in cash-and-carry or multi-brand retail in India.

There is no question of freezing our plans in India. Our target is to make at least 50 cash-andcarry stores operational over the next five years Scott Price they operate in. Here, commercial real estate prices are out of sync with the purchasing power of people. It is prohibitively expensive to open such mega stores. The only places where such large-format stores can be launched are in the distant suburbs of metros or Tier II towns. These locations might not draw the kind of customers these retailers have in mind. Also, it is quite possible that one day, there will be political consensus on opening up multibrand retail for foreign investment; whenever that happens, cash-and-carry will provide the infrastructure and back-end support to launch operations quickly.”

“What difference will it make if we move ahead in cashand-carry or multi-brand retail in India,” says Scott Price, President and CEO, Walmart Asia. “There is no question of freezing our plans in India. Our target is to make at least 50 cash-and-carry stores operational over the next five years.”

Walmart has not expanded ever since it faced internal

investigations linked to the Foreign Corrupt Practices Act (of the US), which deal with charges of wrongdoings, including bribery, by its executives in international markets.

Store openings were also stalled because Walmart broke up with its Indian partner, Bharti Enterprises, last year. The company’s new plan outlines an investment to the tune of `3,500 crore in India.

Back on the domestic turf, Reliance Retail, the retail venture of Reliance Industries, has achieved cash breakeven with the business posting profit before depreciation, interest, and tax (PBDIT of `78 crore in FY 2013). The company posted a jump of 42 per cent in its total turnover at `10,800 crore in FY 2013 as compared to the previous financial year. The retail business opened 184 new stores during FY 2013. At the end of March 2013, the company operated over 1,450 stores in 129 cities across India.

Reliance Retail has over 20 cash-and-carry outlets.

Timeline on evolution of Indian FDI policy in multi-brand retail DIPP* releases a discussion paper soliciting public views on allowing FDI in retail sector

DIPP circulates a draft framework to COS proposing FDI in multi-brand retail up to 50 per cent in phases

Committee of Secretaries (COS) approves DIPP draft framework for allowing up to 50 per cent FDI in multi-brand retail

Union Cabinet passes and enacts the new policy allowing up to 51 per cent FDI in multi-brand retail sector

Ministry of Commerce releases a press note specifying the major tenets of proposed FDI policy in multi-brand retail

*Department of Industrial Policy & Promotion

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INDuSTRY TREND

Push for MBRT from Asean India’s free trade agreement on services with the 10-member Association of Southeast Asian Nations (Asean) is still in limbo, as three members - Thailand, Indonesia, and the Philippines - are yet to ratify the deal. While Thailand and Indonesia are demanding unconditional access to India’s multi-brand retail trading segment, the Philippines appears to be scared of India’s IT sector. Big Indonesian retailers like Matahari Putra Prima, Indomarco Prismatama, Mitra Adi Perkasa, and Ramayana have set aside huge investment plans.

Key beneficiaries India’s retail life cycle is plagued with severe problems on various fronts – back end, technology, supply chain and logistics, real estate, and human resources – and that’s one of the reasons why the Indian retail sector has never been able to match the pace of other developing sectors. In addition to this, India’s public procurement and distribution system needs to be improved. At the same time, overall food-based inflation has been a matter of great concern, despite heavy subsidies.

“FDI in MBRT can act as a powerful catalyst to ensure that there is required growth in the retail industry. In the long term, it will prove beneficial to all the major stakeholders,” J Suresh, MD and CEO of Arvind Lifestyle Brands. “Implementation of a friendly retail policy would benefit both foreign retailers and their Indian partners.

While foreign players would have access to India’s billion dollar market, Indian companies will benefit by cultivating new globally acclaimed best management practices, technological know-how, and retail expertise. There will be investment in storage and transportation infrastructure, technology, and supply chain operations. Intermediaries often bypass the ‘mandi’ norms and their pricing lacks transparency. Opening up of trade will benefit farmers with better price indexing and direct sales to the retailer.

In addition, the consumer will be a major beneficiary as they will have a better shopping experience. They will gain from the competition and the resultant reduced prices,”

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says Suresh, who is the Chairman of CII-National Retail Committee 2013-14.

In India, cold storage, the most critical link of the back-end infrastructure, is estimated to grow from around `20,000 crore to over `30,000 crore by 2015. The real estate retail industry will also benefit immensely due to increase in demand and increased investor confidence. Additionally, the country will flourish in terms of quality standards and consumer expectations, since the inflow of FDI into the retail sector will improve quality standards and costcompetitiveness of Indian producers in all the segments.

“From a retail real estate point of view, FDI in retail trade will open up immense opportunities in the medium and long term, as the demand for quality real estate will rise,” feels Limaye. “Investment by local and new international retailers will definitely take the form of investments into real estate at the front end in terms of retail store spaces and at the back end in terms of better quality warehouses. The new international entrants will be willing to take long-term bets and invest in stores which will be sustainable over the long haul. Also, it will increase the interest and confidence level of real estate developers to set up quality shopping centres.”

Ruling out misconceptions India’s retail market structure is just the opposite of the Western model, with no single player dominating any segment of the market. There is a fear that multinational players can superimpose their retail model on the Indian markets due to strong financial muscle and global sourcing.

In the process, many believe, millions of jobs will be displaced not merely in the self-organised sector, but also in the corporate retail sector. It is widely believed that their entry is likely to put many of those involved in the informal retail sector out of business and lead to increased market consolidation in the formal sector.

“Walmart, Carrefour, Tesco, Metro, and Coop are some of over 350 global retail companies with annual sales of over $1 billion,” says Arvind Singhal, Chairman of retail advisory Technopak. “These retail companies have been operational for over three decades across multiple nations. They have not become monopolies. These are just misconceptions.

India being a large market has room for all these giants to expand. I firmly believe that permitting FDI in MBRT would add up to our coffer by way of GDP and employment rise.”

Walmart, Carrefour, Tesco, Metro, and Coop are some of over 350 global retail companies with annual sales of over $1 billion. These retail companies have been operational for over three decades across multiple nations.

They have not become monopolies. These are just misconceptions

GLOBAL wATCh TERROR IN WEST AfRICA

Nigeria Bleeds as

Boko Haram Strikes All hell broke loose when waves after waves of homicidal maniacs descended upon educational institutions in northern Nigeria, frisking teenage girls. They call themselves Boko Haram, a cult that stands for religious puritanism and cultural preservation. As they unleash unprecedented terror on the West African nation’s schools, the world is yet to wake up from slumber

By Dr Mohan Varghese

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GLOBAL wATCh

Q

uixotic mindset seems to prevail in some parts of the world even in the 21st century.

When Don Quixote, Cervantes’ 17th century character, went amok, wind mills came under attack at an entirely different socio-cultural setting of medieval Europe. But now it is the turn of Nigerian schools, churches, police stations, and government offices that bear the brunt of hostility.

Donning the mantle of romantic hero Don Quixote, whose irrational fears and weird perceptions are famous, Boko Haram conducted a series of raids against objects they consider haram or objectionable. Horses of Don Quixote gave way to motorbikes in Boko Haram’s lexicon. Hordes of riders thronged the country’s Muslim-dominated north, killing, looting, and kidnapping people in the name of their parochial belief system, acts that put even the most obscurantist cult to shame. Alas, the state machinery responded only to the extent of banning motorcycles in Boko Haram strongholds!

What’s there in a name? Of course, there can be quite a bit of symbolism associated with certain names. Boko Haram is one. There cannot be a clearer term than Boko Haram to convey what the outfit stands for. Though the local dialect puts the name of the organisation as ‘Congregation of the People of Tradition for Proselytism

and Jihad’, it is commonly referred to as Boko Haram, which means ‘fake education (read Western education) is forbidden’. Branding everything Western as sinful, the contemporary Don Quixote goes beyond education and bonks all forms of modernisation including development and democracy. It is an irony that the relatively corrupt and poverty-ridden regions of the country’s north proved a fertile ground for the growth of Boko Haram ideology.

Dragon on the prowl Young dragons can’t spit fire, they say. True, when Boko Haram was founded by Mohammad Yusuf in 2002, it had only one soft agenda, the establishment of a pure Islamic State ruled under Sharia law. Though it stood against Westernisation of Nigeria, terror attacks, like the ones carried out in the recent past, were never there in their scheme of things. But once Mohammad Yusuf was apprehended and allegedly persecuted to death by Nigerian Security Forces in 2009, the movement’s modus operandi shifted drastically. Claws of the dragon came out from the paws with the rise of Abubaker Shekau to leadership.

Speaking classic Arabic as well as Hausa, the language of north Nigerian Muslims, this warlord nurtures dreams of bringing back the glorious days of the country’s past, akin to those 500 years of Bornu Empire when Muslim monarchs ruled the northern parts of present day Nigeria, upholding Sharia. In fact, many Boko Haram sympathisers believe that Sharia is the antidote for the rampant corruption that prevails in Nigeria. With Shekau at the helm, the Boko Haram operations took an ugly turn. In collusion with weapons expert Momodu Bama and trusted lieutenants like Dan Haija and Abatcha Flatari, this Islamic outfit started breathing fire down the throat of Nigeria’s equally powerful Christian community through a series of suicide attacks.

The dragon became fully grown and sorties increased with effect from 2011. Consolidating the position in the traditional strongholds of Borno, Adamawo, Kaduna, Bauchi, Yobe, and Kano states in the northern part, it spread its wings to neighbouring countries also. Fighting from its pocket boroughs in north Cameroon, South Niger, and Chad in addition to north Nigeria, this terrorist organisation became a menace to the entire region. The dragon feasted heavily upon hapless citizens who proved sitting ducks and fell easy prey to the highhandedness of Boko Haram.

Striking where it hurts most

Speaking classic Arabic as well as Hausa, the language of north Nigerian Muslims, abubaker shekau nurtures dreams of bringing back the glorious days of the country’s past, akin to those 500 years of Bornu Empire when Muslim monarchs ruled the northern parts of present day Nigeria, upholding Sharia

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Angels do not fight back. Nor do girl children. Schoolgirls became prime target of Boko Haram of late. Targeting schoolchildren, especially girls, served the twin objectives of creating a fear psychosis among Muslim population, who question the moral policing of Boko Haram, and giving a strong warning to the fairer sex pursuing education. In fact, it is a kind of Talibanisation that Boko Haram envisaged for their dream state. No wonder, Malala Yusufsai, who bore the brunt of Taliban attack in Swat in north-west Pakistan in 2012 after speaking publicly about girls’ right to education, reacted sharply after the kidnapping episodes

TERROR IN WEST AfRICA

in May 2014. In a BBC interview on May Angels do not fight back. Nor Bloodbath galore 10, 2014, terming the attack against girl do girl children. Schoolgirls The targeting of educational institutions students “unIslamic”, the Pak teenage started way back in September 2012, when rights activist went to the extent of urging became prime target of Boko 44 male students and teachers were killed Boko Haram “to go and learn Islam”. She in a night raid at an agricultural college Haram of late.

Targeting also called upon the world not to stay in Yobe. Since the response from the state schoolchildren, especially silent over the abduction of girls, the new establishment was negligible, Boko Haram tactic adopted by Boko Haram. became bold in conducting a suicide girls, served the twin Many centres of learning have been bomb attack on January 14, 2014, in objectives of creating a fear vandalised by Boko Haram. A series Maiduguri, its stronghold, killing 31 and of attacks on educational institutions psychosis among Muslim injuring 50. The massacre of 106 villagers started with the killing of 59 pupils in at Izgha took place a month later. In population, who question a boarding school in Yobe in February fact, over 3,000 casualities were reported 2014. On February 25, it was the turn the moral policing of Boko since 2011, when Boko Haram went on of Federal Government College at Buni rampage with all guns blazing against Haram, and giving a strong Yadi, where 29 students lost their lives. hapless citizens ranging from police The most heinous act unfolded on April warning to the fairer sex personnel to students. This figure may 14, 2014, when the militia ransacked the not sound significant in a country which pursuing education. In fact, only girls’ secondary school in Chibok, lost more than a million people in the it is a kind of Talibanisation killed 16 people, and kidnapped 234 girl civil war between 1966 and 1970. In the students. This was followed by the May 6 event of the current conflict snowballing that Boko Haram envisaged incidents of abduction of eight girls from into yet another civil war, the country for their dream state Gwoza area of Borno state and three more cannot possibly withstand the ensuing from a neigbouring village. The nation as catastrophe. well as the world witnessed an aftershock The bloodbath finds justification in when Boko Haram supremo Abubaker Shekau issued a fresh the sovereignty of God’s law which Boko Haram takes in threat of sending the kidnapped girls for slavery. its hands claiming that they are the saved sect mentioned

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GLOBAL wATCh

Good luck, Mr Jonathan!

Goodluck Jonathan in the prophetic tradition of Islam. Prohibiting students from joining educational institutions imparting English education as they inculcate non-Islamic traditions and colonialism, Boko Haram is keen to declare a war on the country’s liberal education structure.

The bloodbath finds justification in the sovereignty of God’s law which Boko Haram takes in its hands claiming that they are the saved sect mentioned in the prophetic tradition of Islam. Prohibiting students from joining educational institutions imparting English education as they inculcate non-Islamic traditions and colonialism, Boko Haram is keen to declare a war on the country’s liberal education structure

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The President of Africa’s most populous country is not a wee bit pleased with the news of such a horrendous situation in his country. Luck seems to elude President Goodluck Jonathan, as his armed forces did little to control the carnage. Amnesty International has alleged that Nigeria, despite having one of Africa’s most combative military forces, failed miserably to act on the basis of an advanced warning of an imminent attack on the town where hundreds of girls were kidnapped. Sections of Nigerian army are generally accused of having a clandestine understanding with Boko Haram. The human rights records of Nigerian army are also not healthy. This is especially so since Boko Haram’s March 14 attack on an army detention centre in Maiduguri, in an effort to liberate their comrades, was followed by heavy fighting, resulting in the loss of over 500 civilian lives.

Jonathan’s diplomatic manoeuvres to bring Boko Haram to the negotiating table in June 2013 also did not meet with any success. Though there were hints about a tentative peace deal with the militants last year, nothing concrete emerged. Moreover, there was no scope for peace with Jonathan at the helm as the government backtracked from its earlier assurance that the villages in the Boko Haram strongholds in the north would be rebuilt and that employment would be provided to the dependents of those killed in military operations.

Goodluck Jonathan, hailing from the Christiandominated Southern Nigeria, may have had an initial lucky break when he was hoisted to the post of President following the premature death of his predecessor, Umaru Musa Yar’ Adua, from the Muslim-dominated north. Many consider him an accidental President as his choice violated the convention of rotation of presidency between the north and south Nigerian politicians. It would have been the turn of a politician from the north to succeed Yar’ Adua. But Jonathan, in cahoots with some northern leaders of his ruling People’s Democratic Party (PDP), assumed office, much to the chagrin of the Islamic militants of the north.

His own party colleagues, including the widely respected former President Olusegud Obasanjo, were also not happy about Jonathan’s methods.

Fingers pointed at Al Qaeda What has Al Qaeda got to do with Boko Haram? Is it possible that 9/11 and Osama Bin Laden have anything to do with the birth of this terror unit in 2002? Need not be.

Nevertheless, Boko Haram Nigeria is considered a poor relative of Al Qaeda, an umbrella organisation or rather a network of Islamic militant outfits that fight against American hegemony all over the world. In that sense, the Nigeria-based Boko Haram, having links with Al Qaeda units in Morocco, is only a distant cousin. Besides, Al Qaeda thrives on international recruits while Boko Haram is content with local fighters, unlike other Al Qaeda associates.

TERROR IN WEST AfRICA

Bring Back Our Girls Abubaker Shekau

It has to be noted that Boko Haram unleashed no major offensive on international targets, though they have an open stand against Westernisation. But doubts have been raised since May 29, 2013, when Abubaker Shekau released a video calling on Muslims from Iraq, Afghanistan, and Syria to join his jihad. On November 13, 2013, the US government blacklisted Boko Haram as a terrorist organisation. It may also be noted that the US military officers were quick to arrive in Nigeria in the first week of May 2014 to help locate the missing girls. Moreover, the Americans watch with great concern the demand for the release of Boko Haram’s jailed cadre in exchange of the 234 girls in their custody.

The presumed partnership between Boko Haram and Al Qaeda is a relationship of convenience. Together, these two outfits appear to be a deadly combination. Nevertheless, these two groups operate on different terrains and there is very little convergence of interests. Boko Haram’s attacks are always localised, while Al Qaeda specialises in global operations. It has to be noted that Al Qaeda has not spoken

since the news of the kidnappings went public. Even in the wildest imagination, Al Qaeda with a more focussed plan is not expected to defend Boko Haram’s unimaginative aggression against young women for fear of loss of goodwill from the global Islamic fraternity.

Empathetic federal democracies watch in dismay Uncle Sam’s efforts are not good enough to bring back the young missing nieces. At least America’s first lady empathised with the African nation ravaged by Boko Haram’s heroics. Terming the kidnapping of young Nigerian schoolgirls an ‘unconscionable act’, Michelle Obama came down heavily on the terror organisation. Illustrating the importance of women’s education in the underdeveloped world, she took over the President’s weekly radio and internet address on the eve of Mother’s Day and proclaimed that “education is truly a girl’s best chance for a bright future”.

The US need not be the only multicultural, federal democracy to express solidarity with the Nigerian people in this hour of crisis. It is high time that India stepped into Nigerians’ shoes to think empathetically.

Dr Mohan Varghese is the Chairman of Media and Communication Committee of National Council of YMCAs of India. He is Associate Professor in the Dept. of Political Science, Mar Thoma College, Thiruvalla, Kerala

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INTERNATIONAL RELATIONS INDIA-KOREA

Courting

Korea

The visit of former South Korean President Lee MyungBak in 2010 is considered a landmark event in the history of India-Republic of Korea (ROK) relations, as the duo upgraded their relationship to a ‘Strategic Partnership’ and signed the remarkable Bilateral Comprehensive Economic Cooperation Agreement (CEPA). India and Korea, which celebrated the 40th anniversary of diplomatic relations in 2013, hope to achieve a bilateral trade target of $40 billion by 2015 by boosting its existing trade treaties and bilateral engagements. Korean majors like Hyundai Motors, Samsung Electronics, LG, and the like had invested around $3.25 billion in India as of December 2013, while Indian FDI, led

by Mahindra & Mahindra (Ssangyong Motors), Aditya Birla Group (Novelis Ltd) & TATA (Tata Daewoo commercial vehicles), is inching close to $3 billion.

New Delhi’s call to Seoul for participation in its developing defence, space, and civil nuclear programmes could act as a big game changer in the geopolitical climate of Asia Mi bureau

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INDIA-KOREA

I

n the golden age of Asia, Korea was ties with Seoul, despite India’s effort to pursue a “Look one of its lamp bearers and that lamp East” policy. South Korean businesses were less enthusiastic is waiting to be lighted once again about the Indian market and never considered India as a for the illumination in the East.” This strategic option for investments until after the 1997 Asian evocative one-liner by Rabindranath financial crisis. However, things have improved dramatically Tagore about Korea’s glorious and on the political and economic turf over the past few years. bright future continues to hold Economic relations between India and South Korea have relevance even after eight decades, as gathered momentum in recent years, with bilateral trade the latter’s two recent incarnations – reaching a substantial figure of $17.57 billion in 2013. as a developing nation first and then “Neither Korea found India interesting nor did India as a developed country with an advanced economy – have find Korea interesting during the 1990s, as they were keen catapulted South Korea to a greater role in global affairs, to develop ties with their other respective allies,” says and now, there are greater avenues for deeper engagements Harsh V Pant, Lecturer, Department of Defence Studies, between India and South Korea.

King’s College London. “They had “During the last four their own reasons as to why the decades, India-Korea relations relationship took time to bear fruit. have blossomed much beyond If you look at South Korea, the recognition,” asserts Vishnu country’s economic investments Prakash, Indian Ambassador to were drained to China then and South Korea. “After the sculpting India failed to initiate dialogues with This January of a ‘Strategic Partnership’ and the latter. Importantly, these Asian alone, India inking of Comprehensive Economic economies were under a developing Partnership Agreement (CEPA), stage those days, unlike today. and Korea India-ROK relations have been Finally, the visit of former Indian signed at least nine expanding in a 360 degree dimension President APJ Abdul Kalam to South across spheres: political, economical, pacts, aimed at imparting Korea in 2006 led to the signing cultural and defence. Significantly, of CEPA, which came into force in forward momentum to the year 2011 was chosen as the ‘Year January 2010. Even as India-Japan of India’ in Korea and the ‘Year of our existing bilateral annual trade stands steady at around Korea’ in India. This January alone, $11 billion, India-South Korea trade ties. I have the strong India and Korea signed at least nine grew to more than $15 billion in pacts, aimed at imparting forward conviction that Asian 2012, with the two sides aiming to momentum to our existing bilateral double it by 2014.” geopolitics would ties. I have the strong conviction that India and Korea presently witness a sea change as Asian geopolitics would witness a share considerable economic and sea change as India-Korea relations trade synergies. Korea, an exportIndia-Korea relations further intensify.” driven economy keenly looking further intensify Although bilateral relations at India’s expansive market, has between India and Korea took off in developed considerable expertise in 1973, there was some serious action shipbuilding, steel, nuclear energy, only after 1993, when the then Prime heavy electrical machinery, and the Minister, Narasimha Rao, paid a like. Similarly, Korea also looks to historic visit to Korea to woo the take advantage of India’s prowess investor community. Subsequently, in IT software and combine it with bilateral trade and investment relations started its expertise in IT hardware, designing, expanding, leading to a robust exchange of highengineering, and manufacturing. India level visits. Former President Lee Myung-bak’s visit to has to diversify its export market, India in 2010 was quickly followed by the visit of the focussing on hi-tech products rather than then President of India, Pratibha Patil, to Korea in July primary goods, if it has to penetrate the 2011 and former Prime Minister Manmohan Singh’s Korean import market. visit in March 2012. Finally, the present South Korean “Undoubtedly, the President, Park Geun-hye, visited India in January way bilateral relations 2014. between India and Korea Slow but steady engagement have been progressing In the early 1990s, New Delhi is impressive,” consistently failed to foster better says JoonVishnu Prakash June 2014 MONEY INDICES

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INTERNATIONAL RELATIONS

From left, B S Seo, Managing Director and CEO, HMIL, Joongyu Lee, Ambassador of Republic of Korea to India, Rakesh Srivastava, Sr VP -- Sales and Marketing, HMIL, and CH Han, Sr. Executive Director, HMIL gyu Lee, Ambassador of the Republic of Korea to India. “Nonetheless, the vast potential of our strategic partnership still remains untapped. An analysis of trade and investment figures would reveal that our current trade and investment is just a fraction of what we are capable of.

For example, Korea’s share in India’s global trade volume is less than 3 per cent. Similarly, India accounts for only 1.3 per cent of Korea’s total outbound FDI flow. This clearly indicates that there is still much to be done. Our efforts in strengthening cooperation in the fields of politics and culture have been successful with the increase in exchange of high-level visits and more intensified people to people contacts. But these exchanges by no means have reached where we would like to see them.”

Korean investment in India is concentrated mainly in the manufacturing sectors at 83 per cent, followed by wholesale and retail trade at 7 per cent, financial and insurance activities at 3.2 per cent, and electricity, gas, steam and water supply at 1 per cent respectively. Major centres of investment are NCR (Delhi, Noida, Gurgaon), Chennai, Mumbai, and Pune. The US continues to be Korea’s main investment destination with an outflow of $45 billion; and China is its main destination in Asia with an overall investment of about $43 billion (18.6 per cent).

Korean majors in India Major Korean conglomerates which have invested in India include Hyundai Motor India Ltd, with an estimated

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investment of $2 billion in setting up an automotive plant in Chennai with a capacity to produce more than 650,000 cars annually; Samsung Electronics, with an investment of $150 million; LG Electronics ($150 million); Hyundai Mobis, Chennai, with an investment of $184 million; Visteon Automotive System India Ltd, Chennai, with an investment of $100 million; Hyundai Wia Corporation, Chennai, with an investment of $100 million.

“There are many Korean conglomerates that have become household names in the Indian market,” says the Indian Ambassador to Korea. “Time has come for the Korean majors to play a more active role in infrastructure development as India is looking for long-term growth prospects. Korean companies can also look at investing in the manufacturing sector, which has enormous potential.

The story of Samsung, which sells over three million phones every month, must act as an inspirational factor for other companies looking to expand in India.” Samsung R&D Institute in Bangalore, the biggest Samsung research and development centre outside Korea, has around 4,000 Indian engineers doing top-quality research and development activities.

According to Korea Trade Investment Promotion Agency, about 88 per cent of all Korean subsidiaries established in India are wholly-owned, while approximately 11.3 per cent are joint ventures. Korean enterprises, including Hyundai Motors, LG, Samsung, and Posco, decided to have wholly-owned subsidiaries with large-scale

INDIA-KOREA

investments, allowing them to operate on economies of scale, establish their brand image at an early stage, and gain negotiating power with local governments.

More than 450 Korean companies are currently operational in India and an increasing number of their products are becoming familiar household names.

Korean companies are also actively involved in numerous infrastructure projects in India, such as highways, subways, and major construction works in power sectors. Indian investments in RoK up to 2012 were to the tune of $1.3 billion, with the major ones including Novelis Inc., a subsidiary of Hindalco Industries Limited, the flagship company of the Aditya Birla Group, Tata Motors Limited, Mahindra and Mahindra, Nakhoda Ltd, and Creative Plastic.

Apart from these, Tata Consultancy Services, Wipro, L&T Infotech, and Mahindra Satyam have set up operations in RoK, serving both Korean and other foreign clientele.

Posco fiasco continues India’s manufacturing and infrastructure sectors remain thrust areas for South Korean investments. However, South Korean steel company Posco’s $12.1 billion investment in Odisha, billed as India’s single largest planned foreign investment, is yet to take off. Recently, the project took a step forward as land was taken over from farmers for the first time since 2011. Yet, Posco is still a long way from its goal of forging steel there.

“The (Posco) episode does not show the Centre in a good light,” says Pant of King’s College London. “Former Prime Minister Manmohan Singh had come out in strong support of the project while speaking at the Nuclear Security Summit in Seoul in 2012. It’s a reflection of various government agencies working at cross purposes. In sharp contrast, there are countries like China where singlewindow clearance for such projects is possible. Foreign investors are on the lookout for investment opportunities that yield returns in a time-bound manner. The Posco fiasco should induce the government to set its house in order to build investor confidence. The project is a test case for the government. The whole world is watching how the world’s largest steel plant is coming up in Odisha.”

“India is vying hard to break into South Korea to tap its world-class naval shipbuilding technologies,” points out Pant. “Naval cooperation has rapidly emerged as a top priority of bilateral defence cooperation between both the nations. The countries also share a strong interest in the Indian Ocean region and maritime security has become a key interest area of the Asian powers. Other top priority sectors for India include nuclear energy and space.”

It is pertinent to note that as a member of the Nuclear Suppliers Group, South Korea had supported the waiver granted to India at the 45-nation grouping’s September 2008 meeting. This then led to India’s civilian nuclear energy cooperation agreement with South Korea in 2011.

Space cooperation between the two countries is also growing. India launched South Korea’s KITSAT-3 satellite in 1999 and has now invited Seoul to join the Indian expedition to the moon - Chandrayaan 2. However, the growing relations between New Delhi and Seoul would disappoint Beijing as it has its own vested interests in the Asian region. There are clear signals that like India, South Korea, too, is re-evaluating synergies with China as it continues to shield the autocratic North Korean regime.

Bilateral priorities Economic ties between India and South Korea have diversified across sectors. The two sides signed a memorandum of understanding (MoU) on cooperation in defence, industry, and logistics in 2005 along with another MoU for promoting humanitarian assistance and international peacekeeping activities, identifying futuristic defence technology areas of mutual interest, and undertaking of research and development works. Codevelopment and co-production of defence products (marine systems, electronics, and intelligent systems) were identified as priority areas. After purchasing eight warships from South Korea in 2012, India’s Ministry of Defence has decided to award a $1.2 billion contract to South Korea’s Kangnam Corporation for eight mine-countermeasure vessels.

Space cooperation between India and Korea is growing. India launched South Korea’s KITSAT-3 satellite in 1999 and has now invited Seoul to join the Indian expedition to the moon Chandrayaan 2

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COVER STORY

Indian pharma’s fighting fit Every time there’s a talk on Indian pharma companies, a whole lot of issues come into play all at once, making it difficult to sense whether our pharma industry is well-posited to becoming the pharmacy to the world and not just another pharmacy of the world. Money Indices takes a look at the current dynamics of the domestic pharma industry to see if we do deserve to be called the care-givers of the world in the truest sense of the word

T Mi bureau

he moment someone mentions Indian pharma, the words “generic medicines” naturally occupy the mind space.

What make generic medicines a big deal in the world of healthcare and what advantage do Indian generic drug manufacturers have against the drug behemoths of the world? Generic medicines are the bioequivalents of branded drugs, identical in dose, strength, route of administration, safety, efficacy, and intended use. They are available for a fraction of the cost of branded drugs. The availability of these drugs over the counter makes it easy for a great number of consumers to collectively save billions of dollars in terms of health expenditure. That’s one major reason why our generic medicines make up a majority of essential drugs administered to patients in poor countries through global health missions of donor organisations.

India manufactures every fifth tablet, capsule, and

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injectable generic drug being used in the world. India’s pharmaceutical industry supplies over 10 per cent of total global production, which also amounts to around 20 per cent of generics globally. Generic versions of drugs are available for many life-threatening diseases like HIV/AIDS, various kinds of cancer, Hepatitis, among others.

Now, why do Western drug manufacturers raise hackles against Indian pharma companies? It’s a war over pricing and better consumption rates in the name of patents, product processes, quality of drugs, and every allied activity that goes into the regulatory clearance and positioning of a drug in the market. At the centre of this game of one-upmanship is a debate over enhancing healthcare access to all at affordable rates with drugs of standard quality. To an extent, generic drug manufacturers of India have stolen the march over some of the big global brands in the pharma industry, but that’s precisely where lobbyism and institutional activism are threatening to stem Indian pharma’s unprecedented rise across the healthcare nurseries of the world. Recently,

PhARMA OuTLOOK

the US Food and Drug Administration banned some generic drugs of Indian entities, stating that they are of substandard quality and could compromise the safety of patients. This has tarnished the image of India’s Brand Pharma and already taken a toll on the country’s export graph, which dipped sharply from the projected 16-17 per cent growth to 6-7 per cent in 2013-14.

The sticky issues Western drug manufacturing giants have always been accusing India of violating the provisions of the World Trade Organisation’s Agreement on Trade Related Aspects of Intellectual Property Rights. Indian authorities, on the other hand, maintain that they have always been adhering to the conventions. There are two main sticky issues here. One is that of compulsory licensing and the other is evergreening. Compulsory licensing means grant of licence to any manufacturer for production of an essential medicine that is required by a sizeable section of the world population at an affordable rate, despite the existence of a branded and patented drug that is priced high. This is where a majority of drug giants are finding it difficult to battle the Indian pharma business environment, thanks to the ever-growing might of generic medicines. Evergreening, on the other hand, is a means of renewing the patent cycle of a drug through inclusion of new ingredients that could improve the efficacy of the same. A number of cases that have been lost by some drug manufacturers in the Indian courts are said to be cases of evergreening.

What’s driving Indian pharma?

They say if you can’t beat the bullies, join them. What better way to maximise product efficiencies, delivery capacities, and market shares than acquiring some of these budding generic drug manufacturers in a world that has shrunk in size because of globalisation. This story of mergers and acquisitions has both foreign as well as domestic entities within its fold and gives one a fair view of the growth leaps taken by Indian pharma.

For a country whose journey in the pharma world began with Acharya Prafulla Chandra Ray’s launch of Bengal Chemicals and Pharmaceutical Works with a seed capital of `700 at Calcutta in 1901, acceptance in the pharma world market and consolidation took time.

“During the earlier times, pharmaceutical business was under the monopolistic control of the US and European business community,” informs Dileep G Shah, SecretaryGeneral of Indian Pharmaceutical Alliance (IPA) and CEO of Vision Consulting Group. “The historical trend of pharmaceutical business has visibly shifted from the US and Europe to developing countries, including India, during the last two decades or so. These countries presently play a crucial role in the development of new treatments and as potential markets for pharmaceutical products.

Their new age laboratories are as sophisticated as the US, and are manned by scientists from across the globe.

The most important advantage of these countries is that

their qualitative R&D costs are just a small fraction of what their developed country counterparts spend. These science labs operate under regulatory regimes that promote development through less adversarial approval processes.

Most significantly, the intellectual property laws of these countries, including India, are fast maturing. Surely, countries like India would be on the winning side if the industry itself insists upon self-discipline while running this super delicate business of tackling diseases,” says Shah, who was a member of the Board of Directors of Pfizer-India, for whom he worked for 30 years.

Giridhar R Babu, Associate Professor at Public Health Foundation of India, says, “India’s healthcare during the post-Independent era was in the hands of Western MNCs, who controlled 90 per cent of the market through importation. To be precise, 99 per cent of pharmaceutical products sold in India under patent were held in foreign MNCs’ hands and drug prices were among the highest in the world. It was in 1960 that the government thought of initiating policies stressing upon self-reliance through local production. The Patent Act, 1970, and the Drug Price Control Order, 1970, paved the way for domestic players to enter the fray. Thirty-five years of protection enabled the Indian pharmaceutical industry to perfect its scientific and manufacturing capabilities, allowing many of its leading companies to move up the value added chain.”

Blue whales in Indian waters Name

Market Valuation

Profit

Manufacturing Facilities

Sun Pharma

`1,30,029.9 crore

`4,770.1 crore

Jammu, Sikkim, four sites in Gujarat, Silvasa, Dadra Nagar and Haveli, Ahmednagar and Tamil Nadu

Dr Reddy’s Laboratories

`44,573.9 crore

`2240.5 crore

Hyderabad, UK and the Netherlands

Lupin Pharma

`43,669.6 crore

`1691.5 crore

Aurangabad, Ankleshwar, Mandideep, Tarapur, Goa, Jammu, Vadodara, Indore and Nagpur

Cipla

`32,116.0 crore

`1,379.3 crore

Cipla has 34 manufacturing units in eight locations across India and has presence in 170 countries

GSK Pharma

`21,539.6 crore

`484.4 crore

The company has its R&D sites in Thane and Nasik, Maharashtra

Cadila Health

`20,563.1 crore

`829.7 crore

Ankleshwar, Vadodara, Patalganga, Navi Mumbai, Goa, Baddi, Sikkim, Dabhasa and Vatva

Divi’s Lab

`18,041.4 crore

`780.5 crore

The company’s manufacturing facilities are located at Hyderabad and Vishakapatnam

Aurobindo Pharma

`16,433.3 crore

`779.7 crore

With six key formulation facilities in India and one each in Brazil and US, the company exports to over 125 countries across the globe with more than 70% of its revenues derived out of international operations

Glenmark Pharma

`15,801.5 crore

`666 crore

With manufacturing facilities at Nasik, Baddi, Nalagarh, Sikkim, Czech Republic and Brazil, the company markets around 350 products in India

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COVER STORY

Today, most major Indian drug companies earn 60-80 per cent of their consolidated revenues from exports. Indian pharma industry, valued at $6 billion in 2005, skyrocketed to become an $18 billion market in 2012, clocking a compound annual growth rate (CAGR) of 17 per cent.

Indian pharma ranks third in the world in terms of volume and contributes over 12 per cent to the global pharmaceutical production Today, most major Indian drug companies earn 60-80 per cent of their consolidated revenues from exports. Indian pharma industry, valued at $6 billion in 2005, skyrocketed to become an $18 billion market in 2012, clocking a compound annual growth rate (CAGR) of 17 per cent. Indian pharma ranks third in the world in terms of volume and contributes over 12 per cent to the global pharmaceutical production. The industry has a lower share in the global market as Indian products are available at prices that are 5-50 per cent lower than those in developed countries. Still, driven by a shift in disease patterns, Indian pharma sector is poised to become a $55 billion industry by 2020, according to reports.

At present, Indian pharmaceutical industry is fairly fragmented with the top firms – Sun Pharma, Dr Reddy’s Laboratories, Lupin Pharma, Cipla, GSK Pharma, Cadila Health, Divi’s Lab, Aurobindo Pharma, and Glenmark Pharma – contributing to 41 per cent of total sales. The next ten companies contribute to 22 per cent of sales, while the remaining firms contribute to 37 per cent of the total sales. By 2016, the value of the total global generics sector will increase to $358 billion from $225 billion in 2011, representing more than 18 per cent of all pharmaceuticals, a projected CAGR of 9.7 per cent between 2011 and 2016.

“Generic drugs exported from India changed the face of Indian pharmaceutical sector. India is a market leader in the generic drug market with 3,500 pharmaceutical manufacturers exporting drugs worth about $11 billion annually to more than 100 countries. India’s pharmaceutical industry also offers manufacturing

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expertise to organisations looking to outsource or create networks of collaboration and discovery,” adds Shah of IPA.

The US market The US, the world’s largest drug market, accounts for more than a quarter of India’s annual pharmaceutical exports of nearly $15 billion. Almost 40 per cent of the generic drugs that are sold in the US are now sourced from India. Once the health cover gets extended to more Americans under “Obamacare”, there will be pressure to prescribe and shift to generics.

Indian firms manufactured products for nearly 60,000 generic brands, covering 60 key therapeutic areas, adds Shah. “Approximately 80 per cent of this domestic production consisted of formulations, while the remaining 20 per cent comprised bulk drugs. Currently, India exports drugs to more than 200 countries and vaccines and biopharmaceutical products to about 151 countries. Apart from the developed markets, Indian pharma companies have established a strong presence in other fast-growing semi-regulated markets like Russia, South Africa, and Latin America. India intends to expand its sales to other emerging markets, the United States, and Europe.”

India also supplies generics for various medical humanitarian programmes run by WHO, UNICEF, Médecins Sans Frontières (MSF), and the like. The vast majority of the antiretroviral medicines purchased by the US government’s global AIDS programme are, in fact, generic medicines, and more than 80 per cent of the HIV medicines MSF uses to treat more than 280,000 people with HIV in 21 countries come from India.

PhARMA OuTLOOK

“Top pharmaceutical majors will continue to flourish as they already have a robust pipeline of products lined up for approval in the US and other semi-regulated and emerging markets,” says Dhananjay Sinha, Co-head Institutional Research (Economist and Strategist), Emkay Global Financial Services Ltd. “Quality pharma players have reaped the benefit and will continue to grow faster in future. Increasing urbanisation, rising income levels and healthcare spend by households, and greater prevalence of chronic diseases will drive their profitability further.

However, stellar performances of Indian majors mainly depend on their successful functioning in the US and European markets. If the Indian companies make a serious note of their experiences dealing with the US market and work towards fulfilling the US criteria, they can be a winner.”

Market expansion & M&As “While global players in the pharmaceutical industry are facing challenges due to dried product pipelines, Indian majors are spreading their wings to reach all corners of the world,” says Sanjeev Krishan, Executive Director and Leader, Private Equity and Transaction Services, PwC. “Declining R&D productivity, expiring patents on blockbuster products, and relentless downward pricing pressure are forcing pharmaceutical majors to look closely at the bottom line. One effect of this onslaught has been upsurges in the level of M&A activities as players within the industry consolidate to cut costs, expand research pipelines, and lengthen geographic reach.”

The Indian M&A story, which started in 2006 with the $736 million Matrix-Mylan deal, touched a new high with the recent proposal by Sun Pharma to buy out Ranbaxy for $4 billion. However, the Andhra Pradesh High Court suspended the merger following a petition by two investors seeking investigation into accusations of insider trading in Ranbaxy shares ahead of the takeover announcement.

Post-acquisition, Sun Pharma will become the fifth largest global speciality generic pharma company after Teva, Sandoz, Actavis, and Mylan. In India, Sun, along with Ranbaxy, will emerge as the number one player with a combined market share of 9.2 per cent, dislodging Abbott (6.5 per cent market share) from the top spot.

“Sun Pharma’s proposed deal to buy out Ranbaxy breaks the historic trend of inbound deals dominating the top deals chart and creates the biggest generic drug business by sales in India,” says Manas Kumar Chaudhari, Partner, Khaitan & Co. “Indeed, it also happens to be the biggest domestic M&A deal ever cutting across sectors. The move will enhance Sun Pharma’s global presence by providing it access to various new and emerging markets and product portfolios. However, Sun will face some challenges in rationalising the field force and other personnel.”

April-October period of the last fiscal amid concerns over continuous mergers and acquisitions of domestic drug-makers by multinationals. FDI in drugs and pharmaceuticals stood at $580 million during April-October 2012, according to the data of the Department of Industrial Policy and Promotion (DIPP). Although DIPP had proposed tightening of norms for foreign investors in existing Indian pharmaceutical companies, including reduction of the FDI cap to 49 per cent in critical verticals from 100 per cent, the Union Cabinet rejected the proposal.

As per estimates, over 96 per cent of total FDI in the pharmaceutical sector between April 2012 and April 2013 has come into the brownfield sector. India allows 100 per cent FDI in the pharma sector through the automatic approval route in new projects, but foreign investment in the existing companies are allowed only through the FIPB (Foreign Investment Promotion Board) approval.

Quality imbroglios The US Food and Drug Administration (FDA) imposed a rash of regulatory sanctions on Indian generic-makers in recent years, triggering concerns about the quality of medicines supplied by the industry to countries including the United States. For the record, India exports all forms of pharmaceuticals from APIs to formulations, both in modern medicine and traditional Indian medicines.

FDI in Indian pharma Foreign direct investment in the pharmaceutical sector jumped by 86.5 per cent to $1.08 billion during

June 2014 MONEY INDICES

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COVER STORY

“There is a During her first official visit to India, Indian pharma, projected serious problem USFDA Commissioner Margaret Hamburg to be a $55 billion with the Indian drug signed a 10-point agreement with India’s regulator, the Central drug regulatory authority on February 10. industry by 2020, Drugs Standard The drug regulators of two of the largest should aspire to be the Control Organisation democracies of the world have agreed (CDSCO), and that to work together for patient safety and “Pharmacy to the World”, has to be blamed for improvement in the quality of medicines as it has the foundational the whole mess,” says and ensure a more science-based Roger Bate, author of evaluation system. strengths to back up ‘Phake: The Deadly the cause. It only needs Patent scuffle World of Falsified India’s patent law for the pharmaceutical to keep the quality of and Substandard sector has long been criticised by MNC Medicines’. “The its products intact and drug manufacturers, as it gunned down world’s notion is several patent applications and revoked continue working on the that CDSCO cannot existing patents following judicial be relied to ensure mantra of affordable challenges filed by local as well as foreign that drugs exported rivals. Unlike the US and Europe, India healthcare to all from Indian shores doesn’t grant patents for drugs invented meet international before 1995 (the cut-off year was fixed agree-upon when India reintroduced its product quality standards. patent regime for pharmaceuticals in 2005 as a signatory to The CDSCO has received repeated the TRIPS agreement). criticism in recent years from the “There has been a deceleration of industry growth rate Indian Parliament for colluding from 16.6 per cent in 2012 to 9.8 per cent in 2013,” Charu with local companies and not testing Kapoor, Principal, TSMG. “The industry faced a different approved products. This May, the Indian type of regulatory headwind; the patent office ruled against Parliamentary Standing Committee on the intellectual property rights (IPRs) for several notable Health and Family Welfare published drugs, including Pfizer’s Sutent, Bayer’s Nexavar, etc. A still a report acknowledging that at least more daunting challenge for MNCs operating in India has 7 per cent of medicines in India are been compulsory licensing and uncertainty about patent substandard and that some “can harm validity.” patients”. In addition to Ranbaxy, other

prominent manufacturers — including those whose products are approved by respected regulatory agencies and the World Health Organisation (WHO) — are among those producing apparently substandard products. India must take concrete steps to combat the internal elements which make its machinery weak.”

“Indian pharmaceutical companies must ensure that they are saying what they do and they do what they say and demonstrate that they did it,” says Howard Sklamberg, Deputy Commissioner, Global Regulatory Operations and Policy, FDA. “Leadership is all about choices and senior management in companies must commit to proactive rather than reactive approach to quality control and allocate adequate resources for managing quality.

Every time top executives see a slippage happen, they should follow it through with a sound internal investigation.”

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MONEY INDICES June 2014

The way ahead

“For India to continue as a force in the international markets, the industry needs to continuously invest in development of global R&D capabilities and develop its strong and well-established Contract Research and Manufacturing Services segment,” feels Dinesh Thakur, a former Ranbaxy executive who exposed the company’s dubious manufacturing practices. “India will have to imbibe the technical capabilities and knowledge of the West, especially in areas of manufacturing and new drug delivery systems. Strong international collaborations and partnership will insure that India continues to reinvent itself by delivering more value added products to the global markets,” adds Thakur, who runs the US-based Medassure Global Compliance Corporation, a consultancy and risk management company.

Conclusion Indian pharma, projected to be a $55 billion industry by 2020, should aspire to be the “Pharmacy to the World”, as it has the foundational strengths to back up the cause. It only needs to keep the quality of its products intact and continue working on the mantra of affordable healthcare to all.

ThE BIOCON OuTLOOK

Biocon working on

world’s first oral insulin

Kiran MazumdarShaw, the Chairman and Managing Director of Biocon Ltd, feels India is fast losing its position of an ‘innovation partner’ and ‘pharmacy to the world’ due to lack of an enabling environment in the country.

In an exclusive interview with Money Indices, the leading light of the biotech sector tells us about her company’s continued push for affordable therapies for chronic diseases, the pharma industry’s main concerns, need for clinical trials in India, and the absence of a universal healthcare system

By Vishnu Rageev R

Kiran Mazumdar Shaw

June 2014 MONEY INDICES

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COVER STORY

You are credited with revolutionising India’s biotechnology sector. Could you take us through the major achievements so far?

Biocon has over the years evolved from being India’s largest enzymes company to an emerging global biopharmaceutical enterprise with a presence across the pharma value chain, spanning development and commercialisation of small and large molecules. The company has leveraged a combination of proprietary fermentation technologies and research skills to develop affordable therapies for unmet and chronic diseases at global scale. Today, Biocon is recognised as the world’s fourth largest insulins company which was credited to have introduced the most affordable brand of rh-insulin in India, INSUGEN, in 2004.

We pride ourselves with being the world’s first Pichiabased recombinant human insulin producer. In 2006, we launched India’s first indigenously produced monoclonal antibody BIOMAb-EGFR to treat head and neck cancers. Our quest for innovation has also enabled us to commercialise second novel biologic in India, ALZUMAb (an The anti-CD6 Monoclonal Antibody), for chronic plaque psoriasis, in 2013.

We also commercialised in India, the world’s most affordable trastuzumab CANMAb ™ for Her 2 positive breast cancer, in 2013. We are also steadfastly pursuing the development of the world’s first oral insulin in partnership with Bristol Myers Squibb. If successful, the oral insulin drug will bring about a paradigm shift in diabetes management.

In 1978, you were venturing into the unknown. What were your challenges then? How did you overcome those?

I encountered many a challenge building my biotech business in India. Biotechnology was unheard of as an industry. Consequently, banks were reluctant to lend me financial support. The prevailing business ethos then favoured low-risk ventures based on services and generics and was averse to risk-ridden, innovation-led businesses like biotechnology. Key infrastructural support, like uninterrupted supply of power and potable water, was also difficult to obtain. Adding to this complexity was my gender, women those days were not perceived as successful entrepreneurs.

I owe my success to my ability to take on a very challenging business environment and pioneering a business based on scientific pursuit through a sense of determination and conviction. As a woman entrepreneur, I have had to overcome a number of credibility challenges that has helped me develop a sense of confidence.

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MONEY INDICES June 2014

Perseverance and the ability to manage risk have also helped me build credibility and success. Most of all, I have been driven by a sense of purpose to put India on the biotech map of the world and to leverage the power of biotechnology in finding new and novel solutions for a plethora of local and global challenges in industry (enzymes) and healthcare (biopharmaceuticals).

What has been your investment towards establishing a world-class R&D?

Driven by our mission to deliver affordable innovation, Biocon has consistently been the highest R&D spender in the Indian pharma sector, investing an estimated 10 per cent of its annual turnover on average. Our commitment to innovation has enabled us to deliver two novel biologics, low-cost insulin and the world’s most affordable trastuzumab.

More recently, early clinical studies on ALZUMAb in other autoimmune diseases such as rheumatoid arthritis and multiple sclerosis have shown great promise and Biocon is in the process of identifying a strategic global partner to develop this molecule for a larger, global patient population. The potentially game-changing oral insulin project continues to report good progress. Biocon entered into two strategic R&D tie-ups in FY14: a co-development programme with Advaxis for a novel cancer immunotherapy to treat HPVassociated cervical cancer and another with Quark Pharma for a rare eye indication.

What do you think about the growth and evolution of Indian pharmaceutical sector?

Drug manufacturers in India have over the past couple of decades brought down the prices of a range of therapeutics — from vaccines for Hepatitis B, diphtheria, polio and tetanus, to drugs for HIV, tuberculosis, diabetes and cancer — and saved millions of lives around the world in the process. India is already the largest global exporter of generic medicines (by volume) and one in every three children in the world is immunised by vaccines manufactured in India. This has rightly earned India the reputation of being “The Pharmacy to the World”. Going forward, India is positioning itself as the “laboratory of the world” as is evident from the growth of the research services business where companies like Syngene are well-recognised as innovation partners to global pharma companies, thus accelerating their quest for innovation.

What are the key factors that are pulling down the growth prospects of the industry? How can India become a market leader in drug manufacturing?

The Indian pharma industry is a highly regulated

ThE BIOCON OuTLOOK

one. Companies need to obtain approvals from multiple regulators, which usually lead to inordinate delays in project clearances. An uncertain and complex regulatory process adds to the industry’s woes. The government’s failure to provide adequate infrastructure also acts as a huge handicap. Moreover, the government’s move to introduce drug price controls have driven price of essential drugs to such low levels that companies see no business justification in manufacturing them.

The government needs to frame policies that will support the Indian pharma industry in delivering on its world-class manufacturing prowess. As India is already one of the world’s leading manufacturers of generic drugs and vaccines at the lowest cost, all government tenders should give preference to indigenously manufactured pharma products, like in the case of vaccines. The government should also provide incentives to create large-scale pharma and biopharma manufacturing facilities, which in turn can attract large foreign investments in the sector.

US FDA and UK’s MHRA have issued many warnings to drug manufacturing facilities in India. Do Indian drug manufacturers need to improve?

Although some Indian drug-makers have been red-flagged for non-compliance with current good manufacturing practices (cGMPs), the Western media has been unduly alarmist in reporting these developments. In reality, Indian pharma companies continue to command a good reputation in pharma manufacturing.

It is imperative to ensure that the Indian pharma industry sets standards of quality and compliance for both products and services that are on par with the best in the world. In most cases, these are already in place, what we need is effective monitoring of compliance.

How challenging is India’s regulatory environment in the pharmaceutical sector?

The Indian pharma industry is witnessing major challenges due to ongoing regulatory uncertainties and policymaking based on knee jerk reactions.

India is fast losing its position of an ‘innovation partner’ and ‘pharmacy to the world’ due to lack of an enabling environment in the country.

The recent controversy over human clinical trials in India has severely hampered clinical trial approvals in the country. It is imperative that clinical trials are conducted on Indian patients to establish safety and efficacy on our ethnic population. Stalling of clinical trials will threaten the innovation culture in India, making it difficult for patients in our country to access new treatment options. The government needs to step in and quickly address the problem to protect the interest of Indian patients as well as the Indian pharma industry. Biocon has been forced to move trials for

the oral insulin programme offshore to ensure the clinical development work does not stop. This is adding to the cost of development of the drug.

What steps would you recommend for enhancement of equity and access to healthcare?

The lack of a universal healthcare system in our country compels patients to bear almost 80 per cent of the healthcare costs directly from their pocket. The opportunity, therefore, lies in leveraging India’s value advantage and scientific excellence to come up with innovative technology for offering world-class products at affordable prices, thus making a huge difference to millions of patients in India.

This is exactly what Biocon has been doing.

The government also needs to play its part in addressing the ‘Right to Health’ of its citizens by introducing a universal healthcare programme which hinges on affordability and access and benefits a larger section of the Indian population. Moreover, public spending on healthcare needs to be raised to 3 per cent of GDP so that the Indian government can fund schemes aimed at lowering the healthcare burden of the poor.

The application of information technology (IT) in terms of E-Health, M-Health, and Telemedicine can improve healthcare delivery and bridge the healthcare gap in the country. A good example is Tamil Nadu’s IT-enabled drugs procurement model that has ensured its citizens access to a reliable supply of affordably priced, generic essential drugs.

Such a model should be replicated throughout India.

Biocon, as a part of its CSR activities, is participating in a PPP initiative to deliver a novel e-healthcare programme for the underprivileged and rural communities in Odisha.

What are your global objectives for Biocon?

Biocon is now in a state of preparedness to attain its aspirational goal of achieving $1 billion in revenue by 2018. As we move in this direction, we plan to evolve our product mix to reflect our growing repertoire in Biologics, Branded Formulations, and Research Services.

At the same time, we will stay focussed on our mission of leveraging India’s cost-effective innovation base to deliver affordable drugs for chronic diseases to global markets. We continue to look for strategic partnerships for various programmes and also strengthening our research services business.

What is your revenue target?

Biocon is on track to achieve its aspirational target of $1 billion in revenues by 2018.

The domestic business contributed to 37 per cent of Biocon’s revenue in FY14, with the balance coming from the international business.

June 2014 MONEY INDICES

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WEB DESIGN WEBANDCRAfTS

The art of

web and craft

Webandcrafts is a global IT solutions company that is helping premium corporate sector companies with optimal online branding, web design, and web development strategies

By Juliet Sebastian

Abin Jose Tom

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MONEY INDICES June 2014

WEBANDCRAfTS

T

he digital commerce industry in India is witnessing exponential growth with small, medium, and large enterprises continually seeking to orient the common man with path-breaking technological innovations that cover the whole length and breadth of our upwardly mobile home to office life.

The market value of digital commerce in India stands at nearly `63,000 crore as of today, amply supported by the `3000-crore allied industry of digital advertising. And the motherboard of these two closely connected industries is the digital business vertical of web design, which is guiding the market to frequent digital disruptions by making space for more technologically adept players in the art of coding, design, and programming. In this medium, it’s all about being on top of the game, says Abin Jose Tom, the Founder of Webandcrafts, a global IT solutions organisation providing web design, web development, graphic design, and internet marketing services.

I believe web design has undergone a significant change from the past, as quality images/ photographs, infographics and high quality programming, ease of navigation and top class contents are incorporated in the present day websites

The website template era is almost over. People who still put together websites using templates are either doing poor business or waiting for miracle to happen.

Today, people are giving more importance to the user experience of a website, so the emphasis is on creation of form, function, interface, design, and content that can give a certain target audience the thrill of friendly navigation. Web design basically helps businesses plan information architecture of their websites effectively for deliverance of a memorable user experience. “I

believe web design has undergone a significant change from the past, as quality images/photographs, infographics and high quality programming, ease of navigation and top class contents are incorporated in the present day websites. One has started to realise the importance of abiding to these new aspects which have played a pivotal role in changing the old phase of web design,” says Abin, stressing that only the unique and globally competitive players can thrive in this market.

Today, mobile internet in India is about to touch 1/5th of the population, and an increasing number of businesses are trying to cater their products and services to this growing customer segment by having mobileoptimised websites. This is where the web design environment has gone responsive. What is responsive web design? “Under responsive web design, each content item or image/ graphics would be optimally coded no matter which device (desktop, tablet, smartphone) one uses. A responsive website would transform its physical look according to the screen size a user is using. It makes it easier for end-users to utilise the resources in a website,” says Abin.

The webandcrafts team

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WEB DESIGN

The genesis and rise of Webandcrafts Abin says, “I always wished to be innovative with my thoughts and wanted to set up a company instead of earning a reputed job in a prestigious firm. I had a strong passion for computers from my early days. While pursuing engineering, I took my first step of advancement towards my dream by seeking permission from my college authorities to do the website of S A Engineering College, Chennai.

That was the turning point for me.

The website gained wide acclaim and people started approaching me for more web design and web development works.”

Abin then built a team of talented people for his enterprise and set a benchmark of quality and excellence.

“After the college website, I was approached with works from small companies. Our craft helped these clients transform into mid-size companies, and over a period of time, they became premium companies in select sectors. I saved the income

earned from these clients to set up the office of Webandcrafts in a rich ambience so that my team could explore their abilities to the core in a creative and productive environment.

Ultimately, my plans produced the desired dividends,” says Abin.

Within two years of operation, Webandcraft has nurtured a team of over 20 multitalented employees that has the ability to tackle major issues with utmost precision. “We have succeeded in presenting prime quality outputs exceeding the expectations of our clients each time,” says Abin, adding, “If one has the potential and skill with the right attitude, then he/ she can work wonders as there are large areas yet to be explored in web design business. Webandcrafts has delivered optimum quality in its works and that brought us global fame.

Currently, we have a large spectrum of overseas clients. We believe in a simple mantra that there is nothing in this world that can be termed the best; anything that is considered the best can always be bettered.”

In the midst of all this success, Abin doesn’t forget to show his gratitude to his supporters. “Many people have supported and motivated me. But the one person who played a pivotal role in my life is Joseph Mattappally, a renowned social worker and Director of Indian Thoughts, the most subscribed international online moral education service. He trusted my abilities and believed that I could do wonders one day. His words of encouragement and motivation helped me find success,” says Abin. “My friends, Nikhil and

Mithun, were also always there to prevent me from falling down.”

There has been a strategic shift in the company’s client base over the years. “Our company has excelled exceedingly in terms of business as we started operating by associating with small companies. We later advanced to works related to mid-size companies. At present, our area of focus is completely on the premium sector projects. We are approached by prestigious corporate sector companies as we have proven our touch of elegance in all that we do,” says Abin.

Strong Force, Ahalya Group, Sharda Motors, Thomson Industries, and SMR Group of Companies are some of the major clients of Webandcrafts. “We believe that branding is a prime aspect that helps in developing values and reputations.

We associate with clients to craft corporate identities that enhance their company values. We bring the level of expectation of company services to the highest hierarchy through our branding techniques as we make sure to offer products and services of top quality to meet the standards set in our branding strategies,” says Abin.

Abin does not believe in imposing rules on teammates. “Each team member has the right to express his/ her views. We do not have a class hierarchy in our organisation and that is the key to our success.”

Abin says that the Internet penetration in India would grow by three folds by 2016, extending digital businesses the opportunity to engage customers in a greater way.

We believe in a simple mantra that there is nothing in this world that can be termed the best; anything that is considered the best can always be bettered

Abin Jose Tom

SOCIAL ENTREPRENEuR PAADuKS

Soulful sole-making Social entrepre is yet to neurship g importan row in the mult ce in India. Cons it id emergin ude of social ent ering g re with an as each day pas preneurs economy ses, a co untry as m and at tim es confu ixed, diverse, sin never ha ve enoug g as India’s can h entrepre neurs wh of the new breed o ca of playing g round fo n create a level r th strive an d thrive. e less fortunate Paa to Rege, is one such duks, led by Jay ve the uplif tment of nture aiming at cob families by makin blers and their g sure th get a sub at t stantial s hare of p hey from the rofit sa from scra le of sandals ma s de pt with Mon yres. In an interv iew ey talks abo Indices, Jay Reg e ut his as pir that sha ped the ations jour of his fle dgling ve ney ntu venture t owards a re, a cle environm ent and aner a be for a dow ntrodden tter life section o society f MI co

rres

pond

ent

June 2014 MONEY INDICES

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SOCIAL ENTREPRENEuR

I

was reading an article about a guy in the US who buys scrap tyres from Indonesia and uses them to make soles for sandals he sells in the US. I thought it was a cool idea and thought we could try it in India too,” says Jay. “Once we decided to do it, we started researching on two aspects. One, on how chappals are actually manufactured. This was easy. We visited the Thakkar Bappa Colony (that lies between Chembur and Kurla area in Mumbai), where most of the chappal-makers reside and work,” he says. “After talking to a few of them and seeing how chappals are manufactured, we learnt how it happens. The second part of the research was to understand how we could use pieces cut out of scrap tyres as soles. We spoke to a few local cobblers and one of them asked us to visit the Mochi Gali in Govandi. He said some of the cobblers there use pieces of scrap tyres as soles, especially for the Kolhapuri chappals that they make and send out to rural parts of Maharashtra.

The information was correct. We did find cobblers who use scrap tyre soles for some of their chappals, because the tyre sole is hard to penetrate and provide better protection to feet against injuries, especially in rural conditions.

They agreed to cut pieces of soles for us too. And that’s how we got some soles cut from there.”

He continues, “Later, we also discovered some scrap dealers in Taloja, Byculla, and Kurla West, from whom we bought cut pieces of scrap tyres. Now, we buy pieces of scrap tyres from these places.”

After talking to a few of them and seeing how chappals are manufactured, we learnt how it happens.

The second part of the research was to understand how we could use pieces cut out of scrap tyres as soles. We spoke to a few local cobblers and one of them asked us to visit the Mochi Gali in Govandi. He said some of the cobblers there use pieces of scrap tyres as soles, especially for the Kolhapuri chappals that they make and send out to rural parts of Maharashtra

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PAADuKS

Paaduks is run by a close knit team of dedicated members, says Jay. “I and my wife, Jothsna Rege, work on this initiative. Ashwin More, who joined us recently, is leading our marketing efforts. We have even hired an intern, Kunal Kurup. Two of my friends, Abhijeet Walanj and Venugopal Kartha, help us. We also have excellent support from the UnLtd India incubation support team, with whom we are an investee. The team at UnLtd is always there to guide and support us at every stage of our venture,” he says.

Paaduks has a definite advantage over its competitors in terms of durability and strength, says Jay. “The fact that our sandals have soles made out of scrap tyres makes the base of these sandals very strong and durable. However, I would not call this a major advantage as most of the commercially manufactured soles that are made out of hard synthetic rubber or PVC-based materials are equally strong,” he says.

“We offer products that encourage the use of eco-friendly/ recycled products and bring fair compensation for the workers who work with us. We use the profits derived to ensure the welfare of the cobblers,” says Jay. Elaborating on the social aspect of Paaduks, he says that the venture ensures that an adequate portion of profits went to the cobblers, who are otherwise exploited for their lack of education and social awareness. Most of the retailers pay the cobblers a small sum for their craft, which is never enough for ensuring proper education of their children or maintenance of their family. Jay aims at bringing forth a major social reform in the life of the cobblers.

“When we started working on this initiative, we realised that the cobblers and their families are plagued by many financial and social problems. Hence we decided to use 100% of the profits that we make to provide for better healthcare for the cobblers and their families and education for their children. Healthcare and education are the two areas that we are currently focussing on. Since Paaduks is at a very nascent stage as of today, we just take care of the medical expenses that the cobblers and their families have to bear. We also pay for the educational costs of their kids. Going forward, we plan to have a formal structure to improve the living and working conditions of our cobblers. We compensate our cobblers three to four times higher than what they usually get from other wholesalers/retailers. These cobblers are poor, uneducated, and willing to work for less, but that does not mean that they should be exploited. Currently, we plan to use 100% of the profits for the cobblers,” he says. He admits that there are hurdles that had to be overcome for the ultimate success of the venture. The profit margin of the sandals made from scrap tyres seems to

be the foremost issue plaguing the venture. “Commercially manufactured soles are at times cheaper than soles made from tyres. The factory-manufactured soles are designed specifically for footwear and are also easy to cut and mould.

Tyres are difficult to work with and it takes more efforts to turn them into soles,” he says.

He says that every sandal user was a potential customer and every sandal manufacturer a potential competitor. The company, he adds, nursed ambitions of going global soon.

When we started working on this initiative, we realised that the cobblers and their families are plagued by many financial and social problems.

Hence we decided to use 100% of the profits that we make to provide for better healthcare for the cobblers and their families and education for their children.

Healthcare and education are the two areas that we are currently focussing on

June 2014 MONEY INDICES

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WOMAN ENTREPRENEuR RITu MAThuR

Championing the organic cause Subsuming your grandma’s home remedies, your love for nature, and your concern for people’s general well-being into a social enterprise isn’t difficult if you know how to live by the rules, like Ritu Mathur MI CORRESPOnDENT

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MONEY INDICES June 2014

R

itu Mathur is not your typical urban mother. She left her comfy IT job nursing her lifelong passion for nature.

An organic ready-to-eat food brand, Grainny’s is her brainchild. Ritu is a passionate plant lover and it is her quest to be in harmony with the environment that further led to the inception of Upvan, an initiative that motivates people living in urban areas to do organic farming by harvesting their own vegetables and fruits. The idea behind Upvan is to enable people to connect with nature, to bring green back into our lives.

Ritu designs gardens for people, depending on their requirements.

Her gardening group, comprising 760 active people, is growing with each passing day. Ritu has been actively working with farmers by travelling across India, helping them adopt natural farming practices. She even sensitises people about the benefits of natural food for better health.

Recently, she did a permaculture design course. An active member of Kheti Virasat Mission, which helps women create and manage their own kitchen gardens, she is part of a vegan group, and has done classes on benefits of millets in increasing the

nutritional value of different foods.

Ritu takes workshops for kids as well as adults, each class extending from 2-3 hours to 2-3 days, depending on the requirement.

She helps kids connect with nature by assisting them in planting perennials, or sometimes edible plants. These plants are taken care of until they grow and start bearing fruits. She teaches adults how to grow their own food by managing their own gardens.

“I am a city bred person, born and brought up in Delhi. During my early years, I moved along with mum and dad as he was with Military Engineering Services, which required him to go to new postings.

I have fond memories of helping my dad tend our garden. Wherever we moved, our garden moved with us. Either it shrunk in size or grew, depending on the accommodation we got at different places. But the first thing he would do every time was to set up our garden,” she reminisces. “Though there was a long break between college and career as a designer and manager, I finally realised my calling after 15 years. I broke the cycle and took to the open air.”

“In 2009, I decided to hang my corporate shoes and took to my gardening boots. My design experience came in handy with my interest in plants, gardens, and environment. I went to IIMB to study

RITu MAThuR

entrepreneurship and started Upvan, an enterprise that helps people lead a healthier life by making it greener and natural,” she says. “My area of work includes organic and natural farming, landscape and garden design, and guiding/facilitating people to create environmentsensitive functional gardens. With Upvan, I got to interact a lot with natural/organic farmers and discover the treasure of lost grains and millets and traditional processes. This led to the foundation of Grainny’s which brings together the lost grains and Granny’s recipes,” she laughs.

Grainny’s is a ready to eat organic food brand conceived and supported by her entire family. “Health concerns are slowly rising amongst the urban youth, especially amidst the outbreak of deadly diseases attributed to the presence of pesticides in food.

Grainny’s is a naturally-organic ready-to-eat food brand which not only suits the daily nutritional requirement, but also provides healthy options for in-between meal snacking. The products are made with trusted natural and organic ingredients, and are made using traditional methods that includes gluten-free and vegan foods as well.

“Grainny’s is much more beyond selling products when it comes to promoting a healthy life, and I think that is what sets it apart. We research and design ready to eat, nutritious, whole day foods that can be consumed by people of all age groups. Be it sports and fitness, school, sedentary, or active work, homemaking, shopping, entertaining guests, or TV time munching. We ensure that it’s the best of health and nutrition which gets to you through Grainny’s food”, she says proudly. “There are two things which make Grainny’s unique. The first one is that the entire life cycle of the product is directly managed, right from sourcing of raw material, manufacturing, and distribution. While the recipes are traditional, they

are carefully re-mastered to meet the nutrition requirement of the current lifestyle, but without any preservative or processed ingredient, and keeping it super tasty and nutritive,” she adds.

In all that she does, Ritu has a team for brand support. Her husband, Manas Arvind, is armed with knowledge of nutritional requirement in performance/endurance sports; Priya Mathur is a certified fitness expert; and Aashish Mathur chips in wherever the others can’t do much.

“While the brand is self-funded at the moment, we will soon start looking for external funding for business

Ready to eat is still a small subset of the `100-crore organic industry. While this industry is set to grow at a CAGR of 19% in the next five years, the natural R-T-E will grow faster within the industry, given the shrinking time on hand and increasing health and fitness awareness

expansion and depth,” she notes.

She regularly holds workshops to convert the youth who prefer fast food, by making them understand the importance of healthy diet and healthy living.

She is gung-ho about Upvan, a green initiative in urban areas. “The idea behind Upvan is to enable people to connect with nature, to bring green back into our lives. I design gardens for people depending on their requirements. The Facebook group has 750+ active people and is growing with each passing day.

I travel across India to meet and work with the farmers, bringing them back to natural farming, and through sensitising people about the benefits of natural food for better health,” she says. She also busts myths pertaining to the difficulty of eliminating pests by pure organic farming. “You will be surprised that there are highly effective natural pest control methods,” she says. “These are cheaper in the long term, do not create resistance in the pest, and ensure that healthy food reaches your family. There are ways to growing food which needs neither chemical fertilisers nor any pesticide. You can use organic methods to enrich the soil for a better yield.” She firmly believes that expansion is at hand for the organic and health-based food industry. According to her, “Ready to eat is still a small subset of the `100-crore organic industry. While this industry is set to grow at a CAGR of 19% in the next five years, the natural R-T-E will grow faster within the industry, given the shrinking time on hand and increasing health and fitness awareness.”

She ends with an advice for aspiring entrepreneurs. “Every individual should choose their passion as their career so that they can give in their best in that field of work. I also firmly believe in the thought ‘Keep nurturing, keep learning, and keep imbibing!’ Our surroundings and society have unique needs. Look closely and one can find many opportunities.”

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PRODuCT LAuNCh PRAYAG POLYMERS

IPL sponsor targets

Kerala’s sanitaryware market

Prayag Polymers is scripting a brand new innings in the sanitaryware market with 3,000 dealers across Kerala

C

MI correspondent

onfidence was palpable on the face of Anil Malhotra, Vice-President of Sales & Marketing at Prayag Polymers Pvt Ltd, on the occasion of the maiden launch of the company’s sanitaryware products in Kerala.

“The people here are educated and quality conscious. That is what gave us confidence to launch our sanitaryware products for the first time in this state. We are yet to launch this product in other parts of the country,” Malhotra said in Kochi.

Prayag has around 3,000 dealers in Kerala.

“Kerala is one of the prominent markets for Prayag. With our sanitaryware collection, we are offering the best of quality and

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designs at very competitive rates. Our network is quite extensive in Kerala.

We are quite sure that like our other products, sanitaryware will also get a good response from end-customers,” said Malhotra.

Rajasthan-based Prayag Polymers Pvt Ltd is one of the largest bathroom fitting companies in India. The company recently diversified into sanitaryware including washbasins and WCs. “We are price conscious.

We want to give quality products at accommodative prices,” said Malhotra, adding that the company can’t compete with non-branded items.

The brand Prayag is the principal sponsor of IPL team Kings XI Punjab. It is one of the leading players in PTMT (Polytetramethylene Terephthalate) and CP (chrome-plated) bath assets with products ranging from faucets and showers to accessories. Other

products include a wide range of stainless steel sinks, flush cisterns, seat covers, and other accessories.

“As far as Prayag brand is concerned, there’s a lot of scope (in the market). We are planning to do almost three times the business we did last year. We are doing our own sink manufacturing and we have a larger market for that. When you consider branded items, the market share is `3,000 crore, while the market share of branded and unbranded products is more than `10,000 crore.

In the sink market, there are a few players who are not doing it cleanly,” he said.

Elaborating on the company’s national presence, Malhotra said, “We have a strong base in India. Very soon, we will be launching hardware products and plumping pipes, etc. We have our presence in the Gulf region.

For the time being, there are no plans for further expansion abroad.”

PRAYAG POLYMERS

The brand has achieved a strong foothold not only among institutions like CPWD, Indian Railways, Defence, NTPC, BHEL, SAIL, ONGC, state PWDs, BSNL, ordnance factories, etc but also with leading private builders, real estate companies, architects and public and commercial enterprises. It is easily available across the length and breadth of the country through extensive dealer network.

Products The new range is inspired by French reflection of luxurious and artistic designs and has

Anil Malhotra

been termed Washrooms (washbasins) and Restrooms (WCs). “The French inspiration has many unique designs and a wide variety to choose from. The collection is available in white and ivory, while there are some unique concepts of washbasins with gold look that can blend perfectly with the vintage as well as contemporary designs one desires for,” he said.

According to him, the brand extension has been planned in a strategic way, considering the demand for finest quality products at competitive rates that Prayag’s brands have been known for.

Prayag has revolutionised the concept of PTMT SYMET, a form of synthetic metal bonded with exceptional properties of synthetic and metals, offering leakage-proof and theft-proof high quality faucets and showers.

The firm has its state-of-the-art manufacturing plant in Bhiwadi.

Last year, the company’s turnover stood at `450 crore.

Prayag’s association with IPL as the major sponsors of the Kings XI Punjab is well-known.

Malhotra justified the relation between cricket and business.

“We have been associating with cricket because it’s a popular game. We associated ourselves with the Asia Cup recently. In IPL, this is for the third year that we are sponsoring Kings XI Punjab. Association with an IPL team gives a big push to the brand in the market. It strengthens our brand with high credibility and reliability in the long run. The team is performing well and I hope they lift the cup,” he said.

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ECOPRENEuR RAK PAINTS

Painting

Providing superior quality products without any trade-off on environmental conservation seems to be the success mantra of RAK Paints. While many bigwigs had written it off as a tall order, the fledgling RAK Paints is all set to prove the sceptics wrong by ameliorating the over-clichéd industry of decorative paints and industrial and high-performance coating paints through assimilation of fresh concepts of anti-carbonation and anti-bacterial emulsions. The end-product is an amalgam of lead-free, pure, hygienic, and low volatile organic compound paints MI bureau

the industry green

R

AK Ceramics, the promoters of RAK Paints, has earned a name for itself as the leading manufacturer of ceramics, porcelain, tiles, and sanitary ware with manufacturing bases in several countries. Under its aegis, RAK Paints was formed in 2008. Currently, their Ras Al Khaimah plants alone boast of a production of approximately 25,000 litres of waterbased and 10,000 litres of solventbased products and a client base in more than 40 countries. Recently, the company officials had formulated a plan to enter the South Indian market as part of a test run for expansion within the country.

“Kerala is a very important market in South India and we decided to start from here due to various reasons. Climatic conditions always play a challenging role in testing certain properties of exterior/interior

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emulsions, such as the anti-fungal and anti-algae properties of the paint,” says Mohammad Zabud, Head of Sales and Marketing of Arabian Links, an exclusive importer of RAK brands. The official intimates that the company intends to leverage the strong brand value of RAK in tiles and sanitary ware segments in South India. “RAK Paints has a distinctive edge over all its rivals due to the use of ultramodern technologies for creation of a wide range of products

The latest offering of RAK Paints is the manufacture of water and solvent-based paints. The main innovation lies in specialty products such as anti-bacterial paints, which can help fight infection to a great extent in high-risk scenarios like blood transfusion

suiting a wide range of applications in different budgets. Moreover, the company incorporates only the latest technology in the field,” he says.

The latest offering of RAK Paints is the manufacture of water and solventbased paints. The main innovation lies in specialty products such as antibacterial paints, which can help fight infection to a great extent in highrisk scenarios like blood transfusion.

Moreover, due to the lead-free and low volatile organic compound contents, the painter is completely devoid of any irritation.

The master stroke, in a tropical country like India, was the new heat insulation coating product which comes certified with the ability to reduce the ambient temperatures inside a house by 5 to 7 degrees.

Interestingly, all of these achievements have been made without any compromise on safety of the environment. “Hi-tech machines and equipment, combined with the best quality raw materials, have been used to produce eco-friendly paints and coating systems,” says Zabud.

MEET ThE ENTREPRENEuR RAJEEV KARwAL

R

ajeev Karwal, the Founder and CEO of Milagrow HumanTech, is a pioneer of robotic technology and tabtops.

Futuristic he is, but at the core of his success is a set of human values he picked up at a tender age. As a schoolboy, he once accompanied his father to the market and stole a little brass weight from a shop. His father was in deep embarrassment when the shopkeeper informed him about the theft by his son. Not a word was uttered until they reached home. Then, his father made him draw seven lines on the floor with his nose, and that was the first time he learned what it means to be truthful and honourable.

Rajeev still follows each principle taught by his parents in everything he does and his deep-rooted faith in those lessons has made him a successful management professional and entrepreneur. “My father and mother represent everything that I am and I strive for. In each and every activity of mine, I see their perspective. They had lesser opportunities than me. Hence, whenever I achieve something, I feel that they are achieving it through me.

It gives me satisfaction to see them happy,” says Rajeev, who has made Milagrow the top domestic robots company in India and a fast growing brand in the Tablet PC space.

While starting his career in Onida in 1984, Rajeev made the most of his opportunity by mastering the nuances of sales and marketing. In 1992, he joined Hispano Kaycee in Spain. “It was an Indian origin transnational where I headed a multinational work force. While there, I learnt a lot about international trade and leading global teams. On return to India, I worked with LG from 1996 to 2000. This was a startup during those days and in my role as the Sales and Marketing Head, I conceived an integrated and ambitious rollout of LG brand in India across various product categories,” he says.

Of human values and

robotic vision Meet Rajeev Karwal, who had been instrumental in shaping up the fortunes of some major firms and bringing out novelty in his own business regime MI correspondent

June 2014 MONEY INDICES

55

MEET ThE ENTREPRENEuR

Milagrow tabtops are known for cutting-edge technology and innovation. I am sure that by the end of this decade, you will see Milagrow tabtops at the very top. Yes, I know it is a treacherous climb thereafter, he took up the Electrolux turnaround challenge from 2003 to 2005. “It was a similar case like Philips. It involved a lot of production revamp, labour, stakeholder, and government issues. In 2006, I joined Reliance Digital as the President and CEO. I had the opportunity of being the architect of an ambitious retail foray by Reliance,” he recalls.

Rajeev’s corporate experience helped him evolve as an entrepreneur later. In 2007, he founded Milagrow Business & Knowledge Solutions. “Till 2011, it was a consulting firm.

In 2012, we set up the HumanTech division. The lessons of my past have a crucial role to play in whatever I do today.

As they say, learning never finishes. Even today, I unlearn, learn, and relearn every day,” he says with a smile.

Tablets and TabTops

Milagrow has three categories of consumer robots now: floor robots, window robots, and body massaging robots He was able to build high performance teams and a very vibrant brand by travelling extensively to every nook and corner of India. From 2000 to 2003, he worked at Philips India’s consumer electronics division as Senior VicePresident. The unit was bleeding a loss of nearly `34 crore at the time. In the first six months, the division totted up an operating profit of nearly `25 crore, up from an operating profit of `13 crore in the first half of 2001.

It was a case of turnaround and brand revival. It involved repositioning of the brand, rejuvenating the product range, the organisation, and the distribution channel. The exercise was extremely successful and

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MONEY INDICES June 2014

Speaking about Milagrow’s tablets and tabtops, he says, “We focus on consumer robots and mobile technologies.

Consumer robots are going to be the industry of the next century. Tablet PC, on the other hand, is the industry of the decade. A decade is a long time. The tablet will replace the desktop and the laptop as technology evolves. Fly by night operators will lose out and only serious players will remain.

Milagrow tabtops are known for cutting-edge technology and innovation. I am sure that by the end of this decade, you will see Milagrow tabtops at the very top. Yes, I know it is a treacherous climb.”

Rajeev is of the opinion that Indian brands (technology products) still lack the potential to become strong competitors in the global arena. “None of the Indian brands have done anything on the technology front.

No innovation, no patents. Milagrow wants to be different. We will invest at least 10 per cent of our revenues in R&D every year and participate in global technology consortiums.

If required, we will acquire some companies to build a global technology powerhouse,” says Rajeev, who was voted one of the Stars of the Millennium

by Business India in 2000.

RAJEEV KARwAL

MSME and the new government

“The new government should address issues related to Goods and Services Tax. Secondly, there should be digitisation of all inspections and records with transparent assessments and penal provisions. The discretionary power in the hand of the government servants has to go, if businesses have to run cleanly. Thirdly, the government should make a part of the salary of government employees performance-based, so that files do not stop and work happens smoothly. If files move normally, Indian economy will move at double the current speed,” says Rajeev.

On the corporate social responsibility (CSR) activities of his firm, Rajeev says, “We do a lot of CSR related to encouragement to ethical business and sports. We have a society which we fund on our own. It is called Forum for Ethical Business. We also give a percentage of our earnings to Ms Saina Nehwal to further the interest of Badminton in India.”

To budding entrepreneurs, he says that hard work can’t be replaced. “You can make large global corporations out of India.

Please think big and stay with your companies and ideas long enough,” says Rajeev, whose first book, “Corporate Blogging in India”, was released in 2008.

Rajeev feels that the MSME sector in India is caught in a vicious circle.

“Very few companies are able to break out of the MSME orbit and make it big. The MSME sector needs timely funds, best manufacturing, marketing and supply chain solutions, but lacks the resources to get them. The MSME sector gets massively abused by corrupt government officials,” he alleges.

Very few companies are able to break out of the MSME orbit and make it big. The MSME sector needs timely funds, best manufacturing, marketing and supply chain solutions, but lacks the resources to get them

Innovations in business The concept of robots evolved in his business in 2012. He has a valid reason for that. “I believe that by the turn of the decade, consumer robots would be a must for every urban customer living in a metro city. Humans serving humans will be replaced by robots. People living in metro cities have rising incomes, less time, less domestic help, security issues, high-rise dwellings, etc. With increasing longevity, the needs of senior citizens can be best met by intelligent robots which can function with minimum human interaction,” he says.

“We are among the early movers. Hence, we have to try much harder. That also makes us move ahead on the learning curve,” he says with confidence.

Milagrow has three categories of consumer robots now: floor robots, window robots, and body massaging robots. “We will add two new categories in June (lawn robots and pool robots). Two more categories will be added before Diwali (robotic kits and companion robots),” reveals Rajeev, who expects the company to net a turnover of half a billion dollars by the turn of the decade. He refused to divulge the recent turnover figures of the company.

This year, Milagrow will launch India’s first 24x7 Cloud Connected Floor Cleaning Robot. After finding a strong foothold in India, Milagrow has decided to expand globally with its innovative range of products.

Consumer Robots by Milagrow 1 India’s first Floor Cleaning Robots 2 Window Cleaning Robots 3 Body Massaging Robots 4 India’s first Lawn Mowing Robots 5 India’s first Swimming Robots 6 India’s largest range of Robotic Kits 7 Living Robots

June 2014 MONEY INDICES

57

SPECIAL STORY SAND IMPORT

Cambodian sand strikes gold?

Sand is priceless.

The paucity of river sand for construction activities has forced buyers to look for other options. In this case, the search for sand led Indian buyers to Cambodia

BY K.R. Rejeesh

58

I

mported Cambodian sand, the latest addition in the sand market, has managed to capture the attention of buyers within a short span of time. For the first time, Coimbatore-based Raja Steel Private Ltd imported a shipment of river sand from Cambodia on April 18, 2013, to Cochin Port. The first consignment contained more than 32,000 tonnes of sand.

“Sand is abundant in Cambodia. Dredging and exporting sand are major sources of income for people there. Apart from India, they export sand to countries like Singapore and Indonesia,” says S Rajet, GM, Operations, Raja Steel, without divulging details of the sand trading agency in Cambodia.

Rajet says that there’s a huge demand for Cambodian sand. “There is no gravel and wastage in this sand. Customers can directly use it. In ordinary sand, the cleaning process is also involved and the customer has to bear labour charge. Considering these things, technically, we have a reasonable price,” he says. Sources say that this type of sand is yet to be distributed fully.

At present, the annual consumption of sand in India is estimated at 30 billion tonnes. Once the demand in the housing sector revives, the annual consumption of sand in India is expected to increase substantially.

The first consignment of sand was denied customs clearance at the Port. As a result, the sand was quarantined at the

MONEY INDICES June 2014

Port for more than six months. Authorities contended that the piles of sand could “cause ecological impacts as they could contain microorganisms or other biological materials.” Raja Steel filed a case in the High Court of Kerala, and on August 7, the High Court issued a judgment in favour of the importer.

Close on the heels of Raja Steel, Chennaibased firm Titanix imported about 36,560 tonnes of sand from Cambodia in a vessel named Sam Dragon, which reached Cochin Port on April 7, 2014. In Kerala, it is the non-availability of river sand that forces the needy to purchase sand from neighbouring states. But even then, one has to compromise on quality. Sellers have adopted ‘bizarre mixing’ methods to sell sand as original sand for construction. According to Sujith (name changed), who had been engaged in sand mining on the banks of Neyyar river before, sand sellers mix sea sand with black oxide or mud to pass off it as proper construction sand. “After crushing soft rocks, once you filter and mix it in different ways, the sand may look like perfect sand. This type of sand is coming from Tiruchy, Tamil Nadu,” he reveals.

the annual consumption of sand in India is estimated at 30 billion tonnes. Once the demand in the housing sector revives, the annual consumption of sand in India is expected to increase substantially

SAND IMPORT

He used to sell one load of river sand (that could fill up a mini-lorry’s storage box) for `11,000. One has to pay minimum `48,000 to `50,000 for one load of sand from places like Tiruchy.

Threat to ecology?

Several sand distributing agencies have evinced interest in importing sand, especially after the High Court eased norms on imported sand. As a result, construction sand will not require Plant Quarantine (PQ) clearance. However, experts express concerns over the imported sand from other countries. Primarily, they forecast a detrimental effect to the environment due to the import of sand.

Dr T V Sajeev, a scientist at Kerala Forest Research Institute (KFRI) says that there are ill-effects to our ecology when sand is imported from other countries. “The major impact would be that caused by alien invasive species (AIS). AIS are those which gain entry into a region outside its normal geographic distribution, and due to the lack of predators in the new place, they increase their population

Several sand distributing agencies have evinced interest in importing sand, especially after the High Court eased norms on imported sand. As a result, construction sand will not require Plant Quarantine (PQ) clearance. However, experts express concerns over the imported sand from other countries.

Primarily, they forecast a detrimental effect to the environment due to the import of sand causing ecological and economic impact,” explains Sajeev, adding that no studies have been conducted on this issue so far.

“The sand could probably contain seeds of exotic species which can spread in Kerala. AIS gain entry to a new country in two ways: firstly, we bring them for some specific

June 2014 MONEY INDICES

59

SPECIAL STORY

purpose and it escapes to the wild. Secondly, it enters referred above should be made to the Plant Protection inadvertently. Inadvertent introductions can happen along Advisor in the prescribed form along with required fees with the sand,” he adds. etc, and if satisfied with the purpose for which such According to him, we have nearly 80-plus species of consignment is being imported, he issues a special permit alien invasive plants in Kerala which have various levels of for its import. impact on ecology and economy.

The consignments of soil, peat, sphagnum moss, etc Reacting to this, Rajet of Raja Steel says, “You can’t is inspected, fumigated, disinfected, or disinfested by underestimate Indian officials. We have to follow certain the importer through an agency approved by the Plant procedures to import sand. A lot of documents are required Protection Advisor under the supervision of an officer duly for the import. We have to submit it. The quality of the sand authorised by Plant Protection Adviser. suits the Indian market. If we find another country’s sand Cambodia’s position on sand dredging and export suitable, we will go there. Anybody can tell their opinion.

Interestingly, sand dredging has been banned in Cambodia.

The High Court has heard our points.”

Prime Minister Hun Sen banned sand exports in May 2009.

“This trade is involved with banks. They are not fools.

Hun Sen banned the export of dredged sand in what was The world’s renowned construction companies are involved deemed an effort to protect aquatic biodiversity. According in this trade. It (the trade) has ethics and formalities. There to The Cambodia Daily, the sand imported by Raja Steel was are labs to test sand. Since a lot of extracted from the river Koh Kong in money is involved in the business, as Cambodia and brought to Cochin Port an investor, we have studied it well,” he As per the Plant Quarantine by the vessel Hongxin Blue Sea. The says. consignment of sand was worth about (Regulation of Import into Officials of Titanix were tight-lipped $1.5 million. It also adds that a ban and refused to reveal anything about India) Order 2003 and its on sand mining is still on. Cambodian their import of sand. various amendments, import sand has huge demand in countries like As per the Plant Quarantine Singapore and Indonesia.

(Regulation of Import into India) Order of soil, earth, clay, compost, As per the website of the newspaper, 2003 and its various amendments, and sand is permitted only for LYP Group, owned by prominent import of soil, earth, clay, compost, businessman and Cambodian People’s any microbiological, soiland sand is permitted only for any Party (CPP) Senator Ly Yong Phat, was microbiological, soil-mechanics, or mechanics, or mineralogical issued a license in September 2010 to mineralogical investigations. The import dredge sand from Koh Kong’s Tatai investigations. The import of peat or sphagnum moss is allowed River. It further adds: “The legality of only for horticultural purposes through of peat or sphagnum moss is LYP’s dredging in Koh Kong has been a specified air or sea ports or land custom allowed only for horticultural source of uncertainty since the firm was station, on applications made for that its licence a little over a year purpose. purposes through specified air granted after Hun Sen’s export ban.”

The application for the purpose

or sea ports or land custom station, on applications made for that purpose

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SAND IMPORT

According to a report in 2012 by Global Witness, an International NGO based in London, around 796,000 tonnes of sand were being exported every month.

Local fishermen began to protest, vandalising dredging equipment, and 1,500 fishermen filed joint complaints to the provincial government. As a result, the Prime Minister announced a ban on sand exports in 2009, but the ban, however, was only for river sand and not sea sand An official at the Ministry of Industry, Mines, and Energy claims, “Basically, there is no more sand dredging there. Yong Phat’s licence expired a long time ago and the dredging has stopped since the ban was issued.”

According to sources, suppliers of sand in Cambodia are able to supply one cubic foot of sand at around `12. The importer will have to spend on shipment and duty. Last year, Cochin Port had earmarked a 20,000 square metre area in two places in Willingdon Island which will be able to store one lakh tonnes of sand.

According to a Port official, sand distributing agents in Kerala and Tamil Nadu are eyeing sand imports from the UAE and Burma on a large-scale through the Port. This is expected to help the Port garner additional revenue.

Case study In a case study by Lee Kuan Yew School of Public Policy (LKY School), National University of Singapore, dredging along the rivers of Koh Kong had devastated the rich marine life and destroyed the livelihood of the poor fishermen and villagers.

Singapore Ministry of National Development says that the import of reclamation sand was done on a commercial basis by Jurong Town Council, a statutory board under the Ministry of Trade and Industry. As per the rule, all sand suppliers have to abide by the source country’s procedures and ensure extraction of sand does not cause “adverse impact to the environment”.

While Cambodia was a country rich in natural resources, 36 per cent of its people still lived in poverty and 1.7 million Cambodians still struggled to ensure daily sustenance. Sand

dredging was a familiar sight to Cambodians. Cambodia was growing fast and there was a need for sand for construction of new houses and buildings. The sand supplied was usually from the Mekong River and for local use. Certain officials also claim that there was a need to dredge, in order to prevent flooding.

According to a report in 2012 by Global Witness, an International NGO based in London, around 796,000 tonnes of sand were being exported every month. Local fishermen began to protest, vandalising dredging equipment, and 1,500 fishermen filed joint complaints to the provincial government. As a result, the Prime Minister announced a ban on sand exports in 2009, but the ban, however, was only for river sand and not sea sand. The announcement did not have any impact on the operations of the businesses and sand dredging along the rivers went on as usual, says the report.

The report reveals that the concessions for sand dredging in the Koh Kong Province had been awarded to three companies behind closed doors - Mong Reththy, LYP Group, and Udom Seima. Two of these companies, Mong Rethythy and LYP Group, belonged to powerful senators.

There were no records of the process under which they had been awarded the licences.

Singapore, one of the major importers of Cambodian sand, used to source the bulk of its sand from Indonesia.

In 2007, Indonesia abruptly banned all sand exports to Singapore, citing environmental reasons. This led to a sand crisis and building activity almost came to a halt.

As a result, Global Witness says, Singapore has turned to Cambodia, where laws are weak.

June 2014 MONEY INDICES

61

MANAGEMENT IIM-TIRuChIRAPPALLI

Indian Institute of Management-Tiruchirappalli (IIMT) is a fairly new institution in management education. While the institution is in the process of setting up its campus, Money Indices caught up with IIMT Founder Director Dr Prafulla Agnihotri for an insight into the institution’s philosophy of learning and its activities. Excerpts from the interview…

MI BUReau

How well is IIMT prepared to mentor other management institutes?

IIMT has 25 faculty members. Two more are expected to join soon. IIMT has filled up all key administrative posts like CAO, FA&CAO, PGP and FP Officers, Admission Officer, Personnel Officer, etc. We also have a very highly qualified, experienced, and efficient librarian to manage our library. As a result, IIMT has enough manpower to run its own management programmes and mentor upcoming business schools, if they need any help of ours.

How important is it to have gender diversity in a management class?

Diversity is an important aspect in one’s education. As one has aptly put it, “learning is understanding the difference between two points of views.” If there’s more diversity in the class, we can experience more diverse points of view and more learning.

This is where many American and European business schools score over Indian business schools, as these foreign business schools have students from a number of countries, bringing with them a rich bouquet of perspectives, making learning full of

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MONEY INDICES June 2014

‘Learning should be fun’ fun, yet a different experience. This is equally true for gender diversity.

We can learn a lot when the class is a heterogeneous mix of students from different backgrounds.

What is the contribution of IIMs in nurturing good leaders of tomorrow?

IIMs give a practical and handson management education. They use real life case studies and offer projects and assignments to their students.

Students also get an opportunity to assist their faculty members on consulting assignments in the industry, which gives them a practical exposure and allows them to peep

The world is passing through a turbulent phase. The commercial world was never so uncertain.

One has to make quick decisions.

Product life cycles are shortening.

As a result, life in the corporate world has become fast-phased.

Management education was never so relevant before

into the corporate world. Typically, IIMs offer a far larger number of courses than many non-IIM business schools which also offers a wider exposure to the students of IIMs. It is because of this knowledge base that many students from IIMs who have entrepreneurial spirit in them wish to start their own businesses. We have seen a number of empires being built by students of IIMs. Some others venture into different social activities and excel in those fields. We have seen a number of such examples in Indian socio-cultural and commercial environment.

How relevant is management education now?

The world is passing through a turbulent phase. The commercial world was never so uncertain. One has to make quick decisions. Product life cycles are shortening. As a result, life in the corporate world has become fast-phased. Management education was never so relevant before. It equips the students with necessary skills to make decisions – preferably the right decisions. If someone goes wrong, it gives the student a chance to come back and join some other profession,

IIM-TIRuChIRAPPALLI

company, or industry, since he has the requisite qualification.

Leadership style is largely determined by the type of followers a leader has, the nature of task a leader needs to accomplish, and the environment in which he has to operate

What are your plans on increasing the diversity on campus?

As mentioned earlier, diversity is the key to business education. We shall aim at attracting students from other foreign countries once our campus is ready.

How do you see the future of executive education in India?

Future of executive education in India is bright. There are a number of executives working in the Indian industry who did not have an opportunity to do a full-time MBA from a reputed institute. It is necessary for them to acquire an additional qualification so that they can move up the corporate hierarchy.

There is also a need to update one’s own knowledge base periodically.

Business schools can conduct Management Development Programmes (MDPs) for this purpose.

Understanding the need for both executive MBA programmes and short duration MDPs, IIMT has launched two executive programmes – Post Graduate Programme in Business Management and Post Graduate Programme in Human Resource Management at its Chennai Centre. It will cater to the needs of working executives who would like to add professional management education from an IIM to their existing qualifications and move up the corporate ladder. It also offers few one-year certificate programmes to the working executives spread all over India through satellite mode. These are one-year programmes where the classes are held once or twice in a week in the evening.

IIMT offers a number of MDPs which are short duration programmes for the working executives at its Chennai centre.

How would you describe your leadership style?

Leadership style is largely determined by the type of followers a leader has, the nature of task a

Dr Prafulla Agnihotri

leader needs to accomplish, and the environment in which he has to operate. I am fortunate to have excellent colleagues, both faculty and non-faculty members who understand their responsibility and are self-motivated. As a result, I need to be more participative and democratic so that I can involve them in decision-making. A participative leadership also makes the team members understand their importance and make them relate to the organisational goals.

What are the challenges that you face now as the Director of IIMT?

I was the first employee to join IIMT. I had to start my office with my own laptop and my own mobile phone. It was a challenging journey which I enjoyed thoroughly. I faced challenges in getting the right quality of faculty and non-faculty members, making students believe that IIMT can also offer them the same quality of education which the brand IIM

stands for, and offering them the same quality of education which older IIMs offer. In a small city like Tiruchirappalli, it is also a challenge to get good quality non-faculty members.

What are the major changes that were introduced in the curriculum of IIMT recently?

IIMT has introduced a number of courses relevant to the industry as well as society. It believes in holistic development of its students. It encourages its students to participate in various extra-curricular activities.

Participation in these extra-curricular activities helps students hone skills like leadership which cannot be taught in the classroom. It also believes in experiential learning wherein the students must experience what they are learning. It offers a number of live projects to the students so that they can get practical orientation and do not become just bookworms.

June 2014 MONEY INDICES

63

SOCIAL RECONSTRuCTION KERALA’S PRISONS

The positive face of

prisons Condemned to a life in prison, convicts seldom find the courage to redeem themselves in a world they once violated by their criminal acts. That was the story until yesterday. Today, Kerala’s prisons are agog when it comes to transforming the lives of its convicts through some progressive means of atonement and reformation. They bury their criminal past in the prison and come out as learned, reformed, and gentle, at the end of their jail terms, with a vow not to repeat the past. At the same time, prisons have been successful in employing the skills of the inmates for development of a forward-looking model of self-sustenance and welfare

I

BY Subin Mananthavady

n recent years, prisons in Kerala have transformed into progressive centres of reformation by shedding their image as dangerous dungeons of oppression and bad influence. These changes are in line with larger improvements in the prison systems across the country and in harmony with the policy of humanisation towards the condemned. Prisons in Kerala now produce a large number of SSLC and degree holders who aspire for a fresh start in life with a reformed self that is far removed from the criminal behaviours of the past. The fact that some of these convicts even go on to become authors only indicates a diametrical change in the role of prisons in the lives of prisoners.

Prisons are making a concerted attempt to channelise the positive energies of inmates by engaging them in a creative and constructive study

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MONEY INDICES June 2014

and work environment that not only benefits them but also the larger society.

Babu Mathew, a native of Payyavur near Taliparamba in Kannur district, was studying for MCA at Erode Arts College in Tamil Nadu when he accidentally killed a person during an altercation over theft of money. He was sentenced to life imprisonment on December 21, 2008. Recently, he was released following commutation of his life sentence to seven years. His appeal was entertained for a reason. Babu had created history in Kerala a couple of years ago by becoming the first inmate of Kannur Central Jail to secure an MBA degree, from Pondicherry University. “The MBA gave me confidence to continue my studies and enhance my chances of getting a better job,” says Babu. “My ambition was to become a software engineer or a database administrator.

I feel very sad about the murder and

how it had spoiled my life. However, I was lucky to get permission for higher studies while in jail. I owe a lot to the jail authorities who permitted me to study.”

“It is not that easy to get out of jail and lead a normal life. A convict is always a convict in the eyes of the authorities and the public. It is not easy to overcome the stigma. Still, I want to be a role model for others by working for people,” says the 37-yearold. Now, Babu is on a job hunt and doing his MCom from Calicut University. He is married and has two children.

Rijo Joseph, 33, a native of Kalady in Ernakulam district, completed his BA and MA in English Literature from Calicut University, PG diploma in Tourism Management from Annamalai University, and MBA in Human Resource Management from Pondicherry University while in incarceration. He is a lifer serving sentence at the open

KERALA’S PRISONS

prison in Nettukaltheri in Thiruvananthapuram.

Now, he is pursuing MSc in Applied Psychology from Annamalai University.

“I killed a 65-year-old woman for money under the influence of drugs. I was a nursing student at Chitradurga in Karnataka at the time. Over the years, I have reformed myself, Alexander Jacob and I would like to become an academician after my jail term,” Rijo says. In 2008, Rijo had created history by becoming the first lifer to appear for the civil services examination. Rijo and Babu are not the rarest of rare cases of reformation. A large number of inmates in 52 jails across the state are engaged in various learning programmes, despite the constraints of a prison life. In the case of the open prison at Nettukaltheri, 148 inmates are pursuing their 4th grade, 7th grade, and SSLC. Two of them are even doing graduation and post graduation. In Kannur Central Jail, 84 inmates are studying for various courses. “We conduct classes from the primary to the high school level,” says K V Mukesh, Welfare Officer of Kannur Central Prison.

“The classes start at 9 am and end at 4 pm. We provide all facilities for the 4th, 7th, and 10th equivalent examinations.

While we have our own teacher, teachers from various schools and colleges have been offering their free services.”

Facilities are provided for contact classes for those pursuing graduation and post graduation courses. “We have started a study centre of Indira Gandhi National Open University at Kannur Central Prison. We use qualified inmates to teach others. Interestingly, the inmates have become disciplined,” says Mukesh.

Thanks to the involvement of inmates in constructive activities, Kerala’s prisons have become revenue-generating entities by following their own models of self-sustenance, and the economic activities range from agriculture, foodmaking and organic farming to brick production. According to the Prison Department, the food business of prisons have posted an impressive turnover of `22.28 crore in the 2013-2014 financial year as compared to `9.81 crore in 2012-2013 and `38.49 lakh in 2011-2012. People from all walks of life are queueing up in front of the sales counters outside the jails for chapati, chicken curry, and other food items. “In 2011, there was a debate in the Kerala Assembly on the escalating prices of food items in hotels across the state. That led to the idea of making food in jails, using prisoners,” says Alexander Jacob, former Director General of Prisons and Correctional Services and the man behind the concept of food-making in prisons. “On an experimental basis, we started production of chapatis in Viyyur Central Prison. When it proved to be a grand success, we extended the food business to other jails in the state. As of today,

nine prisons in Kerala, including three Central prisons, are engaged in food production. Poor people are the target customers. They are provided with quality food at affordable rates.”

K A Kumaran, Chief Welfare Officer, Jail Department, says, “We prepare high quality T P Senkumar food items, like chapatis, curries, idlis, biryani, banana chips, laddoos, and cakes, in the most hygienic conditions and serve them fresh at affordable prices.”

Reforms implemented in the last few years have brought about many revolutionary changes in the state’s prisons, Kumaran says, adding that all prisoners are now fully engaged and most of them have developed positive thinking.

According to the Prison Department, the food business of prisons have posted an impressive turnover of `22.28 crore in the 2013-2014 financial year as compared to `9.81 crore in 2012-2013 and `38.49 lakh in 2011-2012

SOCIAL RECONSTRuCTION

Income generated from commercial activities in Kerala prisons

K A Kumaran

K V Mukesh

T P Senkumar IPS, Director General of Prisons and Correctional Services, says, “We started production and sale of a variety of food items, commercial cultivation of vegetables, fruits, paddy, medicinal plants and flowers, and dairy and poultry farming, in addition to conventional activities such as weaving, carpentry, and soap- making in the jails, to help prisoners develop useful skills, as they usually while away their time playing cards or plotting to escape. We are planning to introduce some new skilled jobs like coconut-climbing and beauty therapy.”

Food business in Kannur Central Prison has contributed `1.71 crore profit to the government exchequer in 2013-2014. This Central prison has now launched food products under the brand name ‘Malabar Freedom’.

Mukesh says, “We are making 25,00030,000 chapatis daily. We are selling food items at the main counter outside Kannur Central Prison and through a mobile unit that goes all over Kannur town. We have plans to expand the coverage area of the mobile unit. One chapati is available for `2. Egg curry and vegetable curry are priced `15 each, and chicken curry is sold for `30.”

After the success of chapatis, the prison launched banana chips in March 2013. “We expanded the business only because of wide acceptance of our products. The price of one kg chips is `200, and we are making nearly 250 kg chips daily,” says Mukesh. As many as 75

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MONEY INDICES June 2014

Financial year

manufacturing items

Garden produce

food products

cattle / poultry

Laterite stone

2009-2010

89.1 lakh

1.2 crore

0

0

0

2010-2011

94.6 lakh

1.5 crore

0

0

22,464

2011-2012

76.9 lakh

1.8 crore

38.4 lakh

0

6.4 lakh

2012-2013

92.1 lakh

1. 7 crore

9.8 crore

5.6 lakh

28 lakh

2013-2014

8.1 lakh

23.2 lakh

22.2 crore

6.1 lakh

0

inmates are engaged in the foodmaking business at Kannur Central Prison. Prisoners are also engaged in cultivation of paddy, long beans, banana, cabbage, and sugarcane.

According to the Prison Department, the prison garden produce turnover was `23.23 lakh in 2013-2014. The turnover was `1.75 crore in 20122013 and `1.89 crore in 2011-2012.

“These kinds of activities have not only been bringing a steady income to the inmates, who use it for supporting their families or save it for their own future business, but also been having a therapeutic effect on them,” says Senkumar. “A prisoner engaged in cooking and food processing gets `117 a day. This dissuades them from returning to crime upon release, and the money sent home from prison ensures that their families don’t do anything illegal to survive. At the end of the month, each prisoner’s family receives `3,500.”

Apart from education and income generation opportunities, the prisons

help inmates in development of their literary and creative skills.

There are several published authors among inmates and their books have been well-received by readers and reviewers. ‘Jailil Mottitta Kathakal’ (Stories blossomed in the prison) is a collection of short stories by 34 inmates of various jails in the state. The book, a brainchild of the Prisons Department, was published by Poorna Publications, Kozhikode. “The stories of the book were selected in a competition. Lissy, a 40-year-old from Chulliyode in Wayanad district and an inmate of Women’s Jail, Kannur, came first in the competition. “I want to write more. The award is the first recognition of any kind in my life,” says Lissy. K N Shobhana, Kannur Jail’s Welfare Officer (in-charge), says that now, more inmates have expressed desire to write stories and poems. “The Prisons Department organises poetry, essay, and short story contests every year to find upcoming writers,” says Kumaran.

column

Shock-proofing your equity investments

By Arun Gopalan

Looking at Index Returns can be misleading The Mutual Fund industry has existed in India for a little over two decades now. It is still maturing and evolving as an industry, constantly innovating and designing new products and services to make it easier for the investor to deploy his money in various asset classes. While equity investments are an effective means of wealth creation, have they in the Indian context lived

up to this reputation? Ask any investor this question and the answer may not be an enthusiastic “Yes!” In fact, equity as an asset class itself hasn’t delivered very exciting returns in the last 20 years that the National Stock Exchange (NSE) has been in existence.

In the 15 years between 1999 and 2014, the NSE’s Nifty has delivered only 9.64% CAGR. But a stable, standard MF Scheme like the large cap Franklin India Bluechip Fund has delivered 15.88% CAGR in the same period,

while the mid cap Reliance Growth Fund has delivered 17.83%. Quite clearly investing in equities via mutual funds is definitely a better alternative to uninformed investment in direct equities. But quite frankly, rarely does one remain invested uninterruptedly for periods as long as 15 years. Most investors are looking at 3-5 years.

What is the best method of investing in these funds and what is the ideal duration? I seek to explore the same in this write-up.

Market crashes, bear phases, and more severe economic downturns are not something which the common investor can either forecast or be prepared for. This was evident in the time of the sub-prime crisisled crash of 2008-09 and the years that followed

June 2014 MONEY INDICES

67

COLuMN

Sip investment investment in large cap funds - cagr% over various timeframes Scheme Name

01/04/1999 - 01/04/2000 31/03/2006 31/03/2007

01/04/2001 31/03/2008

01/04/2002 31/03/2009

01/04/2003 - 01/04/2004 31/03/2010 31/03/2011

01/04/2005 31/03/2012

01/04/2006 - 01/04/2007 31/03/2013 31/03/2014

SIP Investment - 7 years (CAGR%) Reliance Vision Fund

51.06%

47.17%

45.56%

19.88%2

5.82%

18.24%

9.72%

3.56%

7.94%

HDFC Top 200 Fund

42.16%

40.92%

41.24%

21.74%

29.79%

24.31%

14.83%

10.56%

12.42%

Franklin India Blue Chip Fund

36.81%

36.83%

36.45%

17.83%

25.99%

20.46%

13.27%

9.92%

11.16%

01/04/2003 31/03/2008

01/04/2004 31/03/2009

Scheme Name

01/04/2001 - 01/04/2002 31/03/2006 31/03/2007

01/04/2005 - 01/04/2006 31/03/2010 31/03/2011

01/04/2007 31/03/2012

01/04/2008 - 01/04/2009 31/03/2013 31/03/2014

SIP Investment - 5 years (CAGR%) Reliance Vision Fund

68.46%

49.14%

36.09%

3.72%

18.22%

12.81%

6.71%

3.03%

7.83%

HDFC Top 200 Fund

59.32%

46.82%

37.08%

7.72%

23.77%

20.37%

12.74%

10.32%

11.20%

Franklin India Blue Chip Fund

53.02%

42.97%

32.82%

4.47%

20.69%

16.89%

11.18%

10.81%

10.46%

01/04/2005 31/03/2008

01/04/2006 31/03/2009

Scheme Name

01/04/2003 - 01/04/2004 31/03/2006 31/03/2007

01/04/2007 - 01/04/2008 31/03/2010 31/03/2011

01/04/200931/03/2012

01/04/2010 - 01/04/2011 31/03/2013 31/03/2014

SIP Investment - 3 years (CAGR%) Reliance Vision Fund

68.98%

38.43%

22.26%

-17.28%

8.18%

19.57%

4.00%

-5.22%

11.52%

HDFC Top 200 Fund

67.65%

37.77%

25.54%

-11.71%

25.37%

28.23%

11.02%

2.35%

13.73%

Franklin India Blue Chip Fund

61.23%

34.90%

22.05%

-13.92%

22.45%

25.22%

8.75%

4.27%

11.76%

Sip investment investment in mid cap funds - cagr% over various timeframes Scheme Name

01/04/1999 - 01/04/2000 31/03/2006 31/03/2007

01/04/2001 31/03/2008

01/04/2002 31/03/2009

01/04/2003 - 01/04/2004 31/03/2010 31/03/2011

01/04/2005 31/03/2012

01/04/2006 - 01/04/2007 31/03/2013 31/03/2014

SIP Investment - 7 years (CAGR%) Reliance Growth Fund

54.84%

52.31%

52.80%

26.02%

33.81%

22.45%

12.06%

7.35%

8.58%

Franklin India Prima Fund

52.42%

44.66%

40.17%

10.47%

22.64%

14.53%

9.23%

9.93%

15.11%

Tata Mid Cap Growth Fund

39.01%

34.25%

18.01%

8.19%

20.25%

13.33%

8.89%

6.21%

11.42%

01/04/2003 31/03/2008

01/04/2004 31/03/2009

Scheme Name

01/04/2001 - 01/04/2002 31/03/2006 31/03/2007

01/04/2005 - 01/04/2006 31/03/2010 31/03/2011

01/04/2007 31/03/2012

01/04/2008 - 01/04/2009 31/03/2013 31/03/2014

SIP Investment - 5 years (CAGR%) Reliance Growth Fund

76.19%

59.61%

46.61%

7.05%

23.39%

15.60%

8.28%

6.73%

7.48%

Franklin India Prima Fund

70.37%

45.90%

28.84%

-10.07%

15.19%

12.11%

10.14%

13.80%

16.87%

49.67%

39.58%

13.76%

9.82%

7.73%

12.81%

Tata Mid Cap Growth Fund Scheme Name

01/04/2003 - 01/04/2004 31/03/2006 31/03/2007

31.76%

-7.25%

01/04/2005 31/03/2008

01/04/2006 31/03/2009

01/04/2007 - 01/04/2008 31/03/2010 31/03/2011

8.03% 01/04/200931/03/2012

01/04/2010 - 01/04/2011 31/03/2013 31/03/2014

SIP Investment - 3 years (CAGR%) Reliance Growth Fund

85.66%

46.87%

28.58%

-16.95%

24.37%

21.04%

4.46%

-1.09%

9.72%

Franklin India Prima Fund

72.98%

27.33%

8.21%

-30.18%

14.81%

23.70%

9.32%

7.27%

21.51%

Tata Mid Cap Growth Fund

59.23%

31.20%

19.50%

-27.12%

16.61%

17.16%

7.62%

0.74%

16.87%

One bad year can ruin many years of wealth creation Market crashes, bear phases, and more severe economic downturns are not something which the common investor can either forecast or be prepared for. This was evident in the time of the sub-prime crisis-led

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MONEY INDICES June 2014

crash of 2008-09 and the years that followed. Investor wealth had eroded to abysmally low levels and their faith in equity investments was shaken to the core. Even highly acknowledged funds like the HDFC Top 200 Fund and the Reliance Growth Fund managed to deliver a mere 4.20% and 5.14% CAGR in the five years from 2004 to

2009 as result of this downturn. While inflation soared to the double digits, Equity MFs were not appearing to be a lucrative option. So, is there any way in which the impact of this drastic fall in the value of equities could have been softened? Could the investors have protected their wealth better had they opted for a different investment style?

EQuITY INVESTMENT

Turn to SIPs… reliable instruments of sustainable equity returns The answer is that they could have mitigated the pain by using the Systematic Investing Plans (SIP). In the same time that the HDFC Top 200 Fund delivered 4.20% CAGR on a point-to-point basis, an SIP in the same period would have delivered 8.14% CAGR. The power of SIPs hinges on two very powerful mathematical concepts used in finance – (i) Compounding and (ii) Cost Averaging. Albert Einstein is widely rumoured to have said that “the most powerful force in the Universe is compound interest. He who understands it earns it… he who doesn’t pays it.”

But is compounding so simple in the Equity Markets?

Clearly, no! The markets do not yield a constant return and there are huge swings in the rates of return. But this varying rate of return can be converted to an advantage by employing the Principle of Rupee Cost Averaging. SIPs seek to do just that by investing a regular, constant amount, buying lesser units when the NAV is high and more units when the NAV is low.

So, how do I use SIPs to bullet-proof my investments against market shocks?

Now that we have understood that an SIP is a better method of investing in equities, it brings us to the next question – just how long should I commit to an SIP? Three years? Five years? Or a longer period? And how will this help my investments withstand market shocks, like the fallout of a market shock following the Sub-Prime Crisis?

Let’s take a look at the tables and read the interpretation that follows.

In the tables, I have compared the results of doing an SIP in a few typical Large Cap funds and Mid Cap funds, over various 7-year, 5-year and 3-year periods to determine which works best for the investor. We may say that the year 2009 was the year of the “Equity Shock”, when the effect of the global recession was felt fully in the Indian markets, with the Sensex touching a low of 8060 during the year. If we look at the returns of SIPs completed before 2009, the CAGR% is quite fantastic. But 2009 changed it all. Even if one had started their SIP prior to 2009, the market meltdown did major damage to returns. We observe that SIPs of three years’ duration have delivered negative or very poor returns as compared to the 5-year and 7-year SIPs. A 7-year SIP in the HDFC Top 200 Fund would have yielded an average CAGR of 19.49%, irrespective of which 7-year stretch one might have invested in, if 2009 came in between. But on the other hand, a 3-year SIP would have yielded an average of a CAGR of only 3.45%.

What do we conclude? Invest in Long-Term SIPs to withstand market vagaries.

I recommend investment in an SIP in stable and moderate large cap and mid cap funds for at least a 7-year period to mitigate the impact of stock market shocks and thereby creating sustainable wealth. This brings us to the old investment adage - What every investor needs is not ‘Timing the Market’, but ‘Time in the Market

So, quite clearly a longer duration SIP is a better protection against unexpected and large declines in the equity markets. Therefore, we conclude that equities will certainly remain the most attractive and rewarding asset class to be invested in. It is just a question of adopting the right investment style and remaining invested for the optimal duration. I recommend investment in an SIP in stable and moderate large cap and mid cap funds for at least a 7-year period to mitigate the impact of stock market shocks and thereby creating sustainable wealth. This brings us to the old investment adage - What every investor needs is not ‘Timing the Market’, but ‘Time in the Market’.

The author is VP – Research & Investments, Systematix Shares

June 2014 MONEY INDICES

69

column

Rupee: Volatility & Hedging

By Suresh Nair

The Indian Rupee has seen sharp volatility in the last few years. Deteriorating domestic economic scenario amid challenging global environment has led to weakness along high volatility in Rupee. Since 2011, the Indian Rupee has depreciated by near 26% against the US Dollar. The rupee has depreciated by 16%, 3%, and 11% in the calendar years 2011, 2012, and 2013 respectively. Any Indian corporate which is exposed to foreign exchange and is caught on the wrong side of the USDINR (US Dollar-Indian Rupee) moves would surely face great difficulties in conducting its normal business activities. Let’s look at two scenarios wherein companies can mitigate their risks Scenario 1 – A copper wire producer needs to import copper ingots as raw material. The company has a contract to supply copper wires to another Indian company in say six months’ time. To prepare for that, the wire company books the copper ingots required. Therefore, its US Dollar price for imports is fixed but it is still exposed to exchange rate volatility. At the time of making payment for imports, if the Rupee is higher, then the wire company stands to gain. However, if the Rupee depreciates sharply against the Dollar, then the input cost of the wire company would increase sharply, possibly leading to complete wiping off of its processing margins and possibly even leading to losses.

To mitigate this foreign exchange risk of the wire company, it would be beneficial if the company has a hedging policy. The company can have a clearer figure of its input cost in Rupees if it would fix its DollarRupee exchange rate. If, along with ordering its copper ingot, it hedges its exchange rate risk by buying the USDINR futures for the relevant period, the company can significantly protect its processing margins. If the Rupee weakens, i.e. USDINR rises, then, at the time of payment for its shipment, the company pays a higher Rupee amount for its shipment, but it gains on the hedge trade, thus nullifying the foreign exchange currency volatility. Here, the wire company can protect its margins successfully.

On the other hand, if the Rupee appreciates, i.e. USDINR falls, then the wire company gains by paying lower Rupee amount for its shipment. However, it would lose on the hedge trade. In this situation as well, the wire company would be able to preserve its processing margins.

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MONEY INDICES June 2014

Scenario 2 – An export-oriented company has its earnings in foreign currencies Yen, Euro, USD, Pound, etc. The foreign exchange volatility has a critical impact on the profitability and the total revenues of the export company. A rise in the Rupee, i.e. lower USDINR, negatively affects profitability whereas a lower Rupee, i.e. higher USDINR, positively affects the profitability of the export company. In this case, the hedge trade would be to sell USDINR futures to fix its Rupee revenues. If USDINR rises (Rupee falls), then the company loses on the hedge trade but will gain in the spot transaction.

Whereas, if USDINR falls (Rupee rises), the export company loses on the spot transaction but gains on the hedge trade. In this scenario, the export company is able to protect its margins by selling USDINR futures contracts.

The tools available for hedging USDINR exposure in India are OTC (Over the Counter) forwards contracts and futures contracts on exchanges. OTC USDINR forward contracts are basically interbank traded contracts which are traded through RBI designated Authorised Dealer Banks. The OTC market is usually preferred by large corporates who have bigger trading requirements as 1 lot is of 1 million USD. The futures contracts are more suited for small and medium corporates and individuals who have smaller exposure to foreign exchange. Both the forward and future contracts are cash settled using the USDINR RBI reference rate of the final trading day. In the futures market, 1 lot is of 1000 USD, thus giving greater flexibility to smaller traders. The following exchanges offer USDINR futures trading in India – NSE, MCX-SX, USE, and BSE. Among these, volumes and liquidity in NSE and MSX-SX is the highest.

Apart from USDINR futures contracts, EURINR, GBPINR, and JPYINR contracts are also listed for trading. However, USDINR remains the most popular contract for traders and hedgers. For more sophisticated traders, USDINR option contracts are also available for trading. The Indian currency futures markets are regulated by the Securities and Exchange Board of India and the Reserve Bank of India.

`

VOLATILITY & hEDGING

An export-oriented company has its earnings in foreign currencies - Yen, Euro, USD, Pound, etc. The foreign exchange volatility has a critical impact on the profitability and the total revenues of the export company. A rise in the Rupee, i.e. lower USDINR, negatively affects profitability whereas a lower Rupee, i.e. higher USDINR, positively affects the profitability of the export company

The author is Director, ADMISI Forex India Pvt. Ltd

June 2014 MONEY INDICES

71

GROuND REPORT NETAJI APPAREL PARK

f On the

actory

loor

72

MONEY INDICES June 2014

NETAJI APPAREL PARK

When you think of an Indian textile factory, or any factory for that matter, your mind automatically clings on to the images of a dark, out-of-bounds building pervaded by the whirring of machines and the quiet sobs of the oppressed working class. From horrific accounts of child labour, forced labour, and human trafficking to poor safeguards against industrial hazards, we have seen it all, thanks to chilling film yarns and activism against repression by social workers. Well, this isn’t a story about the factory of horrors. This is essentially about being in step with the needs of technological modernism. Netaji Apparel Park, a world-class knit wear production and export centre in Tirupur, is a breath of fresh air.

Boasting of world-class infrastructure facilities, employee happiness at the forefront, and a sunny atmosphere, Netaji Apparel Park is one of a kind in the country and its incredible reputation is vouched for by world leaders such as C&A, Wal-Mart, GAP, Marks and Spencers, Tommy Hilfiger, and H&M, just to name a few. Here’s a ground report from the textile hub of the nation...

Mi correspondent

June 2014 MONEY INDICES

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GROuND REPORT

L

ocated in Eettiveerampalayam village on the outskirts of Tirupur, the 170acre paradise of knitwear exports and manufacturing is sui generis in its strict compliance with social accountability standards, quality and environment management systems, working conditions, and working environment.

“Spotlessly clean” and “exceptionally well-maintained” are the words that come to mind the moment we step inside the Apparel Park.

Excellent infrastructure facilities, including availability of banking facilities inside the complex, combined with the rustic charm and peaceful atmosphere, are a characteristic of the park. The placement is also highly strategic; it’s right on NH47, which gives it access to all major hubs such as Cochin seaport and Coimbatore airport. It’s a short distance away from Tirupur town, which produces almost 60 per cent of the knitwear exported from the country, and in possession of all required facilities for knitting, dyeing, and printing.

When this reporter reached the facility at 08:00 am, the whole complex wore a deserted look, except for the security guards, who told me to wait in the main office.

When one of the guards was asked why the atmosphere at the notoriously busy Netaji Apparel Park was so quiet, he asked me to wait and watch. True to his words, the place was teeming with activity after half-an-hour. Workers arrived on bikes and in several buses arranged by the administrators exclusively for the transport of employees to and from their places of stay. Even more noticeable was the diversity among the workers. Workers from North, Northeast, South, and every corner of the nation, live in colonies in nearby Perumanallur, Avinashi, and Tirupur.

“Their transportation is arranged for by the company. There is also a working women’s hostel inside the complex,” some guards said, adding that worker welfare was a top priority here. Upon joining some workers, who choose to make their morning transit by foot through the complex, one thing became apparent: they are all satisfied with the

pay and the working conditions. “I come from Bihar, where we don’t get paid in the range of what we earn here. With all transportation paid for and good working conditions, I can now send a substantial amount to my family in Bihar even after accounting for all necessary luxuries here,” says an employee. The hubbub subsided as quickly as it had manifested within the next hour as the workers retired into their respective institutions. A cursory stroll around the park assisted in only deepening my initial awe and respect for the administrators of such a vast network without losing sight of what was truly important. Displayed on the gates of many a company were sign posts disclaiming child labour and worker abuse. The companies who have set up base in the Park normally perform the operations of knitting, stitching, and packing. The knitting operation apparently takes place in an inaccessible portion of the Park terrain, requiring the completion of multiple formalities.

My destination, under the hot noon sun, was Glassy Garments industry, where the Manager, Soundra Rajan, kindly consented to give me a walking tour of the facilities.

Only the processes of stitching, packing, and export were done at the facility. The facility was airy and spacious, with the workers seated in the traditional line arrangement and deeply involved in their respective jobs of cutting, pressing, and stitching. The initial stage of operation includes taking a stock of the fabrics such as velour, interlock, and single jersey, which arrive from the knitting facility of the company in Tirupur. “The fabrics are piled on different platforms after the fabric inspection test. The next process involves cutting the fabric according to the approved design pattern. If the size of the pattern is comparable with the size of the pattern design, the process of cutting commences. We use three types of cutting - straight knife, band knife, and manual cutting,” he said, leading the way through the fray of torn clothes and fabrics for the subsequent stickering process. “Embroidery works on the cloth, if required, will be performed by hand there,” he said.

Once the garment produced so far has been approved, a pilot run will be held and the line starts. With a variety of systems such as overlock machine, flatlock machine, Singer

I come from Bihar, where we don’t get paid in the range of what we earn here. With all transportation paid for and good working conditions, I can now send a substantial amount to my family in Bihar even after accounting for all necessary luxuries here

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MONEY INDICES June 2014

NETAJI APPAREL PARK

Buyer complaints are breaking out in the textile markets of Bangladesh. The cost of production is slowly rising in China. In that sense, Indian textile industry is experiencing a very conducive climate for growth machine, and press button machine, the garment goes through a variety of steps to emerge almost full-bodied.

The industrial overlock machines are used to sew over a cloth and are classified into several categories, such as 5 thread, 4 thread, and 3 thread. Singer machines are used to attach labels on the clothes, zig-zag stitching machines are used for zig-zag stitching, and press button machine to place press buttons on a fully finished cloth,” he ended with a flourish. At the end of the presentation, a little piece of cloth that he had shown earlier had transformed into a wearable, stylish piece of clothing. This is but a small stage in the production, he said. There are many other processes, including spinning, knitting, dyeing, washing, and compacting, followed by the processes mentioned earlier.

The clothes are then packed and exported.

Let us rewind a little to the genesis of the Park and the powers behind its formation. The public limited institution, which currently has 15,000-20,000 employees, was developed mainly to protect the interests of the knit wear exporters who have set up base in Tirupur. It was in 2002 that the President of Tirupur Exporter’s Association (TEA), Sakthivel, grabbed a chance to establish an Apparel Park between Avinashi and Perumanallur under the Apparel Parks Scheme announced by the Government of India. Upon approval of the project, more than 50 exporters registered with the Association for a plot in the Apparel Park. An understanding was reached between the Govt of Tamil Nadu and the members of Netaji Apparel Park, whereby the government offered a 50 per cent concession in stamp duty for registration of the land, the price of which the members decided to bear.

Following the alliance, Eettiveerampalayam village was chosen as the ideal location, given its easy connectivity to Cochin Port and Coimbatore airport via NH 47, proximity to Tirupur town, which has easy access to raw materials, supporting facilities such as knitting, dyeing, and printing, and easy availability of labour from nearby villages.

Accordingly, the design layout favoured and implemented 46 plots of 1.8 acres and seven plots of 3.6 acres each in its design layout. Several other features, such as a 90’ inch road from the entrance of the Park to NH 47, infrastructure

facilities like water supply, drainage, sewage, labour welfare facilities, and a Captive Power Plant, were implemented under the scheme. Banks adopted flexible attitudes when it came to lending credit for the Park. Several banks like the SBI came forth with an attractive 9.50% pa when it came to extending credit facilities for acquiring the plants and machinery. Such welcome developments in the fields assisted in the execution of the project within a short 11 months’ time.

The Apparel Park was inaugurated on January 10, 2005, by the then Union Minister of Finance, Palaniappan Chidambaram. Special care was taken in the construction of Netaji Apparel Park to ensure that the infrastructure in the Park conformed to very high international standards.

Without scrimping on the cost, underground cables were used for the entire electricity distribution system and costly internal dry transformers, with the Tamil Nadu Electricity Board establishing a new 110/11 KV substation at Netaji Apparel Park to ensure sufficient supply of electricity. A sewage treatment plant was installed, with the treated water used for landscaping by the process of ‘Fluidised Attached Growth Process’. Environment management and eco-friendly processes assumed prime importance in the construction process too.

The contribution of Netaji Apparel Park units levelled at approximately 1/10 of Tirupur’s total exports. The Park is all set to expand in the near future, some officials admit.

“The international textile market is picking up,” said Estate Manager R Subrahmaniam. “Buyer complaints are breaking out in the textile markets of Bangladesh. The cost of production is slowly rising in China. In that sense, Indian textile industry is experiencing a very conducive climate for growth. The Park is also experiencing very rapid growth and development in infrastructure, as the power gap problems and dyeing issues experienced nearly two years back are all but rectified now,” he opined. “Infrastructure like water supply is not an issue as far as we are concerned, thanks to the presence of a water pipeline from Bhavani,” he said.

The opportunities for the industry are perceived to be almost limitless now, even while the other major industrial clusters are weighed down by the same.

June 2014 MONEY INDICES

75

ECONOMIST’S PERSPECTIVE NIRVIKAR SINGh

Economy’s

tightrope walk

As a new government has dethroned the existing one in an election hailed as one of the world’s largest experiments in democracy, the weakening monsoons and a fluctuating economy make the grand prize of the crown look all the more unappetising. The true grit of our future leaders and the highly publicised economic tenacity of our nation will be put to a very harsh test. In such a situation, questions arise from every corner of the nation.

Heated debates are staged on the national front, the most prominent of which are ferocious showdowns prominently between the Left and the right ideologists.

There is no use in getting sucked down into the vortex of these pointless debates, opines prominent economist Nirvikar Singh. “There need not be any conflict between economic reform and liberalisation on one hand, and inclusive growth on the other. The important thing is that the government performs its core functions well.” mi bureau

Nirvikar Singh

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MONEY INDICES June 2014

NIRVIKAR SINGh

E

very trader in the market is twitching Course Correction with expectation. The Nifty has scaled Indian economy is in urgent need of a course correction, heights like never before with the to stray away from the path it has followed till now and foreign investors swooping in for a explore different avenues to contain the current account chunk of the delightfully underpriced and fiscal deficits. A subset of the electorate, prominently pie that is the Indian market. Technical headed by India Inc, has been seen overtly urging the analysts predict that the Nifty could politicians to open up the economy further on the rise even further in the coming times. principles of privatisation, liberalisation, and globalisation.

The rampant inflation has been Another section, prominently led by the Left ideologists, brought under control and the GDP, stands firm against the same. Nirvikar Singh advises us on a which had earlier taken a nose dive to sub 5 per cent growth few measures the government could adopt for the economy, in the previous quarter, looks to improve on its abysmal emphasising that ideologies don’t matter as long as the growth. However, on the flip side, arguments arise that the government is implementing its core functions well. “A economy is not all sunny as it is perceived to be right now. current account deficit is a symptom of other imbalances Analysts value that the surge in the market is not (good or bad) and the policy goals should lie elsewhere,” a sustainable one, not even with a Modi government he says. “India’s current account deficit has already at the Centre. With a huge number of stalled projects improved, as a result of currency depreciation. India should and budget deficits, the country can recover only with think about ways to increase exports, which will require sufficient time and effort. Some of the main issues can be microeconomic reforms. To control summarised as: the fiscal deficit, India should continue Expensive acts like the Food an ongoing process of evaluating Security Act, though a laudable social the effectiveness and productivity of effort, have bitten off a huge chunk India’s current Central government expenditures. of the budget, constraining the next The Central government should target account deficit government from undertaking any its expenditures better, and rely landmark initiatives. has already improved, more on the states for designing and While the government claims implementing development schemes, as a result of currency that many stalled projects are now in rather than pouring money into the running, the truth remains that depreciation. India grand missions. On the revenue side, bypassing the environmental laws is broadening the income tax base and should think about ways not the way to go in a path of lasting introducing the Goods and Services Tax development. to increase exports, (GST) will help. The inflation fighting The manufacturing industry is in strategy has already improved under which will require a major slump and in need of urgent the current Governor of the Reserve microeconomic reforms reforms for revival.

Bank of India – there is now clearer The looming threat of El Nino forward guidance and measures against that could considerably slow down inflation have become more resolute,” the monsoons in India has resulted in he adds. bearish FMCG stocks, raising the prices of essential commodities in the process.

Globalisation Some analysts evaluate that a temporary surge in Since the historic economic reforms of 1991, India has market is common during elections in many countries, been on the path led by three mantras: liberalisation, resulting from the government pumping money into the globalisation, and privatisation. How those factors figure economy for an image facelift, not to mention all the black into the economic equation and what the changes mean for money for election, liquor, and food, the Achilles’ heel of us now is a broad subject with unlimited scope for debate. the Indian vote bank.

One of the main arguments against the very concept of Experts also opine that the restrictions on gold imports, globalisation has been that India needlessly opens itself which were made so as to bring down external deficit, up for the effects of global economic vulnerabilities in the will have to be removed to meet the domestic demand, process. Nirvikar Singh, however, assures us that there rendering the lowering of the deficits merely transient. are other factors we should be concentrating more on. “I Many investors are becoming disenchanted in India and think one shouldn’t worry too much about global economic China, owing to their complex and often contradicting tax vulnerabilities, and India should focus on setting its own regimes. house in order. Domestic and foreign investment both Sharing his opinion on some of the vital issues is depend on having a policy environment that does not Nirvikar Singh, a noted economist and holder of the Sarbjit impose unnecessary uncertainty and transaction costs on Singh Aurora Chair of Sikh and Punjabi studies. doing business,” he says.

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ECONOMIST’S PERSPECTIVE

Goods and Services Tax (GST)

be a mixed economy. The mix needs to change, but it is not just about more or less government, it is about government focussing on its core functions and doing them well. There need not be any conflict between economic reform and liberalisation on one hand, and inclusive growth on the other. This is not about ideology but about clear economic reasoning and good implementation of policy,” he notes, adding that only the ideology of Hindutva, which was inconsistent with respecting different cultural identities in the nation, worried him.

GST is a landmark tax system that aims at bringing much needed reprieve to the investors in the country, by simplifying the complex tax regimes famous for driving investors out of the country. Merging the current tax structure which consists of excise duty, service, VAT, and the like, GST is indeed a laudable initiative and would do a world of good for an emerging economy like India. In a 2 tier structure consisting of CGST and SGST, which are the taxes levied by the Centre and the state respectively on goods Gold imports and services, GST makes no distinction between goods and A foible of the Indian economy, gold has always been a services. The same tax will also be levied on imports into weakness for the average Indian. However, the market the country. The GST system varies from 12 to 20 per cent, seems to be bearish on the yellow metal now, as opposed while the current tax values at more than 20 per cent. This to the scenario predominant a few years before, when system will also assist in mitigating any unnecessary strife gold promised higher returns than any other asset in the between the Centre and state over the generation of tax market. The government has placed revenue. Nirvikar Singh is all praise increasing constraints on the gold for the tax system, saying that it needs imports into the country in an effort to be implemented at the earliest. to lower the external deficits. “The “On the revenue side, broadening The restrictions restrictions on gold imports are a bad the income tax base and introducing on gold idea and should be quietly removed at GST will help the economy. GST will the earliest opportunity. The spike in help the economy overall, by reducing imports are a bad the demand for gold was a symptom of inefficiencies induced by overlapping idea and should be mistrust in the government and worries and heterogeneous taxes, but its main about inflation. By providing better benefit will be in improving government quietly removed at the policymaking, the government and the revenue,” he says. earliest opportunity.

RBI can reduce these fears. Restrictions Liberalisation like this just encourage smuggling,” The spike in the Liberalisation is a word that rings Nirvikar Singh notes. demand for gold was welcome bells for the leaders of India On a final note, he reacts to the Inc. And one of the most hotly debated a symptom of mistrust statements that the presence of foreign subjects among economists to this day corporate in the country would only in the government is the question of how far the market weaken the PSUs such as LIC which mix economy should tilt to either side and worries about have bailed the government out several (the state and the market). Nirvikar times in the past by buying government inflation. By providing Singh says, “Right now, the government stocks at record lows. “I think the better policymaking, the is still doing things that the private premise is wrong here. India avoided the sector should do better. On the other worst problems of the global recession government and the RBI hand, it does not perform its core by being relatively unconnected can reduce these fears functions well. Those core functions in terms of global finance. This is include providing social insurance, different from giving public sector smuggling and that is something the government financial institutions all or most of the always needs to do, and there is credit. India also had a relatively enormous room for improvement. On good macroeconomic position the other hand, continuing to privatise while entering the crisis. The in areas such as manufacturing will government will always be the help, with the government shifting to lender of last resort, but that providing the needed infrastructure does not mean that everyday (hard and soft) rather than trying to do policy should be tailored only everything itself. I think the priority to deal with extremely rare should be to introduce GST, and find events. Microeconomic reforms ways to accelerate infrastructure that improve the growth rate in a development with private sector sustainable manner will give India the participation. Other things will take conditions to withstand future crises,” care of themselves. India will always he says

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MONEY INDICES June 2014

CORPORATE INSIDER SAhARA

The curious case of

of en fall d d u s the om It was ss empire fr e a busin ble position. ia s an env several plea t, e Despit preme Cour Su to the hief Subrata c Sahara ains behind m Roy re . The tussle rs the ba Sahara and re o en betwe icates that m e d bl SEBI in s would tum rd n oa skeleto hara’s cupb Sa out of reau

MI bu

June 2014 MONEY INDICES

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CORPORATE INSIDER

I

n 2004, Sahara India Parivar was described by Time magazine as “the second largest employer in India” after the Indian Railways. Its chief, Subrata Roy, who was named among the 10 Most Powerful People of India in 2012 by India Today, is cooling his heels in jail now. The whole turn of events in Sahara Group chief’s life is hard to digest, at least for the business world.

The ‘Sahara episode’ began on August 31, 2012, when the Supreme Court ordered refund of over `24,000 crore by two Sahara firms - Sahara India Real Estate Corporation Ltd and Sahara Housing Investment Corporation Ltd - to an estimated three crore investors. It is said that the two group entities raised the amount through issuance of certain bonds.

The group was asked to deposit the money with the Securities and Exchange Board of India (SEBI), which was asked to facilitate the refund to genuine investors after verification of their credentials. In December 2012, Sahara was asked to deposit the money in three instalments, including an immediate payment of `5,120 crore. The group deposited the first instalment and it also claimed to have already refunded more than `20,000 crore in cash directly to the investors. But SEBI contested this claim and ordered attachment of bank accounts and properties of the group for recovery of the outstanding dues from Sahara.

The inevitable happened On February 26, 2014, the Supreme Court ordered the detention of Roy after he failed to appear before it in connection with the `24,000-crore deposits which his company has not refunded to nearly 30 lakh investors.

Sixty-five-year-old Roy was taken into custody on February 28. He has been in Tihar Jail, New Delhi, since March 4. The Supreme Court proposed a conditional interim bail for him on March 26, 2014, asking the group to deposit `10,000 crore. Of the `10,000 crore, `5,000 crore has to be paid in cash and balance of `5,000 crore by way of guarantee by a nationalised bank. The money, to be deposited with the apex court registry, will be routed to SEBI for return to investors. But his lawyers informed the court that they were finding it difficult to immediately mobilise such a large amount to get Roy and two directors out on bail.

Meanwhile, officials of the company have been repeatedly saying that more than 93 per cent of outstanding dues have already been returned to investors. So, submission of any fresh money to SEBI was not required, they say. They also claimed that Sahara group has an “apprehension that money paid to SEBI will remain with it for a very long time as it has not shown any intention to verify accounts yet”. They accused SEBI of not even starting the process of verification of investors despite passage of 18 months.

The lawyers submitted that the apex court’s order on Roy’s detention was illegal and unconstitutional. They told a Bench of Justice KS Radhakrishnan and Justice JS Khehar, which had passed the detention order, that its approach is “biased” and that it should not hear the petition

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MONEY INDICES June 2014

challenging the order. The lawyer told the Supreme Court that the company could not deposit the `10,000 crore bail amount.

Raising the bail money Formerly the main sponsor of Indian cricket team, Sahara is the owner of New York’s Plaza Hotel and London’s Grosvenor House. According to its website, it has a net worth of $11 billion or around `66,000 crore and more than 36,000 acres of real estate. It also co-owns the Sahara Force India Formula One auto racing team with liquor baron Vijay Mallya.

There were efforts to raise the bail money of `10,000 crore from employees. There were moves to collect at least `1 lakh each from Sahara employees and well-wishers to garner `5,000 crore. The money was to be collected in lieu of shares in Saharayn e-Multipurpose Society Ltd for each contributing employee of the entertainment to retail business conglomerate. In a one-page letter, directors of this Society and associates of the group have asked each employee of the Sahara India Parivar and their well-wishers to contribute `1 lakh, `2 lakh, `3 lakh or even more as per their wish and capacity. Meanwhile, a senior Sahara official told the media that the letter had not been issued

by Subrata Roy or the management and that “it is only an emotional initiative from people in reaction to the prevailing situation”.

After the detention of Roy, his lawyer issued a statement saying that he failed to appear before court only because his 92-year-old mother was in poor health and needed her eldest son by her side

A Sahara lawyer said that an embargo has been imposed on sale of assets, while bank accounts of entire Sahara Group have already been frozen by SEBI. “Further, the title deeds of assets having value over `20,000 crore are lying with SEBI only. If, case by case, the court allows sale of assets, it will be a distress sale which would not fetch more than 20-25 per cent of the real value of each asset.

Moreover, money from the sale of bigger assets will only come in long-term instalments in view of Indian financial strength,” he said in a statement.

Plea After the detention of Roy, his lawyer issued a statement saying that he failed to appear before court only because his 92-year-old mother was in poor health and needed her eldest son by her side. Claiming that Sahara had found an international buyer, his lawyers sought Roy’s release from Tihar Jail for negotiation of sale of an unspecified

SAhARA

asset. They pleaded that Roy be placed under house arrest.

“Holidays are coming. Who will go to the jail to talk? It destroys the total credibility... he is not absconding. Please keep him under house arrest. He will report to the court every day,” his counsel Ram Jethmalani told the Supreme Court. He also cited the pathetic conditions of Tihar Jail.

But the Supreme Court rejected the plea. A Bench of Justice KS Radhakrishnan and Justice JS Khehar said: “We have not passed an order of arrest. If that be so, we would have sent him to civil prison. We only passed the order of judicial custody. He is under our custody.”

The Sahara Group had informed its staff that their salaries may get delayed due to the adverse situation. The group is working hard to normalise things despite adverse conditions. It urged the employees to stay united in this challenging phase.

On April 16, 2014, the Supreme Court expressed its willingness to free the bank accounts of the Sahara Group, allowing it to sell properties to raise `10,000 crore and bail out its chief. On April 21, 2014, Roy and two Sahara directors told the Supreme Court that they would deposit `10,000 crore, half in cash before May 30 and half through bank guarantee by June 20, if they are released forthwith from Tihar Jail.

Views Investment analyst Arun Kejriwal pointed out in his article in a business newspaper that the Sahara scheme is not a

pyramid scheme and does not offer returns which can only be shown on paper. The rates vary in the range of 8-10 per cent, which is the current bank rate in the country.

He further added: “The most interesting aspect of the episode is that the same 20,000-odd investors from whom SEBI did not receive reply, Sahara got KYC and refund discharge vouchers in the standard prescribed and accepted form from over 16,000 people. SEBI is not able to locate investors and yet it wants more money. Why and for what is something that SEBI needs to answer?”

In the Saradha case, which rocked West Bengal last year, thousands of investors came out to protest and there were a few cases of suicides as well. “Why do not we see similar protests in the Sahara case if there are millions of unpaid investors as claimed by SEBI? I believe in the current situation, it makes sense for SEBI to seek help of bodies concerned in reaching out to the investors and seeing that the money due is refunded at the earliest,” he suggests.

According to him, the case of SEBI versus Sahara is not one of investor protection but something which goes beyond that.

officials of the company have been repeatedly saying that more than 93 per cent of outstanding dues have already been returned to investors

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STATE FOCuS KARNATAKA

On a fast

growth track The advantages of a robust investment climate and purposive augmentation of the growth capacities of the industry come through clearly in Karnataka’s model of business and commerce MI bureau

Siddaramaiah

W

hen it comes to business, Karnataka has a unique position on the radar of entrepreneurs. Of late, the burgeoning IT sector in the state has been attracting investors from all parts of the world. Karnataka had been ranked No. 1 by the World Bank in 2010 for its investment climate in a study that analysed 16 states using 46 investment parameters. It is said that one new MNC invests in the state every week. This is testimony to the fact that Karnataka is the leading investment destination in the country. One of the fastest growing states in the country, Karnataka has a strong industrial base and vibrant tertiary sector.

In the recently-passed vote on account budget for 2014-15 in the Karnataka State Assembly, Chief Minister Siddaramaiah, who also holds the finance portfolio, asserted that proposals outlined in the Budget lay thrust on social justice and inclusive growth. The fiscal deficit, he said, has been maintained below three per cent of the Gross State Domestic Product (GSDP). The fiscal deficit, which was 2.90 per cent of GSDP in 2013-14, was expected to touch 2.92 per cent during 2014-15, below the three per cent limit set by the Centre, he said. He termed the Budget “revolutionary” since it fulfills promises made in the Congress election manifesto.

KARNATAKA

He said that the state’s economy grew by five per cent in 2013-14, influenced by the slowdown in national economy and slow global recovery. “Due to the slowdown, industrial sector growth was estimated at 1.2 per cent. The growth in services sector that contributes 60 per cent to the State Domestic Product (SDP) is estimated at 7.2 per cent,” he said, adding that the agriculture sector staged noticeable recovery.

However, the CM asserted that his government would put the state economy on a higher growth path, by formulating and implementing growth-promoting policies.

Explaining the overall economic position, he said, “We need to be cautious about the growing inflation, which can slow down investments and growth. We believe that Government of India and the Reserve Bank of India will take necessary steps for economic and financial stability in the background of uncertain external environment.”

Siddaramaiah assured members that the government would address problems faced by coconut, sugarcane, and groundnut growers. “The government is gearing up to tackle the drought situation prevalent in some parts of the state,” he said.

Opposition BJP members, led by its leader Jagadish Shettar, staged a walkout, dissatisfied with the CM’s reply.

Growth The state contributed 5.6 per cent to the GSDP of India in 2012-13. Average GSDP growth rate between 2004-05 and 2012-13 was about 15.5 per cent. The per capita GSDP increased to $1,608.4 in 2012-13, growing at a Compound Annual Growth Rate (CAGR) of 14.2 per cent between 2004-05 and 2012-13. Known as the IT hub of India, Karnataka is home to the fourth largest technology cluster in the world. It accounted for 41.6 per cent ($28.3 billion) of India’s electronics and software exports in 2011-12. It has 47 IT/ITeS special economic zones (SEZ), three software technology parks, and dedicated IT investment regions.

The state offers wide range of fiscal and policy incentives for businesses under the Karnataka Industrial Policy, 2009-14. Investor-friendly sector-specific policies to promote industries like IT, biotechnology, textiles, and tourism have also been instituted and simplified procedures for investment have been introduced. Karnataka ranked fifth in terms of attracting private sector investments in India, and had outstanding investments of $813.8 billion as of December 2012.

Well-developed social, physical, and industrial infrastructure, good road, rail, water and air connectivity and substantial port infrastructure attribute to the growth of the state. Excellent healthcare facilities and welldeveloped telecom infrastructure make Karnataka one of the major investor-friendly states in India. It’s no wonder that the state is called the “Knowledge Capital of India” as it has successfully attracted skilled labour, especially in the knowledge sector. It is among the states that produce a large number of doctors, engineers, and medical technicians in the country.

The state has a stable political environment. Successive state governments have realised the importance of industries in the state and have created conducive business environment to attract domestic as well as foreign entities.

In 2012-13, outstanding investments in the state totalled $197.4 billion, representing nearly 7.4 per cent of total outstanding investments in India. Of the total outstanding investments, the manufacturing sector attracted the most (39.7 per cent), followed by the services sector (24.8 per cent).

Sops for Sandalwood and scribes in 2013-14 state budget 1

A High Tech State Media Centre, on the lines of National Media at New Delhi, will be constructed at Vartha Soudha in Bengaluru, at a cost of `5 crore

2

An international standard film city will come up at Hesarghatta, in association with reputed international film studio companies

3

An annual award will be given to promote short films

4

Multiplexes with four screen facilities will be established to organise International Film Festivals; a museum representing film industry will be developed in Amruthotsava Bhavana, which is under construction at Nandini Layout in Bengaluru, at a cost of `10 crore

5

The state government will provide incentives and encourage entrepreneurs who are interested in building Janatha cinema halls to screen Kannada films in district and taluk headquarters.

6

Pension amount for retired journalists has been raised from `3,000 to `6,000.

7

A separate health insurance scheme will be launched for accredited journalists and their family members.

Investors from Germany, Japan, USA, the UK, Switzerland, and Sweden have invested in computer software, telecommunications equipment, electronics and electricals, machine tools and engineering products, medical and laboratory equipment, minerals, ceramics, chemicals, leather products, food processing, and tourism.

According to the Department of Industrial Policy & Promotion (DIPP), the cumulative FDI inflows from April 2000 to August 2013 amounted to $11.5 billion, the fourth highest in India. FDI inflows from April 2013 to August 2013 stood at $738 million.

Mittal lands on garden city World’s top steel maker ArcelorMittal has acquired land in Karnataka for a $6.5 billion plant in the state. The company has 2,659-acre private land already in possession.

“This leaves a balance of 136.33 acres land owned by the Karnataka government which is being processed for

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STATE FOCuS

industry. The `250-crore Doddaballapur Integrated Textile Park is expected to become one of the country’s important powerloom clusters. This park will provide employment to 8,000 people. The park, spread across 48 acres, will ensure processing and pre-weaving facilities.

Karnataka Industrial Area Development Board (KIADB) has also initiated steps to establish a Textile Park at a cost of `350 lakh in 60 acres of land at Karur and Davanagere.

IT sector Besides, in Doddaballapur, an Integrated Textile Park Bengaluru is the 4th largest technological cluster in the was proposed under the Central government’s Scheme for world after Silicon Valley, Boston, and London. About 50 Integrated Textile Park at a cost of `62 crore. In Bellary, the per cent of the world’s SEI CMM Level 5 certified companies Textile Park is in 154 acres at Mundargi and Guggarahalli. are located in Bengaluru. The state is India’s largest For the High Tech Weaving Park in Mysore, 10 acres have software exporter, with electronics and computer software been allotted to entrepreneurs exports totalling $8.8 billion at Hebbal KIADB Industrial in 2012-13 (till September Area.

2012). Karnataka has 47 IT/ 10 Largest Projects Karnataka has a ITeS SEZs and dedicated IT vibrant auto industry with investment regions and 2,160 1 Krishna Bhagya Jala; Irrigation; `6,727.00 crore investments of around $713 IT companies in the state. million and annual revenues The state houses 5,50,000 of $604 million. It is the fourth Mukund Vijayanagar, Steel; `5,462.81 crore 2 IT professionals, or 1/3rd of largest state in India in terms the total IT professionals in of automotive production. the country, and at least 400 3 Govt of India, Transport Services; `5,300 crore Toyota, Volvo, Tata Marcopolo, Fortune 500 companies have and TVS Motors have set up outsourcing operations in vehicle manufacturing units in Bangalore Mass Transit, Railways; `4,800 crore 4 Karnataka. In September 2013, the state.

US-based eBay Inc launched As of September 2013, a new global development 5 State Indl Inv.Corp, Petro-Products; `4,800 crore the state had an installed centre in India, spread across power generation capacity 1,50,000 sq ft area. of 13,818.1 MW. The state 6 Usha Iron & Ferro Metals, Steel; `4,800 crore contributed 7,373.1 MW of Industry this capacity, while the private Karnataka accounts for 70 7 Nagarajuna Power, Thermal Power; `4,591 crore sector contributed 4,811.8 MW per cent of coffee production and the Central government’s in India; coffee exports from share was 1,633.3 MW. Karnataka stood at $353 8 Jindal Vijayanagar, Steel; `4,138 crore The installed capacity has million in 2012-13. It is the increased from 9,346.7 MW fifth largest producer of fruits 9 Mangalore Power, Thermal Power; `3,984 crore in 2009 to 13,818.1 MW in in the country and the fourth 2013. Of the total installed largest producer of spices. power generation capacity, Karnataka is also the third 10 Mangalore Refinery, Petro-Products; `3,690 crore 6,392.8 MW was contributed largest producer of plantation by thermal power. Capacity of crops in the country.

254.9 MW and 3,570.6 MW was Karnataka produces over 20 per cent of the national contributed by nuclear and renewable power respectively, garment production and 45 per cent of the national raw while hydropower contributed 3,599.8 MW. silk production. Its silk exports constitute 24 per cent of Around 984 acres have been earmarked for an exclusive the total value of silk goods exported from India. Nearly industrial area and sector-specific SEZ for aerospace 3,86,000 manufacturing units are engaged at the organised industries near Bengaluru International Airport. India’s and unorganised level. The state has a workforce of first aerospace SEZ of 300 acres is operational at Belgaum. about 55,000 weaver families with handlooms and over Karnataka Aerospace Policy had identified an investment one million powerlooms. The presence of over 100 Skill potential of $12.5 billion (at 2011-12 rates) in this sector Development Centres and 240 private training centres is for the 2013-2023 period and plans to develop aerospace also making an impact in the growth of textile industry in clusters in different regions of the state. Companies like Air the state.

India, Boeing, and Jupiter Aerospace have already selected In July 2008, the Karnataka government proposed to Karnataka for development of maintenance, repair, and establish 11 Textile Parks to give a boost to the textile allocation,” ArcelorMittal said in its annual report for 2013.

ArcelorMittal plans to put up a 6 million tonne per annum (MTPA) steel plant with a 750 MW captive power plant in Karanataka. The draft feasibility report for the proposed steel plant has been completed and hydrological and environmental impact assessment studies have been initiated.

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MONEY INDICES June 2014

KARNATAKA

Snapshots Capital

: Bengaluru

SDP

: `38,421cr

SDP Growth

: 14.64%

Per Capita State Income

: `8,082

Share of Industry in SDP : 22% Joint Stock Cos In state

: 18,122

State Fiscal Deficit

: `1,450.70 cr

Inflation Rate (Bengaluru) : 11.9% State Bank Credit

: `18,841.70cr

State Market Cap

: `109,238cr

State Priority Sectors : Auto & Auto Ancillaries; Telecom; Electronics;Infotech; Agro-Processing; Leather; Garments; Pharma

overhaul facilities.

In 2011, the state attracted 94.1 million domestic tourists and 0.6 million international tourists.

Tourist arrivals have increased at a CAGR of 20.8 per cent between 2005 and 2012. The sector contributes 15.0 per cent to the GSDP of Karnataka; plans are afoot to expand it to 25.0 per cent by 2020.

Karnataka is making significant investments in industrial infrastructure by setting up industrial clusters and special economic zones (SEZs) and promoting publicprivate partnership projects to provide an impetus to further industrial development. In November 2013, the state high-level clearance committee had cleared 10 projects with an investment of over `100.4 billion. The projects are expected to create 14,105 jobs in 10 districts.

Technology The engineering industry in Karnataka has positive prospects, given its performance. In 2012-13 (till September 2012), the export of engineering products stood at $1

billion. Exports include machine tools, industrial machinery, cutting tools, castings, automotive components, electrodes, welding equipment, construction and earthmoving equipment, and helicopter spares.

A number of engineering exporters are based in Bengaluru, Hubli, Mysore, Belgaum, Mangalore, and Shimoga.

A 300-acre SEZ has been created in Belgaum to develop a precision engineering and manufacturing supply chain ecosystem, which would be a great driver for manufacturing industries. Bharat Earth Movers Limited, Hindustan Machine Tools Limited, and Bharat Heavy Electricals Limited are among the leading companies in this sector in the state.

“Karnataka is heavily dependent on Bengaluru. The growth of tier II cities must be encouraged. Karnataka is an undisputed leader in IT and biotech industry, but we have also faced uncertainty in investment outlook,” said Soumitra Bhattacharya, Chairman of Confederation of Indian Industry, Karnataka State Council, at the recent annual meeting.

Speaking at a conference on “Building the blocks for Growth -Preparing Karnataka for India’s Growth story,” he said the city’s infrastructure development has to be geared up to bring in investments. In fact, Bengaluru’s infrastructure is currently catering to just 0.5 million, where as it has to reach out to 10 million population. So creation of a strong ecosystem is the current requirement.

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SPECIAL INTERVIEw K M MANI

‘Kerala aims for Kerala is not faced with any kind of financial crisis, asserts State Finance Minister K M Mani. But the state needs to tackle a host of issues to ensure all-round growth. In an exclusive interview with Money Indices, the minister talks about issues that demand immediate attention

BY K.R. Rejeesh

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MONEY INDICES June 2014

K M MANI

two-digit growth’ There were apprehensions when the state government issued bonds. Could you describe briefly the present financial status of Kerala?

There is no need for apprehension on the loans availed of by this government. Our statutory limit is `12,500 crore. We are abiding by rules of the limit. Last year, no governments in the country, including the Central government, could achieve the target of tax collection due to slowdown in the rate of growth of the economy. It was true in the case of Kerala too. At the same time, we didn’t shy away from sanctioning funds for developmental schemes or the schemes envisaged in the budget. Funds have been sanctioned to the local bodies on time. Hundreds of crores were sanctioned for developmental and welfare schemes.

So, there was some fiscal stringency at times. It was quite normal. But I was cautious to ensure that it didn’t lead to a fiscal crisis.

Q

& A

In what ways Kerala has to change to get the tag of ‘investor-friendly’ state?

The administrative efficiency of the entire bureaucratic setup must be improved. We have to ensure infrastructure facilities, including road connectivity and availability of quality power supply (regular and right voltage). Unhealthy trends like nokkukooli should not be allowed.

Also, the hartal culture must be wiped away.

What are the factors that hamper the growth of Kerala?

The administrative efficiency of the entire bureaucratic setup must be improved. We have to ensure infrastructure facilities, including road connectivity and availability of quality power supply

In my opinion, the most important factors are dwindling agricultural production, growing unemployment, lack of quality in higher education, and slackening pace of growth in infrastructure.

Do you think that the Emerging Kerala initiative was a success?

To some extent, it was a success.

At the same time, it needs more follow-up action, including timely clearance of projects and extension

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SPECIAL INTERVIEw K M MANI

the Kerala growth rate stood at 8.24.

We aim at two-digit growth rate in the following years.

of loan facilities from the banking system, etc.

You have presented as many as 11 budgets in the Assembly?

Looking back, could you tell us about some of the most cherishing budget sessions you have witnessed?

I presented 12 budgets, not 11.

All my budgets were unique and each of them has been with timerelevant focus on development and welfare of the downtrodden, public health, improvement of educational facilities, strengthening the productive sectors of the state, especially our agricultural sector, distribution of the benefits of development to all sections of society, environmental upgradation, pension for agricultural labourers and small farmers (both first time in India), and the Karunya Benevolent Fund, announced in 2011-12 and covering around 30,000 people.

Do you think Kerala has to follow the growth model of any other Indian states?

There are replicable projects and programmes from other states, such as efforts undertaken by some states for energy generation, infrastructure creation (Tamil Nadu), and IT development (Andhra Pradesh), etc.

But Kerala has its own peculiarities.

It has to evolve its own development strategies that suit its needs. For instance, our people’s talent in the medical field is acknowledged the world over. So, more medical education facilities will enable the state to tap into the employment potential in the field.

A true veteran KM Mani holds the distinction of being the longest-serving minister in the Government of Kerala.

He represents the Palai Legislative Constituency since its inception. In 2012, he addressed a gathering at the committee hall of British Parliament in London.

In the recent past, the Finance Minister’s ‘Theory of the Toiling Class’ came up for discussion among academics at Oxford University. He visited the university to deliver an hour-long lecture and make students and academics understand the fundamentals of his theory

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Dearth of quality power supply appears to be the prime reason, along with the want of infrastructure, environmental issues due to high density of population, high price of land, labour issues, political activities, etc.

What is your opinion about foreign direct investment (FDI)?

FDI is not a very dependable source of growth or solution to Current Account Deficit. International capital moves according to the global economic trends. When there is better profitability in one country as compared to the other at a particular point of time, international capital will flow to that country, and when it is in another country, it will move away, creating fluctuation in foreign currency availability and causing fall in the value of currency. So, we have to learn to depend more on indigenous sources of resources for growth and try to attain external currency security through promotion of exports.

What about the banking sector in Kerala?

The fruits of inclusive growth should reach the weaker sections in society. In my personal view, banks must act as more socially committed institutions. Education loans should be made available to students without hassle. They must cater to the stagnant agriculture sector also.

According to economic review, Kerala registered a growth of 8.24% in 2012-13. Are you optimistic about steady growth of the economy this year?

I am optimistic that the current year will be better for Kerala. Just go through my budget for the current year. It has a large number of schemes for development of our productive sectors and welfare of the people. While the national growth rate was projected at 4.7 per cent,

Why Kerala lags behind other states in industrial growth? Is it due to our wrong policies?

What is the secret of your vibrancy in work even at this age?

KM Mani

People are my strength. As long as I live with them, I feel energetic and recharged. Service to society, especially to the downtrodden, gives me a lot of job satisfaction.

For instance, the very thought of assistance offered to the poor and people suffering from serious diseases through the Karunya scheme gives me satisfaction.

AGRIBuSINESS JALBINDu AGRITECh

Innovating the

‘e’ in agriculture Agriculture has long been considered a stagnant field involving manual labour under the hot sun for a very small profit margin. Disarmed by the myth, the youth of our generation have long portrayed a growing tendency to migrate to the so-called white collar jobs that involves a lot less sweat. But then, many have started realising the importance of innovation in the field and have entered it with a single-minded determination to innovate and evolve the traditional methods for a finer harvest and a finer life. One such initiative is Jalbindu Agritech, a company which is transforming parched regions like the Kutch into a paradise of crops by a new technique of e-farming that advocates completely automated processes of fertigation and irrigation by vaisakh E Hari

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JALBINDu AGRITECh

J

albindu Agritech Pvt. Ltd. was established in system wherein we can precisely deliver the quantity of the year 1994 by Shri Manilal T Shah and late water and fertilisers needed by the crops,” he notes.

Shri Pravin Gala with the vision of achieving Elaborating on some of the ill-effects of the traditional the concept of organised horticulture for the irrigation system, he says, “Timely delivery of water and betterment of farmers and Indian agriculture nutrients in required quantity has tremendous effect. We system as a whole. The company began with humans need food three to four times a day. Similarly, manufacturing and installing drip irrigation plants require the same kind of care. Currently, in our system for various crops and plantations traditional system of irrigation, what we feed plants in throughout India, along with consultancy works one day is meant to nurture them for 8-10 days. The plant, for implementing advanced scientific methods as a result, is stressed out due to fluctuating bouts of for improvement in horticultural production. underfeeding and overfeeding in a period of 10 days. Most A unique feature of the company is the use of of the energy of the plants is wasted in the fight against automatic irrigation and fertigation systems, completely stress.” controlled by data fed into computers.

“Practically, it is not possible to feed the plant several Now, the company has diversified its activities by times a day. With drip automation, this is possible. By introducing quality fruits and vegetables produced on providing required quantities of water and nutrients when its own farms as well as quality products purchased from needed, we not only improve the health of the plants, but other farmers to the specialised also improve the soil’s health domestic and export markets. by maintaining good air-water The flagship units of the balance in the soil,” says company are the 100-acre Rahul.

Panchvati Farm, popularly “Mutual benefit to the known as Pravinbhai’s ‘wadi’, at producer and the customer, We firmly believe that Umargam in Valsad district and a that is, to the farmer and irrigation/fertigation is 150-acre farm known as “Pravin the general public, is the Baag” at Ratnal in Kutch district main driving force behind one of the most integral parts of Gujarat, where various Indian our operations. If you notice, of the process of growing any and foreign farming systems, there is a huge gap between techniques, and practices are the price that a farmer gets crop. Timely delivery of water and suitably adopted for agriculture for his produce and the price fertiliser in required quantity and horticulture crops. Visits paid by the common man. to both these farms have Our effort is to narrow down has tremendous effect on growth become part of the educational/ the gap so that both farmer of a plant and its ability to fight training programmes of various and the general public stand against stress and maintain the agricultural universities, to benefit. We believe in institutions, and government making this happen. Hence, quality and quantity of the fruit departments. we experiment and implement produced Currently, the company is new techniques on our managed by Shri Manilal T Shah, farm, and once satisfied, we Shri Shailesh T Shah, Rahul encourage other farmers to Pravin Gala (BSc Horticulture, adapt. Golden Dates is one Australia), Apurva Pravin Gala such example,” he says.

(MBA), and Harshal S Gala (BSc Moving on to the subject Agriculture, Israel). Barhi, a fresh variety of dates for export of produce, he details the amount and types of produce to Europe and Dubai, are produced under the brand name from their farms. “At our farms, we grow exotic vegetables Golden Dates. like coloured capsicum, cherry tomato, zucchini, broccoli, In an interview with Money Indices, Rahul Gala of seedless watermelon, musk melon, honey dew, etc along Jalbindu Agritech presents a comprehensive view of the with 5,000 plants of custard apple, 4,000 plants of mangoes, workings of the company. “We firmly believe that irrigation/ and 2,500 plants of chikoo. Two-thousand plants of fertigation is one of the most integral parts of the process pomegranate and 5,000 plants of dates are grown and of growing any crop. Timely delivery of water and fertiliser supplied to the five-star hotels and select specialty food in required quantity has tremendous effect on growth of a stores in Mumbai. We also supply fresh and natural pulps plant and its ability to fight against stress and maintain the of custard apple, mango, and chikoo to hotels, caterers, quality and quantity of the fruit produced,” says Rahul. ice-cream parlours and juice shops in Mumbai and Gujarat,” “Moreover, it is comparatively easy to automate the he says. irrigation system. Hence we automated a drip irrigation He says that the drip irrigation technique was not very

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AGRIBuSINESS

popular among farmers mainly due to its cost. Such techniques were more feasible on large farms rather than small ones.

Golden dates, he says, is a preferred variety of fresh edible dates originating from Basra in Iraq and currently produced in Israel, Jordan, and India. “When we say date palm, we are referring to hundreds of varieties of dates, all bearing different names, some sweet, some less so, some highly perishable, some almost hard, and so on. More than 350 varieties of fresh, dried, and semidried dates are available. However, only a few are exported, and these are seldom sold according to variety.

Until a few years ago, only dried and semi-dried dates were available outside their native lands; but now, fresh dates are produced and available in India. They are also exported,” he says.

“One of the first tissue-cultured

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At Pravin Baag, in order to produce the finest quality of fresh dates, large paper bags are wrapped around each date bunch. This protective layering shields the dates from rain, sunshine, birds, and insects.

Barhee dates are carefully picked and packaged on the stem in 300 g, 500 g, and 1 kg punnets; they are shipped by air the day they are harvested for maintenance of freshness. Harvested only in July and August, they are sold out immediately

Barhee date plants was brought to Pravin Baag from London in 1998.

Today, we are the first and one of the largest producers of fresh Barhee dates, with its plantation exceeding more than 120 acres,” he says. “These dates are medium in size and round in shape. They are 3-5 cm long and 3-4 cm in diameter. When picked in their yellow state, they are referred to as Khalal dates; in this stage, it is golden yellow and as crispy and crunchy as an apple. The taste is pleasingly sweet, flavour is rich, and the flesh is thick and juicy. It will turn brownish and soft with the skin peeling off, when it is ripe (rutab). It tastes sweeter and juicier. This type of dates is usually eaten fresh or at least in the ripe stage, and seldom in the final dried, wrinkled (tamr) stage. At this stage, no peeling is required; just eat it as it is,” he says.

“At Pravin Baag, in order to produce the finest quality of fresh

JALBINDu AGRITECh

dates, large paper bags are wrapped around each date bunch. This protective layering shields the dates from rain, sunshine, birds, and insects. Barhee dates are carefully picked and packaged on the stem in 300 g, 500 g, and 1 kg punnets; they are shipped by air the day they are harvested for maintenance of freshness. Harvested only in July and August, they are sold out immediately,” he laughs.

“Golden Dates are extremely nutritious, containing more natural sugar than any other fruit. It has both fructose and glucose, which have high calorific values. It is easily and quickly digestible and very helpful to the brain. It has traces of minerals needed for the body. Dates are rich in natural fibers. Golden dates are sodium-free, fat-free, and cholesterol-free, which makes them a healthy sweet option,” he adds.

India, he says, is a prime market for expansion with tremendous growth potential. “We have already entered into export markets. Directly or through channel partners, we are supplying to more than 10 countries in Europe, Southeast Asia, and the Middle East and Gulf, and the number is growing. However, we give more importance to the domestic market as India itself is a very huge market.

The growth potential here is tremendous,” he says.

Health benefits of Dates Date contains calcium, sulphur, iron, potassium, phosphorus, manganese, copper, magnesium, volatile oils, vitamin-B6, folic acid, potassium, proteins, and sugars Magnesium, a very important element for pregnant women, is hard to find as a natural source Date contains a very high percentage of sugar (70-80%); it has both fructose and glucose, which have high calorific values. It is easily and quickly digestible and very helpful to the brain Dates are recommended for treatment of dizziness.

It is now well-known that low blood sugar and low blood pressure are among the causes of dizziness

Golden Dates are extremely nutritious, containing more natural sugar than any other fruit. It has both fructose and glucose, which have high calorific values. It is easily and quickly digestible and very helpful to the brain. It has traces of minerals needed for the body. Dates are rich in natural fibers. Golden dates are sodium-free, fat-free, and cholesterol-free, which makes them a healthy sweet option

As dates are rich in calcium, they contribute to healthy bones. For this reason, it is recommended that children and older adults, especially women, eat plenty of dates to strengthen their bones Dates are important in maintaining good vision and are effective in guarding against night-blindness Dates are rich in natural fibres

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RETAIL REVIEw wALMART

Who wouldn’t want to snap up quality goods at a lower price? That must have been the main thought running through the head of Sam Walton, when he conceived Walmart in his mind. But who was to know that the company would change lives, employing millions and more, transforming the Walton family into one of the richest in the world. Walmart has emerged from a long retail war, riddled with allegations, boycotts, and investigations, strong enough to stand its ground. What makes this colossus overcome disruption in the market? And despite its advantages, why hasn’t it succeeded in making steady inroads into a great retail market like India? by vaisakh E Hari

walled in?

The elusive Walmart business model Love it or hate it, you just cannot deny the pull of Walmart’s EDLP (Every Day Low Price) principle for standard quality goods. Under the visionary leadership of Sam Walton, the company has broken all sales records in the retail industries.

Several reports have tried to decipher the elusive Walmart model of success, none better than an insightful report by the Harvard Business School (HBS) that evaluated that the success of a venture was dependent on an integrated set of choices made by the company and the consequences of those choices. With Walmart at the helm, vast investments in technology led to the development of Uniform Product Codes (UPC), satellite systems, RFID (radio-frequency identification) technologies, and other flagship innovations, simplifying the entire inventory process. The report outlined the following factors as some of the main reasons behind the explosive growth of the company: Sam Walton’s choice of EDLP implementation was very different from the retailers of that time.

Disregarding the entire concept of promotional discounts, he offered the products at the lowest prices in the market, thus driving sales up through the roof.

Walmart extracted the lowest prices out of its vendors, bringing into existence the concept of vendor partnership. The huge sales boost generated by the EDLP model ensured that Walmart remained at the top of the vendor’s list, always.

Heavy investments in technology resulted in huge dividends for the company in terms of cost reduction. Adoption of the concept of UPC allowed them to know the exact location of their products, and satellite systems facilitated proper interaction between stores and vendors, cutting down the inventory cost greatly.

Sam Walton

wALMART

Sam Walton’s expansion policies were known for brilliance in execution. He ensured that his stores were located in small towns that were ignored by everyone else. His expansion patterns also bore traces of the same style, developing from rural areas of the country, with stores close to existing distribution centres.

When it came to selecting products for the stores, he ensured that they were stocked with diverse products, ranging from apparels, jewellery, pharmacy, and beauty care.

His ultimate aim was to develop a one stop-shop for the entire family.

Cost-cutting was another integral part of the whole scheme, wherein any cost deemed unnecessary was cut down to the core. Managers shared hotel rooms and walked to work, instead of relying on taxi services. The cost-cutting techniques turned out

to be a bane in the later years, as the worker dissatisfaction turned palpable with several instances of alleged discrimination and harassment coming out into the open.

Customer satisfaction was of the highest importance for Sam Walton and his policies were shaped accordingly.

The report said David Glass, who took charge as CEO after Sam Walton retired in 1988, was an “operational wizard” who concentrated more on technological innovation and mounting pressure on the vendors for outsourcing production to developing countries to meet with the Walmart demand and price specification.

Walmart had soon established itself as the primary distribution channel for most vendors. Lee Scott, who assumed power in 2000, had to tussle with several counts of alleged human

resource exploitation incidents like low wages and poor benefits for workers, forcing him to offer improved health benefits to employees and new job and salary structure for nonmanagerial employees.

Sam Walton’s expansion policies were known for brilliance in execution. He ensured that his stores were located in small towns that were ignored by everyone else. His expansion patterns also bore traces of the same style, developing from rural areas of the country, with stores close to existing distribution centres

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Allegations of human resource exploitation As Walmart grew in size, critics trained their guns on the company for its alleged human resource exploitation. While the top executives dubbed these allegations as misleading, reports in recent times have highlighted the burden of billions of dollars in public assistance programmes on the US taxpayers.

These programmes were availed of by low wage Walmart employees for food stamps, medical aid, and housing subsidies. Given this dependence of Walmart’s low wage employees on taxpayers’ money, there were criticisms that the dollar saved at

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the checkout counter was a devious illusion. Walmart responded strongly to the allegation, claiming that the full-time and part-time employees received above minimum wage, along with all necessary bonuses, retirement plans, and health and education benefits.

On the other hand, issues of workers’ safety started surfacing when Walmart pressured suppliers to outsource production to sweatshops in the developing countries, notorious for their low wages and non-existent safety norms for employees. The Bangladesh garment factory fire of 2013 is a case in point. The issue was raked up at Walmart’s annual meet by a former sweatshop worker

from Bangladesh, who implored the top leaders to address workshop safety issues in sweatshops where suppliers of Walmart placed orders for production, according to Forbes.

The top executives denied knowledge of the workings of suppliers and recommended that the shareholders vote against the proposal. The report also noted that Walmart was one of the few importers who refused to sign the Accord on Fire and Building Safety.

Walmart’s dance with the devil in India If India is famous for one thing, it is the complex rules designed to befuddle and drive away foreign investors. As of today, India has

wALMART

allowed 100 per cent FDI in single brand retail and 51 per cent in multibrand retail. Despite these clearances, chaos reigns. An interesting example is the case of IKEA. The world’s largest furniture manufacturer was denied single brand stores in India because it petitioned for the opening of a café and restaurant inside the stores, making it an intrusion into the multibrand retail sector which was out of bounds for the company. The case was amicably settled afterwards.

Recently, the story of alliance and subsequent divorce between Walmart and Bharti group received much media attention. Walmart, in an attempt to bypass the stringent foreign investment rules, found an unlikely partner in Sunil Mittal-led Bharti group, ultimately leading to its entry into the country via sharing of information with the domestic partner, which was considered legal according to the then FDI policies.

The future of the alliance looked bright. The very wide IT framework of Walmart combined with Bharti’s knowledge of the local market bore all signs of a winning combination at the global level. The duo, however, decided to end the relationship. An agreement was reached between the two, wherein Walmart acquired Bharti’s stake in the cash-and-carry business, which was sanctioned 100 per cent FDI investment, and Bharti acquired Walmart’s stake in the Easyday chain of retail stores via acquisition of CCDs of Cedar Support Services, a company owned by Bharti.

A number of roadblocks led to this drastic shift in the investment priorities of the company. The company had faced stiff opposition from the politicians in India after it disclosed attempts at lobbying to obtain greater access to the Indian market. Close behind was the Enforcement Directorate’s probe into Walmart’s investment into Bharti Retail company, at a point of time where that kind of FDI was held illegal. The company was also accused of bribery in Mexico and China for greater access to their markets.

Analysts say that it was an attempt to get rid of the controversy that led to tension between Bharti and Walmart.

Walmart has also been openly vocal against the clauses that must be followed to invest in the multi-brand retail industry. The rules mention mandatory 30 per cent sourcing from domestic SMEs and a $100 million investment, of which 50 percent was meant for backend development.

Further expansion will be considered once the multi-brand regulatory policies are relaxed in favour of foreign investors, now that the company has a grip in the market in the form of cash and carry stores.

Things look bleak for Walmart in India, with a Modi-led government expected to follow a policy of zero tolerance to FDI in multi-brand retail.

Though Walmart Asia Head Scott Price has maintained that the

Walmart and the global market Call it xenophobia or whatever, a majority of Indians have and will always be distrustful of foreign investment in all manner and sorts.

Scarred by allegations of lobbying in India, Walmart may find it difficult to maintain its customer foothold here. The ruling party, which almost always taps into the middle class vote bank, may be reluctant to make any favourable changes in the FDI regulations.

Anti-Walmart sentiments are also on the rise across the world, fuelled by the worker claims of exploitation and safety-deficient sweatshop atmosphere.

On the flip side, while many brick-and-mortar stores face the threat of extinction in the face of an e-commerce boom, Walmart proved

While some analysts argue that the company is waiting for more flexible regulations in India, others opine that the company has realised the true potential that lies ELSEWHERE. The company’s choice of whether or not to relinquish its final cash and carry trump card in India may have far-reaching consequences on the FDI atmosphere of the nation, positive or otherwise

company was very excited about prospects in India and looking to expand further, the company has made no move towards expanding its current 20 stores in the cash and carry sector. While some analysts argue that the company is waiting for more flexible regulations in India, others opine that the company has realised the true potential that lies elsewhere.

The company’s choice of whether or not to relinquish its final cash and carry trump card in India may have far-reaching consequences on the FDI atmosphere of the nation, positive or otherwise.

that it was not yet ready to become a dinosaur of a bygone era and went ahead by investing in a tech lab, @ Walmart labs, in Silicon Valley. The company has been on a shopping binge, acquiring some of the brightest minds in the web industry like Inkiru, OneOps, Tasty Labs, and Torbit, looking to take on the e-commerce giant Amazon head on. While the revenue generation capacity of Amazon is still light years ahead, Walmart’s proven tenacity in the face of boycotts, investigations, and inhospitable policies might just bear fruition.

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WhAT MONEY TAuGhT ME

K K Goel

Chairman, KDP Infrastructure

In some discourses, we hear that “money is not all in life”, but in today’s life, one cannot negate the fact that money is the visible god for humanity in as much as it saves a lot from sufferings and provides comforts of all sorts. I have seen many ups and downs in my industry and have realised that one needs to work hard, but at the same time, management of money is as important as work. It is seen that those who don’t manage money properly in the peak of their prosperity face enormous financial troubles when there is a slowdown. At the same time, keeping business ethics among one’s basic principles and doing things with a word of thanks to the Almighty are as important as the need for money because mental satisfaction and peace cannot be achieved without blessings of the Almighty.

In my real estate business, building trust and caring for customers’ interests have been key factors for reaping long-term benefits. Inflow of money cannot be ensured until we think of a long-term relationship, be it with customers, vendors, or other stakeholders. One needs to analyse the ROI on every investment and take stock of the volatile economic conditions in and around the business. Despite all precautions, we need to face force majeure conditions, and with a good tenure of experience, one can draw enough confidence to withstand those challenges. Having been blessed by Goddess Lakshmi and Lord Ganesha, I gathered the strength to carry on the business in difficult times.

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aGE 55 Ethics & Thankfulness One should follow business ethics and do things with a word of thanks to the Almighty. Our integrity and thankfulness go hand in hand

Long-term relationship Inflow of money cannot be ensured until we think of a long-term relationship, be it with customers, vendors, or other stakeholders

Proper analysis One needs to analyse the ROI on every investment and take stock of the volatile economic conditions in and around the business