FINLY APRIL 2019 by FINLY

FINLY| April 2019 | Finstreet | SIMSR

From the Editorâ&#x20AC;&#x2122;s Desk

Dear Readers, Greetings from the new editorial team at Finstreet. For the past several years Finly has been informing, engaging, inspiring and entertaining a diverse readership -- including alumni, faculty, staff, and students at KJ SIMSR by presenting an intimate, timely and honest portrait of the key activities and events in the Indian and Global economy. We remain committed towards continuing with this rich legacy. We are proud to unveil the April edition of our monthly magazine FINLY for the academic year 2018-19. Our Cover Story helps us in a critical evaluation of the performance of the current government where the authors have taken into consideration several financial and economic parameters. Next in line, is the Eco Section, which analyses in detail the startup ecosystem in India taking note of the funding scenario, renewed corporate interest in startups and the various government policies and regulations affecting startups. In the Sector Analysis, the authors inspect the Paper industry, with an in-depth analysis of the market structure, growth drivers and challenges faced by the sector. This month's Fintech Funda covers the impact of the fintech revolution on the Insurance industry, covering aspects of big data, cognitive technology, and personalized insurance. In the end, we have a section called â&#x20AC;&#x153;Know Your Financeâ&#x20AC;?, which contains information, breaking down some useful concepts in Finance, which would help any aspiring finance student to take baby steps in building the concepts as well as confidence in the subject. We express our gratitude to Prof. (Dr.) Pankaj Trivedi (Course Coordinator, PGDM Core, and Faculty Coordinator, Finstreet) for providing the essential mentoring, support and backing to the Finly team. We would also like to thank our Sponsors, White Knight Ventures, for an enriching collaboration. We hope to continue the partnership for a very long time. This month's call for article competition received an overwhelming response with highquality articles coming in from various top management colleges across the country. We thank each and every participant for their sincere efforts and participation. This month's winner's and runner-up articles are a recommended read. We thank all our readers and faculty members for their constant love and support. Your reviews and feedback are much appreciated. Each edition of FINLY is the outcome of the tireless efforts and dedication of a group of individuals who call themselves Team Finly. We can't thank them enough for their constant support and initiative.

Mohak Shah,

Saurav Jain,

MMS 2018-20

PGDM 2018-20

Team Finly- April 2019 Faculty Incharge

Dr.(Prof) Pankaj Trivedi

Editor-in-Chief

Editor- FINLY

Mohak Shah

Saurav Jain

-Conceptualization & DesignShubham Patel

Indresh Naithani

Adyasha Pratihari

Isha Koolwal

-Content TeamRadhika Goyal

Rohan Thombre

Yash Mangalani

Sakshi Gupta

Swapnil Ghose

Shubham Goyal

Ankit Nimbajiya

Sambhabi Chanda Pratik Sharma Madhura Shastri

Shraddha Joshi

Kunal Mirchandani

FINLY| JULY 2018 | Finstreet | SIMSR

INDEX

Editorial Team Finly

04 Cover Story 08 Article of the

Month-Winner Article of the Month-Runner Up

Fintech Funda

Sector Analysis

Know your ď&#x20AC; nance

Eco Section

NDA II Hits & Misses

Cover Story

With elections due in the next 1-1.5 months, this seems to be the apt time to evaluate the 5 years of Modi government, or, as he says, check his report card. When Narendra Modi came to power in 2014, there was an unprecedented wave in the country. With the election campaign that Narendra Modi had done across the length and the breadth of the country, and the Gujarat development model backing it, 133.92 crore Indians had already set high hopes from the upcoming government. Modi was the face of a change of the country. He gave a new face to the country â&#x20AC;&#x201C; from branding and presenting the old schemes as brand new and reviving them to changing the perception of the world towards India. But just like every coin has two sides, the rule by NDA II also has its highs and lows. Over the past years, the government has managed to deliver the good, the bad and the ugly. Those which top the list include GST,

Insolvency and Bankruptcy Code, FDI Reforms and JAM trinity. However, areas such as land and labour reforms, unemployment continued to be major impediments. Let us have a look at various parameters in order to evaluate the hits and misses of the NDA Government. 1. GDP The most important indicator of a country's health is its GDP. In the first four years of the NDA government, the growth was reported at 7.2% which is almost at par with the growth rate as measured during the first four years of the last UPA government (7.3%) and there has been no substantial increase. Also, the growth in the agricultural sector stood at 2.4% lower than the 4% during the UPA government, though this can be attributed to the droughts for two consecutive years. The industry and the service sector fared at a decent rate of 7.1% and 8.8% respectively.

Cover Story

FINLY| April 2019 | Finstreet | SIMSR

Overall, the GDP numbers were not convincing enough to give a clear thumbs up to the Modi Government. There are plenty of reasons which can be attributed to this average performance, the good thing is that the GDP did not deteriorate. 2. Fiscal Deficit From 4.4% in FY 13 to 3.5% in FY 18, the fiscal deficit has seen a dip. The Government has seriously tried to stick to the fiscal deficit targets and has put in a lot of effort to contain the mayhem caused by a higher fiscal deficit. Probably this could explain the not-sohigh GDP of the country. Balancing the fiscal deficit and the GDP is a task. The choice of the incumbent government seems to be clear.

Source: Economic Times

3. Tax Revenue Tax revenue is the lifeline for any government. With robust and regular tax revenues, the government can implement welfare programs and infrastructure projects that benefit the people. During the four years (20142018), tax revenue stood at 15.91 lakh crore per year as opposed to 8.36 lakh crore during UPA. The income tax

department has become more stringent and vigilant. This is a considerable increase and could surely be ticked in the achievements section. 4. Demonetization Without any doubt, this has been the most controversial topic of the Modi rule. One fine evening while casually watching the news, you suddenly realize that 500 and 1000 rupee notes are no longer legal tender and more than 3/4th of the legal tender was pulled out of circulation literally within seconds. While every person has its own view on demonetization, number speak in unison and convey the same message. Demonetization did not prove to be good for the health of the economy and caused massive trouble for the poor and lower income groups. The unorganized sector in the country faced a really tough time managing this and production was halted for months. The GDP fell and there was chaos in the entire nation. Though close to 99% of the banned currency did flow back to the banks, what good did it do to the people is something that is debatable. Demonetization could have been better implemented, (provided it was that necessary) in terms of its timing and planning. Critics say that it did no good to the economy and rather hampered the growth and caused trouble to the citizens. Those long lines outside the bank ATMs are surely something that people won't forget for years to come. 5. NPA Problem Looking at the graph below, it is not difficult to tell that the NPA's in the Indian Banks have increased substantially.

Cover Story

FINLY| April 2019 | Finstreet | SIMSR

also eased the foreign investment norms in crucial sectors like services, computer software, and hardware, telecommunications, trading, construction, automobile, and power. Overall the FDI inflows increased to $43.50 billion in 2017-18 from $24.30 billion in 2013-14. Source: IBA

However, there is a story to it. The RBI began early identification of stressed assets in January 2014. This led to the banks digging out their balance sheets and surfacing huge amounts of gross NPAs. The NPAs saw a jump from 2.52 lakh crore in March 2014 to 9.62 lakh crore in March 2018. The humungous scams in recent history have worsened the situation further for the banks in the country. The current government has t i m e a n d a ga i n b l a m e d t h e U PA government for this banking mess and at the same time taking measures to improve this “mess”. The historical Insolvency and Bankruptcy code passed in 2016 is a step in that direction. Hence, this increase in NPAs is not a problem created by the NDA government. 6. Foreign Direct Investment (FDI) Foreign Direct Investment has gone up since the NDA government came into power. The FDI inflows showed a significant increase to $24.7 billion in 2014-15 from $16 billion in 2013-14, which accounted for 54 percent change. This huge increase was attributed to NDA g o v e r n m e n t ' s “ M a k e i n I n d i a ”, introduced in September 2014, which attracted a huge pool of foreign investors. In these years, the government

The NDA government did their best to keep retail inflation under check during their reign. It declined to 4.58 percent in April 2018 from 8.48 percent in May 2014. Over the past four years, the figure hit a low of 1.46 percent in June 2017. But as the tenure of NDA government nears the finishing line, the government's key achievement of taming inflation seems to be under threat, because of both global and domestic factors. Crude oil prices have risen sharply over the past few months which are raising concerns. And farm distress has led to a sharp rise in agrarian riots, prompting the government to announce an expansion and hike in farm support prices, which could increase the inflation once again. 7. Forex Reserve India's forex reserve grew nearly 35 percent during the four years of NDA government. As per the data released by Reserve Bank of India, the foreign exchange reserve jumped to $417 billion as of May 11, 2018, from $312.66 billion

Cover Story

FINLY| JULY 2018 Finstreet | SIMSR January 2019 ||Finstreet | SIMSR FINLY| April 2019 | Finstreet | SIMSR

on May 30, 2014. The country's foreign exchange reserves hit a lifetime high of $426.08 billion in April 2018, helped by a r i s e i n fo r e i g n c u r r e n c y a s s e t s . 8. Unemployment Rate The unemployment rate in India rose to 7.2 percent in February 2019, the highest since September 2016 which is one of the major cause of concerns for the NDA government. According to data released by the Centre for Monitoring Indian Economy (CMIE), the labor force is down 25.7 million since September 2016 and the number of employed persons has declined by 18.3 million in the same period. The CMIE report also mentioned that almost 11 million people lost their jobs in 2018 after the demonetization of high-value notes in 2016 and the launch of a new goods and services tax (GST) in 2017 which hit a number of small businesses. All this is pretty bad news for the NDA government ahead of the general elections due to be held by early May. The NDA government of the Center is a "colossal failure" on various issues such as unemployment, the agrarian crisis and the atrocities committed against women. Some of the measures adopted by the NDA government have provoked an agrarian crisis and an increase in atrocities against women. The Ujjwala program, the Swachh Bharat mission (SBM), Ayushman Bharat could be the reasons why the NDA is considered a success. As for the social sectors, it can be said that the current government and its predecessor tend to increase spending through direct cash transfers and insurance coverage instead of increasing

FINLY| August 2016 | Finstreet | SI

the costs for the provision of essential services by the public sector. However, gaps in public procurement can be addressed holistically through a more gradual fiscal policy, decentralization, administrative reforms and greater social responsibility in these areas.

IMSR

Article of the Month - Winner

MINDTREE HOSTILE TAKEOVER ATTEMPT ITS REASON, CURRENT SCENARIO Vishal Jain, KJ SIMSR, 2018-20

Mindtree is an IT service and consulting firm headquartered in Bengaluru, India and New Jersey, USA. The company, with a market cap of Rs. 15,000 Cr. is in the news because of its possible hostile takeover by Larsen & Toubro Infotech Ltd. All this started when Cafe Coffee Day fo u n d e r a n d M i n d t re e ' s l a rg e s t shareholder, V. G. Siddhartha decided to sell off his 20.4% stake to fulfill his own repayment liabilities. Interestingly Siddhartha has plans for expanding his business, and he needs working capital. L&T is taking advantage of the current situation and trying to get almost 51% stake in Mindtree so that they get into the driving seat. But L&T is not alone in this fight, KKR and Co. which is a private equity firm, was also in talks to buy Siddhartha's stake and was backing a competing bid by Mindtree promoters

who are resistant to relinquish control, they own 13.32% in the firm. Of the 13.32%, Chairman Krishna Kumar Natarajan has control of 3.72%, CoFounder Subroto Bagchi controls 3.1%, NS Parthasarathy and the current CEO Rostow Ravanan hold 1.43% and 0.71%, respectively. W h y i s M i n d t r e e a n a t t ra c t i v e acquisition? Mindtree's annual revenue growth rate: The company's revenue growth rate has been registered to be compounded at 22 percent during a 10-year period from 2008 to 2018 on a consolidated basis.

Article of the Month - Winner

FINLY| April 2019 | Finstreet | SIMSR

Source: www.moneycontrol.com

Looking at Mindtree's yearly income, we can see it is growing annually and is showing positive returns as well. This led to an increase in Mindtree's share prices by 15 times which comes to a CAGR of 33 percent, it was much higher than the Nifty IT Index, which rose five times in the period. Mindtree's management Mindtree has been able to execute plans better than its peers over a long duration. The phase of volatility is almost over for Mindtree as they have all the major acquisitions behind them and the future only holds opportunities for the firm to grow. As time progresses, volatility in earnings will also reduce and the company's earnings are estimated to reach $1 billion in revenue in FY19. Revenue from the unique segment and reach to a wider geography Larsen & Toubro Infotech (LTI) has been on a fast track growth path over the last few years. They have outperformed their peers significantly and to sustain this growth path, the company is looking towards expansion and has been making investments to grow inorganically.

Mindtree is not the only one, they have already acquired three firms since the company went public in 2016, the latest being the Ruletronics for Rs. 53 crores. Analysts believe that the acquisition of Mindtree is a strategic tactic as it will give L&T a growth opportunity in certain segments of the industry that they haven't entered yet, for example, Mindtree has a strong presence in the technology and media industries, which is not a strong part of LTI's portfolio. Also, it will give them momentum to acquire a part of geography where they currently don't have a very strong presence, like LTI generates most of its business from North American market, for them to grow in Europe, Mindtree will be a way to round out their portfolio. Retaliation by Mindtree Fighting against the hostile takeover, founders of Mindtree have taken an unusual step of calling a board meeting to consider a share buyback as a means to stave off the current risk of losing control of the firm. It is possibly the first time in India that a firm is fighting a potential takeover bid by using the buyback option. This will result in two positive points for Mindtree, firstly it could increase the cost per share for L&T as the company gets attention from various investors. Secondly, the number of shares available for purchase will decrease. At the same time, it leaves a disconcerting impact on existing shareholders as it shows a disconnect between what management wants to do and what large shareholders want to do. Another step taken by the founding

Article of the Month - Winner

FINLY| April 2019 | Finstreet | SIMSR

m e m b e rs a n d t h e p ro m o te rs o f Mindtree is that they have been holding talks with Baring PE Asia, Chrys Capital and KKR to persuade them to buy Siddhartha's shares to continue their reign. Subroto Bagchi, Co-founder and former CEO of Mindtree has quit his government job and decided to rejoin to fend off L&T's hostile takeover. Clearly, the founders and the company are in no mood to do away with their decisionmaking rights in the company just because a major stakeholder has decided to sell off his shares. Seeing L&T's furious attempts, it seems they are p e rs i ste nt to a c q u i re M i n d t re e . Mindtree shares closed at â&#x201A;š963 apiece on the BSE on Monday 18th March 2019, which means Siddhartha's stake will cost a buyer at least â&#x201A;š3,257 crore. Only time will tell whether the tech giant L&T Infotech will be able to carry out the hostile takeover or Mr. Subroto Bagchi can save the company from doing so.

Article of the Month - Runner Up

FLEXIBLE INFLATION TARGETING (FIT) BOON OR BANE

Rujuta Wani, SIMSREE, 2018-20

Introduction Inflation Targeting is a monetary policy implemented by the central banks of the economy for maintaining inflation at a certain predefined level or within a specific range. Generally, the main target of the central bank is to keep the inflation level sufficiently low. However, in Inflation Targeting, there is a publicly declared and agreed upon target. The central bank then tries to keep inflation below this targeted level and penalties are faced by the central bank in case of missing the targets. This policy was first adopted by New Zealand in 1990, after which it was soon accepted by many economies. India adopted it in 2016 under the Monetary Policy Committee (MPC) of Governor Urjit Patel.

India's Inflation Rate 2013-2017:

History In India, in the past, a monetarist approach was used which used to

consider a supply-side approach to determine the growth of the economy and the demand affected only the inflation, not the output. The inflation targeting, however, focuses on the demand side approach which emphasizes that the demand plays a major role in economic development. The advantage of this policy is that it brings transparency, accountability and it also gives the central bank a wide control spectrum over the economy. So generally the central bank forecasts the future path of inflation and compares it with the targeted inflation rate [2]. Below graph shows how the implementation of Inflation targeting has helped to reduce the inflation level which was approximately 11% in 2011.

Source: www.tradingeconomics.com

Article of the Month - Runner Up

FINLY| April 2019 | Finstreet | SIMSR

Indian inflation has been seeing a dramatic collapse because of the implementation of flexible inflation targeting. However, the above graph shows a spike in the year 2016 due to Demonetization. Also, the rise in 2017 is due to the implementation of GST.

percent in October 2017 and then rose to5.21 percent in December 2017. This rise was marked due to a rise in food inflation

Analysis of FIT The Monetary Policy Committee (MPC) has targeted FIT to be at 4 percent with +/ 2 percent. It has helped to reduce the inflation of 2011 which was around 11 percent. Impact Analysis can be described as below

Source: ceicdata

Ÿ Repo Rate– From the time this policy

was implemented until today, RBI has made almost eight changes to the policy. The repo rate in July 2014 was 8 percent and has been reducing consistently. At present, it is 6.5 percent. This repo rate helps to maintain inflation at a specified level. In case of a lower inflation rate, the expansionary policy is implemented by the government.

Source: Bloomberg and India Central Statistical Organization

Ÿ GDP – GDP growth under this policy is

marked well so far. However, GDP went down in 2016 and 2017 due to Demonetization and GST respectively. However, from 2014 to 2016, the GDP of the economy was good. At present GDP growth is 7.1 percent for the second half of 2018.

Source: ceicdata

Ÿ Consumer Price Index (CPI) – In India,

CPI is used as a key index for measuring inflation. Due to inflationary pressures, CPI is seen to be increasing. It was 3.6

Source: ceicdata

Ÿ Merits - It brings in transparency in the

economy. Adds accountability to the central bank. Narasimha committee

Article of the Month - Runner Up

FINLY| April 2019 | Finstreet | SIMSR

(2000) and Rajan committee (2007) once stated that such a policy provides more room for the policymakers to respond to large shocks. Ÿ Demerits - A successful

implementation of this policy needs a lot of parameters like - Independence of the Central Bank - Developed technical infrastructure for forecasting and modeling - A healthy economy with a sound banking system and well-developed capital markets Challenges in India and Conclusion: Implementing FIT in a developing e co n o my l i ke I n d i a h o l d s s o m e challenges like below [2]: Ÿ Importance of Food Prices to the changes in CPI – In Indian CPI, food constitutes around 46 percent of the CPI basket and this poses a high risk in the implementation of FIT. Food prices are highly susceptible to supply stocks while the FIT is focused on demand side leading to output. These food prices are mainly derived by the agricultural outputs which are highly dependent on environmental factors like adequate rainfall, less soil erosion, and absence of natural calamities etc.

FIT policy will be able to nullify the food price sensitive effect by implementing effective strategies. Firstly, there is a need to have a long run inflation target which will anchor to the expectations. Secondly, the central bank reinforces the anchor by publishing forecast that shows a medium duration path back to the target along with the assessment of the channels through which the inflation adjusts itself back to the target considering all types of lags or delays. Ÿ Building Credibility – Earlier RBI did not

have any explicit price stability which could judge or predict whether long-run inflation target will be achieved or not. With FIT in place, the most important thing for RBI is to gain consumer credibility. This can be achieved through transparent communications (like monthly or annual reports), announced objectives and goals etc.

Source – RBI Website

The above shows how expectations can amplify or absorb in case of inflation shock. Like when the central bank raises the policy rates the effect on the economy depends on how the people of the economy interpret the action. Source – RBI Website

Hence having an inflation target based on CPI is risky. However, a well-drafted

Ÿ Technological Infrastructure – [3] for

future inflation forecasting an advanced technological infrastructural base is

Article of the Month - Runner Up

FINLY| April 2019 | Finstreet | SIMSR

needed. India being a developing nation needs to work on this because at present also we are not able to forecast for 8-12 quarters future data as this requires highly sophisticated instruments.

THE INDIAN STARTUP ECOSYSTEM Ankit Kumar | MMS | 2018-20 Shraddha Joshi | MMS | 2018-20 Shubham Goyal | MMS | 2018-20

ECO Section

About the Indian startup ecosystem

India has the 2nd largest startup ecosystem in the world and is expected to witness the YoY growth of 10-12%. Approximately 20,000 startups in India a n d a ro u n d 4 , 7 5 0 o f t h e s e a re technology led startups, implying there are 3-4 tech startups born every day. Seven million college graduates per year; 55% of the youth prefer working in startups over corporates (as per youth of the nation survey of 150K young Indians). The median age of founders is 31 years. While eCommerce and Aggregators have become mature; Fintech, Edutech, and Healthtech are emerging verticals. Funding in India's education technology startups hit an alltime high in 2018 as investors finally started recognizing the potential of the sector in a country where a third of the population is below 20 years of age. The Edutech sector attracted investment worth $742 million last year, a year on year rise of 733 percent. Bangalore,

Mumbai, and NCR are the top startup destinations with over 65% of the total Indian startups. Bangalore has also been listed within the world's 20 leading startup cities in the Startup Genome Project ranking. It is also ranked as one of the world's five fastest-growing startup cities Following diagram shows the distribution of startups region wise and industry wise

(Source: Startup India Gov.in) 280+ Incubators/Accelerators /Co-Working Space with 40% YoY growth

ECO Section

FINLY| April 2019 | Finstreet | SIMSR

innovative products at a cost five times cheaper than carrying out internal R&D. Economical and Compliance Challenges

(Source: Startup India Gov.in) Tier 2/tier 3 cities are gaining traction, with 66% new incubators established

Funding Angel investments are on the rise, with a 20% increase in active investors. Global investors such as Alibaba Group, Soft bank, Sequoia, and Foxconn have started to invest in the Indian startup ecosystem. On average, four startup deals are announced every weekday. Corporate Connect Enterprises are realizing the disruptive potential of start-ups and are thus, partnering/investing in them. As per KPMG CEO Survey; 37% of CEOs surveyed deem their organizations to be highly capable of connecting in a beneficial way with start-ups. Examples of corporate support: 1. Wipro has set up a $100mn fund to invest in startups, IBM is partnering with 100 Indian big data and IoT start-ups, Barclays has set up an fintech coworking space that looks at getting

Over the past few years, India has witnessed an unparalleled rise in the growth of startups and has become one of the coveted destinations for starting a business in the world. Efforts of the government to nurture innovation and encourage entrepreneurship have provided an impetus to the ecosystem. Government is the single largest enabler for the entrepreneurial ecosystem. Government Policies and Regulations It is uncannily difficult to start a business in India and myriad laws and regulations mean it takes about 30 days to comply compared to just 9 days in OECD countries. The government's role has so far been limited to giving out grants and loans, but without an effective, enabling environment, implementation is far off the target. Lack of adequate knowledge around what constitutes compliance and governance is one of the big gest roadblocks faced by startups. The ambit of compliance surpasses legal or statutory compliance or requirements pertaining to â&#x20AC;&#x153;set up and operateâ&#x20AC;? business only. Compliance must be at the heart of any business and stay so for as long as the business exists. Practices relating to internal controls and processes, risk management, ethics, etc., are some of the crucial aspects in this regard. Often, with investments from friends and family, a team of 3-4 members including the founders, work towards building the

ECO Section

FINLY| April 2019 | Finstreet | SIMSR

Minimum Viable Product (MVP) and strategize subsequent phases of developing the final product. Once MVP is ready, only then startups consider hiring a professional (CA/CS/lawyer) to legalize the entity and protect the intellectual property (if any). Considerable investment in terms of time and money has been put in at this stage, and this calls for establishing a robust compliance foundation as the ethical tone set by the core members is a benchmark for future incumbents and employees. Typically, this phase involves determining the form of the business entity like Partnership/Limited Liability Partnership, Corporation or Limited Liability Company, etc. Once the legal entity is formulated, a due diligence report is presented to investors in the quest for investment. This report focuses on the business model, financial modeling and anticipated growth over time, feasibility tests of the product and echoes market research to assess demand. Businesses which receive requisite funding go on to ex p a n d o p e rat i o n s a n d a c h i eve economies of scale over time. Maintaining clear and up to date financial records, Compliance of Reserve Bank of India (RBI) and Foreign Exchange Management Act (FEMA) regulations, Compliance of Income Tax, Goods & Service Tax (GST), Employee State Insurance, Provident Fund, Gratuity, and other applicable corporate and labor laws.

Hiring The economy has been in flux and along with the world economy, the heady days of high growth are long gone. In an

uncertain economy where one is not sure about demand, for a startup, it is particularly difficult to make correct estimates on the number of employees needed. This, however, is the minor problem where the biggest issue is about finding skilled manpower. India's skilling need is so huge that the National Skill Development Corporation (NSDC) has been mandated to skill 150 million Indians by 2022. For a startup, it is particularly difficult to attract and hire talent and skilled workers. A startup often cannot match the salaries drawn at larger companies nor is a job at a startup seen as a steady one. This means startups face severe hiring challenges and at times have to settle for the next best option. The Path Ahead The entrepreneurial movement in India was given a marvelous boost two years ago with Prime Minister Narendra Modi's “StartUp India Stand Up India” appeal. In the flush of success, it was the muchtalked-about business models that were simply a “lift and shift” from US success stories that were praised and attracted funding. So, could 2019 also become a watershed year for the entrepreneurial movement in our country? Well, it's not going to be easy with the triple whammy of a slowing global economy, the uncertainties of policies and actions of the Trump administration in the US and the short-term economic impact of India's elections all having the potential to slow down the economy and the fortunes of entrepreneurs. Nevertheless, with the right strategy and a focused approach to markets and products, there isn't any reason why the existing entrepreneurial companies couldn't add

ECO Section

FINLY| April 2019 | Finstreet | SIMSR

scope to their operations. The new and scaling companies can and must show success and raise the level of their ambition. India is at cross-roads as most of the sectors are struggling to attain the growth numbers achieved in the past and we need the nurturing of a lively entrepreneurial ecosystem so that India can sustain 10 % growth which is vital to meet the collective aspirations of a billion Indians. The emergence of incubators has helped India to enhance the visibility of the startup ecosystem. The Ten Thousand Startups initiative of NASSCOM, Kerala's Startup Village with its ambition to create a thousand startups in 10 years and the unique p a r t n e r s h i p b e t w e e n i n d u s t r y, government, and academia which led to the creation of T-Hub in Hyderabad are instances which have been the defining entrepreneurial movement in India. The Right Approach Hundreds of startups have choked after the initial enthusiasm and several funded entities of the first wave are at risk of running out of cash and entering a dreaded phase down the road. The scarcity of significant success stories a n d i nv u l n e ra b l e sta r t u p va l u e propositions beyond the oft-repeated Flipkart and PayTM examples has tremor the market and raised questions about the sustainability of the whole start-up movement. However, there is no need to panic as what is needed in the New Year is just a complimentary assessment of the state of play and the case studies of other ecosystems which

can be emulated in our own entrepreneurial journey and make the s t a r t u p m o v e m e n t b r u i s e a ga i n . Entrepreneur's vision orientation and success are imperative to scale manifold in the coming years. One of the companies in India, Kalzoom has focused its thoughtfulness on this segment and recognized over 500 firms in the digital space and technology in India and the US which are stuck in a quicksand of slow growth after being weathered by initial anxieties. It might be time for such entities to gauge the validity of their business model to adapt business environment that necessitates a strategic pivot to find a rich vein of innovative growth to tap. It may also be time for some firms to evaluate acquisition opportunities which can get them into adjacent opportunity areas quicker than by just trying the organic investment way. For other struggling firms, it might be worth considering selling their companies to larger players who can give them the resources in terms of technology infusion or selling bandwidth. All entrepreneurs should place his or her company under this Grow, Buy & Sell lens and follow the right approach.

THE FINTECH REVOLUTION â&#x20AC;&#x201C; WHAT IT MEANS FOR THE INSURANCE INDUSTRY

Fintech Funda

The Fintech revolution is the series of revolutionary advancements that have been disrupting the finance industry over the past decade or so. Although the finance industry has been one of the last business areas to see the disruption due to technology, these developments although late have the potential to completely change the way we transact. The insurance industry is also seeing a lot of change with the development of Fintech, and customer expectations are what is driving this change. Customer demands have completely morphed. They are no longer seeking services but are looking for mobile insurance solutions which integrate several areas of assistance on a single

platform. Many of the insurance companies are aware of this and are embracing this shift in consumer demand, and rather than panicking at the potential threat of the up and c o m i n g I n s u r Te c h a n d F i n Te c h competition, older insurers are looking at these startups as catalysts for innovation of the industry. Customer Segmentation- Data availability has increased exponentially. Companies now have access to a lot of customer data with the development of easier methods of obtaining it. They use this to build a much more accurate profile of customers and tailor their services to suit him/her more adequately. Customers were broken down into segments on the basis of

FINLY| April 2019 | Finstreet | SIMSR

Fintech Funda

their income, their lifestyles, their health and other qualitative factors Personalized Insurance- Another way to use all the customer data is in product/service development. Many companies are exploring the realm of personalized insurance plans, but this sort of first-degree differentiation is the best way to maximize producer surplus. This also opens the doors to cheaper insurance plans for those who need it. Buzzvault is a new enterprise which provides customers with a digitized inventory of all their possessions. So, by uploading their home contents data to the database, customers of buzzvault can then create extremely personalized insurance policies with the added flexibility of adding or removing items from their existing policy at any time. Slice is another such on-demand InsurTech venture which allows customers who rent out their cars or homes to only pay for the insurance for the time they are renting them. Internet of Things (IoT), Big Data, and Blockchain technology are trending buzzwords that are associated with technology and now with insurance as well. Internet of Things enables physical objects to share data more efficiently and effectively. Just like telematic devices provide data on a driver's profile, fitness trackers can be used to give insights into a person's health. This data can be analyzed to more accurately measure the risk and come up with an appropriate insurance premium for the person. Big Data & Analytics helps in precise customer profiling which aids in

customized marketing and cross-selling. Secured and structured record keeping will also be possible thanks to Blockchain technology which also helps in maintaining transparency, detection of fraud, redundancy reduction, and increased productivity. Leading Fintech Innovators in Insurance Sector As insurance firms face rising pressure to go digital, Insurtech offers outstanding opportunities. There are numerous examples of FinTech companies that have ventured into the area of insurance. Additionally, there is a general consensus that there will be increasing infiltration of the insurance sector by FinTech startups. In supplement to larger pricing models, insurtech startups are assessing the waters on a host of possible game changers. These contain employing deep discovering trained Artificial Intelligence (AI) to grasp the tasks of brokers and find the right blend of strategies to accomplish an individual's coverage. There is more use of apps nowadays to pull disparate strategies into one period for association and monitoring, creating on-demand insurance for micro events like employing someone's vehicle, and the adoption of the peer-to-peer model to both create customized coverage and incentivize choices across group rebates. In the insurance sector, examples of leading FinTech innovators include Knip, Brolly & India's PolicyBazaar. These firms provide users with prominent portfolios available to them at a single place and aim to empower customers with comparative and accurate information on different i n s u ra n c e p ro d u c t s . O t h e r m a j o r companies are Friendsurance,

Fintech Funda

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Bankbazaar, PolicyGenius, ZhongAn, To n g J u B a o, L e m o n a d e , S u re i f y, Snapsheet etc. These companies provide a comprehensive and appropriate plan and strategy to their customers. The adoption of Big Data, AI, Blockchain and other technologies have closed the digital gap around customers. Insurers are facing rising pressure to evolve and reinvent themselves before disruption, provoked by emerging technology and insurance startups, hits the bottom line. The major issue that arises is how will traditional insurers, some of which are more than 300 years old, collaborate and correlate with insurtechs that may be less than 300 days old? The insurers need to amalgamate up with the insurtechs for the optimal results. The innovators in insurance are working towards changing their mindset and approach to extract maximum value from working together. They are understanding the market and the challenge they are solving for. They need to ensure that the proposition is clear, concise and related to the specific challenge or business problem. They should also consider the broader insurance industry as a whole and not just the personal non-life space. They should accumulate the queries of customers and support traditional insurers on their cultural and technological journeys. To further help out companies, the insurers should develop their overall innovation agenda and then determine which insurtech sits within it. They should embrace innovation as part draw inspiration and learning from retail banks' Fintech journeys, and from their ability to look beyond the financial services space.

Regulatory and capital barriers to entering the insurance industry limit the impact of 'standalone' FinTechs. However, the marriage of FinTech capabilities with a supporter who brings sufficient capital, regulatory fit and a recognized brand would be transformational for the respective sector. How are things moving in the insurance industry and what does the future hold? The rise of fintech, changing consumer behavior, and progressive technologies are disrupting the insurance industry. Moreover, Insurtechs and skill startups persist to redefine customer experience through innovations such as risk-free underwriting, on-the-spot purchasing, activation, and claims handling. The forces which are disrupting the insurance industry areas : - Shifting the channel: Partnerships with merchandise makers and distributors, and implanting insurance into other products and services may enable customers to select products that best fit their lifestyle. - Underwriting by machine: Technology progresses including Artificial Intelligence innovations and algorithms will likely individualize risk selection and pricing, and customers can select products based on a wider range of price points. - Rise of the flexible product: Timeflexible, event-driven, modular and changeable coverage may evolve to accommodate life stage, lifestyle, and wellness changes among consumers. Given the growth and shopping patterns in emerging markets, insurers who

Fintech Funda

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present flexible term products, and master digital distribution without compromising underwriting are likely to win in the marketplace. Artificial Intelligence and Internet of Things are already shaping the insurance industry. Let's look at how AI and IoT will help shape the insurance industry in the future. Data Burst from Connected Devices In business surroundings, tools with sensors have been omnipresent for the considerable state, yet the upcoming years will see a huge increment in the number of connected consumer devices. The penetration of current gadgets, for example, vehicles, fitness trailers, home assistants, cell phones, and smartwatches will keep on expanding quickly, joined by new, developing classifications, for example, apparel, eyewear, home appliances, medical gadgets, and shoes. The succeeding torrential slide of new facts made by these gadgets will enable bearers to comprehend their customers all the more deeply, bringing about new product arrangements, more tailored assessing, and growingly real-time service delivery. Risk Assessment and Big Data Most of the top insurance agencies are amalgamating their data analytics algorithms with probably the most recent Artificial Intelligence innovation so as to enhance the precision of risk calculations. The description behind this is that insurance agencies need huge amounts of information so as to enhance their appreciation of customer hazard.

Physical Robots The field of automation has seen many energizing happenings as of late, and this development will keep on changing how people collaborate with their surroundings. Additive manufacturing, otherwise called 3-D printing, will radically reshape manufacturing and the insurance products in the commercial markets in the near future. By 2025, 3-Dprinted structures will be normal, and transporters should survey how these development changes risk evaluations. What're more, programmable, self-ruling drones; self-driving vehicles; self-ruling farming gear; and improved surgical robots will all be financially practical in the following decade. Developments in Cognitive Technology Convolutional neural networks and other deep learning progressions right now utilized basically for picture, voice, and unstructured text processing will emerge to be applied in a wide assortment of applications. These rational technologies, which are more or less founded on the human mind's capacity to learn through disintegration and inference, will turn into the standard m et h o d o l o g y fo r p ro c e s s i n g t h e astonishingly huge and complex data streams that will be created by â&#x20AC;&#x153;activeâ&#x20AC;? insurance products attached to a person's conduct and activities. With the prolonged commercialization of these sorts of inventions, bearers will approach models that are always learning and adapting to their general surroundings which empower new product classifications and engagement methods while reacting to shifts in fundamental

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risks or behavior in real time.

Fintech Funda

Digital Transformations

The power that AI processing will pick up precisely relies upon the size and the nature of data that is accessible to it. Principally, the more data AI has about its clients, the better rate it can offer; it won't be restricted to giving you the best sort of inclusion, however, it will similarly have the capacity to give you a superior cost. By linking with sensors and IoT gadgets, policies may change in real-time by adapting progressively around an enrollee's conduct and risk profile.

PAPER INDUSTRY

Sector Analysis

INTRODUCTION

MARKET STRUCTURE

Indian paper industry is the fastest growing major paper market in the world with CAGR of around 8% over the past few years as opposed to 1% for the global paper industry. India ranks 15th among paper manufacturing countries in the world. Though India is a fastgrowing paper market, it is also fragmented. It has been observed that the paper demand in India is growing in sync with the GDP of the country. As a result of rapidly improving literacy rates, growth in higher value coated paper demand and sustained packaging paper demand due to the e-commerce boom, the paper industry has great opportunities to flourish. This article intends to explore different aspects of paper industry like market structure, growth drivers, future prospects etc.

Turnover of the Indian paper industry is estimated to be Rs. 50,000 crores. India contributes around 3% to total world paper production. Indian paper industry provides employment to around 5-15 lakh people. But the paper business in India is fragmented with over 750 mills, out of which only 50 mills have good availability of power supply. Majority of the total installed capacity of paper production is located in Andhra Pradesh, Gujarat, M a h a r a s h t r a , We s t B e n g a l , a n d Karnataka. Currently, the manufacturing facilities are working at 89% capacity utilization. The present demand for paper is estimated to be 13.1 million tonnes out of which domestic production is 11.4 million tonnes and import of 2.2 million tonnes with export being 0.5 million tonnes. The demand is projected to increase to 23.5 million tonnes by 2024-25.

Sector Analysis

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Indian paper industry can be classified on the basis of types of papers as below:

Source: alphainvesco.com

GROWTH DRIVERS

Source: alphainvesco.com

Newsprints: Newsprints are used in newspaper and magazine production. It constitutes 15% of the paper industry. Writing & Printing paper: This segment serves to textbooks, office stationery, copier papers etc. It forms 30% of the paper industry. Packaging paper: It caters to consumer & tertiary packaging purposes in industries like food, FMCG, textiles, pharmaceuticals etc. It has the largest contribution of 51% to the Indian paper industry. This is also one of the fastest growing segments and the growth can be attributed to factors like increased penetration of retail sector, booming ecommerce, rising urbanization, high growth in FMCG, pharmaceuticals etc. Specialty papers: They include tissue, cigarette papers etc. Tissue papers are majorly used for sanitary purposes. Due to increasing hygiene awareness, this segment is experiencing the fastest growth.

Indian paper market segmentation by raw material consumption:

Improving per capita paper consumption: Global paper consumption growth has been stagnant. Whereas, Indian paper industry is witnessing strong growth for fast few years. As a result of increasing urbanization and level of disposable income, paper consumption in the country will improve further. Increase in literacy rate: Educational institutions have been consistently increasing in India. With improving awareness and enrolment in education, paper demand will increase in the future.

Source: Census Data

Rising circulation of Newspapers & Magazines: According to the Audit Bureau of Circulation, the demand for newspapers & magazines has been increasing at a CAGR of around 10% in India. This will lead to improved demand of newsprints in future.

Sector Analysis

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Thriving e-commerce industry: With a thriving e-commerce sector, the demand for packaging paper for deliveries will grow. Food delivery services have also started using paper bags for home deliveries due to a ban on low quality plastic use. Reduction in raw material prices: In 2017, China imposed a ban on the import of waste paper. This led to a substantial fall in prices of waste paper which helped many companies that use waste paper as a key raw material. Even though per capita use of paper in India is low compared to global levels, things are improving and the demand is set to rise from current 13 million tonnes to an estimated 20 million tonnes by 2020. This shows there is a huge scope for development in India. Challenges Access to quality and cost competitive raw material India is a wood fiber deficient country as the Government of India does not permit industrial plantations in the country and inadequate raw material availability domestically is a major constraint for the paper industry. Additionally, the recovery rate of wastepaper in India is quite low (~30%) due to the lack of an effective collection mechanism. With issues like availability of quality raw material at competitive prices, the players depend on the imports of pulp, wastepaper, and even pulpwood to meet their raw material needs and often have to pay a premium for availing them thereby impacting profitability and capacity addition. To alleviate this significant challenge, the

Government of India could frame a policy to allow access to degraded forest land for paper mills to raise pulpwood plantations for increasing pulp availability and reduce i m p o r t d e p e n d e n c e ; f u r t h e r, t h e collection mechanism needs to be strengthened to increase usage of wastepaper. Competition from imports Imports account for over 20% of the paper consumption in India. The domestic paper manufacturers are less competitive against imports, given the superior quality and lower prices of imported paper. As per IPMA, paper from ASEAN countries that is produced from raw wood is available at about USD 40 per tonne, as against USD 110 per tonne in India. Rising imports at predatory prices from surplus countries like China has been a major concern for local players in India. On account of cheaper imports, the domestic industry has faced challenges in pricing its products. An anti-dumping probe into the cheap import of 'uncoated paper' from Indonesia, Thailand, and Singapore has been initiated by the Government as the Directorate General of Anti-Dumping And Allied Duties (DGAD) has found 'sufficient prima facie evidence' of dumping of uncoated paper following complaints from some domestic companies. Technology As the Indian paper industry is largely fragmented with lower capacity with an individual paper mill, it is also prone to using outdated technology. Resultantly, it is estimated that both the raw material as well as the power consumption is higher as compared to a modern paper mill.

Sector Analysis

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Adoption of new technology by domestic paper producers would lead to the emergence of more competitiveness in critical areas including a quantifiable increase in productivity, quality improvement with reduced cost, improvement in energy efficiency and better compliance with environmental protection legislation and safeguards for eco-sustainability of the products. The analyses of these forces indicate that industry is operating under various positive and negative forces which have a mixed effect on its competitiveness. Competition among the mills is low due to a large number of grades being manufactured. High switching cost among the products also makes the industry rivalry less intense; however,

the difficulties to exit from the business due to high capital cost increases the chances of the rivalry among the producers of similar grades. The threat from new entrants is low on account of high capital cost, low return on investment and scarcity of raw materials for paper making. Bargaining power of suppliers of raw materials i.e. wood, straws, bagasse, waste paper, energy (coal etc.) and modern technology is high which, is a deterrent for the growth of the industry. A positive factor for growth & competition among the industry is the forecasted increase in consumption of paper with growing per capita income, literacy rate and living standards. However, the increase in imports of duty-free newsprint and diversified

Sector Analysis

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customer requirement are the negative factors for the industry. Apart from these, Industry is also facing tough competition from electronic media, widespread use of the internet, c o m p u t e r i za t i o n , e - b o o k s , a n d imported printed books. The industry is thus operating under various constraints and high risks, as mentioned above. Therefore, it requires support from Government, in terms of policy interventions for its sustenance.

Government Policies & their impact on the sector – 1.Increase in Applicable Rate of Customs Duty on Newsprint – Newsprint is subject to 'nil' rate of duty on imports. There is also no additional duty and special additional duty on import of newsprint. As a result, newsprint is being dumped into the country by the overseas suppliers which have very adversely impacted the domestic newsprint manufacturers. The registered newsprint manufacturers are not able to sell their product Competitively and the large quantum of imports have resulted in large foreign exchange outgo and revenue loss to the Government. In light of the above, the Government should increase the applicable rate of customs duty on newsprint to the WTO bound rates to save the Indian Newsprint Industry.

2. Exemption of SAD on Import of Pulp and Other Inputs by the Paper Industry – In the Union Budget for 2015-16, exemption of special additional duty (SAD) on inputs to be used by various industries was announced so as to provide relief on the accumulation of CENVAT (Central Value Added Tax) Credit. Paper Industry is a highly capitalintensive industry where input credit on capital items is substantial and on top of it, SAD is levied on import of pulp which leads to further accumulation of CENVAT Credit, resulting into blockage of working capital. There will be no revenue impact on the Exchequer if the levy of SAD is exempted on the import of pulp by the Paper Industry, as paper mills avail CENVAT Credit on the SAD paid. 3. Make the Clean Energy Cess levied on Coal if used for Power Generation, Cenvatable – The doubling of the Clean Environment Cess on coal from INR 200 to INR 400 per tonne in the Union Budget for 201617 has impacted the Pulp & Paper Industry adversely. In case of Pulp & Paper Industry, coal is being used for power generation and the increase has had a significant impact on the cost structure of the industry, which the industry is finding it difficult to absorb. India's Pulp & Paper Industry is struggling to survive under the current scenario of significantly increased raw material, other input, and energy cost and very aggressive competition in the

Sector Analysis

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domestic market from imports of finished products allowed at concessional / nil import duty under the different FTAs signed by India. The hike in the Clean Environment Cess has added further to the overall manufacturing cost of the domestic Pulp & Paper Industry and further impact its competitiveness against ASEAN players. Recent Developments Indian paper industry has a huge potential in the coming future. There are vast demands for paper in the area of tea paper, tissue paper, coated papers etc. Indian paper industry has been an underestimated one because India's per capita consumption of paper is just about 5 Kg which is one of the lowest in the world. The government has given this industry as one of the 35 high priority lists and is valued at approximately Rs. 22000 crore. There are more than 500 manufacturing units of production of paper which have the annual capacity of more than 20 million tonnes. It is estimated to touch 25 million tonnes at a rate of 10% per annum in 2019-2020.

· Tamil Nadu Newsprint And Paper Limited · West Coast Paper Limited · Ballarpur Industries Limited · Andhra Pradesh Paper Mills Ltd · ITC Bhadrachalam Paper Boards Ltd

Integration of electrical systems with mill distribution control systems has helped in monitoring the overall energy consumption and integration of raw material information acts as quality checks at various stages of the production.

Source: www.ngeninvest.com

Future Prospects With increasing , demand paper

industry in India is expected to rise at 100 percent in the next 8 to 10 years. The annual turnover is approximately 35 crores which makes India one of the major players of the paper industry globally. There has also been a constant rise in foreign direct investment in the paper industry in India. According to the reports, India will be an international leading hub for the paper industry in 810 years. Paper industry in India has a huge opportunity to expand by utilizing automation tools and enterprise solutions, integrating them and achieving competitive advantage. Some of the major leading players of the paper industry in India are:

The manufacturing cost of the paper industry is high which affects the actual growth of the paper industry but the government is planning to introduce new technologies for the advancement of the paper industry in India. This

Sector Analysis

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industry is inclined towards rural cities with close linkages to farming. With limited wood resources in India, innovation through better R&D is the need of the hour. Energy cost efficiency should be maximized without compromise on quality. Sustenance of farm forestry is a contributing factor to the stability of this industry, but stronger government support is what this industry really seeks.

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Know your Finance

Shubham Patel | MMS | 2018-20 Mohak Shah | MMS | 2018-20 Sambhabhi Chanda | PG FS| 2018-20

trend in underlying commodities. Traders and Analysts often use this threed i m e n s i o n a l a p p ro a c h t o fo r m a sophisticated trade analysis and make reasonable assumptions about what is happening on the charts to gain an extra edge. STOCK MARKET Volume & Price Correlation between Price, Volume & Open Interest Price, Volume and Open interest are one o f t h e m o s t i m p o r t a n t m a r ke t determinants in the futures and options market. It is a precursor to study price, volume and open interest before understanding the technical charts and the patterns. Among these three, price is more important whereas the change in volume and open interest with respect to price provides a lead indication of an impending change of

Volume is the amount of trading activity or contracts traded on a particular period of time or a day. The greater the amount of trading during a market session the higher will be the trading volume. The greater the volume the more we can expect the existing trend to continue rather than reverse. Volume represents a measure of intensity or pressure behind a price trend. When it comes to price, there are a few things that need to be taken into consideration like momentum i.e. how strong price moves into one direction,

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volatility and hurdles like strong support and resistance areas. Generally, volume precedes price and any substantial increase or decrease in volume could bring a rise or fall in prices. A trader who can read and interpret volume and price information and understand that these elements provide insights about the activity and the sentiment of investors c a n m a ke m u c h b e t t e r t ra d i n g decisions.

can be summarized by the following table:

Ÿ In the first situation, price is increasing

along with volume and Open Interest on rise, this is considered bullish, as new money entering into the market. Ÿ In the second situation, price is rising but

Open Interest Open Interest describes the number of outstanding contracts at the end of any given day that has not been settled. Where volume measures the pressure or intensity behind a price trend, open interest measures the flow of money into the futures market. For each seller of a contract, there must be a buyer of that contract. Thus a seller and a buyer combine to create only one contract. Therefore, to determine the total open interest for any given market we need only to know the totals from one side or the other, buyers or sellers, not the sum of both. Until the moment that a buyer and a seller have been matched to “create a trade” the contract is considered “Open”. An increase in Open Interest shows that more traders want to enter a position. An increase in open interest means, new money is flowing into the assets, resulting a new trend or continuation of the trend. Likewise, decrease in open interest implies traders are liquidating and the current trend is coming to an end.

volume and Open Interest are on decline trend, suggests short sellers are covering their positions, the reason for the uptrend. Money is leaving from the market- this is bearish signal. Ÿ In the third situation, Prices are declining

but both volume and Open Interest is on rise, suggests aggressive new short selling and new money is coming to market. This is considered bearish or continuation of downtrend. Ÿ In the fourth situation, when price,

volume and Open Interest are in a declining mode it signals that long position holders are winding off their short positions and this is likely the end of downtrend as all sellers sold their positions- a bullish trend. However, when open interest is high at a market top and the price falls off dramatically, this scenario should be considered bearish. In other terms, this means all of the long position holders who bought near the top of the market are now in a loss position, and their panic to sell keeps the price action under pressure.

The relationship between the prevailing price trend, volume, and open interest

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Know your Finance

PERSONAL FINANCE Basic Tax Deductions available to an Individual Tax deductions help in reducing the taxable income. It decreases one's overall tax liabilities and helps in tax saving. One can claim tax deduction for amounts spent in tuition fees, medical expenses and charitable contributions. Also, you can invest in various schemes such as life insurance plans, retirement savings schemes, and national savings schemes etc. to get tax deductions. The go ve r n m e nt o f I n d i a o ffe rs tax exemptions for various expenses incurred in different activities to encourage individuals and commercial institutions take part in activities having social benefits. Some of the most basic tax deductions are discussed below: 1. Section 80C / CCC / CCD(1) It is the most extensively used option for saving income tax. According to this section, an individual or a HUF (Hindu Undivided Families), who invests or spends on stipulated avenues, can claim deduction up to INR 1.5 lakhs. Some of such investments are given below which are eligible for the deduction are: · Life insurance premium · Equity Linked Savings Scheme (ELSS) · Employee Provident Fund (EPF) · Annuity/ Pension Schemes · Principal payment on home loans · Tuition fees for children · Contribution to PPF Account · Sukanya Samriddhi Account · NSC (National Saving Certificate)

· Fixed Deposit (Tax Savings) · Post office time deposits · National Pension Scheme 2. Section 80EE It allows the first time home owners to claim an deduction of Rs.50,000 for interest paid towards a home loan. Provided, the loan must not be for more than Rs 35,00,000 and the value of the property must not be more than Rs 50,00,000. Furthermore, the individual must not have any other property registered under his name at the time the loan is sanctioned. 3. Section 80D Deduction under this section 80D is available to an individual or a HUF. A deduction of Rs. 25,000 can be claimed for insurance of self, spouse and dependent children. An additional deduction for insurance of parents is available to the extent of Rs 25,000 if they are less than 60 years of age or Rs 50,000 if parents are more than 60 years old. 4. Section 80G Deduction under 80G offers income tax exemption to an assessee who makes donations to charitable organizations. This deduction varies based on the receiving organization, which implies that one may avail deductions of 50% or 100% of the amount donated, with or without restriction. 5. Section 80E A deduction is allowed to an individual for interest on loan taken for pursuing higher education. This loan may have been taken for the taxpayer, spouse or children or for a student for whom the taxpayer is a legal guardian. 80E deduction is available for a

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maximum of 8 years (beginning the year in which the interest starts getting repaid) or till the entire interest is repaid, whichever is earlier. There is no restriction on the amount that can be claimed. 6. Standard Deduction (Only for the Salaried class) A standard deduction amounting to Rs 50,000 for salaried employees. This has replaced the existing transport allowance of Rs 19,200, and medical reimbursement of Rs 15,000. GENERAL AWARENESS Bond Market There are 2 types of bond market in India, the corporate debt market and government securities. Corporate debt can be raised through - Private placement - Public issue

bonds are traded in the secondary market. The corporate bonds are listed on a few exchanges for trading in the secondary market. They are listed on - NSE - BSE Metropolitan Stock exchange The public issue of bonds is governed by the companies act 2013 and SEBI. The government securities are issued by RBI on behalf of the government through auctions held on RBI's electronic platform known as E-Kuber. All scheduled co m m e rc i a l b a n k , m u t u a l f u n d s , insurance companies, and provident funds and primary dealers are members of this platform who take part in the auction process. They have to maintain an SGL ( Subsidiary general ledger) account with RBI. Government securities have a lower return than corporate debt instruments but are risk-free assets.

An investment bank is appointed in the case of corporate debt issuance to take care of the underwriting process, the pricing of the bond and to conduct the entire process of bond issuance. Private placement is an offer to subscribe to securities to a select group of people whose number should not exceed 200 through a private placement letter. Public issue is a general offer made to the public to subscribe to the securities. A public issue of bonds is a means of raising money from the public against an offer of securities. A bond is issued by the borrower to the lender in the primary market. The securities are sold primarily to the institutional investors or to mutual funds. The pre-issued

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We welcome your valuable feedback Finstreet, The Finance Committee of K.J. S.I.M.S.R.

Email Us At : finstreet@somaiya.edu