Finly August 2021 by FINLY

FINLY

AUGUST 2021 | Issue No. 102

Healthcare Industry: Digitization to Digitalization Intriguing Indeed

Sector Analysis

MSME CRISIS and Road ahead

Oil and Natural Gas

Eco Section Bangladesh's Growth Story

CONTENTS 01

ED ITO R IAL

TEAM F INL Y

C O VER ST O R Y

EC O SEC TIO N

Healthcare Industry: Digitization to Digitalization

Bangladesh's Growth Story: From Bottomless Basket to Vibrant Economy

SEC T O R ANAL YSIS

C O MPAN Y AN AL YSIS

Oil and Natural Gas Industry

Mahanagar Gas Limited

INTR I GU ING IND EED

EN TR EP R ENEUR SHIP INNO VATIO N

MSME Crisis and Road ahead

BYJU'S

PER SO N IN F O C U S

C ALL F O R AR TIC L ES WINN ER

Mr Guenter Butschek

Sarthak Dave

C ALL F O R AR TI C L ES R UNNER -U P

ALU MN I INSIGHTS

Mrityunjay Dass

Amey Patale PGDM Core | Co-Convenor, Finstreet | 17 - 19

ISSUE NO. 102, AUGUST 2021

Editor's Note Dear Readers, “Historically, pandemics have forced humans to break with the past and imagine their world anew. This one is no different. It is a portal, a gateway between one world and the next. We can choose to walk through it, dragging the carcasses of our prejudice and hatred, our avarice, our data banks and dead ideas, our dead rivers and smoky skies behind us. Or we can walk through lightly, with little luggage, ready to imagine another world. And ready to fight for it.” - Arundhati Roy This pandemic is an opportunity to expand our knowledge by finding new ways to circumvent the circumstances, invest in the most intuitive ideas that come to our mind and surpass this havoc. As Ben Franklin rightly said, “An investment in knowledge always pays the best interest,” we at Finstreet are back with our next edition of our monthly magazine “Finly” for the academic year 2021-22. Team FINLY has always been a dedicated group of people who put in a lot of time and effort to put this magazine together, and we can't thank them enough for their unwavering support and initiative. The August edition’s cover story tries to analyze how the healthcare industry is transitioning from digitization to digitalization. The intriguing indeed article goes through the interesting topic of MSME Crisis. We are thankful to Prof. (Dr.) Pankaj Trivedi (Course Coordinator, PGDM Core and Faculty Coordinator, Finstreet) for providing the much-required mentoring, support and backing to the Finly team. We thank all our readers and faculty members for their valuable reviews and feedback. HAPPY READING!!! STAY HOME STAY SAFE!!! Anusha Nair

Riya Agarwal

|Editor-in-Chief|

|Editor-Finly|

MBA FS

ISSUE NO. 102, AUGUST 2021

TEAM FINLY Faculty in-charge

Dr. (Prof) Pankaj Trivedi

Editing Team Editor-in-chief

Editor - FINLY

Anusha Nair

Riya Agarwal

Team Coordinator

Prakhar Gupta

Conceptualization & Design

Karishma Lalwani

Mohit Kansal

Sahil Mankotia

Content Team

Akash Pawar

Anant Maske

Krisha Sanghvi

Anusha Nair

Devansh Mehta

Himanshu Sharma

Riya Shah

Srishti

Vaishnavi Badaya

Nishi Kumari

Praneet Sisodiya

Riya Agarwal

Saurabh Dubey

| COVER STORY

HEALTHCARE INDUSTRY: DIGITIZATION TO DIGITALIZATION Akash Pawar| MBA-IB | 2020-22 Srishti | MBA-FS | 2020-22 INTRODUCTION

BIG DATA AND HEALTHCARE

The last decade has seen the emergence of digital technology in a big way. Businesses and companies, including those in the healthcare sector are adopting digital technology for growth as the world is going digital now. The healthcare sector has gone through a sea change due to the emergence of new technologies and the primary concern before the healthcare managers is how to grow and gain a better market across the world and costeffectively provide better healthcare facilities. The answer lies in the Digitalization of Healthcare Industry. Telemedicine, Artificial Intelligence (AI) enabled medical devices and blockchain electronic health records are just a few examples of digital transformation in the healthcare sector that can completely change the face of the Healthcare sector.

A combination of big data, database management systems and cloud computing supported by context-aware computing and business/predictive analysis is on the verge of changing the way health care will be provided in the future. Big data aggregates information from various sources such as social media, e-commerce, online transactions, financial transactions; and identifies patterns and trends for future use. For the healthcare industry, big data can provide several benefits including: Lower rate of medication error: Through patient’s record analysis, Big data can tally the patient’s health and drug prescriptions, giving alerts when there is a potential medication error.

| COVER STORY Facilitating Preventive Care: 28% of patients stepping into emergency rooms are recurring patients called “frequent flyers”. Big data can identify such patients and create preventive plans which will keep them from visiting again and again. More Accurate Staffing: Big data with its predictive analysis can help hospitals and clinics with strategic workforce planning by estimating the future admission rates. Big data also helps in the proper allocation of staff to deal with patients which saves money and reduces waiting time for emergency rooms. Looking at the benefits that Big data provides, healthcare and pharmaceutical companies should invest in organising their data which will help them identify their weak areas and the market trend. A better understanding of the market trend will help the companies identify their ideal customers and the needs of the customers which would lead to better profitability for the healthcare firms and better healthcare for the customers.

DATA ANALYTICS AND HEALTH CARE SYSTEM By gathering and analysing the varieties of data available, including medical records and traditional clinical as well as genomic and consumer-generated types, both providers and payers can garner new insights across a spectrum of applications ranging from personalised individual care to predictive models for large cohorts. PERSONALISED HEALTHCARE Healthcare is moving towards individual custom-made healthcare. Genomics will guide the way healthcare is delivered in the foreseeable future. The pharma industry is making steady progress in ‘pharmacogenomics’ which means developing medicines to suit individual patients’ genetic profiles. HEALTH WEARABLES AND PREVENTION Another trend of digital transformation in healthcare is the increase in demand for wearable medical devices. In the current era, patients are more focused on prevention and maintenance and demand information about their

health

frequently.

Wearable

devices are redefining preventive healthcare for diabetes, blood pressure, etc. As a result, healthcare

companies

are

proactively

investing in wearable technology devices to provide up-to-date monitoring to high-risk patients. The wearable medical device market is expected to reach more than $27 million by 2023, showing a spectacular jump of 37.5% Source - Yahoo! Finance

since 2017.

| COVER STORY event.

Source - Researchgate PREDICTIVE HEALTHCARE We know how big data could help healthcare companies with predictive analysis about hospitalization rates and help them properly plan their facilities. Another factor favoring the digital transformation in healthcare is predicting what illnesses and diseases will become significant problems in the future. The information generated through Big Data and other marketing sources can help healthcare companies develop healthy lifestyle consulting for their patients. For example, an analyst could help us analyze keyword activity across the internet, social media, and significant search engines to determine the most common searches for medical conditions, illnesses, and general health. The analyst could then create a predictive model that would anticipate where and when the next big health panic will occur

Source - Health Analytics However, on a smaller scale, the predictive analysis could help businesses of all sizes know when to hire temporary staff due to impending cases of colds and flu that could result in a human resource shortage. THE WONDERS OF A.I. Artificial intelligence (A.I.) has a lot to offer than just a digital transformation in healthcare. A.I. represents the core of medical innovation, and the industry is eager to invest heavily in it. The healthcare AI-powered tools industry is on its way to exceeding $34 billion by 2025, which means this technology will shape almost all industry functions. A.I. in healthcare reminds me of Japanese nurse robots. However, many American versions, like Moxi, a friendly hospital droid designed to help human nurses with routine functions such as fetching and restocking supplies.

and how your company can prepare for that

| COVER STORY Chatbots and virtual health assistants are other AI-based technologies that patients are becoming familiar with. Chatbots can perform several roles, from customer service specialists to diagnostic tools and therapists. Their versatile features are translated into heavy investments. The global healthcare chatbots industry is forecasted to cross $314.3 million by 2023 from $122 million in 2018.

What AI-powered computer programs used for oncology, it analyzes thousands of laboratory images of multiple cancers to provide highly accurate treatment and predict the best possible anticancer drug combinations. Moreover, in medical imaging diagnostics, this technology helps radiologists spot details that escape the human eye. BLOCKCHAIN WITH A PROMISE OF BETTER ELECTRONIC HEALTH RECORDS

Source - Your team India Chatbots and virtual health assistants are other AI-based technologies that patients are becoming familiar with. Chatbots can perform several roles, from customer service specialists to diagnostic tools and therapists. Their versatile features are translated into heavy investments. The global healthcare chatbots industry is forecasted to cross $314.3 million by 2023 from $122 million in 2018. Nevertheless, the actual use of A.I. can be best observed in precision medicine, medical imaging,

drug

research,

and

genome

sequencing. Earlier, cancer patients used to undergo cookie-cutter therapies with high failure rates. Now, due to A.I.’s sophisticated pattern recognition, these patients have access to personalized therapies tailored to their genetic makeup.

Blockchain technology will soon play an instrumental role in keeping electronic health records accurate and safe. It is a digital ledger or a computerized database of transactions. The healthcare and pharmaceutical industries are already affirmed for their efficiency by investing millions in this market. According to a report, blockchain in the healthcare industry is expected to cross $890.5 million by 2023. A blockchain is an effective tool in preventing data breaches in the healthcare industry, improving the accuracy of medical records and cost cuttings. An electronic health record (EHR) is essentially a digital version of a medical chart and involves everything from a patient’s medical history and treatment, immunization dates, and test results. It also includes their house address, previous workplaces, and financial data like credit card details. This is what makes EHRs such an appealing target for hackers, who are selling them for up to $1,000 on the black market.

| COVER STORY

Source - Qualcomm Source - blogs.iadb Here is how. Nations like Australia and the U.K. have started to experiment with blockchain technology in order to manage medical records among patients, healthcare providers, and insurance agencies. A decentralized network of computers handles the blockchain and simultaneously registers every transaction; conflicting data is automatically detected. Records are 100% accurate and harder to hack. The U.S. regulations make it challenging for companies to make blockchain-based EHRs. Some startups like Medicalchain efforts where patients will control their EHRs from an app, where doctors, pharmacists, or health insurers will be requesting permission to access their data and where all transactions will be recorded on the distributed ledger. 5G FOR INSTANTANEOUS HEALTHCARE The 5G can run up to 100 times faster than the current cellular connection, making experts hope that it will entirely change the healthcare industry and lead to savings of up to $650 billion by 2025.

5G will eliminate “buffering”, allowing for instant streaming, downloading, and uploading. For telemedicine, this means, regardless of location, patients will experience better video conference quality. The doctors can have accurate, real-time imaging of organs, soft tissue, and bones, significantly decreasing the risk of misdiagnosis. CONCLUSION Technology can provide doctors the ability to speed up and improve their diagnostic capabilities by better managing information flow. However, the healthcare industry has been surprisingly slow in joining the global digital

revolution.

Compared

digital

technology changes in the financial and media industries over the last decade, the digital breakthrough is still in its infancy. However, new tools and technologies are already starting to make waves across the healthcare system and hold great promise to transform the delivery of health services in the near future – improving efficiency and better patient care.

| ECO SECTION

BANGLADESH'S GROWTH STORY: FROM BOTTOMLESS BASKET TO VIBRANT ECONOMY THE PAST The economic story of Bangladesh has not always been optimistic. Historically, Bangladesh has been one of the most impoverished regions in Asia. The 1971 war of independence left Bangladesh with a huge financial deficit. Soon after independence, then-US Secretary of State Henry Kissinger (in)famously referred to Bangladesh as a "bottomless basket," and development experts doubted that an overcrowded country with scant natural resources could have a bright economic future. These prophecies did not account for gradual improvements in social and economic metrics over time.

Source - tradingeconomics.com

Anusha Nair | MBA - FS | 2020-22 Riya Agarwal | MBA - FS | 2020-22 Though in 2020, the economy of Bangladesh recorded its slowest annual growth since 2009, as output grew at a softer pace in all sectors, it must be noted that from 2009 onward, Prime Minister Sheikh Hasina's government has shown a strong political will to root out Islamic terrorism and restore peace, as well as a long-term policy commitment to macroeconomic stability through prudent fiscal and international debt management, social security expansion, and the implementation of mega infrastructure projects. According to Foreign Minister A K Abdul Momen, Bangladesh has changed into one of the world's most vibrant economies. He has welcomed foreign investors to take advantage of the country's tremendous commercial potential. Bangladesh's continuous growth has piqued the world's interest, and the country's growth narrative is nothing short of extraordinary, with the country expected to grow at over 8% this

| ECO SECTION year as well.

invest less to comply with Bangladeshi legislation.

REASONS BEHIND THE REMARKABLE GROWTH Microfinance: Bangladesh microfinance has become well-known throughout the world. The Grameen Bank was founded by Mohammed Younis of Bangladesh. This bank would give small loans to needy people whom traditional banks did not typically serve. Younis discovered that when people were under pressure from the community, they were less likely to default on their debts. As a result, he lent money to the entire neighborhood, and unemployed Bangladeshis could purchase minor capital equipment and start their cottage enterprise. Thus, the microfinance revolution has given rise to a new class of self-employed employees that does not exist in either India or Pakistan. Women Empowerment: While most rural women in other Asian countries are still working in the home, Bangladeshi women have begun to work in productive jobs. They've formed self-help organizations and now have access to funds. Many Bangladeshi households have seen their income double due to women's meaningful employment in rural areas. Labor Laws: Bangladesh has become the global factory for the majority of clothing brands. Brands like Zara and Nike outsource their manufacturing to Bangladeshi enterprises because labor is cheap and plentiful. To top things off, Bangladesh has no restrictive labor regulations. Thus, companies have to

Avoidance of Debt: The government of Bangladesh uses the majority of the money collected as a tax for economic growth. There is no need for massive military funding because the country is at peace with its neighbors. Bangladesh does not need to take on any debt because it does not engage in any excessive spending. Funding own infrastructure projects: Unlike other countries that have borrowed heavily from China, Bangladesh has avoided these Chinese loans due to its reputation for trapping its debtors in debt. As a result, most of Bangladesh is experiencing an economic boom, which is projected to spread farther into Bangladesh's remote districts as the number of infrastructure projects grows To summarize, Bangladesh has emerged as a role model for other young, impoverished nations. In just a few years, the country has transformed into a regional economic powerhouse due to its wise economic policies. If it stays on its current path, Bangladesh will become a force to be reckoned with. LESSONS FOR INDIA The figures demonstrate that the Covid-19 crisis has had a significantly greater impact on India's economy than on Bangladesh's growth. However, even before the

| ECO SECTION pandemic, with its focus on low-skilled labor exports, the latter had maintained a much more consistent rate of increase throughout the previous decade. As a result, Bangladesh's economy was sure to catch up to India's per capita income. According to the World Economic Outlook, in overall GDP terms (at current prices), India's economy was 14.8 times that of Bangladesh in 2010. In 2020, the ratio stooped to 8.15. The previous decade has been worrying for the Indian economy. Even if Bangladesh might not overtake India in real GDP terms any time soon, significant learnings can be drawn from the country's performance in recent years. Bangladesh has followed the East Asian nations' and China's playbooks, which have resulted in extraordinary growth rates over the last five decades. It has leveraged its lowskilled labor force and developed an export competency on products like textiles, which are labor-intensive. Focusing on low-skilled labor has several advantages for developing countries, including that it absorbs a large percentage of the rising workforce and lowers reliance on agriculture. India has taken a different path to growth. The services sector has become the country's economic powerhouse due to its pool of English-speaking skilled workforce. In the process, India missed the opportunity to transition

into

manufacturing-driven

economy. The disadvantage of this road is

developing economy. As a result, India is experiencing a significant amount of unemployment and skill mismatch.

Source - tradingeconomics.com The need of the hour is to enable the development of industries that employ many people. To do so, India must fire its manufacturing cylinder, and only then will it surpass the growth of its neighbors and beyond. AN UNCERTAIN GLORY? Bangladesh has experienced structural change and the growth of industries capable of generating adequate foreign exchange profits, allowing policymakers to maintain stable macroeconomic fundamentals. On the other hand, political trends in the country remain a source of substantial concern. Unchecked political power concentrated in the hands of the ruling party could lead to cronyism and corruption over time, jeopardizing the country's economic prosperity.

that the services sector is not labor-intensive. Thus, it does not create jobs at the same rate

To be sustainable in the long run, there is

as individuals enter the workforce in a

a need to improve core governance

| ECO SECTION challenges, weak tax mobilization capacity, an overburdened judiciary, the insufficient bureaucratic capacity have beset almost all South Asian countries. Also, with many parts of the world quickly losing faith in the doctrine of free trade and larger trading blocs increasingly veering towards protectionism, Bangladesh will need to thoroughly examine the international context within which it competes. Nevertheless, the economic boom has given the country the confidence to go forward with Prime Minister Sheikh Hasina fixing on making Bangladesh a middle-income country as part of her "Vision 2021" and a developed country as part of her "Vision 2041".

| SECTOR ANALYSIS

OIL AND NATURAL GAS Anant Maske | MBA IB | 2020 - 22 Praneet Sisodiya | MBA A | 2020 - 22 OVERVIEW The Covid-19 pandemic has disrupted all the countries and their economies. The Oil and Natural Gas industry were one of the severely hit industries wherein the crude oil prices fell sharply during the initial phase of the pandemic. In addition, the strict lockdown norms imposed by governments of various countries also affected the demand for crude oil as transportation was reduced significantly. As a result, in April and March 2020, the oil market witnessed a sharp fall in oil prices, wherein the demand fell by 25% in April 2020, and the prices dropped heavily. The pandemic has forced the industry to adapt to the changes in the working environment, which included work from a home model and cuts in the business and leisure travels.

A speedy recovery for the markets is expected in the coming months. OPEC production cuts have supported oil prices in international markets. However, the group has increased the production from the start of 2021; Saudi Arabia has voluntarily cut its output by 1 million barrels per day from February 2021.

In the post-pandemic period, the oil demand has been increasing. Source - Bloomberg

| SECTOR ANALYSIS REVIVAL OF THE OIL AND NATURAL GAS MARKETS As per a report by IEA, global oil

demand growth platform. The development of gas in India and China will remain key drivers for the natural gas market in the Asia Pacific in the coming years.

consumption is projected to reach 104.1 million barrels per day (mb/d) by the year

WHAT HAS THE PANDEMIC CHANGED?

2026. In the petrochemical industry, LPG and naphtha together are expected to account for around 70% of the projected increase in oil product demand by 2026, as per the report. Thus, the petrochemical industry will be one of the growth pillars of the oil and natural gas demand. Furthermore, the consumption of LPG, naphtha, and ethane as feedstock in the petrochemical industry is expected to grow

with

the

global

economy

and

increasing demand for plastic in the near future. The US and China are expected to hold the lion’s share in the demand for LPG and naphtha for the forecast period of 2022-2026.

In order to stop the virus from spreading, most governments imposed a strict lockdown which led to the sudden rise in the number of people working from home, the cancelation of flights, tours and a significant reduction in transportation activities. These changes led to a substantial drop in the demand for fuel consumption. As a result, the continuation of remote working is now estimated to displace around 250 thousand barrels per day (kb/d) oil demand in the coming years. Around 8% of the workforce was involved in work from home (teleworking) in the prepandemic period. As per the IEA report, it is now estimated that around 20% of the people will be teleworking, which is likely to hamper fuel consumption. In the U.S and Europe, more than 40% of jobs can be done from home, and in the OPEC region, work from home accounts for 25%. Therefore, these regions are likely to have a significant impact on fuel demand in the near future.

Source - IEA The natural gas demand dropped by 4% in the year 2020, which is now estimated to be back on track at pre-pandemic levels growth at 1.5% during the period of 20212025. Being the largest consumer of natural gas, the Asia Pacific region is expected to provide a good natural gas

Source - IEA

| SECTOR ANALYSIS SCENARIO IN INDIA Appetite for oil and gas has been growing in recent years. The crude oil consumed stood at 5270 thousand barrels per day (TBPD) in 2019 and will reach 5490 TBPD by 2025, expanding at a CAGR of 2.25 percent during the five years. The demand for natural gas is set to rise by a CAGR of 4.63 percent in the next five years as the government is determined to increase the share of natural gas to reduce oil imports. The production of oil in India was around 826.42 TBPD and will reach 613.70 TBPD by 2025 due to aging and maturing oil fields. India is also the secondlargest refiner in Asia after China, with a capacity of 249.90 Mn metric tonnes (MMT). Major companies in India include Indian Oil Corporation Limited (IOCL), Reliance Industries, Bharat Petroleum Corporation Limited (BPCL), Hindustan Petroleum Corporation Limited (HPCL), Oil and Natural Gas Corporation (ONGC), Gas Authority of India Limited (GAIL), and Oil India Limited (OIL) IMPACT OF COVID-19 IN INDIA

oil companies. However, with demand roaring back across western countries as the pandemic abates, the crude price (Brent) per barrel has crossed US$ 75 and is likely to touch US$ 100. This puts enormous stress on our current account deficit as even an increase of 1 dollar increases our import bill by approximately Rs 7500 crore. INVESTMENTS AND INITIATIVES IN INDIA The oil and gas sector comes within the eight core industries in India. With oil and gas consumption growth in India, the government has adopted policies to make the industry conducive for investments. One hundred percent FDI has been allowed. The sector has seen FDI worth US$ 7.86 billion in the last 20 years. Further investments of US$ 206 billion are expected in the next decade. The gas pipeline tariff structure has been simplified to make fuel affordable for users and to attract investment for building gas infrastructure. C region, work from home accounts for 25%. Therefore, these regions are likely to have a significant impact on fuel demand in the near future.

The initial fall in prices allowed India to However,

.The government has also enjoined OPEC to

consumers did not benefit from low crude

remove pricing anomalies for regions in

oil prices due to the upward revision of

view of the pandemic. 5000 compressed

indirect taxes on the motor spirit (MS) and

biogas (CBG) plants are going to be set up in

high-speed diesel (HSD) by central and state

the next two years. To encourage the use of

governments.

clean fuel bio-CNG (compressed natural

detrimental impact on refining throughputs

gas), plants worth Rs 7000 crore are planned

and straining the gross refining margins of

to be set up.

build

strategic

The

reserves.

low

prices

had

| SECTOR ANALYSIS A target to increase natural gas production

The top players will need to review their

to 60 bcm from the current 30 bcm and to

business

explore more than 120 wells in the next two

finalizing strategic options following the

years, and the government has envisioned

energy transition.

continuity

plans

(BCPs)

investing US$ 2.86 billion in upstream oil and gas production. To further expand and upgrade the gas pipeline network across the country, Rs 70000 crore is going to be invested by the government. For introducing market-driven pricing in the energy market, gas exchange is planned, and the proposal is to be taken to the Union Cabinet. CONCLUSION India’s energy demand is expected to grow faster than the demand of all major economies due to the robust economic growth forecasted in the coming years. The demand will double to 1516 megatonnes of oil equivalent (Mtoe) by 2035 from 753.6 Mtoe in 2017. India’s share in global energy consumption is forecasted to increase twofold in the next 15 years. For FY2022, with vaccination drive increasing manifold and business, economic activities improving rapidly, crude imports and throughput are expected to rise sharply. The pandemic has battered the oil and gas companies across the world. In the postCovid-19 scenario, companies will need to consider cost and supply chain optimization opportunities. They will need to renegotiate tenure, quantity, and prices of contracts and keep congruence between their portfolios and changing demand.

| COMPANY ANALYSIS

MAHANAGAR GAS LIMITED Himanshu Sharma| MBA - IB | 2020-22 Devansh Mehta | MBA - FS | 2020-22 BUSINESS OVERVIEW Mahanagar Gas Limited (MGL), incorporated in 1995, is one of India's leading Natural Gas Distributors. The company is promoted by GAIL, the largest state-owned natural gas processing and Distribution Company in India, and BG Asia Pacific Holdings Pte. Ltd.

The Objectives & Goals set by the company are:

Over the last 24 years, MGL has established a strong presence in the Greater Mumbai gas distribution business. The company distributes CNG for Motor Vehicles and PNG for domestic, commercial, and industrial use. It is the sole authorized distributor of CNG and PNG in Mumbai, Thane, and the Raigad district of Maharashtra.

Increase consumer satisfaction. Give quality value-added services

VISION & OBJECTIVES The company's vision is "to be a World-Class Consumer & Environment-Friendly Employer of Choice; committed to providing Safe, Efficient and Reliable energy; while creating Value for all the stakeholders."

Reduce pollution Lead in health and safety performance

Expansion plan in Mumbai & beyond BUSINESS SEGMENTS Piped Natural Gas (PNG): Domestic PNG is used widely in hospitals, nursing homes, hotel homes, restaurants, etc. MGL has a vast network of over 5,916 km of carbon steel and polyethylene pipeline in Mumbai and its adjoining areas and has established connectivity for nearly 1.6 million households. The industrial and commercial customers of

| COMPANY ANALYSIS

the company has increased to 4,192 in FY21 from 3,949 in FY20. PNG segment contributed ~39% to the total revenue for the company in FY21, as consumption of CNG got hit due to lockdown.

Source - Investors Presentation Compressed Natural Gas (CNG): The company also offers CNG, which is a highly efficient fossil fuel substitute for petrol, diesel, and auto LPG in automobiles. The company has increased its CNG stations from 256 in FY20 to 271 in FY21 in the allotted Geographical Areas. All auto-rickshaws and taxis plying in and around the company's operation are fuelled by CNG. Additionally, MGL also supplies CNG to depots of BEST, TMT, MSRTC & NMMT. Approximately 61% of the revenue was contributed by CNG in FY21, although the contribution has been around 70% historically.

CORPORATE GOVERNANCE "Transparency in all dealings and in the functioning of Management, Strategic Management Group, and the Board" is the corporate governance philosophy of the company. The company further strengthens this philosophy through stakeholder's policies, MGL's Code of Conduct, and Code of Internal Procedure and Conduct for regulating monitoring and reporting of trading by insiders. The company has six board members as of now and is in the process of appointing one more member. There is no relationship amongst any of the company's directors, and none of the nonexecutive directors holds any equity shares in the company. The board has expertise in City Gas Distribution, Project Development and Construction, Financial Management, and Administrative Services. However, as per the latest quarterly corporate governance report, the resolution for the re-appointment of Mrs. Radhika Vijay Haribhakti as Independent Director did not get passed in the last AGM held on 24th September 2020. Hence, there is no woman on the board currently. The company is in the process of appointing a Woman Independent Director.

| COMPANY ANALYSIS

SHAREHOLDING PATTERN Mahanagar Gas Ltd. has 33% (majority) of its holding with the promoters of the company. Foreign Institutions are second with 31% holding in the company. The central government and general public have 10% and 8% holding respectively in the company. Financial Institutions hold 14% of the total number of shares. Banks and Mutual funds have almost 3.49% of the holding in the company.

₹983.53 to ₹833.60. Net profit for the year stood at ₹620.47 compared to ₹791.95 the previous year.

Source -Annual Report RATIO ANALYSIS The EPS ratio has fallen from ₹80.33 to ₹62.72 in 2020-2021 due to a fall in earnings of the company in 2020-2021 from 20192020. The quick ratio and the current ratio have both increased marginally compared to the previous year showing a positive sign.

Source - Annual Report FINANCIAL ANALYSIS Total revenue for Mahanagar Gas Ltd. fell to ₹2418.30 from ₹3363.44 compared to the previous year. The total expenses for the company

were

reduced

₹1584.70

compared to ₹2379.91. The company had an increase in employee benefits expense compared to the previous year, showing the company spent more on the welfare of their employees in Covid-19. Profit before Tax decreased by almost ₹150 crores from

Source - Annual Report IMPACT OF COVID Post outbreak of COVID-19, the company had requested PNGRB (Petroleum and Natural Gas Regulatory Board) in April 2020 to extend the timeline for achieving the MWP of Inch-Kms by six months up to

| COMPANY ANALYSIS

March 31, 2022. The company's operations were impacted, resulting in a reduction of sales volumes (except for sales volumes in household gas consumption mainly used for cooking requirements) due to lockdown advised by the State and/or Central government in view of COVID-19. The company has considered the force majeure clause in view of COVID-19 being declared as a pandemic and thereby does not foresee any obligation arising out of such contract. The impact assessment of COVID-19 is a continuing process, given the uncertainties associated with its nature and duration. GROWTH OUTLOOK At the sector front, long-term gas demand potential for India is powerful, mainly due to government support. The government's priority allocation of domestic gas to the City Gas Distribution sector has enabled MGL to access cheaper gas. Also, the government aims to increase the share of gas in the overall energy mix to 15% by 2025, from 6% currently. Along with the regulatory support, stronger economics of CNG versus petrol will play a significant role in the growth of the sector and MGL.

volume growth prospects. In FY 21-22, the company plans to lay about 25 km of steel lines and 14 km of MDPE network to achieve their "GA-3 balance minimum work program target of 399-inch kilometers”. It is also planning to commission the first LNG dispensing station of MGL at Savroli in the current financial year. The management has also hinted at new ways to push CNG. The company is looking to set up a mobile refueling unit (refueling CNG vehicles in parking lots, etc.). Currently, the company is awaiting regulatory approvals on this and will go forward when it gets support and operational efficiency. The critical risks for the company going ahead will be any change in the domestic gas allocation policy of the government and the demand for higher dealer commissions by the Oil Marketing Companies.

MGL's robust gas pipeline infrastructure in Mumbai and the adjoining areas will enable

the

company

capture

the

benefits of a large and under-penetrated market. The development of Raigad GA (Geographical Area) will further add to the

| INTRIGUING INDEED

MSME CRISIS AND ROAD AHEAD LITIGATION FINANCING INTRODUCTION

Vaishnavi Badaya| MBA -FS | 2020-22 Nishi Kumari | MBA - FS | 2020-22

What is the MSME sector? The Medium, Small and Micro Enterprises (MSME) sector is a classification of industries based upon the investments in plants and machinery. The MSME sector is a significant pillar of Indian economy, it contributes to the economy with a vast network of around 30 million units, generating employment of about 110 million, producing more than 6000 products, contributing to about 34% of manufacturing output and about 45% of exports, directly and indirectly. According to the latest available (2018-19) Annual Report of Department of MSMEs, there are 6.34 crore MSMEs in the country of which 51% of these are situated in rural areas.

MSME acts as seedbeds of innovation and adaptability by the virtue of its agility and dynamism.

MSME has gained greater importance in the last few years as India moves towards an inclusive growth agenda. It is the MSME sector which can help achieve the target of the proposed National Manufacturing Policy of raising the share of the manufacturing sector in GDP to 25% by the end of 2022 from the present 16%.

AFTERMATH OF COVID 19

Before this sector was overwhelmed by Covid 19, it was already under distress because of the twin effect of demonetization and GST regime, now the outbreak of Coronavirus has further exacerbated the crisis. Despite the measures which were taken by the Government of India to control the outcomes of pandemics, the MSMEs are grappling with this black crow event for stability since the revenue and income are on hold.

MSMEs have been struggling with this unfavorable event for stability as their revenue sources have been put on hold. The financial assistance provided by the government to support this sector proved to be inadequate for the smaller and

| INTRIGUING INDEED informal firms which form the majority of India’s industrial landscape. As per a recent economic survey, around 80% MSMEs are self-financed and only 7% take credit from financial institutions and government sources, so despite the announcement of various measures by the government, this sector may not be fully benefitted. As an outcome of prolonged lockdown, the functional activities of MSMEs have gone to a crushing stop aside from the rice mills where production has purportedly dropped considerably. Since most of the markets, shops and mills are closed now, they are unable to sell their products. As a result of stalled production and dip in demand for goods and services, MSMEs are facing acute cash crunch. Even expenditures like salaries of employees, interest charges, insurance, rent, among many others cannot be met. This has created liquidity problems.

raw materials, work-in-progress and finished goods were degraded which led to a loss to the MSMEs. The machinery and equipment kept idle for a long-time result in more depreciation. Therefore, MSMEs have to undertake more maintenance and service activities and need to wipe away waste stocks before resuming operations which will burn another hole in the pockets of the entities. One of the major setbacks was the disruption of the supply chain. MSMEs couldn’t procure raw materials as well as supply their products to the consumers. The chemical, automobile, electronics and tea-based industries are suffering the most. The fleeing of migrant labor is also a matter of concern for the MSMEs as this will give rise to a paucity of manpower availability at the time when the economy restarts in the post-lockdown period.

Due to this cash crunch, the MSMEs are downsizing their workforce and declaring salary cuts leading to job losses and increasing the unemployment level in the country. Consequently, this will reduce the purchasing power of the general public and subsequently will decrease the demand for goods and services. Ultimately giving rise to a vicious circle. A survey by AIMO covering 5000 MSMEs, 71% of MSMEs were not able to pay their employees in the months of March to May 2020.

Most of the MSMEs are manufacturing based which require infrastructure and hence has been completely on halt. However, the service-based ones, which can be implemented from home lack the proper facilities which also hinders productivity of critical operations during the lockdown period.

Due to prolonged lockdown, the stocks of

The government had initiated numerous

GOVERNMENT INITIATIVES Atmanirbhar Bharat Abhiyan

| INTRIGUING INDEED measures under Atmanirbhar Bharat Abhiyan Scheme. The measures include:

January 1 to October 31 2021 to first time MSME borrowers.

Rs 20000 crore subordinate debt for MSMEs – Under this all the stressed MSMEs or NPAs which are still functioning are eligible for this debt. Loan would be provided to promoters of MSMEs which will be infused as equity by them.

Furthermore, the RBI has allowed NonBanking Financial Companies (NBFCs) to avail bank funding under Targeted Long Term Repo Operations (TLTRO) in order to promote incremental lending and push revival of stressed sectors. Thus, NBFCs will be able to provide a credit lifeline to financially drying MSMEs.

Rs 50000 crores equity infusion scheme – Under this a fund of funds will be established with a corpus of Rs 10000 crores which will provide equity funding to those MSMEs having the potential for growth and viability to strengthen their growth potentially. Fiscal policy support from RBI Apart from the Atmanirbhar package, the Reserve Bank of India announced a periodic loan moratorium, relaxed working capital financing and deferred interest payment on working capital last year. In May 2021, the RBI extended the loan moratorium facility for those business entities and individuals who had not availed of the facility in the year 2020. The RBI earlier also issued notification allowing banks to deduct the amount released to new MSME borrowers from their net demand and time liabilities. Therefore, banks are exempted to maintain cash reserve ratio for the loans disbursed from

Measures taken by SIDBI The Small Industries Development Board of India (SIDBI) facilitated a concessional loan at the rate of 5% for emergency support to the entire MSME sector. These were collateral-free loans and were made available within 48 hours. This will help MSME sector to stay afloat during the tough times. However, they must look at cutting expenditures and find alternative markets once the restrictions are lifted. In addition to these measures, the Government has introduced delayed GST payments without any interest or penalties being charged. Owing to government support and the resilience showed by the MSME sector, the sector has been able to take-off. However, the second wave has brought an enormous level of Uncertainties indicating towards the third wave. Thus, the Government should continue providing

| INTRIGUING INDEED credit support and handhold the sector in challenging times. ROAD AHEAD The measures taken by the Government build a strong case for ease of doing business, balance competition for local enterprises and startups, widen the network of beneficiaries, and improve transparency. However, looking at the spectrum of challenges, it is important that the government bolsters its reforms and introduces some game changing measures for the MSME sector.

for 40% of India’s exports. It also provides support to large enterprises and their value chain. Thus, along with the current government initiatives, unleashing a new wave of bolder and well-directed reforms would thrust the industry to soar higher.

While ease of doing business has been one focus area, the reporting, approval and compliance requirements for MSMEs continue to create trouble. Thus, it is imperative to provide a hassle -free regulatory framework which works for them and not becomes an impediment for growth. The sector will benefit if a considerate view is taken in making credit and capital easily accessible to MSMEs. Thus, there is an urgent need to strengthen the lending ecosystem by leveraging digital technologies for a seamless lending process and for assessing credit risk of potential borrowers. Also, given the importance of data economy, if an independent body is created to advise and provide consultancy to MSMEs that will help them to win in this new digital world. The

MSME

employment

sector

generates

opportunities

for

lot a

large

section of the society and also accounts

| ENTREPRENEURSHIP INNOVATION

BYJU'S Krisha Sanghvi | MBA - C | 2020 - 22 Riya Shah | MBA - B | 2020 - 22 Byju's app was developed by Think and Learn Pvt Ltd, which was established by Byju Raveendran along with his wife who founded an educational company offering online video-based learning programs for the K-12 segment as well as for competition exams. In 2015, the firm launched Byju's: The Learning App. In 2017, Think and Learn launched Byju's Math App for kids and Byju's Parent Connect app to help parents track their child's learning course. By 2019, Byju's got the sponsorship rights for the Jersey of the Indian cricket team, with Shah Rukh Khan as one of the brand ambassadors for Byju's.

the registration. They are now also available in regional Indian languages. It also planned to launch an international version of the app for English-speaking students in other countries. Recently, Byju's launched new programs in its Early Learn App for students of kindergarten as well. In April 2021, the company also announced the launch of "BYJU'S Future School" to be led by WhiteHat Jr. Founder Karan Bajaj which aims to cross the bridge from passive to active learning with an interactive learning platform blended with coding and other subjects like Maths, Science, English, Music and Fine arts through storytelling. THE GOAL OF BYJU'S

Byju's education tutoring app works on a freemium model, with information being available for free for an initial period after

The primary goal of Byju’s became to bridge the gap between the Indian

| ENTREPRENEURSHIP INNOVATION education system and the students trying to

teaching material for every student. It gives

learn. This is realized through the delivery of

them a specific pattern of training, which is

content in various forms such as quizzes,

exclusive to them. It takes the aptitude and

exercises, visualizations, and much more

grasping power details of the students and

rather than simply theory.

then curates the content for that student accordingly. This kind of learning has

It went beyond targeting only those who are

helped

students

interested or motivated to learn. It focused

examinations

on everyone without any biases so as to

themselves a profound revision.

and

prepare help

for

students

their give

create an environment that aids students to take initiative.

Byju’s- The Learning App came up with Byju’s- Math App and Byju’s- Parent

REASONS FOR THE SUCCESS OF BYJU'S BUSINESS MODEL

Connect App in 2017. The Parent Connect App helps the parents keep track of their kids’ learning and progress.

The success of Byju’s can be attributed to various factors like the quality of the teaching material and the way of presenting it. But the connection that is built with its students was the main reason driving its success. Students have developed a liking for the video lectures on this app. Byju’s also produced teaching content in different captivating formats such as quizzes, liveaction, and animation-based learning which made the students find it as the most enjoyable method of learning and growing. Byju’s understood the need to create videos in different languages to expand its consumer base in India. They also wanted more students to be able to use their platform to gain knowledge which is why they launched the app in various regional languages. The app provides the personalization of the

KNOWLEDGE GRAPH Byju’s unique advantage is its ‘knowledge graph’. Similar to other educational websites and apps Byju’s provides the content to the user in the form of videos, tutorials, and so on. Nonetheless, once a student chooses to subscribe, they get a personalized experience with the use of the ‘knowledge graph’ feature in order to proceed at their own pace. The knowledge graph feature supports various school boards and syllabuses across the country, as well as multiple competitive exams from UPSC to CAT. It isn’t simply a module of videos stored somewhere and accessed through the app online, rather every piece of content in the knowledge graph is tagged with several attributes and parameters. Personalized learning enables the app to form quite a good understanding of the user's strengths

| ENTREPRENEURSHIP INNOVATION and weaknesses. The platform also provides a free counseling session at the doorstep and then the student can understand and select the course of one’s interest more confidently. HOW DOES BYJU'S MAKE MONEY? The business model of Byju’s can be called freemium meaning some of the content is available for free, whereas the advanced content requires a subscription. This method attracts many students. Once they get to know how good the app and the content are, they automatically feel the need for subscribing to the paid services.

system has shifted its process online. Most companies beginning to launch their Education technology platform are now facing the monopoly of Byju’s Classes. In India, Byju’s has become the most soughtafter platform for students during this pandemic. This has increased Byju’s growth estimates to over 200% in 2020. Byju’s revenue structure is primarily based on Subscription fees. However, Byju has launched new products like Byju’s Online Tutoring and other learning programs to augment the revenue growth this year.

A freemium-based business model is similar to the concept of Sample Sales. Students are allowed to see a sample video or a basic video. If they like the video, they can purchase

all

videos

bulk,

i.e.,

subscription.

Source - ET Research Byju’s, which claims to have as many as 80 million registered users and 5.5 million subscribers, has seen its revenues grow at a compounded 125% over the past three years to approximately $400 million. The firm aims to close FY21 with $1 billion in revenues. Source - medium.com

The market size of the Indian edtech sector is estimated to grow by 3.7 times in the

Due to the coronavirus, the entire education

next five years, to touch $10.4 billion by

| ENTREPRENEURSHIP INNOVATION 2025 from $2.8 billion in 2020, according to a recent report by EY-IVCA. The segment will see more than 37 million paid users by 2025. “Increase in digitization, rapid growth in the start-up

ecosystem,

the

massive shift in the mindsets of parents as well as teachers. Now that they are witnessing the real benefits of online learning, they are opening up to it.

ever-evolving

consumer base, and the Covid-19 situation has given the edtech sector a huge growth opportunity,” analysts said.

RECENT ENDEAVOR India’s largest edtech company Byju’s received much-coveted decacorn status in 2020 following the funding from venture capitalist Mary Meeker’s Bond Capital. Today its valuation is a little over $13 billion. With funding flowing in, Byju's has been on an acquisition spree. It started with Osmo in 2019, followed by online coding startup White Hat Jr last August for $300 million, making it one of the biggest deals in the Edtech space. Then it went on

Source - BI India

to purchase virtual simulations startup LabInApp in September of 2020. According to

CHALLENGES One major challenge for Byju’s is its subscription renewal rate. The free trial given to students has a limited number of courses. Once this period is completed, an amount is required to be paid upfront to subscribe. Failing to do so leads to renewal. The renewal rate in 2018 for Byju’s was 89% which went down to 86% in 2020. Another challenge lies in the mindset of parents. While students have always been open and enthusiastic about e-learning, in the beginning, we noticed that parents were a little apprehensive about them learning digitally. Since lockdown, we have noticed a

Tracxn,

Byju’s

has

acquired

companies worth $1.43 billion (as of February 2021). So far, Byju’s has focused on an asynchronous app-based approach, where content is available for students to access at any time. The acquisition of White Hat Jr was to help the company move into a synchronous format and build its one-onone live tutoring model. Thereby, increasing their focus on international markets simultaneously to help Indian markets. Another major working area for Byju’s is in the hybrid space. The company is acquiring exam preparation firm Aakash Educational Services (AESL) in a deal reportedly worth

| ENTREPRENEURSHIP INNOVATION $900 million (as of April 5, 2021), making it

Spanish

the highest-valued deal in the edtech space

onboarding qualified women teachers who

till

engage

now.

Aakash

Chaudhry,

managing

director of AESL mentions how with AESL

and with

Portuguese, students

besides these

two

countries.

joining hands with large players in edtech like Byju’s, better access for test preparation

Byju’s Future School plans to offer a range

education to Indian aspirants can be

of subjects including music, English, fine

provided.

arts and science, and coding and math will be available at the launch.

Source - BI India Another likely acquisition is around Toppr. Launched in 2014, Toppr provides free resources in the form of video lectures, revision tips, and artificial intelligence (AI)enabled instant answers to doubts. Byju’s is reportedly in advanced talks to acquire Toppr for $150-160 million. ROAD AHEAD Boasting more than 11,000 qualified women teachers based in India engaging with students from English-speaking countries, Byju’s Future School is further targeting to penetrate deeper into non-English speaking markets such as Mexico and Brazil. The coding curriculum will also be available in

| PERSON IN FOCUS

GUENTER BUTSCHEK PERSONAL LIFE Guenter Karl Butschek was born on 21st October 1960 in Germany. He completed his graduation in Business Administration and Economics with a diploma from the University of Cooperative Education Stuttgart, Germany. Mr. Butschek is a known personality in the CEO’s circle and is amongst the top 10 highest net worth CEOs. He recently stepped down as CEO and MD of Tata Motors after a five-year stint. He led the company’s operation in India and international markets, including South Korea, Thailand, Indonesia, and South Africa.

Saurabh Kumar Dubey | MBA FS | 2020-22 and associates of Tata Motors worldwide. Upon his joining, the then Chairman, Mr. Cyrus P. Mistry, said Tata Motors is going through an exciting yet challenging phase, and Mr. Butschek’s appointment comes at an opportune moment. He brings with him the rich global experience of growing organizations and developing new markets. I am confident that Mr. Butschek’s ability to lead high-performing teams will enable our company to achieve sustainable, profitable growth.” His career spans over three decades, and the first big break he got was in 1984 with

PROFESSIONAL CAREER

Mercedes-Benz AG in Stuttgart, Germany. He was the Project Engineer Central Material

Mr. Butschek joined Tata Motors as the Chief Executive Officer and Managing Director on 25th February 2016. He was responsible for leading all business operations in India and all other domestic and overseas subsidiaries, joint ventures, and associates of Tata Motors worldwide.

Management. After holding several positions in

logistics,

procurement Passenger

human in

Cars

resources,

the division,

and

Mercedes-Benz Mr.

Butschek

became a member of the management board

DaimlerChrysler

South

(DCSA) in 2000 for manufacturing.

Africa

| PERSON IN FOCUS In 2002, he was promoted as President and

CEO TALKS

CEO of Netherlands Car B.V., a contract manufacturer

within

the

global

Before stepping down from his post at Tata

manufacturing network of DaimlerChrysler

Motors,

and

collaborative talk amongst the stakeholder

Mitsubishi

Motors

Corporation.

Mr.

Butschek

spoke

for

lean

to restart the growth of the automobile

manufacturing principles, he achieved a

industry, which was hit hard by the

drastic improvement in plant productivity,

pandemic and lockdowns. Addressing the

quality, and delivery performance. From

60th annual convention of the Automotive

2005 he led Beijing Benz Automotive Co.

Component Manufacturers Association of

Ltd in China as President and CEO. Leading

India (ACMA) in New Delhi, he said that

the

supply chain disruption had been a

operations to an all-new state-of-the-art

significant problem for the automakers

facility, and he has set the footprint for

globally in this crisis, along with funding

sustainable, profitable growth.

issues, a slump in demand, among others

Focusing

joint

introducing

venture,

relocated

and hence, collaboration is needed. Before joining Tata Motors, Mr. Butschek was appointed as Chief Operating Officer at

THE FINAL WORD

Airbus on 1st June 2012. He shouldered the overall

responsibility

Engineering, Chain

for

Procurement

Management,

Information

Operations, and

Supply

Quality,

and

Before

being

Technology.

promoted to the COO’s position, in March 2011, he was appointed as the Head of Operations and a member of the Airbus Executive

Committee.

Airbus,

Mr.

Butschek used all his professional calibre to bring some valuable changes and

The final word while putting down the curtains, Mr. Butschek said, “Leading Tata Motors over the last five years was an exciting experience. The business fundamentals are stronger, and we are well-positioned to leverage the opportunities in both Commercial and Passenger Vehicles. I look forward to my continued association with the company as a consultant in the coming months.”

restructured the large business operation. He was promoted as the Chairman of the Board

Management

Airbus

Germany (Airbus Operations GmbH). He kept these responsibilities under his new COO

leadership

for

his

enormous

contribution.

| CALL FOR ARTICLES -WINNER

ADDRESSING THE NPA CRISIS: NEED FOR STRUCTURAL REFORMS Sarthak Dave | 2020-23 Economics (H) at Shaheed Bhagat CONTEXT

Singh College, University of Delhi

5th March 2020- The RBI imposes a 30-day moratorium on YES Bank’s operations, restricting depositors to not more than an Rs.50, 000 withdrawals from their respective accounts, except under certain emergency conditions. The motive is in the larger interest of customers and depositors and thereby RBI vows to act swiftly and resolve the matter at the earliest.

sector takes huge advantage of banks and then shows themselves as the defaulters. These have now excelled in this and their squad involves DHFL, Jet Airways, ZEE Group, India Bull, Reliance Group, Yes bank had lent over ₹ 34,000 crores to these companies by knowing their reputation. The distressful increase in non-performing assets and exposure of troublesome borrowers starting with infrastructure leasing and financial services to DHFL were the major reasons for the collapse. Uttam Prakash Agarwal resigned from his independent director post citing serious concerns on deteriorating practices. Later it came to light about the NPA of around ₹ 3277 crores.

In a couple of days, the CBI takes over and a massive scam is reported at YES Bank. BACKDROP OF THE SCAM After 2014, the amount of loans granted to companies

has

increased

fourfold

than

earlier i.e., to ₹ 2.25 trillion in September 2019 which had not gone hand in hand with the

The scam started taking shape between

deposit rate, and also the quality of assets

April and June 2018 when Yes Bank invested

also decreased. As a result, it came into the

₹3,700 crores in short-term debentures of

RBI's eyes. It is observed that the corporate

the scam-hit DHFL. In return, the

| CALL FOR ARTICLES -WINNER Wadhawans allegedly paid kickbacks of ₹ 600

more responsibilities to cater to, and

crores to former Yes Bank CEO Rana Kapoor

hence a separate autonomous body, under

and his family members in the form of loans

the aegis of the Central Government makes

to DoIT Urban Ventures.

sense. RBI, on the other hand, can and will continue to play the role of the lender

THE RESPONSE MECHANISM

(and rescuer) of last resort and will bail out

The Ministry of Finance and RBI do act swiftly and propose a turnaround strategy for YES Bank, the Union Cabinet approves the reconstruction scheme, and the State Bank of India(SBI) one of India’s best-performing banks, takes 49% stake of YES Bank, although not undergoing a merger, with other marquee investors like ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, Rakesh Jhunjhunwala, Radhakishan Damani and Azim Premji trust together infusing Rs.12,000 crore to bail YES Bank out of crisis and restore the confidence in the banking system. AFTERMATH Notwithstanding the caused major disruptions to e-commerce in India, due to a no. of prominent services and online stores having used Yes Bank as its payment provider for UPI, the larger response was quick and efficient and YES Bank was back operational soon. THE NEED FOR A CORPORATE GOVERNANCE MONITORING BODY However, YES Bank’s case study has brought

banks

alongside

the

central

government as and when needed, however, the objective of this body is to ensure that this situation never arises in the first place. Banking and allied services are the backbones of an economy and in a country with a sensitive income base like India- we need to protect our banking frameworkkeeping them away from scams while continuously aiming for fundamental credit growth. RBI’s role was that of a “regulator” till 1991, post which it is functioning like “facilitator” of banking services, however, given the increasing number of scams and loopholes in credit sanctioning and governance, we need a separate, autonomous body, directly reporting to the Ministry of Finance, Central Government. The scope of this institute (body) shall be restricted to the financial services industry and it would be expected to undertake: Audit Review- 2 layered Governance Monitoring

the issue of corporate (mis)-governance and the complacency of RBI back to the limelight.

Selection

RBI is the apex banking body and has a lot

Members, Officers, etc

and

Approval

Board

| CALL FOR ARTICLES -WINNER Overall Legal Monitoring concerning caps, structures, and functioning

board will also become clear and standardized- thus raising functional efficiency.

OTHER RELEVANT CASES CONCLUSION The Case study of YES Bank should not be viewed in isolation, for it is just a manifestation of the present-day mechanism with a long list of flaws. The ICICI Bank scam involving Chanda Kochhar or the PMC Bank case recently- all point in the same direction, that the RBI is complacent in identifying such trends that hamper our growth prospects and thus the idea of a separate body establishment needs due assessment from policymakers and leaders. The renewal of SEBI from the earlier powerless Controller of Capital Issues Department of the Government in the backdrop of Harshad Mehta Scam also proves that with changing times and evolving nature of Financial Services in Indiapolicymakers need to continuously change guards and take notice.

Indian Banking is more globally integrated now than ever before and as we mature on our growth trajectory, our financial services industry at large will play a pivotal role in our expansion and growth. The presentday structural criteria now need due amendments and the need for reforms is at its peak. In line with the philosophy of “Never let a crisis go to waste”, this is the ideal time to reform and revamp our banking board rooms to sync and leverage our potential. The Planning must begin now!

LEGAL AMENDMENTS Besides the Structural, Revolutionary idea of a separate governance board, a set up of Legal Amendments can also be considered to address the NPA issue. Mandating the due distinction between control and ownership of banks, strict and clear audit review standards to avoid escape via window dressing, and capping the timestamp of executive control are certain ideal legal standards that need immediate enforcement. If legal amendments are executed timely, the role of the governance

| CALL FOR ARTICLES - RUNNER UP

EFFECT OF MACROECONOMIC CONDITIONS ON THE FINANCIAL RISK OF A FIRM Mrityunjay Dass| 2020-22 INTRODUCTION

IIM Indore

A firm's financial objective is a function of both internal and external (macroeconomic) factors. However, most empirical investigations focus on internal factors, whereas the impact of macroeconomic conditions in a firm's capital structure decisions and financial risks is somewhat under-researched, particularly in developing countries. In this article, we will focus on macroeconomic factors. Some of the factors which affect the decisions are:

reactions to events in one country can hurt the company's securities in other countries, including India. Investor skepticism of other emerging nations' financial institutions could lead to instability in Indian financial markets and the economy. Any global financial unrest could have a severe impact on the Indian economy

1. Financial instability in other countries, particularly in emerging markets, might affect Indian markets and the operations, resulting in a drop in the trading price of a company's Equity Shares. Economic and market conditions in other nations, notably in Asia's emerging markets, impact Indian financial markets and the Indian economy. Although each country's economic situations are unique, investors'

2. Changing laws, rules, regulations, and legal uncertainties, such as the adverse application of corporate and tax laws, can negatively impact a company's operations, financial situation, and prospects. For example, the Indian government demonetized certain high-value currency denominations in November 2016. Due to demonetization, trading and retail companies in India were hampered for a short period. As a result, such businesses have had to add more point-of-sale instruments to optimize their collection process. GST had a similar impact on small

| CALL FOR ARTICLES - RUNNER UP businesses. 3. Any downgrade of India's debt rating by an international rating agency It could have a negative impact on a company's ability to raise additional funding, as well as the interest rates and other commercial terms available. This could harm a company's financial performance and its ability to obtain capital for capital expenditures and the price of the Equity Shares. 4. The requirements of being a publicly traded firm may put a strain on the company's resources A

business

incurs

considerable

5. Independent of a company's operating outcomes, fluctuations in the exchange rate between the Indian Rupee and foreign currencies may have an adverse impact on the value of the Equity Shares. The Equity Shares will be quoted in Indian Rupees on the Stock Exchanges once they are listed. Any dividends paid on the Equity Shares will be paid in Indian Rupees, which will then be translated into the corresponding foreign currency for repatriation if necessary. Any fluctuation in currency exchange rates during the time it takes to complete the conversion could reduce the net dividend to international investors.

legal,

accounting, corporate governance, and other fees as a listed firm that it did not have as an unlisted company. It is bound by the Stock Exchange's Equity Listing Agreements, which compel them to file audited annual and halfyearly reports on their business and financial status.

there

are

any

delays,

the

corporation may not be able to meet its reporting obligations.

Source - Reserve Bank of India Furthermore, any adverse fluctuation in currency exchange rates during a delay in repatriating outside India the proceeds from a sale of Equity Shares, such as a delay in regulatory clearances that may be necessary for the sale of Equity Shares, may diminish the amounts received by equity shareholders.

Source - Times of India

| CALL FOR ARTICLES - RUNNER UP 6. There are restrictions on daily, weekly, and monthly changes in the price of Equity Shares, limiting a shareholder's ability to sell or the price at which it can sell, Equity Shares at a given time. Once a firm is listed, it is subject to a circuit breaker imposed by the Stock Exchange on which it is listed, which prohibits transactions that go above predetermined rises or declines in the price of the Equity Shares. This circuit breaker works independently of the index-based marketwide circuit breakers that SEBI has enforced on many Stock Exchanges. The Stock Exchange sets the percentage limit for circuit breakers based on historical volatility in the price and trading volume of the Shares. The Stock Exchange does not notify the company of the current percentage limit of the circuit breaker in operation and may change it without notice. 7. A company's capital gains on the sale of its equity shares may be liable to Indian taxes. Outside investors are subject to investment restrictions under Indian law, which limit the country's capacity to attract foreign capital, potentially lowering the market price of the Equity Shares. If Securities Transaction Tax (STT) has been paid on the transaction, any gain realized on

to capital gains tax in India, up to a limit of Rs. 1 lakh. The STT will be imposed and collected by a domestic stock exchange where equity shares are traded. Long-term capital gains tax shall apply in India to any gain realized on the sale of equity shares that are held for more than 12 months to an Indian resident and sold other than on a recognized stock exchange for which no STT has been paid. Furthermore, in India, any gain earned on the sale of listed equity shares held for less than a year will be liable to short-term capital gains tax.

Source - Economic Times 8. Regulative, economic, social, and political risks and other events outside their control affect a company's performance. The current state of income among Indian clients and corporations Political unrest, terrorism, military conflict, epidemics, and public health crises in India, the area, or globally, including in India's different surrounding countries

the sale of listed equity shares held for more than 12 months would not be liable

India's foreign exchange reserves are declining, posing a risk to the Indian economy's liquidity

| CALL FOR ARTICLES - RUNNER UP Macroeconomic factors and central bank regulation, including interest rate changes, which may have a negative impact on the company’s access to finance and raise our borrowing costs; To conclude, after going through the above factors, it is evident that macroeconomic conditions have a significant contribution to the risk. Moreover, the risk analyst team of any firm must holistically consider the prevailing conditions in the domestic and international markets and factor them in their forecasting.

| ALUMNI INSIGHTS

IMPACT OF ZOMBIE CREDIT ON ECONOMY AND STRUCTURED FINANCE Amey Patale | PGDM Core | Co-Convenor, Finstreet | 17 - 19 Its been almost two years since my last visit to campus, but I still find myself reminiscing about college and Finstreet. I am very thankful to the current committee for giving me an opportunity to write for Finly. While I was deciding on the topic, I thought, let me use this opportunity to spread more awareness on a very niche area in finance i.e. Structured Finance by leveraging my experience in this field. Also, I always feel understanding macro-economic variables is of paramount importance. So, I have decided to pen down my thoughts on "Impact of Zombie Credit on Economy and Structured Finance". The topic has too much jargon, so let me start by simplifying them one by one. STRUCTURED FINANCE A bank makes loans (Uses of Funds) using either depositor’s funds or by borrowing from central banks (Source of Funds) and its

profits from the spreads. This looks like a very good money-making business, however, banks have to deal with a major risk of matching the terms of assets (Uses of Funds) and liabilities (Source of Funds). Sometimes, there could be liquidity runoffs on banks i.e. all depositors may ask their money back or there are large NPA's, which is when the bank needs to be able to sell its assets i.e. the loans it made as they would earn interest and return principal over a longer period of time. Now, there may be entities that create Special Purpose Entities to issue bonds in markets and buy these loans from the proceeds. The Principal and Interest from the loans would be used to pay off the Principal and Interest on the bonds. To protect the notes from defaults on loans, the structure has more assets (i.e. Loans) than the liabilities (Bonds), extra cash, subordination of loans, and higher interest collections on more assets coupled with

| ALUMNI INSIGHTS

lower interest to be paid to lessor notes. This

which in turn leads to more decrease in

is a simple example of structured finance.

prices and lessor decrease in quantity.

There are more reasons than the ones cited above for the existence of structured finance, which brings us to the 2008 crisis that was fueled by more appetite to buy loans from banks which led to weaker underwriting standards. All this coupled with limited supervision of the government and higher liquidity from the central banks caused a capital market disruption. ZOMBIE FIRM & ZOMBIE CREDIT A Zombie firm is an unhealthy firm that needs external support either from government or from other firms as it is not a going concern. It's operating revenues can only help to pay interest on its debts and is unable to reduce the actual principal amount (Lower Interest Coverage Ratio and higher Debt ratio). This means they cannot invest in its growth and thus are stagnant. Any credit extended to a Zombie Firm is a Zombie Credit. ZOMBIE CREDIT & ECONOMY When there is a slump in an economy as a result of financial crisis, there is a negative demand shock. In a perfect world, the aggregate production capacity will adjust as

Larger presence of zombie firms affects the attractiveness of the industry for nonzombie firms. 1) Results in misallocation of capital and labour which results in lower productivity, investments and valueadded:

per the aggregate demand (A to B). Weaker banks try to avoid or delay realization of loses by extending zombie credit. By helping a distressed firm to stay afloat, a zombie credit creates additional capacity. This affects the natural way of adjustment of aggregate supply to the aggregate demand (A to C)

Higher input costs, as many firms bid for a limited amount of input material and labour, when there is a decline in aggregate demand. While zombie credit reduces the decline in sales post a negative demand shock, it reduces the

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price more and thus reduces contribution to GDP. 2) Results in lower markups i.e. price over marginal cost: Competition from unhealthy firms leads to lower sales growth, profitability for healthy firms 3)

Reduction

profitability

causes

decrease in firm entry rates: Reduction in overall industry profitability affects the attractiveness of the overall industry, thus, it fails to attract other healthy firms to make an entry into the industry. The absence of natural churning affects the quality of competition, thus new investments and strive for innovation All the above factors lead to a disinflationary pressure on the economy over the long term. In the current COVID scenario, it is pertinent to monitor the presence of zombie firms in an economy and maintain balance in the allocation of zombie credit immediately after economy-wide shocks, and keeping this support for too long. EFFECT ON STRUCTURED FINANCE 1) A deflationary environment means the central bank will keep the interest rates low for the aggregate demand to rise. Lower interest rates reduce the funding cost for buying loans i.e. securitization. Thus, indirectly the presence of zombie firms helps

for more issuances (Positive) 2) When a zombie bank extends loans some of those may be ultimately sold and securitized. After the stoppage of government support, the zombie firm becomes bankrupt. The creditors of the zombie bank would not be able to attach the securitized loans (ABS) because there was a true sale of loans to the Special Propose Entity i.e. a consideration was received. So, there would not be any effect on the securitized bonds (Neutral) 3) In a collateralized loan obligation (CLO), the proceeds of the bonds are used to make syndicate loans i.e. firms looking for money to expand operations approach a bank for several million dollar loans. The bank approves it, but to reduce the risk it breaks the loan into several parts. Some of these parts are purchased by CLO managers. The payment of interest and principal on notes is tied to the performance of syndicated loans. Now, if a zombie firm receives a syndicated loan from a CLO manager, without support from the government there is a high probability of default. and thus a rating change. Thus, there is a direct severe impact on payment of timely interest and ultimate principal on the notes. (Negative) We can conclude, larger the presence of zombie firms in an economy higher is the negative pressure on the economy in the form of deflation. On the structure finance side, we can say there is a mixed impact.

ISSUE NO. 102, AUGUST 2021

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