FINLY March 2021

FINLY

MARCH 2021 | Issue No. 99

Budget 2021- Balance between fiscal position and GDP growth Intriguing Indeed Gamestop Short Squeeze

Sector Analysis Infrastructure

Eco Section Will Bad Banks benefit the banking sector?

CONTENTS 01

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EDI TO R I AL

TEAM F INL Y

03

07

C O VER ST O R Y

EC O SEC TIO N

Budget 2021- Balance between fiscal position and GDP growth

Will Bad banks benefit the banking sector?

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16

SEC TO R ANALY SIS

C O MPAN Y AN ALYSIS

Infrastructure

Reliance Infrastructure

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INTR IGU ING IN DEED

G R EEN F I NANC E

Gamestop Short Squeeze

Green Pension Funds

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C ALL F O R AR T IC LES WI NN ER

Aritra Banerjee NMIMS, Mumbai

ALU MN I INSIGHT

Aarzo Doshi Co-convenor, Finstreet (2017-19)

ISSUE NO. 99, MARCH 2021

Editor's Note At the end of the tunnel is light, and standing at the cusp of 2021, the future sure looks optimistic. The year indeed started on a positive note, with India beginning its Covid vaccination drive on January 16 and is now all set for phase 2 inoculation drive. The benchmark indices, BSE Sensex and Nifty50 fell by over 3% last week as rising bond yields in India and the US, geopolitical tensions, and concerns over inflation led to investors' major profit-booking. India and China finally started the disengagement process in Eastern Ladakh after a 9-month long standoff, yielding new prospects for trade to flourish between the world's two leading economies.

"Optimism is essential to achievement, and it is also the foundation of courage and true progress"- Nicholas M. Butler.

Taking inspiration from this profound quote, we at Finstreet are proud to unveil the 99th edition of our monthly magazine "Finly" for the academic year 2020-21. Team FINLY has always been a robust set of focused individuals who put in many efforts and dedication to stitch together this magazine. We cannot thank them enough for their constant support and initiative. We have received an overwhelming response for this month's "call for article" competition, with some high-quality content from some of the country's best management colleges. We thank all the participants for their sincere efforts. This month's winner article is a recommended read. We are thankful to Prof. (Dr.) Pankaj Trivedi (Course 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!!!

Akshitaa Bahl |Editor-in-Chief| PGDM FS

Nilomee Savla |Editor-Finly| PGDM FS

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ISSUE NO. 99, MARCH 2021

TEAM FINLY Faculty in-charge

Editor-in-chief

Editor - FINLY

Dr. (Prof) Pankaj Trivedi

Akshitaa Bahl

Nilomee Savla

Team Coordinator

Riya Agarwal

Conceptualization & Design

Shubhangi Thapliyal

Jitesh Patil

Mehul Parwal

Content Team

Aakansha Agarwal

Kaushal Daga

Shivam Mahendru

Anuja Singhal

Anusha Nair

Rohan Bhakkad

Tanya Nayyar

Sahil Mankotia

Shrishti Gupta

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| COVER STORY

BUDGET 2021- BALANCE BETWEEN FISCAL POSITION AND GDP GROWTH INTRODUCTION The Union Budget 2021 is a unique budget in several different aspects, this was the first budget presented in the Lok Sabha by our finance minister Smt. Nirmala Sitharaman after the unprecedented Covid19 pandemic, which has a huge impact on perhaps every sector of our economy, whether it's MSMEs, hospitality, tourism, aviation, or service sector .Also, This year's budget is unique in the sense that it was a paperless budget. In the budget for this financial year, finance minister laid down six pillars on which the budget stands i.e.

Physical and financial capital and infrastructure, , reinvigorating human capital, Health and wellbeing, innovation and R&D, inclusive development for aspirational India, and minimum government and maximum governance.

Fiscal policy Looking at the key points on India’s fiscal position, we observe that our finance

Shivam Mahendru | MBA-IB | 2020-22 minister pegged fiscal deficit at 6.8% of GDP from 9.5% of GDP in FY 21 due to the COVID19 pandemic to ensure an increase in the economic growth. The nominal deficit is comprised of two primary components, structural and cyclical.The structural deficit is what remains once the revenue shortfall and expenditure increase on account of sharp deviations in trend growth are stripped away. In a boom year, the cyclical deficit is lower than the structural; during a slump, it is the opposite. The cyclical deficit disappears with a return to trend growth as revenues revive and the stimulus is withdrawn.

Budget estimates for expenditure in 20212022 are Rs. 34.83 lakh crores. This expenditure includes Rs. 5.54 lakh crores as capital expenditure, an increase of 34.5% over the previous Budget estimate figure.

Due to the unprecedented circumstances seen in the past year, it was of utmost importance to have a Contingency fund to

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| COVER STORY ensure smooth functioning of our economy.

Therefore, the Contingency fund has also increased from five hundred crores to thirty thousand crores. The government has discontinued the NSSF loan to FCI for food subsidy and defined food subsidy separately in the budget of about Rs.2.02 lakh core, this subtle change has enhanced the transparency in the budget. The government has allowed states for additional borrowing of up to 4% of GSDP with 0.5% under special conditions.Despite the declining trend preceding the pandemic, the tax-to-GDP ratio is projected to jump, from 9.9 per cent and 9.8 per cent during the two years prior to the pandemic, to 10.9 per cent in 2021–22. Also, disinvestment revenues are far out of proportion to realisations in previous years.If revenue mobilisation is maintained at 9.9 per cent of GDP this year, and divestment collections taken at the average of 2016-2019, the fiscal deficit in 2021–22 would be 8.2 per cent of GDP. Once adjustments are made for the Unusual decline in pension payments, this would boost the deficit to 8.4 per cent.

lThe CAGR in capital expenditure versus fiscal 2020 is a praiseworthy 28%, while revenue expenditure growth is contained at 12%.

Sectors such as power, roads and railways stand out in terms of allocations for next fiscal.

Reduced dependence on Internal and Extra Budgetary Resources — essentially offbalance sheet financing done through public sector and government entities such as the National Highways Authority of India — for funding capex is also salutary.

Other steps taken to ensure smooth functioning of the financial sector includes, the plan to privatise some public sector banks, To Make a bad bank with a capital allocation of 20000 crore in order to transfer bad loans to this bad bank, adequate allocation for recapitalisation, and increase in foreign direct investment limit from 49 per cent to 74 per cent in insurance.

Ensuring Growth in GDP The pronouncements in the Union Budget for next fiscal is growth-centric and expansionary. It checked many boxes, while focussing on improving India’s mid-term growth trajectory. Government spending will continue without any decrease despite limited new tax revenue, and the focus is clearly on stimulating growth after a once-ina-century shock. While this implies higherthan-anticipated fiscal deficit and borrowings, and therefore adds an upside risk to interest rates, the quality of spending is expected to improve, which is crucial.

On the other hand, setting up of an asset reconstruction company (ARC) and an asset management company would help take over existing stressed debt and consolidate, this company will also manage and dispose of the assets to alternate investment funds and

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| COVER STORY other potential investors for eventual value realisation.

With the establishment of ARC, impaired loans can move from the books of lenders, otherwise higher provisions would have been required from banks. This move will help banks and NBFC’s to focus back on fresh lending which will eventually lead to overall higher credit growth.

Asset monetisation in infrastructure, and the plan for a development finance institution will reduce the pressure on banks to fund long-term projects again clearing funds for fresh lending.

The government targets to get Rs 1.75 lakh crore from disinvestment in FY22.

is a step in the right direction, participation of international stakeholders would be crucial to success.

One area where more could have been done to boost growth is the micro, small and medium enterprises (MSME) segment. That’s because the better-than-expected corporate recovery seen in the past few months has passed them by. A few facilitations would have gone a long way in supporting a sector that is critical for jobs and exports. Since unemployment in indi is becoming a major problem especially after the pandemic. Of Course, this assistance can be provided to these sectors outside the budget too.Lastly, the budget assumes a sharp recovery in consumption segments without direct interventions. While there is no increase in income tax or new cess, the recovery curve will need monitoring, just to see if the private capex cycle is getting triggered finally.

Striking a balance between growth and fiscal policy

Source- Reserve Bank of India The government has also increased the capital allocation for existing National Infrastructure Pipeline from 6,835 to 7,400 projects — involving a cumulative spending of ₹132 lakh crore from ₹111 Lakh crore till fiscal 2025. While funding infrastructure projects through asset monetisation and a development finance institution is a step in

A very bold step has been taken up by the government that it has broken the taboo of the 3% fiscal deficit target laid down in the FRBM act and rather defined this year's fiscal deficit goal to 6.8 %. As, we know this year a large amount of capital expenditure is on infrastructure sector so this will create the domino effect and shot up the growth.During the initial time of the Nehru era, India was in bad shape. Heavy industry sectors have a long gestation period so, to upturn the economy one of the bold decisions was taken up in the second five-year plan in which 5

| COVER STORY long-term benefits plans were given importance rather than short-term plans.

Mahalanobis model was implemented in which the investment was made in the heavy sectors like steel, iron manufacturing, heavy machinery manufacturing, etc. so that India becomes self-sustainable. Employment level increased and wealth of individuals and nation increased.Largely, this model proved to be beneficial. Therefore, we can relate this situation to the present scenario of India where the GDP is showing negative results and to turn the GDP figures positive GOI has increased investment in the infrastructure sector leading to the growth in the demand for labour. Simultaneously, there will be demand for other commodities like cement, steel, power, and many other related commodities and this domino effect will ultimately lead to increase in the creation of wealth for both individual and nation in long term. Apart from this, the economy is now operational despite pandemic and may grow at 11.5% during 2021 as per the projection by IMF.

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| ECO SECTION

WILL BAD BANKS BENEFIT THE BANKING SECTOR? INTRODUCTION

Sahil Mankotiya | MBA - D | 2020-22

A bad bank handles the bad business of other banks, freeing them of the burden of resolving their bad loans themselves.

Technically, a bad bank is an asset reconstruction company that purchases bad loans (NPAs) at a discount from commercial banks and seeks to recover the money from the defaulters by offering a structured solution over a period of time. It is not involved in lending and taking deposits but helps commercial banks clean up their balance sheets and resolve bad loans. It is essentially the government's financial help for the banks. The concept of a bad bank seeks to reduce NPAs and then revive lending and credit growth. The 2017 Economic Survey examined this idea, suggested creating a Public Sector Asset Rehabilitation Agency (PARA). The first bad bank was founded by the US-based BNY Mellon Bank in 1988, after which the idea was adopted in other countries, including Sweden, Finland, France, and Germany

A non-performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for 90 days. For a very long time, Indian banks have been facing the NPA problem. Non-performing assets (NPAs) at commercial banks amounted to ₹10.3 trillion, or 11.2% of advances, in March 2018. Public sector banks (PSBs) accounted for ₹8.9 trillion, or 86%, of the total NPAs. The ratio of gross NPA to advances in PSBs was 14.6%.

NPA Crisis and Need of a Bad Bank

During the credit boom of 2004 to 2009, commercial credit doubled. Many Indian

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| ECO SECTION Firms borrowed furiously in order to avail of growth opportunities they saw coming. Several ventures were delayed because of difficulties in acquiring land and obtaining environmental clearances. Simultaneously, with the onset of the global financial crisis in 2007-08 and the slowdown in growth after 2011-12, revenues fell well short of forecasts. This combination of adverse factors made it difficult for companies to repay their loans to Indian banks.

In the wake of the economy's downturn due to the pandemic, commercial banks are expected to experience an increase in NPAs or bad loans. In its recent Financial Stability Report, the RBI noted that the banking sector's gross NPAs are expected to shoot up to 13.5 percent of advances by September 2021, from 7.5% in September 2020. Hence the RBI recently agreed to look at the proposal for the creation of a bad bank. This is in response to a sixmonth moratorium it has announced to tackle the economic slowdown. With banks expected to report even more bad loans this year, the idea of a bad bank has gained particular significance.

Benefits of setting a Bad Bank It is argued that it can help consolidate all bad loans of banks under a single exclusive entity. It could solve the coordination problem since the debts would be centralised in one agency. It can lead to a speedier settlement with borrowers by cutting out individual banks. It helps to speed up the pace of debt restructuring by reducing the number of lenders who have to agree to the proposed

agreement.It also makes it easier for foreign funds to establish control positions in a company's debt by enabling them to negotiate with a single seller.

The high level of non-performing assets (NPAs) makes lending difficult for banks because, under the Basel Accord, they must maintain additional capital (provisioning requirements). Bad banks will ease the provisioning requirements of the banks by absorbing NPAs and help them get on with business as usual. When banks are released from the NPA pressure, they can look at new loans more effectively.

Asset monetisation is one of the most significant advantages of forming a bad bank.

The creation of a bad bank enables the separation of a bank's good assets from its bad assets. It makes it possible for investors to analyse their financial health more clearly and for banks to expand financially. Apart from this, a government-led initiative may make it more attractive for investors to invest their money- both domestic and foreign.

Bad Bank increases the profitability of other banks. They can focus more on lending, acquiring more customers, and upgrading technology without spending too much time recovering or resolving bad loans. Speed of recovery will be better as Bad Bank's primary work is recovery, and they are specialised in this.

Many lenders are concerned over gigantic haircuts they have to suffer after a resolution through the Insolvency and bankruptcy code.

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| ECO SECTION Also, NPAs in the power sector can't be resolved through the IBC system as factors like the lack of coal linkages and the absence of purchase power agreements make them unfit for a resolution through the IBC. The bad bank structure could help banks park their money to separate agencies to find a solution in a long time. Moreover, banks feel the assets having future demand-supply issues face liquidation under the IBC, which can be solved under the bad bank.

Associated Challenges Mobilising Capital: It will be a challenge to find buyers for bad assets in a pandemic that hit the economy, especially when governments are facing the issue of containing the fiscal deficit.Moral Hazard: Former RBI Governor Raghuram Rajan had said that a bad bank might create a moral hazard and enable banks to continue reckless lending practices without any commitment to reduce NPAs. Non-performing loan ratio across India from the financial year 2008 to 2019

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| SECTOR ANALYSIS

INFRASTRUCTURE

OVERVIEW The infrastructure sector is an essential backbone for the industrial and economic development of the country. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from the Government for initiating policies to ensure the time-bound creation of a world-class infrastructure in the country. It mainly includes petroleum & natural gas, telecom, power transmission, transportation infrastructure, and construction activities.

As this sector is an amalgamation of the foretasted sectors, a rather vibrant market structure is observed. Initiatives towards increasing manufacturing and industrial capabilities and capacities, such as the Make in India initiative, development of industrial corridors, etc., have been the main focus area of the government in the last few years..

Shrishti Gupta | MBA FS | 2020 - 22 Rohan Bhakkad | MBA FS | 2020 - 22 Market Structure According to the Department for Promotion of Industry and Internal Trade (DPIIT), FDIs in the construction development sector (townships, housing, built-up infrastructure, and construction development projects) and construction (infrastructure) activities stood at US$ 25.78 billion and US$ 17.22 billion, respectively, between April 2000 and September 2020. The logistics sector in India is growing at a CAGR of 10.5% annually and is expected to reach US$ 215 billion in 2020. The Government of India launched the National Infrastructure Pipeline (NIP) in 2019, wherein it invested about INR 102 lakh crores on infrastructure projects. Of the total, INR 102 lakh crore worth of projects in NIP, 42% are under implementation, 19% are under development stage and about 31% are in the conceptual stage currently. This core sector also attracts high foreign direct investments.

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| SECTOR ANALYSIS Between 2000 and 2019, about US$ 25.6 billion of inflows were recorded in verticals such as townships, construction development projects, and housing. Asian Development Bank also announced a US$ 100 million funding for the Indian Infrastructure sector through the government promoted National Investment and Infrastructure Fund (NIIF).

The Ministry of Railways invited Requests for Qualifications (RFQ) for private participation towards the operation of passenger train services over 109 origin-destination pairs of routes by the introduction of 151 trains.

Across India, the electric power generation capacity of State and Central sector-owned entities is 53.2%, while private sector entities contribute 46.8% of total generation capacity as of FY2020. The Central Electricity Regulatory Commission (CERC) is the government body in charge of promoting competition and efficiency in the bulk power markets of the country.

Highways Authority of India will generate about Rs1 lakh crore in revenue from toll and wayside amenities during 2019-2023.

Indian Railways is the 3rd largest network in the world under single management with over 68,000 route km. The Government of India is making large investments in the modernization and upgradation of railway stations. Under Adarsh Station Scheme, about 1,253 stations have been identified to be developed.

The telecommunication sector is also booming in India.

Total telephone connections grew by 18.8% from 996.1 million in 2014-15 to 1,183.4 million in 201819. As of 2019, the wireless telephone and landline telephone constitutes 98.27% and 1.73% of all total connections, respectively.

Current Scenario Road transport is the most dominant mode of transportation in terms of traffic share in the infrastructure sector. In 2019, 10,855 km of highways were constructed in India, increasing at a CAGR of 20.57% from 20142019. It is estimated that the National

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| SECTOR ANALYSIS The power sector is also an important component of the infrastructure sector.

Growing population with industrialization has increased the electricity demand. As of April 2020, the total installed capacity of power stations stood at 370.34 GW. Under the Saubhagya Scheme, 26.02 million households have had electricity connections as of 31st March’19.

in the areas of Government buildings, data centers, healthcare infra, airports, metro railways, water projects including wastewater treatment and irrigation, hydel projects, expressways as well as onshore and offshore hydrocarbon projects.

Market Players

GMR Group is one of the fastest-growing infrastructure enterprises in the country with a rich and diverse experience spanning three decades. With our vibrant portfolio of projects, GMR is uniquely placed to build state-of-the-art projects in sectors that are of critical importance in the process of development. Using the Public-Private Partnership model, the Group has successfully leveraged its core strengths to implement several iconic infrastructure projects in India.

Reliance Infrastructure Reliance Infrastructure Ltd is one of the largest infrastructure companies and develops projects through various Special Purpose Vehicles (SPVs) across sectors such as electric power, roads, and metro rail. The company had nearly 5,718 on-roll employees in FY2019. The Engineering and Construction (E&C) business division of the company provides integrated design, engineering, procurement, and project management services for undertaking turnkey contracts.

GMR

Larsen & Toubro Larsen & Toubro is an engineering and construction conglomerate with over 80 years of operational experience. Broad categories of the company’s business portfolio include infrastructure, energy, manufacturing, and services.

The infrastructure segment contributed 51% of the total external revenue of the company across segments in FY2019. As per the director's message to the public, prospects

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| SECTOR ANALYSIS Challenges faced by the Sector While the sector holds a high opportunity for banks to grant credit, inherent issues in terms of getting timely approvals from central and state government, like environment clearances, acquisition of land, availability of adequate and skilled manpower (as the sector is both labor and capital intensive) and proper and timely availability of raw materials, leads to delay in project implementation or completion. This is also reflective of the high % of Gross NPA as compared to total advances of banks. The sector had a Gross NPA of 13.1% of total advances as of Mar’ 20, positively declining from a peak of 22.6% in March’18, though it still remains very high. The issues in terms of delays on different works stand very high and may see further increase, at least in the near-term, as the sector was highly impacted due to the Covid pandemic. Power, infrastructure, and steel sectors together constitute about half of INR 4.1 lakh crore worth of stressed assets. The power sector accounts for the largest proportion of the bad loans wherein RBI’s revised stressed asset framework is expected to benefit the stressed power sector assets that were operational and on the verge of being referred to insolvency proceedings under IBC (estimated at INR 1 lakh crore as on March 31, 2019).

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| COMPANY ANALYSIS

RELIANCE INFRASTRUCTURE BUSINESS OVERVIEW Reliance Infrastructure, formerly Reliance Energy was incorporated in 1929 is a fully integrated facility that operates in generating, and distributing power stations as EPC partners. It is one of the listed private companies in India on all major financial parameters including goods, sales, profits, and market capitalization.

Reliance Infrastructure is one of India's largest private-sector enterprises in the power utility sector. It distributes more than 21 billion units of electricity to more than 25 million users in Mumbai, Delhi, Orissa, and Goa. With its power stations in Maharashtra, Andhra Pradesh, Kerala, Karnataka, and Goa, it produces 941 MW of electricity.

The company is not only India's largest private enterprise but also the largest player in the private sector of many other Indian infrastructure sub-sectors. In the electricity sector, they are involved in the manufacture, distribution, distribution, and trading of

Anuja Singhal | MBA - FS | 2020-22 Anusha Nair | MBA - FS | 2020-22 electricity and the construction of power stations as partners of EPC. In terms of infrastructure, the company focuses on roads, urban infrastructure including MRTS, Sealink, and airports, Specialty Real Estate which includes business districts, trade towers, conference centers, and SEZ including IT & ITES SEZ and non-IT SEZs and Locations free trade.

Reliance infrastructure and its affiliates and subsidiaries of the Reliance Group own and operate more than 2,000 MW of Power Generation in the country. These contain conventional thermal power plants, hydroelectric power generators, selfassembly plants, and hydroelectric power plants. Most of its projects are carried out

by Reliance Energy through its EPC division.

Reliance infrastructure currently pursues several gases, coal, wind, and hydroelectric projects in Maharashtra, Uttar Pradesh, Arunachal Pradesh, and Uttaranchal with a

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| COMPANY ANALYSIS

combined capacity of 12,500 MW. These programs are in various stages of development.

Reliance infrastructure plays a major role in the emerging opportunities in the commercial and transfer areas. It is also involved in the portfolio of services in the energy sector in Engineering, Procurement, and Construction (EPC) through a network of regional offices in India.

BUSINESS AREA OF COMPANY The EPC Division: This division of Reliance Infrastructure was established in 1966 and was undertaking procurement, engineering, and construction contracts on a turnkey basis and other value-added services for major public and private sector projects both in India and Abroad.

Power utility: Reliance Infrastructure Ltd. distributes more than 28 billion units of electricity to cover 25 million consumers across different parts of the country including Delhi and Mumbai in an area that spans over 1, 24,300 sq. km. They also generate 941 MW of electricity from Maharashtra, Karnataka, Andhra Pradesh, Kerala, and Goa power stations.

Road: The Company is the largest developer of road and highway projects for the National Highways Authority of India under the BOT (build, own, transfer) scheme.

Urban Infrastructure: Reliance Infrastructure Ltd. is also the country's first and only private sector builder and operator for Metro Systems. The company is already into the construction of the first line of Mumbai's Metro system stretching 12 km from Versova to Ghatkopar.

Specialty Real Estate: Reliance Infrastructure Ltd. is also the country's first and only private sector builder to build India's first 100 storeyed building, a trade tower, and business district in 80 acres of land in Hyderabad, the total investment for this project is Rs 6,500 crores.

Special Economic Zones: Also, Reliance Infrastructure Ltd. is developing over 180 mn sq ft of SEZ for IT/ITES, retail hospitality in Mumbai, and Noida with an investment worth Rs 31,000 crores.

SHAREHOLDING PATTERN

Source: Annual Report

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| COMPANY ANALYSIS

FINANCIAL ANALYSIS Profit & Loss A/C

Source: Annual Report

CORPORATE GOVERNANCE Reliance Infrastructure Limited follows the highest standards of corporate governance principles and best practices by adopting the "Reliance Group – Corporate Governance Policies and Code of Conduct" as is the norm for all constituent companies in the group. These policies prescribe a set of systems and processes guided by the core principles of transparency, disclosure, accountability, compliances, ethical conduct, and the commitment to promote the interests of all stakeholders.

To ensure their continued validity, efficacy, and responsiveness to the needs of our stakeholders, the policies and the code are reviewed regularly. The Company has formulated several policies and introduced several governance practices to comply with the applicable statutory and regulatory requirements, with most of them introduced long before they were made mandatory.

Source: Annual Report

RATIO ANALYSIS

Source: Economic Times

Reliance Infrastructure has delivered a poor sales growth of 3.75% over the past five years and has been having high costs of borrowing with a low return on equity for some time now. However, it's now determined to prosper and is trading at 0.09 times its book value.

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| COMPANY ANALYSIS

IMPACT OF COVID

FUTURE OUTLOOK

The spread of the COVID-19 pandemic has had a huge effect on corporations around the world, contributing to a drastic decrease in economic activity. With Reliance Infrastructure's operations, its business has been affected by interruptions in construction activities, disruption of the supply chain, unavailability of staff, closure/lockdown of various other facilities, etc.

Reliance Infrastructure has around Rs 60,000 crore of receivables that are pending for 5-10 years, trapped in regulatory and arbitration matters. It also has assets of over Rs 65,000 crore and a net worth of over Rs 11,000 crore. Also, after lenders invoked a guarantee on the company's shares, promoters holding in the company declined to 14.70 percent.

For the quarter ended December 31, 2020, the company announced a 76.8 percent decline in its consolidated net profit of Rs 80.08 crore. Although the company recorded a consolidated net profit of Rs 345.51 crore in the previous year, the consolidated operating income of the company fell to Rs 3,831.69 crore in the period October-December, compared to Rs 3,954.92 crore in the corresponding quarter of the previous fiscal year.

Despite the adverse effects of Covid-19 and the associated downturn in economic activity, the company's engineering and development programs are now fully operational. In the year ended March 31 2020, the organization spent 12.79 percent of its operating income on interest expenditures and 5.59 percent on employee costs and also used the protections available to it under various contractual arrangements to minimize the effect of COVID-19.

Given the same, the company has completed the sale of Delhi Agra Toll Road to Cube Highways and Infrastructure III Pte Ltd for an enterprise value of Rs 3,600 crore, and the proceeds from the sale of Delhi Agra Toll Road and Parbati Koldam Transmission Companies are utilized entirely for debt reduction. In November, India Grid Trust (IndiGrid) also signed an agreement with the cash-strapped and loss-making firm to sell its 74 percent interest in the joint venture of the Parbati Koldam Transmission Company, which operates an interstate power transmission line between Himachal Pradesh and Punjab.

Thus, the chairman aims at the company being completely debt-free this financial year and has also committed to shareholders that the promoters will raise stake in Reliance Infrastructure.

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| INTRIGUING INDEED

LITIGATION GAMESTOP SHORT FINANCING SQUEEZE INTRODUCTION:

Aakanksha Agarwal | MBA - C | 2020-22 Tanya Nayyar | MBA- D | 2020-22

The stock market and the internet are burning over GameStop, a video game retailer whose stock price is suddenly surging and a favorite among traders who are putting the squeeze on Wall Street's big players. GameStop, an American chain of brick-and-mortar video games stores, was worth around USD 2 billion in December 2020. By the last week of January 2021, it was worth almost USD 24 billion! The GameStop stock rocketed close to 700% in just five trading days in the last week of January 2021 and plunged around 44% a day later. Then the shares rebounded to rally more than 50% on one day alone. Investors believe a few fund managers have found a mistake they made. In particular, by creating a "short squeeze." This crowd of individual investors collectively pressured these funds to buy the stock.

the direction in which the stock price will go, up or down. When investors bet against a stock, it is called 'short.' Short-sellers borrow shares of an asset they think will fall in price to purchase them after they fall. If they are correct, the shares are returned, and the difference between the price when they started the short and the actual selling price is pocketed. If their prediction is wrong, they are required to buy the share at a higher price and pay the difference between the price they set and its sale price.

WHAT IS SHORT SQUEEZE?

Shorting a stock is risky as one can lose a significant amount if the price increases. At times one makes a bad bet. However, if someone tries to push the price up by buying many shares, one may lose the money. This can happen even though the company is not doing anything different.

This is the squeeze.

A short squeeze involves investors betting on

When a person owns a particular stock, the

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| INTRIGUING INDEED maximum they can lose is capital invested.

The worst-case scenario would be the value of stock falling to zero. Nevertheless, in short selling, the risk is theoretically infinite as there is no cap on how high the price of a stock can rise.

Often, when a lot of a company's stock is sold, it creates a self-fulfilling prophecy by making the stock less enticing to potential buyers, thus lowering the price. Short-sellers, however, do not breach any law by betting in this way against a company.

In the case of GameStop, hedge funds like Melvin Capital, Steve Cohen's Point72, Dan Sundheim's D1 Capital, Citron, and some other funds were associated with withholding millions of shorted shares of GameStop for a few months.

where investors gathered to discuss the stock market and share their ideas. In January 2021, this subgroup, also called subreddit, developed the foundations for a short squeeze on GameStop, dramatically driving up the stock price. Approximately 140% of GameStop's public float had been sold short, which means some shorted shares had been re-lent and shorted again.

This occurred after a comment from Citron Research that predicted a decrease in the stock's value.

On 25 January 2021, more than 175 million GameStop shares were traded, the secondhighest total in a single day, according to Dow Jones market data, surpassing its 30day average volume of 29.8 million shares.

By 27 January 2021, the stock price had risen by 1,500% throughout two weeks, and it is high volatility caused trading to halt several times.

WHAT HAPPENED TO GAMESTOP? Some momentum was provided by Elon Musk and Chamath Palihapitiya's tweets, which pushed the share price to over $200.

By the end of January 2021, GameStop's share price skyrocketed to USD 483, 190 times the low of USD 2.57 it reached in April 2020.

Source: Bloomberg

The GameStop bubble involves a combination of traditional investing, rampant enthusiasm, stock-market mechanics, and the belief that anyone with a Robinhood account can meme a fortune into existence.

Reddit online forum had a subgroup called

Source: Twitter

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| INTRIGUING INDEED The same subreddit triggered a short squeeze of another company called AMC Theaters, a company that had a similar position to GameStop. A restriction limiting trading was reported on multiple brokerages such as Charles Schwab Corporation, a TD Ameritrade, and Robinhood subsidiary.

Robinhood and other brokerages imposed certain restrictions on the purchases of GameStop, AMC Theatres, BlackBerry Limited, Nokia Corporation, and other volatile stocks on their trading platforms.

In February 2021, GameStop shares declined substantially, losing more than 60% of their value and closing below USD 100 for the first time in a week. Reports estimated that almost USD 27 billion in value had been erased. Shares of other companies like AMC and Blackberry, which were also affected by the short squeeze and put under company trading restrictions, declined in value.

THE LONG TERM IMPLICATIONS OF SHORT SQUEEZE Presently, GameStop is up by another 69% and is trading at over $300. Investors who bought it exactly one year ago are now up by +8,000%. However, the value of the company has not changed by this much. Eventually, the situation will collapse back, but as long as there is more demand than the shares' supply, the prices are expected to keep rising.

Short-sellers have already lost a fortune, and with unprecedented speculation and worldwide media coverage of the shortsqueeze, things could quickly get much worse over the coming days and weeks.

Most people think that this will soon be forgotten and things will return to normal; however, there will be long-term implications that investors can potentially profit from in reality.

Most importantly, the risk-to-reward of shortselling has permanently deteriorated, suggesting that the inverse is also true. The risk-to-reward of buying heavily-shorted stocks has always improved. That is because the recent short-squeeze has taught investors two critical lessons that will impact the market far into the future: Lesson #1: The event has taught individual investors that they have the power to "crowdfund a short-squeeze" by building collective interest in a specific stock through social media.

Lesson #2: Further, it has taught hedge funds the risk of running against these new groups of individual investors who leverage social media to go after them.

However, 5-10 years ago, the investors did not run this risk, and hence, shorting stocks in the present day is riskier than ever.

As a result, short-sellers across the board are looking at the GME-disaster and asking themselves how wise it is to short stocks that are already heavily shorted.

GME is not the first short-squeeze, but it is the first one of its kind, and most likely, it is not the last one either. It has shown shortsellers that they could lose everything in a short-squeeze.

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| INTRIGUING INDEED It does not matter whether they are right or wrong because short-sellers may not stay solvent long enough to see their thesis play out. Simultaneously, there is a growing revolt against short-sellers who are perceived to be evil stock market manipulators. Worldwide media is talking about the story of "shortsellers vs. individual investors", and even celebrities are showing support to GME investors on Twitter. The backlash has further triggered a few research firms to discontinue the coverage of short opportunities. For instance, Citron Research has announced that they would not publish short reports anymore. Politicians are vociferating for better regulations of short selling.

Many companies have stayed out of the headlines and remain heavily-shorted and undervalued. Macerich (MAC) is one example that is heavily-shorted, just like GME, but the difference is that MAC is undervalued and operates a highly profitable business with significant underlying value.

THREE VALUABLE LESSONS TAUGHT BY THE GAMESTOP DRAMA 1.Choose investments wisely

Even so, the short-selling is not yet over. Still, it does mean that the risk-to-reward of short-selling is deteriorating by having to face an angry mob of individual investors who will come after you to bankrupt you, risky worldwide media backlash, and greater regulation and scrutiny from politicians.

Amateurs investing directly in stocks should only do it with money they can afford to lose.

Trading might feel like a game, but it is real money. Share prices can change in a matter of minutes, and everything could be gone. If one has the money to invest, spend time researching and choosing the best option and must not conform to bandwagon bias.

The high volatility of a short squeeze is not where most people want their retirement money – or even savings going!

EARNING PROFITS THROUGH SHORT SQUEEZE

2.Investing is a long-term game

Given that the risk-to-reward of short-selling is deteriorating, many short-sellers are increasingly likely to reconsider their positions and cover their shorts in the coming weeks, months, and years. It is not wise to invest in a company just because it is heavily shorted, but it appears that the riskto-reward of these companies is improving in light of this new information. Less shorting means more coverage, leading to more demand for shares and potentially rising share prices.

For instance, someone bought GameStop at $88 - the opening price on 26 January. The share prices were increasing rapidly as the story gained traction and planning how the new fortune could be spent when it reaches that high two days later except unless the shares were sold and the colossal gain was just on paper. A week later, the share price is only $95. Moreover, imagine how much money could have been lost if the investment was made on 28th or 29th January!

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| INTRIGUING INDEED 3.Shorting is best left to the experts Shorting allows investors to make money from falling prices or stock markets. It also provides an opportunity to view a stock where they think earnings or growth expectations are out of kilter with reality. This is what happened in the case of GameStop.

Hedge funds saw a brick-and-mortar gaming store amidst a pandemic and digital download games, and they thought the value would continue to fall.

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| GREEN FINANCE

GREEN PENSION FUNDS PENSION FUNDS Pension funds are pooled monetary contributions from pension plans set up by employers, unions, or other organizations to provide for their employees’ or members’ retirement benefits. They are also known as retirement plans and are among the major investors in many markets, including the bond, debt, and equity markets. When managed by professional fund managers, they constitute the institutional investor sector along with insurance companies and investment trusts. Some prominent examples of these funds are the Social Security Trust Fund from the United States of America who has assets close to US$3 trillion under them, the Government Pension Investment Fund from Japan with US$1.5 trillion worth of assets, etc.

GREEN PENSION FUNDS Green Pension Funds are essentially a type of funds that target interest earning for its users via investment in low-carbon, environmental-

Kaushal Daga |MBA - FS | 2020 - 22 -ly friendly financial instruments or companies to provide for retirement plans instead of your traditional pension funds that invest in financial instruments earn them the highest returns. Green Pension usually aims at moving the capital invested in tobacco firms, oil and gas majors, mining, and polluting technologies to more recent, cleaner technology and infrastructure. This means that when people invest in green pensions, they are moving towards a healthier and sustainable planet and saving money for the future while saving the planet’s future.

For example, we have NEST or the National Employment Savings Trust, the UK’s largest pension provider, which has started supporting renewable energy. These funds are likely to be safer in the long-term if invested in firms prepared for climate change and similar risks.

Green pension works by allocating the funds collected to green investment

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| GREEN FINANCE vehicles such as green bonds, green projects, equity indices (green indices comprising of listed companies operating in the green space) and mutual funds, green infrastructure funds, etc. Most pension funds are more interested in lower-risk investments that provide a steady, inflationadjusted income stream – with green bonds consequently gaining interest as an asset class, particularly – though not only - with the Socially Responsible Investment (SRI) universe institutional investors. Another important initiative launched by several governments is Green Investment Banks – which will use public money and raise funds joint with the private sector to invest in assets relevant for climate change solutions .

WHY GREEN PENSION? The rate at which we are pumping carbon and other greenhouse gases into the atmosphere, we will live in a world that will be warmer than today. That’s a world ravaged by extreme conditions where developing countries will be hit the hardest as low-lying regions will be flooded due to the melting of the polar ice caps. To prevent this scary reality from coming to life, we need to act now and shift our vision to green and clean strategies to slow down this catastrophic time bomb. This is where pensions step into the game since it is the largest fund holder and act as a vital power player. They are the crucial and underrecognized lever for change since almost everyone gets automatic enrolment in a pension once they start working. Many of these people are the younger generation

who will not begin withdrawing their pensions for a few decades to come. This mandate to act with the consideration of savers’ future wellbeing, along with the clout pension funds wield with big business and policymakers, makes them ideally placed to catalyze the shift to a low carbon future.

GREEN INVESTING FOR PENSION FUNDS As discussed earlier, there are many methods for pension funds to invest in the markets among which green bonds are a major one. So what are these green bonds?

Green bonds are broadly defined as fixedincome securities issued in order to raise the necessary capital for a project that contributes to a low carbon, climateresilient economy. World Bank and many other development banks have issued such bonds, usually rated as AAA for climate change-related purposes. Like regular bonds, these green bonds involve the issuing entity guaranteeing to repay the bond over a certain period, plus either a fixed or variable return rate. They can be asset-backed securities or treasury-type bonds issued to raise capital that will be then allocated to various green projects. The market for green bonds, according to OECD is estimated at US$16 billion.

Along with World Bank, which has issued around US$2.3 billion worth of green bonds, the European Investment Bank has also issued bonds; the funds which were raised being used to finance environmental sustainability projects. Asian Development Bank has also invested in clean energy with

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| GREEN FINANCE funds raised from bonds used for renewable energy projects and to reduce carbon dioxide emissions. The federal Energy Policy Act of 2005 established Clean Energy Renewable Bonds (CREBs) as a financing mechanism for public sector renewable energy projects. Instead of getting interest on the CREBs, the bondholder receives federal tax credits. Such bonds are used to implement various wind and solar farm construction.

Apart from green bonds, we have various green infrastructure funds which are being developed so that institutional investors such as pension funds to invest in green growth projects.

European Investment Bank has set up EU funds that have small funds accumulated from various European Union countries such as Green For Growth Fund, the Dasos Timberlan Fund, 2020 European Fund for Energy, Climate Change & Infrastructure, etc., to name a few. There is also Asian Development Bank’s Climate Public Private Partnership Fund (CP3), whose aim is to invest at scale for significant impact; to generate highly favorable risk‐ adjusted returns; to develop investment infrastructure; to incubate quality low carbon specialist funds; to increase the pool of investible projects; to provide risk mitigation tools, and to build trust regarding such investments in the region.

Source: OECD

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| GREEN FINANCE BARRIERS FOR GREEN PENSION There are some barriers to a green pension with investment options in green finance still developing. There are also some barriers pertaining to the financial, structural, or technical nature of these investments, including fossil fuel subsidies, inflexible and insufficient grid capacity, incapable business models, etc. All of these hamper the low carbon solutions offering businesses and vendors, affecting the economic attractiveness.

One more significant barrier to further investment by pension funds is the unsupportive environmental policy backdrop. Most green investments are currently uncompetitive, partly as they often involve new technologies which require support and have yet to be commercialized. Another key barrier is the lack of financial instruments enabling pension funds to make these investments. The market for green investments remains small and illiquid, and there is often a mismatch been pension funds’ long-term, relatively low-risk needs and the financing vehicles available.

Pension funds’ investment in green projects is their lack of knowledge and experience not only with ‘green’ projects but with infrastructure investments in general (which green projects are often a subsector of) and the financing vehicles involved.

climate change, even minimizing it to a certain extent. Governments need to step up and bring various policies which will encourage pension funds to invest in green finance. This includes providing cover for risks, promoting more green projects, and raising awareness about the benefits of green pension funds. This will help gain the confidence of institutional investors, which will move towards greener pension funds, which will lead us towards a greener world.

CONCLUSION Green Pension Funds can become the most significant influence on the environment and help control the negative impact of

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| CALL FOR ARTICLES -WINNER

THE DYNAMICS OF A CENTRAL BANK DIGITAL CURRENCY After years of scepticism and deliberation, the Indian government is likely to put a blanket ban on all private cryptocurrencies in India through “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021”1, which it expects to introduce during the Budget Session of the parliament. While the proposed ban has attracted criticisms of varying degrees from different quarters, the bill’s other proposal of facilitating the formation of a Central Bank Digital Currency (CBDC) has been largely well-received. India’s newfound interest in CBDC is coherent with the broader global trend in which more and more countries are exploring the idea of having their own digital currency. As a matter of fact, a 2019 Bank for International Settlements (BIS) survey found that 80% of the surveyed central banks were involved in full-fledged CBDC research compared to only 50% in 20173. The level of progress, though, varies across countries. While the European Union is carrying out extensive research on the viability of a digital euro, China has already started conducting trials of its digital currency e-yuan. Nonetheless, the keen

Aritra Banerjee | 2020-22 NMIMS, Mumbai interest shown by the central banks around the world implies that CBDC today is no longer a topic of only academic importance.

Instead, it is considered to be a pathbreaking concept that has the potential to transform the way economies around the world function.

Much of the momentous potential of a CBDC stems from its basic nature. Using the distributed ledger technology, blockchain, CBDCs essentially create a digital version of a country’s fiat currency. While a CBDC may seem similar to the “digital cash” balances that are accessible through the net banking platforms, there are subtle differences between them. The existing balances accessible through these platforms are a form of M1 level of money supply, where commercial banks are primarily responsible for the process of money creation using double-entry accounting. On the other hand, a CBDC would be a new form of M0 level of money supply since it would simply be a digital replication of physical currency and

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| CALL FOR ARTICLES -WINNER would be directly issued and regulated by the state authorities. In other words, with CBDCs, people would be able to directly entrust their money and deposits to the central bank without involving intermediary banks in between. Given the nature of involvement of the central banks, CBDCs would largely be centralized and hence would be distinguished from cryptocurrencies like Bitcoin which are decentralized and have their values determined by market forces. This distinction is significant as the central banks see the CBDCs as a means of countering the rising influence of cryptocurrencies and stable coins (Exhibit 1).

It is feared that in case a large enough number of people start using these private modes of transactions rather than the conventional sources of money, the central banks would soon have a lesser influence on their respective economies and their policies may be rendered ineffective. In such a scenario the stability of the financial system would be at risk. The central banks hope that by issuing a digital currency of their own, they would be able to avoid such an eventuality. By having their own digital currency in place, the central banks expect to increase their presence in online payments

and wield enough influence over the economy to maintain the effectiveness of their monetary policies. While this utility of a CBDC is of prime importance for a central bank, there are a variety of other ways in which a CBDC can be useful.

Cashless transactions, in general, are faster as well as a more reliable mode of payment.

It is also cheaper to issue digital coins/cash rather than minting coins as long as sufficient protection against hacking is undertaken. Furthermore, a CBDC would also assist countries in preventing the financing of criminal activities by making it easier to monitor the usage of digital money. In addition to this, with a CBDC, central banks would have greater room to implement negative interest rates. Presently, the fact that savers can shift to cash is a major cause of concern for the central banks intending to implement negative interest rates. However, in the presence of a CBDC, the central banks can work around this hurdle by programming their digital currency to negative rates as well. Through the CBDCs and mobile wallets, governments and central banks would also be able to quickly transfer money to the intended beneficiaries. This functionality would not only improve the effectiveness of the government schemes but also help during crises like the COVID-19 pandemic.

Evidently, countries across the world could be greatly benefitted from the advent of CBDCs. However, CBDCs aren’t devoid of downsides and entail certain pitfalls as well.

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| CALL FOR ARTICLES -WINNER According to certain policymakers, the introduction of CBDCs could give rise to the phenomenon of “digital bank runs” during a time of crisis. In this adverse scenario, people could rush to convert their bank savings into CBDCs during a panic situation like a stock market crash. This could potentially drain the liquidity of the banks and rock the stability of the entire financial system of the country. In yet another possibility, a CBDC could change the demand for money and the corresponding sensitivity to the changes in interest rate. This would hamper the effectiveness of the monetary policy and induce a sense of uncertainty which would increase the difficulty of the central bank’s tasks. In addition to this, many people still prefer physical cash and/or don’t have access to smartphones. Thus, CBDCs, while potentially beneficial, have their own set of challenges and central banks would do themselves a favour by not rushing to find hasty poorly thought-out solutions. To put it in the words of Jerome Powell, the chairman of the US Federal Reserve, it is more important to “get it right than be first” when the question is about the development of a digital currency.

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| ALUMNI INSIGHTS

ENVIRONMENT | SOCIAL | GOVERNANCE ESG must be considered as an investment, rather than a cost. “Profits are in no way inconsistent with purpose – in fact, profits and purpose are inextricably linked.”

- Larry Fink, Chairman & CEO of Blackrock Environmental, Social and Governance abbreviated as ESG refers to three main factors in measuring the sustainability of an investment. It was derived from the ‘Triple Bottom Line’, which is also known as the ‘People, Planet and Profits’ (PPP). So, it is important for every organisation to focus on its people, how are they affecting the planet and then focus on its sustainable way of making profits but not just profits. ESG was born out of this concept which is serving currently as base of SRI (Sustainable Responsible Investing). ESG Analysis can act as an ‘early warning radar’ to assess the risk and integrating it to financial analysis leads to better-informed investment decisions.

Aarzoo Doshi Co-convenor, Finstreet (2017-19) attention in this pandemic where sustainability and ability of organisations to adapt to changes is key success factors. Covid 19 pandemic has bring in more spotlight in considering of ESG lens while investing as state by the Principles for Responsible Investment (PRI). It calls organization for examination about ESG, and a combined objective of how human and economic value can be cocreated

ESG have evolved over years and gain more

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| ALUMNI INSIGHTS Figure 2 below depicts probable parameters for ESG analysis for a Company supplying electricity to households. So, considerations to analyze Company A could be what green initiatives firm is taking to control pollution, is it having a sustainable Supply chain for raw materials, what are labor standards it is following, what are chances of strikes in case of unions, Is it following right accounting standards, are board of directors reliable, what carbon footprint it is leaving on earth and what amount natural resources it is consuming.

ESG score: - Certain Organizations rating agencies like MSCI, Refinitiv & a few startups like Sustainalytics, Arabesque too are working dedicatedly to provide the ESG scores. These agencies work in subscription model like Bloomberg to share the data. The ESG score is calculated individually for all 10 parameters considering peers performance in sectors and then combined to create one score. Depending on the score brackets these agencies provides ESG ratings.

An approx. ESG Score formula to calculate securities ESG score in a portfolio can be =

[No of securities having less than value – (No of Securities have same value/2)] divided by Total no. of securities reporting the parameters These agencies are figuring innovative methods to improve scores using AI and Machine learning. Most important challenges faced is to determine a real time scoring mechanism. The scores are updated periodically, but till the time score updates impact of events for securities have already occurred.

Second Challenge is availability of data and disclosures by rating agencies in standard format which is consumable, and third challenge is how to comparable ratings with other agencies. Recently SASB is working with TCFD to develop an integrated framework and standard guidelines for disclosures that should be followed by organisations. With clear guidelines regarding disclosure, there has been a 363% increase in SASB disclosures. More corporate engagement with ESG disclosure will mean more accurate data for ESG rating agencies to determine company scores.

Why a company should work on improving its ESG parameters?

There are numbers of factors why an organization should invest in building its ESG score: 1. Faster Adaptability: - Evolving business model with time reduce impact of disruption from regulations and innovation

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| ALUMNI INSIGHTS 2. Positive Brand Image: - A company with higher ESG rates have better retention and positive brand recall in customers 3. Innovations: - Technological advancements leads to improved efficiency 4. Attractive to investors: - Green investment fund and Socially Responsible investors prefers companies with high ESG scores I was involved in developing an AI prototype on ESG. The prototype was to update the ESG Score with infusing news feed accordingly sentiments of news feed. My one learning from experience is keep yourself updated with technology, market trends and this will enable you to take up any new projects or assignments. Tech is no longer a separate vertical in any industry, but it is the mainstream, I have been closely involved for projects on intelligent automations across value chains in BFSI whether its marketing, sales, operations HR and of course core banking operations and not only International BFSI but even Indian BFSI sectors are bringing AI as main component in the day-to-day process and upgrading the IT infras accordingly. Post-Covid world needs more virtual, less manual, and more automated intelligent solutions because lockdowns have made organizations to think how the entire setup which can be ran from any region virtually.

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