Finly March 2020 by FINLY

FINLY| March 2020 | Finstreet | SIMSR

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

Dear Readers,

Greetings from the editorial team at Finstreet. For the past several years Finly has been informing, engaging, inspiring and entertaining a diverse readership -- including alumni, faculty, staff, and students at KJ SIMSR by presenting an intimate, timely and honest portrait of the key activities and events in the Indian and Global economy. We are proud to unveil the March edition of our monthly magazine FINLY for the academic year 201920. Our Cover Story helps us understand the twin balance sheet problem, policy announcement by RBI and its impact. Next in line, is the Eco Section, which analyses in detail the impact of Coronavirus on the Indian economy, on various sectors and the opportunity created by it. In the Sector Analysis, the authors inspect of the Power Sector where they provide an overview of the sector and provide an indepth analysis of the growth drivers, contribution to GDP, initiatives taken by Government and current trends in the sector and an Analysis of a Maharatna company, Power Grid Corporation. This month's intriguing indeed covers the scope of Blockchain in Banking & Finance, where we explain blockchain, its types, and benefits. We express our gratitude to Prof. (Dr) Pankaj Trivedi (Course Coordinator, PGDM Core, and Faculty Coordinator, Finstreet) for providing the essential mentoring, support and backing to the Finly team. This month's call for article competition received an overwhelming response with high-quality articles coming in from various top management colleges across the country. We thank every participant for their sincere efforts and participation. This month's winner's & runner-up article is a recommended read. We would also like to thank Saurav Jain of PGDM â&#x20AC;&#x201C; Finance for sharing his internship experience at HUL, a leading FMCG Company of India. We thank all our readers and faculty members for their constant love and support. Your reviews and feedback are much appreciated. Each edition of FINLY is the outcome of the tireless efforts and dedication of a group of individuals who call themselves Team Finly. We can't thank them enough for their constant support and initiative. Mohak Shah, MMS - Finance, 2018-2020

Saurav Jain, PGDM Core, 2018-2020

Team Finly- March 2020 Faculty Incharge

Editor-in-Chief

Editor- FINLY

Mohak Shah Dr.(Prof) Pankaj Trivedi

Mohak Shah

Saurav Jain

-Conceptualization & DesignAkshitaa Bahl

Rohan Thakur

Riddhi Nagda

-Content TeamMihir Mali

Hiral Mody

Viren Palan

Smith Shah

Nihar Shah

Akshitaa Bahl

FINLY| JULY 2018 | Finstreet | SIMSR

INDEX

Editorial Team Finly

04 Cover Story 07

Eco Section

Sector & Company Analysis

Intriguing Indeed

Intern Diaries

21 Call For Articles Runner Up

Call For Articles Winners

RBI REAL ESTATE POLICY Mihir Mali | PGDM FS | 2019-21 Smith Shah | PGDM Core | 2019-21

Cover Story

The Twin Balance Sheet Problem The problems in India's Real Estate Sector have a major role to play in the current slowdown that we are witnessing. So, when RBI came up with a new policy for the real estate sector, it not only offered a solution but also showed that the policymakers are now formally recognizing the flaws that exist in the current economic system. That being said, we have to acknowledge the fact that the policymakers are ready to take unconventional steps to revive the growth. But before we take a deep look into new policy, first let's understand in brief what the problem in India's Real Estate sector is. In 2008, when we witnessed the Global Financial Crisis, most Indian Infrastructure Companies bet big on the future. Huge investments were made in the hope that India would continue its growth unabated. But when such growth did not materialize, these Infrastructure Companies were saddled with large amounts of debt that they simply could not wash away. Also, the banks that loaned generous amounts of money to these folks found out that they were in trouble as well. After the repayments stopped, the banks tried to help crippled corporates by extending new loans to repay old ones. Though this helped for a while in 2015, RBI asked the banks to come clean and soon enough, the skeletons tumbled. Corporates were running out of funds, the defaults picked up and unpaid loans took center stage. The banks

took a massive hit. This is known as the Twin Balance Sheet problem. Even now, unsold homes are piling up everywhere. Now, the developers can't reduce the prices too much to increase the sales because these developers borrow huge amounts of money by pledging unsold homes as collateral. Also, buyers need to borrow in the same manner. Hence, if prices are dropped, then the value of collateral with banks will drop simultaneously and banks won't be happy with that. Banks' exposure to the real estate sector is around 21% of the total loans and advances while that of NBFCs is around 6% of the total assets. So, the prices stay put and properties vacant. On top of that, short-term effects of structural reforms such as the Real Estate Regulatory Act (RERA) and Goods and Services Tax (GST) have adversely impacted housing demand. Therefore, the sector was in dire need of some support from the Government. That seems to have come in the form of RBI Real Estate Policy.

The Policy Announced By RBI The Reserve bank of India allowed another year extension to the date of commencement of project loans for commercial real estate. This is for projects that were delayed for reasons beyond the control of realtors and comes as a major relief to the real estate sector without a downgrade on the asset class. The RBI's decision is in line with the government's efforts to pull the sector out of crisis that it

Cover Story

FINLY| 2020 | Finstreet | SIMSR FINLY| March Sept 2019 | Finstreet | SIMSR currently finds itself in. It will help developers focus on completing the projects and will ease the banks' worry about projects turning into NPAs. Real estate experts say this measure is not limited to the commercial real estate. They say it will benefit residential projects that were delayed on account of regulatory issues. For example, the Noida Bird Sanctuary issue, the construction ban by NGT, ban on the use of groundwater or for that matter even government-related land acquisition issues, have delayed various realty projects. Commercial real estate (CRE) refers to all the real estate asset classes. In RBI's view point, it means non-retail and includes all asset classes such as the construction of commercial buildings, IT buildings and even residential structures for which banks have lent loans to the developers. On February 7th, in the monetary policy committee (MPC) meeting, RBI kept the interest rate unchanged amid uncertain inflation outlook. There were a couple of surprising decisions to help the struggling real estate sector. Firstly, it has allowed lenders to pool in the Cash Reserve Ration (CRR) buffer to lend at a cheaper rate for housing loans and given a one-year extension for date of commencement for project loans for real estate projects. Secondly, to increase the lending to MSMEs, the auto and the home segment, RBI tweaked the Cash Reserve Ratio (CRR) norms by providing relaxation in the calculation of the total deposits.

What the RBI said "It has been decided to permit the extension of the date of commencement of commercial operations (DCCO) of project loans for commercial real estate, delayed for reasons beyond the control of promoters, by another one year without downgrading the asset classification in line with treatment accorded to other project loans for non-infra sector. This would complement the initiatives taken by the Government of India in the real estate sector. DCCO refers to the date when the project was forecasted to be completed. The new policy has a specific provision for the real estate sector which allows rescheduling of the project loans by a year by changing the DCCO. What this means is that if a project was to be commissioned in February 2021 has been delayed due to any liquidity or regulatory issues, it will now b e c o m m i s s i o n e d i n Fe b r u a r y 2 0 2 2 . Consequently, the repayment which was due from February 2020-February 2021 will now have to be

paid from February 2021-February 2022. As per market estimates, around 4.5-5 lakh launched housing units are facing delays for various reasons. While some of these delays would be attributable to project management issues, including funding and execution-related problems, a good chunk would also be on account of reasons beyond promoter control, such as delays in receipt of project approvals or title disputes. In addition to providing more time for the completion of delayed projects, it will also help ease project funding issues arising out cash flow mismatches, and provide developers with additional flexibility to raise last-mile funding for project completion.

How will the new policy impact? Deferring the Repayment by One Year The new policy will benefit the stuck projects. The repayment schedule will be extended by an year, so it will help in infusing liquidity into such projects. Cash flows that otherwise would have been utilized in repayment can now be ploughed back into the project. Real Estate and Infrastructure Developers submitted wish list to Finance Ministry before Budget 2020, in that they demanded an 18-month window for deferring the payment. Their demand has been partially met through the RBI announcement. It is to be noted that this policy gives an additional 12month window. It is not a full one-time waiver or rollover. Developers will have to pay interest for one year. But if this assistance had not come in, these loans would have been declared NPA. On the contrary, the new policy enables developers to get more time to repay.

Complementing the Rs. 25,000 Crore Stressed Asset Fund The Rs. 25,000 Crore Stressed Asset Fund was announced by the Government to provide last mile funding or liquidity to stuck projects. This fund aims at infusing liquidity into projects that are stalled due to lack of adequate funding, come under the affordable and middle-income category, net worth positive projects (including NPAs and projects undergoing NCLT proceedings), are RERA registered and are close to completion. While the Rs. 25,000 Crore fund will help certain categories of projects, the RBI policy applies to a larger pool of projects across the country. Hence, both schemes complement each other. The policy announced by

Cover Story

RBI applies to projects across India at any stage of construction.

Incremental Credit Incremental Credit is retail loans including housing loans over and above the outstanding level of credit to these segments as at the end of fortnight ended January 31. The Monetary Policy Committee mentioned that banks will be allowed to deduct the equivalent of incremental credit disbursed by them from their Net Demand and Time Liabilities (NDTL) for maintenance of Cash Reserve Ratio (CRR). This will help to increase the flow of bank credit to the housing sector and support residential sales. It may also permit a reduction in interest rates.

Impact on Homebuyers' Mindset We should not be surprised if homebuyers demand similar moratorium, especially those burdened with both EMI and Rent. Why should they pay for EMI for a project that is stalled when the delay is not their fault. Also, what is the guarantee that the projects for which the one-year window is being given, will not turn NPA the next year? If these questions are not answered adequately, it may create discomfort at the part of homebuyers. And this may adversely affect the loan demand. So, for now, RBI's move will help developers focus on completing projects. It will also ease banks' worry about projects turning into non-performing assets. But whether this move will help the sector, in the long run, is debatable. It is critical to take the real estate sector out of the woods because of its strong linkages with other sectors. Also, pick-up in demand for the real estate sector can boost overall demand and employment growth. We will have to wait and watch whether these new policies will help in doing that. But surely, we can say that the policymakers are cautious and mindful of the concerns of the real estate sector.

FINLY| Sept 2019 | Finstreet | SIMSR

CORONARIUS IMPACT on INDIA Akshitaa Bahl | PGDM FS | 2019-21

ECO Section

Introduction Scientists around the world are making sense of the outbreak of the novel coronarius in China which has been declared as a global health emergency by WHO. The pandemic has even forced financial analysts across the world into pondering over the future of an already crippling global capital market. The epidemic has forced China to shutter over a dozen of its teeming cities, and closing down tens of thousands of factories, impacting the global supply chain. The impact could have a ripple effect on all major economies across the world as it contributes to almost 16% of global GDP. While the situation for human impact is very serious, the economic impact due to this quarantine-like situation will cascade into loss of employment, markets, and small enterprises.

How it is affecting the Chinese Economy There has been a particularly marked impact on the prices of industrial commodities, as China is such an important buyer .China's market fell 8% on the first day of trading after the lunar holiday on the outbreak of the virus. Crude oil dropped by about 15% in the past two weeks and has hit its lowest level in more than a year, reflecting

declining demand from China. A group of oilexporting nations is considering production cuts to reverse the price fall. Copper is also cheaper - by about 13% over the past two weeks. It is an important material for the construction industry, which is also sure to be affected in China.

China and India Relationship China being the biggest exporter and secondbiggest importer of merchandise has the potential to derail bilateral trade of almost 87$ with India. Any long-term disruption in the economic activity in the supply and demand value chain hub of the world is bound to keep the markets on tenterhooks. Finding substitutes for imports from China which accounts for almost 14% of India's total imports in the near term could be a challenging task. Further, a slowdown in economic activity in China could impact exports from India.

Disruption in Indian Economy India's reliance on China is spread across sectors, especially on the supply of inputs of electronic components, non-electrical machinery and machine tools, metal products, organic chemicals and pharmaceutical ingredients. The major sectors that would be impacted are the automobile sector, pharmaceuticals and technology

ECO Section

FINLY| March 2020 | Finstreet | SIMSR

hardware sector since most of the parts for these products are made in China and all essential chemicals in the pharma sector come from China to India. There is also a scare of increase in India's retail inflation due to increase in prices resulting from a supply crunch in the retail industry. According to the latest official data released on February 12 by the National Statistical Office (NSO) India's retail inflation, which is measured by the Consumer Price Index (CPI), increased to 7.59% in January 2020, a 65-month high.

Automobile India's already bleeding auto industry due to rising prices and lack of availability of cheap loans. Consumers' reluctance to spend has led to a 19% fall in car sales last year and a 14% decline in the 2-wheelers sale. India largely sources electronics, engineering goods, and chemicals from China. Nonavailability of such products from China would mean related parties in India will have to scout for alternative markets, which can mean higher costs. The transition to the new Bharat Stage VI emission norms is also on the cards. If components are in short supply, it will disrupt the smooth transition to new norms. However, R.C. Bhargava, Maruti Suzuki Chairman has a rather positive outlook on the situation. According to him, while alternative sources of supply will probably add a little to the cost of making a car, it is unlikely to disrupt production or sales. Many Maruti vendors rely on supplies of some components and raw materials from China, however, most of them have inventories of up to 30 days and hence there's no immediate panic. Tepid consumption growth in India has made things easier.

Indian pharmaceutical industry is its low capacity utilisation, according to a report from the Ministry of Commerce and Industry (MCI). India has a capacity utilisation between 30% and 40% as against 75% of China.

Solar Industry Indian solar industry incapability of converting abundance sunlight into grid electricity without Chinese imports is a worrisome factor for this nextgen industry over the past 8-10 years, cheap Chinese imports have made Indian solar panel makers uncompetitive and several local players to shut shop. India's dependence on Chinese solar cells and modules,which absorb sunlight to generate electricity is a whopping 80% .

Electronics Industry Unlike pharma and auto industry, electronics equipment and appliance makers do not maintain a large inventory of key inputs. China accounts for 75% of the total value of components used in TVs and almost 85% for smart phones. In case of a prolonged closure, white goods makers of consumer durables like TV sets, washing machines and air conditioners rely on critical components from China which are assembled here to make finished products will have to source components from other countries. Any device that needs component integration in a semiconductor foundry, which is nearly all modern electronics, is dependent on Chinese or Taiwanese capacity. According to analysts quarter 1 will not be a problem, however, if the epidemic persists then quarter 2 could see supply and manufacturing disruptions which would delay new product launches too.

Opportunities Pharmaceutical Industry Bulk drugs and drug intermediates accounted for $1.5bn or 3% of India's imports from China. Approximately 85% of active pharmaceutical ing redients (APIs) impor ted by Indian companies are from China. India's over dependence on China for APIs exposes it to raw material supply disruption and price volatility. Another major hindrance to the

The current crisis in China could accelerate Make in India. The dependence on Chinese finished products has decreased, though only slightly, over the last five years. India is now assembling products and developing the ecosystem here as well which is ironically being helped by Chinese investments .Chinese investments in India have increased 5x to 6x in the last few years. Besides, the higher import tariffs on components and finished products announced in Budget 2020 by the Finance minister

FINLY| March 2020 | Finstreet | SIMSR

ECO Section

could boost local manufacturing. Though the health scare is nothing short of a black swan event, the anxiety and fear in financial markets will be short-lived. Global buyers are considering India as a replacement of China to source ceramics, homeware, fashion and lifestyle goods, textiles, engineering goods and furniture. Reportedly, Indian manufacturers and exporters have seen a rising number of interests from the western market. The ensuing contraction in economic activity in China, the world's largest consumer of crude oil, has sent prices of crude crashing to levels not seen since 2018. Oil prices have slid 25% from the January peak, offering a reprieve to the struggling Indian economy, which depends on imports for nearly 80% of its oil and gas needs. At a time when domestic inflation is moving up, this cool down in oil prices will give the economy breathing room. Though the Chinese pandemic opens various doors for India Inc., however, given the glacial pace of change in our country, Indian companies take advantage of the opportunity but fail to plough money in the long term. They eat free lunch. For instance, coronavirus resulted in a spike in demand from China for N95 masks, but the government here placed curbs on exports, while even France accelerated production and supplied 10 million masks.

Sector & Company Analysis

Power & Energy Sector Hiral Mody I MMS A I 2019-21 Nihar Shah I MMS B I 2019-21

Sector Analysis

Overview of the Sector: India is the third largest producer and third largest consumer of electricity in the world, with the installed power capacity reaching 364.96 GW as of October 2019. The country also has the fifth largest installed capacity in the world. India is ranked 4th in wind power, 5th in solar power and 5th in renewable power installed capacity as of 2018. Prime Minister Narendra Modi star ted Saubhagya Scheme on 25th September 2017 with an aim to electrify all the households across the country. The main target is the rural households where more than 4 crore households need to be electrified. Installed renewable power generation capacity has increased at a fast pace over the past few years, posting a CAGR of 19.78% between FY14–18. India ranked fourth in EY Renewable Energy Country Attractive Index 2019. Power sector Highlights 2018 1. 9 states achieved 100% household electrification under SAUBHAGYA, total 16 states have 100% household as of now 2. More than 2 crore electricity connections released under SAUBHAGYA and 100% village electrification achieved 3. Energy deficit reduced to almost zero and India emerges as an exporter to

Nepal, Bangladesh and Myanmar 4. 31.68 lakhs LED bulbs distributed under UJALA scheme and 74.79 lakhs street lights installed 5. India's rank improved to 24 in 2018 from 137 in 2014 on World's Bank Ease of doing Business - Getting Electricity Ranking Source: Year end review 2018- Ministry of Power

Contribution to GDP: Petroleum products and chemicals are a major contributor to India's industrial GDP, and together they contribute over 34% of its export earnings. India hosts many oil refinery and petrochemical operations, including the world's largest refinery complex in Jamnagar that processes 1.24 million barrels of crude per day. India currently imports around 82% of its oil needs and it aims to bring it down to 67% by 2022. It will be done mainly by use of renewable energy.

Initiatives taken + Budget Allocation ●

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In the Paris Agreement, India has promised to achieve its 40% of the total electricity generation from non-fossil fuel sources by 2030 100% FDI is allowed under the automatic route in the power segment and renewable energy.

Sector Analysis

FINLY| March 2020 | Finstreet | SIMSR ● ● ●

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in 2012. Most of this demand would come from the growth in the buildings, industry and transport sectors 2. Installed renewable power generation capacity has increased at a fast pace over the past few years, posting a CAGR of 17.28% between FY14–19. India added record 11,788 MW of renewable energy capacity in FY18 and 8.6 GW in Fy19.

Government has allocated Rs 22,000 crore for power and renewable energy sector in the Budget 2020 Large solar power capacity grids to be installed alongside railway tracks India is all set to cross the 100GW renewable energy capacity mark in 2020 and can make rapid strides towards the ambitious 175GW clean energy target by 2022 India's installed renewable energy generation capacity touched around 86GW by November-end. This includes solar, wind, small hydro, biomass, waste to energy and others. The Government of India allocated Rs 3,004.90 crore (US$ 416.48 million) in the budget 2019-20 for the development of solar power projects including both gridinteractive and off-grid and decentralized categories.

Solar power Generation Growth: India is located on the solar belt and is one of the best recipients of abundant solar energy. Over the past five years, India's installed solar generation capacity has risen over 10 times including the usage of green technologies and e-vehicles.

Other Incentives: Renewable energy projects are included in priority sector lending, which is relatively cheaper than other sources of credit. Solar and wind energy sectors in India are expected to generate over 300,000 jobs by 2022.

Growth drivers of the sector: 1. Industrial sector had a share of 41% of the total electricity consumption in FY17-18 2. The demand for power and per capita electricity consumption is growing around 5% year on year basis 3. By 2018, around 25 states have achieved 100% electrification of households under the Saubhagya scheme which will further increase the demand for power and electricity 4. To create potential for domestic m a n u f a c t u r e r s a n d d e v e l o p e r s, Government of India will auction 40 GW of renewable energy projects including 30 GW solar and 10 GW wind every year till 2028.

FDI INFLOWS: 1. Power sector accounted for 3% of total inflows till June 2019 2. The renewable energy space in India has become very attractive from investors' perspective and has received FDI inflow of US$ 8.06 billion between April 2000 and June 2019.

GROWTH POTENTIAL: 1. As the economy grows the electricity consumption is projected to reach 15,280 TWh in 2040 from the 4926 TWh

Sector Analysis

FINLY| March 2020 | Finstreet | SIMSR

Source: IBEF

Source: BP Energy Outlook to 2035

Sector Analysis

FINLY| March 2020 | Finstreet | SIMSR consists of 1, 53,635 circuit kms and 243 EHVAC and HVDC substations, which provides total transmission capacity of 3, 67,097 MVA. Also, its interregional capacity is around 75,050 MW. It is listed on both NSE and BSE since 2007. POWERGRID has mainly 3 operating businesses namely Transmission, Consultancy and Telecom.

Corporate Governance:

Company Analysis: Power Grid Corporation of India Business Overview: Power Grid Corporation of India Limited (POWERGRID), is an Indian state-owned Maharatna company headquar tered in Gurugram and engaged mainly in transmission of power. It is India's largest Electric Power Transmission Utility. It undertakes transmission of electricity through Inter-State Transmission System (ISTS). POWERGRID transmits around 50% of the total power generated in India on its transmission network. Its former subsidiary company, Power System Operation Corporation Limited (POSOCO) handles power management for National Grid and all state transmission utilities. POWERGRID also operates a telecom business under the name POWERTEL. Shri Kandikuppa Sreekant serves as the Chairman and Managing Director of the c o m p a n y. P OW E RG R I D i s o p e r a t i n g throughout India and its transmission network

POWERGRID believes in promoting corporate fairness, transparency and accountability in the best interest of various stakeholders in a company. It is a system by which the business corporations are controlled and directed. It also aims at being proactive to Government policies. POWERGRID is a dividend-paying company since 1993. Government of India holds 55% stake in POWERGRID while the other 45% is held by the public. With the appointment of Shri Dilip Nigam as Government Nominee Director w.e.f. 28.12.2019, POWERGRID was noncompliant w.r.t. number of Independent Directors at least 50% of Board Members from 28.12.2019 to 31.12.2019 (i.e. for 3 days) during the quarter.

Source : www.powergridindia.com

Sector Analysis

FINLY| March 2020 | Finstreet | SIMSR

SWOT Analysis:

City projects lined up. Smart Grid is confluence of information, communications and digital technologies. Apart from facilitating real-time monitoring and control of power system will also help in reduction of AT&C losses, integration of renewable energy and power quality management. It has received order of manufacturing of transmission projects – TL Tower parts, Conductor and Insulator. It also has investment plans like POWERGRID plans to invest approximately $18,181 million during th the 12 five-year plan period (2012-2017).

● Strength: POWERGRID has strong transmission infrastructure. It plans and develops the country's nationwide power transmission network, including interstate networks. POWERGRID's expertise in setting up and managing transmission infrastructure enables it to meet the supply-demand gap in India. It has higher operational efficiency as POWERGRID had maintained an average availability of more than 99% for its transmission system since FY2002. It helps the company to run its transmission network effectively at lower costs and pass on the cost benefits to its customers. Due to the increasing focus in consultancy business, POWERGRID has acquired 41 new assignments having project cost of INR 10,020 million in FY2012. It operates in 11 countries internationally. A memorandum understanding was signed with IFC (International Finance Corporation) an extended arm of the World Bank, for extending co-operation between Power Grid and IFC to identify and evaluate transmission projects for development and own/co-owned transmissions projects in Africa and Asia by providing financial aid and technical services to project's client.

● Threats: There is always risk associated with operations in foreign countries. The company carries out business activities in foreign regions directly or through project-specific consortiums with its foreign partners. Also, the sharing of interstate transmission charges and loss regulations has made POWERGRID responsible for billing, collecting and disbursing transmission charges for the entire ISTS from all users. There is a significant competition faced by POWERGRID in consultancy and telecom business. Major companies that it competes with are KEC International, Gammon India, Larsen & Toubro, etc.

FINANCIAL ANALYSIS: The debt to equity ratio is one of the most common financial leverage ratios. The ratio helps in proportion of equity and debt a company uses to finance its assets. Following is the debt to equity ratio of POWERGRID Corporation from 2016 to 2019.

● Weakness: It is highly dependent on government funded consulting clients. The consultancy revenues earned by POWERGRID consists mainly of fees from the Rajiv Gandhi Grameen Vidyutikaran Yojana. If the government reduces its funding amount to the project then its consultancy income would get affected. Similarly, the international consultancy projects served by POWERGRID are mostly funded by World Bank or any other foreign government. If these institutions stop the fund amount, it could hurt the company's revenues from these projects. Consulting is the only business of POWERGRID that serves international clients. Therefore, loss of revenues from international projects could limit's company growth in the consultancy business.

● Opportunities: POWERGRID has plans to increase its presence in the Indian market and also to attract n e w c u s t o m e r s. I t a i m s a t p r ov i d i n g Transmission system for Railways and other bulk users. It also has new Smart Grid/ Smart

Source : www.powergridindia.com POWERGRID has strong financials which helps to gain the trust of investors and shareholders. The following is the financial analysis of POWERGRID Corporation of India Limited.

Sector Analysis

FINLY| March 2020 | Finstreet | SIMSR

FUTURE OUTLOOK: Indian power system is facing high AT&C Losses, poor distribution networks, wide demand supply gap of energy, etc. Smart grid technology will also bring solutions to all of the mentioned problems and sustainability by way of demand side management, demand response, reduction in AT&C losses and improved customer satisfaction. Large investment is further expected for Smart Grid Applications in the distribution in the 12th and 13th Plan, which will provide huge business prospects in future. POWERGRID is preparing a report on overall distribution system improvement through smart grid technologies in Firozabad, Bidhuna, Shikohabad, Katra, Jammu-Gandhinagar, Charar-i-Sharief, Baghat, Gulmarg, Chitradurga etc. This would facilitate an attractive business opportunity for the players in the field.

Source : Bloomberg

Fintech of Funda Scope Blockchain in BFIS Viren Palan | MMS B | 2019-21

Intriguing Indeed

Introduction Blockchain technology was created in the year 2009 by Satoshi Nakamoto. He created the first digital cryptocurrency which is known as Bitcoin using blockchain technology. It is a simple way of passing information from point A to point B in a fully automated and safe manner. It is a public electronic ledger that is built around a P2P (Peer to Peer) system that can be openly shared among different users to create an unchangeable record of transactions, each time-stamped and linked to the previous one. Every time a set of transactions is added, that new data becomes another block in the chain. The blockchain can only be updated by consensus between participants in the system and once new data is entered it can't be erased. It is a write-once type of process and thus being a verifiable and auditable record of every transaction.

How does Blockchain work? The blockchain technology has blocks and each block stores some information along with the hash of the previous block. A hash is a unique mathematical code that belongs to a specific block. If the information inside the block is modified, then the hash of the particular block

will require modification as well. The connection of the blocks which each have a unique has key is what makes it more secure. The other important aspect of blockchain is the nodes that are present on the network which validates these transactions. These nodes are also known as miners and they use the concept of proof-of-work to process and validate the transactions. For the transactions to be valid each of the blocks must refer to the hash of its preceding block. These transactions will take place only if the hash is correct. If someone tries to hack the network and change any information or modify it the hash will also be modified. Thus this change will be detected as the modified hash will not match the original hash. This shows that it is not alterable and if any change is made it will be reflected easily. The flow of a blockchain is as follows: 1) A blockchain makes use of keys to form a digital signature ensuring security. 2) While making a transfer, the sender uses this key and carries on with the transaction and puts up information over the network. Then a block is created containing the information such as digital signature, timestamp, and the receiver's key. 3) The block of information is then broadcasted through the network and then the validation process starts. 4) The miners over the network start solving the mathematical puzzle related to the transaction to process it. Upon solving the puzzle the miner

Intriguing Indeed

FINLY| March 2020 | Finstreet | SIMSR

receives rewards in the form of bitcoins. This method is called the proof-of-work. 5) Once most of the nodes agree to a common solution the block is stamped and added to the existing blockchain. 6) Then the new block is added to the chain and the existing copies of the blockchain are updated for all the nodes on the network.

Types of Blockchain. 1) Public Blockchain: Public Blockchains have an open-source. They allow anyone to participate in the process as users, miners, developers or community members. All the transactions that take place on a public blockchain are transparent and anyone can see the data. They are fully decentralized and no individual can control which transactions are recorded in the blockchain. 2) Private Blockchain: Private Blockchains are also known as permissioned blockchains. The participants need consent to join such networks and the transactions are only available to participants who have permission to join the network. In comparison to the public blockchains, they are more centralized. 3) Hybrid Blockchain: Hybrid blockchain combines the privacy part of the permissioned blockchain with the security and transparency of the public blockchain. It provides the flexibility to choose which data to make public and which data to be kept as private.

Benefits of Blockchain in the Financial and Banking sector 1) Fraud Reduction: Blockchain is being recognized as the new technology which will be very convenient and helpful. It would help in reducing fraud in the financial markets, where approximately 45% of the financial intermediaries and money transfer services are prone to financial crimes. Many of the banking systems have adopted a centralized database method, which are more easy targets to cyber-attack as once the hacker is able to hack into the database he has access to the whole database. By using Blockchain this crime can be reduced as it is more secure than a centralized database and there will be big changes on the trading platforms which have the risk of operational errors and frauds highly reduced. 2) Know Your Customer (KYC): Many of the financial institutions spend between $60million up to $500 million per year to keep up with Know Your Customer and customer regulations according to a survey. These regulations are meant to help security and reduce money fraud. Blockchain would help an organization to access the verification details of a client by another organization thus avoiding the repetition of the KYC process. These reductions in these costs will be very beneficial for these organizations. 3) Smart Contracts: Blockchains facilitate smart contracts as they facilitate storage of any kind of digital information computer code that can be executed once two or more parties enter their keys. Contracts could be created and financial transactions executed when this code is programmed, according to the set criteria.

FINLY| March 2020 | Finstreet | SIMSR

4) Clearing and Settlement: Investment banks pay millions of money for recording loans and other important information. Today this managed through a complex process and a myriad of messages and manual reconciliation. Australian Securities Exchange is a very good example of restructuring which aims to transfer a lot of its posttrade clearing and settlement on to a blockchain system. 5) Trade Finance: Trade finance is currently still based on paper, like the bill of lading or the letter of credits which is being sent by fax or post everywhere. Blockchain could be an easy and good solution as numerous parties require access to the same information. It is an important element in the supply chain and blockchain could be of great help in this.

Intriguing Indeed

Bank using Blockchain in India: Since the concept of blockchain was introduced, many industries have realized its potential to transform services. One, in particular, is the banking sector which is following its development. India's largest bank, State Bank of India (SBI) has stated that it has been working toward introducing a safer banking system in India using blockchain. Earlier, in February 2017 SBI announced its plan to launch a BankChain in association with 27 other banks from India and the Middle East. ICICI Bank, Kotak bank, Development Credit Bank and Axis bank are a part of this community. This BankChain aims to reduce fraud and maximize efficiency, security, and transparency in the banking system. SBI is also using a blockchain solution for managing its KYC system. The system is built on Hyperledger Sawtooth, a platform for developing and deploying blockchains which is developed by Intel. They have also collaborated with the Pune-based Primecahin Technologies. By using components like the Hyperledger Sawtooth and Primechain's expertise to build blockchains they could improve as well as increase fintech services such as P2P lending, crowdfunding, and digital marketplaces. Sudin Baraokar, Head of Innovation at SBI, said at the Bengaluru Tech Summit 2017 that BankChain along with Primechain Technologies is working on eight applications and that the banks will soon be able to roll out blockchain-enabled applications. Asset/Charge registry

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DIARIES

Hindustan Unilever Limited

Internship Diaries

Company Overview Hindustan Unilever Limited (HUL) is India's largest Fast-Moving Consumer Goods Company with a heritage of over 80 years in India. On any given day, nine out of ten Indian households use HUL products to feel good, look good and get more out of life-giving us a unique opportunity to build a brighter future. HUL works to create a better future every day and helps people feel good, look good and get more out of life with brands and services that are good for them and good for others.

Process Hindustan Unilever had sent a shortlist of 19 people mostly with work experience for more than 2 years. There was a case discussion round followed by a Personal Interview. We were divided between two groups for the discussion. The case was fairly simply one which did not require as finance knowledge per se. I initiated the discussion and made 4 entries throughout the process.

Saurav Jain PGDM Core | 2018-20

8 people were shortlisted for the Personal Interview. The Interviewer primarily asked me questions that were related to my CV and prior work experience. Basic finance question was also asked like what are the three financial statements, what is depreciation and its accounting entries, what parameters will you choose if you want to buy equity (asked because of my interest in stock

Internship Diaries

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markets). Few guesstimates and logical reasoning questions were asked like, if the cost price of a pen is INR 50, for how much will you sell the pen for? What is the basic cost involved if you want to set up a factory? Eventually, only I was selected for their internship program.

My Experience I worked in the TOPS department which is Tax and Operation Planning. Within the team, I was working in the Tax department and I was primarily looking into indirect tax- GST. The GST team overlooked the entire indirect tax computation of HUL and was responsible for end to end process of GST calculation, from invoice mapping to ITC calculation. My two months internship was a great learning experience as I got to understand the end to end process of GST which I was not familiar with. I had hands-on experience with HUL's SAP system and understood how the invoice mapping is done. I evaluated existing business processes impacting tax credits /liability accruals and implemented simplification ideas for the current process with the better audit trail, validations built at the source of the transaction. Overall it was a great learning experience.

A piece of advice For anyone who wants to intern at HUL, it is important to note that they are not looking for a candidate who is technically very sound. They are looking for students who cans show them their eagerness to learn and are a good cultural fit for the organization. Keep your excel skills handy and try to use excel without a mouse. Also, I feel students should prepare basic inter view questions like "why Finance", "why MBA ", as these questions tell a lot about the though clarity of the student. This will not only help in HUL but also in other companies.

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Repercussions of India's ineligibility for GSP Harsh Parekh | PGDM | 2019-21 Chetan’s Institute of Management The Generalized System of Preference (GSP) scheme was adopted by the U.S under the provision of Resolution 21 of the second United States (US) conference on trade and development (UNCTAD).It allows the developed countries to adopt a generalized, nondiscriminatory system of preference in favor of the developing countries, including special measures in favor of least developed nations. The special and preferential treatment to the developing countries is an exception to the most favored nations (MFN).India was the biggest beneficiary of this program in 2018 with around 13,731 US million dollars exports that were given duty free in US. As per the reports by US trade and tariff dataweb 2018, automobile vehicle and other engineering items from India became the largest item of GSP followed by gems, jewellery, organic chemicals and plastic While the GSP was proposed to be nonreciprocal and non-condition in nature except the four eligibility requirement for the beneficiary status. The US trade and tariff act 1984, introduced certain revisions ,altering the

scheme of GSP scheme. The changes added tougher reciprocal conditions which required the below developed countries to reform certain domestic economic policies. In particular, the conditions relating to the protections of IPR and reduction of trade distorting investment practices became controversial leading to withdrawal of GSP status of several below developed countries (BDC) by the US government. India and Turkey are the latest facing the brunt of these provisions. USA is one the top trading partners with India amounting to about 16% of the total Indian export. It is a large market exporter for India. Products such as “Plastic and such articles” 75% of the export is covered under such scheme and therefore its withdrawal will have a large impact on these sectors. Similarly the impact on Iron and steel is almost 50% as 50% of the products are covered under such scheme. Therefore it is clear that withdrawal of GSP scheme will have a significant effect on these many sectors. Trumps decision will cost around 300 million dollars to US as additional tariff Without GSP benefits American small business will face a new tax that mean Job losses, cancelled investments and cost increase for consumers. Through this

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American Importers will pay more and American exporters will continue to face current market access barriers in India and others. Trumps administration argues that New Delhi has failed to assure US that it will provide equitable and reasonable access to its markets in numerous sectors. Meanwhile India had said that the US government move to withdraw duty concession on certain exports did not have a significant effect on exports to America. In recent years India has strongly opposed the US free trade argument to support the free flow of data, much to discomfiture of US e-retail giants like Amazon, Wallmart. The India bid for data sovereignty has strongly irked US and other ecommerce giants. They have began to face impact of India's data localization and the evolving e-commerce policy, which allegedly limit their expansion ambition in Indian Market. The India stands data sovereignty is believed to be key stimuli leading to suspicion of New Delhi trade privileges under the GSP program. The use of GSP tool as a Bargaining tool by US to strike deals with the beneficiary economies is hardly new. US has frequently leveraged the program to advance its political commercial interest and arm-twisting partners for developed world. In year 1992 GSP was used as a tool by US to exert pressure on India to extent patent protection to chemical and pharmaceutical products. As a long term measure it would make sense for India to follow a path that does not make it over reliant on such scheme offered by developed country but instead use benefits to improve the quality and competitiveness for product. These structural issue, should be seen as measure to improve and reduce reliance on such scheme. The nature of such scheme is that the beneficiary countries cannot enjoy such concessions for a long term.

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Retail Inflation Dhruvi Shah | MMS | 2019-21

What do we mean by retail inflation? Retail inflation essentially means increase in the price of goods that are sold at the retail market. Increase in the prices of inelastic goods cause retail inflation. After a trend of divergence between the domestic and global food prices, both of them are rising in tandem. Coronarius, global crude prices and the expected rabi harvest would determine the scenario in the coming months. Is food inflation in India really affected by the global price movements? On the face of it, that does seem to be the case. The year-on-year inflation rate based on the United Nations Food and Agriculture Organisation's food price index has risen steadily from 1.13% in August 2019 to 12.22% in December 2019 to 11.33% in January 2020. This striking surge in global food prices is reflected in trends in India as well. Annual consumer food price index (CFPI) inflation stood at just 2.99% in August 2019, before climbing to 5.11%, 7.89%, 10.01%, 14.19% and 13.63% in the succeeding five months. Simply put, since October, food inflation has made a

comeback - both in India and globally. The recent rise in domestic food prices has been blamed on local as well as imported factors. Poor rainfall during the first half of the monsoon season and too much of it thereafter led to delayed kharif sowings and damage to the standing crop at harvesting stage. Onions saw a rise in its prices in Delhi from Rs 22 per kg on January 31, 2019 to Rs 50 on January 31, 2020 which was purely due to the failure of the domestic kharif crop. Since India imports two-thirds of its edible oil requirement, higher international prices would automatically transmit to the domestic market. Talking about the current scenario of retail inflation in India, December 2019 saw a sharp spike in the retail inflation at a rate 7.35 per cent from 5.54 per cent in November and it raced to 7.59% in January 2020. It rose to about five and a half year high, surpassing the Reserve Bank of India's upper-limit target. It is the highest rate of retail inflation witnessed since July 2014 when retail inflation was at 7.39 per cent. The previous high which the retail inflation touched was 8.3% in May 2014. The retail inflation based on Consumer Price Index was 2.11% in December 2018 and 5.54% in November 2019. The retail inflation figures, released by the National Statistical Office, indicated that inflation

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based on Consumer Price Index was 2.11 per cent in December 2018. According to NSO data, food inflation has jumped significantly from 10.01 per cent to 14.2 per cent in November 2019. It should be noted here that vegetable inflation rose to 60.5 per cent in December compared to 36 per cent in November. This has triggered growth concerns amid a slowing economy. The high rise in retail inflation in December has come as a big blow to the country at a time when the government planned it to grow at five per cent, which is the slowest pace of growth in 11 years. The current situation has also strengthened the likelihood of a prolonged pause in interest rates by the Reserve Bank of India, despite muted growth. The rate of food inflation has become a real worry for the government and the RBI. Retail inflation has already breached the RBI's medium term inflation target of 4 per cent with a margin of two percentage points on either side and the prediction made by RBI - of a much higher rate of inflation has come true as well. The central bank decided against a repo rate cut in its policy review of December, it will be interesting to see RBI's next move as inflation has been on the rise for three consecutive months. In its monetary policy review, the RBI maintained the status quo on its rates. It revised the consumer inflation target upward to 6.5% for the January-March quarter. The next policy review would be due in April. The finance minister Nirmala Sitharaman said the economy was on the mend. Relying on the seven indicators, including the index of industrial production (IIP), she said that green shoots have started to emerge in the economy. Independent economists expect also expect a hit in industrial production. Global trade has been affected due to the coronarius outbreak in China. Growth is

expected to be muted and economies of various countries would experience supply side disruptions for commodities that they import from China. Regardless of the level of the CPI inflation, the stance of monetary policy is likely to be retained as accommodative, for as long as the monetary policy committee considers the output gap to be negative. The timing and magnitude of the next rate cut will depend on how inflation reverts towards 4%. Driven by various services, core inflation, which excludes food and fuel, was 4.1% and is a cause for concern.

What can happen now? Both international and domestic food prices are showing signs of renewed hardening. There are a few bearish factors currently at play. The first is, of course, the novel coronarius epidemic that has reduced Chinese buying of commodities like palm oil, soyabean, milk powder and meat. The second is crude oil. Brent crude prices had touched $70 per barrel after the January 3 United States air strike that killed Iran's top military commander but have dropped thereafter. The third is the prospect of a bumper rabi crop in India. The arrival of this crop in the mandis from March should cool down prices, especially of vegetables and pulses. Against these bearish factors are the relatively bullish factors. Global palm oil ending stocks this year are projected to be the lowest since 2009-10. Sugar is also expected to move significantly into deficit. Supply tightness is being seen both globally and in India.