Seasonal Magazine - September October 2015 by John Antony

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VOLUME 14 ISSUE 9 SEPT-OCT 2015

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INDIA'S INADEQUATE

Transport Infrastructure

GREAT INVENTIONS Written-off as Fads

TEACH YOUR KIDS About Money

With almost every other credit-growth opportunity looking down, housing finance is continuing its dream run. And with competition based on lower interest-rates kicking in recently, homebuyers will soon call the shots over here. 3 Upcoming IPOs: Catholic Syrian Bank, Coffee Day Enterprises, RBL Bank

Editorial MAGAZINE

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Managing Editor Jason D Pavorattikaran Editor John Antony Director (Finance) Ceena Senior Editorial Coordinator Jacob Deva Senior Correspondent Bina Menon Creative Visualizer Bijohns Varghese Photographer Anish Aloysious Correspondents Bombay: Rashmi Prakash Hyderabad: Iqbal Siddiqui Delhi: Anurag Dixit Director (Technical) John Antony Publisher Jason D Pavorattikaran

The euphoria of May 2014 and the despair of September 2015 is enough to convince any thinking Indian to understand what is really wrong with India.

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The working of Parliament is wrong. The working of bureaucracy is broken. The working of public sector is slow. The working of the private sector is lacking. The working of the education sector is inadequate. Media, on its part, is travelling from bad to worse, shifting coverage from the silliness of IPL fiasco to the obnoxiousness of the Mukherjeas episode. Almost everything is broken and in need of a fix, especially of the lasting kind.

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Yet, in a jiffy, we find solutions like blaming China. For our woes! China hasn’t taken this much blame in this country even in 1962! But fortunately, anyone who has been to China, and anyone who has at least seen China in Discovery or National Geographic Channels wouldn’t agree.

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The Chinese are a very innovative, very enterprising, and a very visionary breed of people. They have already done a miracle, and so what if they are slowing down a bit, or their stock market is

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when when euphoria euphoria turns turns to to despair, despair, it it is is time time to to relearn relearn

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correcting a bit. They are very capable of finding solutions of their own, even faster than world can learn to spell renminbi. If we want to blame China for anything, let us blame them for lack of proper democracy. In almost everything else, they have left us far far behind, that it would take ages to catch up, if at all that happens. BJP is finally getting to understand how the infamous policy paralysis works, from the other side of the fence. In one of the worst displays of partisanship ever to be witnessed by the Indian Parliament during its whole existence, the Congress Party has stalled two sessions of Parliament, even opting to block GST, its own baby. Corruption is wrong. Stalling lawmaking in the pretext of fighting corruption is another wrong. And two wrongs don’t make a right, whether it is the BJP or the Congress which is resorting to it. The strategy with which the Opposition stalled the Land Bill and GST was almost the same, but its implications are starkly different. While the former was a genuine issue that has the potential to affect the livelihood of millions of

poorer Indians, the other was all about preventing one of the most constructive legislations that would have benefited almost all Indians. The GST has been one of the oldest and most widely debated proposals that stalling it for relatively silly reasons like Lalit Modi is absolutely unpardonable. Blocking something that would have increased the country’s GDP by 1-2%, in the name of a corrupt cricket manager? It happens only in India, sadly. Are saner voices in the Congress like Anand Sharma’s also turning insane? He finds fault with Narendra Modi’s numerous objections that stalled GST while he was the CM of Gujarat. So, what? Modi has grown up now and understands the need for GST. Does that mean enlightened souls in Congress should oppose it now? If this is not insane, what is? What message does such political acts send to our bureaucracy? Precisely, it is this - that things take time in India. Not just reasonable time, or ample time, but inordinate delays. So, how does the officers respond? By compensating political slowness by their own high speed, or by adding to the delays? Yes, you guessed it. If the Master takes this much time, the government servants take even more. That is why you see India’s Rank in World Bank’s Ease-of-Doing-Business Index, at 142 nd position, and not at Brazil’s 120th Rank, China’s 90th Rank, , Russia’s 62, or South Africa’s 43. So much, for the over-hyped BRICS, whose best performer is India according to many Indian commentators! Don’t ever think that politicians or bureaucrats are the only ones to be blamed. Everything and everyone including super-regulators, to overreacting courts, to PIL crusaders, to Jantar Mantar crowds, to the NationWants-to-Know kind of media gimmicks have played their beautiful role in furthering a mood of corruptioneverywhere and the resultant fear leading to policy paralysis. Because, contributing ones part to a destructive endeavour is quite easy; you just have to join the mindless shouting.

Multi-times difficult or next-toimpossible is contributing one’s part to a constructive effort. Coming to India Inc, the public sector and private sector are equally to be blamed, even if for different reasons. Nowhere else is this tragedy more visible than in the insolvent nature of many of our largest corporates. Companies call it a mounting debt problem. Banks call it a mounting NPA problem. What were these companies thinking when they took on these kinds of debt at interest rates that are much above their rate of return? And what were these banks thinking when they kept on lending to these corporates? Now, it is clear that all these power, infra, metals, cement, and industrial companies, as well as the banks, were just taking a huge gamble, on the nation’s expense. In other words, they were building empires, and not creating sustainable businesses that are valuable for all their stakeholders, including their public shareholders. To check this fact, one needs to just verify the level of dividends paid by these highly indebted companies in power, infra, metals, cement, and industrial sectors. Some of them are paying measly dividends, while the rest of them are skipping this vital p a rt t o t a l l y, a s t h ey c a n ’t even

service their interest. And the banks have been left bewildered on what to do with these almost insolvent giants, that they themselves created with their generous lending practices over the past decade. Investors, especially retail investors too can shape and guide the economy by investing in only high dividend paying companies, and shunning all the empirebuilders selling their pie-in-the-sky ideas. The only silver-line here is that, even amidst these chaos, there have been organizations and leaders, who have proved that what matters in the long run is sustainable value creation for all stakeholders, and not empire-building. And this has been true in politics, bureaucracy, & business. Let all of us, first learn to be humble, and start learning from such wellperforming peers. The role models are around us, be it Late Narasimha Rao, or Late Dr. Abdul Kalam, or Raghuram Rajan, or corporate performers like Tata Consultancy’s N Chandrasekaran whose performance has been holding up even the otherwise beleaguered Tata Group. Achhe Din don’t come with just intention or bravado. What it demands include integrity, expertise, and professionalism of the highest degree. John Antony 5

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contents Boom Boom… Housing Finance!

Despite Modi’s and Rajan’s best efforts, corporate credit off-take has so far failed to grow significantly. It may take some time for Government and RBI to realize that much - much more - needs to be done to kick-start the economy than kanjoos rate cuts and re-naming and re-launching of old schemes from Jawahar to Atal. Some sectors like power, steel, and infra are in real doldrums due to spiralling debt with even major players turning insolvent in their current size and shape. With large and painful asset sales and CDRs all set to follow, how can these critical sectors of

AS MODI PUSHES FOR PORTS LED EXPORTS, INDIA'S WEAKNESS IN ROAD & RAIL STANDS EXPOSED Mumbai's commercial seaport, which handles over half the container traffic through India's major ports, is doubling capacity as Prime Minister Narendra Modi seeks to build an export powerhouse.

WHAT INDIA HAS TO LEARN FROM WORLD'S TOP 5 SMART CITIES Cities, whether in India or across the world, are major contributors to economic growth and social prosperity. From housing robust infrastructure to creating employment opportunities, cities are hubs of development. They contribute to nation-building and act as engines that propel a country in the direction of progress.

IN REVEALED SECRET TAPE, PRESIDENT NIXON SAYS: "INDIRA GANDHI IS VERY TOUGH" It's no secret that former Prime Minister Indira Gandhi didn't find it hard to make tough decisions, with the Emergency and the 1971 war with Pakistan being just two of the many she took during her tenure. Now it's emerged that she was prepared to go even further.

BUSTING THE 8 GLASSES MYTH If there is one health myth that will not die, it is this: You should drink eight glasses of water a day. It’s just not true. There is no science behind it. And yet every summer we are inundated with news media reports warning that dehydration is dangerous and also ubiquitous.

WHY MARUTI DROPPED CIAZ DIESEL, AND LAUNCHED CIAZ HYBRID

10 THINGS TO KNOW BEFORE TAKING A PLOT LOAN

Borrowing money for purchasing a plot is a good idea, be it for investment purpose or for selfuse purpose like building a home. However, know these 10 points before applying for a plot loan.

Toyota Prius and Toyota Camry Hybrid finally got some company. Maruti Suzuki has launched its first petrol-cum-electric vehicle, the Ciaz Hybrid to take advantage of government sops

TIME RIPE TO STICK TO ONLY QUALITY STOCKS, SAYS RAAMDEO AGRAWAL

INSIDE SRK'S RS. 4 CRORE LUXURY VOLVO The bus has been transformed in a way that it looks like a home on the inside, and it's been done by none other than the DC Design studio. The brief, we hear, for this big bus was a simple one - sci-fi and from what we can see, it's

An investor does not require 100 stocks to make money, but a wise selection of good-quality 15-20 counters with growth potential can earn significant

HOW STOCKS ARE SUPERIOR TO FIXED DEPOSITS, BUT ONLY OVER THE LONG TERM

COMING, WORLD'S FIRST SPACE ELEVATOR TOWER, 20 TIMES THE HEIGHT OF BURJ KHALIFA

There is no doubt that bank fixed deposits (FDs) are considered safe in that you will most likely get your money back. But did you know that bank FDs can

A Canadian firm has been granted a US patent to build the world's first-ever space elevator 20 times the height of the world's

PLAYING KIDS ENJOY AN EDGE IN MATHS

If the very thought of a maths test makes you break out in a cold sweat, the attitude of your parents may be partly to blame as a new study has found that parent's math-anxiety negatively affects kids.

GANDHI'S WISDOM FOR HUMANITY

When it came to terse quotes of wisdom, Gandhi had little competition. With just weeks remaining for his 146th birthday, it is marvelous to recall some of his best quotes for not only

UNDERSTANDING THELTV PUZZLE IN HOME LOANS

Though your salary may support a big home loan, loan to value ratio may pull down the actual loan the bank is willing to offer you.

7 WORLD-CHANGING INVENTIONS THAT EXPERTS CALLED AS DUMB FADS In 1879, Henry Morton, a leading scientific mind and president of the Stevens Institute of Technology, called one man's tinkering a

PROFESSIONAL RIVALRY: LAWYERS VS. CHARTERED ACCOUNTANTS Get ready for a mega battle between lawyers and chartered accountants. Issues revolving around corporate law is getting so complex in India that many business clients are relying more

BOTTLENECK

AS MODI PUSHES FOR PORTS LED EXPORTS, INDIA'S WEAKNESS IN ROAD & RAIL STANDS EXPOSED

MUMBAI'S COMMERCIAL SEAPORT, WHICH HANDLES OVER HALF THE CONTAINER TRAFFIC THROUGH INDIA'S MAJOR PORTS, IS DOUBLING CAPACITY AS PRIME MINISTER NARENDRA MODI SEEKS TO BUILD AN EXPORT POWERHOUSE.

NARENDRA MODI

he expansion, due to be completed in seven years, can't come quickly enough for Avinash Gupta, whose family business supplies steel forgings to Europe and the United States from the industrial hub of Ludhiana in northern India. Yet the greatest challenge his USD 30 million business faces is getting his production to port. 10

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Gupta pays nearly USD 800 to a staterun rail cargo company to transport a 20-foot container to Mumbai â&#x20AC;&#x201C; as much as 40 times the cost of shipping it onward to the Gulf commercial hub of Dubai. It is exporters like Gupta that Modi had in mind when he launched his 'Make in India' drive in September 2014, laying out a model of "port-led" development that would support

PORT OF SHANGHAI WORLD'S BUSIEST CONTAINER PORT

percent in April - even though its fuel costs have fallen.

industrial growth and help create manufacturing jobs. Modi's vision includes creating a tax union to slash costs and transport times, and a network of industrial corridors connecting the interior to ports. But political opposition to both the new tax and a law making it easier to buy land for development mean those may be years away. For now, the inefficiencies are exacerbating the pain of weak global demand and a 15 percent drop in exports between December and June from a year ago. Exporting a standard container requires seven documents, takes 17 days and costs USD 1,332 in India, according to the World Bank's Doing Business 2015 report. India ranked 126th of 189 economies on the ease of trading across borders, well behind Mexico (44th) and China (98th). All of India's ports together handle less trade than Shanghai alone.

"THE HIKE IN FREIGHT COSTS HAS MADE OUR LIFE DIFFICULT. SINCE EXPORTS ARE ALREADY DOWN 60-70 PERCENT IN THE LAST THREE MONTHS, WE WILL SOON HAVE TO CUT PRODUCTION,"

RISING COSTS Gupta runs one of the thousands of small companies that contribute about half of India's USD 300 billion in annual goods exports. Despite falling global prices, his costs have gone up, and his overseas sales are down more than 60 percent. While shipping lines have slashed freight rates in search of business, state-run Container Corp of India actually raised rail rates by up to 15

"The hike in freight costs has made our life difficult. Since exports are already down 60-70 percent in the last three months, we will soon have to cut production," said Gupta. Unless Modi's government makes faster progress on stalled rail and road corridors, like one that would link Mumbai port to New Delhi and lower costs, India's exporters will find it hard to compete on price and speed during the global trade downturn. Nowhere is this more evident than at state-owned Jawaharlal Nehru Port Trust (JNPT), which last year signed a USD 1.26 billion deal with Singapore's PSA International to build a fourth terminal in Mumbai on reclaimed land. Modi has also acted to simplify export procedures, launching electronic clearance by customs, trade and port officials. 11

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KANDLA PORT

"Ports are the gateway to trade growth," said Neeraj Bansal, the head of JNPT. "The government is expanding port capacity and building railway freight corridors and roads to reduce logistics costs for exporters. Trade is dynamic, we cannot wait till the end of global recession." The two-stage expansion by PSA International would boost capacity to around 11 million twenty-foot equivalent units (TEU). That would speed turnaround times and cut costs - it can take up to 12 hours for a truck to enter the port due to narrow approach roads, limited parking and customs delays. More than 10,000 trucks enter every day. Imports, too, are hobbled by the poor infrastructure, with several container shippers imposing congestion surcharges of up to USD 200 per TEU to cover the cost of delays in unloading. "Congestion at major ports is predominantly caused by an inability to clear cargo from the quayside, and that manifests itself 12

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MODI'S VISION INCLUDES CREATING A TAX UNION TO SLASH COSTS AND TRANSPORT TIMES, AND A NETWORK OF INDUSTRIAL CORRIDORS CONNECTING THE INTERIOR TO PORTS. BUT POLITICAL OPPOSITION TO BOTH THE NEW TAX AND A LAW MAKING IT EASIER TO BUY LAND FOR DEVELOPMENT MEAN THOSE MAY BE YEARS AWAY. mostly on the bulk handling terminals on the east coast," said Ian Claxton, managing director of Thoresen Shipping.

PRIVATE PORTS ARE FASTER Analysts estimate it takes up to four times as long to fill or unload a cargo ship at JNPT than at private rival the

Adani Port and Special Economic Zone Ltd up the coast in Gujarat, Modi's home state. "Land connectivity plays a major role," said Deven Choksey, managing director at KR Choksey Securities, a brokerage, adding that even after the expansion "the inherent disadvantages of JNPT will continue." India added 71 TEU of capacity at major ports in the fiscal year to March 31. Modi wants to double total capacity to 1,600 million tonnes at major ports over the next five years. But businesses hit by the worst slide in exports since the global crisis of 2008 say Modi's approach to easing rules for trade and expanding state-run ports fails adequately to tackle competitive barriers. "Even a delay of a few hours results in missing the vessel and sometimes cancellation of an order," said Khalid Khan, a Mumbai-based exporter of engineering goods and regional president of the Federation of Indian Export Organisations. (Reuters)

Rajan Says Market Volatility to End Soon Amid concerns in India and other global markets about uncertainty over a rate hike in the US, RBI Governor Raghuram Rajan recently sought to play down fears saying markets should not be scared of volatility as it would be transient in nature.

India Needs 10%+ Growth for Decades, Just to Catch Up, Says Amitabh Kant DIPP secretary Amitabh Kant says almost 85 percent of the jobs in India are created by small and medium enterprises and that's where the government's thrust should be.

he biggest challenge is to bring liquidity back into the market and for that India must become an extremely easy place to do business, says DIPP secretary Amitabh Kant. According to him, it is extremely complex, difficult and complicated to do business here. There is hence a need to dismantle rules, regulations, etc., which are presently on, he adds. "I think the biggest challenge is that there is already a huge amount of capacity within India. Indian companies which have invested in India and I think suddenly what has happened is that there is lack of liquidity in the market and you need to bring back liquidity," he says. Kant says almost 85 percent of the jobs in India are created

e also said finance "is only a lubricant to growth" and it would be the overall economic policies of the countries that would determine their basic growth momentum. Addressing the plenary session of the B20 meet, an informal grouping of business leaders from G20 countries, Rajan referred to issues facing the global economy and said the problems include people saving more and spending less, low productivity and low investments. But the solution is that "we should not be scared of volatility", he said. Referring to uncertainties about a rate hike in the US, he said return to monetary policy normalcy would address the concerns over volatility in the future. Rajan also warned that the central banks globally might have engendered excessive fragility in the system. The B20 grouping engages with the G20 governments on behalf of the international business community and it is organising its own meeting on the sidelines of the G20 minister-level meetings. The other panelists in the session on 'navigating through the global low growth and low interest rate environment' included IMF chief Christine Lagarde as also the central bank governors of France, Turkey and Mexico. Lagarde said the G20 leaders need to respond to the calls for creating jobs. On what was holding back the investments, the panelists named lower global growth prospects and structural confidence related aspects such as business environment. Lagarde emphasised on three broad areas - efficient investment in infrastructure, financial reforms and labour and product market reforms. 14

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by small and medium enterprises and that's where the government's thrust should be. "It is the SMEs which create jobs - 85-86 percent of the jobs in India are created by SMEs, of these 66 percent are created by micro enterprises and therefore in India SME & MSME sector gives you just 17 percent of the GDP as compared to about 70-80 percent in other countries and therefore to my mind the real thrust has to be on MSME ," he adds. According to him, India must grow 10 percent plus for three decades or more that is if the country has to catch up with the rest of the world. "With a population of 1.2 billion, your target has to be nothing less than 10 percent plus. And if you want to grow at 10 percent plus, that means your GDP is going to compound every seven years and that is the only way you can lift people above the poverty line," he says. The key challenge, according to him, is reforms. Kant says there is a need for reforms in land, labour and capital markets. Additionally, interest rates too need to come down, he adds.

IAA Silver Jubilee Lives Up to its Promise

Sachin Tendulkar being felicitated by Srinivasan Swamy, President, IAA India and Pradeep Guha, summit chairman

Shah Rukh Khan being felicitated by Pradeep Guha, summit chairman & area director, IAA Asia Pacific and Srinivasan Swamy (right)

The final day of the IAA Silver Jubilee Summit began with the IAA honouring Sachin Tendulkar for being an advertising icon for over 25 glorious years. The citation also read â&#x20AC;&#x2DC;For introducing commercial professionalism into sport; for being the first sports icon to be an advertising icon; for being the greatest human brand in the history of Indian advertising.

Kerala CM Oomen Chandy honouring past presidents of IAA including 16

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The IAA Silver Jubilee Summit at Kochi got off to an impressive start with the speakers talking about action branding; being more relevant than disruptive; and top skills required by marketers today. IAA India Chapter President, Srinivasan Swamy said, “Today’s speakers have ensured that we have had a very different set of insights coming in. across social media, technology and branding.”

Parminder Singh Speaks

Sam Balsara and Raj Nayak and Roger CB Pereira

Amitabh Kant, secretary, Industrial Policy & Promotion, Govt. of India delivering thye key note

Honouring Michle de Rijk 17

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DEVELOPMENT

WHAT INDIA HAS TO LEARN FROM ities, whether in India or across the world, are major contributors to economic growth and social prosperity. From housing robust infrastructure to creating employment opportunities, cities are hubs of development. They contribute to nation-building and act as engines that propel a country in the direction of progress. No wonder then that cities perpetually witness an influx of migrant population. However, they are also at the receiving end of the harmful effects of pollution and climate change. Now if this is how cities are then what exactly does the term ‘smart cities’ mean? How are they different from the cities that you and I live in? What makes them worthy of being personified as ‘smart’? Let us find answers to these.

WORLD'S TOP 5 SMART CITIES

New York

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Barcelona

London

What’s a Smart City? In the last few months, the term ‘smart cities’ has been extensively plastered across Indian newspapers, internet and social media, and not without good reason. After all, the Narendra Modiled BJP government, which just completed a year in power, has promised to create ‘100 Smart Cities’ across the country. The aim of this ambitious project is to take the benefits of urbanization to more and more people. The idea is to reshape India’s urban landscape, push for inclusive growth and make cities more livable. As contours of this mammoth initiative are busy taking shape, we tell you the factors that make a city smart. A study conducted by Juniper Research lists out technologies,

utilities, buildings, infrastructure and the smart city itself as the key components of a smart city. Worldwide, citizens and governments are embracing technology and innovation like never before. Buoyed by internet, big data, and smartphone penetration, cities are getting smarter, intelligent, sustainable and energyefficient. As device-to-device interactions increase, urban spaces are getting more and more connected. The result is better transport systems, advanced healthcare, enhanced service delivery mechanisms and most of all, improved governance. In a nutshell, a smart city is one that uses digital technology solutions to enhance the standard of living of citizens in ways that are economical and eco-friendly. 19

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Singapore City

The Indian Context A McKinsey study titled ‘India’s urban awakening’ says that India must harness the power of big data when it comes to tracking land availability, population growth, job mix and income mix. This data can then be used to deploy smart technology solutions that will be energy-efficient and citizen friendly. A country the size of India needs well-integrated transport solutions that will solve traffic-related problems and reduce people’s dependence on public transport. For long, urban growth and development has been happening at the cost of human and environmental health. As a result, we must ensure that smart cities of the future are sustainable and eco-friendly. This includes creation of green buildings and green infrastructure. The encouraging news is that India has already taken positive steps when it comes to constructing green structures. India has the largest 20

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number of green-rated LEED buildings outside of North America. As the Indian government is taking firm steps in the direction of smart city creation, it can draw inspiration from cities across the world that have undergone a transformation with help from digital technology.

A Digital World Top 5 smart cities in the world according to the study by Juniper

FOR LONG, URBAN GROWTH AND DEVELOPMENT HAS BEEN HAPPENING AT THE COST OF HUMAN AND ENVIRONMENTAL HEALTH. AS A RESULT, WE MUST ENSURE THAT SMART CITIES OF THE FUTURE ARE SUSTAINABLE AND ECO-FRIENDLY.

Research are Barcelona, New York, London, Nice and Singapore. Barcelona was a notch above other cities across all metrics, but it scored particularly high on environment and smart parking. Popularly known as Big Apple -- New York -- won brownie points for its smart street lighting and smart traffic management. London performed well on the technology and open data metrics. When it comes to cohesion between different agencies and environment, the French city of Nice scores high. On the metrics of smart city management and creative use of technology, it is Singapore that fares quite well. If India is to produce smart cities of international standards, it has to judiciously invest in the right kind of technologies. It is only then can we create cities that are not only smart, but also sustainable and efficient. And this can only be achieved if public and private bodies join hands and work towards a common goal.

INCREDIBLE

6 WORLDCHANGING INVENTIONS

THAT EXPERTS CALLED AS DUMB FADS

IN 1879, HENRY MORTON, A LEADING SCIENTIFIC MIND AND PRESIDENT OF THE STEVENS INSTITUTE OF TECHNOLOGY, CALLED ONE MAN'S TINKERING A "CONSPICUOUS FAILURE." THE MAN WAS THOMAS EDISON. THE INVENTION WAS THE LIGHT BULB. hat was obviously wrong, and the light bulb turned out to be a solid invention. But Morton's statement was also revealing. Sometimes it's genuinely difficult to know whether new inventions will be duds or hits. Who knows — maybe our grandkids will come to love Google Glass, Segways, and Dippin' Dots. Morton's pronouncement shows just how hard it is to predict the future. In his case, he didn't doubt that Edison's lightbulb was useful. His main objection was that there was no way

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to carry electricity long distances and get light bulbs in every home (even Edison couldn't figure that out on his own.) Forecasting the fate of a new invention often means forecasting broad social and technological changes and that's incredibly hard. With that in mind, here's a look at seven other important inventions from the bicycle to nail polish to the answering machine — that had their doubters early on. There's a lot to learn from wrong predictions:

1) BICYCLES:

"The popularity of the wheel is doomed" oday, we think of bikes as a major source of transportation, but they started out as a trendy fashion statement. That's why some critics were skeptical that they'd stick around (spoiler: they did).

Bikes had a rapid rise: on August 20, 1890, the Washington Post called bicycling a hot fad for fancy ladies and not just for the "bleached-haired, music-hall type" anymore (read: hipsters). The craze was driven by improved technology, as big-wheeled bikes became closer to the ones we use today. The bicycle's growth was so rapid that on February 29, 1896, the Washington Post called bicycling the national sport. But then the fad faded. On August 17, 1902, the Post called bicycling a passing fancy, and experts declared "the popularity of the wheel is doomed." Critics thought bikes were unsafe, impossible to improve, and ultimately impractical for everyday use. On December 31, 1906, the New York Sun rendered its verdict: "As a fad cycling is dead, and few individuals now ride for all the good they claim to see in the pastime when it was fashion." The Sun turned out to be wrong. Over the years, bikes acquired better tires, and sturdier frame. America's roads also got smoother. That made bicycles an increasingly practical option â&#x20AC;&#x201D; and not just a passing fad.

2) AUTOMOBILES: "The prices will never be sufficiently low" n 1902, the New York Times called the automobile impractical â&#x20AC;&#x201D; and they had a few good reasons why. In the wake of the bike fad of the 1890s, reporters and analysts were wary of the "next big thing" in transportation. As one critic put it:

Automobiling is following the history of cycling with such remarkable closeness in almost every detail, both as a sport and an industry, that the question is often asked if the present period of expansion will be followed by a collapse as complete and as disastrous as was that of the cycling boom of a few short years ago. The Times complained that the price of cars "will never be sufficiently low to make them as widely popular as were bicycles." It didn't help that some of the early proposals for an auto-centric transportation system were outlandish. In 1902, The Steel Roads Committee of the Automobile Club of America was angling for a steel highway system. Bizarre proposals like that made it harder to believe the car would ever make it big. But it did. Once Henry Ford perfected the mass production of automobiles, the price came down and cars took off, eventually becoming the dominant form of transportation. 23

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3) LIQUID NAIL POLISH "A strange and unique fad"

n 1917, Cutex invented the closest thing to modern mass-market liquid nail polish. But it took a while for nail polish to hit the mainstream. In 1927, the New York Times reported on it as a "London fad," and the year before, writer Viola Paris took to the pages of Vogue to assess the new invention. "There seems to be some doubt," she wrote, "in the minds of a great many women as to whether nail polish is in any way harmful or, at least, not so good for the nails as the powder or paste polish."

As late as March 31, 1932, the Atlanta Daily World questioned how long colored fingernails could possibly stick around. "Dame fashion, whimsical and wayward as the wind," the paper snarked, "has so many strange and unique fads that her latest vagary, that of tinting the fingernails...has become quite popular." Ultimately, nail polish wasn't just a passing fancy. Better manufacturing processes, a new age of mass marketing, and clear advantages over powders and pastes helped it stick around.

4) TALKIES:

"Talking Doesn't Belong in Pictures"

n 1928, Joseph Schenck, President of United Artists, seemed confident about one thing: talking pictures were a fad.

He told The New York Times that "talking doesn't belong in pictures." Though he conceded that sound effects could be useful, he felt that dialogue was overrated. "I don't think people will want talking pictures long," he said, and he wasn't alone. In 1967, actress Mary Astor recalled the mood when the silent era drew to a close. She wrote, "The Jazz Singer was considered a box-office freak," and that talkies were "a box-office gimmick." In an early talkie screening, she and her colleagues thought "the noise would simply drive audiences from the theaters... we were in an entirely different medium." In the end, however, talkies proved out to be more compelling than the old mediums. Audiences adjusted, audio-recording technology improved, and a new generation of Hollywood bigwigs embraced dialogue. 24

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5) CHEESEBURGERS: "Typical of California"

Most sources credit Lionel Sternberger with inventing the cheeseburger in 1934, though there's a lot of debate. Regardless of who came up with it, the notion of beef and cheese was initially regarded as a crazy California novelty rather than as a revelation.

The first time the New York Times wrote about cheeseburgers in 1938, they ranked the burgers as a Californian eccentricity, putting them third in a list along with nutburgers, porkburgers, and turkeyburgers. In 1947, a Times writer actually deigned to try a cheeseburger, albeit skeptically: At first, the combination of beef with cheese and tomatoes, which are sometimes used, may seem bizarre. If you reflect a bit, you'll understand that the combination is sound gastronomically. In the end, plenty of people agreed that the cheeseburger was "sound gastronomically." And once fast food chains — like McDonald's — included it on their menus, it was guaranteed a place on the American and global plate.

6) LAPTOPS:

"Was the laptop dream an illusion?"

n 1985, the New York Times reported on the tragic demise of a once promising trend — laptops, the newspaper said, were on their way out. From now on, airplane tray tables would hold beers and cocktails instead of computers. The Times doubted the potential of laptop technology, and with good reason: they were heavy, pricey, and had poor battery life, all of which made it hard to imagine them becoming mainstream. It was a reasonable complaint, but short-sighted: The limitations come from what people actually do with computers, as opposed to what the marketers expect them to do. On the whole, people don't want to lug a computer with them to the beach or on a train to while away hours they would rather spend reading the sports or business section of the newspaper. Somehow, the microcomputer industry has assumed that everyone would love to have a keyboard grafted on as an extension of their fingers. It just is not so. Laptops took a few more years to become practical, but technology improved enough that the laptop became lighter, more durable, and easier to use. 25

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INVESTMENTS

HOW STOCKS ARE SUPERIOR TO FIXED DEPOSITS, BUT ONLY OVER THE LONG TERM THERE IS NO DOUBT THAT BANK FIXED DEPOSITS (FDS) ARE CONSIDERED SAFE IN THAT YOU WILL MOST LIKELY GET YOUR MONEY BACK. BUT DID YOU KNOW THAT BANK FDS CAN NEGATIVELY AFFECT YOUR SAVINGS OVER THE LONG TERM? #1: FDs give returns below inflation: The average inflation rate in India for the last few years is 9.76%. Most FDs only give you about 8.5% interest before tax, and around 7% after tax. This means, you are effectively losing money every year you invest your money in an FD. #2: Higher your income, higher is the FD Tax outgo: Compared with equity mutual funds, long term returns from which are tax free, FD interest is taxable at your current tax slab. The higher your income, the lower your FD return will be. That raises a question - “if bank fixed deposits are not a good way of allocating all my savings, how else should I invest my money?” The simple answer is, invest in mutual funds. See the graph below for FD vs mutual fund comparison.

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Return assumptions – FD @ 7%, Debt fund @ 8.5%, and equity fund @ 14%. Inflation assumed to be 8%. As you can see, investing in Bank FDs will result in less money than you need to keep up with inflation. Debt mutual funds just about manages to beat

inflation and equity mutual funds beat inflation with almost 3 times the inflation adjusted amount. Mutual funds provide professional management of money, are tightly regulated, and have proven their performance over time. Mutual funds are also very tax efficient and a little bit of planning can reduce tax on your mutual fund returns to zero (in case of equity mutual funds) or almost zero (in case of debt mutual funds). Should I invest in equity or debt mutual fund? Equity mutual funds are recommended for long term investing (more than 5 years) and debt funds for shorter durations. But even investing in mutual funds can be daunting. When you decide to start, you’ll be swamped with jargon like index funds, diversified, large cap, NAV, etc. It’s can be really confusing and most people stop there. And aren't mutual funds risky?

Yes. Mutual funds are subject to market risks. However, over the long term, equity mutual funds have shown to provide phenomenal returns. Take a look at how equities have performed over the past several years backed by actual available data.

Even though equity is volatile, it has performed better than all other asset classes including FD, Gold, and PPF. No other asset class can grow your wealth as much as equities. Since direct equity investing is riskier and time consuming, we recommend investing in equity mutual funds which are professionally managed by fund managers. If you want a less volatile option, you should choose debt mutual funds. They are less volatile and more tax efficient than FDs. While returns will be lower compared to equity, they still provide better returns than FD and also manages to beat inflation. But I want regular income… If you want your investments to give you regular income, still debt funds are better than bank FDs due to the long term tax efficiency. You can keep withdrawing from your debt fund corpus or set up automatic withdrawals instead of relying on the monthly interest payout by the banks.

(Credit: Scripbox.com, an automated mutual fund investment platform) 27

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TRAVEL

12 CAPTIVATING ROAD TRIPS IN INDIA

TRAVEL CAN GIVE YOU AN ADRENALINE RUSH LIKE NOTHING ELSE IN THIS WORLD CAN. INDIA'S DIVERSE LANDSCAPES GIVE YOU THE CHANCE TO GO ON A VARIETY OF ADVENTURES. IF YOU LOVE DRIVING CARS OR RIDING YOUR BIKE, THEN ROAD TRIPS ARE THE PERFECT WAY FOR YOU TO TRAVEL AND MAKE MEMORIES ALL ALONG THE WAY. HERE ARE 12 CAPTIVATING ROAD TRIPS IN INDIA.

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LEH TO LADAKH Here, you get to cross some of the highest mountain passes in the world with spectacular views of the Greater Himalayas and stunning valleys. Shah Rukh Khan is seen riding a motorbike in Ladakh in the movie Jab Tak Hai Jaan.

AHMEDABAD TO KUTCH In this road trip, you will witness the white beauty of the Rann of Kutch and a Wild Ass Sanctuary along the way.

MUMBAI TO GOA This is a 10-hour trip, covering the picturesque Western Ghats, lush green fields and coastal areas. Aamir Khan, Akshay Khanna and Saif Ali Khan are seen taking this road trip in the movie Dil Chahta Hai.

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DELHI TO AGRA If you have a passion for driving fast, then this is the ideal road trip for you. An expressway on which you can drive in top gear makes this trip even more thrilling.

SHILLONG TO CHIRAPUNJI These two places are among the most beautiful in the north-east, and the route that connects them is no less. You will experience the full force of nature's beauty on your journey here.

DARJEELING TO PELLING You will experience unforgettable scenic beauty all along this route. The beautiful valleys and majestic mountains will leave you awestruck.

CHENNAI TO KANYAKUMARI If you are fond of majestic architecture, then you will get to see plenty of it on your way from Chennai to Kanyakumari. In between, you can make a halt at the striking Puducherry.

KOLKATA TO VARANASI Travelling from Kolkata to Varanasi is a visual treat. On your way, you can stop at Dhanbad. This is a 700 km long journey, which takes around nine hours to complete. 30

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DELHI TO RANTHAMBORE This trip is a visual treat, taking you through villages and green fields to arrive at the Ranthambore Wildlife Sanctuary. This trip is around 350 km long and takes around seven hours to complete.

JAIPUR TO JAISALMER This is a 600 km route on which you will get stops like Jodhpur, Osiyan and Pokaran to experience the culture of Rajasthan.

BANGALORE TO COORG When you travel from Bangalore to Coorg, you get to enjoy beautiful views of the Western Ghats and delicious South Indian delicacies.

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DEBATE

Professional Rivalry: Lawyers vs. Chartered Accountants et ready for a mega battle between lawyers and chartered accountants. Issues revolving around corporate law is getting so complex in India that many business clients are relying more on Chartered Accountants for the correct legal advice. Angered by this trend, The Society Of Indian Law Firms (SILF) is going after the Big 4 accounting firms for what they call as unauthorised practice of law. Aayush Ailawadi of 'The Firm' (CNBC TV 18) gets in the middle of this mega professional battle that is heating up. Transcript from the debate between the experts on either side:

The Society of Indian Law Firms (SILF), a representative body of more than a 100 Indian law firms has accused the Big 4 accounting firms – EY, KPMG, PWC and Deloiite of the ‘surrogate practice of law’. According to their complaint, among other things, the Big 4 are currently offering legal services such as drafting, reviewing, litigation & advisory in the field of corporate laws, taxation, IPR and the regulatory space. LALIT BHASIN PRESIDENT, SILF “You see this issue has been coming up for the last 15-20 years and we have tried to speak to the CA institute and taken up the matter before the Ministry of Corporate Affairs that these accountancy firms are engaging in the practise of law. They are not just confining their activities to accounting and auditing which they are supposed to do under the legislation that governs them. They have set up large practices having number of lawyers working for them and you know, under some façade they might have some subsidiary company. They’re all incorporated bodies!” Aila wadi: But, your complaint to the Bar Ailaw Council of Delhi is specifically directed at the big 4 accountancy firms…? LALIT BHASIN PRESIDENT, SILF “No, we are targeting all the accountancy firms which have engaged in the practice of law and Big 4 are just to start with, but possibly in the course of next week or so, we will be filing appeals against others also!” Aila wadi: In the specific case of EY, Ailaw 32

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Lalit Bhasin, President, SILF

HP Ranina, Senior Advocate, Supreme Court

“Whereas E & Y have also got into arrangements with Advocates and Law firms in India to provide legal advice and represent clients before courts, tribunals and other authorities. Whereas E & Y have inducted PDS Legal as a member / affiliate firm of E&Y Global Limited. PDS Legal is a law firm and is composed of advocates. Therefore, E & Y have in a surrogate manner engaged in the practice of law.”- By just consulting PDS Legal and collaborating with them, is it compelling enough evidence to attract these charges?

Pankaj Jain is a chartered accountant, auditor and the Chairman of ICAI’s Ethics Standards Board. He’s also represented cases at the income tax tribunal. He disagrees with Mr. Bhasin’s allegations

LALIT BHASIN PRESIDENT, SILF “These are all similar complaints against the Big 4. This is a surrogate practice going on and they are openly and brazenly doing what they are not supposed to do. You can’t do even indirectly what you can’t do directly. That is a principle of law. We have got documentary proof to show that they are not only doing the work but they are also publicizing that they have under one roof all services to offer including legal services.”

PANKAJ JAIN MANAGING PARTNER, KHANDELWAL JAIN & CO “PDS Legal as you have said is a part of EY Global, then obviously it’s a foreign firm or member of foreign firm, whether it is owned by the foreign entity or not, that is the issue that has to be looked into and it depends on the ownership. If the ownership is not Indian, then obviously it’s a foreign firm which is not allowed to practice the legal services in India. But obviously, if EY India is consulting PDS, then it gives altogether a different twist to this entire issue and again, I’d say that it is only the facts of the ownership deciding exactly whether it is permitted by PDS to provide the services of law in India. As regards, the statement whether CAs are in surrogate practice of the law, I completely disagree with that, I think, as CAs we are entitled to practise many laws in India and appear before many authorities right up to the

tribunal under various acts and I think we are doing a very good job about that!” Senior tax lawyer and a chartered accountant himself, H P Ranina also disagrees with the SILF accusation… HP RANINA SENIOR ADVOCATE, SUPREME COURT “It only shows that EY is aware that it has limitations on legal appearance and therefore it has taken on board a legal firm in an informal way which will give specialised legal service and the fact that the two firms may be working in tandem or working together, that does not mean that one firm is doing legal work and the other is doing accounting work!” Aila wadi: “Whereas in Tribunals and Ailaw before authorities, Deloitte appear on behalf of clients. They also work alongside experienced business professionals in tax, consulting, accounting, and financial advisory practices.”- Mr. Bhasin, but in many tribunals such as the ITAT, SAT or COMPAT, CA’s are statutorily allowed to represent their clients… What is your objection here? LALIT BHASIN PRESIDENT, SILF “You see these are all general statutes, but so far as the Advocates Act is concerned it is a specific piece of legislation which has been interpreted by the SC to mean that CAs can do their accountancy and auditing work, nothing more, nothing less. On questions of fact, they can advise the clients but not on the legal issues that arise…” PANKAJ JAIN MANAGING PARTNER, KHANDELWAL JAIN & CO “Under section 288 of IT act, they have defined who are the authorised representatives to appear before the income tax authorities as well as the appellate tribunal. In this case the ITAT. And in this case, it clearly mentions that the term CA means a chartered accountant under the CA Act which would obviously include any of those

working in Deloitte or any of the Big 4 entities that if they come under the definition of ‘accountant’, then they can definitely be authorised representatives!” HP RANINA SENIOR ADVOCATE, SUPREME COURT “As I said, at the tribunal level one of the most important points is that in most tribunals they have what is called a legal member and accounting member. So, you have an accounting member who deals with the accounting aspect of the case and you have the legal member, so the tribunal itself is constituted of somebody representing the legal profession and one member representing the accounting profession and it is because of this reason that accountants and lawyers are permitted to appear before tribunals. But in the High Court and Supreme Court, that’s where the Bar Council rules apply and that’s where only lawyers can appear and accountants and people from any other profession cannot appear.” Aila wadi: What really amounts to legal Ailaw advice? If a CA were to advise a client on a tax dispute, is that barred under the Advocates Act? LALIT BHASIN PRESIDENT, SILF “Legal opinions are exclusively in the domain of the lawyers! You see, even the Supreme Court is quite clear that on facts, you see, they can advise the clients, they can even advise the lawyers who are appearing for the clients, giving the factual position. But, giving legal opinions, that is not at all permissible and they have gone, you see much beyond legal opinions! They are doing actual drafting of agreements and advising clients on intricate and complex issues which arise in global transactions these days. That is strictly not permissible!” PANKAJ JAIN MANAGING PARTNER, KHANDELWAL JAIN & CO “According to me, obviously a CA is well versed in various laws. In their

examination, they are asked questions under various laws and we require expert knowledge not only working knowledge to answer those questions. In the course of our articleship, we actually have practical training, are exposed to those so many laws and after qualifying, many of us practice those laws. So, we believe that CAs are highly qualified to give legal advice under various laws, which they regularly encounter in their practice. Therefore, the issue of whether it amounts to legal advice or not, that I think is very technical in nature, I think that the assesse or the client will obviously want to go to a person who they believe would give them more practical advice based on their daily exposure to the particular law.” HP RANINA SENIOR ADVOCATE, SUPREME COURT “Well, it would amount to legal advice but as I said, if a client feels that a CA is more qualified to give this type of advice then it is for the client to decide. After all the client is free to go to a law firm as well and if the client decides to go to an accounting firm because they feel that they will get better advice from that firm rather than a law firm, then you leave it to the client to decide. Now, the question is, can they give legal advice, can they interpret the law? The answer is they are eminently qualified as CAs to interpret the law if he has studied the law as part of his examination curriculum, then surely he is competent to give advice on that!” This is the first round in the turf war between lawyers and chartered accountants. The next round will be when SILF goes after other accounting firms. Meanwhile, the Bar Council of Delhi has issued notices to the ‘Big 4’ seeking replies before the 7th of August and their representatives have been directed to be present before the council on the 7th of August, else exparte orders will be passed and since the complaint names the top brass of the Big 4, if found guilty, they could be liable to up to 6 months of imprisonment. 33

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SOCIETY

UNDERSTANDING THE

LTV PUZZLE IN HOME LOANS

THOUGH YOUR SALARY MAY SUPPORT A BIG HOME LOAN, LOAN TO VALUE RATIO MAY PULL DOWN THE ACTUAL LOAN THE BANK OR HFC IS WILLING TO OFFER YOU. 34

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anish, a young manage ment professional, shortlisted a property worth Rs. 50 lakh and approached his bank for a home loan. The bank offered him a loan of Rs. 40 lakh only. But Manish had saved only Rs. 8 lakh for down payment and was looking forward to borrow Rs. 42 lakh. Manish had a high credit score and handsome earnings. Puzzled at the bank’s low offer despite his credit standing, he checked his loan eligibility online, only to find the same bank offering him a home loan of Rs. 45 Lakhs. Manish then approach a housing finance company. There, he was offered Rs. 42.5 lakhs as loan. This made Manish even more confused as to how the final loan amount is decided and how with same financial credentials, he was being offered different loan amounts. Many home loan buyers with preapproved loans face a similar situation today, with their loan applications downsized during later stages or even completely denied in some cases. The situation becomes more complex if the borrowers have no money in hand to pay the down payment or if it happens to stretch their finances. The culprit here is the LTV, or Loan To Value ratio. Let us understand the puzzling role of the LTV ratio and its significance in the home loan application process.

Understanding LTV LTV is used to calculate the maximum borrowable loan amount for any loan applicant based on the value of the property in question. While the borrower’s income plays a key role in determining the loan approval or rejection, LTV comes into account during the second stage of loan processing. The value of the property will be assessed by the bank’s technical evaluator, based on the market value of properties in that area. Most banks offer 85% of the property value as loan, while some banks offer only up

to 80%. Some banks even offer up to 90-95% of the property value under special conditions. If you are seeking a higher loan amount for your property (a higher LTV), the loan is considered to be of high risk for the bank. Similarly loans with lower LTV are considered to be of lesser risk.

How LTV can impact your loan eligibility As in Manish’s case, based on his income, he was eligible for Rs 45 lakh. But as his property is worth Rs. 50 lakh, he was offered Rs 40 lakh by the bank, as they could offer maximum 80% LTV, whereas the HFC offered 85% LTV for the same property. So your final loan eligibility is also based on the maximum LTV as applicable.

LTV does not include stamp duty While registering a property bought as second sale or as an outright purchase, a sizeable amount is incurred as stamp duty as well as registration costs. However, while processing home loan applications, banks do not consider the stamp duty and other charges along with the final value of the property.

LTV for land loans While you can avail up to 80-85% funding in a home loan, the number drops significantly for a land loan. For a land loan, the maximum LTV considered by most banks is 70% of the market value of the plot. This means, a lower quantum of loan is available when purchasing a land or plot. Many banks do not offer loans for land purchases in villages or outside corporation limits, thereby resulting in a later stage rejection of the loan proposal.

top up loan chances. Since top up loans are offered on the basis of the property value as well, banks may not initiate a valuation later, while approving top up loans. Even if you are eligible for a top up loan considering other factors such as your income and repayment track record, if you have availed the maximum loan initially, there are lesser chances of getting a Top up loan.

When banks go for 90% LTV Banks permit a 90% LTV under certain conditions only. As per the recent RBI guidelines, for promoting affordable housing, banks can offer 90% LTV for loans under 20 lakhs. Another situation where 90% LTV may be offered is when the bank is lending to a builder. If the bank has a tie up with a particular developer, they may up to 90-95% LTV in some cases.

Why land loan offers are based on lesser LTV Even though land appreciates in value more than an apartment, land loans come with lesser LTV. This is because banks need to safeguard their interest in case of a possible default. Unlike a built house, there is more due diligence in case of plots, as land records are not yet digitized and there can be complexities in connection with legalities due to encroachment issues and others. For normal home loans, banks offer loans on a ready product. But for ready houses at second sale, value depreciation is always considered while calculating LTV, unlike offering loan for a house under construction.

How higher LTV can dent your top up loan chances

LTV can be puzzling for a loan applicant. Armed with the appropriate insights, you can ensure that you understand the eligibility process better and calibrate your expectations accordingly.

If you opt for maximum LTV for your home loan, this may impact your future

(By Adhil Shetty, Founder, Bankbazaar.com) 35

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HOME LOANS

THINGS TO KNOW BEFORE TAKING A PLOT LOAN }

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BORROWING MONEY FOR PURCHASING A PLOT IS A GOOD IDEA, BE IT FOR INVESTMENT PURPOSE OR FOR SELF-USE PURPOSE LIKE BUILDING A HOME. HOWEVER, KNOW THESE 10 POINTS BEFORE APPLYING FOR A PLOT LOAN.

oans for ready or underconstruction home purchase is very popular, but one of the most important purchase rurally as well as in urban India is purchase of a plot of land which is generally not talked about. PSU and private lenders do substantial volume of loans for funding land purchase. Though the personal credit documents for applying for a land loan is same as any other home loan, there are a number of differences which one needs to be aware of before applying. Here are the differentiators:

1. TYPE OF LAND: Land parcel only with residential or commercial conversion can be funded. Agricultural land in green or orange belt can not be commercially funded by regular lenders.

2. TYPE OF PLOT: The plot of land can be an independent one or in a gated community. Lenders prefer plot in gated community as it will be more secure from encroachment angle and will also have basic required development work done 36

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like electrical cables laid, roads developed, proper earmarking and numbering of individual plots, sewerage and water pipes laid underground, proper filling and leveling of land etc.

3. GEOGRAPHIC LIMITATION: Lenders are very particular about the actual location of the land. From the risk-perspective of the collection department of a lender, it is important since there is hardly any land available

Land parcel only with residential or commercial conversion can be funded. Agricultural land in green or orange belt can not be commercially funded by regular lenders.

in the middle of any city and most of the lending in this category are on outskirts. The collections department need to have infrastructure for recovery, which is a basic clearance requirement by most lenders.

4. LOAN TO VALUE (LTV): A very important note in this regard is the sharply lower loan to value ratio (LTV) for funding land purchase. For independent land it is a maximum of 70% of the agreement value and will be peaked at 75% for the ones in gated community where the lender has approved the land-developer as well as the entire property.

5. TENURE: Loan tenure is mostly restricted to 15/ 20 years in land purchase loans. Some lenders who have more branch

network and can absorb more of land loan product give flexibility till 20 years too, based on the profile of the borrower.

6. RATE OF INTEREST:

Rates are generally 1-2% higher than home loans, but many land buyers have obtained land loans at rates comparable to home loans, during some specific campaigns promoted by major banks and housing finance companies. So, it pays to be on a lookout for the same.

7. CONSTRUCTION TIMELINE: Be sure that the loan you are opting for is a pure plot loan and not linked with a 'condition' that you need to start construction within an agreed timeline. Unless you have plans to construct a house on it soon, and if you opt for a composite loan (means loan for land

Lenders might want to know your purpose of purchase during the credit appraisal and discussion.

as well as construction), the lender might choose to increase your rate of interest in the event of not starting the construction within that specified timeline. Composite loans often have lower rates comparable to home loans.

8. INVESTMENT OR SELF-USE: Lenders might want to know your purpose of purchase during the credit appraisal and discussion. If the property is for investment, they might want to know your plans for sell-off to understand your practical return expectations on this investment.

9. RISKS INVOLVED: Land loan is often construed as a riskier investment. Not only it has the risk of encroachment, it can have more chances of litigation and at the end of day, a piece of land is not the priority investment for the borrower especially if he is not planning to build a house for permanent stay. If the value of the land does not increase as expected by the owner, he might even default on the EMI payment and even not mind losing it too! This has happened historically and many lenders have burnt their fingers and had to write off major land loans in their portfolio. Many lenders have also stopped lending on lands after such episodes.

10. LAP, A NEWER PRODUCT: However, some experienced lenders are showing the bright side of lending against a land too. Yes, that means you can mortgage your land and get funded for usage of the money elsewhere. LAP (Loan Against Property) for land is a fairly new concept and an increasing number of lenders are delivering it, but with a low LTV of 40%. (By Sukanya Kumar, Founder & Director, RetailLending.com) 37

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PARENTING

PLAYING KIDS ENJOY AN EDGE IN MATHS IF THE VERY THOUGHT OF A MATHS TEST MAKES YOU BREAK OUT IN A COLD SWEAT, THE ATTITUDE OF YOUR PARENTS MAY BE PARTLY TO BLAME AS A NEW STUDY HAS FOUND THAT PARENT'S MATH-ANXIETY NEGATIVELY AFFECTS KIDS.

We show, for the first time, that aerobic fitness may play a role in this cortical thinning, Laura Chaddock-Heyman

esearchers have also found that physical fitness enhances math skills in kids by aiding the development of brain structures that contribute to mathematics achievement. Children who are aerobically fit tend to have significantly thinner gray matter - the outermost layer of brain cells in the cerebrum associated with better mathematics performance, the findings showed. "Gray matter thinning is the sculpting of a fully formed, healthy brain. The theory is that the brain is pruning away unnecessary connections and strengthening useful connections," said 38

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lead researcher Laura ChaddockHeyman from the University of Illinois in the US.

for aerobic fitness, and half (the lower fit kids) were at or below the 30th percentile.

Previous studies have shown that gray matter thinning is associated with better reasoning and thinking skills, Chaddock-Heyman said.

The researchers imaged the children's brains using MRI and tested their math, reading and spelling skills.

"We show, for the first time, that aerobic fitness may play a role in this cortical thinning," she pointed out.

The team found differences in math skills and cortical brain structure between the higher fit and lower fit children.

The analysis included 48 nine and 10year-old children, all of whom had completed a maximal oxygen uptake fitness test on a treadmill.

In particular, thinner gray matter corresponded to better math performance in the higher fit kids.

Half of the children (the higher fit kids) were at or above the 70th percentile

No significant fitness associated differences in reading or spelling aptitude were detected.

REALTY

40,000 HOUSING UNITS COMING UP IN DWARKA EXPRESSWAY Located towards the south western part of Delhi, Dwarka Expressway or the NPR (Northern Peripheral Road) as its popularly known is a stretch that links Dwarka to Kherki Dhaula at NH 8. Built in the Gurgaon region under the Gurgaon Manesar Master Plan 2031, the expressway is being developed under the PPP (Public Private Partnership) model with HUDA (Haryana Urban Development Authority).

To further streamline connectivity, an Inter State Bus Terminal is being built here. Over 600 hectares of land in six different sectors along the Dwarka Expressway have been set aside to develop public infrastructure.

he 18 km long stretch that was built to provide an alternative route to reduce traffic bottleneck linking Delhi and Gurgaon is expected to complete in a few years. Passing over 15 residential colonies like Sectors 4, 25, 26, 83, 84, 85, 105, 111, New Palam Vihar, Dauladabad, Dhanwapur, Gopalpur and more – the expressway is becoming a sought after residential catchment area. The road’s proximity to Delhi and NH 8 has pushed property prices to soar- thus making the vicinity an ideal investment option. However, the land dispute between HUDA and residents of Palam Vihar is delaying the completion of several ventures.

Connectivity The expressway is an arterial road all on its own. The expressway is connected to several roads like Sohna Road, UER II and Najafgarh Kapashera Road. Apart from these, many other connectors help improve intraconnectivity namely Dhanwapur Road, 40

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SH 15A (Basai Road), Carterpuri Road, NH 8 (Delhi Jaipur Expressway), Dauladabad Main Road and Pataudi Road. The Indira Gandhi International Airport is in close proximity to the expressway. The nearest railway station that is situated parallel to the Dwarka Expressway is the Garhi Harsaru Junction Station. Delhi’s major stations – Nizamuddin and New Delhi Stations are at a distance of 27.5 and 26 km respectively from Dwarka Sector 21 metro station which is the closest metro station to the Expressway

Infrastructure According to the Gurgaon Manesar Master Plan 2031, a large commercial hub is being planned to be built along

The road’s proximity to Delhi and NH 8 has pushed property prices to soar- thus making the vicinity an ideal investment option.

the Dwarka Expressway. The Mumbai Delhi Industrial Link corridor also passes through this arterial road thus developing an industrial belt here. While Chanakyapuri in NCR is cited to be the first diplomatic enclave, the second one will be built in Sector 113 along the Dwarka Expressway. To further streamline connectivity, an Inter State Bus Terminal is being built here. Over 600 hectares of land in six different sectors along the Dwarka Expressway have been set aside to develop public infrastructure. The under construction BRTS (Bus Rapid Transit System) will further enhance connectivity

Real Estate Availability of large land parcels, a green canopy and a serene environment are major factors that are luring real estate developers to come up with residential ventures here. Developers are now wooing potential home buyers by offering modern amenities like clubs, parks, play schools, jogging area, swimming pool and more. After New Gurgaon, Dwarka Expressway is the second locality to witness the highest number of project launches. While multistorey buildings dominate the region, independent homes, builder floors and luxury villas are fast catching up. Over 200 residential projects are on the rise and most of them are likely to be priced between of INR 4,500 and INR 9,500 psft. The prices have appreciated by over 200% since launch. Dwarka Expressway caters to all price segments and has on offer affordable, mid income and luxury projects. According to current market trends, villas in Dwarka Expressway are cited to cost an average of INR 9,180 psft. The recent 20% dip in the capital values of residential plots too has attracted several investors to the vicinity. Property values of plots here are estimated to cost anywhere between INR 3,500 and INR 6,000 psft. As per the plan, the stretch would have more than 40,000 housing units in the coming years

INNOVATION

COMING, WORLD'S FIRST

SPACE ELEVATOR TOWER, 20 TIMES THE HEIGHT OF BURJ KHALIFA

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A Canadian firm has been granted a US patent to build the world's first-ever space elevator - 20 times the height of the world's tallest building Burj Khalifa - that will also have a tower assisting spacecraft to land and take off.

ntario-based Thoth Technology has already outlined plans for an elevator to space that will help save enormous amount of fuel and money that go into launching rockets into orbit. The company will build a freestanding tower, reaching 20 km above the planet's surface. "Astronauts would ascend 20 km by an electric elevator. From the top of the tower, space planes will launch in a single stage to orbit, returning to the top of the tower for refuelling and reflight," its inventor Dr Brendan Quine was quoted as saying.

landing rocket technologies to herald a new era of space transportation. "Landing on a barge at sea level is a great demonstration, but landing at 20 km above sea level will make space flight more like taking a passenger jet," he was quoted as saying. The Thoth design reportedly uses inflatable sections and flywheels to provide dynamic stability.

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The design seeks to get around the complication of geostationary orbit by limiting its height to just 20 km instead of the full 100 km, considered the end of our atmosphere and the beginning of space. "The present invention is a selfsupporting space elevator tower for the delivery of payloads to at least one platform or pod above the surface of the Earth for the purposes of space launch," the patent document read.

The elevator will also be used for windenergy generation and communications.

"The space elevator tower may also be used to deliver equipment, personnel and other objects or people to at least one platform or pod above the surface of the Earth for the purpose of scientific research, communications and tourism," it added.

According to Caroline Roberts, president and chief executive officer of Thoth, the space tower will also include self-

The idea of a space elevator was first proposed by Russian scientist Konstantin Tsiolkovsky in 1895.

Konstantin Tsiolkovsky

SEASONAL MAGAZINE

New Audi A3 40 TFSI Comes at Rs 25.50 lakh, Changes Mainly Cosmetic

Why E-Commerce is Booming: Nearly One-Third of Indians Now Access Net Imagine a supermarket that one-third of 1252 million Indians can access straight from their home, work, or leisure. Flipkart, Snapdeal, and others are such supermarkets. Over 28% of all Indians are on net now, and over 60% of them through mobile devices, mainly smartphones. ndia has added 52 million Internet users in first six months of the year, taking the total user base to 352 million as on June 30, 2015, industry body IAMAI today said. Interestingly, 213 million (over 60%) users accessed the worldwide web through mobile devices. "Internet (in India) has reached an inflection point. The consolidated numbers affirm the fact that Internet in India has now become inclusive, which augurs well for the industry and society at large," the Internet and Mobile Association of India (IAMAI) said in a statement. The number of Internet users has grown over 26% from 278 million in October 2014. The number of mobile Internet users has also grown about 40% from 159 million users in October last year. "The Internet in India took more than a decade to move from 10 million to 100 million and 3 years from 100 to 200 million. However, it took only a year to move from 200 to 300 million users. Clearly, Internet is mainstream in India today," it said. 42

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erman luxury car manufacturer Audi on Wednesday introduced the new Audi A3 40 TFSI Premium sedan with enhanced features. The car is equipped with new and exciting features spread across interiors, exteriors and the infotainment systems. The new Audi A3 40 TFSI Premium sedan is priced at Rs 25.50 lakh onwards (ex-showroom Mumbai and Delhi) and is available at all Audi dealerships across India. The car's new features in exterior includes 40.64 cm cast aluminum alloy with 15-Spoke ‘’Y’’ design wheels. The car gets electrically adjustable exterior mirrors, in addition to the Halogen lamps and Light/ Rain Sensor. The High Gloss Package is also available on the model now. The new features in interior include leather steering wheel in four-spoke design, new ambient transparent inlays in 3D look, floor mats at front and rear and Regatta Leatherette - Fabric upholstery. The new Audi A3 40 TFSI Premium also gets lighting package plus, electronically adjustable driver seat and a chrome package.

STOCKS

TIME RIPE TO STICK TO ONLY QUALITY STOCKS,

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Sa aamdeo A gr awal Sayys R Raamdeo Agr gra An investor does not require 100 stocks to make money, but a wise selection of good-quality 15-20 counters with growth potential can earn significant returns, Raamdeo Agrawal, joint MD & Co-founder, Motilal Oswal, says

he current market decline comes as a good opportunity for investors with a long-term view, and they should select stocks wisely instead of panicking at the precipitous fall, he said.

} Raamdeo Agrawal

He added that markets have their own mind and the large selloff across the globe still remains perplexing. "I mean, at least I cannot explain what is it, but market has its own mind. Maybe after one or two months, we will come to know how big is the global problem shaping up, because India is not a small thing, India is not a Greece, it is a 10 trillion pound gorilla in the global economy. They are second important player or probably the most important player for lot of industries like all the commodities, the way they consumed in last 10 years clearly will have huge repercussions on those industries," he said. Commenting on the valuation, Raamdeo is of the view that there is still value in Indian market. Investors should look at building a portfolio with 15-20 good names that are high-quality, high-growth companies in portfolio. "If you (investors) give long enough time and build a portfolio of 15-20 good companies which you understand, they are going to make money," said Agrawal. However, there are some rules to make money, he said. The first thing is that you make only as much money as the company makes. If company makes

abnormal money, you should do, too.

third of them," he added.

The second rule he highlighted is that once they (companies) keep making money, investors should give long enough time to them. In the meantime, there is a possibility that stocks will go down for sometime or remain depressed.

Raamdeo sees a big correction in commodity prices, which may go back to 2003 levels. "If you are exporting to China that might have done very well, but my sense is at one level, the whole thing will go back to reset of 20022003 when say oil price was $20, $25, $30, iron ore price was $25," he added.

He advised investors to be particular about what he calls QG, that is, quality and growth. "We do not need 100 companies or 80 companies in a portfolio to make money, we just need 15-16 companies and of that I have right to go wrong in one-

"Everybody has expanded and they have taken on debt in the books which will be quite crazy and particularly in country like India where interest rates are 8%, 10%, 12%, it will be very unsustainable for these industries," he concludes. ET 43

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LAUNCH

Why Maruti Dropped Ciaz Diesel, And Launched Ciaz Hybrid Toyota Prius and Toyota Camry Hybrid finally got some company. Maruti Suzuki has launched its first petrol-cum-electric vehicle, the Ciaz Hybrid to take advantage of government sops for environment-friendly vehicles. arking its foray into the new eco-friendly technology segment, country's largest carmaker Maruti Suzuki India (MSI) on Tuesday launched the mild hybrid version of mid-sized sedan Ciaz priced between Rs 8.23 lakh and Rs 10.17 lakh (ex-showroom Delhi). The model, Ciaz SHVS will be available only in the diesel version that is powered by a 1.3 litre engine. It uses a starter generator and an advanced high capacity battery that

offer a fuel efficiency of 28.09 km/ litre. "With smart hybrid, Ciaz has gained the top slot in fuel efficiency... of 28.09 km per litre, and is now the country's most fuel efficient car," Ayukawa said. In October, the company had launched Ciaz in both petrol and diesel options. The latter variant has been discontinued to be replaced by the hybrid version. The company will continue to sell the petrol version. At present the petrol

1,800 to Rs 66 lakh. In four-wheelers, incentives range from Rs 13,000 to Rs 1.38 lakh. By virtue of being in the hybrid category, the Ciaz SHVS will get reduced excise benefit of 12.5 per cent instead of 24 per cent on the normal version. Moreover, it will also get Rs 13,000 benefit under the FAME scheme. "By offering support through the FAME programme, the government has ensured that hybrid technology, being

"With smart hybrid, Ciaz has gained the top slot in fuel efficiency... of 28.09 km per litre, and is now the country's most fuel efficient car," stores energy generated while decelerating or braking and uses it to power an electric motor during acceleration thereby helping in enhanced fuel efficiency. "Through Ciaz Smart Hybrid, we are deploying technology to benefit customers and the environment. The vehicle is also special because it helps us participate in India's vision of promoting hybrid and electric vehicles," MSI managing director and CEO Kenichi Ayukawa told reporters here. As per the company, the car would 44

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variant is available in a range of Rs 7.23 lakh to Rs 9.64 lakh. The company's move to launch Ciaz SHVS comes in the wake of the government launching FAME India scheme in April to promote ecofriendly vehicles that envisages to provide Rs 795 crore support till 2020 for the manufacturing and sale of electric and hybrid vehicles. The scheme offers incentives to electric and hybrid vehicles from twowheeler to buses in the range of Rs

clean and customer friendly, also becomes more attractive and accessible," Ayukawa added. At present, Toyota's Prius and Camry Hybrid priced at a range of Rs 31.92 lakh and Rs 39.80 lakh (ex-showroom Delhi) are full range hybrids available in the Indian market. MSI and its vendors invested Rs 620 crore on development of the original Ciaz. The company has been able to achieve localisation content of 98 per cent for Ciaz.

LUXURY

Inside SRK's Rs. 4 Crore Luxury Volvo The bus has been transformed in a way that it looks like a home on the inside, and it's been done by none other than the DC Design studio. The brief, we hear, for this big bus was a simple one - sci-fi - and from what we can see, it's exactly that. ore often than not, civilians find themselves intrigued by what celebrities drive around in, or what they're driven around in. There are so many people out there who dream about sitting next to them, and perhaps chatting with them about their life and films. However, it's an automotive enthusiast who dreams of sitting behind the wheel of their very expensive cars and driving it around, sans the actor of course. That said, you have to hand it to them for they strive hard to make mere mortals like us happy. So they deserve every bit of the applause - they've earned not only our appreciation, but

also the fancy wheels! And they seem to be as smitten with their vehicles as much as we are intrigued by them. There are the likes of John Abraham, Sanjay Dutt, and Salman Khan who can be deemed genuine automobile connoisseurs. But when you mention Shah Rukh Khan; he's more like a collector. He loves his cars and since he spends a whole lot of time traveling, he loves his vanity vans just as much. We know this because we have photos to show you what his latest vanity van looks like. Let's start with what it is - a B9R Volvo bus that you'd have spotted frequently during your inter-city commute. The bus has been transformed in a way

that it looks like a home on the inside, and it's been done by none other than the DC Design studio. The brief, we hear, for this big bus was a simple one - sci-fi - and from what we can see, it's exactly that. The lights, the ambience, all scream futuristic and somewhere down the line you can't help but think about the movie Tron. The effect that you see on the floor is thanks to a glass floor which has been equipped with LED lights. In fact, things are a bit topsy-turvy here as the floor is glass and the roof is wooden, which seems like an interesting idea. The bus is 14 meters long and has an overall space of 280 sq.ft. The bus essentially houses 4 rooms - a meeting room, bedroom, toilet, and make-up & changing room. To make it even more striking, DC Designs have taken it a step further by adding the provision to expand one room, thanks to a hydraulic system. This, in turn, increases the space by 80 sq.ft. - taking the total area on offer inside the bus to 360 sq.ft. So, that's about the space, but does it have the gadgets to take things to another level? Yes, it does. It has Wi-Fi and Apple TV in all the rooms, three 4K television sets with satellite TV, and a top-notch sound system that takes your breath away. We don't know how many speakers there are, but the total output of the sound stands at 4000 Watts. Shah Rukh's vanity van also gets touchcontrol for the entire lighting system, as well as heating and cooling. Then there is a kitchenette with provisions for tea and coffee, and is also equipped with a microwave. SRK has already taken delivery of the van, which is estimated to have cost him between Rs. 3-4 crore. We tried to get in touch with people at DC Designs to ask them about this van, but couldn't get through. However, we do know that they've completed the project in a matter of just 45 days. This indeed is a technological marvel, and Mr. Chhabria seems to have left no stone unturned to make it as lavish, flamboyant and sci-fi as it can be.

NDTV 45

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HISTORY

SEASONAL MAGAZINE

In Revealed Secret Tape, President Nixon Says:

"Indira Gandhi is Very Tough" It's no secret that former Prime Minister Indira Gandhi didn't find it hard to make tough decisions, with the Emergency and the 1971 war with Pakistan being just two of the many she took during her tenure. Now it's emerged that she was prepared to go even further. document titled “India's Reaction to Nuclear Developments in Pakistan” which was declassified by the US' Central Intelligence Agency in June, highlights how Indira Gandhi considered a military strike against Pakistan's nuclear weapons in the 1980s. The document dated September 8, 1981 claims that Indira Gandhi was also not happy with the US for providing assistance to Pakistan, by arming them with F-16 fighter jets. Gandhi’s concern was visible after she decided to test India’s own nuclear test at short notice after she was informed that Pakistan has already started to produce its own nuclear warheads. "If Indian concerns increase over the next two-three months, we believe conditions could be ripe for a decision by Prime Minister Gandhi to instigate a military confrontation with Pakistan," the CIA report said. The Americans had been well aware of

Indira Gandhi's potential for some time by then, having failed at an attempt to intimidate New Delhi in 1971 during its war with Pakistan that led to the creation of Bangladesh. Richard Nixon, the 37th President of the United States, who was in charge at the time made clear his opinions on Indira Gandhi in a White House tape recording of a conversation with reporter John Chancellor in 1971. Talking of Indira Gandhi and powerful women leaders, the reporter went on to say, “We had lunch with Golda Meir in New York after you had seen her and the very first thing she said to me that I am going to take my views for the UN from Indira Gandhi now on.” To which, after a quite "oooh," Nixon says, "You see, they say only if we had women in positions of power, we would have no war. [But] You look at the history of humans, women are tougher than men. And when you look at the two strongest fronts that are willing to take risks, [they] happen to be [led by] two women. Indira Gandhi is very tough.”

SEASONAL MAGAZINE

HEALTH

BY DR. AARON E. CARROLL, PROFESSOR OF PEDIATRICS, INDIANA UNIVERSITY SCHOOL OF MEDICINE

BUSTING THE 8 GLASSES MYTH If there is one health myth that will not die, it is this: You should drink eight glasses of water a day. t’s just not true. There is no science behind it. And yet every summer we are inundated with news media reports warning that dehydration is dangerous and also ubiquitous. These reports work up a fear that otherwise healthy adults and children are walking around dehydrated, even that dehydration has reached epidemic proportions. Let’s put these claims under scrutiny. I was a co-author of a paper back in 2007 in the BMJ on medical myths. The first myth was that people should drink at least eight 8-ounce glasses of water a day. This paper got more media attention (even in The Times) than pretty much any other research I’ve ever done. It made no difference. When, two years later, we published a book on medical myths that once again debunked the idea that we need eight glasses of water a day, I thought it would persuade people to stop worrying. I was wrong again. Many people believe that the source of this myth was a 1945 Food and Nutrition Board recommendation that said people need about 2.5 liters of water a day. But they ignored the sentence that followed closely behind. It read, “Most of this quantity is contained in prepared foods.” Water is present in fruits and vegetables. It’s in juice, it’s in beer, it’s even in tea and coffee. Before anyone 48

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writes me to tell me that coffee is going to dehydrate you, research shows that’s not true either. Although I recommended water as the best beverage to consume, it’s certainly not your only source of hydration. You don’t have to consume all the water you need through drinks. You also don’t need to worry so much about never feeling thirsty. The human body is finely tuned to signal you to drink long before you are actually dehydrated. Contrary to many stories you may hear, there’s no real scientific proof that, for otherwise healthy people, drinking extra water has any health benefits. For instance, reviews have failed to find that there’s any evidence that drinking more water keeps skin hydrated and makes it look healthier or wrinkle free. It is true that some retrospective cohort studies have found increased water to be associated with better outcomes, but these are subject to the usual epidemiologic problems, such as an inability to prove causation. Moreover, they defined “high” water consumption at far fewer than eight glasses. Prospective studies fail to find benefits in kidney function or all-cause mortality when healthy people increase their fluid intake. Randomized controlled trials fail to find benefits as well, with the exception of specific cases — for example, preventing the recurrence of some kinds of kidney stones. Real dehydration, when your body has lost

a significant amount of water because of illness, excessive exercise or sweating, or an inability to drink, is a serious issue. But people with clinical dehydration almost always have symptoms of some sort. A significant number of advertisers and news media reports are trying to convince you otherwise. The number of people who carry around water each day seems to be larger every year. Bottled water sales continue to increase. This summer’s rash of stories was inspired by a recent study in the American Journal of Public Health. Researchers used data from the National Health and Nutrition Examination Survey from 2009 to 2012 to examine 4,134 children ages 6 to 19. Specifically, they calculated their mean urine osmolality, which is a measure of urine concentration. The higher the value, the more concentrated the urine. They found that more than half of children had a urine osmolality of 800 mOsm/kg or higher. They also found that children who drank eight ounces or more of water a day had, on average, a urine osmolality about 8 mOsm less than those who didn’t. So if you define “dehydration” as a urine osmolality of 800 mOsm/kg or higher, the findings of this study are really concerning. This article did. The problem is that most clinicians don’t. I’m a pediatrician, and I can tell you that I have rarely, if ever, used urine osmolality as the means by which I decide if a child is dehydrated. When I asked colleagues, none thought 800 mOsm/kg was the value at which they’d be concerned. And in a web search, most sources I found thought values up to 1,200 mOsm/kg were still in the physiologically normal range and that children varied more than adults. None declared that 800 mOsm/kg was where we’d consider children to be dehydrated.

DR. AARON E. CARROLL

Studies fail to find benefits in kidney function or all-cause mortality when healthy people increase their fluid intake.

These reports work up a fear that otherwise healthy adults and children are walking around dehydrated, even that dehydration has reached epidemic proportions. In other words, there’s very little reason to believe that children who have a spot urine measurement of 800 mOsm/kg should be worried. In fact, back in 2002, a study was published in the Journal of Pediatrics, one that was more exploratory in nature than a look for dehydration, and it found that boys in Germany had an average urine osmolality of 844 mOsm/kg. The third-to-last paragraph in the paper recounted a huge number of studies from all over the world finding average urine mOsm/kg in children ranging from 392 mOsm/kg in Kenya to 964 in Sweden. That hasn’t stopped more recent studies from continuing to use the 800 mOsm/kg standard to declare huge numbers of children to be dehydrated.

A 2012 study in the Annals of Nutrition and Metabolism used it to declare that almost two-thirds of French children weren’t getting enough water. Another in the journal Public Health Nutrition used it to declare that almost twothirds of children in Los Angeles and New York City weren’t getting enough water. The first study was funded by Nestlé Waters; the second by Nestec, a Nestlé subsidiary. It’s possible that there are children who need to be better hydrated. But at some point, we are at risk of calling an ordinary healthy condition a disease. When two-thirds of healthy children, year after year, are found to have a laboratory value that you are labeling “abnormal,” it may be the definition, and not their health, that is off.

None of this has slowed the tidal push for more water. It has even been part of Michelle Obama’s “Drink Up” campaign. In 2013, Sam Kass, then a White House nutritional policy adviser, declared “40 percent of Americans drink less than half of the recommended amount of water daily.” There is no formal recommendation for a daily amount of water people need. That amount obviously differs by what people eat, where they live, how big they are and what they are doing. But as people in this country live longer than ever before, and have arguably freer access to beverages than at almost any time in human history, it’s just not true that we’re all dehydrated.

(Credit: New York Times) 49

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TIMELESS

GANDHI'S WISDOM FOR HUMANITY

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When it came to terse quotes of wisdom, Gandhi had little competition. With just weeks remaining for his 146th birthday, it is marvelous to recall some of his best quotes for not only everyday living, but for humanity's progress.

“There is nothing that wastes the body like worry, and one who has any faith in God should be ashamed to worry about anything whatsoever.” “The difference between what we do and what we are capable of doing would suffice to solve most of the world’s problems.” “The real love is to love them that hate you, to love your neighbor even though you distrust him.”

“Peace between countries must rest on the solid foundation of love between individuals.” “Satisfaction lies in the effort, not in the attainment. Full effort is full victory.” “Love is the strongest force the world possesses, yet it is the humblest imaginable.” “Happiness is when what you think, what you say, and what you do are in harmony.” “The best way to find yourself is to lose yourself in the service of others.” “Live as if you were to die tomorrow; learn as if you were to live forever.”

}

“Honest differences are often a healthy sign of progress.” “No culture can live, if it attempts to be exclusive.” “My life is my message.” “Civilization is the encouragement of differences.” “An ounce of practice is worth a thousand words.” “Peace is the most powerful weapon of mankind.” “Be the change you wish to see in the world.” “The future depends on what you do today.” “Action expresses priorities.”

“Whenever you are confronted with an opponent, conquer him with love.”

SEASONAL MAGAZINE

Boom Boom… Housing Finance! COVER STORY

espite Modi’s and Rajan’s best efforts, corporate credit off-take has so far failed to grow significantly. It may take some time for Government and RBI to realize that much - much more - needs to be done to kickstart the economy than kanjoos rate cuts and renaming and re-launching of old schemes from Jawahar to Atal. Some sectors like power, steel, and infra are in real doldrums due to spiralling debt with even major players turning insolvent in their current size and shape. With large and painful asset sales and CDRs all set to follow, how can these 52

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critical sectors of the economy even consider going for major capex - debt-driven or otherwise? Banks too are not enthusiastic in extending term loans to corporates any more due to the already unmanageable NPA situation they find themselves in. But even while the credit off-take situation facing banks and NBFCs remain such, there is a silver-line in the financial services sector. A lending sector witnessing steady growth, and miracle of miracles, an average Net NPA level of less than 1%. No marks for guessing it, it is indeed the booming housing finance sector. While there are other retail lending sectors like auto finance and personal finance, nothing

comes close to the robustness of the home loans policies that increase its attractiveness. First among business, whether it is done by dedicated housing these is the advent of affordable homes, and its finance companies (HFCs), public and private sector enabling partner, the affordable home loan segment. banks, or diversified NBFCs. There are several Earlier, a home loan customer was a rich person who reasons for its unique strengths. Firstly, the noncould easily dream of taking a Rs. 50 lakh plus loan, depreciating nature of the asset - the home whereas now the average customer is a middleclass ensures that housing loans never leave a bad taste homebuyer who can dream of taking a Rs. 10 lakh to in the mouth of both the creditor and the debtor, Rs. 25 lakh loan. This synchronised move from the even at the end of a housing loan’s tenure. Compare Home Finance, Realty, & Government agencies have this with the sharp depreciation in certain assets come at the right time, as homes were proving to be like cars, and it is easy to realize that auto loans prohibitively costly for the mass buyers. Even are wealth destructors while housing loans are conservative estimates put shortage of housing units wealth creators. Secondly, for most people, there is in the country at almost 20 million. Home loan only one home to buy in a lifetime, and nobody products have also expanded from a simple home would like to lose it at any cost. There is huge loan to more flexible instruments like Loan Against sentimental value attached to a home that one has Property (LAP), and Reverse Mortgage Loans. And bought after careful consideration. Thirdly, an own lastly, here is the clinching proof for why the home house is an inevitable purchase, loan business is the boom boom unlike most other assets that business of this decade and the can be postponed. This single decades to come in India. Despite In developed nations, the reason has ensured that all the steady growth for more housing finance sector has housing finance business has reached a size that is 80-90% than four decades now, housing grown during good as well as finance is hugely underof the GDP size, whereas in bad times of the economy. India it is only 9% of the GDP penetrated in India. In developed Compare this with auto loans, nations, the housing finance size! It will be a gross and it can be easily understood sector has reached a size that is understatement to say that that it is highly dependent with 80-90% of the GDP size, whereas there is room for growth for the economy’s performance. If in India it is only 9% of the GDP all kinds of housing finance personal earnings are not in the size! It will be a gross operations. And more upswing, consumers will easily understatement to say that there importantly, customer is put off a new car purchase, and is room for growth for all kinds of going to be the king in this the effect is even starker in the housing finance operations. And scenario with lots of home case of commercial auto loans loan providers and competing more importantly, customer is which is directly proportional to rates as well as service levels going to be the king in this the economy’s performance. scenario with lots of home loan to choose from. That is why so many CV loan providers and competing rates as companies that were booming well as service levels to choose once, are no longer growing steadily. Next in line from. India’s housing finance sector is dominated by comes the safety of a home loan, for both the lender three kinds of players - dedicated housing finance and the loanee. The steady appreciation of real companies like HDFC, LIC Housing Finance, Indiabulls estate ensures that even if a home loan turns into Housing Finance, Dewan Housing Finance, Gruh an NPA, the asset remains solvent with safe margins, Finance, Can Fin Homes, GIC Housing Finance, Repco reducing the financial risk for both the loan provider Home Finance etc; by all PSU and private banks; and the home buyer. Then comes the longest tenure and thirdly by diversified NBFCs like IIFL Holdings, of housing loans vis-à-vis other loans. Fresh home Bajaj Finance, Cholamandalam, Sundaram, Shriram loans rates are hovering around 9-10%, and with City Union, Mahindra Finance, Manappuram Finance, interest rates set to climb down, it is a no-brainer Muthoot Pappachan Group, and many more such to understand that a 15-to-25 year home loan at players. Seasonal Magazine takes a detailed look at less than the effective inflation rate would be a huge the offerings of major players from these three wealth creator for the buyers. While these factors sectors that power not only India’s most promising attest for the uniqueness of home loans, there are emerging business, even while delivering on the two additional reasons in India and its current social cause and development fronts. 53

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BOOM BOOM… HOUSING FINANCE! Sunita Sharma, MD & CEO

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LIC HOUSING FINANCE

SKY IS THE LIMIT HERE Indiaâ&#x20AC;&#x2122;s second largest housing finance company by loan book size, still has a long way to catch up with market leader HDFC, but is finally looking like it is going to do it sooner rather than later. Despite emerging competition from the larger banks, LIC Housing Finance is also rapidly outpacing itself from the rest of its peer group HFCs. But the best is yet to come as LIC HF is yet to fully utilize parent LICâ&#x20AC;&#x2122;s massive agent force.

HOMEBUYER ADVANTAGES WITH LIC HOUSING FINANCE LIC HF comes with the trust and best practices of the Public Sector, as it is a Joint Sector company promoted by LIC of India. LIC HF has one of the largest and widest branch networks across India. LIC HF provides a wide range of home loan sizes - from medium to high ticket sizes, and offers competitive rates. LIC HF has a wide range of products in the home loan and related do mains like Loan Against Property (LAP) and Reverse Mortgage. LIC HF has special loans for selfemployed professionals like doctors, engineers, lawyers, CAs etc to have their own offices or business facilities.

CORPORATE STRENGTHS OF LIC HOUSING FINANCE LIC HF being promoted by government run life insurance major, LIC of India, is one of the most powerful companies in the sector that can grow easily in proportion with the market growth. A listed player since many years now, LIC HF has been a massive wealth creator for its public investors. LIC HF has also been a high and rising dividend payer since many years. LIC HF is the second-largest HFC in the country by loan book size, even while maintaining asset quality with Net NPAs steadily coming down in recent years. LIC HF is also a deposit taking NBFC, offering attractive rates on its various Fixed Deposit schemes. LIC HF is a strong contender for a full spectrum banking licence.

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BOOM BOOM… HOUSING FINANCE!

SBI HOME LOANS

INNOVATIVE PRODUCTS, BETTER RATES

State Bank of India (SBI) is providing a formidable challenge to established and sharply focused Housing Finance Companies (HFCs) as well as peer banks by offering very innovative products and better rates, and the real winner from SBI’s aggressive posturing is the homebuyer.

SEASONAL MAGAZINE

Arundhati Bhattacharya, Chairman

HOMEBUYER ADVANTAGES WITH SBI HOME LOANS SBI Home Loans comes with the trust factor of State Bank of India, Indiaâ&#x20AC;&#x2122;s state-run and largest lender. SBI Home Loans are offered at the most competitive rates of 9.75%, with women enjoying a lower rate of 9.70%. SBI Home Loans offers low processing fees of 0.25% for loans up to Rs. 25 lakhs. SBI Home Loans offers interest rates on attractive Daily Reducing Balance basis. SBI Home Loans has innovative products like MaxGain Overdraft, Pre-Approved Home Loan (PAL), and Yuva Home Loan with 20% higher loan amount.

CORPORATE STRENGTHS OF SBI HOME LOANS SBI being the largest bank in both the public and private sector, can grow its home loan portfolio to any size as per the market growth. SBI Home Loans is backed by SBIâ&#x20AC;&#x2122;s state-of-the-art net banking facility that ensures transparency and efficiency, for both the lender and the homebuyer. SBI Home Loans serves a wider portfolio unlike many others with ticket sizes ranging from as low as less than Rs. 25 lakh to as high as more than Rs. 75 lakhs. SBI Home Loans is attracting more and more customers these days due to its longer maximum tenure of 30 years as well as a generous construction period moratorium (repayment holiday) of up to 36 months. SBI Home Loans applications can be submitted online, and evaluated for approval in an online manner, which is attracting young and tech-savvy homebuyers. 57

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BOOM BOOM… HOUSING FINANCE!

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REPCO HOME FINANCE

FULFILLING A SOCIAL NEED, REWARDING INVESTORS One of the latest entrants into the listed housing finance space, Chennai headquartered Repco Home Finance has already proved that it is a massive wealth creator in the making. Driving this performance is the fundamental value in Repco HF’s offerings, which is about housing those working in the informal sector, whom the banks and mainstream HFCs generally shun.

CORPORATE STRENGTHS OF REPCO HOME FINANCE Repco HF has been the latest HFC to list on the bourses, and has been a stellar wealth appreciator since then. Repco HF has been paying dividends to its public investors since listing, and the dividends have been rising. Repco HF has better spreads, margins, & NIM than the rest of the industry. Repco HF has been growing its loan book at a robust pace during the past few years. Despite being in a riskier segment of housing finance, Repco HF’s NPAs are comparably not very high.

HOMEBUYER ADVANTAGES WITH REPCO HOME FINANCE Repco Home Finance comes with the trust and best practices of the Public Sector, as it is a Joint Sector company promoted by state-run Repco Bank. Repco HF is focused on providing home loans to those working in the infor mal sector, who generally don’t get loans from banks and mainstream HFCs. Repco HF extends a lot of handholding for such customers in getting them selves appraised for their credit worthiness. Repco HF provides housing loans to rural customers, which is another segment where the reach of banks and larger HFCs are poor. Repco HF provides housing loans to those in the informal sector at competitive rates, despite the perceived risk of such loans being slightly higher.

R. Varadarajan. Managing Director 59

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BOOM BOOM… HOUSING FINANCE!

MUTHOOT HOUSING FINANCE COMPANY

RAPID GROWTH BY MEETING A SOCIAL NECESSITY

Mumbai headquartered Muthoot Housing Finance Company Ltd, a part of the diversified conglomerate Muthoot Pappachan Group, has been one of the fastest growing home finance companies serving those working in the informal segments of the economy.

HOMEBUYER ADVANTAGES WITH MUTHOOT HOUSING FINANCE Muthoot Housing Finance is sharply focused on offering home loans to financially excluded segments of the society that is working with the informal sector that amounts to 90% of the Indian population. Muthoot Housing Finance has its footprint in 8 states and 21 locations, and over and above that, leverages parent Muthoot FinCorp’s nationwide network of gold loan branches for service. Muthoot Housing Finance has a unique door delivery model for housing finance that services customers in remote corners without they having to visit Muthoot Housing Finance’s office in nearby cities or towns repeatedly. Muthoot Housing Finance offers a rapid turnaround time of around 7 days. Muthoot Housing Finance services both urban and rural customers, and extends support for buying apartments, houses, construction, and plots.

Thomas John Muthoot, Director, MHFCL 60

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Thomas George Muthoot, Director, MHFCL

CORPORATE STRENGTHS OF MUTHOOT HOUSING FINANCE Muthoot Housing Finance is a subsidiary of Muthoot FinCorp, one of Indiaâ&#x20AC;&#x2122;s largest gold loan companies, which in turn is the flagship company of Muthoot Pappachan Group (MPG), a diversified conglomerate established in 1887. Muthoot Housing Finance started operation in only 2011-12, but has rapidly built up a loan book of Rs. 400 crores, and a customer base of over 7000 customers. Muthoot Housing Finance as well as its parent Muthoot FinCorp are currently unlisted entities, and as such provides good opportunities for PE funds and other institutional investors, before their eventual IPOs. Muthoot Housing Finance offers loans to informal sectors at around 100 to 150 bps above HFC rates, due to the higher risk, and has an above average NIM of 3.2%. Muthoot Housing Financeâ&#x20AC;&#x2122;s rapid growth is ample testimony to the fact that the company is serving a large social need of serving those employed in the informal sector, who are normally shunned by banks and large HFCs.

Thomas Muthoot, Managing Director, MHFCL

Maneesh Srivastava, CEO, MHFCL 61

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BOOM BOOM… HOUSING FINANCE! Harshil Mehta, CEO

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DEWAN HOUSING FINANCE

SERVING INFORMAL

SECTOR CUSTOMERS WITH ATTRACTIVE RATES Dewan Housing Finance Corporation Limited (DHFL) was founded in 1984 by Late Shri Rajesh Kumar Wadhawan with a vision to provide financial access to the lower and middle income segment of the society Over the last 30 years, DHFL stands strong as one of Indiaâ&#x20AC;&#x2122;s largest housing finance companies, by providing innovative products and services to LMI customers thus creating niche in the segment.

HOMEBUYER ADVANTAGES WITH DEWAN HOUSING FINANCE

CORPORATE STRENGTHS OF DEWAN HOUSING FINANCE

DHFL offers a range of home loan products including home loan, home extension loan, home improvement loan, plot loans, mortgage loan, lease rental finance, project loan, SME Loan and non-residential property loan to all customer segments across India, retaining its concerted focus on the low and middle income segment.

DHFL has been a pioneer in serving home loans to the LMI segment in the tier 2 and 3 towns, which has made the Company a leading player in the housing finance segment.

DHFL has Pan-India presence with one of the largest branch networks spread over 400 locations, ensuring housing finance with a rapid turnaround time of 7 to 10 working days. DHFL offers loans at competitive interest rates to the rest of the HFCs & banks; the interest rate starts at 9.90%. DHFL offers Loan Against Property (LAP) product for the informal segment, that enables small entrepreneurs to grow & enhance their business needs or acquire an asset. The Company offers a tenure ranging from 1 to 30 years helping the customer for fulfilling his dream of owning a home without compromising his lifestyle.

Despite disbursing lower ticket size loans, with an average ticket size of Rs.11.7 lakhs, DHFL has rapidly grown its loan book to over Rs. 53,795.70 crore, making it one of the largest housing finance companies. DHFL, with a view to expand its liability business, has been aggressively growing its fixed deposit business with innovative products like Wealth2Health that allows the customer emergency draw-downs and a host of medical linked services while providing competitive interest rates. DHFL has one of the best asset qualities in the housing finance sector with 0.80% Gross NPAs and Nil Net NPAs. 63

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BOOM BOOM… HOUSING FINANCE!

Sudhin Bhagwandas Choksey, MD 64

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GRUH FINANCE

AN UNASSAILABLE LEAD IN HOME LOANS Gruh Finance has been the most valued HFC in the country (by P/BV) for quite a long time now, and it is proving that it is a natural outcome of its superior strategies and superior investor returns. While the HDFC pedigree helps, it is clear that Gruh has carved a niche for itself, that other HFCs eagerly look upon to.

CORPORATE STRENGTHS OF GRUH FINANCE Gruh Finance is the highest valued HFC in the country trading at a price to book-value of 12.69 times, which is higher than market leader HDFC, which is also its parent. Gruh Financeâ&#x20AC;&#x2122;s valuations are more than double of comparable HFCs operating in the informal/affordable segment. Gruh Finance has a significant fixed deposit program that offers high rates even while being rated high for safety by rating agencies. Gruh Finance enjoys high spreads, margins, & NIM, even while limiting NPAs. Despite being an HDFC subsidiary, Gruh Finance is listed separately and has been a massive wealth creator and high dividend payer.

HOMEBUYER ADVANTAGES WITH GRUH FINANCE Gruh Finance has been one of the pioneers in providing home loans to the self-employed and those working in the informal sector. Gruh Finance being a subsidiary of HDFC, the largest housing finance company in the country, has competitive expertise in understanding customers as well as projects. Gruh Finance has a proprietary credit score methodology for assessing such customers, and those who rank better in the score can get better interest rates. Gruh Finance is one of the largest affordable home loan providers, operating in eight states with 165 offices. Gruh Finance is a market leader in states like Maharashtra, Rajasthan, & Gujarat, where the demand for housing units by those employed in the informal sector is the highest.

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BOOM BOOMâ&#x20AC;Ś HOUSING FINANCE!

CAN FIN HOMES

BALANCED IN GROWTH AND QUALITY One of the fastest growing HFCs in the whole of the country, Can Fin Homes stands testimony to the power of the Joint Sector. Promoted by Canara Bank and listed on the bourses with more than 50% public shareholding, Can Fin Homes combines the best of public and private sectors like trust and efficiency.

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C Ilango, Managing Director

HOMEBUYER ADVANTAGES WITH CAN FIN HOMES Can Fin Homes comes with the trust and best practices of the Public Sector, as it is a Joint Sector company promoted by the PSU lender, Canara Bank. Can Fin Homes has one of the best turnaround times in home loans, at around 7 days, which is better than even many private sector players. Can Fin Homes has a wide network of branches across all the four South Indian states, and a growing presence in other select regions of India. Can Fin Homes is a major franchise for home loans among government and PSU employees across South India. Can Fin Homes has a very proactive attitude towards prospective customers, and stresses a lot on its pre and postapproval customer service, apart from its competitive rates.

CORPORATE STRENGTHS OF CAN FIN HOMES Can Fin Homes being promoted by Canara Bank, enjoys good reputation and credit standing in the market. Can Fin Homes is well-capitalized for the next couple of years, post its successful Rights Issue a few months back. Can Fin Homes has been one of the fastest growing HFCs in the country and has guided for 30% annual growth, even while maintaining Net NPAs at 0% since the last few years. Can Fin Homes is backed by investors like Infosys co-founder NR Narayana Murthyâ&#x20AC;&#x2122;s Catamaran, and has appreciated investor wealth by many times in recent years. Canara Bank has recently guided the market that it intends to up its stake in Can Fin Homes by up to 5% annually for the next few years through the creeping acquisition route, due to the excellent performance of Can Fin.

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BOOM BOOM… HOUSING FINANCE! R Nambirajan, MD

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DHFL VYSYA HOUSING FINANCE

A SHARP FOCUS ON THE GROWING MIDDLE INCOME SEGMENT DHFL Vysya has the intrinsic advantage of having a strong promoter group in DHFL and Wadhawan Global Investments, as well as a thoroughly professional management. Its footprint spans 7 states including the 5 South Indian states as well as Maharashtra and Uttar Pradesh.

HOMEBUYER ADVANTAGES WITH DHFL VYSYA HOUSING FINANCE DHFL Vysya Housing Finance offers housing loans to both urban and rural middle income group customers. DHFL Vysya Housing Finance offers loans at attractive interest rates to various ticket sizes like less than Rs. 10 lakhs, less than Rs. 15 lakhs, less than Rs. 25 lakhs, and more than Rs. 25 lakhs. DHFL Vysya offers an insurance policy for its home loan customers that insures against loss of life or loss of employment disablement through accidents. DHFL Vysya has attractive interest rates for small ticket sizes in both urban and rural areas that can go as low as 8.87%. DHFL Vysya has a significant presence in the states of Andhra Pradesh, Telengana, Karnataka, Tamilnadu, Kerala, Maharashtra, and Uttar Pradesh.

CORPORATE STRENGTHS OF DHFL VYSYA HOUSING FINANCE DHFL Vysya is jointly promoted by Indiaâ&#x20AC;&#x2122;s third largest HFC, Dewan Housing Finance Ltd (DHFL), and its promoter group company Wadhawan Global Investments. DHFL Vysya is backed by ICICI Bank which is a minority shareholder in the firm. DHFL Vysya offers loans to all possible segments of the society including salaried employees, professionals, self-employed people, and established businessmen. DHFL Vysya offers flexible repayment options like fixed rate for first 10 years, and variable rates thereafter. DHFL Vysya combines the best of capable promoters (DHFL Group) and professional management, with its Managing Director R Nambirajan being an acknowledged expert in affordable housing and affordable home loans.

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BOOM BOOM… HOUSING FINANCE! Warendra Sinha, MD

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GIC HOUSING FINANCE

STEADY PERFORMANCE, ADMIRABLE RETURNS Promoted by India’s general insurance behemoths and backed by key institutional investors like LIC of India, this Joint Sector housing finance company has more than 25 years of track-record behind it. A steady performer, GIC Housing Finance is noted in the bourses for its long-term capital appreciation and high dividends.

HOMEBUYER ADVANTAGES WITH GIC HOUSING FINANCE GIC Housing Finance comes with the trust and best practices of the Public Sector, as it is a Joint Sector company promoted by India’s PSU general insurance companies. GIC Housing Finance being headquartered at Mumbai, is a major player in the near and distant suburbs of India’s economic capital, which is arguably the largest by way of homebuyer demand. GIC Housing Finance has never been an aggressive player which resorts to false promises and unfair practices to boost sales. GIC HF has been in the business of home finance for more than 25 years, which is an experience that benefits its customers in the long run. GIC HF has tie-ups with various developers and corporates to provide loans to their homebuyers / employees at competitive rates.

CORPORATE STRENGTHS OF GIC HOUSING FINANCE GIC HF has been a listed player since long, and has been one of the highest dividend payers in the housing finance sector. GIC HF stock has been a significant multibagger stock for its investors, especially on a longer timeframe. One of GIC HF’s promoters has been upping its stake in the firm, due to its steady performance in recent years. GIC HF is also backed by LIC of India, which is its largest non-promoter shareholder. GIC HF is currently mulling various capital raising plans to augment its share capital to prepare itself for the high growth phase ahead.

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INTERVIEW

MUTHOOT HOUSING FINANCE COMPANY

LEADING BY INNOVATIONS LIKE DOORSTEP DELIVERY uthoot Housing Finance Company Ltd is a subsidiary of Muthoot FinCorp which is the flagship company of Muthoot Pappachan Group. Starting out in 2011, and focusing on low and middle income segments of homebuyers, Muthoot Housing Finance has rapidly built up a customer base of over 7000 customers and a loan book size of over Rs. 400 crore. Their average ticket size is 5 to 6 lakhs, and they lend at 100 to 150 bps above mainstream HFC rates. But customers are not complaining, as they work in the informal segments and as such donâ&#x20AC;&#x2122;t have proper income proofs. This makes them ineligible to avail home loans from banks and conventional housing finance companies. But Muthoot Housing Finance not only provides home loans to such customers, but does it very proactively with innovations like doorstep delivery. Around 50% of their loans are for buying small apartments, around 26-27% for standalone houses, and the remaining for plots. They lend in both rural and urban areas, with around 40% lending in rural regions and the rest in urban and semi-urban areas. Muthoot Housing Finance Company is guided by its Group Chairman & MD Thomas John Muthoot, Director Thomas George Muthoot, and Executive Director Thomas Muthoot. This Mumbai headquartered HFC is led by Maneesh Srivastava as its CEO, who was with HSBC for 13 years.

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BOOM BOOMâ&#x20AC;Ś HOUSING FINANCE! Sea sonal Magazine in Seasonal con sa tion with Manee sh onvver ersa sation Maneesh Sriv ava, CE O ooff Muthoo Sriva sta CEO Muthoott ast e C ompany LLttd: Housing FFinanc inanc Company inance E ach housing financ e ccompany ompany finance no wada ocusing on some now adayys is ffocusing specific cust omer segmen t. Wha customer segment. Whatt constitut es yyour our specific segmen onstitute segmentt in housing financ e ? finance

Maneesh Srivastava, CEO, MHFCL

Our focus segment at Muthoot Housing Finance is broadly the financially excluded segments of our population. They are working in the informal sector, and can be either employed in small firms or selfemployed. For example they include the milkman, auto-driver, the newspaper vendor, and hundreds of such informal job holders. Surprisingly, even to this day, 90% of Indiaâ&#x20AC;&#x2122;s working population is employed with the informal sector. Being a Mumbai headquar ed headquartter ered oper a tion, wha e the kke ey opera whatt ar are ou ar e curr en tly geogr aphie are curren ently geographie aphiess tha thatt yyou tar ge ting? Ar e yyou ou planning ffor or a arge geting? Are pan India rrollout? ollout? Western India is generally a good market as far as our target segments are concerned. There is a huge demand for such loans in the Western states. Having said that, we have a much wider presence across India, in 21 locations spread over 8 states. And we plan to eventually enter all geographies where there is demand for low and middle income home loans. Being an a dable home loan aff for ordable e the kke ey bene fit company ompany,, wha whatt ar are benefit fitss tha ou enjo thatt yyou enjoyy? I wouldnâ&#x20AC;&#x2122;t say there are any special benefits for serving this segment. Because, at the end of the day, the risk-adjusted returns tend to be the same as for other mainstream

housing finance companies. However, there is one real advantage for focusing on this segment, which is that being huge, fast growing, and underserved, there is immense scope for growth. Ther e is a cconc onc ep tion or pr obably here oncep eption probably onc ep tion in the mark et tha misconc oncep eption marke thatt a misc e mor e affor dable home loans ar more ordable are pr one tto o be NP As. Wha prone NPA Whatt ha hass been your eexperienc xperienc e? Wher e do yyour our xperience Where NP A s st and? NPA stand? It is not a misconception, and there is indeed a higher level of risk involved here. But the key point to note is that this risk can be effectively managed through innovative credit appraisal models. Muthoot Housing Finance has developed its in-house credit models that mitigates the risks to a great extent. Speaking about our NPAs, it is at 2.07% currently, which is comparable to industry averages. On the flipside e is also a flipside,, ther there conc ep tion tha gins ar e quit e oncep eption thatt mar margins are quite high in the a dable segmen t. afffor ordable segment. Wha gins yyou ou Whatt is the kind o off mar margins ha havve? That is not fully correct. Margins are comparable to mainstream players, if not slightly higher. Our NIM is around 3.5%, which is healthy but not very high. That is because, though our retail lending rates are slightly higher at around 14-16%, the higher operating costs and higher risk in serving this segment, reduces the returns to average levels. MPG a oup ass a financial ser servic vice group vic es gr ay in gold loans. Ar e hass it itss mainst mainsta Are ha e any ssyner yner gie there ynergie giess tha thatt the ther housing financ e unit enjo om the finance enjoyy fr from gold loan busine businesss? Broadly speaking there are synergies 73

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as the financially excluded segments are customers of both Muthoot’s gold loans as well as housing finance. We also leverage Muthoot FinCorp’s wide branch network across India, when needed. But there are also stark differences, as gold loans are one of the shortest tenure loans, whereas housing loans are the longest tenure debt.

Thomas John Muthoot, Director, MHFCL

MPG also ha ations hass gr gro opera owing oper in the SME segmen ell a segmentt a ass w well ass micr ofinanc e. Ar e yyou ou eeyyeing any micro finance Are oup s yner gie om the se gr ynergie giess fr from these group div er sific ations ? diver ersific sifica tions? Again, there are synergies, as customers for both products belong to underserved categories, but there are also limitations as I mentioned just now. Gold loans and microfinance tend to be small or easy steps for a customer, but a housing loan is a much larger step, which is taken after much consideration.

“ ONE ADVANTAGE FOR FOCUSING ON THIS SEGMENT IS THAT BEING HUGE, FAST GROWING, AND UNDERSERVED, THERE IS IMMENSE SCOPE FOR GROWTH.

“ 74

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C is Almost eevver eryy bank and NBF NBFC bullish on the home loan busine businesss, and tha ea sed thatt means incr increa eased compe tition and a lo ompetition lott o off a atttrition e bank s. Is ds lar ge pla towar playyer erss lik like banks. ards large dable attrition lo wer in the a low afffor ordable segmen t? segment? Yes, increased competition definitely implies that there would be a level of attrition involved. However, at Muthoot Housing Finance, we are less affected as many of our bigger competitors are not interested or equipped enough to serve customers in remote locations. As one among the many HF Cs HFC compe ting ffor or the same pool o ompeting off cust omer s, wha e Muthoo customer omers, whatt all ar are Muthoott Housing FFinanc inanc e’s U SP inance’s USP SPss? Our main USP is our distribution

power. We have something called doorstep delivery of home loans. The customer need not come to a Muthoot branch repeatedly. Our officers would visit their premises to deliver the loan. This is a huge advantage for them as each working day lost for such customers, by visiting a home loan branch, is quite valuable for them. Secondly, our turnaround time is very short, at around 7 days. ou ttell something ell us some thing about Can yyou gr ound, yyour our pr evious your back backgr ground, pre e assignmen t s, and y our per f ormanc signment your performance e? her e in Muthoo inanc here Muthoott Housing FFinanc inance I started my career with Tata, and later joined HSBC, where I worked for 13 years. I joined Muthoot Housing Finance in 2011 as CEO during its inception itself. We have rapidly

Thomas George Muthoot, Director, MHFCL

scaled up our operation, during the last 4 years. Currently we have a loan book of over Rs. 400 crore, and a customer base of around 7000 homebuyers. You ar e a pr ofessional CE pro CEO are O, and Muthoo aditional and Muthoott ha hass been a tr traditional en tr epr eneurial or ganiza entr trepr epreneurial organiza ganization. tion. Whom do yyou ou rrepor epor o, and ho w do yyou ou eportt tto how asse apabilitie en sesss the ccapabilitie apabilitiess o off the par paren entt ? company ompany? I directly report to Mr. Thomas Muthoot, but also interact with other Directors of Muthoot Group. They are a very professional group, and being a diversified financial service provider for a long period, is quite capable of scaling up any of their businesses including this home finance division. Their guiding motto is doing what is good for the

Thomas Muthoot, Managing Director, MHFCL

â&#x20AC;&#x153; WE HAVE SOMETHING CALLED DOORSTEP DELIVERY OF HOME LOANS. THE CUSTOMER NEED NOT COME TO A MUTHOOT BRANCH REPEATEDLY. OUR OFFICERS WOULD VISIT THEIR PREMISES TO DELIVER THE LOAN.

â&#x20AC;&#x153;

customer, as they believe that it is the only way for the company to grow. Ho w do yyou ou ffor or esee the housing How ore financ e segmen owing in India, finance segmentt gr gro t? especially the a dable segmen segment? afffor ordable Wha owth is pos sible ? Whatt kind o off a gr gro possible sible? According to official studies, there is a shortage of 18 million housing units in the country. But our assessment is that the market size is much higher, especially if you take into account the youngness of our population, and the trend to have nuclear families and smaller homes, even in the rural and semi-urban markets. I would say that the sky is the limit for the low and middle income home loan market in India, which constitute 90% of our working population. 75

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INTERVIEW

MICRO HOUSING FINANCE CORPORATION

A UNIQUE APPROACH IN FINANCING AFFORDABLE HOMES umbai headquartered Micro Housing Finance Corporation (MHFC) was started by three ex-bankers with significant international experience. While Executive Chairman Madhusudhan Menon, and MD & CEO Rajnish Dhall were with American Express Bank, co-founder Nachiket Shelgikar who is the ED & CFO of MHFC was with Deutsche Bank. All three shared a passion for social projects and social entrepreneurship in their motherland, and the result was India’s pioneering institution in project-led affordable home loans for the informal sector. MHFC is a zero-branch operation and works through its field-staff to identify and approve affordable housing projects across the country, so that loans can be extended to the homebuyers there. However, unlike most of its peers in the affordable segment, Micro Housing Finance Corporation’s retail lending rates are lower, and comparable to banks and mainstream HFCs. At the same time, MHFC, which is backed by international philanthropic funds like Michael and Susan Dell Foundation, as well as National Housing Bank (NHB), has exhibited excellent asset quality with Net NPA at 0%. Seasonal Magazine interviews Madhusudhan Menon, Executive Chairman of Micro Housing Finance Corporation. In the a dable segmen afffor ordable segmentt one thing tha thatt dif en tia ou is the pr ojec t-led difffer eren entia tiattes yyou projec oject-led appr oach. C an yyou ou de xplain approach. Can dettail this and eexplain ho w this helps y ou in sc aling up ? how you scaling up? Yes, we follow a project-led approach. This means that we are constantly scanning the market for projects that offer affordable homes that meet our criteria. The advantage is that we have a good collection of new affordable homes across 7 states. These are mainly low-cost apartment projects, and we can offer approved projects in even specific suburbs of major cities and towns as per customer’s desire. Though the responsibility for ensuring the quality and promises of the project are with the developers and homebuyers, our basic screening ensures that there is an optimum balance between the requirements of the homebuyers and the specifications/price offered by the builders. This is very important for the affordable home finance business as the major bottleneck is the supply of lowcost homes in those locations that the customers prefer. After iden tif ying such pr ojec ou projec ojectts, do yyou identif tifying st? Will devveloper eloperss fir first? tie-up with the de your agr eemen e in na tur e? agreemen eementt be eexxclusiv clusive natur ture Yes, we tie up with the developers, as we also have a ready pool of 76

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homebuyers looking for affordable projects in those areas. But the agreement with builders won’t be exclusive, and that is the way we prefer it. We also want other banks and HFCs to participate in providing home loans to prospective buyers there. Generally, we finance around 10% of the apartments in a low-cost project. ICICI Bank ha launched hass rrec ecen ently ec en tly la unched an affor dable home loan pr oduc or rur al ordable produc oductt ffor rural w do yyou ou vie w women a 0%. Ho view att 9.7 9.70%. How this ne w ccompe ompe tition? new ompetition? I think that this is a welcome move, as this segment still has the problem of little competition. More players, and more aggressive players means that customers are going to be benefited. And the market is so huge and growing that entry of one player or even ten players is not going to affect the prospects of existing players. It will just bring visibility to this market and ultimately help in enlarging it. Being a Mumbai headquar ed headquartt er ered oper a tion, wha e the kke ey opera whatt ar are geogr aphie ou ar e curr en tly geographie aphiess tha thatt yyou are curren ently tar ge ting? Ar e yyou ou planning ffor or a pan arge geting? Are India rrollout? ollout? Obviously, being in Mumbai has got nothing much to do with addressing the

market here, as there is no supply of affordable homes here. But, in the distant suburbs of Mumbai, yes, we do have a database of affordable homes. Like, say in Boisar, and to a lower extent in nearer suburbs like Virar. But 150 km away from Mumbai, there is a reasonable supply of affordable projects. Anyway, the reason we are headquartered in Mumbai has more to do with our business model, which is not a branch-led one. Our business is led by our field-staff, and we are present in 7 states, and with most of them being in Western and Central India, Mumbai just happens to be the most convenient headquarters. When yyou ou sa ou ar e no anchsayy tha thatt yyou are nott br branchled, wha tly do yyou ou mean? Wha whatt eexxac actly Whatt ength, and is yyour our curr en anch str branch strength, curren entt br without br anche w do yyou ou deliv er ? branche anchess ho how deliver er? Well, you will be surprised to know that we have no branches. This is an entirely different model of housing finance, which as I told you, is project-led. Our fieldstaff in various states continually scan for new affordable home projects that meet our criteria, tie-up with them, and offer home loans to buyers interested in those locations and projects. As such, we don’t need a branch network to expand on this model. However, we are able to deliver on this model only

BOOM BOOM… HOUSING FINANCE! because we have a superior tech infrastructure to gather data from the field and appraise it at a central location. Being an a dable home loan aff f or ordable e the kke ey bene fit benefit fitss ompany,, wha whatt ar are company tha ou enjo thatt yyou enjoyy? There is a gross mismatch between the demand and supply side, in the Indian housing market. Almost all major home developers across India are building homes that barely 10% of the Indian population can afford. That is why you hear about the surplus in housing inventory across major cities. The developers have the supply, banks & HFCs are willing to lend, but there are only a lesser number of takers. These developers, as well as banks and mainstream HFCs, totally neglect the remaining 90% of the population that are employed with the informal sector and as such don’t have income-proof on paper that is required for a conventional home loan. So, if you ask me the business benefit of serving this segment, it is this - we are operating in a segment that is 9 times the size of the premium segment, and which is growing at a much faster clip, and which has much lesser competition. Over and above that, there is a deep sense of achievement as we are serving a massive social need. Go specially some st at e Govvernmen ernmentts, eespecially sta omo ting or building go e pr omoting govvernmen ernmentts ar are promo affor dable housing pr ojec ge ordable projec ojectts on a lar large sc ale no w. Ar e yyou ou financing unit scale now Are unitss in such pr ojec projec ojectts? Yes, very much. Many state governments like, for example, Rajasthan is promoting PPP projects for large scale affordable projects. Micro Housing Finance Corporation is funding units in such government projects too. I think it will be a major growth area in the near future.

well as our customers, are living proof that this is a gross misconception. Our Net NPA is 0% and it has been nil for a few years now. Of course, I am not saying that the informal segment of the population is not prone to generate NPAs, but that with the right credit appraisal framework, NPAs in this segment can be managed effectively, at a level which is even better than what banks and large HFCs are doing with regular customers. On the flipside e is also a flipside,, ther there conc ep tion tha gins ar e quit e high oncep eption thatt mar margins are quite in a dable segmen t. Wha afffor ordable segment. Whatt is the kind of mar gins yyou ou ha margins havve? This is also not very true in our case, as our average retail lending rate is low compared with other affordable home loan providers, and is comparable to banks and HFCs, at 12.5%. Almost eevver C is bullish eryy bank and NBF NBFC on the home loan busine businesss, and tha thatt means incr ea sed ccompe ompe tition and a lo increa eased ompetition lott e of a owar ds lar ger pla atttrition tto ards larger playyer erss lik like bank s. Is a w er in the banks. att trition lo low affor dable segmen t? ordable segment?

for the same pool o omer s, wha off cust customer omers, whatt e MHF C’s U SP are MHFC’s USP SPss? all ar To put it very frankly, we don’t need or rely on any USPs, because there is not enough competition in this segment. If we continue to be sufficiently funded, and if there is supply of affordable homes in the market, we will continue to grow at a good pace, especially since we provide loans at affordable rates. Having said that, we do have our unique features like the project-led and zero-branch approach, which is taken forward by our field-staff. Can yyou ou ttell ell us some our something thing about yyour back gr ound, yyour our pr evious a backgr ground, pre asssignmen signmentts, and the per e o C sinc e perfformanc ormance off MHF MHFC since ep tion in 2008-09? it incep eption itss inc I am a Chartered Accountant by training, and worked with RBI for 2 years before moving to American Express Bank, where I spent 20 years. In 2008, I cofounded Micro Housing Finance Corporation with Rajnish Dhall and Nachiket Shelgikar, both of them exbankers with international experience and passionate about social sector

Since our retail lending rate is not very high and comparable to banks and HFCs, and since these institutions won’t anyway lend to our kind of informal segment customers, attrition is practically nil. However, there is a good percentage of prepayment of loans, as people working in informal segments are very risk-averse, and tend to close their loans at the earliest. Our average ticket-size being Rs. 4.25 lakh, such early closures are possible for many of our customers. As one among the many HF Cs HFC competing

Ther e is a cconc onc ep tion or pr obably a here oncep eption probably onc ep tion in the mark et tha misconc oncep eption marke thatt misc dable home loans ar e mor e pr one affor ordable are more prone to be NP As. Wha our NPA Whatt ha hass been yyour experienc e? Wher e do yyour our xperience Where NP As st and? NPA stand? We, at Micro Housing Finance Corporation, as

MADHUSUDHAN MENON 77

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projects and social entrepreneurship in their country. Initially, we wanted to get into building affordable homes, but soon realized that being ex-bankers, financing such homes would be the better value that we can bring to the market. Being an unlist ed ccompany ompany and a unlisted affter the spec e o specttacular per perfformanc ormance off peer peerss lik like e Gruh Financ e and R epc o Home FFinanc inanc e, when ar e inance Repc epco inance are you planning ffor or yyour our IPO ? IPO? They were much bigger operations when they went for their IPOs. Currently our loan book size is around Rs. 350 crore, and I think our IPO is much away. Can yyou ou ttell ell us some thing about yyour our kke ey something or e the Michael and Susan Dell in stor orss lik like invvest Founda tion? Do yyou ou ge anc e fr om such oundation? gett a asssist sistanc ance from philan thr opic funds on be erms ? philanthr thropic bettter tterms erms? Well, when we started off in 2008, very few banks or institutional investors were willing to back our efforts, as it was not a proven model. But this being a major social cause, we could get the help of philanthropic funds like Michael and Susan Dell Foundation. But now the situation has changed and many banks and PE fund are after us to invest in the company. We are also choosy regarding who invests in MHFC, as we SINCE OUR are availing 50% of INCEPTION IN 2008refinance from 09, WE HAVE National Housing RAPIDLY SCALED UP Bank. TO A CUSTOMER

BASE OF 7500 AND A LOAN BOOK SIZE OF RS. 350 CRORE, EVEN WHILE KEEPING THE NET NPA NIL. THIS SHOWS THAT THIS IS NOT ONLY A FAST GROWING SEGMENT AND BUSINESS, BUT A VERY SUSTAINABLE ONE.

Ho w do yyou ou ffor or esee How ore the housing financ e finance segmen t gr o wing in segment gro India, eespecially specially the affor dable segmen t? ordable segment? Wha owth Whatt kind o off a gr gro is pos sible ? possible sible?

Since our inception in 2008-09, we have rapidly scaled up to a customer base of 7500 and a loan book size of Rs. 350 crore, even while keeping the Net NPA nil. This shows that this is not only a fast growing segment and business, but a very sustainable one. So far, the constraint has been on the supply side with large affordable projects being rare. But now with the new policy in place favouring affordable homes, we are witnessing affordable home projects with 300 to 500 apartments. And as I told you earlier this is a segment that is 9 times the size of the premium segment, and as such, we expect accelerating growth going forward. 78

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UNIQUE DELIVERY MODEL FOR THE INFORMAL SECTOR Micro Housing Finance Corporation is perhaps the most innovative housing finance company in the affordable home loans segment with its unique features like fieldstaff driven and project-led approaches.

HOMEBUYER ADVANTAGES WITH MICRO HOUSING FINANCE

CORPORATE STRENGTHS OF MICRO HOUSING FINANCE

Micro Housing Finance Corporation (MHFC) has a unique field-staff led delivery instead of the normal branch-led delivery, that is much more customer friendly due to door delivery of loans for those working in the informal sector.

MHFC has rapidly built up a home loan book of Rs. 350 crore, within six years of its inception.

MHFC’s business model is also unique in that it has a project-led approach, in which MHFC ties up with affordable home developers, so that customers eyeing a specific project are readily offered a home loan. MHFC also ties up with government projects and PPP projects that offer much more cheaper homes than in the private sector. MHFC’s tie-ups are often with large projects that offer 300 to 500 apartments in one location. Despite MHFC’s focus on a riskier segment of customers, it offers home loans at rates as low as 12.5%.

Despite serving the riskier informal segment, MHFC has been managing an admirable asset quality, with Net NPAs at 0%. MHFC is financially backed by noted institutional and philanthropic funds including Michael and Susan Dell Foundation, run by founders of Dell Inc, one of the largest computer manufacturers in the world. MHFC enjoys almost no attrition in home loans, which reveals their superior delivery of value and service to customers. MHFC continually scans for large affordable projects for tie-ups, and has highly effective grassroots level operation in 7 states, even while having no branches, due to their highly techenabled delivery.

BOOM BOOM… HOUSING FINANCE!

FEDERAL HOUSING LOAN

FEATURE-RICH FOR REALIZING DREAM HOMES IN A HOME LOAN MARKET THAT IS RAPIDLY BECOMING OVERCROWDED, FEDERAL HOUSING LOAN IS STANDING OUT, THANKS TO ITS FEATURERICH NATURE. FEDERAL HOUSING LOAN, LIKE ALL HOME LOAN PRODUCTS, BASICALLY ASSISTS HOMEBUYERS IN THE PURCHASE OR CONSTRUCTION OF A HOUSE, VILLA, OR APARTMENT. BUT IT GOES MUCH MORE THAN THIS BASIC VALUE PROPOSITION. ederal Housing Loan can also be used for acquisition of land or house-plot and subsequent construction of a house. It can also finance or reimburse the debt incurred on repairs, renovation, extensions, re-modelling, beautification, and furnishing, of your house, villa, or flat.

Next in line comes Federal’s flexibility by way of LTV, loan range, tenure, and cushion period. While the bank provides loan up to 85% of project cost, maximum loan amount is quite accommodative at Rs. 15 crore. Its repayment tenures are among the longest in the industry, up to a maximum of 30 years for Resident Indians and 20 years for NRIs.

In case a homebuyer is dissatisfied with his or her current home loan provider, Federal Bank can also assist by taking over the loan. This leading private sector bank also provides supplementary housing loans to employees of well-run companies.

A pre-EMI cushion period is provided, up to a maximum of 36 months. The retail lending rates are very competitive, translating to EMIs that start at Rs. 874 per lakh.

However, what sets apart Federal Housing Loan is its feature-rich nature that meets almost any financing need the homebuyer will be having in connection with his purchase or construction of a home. Firstly, Federal Bank excels in processing the loan with minimal paperwork, which translates to one of the fastest loan approvals in the industry. Secondly, Federal Housing Loan is very flexible in that rental income as well as income of close relatives are considered for assessing repayment. 80

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Other features include Top-up facility up to 100%, Home Plus loans with relaxations, no pre-closure charges, optional life cover with IDBI Federal, and even a House Warming Loan. However, the most innovative product from Federal Housing Loan is Home Extra Gain, which is a special overdraft housing loan product. Under this, customers can remit amounts in excess of agreed EMIs when possible and withdraw the amount remitted in excess of the normal EMIs if needed. Channels for operating the account include Cheque, ATM, Net-banking, over the counter etc.

Shyam Srinivasan, MD

SEASONAL MAGAZINE

BOOM BOOM… HOUSING FINANCE!

MANAPPURAM FINANCE

INNOVATING IN THE BOOMING ‘LOAN AGAINST PROPERTY’ MARKET Manappuram Finance has long been synonymous with gold loans. However, in recent years, the listed company headed by ex-banker VP Nandakumar, has diversified into various financial services that includes a housing finance subsidiary, Manappuram Home Finance Ltd. Among Manappuram Finance’s new businesses, one of the most prospective foray is its Loan Against Property (LAP) division, a business which is much focused on by almost all major housing finance companies in recent times. he newer financial services from this gold loan major include, microfinance, international & domestic money transfer, foreign exchange, depository services, commercial vehicle loans, and SME & Loan Against Property. Manappuram Finance’s Loan Against Property (LAP) product offers higher loan amounts for businesses at the most competitive interest rates. With easy documentation, speedy approvals, and flexible repayment options, getting a LAP loan is quite accessible from Manappuram Finance.

There are several key features that makes Manappuram’s LAP product stand out. Firstly, higher loan amount is available for longer tenure and at attractive rates of interest. Loan amounts ranging from Rs. 10 lakh to Rs. 2 crore is available. Tenure of loan ranges from 24 months to a maximum of 84 months. Secondly, the loan processing is quite fast with a turnaround time (TAT) of just 10 days. Thirdly, Manappuram Finance also accepts a wide range of properties for the LAP product.

Manappuram provides loans against the collateral security of property to eligible entities and individuals carrying on an established business where the scope for finance exists and can be evaluated.

These include self occupied commercial or residential properties; land which extends more than 3 cents in corporation areas or 5 cents in municipal areas or 10 cents in rural areas; and vacant land and plot with approach roads.

This listed NBFC provides loans against property to self-employed professionals as well as nonprofessionals. Eligible businesses include proprietorship, partnership, & limited companies.

Manappuram’s LAP branches are located across Kerala, Karnataka, Tamilnadu, & Pune, and is coming shortly to West Bengal, UP, AP, Delhi, Telangana, Gujarat & Rajasthan.

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VP Nandakumar, MD & CEO 83

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INTERVIEW

SWAGAT HOUSING FINANCE COMPANY LTD.

SLOW AND STEADY, FOR WINNING THE RACE hartered Accountant Ramesh S Prabhu has been a pioneer in Maharashtraâ&#x20AC;&#x2122;s housing schemes for the Economically Weaker Section (EWS) and Low Income Group (LIG) of the population. He was a Member of the Deemed Conveyance Committee of Government of Maharashtra. CA Ramesh Prabhu has also been instrumental in assembling 50,000 cooperative housing societies of Maharashtra under the common umbrella organization, Maharashtra Societies Welfare Association (MSWA). Around 19 years back, Ramesh Prabhu promoted a housing finance company to exclusively cater to the needs of homebuyers falling under the EWS and LIG categories. Until now, Swagat Housing Finance Company Ltd (SHFCL) has helped over 2000 families to have their own homes, which is not a small achievement as it started out in these segments when most of the larger affordable home loan providers had still not been founded. Of course, some of the latter day players with deeper pockets have outpaced Swagat in recent years, but CA Ramesh Prabhu is sticking to his conviction that in this high-risk business, it is the slow and steady that will win the race ultimately. It shows in Swagatâ&#x20AC;&#x2122;s strategies like registered mortgage, and in its low NPA levels in comparison with competition. Seasonal Magazine in conversation with CA Ramesh S Prabhu, Founder & Director, Swagat Housing Finance Company Ltd.-

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BOOM BOOM… HOUSING FINANCE! Can yyou ou st ar fing us about star artt bbyy brie briefing the kind o oduc off home loan pr produc oductts tha thatt Swaga ovide agatt Housing pr pro videss? Our primary product is a home loan for the Economically Weaker Section (EWS) and Low Income Group (LIG) segments of our population. As you might be aware, Government has classified the population as per various annual income strata, and those earning below Rs. 3 lakh per annum constitute EWS and those earning between Rs. 3 to Rs. 6 lakh belong to the LIG. We also have a newer product, which is Loan Against Property (LAP), which is only a minor product as of now. Why doe waga e in the doess S Sw agatt specializ specialize EWS and LIG segmen segmentts? Well, EWS and LIG segments of our population together constitute the majority of Indian population, but they

are unable to get home loans to either buy or construct a house of their own, as they are working in the informal sector and have no income proofs on paper. I have been working for their cause for a long time, especially in Maharashtra, and has been part of many government and cooperative bodies and committees working to find solutions for their plight. So, naturally, in 1996, when I promoted t h i s housing finance company, naturally my focus became serving the EWS and LIG segments.

However, I should add that 97% of our loans are still less than Rs. 10 lakh, which clearly shows our sharp focus on EWS & LIG segments. As an average, our ticket-size would be between Rs. 6 to Rs. 7 lakhs. Wha ould be the ttenur enur eo waga t’s Whatt w would enure off S Sw agat’s home loans ? loans? Though the ticket size is quite low, Swagat offers generous tenures ranging from 5 to 20 years. This allows our customers belonging to the low and middle income group to properly accommodate the EMI into their monthly income vs. expense cash flow.

With their earning ccapacit apacit apacityy rranging anging fr om le s. 3 lakh tto o up tto oR s. from lesss than R Rs. Rs. 6 lakh, wha ould be the loan tick et whatt w would ticke range tha waga thatt S Sw agatt Housing o offfer erss?

At wha ates doe waga o whatt rra doess S Sw agatt lend tto er homebuyer erss? homebuy

19 years back, when I started out our first home loans were around Rs. 50,000. Today, our home loans range from as low as Rs. 1 lakh, to around Rs. 15 to Rs. 20 lakh on the higher side.

Our retail lending rates for home loans range between 14.5% to 16.5%. The rates are slightly higher than banks and HFCs due to two reasons. Firstly, what we provide is registered mortgage

CA Ramesh S. Prabhu, Diractor

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which increases the cost for us, whereas what banks and HFCs provide is equitable mortgage. Secondly, the risks in lending to EWS and LIG segments are higher, which mandates slightly higher rates to offset the risk.

repa ymen signed? epaymen ymentts de designed? Repayments are by Equated Monthly Instalments (EMIs), and there are three options for the mode of payment. It can either be by direct salary deduction, or by post-dated cheques, or by Electronic Clearing Service (ECS). We offer these three routes as our customers include both salaried as well as self-employed persons.

Wha able mor gage,, and why Whatt is equit equitable morttgage can’t S waga ovide it? Sw agatt pr pro In equitable mortgage, the mortgage deed is not really registered with the sub-registrar or land registration authority, and it remains an agreement between the borrower and the lender with just the title deed kept with the lender as security. In the case of default in an equitable mortgage, the lender would need to move a court of law to get a favourable ruling. This type of mortgage is not suitable for EWS or LIG segments, as a small percentage of borrowers may try to sell off the property without the consent of the lender using duplicate deeds. The small ticket size also makes it costly to approach a court of law for each such case.

You men tioned a sec ond pr oduc t, tha mentioned second produc oduct, thatt is LLoan oan A gainst Pr oper e Against Proper opertty. Wha Whatt ar are the ffea ea tur es o our LLAP AP pr oduc t? eatur ture off yyour produc oduct?

R.B.Harnal, Chairman

Wha ould be S waga Whatt w would Sw agatt Housing’s cust omer ba se so ffar ar ? customer base ar?

And ho w is rregist egist er ed mor how egister ered mortt gage en t? difffer eren ent? dif In registered mortgage, the borrower transfers the property to the name of the lender, and this mortgage deed is registered with the sub-registrar so that such a property can never be sold off to a third party without the lender’s knowledge. When the loan is repaid in full, the property is transferred back to the borrower, again through a registration at the land registration authority. In the case of a default, there is no need to approach a court for allowing the sell-off of the property. Swagat, being focused in the EWS and LIG segments, has to implement registered mortgage to prudently manage the risk. Wha e the disadv an Whatt ar are disadvan anttage agess o off a er ? egister ered morttgage gage? regist ed mor Unfortunately, since two registrations at the sub-registrar office are involved, it escalates the costs for both the borrower and the lender. It may be as high as 2% of the loan amount. 86

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Swagat Housing provides LAP so that a house owner can leverage his investment to meet genuine needs like home repairs, reconstruction, and extensions. This is very important in the EWS and LIG segments. While the loans in this category range from Rs. 1 to Rs. 20 lakhs, the Loan-to-Value is lesser at 60% of the current property value and the maximum tenure is shorter at 10 years.

Sahana R. Prabhu, MD However, from our experience it has not been a dampener for the borrowers, as they are unable to get any kind of home loan - be it equitable or registered - from the banks or mainstream HFCs. oanWha ould be the appr oxima appro ximatte LLoanWhatt w would to-V alue o ed bbyy S waga o-Value offfer ered Sw agatt Housing Financ e? inance We offer home loans which are up to 80% of the property value, which is very competitive in the affordable home loan sector. The remaining 20% is to be borne by the homebuyer. S w aga t’s ffocus ocus segmen agat’s segmentt s being EWS and LIG w a rre e the G,, h o ow

Well, we started off in a small manner as I mentioned, and has scaled up over these past 19 years. We have extended home loans to 2000 homebuyers till now. But going forward, we expect the growth to be much more faster due to a few reasons. Firstly, the policies of the Central Government as well as various state governments are highly favourable to the affordable housing and its financing sectors. Secondly, Swagat Housing is raising funds through multiple routes to strengthen our capital base for accelerated lending. Thirdly, Swagat has plans to enter into the group housing loans or micro-financed home loans, which is emerging for the EWS & LIG segments. And lastly, with more players entering the affordable home financing scene, there is growing awareness among EWS & LIG segments that they can take home loans from HFCs like Swagat. And these segments are the largest and fastest growing segments among Indian homebuyers.

INTERVIEW

SHRIRAM HOUSING FINANCE LTD.

SERVING THE UNDERSERVED hen you hear the term underserved, first to come to your mind would be the low and middle income groups. But it is not the full picture, says Sujan Sinha, Managing Director & Chief Executive Officer of Shriram Housing Finance Ltd. Underserved can mean even the middle to higher income groups, which doesn’t have proper income documents due to their work being in the informal sectors of the economy. That is why Shriram Housing Finance extends home loans ranging from Rs. 50,000 to Rs. 75 lakhs, and even beyond to Rs. 1 crore plus. According to this former head of retail lending at Axis Bank, the underserved category of home loans is booming, as the informal segment of the economy accounts for 90% of the working population. Though the interest rates in the segment are higher than that offered by banks and mainstream HFCs, the riskadjusted returns are similar, according to Sinha. Shriram Housing Finance Ltd (SHFL) is a subsidiary of Shriram City Union Finance Ltd, a flagship company of Shriram Group, one of the largest diversified financial services groups in the country. Founded by legendary entrepreneur R Thyagarajan, Shriram Group is one of the most well-capitalized financial service providers in India, which makes scaling up of relatively newer operations like SHFL, a breeze. Shriram Housing has been growing at a blistering pace since late 2011, when it commenced operation, due to the Shriram pedigree and expertise, the management bandwidth, as well as the huge and growing market of the underserved in which it operates. Seasonal Magazine interviews Sujan Sinha, MD & CEO, Shriram Housing Finance Ltd. Housing FFinanc inanc e ha al superinance hass se sevver eral specializa tions, and which is the specializations, segmen am Housing segmentt tha thatt Shrir Shriram Financ e is ffocusing ocusing on? Is it the inance affor dable segmen t? ordable segment?

gr own it oR s. 7 37 cr or e, gro itss loan book tto Rs. 737 cror ore which is one o ast est gr owth off the ffa ste gro rates in the under ser underser servved home loans segmen t. TTo o wha ou a e segment. whatt all do yyou atttribut tribute this brisk pac e? pace

We are present in the affordable segment, but the right segment to describe us would be the underserved category. We offer loans to not only the low income groups, but to the middle and higher income groups, with the common feature of all these customers being that they would be underserved by banks and regular HFCs due to lack of proper income proofs.

For your information, I think we have already crossed Rs. 1000 crore in loan book size in recent months. It is a brisk pace of course, and I would attribute it mainly to the size and growth rate of the underserved segment of homebuyers. At around 90% of the working population, those working in the informal sectors really constitute the mainstream segment of homebuyers. Secondly, its growth prospects and underserved nature being such, what an HFC focusing on

Shrir am Housing which st ar Shriram star artted it itss oper ation only in 20 11 ha wever opera 2011 hass ho how 88

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this segment should have is just adequate funds for lending, which Shriram Housing is blessed with thanks to its parents Shriram City Union Finance and Shriram Capital. Thirdly, an HFC operating in this segment should have innovative credit appraisal models, good management bandwidth, and a willingness to learn, which I believe are qualities this company has nurtured properly. Shrir am, ba sic ally being a South ba sed Shriram, basic sically based and Chennai headquar ed oper ation, headquartter ered opera ha wever chosen Mumbai tto o be hass ho how SHFL ’s headquar s. W as it a vver er SHFL’s headquartter ers. eryy Wa purpose ful decision and why ? purposeful why? Though Shriram Group is headquartered

BOOM BOOM… HOUSING FINANCE! R Thyagarajan, Chairman, Shriram Group

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in Chennai, different group companies are headquartered at different cities across India. The largest group entity, Shriram Transport Finance, for example, is headquartered at Mumbai. So, the decision to locate our head office at Mumbai was for operational convenience. SHFL ha 2 br anche os hass 7 72 branche anchess acr acros osss the coun tr wn tto o oper ate mor e ountr tryy and is kno known opera more in TTier-II ier-II and TTier-III ier-III citie owns. citiess and tto Ho w many st ates do yyou ou cco over in yyour our How sta foorprin t, and which ar e yyour our most oorprint, are ospec tiv e st ates? pr prospec ospectiv tive sta We are present in 17 states and union territories across India. Our largest operations are in the states of Andhra Pradesh, Tamilnadu, Gujarat, & Rajasthan. Doe e the br anch and/or Doess SHFL utiliz utilize branch emplo en am employyee ne nettwork o off par paren entt Shrir Shriram Cit inanc e in any w ay? inance wa Cityy Union FFinanc We have utilized the branch facilities of group companies including Shriram City Union and Shriram Transport on a co-location basis, but in a clearly demarcated way. Our first office in Mumbai was 100% part of a group firm‘s facilities, and around 75% of our branches are still co-located. Shrir am TTrranspor inanc e ha Shriram ansportt FFinanc inance hass a huge cust omer ba se among the used truck customer base s. Is ther e any ssyner yner gy be owner wners. there ynergy bettween this cust omer ba se and SHFL ’s customer base SHFL’s pr ospec tiv e cust omer pool? prospec ospectiv tive customer There is synergy of course, but there are limitations too as customer data can’t be shared between even group firms. So, the synergy is more by way of understanding the underserved segments, their cash-flow challenges, how to effectively appraise their credit worthiness, and so on. Another point to note is that, despite all these synergies, for an average customer in this segment, a home is a pinnacle of an achievement, and is taken after much consideration. So, there is little scope for cross-selling and such strategies. Wha cen am Cit Whatt per perc enttage o off Shrir Shriram Cityy Union’s loan book and busine businesss/ 90

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“

An HFC operating in this segment should have adequate funds, innovative credit appraisal models, good management bandwidth, and a willingness to learn, which I believe are qualities this company has nurtured properly.

”

pr ofit on tribut ed bbyy SHFL? pro fitss is ccon ontribut tributed Well, our direct parent Shriram City Union is a large NBFC which is present in various retail lending segments, and which has been in operation for nearly 3 decades. Shriram Housing, in contrast, is a single segment company, which started only in late 2011. So, our current contribution to their business is tiny, and should be around 2-3%. But going forward, our contribution might go at a faster pace. Considering tha thatt SHFL ha hass been owing a ast pac e, and yyour our gr gro att a ffa pace gr oup ha ving multiple list ed group having listed companie s, is ther e any mo o ompanies, there movve tto tually list Shrir am Housing in the even entually Shriram bour se wn? bourse sess on it itss o own? This is something that has not been considered till now. Shriram Housing is not in need of external funds at this stage, due to the strongly funded nature of our parent companies as well as the capital infusion by Piramal Enterprises. Our current leverage is also less than 2 times, which can go up to 7 times if needed. Having said that, I also believe that Shriram Housing will eventually go for its IPO and become a listed company in the long run, because that would be the logical conclusion. De spit e being in the under ser Despit spite underser servved t, yyou ou ha wn willingne segment, havve sho shown willingnesss segmen to lend up tto oR s. 75 lakh ffor or home s. Rs. homes.

Ar e yyou ou eeyyeing the mainstr eam home Are mainstream Cs loan segmen thatt bank bankss and HF HFC segmentt tha ar e ttar ar ge ting? arge geting? are Well, to answer the first part of your question, our normal limit is 75 lakhs, but we have given home loans for Rs. 1 crore and even beyond. The key here is that, we are not only an affordable home loan company. But I should answer the second part of your question in the negative, as we have no plans to be a mainstream HFC or like a bank. Even our large loans of Rs. 75 lakh or above, is to the underserved categories. Wha ould be the a age tick et siz e Whatt w would avver erage ticke size of Shrir am Housing? Shriram It would be around Rs. 11 lakhs, as the bulk of our home loans are for the affordable segment. Wha ould be yyour our gr would gros osss and ne nett Whatt w os NP A le ? Is a assse sett qualit qualityy a major NPA levvels els? pr oblem in the a dable segmen t? problem afffor ordable segment? Our net NPA is around 2%, which is comparable to peers operating in this segment. Asset quality is a higher risk in this segment definitely, but it is not an unmanageable challenge. Wher e doe our lending rra a t e s, Where doess yyour spr eads, and NIMs st and? Is it spreads, stand? anymor e true tha dable anymore thatt a aff f or ordable segmen on tinue o enjo ontinue tinuess tto enjoyy be bettter segmentt ccon NIMs ? NIMs? Our average retail lending rate for home loans is 15%. It is higher than banks and HFCs to compensate for the higher risk or poorer asset quality. Speaking about spreads, margins, & NIM, our experience has been that the risk-adjusted returns is nearly the same as for banks and mainstream HFCs. I was heading Axis Bank’s retail lending operations, and therefore I can vouch for this fact. Accor ding tto o yyou, ou, wha ording whatt ha hass been the onstr aining the botttleneck cconstr onstraining major bo gr owth o wner ship and home gro off home o owner wnership loan gr owth in India, eespecially specially the gro dable segmen t? affor ordable segment? The primary bottleneck is that of supply. We don’t have large developers

building affordable homes on a massive scale in the organized sector. I hope that with the favourable policies of the Central Government, more developers would focus on bettering the supply side. Even a few state governments have ventured into mass housing recently, on a PPP basis. W h a t a l l wo u l d y o u re g a rd a s S h r i rra a m H o u s i n g ’ s U S Ps i n t h e a f f or dable home loan segmen t? ordable segment?

The market and the opportunity are so huge that an HFC doesn’t need any USP to make productive use of it. The shortage in housing units is estimated at over 2 crore on a conservative basis. If Shriram Housing’s focus stays unwaveringly on the grassroots and underserved segment, I would say that the future is very promising.

Sujan Sinha, MD & CEO, Shriram Housing Finance Ltd.

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If Shriram Housing’s focus stays unwaveringly on the grassroots and underserved segment, I would say that the future is very promising.

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INTERVIEW

MAHINDRA RURAL HOUSING FINANCE

ENABLING RURAL HOMEBUYERS LIKE NO OTHER Mahindra Rural Housing Finance Ltd (MRHFL) is arguably one of the largest HFCs serving the rural underserved population in India. With a loan book of Rs. 2500 crore, and growing at a CAGR of over 50%, MRHFL is proving that corporates can do what is socially neglected and still thrive. Mahindra Rural Housing is the kind of company that only a Group like the Mahindras can spawn, and only something a parent like Mahindra & Mahindra Financial Services (MMFSL) can nurture. Because, the success of Mahindra Rural Housing stems from the in-depth knowledge of Mahindra Group in the rural sector by way of their leadership in farm equipment business, and the expertise MMFSL has in financing such farm equipment. No wonder then that Mahindra Rural Housingâ&#x20AC;&#x2122;s success has been globally acknowledged, with it being a prestigious member of UNDPâ&#x20AC;&#x2122;s Business Call-to-Action. Since its inception, MRHFL has been led by its CEO Anuj Mehra, who has also been its MD since the last few years. An economics graduate from Delhi University and a postgraduate in business administration from IIM Ahmedabad, Mehra has worked in various industrial spheres, and has been a Mahindra Group veteran for long. Seasonal Magazine interviews Anuj Mehra, MD & CEO, Mahindra Rural Housing Finance:

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Anuj Mehra, CEO

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Can yyou ou st ar fing us about the star artt bbyy brie briefing back gr ound and uniquene backgr ground uniqueness s o off Mahindr a Home FFinanc inanc e in the housing Mahindra inance financ e sec ? finance secttor or? Mahindra Home Finance is the brand or product name by which Mahindra Rural Housing Finance Ltd (MRHFL) operates. It is a subsidiary of the listed entity, Mahindra & Mahindra Financial Services Ltd (MMFSL), which is a diversified financial services player which goes by the brand name of Mahindra Finance, and is part of the Mahindra Group. MRHFL is unique in that it’s 12.5% equity stake is held by National Housing Bank (NHB), which is the sector regulator, and a subsidiary of Reserve Bank of India (RBI). The rest 87.5% equity is held by MMFSL. Segment and product wise, Mahindra Rural Housing Finance is unique in that its primary focus is the rural housing market of India. The rur al br eadth or landsc ape o rural breadth landscape off India is rreally eally huge ould be Mahindr a huge.. Wha Whatt w would Mahindra Rur al Housing’s rreach each acr os acros osss India? Rural Very true, as India is a vast country, predominantly rural, with around 6.5 lakh villages. Our reach would be in around 40,000 villages currently. It is significant, but as the numbers indicate the untapped potential is huge. Wha Whatt is the principal challenge in oviding home loans tto o this sec ? pro secttor or? pr Well, in many of the rural communities, there is no proper sale or purchase agreement for most lands. That is why banks and HFCs are not keen in giving loans, and that is one of the main challenges that we overcome with proprietary credit appraisal models. Wha ould be yyour our curr en Whatt w would curren entt loan book e, and wha our gr owth size whatt ha hass been yyour gro siz rates so ffar ar ? ar? We have been growing at a CAGR of over 50% during the past five years, and our current loan book is around Rs. 2500 crore. Will it be ccorr orr ec o sa a orrec ectt tto sayy tha thatt Mahindr Mahindra al Housing FFinanc inanc e is the lar ge st Rural inance large gest Rur such rur al ffocused ocused pla rural playy er in the coun tr ountr tryy? It may be true, but I should add that it is also because our competitors are different in different states and even different regions of the same state. In some states, cooperative banks would be our main competitors, while in some 94

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other regions, a proactive unit of a PSU bank might be our competitor.

of 11%, as here our cost of operations are much lower.

Wha ould be Mahindr a Rur al Whatt w would Mahindra Rural Housing’s ffoo oo tprin os ay ootprin tprintt acr acros osss India, bbyy w wa of st ates and br anche sta branche anchess?

Ar e yyour our mor able or Are mortt gage gagess equit equitable regist er ed? egister ered?

We are present in 9 major states, and operate from 250 branches. Our most productive states are Maharashtra, Tamilnadu, Karnataka, and Andhra Pradesh. Is yyour our loan book 100% rur al? Wha rural? Whatt would be yyour our a age tick et siz es? avver erage ticke size Well, the customer base and loan book is 95% rural as of now, with the rest

We have both equitable mortgage as well as registered mortgage, and the choice between them is often dictated by location. There are states in which registered mortgage is a must, and there are states where either of the mortgages can be given. a Gr oup is a major pla Mahindr Mahindra Group playyer in al ffocused ocused busine arm rural businesss o off ffarm the rur equipmen t. Is ther e a ssyner yner gy her e tha equipment. there ynergy here thatt

"MAHINDRA RURAL HOUSING FINANCE IS A PRESTIGIOUS MEMBER OF ‘BUSINESS CALL-TO-ACTION’, AN INTERNATIONAL PLATFORM BY UNITED NATIONS DEVELOPMENT PROGRAMME (UNDP), WHICH IS A CONFIRMATION OF OUR LEADERSHIP AND COMMITMENT TO INCLUSIVE AND SUSTAINABLE BUSINESS INITIATIVES AT THE BOTTOM OF THE PYRAMID (BOP)."

being in semi-urban areas. Our average ticket size is Rs. 1 lakh, while the usual limit to which we lend is around Rs. 7 lakh. Many of our loans are really homecompletion loans, which customers use for their roofing or flooring. We want to grow the semi-urban segment more as many large-scale affordable housing projects are happening in these geographies. Wha age in est rra ates tha Whatt is the a avver erage intter ere thatt Mahindr a Rur al Housing char ge itss Mahindra Rural charge gess it cust omer customer omerss? Being a rural focused business, that too a lower-ticket business, our cost of operations are much higher. To offset this, as well as the higher risk involved, our interest rates are slightly higher, between 14-16%. However, our semiurban loans are given at an average rate

you ar e ttapping? apping? are Well, the synergy is more with our direct parent, Mahindra & Mahindra Financial Services Ltd (MMFSL), which gives loans to farmers for buying these tractors and farm equipment. But rather than crossselling, the real synergy is the knowledge

that we get from MMFSL in understanding the rural customer, his strengths and his weaknesses. Those entering this segment would think that it is a small thing, but this knowledge has been our greatest edge in this business. Wha tur eo our eexpansion xpansion Whatt is the na natur ture off yyour plans ? Is it br anch led or field-st aff led? plans? branch field-sta Branches are important for us, but more important is our field-staff. This is purely a people-driven business. Our staff has to travel a lot, visit the customers, sit with them, and help them in availing the

It is already proven by us that this is a very sustainable business. We have a Return on Assets (RoA) of 2%, and a Net Interest Margin (NIM) of 7%, which is one of the highest in the sector. Wha ould Whatt about a assse sett qualit qualityy? Wha Whatt w would be yyour our ne A le nett NP NPA levvel? Our asset quality is reasonably high, but the point to note here is that technical NPA level is not the correct indicator to judge the asset quality in the rural segment. Here, the customer’s cashflows are erratic, and we should accommodate for that. Here the correct metric should be the percentage of loan

"INSTEAD OF FORCING CUSTOMERS TO ROUTE THEIR PAYMENT THROUGH BANKS, CHEQUES, OR ECS, WE HAVE IMPLEMENTED ONE OF THE LARGEST CASH COLLECTION SYSTEMS FOR THE EMI PAYMENT WHICH IS WORKING FLAWLESSLY. AND IN ADDITION TO EMIS, WE HAVE THE OPTION OF QUARTERLY AND HALFYEARLY PAYMENTS, SO THAT REPAYMENTS ARE IN TUNE WITH THEIR REAL WORLD CASH-FLOWS LIKE HARVEST REVENUE ETC." write-offs, and ours is well below 1%. ed Ha ving gr o wn tto medium-sized Having gro o a medium-siz oper ation alr eady a Rur al opera already eady,, will Mahindr Mahindra Rural Housing go ffor or it wn IPO and listing? itss o own It is not a question of if, but a question of when. Though our immediate parent is directly listed in the stock exchanges, the growth potential and fund requirements of this housing finance company is such that there will be an eventual direct listing of this business. But nothing much can be said about the time-frame at this stage. right loan product for their home construction or renovation needs. Ho w sust ainable is the rur al housing How sustainable rural financ e busine our finance business s, a ass per yyour experienc ea ell a eturn rra atios xperience ass w well ass the rre of Mahindr a Rur al Housing? Mahindra Rural

Ho w do yyou ou vie w the emer ging sc ope How scope view emerging of the rur al housing financ e sc ene ? Do rural finance scene ene? you sub scribe tto o the vie w tha subscribe view thatt lack o off ma mass s housing scheme schemess limit limitss it itss po tial? potten ential? Not at all. There is absolutely no dearth

of potential in the rural housing finance segment. We have grown tremendously without mass housing and will continue to do so. Mass housing was never a major feature in the rural segment, and I expect that it would remain so. Mass housing will grow tremendously in the semi-urban segment, and that is why we are strengthening our presence there. Accor ding tto o yyou, ou, wha ording whatt is the chie chieff bo e the rur al housing botttleneck be beffor ore rural ? financ e sec or? finance secttor I would say that it is lack of trained personnel. There is infinite opportunity, there are enough funds, but to get it to work, we should have enough trained personnel who are not only capable but passionate about this great work of enabling our rural brothers and sisters to have proper homes of their own. Ha ou applied ffor or any kind o Havve yyou off a banking lic ense ? license ense? No, we have not applied directly, but our parent MMFSL is a contender for small finance banking licence. Mahindra group company Tech Mahindra is already a recipient of a payment banking licence. Wha our a tion with Whatt is yyour aff filia filiation ganiza tions lik e U SAID and UK AID ? organiza ganizations like US UKAID AID? or Ar e yyou ou in any w ay funded bbyy the se Are wa these tions ? in tional or ganiza intterna ernational organiza ganizations tions? No, not at all. They are supporting members or sponsors of a prestigious international platform by United Nations Development Programme (UNDP), called ‘Business Call-to-Action‘. Two years back, MRHFL became a prestigious member of ‘Business Call-to-Action’, which is a confirmation of our leadership and commitment to inclusive and sustainable business initiatives at the Bottom of the Pyramid (BoP). Whatt w would egard ass the highe highest Wha ould yyou ou rregar egar da st inno a Rur al Housing innovvations bbyy Mahindr Mahindra Rural e? Financ inance There are many, but I would mention a couple of them. Instead of forcing customers to route their payment through banks, cheques, or ECS, we have implemented one of the largest cash collection systems for the EMI payment which is working flawlessly. Secondly, in addition to EMIs, we have the option of quarterly and half-yearly payments, so that repayments are in tune with their real world cash-flows like harvest revenue etc. 95

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INTERVIEW

SWARNA PRAGATI HOUSING MICROFINANCE

MICROFINANCING A RURAL REVOLUTION IN HOUSING hile serving as the Chief General Manager of SBI in Maharashtra Circle, he pioneered the bank’s linkages with Self Help Groups (SHGs), that not only propelled SBI to the leadership position in microfinance in the state, but elevated Maharashtra as the fastest growing microfinance destination. Later, as Chairman of NABARD’s National Committee on Rural Habitat, he studied and co-authored a report that has become the basis for government’s policy on rural housing. But disappointed that none of the banks and HFCs would implement his proposals, A. Ramesh Kumar would quit SBI to co-found Swarna Pragati Housing Microfinance, India’s first housing microfinance institution. Today, Chennai headquartered Swarna Pragati, backed by PE fund Aavishkaar Goodwell II, is growing at a CAGR of 200%, even while it maintains a healthy NIM, and manages an NPA of well below 1%. Seasonal Magazine interviews A. Ramesh Kumar, Chairman & Managing Director of Swarna Pragati Housing Microfinance:

Swarna Pr aga ti is a unique model in Praga agati e. C an yyou ou st ar finance Can star artt bbyy home financ brie fing us about ho w this cconc onc ep briefing how oncep eptt our rrole ole in it? came in intto being, and yyour Swarna Pragati, which I co-founded in stages, between 2009 to 2011, has been India’s first housing microfinance company. You must be aware of the Microfinance model, for which its pioneers Muhammad Yunus and Grameen Bank of Bangladesh won the Nobel Peace Prize. That was in 2006, and much before that I was deeply involved in the development of microfinance through Self Help Groups (SHGs) in the state of Maharashtra. I was working with State Bank of India, as its Chief General Manager (CGM) for Maharashtra Circle. Back then, around 25,000 employees and 850 96

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branches were under me, and I could grow that state’s business to a milestone of $15 billion. But more than that, what I regard as my greatest achievement during that period was the headway we made in pioneering micro-credit through SHGs. From being a sluggish state for microfinance, Maharashtra rose to become the fastest growing state for MF under my tenure. SBI’s state unit recorded a 960% YoY growth in SHG linkages, and came to dominate 80% of the microfinance linkages in the state. This has been my background in microfinance. I should also add that the model I pioneered was later adopted by almost all Indian banks to grow their microfinance business. But housing micr ofinanc e is slightly micro finance

BOOM BOOM… HOUSING FINANCE! dif en t, isn’t it? Ho w did yyou ou ccome ome difffer eren ent, How to this super-specializa tion o super-specialization off MF? Yes, it is slightly different, or I should say that it is an adaptation of microfinance for delivering home finance. Soon after my success in microfinance, I was asked to head NABARD’s National Committee on Rural Habitat, as its Chairman. We studied the sector and its problems in-depth and at a grassroots level, and came out with a report on some innovative solutions for promoting rural housing development. It has been the most comprehensive study and detailed document on the subject, and later proved to be an important input for the government in formulating their rural housing policy. But, unfortunately, almost no bank or financial institution was willing to implement the novel approach suggested in this report. Meanwhile, in 2007, I took voluntary retirement from SBI as a CGM, and joined an NBFC. By 2009, I had incubated Swarna Pragati under this NBFC, and later made it a standalone entity. Some of my banking sector colleagues and an enterprising youngster Sameer Siddiqui have been the co-founders. Swarna Pragati was started to implement the suggestions I made in the NABARD report as its Chairman,

and to find further solutions through microfinance.

A. Ramesh Kumar, CMD

“

By reengineering a new model of rural housing finance through Swarna Pragati, I broke up the typical home loan into manageable chunks of smaller and shorter-duration loans for building specific parts or modules of the house. We call it incremental housing finance, and the customers use it for a specific task at a time, like building the foundation, building the walls, having proper flooring, or proper roofing, or for building a small house with a room and toilet first and then adding more rooms, kitchen, workplace etc.

”

Wha er e the major challenge Whatt w wer ere challengess f acing the rur al popula tion in rural population financing the cconstruc onstruc tion o off a home onstruction of their o wn? own? From our studies for the NABARD committee, it became clear to me that there are four core challenges facing a rural person from financing a home of his own. Firstly, his income fluctuates in a wide range, unlike an urban employee or shop owner. It depends on various factors like rainfall, croploss, demand situation etc., and so the rural borrower is averse to a long tenor loan. Secondly, rural land owners don’t have proper land records. They will have some kind of documents that are socially respected, but not acceptable by any bank or housing finance company. Thirdly, the rural population don’t have a credit history, which means that there is no CIBIL score or any such method to verify how good or bad they have been in repaying their loans. And, in the fourth and last place, comes the challenge of high operational costs incurred by a bank or financial institution, if at all it wants to lend to rural customers, who will invariably be in remote locations, quite away from a bank branch. Rural

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housing finance was not happening due to these four core reasons, and I came to the conclusion that if Swarna Pragati has to succeed in this field, I will have to find solutions for overcoming these four challenges. And tha warna Pr aga ti did? thatt is wha whatt S Sw Praga agati But ho w? how Yes, that is precisely what we did. We knew that rural incomes would keep fluctuating to a reasonable degree, and that was why prospective home owners in the rural setting was so timid about taking a large and longerduration home loan. So, what I did was we reengineered a new model of rural housing finance in which Swarna Pragati broke up that typical home loan into manageable chunks of smaller and shorter-duration loans for building specific parts or modules of the house. We call it incremental housing finance, and the customers use it for a specific task at a time, like building the foundation, building the walls, having proper flooring, or proper roofing, or for building a small house with a room and toilet first and then adding more rooms, kitchen, workplace etc. Each such loan would be between, say, Rs. 50,000 to Rs. 1,50,000, and would span 3 to 4 years in repayment time. Once such a loan is repaid, and the home owner is ready to build the next part of the structure, we give the next loan, and so forth. This model clicked big-time, because we adapted the loan product to customer’s repayment abilities and risk tolerance. In fact, incremental home finance was one of my suggestions in the NABARD report, which was however not noticed by the mainstream lending institutions. Secondly, to address income fluctuations, we extend support to what National Housing Bank (NHB) calls Productive Housing, which means that housing that also enables a livelihood like for artisans, small traders, and agriculturists. This is especially useful for women homeowners, who form a major part of our customers. We have also leveraged the best practices of 98

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“

A retail lending operation’s sustainability depends upon its asset quality, its margins, as well as its growth prospects. Swarna Pragati’s Net NPAs were well below 1% as on 31st March 2015, our Net Interest Margin or NIM is satisfactory, and our loan book is growing at a CAGR of 200% now.

” microfinance by turning the traditional home loan which was an individual loan product on its head and making it a group loan product. or lack o Wha warna Pr aga ti do ffor off Whatt did S Sw Praga agati oper land rrec ec or ds ? pr proper ecor ords ds? We innovated the concept of Para-legal Mortgage, to bring inclusion to large number of rural families denied access to home loans. We pioneered what we call para-legal documentation for this purpose. In India, we have grassroots level constitutional bodies like Gram Sabhas and Village Panchayats. So, what we did was, we got these bodies to endorse the mortgage for the loan to the communityacknowledged land owner. In the rural setting, if a Gram Sabha acknowledges the ownership or possession of a land by a certain person, it is as good as proper land records for him. This too has become a very viable solution for a vexing problem in growing the rural housing finance business. Wha ou pr ovide ? Whatt kind o off a mor morttgage do yyou pro vide? egist er ed? Is it equit able or rregist egister ered? equitable It depends on the states in which we extend these loans. While in Odisha it is mainly equitable mortgage, in Tamilnadu it is registered. In Maharashtra, we have mainly these para-legal documentation. Wha as S warna Pr aga ti’s solution ffor or Whatt w wa Sw Praga agati’s

lack o edit hist or off cr credit histor oryy? This is where we took a solution directly from the microfinance model. By the time we started out in Maharashtra in 2010-11, microfinance was well established. Though rural customers didn’t have national level credit scores like CIBIL, many of them were having track-records with the NGOs and Micro Finance Institutions (MFIs) extending micro-credit for various farming and trading purposes. Though it was not very formal, it was very practical to use these records to assess the prospective customers or the Self Help Groups (SHGs) or Joint Liability Groups (JLGs) to which they belong. Moreover, Swarna Pragati being a housing microfinance institution, primarily lends to such SHGs and JLGs. So our lending is ne o an individual, So,, yyour nevver tto enc e but tto o a gr oup ? And wha ence group oup? whatt is the dif difffer erenc be G? bettween SHG and JL JLG Yes, almost always we extend housing loans to a group of prospective home owners, who form an SHG or JLG. They are very similar concepts, SHG being the NABARD promoted model having around 10-15 members, and JLG being the Yunus (Grameen) model having around 4 to 5 members. Members in a group can take slightly different quantum of loan depending on their individual requirements, but as in microfinance, the liability is jointly shared. Wha our a age tick et siz e ffor or an Whatt is yyour avver erage ticke size G? JLG individual in an SHG or JL The average ticket of Swarna Pragati is around Rs. 1.4 lakh, and the range is between Rs. 50,000 to Rs. 2 lakh. But, as I told you, it is almost never taken as a single loan, but happens in a modular or incremental way of smaller loans. So al cust omer w an o ha So,, wha whatt if a rur rural customer wan antts tto havve a bigger home loan? Swarna Pragati does have provision for that. For good customers with satisfactory repayment track-record with us, we provide home loans ranging between Rs. 2 lakh to Rs. 7 lakh. The product is called Housing+. You also men tioned the challenge o mentioned off high a ting c ost s. Ho w is S w arna Pr aga ti oper cost osts. How Sw Praga agati opera managing this ? this?

Yes, high operating cost is the main dampener for banks and HFCs to extend loans to this segment. To overcome this, what we do is, we partner with grassroots level NGOs and MFIs who are actively engaging with these rural customers. They anyway visit these customers on a monthly or weekly basis for various purposes, and on such visits also collect our EMIs. They do it on a reasonable fee basis, so that it is viable for them. We incur a cost of around 3 to 3.5% for the collection, but still cut the operating costs to a manageable degree. We work with large NGOs in various states, for example, one of our largest partners is Gram-Utthan in Odisha. Wha w arna Pr aga ti’s rre e t ail Whatt is S Sw Praga agati’s lending rra ates? We being a housing microfinance institution, our lending rates are more in sync with micro-credit rather than housing finance. Our retail lending rate is around 22-23%, and it is necessary to offset the higher risks due to lack of proper land records, lack of proper credit history, and lack of stable incomes or cash-flows. However, our customers are very satisfied, as we provide them with access to home loans, and because the loans are modular in nature and much shorter in duration - of 3 to 5 years - than regular home loans that takes 15 to 25 years for repayment. We also provide incentives for faster repayments than scheduled. Ho w sust ainable a busine al How sustainable businesss is rur rural housing micr ofinanc e and S warna micro finance Sw Pr aga ti? Praga agati? Well, a retail lending operation’s sustainability depends upon its asset quality, its margins, as well as its growth prospects. Swarna Pragati fares well on all these parameters. Our Net NPAs were well below 1% as on 31 st March 2015, our Net Interest Margin or NIM is satisfactory, and we are growing our loan book at a CAGR of 200% now. Our current loan book size is Rs. 85 crore, and we have a fiscal end target of Rs. 150 crore. 99

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PUBLIC OFFER

WILL SEBI ALLOW RBL BANK’S IPO? All IPO investors’ eyes would be glued to SEBI’s next update on pending IPOs to know whether RBL Bank’s IPO approval has progressed to any extent. In its last update, SEBI had disclosed that it had sought clarifications from Lead Managers of RBL Bank’s IPO. While SEBI has not disclosed what was the clarification sought, and while it is routine for the regulator to seek such clarifications, in RBL Bank’s case, there is a peculiarity as it is already known that the private lender is in serious and multiple violations of a capital raising norm, which is a kind of violation that SEBI has been most stern about in recent times.

t has been almost a decade since any private sector Indian bank has gone for its Initial Public Offer. In fact, there are only a very few unlisted private sector lenders remaining in the market. That is why the upcoming IPO of Kolhapur, Maharashtra, based RBL Bank is likely to be in the focus of investors. RBL Bank is battling a major problem with the regulators, which came into the open when it had to disclose two illegal Rights Issues and a prohibited Preferential Allotment it had done a few years back. The violations are serious as it involved getting investments from 2,591 and 1,969 investors for the unsubscribed portion of two Rights Issues, and 352 investors for the Preferential Allotment, even while it was clear in the Indian Company Law that such issues can’t be to more than 49 investors. Normally, such a repeated violation is sure to attract not only a ban on the IPO, but even regulatory proceedings against the company by SEBI, RBI, MCA, RoC etc. But in RBL Bank’s case, even if there is regulatory action, the IPO might see the light of the day for some peculiar reasons. 100

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Firstly, the violations occurred much before the current management team led by Vishwavir Ahuja took charge of the 72 year old bank. Ahuja was the India head of Bank of America. None of the Directors or top Executives under whom these violations occurred are now with the bank. Also, there is no promoter group involved with this bank, formerly called Ratnakar Bank Ltd. Secondly, RBL Bank is backed by several reputed domestic and overseas investors including IFC (a World Bank arm), CDC Group Plc (of UK Government), ICICI, HDFC, IDFC,, Norwest Venture Partners, Samara Capital, Beacon Capital, Faering Capital, TVS Shriram, Cartica Capital, Ascent Capital, Aditya Birla Private Equity, Asia Capital & Advisors, and Gaja Capital. Thirdly, RBL Bank’s IPO is a major one involving the raise of Rs. 1450 crore and involving both fresh issue of shares (for Rs. 1100 crore) as well as an OFS by some existing investors. Next in line comes the influence of the managers of this IPO which include some of the largest in business like Kotak Mahindra Capital, Axis Capital, Citigroup, Morgan Stanley, HDFC Bank,

ICICI Securities, IDFC Securities, IIFL Holdings and SBI Capital Markets. And lastly, RBL Bank has been advised by RBI almost one year back to go for a public listing. While there are such positive points regarding the approval for this IPO, on the flipside there are several questions. The kind of unapproved capital raising done by RBL Bank in the past from 4912 investors puts the lender as well as SEBI in a difficult position, as SEBI has been quite strict about such illegal capital raising, as seen from the infamous Sahara case. Now all eyes will be on SEBI’s upcoming update on August 3rd to know more about how it will tackle a serious violation and still allow for one of India’s largest banking sector IPOs, in recent times. There is also a fair chance that SEBI will stick to its stand as far as such illegal public issues are concerned, and instead of approving the IPO, take penal action against RBL Bank, and refer the case to other concerned agencies like MCA and RoC. However, if SEBI’s approval eventually comes for RBL Bank‘s IPO, the next thing to be watched out for will be

the asking price for the IPO. In its DRHP, RBL Bank has compared itself with Kotak Mahindra Bank, Yes Bank, & IndusInd Bank, all of which are trading at high valuations. However, in its size it is more comparable to much smaller lenders like Dhanlaxmi Bank, DCB Bank, City Union Bank, & Lakshmi Vilas Bank,

which are trading between 1.1 to 2 times their book value. The strengths of RBL Bank include high growth rate, high NIM, reasonable cost to income ratio, and low NPAs. Its core weaknesses include small number of branches compared to its peer group, low level of CASA deposits, and a loan book dominated by

corporates and MSMEs. Its high growth rate is also partially due to its low base so far, and it remains to be seen how fast it can scale up given the small branch footprint and low CASA deposits. While NPAs are currently reasonable, RBL Bankâ&#x20AC;&#x2122;s high exposure to corporates and MSMEs is a risk factor. Vishwavir Ahuja, Managing Director & CEO

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PUBLIC OFFER

CATHOLIC SYRIAN BANK IPO

IN THE FINE TRADITION OF SOUTHERN & KERALITE BANKS Catholic Syrian Bank (CSB), which recently got a new MD & CEO, Anand Krishnamurthy, has already filed IPO papers with SEBI and has obtained the regulator's as well as FIPB's approval. CSB's IPO is likely to be the next banking sector IPO in India, as another aspirant RBL Bankâ&#x20AC;&#x2122;s IPO is held up due to some past violations in capital raising from the public. Kerala headquartered Catholic Syrian Bank (CSB) is a private sector lender in the same model of already listed private lenders from this southern state as well as the whole of South India, like Federal Bank, South Indian Bank, Karur Vysya Bank, Karnataka Bank, & City Union Bank, that have given good returns to their investors by way of capital appreciation as well as dividends. here are only a few unlisted private sector banks remaining in the Indian financial market, and it has been sometime since a private bank went for its IPO.

Firstly, almost no Indian private lender IPOs have failed to provide decent long-term returns to its investors. Secondly, it is quite difficult to overprice a bank IPO, unlike those in sunrise sectors like pharma research or Internet services.

That is the prime reason why the upcoming IPO of Thrissur, Kerala, based Catholic Syrian Bank (CSB) is sure to be in the focus of investors in Indian primary market.

Thirdly, with a strong regulator like RBI in place, it is rare for a private bank to go kaput in India. Next in line comes the scope for steady growth in the business. Banking may not provide the kind of mind-boggling returns provided by pharma or IT sectors, but it doesnâ&#x20AC;&#x2122;t have that kind of volatility either. Banking stocks are for those investors

However, on a broader and more fundamental outlook, there are at least five more important reasons for this appetite for private bank IPOs. 102

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Shri. S.Santhanakrishnan, Chairman

who value steady growth and rising dividends.

banks. The reason is simple enough to understand.

that of the original investment 10 or 15 years back.

And lastly comes a more contemporary reason, which is that PSU banks being in a challenging phase, private banks are sure to gain market share in growth areas like retail banking.

Banking is not about growth alone, but equally about risk management. That NPAs can gobble up even hard-earned profits quickly has been the banking lesson of this decade.

Catholic Syrian Bank is 95 years old and currently focuses on small and medium enterprises (SME), retail, corporate, and NRI customers.

Catholic Syrian Bank’s IPO fits into this mould of a promising private banking stock. But there is likely to be more value to CSB’s IPO due to a unique reason. Private sector banking is not done in the same manner across North and South of India. While Central India and North India based private banks tend to be more aggressive by way of growth appetite, Southern banks tend to be more conservative by way of risk management. Still, most of the listed private banks in South India have went on to deliver exceptional returns than North based

This is where South based private banks like Karur Vysya Bank, Karnataka Bank, City Union Bank, Federal Bank, and South Indian Bank have proved that they have an edge. Catholic Syrian Bank is also a private bank in the same tradition, hailing from the state of Kerala which is home to a large player like Federal Bank, and from the district of Thrissur which is home to its listed peer, South Indian Bank. All these banks have appreciated investor wealth by 10 times to 95 times since the last 15 years, and have been paying high dividends each year, that in some cases is even multi-times

The bank is led by its Chairman S Santhanakrishnan, and MD & CEO Anand Krishnamurthy. Chairman Santhanakrishnan is a veteran chartered accountant and law graduate who has been on the board of Federal Bank and several other corporates including companies in the Tata stable. Managing Director Anand Krishnamurthy has a 22 year trackrecord in banking that includes international institutions like HSBC. He did his studies at IIT-Chennai and IIM-Kolkata. While Catholic Syrian Bank is aiming for a Rs. 400 crore IPO, also on the plan is a Rs. 150 crore preIPO private placement by some existing investors. CSB has attracted several institutional and HNI investors in recent years including AIF Capital, Siguler Guff, & Yusuffali MA, promoter of Lulu Hypermarket chain of Middle East and India. While no single shareholder has more than 5% of CSB stock currently, around 10 large investors hold around 50% of the bank’s current equity. CSB IPO is likely to be attractive for investors, if it is optimally priced, as it enjoys the additional advantage of a very low base - business-wise & loan book wise - compared with much bigger peers like South Indian Bank and Federal Bank. Long term capital appreciation is more possible from such small bases, from which growth rates can remain high for a longer period of time.

Shri. Anand Krishnamurthy, MD & CEO 103

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PUBLIC OFFER

COFFEE DAY ENTERPRISES IPO

DON’T SIP WHILE TOO HOT

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veryone knows on hindsight what happened after the Jubilant Foodworks IPO. Coming in 2010, at the height of pessimism after the 200809 global economic crisis, and priced at 38 times P/E, it was clearly an avoid by most analysts, and rightly so at that time. But 5 years later, the Domino’s Pizza maker in India, has appreciated investor wealth by nearly 14 times. What happened is simple enough to explain, but only in hindsight. It was for the first time that a Quick Service Restaurant (QSR) chain was listing, and market was not mature enough to understand the kind of growth and operational leverage possible in this

industry, which is driven by young customers. Now, another QSR is all set to go for its IPO, and market might not repeat that same mistake, but another, however more about it later. Café Coffee Day (CCD) is a household name across India’s metros and even tier-II cities. Modelled around US chains like Starbucks, CCD has been growing its outlets and business at a blistering pace for over more than a decade. One of the wisest decisions to opt for in the stock market is to always invest in only sector leaders, something that is vouched for by everyone from Warren Buffett to Rakesh Jhunjhunwala. The logic is simple

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COFFEE DAY ENTERPRISES LTD (CDEL), THE PROMOTER OF INDIA’S LEADING COFFEE SHOP FRANCHISE, CAFÉ COFFEE DAY (CCD), WILL SOON BE GOING FOR ITS INITIAL PUBLIC OFFER. WHILE THIS HOT CAPPUCCINO OF AN OFFER SMELLS GOOD DUE TO ITS DIVERSE PROMISING BUSINESSES, IT WILL BE SAFE TO ORDER IT ONLY AFTER CHECKING THE MENU PRICE.

enough to understand, as sector leaders become sector leaders due to some competitive or strategic edge that is clearly not replicable by the rest of their competitors. And Café Coffee Day is a sector leader like no other. Not only does CCD has a market share of 46% in the QSR coffee shops, it’s footprint is larger than the footprint of the next four competitors put together. It is a nobrainer to understand that CCD passes this test too with flying colours. Next in line comes the issue of how backward integrated is the operation, to understand how input costs may affect future profitability. It is not only because of Tata’s clout that Starbucks

COFFEE DAY ENTERPRISES LTD (CDEL), WHICH IS GOING FOR THE IPO NOW, HAS A PROMISING LISTED LOGISTICS SUBSIDIARY - SICAL LOGISTICS - IN ITS FOLD, CONTRIBUTING 36% OF CDEL’S REVENUES, JUST BEHIND ITS COFFEE SHOP BUSINESS. 104

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chose it for its India joint venture. Tata has formidable coffee plantations, and thus the JV can optimise the input coffee powder costs. Café Coffee Day is equally, if not more, backward integrated. The promoter group of CCD led by billionaire investor and entrepreneur VG Siddhartha is one of the largest coffee planters in India. Thanks to this integration, and efficient management, Café Coffee Day enjoys healthy margins. CCD’s operating

profit margin is over 17.4%, which is quite healthy for the QSR coffee shop sector. With so many good things going for it, can there be more? What if this company also includes a robust logistics business? Logistics has been the buzzword in capital markets ever since e-commerce bloomed in India with the likes of BlueDart and Gati soaring to the skies. Yes, Coffee Day Enterprises Ltd (CDEL), which is going for the IPO now, V. G. SIDDHARTHA, CHAIRMAN

has a promising logistics subsidiary Sical Logistics, in its fold. It is no small operation for the group, as it contributes 36% of revenues, just behind its QSR coffee shop business. Now, what if there are more positives? CDEL is also home to a noted financial services company, Way2Wealth Brokers. Though brokerage business was in the doldrums a couple of years back, it is booming now thanks to the resurgence in capital markets. Way2Wealth has its hands in all brokerage pies, from equity to derivatives to currency to mutual funds to pension funds to commodities. It is not a small operation either, as after coffee shops and logistics, it is the biggest revenue earner for the group, contributing 8% of revenues. Way2Wealth holds additional promise for CDEL as it is still an unlisted entity which can go for its own IPO in the future. After ShareKhan’s expensive acquisition by BNP Paribas recently, the outlook for brokerage business is definitely looking up. The positives for CDEL’s IPO are even more as it has more subsidiary/ associate businesses in its stable including an infra arm focusing on building IT/ITeS Parks, a resort chain (The Serai), and it even has a formidable investment arm that holds stakes in key listed and unlisted companies. The best example for CDEL’s investment prowess is the midcap IT major Mindtree where CDEL and its promoter VG Siddhartha together hold 13.43% stake, making them the largest non-promoter shareholder group ahead of several FIIs, DIIs, and mutual funds. CDEL’s own 10.43% stake in Mindtree has a value of Rs. 1111 crore today. It is no wonder that CDEL has a booming investment business, as promoter VG Siddhartha is a former investment banker, who made his fortunes as a stock market investor and trader, more than 15 years back. 105

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may not be able to grow its footprint as fast as in the past. It is unclear how a company that hasn’t made net profits during its best years, would do the same when growth slows down. Secondly, CDEL’s growth so far has been funded partly by major debt acquisition. Its debt/equity ratio is standing at a shocking 8 times. While a prudent debt/equity ratio stands at 0.5 times, CDEL’s ratio is 16 times of this, which is very troubling.

CDEL also excels in promoter capabilities, as VG Siddhartha is a selfmade entrepreneur and billionaire.

coffee shops and cyber café business, to make the best use of the spurting Internet use in the IT city at that time.

Compare this with the zero debt of Jubilant Foodworks, and one can easily understand why the comparison between the two doesn’t hold. There are also other operational advantages for Jubilant like its booming home delivery business that is unique to the pizza product.

Hailing from a family of medium-sized coffee planters in Chikmagalur, Siddhartha would exit most of his stock investments at the right time during the peak of a bull market, and use that formidable profits to amass coffee plantations in Karnataka, to exponentially grow his family’s coffee business and emerge as one of India’s largest coffee planters.

With such diverse and promising nature of its businesses, with this kind of promoter capabilities, and with the track-record of Jubilant Foodworks, the IPO of CDEL is likely to be expensively priced. If this happens, it will be the next mistake - of a different kind - by investors in the QSR space.

CDEL’s Debt/Equity of 8 times makes its position weaker than even highly debt-ridden companies like GVK Power & Infra (D/E of 7 times), Jaiprakash Associates (5.5 times), and GMR Infra (4.4 times). That is why paying high valuations for CDEL IPO won’t be wise for investors.

Because, for all its promises and promoter capabilities, CDEL IPO has several pitfalls for investors especially if it is expensively priced, anything upward of 15-17 P/E.

However, to be fair enough, in absolute terms, the debt of CDEL is much lower than these infra players. Moreover, CDEL will be using around Rs. 633 crore from the IPO proceeds for reducing the debt.

Later, while coffee prices were at abysmal lows and the business in dire straits, Siddhartha would get inspired by QSR coffee chains in US during a visit to that country, and would return to India immediately to pioneer that high margin coffee shop business in Bangalore. His business genius is also evident from his bringing together of

Firstly, despite its high growth, its near 50% market share, and its high operating profit margin, CDEL has been loss-making during the last three years. Going forward, due to its high base of coffee shops, CDEL

NOT ONLY DOES CAFÉ COFFEE DAY ENJOY A MARKET SHARE OF 46% IN QUICK SERVICE RESTAURANT (QSR) COFFEE SHOPS, IT’S FOOTPRINT IS LARGER THAN THE FOOTPRINTS OF THE NEXT FOUR COMPETITORS PUT TOGETHER. 106

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Thirdly, even while most retail investors would think that CDEL’s diversified businesses like QSR, logistics, brokerage, infra, hotels, and investments etc are an advantage, the main market movers like FIIs, DIIs, MFs etc are likely to take this as a disadvantage, as except for the QSR business, all others would carry the disadvantage of ‘holding company discount’ for CDEL. And these nonQSR activities constitute around 50% of CDEL’s revenues. However, if the CDEL IPO is rightly priced, at around 15-17 P/E, it is a promising business to be invested in for the long term, as at that valuations its diversified businesses would provide a reasonable degree of safety.

HEALTH INSURANCE

NATIONAL INSURANCE COMPANY

HEALTH INSURANCE THAT COVERS NOT ONLY PARENTS, BUT EVEN PARENTS-IN-LAW National Insurance Company Ltd, Indiaâ&#x20AC;&#x2122;s oldest general insurer, and the second largest in the non-life sector, has launched two new innovative health policies, with a view on covering entire families. NIC, which is already the largest motor vehicles insurer in the country is aiming for the top-slot in health insurance too, where it is currently ranked No.2. The customer is the real winner over here. So, if family is indeed your biggest treasure, NIC is offering a way to protect their health beyond measure. he first among these innovative health policies is the National Parivar Mediclaim Policy. A family floater policy, it goes even beyond the conventional, by offering cover to parents too, apart from self, spouse, and children. The sum insured ranges from Rs. 1 lakh to Rs. 10 lakhs. The second policy, National Parivar Mediclaim Plus Policy goes even beyond, by offering health cover for Parents-in-Law too, apart from self, spouse, children, and parents. The sum 108

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insured range is also higher here, from Rs. 6 lakhs to Rs. 50 lakhs. Both the policies carry several common innovative features like hospital cash; cover for maternity, newborn, & vaccination; infertility treatment; discounts for no claims, online purchase, longer terms etc; and several optional covers. The range of optional covers available for both the new schemes include outpatient treatment, critical illness, and pre-existing diabetes

BOTH THESE NEW POLICIES FROM NIC, APART FROM COVERING PRE, POST, & DOMICILIARY HOSPITALIZATION, OFFER COVERAGE FOR 140+ DAY CARE PROCEDURES.

and/or hypertension. Both these new policies from NIC, apart from covering pre, post, & domiciliary hospitalization, offer coverage for 140+ day care procedures. Another innovative coverage from NIC that is offered through these new policies is the provision for Medical Second Opinion (MSO). While

National Parivar Mediclaim Policy covers one MSO for 88 diseases, National Parivar Mediclaim Plus Policy covers two MSO for 160 diseases. The new policies are available effective from September 1st, which means you can buy it today itself, and that too through an online purchase, or if you prefer offline purchase, your nearest NIC office or agent is ready with these two new policies.

Rajesh Aggarwal, CMD 109

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PARENTING

TEACH YOUR KIDS ABOUT MONEY Depending on their age kids make choices with money – whether to hang out on weekends at the local ice cream parlour or hit Starbucks; whether to go with brands or look at value. Before they take on their own financial responsibilities the skills of handling money ought to be provided to kids. Unfortunately money skills are not part of formal school education.

any of us would have picked up some of our own financial lessons the hard way… through mistakes and corrections. That qualifies us to be a personal finance coach that the younger generation can look up to. Here is a guide to imparting money essentials to kids. From a young age children can be taught that money has purchasing power and that it needs to be earned. According to a study by a UK based advisory service, by the age of 7 years, kids develop several basic concepts about money that will later broadly relate to personal finance. Some of these include the understanding that they need to pay for goods with an equivalent amount of money, the concept of earning and income. So depending on their age and capacity you can introduce various aspects of finances. Opening a bank account for teenage kids can go a long way in helping them gain confidence and experience with handling money transactions. Many banks offer student accounts for school and college students. Teens can be taught how to use a debit card, and the “grown up” activities of writing a cheque or ordering a DD. Games are a nice way to engage the smaller kids. You would find many board games on money management such as Monopoly, Cashflow etc. and plenty of them are available online too. 110

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3 MONEY FUNDAS FOR YOUR CHILDREN The old saying goes, ‘Train up a child in the way he should go and when he is old he will not depart from it’. In my view there are three valuable aspects of money management a parent ought to teach their child – ones that are unlikely elements of classroom syllabus.

within one’s means. You can talk to them about how debt could hurt one’s financial life and even ruin it, if in excess. Older kids can be educated on how credit card debt and personal loans can become a vicious trap. Inculcating the savings habit discussed in the point above would go a long way in making them used to creating a corpus from which they use in the future and avoid debts.

1) SAVING COMES BEFORE SPENDING

3) UNDERSTANDING INFLATION AND COMPOUNDING

Kids may not have paychecks to save from but if they do have some kind of pocket money from elders they can be encouraged to save. Let them begin with whatever amount they can, even if it’s Rs 20 a week. The habit once formed is likely to stay with them, as some day they take on their own financial responsibilities. You could incentivize them to drive home the virtue of saving by adding a rupee for every X amount of money they save. Another effective way is to make fun deals. Say they wish to have a camera for the next birthday. Agree to buy one for them after they have accumulated a small portion of the amount required for it. Your child would also better appreciate its value since she has earned it, in a sense.

Even while compared to our western counterparts many of us Indians are savers by tradition, only a minority seems to appreciate the importance of long-term investing in growth assets, and even fewer people actually practice it. For many adults saving in a bank account is equivalent to investing! Teenage children can be introduced to the concept of inflation, how money loses value over time and the need for accumulated savings to outgrow inflation to help in meeting future goals.

2) AVOIDING THE DEBT TRAP One of the foundational keys to financial wellbeing is to learn to live

Parents must also carefully adhere to the good financial principles they’d like their children to follow. Your kids are likely to resemble you in their financial behaviour and orientation because like they say, children learn more by observing than by hearing. By the time your child is ready to fly out of your nest they would have built solid foundations for their financial safety. (By Harshad Chetanwala, Quantum AMC )

ECONOMY

JIM ROGERS EXITS INDIA:

"CAN’T INVEST JUST ON HOPE" ROGERS SAID HE HAS SOLD ALL HIS INDIA SHARES AS HE SAW NOTHING NEW COMING FROM PRIME MINISTER NARENDRA MODI.

ommodities trading guru and hedge fund manager Jim Rogers has sold his holdings in Indian companies and exited India because, he says, the National Democratic Alliance (NDA) government has failed to live up to investors’ expectations. The chairman of Rogers Holdings Ltd, who said in April that he was becoming disillusioned by India because the Narendra Modi government has been all about talk and no action, believes the Indian market lacks any new drivers to propel it. “I am sure Modi is a smart guy, he enjoys good press, and he makes a lot of friends for India. But I, as an investor, after almost a year-and-a-half, have decided to move on to other places, partly also because stock markets are not going to be particularly good for the next year or two,” Rogers said in an interview with LiveMint. Edited excerpts: During yyour our la st in ac tion with us, the last intter erac action Modi go as close tto o finishing govvernmen ernmentt w wa a yyear ear in o e. Y ou bought in offfic fice You intto India la st yyear ear a atiy a JJana ana last affter the Bhar Bhara tiya anatta Par JP’s) vic artty’s (B (BJP’s) victtor oryy under Modi, and had said tha ou w er e se o ttak ak ea thatt yyou wer ere sett tto ake call on whe ther tto o rremain emain in ed in whether invvest sted India. Ar e yyou ou holding on tto o yyour our Indian Are shar es? share I did wait a little more time (after the last interaction), but now I have sold all my India shares. I did sell my India shares as I don’t see anything happening. The market was high, and investors had anticipated great things, including me— even if he (Modi) were to do things, the market had already discounted some of that because it had gone up a lot, and there was nothing new coming from 112

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Modi. You can’t just invest on hope. Even If reforms started coming, it may not be enough to make the markets go higher, because markets have already factored it in. If the reforms are substantial, the markets may go higher. No indication of that. So yyou’v ou’v e eexit xit ed India. Y ou bought in ou’ve xited You intto India la st yyear ear ou said, the last ear,, and a ass yyou mark ets ha ell sinc e. Did yyou ou marke havve done w well since ther efor e mak e a good deal o there ore make off mone moneyy when selling? I don’t like to talk about how much money I have, or how much I made. I am not complaining about my investments in India. Let us leave it at that. I may see myself returning back to India at some stage if Modi starts doing things, or if the markets go down a lot—some stage can even be a long time away, but not at the moment. If Modi made the currency convertible, if he made the markets open to outsiders, then I would have to be back in India again. So far Modi has been doing worthwhile things like addressing some social issues—I am all for that, and that is great for a lot of people—but India needs more. The situa tion is ge situation gettting be bettter in India; the rupee ha ea sonably st able hass been rrea easonably stable as ccompar ed tto oo ther emer ging mark et ompared other emerging marke ompar curr encie s, in fla tion is ccoming oming do wn, currencie encies, infla flation down, in est rra ates ar e se o go do wn, the intter ere are sett tto down, fisc al de ficit is under ccon on tr ol and lo wer fiscal deficit ontr trol low oil pric es ccon on tinue tto o help price ontinue help.. Well, you say that. But Modi had the largest mandate in modern history—no recent politician had what he got. But if he can’t implement reforms, then who can? Is anything ever going to be done? I think it is an accurate statement that

no recent Indian government had this kind of mandate. Yet, very little reforms has happened. I am sure Modi is a smart guy, he enjoys good press, and he makes a lot of friends for India. But I, as an investor, after almost a year-and-a-half, have decided to move on to other places, partly also because stock markets are not going to be particularly good for the next year or two. And if I am going to be at some place, I would rather be at a market that is either depressed, or where dramatic changes are taking place. The India market is not depressed. If markets all around have problems, it is going to impact India, too. As someone who ha atched India ffor or hass w wa e do yyou ou see the time,, wher where a long time c oun tr e the ountr tryy headed? Wha Whatt ar are or India—is it job cr ea tion challenge crea eation challengess ffor f or the yyouth outh tha thatt mee meett s their aspir ations ? spira tions? India has very high debt-to-GDP (gross domestic product) ratio—it is higher than many countries. Studies have shown that when countries have a high debt-to-GDP ratio, it is difficult to grow at a reasonable rate. I don’t really see much going for India right now except Modi, who is not doing anything, when he should be or could be doing a lot. Your central bank governor is probably the best in the world. The basic reason you mentioned, about India having to create so many jobs, is one of the reasons why I am not investing in India. India historically, or at certain times, has been one of the most successful countries in the world. You could have ruled the world if you were aggressive, but those days are not coming back—India is held back by too many restrictions and regulations. Go

around the world, and you see smart successful Indians everywhere—this means you don’t have enough opportunities for these people back in India. You have saved your farmers by making it illegal for foreigners to own more than five hectares—how on earth can an Indian farmer compete with an Australian farmer with 50,000 hectares? In history, India has been one of the great agricultural nations of the world—you have the land, the people, weather—God gave you everything. And then, he also gave you Delhi to mess it all up. I, as well as others, thought that Modi was going to change all this. With

all these crazy laws and regulations, you make it difficult for foreigners to invest in India. With investments comes jobs. Not just foreigners, your bureaucracy makes it difficult for even Indians to invest in India. It is difficult to take money in and out of India—even as an investor, if you bring money into India, there are all kinds of regulations. Indians would rather like jobs and a better economy rather than all these laws, regulations and bureaucracy. Go aghur am R Govvernor R Raghur aghuram Rajan hass been ajan ha criticiz ed f or being stubborn on criticized for in est rra ates. intter ere

Central bankers are supposed to be criticized for things like that. Central bankers are supposed to maintain currencies and low inflation. If you want to do something about the economy, you should call out Modi or Parliament and not the central bank. Central banks that cut interest rates because of politicians—such countries usually have economic problems, currency problems, and all sorts of other problems. In my view your central banker is doing the right thing—he understands what banking is all about, he understands what currencies are all about and he understands the economy. The more

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criticism he gets, the better—that means he is doing what the central bank is supposed to do. Wha our ttak ak e on wha Whatt is yyour ake whatt is happening ealit in China right no w? TThe he rrealit now ealityy is tha thatt for eigner er ew China shar es. oreigner eignerss hold vver eryy ffe share China is pure noise and hype and it is exciting to talk about the Chinese market that has moved a lot. Virtually no foreigners own shares in China. The press is talking about short-selling, but there is hardly any short-selling in China. The Chinese market has done better this year than the American stock market. So you in the press should be talking about the American stock market—but for you that may not be exciting enough as compared with China. I bought Chinese shares during the two-three days when its market collapsed—on the really serious down days, I bought more. I like to buy low, and I found that in history, usually when you buy during panic, things will turn out to be okay two-three years down the road. I would rather be in China than in most parts of the world, because its stock market is still somewhat depressed. The Chinese stock market is still below 50% of its all-time high. The American stock market is near its all-time high. The situation is that for the first time ever, we have had six years of huge money print across the world. The world is floating on a huge artificial ocean of liquidity and that is going to end sooner or later—it is looking to be sooner. Many markets are going to suffer in the future as this happens. I would expect that this year or next year, we will begin to see a lot of problems worldwide. In 2008, China had a lot of money saved for a rainy day, and when it started raining, they began spending their money. This time around, China is facing debt—historically China has not had much debt—so China, is not going to be so insulated the next time around. I bought Chinese shares in the panic, and some of them are more down now because the Chinese markets went down again after I had bought. I feel that I should own something and China and Russia are the couple of markets that are depressed, where they are changes, and that is why I own these shares. best Is this the be st time tto o buy gold? Not for me. I own gold and I expect another opportunity to buy gold within 114

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the next year or two. I suspect this will happen. Interest rates are going to go higher, which will make the US dollar go higher. When there is turmoil, many people seek a safe haven, and the first thing they go to is the US dollar. Nearly everyone thinks the US dollar is safe—it is not! But people are not going to buy the yen or euro and you can’t buy the renminbi, so a lot of money will go into the US dollar, and the dollar will go higher. When the dollar goes higher, commodities will not do so well. So gold will suffer. What I suspect will happen is that the dollar will turn into a bubble in the next year or two as everyone is buying into it. Gold will be down and if I get it right, and if the dollar turns into a bubble, I will sell the dollar and put it into gold. Whatt do yyou do? Wha ou think the FFed ed will do ? I would expect the Fed to raise interest rates. The Fed always follows the market. People think the Fed sets the market, but if you go back historically, you will see interest rates usually move ahead of the Fed, and the Fed follows along. Interest rates will go higher, and when that happens, at some point it will affect markets around the world, including the US. At this point, everyone is going to call the Fed, asking them to save us. The Fed is run by bureaucrats and academics, and they will then come riding to the rescue—markets will heave a sigh of relief, go higher, and that will probably be the last big move upwards for stock markets around the world. After that, we all come to the realization that central banks are not as powerful as we thought, and there is only so much they can do. That is how we see the world developing over the next couple of years. ommoditiess Is the bull run in the ccommoditie ommoditie mark et o or good? ovver ffor marke It is certainly down. In the scenario that I outlined, it is hard for anything to go up, if we are having financial turmoil

around the world. If what I had mentioned takes place—where I sell my US dollar and buy gold—then gold will have its comeback. Then gold could turn into a bubble three-five years from now. I don’t know if this will happen or not. I hope it does not. Other commodity prices may also go up in the future, because supply has not kept pace with demand. Things like iron ore, oil—there are no new supply streams coming. The reserves of all major oil companies are down, and we are not really finding new oil except for fracking. But frackers cannot make money at current crude prices. So fracking is being slowed or curtailed. In the meantime, oil reserves everywhere are doing down. The supplies for most commodities are not strong enough or large enough to keep prices down for ever. Why don’t yyou ou in ar t-ups ? Be invvest in st star art-ups t-ups? it India, China or Southea st A sia, the Southeast Asia, t-up ec os em is booming. st ar ecos osyyst stem star art-up I do not invest in private companies. I feel more comfortable investing in companies where I think I can sell, if and when I want to. I don’t have the interest or the time these days to get deep into and understand these start-up companies. I do not understand technology well enough to get into such start-ups. Today, there are 100s of unicorns with billion-dollar valuations— this sounds like 1999 in the US. In 1999, the bubble was in a couple of small pockets in the US. Now, this bubble is all over the world–China, India… Now there are hundreds of entrepreneurs in their garages who think they are worth millions and billions of dollars. They are worth that right now, but will they be worth so much when the next turmoil comes? Probably not. There are spectacular opportunities for start-ups— there are hundreds of them, but most of them will fail. Most of the companies that were on everybody’s lips in 1999 don’t exist today—most have fallen apart and disappeared. Some of today’s startups will make it—they will become huge. Alibaba and Tencent look like they will make it big. Write down the list of companies today, put it away, and look at it 10 years later. Then you will say, ‘wow that was a bubble’!

(Credit: LiveMint)

INVESTMENT

6 SIGNALS THAT A STOCK IS GOING TO CRASH James Montier, a noted financial analyst is credited with developing the Crash Score or C-Score, which predicts whether a stock carries a high probability of crashing bigtime, or losing value over the longer-term. Coupled with high valuations by way of P/E, C-Score's predictability can be increased. ontier came around to the view that C-Score seemed to have a very good predictive power to separate out the stocks which are potential underperformers. Those stocks which had high C-scores underperform the market. But what exactly is the C-score made up of and why does it have such good predictive powers? C-score has 6 very well thought out parameters that do a great job in showing whether the company under consideration is about to start deteriorating fundamentally or whether it is actually cooking its books. Both of these signals matter because then we can quickly decide not to invest in the stock at all. Or if the stock is already a part of the portfolio, then take it out of the portfolio before the broader markets get a wind of the situation. Please note that any firm can have one or two parameters where it may not do well as compared to the previous year. However, if it is showing a poor reading on all or most of the parameters, then there's every reason for an investor to smell a rat. And this is where this Cscore does an excellent job of identifying the potentially high-risk stocks. Here are the six parameters that make up the C-Score:

1) Greater divergence of net income from the cash flow from operations.

Cash, they say is king and it is also the parameter which the management has the most difficulty in fudging. And therefore, tracking the cash flow from operations of the company vis-a-vis its net income gives a great idea about whether growth is coming at the expense of deteriorating cash flows. As a result, cases where cash flow from operation divided by the net profits sees an increasing trend over previous year, it is a good sign and assigned a score of zero and it's a bad sign if it is decreasing and given a score of one.

2) Deteriorating inventory days. Inventories, as you all know, is a sign that goods are not moving out of the warehouses, which then point towards slowing sales. This is of course a negative and therefore, companies where inventory days are rising, we assign a score of one and where they are falling; we assign a score of zero.

3) Deteriorating debtor days. Sales picking up is possibly the best indicator of an improvement in the fundamentals of the business. However, if it is coming at the expense of debtor days rising at a faster pace, then that's a danger sign. Because this could mostly mean that there's channel stuffing happening and no real sales. As a result, we give a score of one to companies where the debtor days are higher over the previous year and zero where they are lower.

4) Other current assets going up as a percentage of sales. As Montier highlights, cunning CFOs very well know that investors often look at debtor days and inventory days and therefore look to hide things by classifying them as other current assets. The ratio of other current assets to sales is essentially to help expose such manipulations. Therefore, a rising ratio means a score of one and a falling one means a score of zero.

5) Depreciation to Gross Fixed Assets. Companies can lower their depreciation rates in bad times so that profits can be inflated. The ratio of depreciation to gross fixed assets therefore helps in punishing such companies and gives a score of one to companies where this ratio is lower as compared to the previous year and zero where this is higher or is essentially the same.

6) Is total asset growth high? Some firms are serial acquirers and use their acquisitions to distort their earnings. While this may be justified in some circumstance, generally it has been shown that high asset growth firms underperform. It's not clear what Montier defines as "high" but we're assuming that firms with above average asset growth would qualify as potentially risky to crash.

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LUXU RY SIX SENSES ENTERS CHINA WITH THE OPENING OF SIX SENSES QING CHENG MOUNTAIN

THE NEW BMW X3 30D M SPORT LAUNCHED IN INDIA

ix Senses has entered into China with the new Six Senses Qing Cheng Mountain, which will have its preview opening on August 1, 2015. Located at the picturesque gateway to the country’s majestic Qing Cheng mountains, Six Senses Qing Cheng Mountain has been created to complement the UNESCO World Heritage & Natural Cultural site at nearby Dujiangyan. It was in this region known as the homeland of the Giant Pandas that the legendary

Silk Road began. The resort is just over an hour’s drive from the regional capital of Chengdu and 48 miles (78 kilometers) from Chengdu Shuangliu International Airport (CTU). The 113 guest accommodations range from semi-detached suites in duplex villas with balconies and verandas, to courtyard suites, garden and pool villas. Two-and fourbedroom villas offer intimate seclusion, with indoor courtyard, whirlpool or pool, natural wood interiors, unrivalled amenities and exotic outdoor settings.

he new BMW X3 xDrive30d M Sport has been launched in India. The new model variant, BMW X3 30d is locally produced at the BMW Plant Chennai and is now available at BMW dealerships across India. The M Sport package reinforces the agile character and dynamic presence of the BMW X3 even more prominently. Exterior features include the M Aerodynamic package, a choice of six individual exterior colours including exclusive Carbon Black metallic, M light alloy wheels and BMW Individual High-Gloss Shadow Line with design elements in high-gloss Black. The interior elements comprise sport seats for driver, M leather steering wheel and BMW Individual headliner anthracite for a sporty ambience. The BMW X3 is now available in two engine variants: BMW X3 xDrive 30d and BMW X3 xDrive 20d.

ROLLS-ROYCE MOTOR CARS CELEBRATES LARGEST GATHERING OF ROLLS-ROYCES IN THE WORLD olls-Royce Motor Cars recently celebrated the largest gathering of Rolls-Royces in the world at the 56th RollsRoyce Enthusiasts’ Club Annual Concours and Rally. The setting of Burghley House in Stamford, Lincolnshire, provided the perfect backdrop for a record number of motor cars, with over 1000 heritage and contemporary Rolls-Royces attending for the first time in the Club’s history. Rolls-Royce Motor Cars honoured the occasion with a record display of seven Goodwoodbuilt Phantoms, Ghosts and Wraiths, including several bespoke models. The motor cars, hosted by a team of experts from the Home of Rolls-Royce at Goodwood, drew large crowds throughout the three day event.

AMAN UNVEILS A NEW DESTINATION RESORT IN THE DOMINICAN REPUBLIC

man has announced the launch of Amanera, scheduled to debut in the Dominican Republic during the fourth quarter of 2015. Located on a sublime cliff top overlooking the crescent-shaped Playa Grande beach, Amanera is surrounded by verdant jungle and framed by the island’s dramatic Cordillera Septentrional mountain range. The resort will become the first golf-integrated Aman, sited alongside the undulating fairways and challenging greens of the lauded Playa Grande Golf Course, a track distinguished by having the highest number of oceanside holes in the Western hemisphere.

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LUXU RY HIM, HER, WHATEVER! THE ANDROGYNOUS LOOK IS HERE. IT'S TIME FOR SLENDER MEN AND BOYISH WOMEN he best fashion news that hit me this summer was the blurring of lines between men’s and women’s fashion showcased at Milan. Lace shirts, pastel silk blouses, sheer organza jackets and fluid forms hit the catwalk for Spring Summer ‘16. Spearheading the trend was Gucci, which took the most radical approach to introduce the direction by Alessandro Michele, who took over from Frida Giannini. Michele sent out a stream of models in pastel-coloured silk blouses and lace shirts that could very easily be part of any woman’s wardrobe. Since the days of Coco Chanel, and then Yves Saint Laurent, fashion has been about blurring the lines between male and female. One of the latest trends is to have female models walk the catwalk in men’s wear shows alongside the male models. - See more at: http:

BREITLING LAUNCHES CHRONOMAT 38 SLEEKT FOR WOMEN

n 30 years, the Breitling Chronomat has asserted itself as the ultimate aviator’s chronograph. It now has a new model with a highly contemporary style in a 38 mm diameter and a high-tech tungsten carbide bezel for women. Created in 1984 for elite international pilots, the sums up the Breitling philosophy. In changing Him, her, whatever! The androgynous look is here. It's time for slender men andChronomat boyish womenperfectly - See more at: http://www.luxuryfacts.com/ size, the Chronomat has also changed face by adopting a sleeker i n d e x . p h p / s e c t i o n s / a r t i c l e / 4 4 7 1 # s t h a s h . D S T k y R 6 s . d p u f style. Its standout characteristic is a new smooth bezel in tungsten carbide, a high-tech, ultra-hard and scratchproof material whose color makes a subtle contrast with the polished steel of the case. The black lacquered dial features tone-on-tone totalizers. For a more refined touch, Breitling also offers mother-of-pearl dials with or without diamond hour-markers, as well as an optional diamondset steel bezel.

VACHERON CONSTANTIN LAUNCHES NEW OVERSEAS ULTRAMARINE BLUE LIMITED EDITION WATCHES acheron Constantin has launched two new Overseas watches clad in a deep shade of blue, a simple date and a Dual Time. These two new classic timepieces radiate sporting elegance. The Overseas collection features a deep blue dial bearing luminescent hands and hour-markers serving to ensure optimal readability in all circumstances. Available in an elegant 42 mm-diameter steel case with a screw-lock crown, the Overseas (simple date) and Overseas Dual Time watches combine technical excellence with a refined, dynamic design.

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NOTANDAS JEWELLERS UNVEILS ITS NEW COLOURED STONE COLLECTION otandas Jewellers has introduced a Coloured Stone collection that mesmerises. A union of elegance, matchless beauty and surefire force, the new collection from Notandas Jewellers showcases neckpieces with a base of white gold and embossing of precious stones that are fit for any occasion. The rings are a blend of rubies and emeralds along with diamonds. The workmanship is magnificent adding a more glamorous look to it. Baguette and tear drop diamonds make earrings a rocking chandelier for cocktails. A Semi-choker is elegant and classy.

Manish Malhotra

JAGUAR XJ RESETS THE STANDARD FOR LUXURY, DESIGN AND DYNAMICS WITH A NEW MODEL he XJ, Jaguar’s all-aluminium luxury saloon, will soon come with subtle changes to the exterior design, accentuated by full LED headlights, add to the XJ’s already distinctive looks. Materials such as semi-aniline leather and rich oak inlay veneers enhance the interiors, culminating in the new Autobiography model. Matching this traditional craftsmanship is state-of-the-art technology, including a new infotainment system. InControl Touch Pro offers features such as 1,300W Meridian digital audio and high-definition rear-seat entertainment screens. The new XJ features a larger, more upright grille, while sculpted chrome blades in the outboard air intakes emphasise the car’s mature, prestigious character. The full LED headlights accentuate the ‘quad lamp’ design feature that Jaguar sporting sedans have made their own. The upper section of LEDs provides dipped beam and a dynamic lighting function which swivels as a function of steering wheel angle. The bottom section provides main beam and, at speeds below 25mph, a static bending light function which delivers better illumination when turning at junctions, for example.

nfused by his passion for reviving centuries-old Indian craftsmanship, Bollywood couturier –Manish Malhotra once again was the star of the evening. Unveiling his limited edition collection titled The Empress Collection, the designer celebrated a night of uber-chic fashionable heiresses with his classic western silhouettes. An off-site show at the Leela Palace had the designer recreate the royal courtyard of a queen with models sporting heavily embellished sequined pieces in royal shades of red, navy, ivory, beige and gold. A-line lehengas, gowns, cape-style jackets – totally had us believe in his version of the royal wardrobe. To top it all, the couture celebration went notches higher with the presence of the very gorgeous and elegant Aishwariya Rai Bachchan who walked as the showstopper for his show.

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LUXU RY LIVE LIFE ON THE EDGE AT THE SPECTACULAR CASA BRUTALE

BVLGARI LAUNCHES EAU PARFUMEE AU THE NOIR

rom floating houses to underwater homes, the world has come a long way in terms of out-of-thebox architecture. To add to the list of unique and luxurious properties, Netherland-based Open Platform for Architecture (OPA) presents Casa Brutale – the cliff-edge housing space. Built at the edge of a cliff or a hill, Casa Brutale offers a novel way for luxury real estate seekers to live a lavish lifestyle. With a stunning pool as the roof and panoramic views of nature, this is the home of the future.

vlgari’s new Eau Parfumée au Thé Noir, created by Master Perfumer Jacques Cavallier, presents an interpretation of the most noble and rarest notes of the black tea of Yunnan. Its complex facets, worthy of an olfactory big-bang, intimately recall the style of the Roman jeweller. Grown in gardens at an altitude of 2,000m, the tea of Yunnan blossoms in the fertile red soil in a warm and damp mountainous region with pure water, in the Southwest of China. More than half of the 18,000 most extraordinary plants in China are found in this province whose capital – Kumming – has been called the City of Eternal Spring. Its fragrance, as captivating as that of a perfume, and its unique qualities are highly prized in East. Said to stimulate mental faculties, this beverage is both strong in character and exquisitely balanced. Incredibly energising, it awakens without over-stimulating. Mr Cavallier was highly inspired by black tea, which has an extremely nuanced and refined palette of flavours to offer, with aromas oscillating between leather, waxed and honeyed wood, even rolled tobacco.

FERRARI UNVEILS THE SMOKIN' HOT 488 SPIDER outed as the most aerodynamically built Ferrari spider ever, the brand recently unveiled the super hot Ferrari 488 Spider ahead of the 2015 Frankfurt Auto Show scheduled to be held in September. Without further ado, allow us to take you on a virtual drive in this super hot spider!

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CHANEL PRESENTS ITS 2015/16 CRUISE COLLECTION resenting one of its most vibrant collections, Karl Lagerfeld chose the DDP (the Dongdaemun Design Plaza) to present the Chanel 2015/16 Cruise collection. In the heart of this futurist space created by architect Zaha Hadid, the designer unveils a collection full of energy with a structured, avant-gardist silhouette. In an explosion of bright colours, fuchsia pink, coral and intense orange, violet, celadon and mint green, turquoise and royal blue melted into woven tweeds and textured cotton but also into lighter and diaphanous fabrics such as shantung – a type of raw silk so dear to Mademoiselle Chanel – linen, organza, tulle and lace. Ethereal and geometric patchworks as well as multi-coloured stripes combined with delicate floral and geometric marquetry-style embroideries.

ATELIER ALAIN ELLOUZ NOW AVAILABLE AT MY TAILOR HOME, MUMBAI

ow available at My Tailor Home in Mumbai, sculptor Alain Ellouz’s eponymous atelier expertly uses crystal realisations with alabaster – a mesmerising stone that has fascinated cultures for centuries. The Greeks regarded rock crystals as ice. The ancient Egyptians prized alabaster, while early Mediterranean cultures viewed them as solidified light. Though difficult to extract, these crystals have remained coveted over decades and have been used by artists in the precious, and often highly collectible, works of art that they create. Alain Ellouz took up the challenge of giving new form and function to alabaster. In less than ten years, Atelier Alain Ellouz has more than 300 stunning projects around the world today. The master designer uses many innovative techniques to develop his creations, from cutting and assembly, to the treatments necessary to integrate alabaster and rock crystal into avant-garde designs.

FUSION FOOD CAN BE OF TWO TYPES: INTELLIGENT OR SIMPLY MONSTROUS. LEARN THE DIFFERENCE BETWEEN THE TWO usion today is as popular as ever and engendering new and exciting ways of creating and thinking about food. Fusion cuisine now has a younger audience that, thanks to television and Internet, is more knowledgeable and curious about different foods and cultures, and more than willing to try the next fusion creation. These days, fusion is becoming more and more mainstream, with ethnic ingredients like soy sauce and sriracha becoming household staples.

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LUXU RY VERTU’S OPULENT ADDITIONS TO THE SIGNATURE COLLECTION cross the globe, Vertu has always been the choice of head honchos when choosing luxury phones. Enhancing their decade of heritage, the brand has added three new phones to their Signature Collection. Even in the age of smartphones, British brand Vertu’s classic phones are in demand by CEOs and billionaires. Keeping up with the popularity, the brand has added new phones to its desirable Signature Collection—the Signature Ultimate Black, Signature Red Gold Black DLC and Signature White Mother of Pearl. All of the three phones are designed in classic Vertu style. The Ultimate Black has the shade of purest black, a first for Vertu and it has an ultra-hard, Diamond Like Coating (DLC) with solid sapphire crystal screen and leather casing. The coating technology is the same one used by Formula One teams for critical parts of F1 engines.

BMW X6 LAUNCHED IN INDIA he all-new BMW X6, the only Sports Activity Coupe (SAC) in the world was launched in India today at an exshowroom price of INR 1,15,00,000. The BMW X6 is available in Alpine White as non-metallic paintwork and in the following four metallic paintworks: Carbon Black, Flamenco Red Brilliant Effect, Space Grey and Mineral White. The extrovert design of the all-new BMW X6 perfectly combines quintessential BMW X qualities with the athletic elegance of a BMW Coupe. The front view is dominated by a wide kidney grille and large front air inlets with horizontal chrome trims, horizontal lines along with rear L-shaped taillights with three –dimensional LED Adaptive Light banks emphasise the wide stance and convey a powerful, solid appearance.

LOUIS VUITTON UNVEILS ITS FIRST EVER NANO COLLECTION OF ITS CITY BAGS Louis Vuitton has launched the Nano collection, which revisits the brand’s iconic bags and presents them in an of-the-moment, micro-edition. Seven heritage handbags – the Speedy, Alma, Lockit, Noé, Pallas, Turenne and W – now offer a fashion-forward and practical way to travel lightly and carry nothing more than the bare essentials. A perfect expression in miniature, each Nano handbag reprises the exact shape, construction, materials and stitching of its original, classic version. Instantly recognizable and deceptively simple, these scaled down icons are the result of an elaborate creative process that required the Maison’s craftsman to reconsider and reconstruct each style.

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BAUME ET MERCIER LAUNCHES LIMITED EDITION CAPELAND TIMEPIECES IN HONOR OF CARROLL SHELBY uxury watch manufacturer, Baume & Mercier, has launched the limited edition Capeland watches, to honor the automotive legend Carroll Shelby. 50 years ago, Mr Shelby achieved a victory that changed the course of international racing forever: the 1965 FIA International Championship of GT Manufacturers. Launched together with Carroll Shelby company, Baume and Mercier’s limited edition Capeland timepieces capture his most enduring triumph.

QATAR AIRWAYS OFFERS GIORGIO ARMANI AND MISSONI PRODUCTS TO FIRST CLASS AND BUSINESS CLASS PASSENGERS

atar Airways is offering exclusive amenity kits from Italian brands Giorgio Armani Fragrances & Beauty and sleeper suits from Missoni, to reiterate the airline’s commitment to delivering five-star indulgence in the sky. Every element of the new Giorgio Armani Fragrances & Beauty amenity kit has been given a signature touch. The exclusively designed kits ensure passengers are kept refreshed and relaxed throughout their journey. Included are Giorgio Armani Fragrances & Beauty products from the mythic ‘Acqua di Gio’ and ‘Armani pour Homme’ together with Armani men skincare products, and the new feminine Giorgio Armani fragrance ‘Si’ range and ‘Crema Nera Extrema supreme reviving cream’, as well as eyeshades, socks, earplugs, a nourishing lip balm by Rituals Cosmetics and a hair brush for female passengers.

GUCCI PRESENTS ITS CRUISE 2016 COLLECTION IN NEW YORK Gucci showcased its Cruise 2016 collection in the Big Apple, New York, to present a unique collection, the first by Alessandro Michele. Gucci showed a mosaic of metallics, rich jewel tones, and geometric prints. As always, inspired the vintage designs of 1950-70s, the runway (which was also dramatically devised) was full of maxi dresses, wallpaper prints, jewel-encrusted cat-eye glasses and more. Gypsy details, from silk turbans to bejeweled earrings, took the stage. Structured jackets, straight dresses, boyish tshirts – all shared the space.

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