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06/11/2017 – 10/11/2017
Why life insurance is a must for long-term financial security You Only Live Once, more commonly known as YOLO, is a funny concept. It makes people do extremely adventurous and sometimes ridiculously reckless things. While living in the now is perfectly okay, shouldn’t you be more responsible when it comes to your future if you live only once? Andy Rooney, an American author, and journalist had said ‘death is a distant rumour to the young.’ While some millennials attest to the illusion that there is ample time to prepare for the eventuality of death, many prefer other financial products over insurance because hasty returns are a priority and want for them. I recently struck up a conversation with a twenty-something man and he almost instinctively told me that he would prefer to buy any other financial instrument but a life insurance policy for ‘productive’ use of his money. In his opinion, he can use the money he would otherwise use for premiums and build a fund robust enough to provide him the security that an insurance policy would. There is only one problem with this thought - insurance is not about investment and returns. It is a tool for protection and it should be perceived in its true and correct form. While the fact that India is a severely underpenetrated insurance market is not news, the extent of underinsurance here is a different story. A 2015 Swiss Re report estimates that for every Rs. 100 worth of insurance required for protection, an average Indian spends Rs. 7.8, leading to a staggering deficit of more than 92%. Clearly, it is a concerning state of affairs for India. Indians are worrisome by nature and constantly plagued by the ‘ifs’ of life. ‘What happens to my family if I incur a big loss in my business?’ ‘What happens to my family if I develop a terminal disease?’ We spend all our time worrying about these risks, but how many of us actually buy protection to secure our loved ones if any of these scenarios are to become a reality? Contact No. +91-903-977-7700
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If you look at it from a crude perspective, you hedge your risks every single day in some form or another. A homemaker will buy a wider variety of food items and ensure a healthy mix of food supplements in everyday food to ensure that the family members don’t get tired of the diet. You take simple precautions for your family like taking your spouse to a physician when ill instead of relying on home remedies, investing in a good toddler car seat for your child’s safety during travel or child-proofing your house after your baby starts crawling, reminding your spouse to wear a seat belt or carry a helmet and adhere to traffic rules. When you are prepared to take such small precautions for your dear ones in everyday life, why do we hesitate before taking long-term protection steps like buying a life insurance? The perception that ‘I will not reap the benefits of the premiums paid’ keeps many from buying an insurance policy. Several people think life insurance is a costly affair. On the contrary, a term insurance policy is the most cost-effective method to safeguard your loved ones in case of your untimely demise. While it is crucial that you diversify your financial portfolio and have a mix of risky and steady assets, don’t leave out a term insurance policy. You might believe that you can build a fund big enough to tide over your family’s financial duties in the event of your death, but a term insurance is an ideal instrument to do it. I recommend that you do your homework, recognize exactly which product do you require and how much of a risk cover you need. A term insurance will give you the peace of mind to live in the now. So, take the plunge!
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HOT PURSUIT Ujjivan small fin bank to offer personal loans; note ban trouble to end soon: CEO As the cash-heavy microfinance industry still reels from the impact of demonetisation on its collections and disbursements, the new Ujjivan small finance bank is aiming to diversify its loan products, improve collections and turn around its losses by the end of the year. “We are looking at personal loan products which we want to launch soon. We will also add 88 more branches from the 100 so far… next two quarters will definitely be about closing the tale,” Samit Ghosh, Managing Director and Chief Executive Officer of Ujjivan Small Finance Bank, told Moneycontrol. Ujjivan Financial Services, the holding company and promoter of 100 percent subsidiary Ujjivan Small Finance Bank, narrowed its losses to Rs 11.95 crore for the second quarter of 2017-18 from that of Rs 73.01 crore in the same quarter of previous fiscal. The microlender-turned-small finance bank’s loan book grew marginally by 6 percent over a year ago and 4.1 percent from the previous quarter at Rs 6,364 crore. Ghosh expects the loan book to grow by 20 percent by yearend with the aggressive push at asset diversification and revamping the bank’s affordable housing and micro and small enterprise financing business. “We have hired new leadership talent as well and expect that to grow significantly,” he said. It will also target a deposit base of Rs 4,500 crore by year end, from the current Rs 1,349.1 crore. Ujjivan has also set up a specialised collection team of over 300 people to look at the portfolio which has overdues beyond 90 days.“Last quarter we collected about 15 crore. In October itself we collected about 7 crore. So we expect a lot of NPAs to come back (upgraded as standard),” Ghosh said. Post demonetisation, the defaults in most microlenders’ books shot up owing to unavailability of cash with borrowers. Ghosh explained that in a branch of 10,000 customers, the defaults rose from 100-200 to 1,000-1,500. He sees major competition from banks like Bandhan Bank, IDFC bank and now IndusInd Bank, which have recently acquired other microfinance instutions. Contact No. +91-903-977-7700
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Aadhaar-verified passengers can now book 12 railway tickets a month online Indian Railways has increased the monthly cap on tickets booked on the ICRTC portal from six to 12 for Aadhaar-verified passengers, officials said. The move, which came into effect on October 26, is believed to be an innovative way for the railways to encourage passengers to link their Aadhar numbers to their online booking accounts on IRCTC. IRCTC officials said passengers can continue to book up to six tickets a month without validating their Aadhaar cards. If the number goes beyond six, the Aadhaar number of the user and one of the passengers should be updated in the IRCTC portal, an official explained. Users on the IRCTC portal have to click on Aadhaar KYC under the 'my profile' category and update their Aadhaar number. A one-time password (OTP) will be sent to the mobile number linked to Aadhaar and should be entered for verification. In addition, the Aadhaar number of any one of the accompanying passengers should also be updated under the ‘master list’. This will be validated through an OTP. Users can store the names of verified passengers accompanying them on the 'master list'. This should be done before starting the process for booking more than six tickets a month, officials said. The move is expected to eliminate malpractices in ticket bookings as touts and travel agents cannot create fake user IDs anymore. In the IRCTC portal, six passengers can be reserved on a single ticket under general quota while Tatkal bookings allow four passengers per ticket. The railways had announced in December last year that registration of Aadhaar with IRCTC was mandatory to avail concessions from April 1, 2017, but dropped the idea after opposition from various forums.
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New safety, emission norms will make petrol cars costlier by at least Rs 40,000 New cars will cost a lot more than today when the industry adopts more than half a dozen changes such as mandatory fitment of passive and active safety features and emission related costs in the vehicle. The automobile industry expects such safety features and upgradation to new emission norms will push up vehicle costs by at least Rs 40,000 on petrol cars and Rs 80,000 on diesel cars by April 1, 2020. Raw material prices and forex-related cost escalations are likely to make cars dearer by another Rs 20,000 -- considering an annual average car price rise of about 1.5 percent. Hence, in the three years to 2020, the effective price rise may be as high as Rs 50,000 considering this parameter alone. Carmakers will have been mandated to fit in air bags, anti-lock braking system, high speed alert mechanism, reverse parking assist and seat belt reminder in all cars produced after July 1, 2019. The move is part of the government's aim to curb fatalities caused in road accidents. As per government data more than 140,000 people die on Indian roads every year in cases of vehicular accidents which is 400 times the number of deaths the country witnessed in terrorismrelated cases in 2016. In about 78 percent of such cases, the accident was caused due to driver’s fault. While some carmakers offer dual front airbags (for driver and passenger) as standard across all variants on some models, airbag protection will become mandatory for all variants of every model sold in India less than two years later. Each airbag fitment, along with wiring harness, costs around Rs 10,000. While Bharat NCAP (New Car Assessment Program), the India equivalent of Europe's Global NCAP of Europe, will lay guidelines for crash testing of vehicles, the government has formed instructions for passive safety such as reverse parking sensors. Such fitments will cost a minimum of Rs 1,000, whereas a unit equipped with camera and display will cost around Rs 8,000. Contact No. +91-903-977-7700
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How an Indore cloth trader built a snacks company now valued at Rs 2700 crore
It was in the year 1992 that Amit Kumat, now 48, returned from the US after a masters degree in science from Louisiana State University, determined to make a difference in India. Back in hometown of Indore, he could not find a job in an economy which was in shambles. He started assisting his father in his wholesale cloth shop in a busy bazaar of Indore selling stockpiles of nylon, cotton and linen by the tonnes. “Those were the best two years of my life which taught me how to sell to an Indian customer who is extremely price conscious,” says Amit Kumat, now CEO of the Rs 900-crore company Prataap Snacks, which owns Yellow Diamond brand of chips, namkeens and snacks. The company listed on BSE in September, this year and boasts of a valuation of about Rs 2700 crore on the Indian exchanges with Salman Khan as Yellow Diamaond's brand ambassador. Coming back to Kumat's story. The cloth business did well which led Kumat to start expanding in various areas. He started an SAP training institute, a chemical dye business and even a website called dealinchem around 1996-1999. Come dot-com bust and all businesses started collapsing like a stack of cards. This landed the Kumats in neck deep of debt of over Rs 18 crore. “There were days where I had to think twice over whether I should take a bus or simply walk. There were days where I used to wake up and wonder what to do all day as our offices had shut down,” says Kumat. That is when Amit approached a family friend and a classmate of his elder brother Apurva Kumat for an investment of Rs 15 lakh in setting up a snacks business out of Indore. Arvind Mehta, a family friend, who had a real estate business agreed to become a partner in the snacks business. Kumats started getting cheese balls manufactured in Lucknow, and selling them in Indore and other parts of the city. Contact No. +91-903-977-7700
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The snacks business clicked. The trio set up a chips making unit in Indore and started making potato chips by the thousands every day giving competition to market incumbents such as Frito Lays, in certain pockets. In 2006-07, they launched Chulbule, a rival to Kurkure, a popular snack made for the Indian palette by Pepsico India. Seeing the success of Yellow Diamond, Sequoia Capital, a globally renowned venture fund approached them for investments in 2009. However, the Kumat brothers and Mehta waited almost 18 months before saying ‘yes’ to a USD 30 million investment in the company. With the money, they installed a chips making unit, a potato rings making plant and a namkeen production unit. Now Rings constitutes almost 42 percent of the business and chips about 26 percent. The company makes about 40 lakh packets of rings a day with a toy worth Rs 0.50 inserted in each packet. The assembly machine inserts a toy in each packet. “Kids are the biggest consumers of Rings, with each packet costing just Rs 5 for the consumer,” Sumit Sharma, the company CFO informs me. It’s now lunch time. The company management invites me to their daily lunch routine. Lunch is made each day in either the home of Kumats or the Mehtas. The cooks decide amongst each other on their weekly turns. At 2 pm every day, office boys come with steel hot-cases of freshly cooked dal, curry, rotis, rice and papad to the boardroom. Plates are laid and the food is served hot to the top management, which includes the three founders - Amit and Apurva Kumat and their family friend Arvind Mehta. Despite over 21 years of working together, the top management eats together every day. It’s very unlike other MNCs where food is served in the cafeteria or inside the cabins of the top management. Perhaps this is the way, the company management bonds and stays together in thick and thin. “The company’s name was earlier proposed to be Diamond. However, the trademark was found to be registered thus forcing them to suffix ‘Yellow’,” Amit Kumat informs me during the working lunch. “This also made perfect combination as Arvind bhaiyya believes in numerology and it exactly made 13 digits,” he adds while Arvind Mehta relishes the homemade besan laddoos. The company which started with just three people now employs about 750 people directly and about 3,000 people indirectly through contract rolls. After lunch, we travel to a nearby plant making a new product for the Indian market - chocolate pasted jam biscuit. As I enter the airconditioned plant, fragrance of a bakery engulfs me. Fresh wheat and maize flour dough is being made by the assembly plant which converts it into biscuits. Contact No. +91-903-977-7700
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