FINANCE & INVESTMENT CLUB
NIVESHAK
COVER STORY WEB 3.0: A world beyond the Nine Realms
BLS EDITION
FINVIEW Mr. Abheek Barua, Chief Economist & Executive Vice President, HDFC Bank
ISSUE V • VOLUME XV • BLS EDITION • JAN'2022
NIVESHAK
JAN'22
E D I T O R ' S N O T E QUI N'AVANCE PAS RECULE
Dear Niveshaks, We are delighted to present to you the January edition of Niveshak. This is also the special Business Leadership Summit edition. January was a month of uncertainty, with the Omicron variant of COVID causing peak levels of infections since the second wave. However, the recovery was as quick as it could get by the month-end. This edition begins with covering important news stories of January 2022, including, fall of India's Forex reserves, issue of Formosa bonds by SBI, RIL's plan to take on fashion and beauty platforms, currency crisis in Afghanistan, India's financial aid to Sri Lanka, the tussle between El Salvador around accepting Bitcoin as legal tender, and adoption of NFTs into the gaming industry. The cover story of this edition talks about the much hyped Web 3.0. It goes through the journey of the internet from it's early days, the evolution and about the future 1 | EDITOR'S NOTE
TEAM NIVESHAK
Aagam Parikh
Aayush Jain
Akriti K.
Akshat Sharma
Darshan K.
Nikhil Chadha
Shashwati A.
Shreyansh D.
Unnati Tanwar
Aritro Dutta
Arushi Mathran
Hardik Goyal
Manish Kumar
Nihar Mehta
Pratyush Kumar
Rakesh M K
Sandhaan G.
Vasundhra Misra
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that we see with the widespread use of Web 3.0. Then it moves onto the understanding of the revolutionary concept of Decentralized Finance, about how it works and it's future implications. We are honored to have Prof. Sanjoy Mukherjee of IIM Shillong share his thoughts about alternative paradigms of management in the face of a marching global economy. In the Finview section, we bring you the cognizance of Mr. Abheek Barua, Chief Economist at HDFC Bank, who shares with us his career journey, the opportunities available for aspirants in the field of economics, his views on the Budget, the bond market and startup ecosystem in India.
JAN'22
A snapshot of the Niveshak Investment Fund's performance is also shared in the NIF section. Finally, test your finance, economics, and market awareness with this edition's newly designed crossword for you. Don't have a physical copy? Don't worry, scan the QR code and 'Go Digital'! We would love to hear your thoughts, feedback, and ideas. Please feel free to reach out to us to let us know what you think! We hope you derive something from this edition and stay safe and sound in these exciting times! Stay Invested, Team Niveshak
Know Your Sector focuses on the Direct to Consumer(D2C) segment. The section explains the growth catalyst, sub-segments, business models and key metrics used in the industry to adjudge the financial health of the companies. The journey of D2C Brand Mamaearth (Honasa), India's first unicorn of 2022, has been covered in "Something New, Something Offered section. Our 'Deals Brewery' section covers the mammoth acquisition of the gaming company Activision by Microsoft and the underlying implications of the deal.
All images, design, and artwork are copyright of IIM Shillong Finance Club © Finance Club Indian Institute of Management, Shillong Disclaimer: The views presented are the opinion/work of the individual author and the Finance Club of IIM Shillong bears no responsibility whatsoever.
EDITOR'S NOTE | 2
CONTENTS The Month That Was The Finance Bulletin
Niveshak Investment Fund
Know Sec
Monthly performance of NIF
D2C-D Cons
18-1 17-1
7-8
5-6
13-16
9-12
WEB 3.0: A world beyond the Nine Realms
Cover Story
Views of Mr. Abheek Barua
FinView
19-2
Towards an Paradigm of Manage
Straight F Class
w Your ctor
irect To sumer
19 18
21
n Alternative Enlightened gement
From the srom
Deals Brewery Article of the Month Free Fall of Turkish Lira and Resulting Bitcoin Boom
Microsoft & Activision Blizzard
Let's Fin Up
26-27
The Crossword
30
22-25
24
28-29
Honasa Consumer Pvt. Ltd.
Something New Something Offered
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T H E M O N T H T H A T W A S THE FINANCE BULLETIN
Forex reserves fall to U SU DS6D3 4 B n From an all-time high of USD 642Bn (September 2021), the forex reserves declined by USD 678Mn owing to a drop in the Foreign Currency Assets (FCA), which is a significant component of the overall reserves as per the Reserve Bank of India's (RBI) recently released data. FCA includes the effect of non-US units held in foreign exchange reserves, such as the euro, pound, and yen, appreciating or depreciating in dollar terms.
Income Tax refunds w owr o t hr t h Rs 1.62 lakh crore issued so far this fiscal So far this fiscal, the IT department has issued refunds of Rs 1.62 lakh crore to over 1.79 crore taxpayers. This includes personal income tax refunds totaling Rs 57,754 crore distributed to over 1.77 crore entities and corporate tax refunds totaling Rs 1.04 lakh crore sent to 2.23 lakh companies. 5 | THE MONTH THAT WAS
SBI taps markets in T aD iw ea bn t with the Formosa Bonds SBI raised $300 mn through its London branch's first issue of "Regulation S" Formosa Bonds with a 2.49% coupon. The issue attracted a strong response from worldwide investors, prompting SBI to lower its pricing from T+130 to T+100 basis points. SBI's robust investor base and trust in the offshore capital markets might be credited for such a positive response
RIL gearing Up to take o n oM ny t rnat /rN ky ak aaa n yM a /yN RIL is likely to launch an omnichannel beauty portal that would compete with fashion and beauty platforms such as Nykaa and Myntra, among others. "Tiara" is a potential name for the new brand. It will be integrated with Reliance's 'Ajio' and has already secured agreements with several well-known cosmetics and beauty businesses.
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IMF hints El Salvador t o t od r o p B i t c o i n a s i t s legal tender With El Salvador requesting $1.3 billion in assistance, a conflict of interest occurred, resulting in an impasse. The IMF's silence on it meant that El Salvador would have to abolish Bitcoin's status as legal tender in order to limit its use and closely supervise its ewallet platform - Chivo Digital Wallet. This, however, will stymie the country's ambitious proposal to issue $1 billion in Bitcoinbacked bonds to fund a Bitcoin city powered by geothermal energy. Using unregulated money that isn't regulated by the government as legal tender would eventually encourage illicit and fraudulent behavior.
India Extends $900 Mn F iF niannacni a to Sri c il a l A i d Lanka India lent $400 mn in the form of currency swaps and $500 mn in deferred payments, due for settlement to the Asian Clearing Union, to help the failing Sri Lankan economy. Sri Lanka is experiencing an unprecedented economic crisis and is on the verge of default due to a severe dollar shortage that resulted from the Sri Lankan government's sequence of poor decisions. Surprisingly, the help arrived just a week after Sri Lanka reached a long-awaited agreement on strategically positioning an oil tank farm in Trincomalee.
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Afghanistan’s currency c rC i sriiss i s Since the Taliban assumed power, Afghanistan's currency has plummeted, aggravating the country's economic crisis. The Afghani currency has become one of the world's worst-performing currencies in the recent 6 months. The currency crisis has put millions of people at risk of famine, with the humanitarian disaster affecting not only Afghans but also importdependent countries. The Taliban's announcement that humanitarian donations will be used to pay government employees reflects the country's financial difficulties.
Gaming Industry looks f oa rward to NFTs NFTs have a wide range of uses in the gaming industry, as they give in-game monetary rewards and allow gaming firms to monetize their assets. NFTs aren't just for blockchain-based games like Axie Infinity and Decentraland anymore. NFTs have been used by many firms to boost earnings, while others utilize them for marketing. NFTs have risen in popularity in India despite the fear of a crypto ban and a lack of clarity on legislation controlling future Web 3.0 technology. India's gaming business has developed at a 38% compound annual growth rate (CAGR), substantially faster than the US's 10% and China's 8%.
THE MONTH THAT WAS | 6
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N I V E S H A K I N V E S T M E N T F U N D PERFORMANCE EVALUATION
NIF SINCE INCEPTION
Sensex Scaled Value
Portfolio Scaled Value
Return measures Total investment value: ₹10,00,000 Current portfolio value: ₹31,07,849 Change in portfolio value: (1.20)% Change in Sensex: (1.98)%
NIF JANUARY PERFORMANCE
Sensex Scaled Value
Portfolio Scaled Value
Risk measures Standard Deviation NIF: 46.91% Standard Deviation Sensex: 43.19 Sharpe ratio: 4.49 (Sensex: 4.24) Cash remaining: ₹1,84,140
Comment on equity markets & NIF performance The Sensex closed at 57,200, as it declined 77 points whereas Nifty50 index fell 8 points to end at 17,101. on the last day of month. On the global front, Asian stocks traded higher as investors await UK interest rates outcome and reports of US jobs and manufacturing. The performance also tracked the strong upside of Wall Street. All sectoral indices were on a bull run with IT stocks leading the pack while significant gains were also seen in consumer durables, oil & gas, auto and banking stocks. NIF saw a portfolio change of (1.20)% (Sensex: (1.98)%) and stood at a net value of ₹31,07,849. 7 | NIF
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INDIVIDUAL STOCK WEIGHTS & MONTHLY PERFORMANCE Portfolio Weight
Performance
TOP GAINERS - JANUARY '22
18.45%
- PVR
14.27%
- Maruti Suzuki
11.92%
- Thirumalai Chem
TOP LOSERS - JANUARY '22
(13.08)%
- Asian Garnito
(12.67)%
- Avenue Supermarket
(11.34)%
PDr. Reddy
NIF SECTORAL WEIGHTS
NIF | 8
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C O V E R S T O R Y WEB 3.0: A WORLD BEYOND THE NINE REALMS
Overview The original version of the World Wide Web is termed as Web 1.0. The bulk of users were content consumers at this point. It functioned primarily as a content delivery network, allowing users to access information held on websites. An essential component of its subsequent-generation, viz. Web 2.0 is the transition from Web 1.0 in terms of how digital information is created, distributed, stored, and altered. Web 2.0 is distinguished from its predecessor by user-generated content, usability, and interoperability for end-users, where interaction and collaboration have become central to our current understanding of the internet. By allowing the efficient generation, dissemination, sharing, and refining of informative content, Web 2.0 applications facilitate the creation of informal user networks and the flow of ideas & knowledge. Here organizations 9 | COVER STORY
like Google, Twitter, and Facebook use centralized platforms to concentrate data and harness it to run their businesses. Furthermore, despite mounting criticism of how these multinational corporations use the user-generated data they control, the use of social media and forums continues unhindered.
Source: www.labnol.org
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The Advent of Web 3.0 The internet, as we know, is in the process of shifting to the third generation of services. The transition from Web 1.0 to Web 2.0 took over ten years, and Web 3.0, which is currently swirling through its nascent stages, may take much longer to actualize completely. Web 3.0 will be powered by a machine-based understanding of data to make websites and applications intelligent, connected, and transparent. The advent of smart homes, where home appliances ranging from an air conditioner to a light bulb can be operated remotely, is an excellent example of Web 3.0 in its early phases. The Internet of Things (IoT) is revealing new ways to communicate with every connected item in real-time. Web 3.0 is distinguished by its capacity to be open, trustless, and permissionless. It is 'open' because Web 3.0 will be built with open-source software by developers who will work in full view of the globe. Second, by its very nature, the Web 3.0 network will enable users to engage openly and privately without the use of a trusted third party. Finally, Web 3.0 will be a permissionless network with no governing authority to iron-hand it. While mobile, social, and cloud technologies propelled Web 2.0 forward, Web 3.0 will be based on additional layers of developing technologies like edge computing,
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decentralized data networks, and artificial intelligence.
Source: www.affinidi.com
Web 3.0: Decentralized finance Decentralized finance (DeFi) is a collective term for financial products and services open to anyone with an internet connection. These products have no centralized authority capable of blocking the provision of services to the users. If Web 3.0 is decentralized (as conceptualized) and harnesses the power of blockchain technology, DeFi will stand to play a much more significant role than what it is playing today. However, we will also see the two worlds of Centralised finance (CeFi) and
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DeFi merge eventually. Companies that are actively working towards closing the gap between CeFi and DeFi are expected to be the ones that will make significant developments in financial services innovation. DeFi stands to negate the many pain points around traditional finance, such as inaccessibility to bank accounts or other financial services, excessive regulation by governments or centralized institutions, premium and hidden charges, and the risk and delay in money transfers due to the bureaucratic structure of traditional financial firms.
DeFi uses cryptocurrencies and smart contracts to provide services without requiring financial institutions to act as guarantors or mediators. A smart contract is programmed to transact money from one account to another without the need of a financial intermediary, overlooking the transaction and thus charging fees for it. There are several practical use cases of DeFi, and they are continuously growing. It lets one send money around the globe, access stable currencies, borrow funds with or without collateral, trade tokens, buy insurance, and manage one's complete financial portfolio, all under one system.
DAOs: A peek into the finance
Source: www.medium.com
11 | COVER STORY
Decentralized autonomous organizations (DAOs) help likeminded people worldwide form an organization where they set their own rules and exchange values freely without any intervention of third parties. All financial transactions happening in DAOs are done through smart contracts recorded on a blockchain. Smart contracts contain organizational rules that cannot be edited without people noticing them, as DAOs are open and transparent to the public. Another specialty of DAOs is that they are democratized organizations, allowing all the members in DAO to vote for any changes to be implemented, unlike traditional companies where governance and decisions are primarily based on
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executives, investors, or the board of directors' whim. This inclusivity and openness could potentially revolutionize organizational structures as we understand them today. Imagine implementing a DAO framework in an investment management firm, where voting is open to all within the framework to decide upon the investment strategy for a particular investment fund. Such a strategy can become embedded and automated in the investment fund without interference or risk from external factors.
Source: https://blog.codecentric.de/
Some companies have begun to take it up a notch by combining AI with DAOs. The goal is to develop an open and transparent organization, requiring minimal human input while making independent, thoughtful changes to the organization's workings. This will help unlock an era where companies could be run by Artificial General Intelligence, helping them interact with each other seamlessly.
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AI DAOs can have some concrete use cases as it is governed by community-based decision making; is transparent as every transaction; is recorded using blockchain; has most of the internal processes automated, and thus having lower operational costs.
Conclusion Web 3.0, in conjunction with advances in artificial intelligence and machine learning, will connect data from organizations, individuals, and machines worldwide, creating a wealth of information in an ecosystem that can be understood quickly. This will help create new markets, new business models, and a slew of other possibilities that we can only speculate about at this point. Web 3.0 will see the convergence of breakthrough technologies that will elevate the world wide web to a level of efficiency never seen before as blockchain gains traction and eliminates inefficiencies. The next stage of decentralization will arguably return control to the users. There will undoubtedly be concomitant hazards, and it will be prudent to recognize, comprehend, and mitigate them. The benefits of Web 3.0 must be accompanied by a sense of responsibility both by businesses and individuals. It is up to us to adapt and cope with it in order to use it for our incremental development and greater benefit.
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F I N V I E W SPOTLIGHT ON SUCCESS
Mr. Abheek Barua
Chief Economist & Executive Vice President HDFC Bank
Could you please elaborate your journey of becoming the Chief Economist at HDFC and the challenges faced? Well, in terms of the journey, I have two postgraduate degrees in economics—one from Delhi school of Economics, and another from the University of Maryland, in the West. Also, I was one of the first economists in the financial sector in India post-liberalization. So, I started my journey in 1994, worked with several institutions initially on the equity side because I had a lot of interest in Indian stocks, and I think there's still growing interest in stocks, then I worked with the credit ratings company. And then finally, with a couple of foreign banks, Merrill Lynch & ABN AMRO, and currently working for HDFC Bank. One of the challenges I encountered was, of course, the 13 | FINVIEW
largeness of the bank. It goes without saying that if you were to transition from a boutique investment bank or an equity house to a bank, with a staff strength of 150,000 employees, it is difficult just to fit into a larger structure in terms of the number of people that you had to sort of work with and to sort out multiple demands that come your way and I also think banking sector has seen very challenging times. I joined HDFC Bank at the time of the great financial crisis, and I had no idea what was going on, and neither did I force people around me. And as you would know, banking is very closely related to the economy. So, what's happening not just in the domestic economy but globally has a very direct impact on the bank setups of interest rates in terms of fund flows, credit, quality, and so forth. So, it was sort of baptism, not entirely, but certainly, it was an initiation by fire. Commercial banking is a very attractive domain to work in. There are so many different things that one needs to do; you have the
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retail business, which has very different needs, from what I've seen from the Treasury Department, which looks at interest rate trading, looks at effects, trading, as well as an advisory for clients. Retail, which has, you know, completely massbased in the corporate bank, basically deals with credit products and its client base that requires a different kind of advisory. Right Now, as Chief Economist, I run an advisory team, and I think the complexity of the business makes it more challenging as well as innately satisfying. At the end of the day, instead of being stuck in just very niche functions in an equity research house, you're doing a whole bunch of things across the board. So that's broadly how I think was my financial journey.
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What would you suggest to the MBA graduates who aspire to make a career in the field of Economics? And could you please throw some light on the different career avenues available? Our field of economics? Well, you know, since you are specializing in finance, one key area in which you would clearly find a lot of satisfaction and application of both economics and finance is the area of investments, i.e., stocks, either on the buy-side, as in the mutual fund, or some other institution, or on the sell-side. The bond markets are also developing at a rapid pace which has an application of both the domains. Treasury as a financial sector also has a great opportunity to gain enormous satisfaction. As per the finance ministry, this year's budget will lay down the foundation for the next 25 years and give a blueprint to steer the economy over "Amrit Kaal" from India at 75 to India at 100. What are your thoughts on this? I think it is a very good idea in the sense that we do need to have what you call the vision or mission to think about in the long term. It does have a very well thought out long-term plan, particularly for the infrastructure domain, I wish and am sure that government will come up with similar timelines or similar programs for some of the FINVIEW | 14
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social sectors like education and health, which I think are just as critical. But the problem is the turn of events and the uncertainty associated with it. The government, which is looking at a $5 trillion economy and all the plans that went with it, couldn't have anticipated COVID, and that has sort of pushed things back. So, it's good to have a long-term vision, but one needs to be aware that there will be barriers and challenges that come along in terms of the turn of events like a pandemic. People are also talking about a major climate-related event coming next. So, I think, as a future manager, you will have to work much more frequently in crisis mode than in kind of a steady-state.
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Agriculture & Allied sector has had a buoyant growth and was least impacted during the pandemic. Do you think India is taking the right steps to reach its target of "Doubling the farmer's income by 2025"? Well, I mean, you were all aware of the kind of reforms that are needed to reform the sector, and I thought the government had made a very sensible attempt but unfortunately had to abandon it because of the pushback it got. Agriculture is still heavily biased on cereals like rice & wheat because of the skewed pricing driven by the minimum support price. Private players who procure directly are very careful about going in, and food processing really has taken off. We need much more crop diversification since relying on cereals is not sustainable. I think the idea of sustainability in a very fundamental sense is a problem in Indian agriculture because of the use of so much water in agriculture; for instance, sugar shouldn't be grown in Maharashtra because of water scarcity. Then, there’s overuse of fertilizers, and so forth. So, doubling farmer incomes cannot be done just by increasing the support prices; you need to have fundamental reforms. The government is trying its best. I don't think the clock has turned entirely back because the farming reforms rolled back. There are changes that are happening, but we need to sort of accelerate those changes far more rapidly to achieve this goal.
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With the rise in public CAPEX, hawkish FED, pressures on RBI, how do you see the bond yields changing? Do you think public CAPEX will crowd-in further private CAPEX? I think there is an element of crowding-in that will happen, especially for sectors like steel cement companies that manufacture pipes, for instance, under the Nal-se-Jal program. So, there is an element of crowding-in that will happen, but the fact is, as you very rightly pointed out, that there is enormous pressure in the bond market. In a scenario where global inflation is high, other central banks are suddenly turning Ultra hawkish, and the rest remains at a balance. If you want my view, I think, the public capex, the demand effect, or the crowding-in effect, will dominate at least for the next couple of years, But I think it's an issue which needs to be thoroughly thought out. VC & PE have invested about ₹5.5 Lakh crores in the last year and have now been recognized by the GOI. Do you think this will help the Indian investment ecosystem to prosper, or will GOI indulgence fizzle out the PE/VC dominance by burying it under regulations?
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I don't think it will be buried under regulations. I see an entire sort of new ecosystem and I think the government believes in it. It would potentially contribute enormously to the economy, to business activity, and so on. I think the government would be very, very careful about sending the wrong signals to private
and venture capital. And in fact, I think we should see some positive overhaul of the sector and investor concerns being addressed comprehensively. The good thing is the government buys into that story. I think it's very supportive of this new ecosystem and the budget made this very clear.
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K N O W Y O U R S E C T O R D2C-DIRECT TO CONSUMER
Growth catalysts The Covid-19 pandemic wreaked havoc on the traditional retail sector, highlighting the urgency of moving to a digital-first D2C strategy. There are various other factors that have enabled the growth of this sector. These 17 | KNOW YOUR SECTOR
100 75 50 25
25 F 20
24 F 20
23 F 20
22 F 20
21 20
20 20
20
19
0 18
Direct-to-consumer (D2C) selling is a fast-track retail model in which firms sell items directly to customers via an online storefront, bypassing intermediaries like wholesalers and distributors. In-house fulfillment centers, e-commerce marketplaces, and third-party logistics providers are used by brands to sell directly to consumers. More than 800 newage firms from India have bypassed intermediaries and gone D2C in the last few years. The D2C model has exploded in popularity across the country because it allows marketers to skip intermediaries and contact consumers faster and more efficiently.
factors include high growth in Ecommerce, lower distribution cost, larger SKUs and niche positioning, high investor interest & bigger deal sizes, shift in consumer behavior, and improving digital penetration.
20
Introduction
Total Addressable Market Under D2C Source: Inc 42 Plus Ananlysis
Sub-Segments Online FMCG Market Online Fashion Market Online Home Decor Market Online Consumer Electronics Market
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Business Model Subscription Based: This business model is mostly followed by D2C brands in categories such as beauty and personal care, fashion, snacks, packaged food, and milk products, where customers usually place recurring orders. Omnichannel Presence: In the aftermath of the epidemic, consumers are searching for more than just the greatest products; they also want a seamless purchase experience. As a result, shopping has evolved into a handy blend of online and offline venues.
India Factsheet
600+
BRANDS LAUNCHED
2.5x
PROJECTED GROWTH OF ONLINE SHOPPERS IN 5 YEARS
16
BRANDS WITH $50MN+ ARR
45
BRANDS WITH $15MN+ ARR
Source: Tracxn, Avendus Research
Key Metrics Now that we know about different kinds of companies and the operational aspect of EdTech companies, let's delve deeper into analyzing the financial health of the players using key metrics. Average Order Value(AOV) AOV = Sales Total Value/ No. of Carts
This metric gives the average value of each purchase. For D2C electronics it is estimated in Rs.500-5000 range. For D2C Fashion it is estimated in Rs.1500-2000 range. Shopping Cart Abandonment Rate It is calculated as: 1-(No.of completed purchases / N. of shopping carts created) * 100 It indicates the number of consumers who add things to their shopping basket but do not complete their purchases. Most D2C brands have this rate in the range of 70-80% Rate of Refund and Return It is calculated as: (Returned + Refunded Items) / No. of items sold * 100 It refers to the frequency that customers return and refund items. Most D2C brands have this rate in the range of 12-30%
Zooming into the future Given the change in the country's macroeconomic environment, government push to the domestic startup culture and huge investments coming into the sector, we can expect a large number of new companies entering this field. D2C brands will witness a high number of subsequent funding rounds and strategic sales to incumbents, which will give tough competition to the traditional sector. With the Indian retail market expected to grow by a CAGR of 11% to $1757bn by 2025, there awaits a substantial retail opportunity for the sector. KNOW YOUR SECTOR | 18
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S T R A I G H T F R O M T H E C L A S S R O O M TOWARDS AN ALTERNATIVE PARADIGM OF ENLIGHTENED MANAGEMENT - PROF. SANJOY MUKHERJEE, IIM SHILLONG
‘It was the best of times. It was worst of times.’ The opening lines of Charles Dickens in his immortal creation ‘A Tale of Two Cities’ are so relevant even today! From the individual to the organization, society to nation, we are all struggling to come to terms with two realities, and trying to script the ‘tale of two cities’ and thereby deal with the dichotomy between a pre-Covid life-world and the Covid one while preparing for the post-Covid future. Even couple of years back, the phenomenon of globalization was triumphantly marching ahead at an incredible speed propelled by the ideology of market economy. The world also witnessed mindless rush for careerism and consumerism driven by the forces as well as the gospel of competition. But the changes had been so rapid and radical that we are encountering an existential crisis of a different proportion altogether. Locked up in the corner of our apartments in isolation and constrained to
19 | STRAIGHT FROM THE CLASSROOM
follow social distancing in public sphere even among friends and relatives, how do we unleash our creative energy? Time has come when we need to begin our quest for creativity amidst formidable challenges posed by the current reality. All this has prompted conscious and conscientious thinkers in management to search for alternative models and methods of knowledge creation and dissemination. There is also a quest for an alternative holistic paradigm of organic connectivity between our head and heart, thought and being, mind and body, emotion and intellect, but resonates with a wholeness and fullness that engages every part of one’s being. Illumined minds among thinkers and practitioners in management are seeking insights from hitherto neglected disciplines and knowledge systems like Humanities (literature, arts, films, music, theatre etc.), Sports, Spirituality in order to establish
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the missing connect between learning and life. For long we have been mindlessly caught up into the trap of ‘solving the wrong problem precisely’ (as diagnosed by the veteran management thinker Ian Mitroff) using technoeconomic methods whereas the systemic and spiritual perspectives are pushed out of our vista of vision and domain of concern. Terms like ‘Shallow Success and Deep Failure’ (coined by eminent academics Laszlo Zsolnai and Knut J Ims) revealed the emptiness of our conventional notions of success and failure based on materialistic considerations. This finds resonance in Stephen Covey’s proposed shift in management metaphor from the stomach to spirit. There is an urgent need for exploring non-conventional sources and alternative methods of learning for the comprehensive and integral development of the individual in an organization. The aim is to develop a ‘quality mind’ or ‘quality consciousness’ by cultivating the art of ‘mindfulness’. The concepts of Synchronicity by Joseph Jaworski and Spiritual Quotient by Danah Zohar are significant developments in this direction. With the rapidly changing times leaders in academia and business are increasingly finding themselves grappling with turbulence, uncertainty, and paradoxes. Calculations and predictions are simply going
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haywire in the face of turmoil and tremors from global economic meltdown to political anarchy and natural catastrophes. Time has come to take a deep look and seriously question some of our fundamental principles and dominant assumptions on the purpose of education, the role of teachers and pedagogical interventions to address some unsettling questions.
In the academic arena as well as the organizational context the need of the hour is to focus on all-round human development Human Development that will ensure: Cultivation of deeper and nobler aspects of human nature challenging the domineering influence of the techno-economic man; Imparting ethics and values education in a manner that the students find engaging and relevant; Developing our critical rational and aesthetic faculties beyond sharpening of ‘instrumental reason’; STRAIGHT FROM THE CLASSROOM | 20
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Enrichment of pure and lofty emotions for personal and organizational transformation; Creating a holistic vision of management and integration of the disconnected pigeon holes of functional areas; Highlighting the importance of finding meaning in work and discovering our purpose in life.
mind-space from a world of speed, information, and numbersdriven only by technology towards sustainable earth with passion for excellence, commitment to quality, concern for the wellbeing of all, and harmony in relationships, a quest for enduring values and ethics and an earnest seeking for wisdom.
This calls for a creative response at this hour of transition with a shift from an obsession with techno-economic imperatives towards deeper issues and wider perspectives. At a micro level, it implies an expansion of our limited notion of the self to include and accommodate the others and their concerns. Learning to live with uneasy questions that challenge the conventional mental models and stereotypes and finally embarking upon an adventurous odyssey into the search for the real answers are the characteristics of this unsettling transition.
With the dawning of this wisdom in our consciousness, the leaders of tomorrow in business or otherwise can boldly move ahead towards making a palpable difference in the quality of lives of the suffering humanity and the planet at large. Millennia ago, Socrates had proclaimed: “An unexamined life is not worth living.” Only those with braveheart, enlightened vision and passion, idealism, and dynamism will be the pathfinders to this alternative paradigm. May they be charged with the mantra of ‘Charaiveti’ from the Upanishads and the exhortation by Swami Vivekananda, the founder leader of the first twin organization (Ramakrishna Math and Ramakrishna Mission) with headquarters in India and global outreach growing apace and inspiring humanity world over even after a century and quarter of its creation: “Arise! Awake! And stop not until the goal is reached.”
The beginning of this journey in search of new horizons also demands transformation of the
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A R T I C L E O F T H E M O N T H FREE FALL OF TURKISH LIRA AND RESULTING BITCOIN BOOM BY MAHIMA AGARWAL & ADITYA SAXENA NMIMS, MUMBAI
The Economic and Political Landscape Turkey
of
Located in South-eastern Europe and Western Asia, Turkey’s archaeological sites, natural beauty, and location makes it a popular tourist destination. In 2017, Turkey moved into a presidential system from a traditional parliamentary system. The nation has a GDP of approximately $720 billion. While the services sector account for 54.64 percent of the GDP, industry and agriculture contributes 27.8 and 6.6 percent to the GDP respectively. Since the early 2000s, Turkey has been witnessing an impressive social and economic development. A direct result is Turkey becoming an upper-middle-income country because of increased employment and higher incomes. Turkey strengthened its fiscal policy frameworks and focused on urbanizing by opening up to foreign finance and trade.
Additionally, it expanded the access to public services and ensured that it complied with various laws and regulations of the EU. However, rising inflation and unemployment, declining investment, elevated corporate and financial sector vulnerabilities, and patchy implementation of corrective policy actions and reforms have threatened to undermine these achievements in recent years due to growing economic vulnerabilities and a more challenging external environment. External impediments are also present owing to the subregion's continuous geopolitical difficulties. While inflation continues to rise, the value of the Turkish Lira against the dollar has halved this year.
The Decline of the Currency What’s the buzz about it? Lira, the official currency of ARTICLE OF THE MONTH | 22
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(Source: WSJ)
Turkey has been in a free-fall since the dawn of 2021. It had already been depreciating for quite some time and has lost over half its value since the beginning of 2021. On December 21, Turkey's inflation rate reached 36.1 percent, the highest since President Recep Tayyip Erdogan's 19-year tenure began. The Turkish Finance Minister has informed analysts that he expects inflation to reach about 40% in the next months. Several Wall Street firms believe that the currency crisis of last year will push inflation above 50%.
What’s Fuelling the Free Fall of the Lira? Low-interest rates have long been a favorite of Turkish President Recep Tayyip Erdogan. He believes that these are integral for encouraging economic growth and reducing inflation. However, this isn't the best strategy. In fact, when central banks cut interest rates, the public is encouraged to 23 | ARTICLE OF THE MONTH
borrow money at a low cost, increasing the money supply in the economy. As a result, prices are rising and inflation is growing. Mr. Erdogan, on the other hand, appears to feel that no amount of interest rate reduction will result in an increase in prices. Indeed, he has maintained that highinterest rates are the cause of rising prices in the economy because they increase expenses. According to his regime, lowinterest rates will lower inflation by stimulating growth. It will increase the supply of products. According to Mr. Erdogan, a central bank can print an endless quantity of money and yet avoid hyperinflation by boosting growth sufficiently. Erdogan's bold pro-growth initiatives have proven successful until now. Since 2003, he has embarked on costly infrastructure projects, actively pursued foreign investors, and pushed businesses
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and consumers to take on debt. That's when things really started improving. Poverty was reduced by half, the middle class increased by millions, and foreign investors were ready to loan. Turkey was seen as an economic success story. However, Erdogan's insatiable desire to expand proved unsustainable in the long term. Any currency's value is determined by several factors, including its scarcity in comparison to other items. For example, if the market has an infinite quantity of liras but a finite food supply, a single lira will only buy you a small amount of food. When comparing currencies, the same concept applies. When compared to comparably tougher currencies like the US dollar, the supply of liras on the market has been steadily increasing. According to World Bank data, Turkey's broad money supply increased by nearly 3.5 times between 2014 and 2020, whereas the United States' broad money supply increased by around 50%. The currency's demand can also have an impact on its value. Turkey has one of the world's greatest current account deficits, meaning that its imports exceed the value of its exports. To bridge the gap between them, the government has traditionally relied on foreign investment. Foreign investors, on the other hand, who help finance the current account deficit prefer
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some level of exchange rate predictability. The Lira's exchange value has become increasingly unstable as the Turkish central bank grows more inconsistent in its regulation of supplying liras. As a result, international investors have grown hesitant to purchase Turkish liras and invest in Turkey. It has resulted in a reduction in the currency's demand. As a result, Mr. Erdogan's unconventional monetary policy principles have been the primary cause of the Turkish Lira's depreciation. Usually, investors look on the central bank of a country to control inflation and fix interest rates. Erdogan, on the other hand, has consistently demonstrated that if Turkey's finance ministers or central bankers refuse to do what he wants, he will remove them. He has sacked three in the last two years for attempting to raise interest rates in order to enhance the currency's value.
How has the currency fall impacted the citizens? The higher supply of Liras is significant for two reasons. One, the establishment of new currency almost always results in major wealth redistribution among citizens. It is because the central bank's newly generated currency is usually dispersed in a random manner among citizens. ARTICLE OF THE MONTH | 24
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As a result, some people may have more purchasing power than before, while others may be worse off. Second, a fast-depreciating currency can suffocate economic activity. When the real value of the cash received for what they produce is unknown, people have little motivation to produce new goods.
Bitcoin Boom in Turkey Notwithstanding the volatility and government hostility, cryptocurrencies are gaining popularity in Turkey due to a lack of faith in conventional currency. While most Turkish individuals who want to protect their assets reinvest in dollars or gold, a growing proportion of young
(Source: WSJ)
investors believe cryptocurrencies are the way to go. In Turkey, approximately 5 million people have bitcoin trading accounts. According to statistics, cryptocurrency trade volumes in the lira increased to an average of $1.8 billion each day. Turkey has transactions increasing by 1,500% from 2020 to last year. According to research, "there is an extremely strong association between the 25 | ARTICLE OF THE MONTH
amount of lira trade on cryptocurrency exchanges and the amount of lira devaluation." It has not been taken well by the Government and they are releasing programs to attract citizens to Lira investments. The programs promise that they will protect the citizens against losses due to exchange rate. However, several experts are sceptical about the programs.
Conclusion Thus, we can observe how inflation can result in depreciating the value of the money we have and that too without us even realizing it. The ongoing crisis in Turkey and the erosion of the currency value is an example of the same. It is imperative for individuals to invest their money in a manner that results in a return higher than the inflation rate of the economy. Thus, they will be able to ensure that their purchasing power remains healthy.
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D E A L S B R E W E R Y A MAMMOTH ACQUISITION IN THE GAMING INDUSTRY BY THE TECH GIANT
Deal Highlights Microsoft is buying Activision for a whopping $68.7 billion. This is an acquisition unlike any other seen before in the video game industry, and the deal is expected to close in June 2023. The blockbuster acquisition would catapult Microsoft into a dominant spot in the $175 billion gaming industry, where it takes on leaders Tencent and Sony. With the onset of the Covid-19 pandemic, games have gained even more tremendous popularity on all kinds of devices, from bulky consoles to smartphones. Technology companies are swarming around the industry, looking for a more significant share of attention and money from the world’s three billion gamers.
About Microsoft Microsoft Corporation is an American technology MNC that produces computer software, personal computers, and related services. Best known for software products like Microsoft Windows
Operating Systems and Microsoft Office suite,its flagship hardware products are the Xbox video game consoles and the Microsoft Surface lineup of touchscreen personal computers. Microsoft enables digital transformation and innovation for the era of an intelligent cloud and an intelligent edge.
Microsoft's acquisitions over the years (Source: HiTech)
About Activision Blizzard Activision Blizzard, Inc. is an American video game company that creates interactive gaming DEALS BREWERY | 26
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and entertainment experiences. Founded in July 2008 after the merger of Activision, Inc. and Vivendi Games, Activision Blizzard currently comprises five business units: Activision Publishing, Blizzard Entertainment, King, Major League Gaming, and Activision Blizzard Studios. It offers many games like Candy Crush™, Call of Duty®, World of Warcraft®, Overwatch®, Hearthstone®, and Diablo®.
Game Studios currently comprises 23 companies developing firstparty experiences for Xbox users worldwide, 8 of which were added when Microsoft acquired ZeniMax Media for $7.5 billion in 2021. With the acquisition of Activision Blizzard, Xbox Game Studios will have 34 game development studios under its banner, and Microsoft will have an impressive list of franchises under its belt, like Age of Empires, Call of Duty, and Candy Crush.
Scoping the future The US Federal Trade Commission (FTC) will reportedly be reviewing the proposed acquisition to determine if this $68.7 bn deal could harm consumers, rivals, and partners. The takeover of Activision would make Microsoft the world’s third-largest gaming company by revenue.
Portfolio of studios under Activision Blizzard
Deal Synergies Microsoft portrayed the deal as strengthening the company’s name in the “metaverse,” the upcoming world of virtual and augmented reality. But the acquisition will help Microsoft gain an edge over its rival Sony in the gaming industry. It will also allow Microsoft to stay ahead of potential newer competitors in gaming, like Amazon and Google. If we look at some figures, Xbox 27 | DEALS BREWERY
Even though content creation platforms are still fragmented, the game industry has started consolidating rapidly. It remains to be seen who will emerge as the top player in this lucrative industry.
Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms. - Satya Nadella Chairman & CEO, Microsoft
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SOMETHING NEW SOMETHING OFFERED HONASA CONSUMER PVT. LTD.
Company Overview Honasa Consumer Private Limited (HCPL), an India-based ecommerce company, has become the first unicorn of 2022. HCPL sells products in the personal care and beauty segments. It is the parent company of Mamaearth, The Derma Co., and personal care House of brands. In 2021, Mamaearth had acquired Momspresso, a woman-focused content platform along with its associated influencer engagement platform. HCPL announced receiving a $52 million funding round led by Sequoia Capital. This round also saw participation from Sofina Ventures, a Belgium-based investment company, and Evolvence, a UAE-based Indiafocused fund. The round also gave employees an opportunity to monetize their vested ESOP. The company plans to use the fresh funding to expand its portfolio of personal D2C brands, distribution and marketing, and product innovation. Further, venturing into
Varun Alagh & Ghazal Founders of Honasa
Alagh,
Valuation: $1.2 billion Funding: $52 million User Age: 18 to 35 Years Indian Tier 1 & 2 Cities SOMETHING NEW SOMETHING OFFERED | 28
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new avenues with unique propositions. HCPL recently entered the skincare segment with a hydration-based brand, Aqualogica. The funding will also be used for inorganic growth opportunities in several personal care and beauty segments. So far, the brand offers more than 120 products and is known to have reached more than 5 million consumers across 500 cities in the country.
The House of Brand Strategy HCPL uses the house of brand strategy to maximize the gain from synergies at the organizational level. This provides them with several corporate strengths in terms of technology, data, market playbooks, distribution. These together can be utilized using this approach. With respect to the consumers, each brand continues to maintain a separate identity and branding.
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Moreover, at the back end, brands will be able to use the same infrastructure, technology stack, R&D understanding of personal care, consumer insights around skincare, and all of these become synergies. It further enhances the ability to increase market share.
Conclusion Exploring strategic inorganic growth opportunities with science-based and natural ingredient products is a step in the right direction. With international expansion plans, HCPL may soon achieve its annualized revenue rate target of Rs 1000 crore.
Mamaearth has established itself as a clear market leader in this digital-first consumer goods space and team Sequoia is delighted to double down on the partnership with Ghazal and Varun in this journey. - Ishaan Mittal, MD, Sequoia India
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LET'S FIN UP! THE CROSSWORD
oo
Don't have physical copy? Don't worry! Scan this QR Code! Across 1. A combination of two or more corporations (12) 5. 3rd in India to cross USD 100 billion in market capitalization (5) 6. How much % tax will be levied on the transfer of virtual assets (6) 8. Subject to fast, extreme changes in value (8) 10. World Investment Report is published by (6) 11. Number used by banks to measure credit worthiness (9) Down 1. 2. 3. 4. 7. 9.
This tax on crude palm oil was reduced to 10% (7) Exchange a sum of money for a series of payments over time (7) Which commodity will become costly after the Union Budget (8) Who has launched a mobile app called ANANDA (3) Bond that offers dedicated insurance against volcanic eruptions (7) 'Q' in 'Q-Commerce' stands for (5) LET'S FIN UP! | 30
ANNOUNCEMENTS Team Niveshak invites articles from participants from all colleges across India. We are looking for original articles related to Finance and Economics. Participants can also contribute puzzles and jokes related to Finance and Economics. References should be cited wherever necessary. The best article will be featured as "Article Of The Month" and would be awarded a cash prize of 3000/- along with a certificate. The runner-up article would be awarded a cash prize of 2000/- along with a certificate.
INSTRUCTIONS Send in your articles to niveshak.iims@gmail.com Mail subject line must be "Article For Niveshak_<Title>" Mention your Name & Institute Name along with the article Ensure that article has a word count between 1200 - 1600 Please DO NOT send PDF Files and stick to the format Number of authors is limited to 2 for each article Also certain entries which could not make the cut to the magazine will get featured on our website
FORMAT Microsoft Word Font: Times New Roman Size: 12 Line Spacing: 1.5
ISSUE V • VOLUME XV • BLS EDITION • JAN'2022