Niveshak Aug15

Niveshak THE INVESTOR

VOLUME 8 ISSUE 8

August 2015

INDIA INC Presents

THE NEXT BIG THING CELEBRATING

7 GLORIOUS YEARS OF NIVESHAK

7th Anniversary Issue

OCTOBER 2014

DECEMBER 2014 SEPTEMBER 2014

FROM EDITOR’S DESK Niveshak Volume VIII ISSUE VIII August 2015 Faculty Mentor

JANUARY 2015

THE TEAM Editorial Team Abhishek Bansal Bhawana Saraf Maha Singh Gulati Palash jain

APRIL 2015

Prakhar Nagori Ramesh Jaiswal Rahul Bajaj

With this issue in your hands, dear readers, Niveshak completes seven glorious years of its existence. When we look back at the journey so far, we feel satisfaction, joy, encouragement, hope and determination, all at the same time. We continue to introduce a new section every year with FinLife being the recent addition. We feel privileged too for having you with us – having seen us grow from a dream to where we are today. Had it not been for your constant support and motivation, nothing would’ve been possible. Talking about the Indian economy, it has seen great heights over the past one year. Be it the Sensex touching 30,000 or the comfortable fiscal numbers, or the Make in India campaign, we’ve seen huge traction and visibility for our economy in the international arena. The inflation numbers and twin deficit numbers were never so comfortable and with the China slowing down, the Indian economy is poised to become the fastest growing economy of the world. But the question that remains is what could be the next big driver for the growth of the Indian economy. And that is why, the theme of this anniversary issue is ‘The next big thing in India’! As you flip through the pages, you can find a rich mix of ideas and opinions by industry experts and also by the future managers. As the Real-Estate in the country matures we believe Asset Management & Private Equity RealEstate funds will also emerge as the next big thing in India. Online Travel Companies have already made their mark in the most emerging e-Commerce industry. Also for a country with the appetite of over 1.35 billion people, consumer goods industry will continue to be the big thing for the India. In our perusal to understand them, we had the pleasure to interview Mr. Arjun Dosaj, Managing Partner & CEO at Avista Asset Management Pte. Ltd, Mr. Ashish Kashyap, Founder & CEO,ibibo Group & Mr. Sameer Shah, Head Finance (India & SAARC cluster) and Investor Relations, Godrej Consumer Products Limited. This anniversary issue brings you an outlook of seven growth and economy driving industries. Also in this edition we have introduced two special additions – an Equity analysis and MyFinanceStory for our esteemed readers to give them an insight about the world of Finance at different angles.

Sandeep Sharma

JULY 2015

JUNE 2015

Vishal Khare

MAY 2015

Dear Niveshaks,

Prof. P. Saravanan

MARCH 2015

FEBRUARY 2015 NOVEMBER 2014

AUGUST 2014

7th Anniversary Issue

All images, design and artwork are copyright of IIM Shillong Finance Club ©Finance Club Indian Institute of Management Shillong

In the run-up to this anniversary edition, we organised a slew of events under the aegis of ‘Celebratio – Celebrating 7 glorious years of Niveshak’. Thank you for making each one of them so very successful. Also, we received a large number of articles as contenders for space in this limited page edition. It was a herculean task to zero-in on the ones that finally feature in here. It wouldn’t be fair on our part if we didn’t thank each one of you profusely enough for such a huge response to our initiatives. As we traverse on the chosen road in future, we would love to keep your company along and expect that you will keep bestowing your support and contribution to your much cherished Niveshak. Together, we will take it to greater heights! And today, more than ever before,

http://iims-niveshak.blogspot.in

Stay Invested! Team Niveshak

August 2015

7th Anniversary Issue

Message

TOP Seven

06 Automobile Industry

The CHOSEN ONES

13 A journey towards

07 Infrastructure

fiancial inclusion through payment banks

08 e-Commerce

17 Military Keynesianism

09 IT Software Industry

and Make in India

20 Transition in India’s

10 Pharma

Power Sector

11 Mining and Power

24 The Manufacturing

12 Financial Services

Juggernaut

28 Logistics & GST: The tax that reduces costs

From the Faculty Mentor...

A Tryst With The Experts

Niveshak is originally started as a student magazine which changed its phase over a period of time. It is now more of showcasing students’ knowledge of what they picked up in the class room to the outside world. Niveshak has successfully completed seven years of publishing the magazine and I whole-heartedly congratulate the team for their seamless innovative effort in identifying the upcoming and relevant topics for the magazine. The current seventh anniversary issue is focused on the theme “Next Big Thing in India” which best suited for the current business environment. Niveshak is a magazine where one could read articles on emerging issues, views and opinion from people with diverse backgrounds on various interesting topics. Already our magazine have a very strong readership base not only in the business school arena but also in the industry especially in financial firms. I wish to record my special thanks to our Director, Prof. Amitabha De and my colleague Prof. Nalini Prava Tripathy and other members in finance and accounting area for their consistent support in all our activities related to the Niveshak. I would also like to acknowledge all those who have contributed articles for the current anniversary edition. On behalf of the team, I wish to invite each one of you to join us through your contribution of articles or opinions and consumption of the service provided by us, so that we as a team can help each other in enhancing assets in the form of financial knowledge to strengthen our knowledge balance sheet.

35 MR. Arjun Dosaj

Managing Partner & CEO Avista Asset Management Pte. Ltd., Singapore

37 MR. Ashish Kashyap:

31 Startup ecosystem in India: Driver of the Indian innovation

44 Equity Analysis 47 My Finance Story

CEO, Ibibo Group

39 MR. Sameer Shah

Head - Finance, India & SAARC and Investor Relations, Godrej Consumer Products Limited

Best Regards, P.Saravanan Associate Professor

August 2015

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Infrastructure

e l bi o m y o r t t Au dus In The Indian Automobile Industry grew by 1.6% in the financial year 2014-15. The automobile industry accounts for 22% of the country’s manufacturing gross domestic product. Currently the industry stands at $18.2 billion which is expected to reach $28.8 billion in the next four years. To match production with demand, many auto makers have started to invest heavily in various segments in the industry in the last few months. The industry has attracted foreign direct investment (FDI) worth $12,232.06 million in the past 15 years, according to the data released by Department of Industrial Policy and Promotion (DIPP). Lower oil prices have helped to compensate for the loss of the fuel duty reduction from January and interest rate cuts and speculation that they may be cut further are already positively impacting demand in 2015. Also, India’s Union Budget of 2015-2016 has been widely received as boding well for future Indian growth and the government is also indicating its firm commitment to implement the goods-andservices tax (GST) from 1st April 2016 Some of the major investments and developments in the automobile sector in India are as follows: • DSK Hyosung has announced to set up a plant in Maharashtra and is planning to add 10-15 dealerships in the next financial year (FY 15-16) mostly in the tier-II cities and introduce more models in the 250cc segment. • Germany-based luxury car maker BMW’s local unit has announced to procure components from seven India-based auto parts makers. • Mahindra Two Wheelers Limited (MTWL) has acquired 51 per cent shares in France-based Peugeot Motorcycles (PMTC). • Suzuki Motor Corp is planning to sell the automobiles made in the Gujarat plant, in Africa. • Tata Motors Ltd, India’s largest automobile maker, will sell trucks in Malaysia, Vietnam and Australia to strengthen its presence in the Asia-Pacific region. The Government of India encourages foreign

investment in the automobile sector and allows 100 per cent FDI under the automatic route. Excise duty on small cars, scooters, motorcycles and commercial vehicles was reduced in February last year to 8 per cent from 12 per cent to boost the ‘Make in India’ initiative of the Indian government. Some of the major initiatives taken by the Government of India are: • Under the Union budget of 2015-16, the Government has announced to provide credit of INR 850,000 to farmers, which is expected to boost the tractors segment. The government is aligning to ensure that at least one family member is economically strong to support the family. This is expected to improve the sentiments of entry-level two-wheelers. • The Government plans to promote eco-friendly cars in the country i.e. CNG based vehicle, hybrid vehicle and electric vehicle and also made mandatory of 5 per cent ethanol blending in petrol. • The government has formulated a Scheme for Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India, under the National Electric Mobility Mission 2020 to encourage the progressive induction of reliable, affordable and efficient electric and hybrid vehicles in the country By the end of 2015, India is expected to be the fourth largest automotive market by volume in the world. Over the next 20 years, India will be a part of the big global automotive triumvirate. The vision of leading manufacturers sees India, “to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion; accounting for more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016.” Thus with the lowers interest rates and government initiatives through Make in India plan, the sector has a bright outlook in the coming years.

August 2015

ROADWAYS Share of private investments to decline vis-a-vis the past 5 years Private investments in national highway projects will be lower as compared to the past 5 years, as most developers struggle with weak financials and are therefore unable to bid for build-operate-transfer (BOT) projects. Hence, the government awarded Engineering, Procurement and Construction (EPC) projects over past few years. In the next three years, even as government policy changes and a gradual improvement in players’ financials drives up participation, projects awarded will largely remain EPC-based and private participation will improve gradually. However on an aggregated 5 year basis, the proportion of private participation will continue to show a marginal dip. A sound financial position of NHAI, entry of new players and players targeting sale of operational assets amid raising equity will support funding of projects over the medium term. Bank credit growth to the sector would be lower than overall credit growth for the banking sector over the next 5 years. In case of state road projects, private participation is expected to remain stable over the next five years. Despite state government initiatives to improve the policy framework award more projects on the BOT mode, only large progressive states are expected to spearhead implementation of PPP projects.

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revenue growth over the remaining months of 201415. The industry’s revenues are likely to grow by slow 8-10 per cent in 2015-16 as well, with a slight pick-up in demand in the second half of the year aided by improvement in the economic scenario and softening of interest rates. Huge inventories, tight liquidity position to weigh on prices Post the slowdown in 2008-09, real estate developers made significant investments in new projects in 2009-10. However, demand was muted during the past three years. Absorption levels across 10 major cities tracked by CRISIL (Obtained from CRISIL’s Index) declined by 8 per cent in 2013 and 5 per cent in 2014. This resulted in a sizeable pile up of inventory - as of March 2014, inventory amounted to about 2.5 times the industry’s revenues for the year. Hence, a significant amount of funds of real estate developers were stuck in inventories, straining their cash flows. A prolonged weakness in demand, huge inventories and a tight liquidity situation is likely to continue to exert downward pressure on prices. Hence, despite recording a 1 per cent fall in capital values in 2014, capital values across 10 major cities to remain flat in 2015 and rise by a mere 3 per cent in 2016.

REAL ESTATE Revenue growth to remain muted in near term Aggregate revenues of 34 listed real estate companies rose at a muted pace over the last three years. Unlisted companies were more severely affected by the slowdown in demand and constrained availability of funding during the last two years. During the first nine months of 2014-15, cumulative revenues of 34 listed real estate companies rose by a slow 8 per cent y-o-y as fewer projects were launched and new home bookings declined. These factors along with a muted growth in capital values in most cities are likely to continue to impact

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e-Commerce opportunities thrown up by the Internet and the Internet of Things, India provides a wide assortment of companies that can change the way of living of more than one billion people. There are several factors that are fueling this phenomenal growth. The major being fast-growing internet population.

Over the last decade, the Internet has changed the way people buy and sell goods and services. Online retail or eCommerce is revolutionizing the shopping experience of customers. The sector has seen tremendous growth, especially in the past two years. E-commerce sector is becoming more reachable and efficient by the adoption of technology. The digital commerce market in India has constantly grown from $4.4 billion in 2010 to $13.6 billion in 2014 and is expected to rise to $137 billion by 2020, according to a recent Morgan Stanley Research report. Currently, around 61% of e-commerce business is captured by online travel while e-tailing contributes about 29%. Several players have established themselves in e-commerce market just in few years. As the demand for digital commerce is rising, innovative startups are emerging in all segments. Flipkart is the largest e-tailer in India with a valuation of about $11 billion and trying to raise funds to compete with global biggies like Amazon and Alibaba. Snapdeal is another homegrown player with a valuation of $5 billion. Some of the emerging players have revolutionized their respective market like BookMyShow with almost 90% of the online entertainment ticketing market; Paytm with nearly 20 million users is leading provider of virtual wallet. As the competition in the e-commerce becomes tense, the companies are using multiple business models in order to seek customer attention including Inventory model e.g. Shopper Stop, Croma; Social networks e.g. TripAdvisor; Aggregator Model e.g. Ola Cabs; e-Marketplace e.g. Snapdeal, Flipkart; Transaction broker e.g. IRCTC; Click and Collect service e.g. Amazon. The sector is still in its growth stage in India and has enormous potential to offer in the coming years. The government’s flagship project Digital India could take the sector to new heights. With immense passion and entrepreneurial talent in India and huge

IT Software Industry

Fig 1: Internet users by country (in millions)

From the graph, it is evident that in absolute terms internet using population in India is short by only 36 million as compared with 279 million in the US and higher than that in Japan, Brazil and Russia. But these internet users form only 19% of the Indian population. This indicates the potential of internet use in India, and as internet penetration increases, the potential of growth for the eCommerce industry will also increase. Other factors being analytics, payment gateways, social media, autonomous vehicles, investments from VC’s and PE’s, cloud(SMAC) and many more. New technologies like virtual mirrors and virtual walls will further help enhance the retail customer experience, thereby encouraging greater consumption. As per Deloitte India TMT Prediction 2015, a new category of service (handyman, delivery, Healthcare, repairing) that touches the daily lives of the consumer would play a pivotal role in the growth of e/m-commerce in the coming years. As stated by Ambrish Bajaj: Head of Mobile, Jabong in ASSOCHAM report, ““m” is increasingly replacing the “e” in E-commerce, as more Indians get on to their smartphones to buy stuff online. From a technology perspective, on the small screen, discovery of the right products along with the payments payments present two key challenges as well as opportunities. Whoever can solve these challenges faster and in a sustainable manner, can challenge the status quo in e-commerce markets.”

August 2015

The Indian software market has grown rapidly in recent years and this trend is forecast to continue through to 2019 at an even faster rate. Global outsourcing has played a key role in developing Bangalore and Hyderabad as technology hubs. Market had total revenues of $3.7 billion in 2014, a compound annual growth rate of 15.6%. The network and database management segment was the market’s most lucrative in 2014. The operating system software segment equating to 21.2% of the market’s aggregate value. The execution of the business sector is gauge to quicken, with a foreseen CAGR of 20.7% for the five-year period 2014 - 2019, which is required to drive the business sector to an estimation of $9.5bn before the end of 2019. The Indian IT services market has experienced dynamic double-digit growth in recent years, albeit at a decelerating rate. This tremendous growth is expected to continue, at a slower overall rate, through to the end of the forecast period in 2019. India with its own strong market players such as Infosys, Tata Consultancy Services and Wipro. The Indian IT services industry had total revenues of $13.0bn in 2014, representing a compound annual growth rate (CAGR) of 18.5% between 2010 and 2014. The IT outsourcing & processing segment was the industry’s most lucrative in 2014. The IT consulting & support segment contributed revenues of $3.4bn in 2014, equating to 25.8% of the industry’s aggregate value. Cloud computing services are expected to achieve dynamic growth over the next few years as buyers expand the use of data centres and advanced analytics in order to manage the vast amounts of data being produced in the connected world. The positive impact of this transition on the overall market could be balanced by a decline in outsourcing & processing services as many more tasks become automated through the use of artificial intelligencebased algorithms.

The growth of the business is figure to decelerate, with a foreseen CAGR of 13.8% for the five-year period 2014 - 2019, which is relied upon to drive the business to an estimation of $24.8bn before the end of 2019.The IT services market is evolving from offering services that improve productivity and efficiency such as outsourcing, which has been the key driver of export-led growth in India, to providing value-added services such as analytics consulting. Services have become increasingly globalized, with India at the forefront of reducing IT services labour costs, and are likely to become increasingly automated, particularly with the adoption of cloud computing services. The Indian IT industry has been vital to developing India’s international competitiveness. Competition within the software market is boosted by constant advances in technology, by the presence of large international incumbents and a regular supply of new entrants with alternative business models forcing players to operate increasingly competitive pricing strategies. The positive outlook of the market, combined with easy access to the Internet as a distribution channel appeals to new entrants. Brand acknowledgment is liable to be of huge significance to clients and they accordingly regularly look to a legitimate organization for administrations. Then again, a few organizations demonstrate a few backwards integration with their own particular hardware and software capabilities, which lessens their dependence on outer suppliers. Regulation in this industry is shifted and to a great extent subject to the administration offered and the sort of purchaser included.

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Fig 1: Breakup of IT software market industry

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Pharma

The expected robust growth in domestic formulations, their exports to regulated markets are projected to drive the demand for overall Indian pharmaceutical products over the next five to six years. In 2014-15, overall demand for pharmaceutical products manufactured in India touched close to $36.7 bn, which constituted both domestic demand for formulations and exports of both finished formulations and active pharmaceutical ingredients (APIs). The overall segment has grown 13% over the five years up to 2014-15.

of cancers, cardiovascular ailments, respiratory diseases and diabetes Margins And Dynamics: Way Ahead Large formulation players were able to tap the lucrative generic markets of US and Europe much earlier than other mid-sized and small Indian companies driven mainly by fast approvals. These manufacturers have consequently enjoyed EBITDA margins of 24-25% over the past couple of years as most of the drugs were in the initial phase. Going forward, profitability of large players will primarily remain range bound. On the other hand, many mid-sized formulation players have started diversifying their operations, away from the traditional domestic market and filing dossiers in the export markets. Consequently, their EBITDA margins have been improving over the past few years. In 2014-15, the profitability of these players declined on account of low revenue growth and impact of the FDA import alert on IPCA. While formulations players’ profitability improved on account of high growth in exports, Indian Bulk drug manufacturers continued to witness pressures on profitability. On the one hand, they bore the brunt of pricing pressures on many APIs such as anti-infectives, vitamins etc, which are highly commoditized, while on the other, they saw increased competition largely from Chinese manufacturers. Moreover, fortunes of these players are linked to the growth of their

Consumption of Fig 1: Outlook of Indian Pharma with past trends (Source: CRISIL) end consumer segment, ie branded and generic formulation players. Any impact on the business medicines characterizes the Indian market and of formulation manufacturers further exerts pricing nearly 90% of the drugs sold are estimated to be pressure on these players. generics. Hence, drug prices are lower in comparison Stringent global regulatory requirements for with the developed markets. compliance is further prompting higher expenditure Drugs for treating acute and specific diseases on facilities and compliance for these bulk drug have been a major demand driver; however, due manufacturers. Therefore as a result the margin is to urbanization, the disease profile of the Indian expected to remain at 17-19%, over the next couple population is changing and the balance is shifting of years. To counter the fall in profitability, many API towards chronic care drugs such as Cardiovasculars makers are forward integrating into formulations and and anti-diabetics. filing ANDAs to tap the lucrative US market. However, Strong demand in chronic care drugs coupled with delay in receiving ANDA approvals could hamper higher volumes could spur growth. The domestic monetization of the opportunity, cause excess formulations will record a high CAGR of 3-15% up capacities to accumulate and lead to financial stress. to 2019-20, with rising incidence of chronic illnesses driving consumption of drugs used in the treatment

August 2015

Mining and Power

Power Industry India is the fourth-largest producer and consumer of electricity in the world. Electricity production increased at a compound annual growth rate (CAGR) of 6.3% during FY08-14 and the total power generation installed capacity stood at 275.9 GW as of July 31, 2015. Major power generation has been through the thermal plants which use coal as a fuel. Power demand is expected to grow at 8% CAGR over 2015-16 to 2019-20 in line with a gradual improvement in economic outlook. Till now, most of the power

Fig 1: Breakup of inputs to power

capacity additions have based on coal as it is the cheapest source of energy available. But now the government has put alternate energy sources on its priority list. Accordingly, target of Solar Power by 2022 has been raised from 20GW to 100GW. From its current capacity of 4GW, it will require more than 50% CAGR for the next 8 years to achieve the target. Metal & Mining Industry India has an advantage of having vast minerals

resources and is ranked amongst the major producers of various metals in the world. In line of infrastructure development, government has started working on various stalled projects, large flagship projects including the freight and industrial corridors. This is expected to boost the demand for steel, which is estimated to grow by 15% annually after FY 17. Government has allocated USD 94.65 million to Ministry of Mines in the Union Budget 201516. In 2025, it is expected that mining sector will contribute USD 82 billion in the GDP from the current contribution of USD 38 billion. To boost investment, government has allowed FDI up to 100 per cent under the automatic route for this sector. Also increasing power production would increase the demand of coal which has seen major changes in the last year like de-allocation of coal block mines, amendment of policies and fresh coal block auction.

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COAL Block Auction In Aug, 2014, Supreme Court had cancelled 204 out of 218 coal mines allocated to the captive miners and ordered for fresh auction of coal blocks. However, government had immediately came out with the required amendments to start the fresh auction & allotment process of coal mines in December, 14. Till now, 67 coal mines have already been auctioned or allocated in 2 phases which will fetch a whooping amount of Rs. 3.35 lakh crore in the next 30 years for the state governments. Different bidding mechanisms have been adopted for regulated (Power Industry) and non-regulated sectors (Iron, Steel, Cement and Captive power units) to benefit the power-intensive industries. Conclusion Both power & mining industry are facing the problem of red-tapism and stringent regulations leading to the delayed clearance of the various projects. This has been a big issue for a country where more than 30% of the citizens don’t have access to electricity. However, the government has come out with few reforms which will improve the conditions of these industries. But to make long term impact, specific focus is required to work on the problems to revive these sectors.

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Financial Services

Public Sector Banks – PSBs have played a vital role in the growth of the Indian economy. However, their large exposure to infrastructure financing have made them vulnerable to lower profitability mainly on account of provisioning of restructured projects as well as for gross NPAs. To improve the capital needs of the banks, the government has already announced capital pumping into the PSBs in the

next four years. In a recent move, the government has also named two private sector professionals to take leadership positions in the PSBs which will help bring a more business-like rigour to the lenders. The government launched the financial inclusion Jan Dhan Yojana last year which has managed to tap deposits to the tune of 22,000 crore in over 17.5 crore accounts. Out of which, around 42% have been linked with the Aadhaar. This will facilitate the Direct Benefit Transfer (DBT) scheme and the govt. already claims that more than Rs 4,273 crore has been routed through Jan Dhan accounts towards payment of wages under MNREGA and a subsidy of more than Rs 17,446 crore.

Venture Capital/Startup Funding – The startup environment in India has shown significant traction in the recent past with ‘unicorns’ like Paytm, Flipkart, Snapdeal, Ola Cabs etc. More and more people are interested in exploring the entrepreneurial journey as it gives them the power and freedom to work on their dream projects. The government, which aims to raise the share of manufacturing to 25% of GDP by 2025, is focusing on small enterprises and startups to create jobs for 15 million people who are joining workforce every year. The state-run Small Industries Development Bank of India (SIDBI) has opened a funds-of-funds with initial capital of Rs 2,000 crore ($ 306 million) to help finance local startups which will help India move a step close towards becoming manufacturing power. Payment Banks – Payment banks will be the next driver of growth in the Indian economy. RBI has given license to 11 entities out of the total 42 applicants to set up the payment banks. Payments Banks can offer current and savings account deposits of up to Rs 1 lakh. They can issue debit cards and offer internet banking, but they are not allowed to lend or issue credit cards. Three-quarters of the deposits they get will have to be invested in government

securities, while the rest they will need to deposit in a scheduled commercial bank (for easy liquidity). Although the large number of accounts opened under the PMJDY have lowered the potential for payment banks, these banks are expected to improve last mile connectivity, penetration of payment points and service outlets through business correspondent structure and through use of technology. The challenge would be infrastructure because of the far-flung areas and the thin margins which may take five or even more years for payment banks to breakeven.

August 2015

Abhiron Bhattacharya

NITIE - Mumbai Introduction The general concept of financial inclusion stems from the idea of delivering banking services to the vast sections of the general public at an affordable cost. The Dr. C. Rangarajan Committee 2006 provided a suitable definition as: “Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.” One of the biggest challenge that financial institutions faces today is that banks have not been able to reach and bring vast segment of the population, especially the underprivileged sections of the society, into the fold of basic banking services. Our country remains grossly under-banked despite significant efforts by the government to further the financial inclusion. The penetration levels are very poor in India despite all these measures. Out of the Indian population of 1.2 billion, 40-50% of the people are actually eligible for opening a bank account, but still unbanked (according to KPMG). Next is India’s cash addiction. India remains a cash-based society with an overwhelming

preference for physical cash, even in urban centers where alternatives exist. In 2014 FII conducted a survey of 45,000 Indian adults found that 82% of adults consider cash to be the “best tool” for small- to medium- transactions and over 80% of respondents in both urban and rural areas receive remittances in cash and in person. Now In India, 72 of every 100 inhabitants have a mobile phone while only 35% have a bank account, according to the World Bank. The Government of India is aspiring to achieve financial inclusion as fast as it can, reaching 50% of Indians who don’t have a bank account. Business opportunity for telecom operators to capture the under-banked and unbanked customers who are using their mobile network is thus huge. This led to the concept of payments banks as a new institutional structure, which can meet credit and remittance, needs of small businesses, unorganized sector, low-income households, farmers and migrant work force. Overview of a Payment Bank According to the RBI directive, telecom operators, supermarkets chains, electronic wallets and

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prepaid instruments players can open these Payment Banks to accept deposit, basic savings and provide remittance service for millions who presently are excluded from the digital financial system. Advantages & Opportunities • Payment Banks will have an edge to reach out to the rural customers. They represent a unique case where an access point (own or on other’s network) is a more suitable metric to reach out to the targeted customers in rural areas. • Payment Banks will use high-end technology and infrastructure from the beginning. Stateof-art technology, for storage, networks and servers can be deployed at ease to facilitate the requirements. • Consumer grievance cell – Payment banks will provide customer-friendly services for addressing the grievances and keeping the customers well informed is of utmost importance. Flexible grievance/query handling through different means like internet, mobile, SMS, telephone call etc. depending on the convenience of the customers should be enabled, which should mainly target cutting down the number of physical visits to the banks. • Viability becomes a question as it has to offer deposits at competitive rates, bears deposit insurance and earns majorly from investing in government securities alone. But Payment Banks can still succeed in this area provided it, they are able to exploit low-cost technology and high volume of transactions to ensure that charges are reasonable, yet profits are made 14

(major source of revenue is the transaction fee charged on payments) • Customers rate convenience above the interest rates on savings accounts. Convenience may include more access points, easier transactions ie, no cap on number of transactions and minimum balance etc. Experts say this is an area in which payment banks can use technology to reduce costs, while offering various facilities to customers • Provision to ensure last-mile connectivity. It would be easy for new banks to adopt superior technologies and can reshape franchise models by including Kirana stores. Kirana stores can serve as fixed outlets for getting savings and remittance services. Challenges • A low margin business, which needs to adhere to, the stricter norms of minimum 75% SLR put in place. • No provision to offer credit facility and to earn loan interest, due to which the main revenue source gets limited to the transaction fee charged on the payments. • Challenge to expand the network to satisfy the condition that at least 25% of the physical access points should be in rural centers • Business viability will be a major challenge as the targeted customers are from financially excluded segments, in which the cost of acquisition is relatively high whereas the ticket sizes are very small • Limited product portfolio compared to a traditional bank due to which traditional banks will have an edge in terms of liquidity

August 2015

E-Wallets E-wallet is an online prepaid account where one can stock money, to be used when required. As it is a pre-loaded facility, consumers can buy a range of products from airline tickets to grocery without swiping a debit or credit card. The transactions volume via m-wallet has had more than 3x growth in the last two years, which cloaked over Rs 2,700 crore, according to CRISIL. And Payment Banks appears to be in the best interest of wallet operators in India to enable the mobile economy by allowing anyone with a mobile phone to pay, buy, bank, and remit money. The contender startups in the space are Paytm, MobiKwik, and Oxygen etc. Already telecoms offer wallet services like Vodafone’s Name Closed wallet

Particulars Issued by a company to a consumer for buying goods and services exclusively from that company. These instruments do not permit cash withdrawal or redemption. Mostly these function as an account where money gets credited in case of a refund due to cancellation or return of a product or service Semi-closed wallets Can be used to buy goods and services, including financial services, at clearly identified merchant locations or establishments, which have a specific contract with the issuer to accept the payment instruments Open wallets Can be used for purchase of goods and services, including financial services such as funds transfer at merchant locations or point of sale terminals that accept cards, and also cash withdrawal at automated teller machines or business correspondents. Banks can only issue these kinds of wallets.

Example Flipkart.com, Jabong.com Makemytrip.com

Oxigen Services India CitrusPayment, Paytm

M-pesa by Vodaphone PayZapp by HDFC Pockets by ICICI

Fig 1: Types of E-Wallets

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Military Keynesianism and Make in India Shivansh Kumar

IIM Shillong

M-Pesa, and Airtel Money etc. Benefits • The sites where e-wallet services are available generally have the following few easy steps to get started. • Ease of use without having to enter your debit/ credit card details for every online transaction. • For some sites there is no minimum amount and you can deposit an amount as low as Rs 10. • You can pass on the benefits of your e-wallet to your friends and family as well. • There is no chance of a decline of payment since e-wallet is a prepaid account. Risks • Revealed passwords can lead to theft • There is no facility of refund; the amount is only redeemable against a purchase What Is The Profit For E-Wallet Companies? Now e-wallet is kind of a convenience to the consumers but what’s in it for the companies itself. The e-wallet companies are in arrangement with the banks to earn interests. The RBI has made an exemption on earning interest on the funds lying in the account. A formula is used to arrive at the average balance on which one can earn interest, say, on the average balance of 52 weeks. This interest is in the range of 4-6%. But what e-wallet companies are vying for is the fact of positioning itself as a gateway and charging the merchants on every transaction that are occurring through it. So currently it’s trying to capture the market share through all kinds of

promotions like cash back, discounts etc. Road Ahead In countries like Kenya and Tanzania, where access to formal banking channels is limited, mobile-led technology based platforms demonstrated in bringing the banking benefits to large sections of population. M-Pesa was a big success in Africa. In Kenya too, over $ 1 billion money transfers happen through M-Pesa every month encompassing almost 13 million customers. Its because customers who use prepaid cards for paying utility bills or salaries to their staff. These will be early adopters who will spread on the word-of-mouth. Facilities of payment banks should be clearly communicated to the targeted audience through effective advertising. As against 20 million credit cards, Business Standard says e-wallets may cross more than 100 million by next year. Payment banks will accelerate the demise of free money with banks, not to speak of credit card margins. Thus outpacing traditional growth of credit cards. It’s clear that private banks have woken up to the reality of impending competition by covering their flanks and offering their own mobile payment apps and wallets. The idea, obviously, is to keep the money with them and retain the low-cost floats.

August 2015

Three news events perfectly depict the current state of the Indian Armed Forces. On 8th May 2015, CAG issued a report stating that the Indian Army is facing a serious shortage of ammunition and might not be able to sustain a full-scale war for even 20 days . On 22nd December 2014, the standing committee on defence stated that the Indian Air Force is currently operating 25 active squadrons of fighters against the sanctioned strength of 45 squadrons required to counter a “ two way collusive threat”. In the same report it was revealed that there are currently 14 operational conventional submarines in the Indian Navy and most of them are over 20 years old and at the end of their operational life . One question that comes to mind is – Is this an opportunity? An opportunity for the Indian defence manufacturing sector to finally realize its potential or an opportunity for our neighboring countries to find a chink in our armor. With an allocation of about USD 40.07 Billion in the last budget, India is the largest arms importer in the world with about 60% of its total

demand for arms being met by procurements from foreign countries. Not only it showcases our dependency on the western economies for our own defence but also exposes the lethargic development of our own manufacturing base. Below are the examples of few defence projects that portray the inefficiencies in our system It is a common misconception that crucial and capital intensive sectors like defence must be managed by the public sector only. It is about time that the private sector companies start playing a role similar to what Boeing and Lockheed Martin are playing in the United States. The current government is pushing the “Make in India” initiative, which also includes defence manufacturing. It is encouraging to see that the domestic defence production policy and the Foreign Direct Investment policy are going hand in hand, showcased by the below points: • Preference to “Buy Indian”, “Buy and Make Indian” over “Buy Global” • Simplification of procedure to “Buy and Make Indian”

7th Anniversary Issue

Name

Category

Year Started

Arjun

Main Battle Tank 1972

Tejas

Light Combat Aircraft INSAS Rifle INS Vikramaditya Aircraft Carrier

Initial Budget (Cr)

Amount Spent (Cr)

15.5

306

1983

560

10397.11

1982 2004

3.5 4881.67

NA 12641

Current Status First batch inducted in 2004 Operation clearance by 2018 Inducted in 1996 To be inducted in 2018

Fig 1: Defence projects

And at the same time • Up to 49% FDI is now allowed in the defence sector • FII up to 24% and the clause of single largest Indian ownership of 51% of equity removed It would be unreasonable to assume that changes in DPP would result in the private companies becoming instantly interested and competitive in the defence industry. Developing sophisticated technologies involve a lot of R&D and time and in foreseeable future we can expect the Armed forces to place majority of orders with the foreign players only This is where the “Offset Policy” comes into the picture. It requires the foreign companies to invest a minimum of 30% of value of defence deals in excess on INR 3 Billion into the Indian defence industry. This investment can take the form of developing R&D faculties in India, setting up of manufacturing facilities, training centers, IT centers etc. Thus all the deals involving direct purchase of equipment from foreign vendors i.e. “ Buy Global” is transformed into “Make in India” through the offset clause, Transfer of Technology (TOT) and licensed production in India. A perfect example would be the production of 140 Sukhoi 30 MKI by Hindustan Aeronautics Limited after full transfer of technology. The recent news of the MMRCA tender being scrapped to go ahead with a government-togovernment agreement with France of purchase of 36 Rafales also contains an offset clause of 30%. The deal is worth approximately USD 6 Billion, which means that Dassult, the French manufacturer will have to invest approximately USD 2 Billion in the Indian defence sector. Such kind of investment can tip the private sector into becoming actively involved in the defence production process. We have already shown 18

with our missile programs that we don’t have a dearth of talent, what we need now is the active participation of the big conglomerates in our country. In order to quantify the long term benefits of a well established aerospace and defence industry, there is no better example than the United States of America. According to a report published by Deloitte: “The grand total direct, indirect and induced employment associated with the U.S. aerospace and defense industry is 3.53 million jobs, not including industry skilled workers. U.S. aerospace and defense companies generated $324.0 billion in sales revenue in 2010”. “These companies paid $5.5 billion in corporate income taxes on their earnings, as well as $1.7 billion in state income and similar business taxes. Thus together with individual direct employee taxes, the total industry generated an estimated $37.8 billion in wage and income based taxes to state and Federal government treasuries, not including the taxes paid by indirect and induced industry employment” . I would like to state that I am in no way advocating Military Keynesianism to become the driving force of our macroeconomic policy. There have been numerous instances when defence spending became the prime policy to drive a country out of recession. Nazi Germany in the 1930s focused only on militarization to bring the country out of the slump. It was able to wipe out unemployment and bump up the aggregate demand in the country. The multiplier effect came into the picture and drove up the consumption levels in the economy. However it would be wrong to assume that this wiped out poverty, as many laborers were still impoverished. Another example would be of the United States, which pumped up its defence spending during and

August 2015

after the Second World War. There are many economists who advocate military Keynesianism as the reason that brought the United States out of the Great Depression. Since the defeat of the Axis Powers, United States has kept up its defence spending and has voluntarily involved itself in wars of lesser magnitude to provide impetus to its economy. Currently the defence spending of United States has reached to more than USD 700 Billion, which is approximately 9% of its total GDP. Personally I do not see any reason why the United States should decrease the allocation towards its defence budget, considering it has worked so well for them till now. The European countries have refrained from making defence spending a driving force of the economy and have instead focused on social spending. This is an example where military Keynesianism plays a support role in driving up the aggregate demand of a country. It would be worthwhile to note that the Western countries are the primary exporters of arms in the world. They have successfully externalized the heavy cost of defence spending by exporting weapons to the developing countries. A big chunk of money that is spent on R&D and production is recovered through the sales to countries like India. It is a win-win situation for the western countries. Apart from pushing up the Aggregate Demand in their own economy, the western countries transfer their losses to the developing countries. Poor countries have no choice but to spend their money to import arms instead of diverting funds towards other critical areas like infrastructure, education or eradication of poverty. Till now, India too has been a victim of arms imports. But we have reached a tipping point where we do have a choice. The choice to develop our own defence industry. We have an indigenously developed intercontinental ballistic missile, we are the first Asian country to send a probe to Mars, we have developed the fastest supersonic cruise missile along with Moscow along with rapid strides in economic growth. Indian economy is at a stage where we do not need military Keynesianism to be the sole driving force but we do need it to leverage our spending power into building up our defence sector. We are anyway spending USD 40.07 Billion on armaments so why not channel that money into our own

industries. Reliance Defence & Aerospace (RDA), a subsidiary of the Reliance Group headed by Anil Ambani has selected Mihan near Nagpur in Maharashtra to develop India’s first smart city pertaining to the defence sector. It plans to invest about USD 1 Billion to manufacture helicopters for military and commercial use. RDA also plans to invest INR 5000 Crore in the Pipavav shipyard to cater to the needs of the Indian Navy. It is the largest dry dock in India and Reliance plans to convert it into the largest single defence manufacturing facility in India. In a conversation with Anil Ambani, our Prime Minister was quoted as saying “Anil, do you know that even the tears that we shed in our country are not our own? Every tear gas shell used in our country is actually imported!” It is encouraging to see big industrialists coming forward to support the Make in India initiative. With an active participation of the private sector, we can expect new public-private partnerships and a range of smaller companies to provide auxiliary defence equipment to support the original equipment manufacturers. Greater thrust to defence sector can turn India into an export hub, which not only will improve our trade imbalance and fill our foreign exchange reserves but also improve our standing at the global stage. Military Keynesianism can indeed become a vital instrument to fuel the Indian juggernaut for years to come.

7th Anniversary Issue

Transition in India’s Power Sector Tuhin Choudhury

GLIM, Gurgaon

In 2014, the government of India proclaimed a massive electricity-sector transition. A year into this cognition, evidence suggests that momentum is building on a number of key fronts. India’s aim to develop and sustain energy security by diversifying supply reliance beyond coal, gas, hydro and nuclear, to significantly expand levels of renewable energy (solar, wind and biomass) is set to be the next big thing. Our government has initiated this radical transformation of coalmining, renewable-energy, power-generation & distribution sectors. Mr. Piyush Goyal (India’s energy minister) has set extremely ambitious targets in regard to increasing Indian energy supply, which includes addition of 175GW of renewable energy installation by 2022, a commitment of US$50bn modernization of the electricity grid and a target that would increase India’s domestic coal production to 1500 Mtpa. But, for such a transformation to take place, efficiency factor is going to play the key role such as—efficiency of coal production, delivery of targets in time; efficiency in railway dispatches by lifting freight-utilization rates, remove bottlenecks in logistical issues through better planning and strict measures; gains in grid-efficiency to lower the AT&C grid-loss; high operating efficiency to drive the Discoms from their current unsustainable operatingloss position and also ensure power purchase agreements (PPAs) have bankability/cash-flow security to provide a cushion to banks; energy efficiency- to lower the ratio between electricity demand growth and economic growth; raising thermal efficiency of thermal power plants 20

to lower the tonnage of coal required per kilowatt hour (kWh) of electricity produced; carbon efficiency- to lower the electricity sector’s emissions intensity- through better emissions standards, greater reliance on low carbon alternatives such as wind, solar and hydroelectricity; and finally, financial-market efficiency to drive down the cost of capital and increase access to capital. India’s Electricity Generation The Indian electricity market is of global importance for a variety of reasons. As per

Fig 1: The 10 largest countries for electricity generation (Twh, 2014)

estimates, India will soon be the largest country in the world in terms of population, and is already the world’s third largest market in terms of gross electricity generation (Figure 1). Being among the 10 largest electricity systems in the world, India is potentially poised to have the

August 2015

fastest growing electricity market over the next decade. As per the latest data of CEA, India has a total installed generation capacity comprising of thermal, hydro, renewables and nuclear is 274 GW. The role of renewables which is all set to boom and the initiatives laid down by the Govt. is poised to improve the number further in the coming years. India’s Electricity Sector Transformation The fourfold objectives of the Govt. Of India in regard to this transition are:1. To deliver (in a sustainable way), electricity supply (meet the demands) across India in order to build a period of high economic growth (7-8% per annum) without unreasonable retail electricity price inflation. 2. To improve grid efficiency significantly so that financially poor power utilities can begin to turn a profit or meet its financial obligations. 3. To encourage investment in infrastructure, create high-value jobs and extend availability of electricity to 400 + million Indians now living off the grid; 4. To support a rapid diversification away from coal-based power, reducing dependability on coal imports and boost the renewable sector in a big way. These objectives are all about building India’s energy security. The Indian economy today is very much reliant on imported energy (Oil imports 80%, liquid natural gas 28%) thermal coal imports’ market share has doubled in the past five years to 22%. Such reliance on fossilfuel imports is a major drag on the current account and on the Government’s fiscal budgets. In order to cope up with this, the next big thing which is on the verge to boom consists of the mentioned facts:1. Game Changer:- A tenfold increase in solar installation (on grid + rooftop) to 100GW by 2022, threefold increase of 60GW of new wind farms, 10GW of biomass and 5GW of small scale hydro. These initiatives, which total 175GW of new renewable-energy installations, require an investment of over US$200bn, with new national legislative support currently proposed under the National Renewable Energy Act. 2. Financial Strategy:- Opening up access to international debt and equity markets to assist with a proposal to price power purchase agreements (PPAs) in U.S$ as a way to fund low-cost, long-duration loans with centralized currency hedging. 3. Investments:- US$50bn towards upgrading

the capacity and efficiency of the electricity transmission and distribution grid, along with a smart-meter program aimed at significantly reducing the Indian electricity grid’s 23-25% T&D loss rate and to drive a 6% energy efficiency saving for 2015 alone (thereby reducing in the process the frequency and duration of blackouts). 4. Production:-Doubling of Coal India’s production output to 1000 Mtpa by 2021-22, with a promise of greater integration and coordination with Indian Railways to reduce logistical/freight bottlenecks. Apart from doubling India’s overall coal production in 5-7 years to 1500 Mtpa along with an intent to expand domestic private coal-mining capacity to 500Mtpa building competition. 5. Improvisation:- Utilization rates of existing thermal power plants (increase PLF) to reduce the need for more capacity which could then progressively allow a phase out old, inefficient coal-fired power capacity. Replacing it with the latest, highest-efficiency technology. Reevaluating the merits of pursuing the country’s stalled Ultra Mega Power Project (UMPP) plan as of now. 6. Rural Growth:- Pursuing Rural Electrification by an accelerated off-grid or distributed-energy solution with the longer term aim of “24X7 electricity supply for all”; 7. Hydro Power:- Developing more hydroelectricity capacity and promoting the government’s National Mission on Enhanced Energy Efficiency. Also hydro power has other benefits like its ability to meet peak time loads, multipurpose projects etc 8. Uplift Discoms:- Resolving the electricity distribution (Discom) sector’s ongoing operating losses of more than US$10bn annually (total loss is of 3 lakh crores as of now in the entire power sector, our of which approximately 2.5 lakh crores is contributed by discoms) , a situation that chronically undermines the financials of the whole system and that makes many PPAs unbankable. Aim For 175 GW Of Renewable Energy By 2022 Access to international finance will be the key: For India to fund 175GW of renewable energy by 2022, and for the associated improvement in grid transmission and distribution to occur, approximately around US$250bn of funding will be needed. With the typical debt-to-totalinvestment ratio of 60-70%, this means US$150175bn is required for project finance debt over the next seven years to achieve the said target.

7th Anniversary Issue

7th Anniversary Issue Solar installations-100 GW by 2022:- The government’s solar strategy aims nonetheless to attract global leaders like SunEdison Inc. U.S (signed MoU with Karnataka Govt. to generate 5 GW solar power over the next 5 years) and a second with one of India’s Industrial giant Adani Enterprises (US$4bn venture) to build and incorporate a world-scale module-manufacturing facility. A rapid ramp-up in India’s solar quarry over several years is just as feasible, as India has long studied the regulatory, technological advancements, engineering and financial framework required for solar. The sector incentivized by a 70% decline in the cost of solar electricity over the past five years shows the progress and adaptability in India. Mr. Goyal, in seeking industry support for his target projected in February 2015, was met immediately with high-level offers of 266GW in renewable-energy proposals in the program called RE-INVEST 2015 where more than 2800 delegates participating from more than 42 countries pitched in their commitment for green energy. Along with it 40GW of solar rooftop capacity is allowing many state governments to pitch in solar and as well as the private players to make business out of it. In regard to solar manufacturing; the govt. has used a tiered tendering system to allow lowestcost solar project development while reserving 3GW per annum of solar projects dedicated to domestic manufacturing. As solar becomes more and more commercially viable, the stepup in Indian investment and employment, and the benefits of energy system diversity, will only add momentum in the coming years. Wind Installation-60 GW by 2022:- The rapid investment in renewables includes wind energy, with a target of 60GW by 2022. At present the wind energy installed is 24GW as of March 2015. The total installed base increased 10% year-on-year with the addition of 2.3GW installed in 2014. India offers an accelerated tax-depreciation allowance (80% depreciation in the first year of installation) and a Renewable Purchase Obligation (RPO) scheme, both designed to incentivize new wind projects. The Indian Ministry of New and Renewable Energy has an RPO target of 15% by 2020, and 28 states have defined their own RPO targets as per SERC measures. Till date, weak enforcement has materially undermined the RPO renewableenergy certificate (REC) process. Onshore wind is the most cost-effective renewable energy source in India, and PPAs have ranged between Rs(3.39-6.50)/kWh. The installed cost of wind hovers around US$1.0m / MW of capacity, well below global averages of US$1.5-2.0m/MW. Bloomberg New Energy Finance (BNEF) forecasts 22

that the continued decline in nominal installation costs for wind, and a progressive increase in utilization rates through 2040. BNEF also calculates the wholesale cost of electricity from wind in India at US$55/MWh, one of the lowest rates in the world due to Suzlon consistently delivering one of the lowest installation. This trend will only improve with higher utilization rates and lower financing costs. Other Major Initiatives Distributed Solutions:- Energy security was a key component of the May 2014 general election victory of the Bharatiya Janata Party (BJP). On assuming office, the new BJP-led government launched a scheme aimed at ensuring eight hours of quality power supply per day to agricultural consumers and 24-hour electricity for households. The government has approved a Rs 43,033-crore (US$7bn) rural-electrification scheme, called “Deendayal Upadhyaya Gram Jyoti Yojana.” Also the launch of IPDS (Integrated Power Development Scheme) is adhered not just to minimize the Discom losses but also smooth and dynamic progress of erection of substations, transmission and distribution lines and implementation of IT solutions like SCADA(Supervisory Control and Data Acquisition) whose emphasis lies in the followed segment. Improving Grid Efficiency:- Energy Minister Mr. Goyal has outlined a US$50bn investment program to upgrade the capacity and efficiency of the Indian electricity transmission and distribution grid. This key proposition will help to upgrade and permanently address the crippling aggregate technical and commercial losses (AT&C) that total 25-27% annually. Engrossment on the resolution of Discom’s losses, Mr. Goyal is actively working with state governments to implement turnaround plans and cut AT&C losses. Discoms across a number of states, in the first half of 2015 have announced planned tariff increases ranging from 5%-26%, also as history suggests the likelihood of a rollback is high. In November 2014, our Govt. approved a US$4bn smart-meter capital investment program targeted at addressing the most compaction cases of power theft. Additionally, US$8 billion has been made available for loss-reduction programs, and various other initiatives are now under way across India’s 29 states. In May 2015, our Government approved the National Smart Grid Mission, with allowances to cover up to 30% of the capital cost of new projects. In July 2015, our Govt. proclaimed plans to launch a 20-year transmission plan to ameliorate and manage the balance of electricity demand

August 2015

Fig 2: Average cost of various types of electricity generation and quantified external costs

growth and electricity generation by region and incorporate the planned 175GW of new renewable energy generation. That initiative includes a substantial high-voltage directcurrent (HDVC) grid-investment program that will probably be sculptured after the one China has been implementing since 2010. India’s Nuclear Plans:- India’s 20 nuclear plants currently account for less than 2% of total power capacity, but the government has communicated of a possible increase to a 25% share by 2050. Prime Minister Modi has made nuclear a priority. His visits to foreign countries like Japan has secured Japanese Prime Minister Shinzo Abe’s pledge to accelearate discussions on nuclear agreement and has also led to signing a deal with Australian Prime Minister Tony Abbott in late 2014 that will pave the way for uranium sales to India. The second unit of the new Kudankulam Nuclear Power Station is due to be commissioned in 2015/16, adding 1GW to India’s current 5.8GW of nuclear capacity. The 1.4GW Kakrapar Atomic Power Station in Gujarat, 1.4GW Rajasthan Atomic Power Station, and the 2.8GW nuclear power plant at Gorakhpur in Haryana are also already under construction, suggesting that up to an additional 6.6GW of nuclear could be operational by 2019. Wholesale Pricing Of Electricity In India The wholesale price of electricity is a key measure of the relative merits of different electricity-generation sources. However, some forms of generation have very significant external costs and impacts to the community and the economy, that is, costs that aren’t reflect in wholesale prices. IEEFA (Institute for Energy Economics & Financial Analysis) attempts to tabulate the average cost of various types of electricity generation and to quantify some of the external costs as shown in the figure below:While renewable-energy sources generally have a slightly higher up-front capital cost, they bring significant advantages in the form of energy

security through diversifying the supply of electricity across a wider range of free domestic fuel sources. It is also favorably ranked in terms of the limited externalities that include non – toxic chemicals and particulate pollution. It has no carbon pollution and no water consumption. If done properly and in the right places, especially small hydro-electricity(less than 20 MW) has limited external impacts and can add significant advantages in terms of pumped hydro storage. A major advantage in domestic fuel sources (be they domestic thermal or renewables), is the shunning of the ongoing customs on the current account deficit and hence currency valuation. Renewables generally have the longterm advantage of being deflationary; once established, the electricity generated from them has almost a zero marginal cost, low operational cost and no fuel price inflation risk. A more interesting advantage of solar and wind is the rapid installation timeframes, particularly for distributed solar, which has yet another advantage in its avoidance of the failing griddistribution structure in India. “The latest domestic coal-fired power tariffs, from June 2015, ranged from Rs4.27-4.98/kWh in Andhra Pradesh, while 2013 domestic coal tariffs of Rs5.41/kWh in Rajasthan and Rs5.66/ kWh in Tamil Nadu.” The numbers exemplify that the bids of Rs1-3/kWh seen in 2008-2011 were unsustainable and unrealistic. “IEEFA estimates imported coal-fired power in India requires Rs6/ kWh, plus the standard coal requirement of an annual inflation link, making coal imports the least financially viable fuel source by 2016-2018”.On examination, it has been found that “solar currently costs Rs5-7/kWh, and is forecast to fall below Rs5/kWh by 2016”. With further declines of 5-10% annually over the next few decades, solar is rapidly going to become very competitive and it certainly contributes immensely for the next big thing to happen in India.

7th Anniversary Issue

THE MANUFACTURING JUGGERNAUT

Ankur Kumar

IIM Shillong India adds around 1 million, especially unskilled, youth in the labour market force every month.(1) Agriculture contributes around 17% to its GDP, for the year 2014. (2) While 47% of the population is dependent on the agriculture for their livelihood. Even when we are celebrating 68th Independence Day, majority of the population does not have avenues to get employed. The malaise can be traced back to the year 1991 when India opened up its economy. Before liberalization Indian economy was characterized by License Raj which was borne, partly, out of the requirement to use scarce resources of a newly independent economy in the best possible manner. But it embodied many notorious and chocking regulations, archaic laws, red-tapism and government interventions, which were, again, necessary. However these systems were supposed to be done away with gradually after liberalization. But unfortunately most of them continued with the posterity and, for example, only very recently, in the tear 2014, an-bygoneera land law of the year 1894 was replaced by a fresh law. In short, our policy-makers could do much to lift the manufacturing sector in the country. Also there is a digression in our economy from the general economic trend. As, generally 24

economic theories say that an economy will follow the sequential path of being agriculture-, manufacturing- and tertiary-led economy. But somehow while we were an agriculturedependent economy before 1991, we skipped the manufacturing sector and grasped the tertiary sector and today India’s IT sector is recognized all over the world. But now can be the time of manufacturing sector to take up its due share. Lets see and analyze whether manufacturing sector is ready to be the next big thing in India. The Slowing China Once the world manufacturing hub, Chinese economy is losing its pace. Wold Bank has forecasted that India will grow at around 7.9% and China at 7% in the year 2016.(6) This provides India a very lucrative opportunity pull up its manufacturing sector. Also while China’s age dependency ratio – as a percentage of working age population – is gradually rising India’s ratio is continuously falling (7). This provides a future with large number of labour work force in the market. Also as more and more people come in working age group their purchasing power will increase and thus India’s market will swell.

August 2015

Falling Commodity Prices All over the world commodity prices are drastically falling. The Economist commodityprice index has fallen as much as 40% from the year 2011. (8) Brent crude is hovering around $4850 per barrel while US crude is around $43 per barrel. As India imports around 70% of its crude requirement, the bearish oil market is a huge respite for the country’s energy requirements. Also, falling commodity prices is a huge cushion for India, as the country is the net importer of commodities. This will provide the confidence to the domestic industry to take up investment projects and will also tone down the inflationary pressure in the economy which will increase the purchasing power of the people. The Green-Shoots In US Economy The US economy which comprises of around 22% of world’s economy (9) is finally picking up. The country’s unemployment rate is gradually falling (10). The country is finally coming on growth path, though slowly. This again provides a big growing market for India’s manufacturing sector and the country needs only to leverage it. As right now the country’s main export to the US is the IT service. Indian manufacturing can leverage upon its strength, which are Precious Stones, Pharmaceuticals Products, Mineral Fuels, Organic

Chemicals and Textiles Articles, (21) to take first mover advantage of the rising economy. Resource Rich India Manufacturing requires raw materials. And India handsomely carries most of the resources. One of the most important resources of energy in today’s world is coal. And India is the third largest producer of coal in the world in the year 2013 behind China and USA (3) and has the fifth largest reserves of coal in the world by the end of year 2013. India is blessed with the fourth-largest bauxite resources - one of the most important raw materials in making aluminum – in the world. It has bauxite reserves of around 3000 million tonnes.(4) It is also the sixth largest producer of iron ore.(5) Nature has also bestowed it with perennial river system which if utilized keeping in mind repercussions to environment can be a great advantage to the industries. It is only a matter of expertise and proactiveness how the country makes full use of its resources. Strong Political Will The country has given a resounding thump for growth. After a very long time and for the first time in the liberalized India, the country has got its central government with full majority. This has given boost to overall business sentiments in the economy. What is more important is that our

7th Anniversary Issue

Fig 1: A comparison of a survey result between Indian and US companies

Prime Minister Narendra Modi is someone who has proven his mettle in displaying his acumen for business skills. He has put lot of emphasis on making India a manufacturing hub and his global-trotting in selling India-brand has been taken on very positive notes with the investor community. The majority government also did not remind the investors of the possibility of Policy Paralysis, at least in the lower house of the Parliament. Make In India Paying Off India’s manufacturing sector needed urgent attention and fortunately the new government identified that soaring pain and thus came out the Make In India initative. The flagship scheme has been particularly designed to attract investments in the ailing manufacturing sector. Fortunately due to aggressively selling by none other than our PM the scheme has got resonance. The country has bagged many investment proposals in recent times. A multinational electronic giant Foxconn, Chinese largest private sector employer, has agreed to invest $5 billion over five years. Days before Foxconn, General Motors announced that it would invest around $1 billion in Maharashtra, mainly to expand its main plant in the country. The steel behemoth POSCO said it would set up a new plant with an Indian partner with total investment comprising $1.5 billion (11). The US has offered to jointly

manufacture fighter jets with India. Also countries like Germany, the UK, France and Sweden have expressed their interest in joining hands with India in manufacturing jets with India (12). The strong government will is paying and the country has bagged proposals worth Rs.1.10 lakh crore in the last 12 months in the electronics manufacturing scheme MSIPS(13). Japan is coming up in a big way in India’s developmental and investment drive, such as Investor Facilitation Cell of Invest India. This is a crucial component of Make In India initiative. Invest India is also a part of Japan Plus initiative to deepen economic ties between both the countries. These types of economic collaborations between two major Asia’s economies bode well for India, particularly for bringing investments in manufacturing. More so, as Japan has shown interests in India, the technological expertise of Japan can be utilize for the full advantage of India. Prospect of Falling Interest Rate Very recently only the RBI has changed its position on interest rate cycle. The persistent high interest rate had choked the industries which are in dire need of investments. And the chances are that the rate-cut cycle might become shortened and little more aggressive. The WPI data for July 2015 has plunged to the

Fig 3 China-India- A snapshot

August 2015

Fig 7: Traffic utilization at Indian ports

historic low of -4.5%. The deflationary trend is continuing for the last nine months in a row. This shows that there is sluggish demand at industrial level. Also CPI fell to unexpected level at 3.78 for July 2015 which is way below RBI’s January 2016 target of 6%. Also till now Monsoon has been deficient by 9%(14) and much of the RBI decision depends on how Monsoon pans out in the coming weeks. The persistent fall in WPI, uptick in IIP number which rose to four month high at 3.8% (15) in June 2015 raises hope that RBI will take aggressive stance in cutting interest rate. And since manufacturing requires fund not only for long-term but also as working capital, lower interest rates are certainly going to help the sector to take investment decisions India’s One-Of-A-Kind Manufacturing India might not be known for state-of-the-art manufacturing. But then a home-grown familyled company Mahindra & Mahindra has started work to build aircraft parts. The industry requires high precision-level with pin-point accuracy for the products manufactured and they must also meet global standards. And the company is already supplying aircraft’s parts to Airbus and Boeing. (16) Also in March, Ford opened a 400-acre car factory in Gujarat. BMW and Mercedes are using more locally made components for the automobiles assembled in India. Volvo is planning to sell its Bangalore made buses in European market for the first time. In June, Micromax got approval for a new factory in Telangana.

The Future Providing job and thus social security to the growing population is very important for India. To ensure that the manufacture sector contributes 25% in GDP – as set in the National Manufacturing Policy - reforms must be taken by the government. Some of the most contentious laws - like Land Law, Labour Laws – must be dealt with. Though world economy might not be encouraging and except the USA all other major economies, like the EU, the UK, Japan, China, are slowing down or showing no sign of growth, India still can cater to it large 1.25 billion population and neighboring ASEAN countries with whom India. With China losing its sheen of being the leader in manufacturing, domestic economy of India being in stable stage, inflation and Current Account Deficit in control, the time is ripe for India to walk that extra mile. While Green Revolution made India self-reliant in food grains, the country now needs a Manufacturing Revolution.

7th Anniversary Issue

Logistics & GST : The tax that reduces costs

legitimate means to get the job done, enjoy the cost advantage, and hence a significant chunk of the market share with respect to their organised counterparts.

P Karan Jain & Sumon Chaudhuri

IIM Shillong

When can something be classified as the “next big thing”? This question may have numerous different kinds of answers, based on the parameters a person considers to be relevant for judging. However, the one thing that everyone would agree upon is that, in order to be labelled as “the next big thing” from a business standpoint, it has to have an impact of such magnitude, that its tremors would be felt not only on the stock market, but on the way managers conceptualise models itself. This brings us to the next question, as to which sector we think would be the “next big thing” in India. In order to explain that, we need to first address the impact it would make and why we think it would make such an impact in the first place. There are various shortcomings of the present indirect taxation system. Manufacturing of products have excise duties levied on them and its credit remains unavailable against liability of VAT. VAT is charged on the value of excise, thereby causing a cascading effect. The consequences of 28

this factor would be similar to paying taxes on taxes, something that is extremely undesirable for any manufacturer. Furthermore, there are situations when multiplicity of taxes takes place, resulting in significant costs of compliance for the government. These situations occur primarily due to multiple taxable events existing in our present system. For example, for excise, manufacturing of goods is the relevant taxable event, whereas for sales tax, it would be the sale of goods and for service tax, it would be the provision of services. Also, in certain states, there may be an additional hindrance of an octroi, which is imposed at state borders. However, the most adverse effect of the present taxation system is faced by the logistics industry. Logistics efficiency in the country has been severely hit, due to the multiple barriers that have been put up, while getting permits to enter into various states. Trucks in India travel approximately 260 Kms a day, in contrast to the 440 and 660 Kms a day average shown in European nations and the USA respectively. Moreover, it is apparent that unorganised players, who use less than

August 2015

They say necessity is the mother of invention. Therefore it wasn’t really a surprise that these elaborate shortcomings in the present system led to the conceptualisation of the GST. The GST is supposed to be a replacement for all other taxes in India. One of the major impacts of this value added tax is to make taxes destination based rather than origin based. At the same time, GST is supposed to eliminate the cascading effect of taxes. It is also supposed to substantially decrease the parity in regional prices by making all regional tax liabilities equal. The expected outcome of these provisions is a homogenous and substantial growth of the warehousing and logistics industry in India, especially the 3PL services industry, which would in turn make it “the next big thing”. As a result of all the aforementioned provisions, an optimistic man would predict that the organised players in the logistics and warehousing industry, due to the reduction in cost of services provided by them, would manage to eliminate the cost advantage that is presently held by the unorganised players, and subsequently topple them from their current dominant positions in the market. Thus, one can be hopeful that GST will level the playing field and create a holistic and sustainable development of the industry across India. The research division of rating agency Crisil Ltd expects the roll-out of goods and services tax (GST) to reduce logistics costs of companies producing non-bulk goods by as much as 20%. This kind of a substantial cost reduction is something that would prove to be extremely vital for not just logistics companies,

but any company that involves logistics in their value chain, especially considering the fact that various companies, particularly in the FMCG industry, are considering outsourcing their freight forwarding functions in order to reduce costs. However, the impact of GST on the logistics industry is much more substantial than whatever has been mentioned till this point of time. Presently, logistics companies focus on optimizing their operations such that they could minimise the amount of tax they would have to pay. Consequentially, their focus deviates from efficiency and optimum quality of service. Provisions explicitly stated in the GST proposal dictates that tax be levied on stock transfers and full credit be available on inter-state transactions. As a result, one can presume that the focus will now shift from tax minimisation to operational and logistical efficacy. Subsequently, the client’s demands will change as well, according to the changes in the logistics industry, which might result in alterations in established logistics networks of several 3PL service providers. Warehouses may close down in certain locations and new warehouses may be established in others, as the optimisation of the network, which was once based on minimising regional taxes to be paid, has shifted to the new basis of minimising the overall logistics cost. This may in turn result in the realignment of various businesses, in terms of geography, especially the Network and infrastructure related businesses. Proximity to manufacturing units or consumption markets will be emphasised upon and the hub and spoke model will be commonplace. As a result of all the aforementioned factors, it’s really no surprise as to why we consider GST to be a game changer for the logistics

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7th Anniversary Issue industry. The logistics industry is currently a highly fragmented one, with the top ten listed players commanding less than 5% of the net market share. As we have discussed earlier, with the onset of GST, organised players are expected to eliminate any competitive advantages unorganised players may have had in the 3PL services sector. However, this does not indicate a bleak future for the smaller 3PL service providers. If there was any truth to what Darwin proposed several years ago, in order to ensure survival, these smaller players would definitely try to initiate symbiotic relationships with their “fitter” counterparts. In fact, at this point of time, it seems evident that various unorganised player would try to initiate tieups or collaborations with established players, which would result in a win-win situation for both parties, as well as the industry. As for how the financial markets have reacted to GST and its prospects for the logistics industry, sensex seems to agree with the glorious future prospects of GST, as we see stock prices of logistics companies increase by up to 10% in intraday trade on 30th July, 2015. Players like Gati, Blue Dart, Patel Integrated Logistics and Snowman Logistics have seen tremendous surges in stock prices over the past few months. Blue Dart Express reported 33.46 per cent YoY jump in standalone net profit at Rs 45.59 crore for the April-June quarter against a net profit of Rs 34.16 crore in the same quarter of the previous fiscal. Net sales of the company increased to Rs 619.60 crore during the first quarter of 2015-16, from Rs 526.94 crore in the same quarter of 201415 as well. To top it off, even industry veterans like Sunil Kant Munjal, Joint Managing Director of Hero MotoCorp, believes that the passing of this bill would mark a very important event in the way people do business in the country. Thus, it is evident that the country is in eager anticipation of the passing of this bill. Needless to say, 3PL service providers will be licking their chops on the prospects of an extremely bullish market and traders will surely have those companies on their “buy” list. People have raised their expectations, all in hopes of the 30

bright and sunny future that heralds the advent of the lower tax rates. Conclusion

It would be safe to say that the nation is eagerly awaiting the arrival of GST and all the limitless possibilities of a futuristic supply chain that it brings with it. The percolation of lower logistics costs, all the way down to the consumer, the enhancement of service levels, the transformation in the industry and the way 3PL clients perceive it, are just some instances as to how the passing of this bill would be a game changer for supply chain networks established throughout the country. As the focus on costs due to taxes reduce, the emphasis on innovation and implementation of unorthodox supply chain practises will be more commonplace. These innovative and creative measures, will surely catapult India to the pinnacle of supply chain excellence in the global arena, or at least one can hope so. Labelling GST and the changes it would initiate in the logistics industry as “revolutionary”, would truly be an understatement and its impact is something prospective investors will definitely have to watch out for.

August 2015

Startup ecosystem in India: Driver of the Indian innovation

Palash Sinha

VGSOM, IIT Kgp India, the 2nd biggest market in the world always lagged behind in terms of innovativeness, competition & in risk taking ability. Still India has not improved a lot and is unable to portray the right image in front of the world audience. Global Index The Global Innovation Index 2014 The Global Creativity Index 2015 The Global Competitiveness Index 2014 The Global Business Resilience Index 2015 But the good news is India is improving and with a fast pace. India has the fourth largest start up ecosystem after the US, the UK and Israel. However, if the current trend continues, within a year or two India will reach the second spot after the US. That’s the level of enthusiasm and hunger among start-up entrepreneurs to do ‘something different’ which is currently prevailing in India. The success of start-up industry in India is gone beyond pundits’ expectations. According to industry body NASSCOM’s (National Association of Software and Services Companies) India

Startup Report 2014, around 11,500 start-ups would come up in the country by 2020 opening up over 2,50,000 jobs. Now these are some encouraging stats. But how start-ups are gaining their foothold in India India’s Rank 76 92 71 119 rapidly? To know about it we have to dig deep and first have to understand the proper ecosystem of start-ups. Let us understand the key players for a budding start-up. Cultivator: Cultivators are the first level institutions that provide exposure to the budding entrepreneurs and help them find their starting point. These institutions play a key role in igniting the dormant fire and giving birth to entrepreneurs. Promoters & Nurturers: These enabling institutions (usually run by

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volunteers as non-profit ventures) provide the necessary glue in the value chain and ensure a supportive environment is created that encourages entrepreneurism. According to an estimate from one of the founders of such initiatives, only 20-30% participants consider launching a start-up out of which a mere 5-10% can hope to find a place in a structured program like an accelerator. Accelerators: Accelerators help build the fundamental blocks of the start-up business i.e. finalizing the product, launching and gaining initial traction, building a clear business strategy etc. Most accelerators barring a few have popped up in the last year or so and are still devising an optimal model for the Indian start-up ecosystem. Investors – Angels/VCs: Investors are the big daddies of the startup world and arguably play an instrumental

role in making or breaking the dreams of the entrepreneurs who want to leave their mark on this world. They provide the impetus necessary both financially and operationally to scale the business to the next level. Challenges Concerning Start-Ups In India Culture - Entrepreneurship and startups are only a recent phenomenon in the country. It is only in the last decade and half that people in the country have moved from being job seekers to job creators. Doing a startup is tough and every country sees more failures than success. However, culturally we are not groomed to fail and failure is frowned upon. Entrepreneurship thrives on celebrations and a society that fails to appreciate business failures stifles innovation and creativity even before it can start. Mentoring - Having a brilliant idea is different

August 2015

from making that idea a business success. For a startup, it is very important to have mentors who have been through a similar process of starting or have business experience. However, there is no formal mechanism to mentor startups in the country. Policies - Government is the single largest enabler for the entrepreneurial ecosystem. Government’s role in ease of doing business and helping companies start is vital to ensuring success. The latest World Bank Ease of Doing Business (out of 189 economies) ranks India at an abysmal 142 where starting a business rank for the country is even lower at 158.It is uncannily difficult to start a business in India and myriad laws and regulations means it takes about 30 days to comply compared to just 9 days in OECD countries. Hiring - In an uncertain economy where one is not sure about demand, for a startup, it is particularly difficult to make correct estimates on the number of employees needed. This, however, is the minor problem where the biggest issue is about finding skilled manpower. India’s skilling need is so huge that National Skill Development Corporation (NSDC) has been mandated to skill 150 million Indians by 2022. Funding - Capital and access to capital has been

a perennial problem for startups. While, of late angel investors, venture capital and private equity have brought succor to some extent, a large number of startups still grapple to raise funds from institutional setup. But India also offers a plethora of opportunities which are the catalyst of the steep growth curve of India’s start-up ecosystem. Huge Market India, with over a billion people, presents a very large home market for any goods or services. A rising disposable income and growing aspirations of a mushrooming middle class have meant there is a large appetite for brands. The large population has also led to a consumer expenditure growth, which has in turn has propped up supply and production. High Mobile Penetration According to latest Trai figures India’s tele-density reached 76.55 percent with a subscriber base of 95.76 crore. Significantly wireless subscriber base touched 95.76 crore, just shy of 100 crore mark. High mobile penetration in urban and rural India has reshaped the economy of the country and how goods and services are offered. With data enabled mobile phones, the very nature of startups and businesses have changed. For example, startups that develop mobile apps

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7th Anniversary Issue now have an ever increasing market to cater to. Demographic Dividend According to the latest UN report India with 356 million 10-24 year-olds have the largest concentration of youth population despite having a smaller population than China. For startups youth make up the workforce that it so desperately needs and going forward youth can be a huge talent base for startups.

A TRYST WITH THE EXPERTS

MR. ARJUN DOSAJ Managing Partner & CEO Avista Asset Management Pte. Ltd., Singapore

Recent Investments Between 2010 and 2014, the infusion of VC and PE increased from $13 million to $1,818 million. Angel investment too has multiplied almost 8 times from $4.2 million to $32.2 million. In the last five years, there were more than 70 VC/PE have investment worth over $2 billion in the domestic start-up ecosystem, the study stated. In last three years, there were over 20 merger and acquisition deals worth $ 1billion. International Money Entering India Foreign investor interest in India can be attributed to various factors but the biggest one is the consumer growth backed by the mobile revolution. Also, the India focus of New York based Tiger Global Management (TGM) has given confidence to other global private equity and hedge funds to come to India. Tiger was among the top investors in India at $422 million in 2014, despite a lean start. After April, with massive fund infusion into Flipkart, this raised a total of almost $2 billion in 2014. It was followed by Russian investor Yuri Milnerled DST Global, which invested $352 million. Japanese telecom giant Softbank invested $282 million in Indian startups in 2014. VC firm Sequoia Capital has made investment worth $208 million in the first four months of 2015 across 14 deals. Other foreign investors that have shaped the Indian funding landscape since 2009 are 500 Startups (by Dave Mclure and Pankaj Jain), and Inventus Capital Partners among many others.

Fig 1: City wise share of start-ups

Fig 2: Top VC/PE firms in 2014-15 by investments

accelerators, which provide seed stage support to startups. Major cities such as Bangalore, Delhi-NCR, Mumbai, Hyderabad, Pune and Chennai account for 90% of the start-up activity. Bright Future Ahead India never lacked in creativity, knowledge or innovativeness. The thing in which India lacked heavily is the ability to take risks and pushing the ideas to practice. But the scenario is changing fast. Several government initiatives, huge funding and most importantly high infusion of creative ideas are shaping a bright future. All these things are likely to push the growth of start-ups and enable them to maintain edge in the global competition which in turn will drive the Indian innovation.

Incubators And Accelerators Currently there are 80 business incubators and 34

August 2015

You had a long career in Real Estate Asset Management & Private Equity. Starting with the basic’s, what actually is the Real Estate Asset Management Business? Real Estate Asset Management in my experience is fundamentally about preserving and creating incremental value of assets under management. Traditionally it involves “end-to-end management of assets” including leasing, maintenance, branding, reporting, review and disposition. Asset managers are single-minded about driving capital values and relentless about maximizing asset income for their owners while keep a control on operating costs. Asset management is needed to address ongoing issues like design, building features (including eco-friendly, elderly friendly concerns), tenant mix and profile, repositioning & branding, consumer marketing, e-commerce and addressing and maximizing on consumer buying habits and trends.

What according to you are the various drivers that create value in the Asset management business? At a broad level, the drivers of value creation in Asset Management business can be classified into two: Strategic and Operational. Strategic asset management in the current scenario includes creating a new brand for the asset / re-vitalizing an existing brand, embracing Sustainability, asset repositioning (partial or total), conversion / change of use of the asset, etc. Some initiatives seek to streamline processes more efficiently while others attempt to be more effective. From an Operational perspective the output of asset management is typically a function of many drivers. The variables are rental receipts, service charges, occupancy levels, revenue per sq ft, maintenance costs etc. interact to produce a certain output being the operating income. By fine-tuning the variables to optimal levels the most desirable output i.e. operating income can be delivered which would

greatly enhance the value of the asset.

From the various projects executed can you please quote us a few examples so that we can learn from examples of Asset management business? There was a Retail project that was asset managed by us in Seoul, Korea, It was a building built in the 1970’s, the asset was a typical strata-titled (many owners) local shopping mall targeting the mid to mid-low market with limited success. It was however located in the heart of an important shopping district with a Mass Rapid Train station below (Metro). The under-managed property had occupancy of less than 50%. The building under our management underwent a major retrofitting and was re-positioned into a vibrant fashion lifestyle and retail mall attracting international brands with the first ever H&M store in Korea as the anchor client. Efficient integration over the retail floors increased total leasable area and transformed it into the most sought-after mall that achieved a pre-commitment rate of close to 100% prior to the opening of the mall appealing the younger generation. This project was subsequently sold with our investors making a 30% IRR in a 3 year period.

Moving forward to India, How can REITS bring along a structural change in the Indian Real Estate space and what do you think governments approach towards implementing it should be? Real Estate Investment Trusts (REIT’s) would be new to India but are not new to the world. There are several established markets for REIT’s such as the USA, Japan, Hong Kong, Singapore, etc. hence the Indian Governments approach should be to study the best practices from the existing countries and put in place the required regime and laws which would manage the Indian REIT’s effectively rather than re-invent the wheel. The Government should

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7th Anniversary Issue also engage with the various countries regulators and see what changes they are introducing to further enhance the REIT regimes as they are many years ahead of India and have learnt through their mistakes. REIT’s give the ability to the common man to own shares in a multi-million dollar Real Estate asset while securing a decent divided return. Hence if one could not afford to buy a building due to the huge ticket size the investor may be able to buy shares in a REIT which owns several buildings. REIT’s also provide a venue to developers, funds and investors to exit their assets hence creating liquidity in the respective markets. Stable REIT’s also act as a haven for investments for Pension Funds, Insurance Funds and generally investors who like stable returns as REIT’s are supposed to distribute most of their income by law as dividend to investors. REIT’s will give the Indian Real Estate industry more depth, stability, liquidity, enhanced Governance and Controls as well as more credibility.

You have spent a couple of years in India as well as work in Singapore and in addition managed assets in Singapore, Hong Kong, China, Korea, Japan, Malaysia, Thailand, Vietnam & the Maldives. From a real-estate asset management industry perspective what differences have found and what is a good example of Asset Management activities & principles which have left a big impression on you? The disciple of Asset Management extends beyond Real Estate and is applicable to any business & industry whether for profit, non-profit or within the Government sector. The best example I can quote of imbibing the true principles of Asset Management is the country which I live and work in – Singapore. Singapore just 50 years ago was a third world country with no natural resources, a small land mass compared to its neighbors like Malaysia, fishing villages & swamps were part of the landscape, no bank balance, a small population, and in other words virtually nothing as a start point and with all odds of success stacked against it. The true grit of the pioneering founders & leadership of Singapore, A clear Vision, relentless execution, principles of servitude & team work, meritocracy and principles of harmonious living with religious tolerance for all religions have brought Singapore to a first world developed economy in short timeframe. In my view the Singapore Government are world class asset managers who are continually thinking 10 – 20 years ahead and shaping the country in a futuristic direction. The price of Real Estate has gone

up several 100 times since Singapore’s birth and the only reason that has happened is because in Singapore everything works – Governance, Political system, Legal system, Safety & Hygiene, skilled & hard working citizens, trade unions which work with and not against the business and a Government which is pro-business but also pro-citizens. There are plenty of lessons which can be learnt from the success of Singapore which apply to developing and developed economies. Now putting on my Real Estate hat if one had a country as progressive as Singapore attracting global wealth & investment the price of Real Estate would continue to grow – that in a nut shell if the job of good Asset manager – “preserve & create incremental value”.

Please share some insightful career guidance tips so that our readers can learn from your established and diverse career. I have crafted my career as such so that I would get the benefit & experience of numerous industries – Hospitality, Financial Services, Banking, BPO, Process Re-engineering, Real Estate Asset Management & Private Equity. Perhaps one may call me a “jack of all trades and a master of none” but to my mind I view any business situation / complexity with multiple lens as I have the benefit of multi-industry experiences and hence my situation analysis & proposed solutions are far more powerful and robust as compared to someone who does not have the benefit of the exposure that I have had There are a few tips which I subscribe to myself but they are easier said than done as it takes time to find out ones true calling. If you can find work that you love you will never feel that you are working as it will be a joy to be at work. Don’t fret over the money you are making or not making, if there is genuine love & passion in your work the money will come. Experiment with your career and try different things as it takes time for one to know what one really likes. Take risks especially when you are younger – you will learn and grown from them. It is also very critical to remember that you work with ‘people’ and having ‘people’ skills is a must as you cannot carry the baton alone. Most importantly If you think you can do something and everybody thinks you can’t, just believe in yourself – and YOU WILL ACHIEVE IT!

August 2015

A TRYST WITH THE EXPERTS

MR. ASHISH KASHYAP CEO, Ibibo Group

Goibibo has been growing more than 100% y-o-y growth since its inception. It has provided its customers with refreshing offerings each year like first OTA to launch instant refund, goCash and many more. It has also won No. 1 brand award in Online Travel & Leisure category in June 2015. What are your plans to grow it more aggressively?

We are focusing on few key aspects to grow goibibo even more aggressively: a. Mobile: All of our new development is not only mobile focussed but mobile first. b. Real time dynamic packaging and routes. c. More power for the hotel owners by giving them richer analytics. d. More community features. We already have user generated photo reviews. We are taking this to the next level of participation. “Goibibo is today the largest hotels aggregator in the country” in terms of sales and transactions. Consolidation, dynamic packaging, offering more for less and creating a memorable experience was the focus of the OTA industry in the past half-decade, what do you think would be focus of OTA (Online Travel Agencies) space in India few years from now? In your opinion, what are the factors that can help one tackle the increasing competition in the OTA space?

From our perspective, competition will be from new players/ start-ups. Players who were not even in the reckoning. OTA space pretty much is now consolidated between two players. One of which is us. As OTA’s, we are thinking beyond just being an online travel agency. But more from

the prism of organising the transportation and accommodation industry. ibibo’s hotelier facing cloud solution inGoibibo.com is a great example of how we deliver analytics, competition data and booking management tools for the hotel owners, so that they can grow their yields, revenues and ratings. Our recent investment in Djubo is to further go deeper in the accommodation ecosystem. Similarly, Yourbus, bus operator tracking and analytics platform is yet another step towards solving deep problems in the transportation sector. Finally our recent launch of ibibo Ryde, Car and cab sharing is yet another step in the direction with the aim to organise the transportation and accommodation industry in India and connect it to the travellers. This is exactly what differentiates us from any other online travel player in the market. For most of the OTAs these days, mobile bookings exceed/will exceed its desktop bookings. What are the plans of Goibibo to capitalize on this mobile traffic to stay ahead of competitors?

Goibibo is the no 1 android app under travel. We are the biggest travel mobile commerce player. Do refer to Android play store. We also have the highest engagement rates. Our hotel booking already stands at 60% from mobile. We are seeing growing trends for bus (redBus) and air. ibibo Ryde is a mobile only application. We believe that in 12 months’ time 80% of transactions will be mobile driven and that too native mobile. E-commerce companies like Oyo Rooms, Zo Rooms etc are seen as a new breed of

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7th Anniversary Issue accommodation booking providers who are essentially aggregating standalone budget hotels and strapping them with a common brand. To ensure a larger slice of the burgeoning hotel aggregation space, Goibibo has recently launched goStays. What do you see happening in hotel space and Goibibo in the next few years?

First of all: All these developments are excellent from two key points. First: it helps more and more hotels to go online and second: it also drives a consumer behaviour. Coming to the question: We don’t believe that it is scalable for an aggregator to also manage hotel properties and run them. Therefore, our focus is going to be on aggregating all budget accommodations and alternate stays, with authentication and our rating systems. We will provide rich technology to these hotels and drive massive demand. There should be 150k active accommodations that should be leveraging value out of an ecosystem such as ours. There are only a few airlines in India that are profitable. With entry of new players these fare-wars have become even much more intense and frequent. Domestic airlines have lowered commission given to OTAs and Supreme Court has banned transaction fee. What will be the impact of this on goibibo and what will be the strategy goibibo will follow to overcome the impact?

We have a clear opportunity to make redBus a global brand. We have already integrated redBus with goibibo from many perspectives and vice versa. From a valuation perceptive what are the best methods used by Private Equity, VC’s, Institutional funds to value the profitable/ loss-making e-Commerce company?

Numerous metrics. Some of them are: Profitability per customer (Customer life time value); Future cash flows; parallels of similar listed companies. What will be your advice to students who want to make a Start-up/Career in the OTA & E-Commerce Industry?

If you want to start up on your own: Focus on identifying problems and thinking through solutions harnessing the power of technology. If you want to work for an OTA/ e-Commerce: Reflect upon the areas that you can participate in that could bring value to the customer, platform and in return disproportionate learning for yourselves.

Airline business for us continues to grow at a rapid pace. We are outgrowing incumbents (Growing at 85%) whereas the other significant OTA grew only 45% last qtr. Market grew 16% to 17%. The way we look at airline is that it an excellent traffic generator. We are pushing out some massive innovations in this space; such as dynamic routing and dynamic bundling. No player across the globe has invented things in this space. These creations lead to huge customer value and increased margins. RedBus has expanded its operation to Singapore and Malaysia. What are the future expansion plans of redBus? To what extent it is integrated with Goibibo, given the presence of both in online hotel and bus booking?

We are evaluating more markets for redBus.

August 2015

A TRYST WITH THE EXPERTS

MR. SAMEER SHAH Head - Finance, India & SAARC and Investor Relations, Godrej Consumer Products Limited

What are the various parameters that Godrej Consumer Products Limited (GCPL) uses to evaluate its performance? There is one metric which we track internally known as Economic Value Added (EVA). To calculate EVA we look at the Net Operating Profit after Taxes (NOPAT) and then we apply a WACC charge to capital employed to derive EVA. The entire business performance and the variable linked remuneration of the employees is evaluated using the EVA philosophy. Other parameters that we look at are revenue growth, relative market share for revenue, EBITDA growth, Profit after taxes (PAT). Apart from that we have non-financial matrix in terms of talent, supply-chain, R&D, sales, process, practices etc. GCPL have made many acquisitions in Latin America, Africa, and Indonesia etc. What is the strategy and thoughtprocess behind an acquisition target? We have our strategy 3X3 which was formulated in the year 2010 which was a good laying platform for the acquisitions that have been identified since then. 3X3 stands for presence in three categories of Home Care, Hair Care & Personal Wash, and three geographies of Asia, Latin America and Africa. There is rational for both the 3’s in 3X3. The choices of categories are driven by categories in which we have loads of experience and we believe we can cross-pollinate this experience into many other geographies and the other 3 stand for the geographies which all is again emerging market. We consciously have

chosen not to have major focus in developed markets and have chosen to focus on having presence in the emerging markets. More than 45% of the revenue for GCPL comes from foreign markets. Over the last 2 years we have seen a lot of volatility in the currency markets. What is the currency risk mitigation strategy used by the company? Lets first decode what are the different types of impact and then the risk mitigation strategies. 1. First one is translation. We are an Indian origin company, we consolidate financial results of all our subsidiaries whether it be Indonesian rupiah, other currencies in the African market. When we convert the local currencies financials into the parent currency we could have a translation impact which would be positive or negative. No cash-flow is involved in the same, hence to an extent it cannot be hedged. 2. Second impact is in each of the markets we have some imports. In a volatile currency environment assume local currencies are depreciating. It increases our import cost. This is something which gets offset by taking price increases, having continuous cost reduction programme in each of the businesses. Also sometimes it has a temporary impact on profit margins. 3. Third impact is we have Dollar denominated debt, debt which we raised in order to acquire new businesses in the international market. We normally use cash generated from international as well as domestic business for repayment of

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7th Anniversary Issue debt. There could be an impact during the time of pay out, however the way it is structured every quarter on average or at a high level 1415 million dollars come for repayment. 4. Fourth impact is we have trade payables and receivables which are in dollar Circling back all of this we have a hedging committee in place which meets every fortnight to review all our exposure, be it trade or debt. On an average what we have seen is our debt for the next 2-3 quarters exposure are normally hedged. On trade front we keep at a bare minimum level, so even if it is unhedged, it will not move the needle substantially for us. “Future Now” has been the theme of the annual report of GCPL for FY15. It has been “Readiness to capitalise on tremendous growth opportunities”, can you please brief us more on it? The future for the company looks very bright but we should be ready in terms of tapping those potential and opportunities. While that is something that will shape up in the future but we need to be geared as well prepared right now in terms of capabilities, capacities, it could be in terms of different functions like R&D, sales, marketing, processes and even support functions such as supply chain, finance, hr etc. We have identified some of our big priorities and the direction in which we want to head in the next 2-3 years. The point is we have to be prepared such that we can tap the opportunities at the right time and if all goes well maybe before time. GCPL has been primarily operating in growing categories where it sees itself as market leader currently or in the future. However why is the company still operating in highly competitive and slow growing soap category? To be little honest there has been a legacy in soap business in which we have been operating since 1920. It is close to now a century since we have been operating in this category. However across all categories, across all geographies we have been either the market leader or at least in top 3 in terms of overall play. Also, over the years we have strengthened our market share

position in these categories. Apart from this we are also investing in what we internally call basket of emerging categories like air freshener, deodorant, liquid detergent, hand wash, face wash etc. categories which are relatively smaller in size but still growing at a high growth rate. Thus what we are doing is focusing on our core, as well investing in some of these emerging categories to have a healthy mix over a period of time. The EBITDA margins have improved in the last couple of quarters. How was the company managed to improve the margins? Any cost reduction & cost transformation program is vital to have profitable growth. We have implemented cost transformation projects like Project Pie & Project Iceberg over the last year. Very specific to Project Pie, this was kicked-off in India last fiscal year and it has been highly successful. We looked at costs in manufacturing front, sourcing front, marketing and also expenses that we incur with the channel partners (be it distribution margin, retailer margin). This is cross-functional team project wherein we have dedicated team members throwing many such initiatives, ideas and then we filter it and eventually execute. This is the second year and we expect such projects to be a substantial contributor to our EBITDA growth in the future. GCPL is one of the pioneers in developing supply chains in the FMCG sector, what could be the value locked in for the company with passage of the GST? GST in general is going to be single largest reform which will boost the GDP by 100-150 bps. It will also simplify overall tax structure and result in increase in productivity. It will have a huge positive impact, as it will result in government collecting more tax (by higher collection and transparency without increase in rate, rather we expect unified GST rate to be lower than aggregated indirect tax rate today). This in return will help the government to redeploy all this money in infrastructure and social welfare schemes, which will improve consumption by increasing the buying power of

August 2015

our end-consumer, hence good for most of the industries in the country. You had a fast track growth in your career path to the Head - Finance, India & SAARC and Investor Relations, GCPL. What will be your advice to our readers? First is work hard and party harder. Second, be more entrepreneurial in your approach. Your career growth is more driven by your capability, your initiative, your passion, your hunger and equivalently companies like GCPL are quite agnostic about age & experience. It’s all about capabilities. It is not necessary that age gives you that experience in today’s fast growing world. If you have the capabilities to take bigger roles then the companies are also willing to invest in you, give you the ecosystem and infrastructure to excel.

Our UK business acquired in 2005 has a play in hair and personal care. We also operate in the Middle East and have a strong presence across SAARC countries.

ABOUT GODREJ CONSUMER PRODUCTS Godrej Consumer Products Limited is the largest home-grown home and personal care company in India. We are constantly innovating to delight our consumers with more exciting, superior quality products at affordable prices. We have bold ambitions and are becoming more agile and future ready. We rank number 1 in hair colour, household insecticides and liquid detergents and number 2 in soaps. In India, you grow up with our brands - Good knight, Cinthol, Godrej Expert, Godrej No. 1 - and we are now on our way to becoming an emerging markets FMCG leader. In line with our 3X3 approach to international expansion, we are building a presence in 3 emerging markets (Asia, Africa, Latin America) across 3 categories (home care, personal wash, hair care). In 2010, we acquired the Indonesia based Megasari group, a leader in household insecticides, air fresheners and baby care. With the acquisition of Rapidol, Kinky and Frika in South Africa, and the Darling Group, a leading pan-Africa hair care company, we have a strong presence in the fast growing African hair care market. We acquired the Issue and Argencos groups in Argentina, leaders in hair colour, in 2010, and expanded our footprint to Chile through the acquisition in Cosmetica Nacional.

Niveshak Investment Fund

Performance Evaluation

Done on 30/6/14

CONS NON DURABLE (6.34%)

Informa(on Technology (12.52%)

HCL Tech.

Infosys

Wg: 4.76% Gain : 25.66%

Wg: 3.63% Gain : 32.32%

TCS

GODREJ CONSUMER Wg:6.34% Gain:39.93%

Wg: 4.13% Gain : 3.38%

BANKING (5.82%)

FMCG (21.17%) Britannia Wg:6.79% Gain: 196.79%

Colgate

HUL

Wg:4.31% Wg:5.75% Gain:23.2% Gain:17.86%

ITC

HDFC Bank

Wg:4.32% Gain :-‐7.7

Wg: 5.82% Gain : 8.05%

Auto (7.97%)

Pharmaceu(cals (13.14%)

Dr Reddy’s Labs Wg:5.29% Gain:40.35%

Chemicals (6.86%) Amara Raja BaT Wg:4.62% Gain :31.95%

Tata Motors Wg:3.35% Gain : -‐28%

Lupin Wg:7.89% Gain : 61.08%

As on 30th Aug 2015

Asian Paints Wg:6.86% Gain:29.26%

MISC. (3.78%)

MANUFACTURING

Titan Company Wg:3.78% Gain:-‐11.24%

Page Industries Wg:6.41% Gain:34.41%

(6.41%)

August Performance of Niveshak Investment Fund 102

165 155

101.5

145

101

135

100.5

Performance of Niveshak Investment Fund since Incep9on

125

100 99.5

115

105

98.5

98 Sensex

NIF

Values Scaled to 100

Opening PorKolio Value : 10,00,000 Current PorKolio Value : 15,40,548 Change in PorKolio Value : 54.28% Change in Sensex : 7.55% (30th Aug)

Sensex

NIF

Values Scaled to 100

Risk Measures: Standard Devia9on : 18.15(Sensex 24.53) Sharpe Ra9o : 2.51(Sensex : 1.67) Cash Remaining:272497

Comments on NIF’s Performance & Way Ahead : Throughout the month of August the

market eroded the gains of previous highs and witnessed significant vola9lity . Concern over China’s economy con9nues to impact the investors’ confidence across the globe. Due to con9nued decrease in FIIs confidence, flows to India con9nue to be weak. Mutual funds are adding their exposure viewing this chaos as an opportunity which is led by global factors. The immediate movement will depend on INR trend for which the central bank’s FIIs could be expected come back to the Indian market once the consolida9on of global markets end, as we are the best class amongst the emerging market. Some of the sector that was able to resist the fall to a marginal extent were Pharma and IT , we are watchful of the turning events both globally as well as domes9cally .We are also in the process of evalua9ng some of our exposures and very soon we would be making changes our porKolio to reflect the value buying opportunity before us. In pursuit of the same we are introducing the research report of VST Industries before our readers.

7th Anniversary Issue

EQUITY ANALYSIS Chirag Tekriwal & Dhaval Maniar

IIM Shillong

August 2015

MY FINANCE STORY

7th Anniversary Issue

Taking baby steps down the Wall Street My first (virtual) Trading experience During my 1st year in IIM Shillong, I was just another engineer who was struggling with Accounts and Finance subjects. Trading was something I always looked up at in awe but had no clue about the stock markets. All I knew about trading was that some people make fortunes while others lose fortunes and that I wanted to be among the former ones in the future. Nevertheless I was determined to learn about stock markets. Just about that time, Niveshak - Finance Club of IIM Shillong introduced us to ‘ICICI StockMind3’, a 7-day trading competition. It was to be hosted on an online virtual trading platform with realtime stock simulation. This struck to me as a wonderful learning opportunity with some riskfree hands on experience in trading. So with excitement up on my nerves, I started preparing for the competition trying to get as much knowledge on trading as I can from one of my best friends- ‘Google’. Finance club helped us in using the online simulation platform just before the competition started and I was all set to start the competition. Day 1 started with INR 1.5 million virtual cash in our accounts for trading. I started with buying the stocks I had shortlisted the other night based on analyst reviews. By the end of the 1st trading day, I was running in losses, with no signs of profitability at all. I then realized that if I don’t study any companies, I have the same chances of success in stocks as in a poker game wherein I bet without looking at my cards. The same day, I was also amazed as to how some of my peers were making very high profits? It was then that I learnt about margin trading. It was risky but since all that was on stake was virtual money, I decided to go down this path to recover my losses in the coming days. Also for the next 7 days, I would be dedicating some time every night to analyse the market, browse through stock graphs and speculate on which stocks to buy and/or sell the next day. The next day I tried my hand at margin trading carefully and it did help me recover the losses I made earlier. I would buy stocks, wait for it to go up a little bit and sell it. Of course I also incurred losses when the stocks won’t go up but mostly I was on the positive side. I had to be careful in this, since there was a limit of INR 30 million

August 2015

on the trading turnover for a day, which if crossed would mean getting debarred from the competition. So this was it! This was going to be my strategy for the coming 5 trading days left. Decide stocks in the night and short them the next day and hopefully make profits. Being in an IIM that was not going to be so easy. In an IIM you never get time, but you have to make time. The major challenge was to make time through hectic schedules with classes, multiple assignments and deadlines. In the coming days, my decisions turned out to be right and slowly I started increasing my profits. I was climbing the rank ladder day by day and by the end of the 6th day, I stood 3rd in my college in terms of the portfolio value. On the last day, I would rather say luck was on my side when I decided on the stocks, which increased my portfolio value by around 50% in just one day. Needless to say it made me a clear winner in the college round of the competition. You can just imagine the feeling for a person who had no idea about the markets. All that said and done, I still have a long way to go in understanding the stock market and this first step towards trading was an amazing learning experience, the result of which has boosted my confidence to explore the market. In the end I would like to quote lines from one of my favourite songs ‘If you never try, you’ll never know, Just what you’re worth’. So go ahead, and give it a try!!!

Pawan Kadam IIM Shillong

MY FINANCE STORY I am sure for most of us, the teen age would have been the one where limited money was to satisfy unlimited demands. When it comes to college life, your friends are the worst enemies to your wallet, but hey I can’t refrain from being a partyholic. This was the deficit of my life where earnings were zero and expenses touched the vertex. Trust me meeting your daily schedule with all such expenses as per a budget constraint is no less a course in financial management. Although I have a very generous family where apart from the regular pocket money from parents, my aunts used to give me Kharchi, (comes with a tight whoogly-whoogly woosh) but with the never-ending wishes even the ‘Kharchi’ wouldn’t suffice. A time I remember distinctly was when I topped my college exams and being the topper of your Muhalla, I got an offer to teach Accounts. The offer was irresistible and I eventually took it. Teaching was a passion for me and I got an opportunity to make it a part of my schedule. The number of kids and my EPS(Earnings Per Students) increased but so did my demands. The market for securities always fascinated me and then I decided to make that a part of my informal professional life. I used to follow the market and now I had some cash with me too. Eventually, I started investing into stocks just like a small retail play safe investor but with small risk I could make only small gains. It was the 15th of August when one of my very rich friends approached me and exclaimed, hey why don’t you manage my portfolio. I had another irresistible offer and I took it. One always fears losing one’s hard earned money but when it comes to someone else’s, dude you take all the risks. With high risk and high gains, I made huge commissions and made a corpus of 30,000 bucks for myself. Money can’t bring happiness, but it can help in pulling it towards you. My girlfriend’s mobile was stolen and I gifted her a new one with my earnings. Watching your loved ones smile is something which makes you feel elated. The phone was a result of my earnings, which was the reason for the most exuberant smile on her face. But things started changing when I got to know that with all the profits I made for my friend, he used to buy drugs with it and I couldn’t be the one financing a poison for him. I talked to him but he was already addicted to it. I was in a dilemma as I had a friend’s life at stake and as

a friend I decided to tell the entire story to his father. The episode ruined our friendship. I also didn’t have any further portfolios to manage. I managed my expenses utilising my past savings and got through one of the prestigious colleges: IIM-Shillong. Coming from a small town where everyone loves to play Chinese Whisper, I was called by my friend’s father to his house. I didn’t know what was happening and with all my courage, I met him and I remember his words: “I know Mohit you are one hardworking chap and I just want to thank you for what you did for my son. I want to finance your MBA. I have full faith in you. Pay me back whenever you want. Even if you are taking a loan and you require a guarantor let me know.” I was in disbelief as to how someone could have so much faith in me and that’s when I realised the value of money. Although I didn’t take any of his offers, I have my friend back and that’s the best reward I could get. He is good in painting and has the order-line of nearly 250 posters, annually for college festivals and elections. Inspite of getting practically unlimited pocket money, he realised the value of it whence he started earning it of his own accord through his passion of painting. With this incident, I believe that anyone can and everyone should make their passion a part of their profession. It is one of the best things to relax yourself. Earning some extra bucks is then just an icing on the cake. So guys take a pause, look inside you, explore your passion and live it.

Mohit Kanjwani IIM Shillong

7th Anniversary Issue

WINNERS OF 7TH ANNIVERSARY ISSUE 1st Prize (INR 3000) Abhiron Bhattacharya NITIE, Mumbai 2nd Prize (INR 2000) Shivansh Kumar IIM Shillong 3rd Prize (INR 1000) Tuhin Choudhury GLIM, Gurgaon Consolation Prizes (INR 500 each) Palash Sinha VGSOM, IIT Kgp Ankur Kumar IIM Shillong P Karan Jain & Sumon Chaudhuri IIM Shillong

CELEBRATIO WINNERS Round 1- Quiz 1st Prize (INR 2000) Team Safal Niveshak NMIMS, Mumbai 2nd Prize (INR 1000) Team Bahubali IIM Shillong

Round 2 – Quiz

1st Prize (INR 2000) Team Ek Aur Ek Gyarah IIM Shillong 2nd Prize (INR 1000) Team Smiling Assasins XIMB, Bhubaneswar

7th Anniversary Issue

EQUITY ANALYSIS 1st Prize (INR 2000) Chirag Tekriwal & Dhaval Maniar IIM Shillong

MY FINANCE STORY Prize (INR 500 each) Pawan Kadam IIM Shillong Mohit Kanjwani IIM Shillong

TEAM NIVESHAK Front (L to R): , Abhishek Bansal, , Rahul Bajaj, Bhawana Saraf, Palash Jain Back (L to R): Maha Singh Gulati, Ramesh Jaiswal, Vishal Khare, Prakhar Nagori, Sandeep Sharma

FIN Q AUGUST WINNERS 1st Prize (INR 1000) Abhay Pratap Singh Bist IIM Shillong 2nd Prize (INR 500) Bhagyesh SIMSREE, Mumbai

August 2015

ALL ARE INVITED Team Niveshak invites articles from B-Schools all across India. We are looking for original articles related to finance & economics. Students can also contribute puzzles and jokes related to finance & economics. References should be cited wherever necessary. The best article will be featured as the “Article of the Month” and would be awarded cash prize of Rs.1500/- along with a certificate. Instructions »» Please send your articles before 10th September, 2015 to niveshak.iims@gmail.com »» The subject line of the mail must be “Article for Niveshak_<Article Title>” »» Do mention your name, institute name and batch with your article »» Please ensure that the entire document has a wordcount between 1500 - 2000 »» Format: Microsoft WORD File, Font: - Times New Roman, Size: - 12, Line spacing: 1.5 »» Please do NOT send PDF files and kindly stick to the format »» Number of authors is limited to 2 at maximum »» Mention your e-mail id/ blog if you want the readers to contact you for further discussion »» Also certain entries which could not make the cut to the Niveshak will get figured on our Blog in the ‘Specials’ section © FINANCE CLUB, INDIAN INSTITUTE OF MANAGEMENT SHILLONG

6th Anniversary Issue

COMMENTS/FEEDBACK MAIL TO niveshak.iims@gmail.com http://iims-niveshak.blogspot.in ALL RIGHTS RESERVED Finance Club Indian Institute of Management, Shillong Mayurbhanj Complex,Nongthymmai Shillong- 793014

August 2014