The finapolis oct 16 by The Finapolis

Revival Time for Realty

Simple Calculation for Adequate Insurance

How UPI Will Change Banking

What to do if You’ve Lied on Your CV

Finapolis The

1st October 2016 `60

www.thefinapolis.com

Your Personal Finance Advisor

What’s Wrong With Start-Ups?

OCTOBER 2016 l The Finapolis The

EDITOR’S DIARY

Your Personal Finance Advisor

Volume 10

Issue 07

October 2016

Editor Mandar M Bakre editor@thefinapolis.com Associate Editor S Vijaykrishnan Correspondent Sukanta Kundu Editorial Board Phani Sekhar KP Jeewan Jagannadham T Design & Production Vijayendra Kumar Ch Kerthi Saikumar Narsingh Thakur Advertising & Circulation Shabna R Iyer Vijayendra Kumar Ch For Ad Sales Queries subscriptions@thefinapolis.com Printed & Published by Mubashir Ansari on behalf of Karvy Consultants Limited. Karvy House, 46 Avenue 4, Street 1, Banjara Hills Hyderabad - 500 034. AP. Printed at Kala Jyothi Process Pvt. Ltd Regd.Office: 1-1-60/5 RTC Cross Roads, Musheerabad, Hyderabad - 500 020. AP. SVPCL Limited Regd.Office: 206/A, Concorse 7-1-58, Greenlands, Ameerpet Hyderabad - 500 016. AP.

Packed to the Gills!

hat’s ailing Indian start-ups? Something definitely is — although it might be hard to tell precisely what in the current environment. The scene itself seems to have cooled. As our story points out, there’s tur-

moil in the sector and retrenchments are a very real thing. People are quitting, businesses are being re-valued and so on. But this still doesn’t look like a ‘bust’ or a slowdown in the traditional sense… instead, it has all the hallmarks of a sector coming to grips with reality. More than a downtrend, it’s a spring cleaning that’s in the offing. The IT industry went through something similar years back. People could walk out of a college with an IT degree and book their seat in a software company. Then, their supply reached critical levels, and the industry became choosy about whom it hired. In the case of start-ups, the same thing has happened, but at the funding end: the number of start-ups has reached that critical level where the people who have the money become choosy. Our second story on start-ups is a case study. Myntra went app-only with much fanfare, but learnt from its mistakes and brought back its website. Experts sound off on the tale. Beyond start-ups, we look at the Unified Payment Interface, and how its introduction will make transferring money an even easier affair. There are also insights into personal finance: How much life insurance cover is adequate for you? We tell you how to arrive at the magic figure. What is the difference between savings and in-

Published for the month of October 2016 Printed on October 1, 2016 Total No. of pages 68

vestments? We list five differences to guide you. We also have a troika of articles focussed on real estate. Starting with the Shanbhags, who explain why a house purchase is a sound investment strategy, we take you to Hyderabad, which our columnist finds

All charts and tables are sourced from Bloomberg, unless otherwise indicated.

a good market to buy property in, and on to a review of the government’s recent decisions that provide succour to realtors. With stock picks as a bonus. And yes, we do have more. Roshi Jain of Franklin Templeton talks about the

For Editorial Queries Please contact The Finapolis Karvy Centre, 8-2-609/K, Avenue 4, Street No.1, Banjara Hills, Hyderabad-500 034 Tel: +91 40 66072560 Copyright The Finapolis. All rights reserved throughout the world. Reproduction in any manner is prohibited. The Finapolis does not accept responsibility for returning unsolicited manuscripts and photographs. All unsolicited material should be accompanied by self addressed envelopes and sufficient postage.

markets. Amit Kapoor explains how India can gain a productivity edge. The quiz, the cartoon, the quote and the bit about India are all there as well. If ever we put out a jam-packed issue, it has to be this one. Happy Reading! Special mention: Take a look at this month’s Newsmaker, which features some pretty damaging news uncovered by IndiaSpend.

Mandar M Bakre

The Finapolis l OCTOBER 2016

CONTENTS 40

PARABLES The tale of the frog that didn’t listen to others

r Covey Stor

MONEYWISE How Savings are different from Investments

SAFETY NET Are you adequately insured? Find out

CHARTIST

Proﬁle of the Indian Consumer

COLUMNS

A. Shankar Hyderabad’s Real Estate Sector Revives Se

AN Shanbhag and Sandeep Shanbhag If You Have, or Plan to Buy a House, Read This

Adhil Shetty Tips for First Time Fund Investors

Amit Kapoor Getting Indian Manufacturing to Perform to its Potential

OCTOBER 2016 l The Finapolis

WE ARE DIGITAL 42

CASH FLOW How the UPI will transform our banking experience

onwards START-UPS Reality sets in for Indian companies

START-UPS The case study of Myntra

SECTORWATCH

With the proliferation of smartphones and tablet devices, reading habits are slowly but surely changing. We understand the importance of giving readers a cross-platform choice to access the magazine. The Finapolis is now available in a digital avatar as well via a global publishing platform such as Magzter and Indiamags. Besides allowing you to read on the go, the digital version offers an enhanced reading experience. It also eliminates delivery delays. You can download the digital magazine on the first day of every month. Go to www.magzter.com, Indiamags.com or Rockstand mobile app, search for ‘The Finapolis’, sample some pages of the digital magazine, and buy a subscription through your netbanking or credit card account. A one-year subscription for The Finapolis digital costs only Rs 540. You need to have a device that runs on Apple’s iOs, Android or Windows 8 operating system. Do let us know what you think of the digital experience by writing in to feedback@thefinapolis.com

Good news for the real estate industry

Buy on

FACE TO FACE

CAREERSCOPE

Roshi Jain of Franklin Templeton

Have you lied on your CV?

ETCETERA

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linkedin.com/company/karvy

The Finapolis l OCTOBER 2016

inbox Central Banking Peter Schiff makes a convincing argument that central banks are choking productivity. For so many years now, the Fed has kept interest rates low and every expert has said it has increased liquidity risk. Almost a decade since the ﬁnancial crisis is over and still we are grappling with the fallouts from it. The US government should have let the banks go bankrupt and let the bankers experienced life like all the other people who had to suffer in the crisis. Then they would not have been so arrogant like Goldman CEO who told media in interview that he is doing ‘God’s work’. The bankers took the whole world for a ride and made proﬁts, and then when they started to make loss they started to cry that it was someone else’s fault. — Karim Shaikh, Secunderabad Central banks investing in infrastructure bonds seems like a good move to Disclaimer: The technical studies / analysis discussed here

continue for quantative easing. Also, Credit Suissie should also say when

can be at odds with our fundamental views / analysis. The

they should stop the funding, otherwise this cycle is going to keep on

information and views presented in this report are prepared

repeating and we will never see the end of it.

by Karvy Consultants Limited. The information contained

— L Samanth, Belgaum

herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred

Super Shanbhags

based upon it. The investments discussed or recommended

The column in October issue by father-son duo of A N Shanbhag and Sandeep

in this report may not be suitable for all investors. Investors

Shanbhag was very interesting. So many times I also do short term trading

must make their own investment decisions based on their speciﬁc investment objectives and ﬁnancial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy

and make very good money, but luckily I also hold a day job and the trading is always being done as a secondary part of my income. So far I have been successful and made good money, but never I have made more income from trading then by day job hence, I am not facing any problem from the tax

nor Karvy Consultants nor any person connected with any

authorities. Regular traders should take care to see what side of the law they

associate companies of Karvy accepts any liability arising

are on. — Vir Jhawar, Bokaro

from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every

The Shanbhag article is very nice for people who do day trading often. It is also very useful read in bull market. — Mohan Shivdasani, Rajkot

employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering

Lynch Book Still a Big Deal

corporate analysis and investment recommendations are

I liked to read the review of One Up on Wall Street. This is a classic story and I

restricted in purchasing/selling of shares or other securities

remember reading it years before when I was working in Delhi. It reminds me

till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on

that what he said on the stock market is still important. I remember reading and using many things that he said to build my portfolio but now I have sold all my shares and only invest in mutual funds. — Sanjiv Shastry, Kalburgi

it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Send your feedback and views on The Finapolis to feedback@thefinapolis.com

OCTOBER 2016 l The Finapolis

 UNIFIED EXPENSE ACCOUNT Finance Minister will ‘present’ Rail Budget from next year

In a major financial sector reform, India on Wednesday decided to do away with a 92-year-old legacy of separate general and railway budgets by unifying them, a tradition that has been continuing since British colonial times. The budget presentation date in all likelihood is being advanced to February 1 every year, from the last day of February as was the norm. “From the coming year, the railway and the general budgets will be amalgamated. There will be only one budget. And secondly, distinction between plan and non-plan expenditure will be ended from next year. Consequently there will be only one appropriation bill,” Finance Minister Arun Jaitley said. Jaitley said over the years the general budget expenditures have gone up than the railways, and added that ministries like defence have more expenditures than railways but form part of the general budget. The decision to merge the rail and general budgets was mooted by Railway Minister Suresh Prabhu and endorsed by NITI

Aayog’s member Bibek Debroy, which also proposed the doing away of the distinction between plan and non-plan expenditure. Prabhu said the amalgamation would not impact the functional autonomy or the distinct identity of the Railways. He also endorsed the move as a historic step which would help meet global benchmarks and best practices. The merger would also facilitate an integrated and seamless approach towards transportation strategy in the country, he said. On the financial implications, Prabhu stated that the merger will help Railways raise extra capital expenditure, which would allow it to enhance connectivity in the country and boost economic growth. Besides, the Railways would also not need to pay dividends on the allocated capital expenditure amount. The Railways pay about Rs 10,000 crore as dividend annually. Both Jaitley and Prabhu clarified that the distinct identity of the Indian Railways will be maintained — including the freedom to raise resources via extra-budgetary

means. “Functional autonomy of the Railways will be maintained,” Jaitley said. While clarifying on the new date of the budget, Jaitley said it will be advanced and the government in-principle wants the Finance Bill to be passed before March 31. But the date of the budget will be decided depending on various state elections dates. The advancement of the date is to ensure the Finance Bill is passed in the first half of the Budget session than to spill over to the second half after recess. Non-plan expenditure is what the government spends on the so-called non-productive areas, such as salaries, subsidies, loans and interest, while plan expenditure pertains to the money to be set aside for productive purposes, like the various projects of ministries. Finance ministry officials said after the abolition of the Planning Commission, the relevance of plan and non-plan expenditure is lost -- and a better indicator of productive and general expenditure will be a distinction under the heads of revenue and capital. IANS

The Finapolis l OCTOBER 2016

 ONE NATION, ONE TAX Jaitley pushes to finalise GST rate by October 19 In its first set of decisions, the Goods and Services Tax (GST) Council fixed the turnover-based exemption limit from such levies at Rs 20 lakh, but left the decision on fixing the actual tax rates and the finalisation of draft rules for later. Briefing the media after its two-day, maiden meeting of the apex decision-making body on the new indirect tax regime, Finance Minister Arun Jaitley said the council also decided that exemption for assessees in the northeastern region and hill states will be Rs 10 lakh. The base year for compensation to states — on the basis of which they will get a share of the GST revenue — has been fixed as 2015-16, said the Finance Minister, who is also Chairman of the Council. “We have also decided that the compensation should be given at regular intervals to states.” The Chairman said the jurisdiction over assessees with a turnover of Rs 1.5 crore and below will solely be with the states and for those above, it will be jointly with the central and state governments. The council is scheduled to reconvene on September 30 and again from October 17-19. “All existing cesses will be subsumed in GST,” Jaitley said, even as officials added that the draft rules and the model laws could be taken up on September 30. “We will try to finalise the rates and the slabs during our meeting on October 17, 18 and 19,” said the Finance Minister on a matter that has widely divergent views among the states and the Centre. Chief Economic Adviser Arvind Subramanian recommended a standard rate of 17-19% in a recent report, even as some states have demanded rates as high as 26-27%. “We have roughly two months time till November 22 to resolve all the outstanding issues. Therefore, a draft timetable has been given, which also have been adopted,” Jaitley had said after the first day of the council meeting.

On the issue of appointing a co-chair, the Finance Minister said: “Will elect the Vice Chairman at a subsequent date. The appointment for Vice Chairman can be done unanimously or by voting.” The central government is trying to resolve all outstanding issues over the uniform pan-India indirect tax regime at the earliest in a bid to meet deadline for its implementation from April 1, 2017. Jaitley had also said the target roll-out of GST will depend on the passage of the Central GST and the Integrated GST (IGST) bills in Parliament and adoption of respective State GST bills by each state.

Meanwhile, The government on Saturday appointed Arun Goyal as Additional Secretary of the pan-India indirect levies’ apex body. According to the Appointments Committee of the Cabinet (ACC), Goyal will take charge of the newly created post of Additional Secretary, GST Council, under the Central Staffing Scheme. “Arun Goyal, lAS Additional Secretary, Project Monitoring Group, Cabinet Secretariat on lateral shift as Additional Secretary, GST Council against Newly created post under Central Staffing Scheme,” Ministry of Personnel, Public Grievances & Pensions said in a statement. IANS

OCTOBER 2016 l The Finapolis

 OLIVE BRANCH

RAINFALL BOUNTY

Mamata invites Tatas to Bengal after SC sets aside Singur land buy

Kharif output seen at all time high due to favourable Monsoon

West Bengal Chief Minister Mamata Banerjee has invited the Tatas to set up an automobile hub in the state, after the Supreme Court set aside land allotted by the previous Left government for the company’s Nano plant. Banerjee said though the apex court had given 10 weeks to complete the land survey, her government will complete the process in 7-8 weeks. Earlier, the SC had set aside the land acquired by the previous Left Front government in West Bengal for the Nano car plant, saying due processes and procedures were not followed. The land was acquired in 2006 for the car project, which was vehemently protested by the Trinamool Congress — currently in power in the state with Mamata Banerjee as Chief Minister. Reaching out to the Tatas again, Banerjee suggested the group set up an auto hub over 1,000 acres in Goaltore of West Midnapore district and gave them a month’s time to think over the pro-

posal. Urging the Tatas to accept “sportingly” the Supreme Court verdict, Banerjee said: “ I am giving you a month’s time, please think over. We have 1,000 acres of land with us at Goaltore. Will you set up an industry? “If anybody wants to set up an auto industry, be it the Tatas or BMW, you can contact (Industries Minister) Amit Mitra, or my chief secretary or secretary of the industries department. If you do so, we will be very happy,” she said. In other developments, ever since, the West Bengal government has also inked an agreement with Tata Metaliks Ltd for a skill development centre to train 1,200 youth annually in West Midnapore district. “We will immediately be able to start the skill development centre since the state government is providing the hardware part and we the software part for it. To start with, we will impart training for trades such as electricals, carpentry, hospitality & wellness etc. IANS

India’s foodgrain production is estimated to rise 9% to an all-time high of 135.03 million tonnes in the 2016-17 ‘kharif’ season with output of rice and pulses hitting record highs following a good monsoon. According to the first advance estimates, rice production is estimated at an all-time high 93.88 million tonnes (MT) as against 91.31 MT last season. Production of pulses, whose retail prices have soared amid low output in the past two years, is pegged to rise 57% to a record 8.7 million tonnes this year. Foodgrain production stood at 124.01 MT in the kharif season last fiscal. Officials said that good rains have improved soil moisture and increased water levels in reservoirs, which will boost sowing of winter crops beginning October. Data showed that country’s overall foodgrain production had fallen to around 252 MT level in each of the previous two full crop years (including kharif and rabi) due to two consecutive years of drought. Coarse cereal production is estimated to grow to 32.45 MTs in this kharif season, from 27.17 in the last season. Sugarcane output is however, estimated to decline to 305.24 MT in 2016-17 from 352.16 million tonnes. Production of both tur and urad is pegged at a record 4.29 MT and 2.01 MT. IANS

The Finapolis l OCTOBER 2016

 MARKET REFORMS SEBI opens corp bonds market to foreigner investors The Securities and Exchange Board of India (SEBI) has decided to allow direct access to corporate bond market for Foreign Portfolio Investors (FPI). The regulator has also decided to permit Infrastructure Investment Trusts (InVIT) and Real Estate Investment Trust (REIT) investment in two-level special purpose vehicle (SPV) structure. In a statement, SEBI said the board at its meeting decided to allow Category I and Category II FPI the option of direct access to corporate bond market without brokers. Currently, the SEBI (Foreign Portfolio Investor) Regulations, 2014, allow FPI to transact in securities only through registered stock broker who is a qualified member of a Recognised Stock Exchange (RSE). The SEBI also decided to allow FPIs access to Over-the-Counter (OTC), Request for Quote (RFQ) and Electronic Book Provider (EBP) platforms of RSE only for proprietary trading so as to deepen the corporate bond market. “Proposal for amendment to Rule 8 (4) of Securities Contracts (Regulation) Rules, 1957, will be taken up with the Government of India to permit FPIs to become a member of a RSE for the limited purpose of proprietary trading. Necessary amendments to the SEBI (Foreign Portfolio Investor) Regulations, 2014 shall be made in this regard,” SEBI said. The markets regulator also decided to amend the InvIT regulations to facilitate its growth to allow investment in two-level SPV structure through holding company (Holdco) subject to sufficient shareholding in Holdco and the underlying SPV. The other major changes are: (a) An. InvIT to have right to appoint majority directors in the SPV(s); (b). Holdco to distribute 100% cash flows realised from underlying SPVs and at least 90% of the remaining cash flows; (c) Reducing mandatory sponsor holding in InvIT to 15% (d) Remove the limit on the number of spon-

sors of InvIT and others. The amendments to REIT regulations are: (a) Allowing REIT to invest in two-level SPV structure through Holdco, subject to sufficient shareholding in the Holdco and the underlying SPV; (b) An REIT to have right to appoint majority directors in the SPV(s); (c) Holdco to distribute 100% cash flows realised from underlying SPVs and at least 90% of the remaining cash flows; (d) Clarifying the definition of “real estate property” in the regulations, subject to certain conditions. The other amendments agreed by SEBI are: removal of the limit on number of sponsors and introducing the concept of sponsor group; allowing REITs to invest upto 20% in under construction assets; amending the definition of the valuer and clarifying the definition of “associated” and “related parties” in the regulations. “Allowing REITs and InvITs to invest in two-level SPV structure through a holding company will remove the need for a re-

structuring in many cases prior to creation of a REIT/InvIT thereby reducing transaction costs and timelines; this will also ensure liquidity to investors and developers who had invested at the Holdco level,” Maadhav Poddar, Tax Partner-Real Estate Practice, EY said. According to him, increasing the percentage which an REIT can invest in under construction property from 10% to 20% will allow for more portfolios to be listed which hitherto could not be considered as their under construction portion was greater than 10%. “Reducing the mandatory sponsor holding in an InvIT from 25% to 15% will allow for more liquidity to sponsors. Apart from the above SEBI has made changes in regulations relating to number of sponsors, requirements for private placement of InvITs, definitions of associates, related parties etc. One will need to wait for the fine print to see the impact of these changes,” Poddar added. IANS

OCTOBER 2016 l The Finapolis

 MACRO FUNDAMENTALS Trade deficit falls 38%, as gold, oil import bills drop The trade deficit fell 38% to $7.67 billion in August from $12.40 billion in the same month last year. Exports fell 0.3% to $21.15 billion, indicating a halt in a steady slide that had occurred till June. The lower August trade deficit was due to lower imports during the month at $29.19 billion, which was over 14% lower than the imports of $33.98 billion in August 2015, caused by the fall in global crude oil prices. A fall in gold imports by 77.45% to $1.11 billion too helped in narrowing the trade deficit. The trade deficit cumulatively for April-August also declined more than 40% to $34.67 billion against $58.38 billion in

April-August of 2015-16. Lower global crude prices meant oil imports during the month under review declined by 8.47% to $6.74 billion from $7.37 billion in the corresponding month of last year. Yet, GDP growth slowed to 7.1% in Q1, from 7.5% a year ago, due mainly to lower activity in farm, mining and construction sectors. The government has targeted the GDP growth to top 8% this fiscal, mainly on the back of a normal monsoon season. The growth rate of the entire previous fiscal — at 7.6% — had made India the fastest expanding economy globally, overtaking China.

Gross fixed capital formation fell to 29.6% of GDP from 32.7% in FY16. Yet, the government’s final consumption expenditure — the value of what the state procures for individuals and households, as also subsidies — shot up 24.4%. IANS

HANDSHAKE

EXTENSION

M&M, Ola enter into alliance

Govt extends tax filing to Oct 17

Mahindra & Mahindra and taxi aggregator Ola have entered into a strategic alliance, targeting vehicle sales and financing of over Rs 2,600 crore in two years. “Through this strategic alliance, they (Mahindra & Mahindra and Ola) target 40,000 driver partners aiming overall vehicle sales and financing of over $400 million (Rs 2,600 crore) in two years,” a joint statement from the two companies said. “Ola’s driver partners can now avail of Mahindra-Ola package which will include Mahindra cars at special prices, attractive financing with zero down payment, and the best non-banking financial company (NBFC) interest rates, subsidised insurance premi-

The government has extended the date for filing of income tax returns by tax payers whose accounts are required to be audited under the Income Tax Act from September 30 to October 17, 2016, an official statement said here.

ums, comprehensive maintenance packages, as well as exclusive benefits on the Ola platform,” the statement said. IANS

“Taking into consideration that the last date for making declarations under the Income Declaration Scheme 2016 is also September 30, 2016, the Central Board of Direct Taxes (CBDT) has decided to extend the last date for such returns which were due on September, 30, 2016 to October 17, 2016 in order to remove inconvenience and to facilitate ease of compliance,” a statement from the Finance Ministry said.

“An app for f stocks, an app for meditation, an app for learning violin world is turning into ‘planet of the apps.” — this wo — Harsh Goenka, on Twitter

Quote of the month

The Finapolis l OCTOBER 2016

 BRIEFLY

BANKS’ PERFORMANCE APPRAISAL

Microfinance loans up 29% in Q1

NPA provisions eating into banks’ bottomline, says Jaitley

The Microfinance Institutions Network (MFIN) has said the organised industry in this segment has grown by 29% through loan disbursements in the April-June quarter. “Overall, the growth has been healthy and it is an indicator of the fact that confidence in the sector has been growing and there is an evident interest in greater investments in NBFC MFIs,” MFIN Chief Executive Ratna Vishwanathan said. In its report for Q1 2016-17, MFIN said the industry has experienced a growth of 89% compared to the first quarter of 2015-16, and has grown by 9% over the last quarter.

SEBI relaxes employee share allotment norms for IPOs The Securities and Exchange Board of India (SEBI) decided to relax its regulations to enable employees to apply for shares over the Rs 200,000 limit. “The application for shares of the value in excess of Rs 2 lakh shall be considered as application for additional shares and shall be considered only in the event of under-subscription in the employee reservation portion,” the SEBI said. However, the value of total allotment to an employee under the employee reservation portion, including the additional allotment shall not exceed Rs 5 lakh.

First cloud-based document locker launched in India India’s first secured cloud-based platform for the storage, issuance and verification of documents and certificates in a digital manner has been launched. ‘DigiLocker’ targets paperless governance and by helping access papers anytime through mobile devices, anywhere and able to share online, and avoid forgery. The transport ministry’s database of over 19 crore vehicle registration and over 10 crore driving licences, will be integrated with DigiLocker.

Indian public-sector banks have collectively made an operating profit of nearly Rs 35,000 crore this fiscal, but the massive provisioning for bad debts has pared their net profit down to Rs 222 crore, Finance Minister Arun Jaitley said at a quarterly performance meeting of PSU banks on September 16. “PSBs (public sector banks) have collectively made an operating profit of Rs 34,967 crore this year, but after allowing for the provisioning for bad loans, among others, net operating profit works out to Rs 222 crore,” Jaitley said. Jaitley pointed to the steel and infrastructure as the main sectors that provoked the asset quality review. However, with the imposition of the MIP (minimum import price) the big steel companies’ balance sheets have started turning,” he added. Late last month, the government approved new norms for the construction sector to ensure quicker resolution of disputes, kick-start stalled projects and make

access to financing easier. “The broad picture is that PSBs still face the challenge of high NPAs. Detailed discussions have taken place in this regard, while the new RBI norms and changes in legislation like the new Bankruptcy Code and the DRT (Debt Recovery Tribunal) law have helped to empower the banks,” Jaitley said. IANS

ATTEMPT TO COOL Govt moves to control food prices, asks BRICS partners for support The Union cabinet has extended stock-holding limits on traders of pulse, edible oil and oilseeds by one year till September 30, 2017. The move is expected to check hoarding, Food Minister Ram Vilas Paswan said. Paswan also said that following the central government’s move, end consumers would benefit as it would help to control pric-

es. The state governments can now “issue control orders with the concurrence of the central government on importers, millers, whole-

salers and retailers” as necessary, he said. Separately, the government also urged its BRICS partners to help meet the supply-demand gap in pulses and edible oils in the country. Agriculture Minister Radha Mohan Singh said that there is ample scope for cooperation in agricultural trade among these nations. IANS

OCTOBER 2016 l The Finapolis

 WAR FOR WAVES

BRIEFLY

Seven telcos qualify for India’s biggest-ever spectrum auction

Cabinet okays Extra Budgetary Resources for infrastructure

Seven telecom service providers — Bharti Airtel, Vodafone India, Reliance Jio Infocomm, Reliance Communications, Idea Cellular, Aircel and Tata Teleservices — have qualified to bid for the upcoming biggest-ever airwaves auction starting from October 1, according to data from the Department of Telecommunications. Reliance Jio can bid in any licensed service area (LSA) across the country, while Reliance Communications can bid across the country except northeast and Assam. Jio has deposited the highest Earnest Money Deposit of Rs 6,500 crore and been alloted the highest eligibility points at 44,506. Based on the reserve price, the government is expected to mop up be Rs 5.66 lakh crore. The 2,300-plus MHz of airwaves on the block for telecom operators is in seven bands — 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz — as against 470.75 MHz in the previous round, which is set to fetch the exchequer

To augment infrastructure investments, the Union Cabinet approved raising Rs 31,300 crore this fiscal as Extra Budgetary Resources (EBR). Out of this amount, it is proposed to finance the funds to be raised by Power Finance Corporation (PFC), Indian Renewable Energy Development Agency (IREDA), Inland Waterways Authority of India (IWAI), and National Bank for Agriculture and Rural Development (NABARD) by the government.

$17 billion during its tenure. The mock auction will be held on September 26 and 27, while the actual will commence from October 1. The government has decided to allot the right to the spectrum won through auction for 20 years. The operators will have the choice of both upfront and installment payment options. Companies which win airwaves below 1 GHz bandwidth will have to pay 25% upfront, and for those winning above that the upfront payment will be 50%. IANS

Sixth tranche of Sovereign Gold Bond in October The sixth tranche of Sovereign Gold Bond (SGB) is expected to rake in more than Rs 820 crore, the Union Finance Ministry said. The Finance Ministry said the next tranche of the scheme is expected to be around third week of October 2016 ahead of Diwali with additional features.

GST IMPACT BSE may reach 10,000 listings over next 10 years Under the Goods and Services Tax (GST) regime, the number of companies listed in BSE is expected to go up to more than 10,000 in the next ten years from the present 5,500 companies, a stock exchange official said on Friday. “GST is an important framework. Today, there are 5,500 companies listed in the BSE. I would not be surprised in the next ten years, if more than 10,000 companies are listed in the BSE,” said stock exchange’s Managing Director and Chief Executive Officer Ashish Kumar Chauhan. He said the single tax regime would be beneficial for small entities and companies which operate across many states. It will

allow many young companies to grow up very fast and bring more transparency in the system. “Many companies at present have to fulfil regulations which are local. Under GST, their costs are expected to reduce and their profitability might go up. They will find it easy to operate across India,” Chauhan

said. Speaking on investments in the stock exchange, he said, “Investments have to increase and speculations have to reduce. Presently, securities transaction tax is higher on equity. There should be less tax on investment activities and more taxes on speculative activities.” Chauhan also added raising funds through corporate bonds by private sector has suddenly surged after banks became cautious on lending to large corporates following a rise in bad loans. “Suddenly, we see that corporate bonds are doing well in the capital market. Over Rs 40,000 crore has been raised through corporate bonds in the last 45 days,” he said. IANS

The Finapolis l OCTOBER 2016

 ENERGY BOOSTER Pradhan on road to promote first auction under HELP To supply energy at affordable prices to consumers, the government has introduced transparent policies to encourage investment in refineries and petrochemical plants, Petroleum Minister Dharmendra Pradhan said while launching a road show in Singapore for the auction 67 discovered small fields in India. These together hold 625 million barrels of oil & gas reserves. He said participation by big global energy players like Saudi Aramco, Shell, BP and Rosneft is important for developing the energy sector and creating competition in the domestic market. “Our focus is on simplifying policies and improving the environment for ease of doing business in the country,” the minister said. “Singapore is a global hub for trading of petroleum, petrochemical products and oil service equipment. There can be good synergy between the two countries. It is

also a major financial centre in Asia from where FDI and foreign equity investors can invest in Indian oil and gas sector.” The Directorate General of Hydrocarbon (DGH) stated that with significant reforms introduced to reduce regulatory risk, the

industry will find the revised guidelines and processes attractive for the current bid round. The auction will be under the Hydrocarbon Exploration Licensing Policy (HELP) round approved in March, based on a revenue-sharing model, as opposed to costand-output-based norms earlier. The model will replace the controversial production sharing contracts -- by which oil & gas blocks are awarded to firms which show they will do maximum work on a block -that has governed the bidding under the earlier nine National Exploration Licensing Policy (NELP) rounds. Following the roadshow in Singapore the minister also mulled over the possibility of replicating the country’s petrochemical complex at two places in India - Odisha’s Paradip port and Haryana’s Panipat district. IANS

INSURANCE

JOB REFORM

ICICI Prudential’s IPO oversubscribed 10.5 times

Chief Statistician says labour surveys are coming

The initial public offering (IPO) of ICICI Prudential Life Insurance was oversubscribed 10.5 times the issue offer, according to data from stock exchanges. As of 5 p.m. on September 21, the data showed that the IPO issue received applications for 1,38,58,52,468 shares as against an offer of 13,23,78,973 on the final day of the offerings. The three-day share sale, which opened on September 19, had a price range of Rs 300-334 apiece. ICICI Bank at present holds 67.52% stake in the joint venture (JV) company, while Prudential Corp. Holdings Ltd has 25.83% in the India’s largest private

Chief Statistician of India T.C.A. Anant has said the government will introduce a regular labour survey, with both annual and quarterly estimates from the current fiscal. “One of the biggest data gaps in the Indian economy is the absence of series of labour measurement. We are in a very advanced stage and hope to introduce a regular labour survey,” he said. Anant said one of the reasons for a full-fledged survey was because employment was complex: “There are segments that are dependent on trade and if the foreign trade is low, there is slow growth of

sector life insurer. ICICI Bank is targeting to divest a 12.63% stake in the life insurance firm through the offer-for-sale (OFS) route. Prudential is also expected to reduce its stake in insurance company by up to 5.83% after its listing as part of the revised terms of the JV agreement. IANS

employment. But there may be other segments of employment that needs to be captured. So we have to consider the entire picture.” He said the National Sample Survey Organisation would launch the survey. “There are a number of administrative procedures which have to be done (before the launch),” he said. IANS

OCTOBER 2016 l The Finapolis

 TRACKING RAIL Flexi fares on Rajdhani, Shatabdi and Duronto

The government has started flexi fares on the Rajdhani, Shatabdi and Duronto Express trains, effective from September 9. The base fares on these trains will increase by 10% with every 10% of berths sold, subject to a ceiling limit. Although the move came in for criticism, the Railways defended its decision, saying it was cheaper compared to air

travel and road transport. “Railways is still cheaper than flights and buses,” Railway Board Member (Traffic), Mohammad Jamshed told reporters, comparing the fares of the Shatabdi running between Delhi-Jaipur and Delhi-Chandigarh with those of flights and Volvo buses. He said that “flexi fare” pricing is not new to Railways and it began in 1997 with

FDI MAGNET

JIO WRAP-UP Reliance Jio seeks complete overhaul of COAI Mukesh Ambani-led Reliance Jio has alleged that the regulations of Cellular Operators’ Association of India (COAI) are biased and lopsided, framed to subserve the vested interests of Bharti Airtel, Vodafone and Idea. It, accordingly, sought the COAI’s complete overhaul. The association countered, saying it was an internal matter, but not before calling Jio a ‘back door’ operator.

the introduction of Tatkal service. “The premium trains, Suvidha trains and Gatiman Express are also based on ‘flexi fare’ pricing,” he said. Jamshed also said that Railways earned Rs 160 lakh through “flexi fare” pricing of tickets in the first two days, and that it expects additional revenue of Rs 500 crore in the current financial year. IANS

In a letter to COAI Chairman Gopal Vittal and Direct o r G e n e ra l R a j a n S . Mathews, Jio said incumbent players command 68% of the total votes in the association and that quorum in any executive council meeting is based on voting power, rather than number of members. Over the past month or so, Reliance Jio has also repeatedly said that interconnection points provided by its competitors were inadequate, leading to call drops for its subscribers. While Idea has augmented interconnect capacity for

Govt approves permanent residency for foreign investors The government has approved a scheme to grant permanent residency status (PRS) to foreign investors for 10 years subject to conditions specified in the foreign direct investment (FDI) policy.

Jio by 230%, Jio said its subscribers still faced 75% call failures while trying to connect with the network of incumbent players. “Over 12 crore calls fail daily between Jio and the networks of Airtel, Vodafone and Idea,” it claimed. IANS

The PRS scheme will be applicable only to foreign investors and to his/her spouse and dependents and will be renewable in 10-year durations. The foreign investor will have to invest a minimum of Rs 10 crore to be brought within 18 months or Rs 25 crore to be brought within 36 months. Further, the investment should result in generating employment to at least 20 resident Indians every financial year. IANS

The Finapolis l OCTOBER 2016

 CASH CRUNCH

COUNTERATTTACK

Fitch warns bank capitals will fall Voda pumps Rs 48K cr into India short of Basel III norms Nearly half of India’s banks run the risk of breaching capital triggers owing to the progressive increase in minimum capital needs under Basel III norms, credit rating agency Fitch Ratings has warned. According to the agency, more than half of the banks currently have a CET1 ratio that is below the required 8% minimum that will be applied from FY19E. The agency said government-owned banks were most at risk due to their poor existing capital buffers and weak prospects for raising capital from the market. Analysing 27 Indian banks with outstanding hybrid capital instruments, Fitch said at the end of June, the total capital adequacy ratio (CAR) for 11 banks was at or lower than the minimum of 11.5% required by end-March 2019 (FY19E). “Of these, six did not have enough capital to meet the minimum required by FY17E. The minimum total CAR is a prerequisite for payment of coupons on both legacy and Basel III perpetual debt capital instruments,” it said. Fitch Ratings estimates Indian banks would need around $90 billion fresh capital by FY19E to meet Basel III standards, with the state banks accounting for about 80% of the total. The government has earmarked Rs 700 billion ($10.4 billion) for capital injections into state banks through FY19E. IANS

Just a few days ahead of the biggest-ever telecom spectrum auction, Vodafone India has received an equity infusion of Rs 47,700 crore from Vodafone Group in the first half of the current fiscal. “This equity infusion, which we believe is the largest ever in India, will enable Vodafone India to continue its investments in spectrum and expansion of networks across various technology layers delivering the best of experience to our hundreds of million customers,” said

Sunil Sood, MD and CEO, Vodafone India. The telecom service provider has around 200 million customers in the country. Over half of its customers (107 million) come from rural India. The company has around 22.5% revenue market share. “With our commitment to support the Digital India vision, we are building one of the most modern and scalable telecom networks to deliver connectivity and the Vodafone SuperNet experience to all, for both voice and data,” Sood said. IANS

MINT ST MOVES Govt names its 3 nominees to MPC Three academics from the country’s top institutions have been named the government nominee members to the Monetary Policy Committee that has been mandated to ensure the country’s retail inflation stays within a band of 4%, plus or minus two percentage points. The names, cleared by the Appointments Committee of the Cabinet, are: Chetan Ghate, Professor at the Indian Statistical Insti-

tute; Pami Dua, Director at Delhi School of Economics; and Ravindra Dholakia, Professor at the Indian Institute of Management, Ahmedabad. On its part, the Reserve Bank of India (RBI) has already named its set of three representatives to the six-member committee — the Governor, at present Urjit Patel who is also the chair with a casting vote, Deputy Governor R. Gandhi and Executive Direc-

tor Michael Patra. With the full membership of the panel in place, the next bi-monthly monetary policy update of the RBI on October 4 is expected to go by the recommendations of this panel. IANS

OCTOBER 2016 l The Finapolis

 news scan FLYING HIGH Andhra gets 3 new airports; Telangana 1 more The Civil Aviation Ministry has recommended ‘in principle’ approval to three greenfield projects in Andhra Pradesh. The Steering Committee on Greenfield Airports, headed by Civil Aviation Secretary R.N. Choubey, considered the proposals for four new airport projects, including one for Telangana. “The three projects that got the nod in Andhra Pradesh are Bhogapuram, Dagadarthi (Nellore) and Orvakallu (Kurnool). The committee also gave a ‘site clearance’ to the project at Kothagudem in Telangana.” This will give the

state its second airport besides the one at Hyderabad. The ministry said that the new international airport at Bhogapuram will be developed by the state government under PPP (Public Private Partnership) mode at an estimated cost of Rs 2,200 crore to cater to 6.3 million passengers per annum (mppa) in the initial phase. “The other two airports in Andhra Pradesh will be developed as domestic no-frills airports with an estimated cost of Rs 88 crore each,” the statement said. “Dagadarthi will be developed under

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the PPP mode while the project at Orvakallu will be developed by the state government itself.” IANS

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The Finapolis l OCTOBER 2016

 newsmaker

UNSPENT TRIBAL FUNDS Investigations by IndiaSpend reveal that over the last 35 years, Rs 2.8 lakh crore set aside to improve the lives of scheduled castes (SCs) and scheduled tribes (STs) by way of measures like mid-day meals, scholarships and crop insurance was simply not spent. The unspent amount — either lapsed or given back to the Centre — is eight times larger

than India’s agriculture budget, enough to fund India’s rural road construction projects for the next 15 years, and larger than the GDP of Serbia, Nepal or Jordan. If India were to distribute the Rs 2.8 lakh crore among all of India’s 250 million STs and SCs, each would get Rs 11,289. The NITI Aayog, which monitors these funds, verified the figures. IANS

OCTOBER 2016 l The Finapolis

VARIETY ANSWER BACK # 8 It’s only a few questions long, but the Finapolis quiz will still test the mettle of the best: we ask anything on everything. This month, it’s Second Innings of Indian Business Leaders 1) Renuka Ramnath

3) Kris Gopalakrishnan

5) N R Narayana Murthy

A) Multiples PE B) SeaLink Partners

A) Cartamaran B) Axilor Ventures

A) Sparkler Funding B) Speedboat

C) Seabridge Partners D) A-Square PE

C) Infoside Foundation D) Safalta Partners

C) Catamaran D) Murthy Library

2) TV Mohandas Pai

4) Ratan N Tata

5) Sunil Alagh

A) Ventomine Financial B) Arcopolis

A) Lantern Foundation B) RNT Cosmetics

A) Alagh & Co B) Brit-naya

C) Aarin Capital Partners D) BlueBird Ventures

C) Safalta Partners D) Avanti Finance

C) SKA Advisors D) New Age Marketing

KNOW YOUR COUNTRY

Answers to Answer Back #7 1- A; 2- B; 3-C; 4-B; 5-D; 6-A; 7-C; 8-C; 9-B; Winners: Kini Seth, Mr Dharampal ----------------------------------------------Send your answers to feedback@thefinapolis. com latest by October 25. Winners will be acknowledged in the quiz section of the subsequent issue.

SEE AND SMILE

Only 3 psychiatrists for 10,00,000 Indians

t least 60 million Indians — a number more than the population of South Africa — suffer from mental disorders, even as the country lags the world in medical professionals and spending on mental-health issues. Nearly 10-20 million Indians (1%-2% of the population) suffered from severe mental disorders such as schizophrenia and bipolar disorder, and nearly 50 million (5% of population) suffered from common mental disorders like depression and anxiety at the end of 2005, according to data from the National Commission on

Macroeconomics and Health, 2005, the last report available. According to a national mental health survey commissioned by the government that interviewed 27,000 respondents from June 2015 to April 2016, the country is short of health professionals to address mental issues, particularly at the district and sub-district level. There are 3,800 psychiatrists, 898 clinical psychologists, 850 psychiatric social workers and 1,500 psychiatric nurses nationwide. This means there were three psychiatrists per million people, according to data from WHO, 18 times fewer than the commonwealth norm of 5.6 psychiatrists per 100,000 people. By this estimate, India is short of 66,200 psychiatrists. Similarly, based on the global average of 21.7 psychiatric nurses per 100,000 people, India needs 269,750 nurses.

QUOTABLE “Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.” — Will Smith

20 The Finapolis l OCTOBER 2016

company update We take a look at some companies’ performance to figure out what impact they will have on the share prices HDFC Bank HDFC Bank is the second largest private sectorr bank in India with h a nationwide distribution network of 4,541 branches and 12,013 ATMs in 2,587 cities/towns. wns. It has consistently maintained healthy performance across all the parameters despite slowdown in the economy. Net interest income (NII) grew 22% Y/Y in Q1FY17 as advances rose 23%, while net interest margin (NIM) was stable at 4.4%. Asset quality remained

Adani Enterprises

broadly stable with gross non performing asset of 1.0% and Net NP NPA of 0.3%. Additionally ally, provision coverage ra ratio (PCR) was also at 6 69% as of Q1FY17 desspite challenging macro en environment. The bank has been able to maintain robust asset quality given the higher share of working capital and retail ﬁnancing in total loan book. Hence, we don’t expect any negative surprise on asset quality front over near to medium term. All retail loan segments (with a 53% share) grew in double digits except business

banking. The bank is expected to continue outpacing industrywide credit growth rate (1113%) and factor 19% CAGR in advances over FY16-18E mainly led by higher growth in retail loans. NII and net proﬁt are likely to post healthy CAGRs of 20% and 19%, respectively over FY16-18E supported by the growth in advances. HDFC Bank is the best placed among peers given its higher-than-system credit growth, best in-class asset quality and superior return ratios (RoE of 19% and RoA of 2.0%). Besides, the bank has proven track record of higher

2 billion of reimbursement claims. Adani Enterprises Ltd’s (AEL’s) opCity gas distribution volumes as erating profit beat estimates, rising well as margins (23.4% versus 22% to Rs 5.4 billion, while lower raw Y/Y) remained largely flat. Consolmaterial and operating expenses idated EBITDA came in better than powered the adjusted PAT to Rs 2 estimates at Rs 5.4 billion, which billion. While coal trading volumes also drove up adjusted PAT. rose 31% Y/Y to 24MT, mining In the coming quarters, commisbusiness’ volumes doubled. City sioning of the 648MW solar PV progas distribution volumes however, ject in Tamil Nadu and the 12MW grew by just 4%. The emerging reof wind power plant in Madhya newable energy business and coal Pradesh are key positives. Further, mine developer & operator MDO pipeline of 1,468MW of wind and opportunities will be key growth ar- solar power projects are at various eas. On the flipside, per tonne EBIT stages of implementation. The plummeted to Rs 35 from 1.2GW solar PV manufacturing Rs 100 in the preceding quarfacility being developed in Gujarat ter, which lowered at capital outlay contribution from the of Rs 19 billion Current Market Price coal trading business. (70% debt and Rs 69 However, the mining 30% equity) is Target Price business’ performance expected to be Rs 89 was robust, as a twoready by yearfold rise in volumes end. At CMP, the Potential boosted EBIT margin stock trades at Upside by 900 bps to 8% 6.9x FY17E and 30% after adjusting for Rs 6.3x FY18E P/E.

than industry growth rate with high proﬁt margins in the last ﬁve years. Hence, the bank will continue to command valuation premium over its peers over near to medium term. Given the above factors, the stock has an upside of 10%, based on a target price of Rs 1,387.

Mahanagar Gas Mahanagar Gas is a city gas player with a quasi-monopoly in Mumbai and adjoining areas. Along with Indraprastha Gas in Delhi, it is the purest play on the city gas segment which has high barriers to entry. Additionally, Mahanagar Gas company has a strong financial profile, with a high RoE of over 20%, stable positive cash flows and debt-free balance sheet. The domestic city gas business is a steady business and Mahanagar Gas is expected to sustain its robust growth based on three key factors: the relative under-penetration in Mumbai, which is one of India’s most dynamic city gas markets; the commissioning of the Raigad geographical area; and the improving economics of gas compared to

Current Market Price Rs 1258 Target Price Rs 1387 Potential Upside 10%

alternatives. The industry is likely set for structurally higher volume growth and Mahanagar Gas is estimated to clock 7.6% volume CAGR over FY16-20. In FY16, the company’s EBITDA margin showed an increase after three straight years of decline. IN FY16, the company reported EBITDA of to Rs 5.8/scm on feedstock advantages. Gas prices are seen to remain benign, which would reinforce the expansion in the company’s EBITDA margins.

Current Market Price Rs 603 Target Price Rs 755 Potential Upside 25%

OCTOBER 2016 l The Finapolis

company update eClerx’s CC revenue declined 0.6% sequentially while overall dollar revenue declined 1.1%. Q2 is also expected to o pan out on similar lines, the management believes. However, the cable business performed well, followed by digital services in Q1. In case e of the latter, the clientt base is likely to expand to worth ~$1-3 million. Dollar revenues are likely to grow ~5.7% Y/Y in FY17E and 11.6% Y/Y in FY18E, respectively. At 33.5%, eClerx’s Q1 EBIT margins declined ~350 bps sequentially, below the estimate of as employee costs shot up 320 basis points (bps), while general & administrative expenses increased 50 bps.

Current Market Price Rs 1633 Target Price Rs 1412 Potential Downside 14%

Reliance Infrastructure At Rs 4 billion, Reliance Infrastructure’s Q1 proﬁt after tax was marginally lower than estimates of Rs 4.1 billion, as interest expenses rose. While power division’s revenue jumped 4% Y/Y, engineering, procurement & construction (EPC) revenue dropped 24% Y/Y. The company plans to bid for external EPC con-

A 10% pay hike for onshore employees drove up wage costs. For FY17E, management expects EBIT margins to drop to ~30% mainly on grounds of CSR spent, employee stock option charges stoc and unabsorbed an fixed costs. Revenue from top 10 customers declined clin 3.4% sequentially. Though eClerx possesses one of the best return ratios among peers, its growth will remain subdued in line with challenges that the IT sector faces. eClerx is estimated to report rupee revenue, PAT CAGR of 9.9%, 7.3% in FY16-18E and an EBITDA margin of 35.5% in FY17E. While the recent buyback announcement up to maximum price of Rs 2200/share could support the share price in the near term, the stock is currently trading at expensive valuations of 16.2x FY18E EPS, i.e. at ~30% premium to its FY11-16 average of 12.6x despite a subdued financial performance. Hence, target price stands revised to Rs 1412 (14x FY18 EPS), reflecting a downside of 14%. tracts to shore up order book In its Mumbai distribution business, the company continued to recover all its dues (Rs 2.4 b billion recovered in Q1FY Q1FY17 and overall Rs 25 billion recovered ti till date out of a total o of Rs 55 billion). The company inten tends to beef up EPC orde order book and is planning to focus on upcoming opportunities in power, road, railways, metro rail, marine and urban infra segments. It has already submitted bids for

Petronet LNG EBITDA rose 77.9% Y/Y and 43.9% sequentially, aided by: a. High capacity utilisation at Dahej; b. Positive trading/ marketing margins; and c. Non-recurrence of under-recovery of shipping charges in Q1FY17. Utilisation at Kochi

Current Market Price Rs 353 Target Price Rs 256 Potential Downside 27%

terminal declined to 4.6%

after it is connected with

from 8% sequentially on the

Mangalore in the next 2 years.

back of lower cargo reload-

However, as laying of pipeline

ing versus 10% estimated for

remains sub-judice in Tamil

FY17E. Although earnings will

Nadu, the pipeline may remain

n on rebound, core return

underutilis underutilised.

d equity (RoE) pegged

Th The company provides

at 14%/15%/22% for

ﬁrrm visibility on

FY16/17E/18E will

o offtake arrangement,

decline versus av-

b but weak demand

erage of 30% over

e enforces cautious

FY11 to FY16. al’s The Dahej terminal’s expansion by 5 mtpa has

op optimism. Also, the mana management remained not conﬁdent on the entire

been partly commissioned with

offtake post expansion and

3 mtpa in August, while storage

highlighted that re-gas charges

tanks will be commissioned in

may be subject to review. A

October; by when the project

lower offtake without take-pay

would be fully commissioned.

revenue coupled with a pos-

The company is likely to award

sible hair-cut in re-gas tariffs

tenders to further expand the

poses risks to earnings. The

Dahej capacity by 2.5 mtpa (for

TP of Rs 256 is based on equal

completion in FY19/20).

weight assigned to fair value

At the Kochi terminal,

derived on (1) DCFF and (2)

volume recovery would occur projects worth Rs 200 billion and expects to bid for Rs 1,000 billion worth of projects over the next one year. The company will utilise proceeds from the sale of its cement business to Birla Corp

Current Market Price Rs 600 Target Price Rs 609 Potential Upside 1.5%

PEx assigned to Mar-18 EPS. for Rs 48 billion to pare debt. Negotiations for sale of road assets and a 49% stake in the Mumbai distribution business are in advanced stages. The company has also acquired management control of erstwhile Pipavav Defence and has executed sub concession agreement valid up to 2046. It has received 27 industrial licenses for missiles, ammunition, land and naval systems. As clarity is awaited on the above sales, the stock is unlikely to tread much higher than its current price.

CMP as given in report

eClerx Services

The Finapolis l OCTOBER 2016

the chartist Consumer Trends in India

40.60%

AGE PROFILE OF INDIAN POPULATION

28.50%

45%

18.10%

25%

15%

5.80%

7.00%

% Population

35%

0-14

15-24

25-54

55-64

65 +

Age (Years)

INTERNET USAGE AND PENETRATION

2014

25 Mn Indians

18.30% 2016

25.40% 2018

31.70%

}

Penetration Rate

OCTOBER 2016 l The Finapolis

The Chartist Increasing disposable incomes, rapid industrialisation and a shift in the demographic pattern mark India's emergence over the last 10 years as one of the most attractive investment destinations globally. During this time, consumer-centric sectors such as Retail, FMCG and eCommerce have gone through a major transformation over the last decade. Here, we present a snapshot of the Indian consumer.

MARKET SIZE OF HERBAL PRODUCTS IN INDIA

ONLINE SHOPPING

Monthly

Weekly

Monthly

Weekly

40%

Monthly

Weekly

50%

Daily

20%

Daily

30%

10%

2013

2014

2015

2016

$6.4 bn

2017

$6.8 bn

2018

$7.1 bn

2019

$7.3 bn

2020

$7.6 bn

Years

SMARTPHONE USAGE AND PENETRATION

21.20% 2016

29.80% 2018

36.00%

}

Penetration Rate

Source: PwC

2014

25 Mn Indians

24 The Finapolis l OCTOBER 2016

The Chartist FREQUENCY OF PURCHASES MADE USING SMART OR MOBILE PHONES IN INDIA IN 2015

2015

2016

24%

40%

20%

Shop Daily

CRED D

27%

BUY

62%

Shop Weekly

Shop Monthly

Shop Less Frequent

IT CA RD

WHAT ARE SHOPPERS USING SOCIAL MEDIA FOR?

MILLENIALS (AGE: 18–35 YEARS) Men

Women 66% 67%

58% 61%

53%

55% 57%

42% 35%

To keep up with latest trends

Receiving offers

50%

40%

46% 30%

Associating with brands/retailers

Viewing ads

Writing reviews

36%

Reading reviews Option to purchase products via social media

GEN X (AGE: 35–55 YEARS) Men 68%

62% 47%

46%

44%

36%

To keep up with latest trends

55% 57%

53% 33%

Receiving offers

Associating with brands/retailers

Women

62%

41% 28%

Viewing ads

Writing reviews

34%

Reading reviews Option to purchase products via social media

OCTOBER 2016 l The Finapolis

The Chartist CATEGORY-WISE ONLINE SHOPPING 2015: INDIA

6% 6

Household appliances ho old ap plian nce 4%

16%

11%

thing an a twear wear 4% Clothing and footwear Books, ooks, oks m music, movies movie and games nd video game gam

12%

16 16%

16%

Toys 5%

26%

35%

12%

22%

33%

14%

20%

17%

30%

11%

23%

37%

18%

30%

17%

33%

11%

20%

10%

31%

19%

Health and beauty 5%

42%

11%

15%

Grocery 5%

41%

17%

12%

19%

25%

23%

21%

Do-it-yourself/home 4% improvement

16%

38%

23%

Sports/outdoor Spo d 4% equipment pme 4% Jewellery/watches wellery/ el e atch

43%

11%

Furniture/homeware urnitur o om re 4% 4

10%

40%

13%

36%

50%

60%

70%

13%

80%

90%

100%

Source: PwC

Consumer electronics ectronics and co computers mpu ers

26 The Finapolis l OCTOBER 2016

COVER STORY START-UPS

When Reality Begins to Set in... The purchase of Jabong for $70 mn, way below the expected $250 mn to $300 mn, indicates the Indian start-up universe is losing its froth.

hen Jabong, the Indian fashion etailer backed by German Internet conglomerate Rocket Internet, was acquired in July, it was an expected move. Founded in 2012, Jabong was on the block for over a year. Wooed by suitors like Snapdeal, Aditya Birla Group and Future Group, it was finally snapped up by Myntra, the country’s leading fashion etailer and a subsidiary of Flipkart, India’s biggest etailer. What did make news, however, was the price at which Jabong was acquired. At $70 million it was way below the expected figure of $250 million to $300 million. At its peak a couple of years ago, when it was negotiating with Amazon, Jabong had a price tag of $1.2 billion. Industry experts say that a weak business model, inefficient execution, senior level churn, loss of market share and most importantly, investors’ refusal to pour in more money, all led to a once-bright star losing its sheen. Jabong’s trajectory is pretty much indicative of the turmoil gathering pace amongst Indian start-ups. Devaluations, shutdowns, mergers & acquisitions, layoffs and funding crunches have been rampant in recent months. “Many venture funds pushed companies to become unicorns ($1 billion valuation) just because they wanted bragging rights. In some sectors valuation went ahead of value creation. Now there is a catch up happening,” says T. V. Mohandas Pai, chairman of venture capital fund Aarin Capital Partners. K. Ganesh, serial entrepreneur, partner at entrepreneurship platform Growthstory.in and chairman of Portea Medical,

points out that in 2014 and 2015, for the first time several new investors like global hedge funds and late-stage private equity (PE) funds started playing in the Indian venture capital (VC) ecosystem. Not only did a lot more money come in, these investors were also valuation insensitive. As a result, start-ups could raise more money at higher valuations than normal and the subsequent funding rounds were being done much faster and quicker. “This was a temporary aberration and now normalcy has been restored,” says Ganesh. “Investors have started stressing more on profitability, path to profitability, unit economics and basic business model defensibility as against growth, GMV (gross merchandise value), market share, etc. In the current environment, the bar to

raise money has changed; a lot more questions have to be answered and a lot more proof of concept needs to be demonstrated.” Take Flipkart itself. Founded in 2007, Flipkart has raised around $3.2 billion till now from investors such as Tiger Global, DST Global, T. Rowe Price and others. When it last raised funds in 2015 the company was valued at $15.2 billion. Since then its valuation has seen a downswing and is currently at around $10 billion. In May 2016, HSBC’s brokerage arm HSBC Securities and Capital Markets slashed food delivery and discovery start-up Zomato’s valuation by half to $500 million. Etailer Snapdeal, which was earlier valued at $6.5 billion, is also reported to be struggling to raise fresh funds at this level. The market buzz is that Flipkart, Snapdeal and Zoma-

OCTOBER 2016 l The Finapolis

COVER STORY to along with some others are prime candidates for acquisitions by global majors wanting to make their mark in India. Venture Intelligence, a leading provider of data on private company financials, transactions and valuations, notes while from April 2014 to March 2016 there were around 29 acquisitions in the Indian tech start-up space, from April this year to mid-August the number has shot up to around 40. Venture Intelligence also notes that in 2015, 16 VC-funded start-ups shut shop during the course of the year. In 2016, from January to July itself an equal number of start-ups have already folded up. These include Fashionara, PepperTap, Zippon and Murmur. Post July, shutdowns include Exclusively, a fashion portal which was acquired by Snapdeal last year, TaxiForSure which was acquired by cab-hailing app Ola last year, and online market place and classified portal Askme.com. “Many start-ups in India are facing multiple challenges at present. These include both early-stage as well as mid-stage startups and are companies that have either reached the ceiling of their current business model or are unable to raise funds,” says Sreedhar Prasad, partner – business consulting at KPMG India. He points out that these are “classic cases” of companies with “weak business models that are dependent only on funds” to grow. “They all seem to be reaching a stage where acquisition is the only option,” he adds. Anjan M.K., engagement lead at Zinnov Management Consulting, notes: “Running a start-up is like performing a Produnova (a complicated gymnastic move). This downturn is probably the first somersault of the act and we might have another one in a few years’ time. Some could break their necks while others might just land safe. Few would go on to win.” Anjan suggests that while there will be a cash crunch for start-ups in certain sectors, “those with sustainable business models and deep tech at their core” should continue to do well. He adds: “While the past few years were all about growth and customer acquisition, we believe that the next few years will be about profitability

The biggest problem startups are facing at present is a funding crunch. While different reports give different figures for PE and VC investments based on different parameters, all of them point to a downswing – especially in sectors where a lot of capital has been invested.”

Losing the Sparkle Senior level churn has also been making news. Mukesh Bansal, cofounder of Myntra and head of commerce at Flipkart (after it acquired Myntra in 2014) quit in February this year. He was followed by Flipkart’s chief business officer Ankit Nagori, chief product officer Punit Soni and legal head Rajinder Sharma. At Myntra, the exits include head of commerce Prasad Kompalli, head of fashion brands Abhishek Verma, chief creative officer Gautam Kotamraju and finance head Prabhakar Sunder. At Snapdeal, chief product officer Anand Chandrasekaran, senior vice president of marketing Srinivas Murthy, and head of strategy Ranjan Kant. At Zomato, chief product officers Tanmay Saksena and Namita Gupta. At InMobi, senior vice president Samuel John, finance head Manish

Dugar, vice president of engineering Naresh Agarwal, head of strategy Khushboo Gupta and vice president-finance Ravikiran Vadapally. The list goes on. Many of these executives came from established Indian firms and multinationals to partake in the Indian start-up story. While some have moved to other start-ups, others have simply moved out suggesting a lack of confidence in the start-up ecosystem. This has also been the period of freeze in pay hikes and jumps in pink slips. In August, Ola, which counts Japan’s SoftBank Group as a major investor, shut down TaxiForSure, which it had acquired last year for $200 million, and showed 700 employees the door. Flipkart recently laid off around 1,000 people as part of its cost cutting exercise. Others who have let go of people over the past few months include Snapdeal, Zomato, food ordering service Food Panda, local services marketplace LocalOye and online house rental start-up Grabhouse. Kris Lakshmikanth, founder, CEO and managing director of executive search firm HeadHunters India, notes that earlier, thanks to free flow of funds and a massive rush to show growth, start-ups were over hiring at inflated salaries. People shifted easily from one start-up to another at an average of 60% increase in their salary package. Top performers could wangle a 150% jump. For professionals from the Silicon Valley, Indian start-ups were willing to pay whatever it took. “It was a mad gold rush,” says Lakshmikanth. In the current situation of minimal or zero pay hikes, the job situation he feels is “very much like the dot-com bust and the Lehman debacle.” Many people now prefer the safety of the old economy. “They are willing to take as much as 50% cut in their salary package,” says Lakshmikanth, adding: “I expect that the excesses will get wiped out and normal salary increases and normal hiring in start-ups will start by end of 2017 and early 2018.” Meanwhile, some start-ups have raised the hackles of educational institutions by deferring joining dates of campus recruits, reducing compensation terms, altering job profiles and changing placement locations. Some have even revoked their offers.

28 The Finapolis l OCTOBER 2016

COVER STORY Funding Crunch The biggest problem start-ups are facing at present is a funding crunch. While different reports give different figures for PE and VC investments based on different parameters — for instance, some agencies include data only from those firms which are structured as PE/VC firms and exclude family offices and individuals, etc. — all of them point to a downswing. According to Venture Intelligence, from January to June 2015, India saw PE investment of $7.31 billion across 373 deals and VC investment of $970 million across 242 deals. During the same period in 2016, PE dropped to $7.16 billion across 314 deals and VC dipped to $646 million across 211 deals. VCCEdge, a research platform for the Indian investment ecosystem, has put out the following figures: From January to June 2015, PE investment was $11.9 billion across 776 deals, while VC investments were around $2.85 billion across 278 deals. From January to June 2016, PE dropped to $6.2 billion across 667 deals while VC was at $1 billion across 183 deals. “In the 2013 to 2015 period there was a funding euphoria. A lot of people put in lot of money and very quickly. Investors were willing to invest in aggressive growth models. Today, investors are taking conscious and clear investment decisions. The deal cycle has become longer and this is putting a lot of pressure on early-stage start-ups which need money quickly,” says KPMG’s Prasad.

What Lies Ahead? Cash is air for start-ups. And this raises important questions. Will the funding winter choke them? What lies ahead for Indian start-ups? “The phase of irrational exuberance is over. Of course, there will be flavours of the season, but overall I expect to see more diversified and sensible investments,” says Rishikesha Krishnan, professor of corporate strategy and policy at the Indian Institute of Management Bangalore and currently director of the Indian Institute of Management Indore. Arun Natarajan, founder of Venture Intelligence, however, is more optimistic. He

Offrolled Flipkart

Snapdeal

• Mukesh Bansal, Head of Commerce (cofounder of Myntra) • Ankit Nagori, Chief Business Officer • Punit Soni, Chief Product Officer • Rajinder Sharma, Legal Head

• Anand Chandrasekaran, chief product officer • Srinivas Murthy, Senior VP of marketing • Ranjan Kant, Head of Strategy

Myntra

• Samuel John, Senior Vice President • Manish Dugar, Finance Head • Naresh Agarwal, VP of Engineering • Khushboo Gupta, Head of Strategy • Ravikiran Vadapally, VP - Finance

• Prasad Kompalli, Head of Commerce • Abhishek Verma, Head Fashion Brands • Gautam Kotamraju, Chief Creative Officer • Prabhakar Sunder, Finance Head

InMobi

Zomato

• Tanmay Saksena and Namita Gupta, Chief Product Officers

points out that several seed capital funds and India-dedicated VC firms including Sequoia Capital India, Kalaari Capital, Nexus Ventures and IDG Ventures India have raised new funds in the last 12 months. Also, several family offices, like that of industrialist Ratan Tata and the founders and executives of Infosys, have turned active start-up investors. “So, there is sufficient ‘dry powder’ available within India to support new start-ups as well as existing portfolio companies [provided they are] able to demonstrate traction.” Natarajan adds that given India’s growth potential, Indian start-ups “should also be able to attract sufficient long-term focused foreign investors as indicated by the increasing investments here by VC and strategic investors from Japan, South East Asia and China.” A recent example is the $175 million investment in August from Tencent, the founder of WeChat, China’s bestselling instant messaging app, and Foxconn

Even as Indian start-ups work at getting their act together, global giants are upping their game here Technology Group from Taiwan, in Hike, the Indian messaging app founded by Kavin Mittal. This is one of the largest investments in Indian start-ups in 2016 and values Hike at $1.4 billion. Ganesh expects the current funding slowdown to separate the men from the boys. “Models built for earlier momentum play without basic core economics will fold up. And ‘opportunistic entrepreneurs’ — those who saw entrepreneurship as easy extension of corporate employment — will fall away. All this is good for the ecosystem.” He outlines a winning recipe for Indian start-ups: Be a full stack company that can solve the full problem of the

OCTOBER 2016 l The Finapolis

COVER STORY consumer and not just parts. Create your own brand. Solve a big pain point. Have a clear monetization model and viable unit economics. Differentiate yourselves. Don’t be a me-too player. Raise the bar consistently in terms of delivery, design, scale and funding to create moats for your business. Get the core model right; no amount of funding can make a broken business model work. For Sahni, the winners will be “those who will have original ideas and are able to scale in a sustainable manner. The real money will flow into start-ups that try new products, like Paper Boat (ethnic drinks) and launch new brands, like Yepme.” Says IIM’s Krishnan: “The ability to identify and solve real problems for their customers and add real value to people in their daily lives and businesses will be a winning differentiator.” In the coming months, B2C etail, foodtech and hyperlocal delivery start-ups are expected to see a massive shakeout while fin-tech, ed-tech, IoT and B2B start-ups are likely to be on the upswing.

Competing with the Global Giants Even as Indian start-ups work at getting their act together, global giants are upping their game here. In July 2015, Uber announced a $1 billion investment in India. At that time CEO Travis Kalanick had said that India had the potential to be a bigger market for Uber than the US and China. Now, with Uber recently bowing out of China by selling its business there to market leader Didi Chuxing, it is expected to push in India with renewed vigour. The Uber-Didi merger shows the way ahead for Indian start-ups, T. C. Meenakshisundaram, cofounder and managing director of IDG Ventures India, said in a media interview. “Everyone cannot create billion dollar companies, and sometimes investors don’t see the value in a company when there are too many players in the sector. Exit is better than shutting down.” Amazon, which entered the India market in June 2013, is already pushing the

Jabong’s trajectory is pretty much indicative of the turmoil gathering pace amongst Indian start-ups. Devaluations, shutdowns, mergers & acquisitions, layoffs and funding crunches have been rampant in recent months pedal hard. Like Uber, Amazon too has been squeezed out of China and is betting big on India. In 2014 it had announced an investment of $2 billion. In June this year, it announced an additional investment of $3 billion. India is Amazon’s fastest growing market and has apparently even surpassed the company’s “most ambitious milestones.” Meanwhile, Alibaba, which so far has been a strategic investor in India (with investments in Snapdeal and Paytm) is also expected to enter the Indian ecommerce market directly by early next year. According to the industry grapevine, the Chinese etailer has started putting together its India team and is also in discussions to acquire online marketplace ShopClues which is valued at around $1 billion. Prasad of KPMG is bullish. He believes that “even though global players like Am-

azon, Uber and Alibaba are a competitive threat for Indian start-ups, they will also grow the market and force Indian start-ups to innovate faster.” Pai adds a note of caution: “The only way forward for Indian entrepreneurs is to start becoming efficient, stop losing money and focus on execution excellence.” Pai offers another perspective: “India is sadly becoming a battleground for American and Chinese companies and Indian capital is losing out.” Pointing out that in China, 65% of VC funds is Chinese money while in India, only 5% comes from domestic capital, Pai says: “The Indian capitalists want assured returns with no risks. This mindset has to change. They should allocate at least 20% to 25% of their funds for venture capital.” Until that happens, foreign money will continue to play an important role in the Indian start-up ecosystem. F

Republished with permission from Knowledge@Wharton (http://knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania.

30 The Finapolis l OCTOBER 2016

COVER STORY ROLLBACK

A Tale of There and Back Again Decoding Myntra’s decision to undo its switch to an app-only platform

yntra, India’s leading fashion e-tailer, which had announced in May of last year that it was going the app-only route, has now reversed that decision: On June 1, it relaunched its desktop website. When the company announced its app-only strategy last year, nearly 90% of traffic and 70% of the company’s business was happening through its app, and Myntra seemed convinced that was the way ahead. However, a few months later, it brought back its mobile (phone and tablet) website. Myntra insisted that this was not a roll-back of its app-only strategy. At that time, CEO Ananth Narayanan said: “The mobile website will push users toward

downloading the app. We are committed to our strategy of app-only.” Myntra, Narayana said, had two primary reasons for going app-only. One, because they are personal devices, mobile phones enable a personalized experience. Two, mobile phones are the future of computing devices. Both premises continue to be true. So what sparked the return to the desktop? Narayanan explained the roll-back rationale: “The biggest reason is the feedback from consumers, especially women. According to our data, women customers, who are a key area of focus for us, in particular, want to have the option of shopping across channels. In addition, as we enter the next phase of our rapid growth, we’re launching home furnishing and jewelry where view-

ing intricate patterns [on larger screens] leads to better purchase decisions.” According to Narayanan, while Myntra believes in “taking bold calls and pushing innovation,” it is “humble enough to listen to [its] customers.” He says: “We [took a bold call] last year because we thought we could offer consumers a much better experience on the mobile. While it is still true that the mobile experience is far superior to the web, we have recognized that some consumers still want the option to shop on the web.”

A Worthwhile Experiment? Rishikesh Krishnan, director of the Indian Institute of Management Indore, questions what Myntra achieved through its app-on-

OCTOBER 2016 l The Finapolis

COVER STORY ly experiment. “Cutting off a channel doesn’t make sense unless the channel costs were exceeding benefits or the use of that channel was resulting in wrong positioning. Myntra’s app-only strategy certainly got them some media attention, but doesn’t seem to have served a business purpose.” Kartik Hosanagar, Wharton professor of operations, information and decisions who wrote a case study on Myntra two years ago, believes there could be some “potential side benefit” from the app-only experiment: It would have helped inculcate a mobile-only mindset in the firm. “Even if the mobile-only strategy didn’t work, I suspect that mobile-first is still the way to go. So the changes in the company culture and mobile product will continue to be beneficial even if the strategy wasn’t the best one,” he says. Hosanagar thinks it’s an “interesting move” by Myntra to bring back the desktop website. “I was personally supportive of the original move to become app-only. It was bold and surprising…. The decision to revert likely reflects the fact that many customers still prefer an end-to-end desktop

Even if the mobileonly strategy didn’t work, I suspect that mobile-first is still the way to go. So the changes in the company culture and mobile product will continue to be beneficial even if the strategy wasn’t the best one —Kartik Hosanagar, Wharton professor

experience. Further, mobile commerce is associated with lower average order value.” Harminder Sahni, founder and managing director of management consultancy firm Wazir Advisors, says: “As far as I understand, the reason to go app-only was based on the belief that consumers were moving to smart phones so fast that there was no point in keeping the website on. Additionally, the cost of keeping the website and app both technically up-to-date for giving seamless and same-quality experience is quite expensive. While on the business side this may be the right move to not lose on any sales that may have been lost from the website, I am unsure of the technical costs that may be too high to justify the move. The trend towards smart phones is only becoming stronger.” Sahni is not really convinced that shoppers will insist on a website “if they were getting the real value from Myntra in terms of range, choice, price and convenience.” These, he says, are the reasons for success or failure of any retailer, whether offline or online. Pointing out that online retailers in general are becoming less attractive for consumers as they are unable to offer hefty discounts as earlier, Sahni adds: “Having lost momentum, Myntra may be wanting to bring back some of the consumers they lost due to closure of the website. But I believe that it may not help much as the issue lies elsewhere.”

A Different Danger: Brand Erosion Sahni suggests that Myntra needs to focus on “bringing real value” to consumers rather than worrying about “the technicalities” of being an app-only or otherwise player. “If they have the right brands, a wide offering, great user experience pre- and post-sales and a reasonable customer loyalty program, customers will even borrow their neighbor’s smart phone to use the Myntra app.” The real danger for Myntra could lie in its brand erosion. Myntra has built a very strong brand name for itself in the fashion category. But a new move to get into home

furnishing may erode its image as a fashion leader. Says Sahni: “Myntra seems to be diluting its own brand by trying to sell bedsheets and then justifying bringing back its website by saying consumers want to see these big sheets on big screen. By that logic, they should be selling on TV shopping networks. But why bedsheets in the first place?” Meanwhile, Myntra has company. Food startup Faasos, for instance, which went app-only last year, reintroduced the desktop channel a few months ago. In a media interview, Revant Bhate, head of marketing at Faasos, said: “Over the past three or four months, we found that users were not using mobiles alone to place orders; they were also using desktops and tablets. We did not want to isolate our loyal users who used the Windows platform. We have now enabled a Windows-based mobile site, which can also be used on all the periphery devices such as tablets and desktops. Technically, our strategy cannot be called app-only now.” And fashion e-tailer Voonik, which launched as app-only in 2014, added a desktop website in November last year to cater to a larger consumer base. Clearly, in the age of the smart phone, desktop continues to have its own place. F

Republished with permission from Knowledge@Wharton (http://knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania.

The Finapolis l OCTOBER 2016

SECTOR WATCH REAL ESTATE

Govt. Throws Builders a Lifeline Under new norms, 75% of the amount against guarantee will be released in cases where the government is contesting a given award, says Vinod Behl

he government’s latest policy package to revive and boost the cash-strapped construction and realty sector by putting in place a mechanism to release funds that are stuck in arbitration is a significant move for the industry and the economy. Under the new norms, 75% of the amount against guarantee will be released in cases where a given award has been contested by government authorities. This is a big relief for the sector that has around Rs 1 lakh crore under arbitration. The notable, related reform measure — granting permanent residency status to foreign investors aimed at facilitating greater investment — will further bolster liquidity. The government’s stimulus reflects its priority to the construction sector and

The Centre for Monitoring Indian Economy puts stalled projects at Rs 11.36 lakh crore, with projects worth Rs 70,000 crore under arbitration is quite justified, considering that it contributes 8% to the GDP and generates huge employment to revitalise the economy. That’s precisely why Prime Minister Narendra Modi has gone on record as saying that the three-year period (2011-12 to 2013-14) of stagnation, with large number of stalled projects, had badly hit the economy. The new policy is aimed at reducing

the debt and meeting working capital requirements to revive stalled projects and start new ones. It has come as a big breather for construction companies, reflected in the immediate spurt in their stock prices. The positive impact can be gauged from the fact that big construction companies like HCC will be able to reduce their debt by half as revealed by its Chairman Ajit Gulabchand. Industry experts like Sushil Mittal, Chairman of the Association of Certified Realtors of India, are also upbeat about the policy decision, saying that it is a winwin situation for infrastructure companies, financial institutions and the government. The new policy measures are perfectly in line with the government’s policy to push infrastructure and boost economic

OCTOBER 2016 l The Finapolis

SECTOR WATCH activity. As private investments are not forthcoming, the government is banking on public investment, with a spending target of Rs 7 lakh crore. Even in the national budget, the focus has been on infrastructure, as the total value of stalled projects stood at seven percent of GDP. The Centre for Monitoring Indian Economy (CMIE) put stalled projects at Rs 11.36 lakh crore, with projects worth Rs 70,000 crore under arbitration. The government has an uphill task ahead to build 100 smart cities and 60 million new houses under its flagship ‘Housing for All’ programme. And the key to achieving all this is the good financial health of the construction and realty sector. Anuj Puri, Chairman of global real estate advisory JLL India, believes that at a time when we are focusing on infrastructure creation and real estate boosting, the government’s twin measures of providing continuous liquidity and switching over to the globally accepted EPC (Engineering, Procurement, Construction) mode of contracts, promising higher degree of certainty in relation to cost and time, will result in infrastructure capacity-building by giving a fillip to private participation and investment. Today, the biggest bane of the construction and realty sector is debt-ridden developers. That’s why the whole focus of the new policy is to de-stress the developers while at the same time helping financial institutions to recover their loans on time to control bad debts so that they are in a position to not only restructure loans of stressed players but also offer them loans for new projects. Industry statistics show that banks have an exposure of about 45% to the construction sector. The total loan outstanding of the real estate sector is Rs 9.60 lakh crore with 1.6% bad loans, amounting to Rs 16,000 crore. According to rating agency Crisil, the debt of real estate developers for residential projects shot up to Rs 61,000 crore in 2014-15. It estimates that top real estate companies face the challenge of paying about Rs 30,000 crore of borrowings maturing in the immediate future.

Banks’ exposure to the construction sector is about 45%, with a total loan outstanding at Rs 9.60 lakh crore. Of this, about 1.6%, amounting to Rs 16,000 crore, is rated as bad loans It is in this backdrop that private equity entities have come to the rescue of developers of stressed projects. Piramal has recently funded Rs 15,000 crore to over half a dozen developers and has a target of disbursing Rs 1,500 crore of credit to realty companies every month. Big global private equities like KKR, Blackstone and Altico are also extending credit to stressed developers to finish stalled projects. That’s also the reason why the Department of Financial Services under the Finance Ministry, and the Reserve Bank of India (RBI), have announced the need for a one-time scheme to address stressed bank loans in the real estate sector. The new policy prescription also opens up opportunities for realty companies and developers to partner with construction companies and contractors to take up infrastructure projects like roads and highways. In a recent conference of Naredco (National Council of Real Estate Developers), Road Transport and Highways Minister Nitin Gadkari had also suggested that real estate developers facing a slowdown should leverage massive opportunities of undertaking roads and highways projects by partnering with established infrastructure players. In conclusion, the government’s new progressive policy has a healthy prescription of short-term to long-term measures to revive the construction sector, especially as, going forward, it also seeks to bring changes in the bid documents and propose model contracts, besides focusing on greater conciliation to boost the sector. IANS F

Vinod Behl is editor of real estate monthly Realty Plus. Views expressed are personal

Stock Watch The latest research reports from brokerage houses indicate a bullish stance on most, but not all, companies in the real estate sector

Prestige Estate Projects TP: 233 CP: 200.10 Brokerage: Axis Direct

Sobha TP: 350 CP: 293.20 Brokerage: Axis Direct

Oberoi Realty TP: 352 CP: 287.50 Brokerage: Motilal Oswal

DLF Ltd TP: 120 CP: 152.95 Brokerage: CLSA

*CP as of Sep 26 closing

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realty check

A. SHANKAR

Hyderabad’s Real Estate Sector Revives

yderabad, the state capital and the largest city in the state of Telangana, has a population of about 9.1 million (2011, Census), making it the sixth most populous urban agglomeration in India. The city is a major tourist destination with its ancient monuments, forts and modern parks. In Hyderabad, over 360,000 (2014–15) people are employed in the IT/ ITeS sector, and with an output of $74 billion, Hyderabad is the fifth-largest contributor to India’s overall gross domestic product (GDP). The city’s IT/ ITeS sector has recorded exports of Rs 68,258 crore through 1,300 IT units, including over 500 global companies. The growth of real estate sectors in Hyderabad has been slow till 2015 owing to political unrest. However, after the formation of the state of Telangana, the various real estate sectors are showing positive signs of growth. Hyderabad is re-positioning itself as business destination and technology companies are being attracted for investment. The existing and proposed infrastructure projects such as 20 flyover projects, Outer Ring Road (Phase 1 & 2A is operational), radial roads, inner Ring Roads, expressways and MRTS will help create real estate demand across the city over the medium to long term.

Residential revival Residential markets across Hyderabad are witnessing a gradual recovery after a long drawn political unrest. Weak sentiments had dented the markets for over three years till the bifurcation of the state, leading to an over-supply situation with a low absorption rate of

15%. The total inventory of residential units is 18,000+, with an unsold capacity of 15,000+ units. Launches of new residential projects in Hyderabad are slow, with only the western sub-market showing some activity. The new government is trying to instill a positive sentiment in the market with a slew of infrastructure initiatives and policies. It is expected that the market will remain stable with a positive bias, with existing stock witnessing a stable offtake across the micro-markets. In light of the anticipated pick-up in office absorption and job creation, sales in the residential sector are likely to pick up. Areas such as Gachibowli, Kondapur, Miyapur and Manikonda in the western and eastern parts of the city continue to dominate with affordable developments in the price range Rs 2,800-6,000/ sq.ft., while Banjara Hills and Jubilee Hills lead the premium segment of the city with a price range from Rs.8,000-14,500/ sq.ft. Maximum absorption is being witnessed in the western and eastern sub-markets, with a trend of approximately 3,500 to 5,500 units per annum. Well-known developers in this micro market include Aparna, My Home, Manjeera, SMR, Sri Aditya, Purvankara, Mantri, Mahindra Lifespace, Incor, Lodha, Pacifica, Prestige and Total Environment, who are providing gated community apartments as well as villa projects with very good amenities.

Commercial resurgence Commercial leasing and absorption of Grade A commercial spaces in Hyderabad has picked up to 1.2 mn sq. ft., and vacancy dropped to 8% in 1Q 2016 from 10% in 2015. This comes on the back of IT, dig-

Hyderabad is re-positioning itself as business destination and technology companies are being attracted for investment

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REALTY CHECK Its low cost of living, good quality of life, and rapid pace of infrastructure development bode well for the city

ital and e-commerce companies announcing huge investment in Hyderabad. Major players like Amazon, Google, Deloitte, UHG, JP Morgan, Qualcomm, Accenture, Hyundai Mobis, CDK Global and Uber are taking up commercial space this year. The average lease rental in Hyderabad is recorded to be Rs 55/ sq.ft./ month, and capital values are at Rs 4,800 — the lowest when compared to all other commercial and IT destinations of the country. HITEC City is the most attractive commercial destination of Hyderabad, with an office concentration of 27 mn sq. ft. (including campuses). It accounts for about 60% of Hyderabad’s total office stock, followed by Gachibowli with a 30% share. HITEC City is witnessing the highest absorption rate in the past few years, and is expected to do display similar absorption in both these sub-markets until 2018. HITEC City and Gachibowli command an average rental rate of Rs 48-55/ sq.ft./ month. Locations such as Gachibowli, Madhapur, HITEC City, Kondapur and Nanakramguda are expected to witness strong demand as the city emerges as a stronger business destination, with nominal rental values. Further, these locations are being developed as commercial hubs with quality residential supply. CBD and SBD are the developed commercial corridors of the city, with a forecast of an increase in supply by approximately 1.5 lakh sq. ft. of office space by 2018. Overall, the city is seeing very favourable growth prospects on the back of these factors, as well its low cost of living when compared to other Indian metros, good quality of life, a rapid pace of infrastructure development and a proactive government. F

A. Shankar, National Director & Head of Operations – Strategic Consulting, JLL India

36 The Finapolis l OCTOBER 2016 AN SHANBHAG AND SANDEEP SHANBHAG

expert speak

If You Have, or Plan to Buy a House, Read This

n a population-heavy country like ours, there will always be a net surplus of house hunters over houses available. This is why tomorrow’s price will most certainly outdistance today’s, which, by itself is beyond the reach of most of us. Having a comfortable roof over its head has become the most important and integral part of a family’s financial planning. There are four good reasons for treating the purchase of house property as an intrinsic part of overall investment strategy: 1. The rent which would have been paid for a similar property in the same or similar locality is no longer required to be paid, and hence, in effect it is a notional income. In fact, this ‘fair rent’ is brought under the ambit of tax by the ITA. 2. Investment in house property, as in the case of shares or bullion, serves as a hedge against inflation. However, here there’s a flip side. In practice, unless you are in the real estate business, buying a

Most properties are beyond the reach of the common man for outright purchase, which necessitates taking a housing loan house is not an investment, but consumption. Surely, you would not sell your residence just because the prices have gone very high? 3. Normally, the repayment is in installments. When the market price keeps pace with inflation and when your own income is expected to rise, you make payment against the original price with money that becomes cheaper day by day. You should therefore, explore the various avenues for taking loans against mortgage of your house. 4. Finally, the most important reason for

buying a house is — a nagging spouse! But jokes apart, it has become necessary for an owner or a would-be owner of a house property to know the various modalities governing purchase or sale of a house as well as the related tax provisions. Of course, the immediate difficulty is that it is too vast a subject to be covered in one single article. Therefore, we propose to provide the reader with a series of columns based on various nuances and aspects of the subject such that by the end of it, any reader would be reasonably well versed in the subject matter of owning real estate. The first aspect related to property purchase that we propose to cover is mortgage interest. Most purchasable (if we may coin such a word) properties are beyond the reach of the common man for outright purchase. So one has to take a housing loan. Let’s examine various aspects of this process. First of all, as readers would be aware, the interest payable on capital borrowed (inclusive of processing fee) for ac-

OCTOBER 2016 l The Finapolis

EXPERT SPEAK quiring, constructing (as well as repairing, renewing or reconstructing) the property is tax deductible with a ceiling of Rs 30,000 on self-occupied property. The enhanced limit of Rs 2,00,000 is applicable on loans taken on or after April 1, 1999, but only for acquiring or constructing. Recently, for housing loans up to Rs 10 lakh, the RBI has allowed banks to include stamp duty, registration and other documentation charges to the cost of the unit for calculating loanto-value ratio to the cost of the unit. These charges form around 15% of the cost of the house and place an added burden on borrowers from economically weaker sections and low income groups. The lower limit of Rs 30,000 continues to be applicable for loans taken for repairing, renewing or reconstructing. Complicated indeed! Further Complications. This enhanced limit has two caveats: a) The acquisition or construction of the house had to be completed within three years from the end of the year during which the loan is taken. The recent Budget 2016 has raised this limit of three years to five years, and b) The assessee should obtain a certificate from the lender that such interest was payable on the amount advanced for acquisition or construction of the house, or as refinance of the principal amount outstanding under an earlier loan taken for such purpose. There is no stipulation regarding the date of commencement of construction. Consequently, the construction of the residential house could have commenced before April 1, 1999, but as long as it is completed within five years, from the end of the financial year in which capital was borrowed, the higher limit would be available. There is no restriction on the number of housing loans taken and also on properties taken on loans. The limit on deduction will apply to all the loans taken together. The limit of Rs 30,000 or Rs 2,00,000 is applicable only on interest related with a self-occupied house. If an assessee has two or more residential houses, only one of these of his choice shall be treated as

Investment in house property serves as a hedge against inflation. However, there is a flip side: unless you are in the real estate business, buying a house is not an investment, but consumption. Surely you would not sell your residence just because prices have gone up? self-occupied. Others will be treated as deemed let out. For interest related with a let-out or deemed let-out house and commercial property, the entire interest is deductible. As regards interest on the asset acquired by the assessee carrying on business or profession, interest before the asset is put to use shall form part of cost of the asset and any interest due or paid after the asset is put to use shall be treated as revenue expense.

Interest of Pre-construction Period Both the deductions u/s 80C and 24 are allowed only when the income from house property becomes chargeable to tax. In other words, the construction should be complete, the flat should be ready for occupation and the municipal annual value should be known. The interest for the years prior to the year in which the property was completed, shall be deducted in equal installments for the year during which it was completed and each of the four immediate-

ly succeeding years. It is obvious that this privilege of the spread is available only on loans taken for acquiring or constructing a house property. Similar facility is not available for repayment of capital. If the construction or acquisition is completed anytime in a financial year, the interest paid during the entire financial year is deemed to be the normal interest though a part of the financial year is pre-construction period. Now, a pleasant surprise. Interest on money borrowed for acquiring capital assets forms part of cost of asset â&#x20AC;&#x201D; CIT v Mithlesh Kumari (1973) 92ITR9 (Del) and also CIT v Sri Hariram Hotels Pvt Ltd (2010) 325ITR136 (Kar) and also S. Balan alias Shanmugam Balkrishnan Chettiar v DCIT (ITA 1859/PN/2005). The position does not alter even when the assessee has claimed the deduction of interest on housing loan. This implies that you can claim deduction for interest paid on housing loans and also treat it as a part and parcel of cost of acquisition. F

The authors are leading financial advisors. Write to them at wonderlandconsultants@yahoo.com

38 The Finapolis l OCTOBER 2016

INVESTMENT ADVICE SAFETY NET

Are You Adequately Insured? Use This Simple Calculation to Find Out Divide your annual salary by the prevailing interest rate to find out the minimum sum assured you need to have, says Balaji Rao

f you are one among those who fancy buying traditional term insurance plans you could be in trouble. Take a calculator and start calculating these numbers. Type your monthly salary (letâ&#x20AC;&#x2122;s assume it is Rs 50,000); multiply it by 12 (months); divide it by the current bank interest rate (which is about 7.25% p.a.) and what did you get? Rs 82.75 lakh, isnâ&#x20AC;&#x2122;t it? This should be your total Sum Assured. Are you insured for this amount? Similarly, if your monthly income is anything other than Rs 50,000, perform the same calculation to arrive at the sum assured you need (So if your monthly income is Rs 75,000, multiply it by 12 and divide it by 7.25% which will be Rs 1.24 crore. This is the simplest way of arriving at calculating your required sum assured). Wondering how to understand this calculation? First let us examine why we insure ourselves. We opt for life insurance to ensure that our financial dependents are taken care of if we should die prematurely during our working years. (But in reality most of us buy life insurance to get a lumpsum amount later in our lives, which is actually a wrong strategy since returns offered by traditional plans are low compared even to bank deposit products). From the above example we can determine that in case a key earning member of a family dies when he/ she is still young, the family would be left to endure financial hardship in the absence of insurance. If there was adequate insurance cover, the insurance company would com-

pensate by way of reimbursing the sum assured amount. Considering a sum assured of Rs 1.24 crore (as per the above example), if the individual dies, say aged 40 with a financially dependent family (assumed as spouse and child/ children), the insurance company would pay the sum assured amount to the legal successor/ nominee (usually the spouse) who would utilise the funds to fund the future events of life. When the amount of Rs 1.24 crore is received, usually it gets deposited in a as a fixed deposit as the family would not be in the condition of taking any risk with the money and at the prevailing bank rate at 7.25%, the family would receive Rs 75,000 per month as interest, which was equivalent to the amount the individual was bringing home when he was alive

When a policyholder dies, the lump sum paid by the insurance company is usually deposited in an FD, as the family is not in a condition to take any risk with the money. Thus, the familyâ&#x20AC;&#x2122;s income would depend on the prevailing bank rate (Rs 1.24 crore x 7.25% / 12 = Rs 75,000). Now, to check whether you are adequately insured or under-insured, take a pen and notepad and list out the sums assured in all life insurance policies (endow-

OCTOBER 2016 l The Finapolis

INVESTMENT ADVICE ment, whole-life, money-back, ULIPs etc.) that you have purchased till date and calculate as per the aforementioned formula and see if you are arriving at the required sum assured; if not, then you are definitely under-insured. The problem with most individuals is that they buy traditional plans due to various reasons (or even compulsions) such as some agent would force them into buying a plan who does not bother to explain the pros and cons of a policy, older family members would recommend such investments as if it was a blasphemy if not purchased and/or lack of awareness about insurance as a product. Why does one end-up under-insured? With traditional plans, it would be impossible to be adequately insured. Let us understand this using the above example. If one needs a cover of Rs 1.24 crore for a tenure of 25 years, the approximate premium for a 30-year old would amount to Rs 4.5-5.5 lakh per annum, which is definitely not affordable for an individual whose annual income is Rs 9 lakh (Rs 75,000 x 12). Since it becomes unaffordable an individual remains to be underinsured thereby risking his dependents in case an unfortunate event such as death occurs during the earning years. Even if one has five or more traditional policies, still the overall sum assured would not have crossed Rs 10-20 lakh across plans. To address this aspect, one has to understand insurance as a product. Insurance should be purchased to address financial risks and the first and foremost risk one should cover should be the purest form of risk, which is death. Under normal circumstances, the key earning member of a family would have financial dependents for about 25-30 years until the children are fully settled by way of being educated and married. Thus, an individual should cover the financial risk that may occur in case of his/ her death during that period. It would be prudent to buy a Term Assurance Plan rather than traditional plans since the former is very effective and inexpensive way of covering risk.

Insurance should be purchased to address financial risks and the first and foremost risk one should cover should be the purest form of risk, which is death For an individual aged 30, insuring him/ herself for Rs 1.24 crore for 25-30 years under a term assurance plan, (assuming the individual is presently aged 30), will amount to a premium of Rs 12,000 to Rs 13,000 p.a., which is affordable by any standard and also ensures the individual remains fully insured. In case the insured individual dies during his/ her earning years/ policy term, the insurance company would reimburse the entire sum assured amount, which would sufficiently cover the financial risk for the rest of the surviving family membersâ&#x20AC;&#x2122; lives. Further, to meet long-term wealth accumulation goals (similar to a lump sum received at the time of retirement from traditional plans), investing in debt and equity products (preferably through the mutual fund route) is recommended. Even if the return on investment would be in the range of 10% to 12%, the corpus would be sizeable considering the duration of the investment. It is worth realising that instead of paying almost Rs 5 lakh p.a. (under traditional plans) to cover such a huge sum assured, paying a fraction of that amount (under other products including term assurance) is more prudent as it leaves ample money in hand to invest in other opportunities and generate wealth for other life events. Why waste money unnecessarily to earn a meager return over long tenures? One must also note that under term assurance, the premium would be non-refundable in case death does not occur during the policy in force. But the cost-benefit ratio is worth considering â&#x20AC;&#x201D; for a policy term of 25 years at Rs 12,000 p.a., the total outflow would be Rs 3 lakh against the sum assured amount of Rs 1.24 crore, which is

highly beneficial to the insured. But at the same time, using the 25-year period to invest the residual money in other opportunities would have helped create a sizeable corpus. Also to be noted is that considering the present interest rate to divide (as exampled above) is only indicative since the interest rates are dynamic by nature. It would also be wise to use a thumb-rule to arrive at the actual sum assured one should have which is 16 times the annual income; if the annual income presently is Rs 5 lakh the ideal sum assured should be Rs 80 lakh; if it is Rs 9 lakh it should be Rs 1.44 crore. This calculation would help in addressing changes in interest rates (expected to be low in the coming years), inflation (which can eat into purchasing power) and also change in income (increase due to job change/ increment). Also, remember that the premiums would be low if purchased when young (in the early 30s) and the same premium remains unchanged for the entire term of the policy, which is the best aspect about this plan. Remember that if you are underinsured, owing to ignorance or otherwise, you are putting your dear ones at a huge risk, as nobody is immortal. Consulting a good financial advisor is recommended to understand how to address financial goals and financial risks in life. F

Balaji Rao, with 23 years industry experience and six years in academics, is the author of six books on investing and personal finance.

40 The Finapolis l OCTOBER 2016

INVESTMENT ADVICE PARABLES

The Frog That Didn’t Listen to Others Too much of ‘intelligence’ and ‘information’ can ruin the investment journey, says Dharmendra Satapathy

his is a story about a group of frogs in a pond. One day, they decided to go for a picnic. Since they were living in a pond, they decided that they would go for a picnic into the forest. As they were travelling through the forest, two of the frogs fell into a deep pit. When the other frogs saw how deep the pit was, they felt that it was a very deep pit indeed and told the other two frogs that they were as good as dead. The two frogs ignored their comments and tried to jump out of the pit with all their might. They could not do it the first time. The other frogs kept telling them to stop, saying that it was no use trying to get out because they were as good as dead now. The frogs tried again and again to jump out, but could not free themselves. Finally, one of them took heed of what the other frogs were saying and gave up. He fell down and died. The other frog, meanwhile, continued to jump as hard as possible. Now, the crowd of frogs focussed on him. They told him to stop increasing his pain and just die, but the frog did not give up and kept on trying. Instead, he increased his efforts. The other frogs grew more frustrated and started jumping and yelling at the frog in the pit. Even after that, the frog jumped harder and harder and finally made it out. When he got out, the other frogs asked him, “Did you not hear us?” One of the friends of that frog explained that the frog was deaf, and that he had thought all along that they were encouraging him to jump out.

This story is a vital lesson for every equity investor. In equity investing, the market makes a lot of ‘noise’ and those who react to this noise lose opportunities and are left hurt. Instead, if one were deaf and unable to hear such noises, he or she would actually end up being a successful investor.

Strange as it may sound, too much of ‘intelligence’ and ‘information’ can ruin an investment journey. In order to succeed as an investor, all one needs to do is to replace ‘intelligence’, and ‘information’ coming from the market with ‘discipiline’, and if possible, also ‘deafness’. F

OCTOBER 2016 l The Finapolis

INVESTMENT ADVICE TWO SIDES

Savings and Investments aren’t the Same. Here Are Five Differences Savings are the present and investments are for the future, says Viral Bhatt

inancial security is a necessity for meeting various purposes: buying a house, world tour with family, child’s higher education, marriage or retirement. So how secure you? Are you SAVING money or INVESTING it? Let us learn the differences between saving and investing based on the following five parameters to understand what suits you best.

Time horizon: Savings typically cater to short term (1-3 years) financial objectives such as purchasing a new mobile phone or going on a local vacation. On the other hand, investing is typically a long term plan for bigger financial goals. Planning for your child’s education or wedding or setting aside funds for a comfortable retired life requires prudent investment in order to achieve these goals. Access to money: Money saved proves to be handy cash at times of critical need. You may withdraw a part or whole of this amount as per your wish, but at times, you may end up spending all your savings. In case of investing, access to money depends on the kind of investments made. Open-ended equity mutual fund schemes allow you to redeem your investments any time (If you stay invested for over a year in equity mutual funds, the redemption proceeds are also exempted from capital gains tax). The government also provides tax rebates on investments in equity-linked saving schemes (ELSS) u/s 80C of Income Tax Act 1961.

Mere savings might not be enough for larger financial goals of the future. Your dreams don’t follow the inflation rate Returns: In case you park your money in bank fixed deposits, on an average, you may earn interest of up to about 8-9%. Interest on savings accounts is often much lower (4-6%). However, the investments in equity-based mutual fund schemes carry much higher potential for long term value growth. Quality investments have higher potential returns than regular savings if compared over a period of about 5-10 years.

Risk: If you save money in reputed banks, it is more secure than when it is at home. Hence, the risk of losing money in savings is very low compared to investments. Besides, your savings are also entitled to interest. In comparison, investments (and the returns) may be susceptible to market risks. Thus, you might lose money if you don’t invest in quality stocks with a longterm growth potential. Hence, it is advisable to avail services of expert financial advisors so as to avoid short-term ups and downs. Investment risk also varies according to the channel chosen. Mutual fund houses also provide scheme details, thereby indicating the possible risk involved. Investing wisely may give returns much higher than savings in the long run.

Viral Bhatt is head of Money Mantra, a Mumbai-based financial advisory firm.

Choice: It is also critical to identify your purpose. Why do you want to save or invest your money? Check whether your goals are short-term or long-term. It’s always wise to save money for short-term goals, emergencies and casual expenses as it provides quick access. However, in the long run, consider your changing needs, limited income sources and inflation; mere savings may not be enough for larger financial goals. Remember you are planning for your future. It’s advisable to start investing at a young age but it’s never too late. To conclude, your dreams don’t follow the inflation rate. It is recommended to save for small term goals but investing simultaneously may make it simpler achieve your long-term dreams F

42 The Finapolis l OCTOBER 2016

CASH FLOW NEW ROUTE

How the UPI Will Transform Your Banking Experience Transfer of funds will become easier, but other options will remain, finds S Vijaykrishnan

he Unified Payments Interface (UPI) is being touted as the latest revolution in the payments universe. Three facets give the UPI an edge over most rival systems: easier authentication; multiple payment options and, integration/ interoperability across bank accounts. The UPI is an open architecture platform on which all market participants such as banks and merchants can develop their own products. First, existing net/ mobile banking systems are process-heavy — to register, authenticate and transact, you need to be armed with details such as your bank account number, IFSC codes, credit/ debit card number/ CVV number (of both the payer and payee), which becomes cumbersome. The UPI, on the other hand, allows transactions using just two factors — a virtual address and an MPIN (see box). For creating the unique virtual address, one can use a combination of the Aadhaar number, virtual address, account number & IFS code, or mobile number & Mobile Money Identifier (MMID). UPI also transactions without a virtual address, using a bank account number and IFSC code. Second, in the case of UPI, you can transact immediately, unlike net banking, where you need to wait between 30 minutes and 3-4 hours after adding and verifying a payee, depending on your bank. The UPI enables real-time payments ranging from as low as Rs 50 to Rs 1 lakh (while the upper limit seems low when compared to NEFT,

RTGS or IMPS, it is comparable with most m-wallet apps). In other words, the UPI enables immediate ‘sending’ and ‘collecting’ of payments between the transacting parties. Third, the UPI allows transactions for a number of utilities and applications such as transferring funds to relatives, splitting bills, online shopping, travel, bill payments, grocery payments, etc. Lastly, interoperability gives the new payment system an unshakeable edge, especially over m-wallets, the UPI’s closest competitors. With UPI, you can transfer funds between accounts of different banks via your own bank’s UPI app, while in case

of mobile wallets and related apps, you have to install one for each bank in which you have an account. As of now, 21 banks have launched their UPI apps.

Payment game changer Will net banking in its current form take a back seat with the arrival of the UPI? Yes, says Ritesh Pai, Senior President & Country Head, Digital Banking, YES Bank. “A net banking transaction involves multiple hops requiring multiple authentication parameters and unoptimised screens for mobile devices making mobile payments through net banking a painful process. A registered UPI customer can just enter the

OCTOBER 2016 l The Finapolis

CASH FLOW Money Transfers: The Present and The Future Once you download the app and register with your bank for UPI, you create a profile that includes a virtual address in the format “name@bank/ account @provider”. Your bank links this virtual address to your bank account number via its m-banking app. Next, you are required to generate an MPIN. Once you have both these IDs, money transfers are a breeze.

Before UPI

1 2 Customer selects a product/service

Selects payment method as net banking

4 Is routed to the banking “website”

Selects the bank with which he has an account

Enters his customer ID and PIN

6 9

7 8

Enters the OTP and logs into his account

Waits for OTP to arrive on his registered mobile

Customer is routed back to e-commerce site

After UPI

Set app login

Create Visual Address

Install on Phone

Add Your Bank Address

Download UPI App

Set M-PIN

Start Transacting With UPI

44 The Finapolis l OCTOBER 2016

CASH FLOW Is this India’s Blockchain?

UPI seems to be India’s partial answer to Blockchain, the technology that underpins Bitcoins. The RBI was earlier cautious about the effects of such virtual currencies because the space is unregulated, and such currencies do not have a backstop in case their value tanks. Last year, however, the central bank acknowledged the importance of blockchain technology in tackling issues such as counterfeit currency, records management, etc, as well as reduction in the use of paper currency, in line with the RBI’s long-term goal. A short paper by PricewaterhouseCoopers (PwC) explains the potential of blockchain thus: Using this technology, participants can transfer value (read payments) across the Internet without the need for a central third party. The buyer and seller interact directly without needing verification by a trusted third-party intermediary. Transactions are not anonymous, but they are pseudonymous: a transaction record is created, but identifying information is encrypted, and no personal information is shared.

MPIN in a mobile optimised page and the transaction is complete providing a very seamless experience. Additionally, there is no need for the user to remember multiple account numbers and IFSC codes for every transaction,” Pai told the Finapolis. However, Shweta Daptardar, Senior Analyst (BFSI) at brokerage firm KRChoksey, believes that with net banking still uncharted territory for the older generation, UPI could complement the adoption of digital banking services in India. “The UPI will definitely be a big game changer, especially given that the penetration of banking services is relatively low in India,” Daptardar told the Finapolis. She said UPI could also give a fillip to financial inclusion, given that India is relatively underpenetrated in terms of financial services as well as smartphone access. The World Bank estimates that while bank account penetration in India has increased considerably between 2011 and 2014, almost over 40% of accounts stay dormant. The UPI could be a trigger in bringing the unbanked into the formal net. Various studies place the number of smartphones in

India at 200-220 million. In fact, a status report published by the National Payments Corporation of India (NPCI) expects the number of smartphone users to increase to 500 million in the next five years.

Smaller banks lead implementation The UPI’s success will also depend a lot on how actively it is marketed. While its inherent simplicity and the lure of interoperability could turn it into an instant hit among the youth, not everyone is fully

aware of the system and the benefits it offers. “Once customers are made aware of benefits such as easy authentication and secure sharing of sensitive information, then the UPI is only a step away from being a complete game changer,” says Daptardar. The benefits of UPI could be more visible for smaller banks and even open up a new stream of fee income. In fact, while, big players such as State Bank of India and HDFC Bank are yet to enter the UPI fray, smaller entities such as Dena Bank, South

Checkmate for cheques? The UPI could turn India into a cashless society. What about cheques? A look at RBI data confirms the dominance of cheques over comparable NPCI-driven payment systems such as Immediate Payment Service (IMPS), and Rupay debit cards (see table). Will this dominance fade with the advent of the UPI? Cheques might not disappear entirely (staying on at least in the case of large-value transactions over

Rs 1 lakh), yet analysts say UPI could make a dent in low-value transactions. “UPI is a big revolution for collection of payments, whether in between two businesses or individuals,” says Pai. “You will be able to receive the collected funds instantly, removing the additional processes of going to a bank branch to realise the cheque. It will help in saving costs and time for both the customers and the businesses.” F

OCTOBER 2016 l The Finapolis

CASH FLOW Indian Bank and Federal Bank have already rolled out their apps. “The UPI could also stand out as a unique selling proposition for smaller commercial banks, small finance banks and NBFCs, given the competition they face from their established counterparts in the banking space,” Daptardar told the Finapolis. “Given NBFCs’ better reach in semi-urban and rural areas, the UPI could act as a tool to drive adoption of banking services.” For small finance banks, which lack the ready base of CASA deposits and also face lending restrictions, the UPI could be hugely beneficial, in altering their cost structure and generating steady income, she added. She quotes the example of how a small lender (name withheld) which barely has 1,000 customers ready to shift to digital banking, could benefit if the UPI is marketed well. “For small banks, the UPI could increase the volumes of daily remittances that form a part of their business. It could also significantly boost their fee/ commission incomes,” Daptardar said. For larger banks, the UPI is only one among a wide array of digital banking aids (net banking, mobile banking, m-wallets, etc). Quizzed on whether the UPI will eat into fee income from other payment options such as NEFT/ RTGS/ m-wallets, Daptardar denies such a possibility.

The clash of the apps How will the UPI fare against its closest competitors — m-wallets and mobile banking apps?

UPI and m-Wallets will both co-exist as both have their own share of advantages in certain areas. UPI will however play a role in making the wallet-loading process quite simple —Ritesh Pai, Sr. President & Country Head, Digital Banking, YES Bank For starters, banks — the large private ones at least — have integrated the UPI as an additional functionality within their m-banking apps, so as not to affect existing offerings. ICICI Bank has added the UPI as a feature in its existing offerings — the ICICI Mobile Banking App and Pockets, its digital wallet. Private digital payment service providers such as RazorPay and TruPay have also gone the same way. Banks are also tying up with private digital payment providers to launch their UPI apps. While Axis Bank has tied up with Freecharge, ICICI Bank has inked a deal with ftcash — a fin-tech firm, to launch the UPI for the bank’s merchant partners. The open architecture offered by the NPCI allows such modifications.

Both the UPI and m-wallets allow a wide array of transactions, yet interoperability may give the UPI a slight edge. “UPI and m-wallets will both co-exist as both have their own share of advantages in certain areas. UPI will however play a role in making the wallet-loading process quite simple,” said Pai of YES Bank. Factors such as a simplified user interface and brand affiliations will go a long way in determining how the UPI will co-exist or compete with m-wallets in the long run. Then there is the question of how many merchants shift to the UPI framework. “We have taken a lead role in revolutionizing the ecosystem by partnering with over 50 companies to enable UPI-based payment,” Pai told the Finapolis. F

F.Y-2014-15 NPCI Operated Systems

F.Y- 2015-16

Volume (in Mn)

Value (in Bn)

926.00

66,009.50

919.80

69,889.15

78.44

581.89

220.81

1,622.29

RuPay Card usage at (POS)

5.25

10.76

25.41

44.74

RuPay Card usage at (eCom)

0.85

0.51

10.24

5.76

3,709.46

76,111.29

5,380.51

85,262.02

CTS Cheque Clearing IMPS

Total Txn (Incl Above) Source: RBI

Volume (in Mn)

Value (in Bn)

46 The Finapolis l OCTOBER 2016

by invite

ADHIL SHETTY

First Time Mutual Fund Investors? Here Are Some Tips

ny instance of peaking indices invariably makes believers out of those resisting the lure of the equity market. We are going through such a phase now. The markets, which had hit a 52-week low at the start of 2016, are now inching towards peak levels. Naturally, there has been a renewed interest in buying stock and mutual funds. For newcomers to stock trading, it’s a big, bad world out there. When do you buy a stock? When do you sell it? The risk of losing your capital is high. Which is where mutual funds, with all their built-in diversification and hedging of risks, become an attractive option. But even then, it’s important to know what you’re getting into. Here’s a primer for first-time mutual fund investors that would hopefully help you make informed investment decisions.

Beware the Bubble Mid- and small-cap funds are all the rage at the moment. Some of the best-performing funds — those delivering 30% to 50% over the last three years — are from this category. These funds had been through volatility in 2011 and 2012. Investors who had stuck with them despite poor returns till around mid-2014 are now reaping rich dividends. Even then, resist the urge to go all out in buying funds from this segment — or any one segment. Large cap funds are said to be less risky than other market cap categories. Make sure you have a nice mix of large-, mid- and small-cap funds in order to diversify your portfolio and hedge risks.

Spread Your SIPs Remember the advice that you should automate your SIP payments at the start of the money? It works well for those who tend to empty their bank accounts by the end of the month. If you have multiple SIPs, and if you can hold on to your money till the end of the month, consider spreading out your SIP dates over a month. This prevents you from entering into multiple funds on the

Fund management cost varies between 1.75% and 2.5% usually. Weigh this cost against your returns, because if your are low, you may receive a return lower than fixed deposits same day. With multiple entry dates, you allow yourself the chance of an improved cost averaging, because you can then have an increased chance of entering a fund on a day the markets may have fallen.

Small NAV Doesn’t Mean Cheap NAV, or net asset value, is the unit price of a mutual fund – meaning you can buy one unit of a fund for that price. Do not make the mistake of thinking that a lower NAV means a fund is cheap and therefore guarantees greater returns. The NAV itself has no bearing on how quickly your fund grows. You can enter a fund at NAVs of Rs 10 or Rs 50 or Rs 500, and still the only two things that matter is how much money you’re investing and at what rate that money is growing. In any case, most SIPs would insist on a minimum monthly purchase of around Rs 500 to Rs 1,000.

OCTOBER 2016 l The Finapolis

BY INVITE Equity mutual fund units held for less than 12 months and debt fund units held for less than three years attract short-term capital gains tax. No capital gains tax is levied on equity MF units held for more than 12 months

Have a Plan There’s a fund for every investing need. You can plan short, medium and long term investment and corpus needs with mutual funds. You can increase risk for long-term needs, and go for liquid or debt funds for short-term requirements. But it’s important to be clear about what you intend to achieve with any investment. It’s important to have targets. Let’s assume one of your medium-term targets is to raise Rs 3 lakh in three years for buying a car. You can use a balanced fund with a medium degree of risk to achieve your target. Once done, you should secure your capital and exit the fund to ensure that your money is no longer at risk. Without targets and plans, you may remain exposed to market risks longer than you need to, and end up suffering losses.

Have Realistic Targets Mutual funds may seem like the silver bullet to all financial problems. In the last three years, there have been a plethora of equity funds growing at 20%-30% annually. But

Adhil Shetty is the CEO of BankBazaar.com

don’t make the mistake of believing these returns would continue for all time. Past performance is no guarantee of future returns. Even during this short period of high growth, the markets went through a yearlong period of volatility when the same equity funds were either flat or growing negatively. It’s not unreasonable to expect long term returns of 10%-12% annually, but if you’re expecting your money to double every year, it’s never going to happen.

Consider the Costs Buying mutual funds involves costs, even if they are a small percentage of your overall investment. The brokerage platform you’re on will charge you a fee while buying or selling funds. While entry loads have been abolished, there is typically a 1% exit load for units held for less than 12 months. Then there’s the fund management cost which could be between 1.75% and 2.5%. You have to weigh these expenses against a fund’s returns. If the returns are handsome, the expenses won’t pinch. But if the returns are low, you may receive lower

returns than fixed deposits. Additionally, you could consider lowering your costs by buying direct plans of your chosen funds. These plans can be bought directly from fund houses, implying savings on brokerage charges of around 0.75% — which may not sound like a lot, but could save you lakhs of rupees for large-scale and longterm investing for, say, 20 years.

Consider the Tax Impact When you redeem equity mutual fund units held for less than 12 months, or debt fund units held for less than three years, you pay short-term capital gains tax (assuming there are gains). This is charged as 15.45% for equity funds, and as per the tax slab for debt funds. For long-term capital gains tax, you must hold equity fund units for more than 12 months and debt fund units for more than three years. The long-term capital gains tax for equity funds is nil (if securities transaction tax has been paid), while for debt funds, it is at 20.6% with indexation benefit or 10.3% without indexation. F

48 The Finapolis l OCTOBER 2016

expert speak

AMIT KAPOOR

Getting Indian Manufacturing to Perform to its Potential

ndia has convinced a lot of people and the world is making big bets on its stature as a manufacturing and economic powerhouse. However, there are many challenges that lie ahead. Now that the vision has been set, India needs to undertake the hard task of execution. This reality is reflected in India being ranked 11th on the Global Manufacturing Competitiveness Index and is expected to achieve the 5th rank by 2020. The US, China and Germany are ranked at the top on overall manufacturing competitiveness. In the Global CEO survey (2016), the most important drivers identified for manufacturing competiveness were talent; innovation policy and infrastructure; cost competitiveness; energy policy; physical infrastructure; and legal and regulatory environment. If we analyse the performance of various countries on these parameters, India is one of the least competitive countries when it comes to physical infrastructure as well as legal and regulatory environment with scores of just 10 and 18.8 respectively as compared to 90.8 and 88.3 of the United States and 55.7 and 24.7 of China. India has performed better on cost competitiveness,

The drivers for manufacturing competiveness were talent; innovation policy and infrastructure; cost competitiveness; energy policy; physical infrastructure; and legal and regulatory environment where it scores 83.5 compared to 39.3 of the US and 96.3 of China. Indiaâ&#x20AC;&#x2122;s poor score on talent (51.5), the most important parameter for manufacturing competitiveness, is seemingly paradoxical as India has been boasting about its demographic dividend to the world while its adult population has an average of only 4.4 years of formal education. There is no denying that India has a strong demographic advantage for many decades to come as its working population will reach 870 million by 2030, the largest in the world by that time. However, India

needs to engage its working demographic meaningfully and skill them to make them productive. India has suffered a lot due to poor management and the frustration of its unemployed youth has sometimes culminated in protest. Examples of this are the Maoist movement, Gujaratâ&#x20AC;&#x2122;s Patel reservation protest and Haryanaâ&#x20AC;&#x2122;s Jat reservation protest. During 1991 to 2013, the Indian economy could only employ roughly 50% of the job-seeking population. Despite the abundance of working population, there is a gap in the skill level due to which India is losing its competitiveness. The Indian education system has been accused of not developing skills but focusing on giving degrees to people. Vocational institutes of training for in-demand skills like masonry, welding, plumbing, carpentry and operating heavy equipment receive secondary treatment. People instead get traditional degrees even if it means staying unemployed due to lack of relevant skills. Indian society does not appreciate careers other than being a doctor, engineer or high ranking government official.

OCTOBER 2016 l The Finapolis

EXPERT SPEAK Hence aspirations are always aligned towards these fields, leading to disproportionate competition for limited vacancies. In Germany, about 60% of the population goes through 2 to 3.5 years of vocational and classroom training at an industry. As a result of this, Germany scores 97.4 for talent competitiveness. India can learn from Germany’s dual system of education and develop at least one industrial skill among its people. India’s biggest competency similar to China’s is “low cost” and on the other hand the biggest shortcoming for investors is being caught in the web of government regulations. Since the new government assumed office in 2014, India has reduced the regulatory red tape and started the Make in India campaign. This brought in FDI of $9.6 billion in 2014-15 but it dropped to $8.4 billion in the next fiscal as investors aligned themselves to the ground reality in India. Investors remain bullish on India but the Indian government, in its classic style, still remains elusive by taking two years to pass the Goods and Services Tax bill, with the new land acquisition bill still pending. These bills were drafted to smoothen the ground for manufacturing operations in India. India scored 32.8 on innovation competitiveness compared to 98.7 of the US and 47.1 of China. India should have the foresight to predict the next technological advances in manufacturing, with developing countries bullish on technologies like advanced robotics, internet of things, augmented reality and additive manufacturing (3D printing). India needs to stay ahead of the innovation curve to remain competitive in the mid to long term. A very good indicator of innovation is the R&D spend. The US and China are the largest spenders in this sphere at 2.74% and 2.1% of their GDP (purchasing price parity — PPP — adjusted) compared to India’s 0.85% of GDP (PPP adjusted). If we look closer home, Maharashtra, Gujarat and Tamil Nadu rank at the top in manufacturing competitiveness with

Global Manufacturing Competitiveness

2020 PROJECTED

2016 RANKING Rank

Country

Score

Rank

Country

Score

China

100.0

USA

100.0

USA

99.5

China

93.5

Germany

93.9

Germany

90.8

Japan

80.4

Japan

78.0

South Korea

76.7

India

77.5

75.8

South Korea

77.0

Taiwan

72.9

Mexico

75.9

Mexico

69.5

73.8

Canada

68.7

Taiwan

72.1

Singapore

68.4

Canada

68.1

India

67.2

Singapore

67.6

Switzerland

63.6

Vietnam

65.5

Sweden

62.1

Malaysia

62.1

Thailand

60.4

Thailand

62.0

Poland

59.1

Indonesia

61.9

Source: 2016 Global Manufacturing Competitiveness Index

scores of 67.07, 64.75 and 64.63. Together, Maharashtra and Gujrat produced 34% of the gross output of India’s manufacturing sector in 2014-15. The exports of Maharashtra and Gujarat in 2014-15 were 46% of India’s exports at $72.83 billion and $59.85 billion, while Tamil Nadu exported goods worth $27.47 billion. The reason for their success has been their ability to successfully tap into the potential of industrial agglomerations and

an efficient transport system that has enabled them to stay cost competitive along with the benefit of having a coastline. We need to draw lessons from successful manufacturing economies of the world and internally, need to look at the leading states for guidance. India has the ingredients required to become a manufacturing giant and it can reach its goal if it keeps on improving on manufacturing competitiveness. IANS F

Amit Kapoor is Chair, Institute for Competitiveness & Editor of Thinkers. The views expressed are personal. Amit can be reached at amit.kapoor@competitiveness.in and tweets @kautiliya. The article is co-authored with Arpit Singh, a research fellow with the Institute for Competitiveness.

50 The Finapolis l OCTOBER 2016

CAREER SCOPE FIXING FLAWS

What To Do If You’ve Lied On Your CV An estimated 50+% of resumes are inaccurate. Danni MacDonald cautions you against falling for that trap

ou know that when they call you for an interview, they’ve already decided they want to hire you based on your resume. But what if you lied on your resume or CV? An estimated 50+% of resumes are inaccurate. People do lie on resumes and job applications. According to US News, they change employment dates to gloss over gaps in employment or they claim to have experience that doesn’t stand up to scrutiny. They claim to have finished training or degrees they’d only started. People falsify job titles, military service, and salary history, too. The most famous US example is Vice-President Joe Biden. In the 1988 runup to the presidential elections, his resume

misrepresented that he had graduated “in the top half” of law school cohort. He failed in his bid to obtain the Democratic Party nomination for President in that campaign. Why do people lie on job applications? Because they are scared they can’t get hired based on the facts. First of all, you can get hired with your current qualifications. Have faith — there is a job somewhere out there for you. However, it may not be as grand a role as you’d like if you haven’t earned your stripes in the trenches yet. It’s important to know your genuine strengths and to leverage them certainly. It’s definitely important to sell yourself in your resume and your interview. Lying about qualifications to get ahead faster, though, will only put you in harm’s

way. People won’t always know if you lied on your resume or are faking your way through a new job, but if they figure it out, you are back to Square One. Only this time you’ve been fired. One TV broadcaster in Toronto, Canada, for example, was fired over 10 years after he was hired purely for lying about completing his education. Marilee Jones was an ambitious academic administrator who attained the position of Dean of Admissions at MIT, USA, on the false claim of an undergraduate degree that had never been completed. She was promptly fired after the information was discovered. Some companies will go ahead with verifying your employment, find out you’ve lied, and never tell you. They just won’t hire you – and they’ll flag you as ‘Do Not Hire’… ever.

OCTOBER 2016 l The Finapolis

CAREER SCOPE Among the false details put out are changed employment dates to gloss over gaps in employment, or claims to have experience that doesn’t stand up to scrutiny. People also claim to have finished training or degrees they’d only started, besides submitting wrong job titles, military service, and salary history, as well What To Do If You’ve Lied So, what can you do if you’ve lied on your job application or your resume? Do you try to bluff your way through for 10 years or more? On the job application form, did you tell them about your misdemeanor felony conviction — if not, then when? How can you handle this without losing the job?

1. Withdraw your application This is your safest option. Simply call and say you are “Withdrawing your application at this time.” If asked for a reason, tell them you’ve “reconsidered your application.” That’s the truth. They may assume the timing, title, or money isn’t right or that you have another offer or you heard something that makes you think it’s not the right company for you. That’s all okay.

2.Revise your resume and provide it to the hiring manager, asking them to refer the new copy In this case, you can tell them you “noticed some errors” and “want to correct them.” Note that this won’t work if you’ve created jobs or performance claims that were exaggerated. However, you can truthfully state that you want to be “more exact,” if you wish. They may assume you had some-

Reasons You Should Not Exaggerate On Your Resume Robin Schlinger

one else write your resume and the errors were theirs.

3. Come clean This may mean you lose the job, but sometimes people have big hearts. There’s a good chance they are going to find out anyway through reference checks or your own social media presence (like LinkedIn). Provide a corrected resume or job application and tell them the truth. In life, we need to own up to our mistakes and learn from them. Tell them that, too — that you made a mistake and you want to make it right. It’s a sign of good character to do that. People make mistakes, especially under pressure (and needing a job is a lot of pressure). It’s best not to end up in this position, but if the deed is done, these are the top three ways of fixing the problem.

How To Avoid The Problem You can explain gaps and sudden departures from school or a former job in the interview. If you have a criminal record, and that would include any DUIs, be straight from now on whenever asked or call immediately to tell them you ‘neglected’ to mention it and would like to ‘set the record straight.’ They are going to find out anyway and it is not a guaranteed barrier to employment — whereas lying about it may be. And now is the time to change your resume and social media profiles such as Google+ and LinkedIn, so you never have to worry about this again. Do it today so if your dream job opens up tomorrow, you are polished and perfect. F

As a professional and accredited resume writer, I often speak before groups of other resume writers and give advice to many job hunters. I always caution people against exaggerating on resumes. I stand up for truthful resumes because I am a truthful person, but also because: • If you exaggerate on your resume and are invited in for an interview, you are going to have to defend what you wrote. The more you try, the more obvious it will become to the interviewer that you lack enough confidence in yourself to stick to the truth • If you exaggerate on your resume and somehow pass the interview, the company will check references and they will discover that none of the references can confirm the information on your resume • If you exaggerate on your resume and somehow make it all the way through to hiring, you will have to deliver on the job. How can you deliver on skills and accomplishments you simply do not have? • If you exaggerate or lie on a resume (for example, claiming that you graduated with a degree when you didn’t or attended a college you didn’t attend), and you are found out later, you can be fired and might even ruin your chance to ever get hired. In some states, you could be charged with a misdemeanor or even a felony F

Published by agreement with CAREEREALISM.com, a leading global jobs and career advice website

The Finapolis l OCTOBER 2016

BOOKMARK

Frenchman to our rescue Re-discovering an obscure, dated classic, Vikas Datta finds it an engrossing tale which needs to be relished

he Raj seems an integral part of our history. But for much of the 18th century, it was never a certainty, with another European power fiercely contesting British influence in the subcontinent and coming quite close to supplanting them. Were it not for some miscalculations and lost battles, we might have ended up as the world’s largest French-speaking nation. What could have our course been Nemo of “Twenty Thousand Leagues in such an eventuality? Under the Sea”, 1871 and more, revealed A tantalising glimpse of a possible to be Indian — and with great hatred of democratic, republican dispensation the British. It is this vein that Assollant can be seen this long-obscure classic, seemed to have pioneered in his 1867 work. unearthed and translated by British His French hero is brave, enterprising and journalist and author Sam Miller, courteous, while his British opponents about the exploits of a most singular are mostly brutal, venal, inefficient or French adventurer, accompanied by an arrogant and Indians, with exceptions, unprecedented aide, in mid-19th century correspond to the prevailing stereotypes of British India, on the eve of 1857 . noble savages, with a stress on both words. This adventure by Alfred Assollant, a The plot seems to be simple. In Lyons, little-known French author of the 19th the prestigious Academy of Sciences, at century, was most popular in its session in September-end his time and later (as Miller 1856 is told about the death of tells us, 20th century fans one of its members, who “was included the likes of French just about to leave for India, philosopher Jean Paul Sartre to search amid the mountains and Italian Marxist Antonio known as the Ghats, near the Gramsci), translated into most source of the Godavari River European languages, save for the Guru Karamata, the English — its targets, but failed most important sacred books to make him famous or rich. It Once Upon a Time of the Hindus, long hidden is still in print but not much from European eyes” but left a in India read or known. considerable sum to whoever Author: Alfred Assollant Assollant (1827-86) was by takes his unfinished job. (translated by Sam Miller) no means the only Frenchman An academy member Price: ` 299 to write about India — take his suggests they open it to the more famous contemporary Jules Verne public, but it is only in May the following (also a lawyer’s son) with “The Steam year, do they find someone who proves to House” (also known as “The End of Nana meet all requirements. Sahab”), and a notable character, Captain The only thing is that Captain Corcoran

has the impatient five-year old Louison waiting in the other room, and some learned members suggest chastisement before they find she happens to be a Royal Bengal tiger — and hungry. Bedlam ensues. The scene then shifts to India, to the court of the Holkar, “Prince of the Marathas”, at Bhagavpur on the Narmada, where the British, sensing some trouble in the wind, are seek to disarm him, and even suborn his prime minister for the purpose. But sailing up the river is his French saviour. After a confused mélange of revolts, kidnappings (including of Holkar’s beautiful and charming daughter Sita), sieges and pitched battles, Corcoran finds himself the master of the situation, as well the ruler of the kingdom and husband of the princess. But will his radical measures of equitable governance go down well with his traditional subjects or the nobles who think they have a better claim to power? Assollant, who was quite radical in real life (he lost his teacher’s job for his views) makes his hero a vessel for his ideas, but colonialism puts paid to this attractive option. No matter how open and radical at home, the French and the British never followed this rule in most of their colonies. But subtext, some errors in his depiction of India and its customs, and the narrative’s shifting moods — from pure farce with which it begins to a more dark tone later — apart, Assollant’s work is not only a dated, literary curiosity, but an engrossing tale which needs to be relished. Miller, who did a commendable job here, needs to bring out the other adventures too. IANS F

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54 The Finapolis l OCTOBER 2016

STAT DOSSIER All figures as on Sept 23, 2016

Indian Indices: Performance Close Sept 23, 2016

Close August 31, 2016

Return (%)

Return 6 M (%)

Return 12 M (%)

PE Ratio

28668.22

28452.17

0.76

13.15

10.84

21.42

Nifty

8831.55

8786.20

0.52

14.45

12.24

22.37

BSE 500

11947.61

11834.89

0.95

17.85

14.98

25.93

BSE Auto

22642.26

22008.15

2.88

26.99

30.75

25.06

BSE Bankex

22752.65

22656.58

0.42

25.63

15.52

26.55

15119.19

15212.25

-0.61

16.87

0.40

38.81

BSE Consumer Durables

12747.33

12485.32

2.10

10.44

21.41

37.89

BSE Oil & Gas

11433.94

11072.71

3.26

26.20

32.41

12.19

BSE Metal

9837.68

9939.73

-1.03

28.71

42.83

BSE Realty

1570.72

1542.10

1.86

27.58

18.25

59.84

BSE PSU

7594.17

7505.78

1.18

24.47

14.29

26.85

BSE Power

2068.88

2098.41

-1.41

18.68

14.37

20.31

BSE Teck

5672.62

5753.26

-1.40

-6.59

-8.67

19.02

Sensex

BSE Capital Goods

Global Indices: Performance Close Sept 23, 2016

Close August 31, 2016

Return (%)

Return 6 M (%)

Return 12 M (%)

PE Ratio

MSCI World Index

1729.70

1719.52

0.59

6.53

8.47

22.43

MSCI Asia PaciďŹ c Ex Japan

455.66

444.11

2.60

11.76

16.04

16.61

23686.48

22976.88

3.09

16.42

11.80

12.81

Singapore Straits Times (STI)

2856.95

2820.59

1.29

0.34

0.86

12.01

S. Korea

2054.07

2034.65

0.95

3.54

5.72

18.88

Nikkei 225

16754.02

16887.40

-0.79

-1.46

-6.30

20.83

Dow Jones

18261.45

18400.88

-0.76

4.26

11.93

17.58

S&P 500

2164.69

2170.95

-0.29

6.32

12.08

20.38

NASDAQ

5305.75

5213.22

1.77

11.15

13.21

41.67

58697.00

57901.11

1.37

18.20

30.93

161.15

FTSE-100

6909.43

6781.51

1.89

13.15

13.10

58.05

DAX 30

10626.97

10592.69

0.32

7.87

9.69

24.03

CAC 40

4488.69

4438.22

1.14

3.67

0.18

22.93

ASIA Hang Seng

AMERICA

Brazil Bovespa EUROPE

OCTOBER 2016 l The Finapolis

STAT DOSSIER All figures as on Sept 23, 2016

September International Commodity Futures Price Trends Close Sept 23, 2016

Close August 31, 2016

% Change

52 Week High

% Change from 52 Week High

52 Week Low

% Change from 52 Week Low

LME Lead 3 Month ($/t)

1917.00

1899.50

0.92%

1988.00

-3.57%

1551.50

23.56%

LME Zinc 3 Month ($/t)

2276.50

2315.50

-1.68%

2372.00

-4.03%

1444.50

57.60%

10640.00

9770.00

8.90%

11030.00

-3.54%

7550.00

40.93%

19.78

18.72

5.64%

21.23

-6.83%

13.62

45.19%

4856.00

4618.00

5.15%

5356.00

-9.34%

4318.00

12.46%

44.59

44.86

-0.60%

51.67

-13.70%

26.05

71.17%

1636.50

1615.00

1.33%

1709.00

-4.24%

1432.50

14.24%

22.74

20.05

13.42%

23.88

-4.77%

12.12

87.62%

1341.10

1311.80

2.23%

1377.50

-2.64%

1045.40

28.29%

CBOT Soy Oil (cents/lb)

33.60

32.81

2.41%

35.43

-5.17%

26.99

24.49%

ICE Coffee (cents/lb)

151.75

146.70

3.44%

160.90

-5.69%

111.05

36.65%

ICE Cotton (cents/lb)

69.98

65.53

6.79%

77.98

-10.26%

54.53

28.33%

592.80

529.00

12.06%

611.70

-3.09%

356.80

66.14%

2.98

2.88

3.33%

3.10

-3.94%

1.61

84.73%

CBOT Soybean (cents/bushel)

953.25

941.25

1.27%

1186.25

-19.64%

844.25

12.91%

CBOT Corn (cents/bushel)

335.25

315.25

6.34%

444.00

-24.49%

314.75

6.51%

CBOT CORN

335.25

315.25

6.34%

444.00

-24.49%

314.75

6.51%

CBOT Soy Meal ($/t)

302.20

306.10

-1.27%

432.50

-30.13%

258.90

16.72%

CBOT Wheat (cents/bushel)

403.75

391.00

3.26%

531.50

-24.04%

386.75

4.40%

LME Nickel 3 Month ($/t) Comex Silver (S.oz) LME Copper 3 Month ($/t) Nymex Crude Oil (S/bbl) LME Aluminium 3 Month ($/t) ICE Sugar (cents/lb) Comex Gold (S/oz)

LIFFE Sugar (S/t) Nymex Natural Gas ($/mmbtu)

Commodities: September Gainers and Losers (%) MCX

NCDEX Guar Gum, 11.8%

Nickel, 7.5%

Maize, 8.1%

Silver, 6.4%

Guar Seed, 6.5%

Copper, 4.8%

Barley, 4.6%

Cotton, 3.2%

Soy Oil, 3.3%

Gold, 1.8%

Rm Seed, 1.5%

Natural Gas, 0.9%

Sugar, 0.1%

Aluminum, 0.6%

Wheat, 0.1% Lead, -0.2%

Soybean, -1.4%

Crude Oil, -0.8%

Jeera, -3.4%

Zinc, -2.5%

Turmeric, -5.7%

Mentha Oil, -3.1%

Dhaniya, -9.3% Cotton Oil Cake, -23.4%

Cardamom, -4.5% -5 -4 -3 -2 -1

-20

-15

-10

-5

56 The Finapolis l OCTOBER 2016

STAT DOSSIER All figures as on Sept 23, 2016

NIFTY TOP

Company

Sept 23, 2016

Maruti Suzuki

August 31, 2016

5601.80

5053.65

10.85

ONGC

260.55

236.30

10.26

Punjab National Bank

139.30

127.55

9.21

611.55

570.98

7.11

4899.45

4647.40

5.42

Cipla Grasim Industries

Company

Sept 23, 2016

Idea Cellular

August 31, 2016

(%) Change

82.50

92.79

-11.09

Yes Bank

1233.15

1366.10

-9.73

Ambuja Cements

259.00

277.95

-6.82

Axis Bank

557.45

596.85

-6.60

ACC

1617.00

1709.80

-5.43

NIFTY MOVEMENT

15720 15000 14280 13560 12840 12120 11400 Dec-15

NIFTY BOTTOM

CNX-MIDCAP MOVEMENT

8950 8600 8250 7900 7550 7200 6850 Sep-15

(%) Change

Mar-16

Jun-16

Sep-16

Sep-15

7.5% Dec-15

Mar-16

Jun-16

Sep-16

Gain in MCX Nickel

BSE BANKEX

BSE CAPITAL GOODS

23450 22100 20750 19400 18050 16700 15350 Sep-15

16250 15400 14550 13700 12850 12000 11150 Dec-15

Mar-16

Jun-16

Sep-16

DOW JONES

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-15

Mar-16

Jun-16

Sep-16

HANG SENG

18610 18125 17640 17155 16670 16185 15700 Sep-15

Nickel prices surged on account of closure of mines in the Philippines

23900 22950 22000 21050 20100 19150 18200

Dec-15

Mar-16

Jun-16

Sep-16

Sep-15

OCTOBER 2016 l The Finapolis

STAT DOSSIER CURRENCY

ENERGY

Rupee Movement

Brent Crude (US$/bbl) 59.0 54.5 50.0 45.5 41.0 36.5 32.0

68.8 68.1 67.4 66.7 66.0 65.3 64.6 Sep-15

Dec-15

Mar-16

Jun-16

12%

Sep-15

Sep-16

Dec-15

Mar-16

Jun-16

Sep-16

METALS Gold (US$/OZ)

Gain in NCDEX Guar Gum

Silver (US$/OZ)

1365 1310 1255 1200 1145 1090 1035

Guar gum prices rallied on reports of lower crop size and revival in export demand

20.80 19.60 18.40 17.20 16.00 14.80 13.60

Sep-15

Dec-15

Mar-16

Jun-16

Sep-15

Sep-16

Dec-15

Mar-16

Jun-16

Sep-16

ECONOMY Inflation (%)

IIP (%)

4.0 2.2 0.4 -1.4 -3.2 -5.0

Real GDP Growth

Jun-15

7.2

7.1

Sep-15 Dec-15 Mar-16 Jun-16

10-year bond yield (%)

Prior (%)

6.75 6.50

Dec-15

Mar-16

Jun-16

Jul-16

Jun-16

Apr-16

May-16

Mar-16

Jan-16

Dec-15

Feb-16

DII (RHS)

RBI Monetary Data

7.88 7.70 7.52 7.34 7.16 6.98 6.80 Sep-15

Oct-15

FII

10600 7100 3600 100 -3400 -6900 -10400 -13900

Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16

7.4

22500 14500 6500 -1500 -9500 -17500

Gain in NCDEX Maize Maize futures moved higher on crop failure concerns

FII vs. MF (Rs cr)

7.9

7.0

Nov-15

Sep-15

Jul-15

Aug-15

Jul-16

Aug-16

Jun-16

Apr-16

May-16

Mar-16

Jan-16

Feb-16

Dec-15

Oct-15

Nov-15

Sep-15

Aug-15

10 8 6 4 2 0 -2 -4

Sep-16

Repo

Latest (%)

5.75 6.00

Reverse Repo

21.25 21.00

4.00 4.00

Cash Reserve RaƟŽ

SLR

All figures as on Sept 23, 2016

58 The Finapolis l OCTOBER 2016

STAT DOSSIER Performance of Mutual Funds Equity Diversified

ELSS

Mutual Fund Scheme

NAV

1 yr 3 yr 5 yr

Mutual Fund Scheme

NAV

1 yr 3 yr 5 yr

DSPBR Micro-Cap Fund-Reg(G)

51.41

27.4 53.3 28.2

Reliance Tax Saver (ELSS) Fund(G)

50.20

17.1 34.2 20.6

29.77

23.6 49.2 26.6

Escorts Tax(G)

73.79 32.0 32.4

13.0

100.77

16.6 48.8 30.4

Axis LT Equity Fund(G)

33.33

9.9

21.9

HSBC Midcap Equity Fund(G)

44.41

17.3 45.4 20.4

IDBI Equity Advantage FundReg(G)

21.98

9.2 29.8

Canara Rob Emerg Eq Fund-Reg(G)

69.43

19.3

Franklin India Smaller Cos Fund(G)

47.39 26.0 44.5 29.2

Mirae Asset Emerg BlueChip-Reg(G)

37.10 24.4

Kotak Emerging Equity Scheme(G)

31.26

SBI Magnum MidCap Fund-Reg(G)

Reliance Small Cap Fund(G) UTI Transport & Logistics Fund(G)

45.1 26.2

31.1

Birla SL Tax Relief '96(G)

23.90

13.6

29.1 19.0

Birla SL Tax Relief'96 Fund- (ELSS U/S 80C of IT ACT)-(G)

23.90

13.6

29.1 19.0

22.1 43.6 24.0

DSPBR Tax Saver Fund-Reg(G)

37.99

21.4 28.5 20.0

70.37

21.5 43.6 26.4

Invesco India Tax Plan(G)

39.29 14.0 28.5

Sundaram S.M.I.L.E Fund(G)

78.77

18.8 43.5 22.1

Birla SL Tax Plan(G)

30.05

12.9

28.1

18.4

SBI Small & Midcap Fund-Reg(G)

36.06

17.8 43.5 27.6

L&T Tax Saver Fund(G)

30.43 20.6

27.7

16.7

UTI Mid Cap Fund(G)

90.94

15.1 42.7 24.4

Principal Tax Saving Fund

161.76 20.6

27.2

19.7

Birla SL Pure Value Fund(G)

46.49 25.0

DSPBR Small & Mid Cap Fund-Reg(G) 44.37

44.1 27.7

42.1 23.6

26.2 40.6 21.2

18.1

ICICI Pru LT Equity Fund (Tax Saving)(G)

304.73

16.2 26.8

18.5

Franklin India Taxshield(G)

469.55

13.1 26.7

18.4

34.44

13.9 26.6

15.6

JM Tax Gain Fund(G)

12.97

15.8 26.3

16.6

HSBC Tax Saver Equity Fund(G)

30.01

13.9 25.9

17.9

IDFC Tax Advt(ELSS) Fund-Reg(G)

42.18

10.7 25.7

18.0

122.04

10.6 24.6

17.1

ICICI Pru Midcap Fund(G)

77.46

11.9 40.3 21.3

Birla SL Small & Midcap Fund(G)

30.83

28.2 39.7 21.4

HDFC Mid-Cap Opp Fund(G)

45.18

22.7 39.6 23.9

Principal Emerging Bluechip Fund(G)

81.14

22.5 39.5 25.7

101.57

18.5 39.5 22.9

404.91

20.7 39.3 22.6

Birla SL Tax Savings Fund(G)

54.58

12.7 24.5

14.5

Kotak Midcap Scheme(G)

62.56

21.3 38.8 21.3

Sundaram Tax Saver(G)

84.05

18.3 24.5

16.2

JPMorgan India Mid & Sm Cap Reg(G)

21.49

13.7 38.5 23.9

Reliance Mid & Small Cap Fund(G)

38.38

19.6 38.3 21.5

Franklin India Prima Fund(G)

782.36

21.2 37.4 25.0

NAV

1 yr 3 yr

5 yr

Birla SL Midcap Fund(G)

253.73

19.1 37.0 20.1

28.1 33.6

23.1

31.15

29.1 37.0 18.7

ICICI Pru Banking & Fin Serv Fund(G)

45.46

Escorts High Yield Eq(G)

37.76

13.6 36.3 21.0

Reliance Banking Fund(G)

202.40 20.7 29.7

17.7

Tata Mid Cap Growth Fund(G)

109.69

8.9 35.9 21.8

BNP Paribas Mid Cap Fund(G)

28.15

14.7

35.1 24.2

38.82

13.1

35.1 21.8

L&T Midcap Fund-Reg(G) Sundaram Select Midcap(G)

Invesco India Mid Cap Fund(G)

Invesco India Mid N Small Cap (G)

Kotak Tax Saver Scheme(G)

SBI Magnum TaxGain'93-Reg(G)

Equity (Banking) Mutual Fund Scheme

Reliance Pharma Fund(G)

145.60

-2.1 27.0

21.6

Invesco India Banking F-Ret(G)

39.40

21.4 26.5

16.7

UTI Banking Sector Fund(G)

76.44

23.7 25.9

15.4

Source: karvyvalue.com; Note: All returns are annualized and expressed in percentage; all NAVs as on Sept 23, 2016

OCTOBER 2016 l The Finapolis

STAT DOSSIER Performance of Mutual Funds Equity (FMCG) Mutual Fund Scheme

Equity (Infrastructure) NAV

1 yr 3 yr 5 yr

Mutual Fund Scheme

SBI FMCG Fund-Reg(G)

85.61

18.8

17.1

ICICI Pru FMCG Fund(G)

180.72

16.0

16.8

18.1

Equity (Pharma) Mutual Fund Scheme

NAV

1 yr

3 yr

5 yr

Franklin Build India Fund(G)

32.80

17.5

37.3

24.7

Escorts Power & Energy Fund(G)

20.29

18.1

33.8

9.9

L&T Infrastructure Fund-Reg(G)

12.12

18.1

32.4

14.4

13.65

6.1

29.9

12.1

40.97

15.4

29.7

13.9

HDFC Infrastructure Fund(G)

16.79

11.3

29.6

10.4

Birla SL Infrastructure Fund(G)

28.23

13.2

29.5

13.9

17.71

2.7

29.3

11.2

Sundaram Infra Advt Fund(G)

26.92

9.6

27.6

6.4

Sahara Infra F-Var Pricing(G)

23.36

20.9

26.7

9.9

19.12

13.6

26.4

10.2

47.60

15.2

26.3

10.8

7.13

13.8

25.4

3.1

Invesco India Infra Fund(G) NAV

1 yr 3 yr 5 yr

SBI Pharma Fund-Reg(G)

146.74

0.8 29.8 26.9

Reliance Pharma Fund(G)

145.60

-2.1 27.0

21.6

Canara Rob Infra Fund-Reg(G)

HSBC Infra Equity Fund(G) UTI Pharma & Healthcare Fund(G)

95.26 -2.5

22.1 19.4

Equity (Tech) Mutual Fund Scheme

NAV

1 yr 2 yr 3 yr

Taurus Infra Fund-Reg(G) Tata Infrastructure Fund(G)

ICICI Pru Technology Fund(G)

38.69

-7.1

17.7 20.6

DSPBR Technology.com F-Reg(G)

51.43

-3.5

13.8

13.2

SBI Infrastructure Fund-Reg(G)

12.79

17.7

24.9

8.5

Birla SL New Millennium Fund(G)

35.29

0.3

17.6

13.1

Sahara Infra F-Fixed Pricing(G)

21.08

18.4

24.9

8.5

Balanced Mutual Fund Scheme

Escorts Infrastructure Fund(G)

MIP NAV

1 yr 3 yr 5 yr

Mutual Fund Scheme SBI Magnum Children BeneďŹ t Plan

ICICI Pru Child Care Plan-Gift Plan

117.59

19.3 27.6

17.1

HDFC Balanced Fund(G)

121.96

15.2 26.7

17.0

Birla SL MIP II-Wealth 25(G)

Escorts Balanced Fund(G)

113.20

16.5 26.2

14.1

HDFC Prudence Fund(G)

416.84 14.4 25.3

Tata Balanced Fund(G)

185.83 21.55

L&T India Prudence Fund-Reg(G)

NAV 43.40

1 yr 3 yr 5 yr 19.9 20.3

13.3

34.21

16.5

17.8

13.4

HDFC Equity Savings Fund(G)

29.97

15.3

12.1

10.1

15.1

Kotak MIP(G)

26.93

14.2

14.3

11.2

11.5 24.5

18.1

SBI Magnum MIP(G)

34.72

13.2

11.2

12.3 24.4

17.7

Birla SL MIP II-Savings 5(G)

30.55

13.0

11.0

12.8 20.2

15.7

DSPBR Balanced Fund-Reg(G)

124.99

17.4 24.3 14.4

ICICI Pru Child Care Plan-Study

Birla SL Balanced '95 Fund(G)

642.66

17.2 24.3

HDFC MIP-LTP(G)

39.40

12.7

15.3

11.1

DSPBR MIP Fund-Reg(G)

32.82

12.5

12.4

11.0

Reliance Reg Savings Fund-Balanced Plan(G)

44.91 14.4

16.5

24.1

16.7

61.91

ICICI Pru Balanced Fund(G)

105.57

17.6 23.9

17.9

Tata Retirement Sav Fund - Cons Plan(G)

16.70

12.3

13.7

SBI Magnum Bal Fund-Reg(G)

105.67

12.7 23.8

18.1

ICICI Pru MIP 25(G)

34.66

12.2

15.0

11.9

Franklin India Balanced Fund(G)

101.58

13.6 23.7

16.5

Birla SL Monthly Income(G)

60.58

12.0

12.9

10.1

HDFC Children's Gift Fund-Invest

94.40

15.2 23.6

16.6

Franklin India MIP(G)

48.97

11.9

14.1

11.5

HDFC Children's Gift Fund-Invest

94.40

15.2 23.6

16.6

Birla SL MIP(G)

42.77

11.7

11.3

9.7

Canara Rob Bal Scheme-Reg(G)

124.70 14.0 22.8

15.7

Invesco India MIP Plus(G)

1582.64

11.6

8.5

7.4

Source: karvyvalue.com; Note: All returns are annualized and expressed in percentage; all NAVs as on Sept 23, 2016

60 The Finapolis l OCTOBER 2016

FUND REPORT CARD DSPBR Small & Mid Cap Fund-Reg (G) Fund Objective/Mission To generate long term capital appreciation from a portfolio substantially constituted of equity and equity related securities, which are not part of top 100 stocks by market capitalization.

Fund House Details AMC Name: Website:

DSP BlackRock Investment Managers www.dspblackrock.com

Scheme Performance as on Sept 23, 2016 Period

Returns

B'mark

Rank

3 Months

14.60

16.47

53/(275)

6 Months

29.32

24.03

21/(273)

1 Year

27.32

23.07

23/(260)

3 Years

41.03

30.69

14/(162)

5 Years

21.81

16.86

36/(153)

16.43

12.22

Since Inception

SIP Details: Invested Rs 5000 Every Month

Financial Details AUM As On (August 31, 2016) NAV As On (September 23, 2016) Min Investment (in Rs.)

Lumpsum SIP

Period

2312.18 44.86 5000

NAV (52WeekHigh){September 23, 2016} NAV (52WeekLow){February 29, 2016}

Total Invest (`)

Scheme (`)

Bench mark

60,000

70,633

69,124

3 Years

1,80,000

2,67,677

2,47,953

5 Years

3,00,000

5,74,635

4,95,931

10 Years

6,00,000

17,01,443

12,61,799

1 Year

44.87 31.09

Investment Information

Fund Structure

Scheme

Open ended scheme

Launch Date

November 14, 2006

Fund Manager

Vinit Sambre

Bench Mark

Nifty Free Float Midcap

Max.Entry Load(%)

Max.Exit Load(%)

1.00

Total Stocks

Total Sectors

P/E Ratio

29.43

P/B Ratio

4.85

Avg. Market Cap Rs. On (Aug-2016)

Top 10 Companies

19,843.97

Volatility Measures Fama

0.07

Beta

0.77

Std Dev

0.89

Sharpe

0.10

Top 10 Sector Wise Holding

Name

(%)

Industry Name

(%)

Techno Electric & Engineering Co.

5.4

SRF

5.2



Bank - Private

10.1



Engineering - Construction

7.1



Manappuram Finance

3.9



Pharmaceuticals & Drugs

5.6



Kotak Mahindra Bank

3.8



Diversiﬁed

5.2



Repco Home Finance

2.9



Other

4.9



Gujarat State Petronet

2.8



Textile

4.5



The Federal Bank

2.7



Electric Equipment

4.0



Atul

2.6



Trading

3.9



Ipca Laboratories

2.6



Finance - NBFC

3.9



IndusInd Bank

2.4



Cable

3.4



5 Years History Financial Year NAV in ` (as on 31st March)

2015-16

2014-15

2013-14

2012-13

2011-12

35.32

35.98

21.82

17.27

17.00

Net Assets (` Crores.) (as on 31st March)

1796

1820

1009

1047

1201

Returns(%)

-3.24

65.55

24.52

0.56

-2.65

CNX NIFTY Returns(%)

-9.87

26.33

17.53

6.86

-9.11

51/(289)

45/(273)

48/(217)

151/(204)

63/(207)

Category Rank Latest As on 31 March, 16

*Absolute Returns

Source: ACEMF

OCTOBER 2016 l The Finapolis

FUND REPORT CARD Scheme Performance as on Sept 23, 2016

Franklin Build India Fund (G)

Period

Fund Objective/Mission To achieve capital appreciation through investments in companies engaged either directly or indirectly in infrastructure-related activities.

Returns

B'mark

Rank

3 Months

10.35

9.32

36/(51)

6 Months

21.03

17.61

26/(51)

1 Year

Fund House Details AMC Name: Website:

Franklin Templeton Asset Management www.franklintempletonindia.com

17.65

15.27

16/(51)

3 Years

37.09

18.99

1/(44)

5 Years

25.49

13.82

3/(39)

8.10

8.65

Since Inception

SIP Details: Invested Rs 5000 Every Month Financial Details

Period

AUM As On (August 31, 2016) NAV As On (September 23, 2016) Min Investment (in Rs.)

677.55 32.98 5000

Lumpsum SIP

NAV (52WeekHigh){September 08, 2016} NAV (52WeekLow){February 25, 2016}

Total Invest (`)

Scheme (`)

Bench mark

60,000

67,754

66,259

3 Years

1,80,000

2,58,704

2,15,980

5 Years

3,00,000

5,85,273

4,22,848

1 Year

33.49 24.13

10 Years

Investment Information

Fund Structure

Scheme

Open ended scheme

Launch Date

September 04, 2009

Fund Manager

Anand Radhakrishnan

Bench Mark

NIFTY 500

Max.Entry Load(%)

Max.Exit Load(%)

1.00

Total Stocks

Total Sectors

P/E Ratio

25.54

P/B Ratio

3.38

Avg. Market Cap Rs. On (Aug-2016)

Top 10 Companies Name

Volatility Measures

94,356.56

Fama

0.03

Beta

0.94

Std Dev

0.97

Sharpe

0.05

Top 10 Sector Wise Holding (%)

Industry Name

(%)

State Bank Of India

8.8



Bank - Private

28.2



HDFC Bank

8.6



Bank - Public

11.9



8.1



Other

8.6



ICICI Bank

7.6



Telecommunication - Service Provider

8.3



TVS Motor Company

5.3



Reﬁneries

6.1



Bharti Airtel

4.9



Cement & Construction Materials

6.1



Tata Motors - DVR Ordinary

3.8



Automobile Two & Three Wheelers

5.3



Whirlpool Of India

3.7



Automobiles-Trucks/Lcv

3.8



Idea Cellular

3.4



Consumer Durables - Domestic Appliances

3.7



Indian Oil Corporation

2.8



Bearings

2.8



Axis Bank

5 Years History Financial Year NAV in ` (as on 31st March)

2015-16

2014-15

2013-14

2012-13

2011-12

27.48

29.42

15.91

12.76

11.51

545

415

Returns(%)

-7.84

85.43

23.83

10.14

-3.21

CNX NIFTY Returns(%)

-9.87

26.33

17.53

6.86

-9.11

27/(57)

1/(55)

9/(51)

17/(50)

Net Assets (` Crores.) (as on 31st March)

Category Rank Latest As on 31 March, 16

*Absolute Returns

14/(56) Source: ACEMF

62 The Finapolis l OCTOBER 2016

FUND ANALYSIS HDFC Cash Management Treasury Advantage Retail Growth Category: Ultrashort Bond Analyst

e maintain a negative view on HDFC Cash Management Treasury’s expense ratio, which undermines our building a positive view of the fund’s potential. The annual expense ratio of 1.30% makes the fund one of the most expensive available in the Ultrashort Bond Morningstar Category. In our opinion, this is a significant headwind for its ability to outperform peers on a riskadjusted basis. The fund is consistently positioned in the third or fourth quartile in terms of its performance. There has also been a change in the manager of this fund. Anupam Joshi has taken up the portfolio management responsibility from October 2015. Though he has prior experience in portfolio management, we need time to build confidence in the manager. There are also positives in this fund.

Rating: Neutral

Fund Family

HDFC Mutual Fund

Fund Type

Open-Ended

Investment Plan

Growth

Asset Size (Rs cr)

10,000.0 Aug-31-2016

Minimum Investment Rs 5000 Fund Manager

Anupam Joshi

Launch Date

November 18, 1999

We like the cohesive team approach and highly research-oriented investment process with an emphasis on safety and liquidity. In terms of credit risk, the manager has recently increased exposure to between 30% and 40% in sub-AAA rated bonds. However, the manager focusses on investing in companies with strong parentage, which ensures adequate liquidity in the portfolio. This is followed by rigorous

Anayst: Nehal Meshram quantitative analysis such as leverage, coverage, and solvency ratios. They also leverage the expertise of fundamental equity research to select individual debt securities. The risk-management team and the lead managers provide an additional overlay to monitor the overall portfolio positioning. Although aligned to the fund’s conservative style, Joshi had adopted a barbell strategy by taking some allocation in government securities and the remaining at the shorter end of the curve. He increased the portfolio’s maturity as interest rates were trending lower. Although we believe the manager has the necessary experience and resources, the higher expense ratio and disappointing returns limit our conviction and result in a Morningstar Analyst Rating of Neutral.

SBI Emerging Businesses Regular Growth Category: Small/Mid-Cap

Srinivasan plies an aggressive approach: He focusses on investing in high-growth companies and will pay a premium for incremental growth. While growth issues dominate the fund, the manager also scouts for value buys. Here, he seeks lesser-known names where he believes that markets haven’t recognised the business prospects, or stocks that are beaten-down because of negative sentiment. While value stocks can help lower price risk in the portfolio, given the growth bias, they have to be well-executed consistently. To build more conviction in the overall process, we would like to see this aspect of the strategy evolve further. The fund has grown significantly since our last review in 2013. It has grown by over Rs 5 billion over the past three years, with the fund size Reprinted with permission

Rating: Neutral Fund Family

SBI Mutual Fund

Fund Type

Open-Ended

Investment Plan

Growth

Asset Size (Rs cr)

1,838.3 Aug-31-2016

Minimum Investment Rs 5000 Fund Manager

R. Srinivasan

Launch Date

September 17, 2004

touching Rs 17.9 billion as of July 2016. The fund was earlier run with a focus on small caps (roughly 50% of assets) and aggressively traded in line with Srinivasan’s convictions. However, it currently holds a fairly high exposure to large caps (about 35%), with the mid-cap exposures reduced over 10%. In our opinion, this continuing trend could fundamentally alter the fund’s

Anayst: Kavitha Krishnan distinctive character over time, and there is a case for evaluating the fund’s risk/reward characteristics over a longer time period. While the fund house has witnessed a story of a fall and rise, we think that there are many positive attributes at a fund house level under the current investment team. Some of the more obvious positives: the leadership of an experienced stock-picker, the backing of a stable in-house process, and an experienced team that has been trained in-house. We have a high level of conviction with Srinivasan and hold his capabilities in high esteem. However, there is key-man risk. Our confidence is muted because of the aforementioned factors, and we reiterate our Morningstar Analyst Rating of Neutral on this fund.

OCTOBER 2016 l The Finapolis

FACE TO FACE

‘We could see double-digit growth in earnings in FY17’ With over 11 years experience in the investment industry, Roshi Jain is vice president, portfolio management equity, with Franklin Templeton India AMC. She is portfolio manager for Franklin Build India Fund, as well as several other funds of the AMC. Prior to joining Franklin Templeton, she worked as financial analyst at Goldman Sachs, London. Roshi has a post graduate diploma in management from IIM, Ahmedabad, as well as CA and CFA degrees. Tell us about the Franklin Build India Fund… Franklin Build India Fund (FBIF) is an open-end equity fund which seeks to achieve capital appreciation through investments in companies engaged either directly or indirectly in infrastructure-related activities. Broadly defined, infrastructure-related activities include development, operations, management and maintenance of various infrastructures such as Transportation, Energy, Resources, Communication and other infrastructure. The fund has been an outperformer with high ranking — you’ve beaten your benchmark with a high margin. What guides your investment decisions? Do you follow a top-down or a bottom-up approach? Maintaining the discipline of our investment process is the key to our performance. With respect to this fund, our investment decisions are primarily driven by the bottom-up approach. The idea is to focus on identifying: good quality stocks which could compound over the long-term period or companies which have visibility of strong earnings growth in the foreseeable future. The last couple of months have seen markets climb, but investors have remained edgy about the possible fallouts of Brexit, a Fed rate hike and other external factors. How well insulated is the India story from global headwinds? Brexit was a major event which created

global uncertainty, leading to rising concerns regarding short term capital outflows (with risk off sentiment, investors may prefer safe havens such as the USD or gold). As a result there were concerns regarding Rupee volatility. However, given the forex reserves of US$ 360+bn, close to 11 months of import cover, the impact was limited. Further, domestic impulses to growth in form of anticipated good monsoons and 7th Pay Commission hikes are likely to act as a cushion against the global headwinds. All in all, a large domestic market and lesser dependence on exports could augur well for India story. Any key triggers or events that you are looking forward to with regard to domestic market? Earnings growth is going to be very critical.

There is adequate earnings support coming from automobile companies. While private banks continue to do well, we believe public sector banks, on a low base, may deliver better in FY17. Certain companies in cement, healthcare and IT sectors have been displaying consistent growth. Consequently, their profits are hitting new high and as long as this happens, we think, markets will be okay. The number of companies that are hitting a new high in terms of annual profits stand at 190 as of March 2016. We expect this number to increase in the coming years. The Sensex’s EPS itself is at a new high because of the new highs in profit. But when there are 250 or more companies recording new-highs in terms of profit growth, I can say market is at a comfortable level. Till that time, the market breath is limited for my comfort. I see another 4–6 quarters to get to that comfort zone. What are your expectations for corporate earnings this financial year? Given the return of the Monsoon and indications of a revival in urban demand, are we looking at a genuine, sustainable revival in the economy? For the first time in the last five to six years, there is a real possibility of a double-digit earnings growth in FY17. Favourable base, consumption growth, rural economy bouncing back on good monsoons could boost earnings especially in the second half leading to a strong year on year earnings growth for FY17. F

64 The Finapolis l OCTOBER 2016

ETCETERA

Finding Mother Teresa in America Arul Louis tracks the saint’s presence in New York, the country’s richest city, just a few miles off the city’s fabled Billionaire’s Row

The Missionaries of Charity are organised into three regions in the US. In the East Coast province headed by a Korean, Sister Rose Clara Lee, over 100 sisters work in 17 centres, three in Canada. Mother Teresa began the New York mission in 1971 and the late Sister Nirmala, who succeeded her, worked here for a while

other Teresa, who was declared a saint by Pope Francis in September, has been hailed as the “Saint of the Gutters of Kolkata”. But her sisters find they are needed as much in New York, the richest city in America. Suffering and want know no national boundaries. And neither do compassion and charity as the international brigade of Mother Teresa’s sisters bear witness here. Barely five miles from New York’s fabled “Billionaire’s Row” overlooking Central Park, sits the nation’s poorest area, the South Bronx, where Park Avenue sheds its glitz for grit. Clad in blue-bordered white cotton saris, Mother Teresa’s Missionaries of Charity toil there tending to New York’s unwanted, the homeless and the rejects. “We do feel Mother Teresa’s presence

here in these sisters,” Nancy Rivera, who grew up in the area, said. Rivera has since moved up and now lives in a well-off area, but still returns to her childhood neighbourhood to volunteer at a church near Mother Teresa’s sisters. She said that when she sees them pick homeless people off benches on the streets to clean and feed them, she senses “the invaluable presence of Mother Teresa”. She added, “I am one of the lucky ones to have met her in person.” Considered the poorest area in the US, census figures have pegged the percentage of people below the poverty line in the South Bronx at 38% — and it rises to 49% for children. Sister Regipaul, the head of the convent in the South Bronx, said that 20 sisters from the US, Canada, Poland, France, Argentina, the Netherlands and India work there running a shelter for 18 homeless

men, a soup kitchen that provides ready meals for the needy and a service that distributes food supplies to about 200 poor families, many of them immigrants adrift in an alien land. Another convent in Manhattan’s Harlem has a shelter for homeless women with a soup kitchen, and in Brooklyn the sisters provide a home for unwed mothers, she said. A more remarkable service is the home run by the sisters for AIDS patients in downtown Manhattan. The sisters were among the first to step in to care for AIDS patients in the early 1980s when the newly-discovered disease spawned fear and prejudice. The sisters clean, feed and provide for the patients at the centre, Regipaul said. At the sisters’ Bronx centre on Saturday, Preston Radcliff, recalled his own spiral into drugs and alcohol and his redemption.

OCTOBER 2016 l The Finapolis

ETCETERA “They being near to God brought a special awakening in me and I have stopped all that,” he told reporters. “I love this place.” The Missionaries of Charity are organised into three regions in the US. In the East Coast province headed by a Korean, Sister Rose Clara Lee, over 100 sisters work in 17 centres, three in Canada. Mother Teresa began the New York mission in 1971 and the late Sister Nirmala, who succeeded her, worked here for a while. Regipaul, who hails from Thrissur in Kerala, worked in Kolkata and Mumbai before coming to the US 35 years ago. A difference between India and here is that the poverty of the spirit is greater in the US, she said. “In India, it is easier,” she said, adding “If the people are hungry you give them bread to eat, and it satisfies the need. Here the poverty is greater; they need food, but they are also very lonely. The loneliness is greater suffering than poverty.” The sisters work in “little ways” to help alleviate this malaise of a fragmented society, Regipaul said. They organise group activities for them to socialise, visit the isolated and shut-in people to talk to them and cook for them, she said. But like in Kolkata, here also they come across people marked by the deepest stigmata of physical suffering. Regipaul recalled the case of a man with maggots crawling over parts of his body who was being chased by fear-stricken people in a nearby park. The sisters cleaned him up and cared for him. Like in India, the sisters follow an austere regimen that includes not watching television. But they did have special dispensation to watch the live telecast of Mother Teresa being sainted, Regipaul said. “It will remind us that our mother [is] waiting for us in heaven.” The inequalities of the US burst out starkly while emerging from a short subway train ride from the city centre to the outposts of neglect in the South Bronx and Harlem, the racially-segregated, poverty-stricken areas that home to African-Americans and Latinos. Asked about the inequalities, Regipaul with the equanimity of Mother Teresa and charity towards all brushed it aside and

Sister Regipaul, a native of Thrissur in Kerala, heads the Missionaries of Charity convent in New York’s South Bronx, the poorest area of the US. spoke of only the good. “The rich people are very generous and they volunteer to work with us” at the soup kitchen and the shelter, she said. “They humbly do all the work, they sweep the floor, wash dishes, they clean.” “Americans are great people,” she said. “And the Americans volunteering to work with us are White, Black, Latino, Indian, Chinese, Korean, African — people of all ethnicities who make America.”

Mother Teresa has herself had run-ins with New York’s bureaucracy. In 1989, local politicians opposed her plan to convert two abandoned buildings into shelters for homeless men. The next year, the city administration insisted she install lifts in the building, and the project was scrapped

On her day off on Saturday, Police Captain Rachel Evans was volunteering with her husband, Jose Sanchez, at the soup kitchen. She said they were inspired by Mother Teresa’s sisters “to help the people who have no place to eat or to live”. In spite of the vaunted government programmes for the poor and claims of politicians, poverty persists in the richest nations. “To help the poor, you need a warm hand, not a politician,” Rivera said of the difference she sees Mother Teresa’s sisters make. But Mother Teresa has herself had runins with New York’s iron-fisted bureaucracy and petty politics. In 1989, she proposed converting two abandoned buildings into shelters for homeless men, where they would be prepared for life in permanent housing. First, the local politicians opposed the plan. She overcame them and got the project moving. The next year, though, the city administration insisted that she had to install lifts in the building. The ascetic nun opposed it as a costly luxury in a two-storey structure and the unmoving bureaucrats and politicians defeated her plan. IANS F

66 The Finapolis l OCTOBER 2016

LEARNING CURVE We all come across issues and ideas related to the world of finance that sound Greek and Latin. Worry not. We are here to guide you through the maze

Food Inflation

ood Inflation reflects an increase or decrease in food prices that is triggered by demand & supply imbalances and other related factors such as the monsoon, fluctuations in agricultural produce, changing food habits, changes in industrial production — as reflected by the Index of Industrial Production (IIP), etc. While the Ministry of Statistics and Program Implementation India (MOSPI) gives the regular heads-up on how prices are moving, it is the Reserve Bank of India that is tasked with monitoring and curbing any sudden spike in inflation. Recent numbers show a sharp drop in annual food inflation to 5.91% in August from 8.35% in July 2016, which also tempered overall consumer price index inflation to 5.1%. In the past one year, it has averaged 6.2%

A volatile food bill In India, food inflation is computed using a basket of commodities that is fixed by the (RBI), namely: Cereals, Meat & Fish, Eggs, Milk & Milk products, Oils & Fats, Fruits & Vegetables, Pulses, Spices, Sugar & Confectioneries, and ready-to-cook and ready-to-eat food items. The manner of calculation and its basis also matters. Until 2013-14, India used the Wholesale Price Index (WPI) as the benchmark for computing food inflation and in essence, retail inflation. Pursuant to the recommendations of the Urjit R. Patel Committee report, the RBI adopted the CPI as the official benchmark. A prolonged divergence in wholesale (WPI) and retail (CPI) inflation rates also prompted the above move. As movements and variations in price levels for agri-markets take place very often, the Ministry of Agriculture has considers the rates at which large

transactions of purchase take place in wholesale.

What drives food inflation? A varied combination of factors drives food inflation. Rise in agricultural production costs, global food prices, minimum support prices (MSPs) paid to farmers are the main drivers of cereal (rice & wheat) inflation and inflation in pulses, while inflation in milk, vegetables, and meat and fish are driven by input cost inflation and supply shortages.

Weather condition Climate changes affect monsoons in which in turn impacts agricultural productivity. Sudden droughts or floods affect cultivation hugely, especially that of essentials such as cereals and pulses. So as supply drops; prices of food items go up.

Government regulation In India, prices of food crops such as cereals and pulses are regulated by the government through the minimum support price (MSP) mechanism. These prices ensure that farmers get minimum dues for their produce, even in case of adverse conditions such as a rise in supply, or crop failures. However, the retail end is left untended, wherein prices may be higher, even if market conditions call for a lower price.

Political atmosphere and tax issues The lack of adequate cultivable land can also affect agri-productivity, thereby leading to an inflation spiral. The hidden nexus of political leaders and black-marketers lead to crisis of food grains in market. Added to this are local and central taxes. Agri-businesses suffer for double taxes which lead to increase in both wholesale and retail price of food.

Consumers’ affluence & growth In times of an economic boom, consumers’ purchasing capacity increases. Flow of foreign direct investment, government’s initiatives like ‘Make in India’ are encouraging industrialization and consequently, purchasing capacity of all classes has increased. In such scenario, increased demand of food disturbs steady market pricing.

Population and lack of Infrastructure The lack of adequate cultivable land can also affect agri-productivity, leading to an inflation spiral. Hoarding by black merketers can lead to a food grain crisis. Another issue is the local and central taxes. Agri-businesses suffer for double taxes which lead to increase in both wholesale and retail price of food. F

Published on 1st October 2016 Total No. of pages 68, including cover pages

Karvy The Finapolis RNI No: APENG/2007/20461 Regd. No.: L II/RNP/H-HD-1087/2014-16