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RNI No.35850/80; Reg. No.

MCS-123/2015-17; Published on: Every alternate Monday; Posted at Patrika Channel Sorting office, Mumbai-400001 on every alternate Wednesday-Thursday

August 29-September 11, 2016






Mergers & Acquisitions gain ground
with corporate Indias risk appetite
building up

From the Publisher

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Publisher Ashok H. Advani

Managing Editor Parthasarathi Swami
Executive Editors Lancelot Joseph, Daksesh Parikh, Sarosh Bana,
Sunil Damania (Mumbai)
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This issue consists of total 110 pages including 2 pages gatefold

mergers and acquisitions are an integral part of free markets. as we move

towards freer movement of capital we will see much greater activity on the
m&a front.
there are several reasons why so far we have seen limited m&a activity in
india. going back to the pre-liberalisation days there was very little activity
primarily because the markets did not reflect the true value of companies,
since most promoters were busy taking out copious amounts of cash black
money from their companies. and even when deals did get done, most got
done in london or hong Kong, where once again the sellers received a large
part of the consideration in black.
furthermore, there have been and continue to be very severe restrictions on
the banking sector to lend against shares. even now much of the domestic
lending for acquisition of shares are by nbfcs who have fewer restrictions,
but who have limited capital and more expensive funds. many a time, over
the years Business India has pointed out the severe disadvantages indian
promoters face, as against foreigners, in borrowing against shares. the
standard practice in the west is for banks to lend against the shares of the
company being acquired and also based on the income flows of the acquiree
company to service the cost of interest. the result is that indian promoters
wanting to defend or protect their own companies against takeovers are
denied bank funds while a foreigner can borrow against their assets to push
the local promoter into a corner.
also, so far for a variety of reasons, including cultural, we have not seen
many hostile takeovers in india. these will come, but that is a separate story.
ironically indian companies acquiring companies overseas, whether corus
or Jaguar land rover, could legitimately borrow against the assets of the
acquiree companies. this is one factor that encouraged indian businessmen,
with new found elbow room, to bid high for these assets.
of course all countries have restrictions that apply to m&a activity. the
competition authorities scrutinise deals carefully and often the independent
trustees of the pension funds need to be satisfied too. and many countries
also have restrictions on foreigners acquiring major assets. even the us,
irrationally, restricts non-citizens from owning more than 25 per cent of
an airline or broadcast company. in recent years the us has also blocked
chinese companies from taking over major oil companies, and dubais
dp world from acquiring ports. but it would be fair to say that world-over
countries are moving towards removing such restrictions.
this year we have seen a flurry of m&a activity, including some large size
deals. to be sure not all mergers and acquisitions succeed, or create longterm value. also, various market participants have a different view on the
desirability, structure or price of the deal, as in the case of the recently
announced aditya birla nuvo merger with grasim. but suffice it to say, this
is inherent in open markets. it is not justified to substitute ones judgement
for the judgement of the promoters, unless malafides can be shown. other
than this, putting needless restrictions and cumbersome procedures only
delays orderly restructuring and utilisation of assets.
it is for this reason Business India welcomes this current m&a activity.

we are on


au g u s t 2 9 - s e p t e m b e r 11, 2 016


B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

no. 1002

Back on the
growth trail
m& a s are back
in vogue as
corporate india
moves ahead






in a short span, mep infrastructure

developers has evolved from a pure toll
collection business model to bagging hybrid
annuity model projects and is now profitable

Big boxes
the old timers in the industry will tell you that indian big boxes
(as warehouses are commonly referred) are in a transitional
phase from dark, dingy, closed spaces of yesteryears
where everything was manually conducted to modern and
scientifically built units. But this transitional journey is still far
off from reaching a stage of maturity

d-mart has scored
well in net profit
margin terms, while
showing steady
growth in top line
and bottom line
gemfields is geared up to replicate de Beers
success story in the coloured gemstone market
a poultry veteran has a joint venture to sell
and produce a Bulgarian majors products


au g u s t 2 9 - s e p t e m B e r 11, 2 016

no. 1002


B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d





Stock-taking exercise
before the half-way mark of
modis term
Coordination is key to the
success of R6,000-crore
textiles package
Modi dumps nam to get
closer to the us



Owl on the lookout
the incoming
governor has a list of
unfinished business
to attend to

Talking to




khfl bets big on the




Business Notes


Niche Business


reddonatura helps
decentralise garbage
collection and convert it into


milk mantra is riding on the

opportunities in the east



saint-gobains lwe
programme can bridge
indias skill gap



E xcessive incentives have proved a bane

for the cotton spinning sector
A Bollywood theme park in Dubai shows
the growing appetite for entertainment
Most reputed pharma brands

Market News


In the absence of positive cues, the

markets remained flat last fortnight
Sword of Damocles hangs over Welspun



Business notes


Businessmen in the news




corporate reports


cover feature








executive track






government & politics


guest columns










letters to the editor

opens avenues for a new

luxury hospitality player

Sports companies should move the

Time to expand the scope of pledged
India at SAARC



affordable housing
finance market

mbds jv with steigenberger


and md,
his success formula and the
future plans of
the company


a dentist in Bengaluru
revives the practice of
doctors going to
patients homes

a new range of healthy

ready-to-cook foods hopes to
revolutionise the morning meal


advertising & marketing

Telecom war
reliance Jio and
coai go headto-head against


sukhbir singh Badal,

deputy chief minister,
punjab, says the
sad -bjp government has
put the state on
the right track to


au g u s t 2 9 - s e p t e m B e r 11, 2 016

listening post


market news




niche Business


panjus page






special report




talking to


Issue No. 1001 for the fortnight August 29-September 11, 2016.
Released on August 29, 2016

Printed and published by Ashok H. Advani for Business India.

Printed at Glaxy Asbestos and Fittings Pvt. Ltd.,
D-125 TTC Area, Navi Mumbai-400 706
Published at Nirmal, 14th floor, Nariman Point
Mumbai-400 021.
No reproduction is permitted in whole or part without
the express consent of Business India
To order reprints contact: Business India Production Cell,
14th floor, Nirmal Building, Nariman Point,
Mumbai-400 021. Tel: 2288 3942/43, 2204 5446

Letters to the Editor

B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

other earlier special issues of

yours. i cant begin to thank
all those involved in preparing this beautifully compiled 1,000th issue, which
will be a definite asset a collectors item and a valuable
guide for present and future
BidY u t K u m a r ch at t e rJ e e


Fine work

Business Indias special double issue (a millennium of

change, 18-31 august) was
double delight encouraging and enlightening people to move fast, compete
and achieve the best results.
the magazine has worked
wonders on its readers by
promoting and providing
information on education,
agriculture, industry, et al.
fine work; lets move on. god
bless you!


a millennium of change
(18-31 august) presented a
monumental record of contemporary economic history
of india since 1978. the publishers note took me down
the memory lane and made
me feel as if i was reading
Business India from its first
issue onwards. and the lead
essay led the readers to think
on many a matter seriously.
the treatment of the issues
also drove home the points

poorly executed.
mohan nair



a millennium of change
(18-31 august), the 1,000th
issue of Business India, is a
valuable addition to any
comprehensive collection of
readable material.


At the top

1,000th issue of Business India
presented as a millennium
of change (18-31 July). Business India continues to be one
of most readable business
magazines of today.




the article on software industries was informative (a millennium of change, 18-31

august). such useful articles
should appear more often.
also, more than the contents
of the various articles and
features in this anniversary
issue, what was impressive
was the format.
p. g . K r i s h n a m u r t h i i Y e r


An asset

the special double issue

(a millennium of change,
18-31 July) was good, like any



amidst the encomia galore

that, i am sure, you must have
received by now on a millennium of change (18-31
July), my comment may stick
out like a sore thumb. however, i would like to still
record it it is just that the
special issue was all gloss
and no substance. did you
seriously believe that your
readers would be able to
relate to the titbits given in it?
they were so sparse and disjointed that one was tempted
to skip them, rather than
sense out of them. wellintentioned, perhaps, but

Whats in a name?

the names of indian cities

and even states were distorted
by curious pronunciations by
the British. and the exercise
of correction has been ongoing for some time. how about
the central government having a look at the names of all
indian states and cities and
correcting the distortions in
one go? also, lets stop having different versions of a
name in different languages
such as Keralam (as it is in
malayalam, which is the correct version), Kerala (in english) and Keral (in hindi).
pradeep Kumar K.K.


B. r aJaseKar an

m a h e s h K a pa s i
g.n. Bihani

s a r a s wat h Y m u da l i a r

m a n Jush a r aor a n e

JacoB a . sa h aYa m

Spare a thought

when so much is said

about what the government
employees deserve vis-a-vis
what they actually get (editorials, 4-17 July) and also
about the extent to which
the executives and managers
of multinationals and private
companies have progressed
on the emolument front,
has anyone ever thought of
what a real common man is
left with? i am talking about
those grovelling in private
companies be they limited, partnership or under
the shop act? are they are
paid regularly and in even
terms with the work that is
extracted from them? i am
sure, nobody has any idea!
nor do anyone cares.


pleasant manners are worthy attributes to be inscribed

in golden letters on his
memorial. we salute you, sir.


misleading ads (government & politics, 4-17 July)

left many things unsaid.
why polarise on ads on food
(granted, they are necessary)?
But, even ads on items like the
detergents inspire the brats
to roll in mud and be victims
of many an infection. and,
what about the surrogate ads,
talking about soda, while
meaning liquor? everybody
knows what they imply, but
the authorities do not care.
ishi ta pr a Bhu


To Sir, with love

one year has passed since

departed from our midst.
his simplicity, humility and


there was an avalanche of

criticism from trp-hunting
media-men, as also pseudointellectuals, against columnist shobha de, when she
commented on our olympic
team, larger than usual, coming back without considerable
achievement. today, a look at
the scant data sheet on the
teams achievements (except
for sindhu, sakshi and a
few others) shows that she is
totally vindicated. people like
her do not write insensitively;
they write in disillutionment
and frustration. and, their
ire is not always directed
against the sportspersons. it is
more a commentary on the
organisations, as also the
system at large.
a . a . Va r m a


Please address your letters to:

the managing editor, Business india

14th floor, nirmal, nariman point, mumbai 400021.
fax: (91-22) 2288 3940
Please mention your full name and address


au g u s t 2 9 - s e p t e m B e r 11, 2 016


B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

rio imperative
Sports companies should move the Sensex

he spectacle is over, now is the time to

think big instead of fretting and fuming.
with just two of the 118 indian participants in the rio olympics, sakshi malik and
p.V. sindhu, coming back with medals, india
was just about saved the blushes. of course,
there were some flashes of brilliance like dipa
Karmakar who finished fourth in gymnastics, missing the bronze by a whisker. since
independence, 11 indian male gymnasts have
taken part in the olympics, but this was the
first for an indian woman gymnast. hers is a
story of hard work and grit as she comes from
tripura, a state which isnt the most economically advanced in the country. indias performance at rio is being distinguished for the
display the girl power. Yet it is interesting to
note that all these stars do not owe their initial discovery and talent grooming to the government, its various appendages and their
funding. their glory was the success of private initiatives, more of which is now needed
to make indian sports count.
sindhu, for instance, owes her success to coach pullela gopichands badminton academy in hyderabad, which has also
incubated talents like saina nehwal and K.
srikanth. gopichand first thought of setting up an academy with facilities to match
the best in the world in 2001. initially, all he
had was some land gifted to him by the then
andhra pradesh chief minister, chandrababu naidu. sponsors were slow in coming on
board. finally, nimmagadda prasad of the
matrix group decided to step in with a cheque
for R2 crore to start building the badminton
academy, which subsequently received more
funds to build on the infrastructure. it now
boasts world class facilities like a swimming
pool, health club, rehab and wellness centre,
running track and accommodation.
similarly, malik or for that matter the army
of champion wrestlers that india has produced in the recent past, mostly come from
the private akhadas (or wrestling grounds) of
haryana. malik was drawn to wrestling after
accompanying her grandfather to the akhadas. it was ishwar dahiyas akhada in rohtak
where malik earned her spurs. she participated
in local tournaments which catapulted her to
rio. currently, there are nearly 8,000 registered and non-registered akhadas in haryana,

delhi and parts of rural maharashtra with

an average registration of 50 pehelwans (wrestlers). that is not all that private initiative has
produced. the main gymnasium in agartala,
where youngsters like Karmakar train, is run
by a privately-owned club, the first filter for
gymnastic talent in the state, which only goes
to show that private enterprise at the grassroots level is acting as a stimulant for sporting activity.
what now needs to be done is to get the backing of private sector sponsors for the countrys
top athletes. some private companies are still
taking steps to support competitive sports. a
sports excellence program by the jsw foundation encompasses the sporting disciplines of
judo, wrestling, boxing, athletics and swimming; it offers high-quality training and international exposure to athletes. reliance has
launched its Youth sports initiative, a multicity school and college sports competition. for
the record, nine private sector companies did
come forward and signed up as sponsors for
the indian contingent for the rio olympics.
more needs to be done. instead of harping on
more money being spent on athletes, resources
and ideas need to be channelled better. what
we need is corporatisation of sports in a big
way. the success of corporate ownership of
cricket teams in the indian premier league
and its offshoots in kabaddi, soccer, tennis
and badminton seems the way to go for every
olympic sport in the country. this type of
structure will allow professionals to come in
and bring transparency and efficiency in the
management of sports. the private sector can
use star sportspersons as their brand ambassadors. the billion-strong tv viewership can
be milked as india is a great sports watching
nation. as the visibility of returns increases,
even private equity and venture capital entities would get tempted. we now need to aim
for a situation where sports companies are
listed on the bse. currently, there are very few
listed companies with the word sport in their
name. the little-known sportking india and
dupont sports are two one can think of but
neither trades regularly. in fact, the sensex
has zero representation from sports. it is time
for the big groups to join. we should aspire to
have several listed sports companies, some of
them even moving the sensex.

u 10 u

au g u s t 2 9 - s e p t e m B e r 11, 2 016

B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

about time
The scope of pledged shares should be expanded

ery recently prime database came

out with a study that shows that promoter pledged shares are at a sevenyear high with as many as 522 companies
promoters (of 1,517 nse-listed companies)
having pledged their shares. not only has
the value of pledged shares gone up, but it
is also higher when compared to total market cap. this gives a good insight into the
level of stress facing india inc. many companies are yet to come out of the high level
of debt they had borrowed, during the hey
before the financial crises hit the world in
2008 thinking the economy would bounce
back resulting in a better business environment. some promoters made the wrong business decisions and some borrowed funds to
invest in unrelated businesses that did not
give yields.
information on pledged shares is valuable
for minority shareholders as they can take
into consideration the potential risk they
carry while buying shares of a company. in
the past, invocation of pledged shares created a negative spiral in the share price.
companies commanding prices in three
digits are now struggling to keep their price
in double digits as promoter-pledged shares
got revoked and investors lost confidence in
the company as well as the promoters.
while sebi and the exchanges did a good
job in terms of disclosing pledged shares
information, there is equal need that major
non-promoter shareholders of the company
also disclose their pledged shares to the public at large. as it is, sebi and the exchanges
ask companies to disclose the list of investors with more than a 1 per cent stake in
the company. the logic that applies to promoters should also apply to non-promoter
shareholders who have high exposure in the
company and have pledged their shares. to
cite an example: a companys promoters have
not pledged shares but non-promoters shareholders, who in total hold a substantial stake,
have pledged their shares and this is not disclosed to shareholders (which is regulatory);
if these pledged shares get revoked investors will lose a lot of money which is not
fair in an era where transparency and disclosures are norms. it is high time sebi and the
exchanges have one more level of disclosures

in the shareholding pattern. this is in the

interest of a healthy stock market.
similarly, the time has come for the rbi to
revisit its guidelines on loans against shares.
this is an area where the rbi has been very
cautious in its approach, which we believe
is not warranted under the present circumstances. one can put tough restrictions when
the market is overheated but that is not the
case currently for the indian market.
the present rbi guidelines stipulate that
banks can give loans against shares only up
to R10 lakh if the shares are held in physical
form and up to R20 lakh if held in demat.
the guideline also says that the loan can
only be up to 50 per cent of the value. to
take a loan of R20 lakh the market value of
the shares has to be a minimum R40 lakh.
furthermore, banks have their own set of
shares that qualify for loans. in other words,
only good quality companies qualify.
the guideline needs a thorough review.
Banks have anyway found ways to bypass
this regulation. they have floated nbfc s
where the restriction of R20 lakh is not applicable. the prime database study shows that
the largest pledgees in this segment with
promoters are the Kotak group, lic, indusind
Bank, axis Bank & its group companies and
Yes Bank & its group companies.
taking such reductions are not relevant
in this day and age. such restrictions do not
exist in markets across the world. the standard bureaucratic excuse is that such facilities would be misused particularly by
promotors. But such arguments make no
sense in modern markets. to start with, in
a free and open market where loans can be
given against gold and real estate, why discriminate against shares. worse there are no
such restrictions on foreigners who can borrow overseas against their shares in india.
this will not only increase the flow of money
to the capital market but also encourage promoters to invest in entrepreneurship to fund
various other business activities. one should
also understand that all pledged shares are
not bad like tata sons which has pledged its
tcs shares to fund other group businesses, as
did the promoters of asian paints. hopefully
the new rbi governor, urjit patel, will have a
fresh look at this regulation.

u 11 u

au g u s t 2 9 - s e p t e m B e r 11, 2 016




Complementing SAARC
Pakistan plays hardball but others are welcome

led regimes and the non-Congress ones. Nor

should he let the Pakistan army that is hostile
to India undermine the SAARC.
To be fair to Modi, he has tried to do his bit
for SAARC by announcing a number of new initiatives at SAARC in Kathmandu at the end of
2014, including the offer to build a SAARC satellite. But Pakistan stalled these initiatives:
indeed, its reluctance to sign the South Asian
Motor Vehicle Agreement, that was ready for
signature at Kathmandu, made it quite clear
that the civilian leadership in Islamabad was
not free to act. Earlier too, Pakistan had pulled
back from agreements that its senior officials
actively participated in drafting. Recall the
efforts in the last years of Manmohan Singh on
bilateral trade liberalisation as well as efforts to
boost energy and electricity exports.
The irony is that while Pakistan enthusiastically embraces economic integration with
China, it throws a wet blanket on any move
at trans-border commercial cooperation with
India negotiated either bilaterally or collectively under SAARC. In the past, while New
Delhi simply threw up its hands in despair,
this time around it is doing something very
different by moving forward with other
members of the SAARC. By deciding to sign the
motor vehicle agreement with Bangladesh,
Bhutan and Nepal, a big boost has been given
to regional connectivity in the eastern part of
the subcontinent. Similarly, the SAARC satellite project is being repackaged as a South
Asian satellite. Islamabad cannot complain
because the SAARC charter provides for this
kind of sub-regional economic cooperation.
Indian cannot change its neighbours. But
it can surely have an order of precedence in
dealing with them and the friendlier ones can
enjoy the fruits of high economic growth that
India is poised to achieve. The idea is not to
let Pakistan hold others in the region to ransom. Of course, Pakistan too is free to choose
its preferred set of partners.
While persisting with this strategy, the
Modi government must not allow its patience
with Pakistan to run out. It must put pressure
on Pakistan by complementing SAARC, which
is otherwise a good idea, with a proactive
engagement with the rest of the subcontinent
through all unilateral, bilateral, sub-regional
and trans-regional means.

ndias decision to ask Finance Minister Arun

Jaitley to opt out of the SAARC Finance
Ministers meet in Islamabad, sending Economic Affairs Secretary Shaktikanta Das in
his place, is a move diplomatically calibrated
to send out a strong signal to our troublesome
western neighbour but at the same time not
push the strained India-Pakistan ties over the
precipice. The possibility of Jaitley attending the meet was always in doubt after Home
Minister Rajnath Singh was given a cold shoulder by Pakistan authorities when he visited
Pakistan to attend the SAARC Home Ministers conference. Media-persons who accompanied the HM were not allowed inside the
hall and a number of those who had applied
for visas (to cover the event) did not get them.
Clearly, Islamabad was aware that Rajnath
Singh was not going to keep silent about Pakistan recently fishing in the troubled waters of
Jammu and Kashmir. In his speech, Singh had
lashed out at Pakistan over its alleged support
to terrorism. Pakistan showed its churlishness
by censoring Singhs speech and not allowing
it to be covered live. New Delhi made it clear
that this restrictive approach by Pakistan,
even for a multilateral event, was not helpful in promoting close ties between SAARC
The downgraded participation is of a piece
with Indias new strategy to deal with Pakistans recurring intransigence and the increasingly dysfunctional character that SAARC is
acquiring as a regional forum. Prime Minister Narendra Modi is expected to attend the
SAARC heads of government scheduled for
November in Pakistan. If he also chooses to
skip the meeting, it could mean another body
blow to SAARC. More importantly, it would
also mean a negation of the initiative that
Modi took two years ago when he invited the
leaders of the SAARC countries to attend the
inauguration of his tenure as PM. In the coming months, there will be arguments in favour
of and against Modis visit. Even if there is no
guarantee of a warm reception, the PM will be
well-advised to reaffirm his commitment to
attend the SAARC summit. He should not allow
the current difficulties to come in the way of
New Delhis long-term strategy to alter the
structure of Indias relations with Pakistan.
This strategy has guided both the Congressu1

AUGU S T 2 9 - S E P T E M B E R 1 1 , 2 0 16

Listening Post

B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

exploring growth

Bse to list

bse-listed cmi ltd is betting big on

the countrys infrastructure space.
in order to explore the space, the
R250 crore specialty cable maker is
expanding its capacity and diversifying its offerings. the company,
which manufactures a wide variety of cables for the indian railways,
oil & refinery industries (iocl, bpcl,
gail and ongc), government agencies and companies (eil, isro, bhel,
ntpc, npc, bsnl and mtnl) and the
private sector (l& t, alstom, siemens,
hitachi and abb), has recently made
two acquisitions that will augment
its capacity significantly. in february
2016, cmi acquired general cables
energy india pvt ltd, a wholly owned
subsidiary of general cable corporation, a fortune 500 company. this has
enabled it to acquire general cables
facility located at Baddi, in himachal
pradesh. earlier, cmi acquired the
fully developed manufacturing facility of danish company fl smidth at
Bawal, haryana. going forward, it is
also looking to move into the B2c
segment of the business, and is all set
to take its revenue to around R1,000
crore by end fY19.

the bse, indias oldest exchange, is all

geared up to file its drhp by september. the issue, likely to be an offer
for sale (ofs), will be to the tune
of 30 per cent. it is reliably learnt
that the stock exchange had asked
its members to indicate the number
of shares they would like to tender
and the members have collectively
offered to tender 30 per cent of the
total share capital of R10 crore. one
rumour is that even the singapore
stock exchange, which had held 5
per cent, has indicated its intention
to tender shares. while the price of
the shares for the offer will be finalised through a book-building mode,
there are indications that the range
will be between R450-500 per share.
the market cap on listing would be
around R5,000 crore. while this is
lower than that of the multi-commodity exchange at R5,100 crore,
the bse, which has got a license to
start the commodity business and
plans to set up a global exchange in
gift city where 300 members have
already consented to set up their
offices, is likely to surpass mcxs market cap. meanwhile with the change
in guidelines permitting entities
to raise their stake to 15 per cent,
there is speculation on whether the
deutsche Borse will also up its stake
in the public issue from the current 5
per cent it had bought for R189 crore
in 2007.

energy saving
energy efficiency services ltd (eesl),
a mid-cap company promoted by various public sector undertakings (psus),
is to undertake the current energy
efficiency drive in the country by use
of led lighting. the company is now
actively looking at moving into other
products such as tube-lights, fans, and
pumps. through this initiative, eesl
intends to be a self-sustaining running concern while meeting the key
objective of energy saving by promoting usage of energy-efficient products. however, according to a source,
a major impediment in india is the
low awareness and high cost of such
products. to address these issues, eesl
plans to bring prices of such products
down to make them affordable and
a natural choice for the consumer.
once market prices reach parity with
eesl prices, eesl will exit the respective market place to extend the
programme to other products.

at the top
pressure by banks has given companies the opportunity to consolidate their strength in the markets.
after reports about jk paper eying
Ballarpur papers assets, the latter
is looking to pare assets with a view
to reducing debt. its focus is now on
century paper housed in century
textiles and industries. the pulp
and paper division has two facilities in Bharuch and uttrakhand and
contributes R2,000 crore, which is a
little under 13 per cent of its total
turnover. while there are not too
many big paper companies, tnpl
being a state government-promoted
company, investment bankers are
u 13 u

au g u s t 2 9 - s e p t e m B e r 11, 2 016

looking at one possible buyer in itc

which has enough surplus cash on
its books and is continuously on the
prowl to acquire good assets. if the
deal gets consummated, jk paper,
tnpl and itc will emerge amongst
the top paper manufacturers.

astral pipes ltd (apl) was dependent on its tie-up with lubrizol for
its key raw material cpvc. according
to a source, to de-risk the business
and end its dependency on lubrizol, astral has backward integrated
to make its own cpvc compound by
using resin from sekisui, Japan. it is
now ready to launch its own cpvc
pipe brand astral cpvc pro. meanwhile, a new adhesive plant is getting
commissioned this year.

smart foray
after robotics, the indian market is now embracing its refined
and upgraded version i.e. cobotics, where innovative robot-human
collaboration takes place towards
augmenting overall productivity.
looking at the potential, danish
company universal robots, known
for manufacturing user-friendly
cobots (collaborative robots or compact table-top robotic arms) for
various applications, has recently
set up a marketing office in Bangalore, and is currently in the process
of building up a network of distributors and partners (currently, there
are around 10). the global major,
which has been in the business of
making these intelligent machines
since founded in 2005, has already
sold around 200 cobots in india to
clients including Bajaj auto, tvs,
m& m, siemens, renault, ge , tcs,
iit Kanpur and auro lab. this year
alone the company is looking at
selling 100 cobots (R10-25 lakh) in
india and the figure is expected to
touch 200 in 2017 and 400 in 2018.
last year per the international
imported around 2,600 robots
which is likely to touch around
6,000 by 2018.


G O V T. & P O L I C Y

WPI goes up in July

the wholesale price index

(wpi) rose 3.55 per cent in
July over what was recorded
during the corresponding
month last year. in July
2015, wpi had contracted
by 4 per cent, while food
inflation increased by 11.82
per cent during the same
period. the hike in food
inflation in July 2016 was
triggered by the increase in
the prices of cereals, milk
products, sugar, oils and fats,
fruits and pulses.

Replace MCI, says

Niti Aayog

a three-member committee
of the niti aayog has
finalised a report to replace
the medical council of
india (mci) with a threetiered regulatory apparatus
for medical education
to be appointed through
a transparent process by
a search-and-selection

SEBI to ban sugar

futures trading

the government has asked

the securities & exchange
Board of india (sebi) to ban
sugar futures trading, as it
does not want a few traders
and speculators setting
prices in a year when there is
likely to be a shortfall of the

E-tailers accused of
flouting FDI norms

the confederation of all

india traders, a body of
traders in the country, has
filed a complaint with the
department of industrial
policy & promotion against
leading e-commerce
players, alleging that they
are flouting the foreign
direct investment norms.
e-commerce companies,
including amazon, flipkart
and snapdeal, have been
announcing discounts
on their e-platforms in
violation of the fdi norms,
according to the traders

B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Panel to review
rules for

the government has

set up a panel to look at
easing the policy regime
for e-commerce players,
including the rules for
foreign direct investment a
controversial issue with local
retailers. the panel has been
asked to submit a report
within 60 days.

Tax collection up in

tax collections, excluding

refunds, rose 27.9 per cent to
R4.31 lakh crore in the first
four months (april-July) of
the current financial year,
as against R3.37 lakh crore
during the corresponding
period of 2015-16.

Spectrum auction
to start by end

the government will auction

spectrum by the end of
september, in which mobile
airwaves worth R5.63 lakh
crore at the base price value
will be put up for sale. the
government will put a total
of 2,354.55 megahertz of
mobile airwaves frequencies
for auction in all bands -700 mh z, 800 mh z, 900 mh z,
1,800 mh z, 2,100 mh z and
2,300 mh z. all the airwaves
being put for auction can
be used for high-speed 4g
services. the government
expects to raise at least
R64,000 crore from this

Retail inflation
target fixed at 4 per

the government has

formally notified a consumer
inflation target of 4 per cent,
allowing for two percentage
points movement on either
side of the 4 per cent target
for five years starting from

Grain output to
touch 252.22
million tonnes

the government has revised

the crops output data for

2015-16 crop year (JulyJune), with the production

touching 252.22 million
tonnes. the earlier estimate,
in may, had projected grain
output at 252.23 million
tonnes. production in
2014-15 was 252.02 million

GST rates to be
below 20 per cent?

industry association
assocham has said the
standard goods & services
tax (gst) rate should be
well below 20 per cent,
with services of mass
consumption included in
the merit list, to ensure that
prices of critical services
like telecom, banking,
healthcare, railways, do not
lead to inflation.

Anti-dumping duty
on HR steel

the government has

imposed an anti-dumping
duty (add) for six months
on import of hot-rolled
( hr) steel products from six
nations, including china
and south Korea, to shield
domestic manufacturers.
this comes after the
government recently
extended the minimum
import price (mip) norms
on select steel products, but
removed safeguard duties
from 37 others. earlier, there
were 173 products under
mip, which has now been cut
to 66.

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au g u s t 2 9 - s e p t e m B e r 11, 2 016

Railways invites bids

for Maglev trains

indian railways has invited

foreign private players to run
high-speed trains running at
500 km per hour. according
to railway officials, these
trains will operate on
magnetic levitation (maglev)
technique, which allows
trains to run at very high
speed, the minimum being
350km per hour. at present,
maglev technology is used in
countries like Japan, china,
and germany.

New model for

monsoon forecast

from 2017 onwards, the

india meteorological
department (imd) is set to
operationalise the dynamical
model, departing from the
current ensemble statistical
model. imd has been using
the ensemble statistical
model to predict monsoons
since 2007. a basic statistical
model was in use since 1920.
later, in 2007, imd switched
to the ensemble statistical
forecasting, as the annual
summer forecasts were
increasingly turning out to
be inaccurate.


No indemnity-based
health products

the insurance regulatory

& development authority
of india (irdai) has issued
new health insurance


B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

regulations, which will

replace the 2013 rules. it
will be applicable to all
registered life insurers,
general insurers and health
insurers conducting health
insurance business. as per
the new regulations, life
insurers can no longer offer
indemnity-based health
insurance products either
as an individual or a group

guidelines issued

irdai has issued guidelines

on the remuneration of
non-executive directors,
managing directors, ceos
and whole-time directors
of insurance companies.
the guidelines cover
remuneration structure such
as fixed pay, perquisites,
bonus, guaranteed pay,
severance package, stock,
pension plan, gratuity,
etc. the authority has said
that any remuneration
of the md, ceo or wholetime director over R1.50
crore should be debited to a
shareholders fund.

Listing deadline
proposed for

in its draft norms for listing

insurers, irdai has proposed
that that all companies
meeting the stipulation
on minimum years of
existence for listing should
initiate steps to get listed
within a period of three
years from the date of issue
of directions under these
guidelines. all general
insurance companies,
including stand-alone
health insurers, that have
been in existence for eight
years and life insurance
companies in operation for
10 years should initiate steps
to get listed.

SEBI goes after

ponzi schemes

the securities & exchange

Board of india (sebi) has
so far launched as many
as 567 prosecution cases
against those collecting

public money through

illegal investment schemes.
these entities have garnered
funds through fraudulent
investment schemes, with
promise of huge returns to

NPPA to launch
app with key drug

the national pharmaceutical

pricing authority (nppa) is
planning to introduce an
app that will enable patients
to check prices of essential
medicines on-the-go. the
app search medicine price
has been developed by the
national informatics centre.
patients can search for the
ceiling price of all medicines
under the national list of
essential medicines on the
basis of its generic name and
the state theyre buying it

Portal launched
to curb pooling of

the reserve Bank of india,

along with other financial
sector regulators, has
launched a website www. which
will enable people to obtain
information regarding
entities that are allowed
to accept deposits, lodge
complaints and also share
information regarding illegal
acceptance of deposits.

Panel to study
household finance

the rbi has set up a

committee to look at the
various facets of household
finance in india. the panel
will also consider whether,
how, and why the financial
allocations of indian
households deviate from
desirable financial allocation
and behaviour (such as the
large household allocation
to gold).

MCLR rules tweaked

rbi has said it will slightly

adjust the existing marginal

cost of funds-based lending
rate (mclr), which was
in vogue since april. the

central bank had brought

down the repo rate by 1.50
per cent in January 2015.
however, the banks have
lowered their
base lending rates by only
0.6-0.7 per cent. rbi is
seen to be evaluating the
progress in transmission
of its previous rate cuts to

Bias against existing


the cellular operators

association of india
(coai) has alleged that
the telecom regulatory
authority of india (trai)
is discriminating against
existing operators. the
industry body said it was
shocked that some of the
papers appeared to have
been crafted and timed to
serve the interests of new
players, with complete
disregard for the massive
investments made by the
existing operators.


Shareholders allege
violation by Cairn

two of the largest minority

shareholders of cairn
india have approached the
independent directors of
cairn india, questioning
the tenure extension of
$1.25 billion inter-corporate
loan to thl zinc, a Vedanta
group company. the
minority shareholders, cairn
energy plc and mondrian
investment partners, have
both expressed concerns
about possible violations of
sebis listing obligations and
disclosure requirements by
cairn india.

Grasim and AB Nuvo

to be merged

aditya Birla group chairman

Kumar mangalam Birla
has initiated a plan to
merge grasim industries
and aditya Birla nuvo. the
restructuring would entail
aditya Birla nuvo demerging
its financial services business
into a separate listed
company and the rest of the

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au g u s t 2 9 - s e p t e m B e r 11, 2 016


r ajamani, as managing
director, Microsofts India lab
SamSon Khaou, as
managing director, Dassault
Systemes, India
hiteSh Gupta, as managing
director, Iron Mountain India
pawan Kumar Bajaj, as
managing director, United
Bank of India
r avindra praBhaKar
marathe, as chief executive
officer, Bank of Maharashtra
dineSh Kumar Khara, as
managing director, State
Bank of India
r ajeev KriShnan, as
managing director, Max
Hypermarkets India, a
Landmark group company
v. SrinivaSan, as chief
operating officer, Cognizant
Technology Solutions
RESIGNED r. BalaKriShnan,
as group chairman, Mullen
Lowe Lintas
businesses being merged
with grasim.

Poor dividend irks

Tata investors

several shareholders have

complained about the
low dividend payout at
tata motors 71st annual
general meeting. chairman
cyrus mistry said that
the company was going
through challenging times
but is on a turnaround
path. for 2015-16, tata
motors declared a dividend
of 20 paise per ordinary
share and 30 paise for class
a shares.

Reliance Jio
demands action

reliance Jio has asked

the telecom regulatory
authority of india (trai)
to take action against
dominant players, including
airtel, for denying it interconnection in breach of
the licence agreement. the
company said denial of
inter-connection has led to
unusually high call failures
during its test run.


B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

dedicated performance

Sanghi: complete
control to customers

In August 2015,
Business india
wrote that Netmagic
would continue
to focus on valueadded services
in its portfolio.
The company has
recently launched
a private virtual
cloud service for
enterprises in
association with
Cisco and Microsoft

n a significant move to diversify its cloud

service portfolio, netmagic solutions pvt
ltd, an ntt communications company,
has launched a unique product simpliVpc
in association with microsoft and cisco. a
next-generation cloud service, also known as
virtual private cloud (vpc) is an offering that
bridges the existing gap between private and
public clouds in a cost effectively. here the
service provider offers its customers a dedicated computing component (node), even as
network and storage facilities are shared by
multiple tenants.
Businesses that have been finding it difficult to hire a private cloud due to costs, will
be able to enjoy a similar service with almost
20-25 per cent savings without compromising compliance and security. this will help
enterprises that are shifting their processes
to the new saphana platform.
the vpc service, which is being launched
in asia for the first time (though the product has just taken off in developed markets),
will help enterprises leverage hybrid it strategy to scale, optimise and manage the technology environment real-time. simpliVpc is
an enterprise grade iaas (infrastructure as a
service) platform that comes with an extensive set of managed services that enable businesses to provide a simple transition to the
cloud with diverse compliance, security,
scalability, flexibility, and application performance needs. moreover, the lead time
here is as short as 24-48 hours (as against
around two months), which netmagic is
looking to bring down to around 4-8 hours
going forward.
with this product, netmagic will further
diversify its portfolio for a market which is
undergoing rapid transition. the vpc is a
niche segment and is currently pegged at
around $5 billion (global market), and is estimated to reach around $45 billion by 2022.
netmagic is investing over $30 million in its
infrastructure and resources; it has already
done the necessary upgradation and modifications to its mumbai and Bengaluru grids.
chennai and noida will be taken up in the
next quarter.
we are extremely proud to present the
simpliVpc service. customers looking for
managed a private cloud service can now overcome the entry barriers typically encountered
in private cloud adoption. simpliVpc will
deliver high levels of dedicated performance,
while giving customers complete control

over their virtual resources, allowing them

to deploy and scale as needed, says sharad
sanghi, md and ceo, netmagic, which has
already received an overwhelming response.
led by big enterprises like lafarage,
crompton, the greatship group and century
mattresses, the company has already developed a customer base of 10 companies and is
looking to add around 50 more enterprises by
the end of this fiscal, adding around $10 million to its topline. Besides being powered by
microsofts latest hypervisor platform, simpliVpc service is also the first in asia pacific
region to leverage programmable network
fabric (sdn) powered by ciscos application
centric infrastructure technology in a multitenant service provider environment.
ashok shenoy, director, data center sales,
cisco india & saarc, says, as enterprises
move to cloud, many have begun understanding the benefits of vpcs to manage
their existing management and security policies. it is therefore imperative to provide
them with solutions that are not only robust
but agile enough to meet varying workloads. we are pleased to associate with netmagic to launch simpliVpc services in india,
which will empower enterprises with more
flexibility and control over deploying their
workloads to the cloud.
we are excited to partner with netmagic
and offer hyper-V on the azure stack that
enables simpliVpc, the hybrid cloud scenario for our customers. with the launch
of simpliVpc, our customers will benefit from high value infrastructure and platform services of azure like disaster recovery,
identity, backup, cloudburst as well as testing and development. the journey from
private to public to hybrid cloud is a natural progression for businesses in india and
microsoft is suitably positioned to cater to
the evolving cloud requirements of customers in india, says peter gartnerberg, general
manager, enterprise partner group, microsoft
india, who feels cloud adoption by enterprises in india will continue to grow, and an
increasing number of businesses are moving to public and hybrid clouds. this trend
will continue to strengthen in the future
and we are committed to providing the best
cloud offerings for our customers, enabling
them in their next step towards digital
transformation, he adds.

u 16 u

au g u s t 2 9 - s e p t e m B e r 11, 2 016

u a r Bi n d gup ta

Businessmen in the News

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

onalika itl recently unveiled its solis

120, a 120 hp tractor, under its international brand name solis. it is the first
and only indian company to indigenously
develop and make 120 hp tractors, with
the aim to strengthen and increase its presence in indian and overseas market. for
the past two decades, the sonalika group
has always endeavoured to empower farmers by providing a complete agricultural
solution that will enhance their agricultural productivity. through this 120 hp
tractor, the company is focusing on commercial farmers, by providing an ease in
doing arduous work, says Deepak Mittal (centre), md, sonalika itl. the solis 120
is ergonomically designed to cater to the
needs of its end user with international
styling and built with a 6-cylinder, turbocharged engine with 24+24 gear box ensuring 4,500 kg of huge lifting capacity.

mul the taste of india

will be setting up a stateof-the-art ice cream manufacturing facility at Khed city,
pune. K. Rathnam, managing director, amul dairy,
recently signed an mou with
Khed economic infrastructure
pvt ltd (keipl). pune is our
largest market for amul icecream and currently there is
a supply shortage. we wanted
a quick set up in and around
pune, and Khed city qualifies
as our preferred destination.

we have got around 11 acres

of land in Khed city for our
new dairy plant. the facility
is planned to commence its
operation in 12-18 months
with an estimated investment
of over R120 crore, said rathnam. amul will manufacture
ice cream and other milk products in Khed city. its presence
will give an immense boost
to the make in maharashtra campaign and strengthen
the rural economy further. u

watting mosquitoes is
a chore for anyone, but
Apollo Munich Health
Insurance makes it fun,
with an interactive online
game Kill the Killer combined with a public interest message. gamification
has undoubtedly become a
strong communication tool.
through it, we are hoping
to raise awareness for dengue and educate consumers about the disease. at
apollo munich, we have
always focussed on innovation and this time around
we are moving innovation
from products to customer
engagement, says
Antony Jacob, chief executive officer, apollo munich.
the game can be played on
apollo munichs homepage anytime, anywhere. u

ata AutoComp Systems, a leading autocomponent

has acquired titanX a leading global engine cooling
supplier. titanX has plants
across north america, south
america, europe and china
with sales of approximately
$200 million, and is currently

owned by eqt opportunity

and fouriertransform. speaking on the occasion, Praveen
Kadle, chairman, tata autocomp systems, said, titanX
powertrain cooling solutions with a global presence
that fits perfectly into our
future growth areas. we are

u 18 u

au g u s t 2 9 - s e p t e m b e r 11, 2 016

confident that under the successful and experienced management in titanX, it will be
a great asset and will contribute to the growth of tata
autocomp. Ajay Tandon,
md & ceo, tata autocomp
systems added, tata autocomp offers its customers in
india and china a wide portfolio of products and services
through its own capabilities
and jvs with global majors.
titanX has the latest technology in engine cooling solutions for commercial vehicles,
which will help enhance our
offering to our customers
in commercial vehicle segment outside india. titanX
was advised by bda partners and tata autocomp
was advised by tata capital investment banking. u

Businessmen in the News

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Equitas Holdings which
received rbis final approval
to launch a small finance
bank (sfb) recently, is all set
to start the sfb operations
in september. we currently
serve about 1 per cent of the
indian households. with the
conversion to a bank and
expansion in the product and
service offerings with inclusion of savings, deposits,
remittance and third party
products such as pension
and insurance, the company
expects to provide a more
comprehensive service to
the low income households,
says P.N. Vasudevan, managing director, equitas holdings. the company, having
presence in micro finance,
used commercial vehicle
finance, small enterprise

loans and housing finance

services, primarily targeting the low-income households in the informal sector,
will convert around 410 of its
branches into sfbs out of its
580 branches. the companys
loan book (present: R7,000
crore) has grown at a cagr of
around 50 per cent in the last
four years.

gs Health, a global provider of revenue cycle,

healthcare analytics and
medical coding services to
leading us healthcare providers, inaugurated its new
centre at western pearl in
hitec city. this is its largest
delivery centre in hyderabad,
with a capacity to seat over
1,000 employees. it will also
be hosting a world class 90
seat in-house training academy and a dedicated 150-seat
centre. we are delighted
to expand our operations in
hyderabad as the city plays
a vital role in our business
strategy owing to its vibrant
entrepreneurial culture, business-friendly
policies and highly qualified

talent pool, said Devendra Saharia, founder &

ceo, ags health. the state-ofthe-art facility will help the
company service its growing base of blue chip clients,
while expanding its national
footprint to access the best
and brightest talent in and
around hyderabad.

to welcoming the discerning genre at our upcoming

stores at two more airports,

and at facilities at cochin
and sringar. da milano is
preparing to meet global
aspirations at international
locations in uae and in
southeast asian markets,
says Sahil Malik, managing director. the expansion
entails widening its base to
tier ii towns of the 11 states
that da milano is in at present, and to set up facilities in
another eight states, besides
seeking to mark its presence
at all airports in india. u

mumbai last month, roekal

along with bdo asia head
Stephen Darley and india
are optimistic of good
growth. rotation of auditors and growth of midsize firms will provide us

good opportunity says darley. over the next 5 years

we expected to be in the
top 5-6 firms in the country, says Kothari. bdo a
R100 crore entity is expected
over the next few years. u

ast fortnight, at the construction world architect

and builder (cwab) awards,
Pratap Padode, founder-director, Smart Cities
Council India, spoke on
the various problems facing
cities today. he emphasised
on how traffic is creating a
major problem, as almost
7.7 million people out of the
total billions of population
are urban residents. the
three mega cities coming up
are delhi, mumbai and Kolkata, he pointed out, highlighting that basic amenities
need to be defined, capacity
expansion of infrastructure
need, to be made, and cities
need to grow vertically. the
cwab awards felicitate indias
top builders and architects for their excellence. u

eather luxury brand Da

Milano plans to expand
its airport presence by adding cochin and srinagar
by the end of september. it
is present in more than 15
premium international and
domestic airport locations
across india including delhi
and mumbai which attracts
over 50 million passengers
in a year. da milano has
a strong presence in the
country and has carved a
niche for itself. i am personally looking forward

ur focus in india
currently is to get
more partners and hire the
best available talent, says
Martin Van Roekel, ceo,
BDO International on
his visit to india. attending
the asia-pacfic conference in

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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

lon musks tesla motors

has been pioneering the
concept of self-driving cars
for quite some time. now
german automobile giant
daimler ag too bets big on it.
Jan Brecht, cio, Daimler
ag sees autonomous driving
and connected cars as being
the next big thing in the
automotive world. but he further adds that traditional car
makers are well positioned to
challenge apple, google or
tesla and drive the change,
thanks to their all-round
capability, engineering skill
and it expertise. brecht says
india can play a critical role
in the global development of
connected cars and trucks at
daimler group through its
r&d base in bengaluru mercedes benz r&d india (mbrdi).
i think no big global corporation can afford not to be in
india to take advantage of its
it talent. we want this centre
to transform from extended
work bench to a really
entrepreneurial and business model defining team.
on the challenge thrown
by tech giants like apple,
google and tesla, he said, at
some stage, you need to get
entirely new ideas and often
they come from an external
world rather than an internal
one, so in that regard, you
are right. it keeps you honest, if there are new players
entering the industry. that is
a good challenge. given the
competency we have in engineering, and the competency
that we are building in mbrdi
in bengaluru, i dont think
we have to shy away from the

ion Weisler, ceo, hp,

was in india last fortnight. a frequent visitor to
the country, this is probably his `50th visit. weisler
sees big opportunities for
his company from digital
india program. the company recently bagged a contract for digitisation of over
5 crore land records in bihar.
weisler says that the company will set up a separate
digital india business unit
making the company probably the first mnc to do so to
pursue opportunities. india
is one of our top three important countries in the world.
for someone who has been

here for so many decades

now, to see the momentum
thats building in this country is really exciting, he
said. the company manufactures more than 300,000
pc s every quarter but weisler
feels manufacturing is going
to change significantly in the
years to come. weve been
pretty aggressive with our
positioning of 3d printing
and the impact it will have
on democratising manufacturing, which really hasnt
changed since the industrial
revolution. manufacturing
will take place in any country much closer to the customer. we didnt get into 3d

printing for the $5-billion

industry it is today but got
into it to disrupt the $12-trillion manufacturing industry
centralised in a few countries
across the world, he added. u

fantastic food and wine, travellers can get close to the real
australia in south australia,
claims urmonas. the core target segments include leisure
travellers, group travellers,

honeymooners and families.

to attract these travellers,
satc has been promoting
three key destinations adelaide, Kangaroo island and
barossa. Kangaroo island
is well known for its wildlife and pristine beaches and
barossa is famed for its rolling vineyards and gourmet
food. adelaide is the vibrant
capital city of the state and
serves as a gateway to other
regions. adelaide also has
one of the most recognizable
icons among indian tourists
the popular adelaide oval
which is home to the famous
sir donald bradman museum
and now offers a roofclimb

years. we didnt feel ready to

come into the market until we
had clarity on our direction.
secondly, we didnt feel the
market was ready, said Ian
Bickley president, Coach,
the new York-headquartered
luxury brand. bickley said he
would like to build a leadership position in the accessible
luxury space in the country and that he is betting on
india as a market with long
term potential. when i came
here last summer, i visited several cities and top shopping
malls and based on the traffic in the malls i felt a much
stronger engagement with the

local consumers compared to

my previous visits. i was reassured by the evolution of the
market and the performance
of the brands and felt there
was an appetite for our products, said bickley. on the
luxury brands partnership
with genesis, he said, genesis has a strong track record
of launching luxury brands
in the market so things
moved quite quickly in terms
of developing the partnership with them. the opening price points for coach
bags in india would be under
R30,000 but there are also
products over R50,000.

ana Urmonas, regional

director, southeast asia
& india, The South Australian Tourism Commission (satc) was in india last
fortnight, extolling the many
wonders of south australia. the 2015 india-pakistan
world cup match hosted at
the adelaide oval drove considerable awareness for the
state and the satc is looking to leverage the momentum built. india is one of
the worlds fastest growing
outbound travel markets in
the world and we at the satc
recognise the huge potential
this market holds for us. with
wildlife experiences, pristine
beaches, unspoilt nature and

here are two reasons

why we got late in
entering india. firstly as a
brand we have been going
through a significant transformation over the last three

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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

aetitia Ayache, brand

Dior, was in the capital for
the launch of parfums christian dior boutique. for
christian dior, beauty is in
every woman, beauty is in
what makes her unique, her
very own self. there is therefore no ideal christian dior
woman but a certain vision
of a woman: independent,
mischievous, charming, daring and elegant at the same
time. the dior woman has got
that je ne sais quoi as we say in
french, meaning she has got

here are parts of india

where people dont
have their own garbage

fter his meeting with

finance minister arun
Jaitley recently, Thomas
Sweet, cfo, Dell, said the
meeting was an opportunity
to give him some flavour of
what dell does here. dell is
willing to use india as a manufacturing hub for exports
to south asia but it wants
a more conducive framework in terms of duties and
structures. there is a lot of
opportunity for india to be
a great domestic market for

ietnam and india held

their 8th political consultation session and 5th
deputy foreign ministerial
strategic dialogue in new
delhi recently. Vu Hong
Nam, deputy foreign minister, Vietnam and preeti
saran, secretary (east) of the
ministry of external affairs
chaired the events. the two

this certain charm you cant

describe clearly but you cant

resist it. the classic french

chic is really the essence of
the dior woman; and for
christian dior, happiness is
the secret to her beauty, said
ayache. christian dior parfums & beauty has a range
of products, in makeup and
skincare. indian customers
have indeed already elected
their favourites! in makeup,
dior addict lip glow is a best
seller. in fragrances, sauvage
is our very number one for
men, while for women, Jadore
and miss dior remain classic
in india, added ayache.

pick-up. people are burning garbage and then people ask for 4g. (in that case)
youre focussed on the wrong
g, until people are disposing their own garbage. Sree
Sreenivasan, the newly
appointed chief digital officer (cdo) of New York City,
said. he said india should
give priority to setting up and
smoothing out infrastructure
issues over the digital drive.
sreenivasan, who has been
the cdo at columbia university and the metropolitan

museum of art, is on an
india tour, talking about the
importance of using social
media and different online
platforms effectively. what
can india learn from the
experience of us cities going
digital? look at the new
York city digital playbook.
its our road map on how
new York city (will do digital) it doesnt mean thats
exactly how india needs to
be, but somewhere there is
the right way for india to be
as well, he said.

technology consumption, but

there is also a great opportunity for it to be an exporter
of technology, said sweet.
dell primarily caters to the
domestic market, but the
company also sees india as a
regional manufacturing hub.
there is a lot on the governments plate right now with
gst, etc. but over time making sure that the framework
around how you treat exporters make sense, is important
to us, sweet said.
sides acknowledged positive
strides in relations across
politics, economics, defencesecurity,
science-technology, culture, tourism and
people-to-people exchanges.
they highlighted the significance of high-level visits of
the two countries leaders,
especially the upcoming tour
to Vietnam by indian prime
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au g u s t 2 9 - s e p t e m b e r 11, 2 016

uroblech 2016 will open

its doors in hanover, germany from 25-29 october
2016. the exhibition will,
once again, be the meeting
place for sheet metal working professionals from all
over the world. with this
years theme the new
generation of sheet metal
working, euroblech 2016
reflects the trend towards
digitalisation and smart
manufacturing in modern
sheet metal processing. five
months ahead of the show,
the organisers, mack brooks
exhibitions, announced a
further increase in exhibition space. Evelyn Maria
Warwick, exhibition manager from uK recently visited mumbai to share the
plans. a total of 1,522 exhibitors from 40 countries have
already secured their stand
space at this years euroblech. this represents an
increase in net floor space
of 4 per cent compared with
the previous exhibition and
reflects the fact that exhibiting companies have booked
bigger stands. major exhibitor countries are germany,
italy, china, turkey, the
spain, austria, great britain
and the usa.
minister narendra modi.
Vietnam and india agreed to
prepare for the 45th anniversary of diplomatic relations
and the 10th anniversary of
their strategic partnership.
the two sides discussed propelling the strategic partnership forward and agreed
to maintain sound defencesecurity relations.

Business Notes

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Incentives have proved a bane for the cotton spinning sector

he domestic cotton yarn sector, the strongest link of the

indian textile value chain, is
under tremendous pressure. and the
biggest irony is the fact that the same
incentives that have been offered to
this sector to maintain its pace and
momentum in the last few years, have
worked against it. the centre-sponsored technology upgradation fund
(tuf) and incentives given by various
state governments like maharashtra,
gujarat, rajasthan, andhra pradesh
and madhya pradesh in the last four
years, have created huge spinning
capacity in the sector. but the commensurate demand has not been generated in the downstream segments
such as weaving and garmenting.
currently, there are around 52 million spindles in the country of which
a big chunk was added (through
replacement and new) during the
initial years of the tuf scheme that
started in 1999 in order to upgrade
and modernise the domestic textile
industry. later as the government
realised that most of the fund was
getting consumed primarily in spinning, it tweaked the scheme in favour
of other segments of the industry. in
the last six months, most of the incentives under the scheme to the spinning sectors have been discontinued.
however, that has been more than
compensated for by the state governments textile policies in the last fourfive years. in fact, the last four years
have seen around 2 million additional

spindles every year due to incentives

provided by these states.
this has led to a massive demandsupply imbalance (an overcapacity
situation) in the cotton yarn sector.
the recent chinese cotton policy
which has discouraged the piling up
of huge raw cotton bank, has added
to indias woes in a big way. china,
which would import almost 45 per
cent of indias cotton yarn exports
till three years ago, has reduced its
imports to as low as 15 per cent. this
has created a big flutter in the indian
spinning industry which produces an
export surplus as high as 30 per cent.
lack of diversification into other markets in the wake of the emergence of
regional blocs, has failed to offset the
loss suffered in china.
as if that was not enough, the
whole equation of the yarn business
has gone awry for the spinning units
since the raw cotton prices in the last
couple of months have almost doubled (from around R32,000 per candy
in June to R50,000 in august), even
as the yarn prices continued to be
muted in the last three years on the
domestic market. this has not only
squeezed the margins for the spinners
but also most of the industry players
are bleeding profusely. many mills are
partially or fully closing down. the
recent rbi financial stability report
has stated that textiles have the highest slippages from standard account
to npas i.e. 8.8 per cent in 2015 and
the way the industry is going, 2016 is
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au g u s t 2 9 - s e p t e m b e r 11, 2 016

sa n JaY bor a de

challenging times

going to be worse.
as npas are increasing, mills are
partially or fully closing down on the
one hand while, on the other hand,
new investments are coming up. old
and new mills have a cost differential
of 10 per cent in an industry, which
doesnt even have a consistent net
profit margin of 5 per cent.
cotton to yarn had a value addition of R125 per kg in march 2013 and
went up to R144 per cent kg in september 2014. for the last one year, it been
down to R115 per kg and now it has
come down to R100. hence, in the last
three years, contribution from yarn
manufacturing has reduced by 25 per
cent, while manufacturing costs have
gone up by about 10 per cent.
experts have attributed this plight
of the cotton yarn sector to the governments lopsided policy that only
helped in abnormal addition (mushrooming) of spinning capacities at the
cost of the other downstream links of
the textiles and clothing industry. it
is to be noted that over 70 per cent
of investments made under the tuf
have gone into the spinning sector,
while the weakest links like weaving,
processing and garmenting together
have received the rest.
on the micro level, tuf has failed
to deliver its main objectives. instead
of strengthening the weaker segments
of the industry, incentives have gone
into upgrading the already strong segment (i.e. spinning) of the industry.
this has created a massive imbalance
and distortion across the textile value
chain. while other weaker segments
have continued to suffer, spinning is
currently under huge stress as there is
not enough demand to consume the
production, says sanjay Jain, president, north india textile mills association (nitma).
our policy initiatives and their
implementation have gone haywire.
there is a lack of a holistic approach
and instead of putting in place an
organised supply chain, we have
ended up infusing anomalies and
thus distorting the production base.
You will be surprised to know that
these incentives have also created an
unhealthy competition within the
spinning sector. in other words, newly-built spinning units are not only

Business Notes

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

u a r bi n d gup ta



lmost everyone takes medicines

on faith: faith in the prescribing doctor that he has made a proper
diagnosis and prescribed a suitable
medicine, faith in the pharmaceutical company that manufactures the
drugs and even faith in the neighbourhood chemist that he will strive
to keep the menace of fake drugs at
given these circumstances, the
reputation of all these players in the
healthcare scenario is of the utmost
importance and a research report on
the most trusted pharma companies
in india would clearly have immense
value. the most recent report of
this nature, released just last fortnight is the most reputed pharmaceutical brands list, prepared by tra
research and bluebytes news.
the tra-bluebytes findings are a

pa l a s h r a n Ja n b h au m i c K

enjoying incentives on their investments but also on their operations,

rendering several existing units unviable. old and new mills have a cost
differential of 10 per cent in an industry which doesnt have a consistent
net profit margin of even 5 per cent.
it is a kind of cannibalisation that
will have severe ramifications on the
overall sector, warns d.K. nair, past
secretary general, confederation of
indian textile industry (citi).
the union government, which
is in the process of coming up with
a new textile policy, needs to give it
due diligence while framing various details of the policy. Just having
a new textile policy and providing
incentives will not serve any purpose.
this is something we must learn from
our recent experience. states should
also be made party to the think-tank
so that the resources can be used judiciously and as a consequence we can
prepare our textile industry to take on
the challenge effectively.

composite of what they have dubbed

brand reputation, based on tras
analysis of over 24,000 articles published in the mainstream newspapers, and brand respect, based on
interviews with some 2,500 consumer-influencers in different parts of
the country.
working with this technique, the
latest report places lupin at the top
spot with a score of about 90,000 (out
of a possible 100,000) points, and
sun pharma a distant second with
just about 43,596 points. by comparison, abbott occupies the 10th position with a mere 748 and mankind
pharma the 20th rank with just 77.8
according to the authors, the stark
difference in total score between
lupin and the rest of the companies
is because of what has been described
as brand respect score ( brs). the brs
is calculated on the basis of how
much respect each of these is able to
command in the eyes of the consumer-influencers. no further details are
provided in the report, particularly
about who these influencers are.
as dr gurpreet singh wander,
president of association of physicians of india, points out in one
of the three guest columns in the
report, the pharma industry operates on diverse objectives of improving the lives of the patients and at
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au g u s t 2 9 - s e p t e m b e r 11, 2 016

the same time generating profits to

satisfy its stakeholders including
the funds needed for research and
thus the two main stakeholder
groups that any pharma company
has to serve are the prescribing doctors and the equity stakeholders,
even though their interests may not
be completely aligned with each
other most of the time. therefore,
without some details of whether the
influencers included the medical fraternity as well as the investing community, the authenticity of the brs is
difficult to assess, says an industry
besides, everyone in the pharmaceutical industry in india knows that
the end user, that is the patient who
actually consumes the medicine,
is very rarely the decision maker in
this regard. in fact, many patients
are even unaware of the manufacturer of most medicines that a doctor might prescribe. in that scenario,
how significant can a brand reputation calculated on the basis of newspaper articles be?
looking at it from another standpoint, namely market capitalisation and annual sales revenue, the
difference between the three topranked drug companies tells quite a
different story. thus lupin, which
has scored more than double of sun
pharma in the tra-bluebytes report
(90,000 versus 43,596), has a market cap of R68,666 crore (as on 25
august) and its fY16 sales revenue
stood at R13,701 crore (net profit:
R882.5 crore). by comparison, sun
pharma has a market cap of R184,076
crore) and its 2014-15 sales revenue
stood at R27,287 crore (net profit:
R4,541 crore).
likewise, cipla is ranked 3rd with
31,254 points while dr reddys comes
next with just 9,163 points. however,
in sales revenue and market cap, the
difference is not so stark. ciplas sales
revenues for fY16 were R13,609 crore
(net profit: R1,350 crore) compared
with dr reddys (revenue: R10,207
crore; net profit: R1,354 crore). in
terms of market cap, cipla stood at
R45,247 crore, while dr reddys was
at R50,486 crore.
this appears to indicate that both

Business Notes

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

in the view of the prescribing doctors, who are driving the sales, and
the investing community which
determines the share price movement, and market capitalisation, the
tra-bluebytes report may be wide off
the mark!
u sumit ghoshal


a bollywood
theme park

ndians will soon have another

major reason to extend their trips
to dubai. the largest integrated
theme park destination in west asia,
dubai parks & resorts (dpr), is set
to open its many gates to the public in october this year. the park
has a clear focus on india, as the
worlds first bollywood themed park
will open as one of the three theme
parks. india is a key source market,
says Vinit shah, chief destination
management officer, dpr.
the amusement park, built at a
cost of $2.7 billon, will open in its
first phase with motion gate dubai,
bollywood parks dubai, and legoland dubai. the first phase of the
construction had started late in 2013
and the park is now slated to open
in october.
this mega theme park has a number of firsts to its credit. this includes
the worlds first bollywood-themed
park. Yes, as a fan of bollywood
movies, you can relive nostalgic
moments through a number of different environments. some of the
biggest blockbusters of the past and
present find space here such as Sholay, Don, Mughal-e-Azam, Rock On,
Dabanng and Lagaan among others.
bollywood parks dubai covers an
area of 2.7 million sq ft, of which
1.7 million sq ft launches in the first
phase. the bollywood theme park is
operated by parques reunidos, one
of the leading and fastest-growing
leisure park operators in the world.
another leader, merlin, is handling

for most non-indian visitors, the

main attraction is expected to be
motion gate, which will have attractions from three leading hollywood
studios dreamworks animation,
sony pictures studios and lionsgate.
the legoland park is its park in the
middle east and the seventh worldwide. it will be an interactive park
designed for children aged two to 12.
this is also the first legoland, where
miniland has been brought indoors
and, instead of a rather passive show,
it will also have music and lighting,
a departure designed to attract visitors, explains shah.
A new Orlando? the entire destination will be connected by riverland
dubai, a themed retail and dining
destination which will connect all
the parks. guests can stay at the lapita hotel, a polynesian themed family hotel, part of the autograph
collection by marriott. this 504key hotel is the only accommodation facility inside the park. shah
explains the departure from other
leading global theme parks by saying
multiple hotels are expected to come
up for dubai expo 2020.
dpr is spread across 25 million sq
ft of land located on sheikh zayed
road, close to the palm Jebel ali in
dubai, about 60 km from downtown dubai. the location is about
midway between the dubai and abu
dhabi airports.
dpr projects about 6.7 million ticketed visits for 2017, its first full year
of operation. the project opens with
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au g u s t 2 9 - s e p t e m b e r 11, 2 016

4,000 staff. dpr is yet to announce the

price of entry tickets for spot entries.
it has however announced the prices
for annual passes. besides india, the
park also expects to receive the bulk
of visitors from the gcc and europe.
dpr has given the nijhawan group
the mandate for marketing and representation in india.
dpr also looks to be a location for
group tours, mice groups and shoots.
indian tour operators can book
through dmcs we will contract with
in dubai, says nevil dsouza, head,
sales, dubai parks & resorts.
the next phase of the project is
slated to include a six flags theme
park and is scheduled to open by
Q4, 2018-19, reveals shah. if all goes
according to plan, by then dubai
could well be on its way to being the
orlando of the region.
matching orlando, with its seven
theme parks, all in the worlds
top 25 by popularity, is an ambitious target, but dubai with seven
theme parks just opened or about
to, is ahead of any other destination. the indian amusement parks
industry, is expected to clock a 20
per cent growth over the next five
years to touch R6,000 crore, and
attract R17,000 crore in investments
over the next 3-5 years, estimates a
report by anand rathi research. the
appetite for entertainment certainly
seems to be present, and with venues closer home, dpr may just have
got its india-centric focus right.
u su m a n ta r a f da r

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Government & Politics

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

sa n JaY bor a de

final burial?

Modi dumps NAM to get closer to the US

n his effort to recalibrate indias

foreign policy, prime minister
narendra modi is set to dump
another nehruvian vestige the
non-aligned movement which was
created in 1961 as a body of developing nations keen to steer clear of
alliances with either of the two cold
war rivals: the us and the soviet
union. nehru along with Yugoslav
leader Josef broz tito and egyptian
leader gamal abdel nasser were the
architects of the move.
a big question mark has arisen
over modis participation in the
next summit being hosted by Venezuela on 17-18 september. Venezuela had postponed the summit which
was originally planned for July
last year to accommodate modi.
recently, of course, it has made it
clear that this wouldnt happen next
month even if the leader of founding member india skips the rescheduled meet. modi may instead travel
to a different country on these dates.
on its part, Venezuela appears convinced that new delhis refusal
to commit to the prime ministers
presence reflects his priorities.
last fortnight, Venezuelas foreign minister delcy rodriguez met
indian counterpart sushma swaraj
and handed her an invitation for
the nam summit that caracas has
planned in the picturesque margarita island in the caribbean sea. the
issue came up but rodriguez got no

commitment from his counterpart.

it is possible that sushma swaraj or
Vice-president hamid ansari is likely
to represent india.
officially, the government has
insisted there had been no shift in
the countrys position on nam. the
decision on our level of participation
at the nam summit has not yet been
taken, foreign ministry spokesperson Vikas swarup said. having said
that, i want to emphasise that india
attaches the highest importance
to the nam, and has in fact led the
reorientation of the groups priorities
in a post-cold war era.
Moving away
but the refusal to commit to modis
attendance for the summit despite
rare consideration by its hosts comes
on the back of other signs, including
public pronouncements that suggest
a move away from the foreign policy legacy of nehru. only one previous indian prime minister, charan
singh, who led the country for less
than six months in 1979, has skipped
a nam summit in havana that year.
but successive pms including atal
bihari Vajpayee have tried to retain
indias association with nam.
over the last two decades, india
has tried to shift closer to the us,
which looks at nam with barely-concealed contempt. however,
indias historic role in the founding
of nam, and the increasing global
u 28 u

au g u s t 2 9 - s e p t e m b e r 11, 2 016

clout the country now carries, were

factors that influenced Venezuela, in the run-up to the summit in
July 2015 to postpone it to
accommodate modi.
some are linking modis decision
to Venezuelas deteriorating relationship with the us. the relationship has
reached its nadir, with president
obama last month extending sanctions on Venezuela for human rights
abuses and also, earlier this year,
renewing the decree calling Venezuela a security threat to the us.
last year, the reason given by
india for modis non-participation
was his hectic schedule he was visiting russia, Kazakhstan, uzbekistan, tajikistan, turkmenistan and
Kyrgyzstan that month. Venezuela
postponed the summit by a year to
July 2016. then, as a deep economic
crisis hit the country, the meet was
postponed to september. the reluctance by indias political leadership
to commit to attending the nam isnt
the only sign foreign diplomats of
countries still associated deeply with
the movement are reading.
at the third and the largest indiaafrica forum summit, held in new
delhi last october, modi did not once
refer to the nam in either his inaugural or valedictory address, even though
the organisation was traditionally a
key bond between india and the continent. every african country other
than the newly born south sudan is a
member of the nam.
almost coinciding with the original 2015 dates for the nam summit in Venezuela, foreign secretary
s. Jaishankar said in a lecture in singapore that india, under modi, was
indeed shifting its strategy from that
of a balancing power to one of a
leading power. the transition in
india is an expression of greater selfconfidence, Jaishankar said on 20
July 2015. its foreign policy dimension is to aspire to be a leading power,
rather than just a balancing power.
this July swarup made it clear that
indian diplomacy had a new catchword to swear by, insisting that india
was following a multi-aligned
foreign policy.
u raKesh Joshi

Government & Politics

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

textiles trouble
Coordination is key to the success of a R6,000-crore package

eething tensions between

the new textiles minister
smriti irani and her seniormost bureaucrat, rashmi Verma, do
not bode well for the rollout of
the R6,000-crore
package announced by
the government in June. the package is aimed at creating 1 crore jobs
over the next three years and help
the industry reap the benefits of the
chinese slowdown.
while the pmo is said to be trying to resolve the differences, it
would require more than that to
implement the package. apart from
ensuring coordination within her
ministry and with textiles secretary
Verma, irani will have to ensure
coordination with several departments including revenue, labour
and commerce as well, so that the
relevant notifications are issued.
the notifications relate to labour
law relaxations and duty drawbacks
on textiles products.
ministry officials point out that
labour law relaxations a tricky terrain to negotiate at the best of times
are vital to the upliftment of the
industry as the sector needs to be
rid of archaic labour rules that have
stifled growth and ensured the rise
of trade unionism. indeed, this was
one of the factors that prompted the
government to introduce fixed-term
employment and bring in parity
between the contractual and permanent labourers in terms of wages
and all other incentives an important step that can potentially be
replicated in other industries too.
under the new rules, a garment
factory will now have the flexibility to hire contractual workers for
a fixed period with ease so that it
can meet supply commitments,
given the highly seasonal nature
of export orders. rigid labour rules
have caused indian garments exports
to remain almost flat at $40 billion in 2015-16 from a year before.

Irani: busy shooting off missives

pro-reforms bangladesh, on the other

hand, beat india in garment exports
in 2003 and Vietnam in 2011.
the government has also raised
the overtime work limits to 8 hours
per week (which will translate into
roughly 100 hours a quarter) against
the current 50 hours per quarter.
employees provident fund contribution will be optional for employees earning less than R15,000
per month. the government has
decided to bear the entire 12 per
cent of the employers contribution
of the employees provident fund
scheme for new employees in the
garment industry earning less than
R15,000 per month for the initial
three years. currently, 8.33 per cent
of the employers contribution is
being provided by the government
under the pradhan mantri rozgar
protsahan Yojana.
s.c. ralhan, president, fieo, said:
the exemption from employees
contribution to those drawing wages
up to R15,000 and contribution by
the government in lieu of employer
will facilitate bringing workers from
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au g u s t 2 9 - s e p t e m b e r 11, 2 016

informal sector into a formal sector

thereby entitling them for the various benefits extended by the government aimed at labour welfare.
with the latest changes, the
ministry of textiles will provide
the additional 3.67 per cent of the
employers contribution, amounting
to R1,170 crore, over the next three
years. this shall leave more money
in the hands of the workers and also
promote employment in the formal
sector, according to an official.
in other moves, the government
has also raised subsidy under the
amended technology upgradation
fund scheme (atufs), which will
be moving from input to outcomebased incentives, from 15 per cent
to 25 per cent for the garment sector. a unique feature of the scheme
will be to disburse the subsidy only
after the expected jobs are created.
the government will also refund
state levies under the duty drawback
scheme to garment exporters. this
move is expected to cost the exchequer R5,500 crore a year, but it will
greatly boost the competitiveness of
indian exports in foreign markets.
moreover, the provision of 240 days
under section 80jjaa of the income
tax act would be relaxed to 150
days for garment companies. but
this would require close coordination with the finance ministry.
the textiles industry is appreciative of these moves. the support
will help the industry gain cost competitiveness, said apparel export
promotion council chairman ashok
g. rajani. b.K. goenka, chairman,
welspun group, and co-chairman,
cii national committee on textiles,
said, these reforms are critical for
the sector as the industry is highly
labour-intensive and india needs to
increase productivity to put up with
the growing competition.
all this will happen only if irani
ensures proper coordination with
her bureaucrats, instead of shooting
off missives to them and complaining about poor follow-up on the textiles and apparel package by senior
officers in the ministry during a
recent cabinet meeting.
u raKesh Joshi

Government & Politics

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

under review

Yet there are serious challenges.

unemployment is rising to alarming
levels as jobless growth continues to
bedevil the government. bank indebtedness remains a major concern,
resulting in a credit squeeze. industrial growth remains sluggish, and so
do exports. major infrastructure projects face a judicial logjam with companies battling disputes over payment.
while more and more road projects
are being awarded, the government
will have to come up with innovative measures to break the gridlock by
releasing funds on a guarantee to such
companies and by being judicious in
referring cases to the supreme court
when it loses the arbitration process.

A stock-taking exercise before the half-way mark of Modis term

s prime minister narendra modi heads towards the

half-way mark of his term in
november, he has begun a stocktaking exercise of the governments
achievements, starting with a review
of progress on budget proposals since
his government came to power. with
the presentation of the budget likely
to be advanced to January 2017, this
exercise is necessary to gauge what
needs to be done to deliver on the
promises made by the government
ever since it came to power in 2014,
before any fresh commitments are
made. according to officials, a progress report has been prepared to discuss each budget proposal and identify
the hurdles in implementation. under
focus will be the flagship schemes.
the half-way mark of a governments
five-year term is a point where antiincumbency normally sets in. the
exercise, which included a meeting
with his council of ministers, also
discussed the governments key priority schemes over the next three
years. niti aayog ceo amitabh Kant
has been holding meetings with
social sector and infrastructure ministries to firm up major schemes that
the government departments would
be implementing over the remaining
half of modis term. a senior official
said, there are specific social sector
schemes like scholarships for minorities, construction of residential schools

in 83 tribal-dominated districts and

training modules for the differentlyabled, which would be listed out.
while the government can justifiably take some credit for the passage of
the goods and services tax bill in parliament, its implementation and fallout remain uncertain. while the doors
of fdi have been further opened to key
sectors of the economy, the money has
yet to start pouring in. how this will
impact domestic business also remains
to be seen. tough measures like raising lpg prices and limiting subsidised supply of gas to the needy have
been appreciated by most economists
but whether there will be a popular
backlash against the move remains to
be seen.
on the whole, modis macroeconomic management is being perceived as sound. all the three key
indicators of the short-term health of
the economy are in the positive zone.
inflation, though not totally under
check, is still within comfort levels. the current account deficit and
also the fiscal deficit, despite the pay
commission hike and the one-rank,
one-pension payout, remains under
control. gdp growth is at a healthy 7.65
per cent, making india possibly the
fastest growing economy in the world
at a time when the international environment remains far from conducive.
on the balance, modi and his ministers have reason to be cheerful.
u 31 u

au g u s t 2 9 - s e p t e m b e r 11, 2 016

Mode of the nation

so modis ministerial team cannot
afford to be complacent. extraneous circumstances can change the
mood of the nation. if the price of
oil goes up to $70 a barrel in 2017, as
is being predicted, it could result in
fiscal pressures and a recalibration of
macroeconomic management. the
coming assembly elections in uttar
pradesh, punjab and goa will provide the pm with an opportunity to
gauge public pulse.
also, modi would not want to be
seen as a lame-duck pm if anti-incumbency does up with him when he seeks
a fresh mandate in 2019. this was one
of the biggest political handicaps of
the upa-2 in 2014. a group of secretaries formed by the prime ministers
office recently conducted an elaborate exercise to formulate schemes
to drive up economic growth. the
ministries have given their final proposals to niti aayog on their targets and time frame of achievement.
modis review exercise comes in the
wake of the cabinet reshuffle in July
and provides an opportunity to assess
how the ministers have fared in their
new portfolios. while two months is
not sufficient time for new ministers to
break fresh policy ground, what modi
could possibly be looking at is how
the backlog of issues is being tackled
and whether the new incumbent has
brought in changes in work ethic that
would translate into political success.
u raKesh Joshi

Panjus Page by panju ganguli

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

... the fundamental philosophy which

we have is look at the risks, look
at the returns, and thereafter take
your decision based on risk-adjusted

the sales growth is reflected in the

positive financial results for the quarter,
and has given us the momentum to carry
forward as we prepare for the upcoming
festive season.

pawan munjal,
Hero MotoCorp

uday kotak
MD, Kotak Mahindra Bank
u 32 u

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B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

the power of sports

Fostering sportspersons would make India proud

hy is india, a nation of 1.2 billion

people with very ancient martial traditions, so dismal at olympic sports?
Various answers are being offered currently
with most built around such deficiencies as poor
infrastructure, poor physique, poor diet and the
lack of motivation or killer instinct.
none of these are immutable conditions that
cannot be remedied quite easily. all it takes is
properly structured corporate sponsorships
aided by a less corrupt sports administration at
the national and state levels.
the cherry on the cake would be pride in nurturing high performance sportspersons through
proper coaching and compassionate treatment
that pays more attention to their needs than
those of sports officials.
despite such disregard, the sheer grit and
talent of p.V. sindhu in badminton and sakshi
malik in wrestling won medals for india. they
saved the nation from the ignominy that officials relishing junkets seemed not to feel.
more success in the olympics is a necessity
for bringing greatness to india in the perceptions of ordinary people since nearly two-thirds
watch the olympics in real time around the
world. Building more indian military and industrial power is not enough.
the only requirements for a more luminous
performance are a clear-cut strategy for talent
development in sports backed by administrators who place pride in india above lining their
own egos. coercing a proper start to this kind
of process is well within prime minister narendra modis skill set. he should not underestimate
the power of sports to change global perceptions
about india. the tax man could help by providing incentives for sponsoring sports.
the international olympic committee and
the various international sports federations
are gold mines of information and methods
required to locate talent, nurture it and crown it
with success at national, regional, international
and olympic competitions.
the world is now an open sports arena
and market. Young talents can be trained and
strengthened at facilities within india and
almost anywhere else in the world, including almost any western country. many countries put up barriers to receiving highly
trained workers from india to preserve jobs
for their own people but hardly any country

Brij Khindaria

denies entry to potential sports prodigies seeking better training and facilities. all sports
authorities know that talented international
sportswomen and men can perform in foreign
teams while performing for their country of
origins teams in international competitions.
the main barriers for talented young
sportspersons in india are a lack of respect for
their capabilities and paucity of funding for
their training. this is where corporate sponsors
can and must help. the government, whether
national or at the state level, cannot be entrusted
with the precious tasks of talent development.
its officials and local politicians are too venal
and uncaring about young sportspersons, especially if they emerge, as most do, from poor and
less educated backgrounds.

The author is
an international
affairs columnist
for Business india.
He can be contacted
at brij.khindaria@

ports in india needs to be nurtured in a similar manner to the alluring new formats of
cricket that attract billions in revenues because
they are fast-paced and enjoyable to view on television. comparable popular interest will not be
easy to achieve for olympics sports but some of
them, like athletics, gymnastics, decathlon and
marathons, are heroic battles driven by gritty
personalities fighting off challenges by competitors, including new entrants.
once indian viewers realise this excitement,
they will flock to stadiums and tv sets. But the
government is much too turgid, backward-looking and encrusted in old ways to fill such tasks.
if they see earning potential, more parents will
let their talented daughters and sons seek discipline through sports rather than forcing them
to struggle at the bottom rung as junior doctors,
engineers and government babus. only corporate
sponsorships and endorsements can bring this
about especially if tv channels look outside the
box in their search for new revenue streams.
over time, nurturing sports need not be
mostly charitable or public image activities for
private sponsors. they are likely to become
money-spinners. evidence is easily visible in
the billions pocketed by the olympic and sports
federations, western tv channels and major
western city stadiums.
sports persons have natural talent, dedication, and drive. fostering them would make
india proud and could also generate the funds
necessary for nurturing future generations
of champions.

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au g u s t 2 9 - s e p t e m B e r 11, 2 016

Riding High on V-Next & Yarn

Visaka Industries enjoys a market capitalisation of R164 crore as on August 1, 2016

oVer the

isaka Industries Ltd,

Hyderabad and with
manufacturing facilities spread
all over the country, boasts
products that capitalise on ongoing improvement in lifestyle
standards in India and abroad.
Promoted by Dr. G. Vivekanand in 1981, a first generation entrepreneur, Visaka has
grown from a single product,
single unit company in 1985
to a multi-product, multi-location company with a turnover of about H1000 crores,
under the leadership of Dr.
G. Vivekanand. The company
is engaged in manufacture of
Building Products (i.e. Cement
roofing Sheets, fiber cement
flat sheets, Vboards and sandwiched panels) and synthetic
blended yarn.
The company has since
smoothly transitioned into the
second generation with G.
Vamsi Krishna joining the company six years back. Having
worked through all the operations and functions of the company, today, Vamsi Krishna
heads the operations of the
company as a Whole Time Director from the last couple of
years, while Dr. G. Vivekanand
continues to be involved. Vamsi holds a Bachelors degree
from Purdue University, USA.
With a combination of aggression and conservatism,
Visakas success is evident
from its CAGR in companys
revenues of 5.9 per cent in the
last 5 years, thus establishing
itself in a commanding position
in the industry. Visakas equity

u Diversified
and implemented
a totally new
technology Air
Jet Spinning in
the year 1992
and became
the Worlds

shares are listed and actively

traded on the Bombay and National Stock Exchanges. The
company enjoyed a market
capitalisation of H164 crore as
on August 1, 2016. The promoters hold 37.54 per cent of
the companys equity share
The company has a record
of making profits and paying dividends for 29 out of 31
years of its existence with just
2 bad years in the very early
1990s. For the year 201516, its building products division reported revenue of H818
crore contributing 83 per cent
(82 per cent in 2014-15) to the
Companys overall revenue.
The Textile division reported
revenue of H172 crore contributing 17 per cent (18 per cent
in 2014-15) to the companys
overall revenue.
The companys presence
in the building products segment is dominated by cement
sheets, a popular building
material used for roofing due
to its durability and strength.
Visakas automated cement
roofing plants incorporate sophisticated technologies and
products are made to meet IS459 standards. The Company
generated 69 per cent of its
revenues from cement roofing
sheets in 2015-16. Visaka is
the second largest player in
this segment with an installed
capacity of 8,02,000 mt.
The other product in this
segment is fiber cement flat
sheets marketed as Vboards
(reinforced building boards)
and Vpanels (sandwiched pan-

largest set up for

manufacture of
Twin Air Jet Spun
uSteady Growth
Grown from a
single product
single location

Company to
multi product
multi location
Company. The
turnover of the
Company has
grown from Rs. 5
crores to close to

G. Vamsi
Wholetime Director
els) under the V-Next brand.
These are new age multipurpose cement flat sheets with
a wide range of applications.
They are fast and easy to install, with no maintenance required. These products can
be used for almost any application in a building whether
residential, industrial, hotel,
hospital, auditorium, college
and university.
Vamsi strongly believes
that the V-Next brand of products have a very bright future
over a very long period and
are currently in nascent stage.
He believes it will be the future
growth engine of the company. Our V-Next products will
revolutionise the construction
methods in the country over a
time, says Vamsi.
Visaka is the second larg-

R1000 Crores over

a period of 28

uAs part
of its social
the company

est player in this product as

well. The fact that the volumes
of this product have grown at
a CAGR of 20 per cent during
the last four years with exports
to over 15 countries is testimony to the potential of this
business segment.
Being fire, water and termite resistant these products
will very effectively substitute/
replace the conventional brick
and mortar construction, plywood, gypsum board and a
host of other building material
for various applications. Factors like faster construction,
more carpet area, better aesthetics and appeal will ensure
world class construction since
these products are extensively
being used in developed and
advanced countries.
These products also have
other advantages like low
thermal conductivity, high energy efficiency, good acoustic
values and hence are an ideal
choice for acoustic, dry wall
and fire rated applications.
These products are conducive
to any kind of finish like paint,
wall paper, laminate, veneer
and many more. Vnext products are Green Pro Certified
by CII-IGBC, the first and only
company to get this certification as Green Products in the
category of FCB.
Vnext products have variants in internal & external categories Interior grade products
popularly known as Vboard
and exterior grade popularly
known as Vpremium. In both
interior and exterior grade,
Vnext has 10 variants.

Charitable Trust to
support initiatives
that benefit the
Society at large.
u Visaka now is
the second largest
player in the
Cement Roofing

u Visaka is
the 2nd largest
player in the fiber
cement boards
industry and also
export to about 15

award from the
Andhra Pradesh
Federation of
Chambers of
Commerce and
Industry in 1987.

Interior grade variants are

Vlake and Hill, Voceanic, Vcedar, Vwave, Vstone, Vvalley.
Exterior grade variants are
Vplank, Vstone, Vsand stone,
Both Interior and exterior
grade products are used for
applications like partitions
(regular, fire and acoustic),
false ceiling (concealed grid
and T grid), wall paneling,
mezzanine flooring, wardrobes, roof under lay, shelves,
kitchen cabinets, etc.
The designer variants are
used for wall paneling, false
ceiling, exterior cladding, faade, soffits, etc.
The company is continuously coming up with new designer variants to give multiple
options to customers with
never before seen designs in
FCB Industry. The company
has been conducting active
training programs to spread
knowledge for smarter means
of construction.
The other business which
Visaka is into is synthetic yarns
which the company diversified
into in 1992. The companys
Spinning Unit employs stateof-the-art technology based
on twin airjet Spinning Machines procured from Murata
of Japan and is the leader in
the world with highest capacity, productivity and efficiency.
The companys products in

uBest Management
award from the
Government of
Andhra Pradesh for
the year 1987.
uBest Entrepreneur
of the year award
from the Council for

Industrial and Trade

Development for the
year 1990-91.
u Highest
Productivity award
from the Council for
Industrial and Trade
Development for the

this segment figure in the top

5 per cent of uster standards
in the world. Its adherence to
stringent quality processes in
this segment resulted in ISO
Visaka is not only the largest twin airjet spinning installation in the world but is perhaps
also a company with 100 per
cent TFO twisted yarn, employing about 119 two-for-one
twisting machines. Besides,
the companys products are
benchmarked with international quality standards and
internationally-accepted quality certifications.
The companys optimism
in this business is derived from
the fact that we are a boutique
player. There is a growing respect for yarn makers who
can deliver first-rate quality, servicing the demanding
needs of manufacturers with
latest automated looms for
light weight suitings, shirtings
and home furnishing, says
The Company is a returnsdriven manufacturer selecting
to manufacture yarn products
that fetch the highest realisations on the one hand and
possess a consistent clientele
on the other. It is productbased in an otherwise commodity industry. The margins
of its spinning unit are one of
the highest in this large and

year 1995.
uBest Industrialist
award from the
Government of
Tamil Nadu for the
year 2000.
uBest performance

competitive industry.
The company possessed
H54 crore in long-term debt
against a net worth of H347
crore as on March 31, 2016 indicating its low gearing. Vamsi asserts that the company is
conscious of the financial solvency and hence ensures that
debt is kept under control and
is used very judiciously.
In view of the companys
financial discipline, prompt
repayment of loan instalments
as well as interest thereon to
banks and other stakeholders, it enjoys good credit rating with them. While long term
bank facilities of the Company
are accredited with CARE A+
rating, other loan facilities are
accredited with CARE A1+.
The company holds significant commanding position
and stature in all the three
businesses in which it operates, both in terms of market
share and margins. In the Cement roofing and VNext products, the company is the second largest and in Twin Airjet
spinning the company is the
largest operation in the world.
It also earns one of the best
margins in the industry in each
of its business segments.
Vamsi credits the companys outstanding performance to the longevity of the
Senior Management, which is
the backbone of the compa-

in Large and
Medium Sector
for the year 2001
awarded by All India
Andhra Pradesh
State Board.

u A.P.
Award for the year
2003 awarded by
Exhibition Society.
uBest Practices in
Investor Relations

ny. The company has a rich

blend of youth and experience
in all its operations. We always
endeavour to implement the
latest technologies in all its
operations with most cement
roofing and V-Next product
plants designed in house
with productivity and quality parameters benchmarked
against some of the best in the
world, Vamsi informs.
The company is now looking forward to expansion of 26
per cent in capacity in its yarn
manufacturing plant which
is expected to go on stream
by October this year. Going ahead, it expects to grow
the fiber cement flat sheets,
Vnext component of its business. The company intends
to increase the non-asbestos
component of its business
(predominantly by V-Next with
support from spinning) from 31
per cent of turnover to 50 per
cent by the year 2020, generating a disproportionately
higher increase in margins and
Visaka also plans to have
a holistic approach, as a solution-provider, in terms of
pre- and post-sales service,
clubbed with products and
systems of International standards. The goal would be to
provide efficient products to
usher in world class construction systems in the country. n

in Fibre Cement
Sheets Industry
Category 2012 by
the IR Society
uFiber Cement Flat
sheets certified as
Green Pro products
(Vboard, Vdesigner,

Vplank & Vpremium,

and Vpanel) by
CII-IGBC, the first
and only company
to be certified
Green Products
in the category of

Cover Feature

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Back on the growth trail

hen tata steel

europe, the talks
about how several m&a deals fall through resurfaced. gratis advice from experts
touting number of m&a deals falling
through and how globally takeovers
have been a disaster started pouring
in. whether m&as work or do not
work is a subject of debate. currently,
however, corporate india, does not
agree with the naysayers. according
to h.V. harish, partner, grant thornton, we are in the middle of another
m& a spree. m& a is today considered
a core element of strategy and is no

M&As are back in

vogue as Corporate India
moves ahead
different in success rates from other
elements of strategy be they new
products or brands, new geographies,
greenfield projects, expansion, diversification etc. harish, leading the
m& a practice says, it is indeed disconcerting to see m&a being singled
out as the satan of corporate strategy
simply because it leaves a measurable
reference in value for a comparative
review to measure success in future.
the fact is that while the outcome
of any other corporate strategy takes
u 36 u

au g u s t 2 9 - s e p t e m b e r 11, 2 016

longer to manifest and can be ambiguous, the result of an acquisition

tends to get scrutinised based simply
on the acquisition price.
ceos are increasingly sold on the
idea of growth through m&a. grant
thornton, which has been tracking
m& a deals since 2012, has estimated
300 deals valued at nearly $20 billion inked in the first 7 months in
2016, with the momentum picking
up gradually. while the number of
deals inked is lower than in 2015, the
higher valuations have seen the deal
value being higher than in the comparable period. there have been several billion dollar deals done till date
(see table).

Cover Feature

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Gaining momentum
Value ($ million)


Jan 16 Feb















in august also there have been

several mega deals, the latest being
aditya birla nuvo merging with
aditya birlas group company grasim
(see page 41). birla corp cemented
a deal of R4,200 crore for the takeover of the 5 mtpa reliance cement,
from reliance infrastructure. in
July, nirma picked up the 11 mtpa
cement plants of lafarge india for
$1.2 billion. hdfc life announced a
merger with max life insurance also
in august, to create the largest private sector life insurance company.
more recently, a chinese consortium bought, an advertising tech company, for $900 million.
earlier this year they did deals in the
internet retail companies and more
recently in a pharma company. the
deals have been across sectors manufacturing, infrastructure, power,
telecom, insurance and it.
there are several factors for this
heightened m&a interest, both from
overseas as also indian buyers looking to acquire assets in india and
overseas. risk appetite is definitely
growing amongst corporate india,
says lalit ratida, md, head investment banking, axis capital. ratida,
who had been with enam (now
taken over by axis) for over 15 years,


Harish: in the midst of an m&a spree

points out, there is a discernible

change in the psychology of promoters. the younger generation is not
so emotionally attached as the older
generation and is willing to monetise
assets. even the old generation promoters are now realising the need of
getting out of assets which are not in
line with the strategic growth of the
the pace of mergers and acquisitions is like to grow at a fairly
steady clip in the coming period,
says Vimal bhandari, md and ceo of
mumbai-based nbfc, indostar capital finance ltd. bhandari says one of
the reasons driving this is companies
looking for consolidation in existing
businesses or diversification into new
areas of growth. while consolidation
instances include ultratech acquiring the jp cement plants or jsw and
adani acquiring power plants, diversification
the reliance adag group acquiring pipavav offshore to get into the
defence sector. other instances are
mukesh ambani taking a stake in
east india hotels and ajay piramal
taking a stake in shriram finance.
this time around there is also
a paradoxical situation of a few
cash rich corporates willing to buy
and cash-strapped ones on a selling spree. pressure from the banks
as also regulators are forcing companies to sell in a bid to deleverage
their balance sheet, says ajay arora,
partner, e&y. sajjan Jindal-led jsw
which has a seemingly unsatiated



Jul 16

Source: Grant Thornton

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arora: buyouts will happen

growth appetite and has no dearth

of capital recently took over two
power assets one from Jaiprakash
power and another from his brother,
steel and power. the deal for 500
mw, bina plant in madhya pradesh,
inked in July was valued at R2,700
crore while the enterprise value of
the 1,000 mw chhattisgarh thermal plant was R4,000 crore which
could go up to R6,500 crore, on meeting certain conditions. jspl and Jaiprakash group which are plagued by
huge debt have been trying to monetise their assets in a bid to pare their
interest costs. Jaiprakash also sold off
its cement business to ultratech for
$2,373 million.
arora, who is also associated with
deals in various roles points out that
pe exits have also played a major part
in the m&a landscape. compared
to the ipo route which was the preferred exit route, pe to pe trades are
also taking place. unlike in the past
where pe firms were content with
minority stakes they are increasingly
looking at getting significant stakes
in companies. arora predicts that
buyouts will increasingly happen.
some of the major pe exits witnessed
in recent months have been the exit

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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

of kkr (Kholberg Kravis and roberts)

from alliance tire group. in a deal
valued at R8,400 crore ($1.179 billion)
kkr along with the promoters sold off
one of the largest off-road tyre company with manufacturing facilities
in tamil nadu, gujarat and israel,
to Japanese company Yokhoma rubber in march this year. the company
that manufactures tyres for construction equipment, farm and forest machinery was bought by ashok
mahansaria and Yogesh mahansaria, two professionals in the industry
with the backing of warburg pincus.
kkr had taken a majority stake from
warburg pincus for $500 million in
2013. this exit, one of the biggest
in the pe space saw kkr make a 2x
return on its investment.
in another exit, advent international, a private equity company
which has been in india since 2007
sold off its 72 per cent stake in care
hospitals, a multi-speciality hospital
chain operating in south india and
madhya pradesh to another pe abraaj
capital for R1,800 crore this year.

asset sales, forced or otherwise, are

likely to sustain the momentum of
the deal flow. on the other hand
cash rich promoters like piramal
group, last fortnight inked an agreement with bain to set up a stressed
asset buyout fund.

aarthi: Japanese strategic interest continues

stressed asset is a major catalyst

to m& a s that cajoles promoters to
sell assets. with the banks balance
sheets stretched to the hilt more

Merger & Internal Restructuring
Total M&A
Cross-border includes











6,018 10273
301 20,523 16,219 19,875




Source Grant Thornton Jan-July period

Japan and China

stressed assets have by and large
attracted indian buyers. foreign buyers, save for buyout funds like kkr or
ross, are less willing to traverse the
unfamiliar environment which is
strewn with regulatory risks. however, foreign buyers have shown a
considerable interest in buying assets
in india, given its stable growth policies amidst the global turmoil. we
are seeing Japanese strategic interest in india continuing, says aarthi
ramakrishnan, md and head investment banking, mizuho securities. pointing out that the interest
will definitely keep them busy for
another year, at least, ramakrishnan
says that it is not just the big corporations which are looking at india but
even medium and small companies
are looking at india. while the interest was there earlier too, the interest
over the last couple of years has gone
up significantly as india is looking
more robust. mizuho had been a coadvisor to Yokohoma rubber companys takeover of alliance tire group.
Japanese companies have shown
interest in auto, auto ancilliaries and
pharma. but china is also looking at

Complexity and non-compete fees

eals are becoming more

complex in nature due to
the myriad shareholding structure of the promoter group or
regulatory requirements. The
merger of hdfc Life Insurance
with Max Life Insurance is one
such instance. Following a
multistep process, it involved
the merger of Max Life Insurance, a subsidiary between
Max group and Mitsui Sumitomo Insurance with its parent Max Financial Services Ltd.
The latter is a listed entity with
a market cap of H13,700 crore.

This would involve giving 1

share for every 5 shares held
to Mitsui Sumitomo. Following the merger, the insurance
division would be demerged
and merged into hdfc Life
Insurance. Shareholders of
Max Financial Services would
get 7 shares of hdfc Life for
every 3 shares held in Max
Financial Services.
The residual part of Max
thereafter be merged with
Max India for which Max India
would issue 1 share for every

500 shares held in Max Financial Services.

The promoters of Max
group held only 30.45 per cent
shares in Max Financial Services
as on 30 June reduced from 40
per cent in December 2015.
As if this was not complex
enough the merged company
would be making an upfront
non-compete fee of R500
crore initially and another 3
equal instalments of R349
crore spread over the next
3 years to Analjit Singh.
While the entire deal hinges

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Doshi: unreasonable payment

on the approval of the shareholders of the parties concerned and is subject to the
regulatory clearances, the payment of the fees by the merged
entity is being widely debated.

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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

india seriously. having eclipsed Japan

as the major buyer of assets globally,
it makes sense for it to look at our
growing market. while their interest
so far had been in the tech start-ups
and internet related businesses, the
chinese companies seem to be widening their areas of interest.
last month, shanghai fosun pharmaceuticals took over a majority stake
in kkr-backed unlisted company
gland pharmaceuticals, a hyderabad-based speciality injectibles company. fosun has inked an agreement
for $1.2 billion. this is one of the biggest deals done by china in india.
chinese companies which are more
focused on api are now gradually
moving in to other formulations and
speciality products like injectibles.
as of now chinese companies
are testing the regulatory environment in india, as they had done in
the us and australia. however, they
have patience and are often willing
to pay significantly higher prices for
getting the desired assets.
Strategic divestures
realignment of strategic interests
has also seen some divestments,
says sourav mallik, joint md, Kotak
mahindra capital company, pointing out the sale of the urea fertiliser
division by tata chemicals to a norway-based companys indian subsidiary, Yara fertilisers for a little over
$405 million. the deal was struck
in august. mallik who is embarking
The issue about non-compete fees is getting more and
more controversial and I personally feel it is best avoided,
says Lalit Ratadia, head, investment banking, Axis Securities.
Ratadia was unwilling to speak
about the hdfc Life-Max Life
merger deal.
When many investment
bankers were unwilling to
go on record especially as it
involved speaking their minds
against Deepak Parekh and his
team at hdfc, this will indeed
be an interesting test case. In
recent times payment of separation fees by Diageo to Vijay

Balakrishnan: firms have large m&a teams

on a trip to Japan and china says,

interest amongst both Japanese and
chinese companies is high even as
better valuation is driving transactions. on the divestment of the fertiliser business, one view is that there
are poor growth prospects in this
highly government regulated industry. hardly any new capacities have
been added by the private sector in
this area over the last two decades.
and given the long waiting period
before the government reimburses
subsidy, the returns are low and one
view is that it does not make sense

Mallaya has raised the heckles of the regulators. hdfc Life

is also likely to become a test
case and sebi would be examining in details whether the
merger is more aligned with
the interests of the promoters or of all the shareholders
at large. Amit Tandon, md,
Institutional Investment Advisory Services (iias), a Mumbai-based proxy advisory firm
providing independent views,
says, We are negative on the
non-compete front but positive on the transaction. He
points out that it is clearly discriminatory and unfair to other

for the private sector to partially

fund the governments working capital needs! Yet as in several other areas
if the government does let go, fertilisers will be a booming industry,
once again.
the pharma sector is also seeing a
lot of action with many indian companies looking at acquiring assets
overseas. interestingly as opposed to
merely acquiring drug making facilities indian companies are also on a
brand buying spree. for the multibillion dollar mncs it does not make
sense to have small brands valued
between $50-75 million. for the
indian companies wishing to make
inroads in a country these brands,
mainly off patent drugs sold under
well known brands, give an entry
point in those markets. even for
established players, it allows them
to offer a wide bouquet of drugs. dr
reddys which has a significant presence in the us inked an agreement
to buy 8 abbreviated new drug applications from teva and allegergan for
a total of $350 million in July. earlier in may it bought 6 over-thecounter drugs for treating cough and
cold, from ducere pharma for an
undisclosed amount. sun pharma,
indias biggest pharma company, had
bought 14 older prescription drugs
from novartis, for $293 million in a
bid to widen its portfolio in the Japanese market. in July 2015, lupin
laboratories had bought us generic
drug company gavis pharmaceutical

Tandon: positive on transaction

Kanu Doshi a senior chartered accountant and dean,
finance, Welingkar Institute
says, The proposed payment

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is wholly unreasonable and

unjustified keeping in view the
promoter Analjit Singhs family has had in the first place no
prior history of the insurance
business and hence the question of paying such a promoter
any non-compete fees has no
basis and smacks of purely an
additional payment for parting with their holding in Max
Life Insurance in favour of
HDFC Life.
Another investment banker
was of the opinion that payment by the merged entity is
without any precedence in the
annals of corporate India. u

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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

for $850 million. this august lupin,

through its subsidiary Kyowa pharmaceutical, inked an agreement
with osaka-based shionogi & co to
acquire 21 long-listed drugs. the
agreement, which will be effective
from december this year, will elevate
lupin to the 6th largest generic drug
maker operating in Japan from the
current 10th position. the acquired
drugs which have one market leader
in the central nervous system, have a
market of around $90 million.
companies are increasingly evaluating deals, says raj balakrishnan, md
and head, investment banking, dsp
merrill lynch. pointing out a good
flow of inbound and outbound deals,
balakrishnan says, many companies now have larger m&a teams than
many investment banks. the bank,
on its part, restricts itself to deals over
$100 million in size.
like in any other markets, india has
its own set of challenges slowing deal
flows. acquisition finance is one.
presently banks are prohibited from
funding acquisitions and this has
created a market where corporates
have to invariably turn to nbfcs or
raise international money at a higher
cost. it would be good if the rbi
re-examines the rationale for this,
says harish.
regulatory challenges are another
concern often voiced by bankers.
continuity in regulations is something which buyers are keen to have
both on the taxation front as well as


Bhandari: growing at a steady clip

legal front. speedy settlement of disputes is something which is desired.

one view is that the long execution
time also keeps off buyers. it takes
anywhere between 12-15 months
for a deal involving a listed entity to
be consummated. there are pending deals concerning sistema, aircel,
and tata-docomo which require to
be speedily settled.
buyers, including private equity are
becoming more impatient. the earlier
argument of india being a long term
story does not gel with buyers wanting
to see on the ground performance.
the environment for deals looks
promising and the government is

Notable M&A deals (January-August)

China Consortium
JSW Energy
JSW Energy
Tata Power Renewables Energy
Birla Corp
Yara Fertilisers
The Yokohama Rubber Co
Fosun Pharma ( China)
HDFC Life Insurance



JSPL-Chattisgarh Thermal Plant
Bina Power (Jaiprakash Power)
Welspun Renewable Energy
Jaiprakash Associates
Lafarge India
Reliance Cement (Rel.Infra)
Urea Fert. Tata Chemicals
Alliance Tyre Group
Gland Pharma
Max Life Insurance
share swap
Aditya Birla Nuvo Ltd
Share swap

Source Grant Thornton and Industry Sources

also expected to divest some of its

holdings. it has already made known
its intention to divest its portfolio,
fully or partially in specified undertaking of the unit trust of india
(suuti). once the market starts moving upwards and shares find favour
once again, outbound deals are likely
to increase. while so far we have
seen traditional m&a deals, i expect
to see more innovative and structured deals being inked in the future,
says ramakrishnan.
buyers are becoming more cautious and discerning and capital is
becoming scarce and expensive, says
ajay arora pointing out that what we
are seeing currently is more of supply
side driven deals. a pick-up in investment demand could spur deals in
the infrastructure sector with genuine buyers and pension funds entering the fray.
the property market is also likely
to see more deals with stressed developers being cajoled by banks to
sell more and more assets. besides
pharma, the manufacturing sector
looks interesting. deals in the insurance sector may not be frequent
despite a plethora of companies in
the life insurance sector. for one,
the existing foreign partner may
not allow newcomers to buy stake
in the existing jvs. and unless there
are some compelling reasons, foreign companies may not easily give
up their presence in the country.
telecom, which is expected to see
a bloodbath, post the entry of reliance Jio, may see some regional players trying to cash out. post brexit,
indian companies may well look at
acquiring assets in uK and europe.
private equities and banks nursing
unmanageable npas are expected to
be the major catalysts driving growth
in the near future. retail space is
another promising sector both in the
physical as also the internet space.
banks, in a bid to clean their npas and
deal makers, are likely to keep lawyers
and accounting firms amongst others,
busy for some time to come.
Year 2016 and 2017 may well
become memorable for investment
u da K s e s h pa r i K h

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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Creation of a financial
photos: sa n JaY bor a de

The complex merger of Nuvo with Grasim and the

subsequent demerger will benefit shareholders

hen aditya birla nuvo

garments business and
merged it with pantaloon fashions,
later renamed aditya birla fashions
and retail, shareholders were overjoyed. they got to participate in a
consumer facing business spun off
from abnl with the market cap of

abfl almost becoming equivalent to

that of its parent aditya birla nuvo.

today the market cap of abfrl is
R13,000 crore as compared to abnls
market cap of R16,500 crore.
given the huge unlocking of value,
shareholders expected another similar bonanza from Kumar mangalamled abnl . soaring expectations about
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birla doing a similar demerger of its

100 per cent subsidiary, aditya birla
financial services which housed,
nbfc, life insurance, mutual funds
and broking had seen abnls share
price going up by 60 per cent, since
the beginning of the year. opening at
R1,000 the shares crossed the R1,600
mark to record a high of R1,616 on 8
august. speculation about an imminent demerger which appeared in a
leading financial daily was denied by
the management with a clarification
that as and when there is any corporate action undertaken with a view
to unlocking value for its shareholders, the stock exchanges will be duly
informed. on the basis of the managements statement the shares of
abnl hovered around R1,565.
when a complex scheme envisaging the merger of abnl with grasim
and a demerger and listing of aditya
birla financial services thereafter was
announced on 11 august, a day later,
investors were taken aback. confusion prevailed among investors, who
felt that they were being denied their
rightful dues. the feeling that the
investors were given short shrift saw
the share price plunge by 18 per cent
to close at R1,290 on 11 august. the
share price is currently hovering at
the same level.
one of the main concerns
expressed was the rationale for merging with grasim ahead of it being
demerged and listed as a separate
entity. why was a delisting not done
before merging the residual businesses which included fertilisers,
telecom, chemicals, fibre and insulators (see chart). after all Kumar mangalam birla was a strong proponent of
corporate governance and he would
not allow minority shareholders to
be given a raw deal. sushil agarwal,
52, group cfo, who has been with
the group for over two decades and
involved in acquisitions and funding
of the same, explained the rationale

Cover Feature

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

for doing what the management

did. aditya birla finance required a
financially strong parent. given that
grasim with a near 60 per cent holding in ultratech would be flush with
cash, it would be able to fund abfs
growth easily.
no one disagreed with the rationale for the separation of abfs and
listing of the company. deven choksey, md, Kisan ratilal choksey shares
and securities pvt ltd, a mumbaibased broking house, says, it was
imminent for abfs to grow independently and with all businesses still
requiring capital it makes sense to
have a stronger parent (grasim).
investors however felt that even if
abfs was listed separately, shareholders of the company could have easily
contributed to the financial requirements. and whether it was nuvo or
any other birla group company, raising finance by the promoters was
hardly ever an issue. after all no
growth in any birla ventures till date
has suffered for want of capital from
the promoters. however, one view is
that funds, even in birla group companies, are not infinite. and the

Srinivasan: wrong expectations

boards were required to justify the

increased infusion of funds time
and again especially, if the investee
company was a mere investment

in the books. with every business

on the growth path, competition
amongst other businesses could possibly have led to the interests of abfs
being questioned by other shareholders. by merging abnl with grasim,
through a share swap in the ratio of
3 shares of grasim for every 10 shares
held, abfs will become a subsidiary
of grasim. and Kumar mangalam by
his existing holding in the company
would have an additional stake of 17
per cent in abfs. in effect along with
grasims 57 per cent stake and 17 per
cent of Kumar mangalam and his private companies stake of 17 per cent,
the promoters would effectively control 74 per cent and 26 per cent would
be with the public. given this equation providing money to a subsidiary
as opposed to a group associate company would be easier to justify.
however the minority shareholders in nuvo felt it was dilutive as promoters shareholding was increased
at the cost of other shareholders.
while, there were certainly no mala
fide moves which were leading to
dilution of the public shareholdings, the resentment persisted. some

Current holding structure


Aditya Birla Nuvo









VSF & Pulp

Aditya Birla
Fashion & Retail




Birla Sun





Asset management
General insurance
Wealth management
Private equity
Online money
Health insurance
u 42 u

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Housing finance

Aditya Birla Nuvo

Idea Cellular


Aditya Birla



Aditya Birla Nuvo











Aditya Birla
Fashion &



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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

shareholders however felt that it was

better to have a smaller holding in two
bigger companies rather than have a
bigger holding in a smaller company.
assuaging the apprehension of the
confused shareholders, Kumar mangalam birla, cmd, pointed out that
the proposed restructuring will create one of indias largest, well-diversified companies with a healthy mix
of businesses with steady cash flows
and long term growth opportunities. birla explains that as there are
substantial operating businesses in
the merged entity we are not creating a conglomerate out of a pure play
there were also concerns that idea
cellular, where nuvo holds around
23 per cent would benefit from the
merger given that grasim has a stronger balance sheet and better borrowing abilities. idea cellular, according
to one view would also require infusion of funds. a misgiving which was
cleared by birla, soon after the contours of the scheme were announced
by the boards. idea cellular, which
is the third largest player currently,
has not required fresh fund infusion

agarwal: need a strong parent

from the promoters and is capable of

sustaining itself on the strength of
its own balance-sheet he said. the
fears of reliance Jio cannibalising the

market share of bharti airtel, Vodafone and idea also led to rumours
about idea being hived off or striking
deals with a competitor like Vodafone. like other fears, the rumour
was scoffed at by the management.
and in any case aditya birla group
as such has not been known to sell
assets in distress. even in the case of
fertilisers, where both tatas and birlas were rumoured to sell off their
low profit yielding fertiliser plants,
birla, according to one view, would
wait for the right time and opportunity if it ever was serious in divesting
its 1 mtpa fertiliser business. birlas,
in fact have over the last few years
been buying assets, distressed or otherwise in a bid to meet their stated
target of doubling the turnover to
$65 billion.
ashish adukia, head, group corporate finance, who has been with
the group since 2014 having been
an investment banker with citi
and morgan stanley earlier, points
out, investors have not yet understood the complexities of the transactions. a merger with a stronger
parent will be in the interests of the

Resultant Holding Structure





Grasim + Aditya Birla Nuvo

Aditya Birla


Idea Cellular



All of financial
including life
insurance and
payments bank




Aditya Birla
Fashion &

Swap and Share Exchange Ratio

Swap Ratio for merger of Grasim
and Aditya Birla Nuvo

3 equity shares of Grasim for every 10 equity shares of Aditya Birla Nuvo

Share Exchange Ratio for demerger of

Financial Services Business as a
separate listed entity

7 shares of Aditya Birla Financial Services for every 1 equity shares of Grasim (post merger)
resulting in a listed entity with minimum public shareholding of 25% to be held by public
shareholders of Grasim and Aditya Birla Nuvo

The Swap ratio and the Share exchange ratio will be adjusted to take into account sub-division of Grasims equity shares of Rs10 each into 5 equity shares of Rs2 each

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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Surprising valuation

he closest comparison of
the business is with Bajaj
Finserv and Bajaj Finance.
Bajaj Finserv with a market
cap of H43,000 crore houses
the life insurance and general
insurance business besides
having a subsidiary, Bajaj
Finance which is an nbfc having a market cap of H54,000
crore. Bajaj Finance and Bajaj
Finserv also have a 100 per

cent housing finance company. Bajaj Finance has a

H47,000 crore strong book as
on 30 June.
In the case of abfl which is
currently housing similar businesses under one umbrella. It
has not as yet made an entry
into general or health insurance. However if one were
to do a back of the envelope
calculation the nbfc with an

shareholders. they will be given a

chance to participate in grasims
cement business as also have a better
portfolio of matured businesses. he
explained that an aaa rating enjoyed
by grasim will also allow grasim as
well as abfl to get capital at a better
interest rate. and cheaper credit lines
will ultimately allow abfls nbfc to
get better quality of assets by offering competitive rates. ajay srinivasan, ceo, abfl, explains that the
markets expectations of abfl based
on the demerger and subsequent listing of madura coates is not correct.
both are totally different businesses
and capital requirements in case
of a finance business are very high
as compared to the retail fashion
and garment business. he estimates
that the capital required for abfs for
the first year will be around R1,000
crore and gradually increase in the
years to come.
abfs is still in the build mode.
while it has a strong presence in the
mutual fund business with an aum
of over R160,000 crore, and is ranked
amongst the top 5 companies in the
private life insurance sector, it is the
nbfc which will require a large fund
infusion for growth. currently the
nbfc has a decent size book of R30,000
crore. besides this, srinivasan points
out that abfl is also planning to grow
its fledgling housing finance business which has a book of R130 crore.
moving into health care, where it has
already inked an agreement with a
south african company, it will also
require funds when it rolls out the
health insurance products.

asset book of H30,000 crore

has an ebitda of H4,000 crore.
Assuming the company continues to grow around 30 per
cent year on year, the nbfc
itself would fetch a valuation of at least H20,000 crore.
Insurance business can be put
at H10,000 crore (abfls stake is
51 per cent) while the mutual
fund business at an average of
at least 6 per cent of the aum
can be valued at H5,000 crore
(51 per cent stake). If one

adukiya: complex situation

another factor which nudged birla
management to take the circuitous
route of merging nuvo in toto with
grasim. would the insurance regulator allow the insurance business to
be a part of a conglomerate?
Business Indias view is that shareholders are too focussed on the short
term benefits and are unable to come
to terms with the fact that they will
be moving in a larger conglomerate
and also have a chance to participate
in the growth of abfs. one share of
grasim will fetch them 7 shares
in abfl .
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au g u s t 2 9 - s e p t e m b e r 11, 2 016

were to discount the losses

of the payment bank where
abfl has an indirect holding
along with Idea Cellular and
its home finance business and
non-life business, it would be
safe to assume that the market value of abfl on listing
would be between H25,00030,000 crore. The key would
of course be the performance
of the payment bank and how
long it would take to break
even on the ebidta levels. u

while the management has

cleared a lot of misapprehensions
ever since the broad contours of the
scheme were announced a fortnight
ago, it is well known that the birlas have historically been masters of
finance. birla says, we have ambitious growth plans for the financial
services business through its market leading businesses of nbfc, amc
and life insurance. furthermore, our
recent foray into health insurance,
payment bank and housing finance
offers strong future growth opportunities. the transactions unlock value
for all shareholders and provide the
financial service with a stronger parentage which will support its ambitious growth plans.
while some experts would like to
wait for the details of the scheme to
be put up in the public domain, Business Indias view is that the scheme
of demerger and merger will actually benefit shareholders immensely
both in the short term and also in
the long term.
in a few years, it may not be surprising to see abfls market cap
matching or even going higher than
grasim. five years back no investors would have been able to visualise the market cap of ultratech
growing from R28,212 crore (2011) to
cross R100,000 crore by 2016. financial services have a higher potential to reach this figure in a shorter
period, if the current environment
continues to remain for the next
few years.
u da K s e s h pa r i K h

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

s u r v e y


big boxes
Bigger, yes!

t is no secret to anyone that in the fiercely

competitive fmcg space in the country, the baba ramdev-led patanjali has
emerged with a bang in recent years.
backed by a top-pitched patriotic fervour
coupled with the subtle consistent message of
being a cut above the rest on hygiene and health
parameters, patanjalis rise in prominence and
scale has indeed stumped many. so much so
that baba ramdev has now begun making the
claims of toppling the top of the pyramid boys
in the game in the not so distant future. however, for patanjali, which clocked a revenue of
around R5,000 crore in the last fiscal and is planning to go beyond the $1 billion sales mark
in the near run, a further scaling up entails a
series of churnings in its back-end supply chain
and those adjustments have begun within the

organisation in right earnest. about four months

back, the patanjali management decided to make
a decisive shift in its distribution strategy shifting finished products from manufacturing centres to dealers and franchise operators all across
the country to a typical 3pl (third party logistics) model wherein it will be taking warehousing space on lease at different strategic locations
in the country with the assistance of logistics
operators. and since then, it has been occupying the warehousing space at a frantic pace 11
lakh square feet of space in the last four months
spread across 20 cities and the mandate is to
double this size in the next one year. but finding the right product mix as per its specification
has been an issue. in himachal, we were looking for a space size of around 50,000 square feet
and had to settle for a 30,000 square feet unit
since we could not find anything matching our

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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

of the e-commerce sector has been

specification. while in places around
Current status
metros, its much easier to find quality of warehousing a big catalyst in the last two years
warehouses; this is a challenge even Capacity in india since the demand now is to deliver
humungous amounts of goods with
around state capitals. You may stum(storage sapacity in
a time-bound commitment someble upon some stand-alone units but
million MTs)
thing that did not exist at all till
there the owners may ask for premium
Food Corporation of
rentals, says sanjeev Khanna, head
India (FCI)
no stakeholder in the producsupply chain management, patanjali.
and distribution value chain
Khannas statement is symptomatic
Central Warehousing
has any issue on the quantitative
of that larger issue which has engulfed
Corporation (CWC)
growth of warehousing units in
the warehousing sector. warehous10.07
the country. they have come up
ing is the second most important
state Warehousing
and mushroomed in the last 10
vertical after transportation when it
Corporations (sWCs)
years at a modest speed. there also
comes to forming a robust distribu21.29
been patches within this spell
tion value chain in the country today.
state Civil supplies
their growth trajectory has
prima facie, the quantitative growth
in the warehousing space has been
Cooperative sector
if earlier, godowns or warequite commendable in the last 5-10
houses, were supposed to serve an
years. but the issue is that of quality,
Private sector
important role in the manufacturin reaching that high-end efficiency
ing value chain; now the advent of
where the storage and distribution
modern retail in its varied forms
process truly becomes seamless. the
has meant a decisive consumptionold timers in the industry will tell
centric push to the business. not
you that indian big boxes (as warehouses are commonly referred) are in a transi- surprisingly, the major warehousing clusters are
tional phase from dark, dingy, closed spaces of mostly around big metros. in the last five years,
yesteryears where everything was manually con- warehousing business has had a cagr of 18-20
ducted to modern and scientifically built units. per cent, front-ended heavily by a huge spurt in
but this transitional journey is still far off from e-comm driven businesses, says Vikram manreaching a stage of maturity. if you refer to sukhani, head 3pl services, diesl. most of
new warehousing units, then most of them are the large warehouses have come up around the
being made as per the new standards. but mod- metros only, as these are large consumption cenern warehousing units have still not reached tres. supply overtaking demand was a reality till
a matured stage as old warehousing units are 2014 when e-commerce hit the market, and now
still to be replaced, points out balbir singh most of the grade a supply across metros has
Khalsa, national director industrial, Knight & been consumed, adds Jasmine singh, executive
director, industrial & logistics services at cbre
frank india.
south asia.
but before it begins to sound as if the wareCapacity dynamics
warehousing, no doubt, has increasingly housing sector in india is a pure private play,
become a focus area, not only for logistics and heres a reality check. in a cumulative sense, the
3pl operators but also for companies either warehousing sector in the country is dominated
manufacturing specific industrial goods or con- by public sector enterprises like the food corsumer products. and this trend has acceler- poration of india (fci) and central warehousated in the last 10 years. the sudden explosion ing corporation (cwc; see chart). but their food
grain-centric character remains intact leaving
the field wide open for the private sector to align
Demand for warehousing
with manufacturing and general consumption
space in india (mn.sq.ft.)
needs in a fast growing economy. but even in the
Additional space
required from
public space, consistent capacity addition has
Total warehousing CAGr
been a regular feature. in the past five years, we
space requirement (%)* Total
have added over nine lakh metric tonnes capac2014 (e) 2019 (P)
ity, harpreet singh, md, cwc, told Business
India. according to former railway board chairConsumption
man K.c. Jena, public sector units have been in
the forefront of scaling up their storage capacTotal Warehousing 919
ity. a company like concor has significantly
(E): Estimated, (P): Projected * Compounded Annual Growth Rate
added to its cold chain capacity to scale up its
** The entire area of the Inland Container Depot (ICD)/ Container Freight
Station (CFS) is considered including covered and uncovered portion of land
perishable solutions, he observes. another
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s u r v e y


We had got into

at the request
of one specific
Rubal jain

In the last
five years,
business has
had a CAGR of
18-20 per cent,

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

s u r v e y


The company
is presently
operating 15
million square
feet throughout
the country,
akash bansal
Om Logistics

significant case is that of central railside warehousing company (crwc), a fully-owned subsidiary of cwc, which was formed in 2007 to
make use of unused railway terminals as vibrant
cargo transit units. we were formed with the
mandate of creating 22 terminals. out of that,
18 are already in operations. we are covering
all metros plus locations like hyderabad, pune,
lucknow, ghaziabad, Kandla, Vadnera, nasik,
etc. our latest addition is Jogeshwari which was
opened last year. we have so far created a capacity of 3,29,000 metric tonnes primarily used as
a transit point for commodities like cement and
fertiliser which come in bags, explains K.u.
thankachen, md, crwc. the warehousing
units set up by crwc are typically 750 metres
along the railway track with a width of around
15 metres.
but most of the current action is visible in
the non-foodgrain, non-basic commodities section and here the driver is private. but this space
also needs massive scaling up, both quantitative
and qualitative, to ensure a strong supply chain
(with warehousing as a vital cog in the process)
in an economy still besieged by very high logistics costs. as much as 13 per cent to the gdp,
which in more matured economies like the us
and several countries in europe is in the single
digit range of 7-9 per cent.

And better

according to Vineet agarwal, md, tci (one of

the leading players in the fray), the actual process of going beyond the basic godown structure
had taken off in the late 1990s. prior to modern warehousing, what was prevailing in the
country was a typical c&f (carrying & forwarding) model wherein companies were keeping
their goods in small godowns run by local operators. but in the late 1990s clients started asking
to move from the c&f model to the 3pl model.
mncs like unilever were in the forefront of this.
other fmcg and consumer durable giants too

The biggest multi-modal logistics hubs

The $100 billion Delhi-Mumbai Industrial Corridor project is billed as
the biggest infrastructure project ever undertaken in this country to
give a serious rejig to the manufacturing sector. According to alkesh
sharma, CEO & MD of DMICDC in conversation with ritwik sinha,
the project also envisages some epic-scale units on the storage side
it would need an investment of $100
billion. All of it put together makes it a
gigantic project.

is it really the single largest

project as is referred by many?
It is certainly one of the largest infrastructure projects currently underway in the
world in terms of size and extent. We are
developing an industrial corridor which
will be 1,504 km long. In terms of influence area, you can take 200 km on both
sides of the stretch. so that makes it one
of the largest projects in terms of geographical spread. And then it is going to
have 24 investment regions to be developed in 25 years. On a cumulative basis,

it was mooted about nine years ago

and then the actual work began
four years ago. going by general
reportage, one gets the feeling you
are currently focussing on developing four zones in the first stage.
My question to you is: when are we
are going to see first signposts of
opening of this project?
you are right. The company was formed
nine years ago. But it took actual organisational shape in 2011. since then we
have done detailed master plans of
eight investment zones. We have got

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environmental clearance of the zones

we intend to develop in the first phase.
Besides that we have done DPr of two
Mass rapid Transit system (MrTs) projects. They will be financed by JICA. Then
we have two greenfield airports along
the stretch. One of them would be at
Dhorela, Gujarat, and we have already
done its DPr. By year end, we hope to
find a developer. They will be international airports but they will be developed in a manner that they become
so you will be completing the first
phase by 2019
The first phase covers eight investment
regions. Out of eight, we have managed

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

joined the chorus soon as they realised that c&f

operators do not have the wherewithal to scale
up as per their specifications, he recalls. tci
today has nearly 11 million square feet of warehousing space spread across the country.
safexpress md, rubal Jain agrees that the
demand for modern warehousing units was triggered by the manufacturing majors. we had
got into warehousing at the request of one specific customer during the initial spell of our journey (the company is nearly 20 years old now) and
then we realised its potential. it was integrating
very well with our express distribution business.
to take possession of land in four. We
have already formed sPvs for these
regions and development of basic infrastructure has already begun. We will be
in a position to start allotting land to
potential investors from september this
year. Infrastructure development in most
of these places will be done by 2018.
how much of land you need to
acquire for the first phase?
Gujarat has a major share in this phase
and they have already transferred
12,500 acres of land. In Maharastra, the
total land size is around 10,000 acres. We
have already started working on 2,500
acres. We need further 1,100 hectares
in Madhya Pradesh and 750 hectares in
Greater Noida. These are smaller nodes.
In these stretches, the work has already
started and we have good contractors
taking care of the development.
it is an imperative point what
DMiC provisions have been made
in terms of supporting the allied
industries of manufacturing? it will
certainly need very efficient transit

we got into it big time in the late 1990s and gradually we got into building our own state-of-theart logistics parks, he says. the company today
has 29 logistics parks in the country and is a front
league player in the space with a cumulative capacity of around 12 million square feet. the company
has invested R600 crore in building state-of-the-art
logistics parks in the last 10 years.
on the organised private side in the warehousing business, there are clearly three sets
of players. the first league is those of original
lsps, players like tci, safexpress, om logistics,
etc, who have existed for a long time with transportation expertise in their dna but later added
warehousing as an efficient value addition to
their services portfolio. om has been creating
a land bank since the 1980s and that has put it
in a strong position today. in the recent past, we
have been adding two to three large size units
every year, says akash bansal, head (logistics),
om logistics. he adds that the company is presently operating 15 million square feet throughout the country. om is particularly aligned to
the automotive and telecom businesses. much
diversified logistics players like allcargo and
global major dhl supply chain too belong to
this league with complete supply chain solutions. we have 700,000 of sq ft of logistics
parks operating out of panvel, mumbai, with all

and storage facilities?

you are right. We have planned two huge
multi-modal logistics hubs for this. One
would be in Dadri which will be spread
across 1,500 acres. And another unit
would be set up in Haryana and its size
would be around 1,000 acres. The Haryana government is presently negotiating
for the land acquisition of this unit and it
will happen soon. We expect these two
projects to take off before the year end.
While creating DMIC, one of our major
considerations is to address the concerns
of the manufacturing players and even
the exporters that relates to the logistics cost. The logistics cost in India is one
of the highest in the world and to bring
it down is also one of the key objectives
of the DMIC project. What do you need
to respond to this? you need an efficient transportation system which DMIC
will facilitate. you need enough storage
space for all kinds of goods including
perishables and you need a proper tracking system. you have to ensure that the
movement to desired destinations happens in the least possible time. When
all of these work in conjunction, you

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s u r v e y


We have about
400,000 sq ft
space across
aDaRsh hEgDE

can dilute multiple handling of consignments and this brings down the cost. The
multi-modal logistics hubs which we are
creating will be biggest this country has
seen so far. Normally, the best of logistics parks are laid out in 100-200 acre
land parcels but ours will be much larger
than that. Apart from these, we are also
mooting another logistics hub in sanad,
will there be any alignment
between DMiC and Dedicated
Freight Corridor (DFC) projects.
DFC is again a very ambitious project with very similar objectives to
facilitate easy movement of goods
and bring down the logistics cost.
We will be complementing each other.
DFC will ensure dedicated freight movement which will bring down the transportation time significantly. For instance,
the journey time between Delhi and
Mumbai will come down to 18 hours.
Our industrial and logistics hubs on the
northern and western stretches will feed
consignments to DFC.

Ahead of GST Agarwal Movers Group

crafts Virtual Warehousing Solution
Known much for its expertise in the movement of household goods, Agarwal
Packers and Movers ltd. is betting big on its trucking cube solution. Introduced
last year, the solution implies containerized (in all sizes from 4-20 feet)
movement of all kinds of goods and ensuring the safety and security while
in transit or at storage level. The company which notched around R450 crore
turnover in the last fiscal and is inching close to its 30th anniversary firmly
believes the solution can bring a world of difference to supply chain modalities
in the country. Ramesh Agarwal, Chairman of the company shares the details
Prima facie, your trucking cube solution means containerized
movement of everything. How did you stumble upon this idea?
At Agarwal Packers and Movers ltd., we have always been looking
for new ideas which can provide benefits to the companies or customers, especially those who are looking for innovative offerings.
Somehow most of the service providers in our industry have been
driven by the feeling that anything can be pushed to the consumer.
But last year, the controversy over Maggi noodles has made it clear
that customers are now more aware than ever before. We tried to
analyse the problem. If something was good for a long time, how
could it become bad suddenly? And we felt that discrepancy in
the quality standard from manufacturing stage to consumers is
mostly happening during the transit of the product. We transporters are quintessentially partners of the manufacturers. A factory
might be having 1000 trucking vendors. But even if one of them
shows laxity in maintaining the quality of the product, an unsafe
product can be delivered to the consumer. And if something goes
wrong at the end-user level, the reputation of manufacturer will
nosedive. There is an analysis which says that about 7 percent of
our trucks face breakdowns during the transit of the goods. What
is the usual solution we resort to in such a situation? We bring in
a new truck; load the goods from the original vehicle and then
move on to the journey ahead. But nobody notices the nature of
the goods the replacement truck had carried earlier. What if it was
carrying urea/ soap detergent? It will completely spoil the food
products offloaded from the original vehicle and will be harmful

for the end-consumer. It happens quite often.

That was the background. Now what precisely your solution has
to offer?
Our solution ensures that there would be no physical offloading if
in case the goods have to be shifted from one freight vehicle to another. As part of this solution, our trucks will have portable body
(cube) and in the event of a breakdown and goods being transferred to another truck, cube will be shifted. We ensure that all
the cubes are locked by clients and they keep the key with themselves. So there is no possibility of them getting into the contact
with any external hazardous element which may dilute the quality
of the product. At factory levels, the company might be taking all
precautions to ensure that a high quality product is churned. But
imagine a chocolate product bundled with soaps while in warehouse or in transit while on its way to the final delivery. And this
100% affects the quality of the products. Now with our Trucking
Cube, different goods will be coming in different containers and
will be stored separately which will ensure that its quality does
not get adulterated during the transit. Our cubes are available in
the 4-20 feet size. Cube is an impregnable coverage; protect the
goods from dust, moisture and other things. We have very carefully designed our floors to carry these containers. For instance,
the floors of the trucks often get uneven. So on our cubes; we have
laid out a special kind of floor pad which acts as a shock absorber.
Plus, there is safety belt and net with every cube so that the transit

jerks do not cause any damage to the goods being transported in

them. They also control the abrupt fall of goods from the top shelf
of the container when it is opened. This will ensure zero damage
and any casualty.
You had launched this product last year. How have your customers responded to it?
Let me tell you honestly, I never imagined that its demand will escalate to such an extent in such a short span. We had launched
this product with 500 cubes but demand went through the roof.
We had to express to our customers that we could not put in too
many cubes in our services in such a short time. It was also important to ensure that the management of these cubes happens
efficiently and scientifically. You need special stock yards for them
and proper loading and unloading equipments. Unfortunately I
had to disappoint some customers initially. But considering the
high demand for this specific service, we have cobbled up around
2000 cubes by now and in the next two years, the target is to take
their number to over 10,000.
You talked about this solution ensuring the safety and quality of
the product during transit of the goods. Now how it could help in
the specific area of warehousing?
After GST is implemented, this product will have great value as
far as storage and warehousing is concerned. To avoid CST, earlier companies used to have several smaller warehouses at the
state level. But in a uniform tax regime that will be not required.
With this solution, we can offer the big companies the Virtual
Warehousing Solution (VWS). They can just continue with their
regional distribution centers (RDCs)/Fulfillment centers (F.C) to
deal with their clients while their goods can remain parked with
us in cubes in our stock yards. At the regional level, the clients just
have to let us know where it has to be delivered and we will take
care of this last mile bit.
How many hubs you have on a pan-India basis?
We have 34 hubs presently and we are targeting to take it up to 50
as our cube volume climbs to over 10,000. All the hubs (RDCs/
FC) have been categorically and strategically located giving
an impetus to Truck transport throughout India. Mother hubs
have been made at Dudhu, Malkapur, Malegoan, Hosur and
Asansol and child hubs have been created at Palwal, Ambala,
New Mumbai, Kolkata and many more.
But considering the size of the Indian market, even a volume of
10,000 will be not enough?
Yes, you are right. We will keep on pushing the volume. The biggest company in the US offering a similar solution has around
1,60,000 cubes in their inventory. So you can understand the extent to which it can expand.
Where from you are procuring these cubes?
We have imported some units. And now we have also outsourced
the manufacturing of these cubes to company based at India.
What about the cost implication? Since you are providing an additional layer of protection to goods in transit as well as storage,
does it not imply that the cost of the end-user will go up?
You will be surprised to know that the logistics cost for our customers will actually come down by eight percent even as they
will be catered a superior and more efficient service. It can also be
used for the movement of household goods where we are a market

Virtual Warehouse at Bangalore

leader in the country. All goods of consumers who are shifting to

another location will be packed in a cube and he/she will be lock
it him/her as I said earlier. It gives a sense of satisfaction to the client. In case of any delay in taking the position of house at destination, we can also provide storage in our yards. We have begun this
service without charging any additional cost from the individual
It is quite surprising to hear that there is no additional cost implication. You are investing in a cube which is part of your capex.
Please explain the mechanism.
The rationale is simple. The common charge for keeping goods in
a well-constructed warehouse works out to be around R14 square
feet in India on an average basis. As against this, our open stock
yards where goods are parked in a cube, the cost is just R2-3 square
feet. So you see the huge difference. The loading/unloading cost
which is labor intensive also is low in our case because you dont
need that many human hands. This is big savings which we are
passing on to our esteemed customers.
It does happen that when a new product or solution comes to
the market, their operators keep the prices low to make it popular. Are you also toeing this line?
No. As I explained the cost of trucking cube is really low.
You have two set of clients- industrial and individual customers.
Which side has turned out to be the bigger buyer of this product
in the last one year?
It is clearly the industrial clients. In terms of demand, the ratio between industrial to individual consumer is 60:40.
You seem to be betting too big on this solution. How much of
investments have you planned for this?
In next two to two and a half years, we will be pumping in over
R100 crore in this solution. Most of the investments will be routed
to in having a much larger inventory of cubes, more stockyards
throughout the country and having a trained manpower to
support this solution.

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

s u r v e y


TCI today
has nearly
11 million
square feet of
space spread
across the
agaRwal ,TCI

required design and safety compliances. similarly for food, retail and e-comm storage where
hygiene and cleanliness is of paramount importance, we have about 400,000 sq ft warehousing space across india, informs adarsh hegde
joint managing director, allcargo logistics.
dhl supply chains md Vikas anand says: we
now have nine mcs (multi-client sites) completed and operational across india which have
been built to world class standards with stateof-the-art features customised to suit specific
requirements of customers. these mcs facilities can consolidate, store shipments and re-distribute them to several distribution channels in
the country. the dhl group had committed
an investment of 100 million four years ago to
scale up capacity in india.
the second set are players who have stemmed
as the branch of a large business conglomerate
(mostly in the last 10 years), firstly to support
the captive business of the group and then to
also generate business from outside. future supply chain, mahindra logistics, diesl (a tata
group company originally, it was bought over by
tVs logistics last year), etc, belong to this league.
mahindra logistics, for instance, has been very
closely aligned to the groups expansion in the
automobile space. says pirojshaw sarkari, ceo,
mahindra logistics: we have invested in big
box warehouses (ranging from 2-5 lakh sq ft)
and cross docks at strategic locations for our current customers and network business to transport products from a supplier or manufacturing
plant directly to the customer or retail chain
with marginal-to-no handling or storage time.
and then there are operators who do not have

complete supply chain expertise but backed by

institutional financing are showing signs of upping
the ante. indospace, jointly managed by everstone
capital and realterm capital (a leading industrial
real estate investment firm in the us), is a case in
point. in a short span of six years, it has created
nearly 9 million square feet of space through its
five logistics parks. six years back, we realised that
there is a serious gap in quality supply of warehousing and manufacturing real estate i.e. logistics parks. and we found ourselves in a position to
help bridge this supply-demand gap. that, too, on
a lease model, which swiftly helps clients convert
capex into opex and not undertake the headache of
procuring land and developing their own spaces,
explains rajesh Jaggi, ceo of indospace and managing partner everstone real estate. according to
Khalsa of Knight & frank india, more such players will be entering soon. other new players like
embassy, assets, salarpuria, tVs, casa grande
and other new developers are in advanced stages
to enter this space. basically there is demand for
new developers having huge funds in the market
for modernised warehousing.
and there is another group of players who fall
outside of any organised ambit the local standalone players especially at the fringe of indias
leading metros. there are villages around
dwarka in west delhi where local residents in
possession of small land parcels have opened
make shift units and are doing well. they may
not follow any rules but nobody is complaining. such a pattern is witnessed in all leading
consumption centres in the country, informs
divya prabhat, founder director, novus supply
chain solutions.

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a new vertical
The big changes

We now have
nine MCS
completed and
across India,
Vikas ananD
DHL Supply

arehousing, after transportation, is

the second most important vertical
of any logistics operation accounting for as much as 30 per cent of the total cost.
but companies which draw their bread and butter from supply chain operations and even those
promoted by big conglomerates are not in the
habit of treating it as a separate vertical. for us,
it is part of an integrated supply chain process
wherein we offer end-to-end supply chain solutions to our customers, asserts Jain of safexpress. if any customer approaches us just for
warehousing requirements, we are likely to turn
him down. it makes sense for us only when they
avail our bundled offering transportation plus
warehousing, emphasises bansal of om logistics in a similar vein.
but for those offering warehousing as their
core business, the good news is: the rental scenario has been positive in recent years. according
to Jasmine singh of cbre south asia, there has
been a steady increase of 8-10 per cent per annum
across key markets, with grade a assets fetching
more than 15 per cent per annum. a report,
released earlier by cbre, mapping the developments in 2015 sets out an enhanced demand
cycle. for instance, during h2 2015, more than
3.6 million sq ft of modern warehousing space

was leased which was a modest increase of 5

per cent compared to the corresponding period
the previous year. foreign 3pl operators such as
fedex, tippmann group, dhl and domestic &
global e-commerce companies such as big basket,
urban ladder and snapdeal were the leading flagbearers of this fresh demand. among the cities,
delhi/ncr and chennai led the race (23 per cent
each) followed by bangalore at 21 per cent. some
of the notable transactions include 330,000 sq ft
leased by urban ladder at bidadi industrial area
in bangalore, 138,000 sq ft lease by suzuki motor
corporation at farukh nagar, nh-8 at gurgaon
and flipkarts lease of 250,000 sq ft and 350,000
sq ft at medchal in hyderabad and binola.
about 60 per cent of new warehousing capacity creation has been developed around indias
metro centres in the last 10 years resulting in
big bang emergence of dedicated warehousing
clusters like bhiwandi and panvel near mumbai; chakan, wagholi- lonikand near pune;
patudi near delhi/ncr, etc. nothing surprising,
the operators are fiercely fighting to keep their
customer base intact by sweetening their offerings. over the last few years, there has been a
gradual shift from a fixed commercial model to
variable commercial model. it is a win-win situation for both the customer and the service
provider where the customer is charged on an asuse basis, addressing various factors like short
period rentals, scale up-scale down possibility and seasonal adjustments in space & manpower, sarkari of mahindra logistics points
out. a lot of value additions are offered these

Indospace state of the art

logistics park

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Most of
the large
have come
up around
the metros,
jasminE singh

days at the warehousing level. its like a buy-oneget-one-free kind of pattern. so you have kitting
activities, bar-coding of apparel and e-commerce
products, etc, being offered to the customers,
concurs agarwal of tci.
How modern are the new units?
the warehousing pie has undoubtedly got bigger but the moot question now is have they really
become better? equally important is to understand the attributes that define a quality, modern warehouse. responds Jain of safexpress: a
modern warehouse is a concrete brick and mortar structure designed and laid out in an efficient
way which allows easy movement of trucks with
vehicles being docked at the height of the platform and with engineered floors which should be
utilised without any issue for 25-30 years taking
the weight of 6-8 metric tonnes. furthermore,
it should have the ability to scale up vertically;
there should be proper handling of equipment
and sufficient space for them. that means creating warehouses without columns in the middle.
then, of course, you have to ensure right safety
standards, access to natural light, air circulation,
wi-fi, etc.
no doubt, such units are no longer a rarity in
the country, but they have also not become common in every demand zone. a report released by
an industry chamber early this year had pointed
out that about 80 per cent of handling and
warehousing facilities are not mechanised and
traditional manual methods are widely used.

furthermore, the warehouses which are mechanised have just forklifts or hydraulic hand pallet
trucks. according to singh of cbre, most developers are keen to build only the shells/pebs along
with common infrastructure as required by the
clients. automation, racking, material handling
equipments and inventory management systems
like wms/ims, etc, are client specific which the
tenants get on their own or ask their management partners like 3pls to invest in. warehouse
management system (wms) considered to be
the most vital piece while moving towards an
automated regime is not a regular feature with
indian warehousing units. automation of warehouses is yet to gain momentum in india. theoretically, the players are convinced that it is a
must but most of them are not ready to take the
plunge as yet, points out sunnil dabral, country head, schaffer the global giant in the automated solutions.
we have seen some improvement in the
quality of warehouses offered to us in recent
years. but the story hasnt even reached the half
way mark to full warehousing modernisation.
at best, we have semi-automated units, opines
Jagadeesh Kunchey, head supply chain of business conglomerate itc, which requires about 4.5
million square ft warehousing space for the storage and distribution of its products annually. i
dont think more than 8-10 per cent of warehousing units in the country deserve to be qualified as modern. it is a huge gap which needs to
be filled, adds Khanna of patanjali.

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s u r v e y


The real game changer

ut with the decks being finally cleared for

gst, the expectation is that the logistics
business in general and warehousing services in particular are going to witness sweeping changes in the future. this coupled with a
growing economy will act as double dynamo to
spruce up the vital supply chain modalities. gst,
We have
in fact, has been eagerly awaited by the supply
chain players and there has been a wider perinvested
ception in the industry that many of them have
in big box
been holding back their investments in new
warehouses and
warehousing units in the last five years in anticcross docks,
ipation. consolidation is a foregone conclusion
which will pave the way for large-scale waresaRkaRi
houses and elimination of many small units.
You cant imagine how it could change the
scene. today a manufacturer in chennai sendLogistics
ing his goods to northern states is compelled to
set up a sales tax registered warehouse in every
state. but with gst, he will have the leeway to
work with a centralised warehouse in the region
from where he can push on supply to other
states. plus, the pain of innumerable pieces of

documentation will be gone, explains bansal.

gst will definitely usher in a move towards
larger and co-shared warehouses. Value-added
services like kitting, repackaging, gift packaging or refurbishing within warehouses will be
more of a norm than exception in these larger
units. balaji V., ceo, avvashya cci, pinpoints
the regions where most of the action would be

We will pursue warehousing first strategy

anshuman singh, former top executive, Future Supply Chain
(the logistics unit of Kishore Biyani-led Future group) raised
eyebrows recently when he raised $125 million from global private
equity fund Warburg Pincus to start a new venture - Stellar Value
Chain Solutions. This is clearly the largest funding to a supply
chain start-up in India and according to Singh, the operational
differentiator of his new venture would be in big boxes centric
offerings. Excerpts from an exclusive interview with ritwik sinha

Before i ask what you intend to

do as an entrepreneur, let me ask
you this: has the journey of indian
godowns to modern units reached
to a matured stage?
The evolution of warehousing, from
godowns to modern units or fully automated distribution centres (DCs), in
India has definitely been rolling out for

quite some time. But it has evolved at a

very slow and steady pace. The change
has clearly been not transformational.
But right now, everything is coming
together. Warehousing segment could
well be at an inflection point where bigticket transformation may fall in place.
Decks have been cleared for GsT which
I would call the biggest reform which
has been pushed in the recent times.
Companies, especially in the consumer
goods side, have been waiting for it to
give a rejig to their supply chains which
among other things also mean switching over to big boxes. I expect in the
next five to seven years would be the

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biggest transformational era for supply

chain and there would be huge consolidation in warehousing to gain efficiency.
I would just cite an example of what we
had done in the Future supply Chain. For
Big Bazars distribution, we used to have
16 locations at one point of time. But
then we shifted everything to the mother
warehouse in Nagpur which is one of the
largest DCs and that was quite a successful and beneficial move. GsT will facilitate more such initiatives.
with your previous company,
you had set up a pan-india warehousing network. and now as an

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

visible after gst becomes a reality. gst would

allow companies to expand their existing warehouses, develop new warehouses or indeed shut
down several existing setups. some of the most
impacted regions will include mumbai-gujarat-rajasthan-ncr corridor in the northwest,
chennai-bangalore stretch in the south and
nagpur region in the central part, particularly
entrepreneur, you will have to do
it again. Do you think, this time it
will be much easier given the gsT
It will definitely be far easier. As I said, GsT
will create a positive environment, the
government is stable, and the economic
growth pattern is favourable. Companies
in general have realised that they need to
spruce up their supply chain and for this
they need large logistics parks with very
large processing capabilities. What does
it require? It requires capital investment
inside the big boxes in terms of material
handling equipment, racking, shelving,
technology, automation, conveyor system, sortage and storage systems and
a whole lot of advanced software applications. And then you need to adopt
global benchmarks in warehousing management. A half-a-million sq ft modern
warehouse can give 50 times more output than a 50,000 sq ft godown if we
could integrate all the required pieces.
Big boxes is the idea whose time has
come in this country now.

due to upcoming manufacturing setups and

the planned delhi-mumbai industrial corridor
(dmic) in this region.
the tilt towards large boxes is good news for
players in the automation space too. bringing in
adequate automation in a large unit is inevitable.
You cant run them efficiently just on the basis
of manual power, points out dabral of schaefer.
and there seems to be a larger agreement on this
point even public sector enterprises echo this.
as you are aware, cwc was set-up in 1957 and
the infrastructure created by cwc is very old
and, therefore, it has been decided to upgrade 140
centres currently. out of these, 42 centres have
been upgraded by June, 2016. another 51 centres will be upgraded by march 2017 and 37 centres by december 2017. the balance 10 centres by
march 2018, specifies harpreet singh. crwc, on
its part, has begun pilot tests with installation of
wms in its units and according to thankachen,
this exercise will be pushed aggressively.
for well-established logistics service providers, gst ensures an expansion of their services
profile. the real impact of gst will be felt after
two to three years. consolidation will definitely
happen. for instance, a company running 20-25
units may bring it down to 10-12 large units. but
once these big spaces come in, complexities will
arise in terms of management. You will need the

s u r v e y


We realised
there is a
serious gap
in quality
supply of
R ajEsh jaggi,

be doing on warehousing front?

We are clear in our mind: we will build
high-end modern DCs across the country. I have set a target of 20 million sq
ft of modern DCs in the next three-four
years which could go up to 30 million sq
ft in the next five years. It will all depend
on how customers adopt it. These units
will be based on GsT strategy, linked
with modern transportation systems
and logistics parks where I will provide
modern warehousing, cold chain stores,
fulfilment centres for e-commerce companies, etc. Our focus will be on an integrated value chain.

so are you promising the biggest

DCs which this country has seen?
That is the intent.

so when you say 20-30 million sq

ft space in a cumulative sense, how
many units you are talking about
in a broader sense?
This kind of space capacity will be built
across 21 cities in the country. These cities are either major consumption centres
or production centres. each unit will be
between half-a-million to 2 million sq ft
depending upon the demand in a specific location.

Most of the supply chain players in

the country talk about transportation first and then warehousing as
part of the larger integrated design.
what will be your strategy?
In our case, it will reverse. For us, warehousing will be the fulcrum of our operations even as transportation will be a
vital component of our larger integrated
value chain. But we will pursue warehousing first strategy.

Your new venture, what all it would

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will they be greenfield units?

They will be a combination of greenfield,
build to suit and existing units. We ourselves will not be investing in land and
building. Our aim is to change the life
of our customers and not to become an
infra player. We will purely remain a supply chain player from the services side.
We will join hands with developers to
build those large warehouses. We will
invest in the facilities inside the big box.

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

s u r v e y


GST would
to expand
their existing
balaji V.
aVVashya CCI

right players to manage them, explains tcis

agarwal. and with gst unlocking a plethora of
opportunities, the serious stakeholders are also
talking of a right mix of qualitative and quantitative growth. Knight frank projects that total
warehousing space (including those for exim
cargo) in the country will go up from around
900 million square feet in 2014 to over 1,400
million square feet by 2019. and serious stakeholders seem to be ready for it. tci confirms
adding 0.5-1 million sq ft of warehousing space,
safexpress is working on four more logistics
parks units, dhl supply chain confirms that it
is contemplating more mcs, om will be adding
more greenfield units especially in gujarat, etc.
and given indias robust growth, the expanding demand for industrial real estate, coupled
with the governments make in india push plus
the e-commerce sector expansion, indospace
is looking to increase its industrial and logistic

parks from around 27 million sq ft (operational,

under development and planned) to 50 million sq ft (operational, under development and
planned) in the next five years, with a planned
investment of upto $ 1 billion over the same
period, to take total investment to $1.75 billion,
says Jaggi of indo-space.
from the public sector side, harpreet singh
of cwc confirms an average addition of at least
1.5 lakh metric tonnes every year till 2020 and
its crwc is targeting to unveil four more rail
terminals in the next two years. but the real bigticket intention is expressed by alkesh sharma,
ceo and md, delhi-mumbai industrial corridor
(see interview), that indias largest infra project
has provided for two epic-scale logistics parks.
clearly, the story of big boxes in the country is
poised to get more interesting.
u ritwiK sinha

i n D u s T r i a l pa r k s

the new catalyst

Post GST, industrial parks will become a happening segment

he growing demand for large scale warehouses in the country could well find a new
cushion apart from big ticket designs of
established logistics service providers (lsps). there
are trappings to suggest that industrial parks, the
dedicated manufacturing zones with adequate
provision for storage and other supply chain activities, will become a happening segment in the
coming years post gst. the lack of clarity on the
path-breaking law in the past is believed to have
forced developers to lie low. but now with gst
round the corner, their offerings are expected to
find more willing takers from the manufacturing
and distribution sides who know the pragmatism
of an integrated play, which is the usp of an industrial park.
considering the size of the indian economy,
the gap is glaring when it comes to industrial real

estate the base turf for advanced offerings either

in manufacturing or distribution or a mix of both.
indian industrial real estate stock is 170 mm sf
compared to 17,000+ mm sf in the us and 7,500+
mm sf in china. when compared to respective
gdps, the gdp to industrial stock mismatch in
india is telling, explains rajesh Jaggi of indospace. but this mismatch is likely to be bridged in
a gradual manner with the arrival of a slew of players on the scene who often have the institutional
funding back up. we are witnessing the heightened interest of international financial and development institutions, global institutional investors
and developers to participate in this accelerating
opportunity. the indian developer community,
which has long been fixated on the traditional real
estate asset classes, viz. residential, office, hotel
and retail, have now opened its mind and wallet to

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s u r v e y


Patel: in
support of SMEs

enter into the warehousing segment, points out

balbir singh Khalsa of Knight frank india.
but it is not only warehouses which are on the
radar of the new league of developers. they are
rather indulging in a larger play by bringing in
manufacturing and storage under one roof. take
for example, the 200 acre renaissance industrial
smart city which has partially opened its doors
for the industry users. located on padhga-Kalyan
road, the facility typically functions on industrial clusterisation model something that has
contributed significantly to chinas manufacturing might in the last couple of decades. in
china, we have seen how mobile cities or electronic cities have come up which have added
strength to their economy. they primarily function on the model of creating clusters for different
industry segments and delivering them the most
robust ecosystem which includes all facilities on
the supply chain side. this is what we are trying to do here, says mayur suchak, md, magus
consulting, which has developed the first integrated industrial area (iia) in the mumbai metropolitan region (mmr). the industrial park has
seven dedicated clusters supporting businesses
like machine tools, textile, e-commerce (amazon has already established a fulfillment centre
here), plastic, printing and engineering. renaissance industrial smart city has received substantial funding support from edelweiss (to the tune
of R400 crore), and it has planned further horizontal expansion of the project as it gears up to
get completely ready in the next five years. we
have plans to add about 200 acres more in this
project. and with the core strategy of creating an
expansive integrated platform for manufacturing
and supply chain, this complex will eventually

provision for about 100 acres of modern warehousing, adds suchak.

bhumi world industrial park, located in bhiwandi near mumbai (a noted warehousing cluster in the country) is another case in point. the
park spread across a sprawling 100 acres (to be
fully ready by march 2018) had begun its operational innings in 2012 with its
core usp of supporting small
and medium enterprises. the
response to our unit has been
tremendous. about 600 units are
already operational in our park,
out of which 100 units belong to
the foreign entities from countries like spain, switzerland,
malaysia, etc. every unit holder
in the park has his own storage
space for raw materials and finished goods, informs prakash
patel, cmd, bhumi world.
the unit has provisioned for as
many as 11 industrial clusters including garment,
printing, plastic, furniture, engineering, food,
pharma, etc.
elsewhere in the country, other companies
too are coming forward with their larger designs
of establishing industrial parks with the integrated supply chain facilities. embassy, assets,
salarpuria, tVs, casa grande and mascot are
the leading names which have drawn the attention of market observers. in the next five
years, we expect more pe-backed developers
to hit this space and average ticket size of the
parks will increase manifold, says rami Kauhal,
md, consulting and valuation services at cbre
south asia.
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Suchak: wants
to do what
China has done

Guest Column

B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

its time to be proactive

India needs a deeper corporate bond market, as also a redirection of savings, if its long-term
growth prospects are to improve

t the turn of the millennium, on 9 august

2000, the reserve Bank of indias policy
or repo rate touched an all-time high of
16 per cent. from there, to a record low of 4.75
per cent on 21 april 2009 (in the aftermath of
the global financial crisis) and to 6.5 per cent
now, we have seen many a seismic change in
indias financial markets.
But one thing that didnt change through
this structural downshift in interest rates was
the pursuit of macro-economic stability. given
such directionality, shouldnt india have had a
much larger corporate bond market today?
Just take the time-frame of the last decade.
corporate bonds outstanding in emerging economies tripled to $6.9 trillion in 2014 from $1.9
trillion in 2005. on the other hand, in the five
fiscals to 2015, corporate bonds outstanding in
india could only double, that, too, helped largely
by public sector financial entities that borrowed
thick and fast. the issuer demographics remain
askew, which is another story.
overall penetration of the debt market in
india, as measured by the amount outstanding to gdp, increased from 10.31 per cent to ~17
per cent between 2010 and 2015. however, that
growth pales in comparison with top developed
and emerging asian markets.

ashu suYash

So where did we miss the bus?

for one, we havent been successful in directing a chunk of household savings to professional investment institutions such as pension
funds and mutual funds. today, less than 2 per
cent of household savings in india is allocated
to the capital market (rBi data, 2014-15) compared with ~35 per cent in the us, 15.8 per cent

The peneTraTion piCTure

The US
South Korea
Hong Kong

(outstanding debt/
gdp) as on December
31, 2015 (%)


Corp bonds





in Korea and 8.6 per cent in a small market like

turkey (oecd data, 2014).
this dearth of institutionalisation of savings has meant far too many retail investors
taking the risk of investing directly in equities
and bonds even foregoing some tax benefits.
then, rattled by volatility, losses and ructions
such as the global financial crisis and the taper
tantrum, many rush back to fixed deposits and
stay put. this cycle has impacted the growth
of the investment pools even as bank deposits continued to grow and, by extension, bank
if that werent enough, the central government has been a continuous borrower ever since
the ad hoc bills regime demised, which has kept
interest rates high and further encouraged passivity among savers. and, all these years, companies could borrow relatively easily from public
sector banks that were awash with liquidity stemming from strong deposit growth.
that meant a key push factor for corporate
bond issuances was missing. thats a structural
imbalance and data reveals it: only a fifth of outstanding credit to companies is from the corporate bond market.

The author is md &

ceo, crisil, on the

corporate bond market

or private borrowers too, there is little inducement. But the good part is: that could change
soon, with the reserve Bank of india making
it costlier for banks to lend to specified large
borrowers beyond a defined limit. such a regulatory push in the current cycle of declining
interest rates will provide a much-needed structural impetus for the rebalancing.
systemically, it would serve stakeholders well,
if less money goes into fixed deposits and more
into mutual funds, pension funds and other
managed assets. the win-win is that, for savers, leveraging institutional expertise for investments is any day a better bet than going direct.
for issuers, as more savers shift away from fixed
deposits, borrowing cost will fall.
that would mean the traditional banking system can sharpen its focus on serving the credit
needs of the lower rungs of the pyramid. underpinning all this, of course, is continued macroeconomic stability and low interest rates.
as for regulatory focus, so far it has been on
safety and the banking sector; the time is nigh
to be proactive on the corporate bond market

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Guest Column

B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

How tHe primary corporate bond market fares

n an encouraging turn, India saw a

healthy growth in fresh issuance of
bonds in the last five years, at a 19 per
cent cagr. However, this was concentrated towards the top end, with aaa and
aa papers accounting for almost 80 per
cent of the total, mainly given the restrictive investment policies of key investors
such as pension funds and insurance
Among the sectors, banking, financial services and insurance (bfsi) dominated the issuances. In fiscal 2016, as of
the third quarter, private corporates and
nbfcs saw the sharpest increase, followed
by financial institutions and hfcs. The
skew towards top-rated issuers remained,
given higher demand from the market.
Also, favourable spreads between bank
base rate and yields on these papers
prompted these players to raise capital
through bonds instead of bank loans.

The top 10 issuers accounted for 32

per cent of total issuances in fiscal 2016,
led by the financial sector. Indeed, the
list had only one issuer from manufacturing; financial institutions, hfcs or banks
brought up the rest.
is the secondary market any
The secondary bond market, too, remains
quite illiquid, compared with global
peers. The concerns are heightened in
case of corporate bonds compared with
Similar to the primary market, liquidity in the secondary market for corporate bonds has improved as average daily
trading grew 11.5 per cent annually over
the past five years. However, the trading
remains concentrated towards top-rated
securities, with aaa- and aa-rated issuers
accounting for almost 96 per cent of the

How to deepen indias

corporate bond market

trades, while low-rated issuers are mostly

in the held-to-maturity category. Here,
too, the BFSI sector dominates play.
A review of investment guidelines
from major regulators for pension funds
and insurance companies, explains the
skew towards top-rated issuers. First,
regulations prohibit key investors from
picking up securities rated below aa, a
segment where the bfsi sector dominates.
Secondly, the market prefers top-rated
psu issuers, given a perceived lower risk
because of government backing. Third,
high slr/crr requirements limit banks
demand for corporate debt. Fourth, arbitrage provided by bank loans, which are
not marked to market, unlike bonds,
feeds the preference for loans instead of
bonds, too. Fifth, major players follow
an htm style of investing, which is also
a reason for illiquidity in the secondary

and facilitate innovations there. the example of

how malaysia went about this is germane and
instructive. the government there drew up a
10-year roadmap for its capital market in 2001,
implemented programmes, and in 2009, opened
things further by setting up danajamin nasional
Berhad, the first national financial guarantee
institution. the upshot? penetration of the corporate bond market in malaysia is 43.85 per
cent, or more than two-and-a-half times indias
16.74 per cent.
its not that there havent been regulatory
and policy efforts. the recent legislation of the
insolvency & Bankruptcy code is one of the
biggest reforms seen in indias financial sector. Yet, we need to do a lot more, we need a
concerted effort to deepen the corporate bond
market, taking cues from seminal works available, such as from the imf and the experience of
other countries.
all the more so, because indias banking sector could come up short in terms of wherewithal
for the infrastructure build-out necessary. crisil
estimates this at R43 lakh crore in the five fiscals
to 2020, nearly a quarter of which will have to
come from the corporate bond market.
Banks also need another R1.7 lakh crore of
capital to meet Basel iii guidelines. thats why
taking another raft of steps (see box 2) to deepen
the corporate bond market has become unavoidable. only then can we fulfill one of the crucial conditions necessary to lift indias potential
growth rate and keep it there.

We believe the time to identify and pursue actionable

steps to increase the depth of Indias corporate bond
market depth is nigh. We have identified a few of
these, and it will be pertinent to note that all of them
have facilitated growth in the corporate bond market of developed nations, which underscores their
broad-based retail participation through investment institutions
Investor awareness
Development of new products
Increased share of organised sector employment
Increased contribution of foreign investors
transition from bank loans to bonds
Impetus to securitisation market
Removing loan-bond arbitrage
Additional measures such as putting a cap on
loans that can be raised by top-rated issuers
bonds by public sector banks demand is from
limited amount of investors
revamp of credit enhancement mechanism
Boost to innovative structure (partial guarantee,
securitisation of annuity roads, receivables by
municipal corporations)
revamp of regulatory policies for investments
Identification and modification of regulations
which are roadblocks in development of bond

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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Owl on the lookout

The incoming governor has a list of unfinished
business to attend to
sa n JaY bor a de

ow indian should the governor of the reserve bank of

india be? in 1943, two european candidates stood as frontrunners for the governors post against
chintaman deshmukh, a deputy
governor, who had risen from the
civil service ranks and emerged as
the prime candidate who could at
least ensure that indias economic
interests would not go by default,
notes the cambridge economic
history of india.
deshmukh got the job but how
much the times have changed since
then. stanley fischer, born in zambia, who holds a dual citizenship
between israel and the us, is vicechairman of the us federal reserve

system. the current governor of the

bank of england mark carney is of
canadian descent. israel-born ilan
goldfajn took charge as president of
the central bank of brazil last month.
Kenya-born urjit r. patel will take
charge as governor of the reserve
bank of india from raghuram rajan
on 4 september.
his predecessor leaves two big
boots to fill. rajan, 53, opened up the
banking system for on-tap licences,
paved the way for a monetary policy committee, lowered regulatory
requirements that force banks to
lend to government and restructured
the rbi internally. the governments
Jan dhan Yojana scheme for financial inclusion, the linking of aadhar
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with bank account numbers and the

passage of the bankruptcy bill, have
taken place during his term.
he has had failures too. foreign
banks have yet to set up subsidiaries as desired by the rbi. while the
bharat bill payment system will run
a pilot next month, a unified resolution framework, as suggested by the
fslrc (financial sector legislative
reforms commission), hasnt made
much progress.
rajan leaves the rupee at a level
close to where he picked it up at. he
has reined in inflation and moved
the benchmark to the consumer
price index. significantly while his
outspoken nature failed to earn him
votes from businessmen and government, it has ensured that the rbis
perceived autonomy stands intact.
his premature departure leaves a lot
for urjit patel to do.
though a prolific writer of
thoughts and ideas, patel has in the
past made rare public appearances.
most of the non-performing assets
are from infrastructure lending. and
he has a clear understanding of the
problems in the sector, says deepak
parekh, chairman, hdfc. he has
played a key role in developing the
new monetary policy framework
that has focussed on reining in inflation, says chanda Kochhar, managing director, icici bank. a central
bank governor doesnt need to have
rockstar status to rein in inflation or
clean up the banking sector, says
fitch ratings.
the son of gujarati migrants to
Kenya who ran a chemical factory
there, patel, 52, did his early schooling in nairobi. he graduated from the
university of london, completed his
masters in economics from oxford
university and earned a doctorate in
economics from Yale university.
his first job was at the international monetary fund in 1990, under
an economist programme working on the us, india, bahamas and
myanmar desks. with leave from the
imf he joined the rbi for two years


b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

in 1997, to offer advice on development of debt markets, the banking sector and pension fund reforms,
real exchange rate targeting and
evolution of the foreign exchange
when idfc was being formed as
a development finance institution
in 1997, patel, wanting to remain in
india, joined the company and rose
through the ranks from chief policy officer to executive director and
member of the management committee. responsible for idfcs policies
and regulatory framework around
infrastructure, he also managed the
proprietary equity group till 2006. in
2009 came a year-long stint at reliance industries as president (business development), to strategise a
commercial plan for the energy company within constraints on account
of climate change, and another stint
as advisor on energy to the boston
consulting group.
till 2013, patel served on various
government committees until his
appointment as deputy governor of
the rbi in charge of monetary policy.
there he produced the 2014 report
for which he is widely known for
a revised monetary policy framework
that recommended a shift to consumer price inflation targeting and
a joint committee decision to decide
the policy rate.
of the many targets that patel will
identify for himself for the next three
years, defending the rupee in the
short term will take topmost priority.
foreign currency deposits raised by
the rbi in 2013 are due till 30 november, and will see outflows upwards of
$20 billion starting around end-september. while these amounts have
been covered by the rbi through forward swaps, the market is bracing
for stray days when mismatches may
fuel currency volatility.
all formalities for a monetary
policy committee have been put in
place, and the government needs to
choose its men. the next interest rate
decision in october 2016 may not be
taken by patel alone, but for the first
time by a committee he will lead.
the governor will chair this committee and be assisted by a yet-to-be
appointed deputy governor in charge

of monetary policy and one other

officer from the rbi. it will include
three other members appointed by
the government, who are to be independent and not employees of the
central government.
the attempt to nurture gdp growth
while keeping inflation within the
glide path will be key. both the government and rbi are committed on
paper to a band within which inflation is acceptable. any government
pressure on lowering the policy rate
will be directed to the prospect of
stiffer inflation.

Patel sPeak
Unless measures to reduce the primary
deficit are taken, a fiscal crisis is bound
to come. Where and when it will strike
cannot be predicted with certainty.
Debt, deficits and inflation, 1990
Inflation had not accelerated when
nominal devaluations are used as a
policy tool.
Implications of real exchange rate
targeting in India, 1997
The incentive structures under public
sector dominated intermediation are
simply incompatible with commercial
The financial leverage co-efficient, 2002
In order to prevent connected lending
(one of the original motives of bank
nationalisation), private banks in India
cannot have corporate owners who
own more than 10 per cent of the
banks equity capital.
Reform strategies in the Indian
financial sector, 2003
With smaller fiscal deficits and
higher saving and investment, the
government could make a contribution
to faster growth.
Fiscal rules in India, are they effective?,
The Central government needs to
ensure that its fiscal deficit as a ratio to
GDP is brought down to 3 per cent by
Revise and strengthen the monetary
policy framework, 2014

bringing a limping banking system back on track to support growth

is another top priority. and linked to
that is the development of a corporate bond market. indian banks have
traditionally offered loans to companies for shorter tenures, which
matches the tenure of deposits they
are able to raise.
in most developed countries, the
market for corporate bonds is much
larger than individual stock markets.
companies approach investors to raise
long-term funds, but in india they
are financed largely by public sector
banks. the banks in turn, raise funds
from the investors who would otherwise have invested directly in corporate bonds. the lack of a bond market
for companies to raise long-term
loans is partly responsible for the rise
in the banking sectors nonperforming assets.
lastly, there is still no end to the
road towards capital account convertibility. neighbour china, which
till not too long ago had a currency
pegged to the dollar, has put in place
all the building blocks that will see it
achieve this target much faster than
india will.
patel has a similar background
to many of the economic advisors
or specialists that the government
(particularly congress governments)
roped in. former prime minister
manmohan singhs star performer
was montek singh ahluwalia, who
had studied at oxford and worked
at the world bank. similarly in the
case of shankar acharya and deepak
nayyar who were also from oxford.
with a background no different from
the rest, it is unlikely that patel will
chart a different path.
while patel does come with more
commitment to the post than his
predecessor could, he is likely to follow the same kind of policies we
have seen in the last 15-20 years, particularly depreciating the currency
to boost exports, going slow on full
capital account convertibility or a
vibrant market for indian corporate
bonds seeing the light of day during
his term. we are happy to be proved
u rYa n m a X i m rodr igu e s

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Telecom war
Reliance Jio and COAI go head-to-head against

elecom players are on the war

path. there are allegations and
counter allegations from two
sides: reliance Jio on one and the
coai (cellular operators association
of india) on the other.
the situation has become so grim
that coai took the matter to the
prime ministers office (pmo) where
it complained that some recent decisions and papers by trai (the telecom regulatory authority of india)
point to a pattern of discrimination
against existing mobile operators
while at the same time, deliberately favouring Jio. a few days later,
mukesh ambani, promoter, reliance
Jio, went and made a presentation
to the dot secretary and trai giving updates on Jios operations. Jio
denies that there has been any decision from trai that benefits it.
reliance Jio has threatened to take
legal action against coai for its various allegations. it has also alleged
that coai is openly promoting cartilisation in the guise of promoting the
cause of the industry.
incidentally reliance Jio is also a
member of coai an association of
gsm telecom companies operating
in the country. its core members are
airtel, Vodafone, idea, aircel, reliance Jio, telenor and Videocon. tata
docomo and reliance communications, originally cdma-based systems
players in the wireless business
are not members. public sector units
bsnl and mtnl, too, are not members. coai also has associate members which include apple, facebook,
cisco and ericsson to name a few.
the stakes are high and when
stakes are high everyone will try
to protect their own turf. there are
many issues that reliance Jio and
coai differ on, but a few major ones
have been bones of contention.
first is interconnection usage
charges (iuc). the matter started

Mathews: crying foul

when, on 5 august trai issued a consultation paper requesting stakeholders to send their written comments
on a reduction of the existing iuc
by 5 september 2016 and counter
comments by 19 september. rajan
mathews, director general, coai says:
what was the hurry for trai to come
out with this consultation paper
now? the present iuc was introduced

Wireless subscribers circle-wise


10.42 crore

Circle C

15.42 crore

Circle A

Circle B

36.2 crore

41.27 crore

Source: TRAI. Data as on May 2016

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on 1 march 2015. the next review

is called for only after two years. at
least, trai should have waited for the
spectrum auction to get over. the
new spectrum auction is scheduled
to take place in september.
trai on the other hand reasons
that when the iuc was fixed, it was
based on circuit switched radio
access network (cs-ran) which is
used for 2g and 3g networks. with
several telecom service providers
having built access networks using
4g and a few of them using ip-based
Voice over lte (Volte) on such networks, there was a need to review the
iuc. the technology used in 4g is
different from 2g and 3g; 4g uses
a packet-switched radio access network (ps-ran). trai also argues that
comprehensive policy exercises take
6-9 months and hence the timing is
in order.
so how does iuc impact the
industry and existing players?
R8,000-10,000 crore is at stake, says
mathews. iuc is the charge that the
call originating company pays the
call terminating telecom company
to use its infrastructure. iuc is implemented only on voice calls and not
on data usage. mathews estimate is
on the gross level. but on a net level
this figure may not be that high as
telecom companies pay when the
call originates from their network
but also receive iuc when calls terminate on their network. netting
out the figure would be in the region
of R1,000 crore or so, for all coai
in india, iuc was first introduced in January 2003 with charges
in the range of R0.15-0.50 per minute depending upon the destination network and whether it was in a
metro or non-metro. this was introduced when india moved to a regime
of calling party pays (cpp) and all
incoming calls were made free. prior
to this, telecom subscribers used to
pay for both making and receiving
phone calls. incidentally, reliance
industries first telecom venture also
launched its full mobile service in
2003 when iuc charges were introduced. due to the family split, that
business went to the anil ambani
group and is now called reliance

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iuc rates were first revised in
2004 where trai recommended flat
charges of R0.30 per minute irrespective of distance. the same rates were
again revised in 2009, they were
pushed further down to R0.20 per
minute. but this was challenged by
some telecom players all the way to
the supreme court. later, the matter was settled and in 2015 iuc was
again revised to its current level of
R0.14 per minute.
the present consultation paper
floated by trai looks at the possibility of moving to a new regime called
bak (bill and Keep). in this method,
telecom service providers do not
have to pay any termination charges
to the interconnecting telecom service provider. hence there is no
share of revenue from the call originating company to the call destination company. trai argues in favour
of bak in its consultation paper, stating that fixing termination charges is
complex and hence debatable. it
adds that termination charges work
as a disincentive for telecom operators to deploy ip-based networks
which is the future of telecom. the
same consultation paper also gives
the counterargument against bak
which states that this will incentivise
telecom players to set low prices to
capture a larger market share (read
reliance Jio) which in turn will result
in inadequate network infrastructure
and consequently impact telecom
growth. but the tone of the trai consultation paper is in favour of bak.
b.K. syngal, former chairman of vsnl
and then president at the undivided
reliance telecom, believes that india
is not mature enough for the bak
regime. the bak regime will favour
new players and it would be disadvantageous to existing players.
Bone of contention
at present too we follow a bak regime,
but only to calls originating from
mobile to landline, from landline to
landline (the segment dominated by
psus) and from landline to mobile.
but this regime has been challenged
in the high court (delhi and gujarat). a decision is likely to be made
by september. the coai believes

Syngal: Jio wont have easy time

that trai should have waited for the

judgement before coming out with
the consultation paper.
trai argues that the bak regime
helps improve wireline connection penetration and will similarly
improve tele-density in the country. as on may 2016, the countrys
mobile tele-density stood at 81.18,
while in rural india it is only 51.27.
at present, except for the us there
is no other country that follows bak
for iuc as per the trai consultation
paper none of the european countries have bak. in north america

Smartphone & 3G/4G penetration

(% Mobile Subscribers)
Smartphone penetration


3G/4G penetration





FY 2013




Source: CLSA

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bak has been used as both parties

call originating as well as call receiving pay, unlike in india, informs
mathews, adding: if trai implements bak it will impact rural roll
out. this is contrary to what trai
argues in its consultation paper.
the second bone of contention
is that trai has come out with several consultation papers in the recent
past. why do you need 23 working
papers in just 6-9 months? questions
mathews. some of the consultation
papers floated by trai we believe are
an attempt to disenfranchise existing players and this does not augur
well for healthy growth in the industry. the trai website shows that
in 2016 it floated 23 consultation
papers till 20 august which is higher
than in 2015 when it presented 17. in
2014 the same stood at 19. trai got
its present chairman on 10 august
2015 and since then 31 consultation
papers have been floated.
the recent call drop matter that
went to the supreme court is one
such example where coai feels that
existing players have been victimised. in september 2015 trai floated
a consultation paper on this too. trai
wanted to penalise telecom operators
for call drops by crediting subscribers
with R1 for every dropped call, but
with a limit of three dropped calls
per day per subscriber. this would
have imposed yet another financial burden on the existing players
already saddled with high debt due
to spectrum purchases. coai did not
accept this penalty as they argued
that they are anyway within the 2
per cent benchmark of call drops,
which is part of the licence agreement. they challenged this ruling in
the delhi high court, and when it
ruled in favour of trai, coai moved
to the supreme court where the decision was in favour of coai. the sc
found the delhi high court judgement flawed for several reasons.
incidents like this clearly show
that coai is in combative mode and
does not want to take anything they
feel is harming their interests lying
down. coai believes that reliance Jio
has, under the guise of a test launch,
already launched commercial activity an allegation that has been flatly

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Wireless subscribers
(Nos. in crore)


















Quadrant 0.29
Source: TRAI. Data as on May 2016

pa l a s h r a n Ja n b h au m i c K

denied by it. reliance Jio claims that

it has 15 lakh-plus test users, which is
part of their licence conditions. coai
believes that reliance Jio has more
than 15 lakh test users.
reliance Jio started test trials
in december 2015 with company
employees and families, its affiliates,
consultants, service providers and
buyers of lte devices. this test trial
later extended to lte handsets certified by its network. it has been more
than eight months since reliance
Jio started its trial runs but there is
little clarity on when it will launch
its commercial services. in its letter dated 4 august to trai, reliance
Jio blames coai arguing that due to
inadequate points of interconnection (poi) there has been a delay in
its commercial launch.
in response to our email query
a reliance Jio spokesperson states:
based on industry practice, 12,500
e1 ports are required for 22 million
subscribers, for which the details
have been given to coai member operators. as against this, the
top three operators have released
only 1,400 ports so far. as you can
see, it is grossly incorrect to suggest
that a sufficient number of ports
have been given to support 15 million users. this is reflected by the
experience in the field where over
65 per cent of calls to networks of
the top three operators are failing
today. the response goes on to add,
there are over 1.8 crore failed calls

per day to these networks. over the

last few months, Jio has asked for a
time-bound release of ports to meet
expected traffic on the network so
that the other operators are able to
plan better. these details have also
been submitted to trai. however,
less than 4 per cent of the required
ports in the first year have been
released. there is little clarity as we
write this article on what action trai
took against coai against this allegation by reliance Jio. the present telecom regime has not specified a time
limit for test runs before a commercial launch. trai may revise its guidelines post this episode.
reliance Jios unlimited test service is not ethically correct. even
though it claims it is free, it is making money by selling handsets. under
the guise of a free service reliance Jio
is running commercial operations.
the government is losing money due
to this on two counts: license fees
and spectrum usage charges, feels
in fact, many believed that reliance Jio would launch its commercial
operation on 15 august but that did
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not happen. observers tracking the

event suggest that coais aggressive
posturing just before 15 august is a
ploy to ensure that reliance Jio does
not launch an allegation mathews
denies. coai wrote to the pmo on 11
august. going by a letter written by
reliance Jio to trai in response to the
allegation levelled by coai, one gets
the impression that reliance Jio may
not launch commercial operations
anytime soon. in the letter reliance
Jio says, lte technology throughputs are highly dependent on signal to noise ratio. rjil is conducting
test trials to estimate optimal network parameters for best throughput
in loaded conditions. the current
15 lakh-plus users over 92,000 enodeb give a meagre 16 test users per
enodeb which is insufficient load for
conclusive testing. the letter does
not mention how many users per
enodeb would be sufficient to have
conclusive evidence. in the same letter reliance Jio claims that its test
users are experiencing 65 per cent
failure owing to poi congestion. reliance Jio wants more network connectivity from the existing telecom
players but these players believe that
they have given enough connectivity for trial testing.
right now none of the parties are
willing to blink first. because of reliance Jios entry, there is uncertainty
in the telecom sector as to how reliance Jio will impact the revenues of
existing players. the stock market

No. of subscribers in India

(Nos. in crore)









Source: TRAI. Data as on May 2016


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has been cold on the two big players: bharti airtel and idea, as both
are finding it hard to maintain their
market cap. analysts believe that reliance Jios aggressive pricing would
cut into the business as well as margins of existing players. idea has lost
41 per cent of its market cap in the
last one year while bharti airtel suffered by 8 per cent. against this, the
sensex is marginally in the green,
suggesting that both companies have
underperformed significantly.
reliance Jio has gone on record
saying that its present ip network can
support over 20 crore subscribers.
it aims to have 10 crore subscribers
in the very first year of commercial operations of which 50 per cent
would come on board in the first
three months. this is a very ambitious and aggressive target by reliance Jio. as on march 2016 india
had 103.36 crore wireless subscribers. reliance has pumped R1.34 lakh
crore in the project and aims to
spend a total of R1.5 crore.
it looks like there will be stiff

Bright future for gold

Gold price shot up sharply in the
last few months despite several
restrictions imposed by the government. What is your future price
forecast in both dollar and rupee
Gold price in India is governed by
two major factors: global economic
conditions and the movement of rupee against the dollar. Both factors
have contributed to the current price
rise. Global economic conditions
continue to pose a greater risk by
the day following fluctuating recovery
trend in the United States, Britains
exit from the European Union (BREXIT) and other geopolitical tensions.
On the other hand, Indian rupee has
depreciated against the greenback
despite reports of good inflow of dollars. In India, therefore, standard gold
is available at H31,300 per 10 grams
approx. Gold price may touch $1400
in near future in the international
markets which will translate in rupee
term to H32,500 per 10 grams. While
the uptrend continues there could be
some profit booking.
Has it impacted consumer and in-

Data consumption in India

vs other leading countries












S Korea

Source: HSBC Global Research

competition in the marketplace and

a war being played out through the
media. both sides are determined to
give their opponent a tough fight
it will be interesting to see how consumers react. at present india has 11

players in the telecom space and reliance Jios entry is definitely going to
shake things up. but syngal feels reliance Jio is not going to have an easy
time. the situation is quite different
from the first time they launched in
2001. this time incumbent players
are geared for the competition. for
consumers there has to be a compelling reason to move to a new player,
such as a novelty factor, entertainment offerings or killer price points.
there is likely to be a consolidation in the telecom sector and it is
expected that only three players will
command 85 per cent of the revenue
share. it would be interesting to see
who these would be. consumers will
love this competition as they can
expect better schemes and excellent
service. but what is happening at
present is not a healthy sign for india
inc. it is much better that indian
companies fight in the marketplace
rather than through the media and
government offices.

vestment demand in India?

son is considered as a lean period
Yes, in a bad way. Both consumer and for gold purchase due to the lack
investment demand have declined of festivals, weddings or any other
by half between January and June occasions during this season. Also,
2016. Repeated efforts by the gov- consumers have faced two subseernment to discourage gold sales in quent years of deficient monsoon
India have yielded desired
rainfalls. Although, the curresult in the first half of the
rent year has seen normal
current calendar year at
rainfalls yet its distribuleast. Leading global contion continues to remain
sultancy GFMS Reuters
uneven. Also, the crucial
estimates Indias overall
rainfall month August is
gold demand both for
yet to come. So, lets keep
Jewellery and investment
our fingers crossed for the
at 142 tonnes between
Kharif sowing and harvestJanuary June period, PRITHVIRAJ KOTHARI ing this year. In case of noris 52 per cent lower than
mal monsoon and its even
MD, Riddi Siddhi
the corresponding period
distribution, Kharif crop
Bullions Ltd
last year.
would bring some cheer
for farmers with higher output which
Government has introduced sover- would translate to a proportionate ineign gold bond and got it listed in crease in gold demand.
stock exchange to bring in transparency. But it received very poor What is the biggest hurdle for imresponse. Also, physical gold de- provement in gold buying sentimand is weak. Are Indian consum- ment in your view?
ers shifting from gold to other as- The import duty on gold was raised to
set classes?
10 per cent just to discourage import
Frankly speaking, very few people and bridge the widening current acwant to invest in gold at this price. count deficit (CAD). But, the CAD is
Buyers, it seems, feel that the current under manageable level and hence,
price is not sustainable and hence, the government should immediately
they wait for a correction. Since BR- start withdrawing import duty on gold
EXIT, spot gold price jumped rapidly and should bring it down steadily to 2
but, stayed elevated. Also, rainy sea- per cent. It will not only provide cusu 71 u

au g u s t 2 9 - s e p t e m b e r 11, 2 016

u su n il da m a n i a

tomers some comfort in prices but

also for controlling smuggling which
has increased substantially. Most importantly, the jewellery industry has
few hours of work for its artisans due
to reduced orders. So, by reducing
import duty, the government would
provide employment to thousands of
skilled and unskilled workers. Further,
it will translate into Make in India
initiative of our visionary Prime Minister Narendra Modi.
What are your observations about
impact of governments measures
on gold buying sentiment?
Consumers continued to postpone
their gold purchases amid expectations of price correction. The government introduced mandatory requirement of permanent account number
(PAN) for jewellery purchase worth
over H200,000 for both bullion and
jewellery. But, the limit was raised
later to the earlier level of H500,000
for jewellery without raising limit for
bullion. Previously, buyers were hesitating disclosing PAN for jewellery
purchase. Since, the overall consumer sentiment is very weak, bullion dealers and jewellery retailers will
have to wait for few more months for

the improvement.

Corporate Reports

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Taking a U-turn

In a short span, MEP Infrastructure Developers

has evolved from a pure toll collection business
model to bagging hybrid annuity model projects
and is now profitable

fter totting up losses in the

last few years, mumbai-based
mep (mumbai entry point)
infrastructure developers ltd (mepidl) a listed entity with a market capitalisation of around R725 crore, is in
the black. for the year ended march
2016, on a revenue of R2,006 crore
(previous year: R2,008 crore), the
company has reported a profit before
tax of R41.7 crore (loss of R107.5 crore)
and a net profit of R26.3 crore (loss
of R115.3 crore). in the last two years
alone, revenue has grown from R1,214
crore (2014) to R2,006 crore, while
the net profit has turned from negative R129 crore to a positive R26 crore.
during this period the company has
also generated a cash profit of R181.6
crore (2016). in fact, in the previous
three years the company has been
in the red at R47.7 crore (2012), R93.1
crore (2013), R129.2 crore (2014),
interestingly, the companys shift
and increasing focus to long-term

contracts in the last two years has

been one of the key elements of the
turnaround. in 2012, 39 per cent of
its R1,080 crore of revenue came from
the long term business. now, in 2016,
this has moved to 67 per cent.
the numbers speak of the turnaround. this provides us with
a foundation on which to grow
our financials across the foreseeable future. when we were awarded
a 16-year contract to manage the
five mumbai entry points, we were
required to pay R2,100 crore upfront
to the government as against staggered payments over the years. this
one-time payment carried two implications. one, we were required to
amortise this large quantum across
16 years. this cumulative impact
the depreciation and the increased
interest on account of the large debt
taken to pay this amount affected
the companys financials in the initial tenure of the contract. for the
first time a private company paid
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upfront to the government for a project, explains 40-year-old Jayant

d. mhaiskar, vice-chairman &
md, mepidl, which went public in
may 2015.
mepidl made an initial public
offering (ipo) at R63 per share, which
is now hovering around R45. while
Jayant and family hold 69 per cent
of the company, hdfc mutual fund
holds around 9 per cent, em resurgent fund (4.60 per cent) and orange
mauritius investments (1.16 per cent)
are the other large shareholders. the
balance is with the public.
much of the financial turnaround transpired during 2015-16.
the company generated stronger
cash flows from the mumbai entry
point project. the result was that its
finance costs declined from R403.61
crore to R383.23 crore at year-end.
there is a second point that contributed to the transformation. a gradual
emphasis towards long-term projects
over short-term projects owing to

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photos: sa n Jay bor a de

stronger revenue visibility and better margins. in addition, for the last
three years, we were engaged in tolling and operation-maintain-transfer (omtprojects, which involve
maintenance obligations in addition to toll collection on operational
roads) in the chennai bypass project.
during the operating period various
disputes arose on account of mainly
evasion of toll and fee rule notification. we exited this project freezing
the loss on our books, filed for claims
and we are optimistic that there
would be a positive resolution this
year. the cumulative result is that
our robust business potential, earlier camouflaged by a deficit, is now
beginning to reflect in our financials, adds mhaiskar.
the year 2015-16 has been a
landmark year for growth and development. within the first year of our
listing we were able to translate our
promise to performance. the promise that we will turn our performance

around. the big message is that we

made a positive beginning in our
presence as a public listed company
and expect to sustain the substantial
improvement going ahead, says m.
sankaranarayanan, chief financial
officer, mepidl, who is a chartered
accountant and company secretary
with over 18 years of experience in
the field of finance, accounting, audit
and taxation.
in fact, the ipo of R324 crore was
the first of a number of recent events
that kick-started mepidls financial transformation. we used the
entire ipo proceeds mainly towards
the repayment of consolidated project debts, which resulted in a targeted reduction of finance costs and
deleveraging of the consolidated
balance sheet. this coupled with a
robust growth in our long-term tolling contracts has kick-started our
financial transition towards a much
improved and sustained profitability.
the infusion of net worth helped correct the skew of the balance sheet,
adds murzash manekshana, executive director, mepidl, also a qualified
chartered accountant. prior to joining mepidl, he was associated with
halcyon resources & management
private limited and arthur andersen
& associates. at mep he is actively
involved in supporting the strategic development and also day-to-day
management of the businesses.
How it began
it would be interesting to trace the
genesis of this company. it all began
in 2002, when mumbai entry point
(mep) was a special purpose vehicle (svp) of irb ltd (irbl), a listed
entity and a mhaiskar family enterprise, which like most upcoming
construction groups in the 1990s
were perceived to be closely connected to certain politicians. this,
the mhaiskar family denies.

irbl is now run by Jayants older

brother Virendra. it has grown to
become one of the largest private
roads and highways infrastructure
developers in india. this spv bid
and won the right to collect toll at
five mumbai entry points on the
sion-panvel highway, the western
express highway corridor, the eastern express highway corridor, the lal
bahadur shashtri marg corridor and
the airoli bridge corridor. the maharashtra state road development
corporation (msrdc) had then completed construction of a major part
of 55 flyovers in mumbai. in order to
recover the cost of construction the
msrdc had taken an upfront payment of R427.5 crore for repayment of
the loan taken for the construction
of the flyovers by securitisation of
five mumbai entry points under the
mumbai entry points project which
was for a tenure of six years.
in 2008, the contract with msrdc
ended and was up for renewal, which
coincided with irbls restructuring.
under the new restructuring plan,
the two brothers parted ways. in the
bargain, the mep spv of irbl was hived
off into a new company and Jayant,
who was strongly in the saddle running the spv, and his immediate
family together with his investment
companies got 100 per cent shareholding in the hived-off division
which now operates as mepidl .
so from 2009-10, mepidl under
the stewardship of Jayant started
its forays beyond tolling, into omt
and has more recently moved into
road development and construction
by participating in hybrid annuity
model (ham) road projects.
in its new avtaar, mepidl in 2009,
was awarded the meps project on
omt basis for 16 years, again with
an upfront payment of R2,100 crore.
this was won against the likes of
a consortium of reliance and sms



















PAT (loss)






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among others. the reliance-sms consortium challenged the award which

was dragged to the supreme court,
which then decided on the amount
to be paid upfront and the period.
we paid up and since 19 november 2010 are operating the five mumbai entry points, says Jayant, who
recalls 2010 as the turning point in
terms of garnering contracts.
in July 2009, mepidl also started
collection of toll at the rajiv gandhi sea link toll plaza. we aggressively started bidding. i remember
in august 2010, when we submitted
60 bids in a day for nhai (national
highway authority of india). parked
outside the nhai office, we had our
vehicles just filling in the bid documents. out of 60 we got 21 projects.
indeed, a good strike rate for our
journey to spread across nine states
and become a pan-india company.
besides that we were awarded a 5 year
long-term contract in rajasthan by
rajasthan infra development corporation (ridcor) for R150 crore (closed
and handed over in 2015). in 3-4
months we had to mobilise around
3,000 people in states beyond maharashtra, adds Jayant, who started
running toll plazas for nhai in up,
ap, tamil nadu, rajasthan, bihar and
Karnataka. from then on, mepidl ran

Jayant: highway to profit

these 102 toll plazas which are operated and maintained by the government, only toll collection rests with
the company. the first year started
with 21 locations and year-on-year
there has been addition and deletion, which in various years are from

HAM: hitting the highway

alking about ham, this is a

model which got its teeth
in November 2015, when the
Cabinet Committee on Economic Affairs (ccea) chaired
by the prime minister, gave its
approval for this model as one
of the modes of delivery for
implementing the highway
projects. It felt that adopting
such a model for projects, not
found viable on build, operate
& transfer (bot) or toll model,
would be more effective
in terms of maximising the
quantum of kilometers implemented within the available
financial resources of the government. The main object of
the approval is to revive highway projects in the country

by making one more mode of

delivery of highway projects.
By adopting the model as
the mode of delivery, all major
stakeholders in the public-private-partnership arrangement
nhai, lender and the developer, concessionaire would
have an increased comfort
level, resulting in revival of
the sector through renewed
interest of private developers
and investors. It will facilitate
uplifting the socio-economic
condition of the entire nation
due to increased connectivity
across the length and breadth
of the country, leading to
enhanced economic activity.
The erstwhile Planning Commission developed the first

21 to 15 locations.
mepidl, over the last 13 years of
operation, has executed more than
110 projects and completed 96 projects including 183 toll plazas and
1,096 lanes. our operating platform
has strategically been developed to
have strong operating capabilities
on a pan india basis (across 10-plus
states), by successfully operating
concessions with both state authorities and central authorities. the
companys business model is also derisked through a prudent selection of
projects, focusing on the asset light
philosophy. our recent foray in the
hybrid annuity space is a logical
extension of the same strategy. we
have invested heavily into our capabilities to deliver with the potential growth opportunities in this
space. our business model is ready
to address the projected upturn in
the road infrastructure industry
whether it is in the form of road construction contracts or toll collection
contracts, explains manekshana.
today, in pure tolling, it has 5
long-term and 10 short-term projects at 27 toll plazas across 8 states.
under omt, there are four projects
across india covering 2,334 lane km
and 13 toll plazas. of the recently
awarded ham projects (see box) four

version of the model concession agreement (mca) for

highways in 2006. This was
done considering the need to
standardise documents and
processes for the ppp framework in the country for ensuring uniformity, transparency
and quality in development
of large-scale infrastructure
projects, including highways. Subsequently, it developed various other versions of
mca considering the different
ppp modes like bot (toll), bot
(annuity) and operate, maintain & transfer (omt) addressing to a significant extent, the
changing needs of the sector.
One of the documents
developed by the Planning
Commission for infrastructure, including highways, is

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the mca for annuity projects

version April 2014. It provided
an alternative model in the
form of design, build, operate
& transfer (dbot) where the
project is financed only to the
extent of a certain percentage of the cost by the private
investor, recovered through
annuity payments to be made
by the government/authority over a specified period,

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are in maharashtra and two in gujarat worth R3,836.99 crore covering

1,060 lane km. on the bot side, it
has one long-term contract with toll
revenue covering bridge, ring road
and 5 toll plazas. all in all, around
60 per cent of its projects are under
nhai, 20 per cent with msrdc and
the balance with hrbc, ridcor and
ever since, the government introduced ham in november 2015,
which is a combination of epc and
annuity (also referred to as deferred
epc contract, wherein the debt and
equity in a 60:40 ratio is chipped in)
between the developer and the government, till date there were 25 projects awarded. mepidl bid for eight
and bagged six of them, through its
74:26 spanish joint venture partner,
sanjose india infrastructure & construction. we have to execute these
ham projects in the next 42 months.
financial closure will soon be done
and in the next quarter our ham will
be on a roll, adds Jayant.
in the last one month, nhai has
been looking at reactivated omt and
is under consideration to come in
the toll operate transfer (tot) mode.
here the private party pays the estimated toll upfront to the authority,
undertakes o&m and collects the toll

Manekshana: strategic development

during the concession period. so for

us, our revenue will be the toll and
the concession period will be long
term (typically more than 25 years as
observed globally). we will be present in this value chain, says Jayant.
mepidl, an early mover in the

resort to the public funded

epc mode in 2013-14 and

commencing from the date

of commissioning of the project. The balance percentage
of the project cost is provided
by the government during the
construction period.
improved road connectivity
was a continuing imperative,
the ministry, including its
implementing agencies like
the nhai had to increasingly

There is an inherent limitation in implementing projects
on epc mode it is restricted by
the financial resources available with the government.
An important feature of the
hybrid annuity model for
highways development is the
rational approach adopted
for allocation of risks between
the ppp partners the government and the private partner
i.e. the developer/investor.
While the private partner
continues to bear the construction and maintenance
risks as in bot (toll) projects,
it is required only to partly
bear financing risk. Further,
the developer is insulated

tolling/omt space, has gained valuable experience in handling projects

through their complete life cycle.
its diverse geographic presence and
asset light model makes it an ideal
play on recovery in traffic growth
as and when economic recovery
gains momentum. also, its ability to
manage multiple projects across different geographies gives it a significant advantage to efficiently manage
its growth and expansion. with
renewed government focus on building roads through the epc mode,
we see strong growth opportunities for tolling/omt players like mepidl, observes ashish shah of idfc
securities research, in his report on
the company.
according to a report on assessment of operate-maintain-transfer
and toll collection market for road
projects in india by crisil research,
based on the number of projects operated and quality of project stretches,
mepidl is the leading player in omt
as well as toll collection in india.
india has the second-largest road
network in the world, aggregating
5.2 million km as of november 2015;
however, the quality of roads is subpar with only half of indias road
network being surfaced, states the
report, which sees a surge in private

from revenue/traffic risk and

the inflation risk, which are
not within its control.
All in all, ham projects
require initial capex, wherein
a company like mepidl will
have to chip in 60 per cent of
the project cost. This is to be
recovered as bi-annual payments from the authorities
over 15 years. Out of the total
project cost, the balance 40
per cent will come from government coffers during the
construction period in equal
installments. The developer
(mepidl) also gets bi-annual
o&m payments over 15 years
against the initial investment.
Then, the toll collection responsibility on the
stretches developed by companies like mepidl lies with

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the authority, who pays the

developer annuity payments
over 15 years along with
interest thereon as 30 bi-annual annuity payments. All
project payments are inflation indexed, says Jayant
who is aggressively looking at
this pie.
The benefits of ham are:
reduced initial capital outflow
for authority compared to epc
mode; easier debt servicing
by concessionaires during the
initial years of project compared to bot/omt (toll) projects; additional comfort to
lenders in case of termination
during construction period;
reduced equity investments
by developers and lastly private sector not required to
bear the traffic risk.

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Toll automation

n 2012, mepidl implemented the rfid technology envisaging electronic

toll collection on the BandraWorli Sea Link. This form of
electronic toll collection was
implemented with the objective to decongest toll plazas
and allow smoother vehicle
movement. These rfid tags
can hold prepaid balances
starting from R100 to R1 lakh,
empowering vehicles to move
almost non-stop through
toll plazas.
In a step ahead, enabling
recently, mepidl has partnered with Citrus for online

recharge of etc tags across

the Rajiv Gandhi Sea Link and
the five Mumbai Entry Points.
The etc tag, which can be
recharged anytime, anywhere, are available for value
based, monthly pass and journey based travel. These tags
also help reduce cash management and hence improve
transparency in transactions.

participation in this sector. amendments to the mca (model concession

agreement) governing private participation in the road sector since
august 2009 have made investment
in roads favourable for the private
sector; consequently, the private sectors share increased to about 26 per
cent of the overall funding pie. private equity has contributed to road
projects in the past.
going ahead, private equity
investment can further pick up, following the recent announcements
of the exit policy for debt-stressed
operators for toll roads. also the reemergence of epc contracts. given
the current financial crunch being
faced by bot players, over the next
five years, crisil research expects
the share of engineering, procurement, construction or cash contract
projects to widen, especially in lowtraffic-volume projects under nhdpphase iV. other sector-favourable
policies: 100 per cent exit policy for
stressed bot players, providing for
secured status for ppp projects while
lending, proposal to scrap slow moving highway projects, etc.
between 2015-16 and 2019-20,
crisil research expects an average of
11.3 km per day of roads to be constructed or upgraded at an estimated
cost of R2,79,800 crore. further,

By using the hub-spoke concept, we augmented our tool

plazas to increase lane capacities and solve traffic congestion problems at all the five
Mumbai Entry Points. We had
more than 47,000 etc tag
users as on 31 March, 2016.
In 2015, we embarked on a
strategic decision to invest in

Sankaranarayanan: promise to performance

national highway investments are

expected to almost triple over the
next five years, from R30,300 crore in
2015-16 to R85,900 crore in 2019-20.
execution of national highway projects is expected to pick up in 2015-16,
aided by policy reforms, after having slowed down in the previous two
fiscals. higher budgetary support
to fund epc projects will also drive
investments in national highways,
which has recently seen a significant drop in private interest. crisil
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that would graduate the

countrys toll collection experience to the international
standard. What proved to
be the game changer is that
we didnt just commission
this service for captive use;
we made a merchant application of this competence
and, in doing so, emerged as
a technical service provider
to 50 toll plazas out of the
100 public-funded projects in
India. This work was awarded
by Indian Highway Management Company Ltd (an nhai
initiative) to mep consortium
and this engagement will
generate R150 crore in contract value across five years,
concludes Jayant.

expects the length of roads upgraded

or constructed to rise at 24.2 per cent
cagr between 2015-16 and 2019-20.
all this augurs well for Jayant and his
team at mepidl .
meanwhile, the new twist to mepidls stock on the bourse is the potential of a lot of investors who have
started to follow the company, with
caution. the company is highly
dependent on government authorities for new projects. any change in
government or government regulation will affect the companys earnings, states a bob report. another
observation by alok deora of iifl
wealth management says, mepidl
has grabbed the newly introduced
ham road projects by the government
with both hands. the company, with
no construction experience, has won
six projects at a whopping R3,800
crore. while the aggression is visible,
the execution remains key. the company is confident of executing these
projects without any issues. while
the order book is in place, the company would require significant funding compared to pure tolling and
omt projects. arranging this funding in time would hold the key to
execution of the project as per the
set timelines.
u lancelot Joseph

Guest Column

B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Sairat and the art of regionalism

A regional product is a good commercial proposition too

he total size of the marathi film industry

was estimated to be R150-300 crore at
least it was, until the release of Sairat, the
phenomenally successful movie that has grossed
more than R100 crore. with two young, raw and
unknown actors in the lead, Sairat has created
a box-office record and been proclaimed as the
most successful marathi film.
what is even more interesting is that the movie
was made on a shoestring budget of R4 crore, with
newcomers akash those, 22, and rinku rajguru,
15, in the lead. filmmaker nagaraj manjule has
written this simple story of a young boy falling in
love with a girl and set it against the backdrop of
the contentious issue of caste discrimination.
Sairat has made a telling point to producers of
hollywood and Bollywood films that a marathi film, made at a lower cost, can stand on its
own and become a commercial success. it also
proves the theory that regional and rural markets
are critical markets in india.
in fact, rural consumer markets in india are
expected to grow faster than urban markets. due
to the increased reach of media, rural consumers
now aspire for local, high quality products. with
850 million consumers in about 650,000 villages,
rural consumers form about 70 per cent of the
population and form a large market.
in the modern day Bollywood era of star-studded masala films with a massive commercial
blitzkrieg, marathi films have evolved their distinctive positioning. directors of marathi films
have deftly dealt with several critical, topical and
sensitive societal issues. in fact, they have proved
that the audience is prepared to appreciate such
subjects. most marathi films have not been starstudded affairs and many of the actors are from
the marathi theatre. manjule has gone a step further and chosen ordinary people to cast in his
film. what emerges is that content is the king in
marathi cinema. the audience is eager for a movie,
if it has a good story and is well presented.
for any product to be marketed in regional
or rural markets, quality is of paramount importance. localisation of a product to the regional
market is also critical.
take the example of cobra condoms, which
are popular in some states in the north. last year,
they sold 13.6 million pieces, with a market share
of 4.7 per cent. this brand, along with enjoy and
midnight, belong to anondita healthcare, a noida-based company. anondita sold 117 million

ninad Karpe

pieces of condoms last year making it the largest

regional condom player. a total of 300 local labels
have a collective market share of 22.3 per cent
in this space. in fact, the global giant durex has
only 1.7 per cent market share (nielsen data).
to add insult to injury, last year, whilst national
players of condoms saw a dip in sales, regional
players grew by 6.1 per cent. what makes these
regional players tick? they supply a good quality
product at a reasonable price, maintaining regular contact with the retailers who influence the
decision-making process.

The auThor is ceo &

md, apTech. Views
are personal

rom a marketing perspective, india is far more

like a continent than a classic nation state. it
is a multi-ethnic, multicultural society, in which
more than 22 official language groups coexist
each with its unique customs, but bound by a
shared colonial history and contemporary political structures.
there are many stories of successful regional
waghbakri tea was launched in 1892 and is
a popular brand in gujarat, with a market share
of more than 50 per cent in this state. Vi-John is
another example of a regional brand, which has
now grown to a R500 crore company. founded in
1960, its shaving cream is the largest selling product in their portfolio of personal care products,
which has helped Vi-John make deep inroads in
the north.
there are other successful regional brands too
himgange herbal products in uttarakhand, sakthi masala in tamil nadu, mapro jams and food
products in maharashtra and safed detergent in
Kolkata to name a few.
all such regional brands are now delivering on
quality and are successful, as they respond faster
to market changes. with so much diversity, india
will continue to have regional brands, which will
survive and succeed against the might of national
and global brands.
coming back to Sairat here is quality in
the regional space; a movie tuned to local content and able to spin unimaginable profits. in
fact, this proves all over again that a regional
product is an equally good commercial proposition to an expensively mounted national product. marketers need to certainly realign their
marketing strategy to think about regionalism
and plan for regional markets to continue to
hold their own with national or global markets. u

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Soaring high
D-Mart has scored well in net profit margin terms, while
showing steady growth in the top and bottom line

s an investor and trader on

the bse, radhakishan damani
had a good following. in the
1990s, even a rumour about a stock
damani was eyeing was enough to
send the price of the stock soaring.
it was an open cry system then and
damani was one of the rare individuals to be known as a value investor as well as an astute trader. rakesh
Jhunjhunwala openly admits that he
counted him as a guru (see Business
India, november 9, 2015). damanis
reputation was akin to that of a wildwest gunslinger quick on the draw
and firing from the hips. investing in consumer stocks, where he
had placed big bets, enabled him to
get a slice of the action and so, he

ventured into retailing. having successfully worn the hats of an investor

and a trader, a rare trait in the stock
market, damani chose to grow at a
steady pace, rather than fire all guns
at once.
choosing the sites where he put up
the retail stores, and his mode of giving value for money, soon paid off.
d-mart, a chain of hypermarket
and supermarkets in india started
by him, has spread across maharashtra, gujarat, telangana, andhra
pradesh, madhya pradesh and Karnataka. and, it has shown a good
pace in advancing towards expanding across india. damanis empire
is now worth over R5,000 crore
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(without counting his other investments in shares and stocks). but, he

still continues to alternately wear his
old hats, which has earned him the
respect of all investors.
already one of the top three
retailers in the country by revenues,
d-mart is charting an aggressive
expansion that will see the chain aim
to service customers 24x7 through a
multiplicity of channels. the bold
plan for the retailer that has hitherto
operated with a conservative debt:
equity ratio of close to 0.5 times will
see the company take fresh debt as
well as come out with an initial public offer of its equity shares.
according to credit rating agency
crisil, d-mart, which is owned by
avenue supermarts ltd (asl), is aiming to increase its existing retail space
of about 3.7 million sq ft by about 70
per cent by 2017-18. the eponymous

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on leased space for store expansion

is easier to execute due to the high
availability of vacant spaces following the crisis that buffeted this sector
in the past. a build-to-suit approach
could take about 18 months to execute in comparison. the lease model
will also allow d-mart to tap into
footfalls at shopping centres that
typically dont like to sell space
to outlets.
part of the funding for this expansion is expected to be raised via an
ipo. in June 2016, market reports indicated that d-mart was in talks with
bankers for a R1,000-1,200 crore ipo
that is expected to value the retailer
at close to R10,000 crore. in comparison, future consumer enterprises
had a market cap of about R3,700
crore. marquee investment bankers business india spoke to said that,
while asls core retail business is itself

more money available to the retail

chain for its day to day operations,
says hoshedar K. press, independent fmcg consultant and former
vice-chairman, godrej consumer
d-mart stores are mostly owned
and located outside the city area, as
compared to its competitors who
operate out of leased locations in cities often at a high cost. the companys focus has been on tier 2 and tier
3 areas, even as it adds some stores in
tier 1 locations too, says an official of
the credit rating agency care, which
rates asls short-term debt at a1+
(very strong degree of safety regarding timely payment of financial obligations. such instruments carry the
lowest of credit risks). the official is
of the opinion that asl has so far had
a measured pace of expansion adding 10-15 stores annually, but is now

Stores Total income



(` crore)

(` crore)




FY 2011




FY 2013




FY 2014




FY 2015




FY 2010

Source: CARE Ratings

firm that had 89 retail stores in 26

cities spread across seven states as on
end march 2015, now has 110 such
stores (an increase of over 23 per cent
in a little over a year) across maharashtra, gujarat, andhra pradesh,
madhya pradesh, Karnataka, telangana and chhattisgarh. traditionally, the company has added 10-15
stores each year, while focussing on
a slow and steady build-out in the
states that its already present in.
to prepare for this next stage of
growth, d-mart is reorienting its
business model, which has so far
relied on owned store locations, to
look at small format neighbourhood
stores operating out of leased locations in high cost real estate areas
that it has so far avoided. shubhranshu pani, managing director, infrastructure services, Jones lang lasalle
india, feels that a strategy that relies

valued at around R6,000 odd crore,

where d-mart differs from other firms
is in its ownership of its retail outlets.
the embedded value of the ownership of these assets, which would
have appreciated significantly when
compared to their purchase cost,
would also have to be factored into
the enterprise value of the firm.
New strategy
multiple sources familiar with the
companys plans reveal that asl is in
the process of tying up small neighbourhood retail outlet leases for a
nine-year period at high street locations in areas such as the western
suburbs in mumbai, which can be
supplied by its hypermarkets in the
city. the new strategy is asset-light
and that is a good philosophy for a
brick and mortar plus online presence. the asset-light model makes
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au g u s t 2 9 - s e p t e m b e r 11, 2 016

going in for an ipo, as it feels it can

expand faster on its mehnat hamari,
bachat aap ki positioning.
asls growth is unique in its business segment in that its driven as
much by growth in same store sales,
as much as its driven by new store
additions. rating agencies, which
rate its commercial paper at a1+),
often cite its key metrics as being the
best in its operating segment. this
is despite the fact that d-mart aims
to be the lowest priced retailer in its
area of operation and makes available new product categories to customers at the best prices so that every
rupee they spend on shopping gives
them more value for money than
they would get anywhere else.
while most food and grocery
retailers reported moderate samestore growth of 7-10 per cent during
the six months ended 30 september

Corporate Reports

2015, asls stores continued to grow

at a healthy pace of over 15 per cent,
reflecting its increasing market share
in its catchment areas. notwithstanding d-marts positioning as a
value-for-money retailer, the aggregate revenue per sq ft is about 50 per
cent higher than most retailers in
the same segment. d-marts strong
brand also helps new stores ramp
up faster and break even within six
months on average, as compared
with the industry benchmark of
12-18 months for new store breakeven, says a crisil report.
d-mart, which has so far only had
a brick and mortar presence, will
also debut a mobile app that will
allow customers to shop for its range
of offerings across food, toiletries,
beauty products, garments, kitchenware, bed & bath linen, home appliances, etc, and have it collected from
a neighbourhood small format delivery point close to their home. both
the e-tail presence and the small format leased store network are expected
to be launched over the next quarter
or so. factors such as availability of
parking, distance to commute and
other such logistical factors often get
in the way of consumers going to the
supermarket for their needs. having
the ability to buy their needs online,
particularly for undifferentiated
products that customers dont need
to touch, feel and try, is a good strategy, says press.

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

is changing every six months, which

is about the time a firm would take
to establish the delivery hubs, says
harish bijoor, ceo, harish bijoor
consults inc. he feels d-mart should
stick to its large format retailing
model that shares price savings with
consumers as, its working beautifully and the new format will affect
the management bandwidth, diluting focus that is important.
others, however, differ. they feel
the hypermarkets typically tend
to be located at central locations,
whereas smaller format stores could
allow retailers to serve micro markets well. d-mart is one
of the most efficient playD-Marts new
ers in the industry and, if
strategy will
they can get the logistics
pitch it in
right by delivering to the
competition with
Going online
micro markets efficiently
historically, d-mart
then, this would be more
Reliance Fresh
has preferred to add
convenient for their cusDirect which
owned rather than
tomers, says pani of Jones
has a parallel
leased store localang lasalle india.
tions with less than
the hybrid customer serset-up to Reliance
10 per cent of its
strategy that embraces
Retails brick and
total stores being
offline and online retailmortar format as
on long term lease.
ing is expected to allow
well as pure play
only in those locathe retailer to maintain its
tions where they feel
industry leading position
tailers such as
the capital values of
in terms of sales per sq ft
propand defray the cost of the
erty are not favourlease over a large number of
able have they gone in for a lease customers, who otherwise couldnt
option, according to care .
have been serviced from small forthe move to embrace the dig- mat stores of under 500 sq ft, which
ital channel follows the appoint- are a fraction of the typical 25,000
ment of Vikram dasu, formerly of sq ft plus stores that the chain has., as ceo, avenue globally, the biggest trend in retaile-commerce ltd, in march this year. ing is omni channel - service the
in 2015, the firm also hired uday customer anytime, anywhere. offerbhaskar, who has worked for over ing an online option allows chains to
two decades with cincinnati, us, capture the full wallet share of their
headquartered procter & gamble co, customers which they might have
in various roles across india, south otherwise lost, says Kumar rajagoeast asia and europe as chief operat- palan, ceo, retailers association of
ing officer, retail. the new hires are india.
said to have helped neville noronha,
the hub-and-spoke model of the
managing director & ceo, asl, to supply chain being contemplated by
evolve an omni channel retail strat- d-mart could ensure fuller utilisation
egy for the firm. noronha, however, of staff and resources at its owned
declined to comment for competitive stores in non-peak hours, while
reasons, as the results of the compa- shared resources such as stock yards
used by the hyper marts could also
nys initiative are yet to roll out.
the hybrid format of e-com- be used to service the small format
merce, along with localised deliv- stores. this is important for the chain
ery, is a tricky business as the space as almost 90 per cent of its existing
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outlets are owned rather than leased,

so sweating its assets further will add
to its profitability. with the central government allowing 24x7 operations for retail chains, the hybrid
format can ensure firms never lose
customers. furthermore even a product that is out of stock at a store can
be purchased online, bringing into
play the global concept of endless
aisles, adds rajagopalan.
normally, the collection of goods
that a chain can offer at a store is limited not just by the customer profile
and its spending pattern but also the
available shelf space to display and
stock goods. by allowing customers
to buy online and then collect from
their neighbouring convenience
store, d-mart aims to increase the
sales per sq ft potential of the smaller
locations allowing it to maintain its
industry beating metrics.
according to a report by care,
real estate costs in india account for
a larger share of retailers expenses
than the global average. it is a major
hurdle for the cost-sensitive and low
margin retail business. rentals may
comprise up to 40 per cent of total
cost of sales. unless rent costs are
lowered or stabilised, most stores in
the segment will end up taking much
longer than originally planned to
break even, says care in its report of
the indian retail sector.
there is also the cost of delivery
from hub to retail outlet for small parcels, but that is a logistics cost that is
incurred at every single dmart store,
whether large or small, and one that
is encountered by every single convenience store format.
d-mart knows how to make its
business efficient as its stores have a
high productivity regardless of the
type of market location they operate
from, explains pani. d-mart is one
of the most successful retail chains in
india led by an efficient and grounded
leadership team, with a good execution record. i therefore believe that,
while the lease model will impact
their profit and loss account it will
also take off the limits on their
growth, comments Jayant Kochar,
ceo, go fish retail solutions, a leading consultancy in the industry.
d-marts new strategy will pitch

How its competitors fare

(` crore)

Future Retail
12 m ending 12 m ending
Jun 2010
Jun 2011
Total income

18 m ending
Dec 2012

15 m ending
Mar 2014









Reliance Retail
FY 2013-14

FY 2014-15


FY 2011-12 FY 2012-13





- 273.76

- 54.78



Source: Annual reports. Figures for FY 12-13 & 11-12 pertain to Reliance Fresh which was subsequently renamed Reliance Retail

it in competition with reliance

fresh direct which has a parallel
set-up to reliance retails brick and
mortar format as well as pure play
e-tailers such as the
pure play e-tailer space in the food
and grocery segment has seen a
shakeout with several firms with
me too business models falling by
the wayside as, delivering directly
to consumer homes, they encounter
fairly large delivery costs that can at
times prove difficult to control and
manage. apart from thin margins
in the segment, these firms also face
issues of damage during transport,
failed deliveries due to unavailability
of customers and the costs involved
in offering cash on delivery options.
Good profit margins
by limiting delivery to its own convenience stores, d-mart simplifies a lot
of logistics pain points such as staff
spending time looking for customers
home location, waiting at each customer home for the delivery to be
cross checked and at times waiting
for payment to be collected, etc.
this efficiency in asls operations
is clearly reflected in the financials of
the closely held, mumbai headquartered firm (see table). during the first
nine months of the financial year
ended march 2016, asls total income
from operations had already touched
R6,363.81 crore, while its profit before
taxes stood at R370.61 crore. a comparison with its two much larger rivals
the R16,202 crore reliance retail
and the R11,605 crore future retail
shows that d-mart has enjoyed a
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steady increase in its top and bottom

line, even as in its competitors have
had a mixed position in their net profits, showing that their sales growth
hasnt been rewarding for shareholders. interestingly while reliance fresh
today has a count of over 700 stores,
big bazaar as far back as 2008 had
already crossed the 100 store mark
while d-mart even today operates out
of just around 110 locations.
even in terms of sales, while
d-mart roughly grew over six times
in five years, the Kishore biyanipromoted future retail merely doubled over a four year period. also,
as compared to the countrys largest retailer reliance retail, d-mart
has been profitable in each of the
last five years (growing its profit after
tax from R21.21 crore in 2009-10 to
R211.29 crore in 2014-15, while reliance retail has managed a net profit
of R272-odd crore only in 2013-14,
with the subsequent year basically
seeing a flat line.
d-mart has also compared
favourably in its net profit margin with its two larger competitors
its net profit margin of 3.27 per
cent of total income in 2014-15 is
an improvement on future retails
net profit margin of 0.02 per cent
and reliance retails 1.68 per cent.
in other words, even when compared to other value retailers with a
bigger scale than itself, d-mart has
scored higher in net profit margin
terms, while showing steady growth
in both top and bottom line.
u Ya s s i r a . p i ta lwa l l a

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A colourful journey ahead

Gemfields is geared up to
replicate De Beers success
story in the coloured gemstone

Montepuez Ruby Mine,


im-listed gemfields plc has

undergone a major transformation in a short span of time.
the london-based entity, which
started its journey in 2005 as an emerald miner in zambia (though, failed
to make any headway till 2009), has
made big strides in the last few years.
the company was taken over by a
Johannesburg stock exchange-listed
and pallinghurst resources-led consortium (pallinghurst resources is a
global pe fund specialised in investing
in underperforming assets and businesses in the mining space), in 2008
from its original promoter rajiv gupta
of the gupta group from Jaipur, which
has a presence across the large part of
the emerald value chain (mining, cutting, polishing and trading). the consortium now controls 63 per cent of
gemfields and has not only scripted
a major turnaround story for itself
but also emerged as one of the largest miners and suppliers of coloured
gemstones (such as emeralds, rubies
and sapphires) in the world.
gemfields, which was languishing (incurring losses) till 2009 due
to lack of a clear vision and strategy, has emerged as one of the most
organised and reliable suppliers of

coloured gemstones
in the world today,
claiming over 25 per
cent market share in
emeralds and almost
20 per cent in rubies
(value terms). it is currently
the worlds single largest organised
rough emerald producer from its
Kagem mine in zambia, and is looking to take its market share in both the
segments to about 40 per cent in the
next two to three years, with emerald production going up to some 45
million carats annually from 30 million at present and ruby production
to 20 million carats from the present
production of 8.4 million carats at its
montepuez mine in mozambique.
gemfields has taken up the challenge successfully to organise the
entire value chain of coloured gemstones, which has been historically
fragmented and undercapitalised.
due to lack of adequate supply and
the unorganised nature of the business, the coloured gemstone market
had failed to take off as a category,
even as diamonds, which would be at
par (in terms of prices) with coloured
gemstones until the mid 20th century, emerged as a major category
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au g u s t 2 9 - s e p t e m b e r 11, 2 016

alongside gold. the

whole credit goes to de
beers, which played a
vital role in organising
the entire global trade
and industry pertaining to
diamonds. it not only created
a common platform for producers but
also took a big lead in promoting diamonds through generic campaigns.
taking a leaf out of de beers success story, gemfields is all set to replicate a similar kind of story in the case
of coloured gemstones which, in the
last three-four years, have shown a
great deal of momentum, as the jewellery market is showing a distinct
shift towards jewellery collections,
with increasing share of coloured
gemstones. the company has not
only ramped up the supply significantly, but is also putting up a series
of efforts (generic and specific promotional campaigns like de beers did
that a few decades ago for diamonds)
along with other stakeholders including retailers and processors and manufacturers to strengthen the presence
of coloured gemstones in the market.
the recent meltdown in the diamond business due to a squeeze in
margins (last two-year margins have

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come down to 15-20 per cent from

as high as 40 per cent at the retail
level owing to growing competition
and other factors), has only helped
coloured gemstones to expand their
base further as jewellery consumers
are also looking for changes in the
collections with greater fascination
with colours.
the global production base for
coloured gemstones has historically been highly fragmented and is
afflicted with small and unroganised
players. while colombia, brazil and
zambia are known for supplying
emeralds, myanmar and now (lately)
mozambique are major suppliers of
rubies. sapphires are sourced primarily from sri lanka. it is against this
backdrop that gemfields, backed by
its strong and organised supply chain,
is gearing up to transform the global
landscape for the coloured gemstones
business. in the past four years the
market has shown a brisk momentum, growing at an annual rate of 40
per cent. the impetus is likely to be
in india, which is one of the focus
markets, along with the us, china
and the eu, and known for its passion
for jewellery, gemfields has already
made big inroads. it has an office in
mumbai for india (which also looks
after the whole of asia), where it now
commands 40 per cent market share
in emeralds and 20 per cent in rubies.
as the indian market is growing rapidly, the company has decided to keep
the mumbai office dedicated for india
operations and hence is opening up
separate offices in china and hong
Kong. besides, it has an office in london for the eu market and new York
for the us.
this ongoing shift towards colours,
presents gemfields with a big opportunity to expand its base in india
where it is starting number of initiatives towards the creation of a robust
marketplace for coloured gemstones,
even as it is also evaluating the possibility of adding Kashmiri sapphires
to its portfolio. in fact, sapphires
will be a significant part of its offering, as it has entered sri lanka where
it has acquired operating interests
in 16 exploration licences. in india,
the company, so far as the mining

Harebottle: proud of the progress

goes, can also play a role in reviving

the ruby deposits in mysore which
once upon a time was well known for
its rubies.
Adding some colour
as part of its generic advertising campaign (which started in 2012 to promote coloured gemstones with a focus
on emeralds with hollywood actress
mila Kunis as gemfields global brand
ambassador), the company is launching another campaign in india in
september this year, with bollywood
actress aditi rao hydari as the face of
the campaign. started in london in
June this year, this time around the
campaign will just promote rubies
from its mozambique mine. in india,
gemfields is also in talks with major
retail jewellery brands and manufacturers including tanishq for the
creation of coloured jewellery collections for the market. this will be part
of its co-branding and co-marketing
moreover, gemfields is also evaluating the indian market to launch
exclusive high-end luxury collections
under its iconic brand faberg which
it acquired in 2013 for $90.3 million. faberg, famous for its jewelled
eggs and fully-owned by pallinghurst
group after being bought out from
unilever for $38 million in 2007, was
merged into gemfields.
in fact, gemfields which clocked
a revenue of around $174 million for
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year ended June 2015 and is expecting around $195 million for the fiscal ended June 2016, has earmarked
around 10 per cent of its revenue for
activities related to market development. the primary motto is to create
much needed awareness about these
stones which despite being in existence for ages have failed to draw the
desired attention. having run successful campaigns for emeralds and creating the required traction, now it is
getting into the promotion of rubies.
the indian gems & jewellery market (in line with global trends) is
undergoing a transformation. after
enjoying the aura and sparkle of diamonds for many decades, the $40-billion gold-centric domestic market is
now looking to add a distinct element
of colour and vibrancy to its offering. coloured gemstones like rubies,
emeralds and sapphires are increasingly finding their way into jewellery
collections that traditionally confined themselves to the monochromic boundary of gold and diamonds.
the indian coloured gemstones
jewellery market (pegged at $1 billion
as against the total jewellery market
size of $40 billion) is likely to continue to enlarge its share going forward. the next decade will be one of
colours where these precious coloured
gemstones will make major inroads in
the market, which is expected to grow
in excess of a 15 per cent cagr in the
next decade or so. currently, gold,
with around 92 per cent share, is the
major category, while diamonds along
with other categories form the rest.
there is a distinct shift towards
coloured gemstones and this trend is
a global phenomenon where consumers are looking to add more colours
and vibrancy to their purchases.
the market is repositioning itself in
favour of this category and trying to
get adjusted as per the demand. most
of the stakeholders in the value chain
are gearing up towards this end, says
aruj ajmera, director, diacolor india,
Jaipur, which owns the famous jewellery retail chain diacolor, known for
its original and exquisite design collections of diamonds, rubies, emeralds, sapphires and pearls.
gemfields as a company is playing a big role in boosting the entire

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supply chain of coloured gemstones.

along with ramping up the production and supply of these stones into
the market, the company has taken a
lead in creating much needed awareness about these stones and thus providing the required impetus for its
growth. in the past, the lack of consistent supply from the hitherto-fragmented industry has restricted the
growth of coloured gemstones in the
jewellery market, states nitin golecha of gems & Jewels, another Jaipurbased processor specialising in rubies.
Jaipur is a global hub for processing
of emeralds.
as a whole the global market along
with the indian market is realigning itself in favour of coloured gemstones. the process has commenced
in the last four to five years and in the
coming years, we are expecting this
to gain further momentum with the
establishment of an appropriate and
organised supply chain. we can easily say that the next couple of decades
will definitely be the era of colours in
the jewellery industry, says rupak
sen, sales and marketing director
(asia & the middle east), gemfields.
backed by its realigned strategy of
mine and marketing, the company
has not only come out of red, but
made a strong comeback. it has set
a target to double its revenue in the
next three-four years.
from an ebidta loss of around
$13.5 million in the fiscal year ended
June 2009, the company turned

Shetty: go-getter approach

ebidta positive at $1.8 million in June
2010. thereafter, it has never looked
back, creating new benchmarks.
from a revenue of $48 million
(ebidta: $1.2 million) in the financial year ended June 2013, the company registered a phenomenal jump
in revenue to about $160 million
(ebidta: $59.3 million) in June 2014.
for the fiscal year ended June 2015,
gemfields achieved record revenues
of $171.4 million and pat of $12.3
million (ebidta: $64.4 million). for
the six months to 31 december 2015,
it achieved a revenue of $94 million
and pat of $8.2 million. for the whole
year ended 30 June 2016 (results
to be announced), the miner is

Mining strength

aving started its emerald mining activity in a

small way in Zambia in 2005,
Gemfields plc, backed by a
workforce of about 2,000
employees, is the operator and 75 per cent owner
of both the Kagem emerald mine in Zambia (Kagem,
located in the Copperbelt
region of northern Zambia,
believed to be the worlds
single largest producing
emerald mine) and the Montepuez ruby mine in Mozambique (the most significant

recently discovered ruby

deposit in the world). In
addition, the company also
holds 50 per cent interest in
the Kariba amethyst mine in
Zambia, as well as controlling interests in various other
gemstone mining and prospecting licences in Colombia, Ethiopia, Madagascar
and Sri Lanka.
Next year, the company is
planning to start its emerald
mining operation in Colombia which has been known
for its emerald deposits

expected to clock a revenue of around

$195 million.
in a significant move, gemfields
has developed a proprietary grading
system and formed a pioneering auction and trading platform to provide a
consistent supply of quality coloured
gemstones to the global downstream
markets. it has successfully held
auctions in singapore, london and
Jaipur and created new benchmarks
in the fields of quality and pricing of
coloured gemstones, the efforts market observers believe will revolutionalised the entire landscape of the
coloured gemstone trade and industry, going forward.
since the formation of pallinghurst in 2007, our strategy has been
to create industry-leading businesses
regardless of the market environment. the past year has seen gemfields making further strides towards
becoming the de beers for coloured
gemstones. in 2015, we repeated the
zambian success in mozambique,
with gemfields now positioned as the
worlds most important ruby miner.
i now look forward to gemfields
applying our unique business model
to sapphires, to be sourced from our
properties in sri lanka, says brian
gilbertson, 73, chairman, pallinghurst resources ltd in his speech in
pe companys annual report 2015.
we are proud of the progress, we
have made in the short space of time
since gemfields first began operations.
we are now the worlds largest supplier

(high-value emeralds) for

ages, even though the deposits have not been adequately
explored. The Colombian
government has urged Gemfields to provide its industry a
direction and carry out initiatives that have brought about
major changes in Zambia
and also Mozambique. Globally, the gemstone business is
grossly under-capitalised and,
hence, fragmented. Many of
these places are afflicted with
illegal mining.
Moreover, the company
is also commencing its operations in Sri Lanka where it

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acquired 75 per cent operating interests and 16 exploration licenses in 2014 in

the Sri Lankan sapphire and
gemstone sector. In the
beginning, it will engage in
the trading of sapphires in
the island nation. In Ethiopia, the company is in the
process of scaling up its mining activities for emeralds.
Thus, Gemlfields is all geared
up to have an enlarged portfolio, comprising emerald
(green), ruby (red) and sapphire (blue), often called the
traffic lights of coloured

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of responsibly sourced coloured gemstones. this is a title that reflects not

only our rapid growth, but also our
efforts to lead the industry towards
creating a more sustainable, and
responsible supply chain, says ian
harebottle, 53, ceo, gemfields. a veteran of the coloured gemstone industry, ian joined the company in 2009.
he has been instrumental in pioneering many of the coloured gemstone
industrys most innovative strategies,
and has extensive operational experience in mining and marketing.
no doubt, though gemfields has
positioned itself quite strongly in
the market, the initial few years were
quite challenging for the company.
when pallinghurst resources took
over gemfields in 2008 in a reverse
takeover deal of about 62 million,
the company was in a distressed condition. though it had an excellent
emerald asset in zambia, it was struggling to manage the same due to lack
of operational efficiency and overall
expertise of management in colour
gemstone mining, which is considered to be a quite different science as
compared to base metal mining.
the original promoters (rajiv
gupta and family) primarily had
experience in the cutting and polishing of emeralds. in fact, their overall
approach and strategy failed to take
off. first of all, the scale was quite low,
and hardly backed by adequate r&d.
the operating management team was
falling short of requirements. for
the initial few months after the takeover, the same team was retained, but
as the situation deteriorated further
(they ran out of working capital), the
new management decided to revamp
the team in order to put in place a
correct strategy.
pallinghurst resources deputed
dev shetty, coo, from its team to
fix the issues faced by its newly
acquired gemstone business. a chartered accountant, shetty, 37, had prior
experience of turning around a couple
of businesses (he was instrumental in
turning around ashok goel-promoted
essel propacks tube businesses in the
uK). he joined gemfields in december 2009 as its cfo (and was later promoted to coo of the company in
september 2012) to address the issues

Sen: expecting the era of colours

of a business that had already written

off around $257 million and recorded
ebidta loss of $13 million. the company, left with just $10 million in its
bank, saw its share price hitting an all
time low of 2.75 pence.
Turning point
however, the stock has made a good
comeback ever since, riding on the
success story the company scripted
subsequently. backed by various initiatives under the new management,
the stock recovered to 22 pence on
31 July 2013. thereafter, the stock
touched a high of around 69 pence on
12 June 2015. last year, when there
was a bloodbath in the mining stocks,
the companys share managed to hold
back nicely and was also formally recognised by lse for that.
however, the bad news from the
mining stock continued, the diamond
sector took a massive hit and investors started realising profits on the
stock (gemfields) which didnt help
its cause and stock declined significantly and was ruling at 38.12 pence
(52 week h/l: 66/31 pence) as on 22
august 2016. global brokers covering
this stock continued to be bullish on
the stock. the specialist commodities broker sp angel values the stock
at 82 pence, while finncap reckons it
is worth 85 pence.
with his go-getter approach, shetty
formulated a completely new strategy,
which revolved around indentifying
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the problems and then addressing

them in a systematic way. to start with
the company tried to plug the leakages by cutting down the operating
cost. the process also involved consolidation of multiple sites in its emerald
mining in zambia. in another strategic change, the company decided to
move from its fully-integrated (mine
to marketing, including cutting and
polishing) to mine and marketing
approach which the company still follows. the company put in place a new
team roping in select brains from various links of the mining value chain.
however, the major change that
proved to be a big game changer for
the business was development of a
ground-breaking emerald grading and
auctioning system.
the development of proprietary
grading system proved to be one of
the turning points for our business.
this in-house initiative transformed
the entire value proposition, unlocking massive value for our business as
buyers found their requirements with
much ease and at the right value. in
fact this move corrected the entire
supply chain, says shetty, who has
played a pivotal role in turning the
entire business around and taking it
to a level, where it has become a force
to reckon with in a market where
coloured gemstones are fast-emerging
as a formidable category. the company, along with building its team
also invested heavily in science (gemology) and r&d. in the case of rubies,
though mining (open pit mining) is
easy, as compared to emeralds, the
gemology is complex and towards this
end, gemfields designed and discovered a proprietary washing technique
that separates rough rubies from ores.
encouraged by its success in zambia where it holds 75 per cent stake
(the balance is with the republic
of zambias government), the company went on to acquire 75 per cent
of large ruby deposits near the town
of montepuez in northern mozambique in 2012. the remaining 25 per
cent is still held by the local mwiriti
family, who owns the entire area as a
hunting concession.
the mining licence in mozambique covers 340 sq km and is
believed to be the most significant

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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

recently discovered ruby deposit in

the world. the company started its
mining in just 10 per cent of its allotted concession.
we are working towards bringing
together resources and expertise for
integrating this long overlooked sector and thereby ensuring a consistent
supply of premium-quality, responsibly-supplied coloured gemstones to
the market, says shetty, adding that
gemfields has also initiated talks with
other major miners such as mustang
and african minerals as it is looking
to create an organised supply chain
for the market. both these players
have entered mozambique but have
yet to start mining operations.
Reliable auction platform
we have pioneered the worlds most
comprehensive grading and sorting
system for rough emeralds and rubies.
besides, we have put in place a wellestablished and reliable auction platform in the coloured gemstone sector.
the objective is to deliver a reliable
supply of well-graded rough gemstones and thus help formalise the
market, says shetty.
the auction held in June 2016, generated record total revenues of $44.3
million at an average realised price of
$29.21 per carat for its rubies mined
from its montepuez ruby mine in
mozambique. of the 1,601,145 carats
offered for sale (75 lots), 95 per cent
by weight or 98 per cent by value,
the equivalent of 1,516,459 carats (71
lots), was sold. this latest sale was the
sixth montepuez auction held since
June 2014, and they have generated
$195.1 million in aggregate revenues
so far.
for gemfields, india is the third
largest market after the us and china,
and india is also a strategic destination
due to its rich legacy of jewellery as it
has also got a huge base and expertise
on the upstream front. india is significant for us due to its strong base and
rich heritage for gems & jewellery. we
have initiated multiple initiatives for
this market and the results have been
more than encouraging so far, says
shetty, who strongly believes that the
current slowdown in the diamond
category has proved to be a blessing
in disguise for the coloured gemstone

Ruby wash facility, Mozambique

industry. manufacturers, jewellers

and retailers are eagerly looking to
fill the void by adding gemstones in
their portfolio.
in fact, he believes that the recent
meltdown in diamonds has forced
the global industry in general and
india in particular to look for diversification, which would not only boost
their topline but also give them the
much needed hedging mechanism to
withstand market vagaries going forward. as a consequence, the whole
process of market enlargement for the coloured
gemstone will gain
with all these
developments in
place, gemfields
is all geared up to
script a successful
story for the coloured
gemstone category in
the indian gems & jewellery market. the company is all set
to boost production further. moreover, it will also add other coloured
gemstones in its portfolio which will
strengthen the category as a whole.
operations in columbia and sri lanka
will be added soon that will not only
diversify its offering but broaden the
portfolio in a major way.
on the supply side, apart from
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au g u s t 2 9 - s e p t e m b e r 11, 2 016

creating the auctioning platform, the

company is also looking to broaden
the same by bringing in various buyers (in other words buyers of rubies
will also participate in emerald auctions and vice-versa). this will go
a long way in broadening the platform and the whole ecosystem of the
coloured gemstone industry which is
quite nascent at present. while the
company is thus trying to organise the rough side of gemstones, it is
also trying to organise the polished
side by creating a separate r&d wing
which will focus on the treatment of
rubies (one of the processes of value
in india, the company has
appointed jwt to commission a
detailed survey of the market which
will help it draw up a comprehensive road map and chalk out its future
strategy. based on the feedback and
outputs, a sales and marketing programme will be launched by the end
of this year. the company is evaluating the possibility of launching a
brand like nakshatra in coloured
gemstones. it is also looking to
launch faberg in india and for this
it is going for a test launch sometime
in october-december. the jwt report
will also help it decide the marketing
spending on its various marketing
initiatives where it is not only creating awareness about coloured gemstones but also making programmes
for training the retail folks.
while carrying out its mine
and marketing strategy in a
sustainable way, gemfields
has put a lot of emphasis
on how it implements it, as
also adopting and implementing ethical and best
practices. while it is helping
the value chain to get more
organised through its consistent
and technology-driven production,
auctioning and grading as also welldesigned marketing campaigns it is
also putting a lot of effort in community development measures around its
mining sites. this is something that
is paramount for sustenance and
overall development.
u a r bi n d gup ta
as a guest of Gemfields plc in Mozambique

Corporate Reports

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

For people and animals

A poultry industry veteran has a joint venture to sell a
Bulgarian majors products as well as produce some

he wide range of coccidiostats

available from huvepharma is
a major plus factor with customers of its indian operation, too.
coccidiostats, explains o.p. singh,
managing director of huvepharma
sea (pune), are anti-protozone products which go into animal feed to
increase the availability of proteins
to the livestock and improve their
growth. they are the biggest segment in the business and huvepharma is the world number one in
this, he points out. they add value
very substantially.
the Kolkata-based shalimar group,
which prides itself on making a
meaningful difference to poultry, is a
two-year customer. all different combinations are available from them. so
its easier for us to get our rotation programme working in the field, says
director dr. shivaji dey, who is also
a consultant and veterinarian, and a
director of agricultural and animal
husbandry consultancy agrivet.
huvepharma which develops, manufactures and markets
human and animal health products derives its name from these
activities, on which it says it places
equal emphasis: the first two letters
of human and veterinary, with
the pharma tagged on. the privately-owned company, headquartered
in sofia, bulgaria, also makes and
sells enzymes for food, feed and
industrial applications.
singh, who has spent 27 years in
the poultry industry with the bengaluru-based Vetcare and the Venkateshwara hatcheries (vh) group in
pune where he was ceo of Venkys
india and managing director or executive director of several vh companies finally quit in 2007 to become
an entrepreneur. he started off by
setting up advanced bio-agro tech
ltd, in association with enzymes pioneer advanced enzymes; he is also

subsidiary. the rechristened huvepharma began crossing bulgarias

borders in 2006, setting up a representative office in china, subsidiary
companies in taiwan, thailand and
russia and acquiring the production
facility of merial inc in the us all
over a three-year period. it started
an indian marketing subsidiary in
2009, and signed the jv with singh
the following year. along the way, it
also established its footprints in brazil and turkey.
the indian company set up its
first manufacturing facility at ranjangaon near pune in 2010, with a
finished goods capacity of 80,000
tonnes per annum (tpa) which it
doubled at the beginning of 2016.
it makes veterinary products
Singh is looking with apis (active pharmaceuat healthy growth tical ingredient) it imports
to a position of
from bulgaria, and markets
strength in a
them in india, bangladesh,
sri lanka and nepal. it has
a director of nutrient bioalso entered the african contiagro tech, which services
nent. the core segments to which
the feed supplement and additives sector, and advanced nutrients we sell are the commercial producers
india which specialises in bio-security of animal feed as well as those that
in animal health. he is a core commit- manufacture feed for their own inhouse use, singh explains. bulk custee member of poultry india, too.
tomers including Venkateshwara,
Huge demand
c&m hatcheries in nashik and sugsingh has taken huvepharma sea, una in coimbatore make up about
the jv which he founded in 2010, three-fourths of its business.
in india, the high cost of protein
to a turnover of $27 million (nearly
R180 crore). the indian market for makes it essential for chicken and eggs
chicken and dairy feed is huge: to be made more robust, especially for
29 million tonnes and 19 million rural consumption, as they are the
tonnes, respectively, every year. best source. and in dairy, the farmer
and the dairy industry still holds a doesnt know how to upgrade the
big growth potential, as it is largely nutrition of his animals. we educate
unorganised and dependent on fod- farmers on these aspects to improve
der, he says. in the next 10 years, he their productivity, singh says. we
believes his company will overtake are working on a digital mechanism
to spread this education, as everyone
its competitors.
the 62-year-old parent company has a mobile phone today.
huvepharma sea now plans to get
has six manufacturing sites in its
home country and as many in the human pharmaceuticals, too, like its
us, growing fast both organically global parent beginning with medand through acquisitions since 2002. icines for dengue and hepatitis. after
in 2005, it changed its name from animals, people!
the earlier biovet, but retained the
u seKhar seshan
original name for its manufacturing
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Talking To

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Kwid storm
After the runaway success of its compact hatchback, Kwid,
Renault India recently launched a 1.0 litre variant. Sumit
Sawhney, country CEO and MD, Renault India, shares his success
formula and the future plans of the company with Daksesh
Parikh and S.M. Boothem
What was your rationale in
introducing a 1 litre Kwid?

we have been delivering around

9,000 Kwids per month. a lot of customers would have preferred a 1 litre
rather than the 0.8 litre. but since we
didnt have the product they went
ahead with the 0.8 litre variant. we
want to give more options to our
customers. it will broaden our base
and for me its important that Kwid

should constantly sell 10,000+ volumes on a month on month basis.

thats the clear objective.
What is the value proposition for
the buyers of the Kwid and the
new Kwid?

i divide value into three parts. pricing is the first thing thats asked by
a buyer. so it was very important
for us to get the pricing of the car
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au g u s t 2 9 - s e p t e m b e r 11, 2 016

right. our plan of 98 per cent localisation helped us to cap prices. and
the second thing is that in this car,
everything is ground-up. Kwid is a
global car but it was first launched
in india. so the success of this car in
the country is extremely important.
besides localisation, we banked on
innovation with a focus on improving fuel efficiency. for the first time
we created a global engine for this
car, which gives a fuel efficiency of
25.17 kmpl. this still remains indias
most fuel-efficient petrol engine.
buying, driving and maintaining
a Kwid, all three of them are value
propositions. we also managed to
time it right. the timing was opportune because india was growing and
today it is the fifth largest car market
in the world; it will become the third
by 2019-20.

Talking To

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Are you satisfied with the progress

of Renault in India?

as a brand we are just five years old.

we started getting into a volume business after the launch of duster. and
thats just a four-year-old journey. so
being a young brand in this country,
today we are among the top 5 brands
in terms of volumes. we hold close
to 2.5 per cent market share. india is
one of the most challenging markets
in the world with the top two players holding more than 65 per cent of
market share. we have got our basics
right. we have a 5,000 strong team
and have two design centres at mumbai and chennai. we have got parts
distribution operations in pune.
innovation was necessary to help us
stand out. so we brought the duster
in July 2012. and the duster helped
recreate the suV segment.
What is the market size of
compact SUVs?

size is roughly around 20,000,
all put together. but this market is
growing very strongly. it only had
ford ecosport one year back, which
was selling 5,000 units; now its four
times that. indians also have a liking for suvs. a sub-four metre may
not be a true suv. but these are suvstyled cars.

segment that contributes 24 per cent

to the indian automotive space. and
the second thing is that india is still
a very big market.
so when i say right product, we
designed Kwid keeping that in mind.
so, in a right product, the looks have
to be nice, suV-ish kind of looks.
this is a car which has got the highest ground clearance. we indians,
even if we are buying a small car,
want a big small car. Kwid is truly a
big small car because this car has got
300 litres of boot space. so, all this is
very important when you are designing a product.
What about distribution network?

renault invested a lot in the distribution network and when we launched

Kwid last december, we had 205 out-

My mantra is
to have the right
product, right features,
right value, right timing
and the right strategy
lets. we will have around 270 by end
the of this year.
Where do you export?

What is your target now?

i was very clear that by 2017, we

should achieve 5 per cent market
share. and today we are the number
one european brand. if i see the performance of the first seven months
in india, we have already achieved
close to 4.5 per cent of market
share. and the way its going, i am
looking forward to achieving the
5 per cent mark by end 2016, not
waiting for 2017.
What is the strategy behind Kwids

i personally feel that an india strategy is very important and relevant

to succeed. my mantra is to have the
right product, right features, right
value, right timing and the right
strategy. so with the Kwid, we were
getting into the mini-segment. but, i
was clear that we have to get into this

we launched Kwid in sri lanka in

June and nepal this month. we will
launch in bhutan, bangladesh and
other neighbouring countries. Kwid
will also be manufactured in brazil. then in south africa, and we are
exploring other markets now. it is a
global car and it will go to a lot of
emerging markets, wherever there is
How many Kwids have been
delivered till date?

more than 75,000 Kwids are already

running on indian roads. and i am
not talking about the cars with my
dealers but cars that are in my customers hands on the road.
How has the response for the
1 litre been?

we still have to see how the consumers take this. over 47 per cent of our
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Kwid customers are first time car buyers. plus, if i split the balance, then
there are people who are upgrading
or moving from secondhand cars to
new cars. then there is another set of
customers who are existing car buyers who are taking this as the second
or third car in the family.
What is the approximate cost of
developing a new product?

category of product it is. for a minicompact suV, it could be anywhere
around $600 to $700 million. it also
depends on whether some company
is leveraging a platform, or another
is leveraging an X body style. but
the thumb rule is around R3,0004,000 crore to build one car from the
How do you plan to increase your

we have introduced workshop on

wheels, which is a new concept. we
launched three workshops on wheels
in Kerala in June that will be moving
across villages and doing servicing.
the intention is that the customer
should not travel more than 15-20
km for servicing. right now we have
8-10 workshops on wheels, which
will go up to 25 by the end of this
year, capturing the three-tier and
four-tier towns. workshop on wheels
can perform periodic maintenance
of 8-10 cars per day.
How would you like to position

from the point of view of a brand

i would like to position renault
as a company which gives a lot of
innovation, a brand which people
should aspire to. talking from a service point of view i want renault to
be known as a brand which is very
customer-centric, a brand focused
on customers. but one of the most
important aspects in our business
is having engaged dealers as they
are my first customers. if a dealer
is motivated, engaged towards my
brand, then he will deliver what i am
asking. the Jd power dealer satisfaction survey of 2016 ranked us number four. so, i believe we probably are
in the right direction at this stage.u

Advertising & Marketing

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d


on mtrs calendar were its rava idli

and multi-grain range of breakfast
mixes. the new range, combining
the taste of idli and vermicelli with
the goodness of vegetables, also looks
A new range of healthy ready-to-cook foods hopes to revolutionise very different: in the bright colours
of beetroot red, spinach green and
the morning meal
carrot orange. parents are already
finding that these colours pique their
childrens interest, sharma says.
adds bhasin: the range was
conceptualised and launched with
the insight that parents are always
looking to add vegetables to their
childrens diet. children on the
other hand, do not like vegetables and resist eating them. other
foods like instant noodles have vegetables, but children are often found
picking these out and leaving them
on the plate. the blending makes this
impossible and once the children
taste it, they are hooked. we have tremendous faith that with the launch
of the Veggie range, breakfast will
never be the same! he says.
Bhasin: Moms
the blending idea was
and kids are
not really original, sharma
loving our beetroot
admits: it had been tried earand other veggie
lier with pasta in denmark,
where it proved a success.
then we tried it here with verhis is a big idea, says sunay mixes in three variants of
micelli first, and found that the
bhasin: i am convinced it is spinach, carrot and beetbright colours made it attractive. the
massive! bhasin, chief mar- root. the products contain more
keting officer of mtr foods in beng- than 40 per cent vegetables, blended performance in the market during
aluru, is talking of the new range of into them using breakthrough tech- the first month has been great, and it
is only improving.
Veggie idli mix and veggie vermicelli nology. says sharma: innovaboth sharma and bhathat the indian subsidiary of nor- tion is a big focus for us.
sin are confident that
wegian conglomerate orkla has just we have introduced 100
the acceptance in the
launched. i have seen the childrens innovations in the marsouthern states is
excitement and the mothers satis- ket over the past two
half the battle won.
to three years. but this
faction. its a win-win.
the biggest barriers
was one of our fastest,
mtr chief executive officer sanjay
to consumption are
sharma is equally enthusiastic: this created in under seven
in the south, sharma
is our biggest launch in recent times, months cutting the norsays. there is huge oppomal product develophe says. even the trade loves
sition to converting from one
ment period by a good
it we even got a standthree months. earlier, food to another; so we needed to creing ovation when we
the company had come ate something that is not made at
launched it in chenout with multi-grain home.
nai. so does our sales
the 1,000-people, R200-crore mtr
idlis, chettinad masala
team, which is always
and a separate range of foods, with a 90-year history of servthe biggest critic of
sambar and rasam pow- ing authentic indian food to indians
anything new.
ders for its consumers in a ready-mix format, has a diverse
the new range
in tamil nadu, who have portfolio including breakfast, lunch
which the company
taste requirements that are and dinner, snacks and desserts that
says is set to completely
different from its home state of cover every meal occasion.
revolutionise the breakfast
scenario in india is a total new- Karnataka.
u seKhar seshan
the last mega successful launches
bie in the breakfast category: idli

blushing breakfast

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Guest Column

B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

lessons from abroad

can help on gst implementation as also foreseeing the challenges in transition

st implementation, one of the single big-

gest tax reforms ever witnessed by the

country, passed an important landmark
with the approval of gst constitutional amendment Bill (cab) unanimously by the upper house
of indian parliament during the last week. the
passage of cab by the upper house sets in motion
various steps to be undertaken to achieve the
vision of gst implementation from april 2017.
the implementation of gst is expected to create a nationwide unified market for goods and
services, with consistent tax rates and procedures
across india and the elimination of trade barriers
in the form of check posts and local taxes. this
would have a positive impact for both the industry and the consumers in the long run not
only in the form of tax, but in business efficiencies as well. and, to achieve the said objectives,
it is imperative to note, from the governments
standpoint, international experience(s) on gst
implementation and foresee various challenges.
one of the foremost issues which had been
widely debated is the potential short term inflationary impact of gst. the end objective of the
transition to gst is to make the whole indirect
tax mechanism more efficient and unless the said
efficiencies flow to the end consumer, gst cannot be said to have achieved the intended objectives. while a proper balance needs to be drawn
between the revenue needs of both the federal
and the state governments and the impact of the
said taxes on the end consumer; the government
can take cues from international experience on
the average indirect tax rates as also the fact that
most of the countries implementing gst witnessed considerable buoyancy in tax collections
with tax revenues exceeding expectations.
some of the quarters had raised a demand to
have anti-profiteering provisions of similar to
the malaysian gst law, obligating the industry to
pass on the gst tax efficiencies to the end consumer. while, on the one hand, the said provisions would be difficult to administer and could
be an administrative nightmare for the industry, on the other hand, the government would
artificially interfere with the economic demand
supply dynamics. considering the competitive
dynamics, it is expected that the industry would
nevertheless pass on tax efficiencies to the consumers to sustain/improve their market shares.
one of the things which should be avoided
is excessive differentiation of rates on goods

p r a s h a n t r a i z a da

The author is
national gst leader
& partner indirect
tax, BDO India

and services. this adds to the cost of administering and complying with the taxes and could
lead to potential classification challenges as
well. while the pressures to set reduced rates on
essential goods are well intentioned to lower the
tax burden on the underprivileged, a balanced
approach needs to be followed as to the extent
to which such lower rate benefits them as the
relative consumption of the said goods by the
rich may equally be high. the differentiated
rate regime ought to be structured in a manner
where the goods/services enjoying concessional
rates are the bare minimum with a coherent
plan to move the said goods/services to the standard rate in a longer period of 3-5 years.
one of the proposals in the model gst law is
to deny tax credits for gst to a customer if the
taxes are not discharged by the vendor/service
provider. there had been rounds of litigations
on the said issue in the european union with the
courts reaching a conclusion that, if reasonable
precautions were undertaken by the customer in
making the procurement and nothing unusual
could be signified in the transaction, vat credits
cannot be denied to a customer for lapses of the
vendor. the said provisions also ought to have
been followed under the model gst law.
one of the important pillars for an efficient
and seamless transition is the tax administration
part. implementation of gst would be a historic
reform for the industry and the consumers only
if it improves tax efficiencies and reduces the tax
compliance burden and the ensuing tax costs for
the industry. framing of a good law is a job half
done; it will be complete only when it is coupled
with efficient administrative machinery. considering the very fact that the gst model proposed
to be adopted by india is a unique one with multiple stakeholders, the government would need
to make considerable efforts on the tax administration front to avoid any backlash.
last but not least, various countries across the
globe had implemented gst during the course
of the financial year rather than waiting for the
next financial year. it is expected that the government would not shy away from implementing gst during 2017-18, in case there is a delay
in meeting the april 2017 deadline.
a mid-term implementation may mean some
additional efforts for the industry; but considering the benefits of this reform, the industry
would surely take it in their stride.

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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

lending a helping hand

him from various banks and fis, such

as citibank, standard chartered and
axis bank.
with all expertise and resources
KHFL bets big on the affordable housing finance market
in place, khfl has already started to
make its presence felt in the market.
in the last three months, the company has built up a loan portfolio of
slew of reforms announced in
over 140 people, disbursing over R15
this years budget for affordcrore, where its average loan size is
able housing have added furabout R9.50 lakh (range: R2-20 lakh).
ther fuel to the booming housing
for the current fiscal, it is targeting
finance space, which had already
to build up a portfolio of about R125
received a shot in the arm, followcrore. we have developed a novel
ing the modi governments housmethodology, which not only mitiing for all by 2022 scheme launched
gates the risks but identifies and rates
earlier. according to estimates, the
the borrowers credit worthiness
market size is over R65,000 crore, and
despite technical bottlenecks like
expected to grow at about 30 per cent
lack of documentation and income
cagr in the next five years.
proof, says magia.
the recent efforts to boost the supply of affordable housing by incentivkhfl is in the process of creating
ising both developers as well as home
a distinct edge for itself in the marbuyers have opened up new avenues
ket where, so far, about 78 hfcs have
for the domestic mortgage industry
got the approval of nhb, though only
and this is where we have decided to
some 25 are functional. it has set a
play a major role, says amit magia,
target to reach about R1,000 crore of
39, managing director, Khush housdisbursement in the next three-four
ing finance pvt ltd, (khfl).
years. though it looks ambitious, the
target is achievable, say experts, conkhfc, which started operations
sidering the kind of demand and supfrom January this year, focuses on
ply gap that exists at present. with
offering affordable housing finance
almost 60 per cent of its portsolutions to the economically-weaker
folio falling under the pradsection and urban poor, who are usuhan mantri awas Yojana
ally ignored by traditional banking
scheme, khfl is looking at
institutions owing to lack of docuMagia: human
mentation, income proof, residen- background that motivated
having a pan-india footangle
tial proof, etc. it offers customised me to get into my curprint in the next few years.
solutions to those aspiring home- rent business, where, due
khfl is raising a capital
owners by ascertaining their credit to my humble background,
of about R100 crore for this
worthiness through deployment of i find it easy to connect with
year (next year: R300 crore)
unconventional parameters without my customers, who come from the through a mix of debt (bank loans,
lower income group. the entire busi- debenture, etc) and equity for the
impairing the asset quality.
though we work under the regu- ness revolves around how well you current year, where its cost of finance
latory framework, this particular seg- know this group of customers and is about 11 per cent (priority sector),
ment of the industry offers massive how you devise customised solutions while disbursement is being made at
scope for innovation. much beyond for them, says a confident-looking about 13 per cent. in the next threethe set rules, it all depends upon how magia, whose wife is also a ca and four years, the company is also evalwell you connect with your custom- currently looks after the back-of- uating the possibility of going in for
ers and lend a helping hand in real- fice operations of khfl, named after an ipo, which will not only help the
ising their dream homes. there is a their elder son Khush, who is 13 (the company in meeting its expanded
humane angle involved since you younger son om is nine years old).
capital requirement, but also help
are dealing with a completely new
reduce the cost of funds, as this will
population, says magia, a chartered Strong team
provide it access to a large pool of
accountant and harvard alumnus. magia, who is also pursuing his mba institutional assistance. moreover,
he originally comes from a small from london business school at it will also help the company attract
village savarkundla in amreli present, has put together a strong pe funds, who are betting big on this
district in gujarat.
team of over 80 employees, which segment of the business.
my village background has never consists of nine professionals, most
u a r bi n d gup ta
come in my way. in fact, it is this of whom have been hand-picked by
sa n JaY bor a de

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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

say aaah!

A dentist in Bengaluru
revives the practice of
doctors going to patients

ancer, dr srivats bharadwaj

points out, is the second biggest cause of death globally.
and oral cancer accounts for over
45 per cent of all cancers. according to the us-based oral care foundation, some 48,250 americans will
be diagnosed with oral or pharyngeal cancer this year; more than
9,575 about one person every hour
will die. almost every other patient
who is newly diagnosed will be dead
in five years. no wonder bharadwaj is seriously concerned: even
a sharp tooth, or an alcohol-based
mouthwash, can cause cancer in the
mouth, he says. so, the focus has
to be on bringing oral hygiene as an
integral part of general health.
pointing out the huge medicaldental connection, he says a number
of other factors like uncontrolled
diabetes, premature or underweight
birth, respiratory or cardiac diseases are all associated with oral
hygiene. but there is good news, too:
as much as 98 per cent of dental
problems are preventable with simple procedures. and four in every
five can be handled with home oral
care, he points out. ergo, prevention
and home visits: we cant just sit
in our clinics and insist that patients
who are in pain should come to us!
we should go out to them. a van
equipped with all the paraphernalia
for this stands ready in the parking

lifetime, or practise the cheaper acr

(arresting caries technique), which
costs only R10-15 a month. doctors
should be paid more if they ensure
that their area of responsibility is disease-free! he says. this will enthuse
them more in the area of prevention
rather than cure. with this kind of
promotion of wellness rather than
disease in mind, he has a vision of
setting up community centres each
with a doctor in charge, practising
the old family physician concept.
with a 15-doctor team working completely passionately with
him, bharadwaj ensures that there is
always one on emergency duty and
one for home visits all night. the
biggest medical malpractice,
he says, is in betraying your
believes that
patients trust in you about
prevention is
his or health.
better than
lot of the building near iim
but bharadwaj insists that
he is not running a charity,
bangalore, where his Vatsathough he has a separate Vatsalya centre for oral health is
headquartered. his other two centres lya oral health foundation which
in the city have such vans, too as works with chittadhama, a rehabilwill those he is in the process of set- itation centre for the mentally ill at
a village 350 km from bengaluru.
ting up around india.
we provide end-to-end dental we are not expensive, either our
care, says bharadwaj, who firmly charges are very affordable: just R200
believes that all doctors should do for a regular consultation, R350 for
this. a doctor should be available to root canal treatment and R800 for a
the patient 24 by seven, for all 365 full months course of treatment, he
days of the year! he says. and though points out.
the Vatsalya model has impressed
his clinics boast the best technology and equipment in the world, he investors. bharadwajs vision and
feels that whatever can be done in a efforts to create an expansive dental
clinic can be done at home, too. hav- care centre were supported in 2016
ing travelled the world for six years, with a seed fund from s-squared
practising dentistry including a capital investments, us. the same
spell with the who in remote areas year arvind Krishnaswami, ceo and
of nepal before setting up Vatsa- founder of the us-headquartered
lya in 2003, he has found that 99 per healthcare consulting and technolcent of all toothaches come on with- ogy company medlytix which speout warning at night, because the cialises in predictive analytics to
blood pressure moves up to the face enhanced revenue cycles and colwhen you are lying down.
lections for hospitals and healthcare
providers also joined the board
Compassionate medicine
of Vatsalyas parent company, spenow that he has tested the concept cial smiles. he obviously believes in
for nearly 14 years, he wants to scale the companys ability to bring down
up his operations pan-india, as well treatment costs and achieve econoas in nepal, bhutan and other geogra- mies of scale by managing the supphies where people have little access ply chain efficiently and negotiating
to such services. he also wants to competitive pricing with dental
introduce a globally accepted dental material suppliers. smile!
sealant, which is 98 per cent effective
u seKhar seshan
against dental decay for the patients
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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

puneet chhatwal, ceo, steigenberger hotel group, says the move is

an important milestone in our history of international growth, adding
that the group plans to grow internationally in all major markets. after
establishing our presence in china,
india is one of the largest markets and
poised to grow, he says. pointing out
that the group had consulted in india
decades ago, he admits the expansion
should have happened earlier.

luxury, german style

MBDs JV with Steigenberger opens avenues for a new luxury

hospitality player

here is potential yet in the

indian luxury hospitality
space! the latest indication of
this was the announcement of germanys steigenberger hotel group
that it plans to enter india and has
decided to set up mbd steigenberger,
a joint venture with the mbd group,
for the purpose.
the mbs group has a 51 per cent
stake in the joint venture company,
solely for india, and will manage the
india operations for the brand. this
further raises the profile of the group,
known largely as the largest publisher of text books in india. it also
has interests in real estate and owns
two hotels, in noida and ludhiana,
currently operating under the radisson brand. the mbd group will have
a majority on the board of the special purpose vehicle (spv), formed to
expand the mbd steigenberger brand
in india.
sonica malhotra, managing director of the joint venture, as also joint
managing director, mbd group, laid
out the timeline for expansion of the
new venture, saying it plans to have
20 operational hotels by 2030, fetching a revenue of R2,000 crore. while
the group plans to build five luxury hotels, it also intends to manage
another 15 luxury hotels.
according to the agreement, the
mbd group will handle the business development, management and
franchising of hotels, india marketing, pre-opening and post-opening
assistance. to create awareness about

Malhotra: confident of prospects

Chhatwal: realistic projects to start with

the brand, malhotra plans aggressive

btl activities and participation in
trade shows. steigenberger will provide international sales & marketing support, as well as training and
brand standards to be deployed in
the indian region, to suit the expectations of a luxury traveller.
the R4,300 crore steigenberger
hotel group, set up in the 1930s, is the
largest german chain of hotels and
resorts, with 117 hotels in 12 countries.
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Luxury comes first

the first unit of the new jv will be
the mbd zephyr bangalore an mbd
steigenberger hotel. to be located in
whitefield, it will have 184 rooms and
118 service apartments. it is scheduled to open in 2019, and be part of a
mixed use complex. while hotels are
capital-intensive, cash flow for service
apartments is easier. the hotel design
is expected to be neo-classical, with a
stress on old world charm.
the group is looking at gateway
cities such as delhi, mumbai, chennai, hyderabad, goa, Kolkata, pune
and indore, where we want to come
up with luxury hotels, says malhotra. she is confident of the prospects
of the luxury hospitality sector in
india, an increasingly crowded space
with the entry of many global players in recent years. her main task, she
feels, will be to identify areas that still
require luxury hotels, such as north
goa. to expand fast, her preference is
brownfield properties, or even greenfield ones over conversions.
expressing satisfaction over his
choice of partners in india, chhatwal says we wanted realistic projects to start with. steigenbergers
partnership is limited to the luxury space. chhatwal says the groups
mid level brand intercity, is growing fast and could be exciting for
india. the group has also opened its
first hotel of its new brand, Jaz in the
city, in amsterdam, with stuttgart
next in the list. chhatwal thinks this
style would be suitable for cities such
as pune or chandigarh too. while
plans are still to firm up, the first test
for the group in india comes in the
luxury space.
u su m a n ta r a f da r

Niche Business

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

giving back
These machines help
decentralise garbage collection
and convert it into compost

fter a series of successful businesses that took off from their

fathers business in voltage
stabilisers and changeover switches,
aayush and abhishek gupta zeroed
in on waste management. three years
ago, the bengaluru-based brothers set
up reddonatura a latin-inspired
name which loosely translates into
giving back to nature to make,
supply and maintain small garbage
processors that create compost.
we had bagged a contract to
supply power generators to prestige
builders, says aayush, managing
director, reddonatura. waste management had also become a big topic
around that time. adds abhishek,
chief executive officer: we were
looking out for a new venture, and
decided to work on decentralising
the collection and disposal rather
than having it carted to landfills by
the municipal corporation.
having got into the business, they
worked with a will, getting our hands
dirty as aayush says, and managed
to persuade taj hotels to try out their
first machine. today, the site of their
first installation Vivanta by taj
in the heart of bengaluru doesnt
send any of its kitchen and other wet
waste to a landfill. since then, not
only other hotels in the chain, but
also major groups like prestige housing are their loyal customers.
reddonatura has installed a
unit in one of our landmark developments, says V. gopal, executive
director, projects & planning, prestige group. they are also partnering
with us to install similar processors
in some of our other projects. the
promoters have a long-standing business relationship with us, and have
always performed well, delivering on
their commitments.
the guptas say theirs is indias
first fully-automatic composting
machine which converts organic

inputs that increase the cost operation drastically, aayush points out.
not to forget the odour and infestation of rats and flies around the facility, as well as high attrition of staff.
on top of all this is that a normal
plant has a large footprint, which
is prohibitively expensive with the
high real estate costs in urban areas.
reddonaturas r-nature, on the
other hand, boasts the most compact dimensions in the industry.
the waste of 600 houses or flats for
about 1,200 people every day needs
a machine that occupies just 28 sq ft
(3 sq m). the models range in capacity from 25 kg a day to 5,000 kg/day,
while customisation according to a
clients individual requirements is
also on offer. the price ranges
from R3 lakh for the smallest,
Aayush (in specs)
to R1.2 crore for a 10-tonne
and Abhishek
unit for use by a municipal
wet waste into manure
Gupta: turning
within 24 hours. the
garbage to green
the aero india show
mixer in the main comin 2015 was a major motiposting tank ensures that
vator, on a totally different
the culture is evenly distributed, while a heater that is part of wavelength. we successfully demthe equipment ensures that it is at onstrated the possibilities of our prothe right temperature to convert cessor, abhishek recalls. some half
waste into compost. the air inlet a million people visited the fiveand exhaust system keeps the odour day event, during which our r-naat the minimum. working with the ture machine recycled 12 tonnes of
motto garbage to green which compost from the food waste genis the brand name for the rich com- erated from the five massive food
post it produces, for use by the cli- courts. decentralised waste manent for in-house gardening or sale by agement has never been done in
india for any event. reddonaturas
the company.
efforts at the event was not just to
process the organic food waste but
Zero discharge
while some responsible corporates also create awareness among people
and citizens have readily accepted on segregation and to showcase that
the need for waste management to waste is not a waste but a resource
ensure zero discharge from their if handled and processed properly,
premises to the landfill, others are he adds.
beginning on their home turf, the
reluctant to incorporate waste management in their premises. this, guptas have taken their machines to
abhishek says, is mainly due to a lack a dozen-plus cities, including chenof knowledge and awareness. we are nai, Kochi, mumbai, pune, panaji,
thankful to prime minister naren- ahmedabad, Jaipur, delhi & ncr,
dra modi for launching the swacch and Kolkata. with many municibharat project. this has increased pal corporations now insisting on
awareness, and more and more peo- garbage processing facilities to be
ple are ready to invest in small gar- installed before they issue no-obbage processors.
jection certificates to new buildings
but the conventional process of and apartment complexes, business
waste management is time-consum- is all set to boom.
ing, taking 12-15 days, and involves
u seKhar seshan
extensive labour and various material
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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Milk Mantra is riding on the

opportunities in the east

ndia is the largest producer of milk

in the world at 150 million litres
a day. it is a $50 billion industry
growing at 5 per cent, of which the
organised sector accounts for only
20 per cent. the eastern regions have
a measly 18 per cent market share
and this gives an immense investment opportunity for the organised
players in this sector. however, it
requires suitable infrastructure and
a large farmer network for milk procurement and supply systems which
eliminate middlemen a tough job.
srikumar misra, a born entrepreneur
with a knack of identifying opportunities moved into this space six
years ago by setting up milk mantra and changed the game in odisha.
today we have a turnover of R122
crore with a healthy cagr of over
61 per cent for the last four years,
says the 39-year-old misra. ethical
milk sourcing from farmers and an
innovative marketing strategy drive
our success.
milk mantra is a start-up success
story. it is indias first venture capital-funded start-up in the agri food

sector. misra was born in a business

family in bhubaneswar, odisha. his
father was in the transformer manufacturing business in bhubaneswar.
the untimely demise of his father in
a car accident in 1985 put an end to
his carefree childhood at the age of
8. even the family house was mortgaged to fund his fathers company.
it was a long legal battle for the family to retain ownership of the house.
a brilliant student, after completing his graduation at cuttack, misra
moved to the university of pune to
pursue engineering (mechanical).
he also completed his mba from
xmib in 2001. he later did an executive course in private equity and venture capital from harvard business
misras zeal of entrepreneurship
is in his dna. but he decided to gain
some experience in the corporate
sector. in 2001 he joined tas, formerly known as tata administrative services and rose to become the
director of mergers & acquisitions at
tetley, uK, in 2008 at the age of 31.
with extensive experience in setting
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au g u s t 2 9 - s e p t e m b e r 11, 2 016

saJal bose

mooing growth

and Rashima;
enjoying the
steady growth

up new market operations, brand sales and

marketing, joint ventures
& m&a, misra has worked
in geographies across the world. i
was always excited about creating a
food brand, he reminisces, my job
required travelling and i noticed that
the dairy segment in india was not
very organised and i realised this is
my future. he left his cushy job and
the luxury of london and returned
to his home state odisha and incorporated milk mantra in late 2009.
he obtained regulatory approval and
bought land for the factory.
the dairy segment is capital
intensive and misra was looking for
funding to set up a top class manufacturing facility and create infrastructure for milk collection. since it
was not a fancy technology start-up
venture, convincing investors was a
challenge. it took almost 18 months
to raise about R22 crore through
angel investors, venture capital and
a bank loan. finally the state-ofthe-art plant was commissioned in
January 2012 at gop near Konark


b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

with a capacity to process 75,000 coolers and 391 milk collection cenlitres of milk per day; and so the tres that collect 1 lakh litres of milk
every day. the number of farmers
journey began.
milk mantra has leading global has been growing by 15-20 per cent
food technology companies like tet- annually in the milk sourcing chain
rapak, de laval and multivic as tech- of the company.
by taking an everyday commodnology partners. it uses the tripak
technology that prevents light from ity product like milk, the company
damaging the milk and keeps it fresh has created an ecosystem for farmfor longer. our plant has a fully inte- ers for a better livelihood, and for
grated tetrapak milk processing line. the public to have quality nutrition
nobody in eastern india has such and enhanced health, said outgofacilities, claims misra. the capac- ing rbi governor raghuram rajan,
ity of the plant was later expanded to on his visit to the milk mantra plant
2.5 lakh litres per day.
where he interacted with the farmer
the other challenge for the com- community.
pany was to keep the middlemen
away from farmers by creating an
he company has introduced
organised supply channel. it is
direct-to-home delivery for its
important to win the trust of farmmilk brand milky moo. with
ers through awareness and setting the tagline no more boiling, the
up bulk milk coolers for storage and brand has created a significant buzz,
more collection centres closer to and enjoys word-of-mouth recomthem. milk mantra is amongst the mendations. with limited funds
very few companies that first estab- to spend on branding in the beginlished the infrastructure for raw milk ning, our marketing strategy was to
collection before the plant was com- reach the household directly to build
missioned. the company, therefore, a loyal brand following. the stratfrom the very beginning procures egy clicked for us, says rashima
pure milk through an ethical milk misra, wife of srikumar misra and
sourcing (ems) programme happy co-founder of the company. today
milky moo reaches 2.5
farmers, happy cows and
lakh consumers, covers
best milk. ems ensures that
60 per cent of odisha and
not only are the farmers
Milk Mantra
employs 350 people. now
rightfully rewarded, but
the company spends 2 per
also able to access a vari2009
cent of its revenue in marety of extension services
keting and advertising.
aimed at bringing in qualFoundErs:
ity and clean milk produc- Srikumar Misra and milk mantra gradually forayed into dairy products
tion. it includes training,
Rashima Misra
over the years. the prodlow cost loans from banks
ucts include milk, paneer,
and microfinance instituR122 crore
probiotic dahi, lassi, buttions, and a 24-hour heltermilk and misthi dahi
pline, besides fair price
under the milky moo brand, and
life has changed for 49-year-old ready-to-drink milk beverages called
prafulla moharana from goddhana- moo shake. the brands are available
para village in odisha in the last four in major retail chains like reliance
years since he has been associated fresh, spencers, big bazar as well as
with milk mantra. now i get a good in retail stores across odisha, bengal,
price for raw milk and the payment Jharkhand and chhattisgarh, says
is prompt. technical inputs from the rashima.
milk mantra has competition
company have helped my cows to
give more milk. my income has gone from omfed (orissa state cooperaup significantly, he says. from 7-8 tive milk producers federation). we
farmers in 2012, today milk mantra have strong brand equity and are the
has created a network of 40,000 farm- second largest player in the state,
ers across 480 villages in odisha. the says ceo amitava mukherjee. the
company has installed 28 bulk milk company has achieved phenomenal

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au g u s t 2 9 - s e p t e m b e r 11, 2 016

growth. its turnover of R18 crore in

2013 has grown to R122 crore in 2016
of which milk constitutes 80 per
cent and the rest comes from dairy
milk mantra is progressing well
and empowering the farming community. the segment needs more
organised players for the benefit of
the marginal farmers and help adding
to the countrys milk production,
says r.s. sodhi, managing director,
gcmmf (amul). the per capita milk
consumption in the country is 300
ml a day while odisha is a milk deficit state that consumes only 158 ml
per day. who (world health organisation) guidelines suggest a per capita milk consumption of 220 ml per
day to get the right nutrition.
after strengthening its market
position with the steady increase
of milk collection, milk mantra has
ramped up its processing capacity
for future growth in last two years.
it acquired western land dairy, a
local farm in sambalpur with 50,000
litres per day capacity, for R10 crore
in 2014. the sambalpur plant gives
us a ready market in western odisha
and the adjoining states, says misra.
subsequently it has added 1.75 lakh
litres capacity at gop over a period
of one year. now with two plants,
milk mantra has an installed capacity to process 3 lakh litres of milk per
day. the investment of R80 crore for
acquisition and expansion including
value chain was financed through a
second round of funding. the company has recently tied-up with a contract manufacturer in Kolkata to
produce Mishti Dahi and probiotic
misra wants to take the company public in due course once the
enterprise is mature and the management structure is in place to handle the expected growth. it has set
itself a target to achieve a turnover
of R1,000 crore in the next five years.
at the core of this is misras ability
to transition from being a strong
regional player to a robust national
player who can fight the competition
with his quality brands and effective
u saJal bose


b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

talent creation

Saint-Gobains lwe programme can bridge Indias skill gap

aint-gobain india, the world

leader in flat glass products and
solutions, started its business
in chennai in 2000. it has cumulatively invested over R3,500 crore with
plants in andhra pradesh, maharashtra, gujarat and rajasthan. within the
global framework of corporate social
responsibility (csr), the saint-gobain
group in india has been focussing on
the areas of education and employability, health and hygiene, infrastructure
and disaster relief.
the company recently celebrated
its convocation where the first batch
of 54 students received their certificates diploma in manufacturing
technology under the programme
learn while earn (lwe). Jointly conceived by saint-gobain and nettur technical training foundation
(nttf), the programme was launched
in 2012 to help and support students
from a socially and economically disadvantaged background and develop
them into industry-ready talent for
the manufacturing sector. after successful completion of a four-year
diploma course, 53 out of the 54 students have been absorbed by the company (one student having decided to
start his own business).
the unique method of lwe is
divided into 1,164 hours of theoretical learning and 8,320 hours of practical exposure, spread over a span
of four years, with eight semester

programmes in diploma in manufacturing technology from saint-gobainnttf practice school. any student
from a financially weak background,
who has passed the 10th standard, is
eligible to join lwe.
apart from studies, the students
undergo a number of programmes,
including personality development
and memory improvement. each student gets a scholarship of R66,000 per
annum in the first year, R78,000 in
the second year, R96,000 in the third
year and R1,20,000 in the fourth year.
a company official says 50 per cent of
this scholarship will be sent to the students parents.
Everyone wins
the quality of students that graduated
this year stands testimony to a well-developed association with a committed
corporate partner like saint-gobain.
says n. raghuraj, md, nttf. none of
this would have been possible without support from raghu raj, md, nttf,
and his team, who transformed our
dream into reality, not just for our
company, but for many other companies, says b. santhanam, president &
md, saint gobain india.
in lwe, the true learning takes
place in the industry. in countries
like germany, this is a national programme supported by the government. they take in interns on a large
scale and train them. india has the
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highest dropout rate after high school,

simply because parents cannot afford
their higher studies.
this is really a big issue in india,
santhanam adds. we decided to
take care of the students and their
families by way of financial support
through stipends and have invested
R7 crore in the last four years. this
will also help us in the future, so i
call it investment in peoples education and skills. the emphasis is on
earning while learning.
the company has urged industries
across the country to come together
and adopt the lwe model to create
the next generation manufacturing talent. this model leads to theory being combined with workplace
knowledge. those skilled and educated through this model can bridge
the acute gap the manufacturing
industries face today.
when we began the selection process for our first lwe batch, we faced
strong resistance from parents, says p.
padmakumar, head, human resources
& csr, saint-gobain. through our
innovative scholarship model that
allocates monetary assistance to the
family, in addition to a lump sum
given to each student post completion, we were able to win the confidence of the parents and students.
we have vast experience in
training people at nttf, raghuraj
adds. today, we have 10,000 students, and this requires a lot of infrastructure and trainers. we use the
plant infrastructure to train these
students. apart from saint gobains
successful lwe, we have also started
training students for ashok leyland.
we are training more than 50 industries in our 20 centres located in various states across india. under the lwe
programme, the students win, the
parents win, the industries win and
training providers like us also win.
with the successful completion of
the first batch of students, the company is now planning to start courses
for women with an initial batch of 40
students. our job is to provide them
opportunity, says santhanam. our
next target is to educate and train
400 diploma graduates by 2020.
u s. m. boothem

Market News

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d


listless market

In the absence of positive cues, markets remained flat

t was another listless fortnight in

the markets. on 24 august the
sensex closed at 28060, almost
around the same level as it was at
the beginning of the month. on
1 august it had closed at 28003.
fatigue seems to be setting in as the
undertones continued to remain
weak with investors looking at some
cues either on the global or domestic
front to gauge a sense of direction.
the sensex has gone up by a mere 7
per cent since 1 January 2016.
while fiis continued to pour in
funds, domestic investors were wary
of taking long-term bets. the value
of securities with the nsdl, which
had reached R115 lakh crore on 15
november, has dwindled down to
R100 lakh crore at the end of July.
on the bse, however, the total value
of the companies was close to R110
lakh crore. investor accounts have
however nearly doubled to R148 lakh
from around R70 lakh a couple of
years ago. average assets managed by
mutual funds in the quarter ended
June was R14.48 lakh crore.
most experts continue to remain
optimistic about the india growth
story citing good monsoons, release
of funds recommended under the
Viith pay commission, and continuation of fpi inflows. while the consumption story is likely to improve,

the moot question is to what extent

will it be able to neutralise the lower
capital investments and in turn the
poor investment demand. while
m& a deals have again started resurfacing, most of the mega deals like
hdfc-max life and aditya birla
nuvo-grasim are unlikely to lead
to creation of new capacities. consolidation in the cement sector has
already seen ultratech becoming a
dominant player with a capacity of
92 mtpa. further growth through
m& a will, according to experts, be
restricted. nirmas acquisition of
lafarge assets and birla corps acquisition of reliance cement will help
the industry consolidate. however,
pricing power will be constrained
by the number of relatively smaller
regional players.
Expectation mode
the fears of a slowdown in the it sector following brexit have seen investors fancy for stocks like infosys,
wipro, tcs and tech mahindra waning. the announcement of an orderly
ramp down of around 3,000 persons due to rbs choosing not to pursue plans of spinning off williams &
glyn into an independent uK standalone bank has spooked investors
further in the belief that other european banks may take similar steps.
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infosys had seen its price dipping to

R1,053 from R1,085 in the first week
of august. tech mahindra, tcs and
wipro also lost ground.
one major loser during the fortnight was welspun india. one of
the largest cotton products exporters was accused of passing off cheap
bedsheets as premium egyptian cotton and effectively substituting nonegyptian cotton. while the contract
was revoked by target, wal-mart
also said it was reviewing its contract with welspun. the share price
tumbled from R102 on 19 august to
R59 in a matter of days. grasim and
aditya birla nuvo were the other
shares which lost ground soon after
the announcement of the merger.
while the secondary market
remained lacklustre the primary
market saw heightened activity. the
ipo by rbl (earlier ratnakar bank
ltd) saw oversubscription to the tune
of 70x. what was surprising was that
the ipo was subscribed less than
0.7 times on the first day of opening. from 3x at the end of day two it
suddenly shot up to 70x, giving rise
to the credence that there was too
much liquidity in the system. as per
sebis new guidelines, aspiring investors need not pay cheques along
with the application forms and the
money would be collected from the
accounts only post the allotment.
meanwhile banks continue to raise
funds to meet their growth demand.
sbi has recently announced plans to
raise R11,000 crore through an issue
of perpetual bonds.
while the economy continues to
show signs of robustness, markets are
still in expectation mode. goldman
sachs in its research report India: We
remain constructive on growth has predicted Q2 gdp will grow by 7.8 per
cent as higher government spending
and robust consumption trends would
offset weak private investments.
for investors the flat markets provides them with opportunities to
build up a portfolio of good quality
shares. the property sector may see
marginal uptick on growing expectations of lending norms being eased for
development of affordable houses.
u da K s e s h pa r i K h

Market News

b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d


not spun well

The sword of Damocles hangs over the company

elspun india is facing a crisis

which is very big and could
turn out to be a disaster for
it. it all started when on 19 august,
target the second largest discount
retailer in the united states and one
of the leading customers of welspun
india announced that it was pulling thousands of products manufactured by welspun from its shelves. its
investigations revealed that welspun
india did not use egyptian cotton for
its bed linen and pillow covers supplied from august 2014 to July 2016.
target estimated that 7.5 lakh products were impacted, and is offering a
refund to the customers who bought
these products. as we write this story,
there is little clarity on the extent
of the financial damages target will
demand from welspun india.
following the announcement by
target, other leading customers of
welspun viz wal-mart, bed, bath
& beyond and jc penny have also
announced that they are looking into
their product supply from welspun.
targets official statement did not
disclose why it started this investigation and when it got suspicious that
welspun was not using egyptian cotton, after an extensive investigation,
we recently confirmed that welspun
substituted another type of non-egyptian cotton when producing these

sheets between august 2014 and July

2016. neither target nor fieldcrest
(the brand name under which the
products were sold) had any knowledge of this substitution. these sheets
were produced by a number of vendors and only one of those vendors
was substituting the product. welspun has not challenged targets findings. responding to analyst queries,
rajesh mandawewala, md, welspun
india, says: we have been very particular about our quality standards, so
we are taking this issue very seriously.
the final products quality is rigorously tested and during the period in
question, the product specification
in question met all the quality standards. the issue, in fact, was around
the provenance of the fibre, the products themselves were rated highly by
the end consumers.
Worrisome matters
going by a statement issued by target, it seems the investigation was not
restricted to welspun india but it was
the only one that did not pass the test.
this is a cause for worry for the welspun management as well as minority
shareholders. what is also worrisome
is that target, instead of just suspending the supply of egyptian cottonbased bed sheets, which is only 10
per cent of its total supply to target,
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is completely winding down its business with welspun.

target is a big customer for welspun as it accounts for 10 per cent of
its total revenue. for fY16, welspun
supplied goods worth $90 million a
huge loss in revenue for the company.
last year, by borrowing, welspun
expanded its bed linen capacity from
60 million metres to 72 million metres
in anticipation of growth this now
is likely to be underutilised. it can
put a strain on welspuns cash flow
too. its long-term borrowings moved
up from R1,278 crore in march 2015
to R1,589 crore in march 2016. now
this could stretch its financials in the
short term.
to salvage the situation, the company is in the process of appointing an external independent auditor
from one of the big four auditors,
for its supply systems and processes,
to understand the root cause. it is
expected that the audit will be completed in six to eight weeks.
the journey for welspun india will
not now be smooth. it all depends
on the business relationship with its
other customers post the target episode. if the other retailers also decide
to snap business ties this would be
a nasty blow for the company. welspun derives two-thirds of its revenue
from the us and almost 90 per cent
through exports. with the welspun
episode splashed across us media,
the make in india campaign has also
come under question, which doesnt
bode well for the country, especially
with prime minister narendra modi
making all attempts to promote make
in india.
welspun was on the buy list
of most research firms. in fact, as
recently as 29 July centrum came
out with a research report suggesting welspun as a buy with a target
price of R130. post this event edelweiss has reaffirmed its faith in the
company suggesting this episode is
a blip. it has recommended a target price of R101. but welspuns share
price is on a downward spiral with the
current market price quoting at R54.
it seems no one wants to catch the
falling knife.
u su n il da m a n i a

Executive Track

B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

turnaround man

next phase

gurdeep singh, managing director of

gujarat state electricity corp (gsec),
has been appointed as the chairman
and managing director of ntpc. singh
was instrumental in gsecs turnaround. (this is the power generation
entity of the gujarat government). he
was earlier associated with calcutta
electric supply corporation, powergen and idfc projects in different
capacities. singh has close to 27 years
of experience in the power sector.

lafargeholcim (lh) has announced

changes to the executive committee
reflecting the evolution of the portfolio following recent divestments
and a transition to the next phase
for the company as it closes the integration phase. martin Kreigner, currently responsible for india, will
join the executive committee of
the lh group and take additional
responsibility for southeast asia
and will be based in mumbai. the
current re-structure reiterates the
companys growing focus on its
indian business.

coming back
arunvir singh, currently posted as
additional ceo of noida authority,
has been made the yeida ceo. this is
the second time that singh has been
designated as the ceo of yeida. he
had been posted as the ceo of the
authority in october last year. Barely
nine months later in July this year,
singh was transferred to the noida
authority as additional ceo.

global experience
the landmark group has appointed
rajeev Krishnan as the managing
director of max hypermarkets in india.
Krishnan takes over from the outgoing
managing director, Viney singh, who
will continue to be on the board of the
company as a non-executive director.
with over 29 years of global experience, Krishnan will guide and direct
the strategy and execution of the
hypermarket and supermarket business of the spar brand in india, and
will report to the board of max hypermarket (a franchisee of spar india).

on board
the board of directors of reliance
capital has approved the induction
of anmol ambani, the 24-year-old
eldest son of reliance group chairman, anil dhirubhai ambani, on
the board of reliance capital as an
additional director. the induction
follows the recommendation by
the nomination and compensation
committee of the board of reliance
capital, comprising largely of independent directors. ambani has been

Ambani: boarding first class

working in various financial services

businesses within reliance capital since 2014. he has been actively
involved in internal business reviews
across companies and has also been
part of interactions with nippon life
for increasing stake in reliance life
insurance and reliance capital asset
management in the last two years.

steering housing
indias online real estate platform, announced the
appointment of former google and
amazon executive Vivek Jain as
chief product and technology officer.
as part of his role, he will focus on
strengthening the product and engineering aspects of the business to
help steer towards its
goal of becoming a full-service transaction player. Jain is an industry
veteran with over 14 years of experience in the technology and digital
domains in india and the us.

moving up
md and chief executive officer of sbi
funds management pvt ltd, dinesh
Kumar Khara has been appointed md
of state Bank of india (sbi), for a period
of three years, extendable by two years
after a review of his performance. the
appointments committee of cabinet (acc), which approved Kharas
appointment, has also appointed
ashok Kumar garg and raj Kamal
Verma as executive directors of Bank
of Baroda and union Bank of india
respectively. gopal murli Bhagat and
himanshu Joshi have been appointed
as executive directors of corporation Bank and oriental Bank of commerce respectively.
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moving the
storage and information management services company iron mountain has appointed hitesh gupta as
its managing director for iron mountain india. gupta will be responsible
for steering the companys business in india during a period of fast
change and ongoing expansion to
help iron mountain deliver on its
global strategy for growth. gupta has
held senior roles in the finance and
information management sectors for
the last 20 years, he has had key roles
with icici Bank, centurion Bank of
punjab and Karvy finance.

on a mission
citrix announced that stanimira Koleva has been appointed group vicepresident (gvp) of sales and services
for the asia pacific and Japan (apj)
region, reporting to carlos sartorius,
executive vice-president worldwide
sales and services. as the new gvp,
Koleva will be responsible for leading and evolving the citrix sales and
services strategy to continue to drive
the companys vision of securely and
reliably delivering applications and
data and supporting the companys
customer success in the region. Koleva brings 25 years of industry experience managing sales and business
development for large multinationals across the globe and within the
apj region.


b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

T h e C h e f s d e l i g h T s s Tay a m o m e n T o n T h e l i p s b u T f o r e v e r o n o n e s h i p s

southern comfort

rasad comes from root syllables which mean light,

equanimity and glimpses of
divinity and master chefs, accordingly,
take their creations seriously. breakfast at itc grand centrals hornby
pavilion is a delight, a quiet time in a
bustling day. there are arrays of baked
goods, chocolate croissants, muffins and fresh juices and sprouts for
health fiends who arrive puffing from
the gym, omelettes for hungry omnivores stuffed with everything, waffles for wailing children determined
to eat chocolate and more chocolate
and most of all, master chef rajan,
reigning over his dosa counters with
both the purists dosas and todays
elaborate new recipes and myriad
there are many indian master
craftsmen all over the world, such
as shinde, the jeweller from goa,
unknown and unremarked except by
harry winston or madhubani painters like Jangarh singh shyam, patola
weavers and gourmet chefs like rajan.
a legend at the itc hotels, he is a fantastic bhandar (a treasure house) of
south indian cooking and its techniques. i am never tired, says rajan,
aged 80. i do what i love, delighting
people with food, and that keeps me
happy and healthy. he has cooked
for food festivals in europe and
was once at thimpu, where it was
cold, he sighs, so cold. another of

indias treasures, m.s. subbalaksmi,

was singing there and, in that wintery chill, she missed her hot food.
he assured her he would make exact
mylapore brahmin cooking specially for her.
incidentally, marco polo too had
written admiringly of mylapore
food and culture. the delighted (and
replete!) sovereign of singing then
gave him a gold sovereign. during
rajiv gandhis time, he served 30 special guests from the army, those who
had served and protected india while
facing the harshest conditions. on
armed forces day, food went from
his maurya kitchens. now he is, and
says he will be, in mumbai. happy,
i am happy. i love the delight on
guests faces when they eat my food,
repeats master chef rajan.
Gastronomic delights his story, like
many, begins with a difficult childhood in a small town. his father died
and he started work, aged eleven for
R5 per month. he had done but one
year of school, the fifth standard, and
never had the chance to study more.
however, he speaks hindi, tamil
and english fluently, all of which he
learned while working a difficult
way to learn languages, especially
grammatical english, a language with
so many irrational peculiarities.
initially, he was employed to simply serve water and maybe help at
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the tables in a small restaurant and

slowly his pay increased to R10. he
used to wash floors and at night pull
out old smelly jute sacks, which had
arrived holding sugar, from under
the front step, for a bed. sometimes,
it was cold, sometimes it rained.
soon, his pay inched up to R25. i
worked in small holes, he laughed,
as we both looked around the luxurious hornby pavilion, itc, parel.
soon, he became the head cook
and his real break arrived in 1971:
he began working for srinivas rao
and woodlands in bengaluru, the
famous restaurant chain, which first
surprised and delighted indians at
the un. today, chef rajans meals
sell for thousands.
born a brahmin, he soon learned
chettinad, chettiyar, Kerala, Karnataka, andhra, etc, styles of cooking
and went to delhis maurya. there he
met Jiggs Kalra, in 1984, the foodie
and, ahem, a rather large eater, who
took down his recipes painstakingly
for his book, Prasad. The Daily Mirror wrote about his chutneys and rasams. next, cooking for the Vidhan
sabha, he met sarojini mahishi, who
recommended him to itc and he
went to itcs grand chola. he says,
with childlike glee, he never underwent any tests, any trials.
soon, 18 years had gone by, and
a respectful itc sent him to mumbai and has said for years, he must
not retire. chef rajan specialises
in southern cooking and talking
to him, one learns so many little
ways to make good food. he says,
for example, i make small dosas;
so, they are still hot until you finish
them. his are round, patterned with
golden brown, lacy bubbles. Yes, he
sighed softly, some add wheat and
sugar and make huge ones, but they
become cold and limp, as you cannot eat so much quickly. a homemade taste and just made freshness
are especially essential in indian vegetarian cooking. chefs work hard to
produce delights, which stay perhaps
a moment on the lips and, alas, forever on ones hips.
u s wa p n a Vo r a


b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

d e a d l i n e : y e s T e r day

ending hunger

n 14 & 15 august, some

youngsters in india and pakistan worked hard at collecting food and feeding thousands of
people. the robin hood project is
managed by volunteers, who collect
and offer food every weekend. and,
on independence day, they decided
to make a massive effort to serve at
least half a million. they work in
about 26 towns and usually serve
their immediate localities. in mumbai, saloni and her colleagues, for
example, had worked almost continuously for three days. the youngsters
had collected food donations from
various restaurants and businesses
and taken them right to the many,
many areas where the poor live.
a transport company had offered
some cars to drive them and the
food to various locations. they visited slums, ensured the children and
adults were in neat lines, offered
them food graciously and received
a joyful thank you. some children
sang the national anthem, some
pushed each other before settling
down, some tried to cut lines and
were firmly shushed by other children. it was a delight to watch them
while inwardly one cringed and ones
eyes filled looking at a small pair of
eyes and tiny hands waiting and
hoping for just some biscuits. how
can you help them? first search for
their site and learn about this project
and then volunteer time, effort, and
most of all, share what you can: their
needs are simple biscuits, fruit,
maybe rotis.
statistics tell us one third of the
worlds (and indias) food is wasted.
our world does not need more food
grown, it needs accessibility to food,
buying power, ability to store and
transport, knowledge of inexpensive
nutrition and finally and vitally, an
insistence on better food such as
quality food without harmful pesticides, unnecessary colors, etc, which
wreak havoc on humanity, especially
on the most vulnerable: small, malnourished kids. their bodies and

brains cannot wait, they need good

nourishment now.
in these slums, wretched beyond
measure, the kids greet you joyfully,
the older ones are quiet, some hide
a roti or a banana, hoping to receive
more. the babies, as always, are adorable and gobble quickly, the watchful
older ones store what they are given,
knowing hunger is skulking just round
the corner. the volunteers request
them to pick up peels and packaging and throw them into bags they
hold out. the kids comply. Yes, there
is sorrow but underneath it all runs a
current of joy, because nothing, but
nothing, creates as much happiness
in you as helping someone, watching
eyes light up because of food, watching a child say thank you and ask for
her picture to be taken, while posing
like some trendy film star.
historically, no country or society has managed such numbers,
such overpopulation well. the real
long-term compassionate solution to
all of indias internal civil problems
is birth control as a national and
social priority.
Reaching out the robin hood
army (
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was founded on 26 august 2014

by neel ghose and anand sinha
and registered as a charitable trust.
from new delhi, it spread to Kolkata, mumbai, hyderabad, bangalore,
Jaipur, Jabalpur, panipat, gurgaon and faridabad and, in february
2016, to Karachi. the organisation
reaches out to homeless families,
orphanages, night shelters, homes
for abandoned children, patients
from public hospitals, etc. its aim is
self-sustained communities where
each locality contributes food to the
needy through local volunteers and
these restaurants regularly provide surplus or freshly cooked food
on a goodwill basis. it does not
accept money. it aims to impact the
less fortunate and inspire a community to help those who need it
most. for feeding half a million
many major start-ups, vh1, musicians and rha came together in an
unprecedented mission to unite
indians and pakistanis into action.
on independence day, the robin
hood army had planned to feed
half a million people across india
and pakistan and said, we have
tied up with virtually the whole
start-up ecosystem uber, zomato,
snapdeal, oyo, grofers, inshorts,
roposo, inmobi and pressplay for
#mission500k, while vh1 is driving
the message through the music fraternity with artistes farhan akhtar,
uday benegal, Vishal dadlani, coming together. so join the robins in
your hood!
every indian needs to read
churchills Secret War. today, the
challenge is not a lack of food it
is making hygienic, quality food
consistently available to everyone.
there are 850 million hungry people in the world. every 10 seconds, a
child dies from hunger. one in every
eight sleeps hungry each night. onethird of the food produced is never
consumed. as much as 82 per cent
of these hungry people live in countries with food surpluses, not shortages. hunger kills more people each
year than aids, malaria and terrorism combined.
u s wa p n a Vo r a


B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

a sporting timeout
This is one of the most interesting management books written in
recent times
Vinay Kanchan
Fortytwo bookz
`495; Pp 434

hy feel guilty sneaking

time during office hours
to watch big match? You
can easily use the inspiration from
that to influence your thinking on
whatever business challenge you are
working on. why let the enthusiasm
of the discussion around the previous nights stupendous sporting feat
wither away, when someone politely
returns the conversation to the corporate matter at hand? You can
channel that energy burst into more
vibrant thinking that might redefine
your companys vision and strategy.
why should sport be purely viewed
as a theater of the body? why cant
it also provide food for the mind,
management thinking?
this is what Vinay Kanchan
seems to be saying in his engaging new book, Lessons from the playground. the author of the best-selling
Madness starts at 9, encapsulates an
interesting idea of getting the adrenaline rush of sport to inspire management thinking. spanning several
diverse sports from cricket, football
and hockey to tennis, basketball, boxing, athletics and many more (nearly
20 in all), the book is a must read
for the sports fans in the corporate
world. it not only provides a ringside
view of some of the most memorable
sporting stories in recent times, but
also seamlessly weaves that narrative into insights pertinent to those
playing a whole different game in
white collars.

this premise is brought alive,

using lively cross references set
against a sporting background. the
pitch serves as the backdrop to the
conference room white screen, as
multiple anecdotes make for some
thought-provoking ideas, several of
which might begin to get referenced
in corporate presentations in the
near future.
given that the reservoir being
tapped into is so vast, in a sense the
entire world of sport across history,
structuring such a book into a coherent read might have been a bit of a
challenge. Kanchan overcomes this
rather interestingly, by introducing
his own, new set of 4ps a pun on
the famous 4ps of marketing. these
are people, platforms, processes
and pinnacles.
people looks at the lives of champions like pele, ali, tendulkar, Jordan and federer, and seeks to eke
out, relevant to the white collar
world, inspirations from their stirring exploits. platforms looks at the
stages in world sport such as world
cups, olympics, and derives management learning from the epochal
events that transpired there.
processes examines how things
work in the sporting world captaincy, Barcelonas playing style,
sporting rituals and so on, aiming
to bring some of those back into the
boardroom. pinnacles is a celebration of once in a lifetime sporting
achievements Bannister, maradona
in 1986, Kapil devs 175, phelps at
Beijing, with the idea of deriving lessons around what it takes for companies to achieve peak performance.
perhaps one of the interesting facets of the book is that every chapter is a microcosm of the same idea,
the book can be read in any order,
begun anywhere. at over 400 pages
it is a bit long, but the writing style
is engaging, and the subtle use
of humour keeps the reader right
on track.
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the lateral references which stand

out are too many to elaborate here,
but just to present a few interesting samples from the mixperhaps
sachin tendulkars batting style is
an amalgamation of two divergent
batting philosophies represented by
sunil gavaskar and Viv richards.
along those lines, companies striving for innovation need to develop
the aptitude of also exploring ideas
which might capture the best of both
worlds say bikes balancing the fuel
economy and power propositions,
or financial companies finding the
right mix of risk, return and safety.
nadia comanecis perfect 10 shows
perfection is also achievable in every
aspect of business from delivering
within stipulated times, to zero errors
on the assembly line. it even seeds the
perception that no target is impossible, however stiff. in fact there is an
interesting point made in that anecdote, about how culturally we are not
even conditioned to expecting perfection, case in point being the scoreboards at the montreal olympics
could not display the perfect score,
instead of showing 1.0.
then there is the example of how
strategic timeouts, first used by the
nfl and the nba, and imported into
the ipl, have the potential of changing the game. the author makes an
eminently ponderable recommendation of introducing sporting timeouts in corporate processes. the
premise being just as the introducing of thinking in the sporting
domain helps, so also could a break
from things where managers go out
to sweat and exercise, and in essence
walk away from the problem, lead


B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

to breakthroughs in the creative

thought process.
also worth mentioning is the
rousing case of how phelps replied
to incessant queries as to how he felt
being the next spitz, by countering,
i dont want to be the next mark
spitz, i want to be the first michael
phelps. the author extrapolates this
to the near spiritual point of walking
in ones own footsteps and not being
bothered by the precedents set. from
ceos taking on the mantle of high
profile predecessors to brands entering competitive markets, this seems
like prudent advice for all to follow.
this is probably one of the most
interesting management books written in recent times, the best part
being it seldom feels like one. the
passionate rendering of sporting stories, coupled with analogies from
a host of other domains keep the
conversation lively at all times. it
must be said that the book is biased
towards those who love sports, those
who dont might switch off after the
first few chapters. there will also be
the perennial question of why certain aspects were not spoken of.
for instance, why some greats were
not included, or some processes in
the sporting world-football managers and the art of managing, being
a prime case in point, were not
dealt with in more depth. perhaps
a few aspects of management could
have been singled out and dwelt on
more exhaustively.
But in many ways this looks like
the start of a new conversation.
there is an open source code feel
to the book. it seeks to open doors
to a new thinking process. it wants
to usher in something new, which
might seem like a lot more fun.
something to enliven the dull proceedings as meetings and managers ramble on from one clich to
another. this book represents the
urge to freshen thinking in the business world using more of lateral references, because such an act can only
make all thinking more creative.
and in an era where innovation is a
necessity, this can be the most lucrative boardroom sport of all to play.
u lancelot Joseph

defining greatness
The author helps us identify winning companies
Saurabh Mukherjea
`499; Pp 445

n a fateful evening journeying from Kota to mumbai on the rajdhani express,

saurabh mukherjea encountered
an elderly gentleman. he struck up
a conversation with him. it turned
out that the man had been providing consulting advice to oil refineries for the last 40 years, helping them
identify the correct coatings, paints
and dyes for their oil tankers and
storage units. intrigued, mukherjea
asked him which companys paints
he usually recommended. promptly,
he said: asian paints. it wasnt as
though asian paints were the cheapest products available, in fact quite
the opposite. they werent even the
only high quality products available.
others could replicate the same quality, mulled the consultant. so what
then set asian paints apart?
this chance encounter and the lingering question it left in mukherjeas
mind, paved the way for a deep study
into what made for a great company.
what made asian paints special? and
could those parameters be quantified
so as to apply them to other companies? The Unusual Billionaires unravels what makes companies stand out
from the pack, provides detailed case
studies of such companies, and finally
educates investors on the nuances
of identifying such stocks. this is
mukherjeas second book after the
well-received Gurus of Chaos: Modern
Indias Money Masters.
at the outset, mukherjea, whose
day job is ceo, institutional equities at ambit capital, goes on to
define greatness using quantitative
metrics. he first limits himself to a
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universe of companies that have a

market cap of at least rs100 crore. of
the 5,000 odd companies listed on
the indian stock exchange, this exercise left about 1,500. he then argues
that a companys greatness needs
to be measured over the long term,
which he defines as a decade. finally,
because over long periods of time,
financial performance is the best
reflection of a companys business
strategy, he defines a great company
as one that has delivered a revenue
growth of 10 per cent and a return
on capital employed of 15 per cent
every year for the past ten years.
mukherjeas rigourous analysis revealed that only 18 companies
made the cut. of these he defines
eight companies including asian
paints, hdfc Bank, axis Bank, marico, Berger paints, page industries,
astral poly and itc as the first
among equals. these eight companies have shown that it is possible
to deliver sustained growth without
compromising on long-term profitability a test that 99.8 per cent of
the 1,500 largest listed companies in
india fail to meet, he writes. he then
delves into detailed case studies of all
the companies except itc, which for
some unexplained reason is left out
highlighting not only their financial
performance, but also their superior
management and tact in deepening
their competitive moats. punctuated
with anecdotes, the studies make for
an easy, interesting read.
whats more, mukherjea goes a
step further and explains how investors can generate market-beating
investment returns by identifying these winning companies using
a simple set of metrics. in 2014 and
2015, mukherjea was rated as indias
leading equity strategist by asiamoney polls. clearly, he understands
companies. mukherjea is able to convey his understanding with flair
clearly and rather compellingly.
u Va r s h a m e g h a n i


b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

silky success

Business to

veryone, says R.C. Nathan,

thinks that he has unique
ideas. i am also one of those, he
says. so in a way, this initiative is
a reality check for me. the bengaluru-based mechanical engineer and management consultant
has launched Business Quality, a monthly magazine that
he describes as actually meaning quality of business and not
the business of quality. nathan,
who has also just self-published
a book, I Will Make It Happen: A
Guide for Actions, says the magazine is a vehicle to reach out to
anyone who has an interest in
business growth. it covers business ideas, technology, business models, sharing of available
opportunities, sharing of easy
to deal with systems to operate,
guidance and support to start-ups
and stagnating companies, both
domestic and global. it is also a
platform to share products and
processes which can be encashed
by anyone, he adds. it is a logical
continuation of a network called
apna which he started two years
ago as a business enhancement
group to support stagnating companies and start-ups to grow their
business. offering marketing and
financial support only finding investors, he clarifies it
now has about 250 members..u

t is matter of pride for odisha! says dr

Sanjay Kumar Panda of the international louis pasteur award that he has just
won for outstanding contribution for the development of sericulture and silk industry. this
award is considered the nobel prize in the sericulture and silk industry. panda, an ias officer
of the 1980 batch and a former union secretary for textiles as well as chief secretary in the
tripura government, was conferred the award
last fortnight at the 24th international congress on sericulture and silk industry in bangkok. the first civil servant to get this, he was
selected by an international jury for his work
over two-and-a-half decades, during which he
was director, textiles and managing director,
odisha state tassar and silk cooperative society
and spearheaded the introduction of bivoltine
sericulture for the empowerment of scheduledtribe women, and successfully implemented a
project that led to their economic empowerment. their daily income went up from $0.5
to $3, which has made a big difference in their
lives. this honour is dedicated to our sisters
who have adopted the sericulture practices
we could pass on and become settled sericulturists instead of practising shifting sericulture, moving from forest from forest, he says..u

tech savvy

ast fortnight 36-year-old Bhavin

Turakhia, co-founder and ceo
of califirnia-based directi, was in
the capital to attend the prestigious
awards ceremony hosted by entrepreneur media india. sixth in the edition, the annual entrepreneur india
awards 2016 felicitated some of the
most successful entrepreneurs from
various industries like healthcare,
medicine, manufacturing and technology among others. turakhias first
award recognised his shining efforts
in the space of technology, and he
was conferred entrepreneur of the
Year in innovation and technology.
at directi, we have always believed
in creating value with our businesses.
we believe that it is our moral value
to create an impact that is directly
proportional to our potential. this is
the principle that all of our 11 successful global businesses are run
on, said turakhia. he extended his
heartfelt gratitude to all his employees at directi, his partner-in-crime
brother, divyank and his father, who
also made it to the ceremony to celebrate his sons accomplishments..u
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b u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Made with love

iblings Ritika and Pawan Chawla recently

launched Oh Dough, a caf in mumbais fort
area, selling a variety of cookies and artisanal icecreams. ritika, a le cordon bleu graduate, was never
into baking but realised she had a magic touch when
she tried her hand at making cookies for some of her
friends. they loved her cookies and soon she found
herself baking quite regularly, explains pawan. she

Playing a big role

Heart art

ome 1,000 people visited, and

38 artworks were sold, says
Milind Sathe, who presented
a week-long exhibition, My pictures with their little stories,
last fortnight for world photography day. no wonder sathe, a
pune-based entrepreneur, gallerist and art promoter, describes the
show as having been very successful. aimed at creating awareness of and raising funds for the
nana palkar smruti samiti, which
provides free accommodation in
mumbai to needy cancer patients,
the week-long event showcased
special moments from sathes
journeys over the years. each of
the 63 photographs, he explains,
has a little story which is the reason it was shot. apart from the
pictures on display, i also put up
the story behind each picture,
and this was hugely appreciated,
he says. as people went through
the collection, they experienced
the same emotions which originally acted as a trigger for creating each of the pictures sheer

decided to pursue her new found talent at the londons famed culinary school. on her return, older
brother pawan, who studied hospitality in switzerland and later worked at the burj al arab and grand
hyatt in dubai, pushed her to open a caf. its comfort food. and everyone loves comfort food, he says.
he looks after branding and the space itself, and says
that the response thus far has been overwhelming..u

delight, getting mesmerised, feeling the pain, going into a trance,

seeking solitude, becoming a
child again, and so on. held at the
nehru centre in mumbai, entry
was free, because the plan was to
reach out to maximum number of
people from all walks of life and
not raise funds from a select few.

ikas Chadha, executive director and chief

financial officer, Berggruen Hotels pvt ltd,
has been awarded as the best cfo of the Year in
the services and hospitality sector, for his contribution to business and industry and represented the
hospitality industry among stalwarts from across
industries at the event. the glittering award ceremony took place at hotel pan pacific, singapore, and
was organised by cmo asia a global forum awarding
excellence across sectors. the hospitality industry has
numerous challenges like expansion, funding, business growth and profitability enhancements in which
the cfo plays a critical role. chadha is also on the
board of berggruen hotels as an executive director.u

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B u s i n e s s i n d i a u t h e m ag a z i n e o f t h e c o r p o r at e wo r l d

Our track record

speaks for itself
Sukhbir Singh Badal, deputy chief minister of Punjab, is
leading the shiromani akali dals fight back in the face of the
challenge posed by the Congress and the Aam Aadmi Party in
the upcoming assembly election. Vigorously defending the aapsad bjp governments record, he says that it has put the state on
the right track to development
If the Congress and aap are to be
believed, there is a strong antiincumbency against the sad-bjp
government. How do you propose
to counter this?

on the contrary, the sad -bjp

government has served the
people of punjab to the best of
its abilities. look at our track
record. our government has
acted as the real benefactor of
all the sections and fulfilled its
promise of making punjab a power
surplus state. the government is
carrying out modernisation of road
infrastructure, a prerequisite to
development, making punjab the
second state in the country to have
a road network of such a broad
scale. all the major cities and towns
of the state would be connected
with 4-6 lane roads by 2017.
the sad -bjp government has
constructed airports of international
standard at sas nagar and Bathinda
apart from opening up 12
universities, iit-ropar and initiating
work on iim-amritsar to bolster the
educational sector.
a sum of R2,500 crore has been
spent to give fillip to the irrigation
sector, free power worth R6,500 crore
to farmers is being provided, a new
pro-farmer law has been enacted
according to which interest of R1
lakh would be payable on availing
a loan of the same amount, no
interest is to be levied on a R50,000
agri limit loan. Besides, we have
provided health insurance scheme
for farmers, traders and poor sections
and launched the shagun scheme
under which money is given to

under-privileged families at the time

of girls marriage.
But industrial development hasnt
really picked up...

this is again a misleading opposition

campaign. the number of industrial
units has increased from 5,000 in
2007 to 11,000. soon, skill centres
would be opened so as to impart
latest professional skills to youth.
Besides, 389 sewa kendras in urban
areas have been operationalised with
another 1,758 to start functioning
soon in rural areas which would
change the economic and
developmental landscape of the state.
To what would you attribute the
rise of aap in Punjab?

what has aap done for the people

of delhi? nothing but empty
promises. aap would meet the same
fate as the peoples party of punjab
met in the last assembly polls. it is
a conglomerate of outsiders who
neither have any understanding
of the culture or the traditions
in punjab nor any connect with
its roots. it is plagued with bitter
internal feuds and therefore cannot
compete with the sad -bjp alliance.
they have links with radical
elements and are hobnobbing with
them. see who has joined him
radicals, people from terrorist
organisations, people who declared
Khalistan are their supporters. in
fact, aap s sources of funding
need to be probed by the central
But why are people coming to
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Kejriwals rallies?

the aap is full of comedians. the

crowds come for entertainment.
fighting electoral battles is very
different... if comedy was key, all
jokers would become chief ministers.
What about the Congress

the congress is a party without

any progressive agenda. it is not a
match for the sad -bjp either. punjab
congress chief captain amarinder
singh cannot list even a single
developmental work he had done as
chief minister.
Will former cricketer Navjot Singh
Sidhu be a factor?

he is no threat. it was always the

akalis who saved him. look at his
parliamentary (election) record: he
only won from akali seats (assembly
segments). he admitted in an
interview that he won (in 2009)
because of the akali dal.
opportunists and fugitive political
leaders have no place in punjab
politics and people will teach him
a befitting lesson. in the past too,
leaders like surjit singh Barnala and
manpreet singh Badal had backstabbed their mother parties in the
back and he (sidhu) is no exception.
A new controversy has surfaced
after the Centre appointed an
administrator for Chandigarh and
then withdrew the order. What is
your stand on this?

chandigarh belongs to punjab

forever and punjab would get its
legitimate right.