Pivot or Perish

Shilputsi Consultants Discussion

June 10, 2020 | Shiv - ABG
Structure
• Global economic context
• Businesses perishing right now
• Indian company data
• How are individuals feeling
• Pivot to a new future
• Summary
We are in a recession right now and we have
seen 14 global recessions in the last 150 years.

Past global recessions have been a result of

war, oil prices, fiscal policies
 Top 10 : GDP steep drop
GDP Growth rate % Covid-19 Deaths
Country GDP: 2019 (US$ tn) (E) now GDP:2020 (US$ tn) 7 June 2020
USA 21.1 (6.1%) 19.8 112101
China 14.2 1.0 % 14.4 4634
Japan 5.0 (6.1 %) 4.7 914
Germany 4.0 (7 %) 3.7 8769
India 2.9 (3.2%) 2.8 6957
United Kingdom 2.9 (6.5%) 2.7 40465
France 2.8 (7.2%) 2.6 29142
Italy 2.1 (9.1%) 1.9 33846
Brazil 1.9 (8%) 1.8 36044
Canada 1.7 (6.2%) 1.6 7773

Source : World Bank , IMF for Europe countries

 Top 10 : Interdependence is high, isolation doesn’t help

GDP: 2019 Growth rate % Exports Imports No. of listed domestic

Country (US$ tn) (E) GDP:2020 (US$ tn) (% of GDP) (% of GDP) cos. Market Cap / GDP

USA 21.1 (6.1%) 19.8 12.2% 15.3% 4397 148.1%

China 14.2 1.0 % 14.4 19.5% 18.7% 3777 46.5%
Japan 5.0 (6.1 %) 4.7 18.5% 18.2% 3704 121.5%
Germany 4.0 (7 %) 3.7 47.0% 41.1% 470 54.5%
India 2.9 (3.2%) 2.8 19.7% 23.6% 5065 76.6%
United Kingdom 2.9 (6.5%) 2.7 31.5% 32.7% 2026 107.0%
France 2.8 (7.2%) 2.6 31.4% 31.9% 457 106.1%
Italy 2.1 (9.1%) 1.9 31.6% 28.5% 290 36.0%
Brazil 1.9 (8%) 1.8 14.9% 14.5% 324 65.7%
Canada 1.7 (6.2%) 1.6 32.1% 34.1% 3358 113.1%
 Top 10 : Stimulus not translating to spending

GDP: 2019 (US$ Growth rate % Fiscal Stimulus (US$ Fiscal Stimulus
Country tn) (E) GDP:2020 (US$ tn) bn) (% of GDP) Unemployment Rate

USA 21.1 (6.1%) 19.8 2791 13.3% 13.3%

China 14.2 1.0 % 14.4 510 3.5% 6.0%
Japan 5.0 (6.1 %) 4.7 1056 21.1% 2.6%
Germany 4.0 (7 %) 3.7 323 4.9% 3.5%
India 2.9 (3.2%) 2.8 106 3.7% 23.5%

United Kingdom 2.9 (6.5%) 2.7 430 15.0% 3.9%

France 2.8 (7.2%) 2.6 480 19.0% 7.8%
Italy 2.1 (9.1%) 1.9 519 29.6% 6.3%
Brazil 1.9 (8%) 1.8 189 10.0% 12.6%
Canada 1.7 (6.2%) 1.6 152 9.8% 13.7%

Stimulus, Savings, Unemployment at all time high

Stimulus was 4% of GDP
with the Global financial
crisis in 2008, this pandemic
has global stimulus of
~ 11 to 14% of GDP.

Speed of decision!
Most people believe
that this recession
will be deep and
long, linked to
vaccine availability.
1. Virgin Australia
2. Avianca Columbia
3. Air Mauritius
4. Miami Air USA
5. Braathens Sweden
6. Ravnair USA
Airlines Perished now
7. Flybe UK
8. Tsa USA
9. Compass airlines
USA

Airlines has been a glamorous ,fragile business all its life

9
 1. J Crew
2. John Varvatos enterprises
3. Neiman Marcus
4. Stage stores
5. True religion apparel
US Retail perished now 6. JC Penney
7. Dean and Deluca
8. Peir 1 imports
9. Tuesday morning
10. Lord and Taylor

10
1. Oasis UK
2. Warehouse UK
3. Debenhams UK Europe Retail perished now
4. Galeria karstadt
Germany

11
 • High Debt
• High physical business model
Reasons to Perish • Low margins, high cost structure
• Inflexibility to pivot

In every crisis, 30% of firms drop off and Industry consolidates

 India: Net Debt / EBITDA
S&P BSE Index 2019 (A) 2020 (E) 2021 (E)
Sensex 30 2.4x 2.8x 2.5x
BSE 500 2.8x 3.6x 3.1x
BSE Sectoral Indices
- Information Technology -0.8x -0.8x -0.8x
- FMCG -0.2x -0.1x -0.1x
- Capital Goods 4.0x 4.4x 3.8x
- Consumer Durables -1.4x -1.5x -1.2x
- Healthcare 1.9x 0.7x 0.6x
- Auto 1.9x 1.9x 1.5x
- Metal 1.8x 1.8x 1.4x
- Oil & Gas 1.7x 1.9x 1.6x
- Realty 3.7x 2.4x 2.2x
- Power 4.8x 4.3x 4.1x
- Carbonex 2.6x 3.0x 2.6x
- Greenex 2.7x 2.4x 2.1x
- Industrials 3.3x 3.2x 2.7x
- Utilities 4.8x 4.8x 4.5x
- Telecom 4.5x 3.7x 3.1x

• Pivot by Reducing debt - hiving off non core assets

• Pivot by reducing Fixed Costs

Source: Bloomberg | Note: Data as on 31st December for each year | Bloomberg terminal accessed on 7th June, 2020
 India sector probable situation
Organized retail Auto,shared riding
Energy-Coal Real estate
Coaching centres Aviation
Offline education Entertainment ,QSRs
Physical apparel model
Slow Recovery Travel,Gyms,Spas
Newspapers, Magazines,Advertising
NBFCs
FMCG, Health/Wellness/Sanitation products Electronics
Pharmaceuticals Digital apparel model
Insurance Dishwashers
Quick recovery
Healthcare delivery Food delivery
Diagnostics
Broadcast,Telecom, Broadband
Agri Inputs, IT, data Centres

Covid impact low Covid impact high

Source : Industry reports
 Consumer Sentiment CMIE

% March 15 ,2020 May 10 ,2020

Urban India 101 35

Rural India 102 43

The new enemy?

• Washing
• Cleaning
• Shaving
• Haircuts
• Dressing up
• Swopping
• Being on a technology leash
 Reflect
Brood
Anger
Argue
Domestic Violence
Helplessness

In this lockdown, time has been an ally and an enemy

 How do I stay
The Individual secure in an
insecure world?
 What are our people saying?
• 50% expect a salary cut
• 40% expect to spend less
• Higher DIY trend
• Will buy more only if discounts are steep
• Will buy cheaper brands to reduce expenditure
• Death by webinars
• Buying robot cleaners, dishwashers, Ready to cook, eat, portion meals

Source: Some from BCG-Facebook

What are people doing?

• 50 % increase in digital payments

• Postponing big spend items
• Postponing family decisions, eg. having kids
• Looking at their financials and investments more closely
• Rethinking Insurance
• Investing in self development and new skills
 Pivot essentials - HDTV

Health Digital Trust Value

How many proof Digital- shortest How many proof Innovation

points can you give? distance between points can you give to
brand and consumer earn more trust? Terms of Trade
Contactless service / least friction for
consumer to access How much can you Eco system approach
Eg Temperature the brand. address a felt
tracking in food consumer risk ?
delivery 3 parts to digitize in
an organization Doing good for
society

Traceability
Most unlikely PIVOT successes
• Doordarshan with Ramayan !
• Max Bupa digital with self declaration for insurance
• BMW with digital immersive experience
• Radisson hotels teaching housekeeping, washing etc on line
• Bingo moment with Ranveer Singh
• The US graduation speech idea from Obama to CEO speeches
• Nippon paints anti virus surface coating
• Jindal steel and power
• Reliance petrochem export ratio
• Liquor brands into sanitizer market
Pivot to New Business models
ITC hotels prepaid model
Kotak KYC Model
Reliance + J&J + Adi for Covid test
earbuds
Pivot to New categories:
Sanitizers
Surface spray cleaners
Fruit and vegetable washing
50 ps hand sanitizer sachet from Cavinkare
PPE
Covid 19 insurance products
Data Rich businesses
 Pivot to a barbell organization.

Lean middle management

1.Customer facing
1.Digital push
2.Revenue models
2.Automation
Pivot to…

1. New Business Models

2. Innovation with eco system

3. Digitize,digitize,digitize the orgn

4. Focus and think global

5. To a lower breakeven point

Thank you Purvi and Shilputsi

Shilputsi consultants is a 42 year old HR consulting firm,run by Purvi Seth. Purvi’s passion is to create responsible leaders
and build agile HR practices.
 • Note 1: The unemployment rate for most of the countries is either as on April
2020 or May 2020 | Source: www.tradingeconomics.com
• Note 2: Covid-19 deaths based on database accessed on 7th June, 2020 |
Source: www.worldometer.com
• Note 3: Export % of GDP and Import % of GDP data for China, USA, India, Japan,
Brazil, Canada is for 2018 - from World Bank database | For Germany, France,
Italy and UK for 2019 - from OECD database
• Note 4: GDP nos.(for 2019 (E) are based on IMF database (October 2019) | The
data for India is in FY 19-20 / 20-21 while for others in CY 2019 / 2020 | Nos. for

Reference 2019 and 2020 computed by applying growth rates estimated in IMF report of
October 2019 and April 2020 and World Bank June 2020 report.
• Note 5: Market Capital to GDP ratio are as on 2019 for Brazil, Italy, France,
Germany, Japan and UK | For USA, China, India, Brazil and Canada it is as on
2018 | Source - www.ceicdata.com
• Note 6: The listed domestic companies in UK, China, Germany, Brazil, Canada is
for 2019 | For USA, India and France - 2018 | For Italy - 2014 | Source - World
bank database
• Note7: Fiscal Stimulus based on “fiscal measures” announced as on 4th June,
2020 | Doesn’t include Monetary and macro-financial measures announced by
countries | Data for most countries converted to USD bn | Source: IMF
How do resilient organizations pivot?

1. Clarity around goals

2. Careful use of resources
3. Play to their ‘soft’ strengths
4. Relay race of good work, not just one lap
5. We are in this together feeling