Business-Today 200920 PDF

businesstoday.
in SPECIAL ISSUE
OC
September 20, 2020 `100
the Wealth
Creators
HOW RELIANCE’S MUKESH AMBANI, BAJAJ FINANCE’S
SANJIV BAJAJ, DEEPAK NITRITE’S MAULIK MEHTA, GMM
PFAUDLER’S ASHOK PATEL AND A HOST OF OTHERS MADE
INVESTORS AND PROMOTERS WEALTHIER
HOW TO MANAGE AND PROTECT WEALTH

From the Editor
http://www.businesstoday.in
Mastering Wealth
Editor-in-Chief: aroon purie
Group Editorial Director: Raj Chengappa
Editor: Rajeev Dubey

Group Creative Editor: Nilanjan Das
Group Photo Editor: Bandeep Singh
Y
Executive Editor: anand adhikari
ou earn. You manage. You protect. That’s easier said than done Deputy Editors: ajita Shashidhar,
Naveen Kumar (Money Today)
though. Especially under the circumstances when businesses and in-
special projects and events
dividuals alike have their eye set on wealth erosion and wealth protec- Senior Editor: anup Jayaram
tion rather than wealth generation.
correspondents
But wealth is really in the eye of the beholder. Nothing is more awe-inspir- Senior Editors: p.B. Jayakumar, Nevin John,
Joe C. Mathew, E. Kumar Sharma,
ing than super wealth generators. They remain THE role models to emulate Dipak Mondal, Manu Kaushik, Sumant Banerji
in democratic, free economies. In the past five years, Reliance’s Mukesh Am- Associate Editor: Nidhi Singal,
Senior Assistant Editor: Sonal Khetarpal
bani, Bajaj Finance’s Sanjiv Bajaj, Minda Industries’ Nirmal Minda and GMM
research
Pfaudler’s Ashok Patel have made investors and themselves far wealthier than Principal Research Analysts: Niti Kiran, Shivani Sharma
their peers. Coupled with some equally impressive wealth creation at HDFC copy desk
Bank, The Titan Company, Deepak Nitrite and Alkyl Amines, they represent Senior Editor: Mahesh Jagota
Associate Editor: Samali Basu Guha
the cream of the money spinning super-large, large, medium and emerging Copy Editor: aprajita Sharma
enterprises in the country today. Ambani has made investors — and himself photography
— wealthier by 4.5 times since 2015; 2.5 times during just the lockdown. Read Deputy Chief Photographers:
Yasir Iqbal
their stories starting page 18. Principal Photographer: Rajwant Singh Rawat
Next, even though crystal-gazing is a risky proposition when the future is art
so uncertain, which firms will generate wealth in the future can be still gauged Deputy Art Director: amit Sharma
Assistant Art Director: Raj Verma
with deep data intelligence and smart exclusions. Consider our list of ‘value
production
stocks’ with potential to continue the good run into the future. They have Chief of Production: Harish aggarwal
grown faster than the industry while maintaining higher return on equity Senior Production Coordinator: Narendra Singh
Associate Chief Coordinator: Rajesh Verma
vis-a-vis peers. Their track record may give you confidence about their future.
library
Rashmi Pratap brings you the chosen ones on page 52. Assistant Librarian: Satbir Singh
Just as important as wealth creation is the prospect of wealth management Publishing Director: Manoj Sharma
and protection. It’s easier to generate wealth, but far more difficult to manage Associate Publisher (Impact): anil Fernandes
it. Managing it responsibly is the mantle increasingly being taken over by Fam- impact team
Senior General Manager: Jitendra Lad (West)
ily Offices — the newest concept in the progression from the age-old munim to General Managers: Upendra Singh (Bangalore)
HUFs to Trusts to holding companies. They not just manage investment and Kaushiky Gangulie (East)
properties with an aim of enhancing wealth but, more importantly, ensure Marketing: Vivek Malhotra, Group Chief Marketing Officer
smooth inter-generational transfer. Nevin John explains why glamorous Fam- Newsstand Sales: Deepak Bhatt, Senior General Manager
ily Offices have some very complex nuts and bolts. (National Sales); Vipin Bagga, General Manager (Operations);
Rajeev Gandhi, Deputy General Manager (North),
To fathom life beyond equity as an asset class, dive into the world of bonds, Syed asif Saleem, Regional Sales Manager (West),
S. paramasivam, Deputy Regional Sales Manager (South),
alternative investments and asset classes such as gold, real estate and com- piyush Ranjan Das, Senior Sales Manager (East)
modities in the following pages.
Finally, on to protecting wealth. For those invested in debt, it’s a Hobson’s
Vol. 29, No. 19, for the fortnight September 7 to
choice. Real interest rates are already in the negative zone because of high September 20, 2020. Released on September 7, 2020.
Editorial Office: India Today Mediaplex, FC 8, Sector 16/A, Film City, Noida-201301; Tel:
inflation and falling interest rates. And with regulator RBI indicating it’s not 0120-4807100; Fax: 0120-4807150 Advertising Office (Gurgaon): A1-A2, Enkay Centre,
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reached the end of the rate-cut cycle, they’re likely to stay in the negative ter- 4948400; Fax: 0124-4030919; Mumbai: 1201, 12th Floor, Tower 2 A, One Indiabulls Centre
ritory for some time. So, where should they invest? Tread carefully, but don’t (Jupiter Mills), S.B. Marg, Lower Parel (West), Mumbai-400013; Tel: 022-66063355; Fax: 022-
66063226; Chennai: 5th Floor, Main Building No. 443, Guna Complex, Anna Salai,
lose heart. There are options in fixed deposits, company deposits and deben- Teynampet, Chennai-600018; Tel: 044-28478525; Fax: 044-24361942; Bangalore: 202-204
Richmond Towers, 2nd Floor, 12, Richmond Road, Bangalore-560025; Tel: 080-22212448,
tures, public provident fund and debt schemes of mutual funds. Returns may 080-30374106; Fax: 080-22218335; Kolkata: 52, J.L. Road, 4th floor, Kolkata-700071; Tel:
033-22825398, 033-22827726, 033-22821922; Fax: 033-22827254; Hyderabad: 6-3-885/7/B,
be low but are decent under the circumstances. Anand Adhikari lays bare the Raj Bhawan Road, Somajiguda, Hyderabad-500082; Tel: 040-23401657, 040-23400479;
Ahmedabad: 2nd Floor, 2C, Surya Rath Building, Behind White House, Panchwati, Off: C.G.
priorities before investors to protect — even grow — their capital. Road, Ahmedabad-380006; Tel: 079-6560393, 079-6560929; Fax: 079-6565293; Kochi:
Karakkatt Road, Kochi-682016; Tel: 0484-2377057, 0484-2377058; Fax: 0484-370962
Topping these up are expert tips on how to manage risk by age, product Subscriptions: For assistance contact Customer Care, India Today Group, C-9, Sector 10,
Noida (U.P.) - 201301; Tel: 0120-2479900 from Delhi & Faridabad; 0120-2479900 (Monday-
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lines); Fax: 0120-4078080; E-mail: wecarebg@intoday.com
how to borrow smartly to boost wealth. Sales: General Manager Sales, Living Media India Ltd, C-9, Sector 10,
Noida (U.P.) - 201301;
Just why we believe this issue could not have come at a more appropriate Tel: 0120-4019500; Fax: 0120-4019664 © 1998 Living Media India Ltd.
time. Be wealthy, stay wealthy. Good luck! All rights reserved throughout the world. Reproduction in any manner is prohibited.
Printed & published by Manoj Sharma on behalf of Living Media India Limited.
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September 20, 2020 Cover by
Volume 29, Number 19 NILaNJaN DaS
16
All
About
Wealth
IT’S NOT
JuST aBOuT
generAting
weAlth
illuStration by raj verma

BuT aLSO
MaNagINg aND
PrOTeCTINg IT
game Consumer home run titanic encashing Consolidate On a Following

Changer loans And A Bit innovations the right + Diversify Mission Atma
reliance Drive Of retail The Titan Chemistry = growth Mode nirbhar
Industries Bottomline Bajaj Company Deepak Minda gMM Mantra
Limited HDFC Bank Finance Pg. 30 Nitrite Industries Pfaudler alkyl amines
Pg. 18 Pg. 22 Pg. 26 Pg. 34 Pg. 38 Pg. 42 Chemicals
Pg. 46
6 Business Today 20 September 2020

why gold Matters invest Short,
economic uncertainty Stay Safe
across the globe has Debt investors need to
increased the appeal tread carefully in the
of the yellow metal fixed income market as
among investors. This the balance sheets of
makes it a good store the two biggest issuers
of value in the near — the government and
future corporate sector —
Pg. 67 are not in the pink of
Stocks to health.
look Out For Pg. 78
COluMn
Value investing is all 10
about picking good right Asset Mix is
Key to riches Securing the gains
quality stocks trading
at a discount to Insure your life before The Point
Multi-asset portfolios
historical valuations. anything else so that
tend to outperform
BT crunches the the family does not
numbers to bring you
conventional
miss out on goals The Forex Advantage
counterparts
likely future wealth dear to them India’s foreign exchange re-
Pg. 70 serves touched a record high
generators Pg. 82
Pg. 52
of $535 billion on July 31. This
provides strength to India’s
Customised external sector
for hnis Keeping Assets
Custodians of Safe
wealth Mass products such
a look at non-life
as mutual funds do
Family offices are insurance plans that
not work for the very
helping people protect protect your wealth
rich. Welcome to the
and grow their wealth world of portfolio Pg. 84
while also ensuring management services
smooth succession and alternative
planning investment funds health Cover to
Pg. 58 Protect Savings
Pg. 72
Medical insurance
will come in handy in
Building riches COluMn emergencies,
in 2020 prevent
real estate investment Don’t invest outflow of personal
can take years to bear Based on Age wealth
fruit. Here is how Instead, financial goals Pg. 86
88
you can tweak your should decide risk
approach to make the appetite
most out of it
Pg. 76
Network
Pg. 62
The Conservationist
Amit Jain, MD, L'Oréal India,
never misses an opportunity
to visit wildlife parks. He has
been to almost every wildlife
businesstoday.in reserves the globe, but the

Jim Corbett National Park is
closest to his heart
STay CONNeCTeD WITH uS ON 90

www.facebook.com/BusinessToday@BT_India
Best Advice I Ever Got

An Feature “Shift roles
From time to time, you will see pages titled “An Impact periodically and
Feature” or “Advertorial” in Business Today. This is no
different from an advertisement and the magazine’s editorial
be persistent in
staff is not involved in its creation in any way. approach”
Manish Bharti
20 September 2020 Business Today 7

The Point
The Forex
AdvAnTAge
India’s foreign exchange reserves
touched a record high of $535 billion
on July 31. This provides strength to
India’s external sector
By Shivani Sharma | Graphics by Tanmoy Chakraborty
Forex Reserves Surge

to All-time High…
($billion)
600
550
500
450
400
350
300
July 2019 July 2020
…Thanks to Foreign Currency Assets and Gold

FoReIGn SPeCIAL ReSeRve
CuRRenCy DRAwInG TRAnCHe
ASSeTS GoLD RIGHTS PoSITIon In IMF
500 40 2.0 5
400 32 1.6 4
300 24 1.2 3
200 16 0.8 2
100 8 0.4 1
0 0 0 0
July July July July July July July July
2019 2020 2019 2020 2019 2020 2019 2020
(in $billion)
10
China 3,154
Japan 1,320
Switzerland 896
India 535
Saudi Arabia 436
Russia 427
South Korea 404
Brazil 337
Mexico 183
UK 142
Indonesia 127
Canada 77 India
France 54 now Has
Turkey 46 Fourth
Italy 44 Biggest
US 42 Reserves
South Africa 42
Germany 38
($billion)
Argentina 37
Australia 33
Contributing Factors
Lower Trade Surge in
Deficit Gold Prices
Trade Balance Highest Price 24 Carat
($billion) Gold (`Per Gram)
5 6,000
0 5,500
5,000
-5
4,500
-10
4,000
-15 3,500
-20 3,000
July July July July
2019 2020 2019 2020
Rise in FDI Inflows

Foreign Direct Investment ($billion); quarter ended
17.2
15.2
13.1 13.2
10 10.4 9.8 10.4
8.6
Mar Jun Sep Dec Mar Jun Sep Dec Mar

Source: RBI 2018 2019 2020
30 May 2019 Business Today 11
The Point
Bank Credit to Key RecoveRy in

Industries Dips coRe output
î Bank credit to 13 out of 19 key industries
contracted in first quarter of FY21
SlowS in June
î The index of eight core industries, which
î This was in spite of the government going all out was at 134 in March, had fallen to 82.3 in April.
to push banks to provide liquidity to industrial/ It recovered to 106.9 in May and then rose far
services sectors to tide over the coronavirus-induced more slowly to 112.9 in June
slowdown
î In May and June, output of fertilisers,
î Credit offtake to industrial sector declined 1 per natural gas, cement, electricity and crude oil,
cent (v/s 2.6% fall in first quarter of FY20) recovered substantial ground and reached
close to pre-lockdown levels
î In case of services, the fall was 2.6 per cent (v/s
5.4% rise in first quarter of Q1 FY20) î Output of refinery products, steel and coal
is still far from pre-lockdown levels. Coal
output fell MoM in June
contRaction in Bank cRedit (Y-O-Y %)
29.9
Chemicals, Chem- -8.8
M-o-M change (%)
ical Products -11.3
5.8
5.6
4.9
4.8
Beverage & -2
1.4
1.4
Tobacco
0
-9.1
-0.2
-0.6
-2.5
-3.1
-3.1
-6.1
Glass & Glassware
-7.3
-10.8
-8
Gems & Jewellery
-6.4
-2.4
82.3 -36.6
All Engineering
135.5
137.4
132.8
132.6
130.7
-6.3
129.2
128.5
127.4
120.7
137
134
134
106.9
112.9
Rubber, Plastic & 0.1
Their Products -4
Petroleum, Coal -11.7

index
Products, N-Fuels -3.3
0.8
Apr-19
May-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Jun-19
Jul-19
Aug-19
Sep-19
Apr-20
May-20
Jun-20
Cement & Cement

Products -2.6
Mining, Quarrying -1.5 Source: Office of Economic Advisor

(Including Coal) -2.4
-4.9
Textiles
-1.7
-2.3
Construction
-1.6
Leather & Leather 0.7

Products -1.5
13.1
Other Industries
-0.8
Jun-19 Jun-19 Source: RBI

First Quarter iip
iip oveRall ManuFactuRing
10 10
Shows Severe
0 0
-10 -10
contraction -20 -20
-30 -30
î Index of Industrial Production (IIP) grew
20.5 per cent in June over May. Still, in the -40 -40
first quarter, it was 35.9 per cent lower
compared to its level a year ago -50 -50
Jun Quarter Jun Jun Quarter Jun
î This is expected to translate into a sharp 2017 ended 2020 2017 ended 2020
fall in Gross Domestic Product
during the quarter due to loss Mining electRicity
of industrial activity 10 10
î IIP has been in the red for four 0 0
consecutive quarters now
Source : MOSPI -10 -10
-20 -20
-30 -30
Jun Quarter Jun Jun Quarter Jun
2017 ended 2020 2017 ended 2020
Rail Freight crude oil

y-o-y change (%)
Picks Up usage
-2.3
-2.3
-6.1
-6.9
down 22%
-22.2
î Indian Railways carried 95.2 million
tonnes of freight traffic in July (1.7 per -19.1
cent more than in June) î While domestic crude oil
output was down 6.9 per
î There has been a sharp recovery cent in Q1 FY21, consumption
after the 36.6 per cent dip in April when slumped 22.2 per cent due
consumPtion
Production
goods movement was badly hit due to to the lockdown, as opposed

imPorts
the lockdown to a 2.3 per cent fall in the

previous year
Rail FReight tRaFFic (Million Tonnes) î One reason for low output
was massive fire at Oil India’s
120 field in Baghjan in Assam
406
100
458
356
Q1FY21
328
80
Q1FY20
60
40
20
60
56
0
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Million BaRRelS
Source: Ministry of Railways

The Point
Salaried
14.9
Salaried Employees
Jobs See the
Daily Wagers
Business
Steepest Fall
Farmers
-0.1
î Over 12.5 crore jobs were lost in April.
This fell to 10.03 crore in May, 2.99 crore
in June and 1.1 crore in July
-6.8
î The biggest hit has been in salaried
jobs, which shrank 18.9 per cent during
April-July. In sharp contrast, farm jobs Job losses
rose 14.9 per cent during the period, April - July
showing that the rural economy is doing
-18.9
2020
far better than the urban economy (YoY % change)
FPI Interest in LiFe inSurerS

Indian Markets See BuSineSS
Wanes in July uptick
î Foreign portfolio investors (FPIs) invested
$619.3 million in Indian capital markets in î Life insurers reported rise in first-year premium
July, far less than the $3.1 billion in June income in July. It had fallen for four straight months
î They pulled out a net $245.6 million from î The first-year premium grew 6.9 per cent to
debt. They remained net sellers of Indian `22,986 crore compared to `21,509 crore in
debt for the ninth consecutive month July 2019.
î Since November 2019, they have pulled î The growth was driven by private insurers. They
out $15.7 billion from Indian debt earned `7,815.1 crore as first-year premium, 26.1
per cent higher than `6,197.4 crore in July 2019
FPI InvestMents In
IndIan Markets ($ million) Monthly FIrst-
(-11%)
(-32%)
37,459
year PreMIuM
(6.9%)
5,000 (`crore)
32,241
28,869
25,409
(-25%)
0
22,986
21,509
18,414
(-33%)
-5,000
13,739
9,982
-10,000
6,728
-15,000
Debt Equity Total
-20,000
Jul 2019 Jul 2020 March April May June July
Source: NSE, CMIE 2019 2020 Source: IRDA

RIL AccountS pVs See Fastest
FoR 14% nIFty recovery in July
WEIght î Passenger vehicle (PV) sales reported the
sharpest recovery MoM of 73 per cent, followed
î The RIL stock was flat between December by two-wheelers (26 per cent) and
2009 and 2016. Since then, it has rallied three-wheelers (24 per cent)
almost four times as markets bet on
deleveraging and growth of the digital î However, year-on-year, PV sales fell 4 per cent
business while two-wheeler and three-wheeler sales fell 15
per cent and 77 per cent, respectively
î RIL’s weight in the Nifty has risen from 5.2
per cent in December 2014 to 14 per cent î Tractors remained the only bright spot. Sales
rose 36 per cent Y-o-Y
î It accounts for nearly 9 per cent of India’s
market cap, a rise of three times from 2.9
per cent in December 2014 Passenger tWo-Wheelers
vehIcles
10
rIl as % oF IndIa
lIsted McaP
8
-4
6
-15
4
-27 -28
-44 -41
2
0
three-Wheelers tractors
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Jul-20
36
Source: Motilal Oswal
14 17
-51
-65 All figures are y-o-y %
-77 Production
Domestic Sales
Exports

How
this is the first edition of the five-year period. We divided them
bt Wealth Issue where we have into four categories on the basis of
identified companies that created gross sales: super large (`75,000
We
the most value for owners and crore or more); large (`7,500 crore
individual investors over five years. to `75,000 crore); medium (`1,500
We started with companies in the to `7,500 crore) and emerging
Did It
nifty 500 list. as a first step, we (lower than `1,500 crore).
eliminated all companies that had as part of the initial screen-
incurred losses any time during the ing criteria, we applied a filter
the Wealth issue — Opening essay
All About Wealth

It’s not just about generating wealth but
also managIng and protectIng It
By naveen kumar
IllustratIon By raj verma
months, showed equity wealth can erode as fast as it is gen-

erated. Hence, preservation and growth of wealth requires
H
deft investment skills. Diversification with the right mix
of asset classes like equity, debt, gold and real assets is the
time-tested tool to manage wealth. Each asset class has its
own challenges. Check out the factors affecting different
asset classes and how to handle your wealth effectively un-
der the circumstances.
This special issue of Business Today goes beyond asset
creation — into asset management and protection.
ad you invested `1 lakh in Reliance Industries in 2015, When your corpus grows and your risk-return ex-
it would be worth `4.4 lakh now. If you had invested two pectations do not remain confined to mutual funds, seek
days before the lockdown, it would have grown even faster professional fund management services of PMS and AIFs.
to `2.5 lakh today. But if you invested in smaller firm GMM Top performers have delivered over 15 per cent in the past
Pfaudler, it would have grown to a whopping `14.68 lakh in year even though the market is still to recover fully. When
last five years. Letting your money work as hard as you do is your wealth grows to the next level, avail the services of a
the key to wealth creation. Equity investment remains the family office on the lines of the Bajaj Family, Azim Premji
preferred mode of wealth creation and sharing. or N.R. Narayana Murthy’s Catamaran Ventures. They
In the following pages, consider how some of India’s not only help manage and grow wealth, investment and
biggest equity wealth creators have fared in the past five properties but also ensure seamless transfer to the next
years. They are clubbed in four categories: Super Large, generation.
Large, Medium and Emerging. If you missed investing Last, but not the least, is protection of wealth from any
in them, check out those that are the potentially biggest unfortunate incident related to life or damage to physical
wealth creators in future (See Stocks to Look Out For). assets — events that could ruin years of asset creation. That
Still, with Murphy’s Law at work, it’s vital to diversify is where life, health and general insurance help with asset
and look beyond equities. The recent market crash, when protection at least cost. But how? Find those answers in the
the Sensex fell almost 38 per cent from peak within two pages ahead.
of minimum four-year cagr of required. to select the top three per cent cagr in operating profit
15 per cent in gross sales for all companies in the large category, a over the last four years was applied.
categories except super large. filter of 20 per cent cagr in share In emerging category, a filter of
the top players were identified as prices over the last five years and 50 per cent cagr in share prices
best combination of four-year gross 20 per cent cagr in operating in last five years and 20 per cent
profit cagr and five-year equity profit over the last four years was cagr in operating profit in last
returns cagr. In the super large applied. In the medium category, a four years was applied. the data
category, since there are very few filter of 30 per cent cagr in share was sourced from the ace equity
companies, no secondary filter was prices in the last five years and 20 database.
the Wealth issue — reliance industries ltd
Game super Large

Company
Changer
by ReInventInG oIL MonoLIth riL
Into A teChnoLoGy And RetAIL
entIty, mukesh ambani hAs
heLPed doubLe InvestoR weALth
By NeviN JohN
PhotograPh By BaNdeeP siNgh
Consumer
businesses today
Contribute
about 35% of our
ConsoLidated
In fIve Years... Promoter ebitda. Just
five years ago,
stake valued nearLy aLL of
`1 Lakh at `1.43 lakh our ebitda was
Invested In crore is now from our energy
2015 is now worth and materiaLs
business”
`4.4 `7.27 Mukesh Ambani,
Lakh Lakh Crore Chairman, RIL at the
company’s virtual AGM in
All values as of August 6, 2015 and August 6, 2020 July 2020

the Wealth issue — reliance industries ltd
day, consumer businesses — telecom, technology and

retail — contribute around 35 per cent. Reliance Jio has
emerged as India’s largest telecom service provider with
W
398 million subscribers in three years.
Ambani now calls RIL a technology company. In the
last six years, RIL invested `6 lakh crore to transform the
empire. Of that, almost `4 lakh crore went to the digital
business, `50,000 crore in retail and just `1 lakh crore
into expanding petrochemicals capacity. In the process
the market capitalisation of RIL crossed the `14-lakh-
crore mark, going way ahead of Tata Consultancy Ser-
vices (TCS) with which it was in a neck-to-neck battle to
be India’s most valued company over the years.
RIL’s market value at `14 lakh crore, is around 145 per
cent higher than what it was since the historic market
hen Mukesh Ambani addressed the Reliance Indus- crash on March 23. It is now valued more than the com-
tries (RIL) annual general meeting in 2017, the launch of bined market cap of the top 15 Tata companies (around
telecom venture Reliance Jio was still a couple of months `12 lakh crore) as on August 20. It is even bigger than the
away. Though shareholders knew about Ambani’s proj- GDP of West Bengal, Andhra Pradesh, Telangana, Rajas-
ect execution skills, many were unconvinced about the than, Madhya Pradesh, Kerala and Delhi.
investment opportunity in an incumbent dominated, RIL’s big push in the technology space was evident
price-war driven telecom business. Ambani then an- during the pandemic, when 13 global marquee technol-
nounced the next 10 years will be the ‘Golden Decade’ ogy investors, including Facebook, Google, Silver Lake,
of RIL as the company founded by his father Dhirubhai KKR and Vista, invested `1.52 lakh crore in RIL subsid-
Ambani celebrates the Golden Jubilee of its initial public iary Jio Platforms Ltd (JPL) for 32.97 per cent stake.
offering (IPO) in 2027. Today, JPL and Reliance Retail Ventures Ltd (RRVL) ac-
As the world pushes towards a future in renewables, count for around two third of RIL’s valuation.
Ambani literally pivoted RIL from a core sector, oil & RIL also executed a `53,125 crore rights issue that
gas monolith to a new-age software, technology and re- was oversubscribed 1.59 times. The stake sale and the
tail business. Till quite recently, petrochemicals and oil rights issue helped Ambani to make his new-technology
refining accounted for 90 per cent of RIL’s cash flow. To- empire net-debt-free. There are deals pending to make
reliance industries ltd
Gross revenue operAtinG profit

Change %
FY16 2,51,241 FY16 47,168
FY20 3,65,202 FY20 66,394
in ` Crore in ` Crore CAGR %
Source:
Ace Equity
45.36 9.80 40.76 8.92

the decade more interesting. Saudi oil on Amazon and others in the e-health
giant Saudi Aramco wanted to pick space. RIL is also expanding its busi-
up 20 per cent stake in Reliance O2C ness in financial services with insur-
Ltd, which houses the twin refineries ance, brokering and mutual funds.
and petrochemical complex of RIL, Ambani has plans to build a soft-
for `1.1 lakh crore. It has been delayed ware company inside RIL — which
after the crash of oil market in March can provide e-commerce, cloud stor-
and April. age, entertainment, home automa-
Ambani is looking to dilute the tion and high-end broadband servic-
stake in RRVL, the holding comes for businesses.
pany for retail operations, and is in In FY20, Jio posted a 87.65 per
talks with global investors. RIL has the BiG cent rise in standalone net profit at
divested its stake in the tower infra- DevelopMents `5,562 crore, against `2,964 crore in
structure investment trust (InvIT) FY19, driven by continued subscriber
to Brookfield for `25,215 crore and raised `1.52 lakh additions. Standalone total income
awaiting another deal in optical fiber crore by selling 32.97 was up 33.47 per cent at `63,983 crore.
InvIT. BP Plc’s `7,629-crore invest- per cent stake in Jio Research agency Credit Suisse ex-
ment in the retail joint venture Jio-BP platforms to facebook, pects Jio will have 550 million sub-
has already been realised. Google among others scribers and the average revenue per
Ambani monetised part stakes to Biggest-ever rights user (ARPU) will rise to `200 from
deleverage the balance sheet. It re- issue of `53,125 crore `130.6 at the end of FY21.
sulted in a 300 per cent jump in the oversubscribed 1.59 Reliance Retail has the advantage
share price of RIL since 2017 —from times of multi-channel play. It owns the
around `530 to `2,100, even though largest physical retail network in the
Bp invested `7,629
RIL reported a flat 0.1 per cent rise in crore for a 49 per
country with 11,806 stores (Reliance
consolidated profit at `39,880 crore cent stake in ril's fuel Digital, Reliance Trends, Reliance
in FY20 on revenues of `659,205 retailing business Smart, Reliance Fresh and Reliance
crore, up 5.4 per cent. Mart) and 29 million sq.ft. of retail
Recently, RRVL acquired major- space, across 7,000 cities. During the
ity stake in digital pharma market- pandemic, it announced the nation-
place Netmeds for `620 crore to take wide launch of ecommerce grocery
platform, JioMart, which rolled out
across 200 cities and towns. Ecom-
merce businesses such as Ajio (fash-
ion), and Reliancedigital.in are con-
tributing substantial revenue.
The hydrocarbon business has
faced challenges because of weak
shAre price global trade since 2018-end. The
FY20 revenue from petrochemicals
the iMpAct fell 15.6 per cent to `145,264 crore
6-Aug-15 485 due to weaker demand. EBIT was at
6-Aug-20 2,135 reduced net debt to `25,547 crore, down 21.1 per cent from
zero from `1.61 lakh
Figures in ` crore the previous year.
RIL wants to convert 70 per cent
telecom customer of its output from Jamnagar refinery
34.49 base increased to and petrochemical complex to chem-
nearly 400 million icals. Currently, chemicals is just 10
340.04 per cent while fuels account for the
retail network
expanded to 11,806 rest. The transformation continues
operational stores unabated.
@nevinji

the Wealth issue — HDFC Bank ltD
Consumer Loans
Drive Bottomline
HDFC Bank has managed to create massive
wealth by focusing on retail banking,
especially auto, gold and education
loans. expansion in rural markets also
helped in scaling up further
By anand adhikari
In fIve Years... promoter

stake valued
`1 lakh at `59,586.8
invested in crore is now
2015 is now worth
`1.89 `1.49
lakh lakh Crore
All values as of August 6, 2015 and August 6, 2020
our vision Has Been to

Bring aBout meaningFul
CHange. We DiD tHis By
aDopting teCHnology
to poWer Digital
transFormation in
Banking, FoCusing on
semi-urBan anD rural
areas to Drive groWtH”
Aditya Puri, md & ceo, hdfc bank, in a
message to shareholders

super large
Company
PhotograPh by rachit goSwami 20 September 2020 Business Today 23

the Wealth issue — HDFC Bank ltD
HDFC
Bank LtD
Change %
T
CAGR %
groSS revenue
FY16 60,221
FY20 1,14,813
in ` Crore
17.51
he best of our bank is yet to come,” wrote Aditya
Puri, Managing Director and Chief Executive Officer of 90.65
HDFC Bank in his farewell message to shareholders. The
70- year-old ex-Citibanker's words carry a lot of weight
in the market — after all, in the past two-and-a-half de-
cades, Puri had built a bank with market leadership in
products, including car loans, credit cards and personal
loans from scratch. The bank has one of the biggest and
the strongest balance sheets in the industry with a size oPeraTing ProfiT
of `15.30 lakh crore, only next to the country’s largest
lender, State Bank of India. FY16 21,364
The private bank promoted by mortgage lender
HDFC Ltd under Deepak Parekh's guidance reported a FY20 48,750
net profit of `26,257 crore in FY20, more than its parent in ` Crore
at `22,826 crore. The asset quality, a barometer of lend-
ing, is the best in the financial services sector. Its mar-
ket valuation at `6.14 lakh crore is only next to Reliance
22.91
Industries Ltd (RIL) and TCS. Investors are laughing
all the way to the bank. For instance, `1 lakh invested in 128.19
2015 is now `1.89 lakh.
In the last five years, the bank has more than doubled
its balance sheet, advances, retail assets and profits. The
focus has been on consumer banking where net NPAs
have been the lowest at less than 1 per cent. Retail bank-
ing today constitutes over 50 per cent of the bank’s to-
tal advances. The share of large corporates in loans and was scaled up by first offering loans to existing custom-
advances is less than 15 per cent. In fact, the strategy to ers. On the liabilities side, the bank aggressively tapped
focus on working capital loans instead of long gestation the low-cost retail deposit segment instead of wholesale
project loans has paid rich dividends as other banks got deposits, which are costly. Currently, CASA is close to 50
mired in non-performing assets (NPAs) in steel, power, per cent of the bank’s total deposits and cost of funding
telecom and other sectors in the last five-six years. is 5.0 per cent. The low cost of capital offers a competi-
The biggest growth engine has been the retail seg- tive advantage for the bank in businesses such as auto
ment with a book of`5 lakh crore, especially auto, gold, loans, where margins are relatively low.
agri and education loans. The bank didn’t get into home “In the last decade when most banks were grappling
loans which parent HDFC does more efficiently. The with asset quality issues, HDFC Bank actually created
bank simply sources business for HDFC for a fee. The wealth for shareholders,” says S. Ranganathan, Research
high-yielding credit card and personal loan business Head, LKP Securities, a Mumbai-based securities firm.

The ground for future growth was laid long back. markets. These players with a differentiated business
Much before digital banking became imperative, the model of lending to the unorganised sector (at a slightly
bank had laid the foundation for initiatives in the online higher rate) are giving a tough competition to full-scale
banking space. The biggest hurdle, regarding the suc- banks in the liabilities or deposit market with higher in-
cession of a long-standing CEO, has been passed, with terest rates. “They will have competition, but the bank
insider Sashidhar Jagdishan, Group Head and Strategic has a bigger balance sheet and network. In addition, the
Change Agent, set to take over from Puri in October. bank is much more digital than small finance banks,”
The bank is betting big time in rural and semi-urban says Rajin Ranjan , Research Analyst , Geojit Financial.
areas, where it has half of its branches. “We have a 10- "New payment and fintech companies will pose
year track record of presence in rural and semi-urban strong challenges in the digital banking space," adds Ji-
markets. There is a huge runaway there for growth in lia- tendra Upadhyay, Senior Equity Research Analyst, Bo-
bilities and assets,” Jagdishan said during his first inter- nanza Portfolio.
action with analysts last week after getting the top job. HDFC Bank has always had the first-mover advan-
The bank has also taken a lead in trans-
forming into a digital bank in the last five
years. “The strategy is to build scale on
the capability of the bank’s existing digital
Share Price The Big The imPacT

DeveloPmenTS
6-Aug-15 548 introduction of more
Transformation into a digital loans, improvement
6-Aug-20 1,041 digital bank in productivity
Figures in `
Tapping rural markets more business in rural,
with expansion of branch semi-urban markets
13.69 networks, customised
products rise in retail banking – it
89.91 currently constitutes over
more focus on consumer 50 per cent of the bank’s
banking total advances
Staying away from large lower nPas as the bank

Source: stayed away from large
Ace Equity gestation project loans
and infrastructure lending corporate loans
platforms and collaborate for customer acquisitions,” tage. Puri recently said Covid crisis opened new ideas
Jagdishan said. In the payments space, the bank has for the bank, especially being efficient while working
built a strong base of card holders and merchants. Its fo- from home, readying for tomorrow via e-learning and
cus is to bring small merchants, including kirana stores, leveraging the opportunity to further its digital agenda.
into the formal banking system by digitising their pay- The market will keep a close watch on developments
ments solutions. Lending, too, is taking place digitally at the bank. Jagdishan is expecting normalcy in con-
with 10-second personal loans. Branch banking is be- sumer spending, asset product sale, disbursal and col-
ing transformed into a financial marketplace backed by lection to start from October onwards. That is also the
Artificial Intelligence (AI)-led Big Data Analytics to ad- time when he will occupy the corner room. Investors,
dress customer needs and cross-sell products. meanwhile, have high hopes.
Jagdishan's big challenge will be to compete with the
likes of Bandhan Bank and small finance banks in rural @anandadhikari

PhotograPh by rachit goSwami

the Wealth issue — BAJAJ FINANCE ltd
Home Run
large
company
And A Bit
Of Retail
bajaj finance, the pioneer in retail
lending, has kept npas low while
expanding its reaCh and serviCes
By NeviN JohN
We have democratised entrepreneurship Within

the company. once We're convinced of an
employee's neW idea, We give him all the tools
to build the business”
Sanjiv Bajaj, Chairman, Bajaj Finance
In fIve YeARs...
`1 lakh invested promoter stake valued at

in 2015 is now `16,883 crore is now worth
`6.12 lakh `1.13 lakh crore

the Wealth issue — bajaj finance LTD
cost structure. In the last five years, BFL has made sig-
nificant investments for broadening its presence in
payments through EMI card, credit card and wallet of-
T
ferings. It plans to integrate its sales finance ecosystem
with payment operations. The NBFC has been testing its
omnichannel strategy of ‘online to offline’ and ‘offline
to online’ for the last three years, by integrating custom-
ers and retailers. The transformation is set to help the
company and retailers sell more products and services.
It is present in 1,049 urban areas and 1,359 rural areas.
In 10 years of operations, BFL is part of the 30 Sensex
scrips. The stock has risen around 100 times between
January 2008 and February 2020. Its market value stood
at `2.2 lakh crore in the last week August. The holding
company, Bajaj Finserv, which also has two insurance
he 2007 decision by Bajaj group Chairman, Rahul Ba- firms under it, had a market value of `1.04 lakh crore.
jaj, to convert the two-wheeler lending subsidiary into a The company's consolidated profit grew 32 per cent
full-fledged non-banking finance company (NBFC) was to `5,264 crore in 2019/20. Net interest income (NII)
a turning point in the fortunes of the 94-year-old group. was up 42 per cent to `16,913 crore. Operating expense to
Bajaj Finance Ltd (BFL) was the sole retail lender giving NII stood at 33.5 per cent, against 35.3 per cent in 2018/19.
loans to purchase TVs, refrigerators and air condition- In the first quarter of FY2021, assets under management
ers among other things. It built a pool of loyal customers (AUM) grew 7 per cent to `1,38,055 crore. BFL had con-
and widened its portfolio to offer loans for smartphones, solidated liquidity buffer of `20,590 crore and SLR in-
apparel and groceries over time. vestments of `2,550 crore, which represent 19.2 per cent
The financial services business today accounts for of its total borrowing. Given the environment, the com-
73.3 per cent (`3.3 lakh crore) of the Bajaj group’s market pany will continue to run high liquidity buffer, despite
capitalisation of `4.5 lakh crore. an impact on cost of funds in the short term, BFL said.
BFL is deploying ‘zero-based budgeting’ to reimag- However, BFL is today at the crossroads. Just before
ine its businesses and functions. It means getting into the coronavirus outbreak, it lost its guiding force Na-
micro details of every process to enhance customer noo Pamnani, former CEO of Citibank India, who built
experience and digital orientation, besides a leaner the business along with Sanjiv Bajaj, the younger son
bajaj finance Ltd

gRoss ReveNUe opeRaTINg pRoFIT
FY16 6,901 FY16 4,948 Change %

FY20 23,619 FY20 14,936
in ` Crore in ` Crore
CAGR %
36.01 31.81
Source:
242.24 201.88 Ace Equity

of Rahul Bajaj, and Managing Director Rajeev Jain. The three months until August 24. At a time when State Bank
pandemic challenged BFL’s lending bandwidth and loan of India’s shares are trading at half of their pre-lockdown
recovery potential. It provisioned `2,350 crore as contin- value, BFL is 28 per cent less compared to its peak. Ac-
gency in the last two quarters. In his letter to sharehold- cording to Rahul Bajaj, the management is using “this
ers in the 2020 annual report, Rahul Bajaj said: “There is grave situation to cut operational costs, while improving
no doubt that business will be difficult in the first half efficiency and IT infrastructure for faster delivery.”
of the year — especially so in the first quarter with April BFL has remained focused on building a dominant
2020 being fully under lockdown. However, your man- and profitable financial services business, says Rajeev
agement believes that things may pick up in the second Jain. The firm has an exciting strategic plan for the next
half. In any event, it has sufficient surplus liquidity to three-four years, he adds. “We have been able to navigate
deal with the crisis.” well for two reasons: we focused on retail and SME and
The company prepared different contingency plans managed risk well,” Jain had said earlier.
to come out of the crisis unhurt, so investors have not It was Pamnani, who spotted the talent in Jain. Pam-
been hit. The stock rose 83 per cent to `3,463 in the last nani was roped in by Rahul Bajaj to guide Sanjiv. The
The BIg The ImpacT

DevelopmeNTs
aUm of home finance
Bajaj home Finance business grew 85 per cent
launched in 2017; Bajaj to ` 21,435 crore in FY20
Finance securities in 201 9
consolidated net Npa at
Rural branches increased 0.65 per cent— lowest in
to 1,359 across 21 states NBFc industry
Raised `8,500 crore maintained leadership in

through the QIp route; core areas — consumer
reduced cost of operations electronics, digital products
NBFC has been agile under the leadership trio of Pam-

nani, Sanjiv Bajaj and Jain. They spotted opportunities in
retail segments, and shut down unsuccessful businesses
such as infrastructure lending early. Pamnani was the
shaRe pRIce brother-in-law of Rahul Bajaj’s late wife Rupa Bajaj.
BFL is betting big on using consumer insights. "Ear-
lier, the customer needed to apply for a loan and wait for
6-Aug-15 547 approval. The bank took time to dispatch the card. We
6-Aug-20 3,345 simplified the process and made purchases simpler. It
Figures in ` reduced cost and improved chances of doing more busi-
ness with the same customer. The revenue per customer
has gone up,” Jain had said in an earlier interview.
43.67 Over the next few years, BFL will target the financial
services wallet, including payments, loans, insurance
512.12 and mutual funds. Its share of the retail lending market
is around 3 per cent, and the company aims to take it to
8-10 per cent in the next few years.
@nevinji

the Wealth issue — The TiTan Company lTd
large
Company
PhotograPh by SandeSh ravikumar
Titanic
30
Innovations Business Today 20 September 2020
"When you are fair To all
your sTakeholders, iT gives a
far beTTer shareholder value
and ThaT is someThing ThaT
We have ConsisTenTly done"
Subbu Subramaniam, cfo, the titan
company ltd
In fIve Years... promoter

stake valued at
`1 lakh `15,438.4 crore
invested in is now worth
2015 is now
`52,625.9
`3.41 lakh Crore
By AjitA ShAShidhAr
A strong focus on Agility And

innovAtion And An Ability to quickly
AdApt to chAnges hAve mAde
The TiTan Company one of corporAte
indiA’s topmost weAlth creAtors
the Wealth issue — The TiTan Company lTd
ators for shareholders. In the last five years the stock rose
138.43 per cent, while revenue and PAT grew 67.35 per cent
T
and 84.39 per cent, respectively. Subramaniam attributes
the growth in wealth for its shareholders to its DNA of car-
ing for multiple stakeholders. “It’s not just about share-
holder perspective, but also employees, channel partners,
business partners and customers.”
Much of Titan’s wealth creation is due to the way it
built brands and made lifestyle affordable. From afford-
able watches — Titan and Sonata — to launching high-end
perfumes (Skinn) in 20 ml bottles and branded spectacle
frames at `300, it always believed in democratising fashion.
Be it watches, jewellery, eyewear or saris, Titan has con-
sistently made a successful brand story out of unorganised
he Titan Company's watch business was at an all-time businesses. “In jewellery, our focus was to organise the
low during 2015/16. Despite an over 50 per cent market manufacturing process, make buying gold jewellery fair as
share, it grew in low single-digits. That had nothing to do well as help the karigars,” explains Subramaniam.
with watch-making skills, but analog watches were be- Titan in Q1FY21 reported a loss of `297 crore against a
coming passé and the company had not been able to react profit of `364 crore during the same period last year. With
to the change. Titan's biggest competitor was not another consumers locked down in homes, the last thing they are
watchmaker, but Apple and Samsung, which sold close to thinking about is to buy a watch or jewellery. The lifestyle
80 million smartwatches, while Titan managed to sell only major continued to be restless for growth even during the
15 million watches.
Bhaskar Bhat, the then MD of The Titan Company,
had admitted Titan watches had lost their attractiveness.
The senior management realised the team lacked agility to
adapt to the changing times. That's when Titan decided to
rebuild the company on four pillars — agility, accountabil-
ity, innovation, and anticipating and adapting to change.
“We realised we were reacting to situations rather than be-
ing proactive. That’s when we brought in the four pillars,"
remembers Subbu Subramaniam, Chief Financial Officer,
The Titan Company.
Also, consumers wanted good looking smart watches. The Big The impaCT
The available ones were smart, but consumers were look- DevelopmenTs
ing for a higher style quotient. Therefore, Titan partnered Despite phases of de-
with Intel and launched a range of fully touch-screen hy- Foray into highly growth, the company
unorganised has managed to
brid smartwatches with a strong design element. categories such as bounce back
It also made corrections in its cash-cow, the jewellery jewellery, eyewear and
business (Tanishq), by launching new collections and in- saris From almost zero in
troduced a gold jewellery exchange offer. These strategies 2015, ecommerce
worked and in 2017/18, it reported a 20.75 per cent growth Focus on four pillars — is now a `600-crore
in revenue after years of low growth. The watch business agility, accountability, business
innovation and
reported its highest-ever profits and Titan's market cap adaptability Watch business is
doubled from `41,082 crore in 2016/17 to `83,656 crore in growing at 13-14 per
2017/18, making it the third-most valuable Tata company Transition from analog cent year-on-year,
after TCS and Tata Motors. Five years hence, the company to smartwatches from low single-
still abides by the four growth pillars. "Even during the peak digits in 2015/16
Building a robust
of lockdown there was no room for excuses. We found new ecommerce business growth in consumer
ways of reaching out to consumers," says Subramaniam. by making digital a base to 18 million due
The lockdown brought business to a halt in April and separate profit centre to attractive pricing
May. However, these ups and downs have seldom impacted
the `20,010-crore company’s spirit to bounce back.
Titan has managed to be among India's top wealth cre-

The TiTan
company lTd pandemic, claims Subramaniam.
Jewellery arm Tanishq is looking at digital as an impor-
tant engine of growth in the Covid era, as consumers are
increasingly opting for online shopping. It serviced over
Change % CAGR % 2,000 customers in the last five weeks through video calls.
It has been averaging 10,000 live chats a month and gets
90-100 requests daily for store appointments on its website
gross revenue or through GoogleMyBusiness. While a 'digital first' strat-
egy was on the cards prior to the lockdown, Ajoy Chawla,
FY16 11,105 CEO, Jewellery Division, says Covid forced them to acceler-
ate digital plans. "Digital from now on will be an important
FY20 19,732 engine of growth along with Golden Harvest, wedding jew-
in ` Crore ellery, gold exchange and growing our share in low market
share markets."
15.45 The branded jewellery market de-grew over 70 per cent
during the lockdown. Tanishq has also rolled out the 'end-
77.68 less aisle' concept, which shows consumers the inventory it
has across the country. The video calling and endless aisle
facility have already been rolled out in 230 of its 335 stores.
Subramaniam says: “We invested substantially in the
last few years on ecommerce, CRM, online assistance and
omni-channel. The good news is that we started at the right
time and that is giving us dividends now. The way we are
operaTing proFiT using our digital infrastructure is helping us connect with
consumers far better.”
FY16 1,018 Digital at Titan is a separate profit centre. “We said a
FY20 2,564 portion of the revenue will be given to them as cost for that
in ` Crore initiative. By the second year, we got the entire cost from the
division. The extra revenue generated is `500-600 crore.
This came after the analytics team identified the right cus-
25.99
tomers and targeted them for specific products,” he adds.
Bhat had set a target of making Titan a `53,000-crore
151.93
company by 2023. The slowdown and the pandemic have
made that target unviable. Subramaniam says the target
has got extended by a couple of years. “Next year, I assume
we will get back to normalcy in sales. We should grow well
and all that we are doing in the cost side will bolster our
margins.” The company, has started a rigourous cost-sav-
share priCe ing exercise across functions. “This has nothing to do with
Covid. When we started the planning for FY21 in November
2019, we decided to look into costs. The idea is to make the
6-Aug-15 328 business more sustainable.” But won’t growth in the ‘new
6-Aug-20 1,120 normal’ get increasingly difficult for a lifestyle company?
Figures in ` “Discretionary companies do well when the economy is
de-growing as people want to buy good branded products.
This year is bad because of the lockdown and the fear factor,
27.86 otherwise, I don’t believe there will be an issue. Of course,
we have to make products which are relevant and connect
241.78 with the consumer,” says Subramaniam.
It will be interesting to see how The Titan Company
manages to attract consumers to its discretionary prod-
ucts. It certainly won’t be easy.
@ajitashashidhar

In fIvE YEaRs...
`1 lakh invested in promoter stake valued at All values as of August

6, 2015 and August
2015 is now `421 crore is now worth 6, 2020
`9.14 lakh `4,007 crore

the Wealth issue — deepak nitrite Ltd
Encashing
the Right
Chemistry
product mix is crucial
in chemistry as well as
in business. chemical
company Deepak Nitrite
relied on this mantra to
create a success story
By K.T.P. RADHIKA
meDium We focuseD oN DoubliNg our

compaNy reveNue aND tripliNg our profit
iN the past five years. our key
strategy for this Was to make
greeNfielD aND broWNfielD
iNvestmeNts Where returNs
Were high”
Maulik D. Mehta, ceo & executive director,
deepak nitrite
the Wealth issue — deepak nitrite ltd
Impact of Lockdown
The rapid spread of the pandemic and resultant lock-
downs have sharply derailed industries across the coun-
L
try. The lockdown has affected capital project timelines
of the company. There have been disruptions on the sup-
ply chain front as well. That said, the company launched
Iso Propyl Alcohol (IPA) during Covid-19. It is used as a
solvent in the pharmaceuticals industry and an input for
sanitisers. “Our facilities are operating at sub-optimal
levels (some plants are functioning at full capacity while
a few are functioning at 50-70 per cent capacity) after the
lockdown,” says Mehta.
With global customers seeking alternative supply
aunching new products, diversifying the business,

getting the perfect product mix and growth in exports.
Few companies get all of these right and that too over a
long period. Those that do, such as Gujarat-based chemi-
cals company Deepak Nitrite, create huge wealth for their gross revenUe
investors.
“We focused on doubling our revenue and tripling our FY16 804
profit in the past five years. Our key strategy was to make
greenfield and brownfield investments where returns FY20 2,230
were high and garnering largest market share,” says Mau- in ` Crore
lik D. Mehta, CEO and Executive Director. “We invested
`1,700 core in a plant for phenol where our market share
is around 65 per cent,” he says. The plant, the country's
largest phenol-acetone (used in bath, hair and skin care
177.22 29.04
products to kill microorganisms, reduce body odour and
cleanse the skin) unit at Dahej PCPIR, Gujarat, with a ca-
pacity of about 2,00,000 tonnes phenol per annum and
1,20,000 tonnes of co-product acetone, is expected to
reduce the country’s import dependence. It started com-
mercial production in 2019 and has provided the company
an income of around `2,000 crore so far.
The BIg
Increase in Wealth DeveLopmenTs
With six plants, 30 products and 1,000 customers in 30
countries, Deepak Nitrite bet on opportunities such as made greenfield
US-China trade tensions, which further opened up export and brownfield
markets for its products, and environmental issues in Chi- investments
na that led to closure of capacities there. Bet on Us-China trade
“We invested in high-margin products in pharmaceu- tensions
tical and agro sectors and kept capacity utilisation high at
80-100 per cent on an average. Apart from this, reducing Invested in high
input costs, financial prudence and hedging helped us,” margin pharma and
says Mehta. The depreciation of the Indian currency also agro products
helped the company increase its profits from abroad in ru-
pee terms.

chains to de-risk their business operations, Deepak is now Way Ahead
emerging as an alternative to Chinese suppliers. It has While high volatility in input prices and reverse globali-
been getting a lot of enquiries from across the globe for its sation are still challenges for Deepak, the future looks
products and services. “We have witnessed a surge in de- bright as the industry slowly recovers and explores op-
mand for diamino stilbene disulphonic acid,” says Mehta. portunities arising out of disruption of raw material sup-
The acid is used in synthesis of dyes and optical brighten- ply from China.
ers or fluorescent whitening agents. Backed by the government’s support and policy
Gross revenue of the company shot up from `804 crore changes and focus on reducing import dependence, the
five years back (FY16) to `2,230 crore in FY20, a CAGR of Indian Chemical Council is aiming to double the turn-
more than 29 per cent. Operating profit grew from `168 to over of the industry to $300 billion by 2025. “These
`1,320 crore and profit after tax from `65 crore to `544 crore economic changes will offer a plethora of opportuni-
during the period. The company is number one in the medi- ties, forcing Indian companies towards Atmanirbhar
um category in our list of India’s biggest wealth generators. Bharat, both in terms of forward as well backward in-
Deepak Nitrite LtD

operATIng profIT shAre prICe
FY16 168 6-Aug-15 70

FY20 1,320 Change % 6-Aug-20 643
in ` Crore Figures in `
CAGR %
67.38 55.67
684.89 Source: Ace Equity 814
The ImpACT
tegration of the chemicals sector,” says Mehta. “Our
Doubled core philosophy is to have import substitution and
revenues and self-reliance. Thus, we will increase our IPA capacity
tripled profits from 30,000 to 60,000 tonnes per annum and invest in
emerged as brownfield projects for agro intermediates in the next
alternative to one year,” says Mehta. The company is also planning
Chinese suppliers to set up a new R&D centre and a captive power plant to
reduce costs. “We will also explore newer downstream
plant utilisation products related to phenol and acetone business,”
over 80 per cent
says Mehta.
The company is going all out for fast growth it seems.
(K.T.P. Radhika is a writer based in Chennai)

the Wealth issue — Minda industries ltd
MediuM
coMpany
Consolidate
+ Diversify
= Growth
How component maker Minda industries
became an outlier in a down and out
sector like automobiles
By sumant Banerji
PhotograPh By yasir iqBal
My priMary focus is In fIve Years... promoter

to keep My custoMers stake valued
happy. i know if i do `1 lakh
that well, it will at `658 crore
take care of the invested in is now worth
business of creating 2015 is now `5,230.9
wealth for My
shareholders” `7.22 lakh crore
Nirmal Minda, chairman,
minda ind. All values as of August 6, 2015 and August 6, 2020

the Wealth issue — Minda industries ltd
gross revenue
If
FY16 346
FY20 3,175
in ` Crore
816.92 74.01
someone were to tell you that one of the Indian com- then our Chief Financial Officer (Sunil Bohra) would
panies that have made most money for shareholders in point it out in one of our meetings,” he says. “My primary
the last few years is a supplier of automotive parts, you focus is to keep my customers happy. I know if I do that
would be forgiven for thinking of it as a joke. India’s well, it will take care of the business of creating wealth
$120 billion automobile industry has been in the grip of for my shareholders.”
an unprecedented slowdown for almost two years now, While this partly explains the company’s run at
and the pandemic has exacerbated matters. Sales of ve- bourses, diversification and strategy to consolidate sub-
hicles declined 18 per cent in FY20 and are expected to sidiaries and joint ventures into the parent firm have
contract another 30 per cent this year. The component contributed significantly in reinforcing the trust of in-
industry registered its worst performance in FY20 with vestors. Since 2015, as many as 11 subsidiary companies
a 12 per cent dip in revenues. FY21 looks set to be worse. have been merged in a process that is still not finished.
Yet, Gurgaon-based Minda Industries is as big an “This has benefited us in two ways. One, it has strength-
outlier as any. The company, which makes components ened our balance sheet both in terms of top line and bot-
as diverse as cigar lighters and CD tuners to sensors, ac- tom line performance and presented a more cohesive
tuators and steering wheels with airbags, has increased entity to investors, increasing their confidence in the
its turnover at a compounded annual growth rate of firm,” says Sunil Bohra, CFO, Minda Industries.
over 21.25 per cent in the last five years with 20.94 per At the same time, the company has been spending
cent annual growth in profitability. The performance more time in building rapport with investors and bro-
saw its Chairman, the soft-spoken 62-year-old Nirmal kerage houses through roadshows and investor meets.
Minda, become one of Business Today’s biggest wealth “It has been our endeavour that no query from any inves-
creators between 2015 and 2020. Minda Industries has tor, howsoever small or insignificant, should go unad-
outperformed every other automotive company in the
stock market with its share price galloping from just `39
in August 2015 to `282, a rise of 623 per cent. This trans-
lates into a return of 48.52 per cent a year for sharehold-
ers and makes Minda one of the top wealth generators in The Big
the industry. DevelopmenTs
So, what is it that makes the company the darling
of stock markets at a time when most investors are not The company has
willing to even look at automobile companies? Minda consolidated 11
says he does not keep tabs on his company’s share per- subsidiaries with the
formance on daily or even weekly basis and was a bit parent firm in the last
five years
surprised when presented with facts about the five-year
performance. “To be honest, this is not something I am Diversified into
obsessed about. Sometimes, weeks would pass and I segments like alloy
wouldn’t check the company’s stock performance and wheels and sensors

Minda industries Ltd
operaTing profiT share price

Change %
FY16 162 6-Aug-15 39
FY20 1,469 6-Aug-20 282
in ` Crore
CAGR % Figures in `
Source: 48.52
Ace Equity
807.47 73.56
623
dressed. At the same time, we are clear that no selective April 1 this year, demand for sensors will grow manifold.
information will be shared with anybody,” says Bohra. It expanded capacity for sensors. In the same way, it
In a dynamic sector where rampant technological joined hands with Taiwan’s Tung Thi Electronic Co in
changes are on the anvil, including electrification and 2017 to develop and produce driver assistance products
autonomous driving, Minda has diversified and expand- and safety systems such as reverse parking camera and
ed its product portfolio to stay ahead of the curve. For tyre pressure monitoring systems.
example, it ventured into alloy wheels early on after real- “We are open for more. There are big opportuni-
ising the potential. Adoption of alloy wheels was slow in ties. We are still dependent on China for many compo-
India till 2015 and the industry was heavily dependent on nents — semi-conductors, small motors, printed cir-
imports from China. They now account for 40 per cent cuit boards. Some of them we can’t make it here but we
of the market compared to 10 per cent then. Minda, as a should not be fully dependent on China,” he says. “Lo-
first mover, has been a big beneficiary. It set up a factory calisation of technology is a big area. Wherever we see a
for four-wheeler alloy wheels in Bawal, Haryana, in 2016. chance for growth in any business in automobiles, even
A second factory, for two-wheelers, will be operational if we are not manufacturing that product today, we will
next month. look at it. That is the way to future-proof ourselves and
“Maruti welcomed this step of ours with open arms,” stay relevant.”
says Minda. “People are talking of import substitution While the outlook for the industry is bleak, at least in
from China today but we have already shown how it can the short term, Minda is confident that its growth story
be done in alloy wheels.” will not be impacted. Beyond the domestic market, it
Similarly, the company was quick to realise that un- wants to increase the share of exports from 10 per cent
der the new BS VI emission regime, which kicked in from to one-third of revenues by FY25. “We are looking at
exports. That is something where potential is huge but
we have only scratched the surface so far,” he says. For
example, the company has a manufacturing facility in
Indonesia for the ASEAN region but wants to expand its
presence in the market by making more products there.
The impacT “We are doing switches and lights but are in active dis-
consolidation has made cussions to sell more products in the region. In the do-
balance-sheet stronger, mestic market, the projections for this fiscal are conser-
given confidence to vative, but growth will return. Our per capita ownership
investors of cars and two-wheelers is nowhere close to the global
average. We are bound to grow in the long term.”
new areas of business
have expanded portfolio, The prognosis for the industry may be dire, but if you
improved top line and are an investor in Minda, you can rest easy.
bottom line and cushioned
it against sluggish demand @sumantbanerji

the Wealth issue — GMM Pfaudler
emerging
company
On a
Mission
Mode
gmm pfaudLer has MaDe strateGic
acquisitions, DiversifieD its ProDuct
basket anD investeD in new caPacities
with an eye on lonG-terM Growth
By P.B. Jayakumar
PhotograPh By mandar deodhar

In fIve Years...
`1 Lakh invested
in 2015 is now
`14.68 Lakh
Promoter stake
valued at
`104.8 crore is
now worth
`1,538.1
crore
All values as of August 6,

2015 and August 6, 2020;
includes only Indian
promoters
With more and

more chemicaL
companies
pLanning to
de-risk their
reLiance on
china and move
manufacturing
to countries
Like india,
future
opportunities
gLobaLLy are
huge”
Tarak Patel, MD,
GMM Pfaudler

the Wealth issue — GMM Pfaudler
G The Big
DevelopMenTs
Acquired French competitor
De Dietrich process system’s
ujarat Machinery Manufacturers (GMM), which indian arm DDpsi in July 2020
started off in 1962 on a 20-acre facility near Vadodara,
Acquired industrial
will hold a majority stake in the parent company, Pfaudler mixing solutions division
Group, owned by German private equity firm Deutsche of sudershan Chemical
Beteiligungs AG. GMM Pfaudler will acquire 34.4 per cent industries in April 2019
stake, while its Swiss subsidiary, Mavag AG, will buy an-
other 19.6 per cent. The promoters — Ashok Patel and his Added two new glass
line furnaces at gujarat
son Tarak Patel — will buy another 26 per cent in the global
manufacturing facility
business. The deal is expected to be completed over the recently
next four-five months.
GMM Pfaudler, a leading supplier of anti-corrosion More professionalised
process equipment for the pharmaceutical and chemical systems and processes put in
industries, has seen a steady rise in its revenues and prof- place over the years
its in the past five years. The stock is a clear winner in the
emerging companies category.
Its main line of business is glass line manufacturing
— making reactors with glass-coated linings inside ves-
sels to avoid metal contact and corrosion while mixing
various pharmaceutical or chemical ingredients. Nearly 70
per cent of the company’s revenues come from glass lined
equipment; the rest are from pressurised vessel manufac-
turing in heavy engineering (10 per cent) and proprietary
products (20 per cent).
The glass lined machinery is a `700- 800 crore market The iMpACT
in India, and GMM is the market leader with a 55 per cent
share. In July, it acquired French competitor De Dietrich The company is now ready to
Process System’s Indian arm DDPSI for 6.25 million eu- make the entire line of reactors,
ros (around `53 crore). The new capacities, which will be storage vessels and related
equipment
added by September, will increase GMM’s market share to
around 70 per cent. To boost its product mix, the company it also plans to foray into new
also acquired the industrial mixing solutions division of areas such as heavy equipment
Sudershan Chemical Industries in April last year. for oil and gas and other
Founded in 1962 by J.V. Patel at Karamsad near Vado- industries
dara, GMM grew under Ashok Patel, and got listed on the
it is looking at a 70 per cent
Bombay Stock Exchange later. In 1988, US-based glass line share of the `700-800 crore
manufacturing specialist Pfaudler Inc acquired 40 per cent glass lined equipment market in
stake in the company. By 1999, it increased its stake to 51 india; aims to double revenue to
per cent, and renamed the company GMM Pfaudler Inc. `1,300 crore within five years

GMM
pfaudler
Parent Pfaudler was acquired by National Oilwell Varco
Change % CAGR % (NOV) of France in 2012, and sold to French private equity
firm Deutsche Beteiligungs AG (DBAG) two years later.
"Me and my father have been mainly running the busi-
ness professionally, though Pfaudler was having a major-
gross revenue ity stake. The PE owner also used our experience to run
Pfaudler's global business as well," says Tarak, a manage-
FY16 247 ment graduate from the Columbia Business School.
FY20 516 In 2015, the company launched Mission 2020, with am-
bitious revenue and profitability targets. “We brought in a
in ` Crore
cultural change in the organisation, Pfaudler and DBAG’s
management bandwidth. More professionals were brought
109.13 20.26 into the system. We also invested heavily to create capaci-
ties, anticipating market trends, to meet the increasing
demand in India,” says Tarak. The product basket was
expanded to include the complete line of reactors, stor-
age vessels, columns, mixer systems, instrumentation and
reglassing services. To boost its glass line manufacturing,
the company is also setting up two new furnaces at its Gu-
jarat factory, expected to become operational in October.
operATing proFiT The numbers speak for themselves. Revenues grew
20.8 per cent to `353 crore in FY17, 14.9 per cent to `405
crore in FY18, 23.9 per cent to `502 crore in FY19 and 17.6
FY16 35
per cent to `516 crore in FY20. Profit after tax (PAT) during
FY20 106 these years were `31.1 crore, `42.7 crore, `50.6 crore and Rs
in ` Crore 71.1 crore, respectively, an average PAT margin of above 10
per cent of revenues every year. A debt-free company with
199.57 31.56 strong fundamentals, shareholders have also been reward-
ed with handsome dividends.
Currently, overall exports are only about 10 per cent of
the company’s revenues and operations are limited to phar-
maceutical, agrochemical and specialty chemical sectors.
But with more and more chemical companies planning
to de-risk their reliance on China and move manufactur-
ing to countries such as India, future opportunities glob-
ally are huge, says Tarak. Also, the government’s recent
shAre priCe move to set up three bulk drug parks at an investment of
`10,000 crore to boost manufacturing and reduce depen-
6-Aug-2015 292 dence on imports of key raw materials, intermediates and
active pharmaceutical ingredients (API), is expected to
6-Aug-2020 4,284 aid growth. Despite the recent slowdown, pharmaceutical,
in ` agrochemical and specialty chemical sectors have largely
remained insulated, which augurs well for GMM Pfaudler.
71.14 Even though pharma growth may moderate over the years,
opportunities for diversifications in heavy engineering in
1,368 sectors such as oil and gas and petrochemicals, remain.
With all these in mind, Tarak Patel and the team is
launching UDAAN 2025, to double revenues to `1,300
crore by 2025.
Source: Ace Equity
@pbjayakumar

the Wealth issue — Alkyl Amines ChemiCAls
emerGinG
ComPAny
Following Atma
Nirbhar Mantra
Alkyl Amines ChemiCAls, the
manufacturer and supplier of specialty
chemicals for pharmaceutical
and agrochemical sectors, has
consistently remained ahead of
competition for the last few years.
new products and expansion plans are
set to propel its growth further
By P.B Jayakumar

"if GDP Grows At 5 Per Cent, the ChemiCAl
intermeDiAtes inDustry will Grow At An estimAteD
7.5 Per Cent. we hAve been CreAtinG CAPACities in the
PAst few yeArs"
Kirat Patel, executive director, alkyl amines chemicals
IN FIve YeArs...
`1 lakh invested promoter stake valued at All values as of

August 6, 2015
in 2015 is now `423.3 crore is now worth and August 6,
2020
`8.6 lakh `3,651.1 Crore

the Wealth issue — Alkyl Amines ChemiCAls
ALKYL AMINES
CHEMICALS
Change % CAGR %
V
Gross revenue
FY16 523
FY20 993
in ` Crore
89.74 17.36
eteran investment banker Hemendra Kothari's fam-

ily has been in the financial services business for over
100 years. His great-grandfather was one of the found-
ers of the Bombay Stock Exchange. But when Hemendra
Kothari's younger brother, Yogesh, a chemical engineer,
returned to India after studying in the US in the late
operatinG profit
1970s, he had other ideas. He wanted to get into manu-
facturing of some key specialty chemicals and import FY16 93
substitutes. At that time, public sector fertiliser major FY20 264
RCF was producing methylamines from ammonia and in ` Crore
methanol. India lacked manufacturers. It was then that
Yogesh zeroed in on ethylamines, produced from ammo-
nia and ethanol. It laid the foundation of Alkyl Amines 182.66 29.66
Chemicals in 1980.
Almost forty years later, Alkyl Amines Chemicals
is a global manufacturer and supplier of amines, amine
derivatives and other specialty chemicals used mainly
in pharmaceutical and agrochemical sectors, made
from about 15 plants at Patalganga and Kurkumbh in
Maharashtra and Dahej in Gujarat. Amines are used in
a large number of popularly made drugs like metformin, share price
amoxycillin, statins for heart disease drugs etc.
"We have been growing at over 10-15 per cent in the 6-Aug-15 280
past five years, mainly made possible by very high capac-
ity utlisation of nearly 85 per cent, operational efficien- 6-Aug-20 2,417
cies with constant in-house research and development Figures in `
(R&D), and debottlenecking and savings in power costs
to remain ahead of competition with cost-efficiencies
and quality,” says Yogesh, Chairman and Managing di- 53.87
rector. Another cost-efficient move was generation of
own turbine and solar power. 763
That can make a lot of difference in a small domestic
market for amines worth `3,000 crore. There are only
three domestic manufacturers — Alkyl Amines Chemi-
cals and Balaji Amines with a revenue share of `1,000 Source: Ace Equity
crore each, and RCF with another `300 crore. The rest

the BiG the impact is shared between multinationals, including BASF and
Developments Eastman, and some Chinese companies. But each manu-
factures different products.
Alkyl Amines has a product basket of 40-60, made
mainly using ammonia, methanol, acetic acid and etha-
nol as raw materials. It has a customer base of about 600,
of which 350 are regular ones. About 20 per cent prod-
ucts are exported. "Product mix, process efficiencies
and benign raw material prices mainly account for high
helped to remain profitability. Since this is a niche industry, comparisons
Debottlenecking cost-competitive and on profitability are irrelevant," says Kirit Patel, Execu-
and operational ahead of competition tive Director, and the company’s first employee. "If GDP
efficiencies to protect in the `3,000-crore grows at 5 per cent, the chemical intermediates industry
margins domestic amines will grow at an estimated 7.5 per cent. We have been cre-
market
ating capacities in the past few years,” adds Patel. Along
with Kirat Patel, Yogesh Kothari's son and Executive
Director Suneet Y Kothari assist him in running the
business. The company, which has invested around `300
crore in the last three years, plans to put in another `300
crore in the next two-three years. Through debottle-
necking — a way of improving efficiency of old plants
with better technology and new processes — the com-
pany will create around 15,000 tonnes of new capacity
average capacity
utlisation of 15 plants Debottlenecking with in methylamines, with low capital expenditure, besides
increased to about less capex helped setting up a couple of derivative plants.
85 per cent create additional A new plant is coming up at Dahej for acetonitrile,
15,000 tonnes which will add another 18,000 tonnes to the current
of methylamines capacity of 12000 tonnes a year, by the middle of next
capacity
financial year. This will boost revenues by another `350-
360 crore, making Alkyl Amines the second-largest
producer of acetonitrile in the world, after global petro-
chemical major Ineos. If the company produced about
300 tonnes of intermediates in the first year of operation
in 1980, it now makes the same in a single day. Produc-
tion capacity currently is around 90,000 tonnes, and 25-
research & 30 per cent of it is used for internal consumption to make
development
capabilities derivatives. Around 45-50 percent of the products are
strengthened to new acetonitrile plant aliphatic amines and 20-25 per cent includes specialty
create the entire to make company products. The rest are derivatives.
range of amines and the second-largest "Our first two projects on ethylamines and methyl-
derivatives manufacturer of amines were done with US technology. Then we set up
acetonitrile globally
own R&D and developed many new products based on
amination (a chemical process) with ammonia and al-
cohols. It took us three years to develop the acetonitrile
project from the pilot stage to the end level,” says Yogesh.
The target now is to double revenues within the next
four-five years. "The new schemes announced for set-
ting up of pharmaceutical bulk drug parks will create big
capacities for APIs in India and that gives us new oppor-
` 300 crore invested
tunities,” adds Patel.
for expansion in three revenues to double in Overall, the growth story of Alkyl Amines looks
years next four-five years intact.
@pbjayakumar

the Wealth issue — Table
Money Spinners
companies that made the cut in
wealth creation sweepstakes
Gross Revenue (`cr) Operating Profit (`cr) Share Price (`)

Rank Company Name FY16 FY20 Change % CAGR % FY16 FY20 Change % CAGR % 6-Aug-15 6-Aug-20 Change % CAGR %
Super Large Companies (`75,000 crore-plus revenue)
1 Reliance Industries 251241 365202 45.36 9.80 47168 66394 40.76 8.92 485 2135 340.04 34.49
2 HDFC Bank 60221 114813 90.65 17.51 21364 48750 128.19 22.91 548 1041 89.91 13.69
3 TCS 85864 131306 52.92 11.20 30811 45435 47.46 10.20 1287 2308 79.29 12.39
4 Infosys 53983 79047 46.43 10.00 18715 22735 21.48 4.98 545 969 77.92 12.21
5 Bharat Petroleum Corp. 217895 327581 50.34 10.73 12801 9721 -24.06 -6.65 313 409 30.76 5.51
Large Companies (`7,500-75,000 crore)
1 Bajaj Finance 6901 23619 242.24 36.01 4948 14936 201.88 31.81 547 3345 512.12 43.67
2 Titan Company 11105 19732 77.68 15.45 1018 2564 151.93 25.99 328 1120 241.78 27.86
3 Jindal Steel & Power 14466 30021 107.53 20.02 2465 5777 134.42 23.74 78 197 150.86 20.20
4 Muthoot Finance 4801 8636 79.90 15.81 3632 6891 89.74 17.37 191 1190 523.23 44.19
5 Radico Khaitan 4245 9418 121.88 22.05 227 381 68.14 13.87 97 379 289.37 31.24
Medium Companies (`1,500-7,500 crore)
1 Deepak Nitrite 804 2230 177.22 29.04 168 1320 684.89 67.38 70 643 814 55.67
2 Minda Industries 346 3175 816.92 74.01 162 1469 807.47 73.56 39 282 623 48.52
3 Escorts 768 5761 650.06 65.49 233 3439 1378.68 96.10 158 1121 609 47.96
4 Aarti Industries 940 3994 324.91 43.57 540 2934 443.43 52.68 204 1058 419 39.02
5 Biocon 488 1988 307.71 42.10 595 2335 292.57 40.76 79 407 419 39.00
Emerging Companies (Less than `1,500 crore)
1 GMM Pfaudler 247 516 109.13 20.26 35 106 199.57 31.56 292 4284 1368 71.14
2 Alkyl Amines Chemicals 523 993 89.74 17.36 93 264 182.66 29.66 280 2417 763 53.87
3 Bharat Rasayan 452 1215 168.75 28.04 81 246 203.39 31.98 1263 9623 662 50.09
4 Capri Global Capital 168 556 231.66 34.95 67 414 515.98 57.54 29 205 604 47.75
5 Adani Transmission 274 858 212.55 32.96 213 773 262.81 38.01 34 232 574 46.48

the Wealth issue — FUTURE WEALTH CREATORS
Stocks to
Look Out For
nvesting is a unique kind of casino — one where you
cannot lose in the end, so long as you play only by the rules
that put the odds squarely in your favour.” When British-
I
born American economist and investor Benjamin Graham,
who was also Warren Buffett’s mentor, said this sometime
early in the last century, he was guiding investors on ways
to earn good returns while playing it safe. This is truer now
than ever before in India where, in a volatile stock market,
only a handful of stocks are driving the rally, while most
others are refusing to move.
Graham was a proponent of value investing, the
most reliable way to generate good returns in stocks
markets. The idea is to pick good quality stocks trading

Value inVesting is all about picking
good quality stocks trading at a
discount to historical Valuations. bt
crunches the numbers to bring you
likely future wealth generators
at a discount to their historical valuation ratios. These,

he believed, would be long-term wealth creators while
also providing a margin of safety. With the current stock
market rally built on weak economic fundamentals, it
is even more important for investors to buy only value
stocks with strong growth potential.
To save you the hard work, BT has crunched numbers By rashmi pratap
to come up with scores of such potential wealth genera- illustration By raj verma
tors. We have drawn up the list (See Table) by compar-
ing the current valuation ratios of the top 1,000 listed
companies with their historical ratios and looking at
the quality of their earnings and balance sheet strength
(See Methodology).

Ideal Time for Value Picks quarters. The FMCG division now accounts for a quar-
Value investing involves buying a piece of a quality com- ter of ITC’s revenues; its PBIT rose 31 per cent in FY20.
pany which is undervalued compared to its fair value. This is likely to support ITC’s valuation going forward.
“In the current market scenario, a beaten down stock Similarly, Power Grid Corporation is trading at
will enable an investor to compound his returns if there around 30 per cent discount to its five-year average P/E
is a mismatch between its current price and fair value. multiple. There has been a slowdown in top line growth
The pandemic-led lockdowns have disrupted a number in the last few quarters but it has one of the best return
of industries and many companies are suffering. on equity (RoE) in the power sector. While the
But a wise investor will look beyond that and sector’s RoE is 10-11 per cent, the figure for
pick companies that he feels will emerge Power Grid is 15 per cent, making it an ide-
stronger on the other side of this pan- al value stock for long-term investors.
40%
demic,” says Nirali Shah, Senior Re- Bajaj Auto, too, is trading at a 30 per
search Analyst, Samco Securities. cent discount to its historical average
Ajit Mishra, VP - Research, Reli- P/E multiple. The company is not
gare Broking Ltd, says markets have Fall in broader market only a bet on two- and three-wheeler
already run up significantly from indices between markets in India, it also leads the
March lows and some large caps are January 2018 two-wheeler market in Africa and
trading at stretched valuations. The and March 2020 Latin America. Other large-cap stocks
BSE Sensex hit a three-year low on available at a discount to their long-
March 23 and closed at 25,981. Exactly term valuation ratios include JSW Steel
three months later, it was at 38,435, up al- and GAIL.
most 50 per cent. The beaten-down stocks like ITC, GAIL,
“In such a scenario, investors should opt for Power Grid and ONGC have strong fundamentals.
the ‘bottom-up’ approach and look for stocks which are Mishra of Religare says one can invest in these compa-
available at a fair valuation. They may consider broader nies. “These stocks are fundamentally sound and are
markets to start with as these are picking up pace due to trading at low valuations due to business mix and Covid-
attractive valuations,” says Mishra. led disruption. However, going forward, as the situation
Tobacco and FMCG major ITC, for example, is cur- stabilises and demand picks up, we may see these stocks
rently trading at 16 times its trailing 12-month earnings, gain traction. Investors may start accumulating these at
about 50 per cent discount to its five-year average price
to earnings (P/E) multiple of 29x. Such a low valuation
was last seen in the aftermath of the 2008 global finan-
cial crisis in the March 2009 quarter. There has been a Sanjeev Puri,
sharp fall in ITC’s top line and earnings growth in the CMD, ITC
last two years due to shrinking of its tobacco business
but the company has shifted its focus to the fast-growing
FMCG division that should yield dividend in the coming
ITC's FMCG dIVIsIon

PhotograPh by yaSir iqbal
now aCCounTs For a

quarTer oF reVenues;
ITs PBIT rose 31 Per CenT
In FY20. ThIs Is lIkelY To
suPPorT ITs ValuaTIon
GoInG Forward
54
value picks that may give good returns
Current Valuation 5-Year Average 5-Year CAGR Growth (%)
Price to Return Mkt cap as on
Company Name P/E Book Value on Equity P/E P/B Net Sales Opr Profit Adj PAT Aug 14 (`cr)
ITC 15.8 3.7 23.5 29.0 6.8 5.9 7.4 7.6 2,41,788.0
Power Grid Corpn 8.3 1.4 14.7 12.8 1.9 18.3 16.1 25.5 91,762.1
Bajaj Auto 16.6 4.0 24.2 18.5 4.5 10.0 13.5 10.4 86,455.6
JSW Steel 15.9 1.8 13.2 -9.3 1.8 11.9 19.2 78.2 64,153.0
GAIL (India) 4.6 0.9 9.7 17.2 1.6 6.4 15.4 21.1 43,274.8
Petronet LNG 14.4 3.5 18.8 17.1 3.2 -0.5 22.9 26.6 39,000.0
Bajaj Holdings 9.7 1.0 13.1 9.5 1.2 55.4 57.2 10.7 28,990.5
Amara Raja Batteries 19.2 3.5 19.3 30.2 5.9 12.8 7.6 4.1 12,687.1
National Aluminium 48.1 0.7 10.4 11.9 1.1 9.6 4.6 10.5 6,548.3
Finolex Cables 11.0 1.4 16.5 20.7 3.3 7.7 17.6 25.4 4,286.1
Caplin Point Lab 19.2 4.4 38.9 29.1 11.6 27.6 41.4 43.7 4,137.7
Garware Technical Fibres 22.7 5.2 17.7 15.7 2.9 7.0 26.5 28.8 4,044.5
Sundaram Clayton 9.9 1.3 17.4 19.4 3.3 17.0 30.6 26.7 3,323.7
Cera Sanitary. 27.3 4.0 18.4 38.5 7.1 13.2 15.0 13.8 3,093.7
Suprajit Engg. 22.7 2.8 19.4 27.3 5.3 27.9 28.1 28.6 2,363.8
Meghmani Organics 7.3 1.5 15.2 9.0 1.4 15.0 28.0 49.3 1,764.8
JK Paper 3.6 0.7 10.5 2.3 1.0 9.3 36.9 LP 1,712.0
India Glycols 7.5 0.8 -1.6 5.5 0.9 7.0 41.4 LP 857.6
Repco Home Fin 2.8 0.5 15.6 21.6 3.4 14.6 15.0 17.0 824.6
L G Balakrishnan & Bros 7.8 1.0 15.7 13.6 2.1 10.0 10.3 8.6 711.8
Fiem Inds. 8.7 1.2 14.2 21.9 2.9 15.1 11.1 6.9 652.2
Sterling Tools 20.9 2.1 20.1 18.3 3.6 11.7 17.8 20.4 638.0
Associated Alcohols & Breweries 9.5 2.4 18.9 13.6 2.6 8.3 15.2 29.1 468.9
NCL Inds. 8.0 0.8 15.4 14.3 1.9 20.6 17.4 50.8 406.9
Nitin Spinners 9.5 0.5 18.7 7.5 1.3 19.0 14.7 11.5 226.9
LP : Loss to profits
methodology
The two most common valuation ra- compared to their average in the have since shown an improvement in
tios to filter out potential wealth gen- last five years. But not every low P/E their financial ratios.
erating stocks are price to earnings ratio or low P/B ratio stock has been We have also excluded companies
(P/E) and price to book (P/B) value. included. We have considered only with poor working capital manage-
Both are based on actual or reported those companies that grew faster ment as those find it tough to convert
earnings and not forward earnings. than the industry in five years prior to profits to cash flows and this leads to
P/B ratio is especially useful in case the pandemic and had high average financial problems.
of companies in capital intensive or return on equity among peers during We have also looked at compa-
asset heavy sectors such as banking, the period. Some companies such nies’ debt sustainability by comparing
NBFC, oil & gas and utilities, among as India Glycols and JK Paper were historical movement of ratios
others. loss-making in the past but have since such as debt to equity, total debt to
The companies in the list are become profitable. This may translate operating profits and interest
cheaper on P/E and P/B value basis into lower RoE historically but they coverage ratio.

current levels and adding more on dips with a time hori- of which may have dragged down growth in the near
zon of two-three years,” he says. term, even if they are positive for long-term growth,”
In the midcap space, value investors should look at according to global brokerage Morgan Stanley.
Petronet LNG, Bajaj Holdings and Amara Raja Batter- Mishra says broader markets provide valuation
ies. While Petronet is the country’s top LNG producer, comfort at these levels given their sharp underperfor-
Bajaj Holding is the main holding company for the Bajaj mance since 2018. “The earnings growth trajectory
Group with large stakes in Bajaj Auto, Bajaj Finserv and has also improved as the economy is opening up and
Bajaj Finance. The company also has equity investment growth is showing signs of improving. However, one
in non-Bajaj companies. Besides, it invests in debt in- should stick to quality names in this space and avoid
struments and operates like a diversified close-ended penny stocks,” he says.
mutual fund, making it a good long-term investment for
value investors. Eye on the Future
Amara Raja Batteries is the country’s second-largest G. Chokkalingam, Founder and Managing Director of
automotive battery maker and has gained market share Equinomics Research & Advisory Services, says most
from incumbents in the last few years. The company’s investors today are fixated with quick returns in a vol-
margins and earnings growth took a hit due to price war atile market. “Most new investors don’t look at valua-
in the industry and slowdown in auto sales. However, tion multiples and that’s why value investing seems to
things are looking up due to de-
cline in international commod-
ity prices and improved growth
outlook for the automotive in-
dustry in the coming quarters. BAjAj Auto is
trAding At A
In the small-cap space, Ster-
ling Tools, LG Balakrishnan &
Bros, Fiem Inds and Cera Sani- 30 pEr cEnt
tary Ware remain value buys at discount to
current valuations. While the
its HistoricAl
PhotograPh by rachit goSwami

first three are auto parts mak-
ers, Cera is the country’s most AvErAgE p/E
profitable sanitaryware manu- multiplE. tHE
facturer.
In fact, many of these stocks
compAny is A
have already started rising as BEt on tWo-
investors look for ideas beyond And tHrEE-
the large-cap universe. JSW WHEElEr
Steel, for example, is up 7 per
cent in 10 days since August 14 mArkEts in
while PowerGrid and Gail are indiA
up 5 per cent each. In the small-
cap space, Sterling Tools and
LG Balakrishnan are up 10 per
cent each. Bajaj Holdings is up 5 per cent.
This is in contrast to the trend that persisted for al-
most two-and-a-half-years when markets were being
driven by large caps. The Sensex and the Nifty did well
but other parts of the market struggled. Small and mid-
cap stocks peaked in January 2018 and then entered a
long phase of underperformance. Between January
2018 and March 2020, the broader market indices were
down more than 40 per cent relative to the BSE Sensex.
“Growth slowed down due to a number of factors, in- Rajiv Bajaj
cluding the GST law, the real estate regulation Act, the MD, Bajaj
bankruptcy code and the new inflation framework, all Auto
56
solidated numbers at the end of the financial year.
Similarly, the JB Chemicals stock, with face value of
HoW to invEst in `10, was trading at `68 in 2010. It split to `2 per share
tHis mArkEt and is now at `700, giving 54 times returns, says Chok-
kalingam.
However, experts throw a word a caution. “The mil-
With the current stock lennials, people out of job or small entrepreneurs who
market rally built are trading in the market don’t have the patience to wait
on weak economic in the current tight liquidity scenario. So, the risk is very
fundamentals, it is high right now. Penny stocks or those with bubble valu-
even more important
for investors to
ations can fall like a pack of cards anytime,” says Chok-
buy value stocks kalingam.
with strong growth Moreover, value investing has another crucial com-
potential ponent – the vision to correlate a company’s perfor-
mance with broader socio-economic, policy and future
scenario. MRF scrip is a case in point. It was trading at
`6,000 in 2011-12. It closed at `59,720 on August 21. An
investor who realised in 2011 that India’s fast-growing
As the big auto market is alongside creating a consistent demand
stocks have run for tyre replacement too, would have seen her money
up quite a bit, grow 10 times in eight years. “The visionary aspect of
investors should value investing looks at the future, as happened in case
be cautious and
of MRF,” says Chokkalingam.
look for stocks
available at a fair Shah agrees that future growth opportunities
valuation should be considered in value investing too. “Currently,
valuations in some pockets are extremely low and earn-
ings growth is slowly picking up due to pent-up demand.
The crisis has pushed recovery in corporate earnings by
at least a few months. Recovery may take longer than ex-
pected. So, value investments should be made looking
However,
companies with
at the PEG ratio (which compares P/E ratio to growth of
high debt or high the company) and future growth opportunities in small
promoter pledge pockets. Not all companies in broader markets are at-
should be avoided tractive,” she says.
even though they So, what are the boxes which need to be checked be-
are available at low fore investing in companies even with low valuations?
valuations Primarily, companies with high debt or high promoter
pledge should be avoided even though they are available
at low valuations, says Shah. “Also, companies which
start showing a significant decline in sales or margins
should be observed more closely. High investment in
capex, without any material return, is again a red flag. A
be losing favour. But it is well-known that some of the number of such parameters must be considered before
best wealth generating scrips of today were value stocks investing in strong yet undervalued stocks,” says Shah.
some years back,” he says. Just as value investment requires caution, even an
For instance, Bombay Burmah is trading around exit should be well thought out. “In a crisis, investors
`1,500. It was nearly `80 in January 2012 and has grown should not run to exit the stock just because the price is
almost 19 times in the last eight years. Bombay Burmah, falling. It would be prudent to check if the fundamental
originally a tea trading entity, is the holding company debt and cash story is intact, and if all seems well, the in-
for Britannia Industries, the flagship of Mumbai-based vestor should continue holding the stock irrespective of
Nusli Wadia Group. Investors usually don’t track shares certain corrections,” says Shah.
of Bombay Burmah actively because it includes finan-
cials of Britannia only when it presents its audited con- (The writer is Co-founder and Editor of 30stades.com)

Custodians of
Wealth
family offices aRE hElPinG PEoPlE PRotECt and
GRow thEiR wEalth whilE also EnsuRinG smooth
suCCEssion PlanninG
By nevin john
illustration By raj verma
reating wealth is easier than ma- “When the size of the economy
naging wealth, says Raamdeo Agrawal, doubles, the wealth of business families
C
Co-Founder & Non-Executive Chair- increases manifold. Assigning Family
man, Motilal Oswal Group. Fortunes Offices to protect and utilise the wealth
are made — and destroyed — often according to the wish of its founders
within a generation. But when busi- will help avoid mismanagement of as-
nesses do survive beyond the first, sets,” says Agrawal.
expanding families and conflicts of Several business families in pre-lib-
interest among family members could eralisation India disappeared because
potentially implode businesses and de- of a lack of focus on wealth manage-
stroy wealth. ment and preservation. However, an

the Wealth issue — FAMILY OFFICE
institutionalised wealth management which has nearly `1 lakh crore worth

system through Family Offices is gain- of assets as shares and properties. The
ing popularity at a time when assets are FSA, which delineates how the fam- issues that family
appreciating faster than ever. ily wealth will be divided and who will offices handle
There are just over 100 billionaires manage which companies, is essential
asset deployment &
in India with a wealth of around $400 to continue running the business as a maintenance: Members hold
billion — a large portion of which is the joint family venture and avoid disputes shares/properties individually
value of the promoter shares they hold. within. and through holding
Family Offices are privately held The Bajaj family, headed by Rahul companies. Family offices
entities that handle corporate groups’ Bajaj, holds promoter shares in individ- reinvest the family’s income
wealth and investments. They can be ual names and through 14 holding com- which comes as dividend and
remuneration of members
a single Family Ofice — handling one panies. There are large trusts such as
family’s wealth — largely run under the Jankidevi Bajaj Gram Vikas Sanst- succession planning: In
the guidance of the patriarch or some- ha, Jamnalal Bajaj Foundation and Jam- India, families — one or
one appointed by the family, or a multi- nalal Kaniram Bajaj Trust. Operations multiple — control a number
Family Office that handles wealth of of these entities come under the ambit of companies. So, succession
many families and are run by profes- of Family Office. Niraj Bajaj, who runs requires urgent attention
sionals. the family office with around 30 em- grooming: Family offices help
According to the internal estimate ployees, says: "I have been handling the with educational exposure
of a foreign bank, Indian business fami- Bajaj Family Office for the last 30 years, and grooming of the next
lies may have deployed about `6-7 lakh on behalf of the joint family. In this pe- generation
crore of wealth through Family Offices. riod, the number of family members
constitution & council: A
Family Offices serve several pur- increased, new companies were added Family Constitution is needed
poses, says Harsh Goenka, Chairman, and wealth appreciated. The Family for smooth operation of firms
RPG Enterprises. “Firstly, regulatory Office acts as a supportive system for owned by joint families. The
compliance has become an important improving business and safeguards Family Council is a non-legal
area that needs professional manage- personal wealth.” body that takes decisions
ment. Over the last few years there have Billionaire Azim Premji’s Family regarding new investments
been a lot of additions to the regulatory Office controls the operations of Prem- and succession
framework in the country and most di- ji Invest, the investment arm of Azim external assistance:
versified groups have a number of enti- Premji. The fund started in 2006 with Family offices take external
ties in their holding structure.” Goen- $1-billion capital has more than tripled assistance in legal, tax and
ka notes that investing surplus funds, its investment value in a span of 10-12 regulatory matters
maintaining asset allocation according years. It has invested in Aditya Birla
social investments: Family
to the risk profile and managing the re- Capital, Flipkart (through Myntra), offices manage CSR activities
turn on investment (RoI) is another as- Snapdeal, FabIndia and Future Retail,
pect that family offices address. “With among others.
the boom in the start-up ecosystem,
most families have set out to invest in
promising ventures and Family Offices
are tasked with identifying and invest-
ing in suitable projects. Besides, it is im-
portant that the next generation is in-
With the boom in the
volved in the functioning of the Family start-up ecosystem,
Office so that there is greater degree of most families
awareness and exposure to the family’s have set out to
balance sheet,” he adds. invest in promising
Running a Family Office is not an ventures and family
easy task. As the custodian of family offices are tasked
wealth, Niraj Bajaj, youngest cousin of With identifying
industrialist Rahul Bajaj, faced a tough and investing in
time during in 2017-18 when he was suitable projects.”
charting the Family Settlement Agree- Harsh Goenka, Chairman, RPG
ment (FSA) of the 25-member family, Enterprises
PhotograPh by rachit goSwami 20 September 2020 Business Today 59

the Wealth issue — family office
Similarly, RNT Associates is the

Family Office of Ratan Tata and Cata-
major
`6-7
maran Ventures of NR Narayana Mur-
thy, doing investments, including in Investments
start-ups. Ratan Tata has invested in
over a dozen startups, including Paytm, lakh crore reinvestment in
Ola Electric, Snapdeal, Tork Motors, Wealth deployed existing companies
UrbanLadder and Lenskart. Mukesh by Indian business start-up investments
Ambani's Reliance Family Office has families through in family group
last year facilitated sale of the private Family Offices
pipeline owned by him to Brookfield pe investments
for `13,000 crore. Catamaran has ven-
fixed income bonds
ture capital investments in Paper Boat,
Innoviti and Healthspring. land/real estate/
The business of Family Offices is infrastructure
becoming increasingly relevant these that there is a ‘safety pot’ kept aside to
days as the churn in the economy has deal with any exigencies and manage hedge funds
started affecting investments of high- their cash flow requirements,” she foreign currency
income earners. Gautami Gavankar, adds.
Executive Director & Head, Estate Another emerging trend is that gold/precious metals
Planning and Family Office Services, many families are exploring immigra-
Kotak Mahindra Group, says most tion, and considering various places in art/antiques
Family Offices today are looking for in- Europe for the long term, according to
vestment opportunities in diverse sec- Gautami.
tors, and the smart money is moving The reason for that is diversifica-
into sectors where value creation can tion of risk and taking advantage of
be seen over the long term. cross-border opportunities over time, long-term investment opportunities
“In addition, ultra high networth apart from the reasons of lifestyle, be- and prefer direct investments that offer
individuals (UHNIs) and high net- ing closer to the family and ease in liv- more control and lower fees. In the cur-
worth individuals (HNIs) are ensuring ing and doing business abroad. In such rent scenario, distressed assets are also
cases, it is important to set up Family a big focus area for them. Many families
Offices in India to manage wealth. are looking at impact investments and
Family Offices tend to look for social investments as well. “Philan-
thropy, which is usually a big part of
most family ethos, has seen a ramp-up
recently. The next generation, in partic-
ular, is looking to make a social impact
and bring about a positive change, says
Gautami of Kotak.
“While multi-Family Offices follow
a disciplined, asset allocation-based
I have been handlIng approach depending on the risk profile
the bajaj famIly
of investors, single Family Offices in
offIce for the last
30 years... the India are more inclined to make invest-
famIly offIce acts ments based on the patriarch’s views,”
as a supportIve she adds.
system for the Multi-Family Offices also focus on
betterment of other aspects such as compliance, tax/
busIness and legal implications and give more round-
safeguards ed and holistic advice, Gautami thinks.
personal Ultimately, it’s all about using
wealth” wealth responsibly.
Niraj Bajaj, Director,
Bajaj Group @nevinji
Business Today 20 September 2020 PhotograPh by MaNDar DEoD

the Wealth issue — Real estate
Building
Riches in 2020
Real
estate
Basics
Real estate has
delivered good
returns in the
long run
Residential
real estate sees
abrupt growth
cycles
commercial real
estate offers
higher rental
yield but one
needs deep
pockets for
investing
Reits give
investors the
option of making
small-ticket
investments in
the sector

Real estate investment can take
years to bear fruit. Here is How
you can tweak your approacH
to make tHe most out of it
By ASHWiNi KUMAR SHARMA
W
hen it comes to building assets, especially in
India, real estate attracts a large section of inves-
tors. The reason is that, unlike a financial asset,
it is something investors can see, touch and feel.
That is why almost three-fourth of Indian house-
hold wealth is parked in real estate and only a
small fraction in financial assets. “The average
household holds 77 per cent of its total assets
in real estate (which includes residential build-
ings, buildings for farm and non-farm activities,
constructions such as recreational facilities, and
rural and urban land) compared to 5 per cent in
financial assets (such as deposits/savings ac-
counts, publicly traded shares, mutual funds,
life insurance and retirement accounts),” says a
PhotograPh by vivan mehra 20 September 2020 Business Today 63

2017 report by the Reserve Bank of India titled “Indian in life, mainly for living. The market is conducive for the
Household Finance Survey.” latter as prices have either corrected or remained stag-
However, in the last few years, returns, especially nant over the last few years. Besides, due to huge inven-
from the residential segment, have been muted or even tory, developers are ready to negotiate prices. “Property
fallen. Many have even predicted the end of real estate as rates are at their lowest. Many developers are offering
an investment, a view that gained further currency after further enticements such as attractive payment options
the outbreak of Covid-19. However, as life slowly moves and offers. Also, unlike in earlier years, buyers can get
towards normalcy, there are enough signs that the sec- completely de-risked, ready-to-move-in homes at prices
tor cannot be written off as an investment. With inter- previously fetched by early-stage, under-construction
est rates on fixed income instruments falling and stock properties,” says Anuj Puri, Chairman, ANAROCK
markets volatile, investors are seriously looking at seg- Property Consultants. However, it is not advisable to
ments such as commercial real estate, which has given
decent returns over the past few years, and real estate
investment trusts (REITs), whose early returns have
been promising.
“Indian real estate consumers still remain positive
about the economic scenario and income stability for
the coming six months. Real estate (35 per cent) is still
tHE Winning investors can
perceived as the preferred mode of investment, followed
StRatEgy consider commercial
by gold (28 per cent), fixed deposits (22 per cent) and properties like shop
stocks (16 per cent),” says a recent report by Housing. liquidating real or office space at a
com and National Real Estate Development Council. estate can be a good location
Barring some periods in the short to medium term, big hassle. make
a commercial
real estate has given decent returns over long periods. sure you have
property at a good
considerable
However, before writing the cheque, one must under- location can fetch
liquid assets for
stand that there are different segments within real you a return of 6-8
contingencies and
estate, and risk, return and other factors differ in each per cent per annum
other financial goals
case.
REit is a good
unless it is for end
investment
Why Real Estate use, avoid investing
avenue. low ticket
in the residential real
While it is true that almost everyone wants a piece of real size (`50,000),
estate segment, as
estate, financial planners say one should invest in the transparency and
capital values are
sector only if it fits in one’s portfolio. “Any investment liquidity make it
expected to remain
decision regarding real estate ought to be made with apt for all types of
muted and rental
investors
an eye on overall allocation of finance and short-term yields are low
liquidity requirements,” says Lovaii Navlakhi, Manag-
ing Director and Chief Executive Officer, International
Money Matters Pvt. Ltd, a financial planning firm. This
makes even more sense during a period like this when
household incomes have fallen. But the key questions
are — Who all should invest? And in which segment?
“One should consider real estate only after building a buy a house for investment at this stage. Market trends
sizeable liquid fund through financial assets such as mu- hint at tepid demand and severe stress on builders due to
tual funds,” says Varun Girilal, Executive Director, Mi- large unsold inventory.
traz Financial Services Pvt. Ltd. What about commercial property? In contrast to
Rohit Shah, Founder and CEO, Getting You Rich, a residential real estate, commercial assets have been do-
financial planning firm, says, “Real estate is considered ing well in most major Indian cities. They are becoming
a growth vehicle and can give decent returns in the long popular among not just institutional investors and high
run. But concentrating all your money there is not a net worth individuals but also retail investors. Commer-
good idea. Check for asset allocation, liquidity, EMI ra- cial properties can yield 8-10 per cent in major markets
tio, rental yield and investment horizon.” depending upon location, demand-supply and quality
Among the different segments, buying a house may of asset. Though the pandemic has dented growth and
not be a good idea at present, though most financial returns due to fall in demand for office spaces, experts
planners encourage purchase of a house at some stage believe it will rebound soon. “As a result of the pandem-

Smaller metro CitieS Have mmR
returned more tHan nCr 33

and CHennai
610
10,
Avg. price Avg. price in
in 2010 (`/sq ft) q1 2020 (`/sq ft) % chAnge
5
7,96
PunE BangaloRE HydERaBad KolKata
67 49 45 44
4,385 CHEnnai
20
4,19
4,
97
5
5
5
nCR
3,050
93
0
5,
0
51
4,
4,1
0
2,8
19
97
3,
34
0
85
5
3, 80
4,5
3,3
0 0
Source:
AnArock
Property
consultants
graphic by amit Sharma
ic, there has been a flight towards liquidity, which is im- India over the next five-seven years. The cities include
pacting this asset class. Commercial real estate has been Bengaluru, Hyderabad and Gurugram. The trend is like-
impacted more as many organisations are asking em- ly to gather pace in the coming quarter where we will see
ployees to work from home and downsizing. That said, at more such announcements. So, it is an appropriate time
some point, the tide will turn, and prices will rise. How- for investors to get into Grade A commercial spaces that
ever, one has to remember that real estate cycles last lon- are future-ready and can align with the new normal now
ger, five-seven years, and hence it could be a while before and in the future with ease.”
things start looking up,” says Navlakhi. Puri says office spaces near residential hubs have
Puri echoes this. “Undoubtedly, there was a dip in de- great potential. “Offices in a decent workplace hub or
mand for commercial spaces, especially during the lock- shops in residential areas make investment sense. Most
down. But we are gradually seeing pick-up in demand in retail investors may lack the bandwidth to participate in
key cities. Google, for instance, is on an office leasing Grade A office buildings, which are the best bet, but they
spree as a follow-up to its planned massive investment in can still buy space in smaller office buildings that are

well-connected and can draw work- Therefore, one can study the past
force,” he says. performance of only one REIT for
However, even for that, you need reference.
deep pockets. You also have to carry “In the first year of our REIT,
out proper due diligence in terms of FY20, we delivered a 15 per cent YoY
legal issues and future market out- growth in NOI (net operating in-
look. That is why, for retail investors, come), early delivery and healthy
Real Estate Investment Trusts (RE- pre-commitments on our 1.4 msf on-
ITs) make perfect sense. campus development, culminating
in strong distributions for our unit
The REIT Bet holders of `1,882 crore,” says Mike
REITs address the challenges of tick- Tax ImplIcaTIon Holland, CEO, Embassy REIT. “We
et size and transparency. “REITs are on InvEsTIng successfully navigated through the
good for investors who have small In REITs 1st quarter of FY21 despite the pan-
appetite for real estate - as small as demic and maintained a healthy 92.2
`50,000 - and yet want to invest in “REITs are regarded as per cent occupancy, collected a ro-
the otherwise highly cost-intensive hybrid pass-through bust 98.9 per cent of rentals and dis-
commercial real estate market. They entities to avoid double tributed `4,49.9 crore,” he says.
can take a small bite of the large com- taxation,” says sandeep Some financial planners suggest
Jhunjhunwala, partner,
mercial real estate pie with REITs,” caution. “Like in case of any other as-
nangia andersen llp.
says Puri. set class, you should focus on sustain-
Sameer Kaul, MD and CEO, Trust There are different types ability of returns, that is, ability of the
Plutus Wealth Managers, says REITs of incomes —interest, asset to generate steady and growing
should be the preferred vehicle for re- dividend and capital gains returns. At present, the listed REITs
tail investors. “Investors should look — that an investor can earn in India have marquee commercial
by investing in a REIT. Tax
to participate in real estate indirectly office assets and sticky Grade A ten-
implications and rates
through more efficient structures differ accordingly. ants, offering clear visibility of sus-
such as REITs, which have better re- tainable returns. It is critical to assess
turns visibility, higher transparency Withholding Tax Rate: 10% the ability of the REIT manager to
and a certain degree of liquidity (high- and 5% on distribution of maintain the property and renegoti-
er than hard assets),” he says, adding, income to resident and ate rentals,” says Kaul of Trust Plutus.
non-resident individuals,
“REITs have been made available at an Some financial planners such as
respectively
appropriate time given the volatility in Suresh Sadagopan, Founder, Lad-
debt and equity markets.” Tax on interest income: der7 Financial Advisories, doubt that
Girilal of Mitraz is also positive Interest earned is fully REITs will be able to generate an av-
on REITs. “REITs have done well in taxable in hands of unit erage return of over 9 per cent year
developed markets such as the US holder on year over a long period. Girilal
and Europe, so one hopes that they Tax on dividend: Dividends suggests that in the current market,
grow in India with more options and are fully taxable in hands one can allocate 5-10 per cent of one's
transparency,” he says. “Embassy and of unit holder portfolio to REITs. “So, we would still
Mindspace REITs offer decent po- recommend REITs as a satellite/non-
tential for returns. Returns through Tax on capITal gaIns core allocation only after one has
on salE of unITs:
lease rentals and capital appreciation adequately diversified across bonds,
can range between 8 per cent and 12 long-term capital gains equity-based MFs and debt MFs.”
per cent. One does not have to part (holding period is more If you are looking at investing in
with a large capital for REITs. They than 36 months) - 10 per real estate, consider commercial real
also come with the added benefit of cent for gains over `1 lakh, estate such as shop or office space at a
liquidity and diversification of proj- good location which can fetch you de-
short-term capital
ects,” he says. gains (up to 36 months) cent returns. Go for REITs if you have
The issue is that there are only –15 per cent budget constraints.
two REITs in India so far. The first
one was launched last year while the Source: Nangia Andersen LLP
Ashwini Kumar Sharma is a
second one was launched last month. Delhi-based Writer

the Wealth issue — GOLD
Why Gold Matters
Economic uncErtainty
D
across thE globE has
incrEasEd thE appEal
of the yellow metal
among invEstors. this
makEs it a good storE
harmesh Solkar, a Mumbai-based middle-level IT
of valuE in thE nEar professional, decided to go for a week-long summer va-
futurE cation to the Maldives when he got promoted in Novem-
ber last year. He and his wife Surabhi, a home maker, had
been planning the trip for years. They had to cancel due
to the Covid-19 outbreak.
Soon, he started worrying about the future when he
By P.B. Jayakumar heard about jobs cuts across sectors. In 12 years of his
IllustratIon By raJ verma working life, he had saved little. The `2 lakh he had set

the Wealth issue — gold
aside for the trip was lying in his savings account when vestment in future as well.
he got a call from a jewellery chain’s executive, who gave
him gold price data from as far back as 1923 to March 31, Wealth in Crisis
2020. “Since 1925, when a sovereign of eight grams was Dharmesh is not an exception. A new set of young custom-
priced at `13.75, prices never went down till 2014,” he ers, who used to spend on lifestyle products, vacations,
said. As Solkar saw prices hit historic highs of `54,000- dining and entertainment, are now investing in latest
plus per 10 gm this year, he thought he had missed the fashions in jewellery, says Ramesh Kalyanaraman, Ex-
bus. But a few days later, the relationship manager men- ecutive Director of Kalyan Jewellers. Middle-class senior
tioned the ‘Independence Day Freedom Offer’, a dis- citizens, who either kept money in fixed deposits or real
count of nearly `3,000 for eight grams, for purchases on estate, are also increasingly buying jewellery for their next
August 15. Dharmesh bought a small diamond gold chain generation. With restrictions on number of guests, wed-
for his wife. dings have become a closed family affair. A part of those
While Covid-19 has ruined businesses around the savings is being used to buy jewellery for the newly-weds.
gold Has Been an outstanding Performer

Five-year CAGR
Equity Equity
Gold Silver LargeCap SmallCap
Equity
MidCap MF
ElSS MF Sensex Nifty
Real
estate
17.7% 16.6% MF
8.02%
MF
7.92% 7.9% 7.62% 6.1% 5.5% 5.3%
* Real estate is from RBI's Housing Price Index from Q1FY16 to Q4FY20; MF values from Aug 25, 2015, to August 25, 2020;
For the rest, it is August 6, 2015, to August 6, 2020; ELSS is equity-linked mutual fund scheme
globe, including the gems and jew- WHY GOLD WILL “Even we were surprised when
ellery business, the yellow metal is REMAIN IN FAVOUR sales picked up within weeks of the
still shining as a key instrument for complete lockdown to 80-85 per cent
creating wealth, even as the industry Economic uncertainty of what they were during the period
is still undergoing Covid-19 turbu- means people will a year ago, though there are still is-
lence. Consider this: Gold has been prioritise safe investments sues like showrooms falling in con-
the best investment in the past five tainment zones,” says Ramesh. This
Dollar is expected to
years and returned 17.7 per cent per remain weak, so globally, is despite retail gold prices rising 60
year, far ahead of equities, which have people and central banks per cent since January 2019 and 20
returned 7-8 per cent, and even real will buy more gold per cent since January 2020.
estate, which has returned a mere 5.3 Even diamond sales are picking
per cent per year during the period. No asset class has given up. De Beers Group, the world's larg-
decent returns in the last
With economic uncertainty worsen- est diamond producer and retailer,
five years in India
ing across the globe, investors will in- witnessed about 30 per cent growth
creasingly add gold in their portfolio Fear of inflation will in India last year, but Covid-19 slowed
for safety. A weakening dollar (also further increase the the momentum. “Demand is gradu-
considered a safe haven) is also good appeal of the yellow metal ally growing in Tier-I cities and sales
for gold. Industry experts say the yel- may get back to 70-80 per cent of last
low metal will remain a preferred in- year’s level by October-November,”

ity and economic uncertainty have added to its safe-hav-
en status, says Ahammed.
However, 2020 has not been good for the industry
Hitting so far, despite high gold prices internationally due to
new HigHs Covid-19, economic slowdown and US-China tensions.
According to data from the World Gold Council, dur-
ing January to June, jewellery sales in India were 117.8
tonnes, a 60 per cent drop in volume terms compared
60,000 Gold price (`per 10 gm)
with same period last year. Gold as an investment (bars,
coins and exchange-traded funds) witnessed a fall to
6-Aug-20 47.8 tonnes worth `18,600 crore in the first half, a 19
55,550
per cent fall in rupee terms and 39 per cent in volume
50,000 terms as retail shops and bullion dealers were closed un-
til mid-May.
Hopes Shining Bright

Mar-20 “Due to uncertainty and fear, demand had gone down,
40,000 42,051.20 but sales trend during the window of opportunity af-
forded by relaxation of the lockdown points to healthy
latent demand that should surface once Covid is behind
us,” says Somasundaram P.R., Managing Director, India,
World Gold Council.
30,000 Trade is sensing optimism as people are coming
back to showrooms due to festival season and starting
to learn to live with the virus. “The demand for physical
gold, majorly channelised through jewellery, could be
25,748.50 impacted to a certain extent due to the economic sce-
nario, but it will become stronger once the economy is
Aug-15 Source: CMIE 6-Aug-20 back on track,” says M.P. Ahammed.
The retailers are adapting to the new realities. Kaly-
an, which is soon planning an initial public offer despite
the Covid-19 crisis, recently launched a branding cam-
paign related to weddings as a closed family affair. “It
was a hit. Our online sales are also growing,” says Ra-
De Beers India Managing Director Sachin Jain said last mesh Kalyanaraman.
week at the 9th Edition of the Forevermark Forum. Nan- Sachin Jain of De Beers India says their diamond vid-
cy Liu, CEO, Forevermark, a brand of De Beers, says peo- eo campaigns were witnessed by 52 million people and
ple with disposable incomes in countries such as China their online counters have got 3.4 million visitors since
and the US are increasingly investing in diamonds. In the Covid-19 crisis. Forevermark launched a digital B2B
India, the main attraction is jewellery. India is the sec- site last week and digital showrooms that provide cus-
ond-largest consumer of gold in the world after China. tomers an experience similar to physical showrooms.
Indian households stock the largest amount of gold in Online buying convenience is playing a significant
the world, estimated at around 25,000 tonnes. part in consumer behaviour, say experts. Digital gold
“The nationwide obsession with gold apparently sales are also picking up, though volumes are negligible
reflects in the form of wearing of jewellery on social in the overall demand scenario. “We are still in the midst
and religious occasions, occasion-based gifting and of the crisis without clear sight of many variables about
purchase on auspicious days like Akshaya Tritiya and consumer behaviour, prices or length of the disruption.
Dhanteras. However, the underlying theme of that end- We will not be able to quantify the impact on full-year
less fascination for the yellow metal is predominantly gold demand in India,” says Somasundaram.
investment,” says M.P. Ahammed, Chairman, Malabar It is a time of optimistic wait and watch for the indus-
Gold & Diamonds, among the largest jewellery retail- try and investors.
ers in the world with about 260 showrooms in India and
abroad. Demand is set to grow further as market volatil- @pb_pbjayan

the Wealth issue — column
right asset Mix

is Key to riches
MultI-Asset portfolIos outperforM
ConventIonAl CounterpArts
By Vishal Dhawan
technically refer to it, clarity on a few term investments, that is, between
things could be of significant value. one and 10 years away.
A Define Goals with Timeframes

It is critical to start with a set of clear-
ly defined goals at the outset, so that
it is easier to look at asset classes suit-
ed to those needs, rather than con-
stantly chasing the best asset class
Understand Risk Tolerance
The cycle of greed and fear can cause
investors to take on much more risk
than they are comfortable with, or be-
come far more conservative than they
need to, when financial markets are
in terms of returns. A typical set of doing extremely well or giving nega-
financial goals for a 35-year-old may tive returns, at different points.
large number of investors are include having a self-owned house Very often, we find the reason
looking to identify the best asset class by 40 with a manageable mortgage, for this is that investors may have a
to be in for now. The aim is to move an education corpus to support over- very different risk tolerance from
in and out of asset classes in a swift seas education for children by the the portfolio that they have chosen
manner, so that they can generate time they turn 18 and comfortable to create. A well-designed risk toler-
highest returns, with minimal risk. retirement without compromising ance questionnaire, along with an
The challenge is that most do not get the retirement age. By clearly under- understanding from past data on how
this right, and thus set themselves up standing what investment time hori- financial markets behave both when
for disappointment. zon you have before you need money they do well, and also when they are
Most investors at the end of March to achieve your financial goals, you down, can help investors better un-
2020, for example, would not have be- are in a better position to choose as- derstand how much downside they
lieved that global equity markets will set classes and, therefore, the mix. can withstand before they start to
be close to their all-time highs in just For example, asset classes like equity, worry about their investments and
a few months, despite the biggest lock- gold and real estate that have the abil- possibly make mistakes. The asset al-
down in the history of the world. Thus, ity to beat inflation over long periods location may vary depending on their
having a well-defined mix of assets, can be very volatile in the short term, risk tolerance, which could vary from
put together scientifically, is critical and thus are ideally suited for goals conservative and moderate to aggres-
for long-term investment success. that are long-term in nature, that is sive. Investors who have a conserva-
In order to decide the right mix 10 years-plus away. In contrast, debt tive risk tolerance are more likely to
of assets, or asset allocation, as many as an asset class is suited to short- deal better with higher exposure to

debt as an asset class, with some ex- IDEal PortFolIo CoMPosItIon
posure to equities and gold. In con-
trast, investors with a moderate risk
Investor Type Conservative Balanced Aggressive
tolerance can look at a blend of debt,
AssetClass Conventional MultiAsset Conventional MultiAsset Conventional MultiAsset
equity and gold, while investors with
an aggressive risk tolerance can look Debt (Domestic) 100% 90% 50% 50% 0% 0%
at a larger exposure to equity, real es- Equity (Domestic) 0% 0% 50% 25% 100% 70%
tate and gold in the portfolio.
Gold 0% 10% 0% 10% 0% 10%
Correlation Among Assets Equity (International) 0% 0% 0% 15% 0% 20%

Over long periods of time, you will
find that the correlation among equi-
ties, debt and gold is very small, and
FIVE-YEar rEturns oF ConVEntIonal V/s
thus they combine well together to
ensure that your portfolio does not
MultI-assEt PortFolIo
all move up or move down at the same
Conventional Multi Asset
time. Adding international equities
into the portfolio could further diver-
sify your portfolio and make it more
robust from asset class cycles that are
inevitable over a period of time. 8.49% 9.32% 7.88% 10.13% 6.67% 9.56%
While a robust asset allocation
strategy can seem rather theoretical,
we find that it has great application Conservative Balanced Aggressive
Investor Investor Investor
in real world outcomes. For instance,
Rajesh and Priya (names changed
on request) came to meet us about
five years ago seeking an aggressive
portfolio to help them achieve their
retirement objectives faster, on the ventionally created for themselves. lio after five years, as against a 100 per
back of a strong outlook for India. We could sense a tinge of disappoint- cent domestic India equity portfolio
This desire was fueled by a relatively ment at the outset with the portfolio that they wanted to ideally create,
recent change that had happened in that was created for them that has a the balanced portfolio has delivered
the government in power and great blend of domestic equities, interna- a return that is approximately 3.5 per
excitement about the India story on tional equities, gold and debt funds, cent per annum higher with volatility,
the back of multiple reforms that against a conventional portfolio that measured by standard deviation, at
were expected to transform India they wanted to create which was com- approximately one-third.
into an economic giant. This was also pletely Indian equity centric. We also looked at conventional
backed by a global growth story that As we look back at the comparison portfolios for conservative, balanced
was starting to gather momentum, of their multi-asset balanced portfo- and aggressive investors, and found
and they wanted to use this opportu- that multi-asset portfolios tended to
nity to accelerate their plan for finan- outperform their conventional coun-
cial freedom. terparts over the last five years, and
When we ran them through a risk for shorter tenures as well.
tolerance tool and discussed portfo- While this outperformance may
lio return ranges both on upside and The CyCle of GReeD or may not continue in the future,
downside, we discovered they were AnD feAR CAn CAUse our experience shows that having the
not comfortable with their portfolios invesToRs To TAke on right asset allocation can help you
going below a certain threshold, even mUCh moRe Risk ThAn achieve your financial goals, and in
if it was temporary. Thus, the right
They ARe ComfoRTAble turn sleep better at night.
portfolio mix that would have worked
wiTh, oR beCome fAR
moRe ConseRvATive
for them was more in line with a bal- The writer is a certified financial
ThAn They neeD To
anced portfolio, and not an aggres- planner and Founder, Plan Ahead
sive portfolio they would have con- Wealth Advisors

the Wealth issue — PMS/AIF
Customised
for HNIs
Mass products such
as Mutual funds do
not work for the very
rich. welcoMe to the
world of portfolio
T ManageMent services
and alternative
investment funds
he mutual fund (mf) space has grown significantly

in the past two decades. However, being a mass product,
By NAVEEN KumAr
MFs follow the law of averages when it comes to risk and IllustrAtIoN By rAj VErmA
returns. This works for retail investors but fails to meet
the risk and return objectives of high net worth individ-
uals (HNIs).
This is where portfolio management services (PMS)
and alternative investment funds (AIFs) come into the developments in the market. Concentration of stocks
picture. “MFs are standardised schemes with a lot of in- generates superior returns in normal course. However,
vestment restrictions. PMS and AIF offer more flexibil- it can be risky in case of a broader market correction like
ity,” says Rahul Jain, Head, Edelweiss Wealth Manage- the one at the beginning of the year which eroded wealth
ment. The recent rigid classification of MFs by Sebi has of most equity investors. The good part is that it was fol-
made it worse. lowed by an equally impressive recovery in subsequent
“PMS managers construct a focused, client-cen- months. “The recovery has been fast. The deluge of global
tric portfolio with fewer high-conviction stocks hav- liquidity created by governments and central banks has
ing healthy earnings visibility, quality balance sheets found its way into various assets, including equities, gold
and business leadership,” says Rajesh Cheruvu, CIO, Vali- and bonds. Equity markets are placed as if Covid never
dus Wealth. happened, erasing the losses suffered in February and
March,” says Unmesh Kulkarni, Managing Director, Se-
Pms returns nior Advisor, Julius Baer India.
Most PMS plans get their returns from equity markets, The BSE Sensex is only around 7 per cent short of its
they cannot remain completely insulated from significant all-time closing peak on January 14. A few top perform-

ing funds are giving positive one-year returns while a good vu, CIO, Validus Wealth.
number are still in the negative territory. One of the biggest The market is also betting on new favourites. “The ini-
PMS funds with assets of `10,778 crore, ASK – IEP, has re- tial recovery was led by quality large-caps. The gains later
turned 5.3 per cent in one year and a CAGR of 16.40 per cent percolated down to select mid-caps and small-caps. The
since its inception more than 10 years ago. ACCURACAP - bulk of the returns have come from sectors that have either
ALPHA10 has delivered a return of 17 per cent in one year been less affected by the pandemic or benefited — phar-
and a CAGR of 14.29 per cent since inception around nine maceutical, healthcare, technology, agriculture, rural con-
years ago. sumption, etc,” says Rajesh Saluja, CEO & MD, ASK Wealth
However, the recovery has changed many things for Advisors.
these funds. “The large-caps were knocked down in the
pandemic-driven crash by approximately 40 per cent while Pms – the Options
mid-caps and small-caps were beaten down 50 per cent or The biggest differentiator in PMS is the entry criteria. The
more. The recovery has been phenomenal for both small- minimum investment is `50 lakh. There are two options —
caps and mid-caps with some stocks trading at as much as discretionary and non-discretionary. In the latter, the fund
2.5 times their pre-Covid 2020 highs,” says Rajesh Cheru- manager advises clients and executes decisions taken by

the Wealth issue — PMS/AIF
them. In discretionary PMS, the investments are managed

by the fund manager as per the objectives agreed by the
client. “Most PMS providers offer discretionary services.
Non-discretionary PMS is for big clients such as family of-
fices,” says Pallavarajan R., Director, PMS Bazaar.com.
Service providers either charge a fixed amount, or a
performance-based fee, or a combination of both. In per- HoW PMS AIF
formance-based structure, there is a hurdle rate of return, WoRkS BASICS
returns above which are shared with the service provider as
per the pre-agreed rate. “It is important to note that a win- Minimum investment Minimum investment
win fee structure is gaining traction wherein there is profit- is `50 lakh is `1 crore
sharing and no fixed fee. Rules mandate that no upfront fee Cat 1 and Cat 2 AIFs
It allows investment
will be charged by the portfolio manager directly or indi- in fewer stocks than are mostly exposed
rectly,” says Pallavarajan. In the non-discretionary space, MFs; so, risk is higher to venture capital and
investors also pay stock buying/selling charges. There is private equity funds
also a fee if the client exits before three years. Fee could be fixed,
PMS services differ from MFs not only in investment performance-linked Cat 3 AIF is like
or combine features a structured
size but the entire philosophy and approach. “Portfolio investment product
of both
managers typically enjoy a lot more flexibility in portfolio
construction compared to traditional equity funds — in
terms of absolute return philosophy (instead of bench-
marking portfolio weights to an index), having more con-
centrated portfolios, holding higher levels of cash when
necessary, having more agility in some of the schemes due tolerance for risk and significant investable surplus of `1
to smaller size (compared to MFs) and ability to charge crore,” says Nikhil Kamath, Co-founder and CIO, True
performance-linked fee that aligns the manager’s earn- Beacon and Zerodha.
ings with the performance of the scheme,” says Kulkarni of AIFs come in three forms — Cat I, Cat II and Cat III.
Julius Baer India. “Most equity MFs hold a large number of Cat I AIFs invest in start-ups or early stage ventures or so-
stocks (50-70) whereas equity PMS schemes hold ‘concen- cial ventures or SMEs or infrastructure and other areas
trated portfolios of 10-25 stocks,” says Saluja of ASK. which government or regulators consider as socially or
The taxation is similar to MFs. “Investors are taxed as economically desirable and include venture capital funds,
per tax slabs. Capital gains are taxed as long-term or short- SME funds, social venture funds and infrastructure funds.
term on the basis of the holding period. From FY21, the Category II AIFs include funds such as real estate funds,
dividend will be taxed at the tax slab rate,” says Rajmohan private equity funds, funds for distressed assets, and so on.
Krishnan, Principal Founder & MD, Entrust Family Office. These do not leverage or borrow other than to meet day-
to-day operational requirements. Cat I and Cat 2 AIFs are
AIF Returns customised investments designed to meet the need of each
AIF is a new category and so few funds are more than five individual client. Hence, having a standard product struc-
years old. However, five out of eight funds under the ‘long- ture is difficult. But Cat III AIFs come in the form of struc-
short’ strategy in the PMS Bazaar universe had delivered tured products. They employ diverse/complex strategies
a one-year return of more than 11 per cent till July-end. In and may use leverage, including through listed or unlisted
‘long-only’ strategy, the top four funds delivered a return of derivatives.
more than 11 per cent in one year till July-end. However, a The two broad strategies adopted by Cat III AIFs are
large number of funds are in the negative territory. ‘long only’ and ‘long short’. “Long only’ involves investing
AIFs are for sophisticated HNIs who want to employ only in equities while ‘long-short’ strategies, in addition
complex investment strategies and even take leveraged po- to equities, include derivatives too. While derivatives are
sitions. Investments start from `1 crore. “AIFs offer high- riskier due to the leverage, they can also hedge equity port-
est flexibility — long-short, multi-asset, leverage, hedging, folios,” says Kamath.
etc, without restrictions,” says Jain of Edelweiss Wealth AIFs also charge setting up and recurring fees. “The
Management. higher the investment, the lower the management fee (in
“AIFs are geared towards sophisticated investors with percentage). There can also be a set-up/placement fee (one-
higher appetite for risk as their investment strategies are time, as per cent of capital commitment),” says Pallavara-
more complex. However, compared to a basic MF, AIFs can jan. A few performance-driven companies do not charge a
be less risky due to hedging. The main criterion is higher management fee but a share of profits above the hurdle rate.

Best Performing Pms funds
AUM AGE OF Since
AMC / STRATEGY NAME (`cr) PORTFOLIO 1 year 2 years 3 years 5 years Inception
Narnolia - India 3T 201 8 Yrs, 4 Mon -1.52 -5.52 6.20 13.70 16.70
Girik Capital -Multicap Growth Equity 248 10 Yrs, 7 Mon 15.78 3.05 3.97 12.10 18.56
Ambit Inv. Advisors - Good & Clean India Fund 318 5 Yrs, 4 Mon 1.00 6.10 5.50 9.40 8.70
Accuracap - Alpha10 556 8 Yrs, 10 Mon 17.73 4.97 7.49 9.12 14.29
Ask - IEP 1,0778 10 Yrs, 6 Mon 5.30 -2.40 4.50 8.20 16.40
Ask - India Select 3183 10 Yrs, 6 Mon 7.50 -1.60 1.90 7.00 14.90
Quest Inv Advisors - Flagship 695 12 Yrs, 9 Mon 4.70 -1.80 -1.10 6.50 15.80
Alfaccurate Advisors - Aaa India Opp 649 10 Yrs, 8 Mon 7.00 -4.80 0.00 6.30 16.10
Aditya Birla Money - Core & Satellite Portfolio 240 5 Yrs, 3 Mon 0.10 -10.00 -3.60 6.10 6.50
Nj Advisory *** Dynamic Stock Allocation Portfolio 370 6 Yrs,1 Mon 11.46 2.91 3.95 5.58 7.81
Only equity funds with AUM of `100 crore or above were considered; returns in %; ranking based on five-years returns; all performance as on
July 31, 2020; above one-year returns in CAGR; *** MODEL; Source PMSBazaar
AIF Taxation
Just like the product, the taxation, too, is complex. “AIF Cat
Best Performing Aif CAt-iii III is not a pass-through entity for taxation. Typically, the
'Long onLy' sChemes nature of income under AIF Cat II would be capital gains or
business income. Income which is not under a special rate
AUM Return like capital gain, i.e., business income, interest, dividend,
AMC / Fund Name (`cr) 1-year etc, would be taxed at the maximum marginal rate in AIF
GIRIK Multicap Growth Equity Fund *** 68.69 17.34% Cat III. For FY21, the rate would be 42.74 per cent. If busi-
ACCURACAP - Vectra Fund *** 35.85 12.70%
ness income is earned by AIF Cat III, the AIF will automati-
cally pay a tax of 42.74 per cent (tax bracket for individuals
Proalpha Capital - QGD ** 41 12.87% with over `5 crore taxable income). This may lead to the
ACCURACAP - ALPHAGEN NEXT *** 109.9 11.30% investor paying more tax than his tax bracket requires him
Ampersand Capital - Growth 155.1 9.86% to,” says Rajmohan Krishnan of Entrust Family Office.
Opportunities Fund Scheme 1 ***
Word of Caution
So, what should you go for – AIF or PMS? The first thing to
look at is the ticket size, which is `50 lakh for PMS and `1
crore for AIF Cat III. The next could be your comfort with
strategies adopted by the two. “If you are looking for multi-
Best Performing Aif CAt ii asset, more flexible or differentiated strategies, go for AIF
'Long short' sChemes Cat III, but if it is a simple buy & hold trade, PMS is better,”
says Jain of Edelweiss Wealth Management.
AUM Return Whether PMS or AIF, these are high-stake investments
AMC / Fund Name (`cr) 1-year
and suited for investors who understand the risk-return
ITI Long Short Equity Fund ### 169.8 14.64% dynamics in depth. “Besides, while investing in thematic
Edelweiss Alternative Equity 877 13.06% strategies, you should be aware if such thematic portfolios
Scheme### invest in a single sector (or only a handful of sectors) or ac-
Varanium Capital Dynamic Fund ## 72 6.40% cess the theme through multiple sectors. If it is the former,
Edelweiss Alpha Fund Scheme 1## 74 4.10%
then once again, the investor runs concentration risk,” says
Kulkarni.
***Post Expense and Tax; **Post Expense, Pre Tax; ## Gross
Return; ### Post Expense & Pre Perf. Fees & Tax; all performance
as on July 31; above one-year returns are in CAGR; only funds @naveenkumar80
which disclosed their AUM considered; Source PMSBazaar
75
the Wealth issue — column
Don’t Invest
Based on Age
Instead, fInancIal goals should
decIde rIsk appetIte
By C. S. Sudheer
to 100 minus your age. For example, chasing a car in the next one year.
if you are 30 years old, your portfo- Equities, real estate, gold and govern-
I
lio can have 70 per cent equity. This ment schemes are ideal for long-term
means as you grow older, you must goals. Debt funds are ideal for short-
move your portfolio from equity to term goals.
debt. But it is time to change this
thought. Returns Expected
The risk a person takes must be The returns expected are as impor-
based on his financial goals, irrespec- tant as the time required to get those
tive of age. Along with his goals, he returns. Some investment options
nvestment is a process of allocating must also consider the time period to might give higher returns than oth-
money to assets for creating wealth achieve those goals, his financial situ- ers. If you are looking forward to a
and achieving financial security. ation as well the returns expected. massive amount, investing in a bank
There are several investment options. These four things determine his risk fixed deposit (FD) will not serve your
Each comes with ample risk. Selec- appetite. purpose. Equity and real estate must
tion is largely based on the investor’s A 60-year-old person who wants be looked at in such a scenario. At
risk appetite. Also, traditional belief to start a business after 10 years can- the same time, if your goal is to raise
is that age determines an investor’s not depend on debt funds. Instead, an amount in the next five months, a
risk-taking capability. Is that true? equities will yield higher returns. bank FD is the perfect option. Invest-
Should we manage our portfolio Again, if a person’s goal is to earn sta- ment options can have different fea-
based on age? ble and steady returns each month, he tures: safety, stability, risk, returns,
must invest in debt funds. etc. So, while choosing your invest-
Risk Vs Age ments, consider all these to make sure
Investing in equities can fetch great Time Period that they are in line with your goals.
returns. However, the risk involved Financial goals can be short-term
is high. According to the traditional or long-term. It is important to seg- Financial Situation
school of thought, a person should regate them and choose investment The investor’s financial situation also
reduce exposure to portfolio risk as options accordingly. You cannot in- plays an important role in risk man-
he grows older. Here, risk primarily vest in the same instrument for two agement. A person who earns `5 lakh
refers to equity risk. According to a widely different purposes such as per annum and another who earns
thumb rule, the proportion of equity your child’s education, which is likely `12 lakh per annum will have entirely
in your portfolio must be equivalent to be after 12 years, as well as for pur- different sets of options. Other things

like marital status, gender, family re- tively in mutual funds, government debt options such as commercial pa-
sponsibilities will also be the deciding securities or even gold. Public provi- per, corporate bonds, government se-
factors. dent fund (PPF) is a common choice curities, treasury bills, bank FDs, etc.
across age groups due to tax benefits. Debt instruments provide steady re-
Illustrations After some years of employment, turns and are just right for those with
Let’s see a few examples of allocat- appraisals and better opportunities a low risk profile.
ing assets based on differences in age are expected to increase a person’s
and financial situation. Generally, an salary. This means equities can be an Equities: Equities are nothing but
individual is expected to start earn- option. Equity investments could be shares of companies. You can invest
ing when he is around 21-23, after either direct or via mutual funds. Real either directly or through equity mu-
completion of studies. He might start estate is also a great option to create tual funds. Equity instruments aim
his career with a monthly salary of wealth over time. Bank FDs and liquid to give higher returns but are subject
`20,000. In such a scenario, he can funds could be maintained for emer- to market risk. Returns and risk in-
open a recurring deposit. Once he has gencies. Now, as we have understood volved are largely influenced by mar-
accumulated a considerable funds, he how to manage risk based on age, it is ket dynamics.
can open an FD account. SIP is also a important to have clarity on the five
great option to begin with, as the min- major investment options available: Real estate: It involves investing in
imum amount is only `500. land or property. You can buy land or
Now, if a person begins his career Debt instruments: Fixed interest property for a price and later sell it for
with a salary of `30,000 or `60,000, generating securities are called debt a higher price. Real estate investment
he has vast options. He can invest ac- instruments. There are a number of can be really rewarding. The major
advantage is capital appreciation.
Gold: Indians have been investing in

gold since ages. Gold prices have been
increasing rapidly, and the yellow
metal is likely to yield good returns
over a long period. Some common
options for investing in gold are: gold
exchange traded funds, sovereign
bonds, digital gold. However, the
proportion of gold in your portfolio
should be 5-10 per cent and not more.
Government securities: Besides,

there are a number of schemes of-
fered by the government such as PPF,
National Pension Scheme, National
Savings Certificate, Atal Pension
Yojana and many more. There are
for every section of the society and
age group. These give fixed returns
over long periods. They involve very
low risk as they are backed by the gov-
ernment.
So, basically it is financial goals
that decide the risk appetite and not
IF you ARE lookIng FoRwARd To A
mASSIVE AmounT, InVESTIng In A age. We all have heard that “age is just
bAnk FIxEd dEPoSIT wIll noT SERVE a number”; it is high time we incorpo-
youR PuRPoSE. EquITIES And rate this thought in our financial de-
REAl ESTATE muST bE lookEd AT In cisions as well.
Such A ScEnARIo
The writer is Founder and CEO of
indiamoney.com

the Wealth issue — debt investment
Invest
Short,
Stay
Safe
Debt investors
need to tread
carefully in the
fixed income
market as the
balance sheets
of the two
biggest issuers —
the government
and corporate
sector — are not
in the pink of
health
By anand adhikari
illustration By raj verma

per cent per annum. Though there are decent returns,
liquidity and tax benefits, nothing is guaranteed if one
O
goes beyond the government paper. So, investors need
to tread carefully.
the Fixed option

Fixed deposits have, traditionally, been most popular
among savers. Over the years, non-banking finance
companies (NBFCs) and the corporate sector, espe-
cially manufacturing companies, have also emerged as
issuers of fixed deposits. Banks offer the highest safety
with moderate returns, while NBFCs and companies
offer relatively higher returns with moderate safety.
Well-known banks such as SBI, HDFC Bank and ICICI
ne of the fastest-growing economies in the world Bank offer fixed deposits at 4.30 to 5.0 per cent per an-
may be staring at a recession for the first time in the last num. The rate for a five-year deposit is around 5.35 per
four decades. In fact, experts are even talking about a cent per annum. If one wants slightly higher returns, the
Great Depression ahead for India. These telltale signs best bet is new, full-scale banks such as IDFC First Bank
are enough to cause panic among debt investors, already and Bandhan Bank. These two banks offer anywhere
hit by the IL&FS default debacle. Interest rates, too, are between 5.75 and 6.50 per cent for a year, and up to 6.75
on a decline, and are pulling down yields or returns. Real per cent for five years. The reason for higher interest rate
rates are already in the negative zone because of higher is the low proportion of low-cost funds in the portfolio.
inflation and lower interest rates. The Reserve Bank of In addition, these banks follow a differentiated banking
India (RBI) is also stressing on growth by reducing inter- model of lending to MSMEs and self employed, where
est rates to support demand. “This situation of negative yields are higher. The new set of small finance banks
real interest rates is going to stay for some time,” says (SFBs) also fits into this category since they have a large
Rajesh Cheruvu, Chief Investment Officer of Validus portfolio of micro loans. These SFBs offer a much higher
Wealth, a wealth advisory firm. rate of 7 per cent for a year and 8.25 per cent for five years.
There is likely to be one more rate cut of 25 basis Bank deposits, including SFBs, offer a safety of deposit
CAse For economic insured FDs, there is safety MF debt tax benefits
FiXeD slowdown PPF and of capital schemes offer on interest
and likely good funds in fixed diversified and deduction
inCoMe recession set offer assured income portfolio under 80C up
oPtions to increase returns securities under single to `1.5 lakh/
credit risk scheme annum
points (1 basis point is one hundredth of a percentage of up to `5 lakh per depositor. Currently, every bank de-
point) in the near future. The balance sheets of the two posit is insured with the Deposit Insurance and Credit
big issuers of debt — the government and the corporate Guarantee Corporation (DICGC) up to a maximum of
sector — are also not in the pink of health, which raises `5 lakh in case the bank goes into liquidation. It is there-
concerns on credit risk. fore advisable to go for a deposit of a maximum of `5 lakh
The priority of investors today is to protect their with new banks just to be on the safer side.
capital investments. So, where should one invest his or “One can actually choose multiple banks to protect
her hard-earned money in these times? A number of op- deposits if they have a higher amount to invest,” says a
tions are available under fixed income schemes — from banker. For example, an amount of `20 lakh can be de-
fixed deposits, company deposits and debentures to posited in four different banks (`5 lakh each).
public provident fund (PPF) and debt schemes of mu- There are also tax benefits in bank fixed deposits.
tual funds. The returns range from 5 per cent to 10-12 Interest up to `10,000 is exempt from income tax. How-

the Wealth issue — debt investment
ever, liquidity is an issue with fixed deposits, since banks

charge for premature withdrawals. For those who don't
need liquidity, there is the option of a five-year fixed de- KEY
posit, which offers a slightly higher rate, though there is DEVELOPMENTS
a five-year lock in. The amount up to `1.5 lakh is available
for deduction under Section 80C of the Income Tax Act.
In terms of returns, deposits in NBFCs and the cor-
porate sector offer an interest rate of 200 basis points
higher than bank deposits, but the risk factor is that
these are completely unsecured. Currently, companies
are offering high interest rates since they urgently need
funds due to Covid disruptions. Falling interest Deposit insurance
Banks have limitations in offering higher rates since rates limit increased
they are flush with funds. In addition, deposit rates are from `1 lakh to `5
linked to lending rates. Fixed deposits of HDFC Ltd, Ba- lakh per depositor
jaj Finance, Tata, Mahindra and Shirram Group are quite
popular in the market. It is advisable to go for reputed
names and the highest credit rating of triple A.
One should, however, be careful in taking a deci-
sion solely on the basis of credit rating. In the past, even
highest-rated Jet Airways, IL&FS and Dewan Housing
have collapsed or defaulted in loan obligations, leav-
ing depositors high and dry. While bank deposits are at
least secured up to `5 lakh, NBFCs or company deposi-
tors have to stand in queue with unsecured creditors for
claiming their dues in the event of a liquidation. Default Government and
disclosure by corporate sector
corporates to on borrowing
Shopping For Higher Returns
stock exchanges spree post Covid
For investors with a little more risk appetite in fixed in-
come securities, non-convertible debentures (NCDs) is-
sued by the corporate sector is a good bet. NCDs are un-
secured instruments used by companies to raise funds
from retail investors and institutional investors. The High credit
tenure ranges from a minimum of two years to as high risk due to
as 15 years. Like in the case of company fixed deposits, economic
disruptions
the credit rating of the issuer is important – it should be
highest rated or triple A.
The returns in NCDs at 8-12 per are higher than fixed
deposits. In some cases, yields are 8-12 per cent. There
is also more liquidity since NCDs are listed on stock ex-
changes. The listing window also offers the advantage with parking your savings in a single issuer,” says Anand
of capital appreciation at the time of the exit. “NCDs Varadarajan, Business Head at Tata Mutual Fund.
can provide good capital appreciation if interest rates go Then there are lessons from the past as well. Post
down as prices of existing NCDs would command a pre- 2008, large companies with billion-dollar acquisitions
mium,” according to a wealth advisor. in the commodity space saw their fortunes dwindling.
In terms of taxability, the tax is paid on the interest Similarly, the boom in infrastructure, power, roads and
earned at the time of filing returns since there is no TDS real estate saw a not-so happy ending post 2014. More re-
deduction. In addition, the sale of NCDs at bourses be- cently, Covid hit the best names in hospitality, tourism
fore maturity attracts short term or capital gains tax. and transportation. "You are on your own if you are just
Advisers suggest investing in NCDs can be a good looking at the credit rating. In the past, best-rated com-
diversification strategy to park a part of the funds. But panies have defaulted,” says a debt manager.
there is a caveat. “Your diligence level of companies in There are also liquidity issues. “The higher the out-
terms of ratings, cash flows, leveraging, sectoral up- standing debt amount, the higher will be the liquidity in the
date has to be very high. There are also risks associated paper in stock exchanges,” says Cheruvu of Validus Wealth.

The PPF Option that rates will be lower in the near term and could inch
Public Provident Fund (PPF) offers the best option for up in the medium term, shorter-duration products
long-term invests. Currently, PPF offers an interest of are much better than locking the money for a longer
7.1 per cent per annum for a 15-year lock-in period. The term (seven to eight years),” says Varadarajan of Tata
interest rate, which is notified every quarter by the gov- Mutual Fund.
ernment, is much higher than bank fixed deposits. The Ultra short funds are also something that advisers
entry-level amount is just `500 and a maximum amount are betting big on. These funds invest in high-quality
of ` 1.5 lakh is available for investment every year. debt paper of the government, PSUs and companies for a
The only issue here is liquidity, though there are win- period of three to six months. “There is no credit and in-
dows available. For someone in need of funds, the loan terest rate risk in these instruments,” says Varadarajan.
facility is available from the third year onwards. Simi- There are best rated funds such as Aditya Birla Life Sav-
larly, there is also a partial withdrawal facility available ings Fund, Tata’s Ultra Short Term Fund, SBI’s Magnum
after the competition of six years. Ultra Short and Kotak Savings Fund. If someone wants
There are tax benefits as well. Contribution of `1.5 to go slightly longer within the near term, the money
lakh per annum is eligible for deduction under Section market mutual fund option is there to park funds for a
80C. The interest earned on the investment is also tax year. These funds offer slightly higher yields because of
free. The total interest earned and the maturity amount their exposure to corporate than PSU bonds. They gen-
is exempt from income tax. Given the falling rate of in- erate 7-8 per cent return, and can be a good option along
terest in the economy, there is a likelihood of PPF rates with fixed deposits.
also declining going forward, but they will still be higher Credit risk funds, popular among investors during
ON THE TABLE
INSTRUMENTS INTEREST P.A. (IN %) TAXABILITY RISK
Fixed deposits 4.0-8.0 Interest of up to `10,000 Deposits of up to `5
exempt from tax lakh insured
nCds 8.0-12.0 Interest taxable, capital gains Unsecured
on market sale
PPF 7.1 `1.5 lakh deduction under 80C; 15-year lock in
Interest exemption
money market funds 3.5-7.0 Taxable Liquidity risk
compared to bank deposits. the pre-IL&FS days due to high returns, are something
PPF provides an additional source of resource for the that wealth advisers are cautioning against. These funds
government. Investors looking for higher return, safety take a risk by investing in corporate bonds with credit
and tax benefits should look at PPF. ratings below the highest investment grade. “The credit
environment is challenging. Downgrades are rising. The
Short Is Safe moratorium and forbearance also indicate the stress in
For those who want to avoid the hassles of studying vari- the corporate sector,” says a wealth adviser.
ous debt schemes, the mutual fund industry offers an The perception among investors is that the debt mar-
array of investment avenues in the fixed income space. ket is risk free. But that is not the case if you are shopping
They offer a single-point entry for investing in a scheme for higher yields. “Everything is not issued by the Gov-
with a diversified pool of debt securities. Various op- ernment of India or comes with a guarantee,” Cheruvu
tions are available in terms of returns, risk and liquidity. of Validus Wealth cautions.
“What is not very clear is for how long this phase
of low interest rates will continue. If the assumption is @anandadhikari

the Wealth issue — life insurance
Securing
The Gains
INSURE YOUR LIFE before anything else
SO that thE FamILY dOES NOt mISS OUt
ON gOaLS dEaR tO thEm
By NAVEEN KUMAR
IllUstRAtIoN By RAj VERMA
tor & Chief Marketing Officer, Max Life plan is an affordable financial tool that
Insurance. allows individuals to financially secure
W
Here is how you can use a term plan the future of loved ones in their ab-
to ensure the well-being of your family sence, adding a layer of security to navi-
when you are not around. gate an unfortunate crisis,” says Bhan
of Max Life Insurance.
Protect Your Dreams: “When start- It scores above all other life insur-
ing on the wealth creation journey, one ance-cum-investment products. “It is
of the first things an investor should much cheaper and gives a higher cover
think about is buying adequate insur- compared with other life insurance
ealth building is a long journey that ance. Insurance is a great tool to pro- products such as Ulips and, therefore,
ends usually when you have either met tect oneself and one’s family from un- can give investors the most value for
your life’s goals or earned enough to be foreseen costs and, therefore, preserve money,” says Manekia of Kairos Capi-
able to meet them in future. However, wealth” says Rishad Manekia, Founder tal. A 30-year-old can get a `1 crore
given life’s uncertainties, if something and Managing Director, Kairos Capital cover at annual premium of around
bad happens to the earning member Private Ltd., a Mumbai-based financial `10,000. This means you spend just
midway through this journey, should planning firm. `1.5 lakh in 15 years, almost 1.5 per cent
the family members be left to their fate? You should not get complacent of the protection amount.
A well-planned wealth building even when both spouses are working
journey plugs this gap through term in- as dual income means higher goals and Enhances Risk Appetite: The more
surance – a pure life insurance product lifestyle expenses which a single person sure you are about the well-being of
that pays the cover amount to the nomi- will find it difficult to sustain in ab- your family, the more risk you can take
nated family member if the insured per- sence of the spouse. while investing. This means you can go
son dies. “The aim of creating wealth is heavy on equities, which are known to
to achieve some goals. A term plan pro- Least Costly: A term plan gives you be volatile in the short term but offer
tects that goal,” says Aalok Bhan, Direc- higher life cover at a low cost. “A term higher returns in the long run.

how life
insurance
helps in wealth
building
Most life goals are
related to family
member(s), be it spouse
or children or parents
the goals may remain

unfulfilled with demise
of the earning member
term plan gives financial

protection to the family
dual income families

have costly goals and
lifestyle and must buy
dual life cover too
creasing the cover amount to match the

current obligations and lifestyle. “One
should increase the life cover to match
the increased value of life and insulate
the family from unfortunate circum-
stances,” says Bhan.
Additional Protection: There are

other unfortunate events that may be
“The journey towards investing ance cover, taking into consideration as damaging as death. What happens
and wealth creation starts by evaluat- current and potential financial respon- if a person gets critically ill for a long
ing current financial requirements, sibilities as well as the value of aspira- period, losing his income and ability to
future goals and milestones and then tions of your loved ones,” says Bhan. pay the premium? What if one survives
building a sound financial portfolio However, if you want the easiest an accident but is permanently dis-
matching your risk appetite,” says Bhan way to reach closer to the adequate abled? You can get additional protec-
of Max Life Insurance. cover amount, follow a thumb rule. tion against such threats in the form of
“The ideal cover should take care of riders selected at the time of buying the
Ideal Cover: The ideal amount expenses of surviving family members. term plan.
should consider all life goals related to That is why the rule of thumb is to look “It is advisable to purchase criti-
each family member besides sufficient at 10 times the annual income. The logic cal illness riders. Policy holders are as-
retirement income for your spouse. It is that this money will give the surviv- sured of a lumpsum upon being diag-
should also help your dependents pay ing members adequate time to get back nosed with critical illnesses specified
all liabilities. Ask an expert to quantify on their feet and start earning on their in the policy, giving protection over
the current and future value of all your own. Investors can also look at higher and above the base sum assured dur-
goals. covers depending on their personal sit- ing tough times,” says Bhan of Max Life.
Most life insurance companies have uation,” says Manekia of Kairos Capital. Though you can buy standalone critical
an online calculator for this. “We at Max However, if you have other significant illness plans too, they cost less if bun-
Life offer customers an easy to use ‘Real obligations such as home loan, you can dled with a term plan.
Value Tool’ that enables them to calcu- add that to your cover amount.
late their real value, that is, apt life insur- As income rises with time, keep in- @naveenkumar80

the Wealth issue — non-life insurance
Keeping
Assets Safe
A look At non-life insurance plAns
thAt protect your weAlth
G By AprAjitA ShArmA
illuStrAtion By rAj vermA
eneral insurance products hardly Cyber insurance is not very expen- lower than that for content. However,
find favour with customers in India. sive. For example, the premium on ICI- it is advisable to go for a comprehensive
People buy travel and motor insurance CI Lombard’s policy ranges from `6.5 policy,” says Tarun Mathur, Chief Busi-
when they are mandatory, but home, (for `50,000 sum assured) to `65 per ness Officer, General Insurance, Policy-
cyber security or sachet sized insur- day (`1 crore sum insured). The policy bazaar.com.
ance products such as cycle/dengue in- provides coverage to the entire family, As per Policybazaar, HDFC Ergo’s
surance, etc, do not have many takers. including children, for a year. In Bajaj Home Shield policy provides compre-
You may need some of these products: Allianz's cyber policy, the sum insured hensive coverage for one year at `15,905
ranges from `1 lakh to `1 crore, for a for a cover of `1 crore for structure and
cyber insurance premium of `662 to `8,933. `25 lakh for contents. The coverage for
From office work and education to only structure or contents costs `2,374
purchase of grocery, most of our daily Home insurance and `13,423, respectively.
activities have gone online. Digital There have been more and more cases There are also some lesser known
transactions which require you to share of torrential rains damaging property covers a home insurance policy may
bank details have become frequent. of late. You also never know when a provide. “Many people are unaware
This has led to a surge in online frauds. natural disaster or a burglary or a theft that home insurance covers pet vet-
A cyber insurance policy can protect will cause you a financial loss. A home erinary costs. Damage due to burst-
you against online identity compro- insurance policy covers loss or damage ing and/or overflowing of water tanks/
mise, fraudulent transactions, cyber to the building and its contents due to pipes, landslides, missile testing opera-
extortion, phishing and malware at- natural calamities such as lightning, tions, leakage from automatic sprinkler
tack. “Since our financial and other im- fire, volcanic eruption, bush fire, forest installations are also covered,” says Na-
portant data, including identity proofs, fire, earthquake, storm, flood, explo- val Goel, Founder & CEO, PolicyX.com.
are stored in our phone or laptop, any sion/implosion, anti-social activities
loss of the same can be a hassle. This is such as strikes/riots, burglary and theft. Travel insurance
where a cyber insurance plan comes in The premium is reasonable, a few Around 34 countries such as Cuba,
handy. It is gaining impetus with the thousand rupees per year, depending USA, UAE, Turkey and Russia and
millennials,” says Dhirendra Mahya- on house type, structure and security. 26 Schengen countries have made
vanshi, Co-Founder, Turtlemint. “The premiums for the structure are travel insurance mandatory for tour-

How General
insurance
ists. So, people buy insurance before Helps in wealTH coverage for health, life, and house-
travelling to these countries, but BuildinG hold under a single plan. “It is unique in
through travel agents. It is better to having a single simple interaction and
one unfortunate event can
do your own research for best cover- damage years of hard work a small monthly payment (starting at
age. “Travel insurance is typically by forcing you to sell your `600 per month) that cuts down your
offered with different sum insured assets insurance expenses in small bite-sized
of $50,000, $1,00,000, $2,50,000 amounts," says Rohan Kumar, CEO and
and $5,00,000. But check per illness digital transactions are Co-Founder Toffee Insurance.
inevitable and so are the
limit, if any. For example, if per ill- There are also other byte-sized
threats emerging from them
ness limit is $10,000, you will get only products for mobile damage, marathon
$10,000 for any one illness, even if Just one cyber crime can and trip insurance from companies
you have selected a plan with higher leave a big hole in your such as Toffee Insurance, Digit Insur-
sum insured. Besides, if you have a savings ance, Acko Insurance, Symbo Insur-
pre-existing disease, buy a plan which ance and Mobikwik. Many companies
a medical emergency
covers it in emergency,” says Indra- during travel overseas can also provide home appliance insurance.
neel Chatterjee, Co-Founder and erode your savings You can also buy credit and mortgage
Principal Officer, RenewBuy.com. insurance under which the insurance
RenewBuy says a seven-day travel company pays EMIs if you have an ac-
insurance may cost `600 for $50,000 cident or are no longer around.
sum insured. In the post-Covid world, “There are some health insurance
the premium may go up. “Insurance Byte sized insurance covers which can be beneficial such as
companies may ask if you’ve been ex- With gyms and dance/swimming class- personal accident insurance, vector
posed to someone who tested positive es closed, many people have switched disease insurance (dengue), critical ill-
for Covid-19. Also, premiums could to cycling to stay fit. Insurance firm ness covers like cancer insurance and
rise depending on the location you’re Toffee Insurance provides insurance hospi-cash insurance,” says Chatterjee
travelling to and the situation there in that protects your cycle against theft of RenewBuy.com.
terms of the intensity of the pandem- and accidental damage. It has also
ic,” says Mathur of Policybazaar.com. launched a ‘Toffee Plan’ that provides @arpi_sharma

Health Cover
T To Protect
he momentum of your wealth-
building journey could take a hit in case
of medical emergencies. It not only has
the potential to consume all your sav-
Savings
ings, but can land you in a debt trap as
well. Health insurance offers a wider MeDiCal insuRanCe
protection net in such cases.
will come in handy
a Critical Factor
While you keep saving and invest- in emergencies, prevent
ing diligently, you need to guard your
finances against incidents that can outflow of
derail the process. “Health insurance
offers complete peace of mind to the
personal wealth
insured. The knowledge that in case
of an unforeseen event the economic
damage will be covered is enough to
reduce stress hormones,” says Abhinav
Angirish, Founder, Investonline.in. By naveen kumar
“Even if you are in perfect health, IllustratIon By raj verma
86
the Wealth issue — health Insurance
your health insurance should play a cover their children along with them- covered under the group health insur-
critical role in your financial planning selves in the same policy on a floater ba- ance policies provided by their employ-
as it prevents you from dipping into and sis against an individual basis, the sum ers. However, if you find that the cover
depleting your savings in case of medi- insured should be sufficient to take is insufficient you can consider top-up
cal emergencies,” adds Shanai Ghosh, care of multiple incidences of illness in plans as well” says Gurdeep Singh Ba-
Executive Director and CEO, Edelweiss the family during the policy period,” tra, Head, Retail Underwriting, Bajaj
General Insurance. says Rakesh Jain, Executive Director Allianz General Insurance.
“The premium is nothing com- and CEO, Reliance General Insurance. The next big question is whether
pared to what you would pay in case of If there is a family history of chronic to opt for individual plan or a family
hospitalization… My advice would be to ailments you need to look for higher floater plan.
act now, if you haven’t already.” coverage. “Ideally, people living in met- “An individual policy offers more
ros must have a health insurance cover extensive coverage. In the case of a
Deciding The Right Cover of around `10 lakh, the reason being the calamity, the sum assured may not be
One of the important things to decide is high cost of living” says Angirish. If you adequate for the entire family” says
the cover amount. “There is no set rule are living in other places, the minimum Angirish. If you are going for a family
to arrive at the amount of insurance starting point could be `5 lakh for each floater plan make sure that it has higher
one may require. One must account individual. coverage in case multiple members are
for medical inflation while purchasing hospitalised. One can also choose a
health insurance. Currently, medical Type Of Policy separate senior citizen cover for par-
inflation is hovering at 17 per cent per Having a corporate health policy is ents, says Batra.
annum,” says Angirish of Investonline. common among salaried people. These The Checklist
WHaT YOu sHOulD DO

Get a Buy a health To increase Have a if you have if you have
minimum policy as soon affordability, separate family history a good
health cover as possible, buy a family policy for of chronic corporate
of `10 lakh if the earlier you floater plan senior diseases, it is policy,
you are living buy, the lower to get higher citizens in better to buy enhance the
in a metro will be the coverage the family a higher cover family
and `5 lakh premium at a lower since thay are at an early cover with
for other premium most prone to stage a top-up
locations emergencies plan
in. So, while deciding the cover amount policies are considered to offer wider One needs to understand the basic nu-
you have to think about the present as coverage. "Most of the group policies ances before buying a health insurance
well as the future. If you buy a policy at of companies have various advantages policy.
a young age, you will need it for a much like coverage of pre-existing diseases, “It’s imperative to thoroughly read
longer period, so the cover should be coverage of maternity expenses and through your policy documents in or-
sufficient for long duration. The good new-born child from the first day just der to be informed regarding the cover-
thing is the sooner you buy a health to name a few, which are usually not age you receive, the SI (sum insured) of
insurance policy the lower will be the available in case of individual policies,” your policy and also your exclusions (e.g
premium. So, you will be able to afford a says Jain. room category /capping, co-payment if
higher coverage. You can also buy a ba- But corporate policies also have any, sub-limits for any illness, etc). It’s
sic cover and enhance it at a later stage. their disadvantages. "It will be prudent also essential to have adequate cover-
While deciding the cover, you to have an individual plan along with age which is at par with medical costs,”
should also keep other factors in mind. your corporate plan. This ensures you says Batra. Also, compare the features,
"Some of the key factors one needs to have an added cushion, in case your coverage and premiums of different
consider are the size of the family and medical emergency goes over limits of policies before buying one, and disclose
age group of members. For example, your corporate,” says Ghosh. all details while filling your application
the sum insured opted by a newly mar- If you have a good corporate health form.
ried couple may be lower than a middle- policy then you add top-up plans as
aged couple. Also, if a couple wants to well. “Conventionally, most Indians are @naveenkumar80

Network
The ConservaTionisT
Amit Jain, MD, L'Oréal India,
never misses an opportunity to
visit wildlife parks. He has been
to almost every wildlife reserve
across the globe, but the Jim
Corbett National Park is closest
to his heart. "I have been going
there since I was five and have
fond memories of going deep into
the forest riding an elephant." His
biggest passion, however, is tiger
conservation. He actively contrib-
utes to the World Wildlife Fund in
his personal capacity. "I inherited
this love for conserving wildlife in
India from my grandfather, who
became a conservationist after
retirement. Even in my stints
outside India, I have stayed close
to supporting causes, contributing
to rehabilitation of villages outside
wildlife parks."
His passion for tiger conserva-
tion has taught him the impor-
tance of respecting the ecosystem.
"You can’t consume the planet and
ecosystem at a faster rate than it
regenerates. That’s the mistake
we have been making over the last
two generations. The tiger is on the
apex of the food pyramid, without
the tiger the rest of the pyramid is
in danger. It is critical to conserve
the apex predators," says Jain. He
wants to push the sustainability
agenda in his business as well. "If
there is one legacy that I would
build in L'Oréal India , it is how we
have really contributed to sustain-
ability in India."
–ajita shashidhar

Unplugging
With Bjj
Andrew Wilson, CEO of American
video-game company Electronic
Arts (EA), is a man of multiple in-
terests. He began playing games
at a very young age, not surpris-
ing for someone who grew up in
Geelong, Australia. In his spare
time, he plays games, goes surf-
ing and training on Brazilian Jiu-
Jitsu (BJJ), a self-defence martial
art based on grappling, ground
fighting and submission holds. BJJ
PhotograPh by rajwant rawat

emerged from Japan’s judo and
jujutsu. For many like Wilson, jiu
jitsu is also a way to unplug. Like
other martial arts, what BJJ does
is force people to forget about
what’s going on at their jobs. It's a
great way to de-stress.
Wilson who has spent over 15
years at EA was appointed CEO in
2013. During his tenure as CEO,
EA launched groundbreaking new
games and services, reached
record player engagement levels
across global franchises, and
The Avid Golfer

emerged as one of the world’s
leading digital entertainment
companies.
When Raj Khosla, CEO, relaxed and familiar envi-

MyMoneyMantra, is in ronment.” Connecting the
Delhi, he makes it a point game with life, Khosla says
to visit the Delhi Golf just as in golf you need
Club twice a week. An complete focus on your
avid player for over four goals, similarly, in life, in-
decades now, Khosla has stead of getting distracted
served as the captain of by random thoughts,
the Delhi Golf Club, and you must focus sharply
has also been on the board on immediate business
of the Indian Golf Union. goals. “Every shot counts.
“While studying I never got I have seen good players
time to pursue my interest, go horribly wrong when
but when I started working their minds are elsewhere.
abroad with KPMG, I would Besides, there is no substi-
participate in the game tute to hard work. Golf is a
with colleagues. That’s how game that requires infinite
I learned golf. When I came patience." He quotes
back to India, I continued famous golfer Gary Player,
playing.” “The harder I practice, the
Khosla takes keen inter- luckier I get.”
est in organising the game For Khosla, being on the
and increasing participa- golf court is like meditation.
tion by young golfers. “How often do you get a
“For young entre- chance to gaze at greenery
preneurs, golf offers the for 500 yards or more? Golf
unique opportunity to gives me an opportunity to
spend five uninterrupted be with nature.”
hours with CEOs in a –aprajita sharma

“shift roles periodically and be
persistent in approach”
Manish Bharti, President, india and saarC, UiPath
Q: What was the problem you were Domain. He was also someone who understood the
grappling with? dynamics of the industry deeply. He advised me to con-
a: I started as a software developer fresh out of college sider two changes to further my growth — move to a cus-
in 1995. While I enjoyed being able to create solutions for tomer-facing role to get an end-to-end view of business,
complex problems, my interests diversified. I wanted to and move to global assignments to broaden my exposure.
go beyond coding. So, there were questions about when The advice helped me get a new perspective. I moved
to move, what to do, and whether it was the right move from the role of a systems and software engineer to con-
from a career standpoint. sulting and sales. I also moved to overseas territory.
Q: Who did you approach and why? Q: how effective was it in solving your
a: I have always been fortunate to have mentors and problem?
managers guide me. During that period, I reached out to a: I was still in my early 30s, and the shift was not easy.
my manager Pankaj Kathuria at my then employer Digital But I persisted. Soon, I was able to find my ground. I
Domain. I shared my aspirations candidly. He acted as started managing large global projects sitting across the
my bouncing board and helped me think with clarity in table with C-suite leaders of Fortune 100 clients, includ-
choosing the next steps in my career. ing Nestle, DHL, J&J, Cisco, and Cardinal Health. As I
worked through them, I gained confidence, started see-
Q: What was the advice you received? ing success and enjoyed the impact I was able to create in
a: He had observed me during my tenure at Digital my role.
90 Vol. 29, No. 19 for the fortnight September 7 to September 20, 2020. Released on September 7, 2020. Total number of pages 92 (including cover)
Simplify operations across
all clouds with VMware.
VMware software establishes consistent infrastructure
and operations across clouds—giving developers the
flexibility they need to speed modern app delivery.
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businesstoday.

HOW TO MANAGE AND PROTECT WEALTH

Editor: Rajeev Dubey

For reprint rights and syndication enquiries, contact

illuStration by raj verma

game Consumer home run titanic encashing Consolidate On a Following

6 Business Today 20 September 2020

businesstoday.in reserves the globe, but the

STay CONNeCTeD WITH uS ON 90

Best Advice I Ever Got

20 September 2020 Business Today 7

Forex Reserves Surge

…Thanks to Foreign Currency Assets and Gold

Rise in FDI Inflows

Mar Jun Sep Dec Mar Jun Sep Dec Mar

Bank Credit to Key RecoveRy in

Petroleum, Coal -11.7

Cement & Cement

Mining, Quarrying -1.5 Source: Office of Economic Advisor

Leather & Leather 0.7

12 Business Today 20 September 2020

contraction -20 -20

Rail Freight crude oil

goods movement was badly hit due to to the lockdown, as opposed

the lockdown to a 2.3 per cent fall in the

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FPI Interest in LiFe inSurerS

Source: NSE, CMIE 2019 2020 Source: IRDA

14 Business Today 20 September 2020

20 September 2020 Business Today 15

All About Wealth

months, showed equity wealth can erode as fast as it is gen-

Game super Large

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day, consumer businesses — telecom, technology and

reliance industries ltd

Gross revenue operAtinG profit

20 Business Today 20 September 2020

20 September 2020 Business Today 21

In fIve Years... promoter

our vision Has Been to

22 Business Today 20 September 2020

PhotograPh by rachit goSwami 20 September 2020 Business Today 23

24 Business Today 20 September 2020

Share Price The Big The imPacT

Staying away from large lower nPas as the bank

20 September 2020 Business Today 25

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We have democratised entrepreneurship Within

`1 lakh invested promoter stake valued at

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bajaj finance Ltd

FY16 6,901 FY16 4,948 Change %

28 Business Today 20 September 2020

The BIg The ImpacT

Raised `8,500 crore maintained leadership in

NBFC has been agile under the leadership trio of Pam-

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In fIve Years... promoter

A strong focus on Agility And

32 Business Today 20 September 2020

20 September 2020 Business Today 33

`1 lakh invested in promoter stake valued at All values as of August